As the real estate and economic markets continue to wreak havoc on the majority of community associations, many find themselves in the uncomfortable position of having to consider a host of formerly undesirable options. I have heard associations threaten bankruptcy and others consider cutting back on essential services including management. However, neither bankruptcy nor self management is as simple or as beneficial as many associations may believe.
My organization, the Community Advocacy Network (CAN) has just released its Association Management Survey which can be found at http://surveys.canfl.com. The survey is designed to assess what factors most associations take into account when considering their various management options and which services they value most.
In my own community we were self managed for years because the board members were retired and could devote the time and energy required to run a 100+ home community. Even though we have a relatively small neighborhood, do not have an abundance of common areas to maintain or services that we offer, it soon became apparent that newer board members were not willing to devote the same amount of time as their predecessors had. Moreover, when times were good, we had relatively infrequent violations and delinquency issues. However, with the downturn, more problems arose and the ones that did were complicated and messy. It became harder for the Board members to put on their "director hats" and confront their neighbors about unpaid dues and unkempt homes.
In the end, we have returned to professional management for a variety of reasons including the convenience factor and the buffer on issues such as maintenance and collection. We consider this service essential to our sanity. Of course, every community is different and what works for one is an abysmal failure for another. It is for that reason that I want to hear what has worked for you, what hasn't and what you feel is important to help you successfully operate and administer your private residential community. The CAN Association Management Survey will remain open until January 15th at http://surveys.canfl.com. If you currently live in or have ever lived in a community association you are eligible to take the survey. The results will be tabulated and should be available the first week of February.
Wednesday, December 09, 2009
Tuesday, December 08, 2009
Can the board take matters into its own hands?
I am often asked by frustrated board members whether or not they can legally hire someone to clean that dirty roof, cut the overgrown lawn or tow away the illegally parked vehicle after they have tried unsuccessfully to convince a unit owner to comply with the association's governing documents.
The answer depends on whether or not such authority is granted to the board under the documents. Many, but certainly not all documents, do grant some form of "self help" that boards can utilize to solve a violation when all else has failed. Of course, there are several factors to consider when deciding whether or not to take this route.
1. Do the documents allow the board to perform maintenance or repairs that are the responsibility of the unit owner when he or she refuses to do so and specially assess the owner for those costs? If the documents allow the board to perform the work but not to charge the owner directly for those costs, that is usually the dealbreaker for most associations contemplating self help.
2. Does the association know a reliable contractor willing to undertake the work knowing that the homeowner is not in agreement with the board? Many contractors are understandably reluctant to step foot on private property under these circumstances.
3. Will the owner or other resident become violent once an attempt is made to undertake the work? Many associations choose to commence the necessary repairs or maintenance while the owner or resident is vacant from the property to avoid an escalation or possibly violent encounter.
4. If towing is contemplated, is the proper authority for same provided in the documents and is the proper signage installed on the property?
5. Has the proper notice been given to the owner demanding that the violation be cured and failing compliance, notice given that the board will be exercising its right to perform the maintenance, repairs or other corrective action itself and bill the owner accordingly?
The upside to self help is obviously the ability to fix the immediate problem without having to wait forever for an owner to do so. Being able to specially assess the violating owner for the work without having to incur attorney's fees to otherwise pursue the matter is also a benefit. The downside includes potential liability should the contractor hired by the association injure person or property and the possibility that the situation could quickly become hostile during the performance of the project.
As with every other enforcement method, self help must be applied routinely and uniformly. If your association documents do not provide for this method of enforcement, you should discuss the pros and cons of such a provision with your association attorney.
The answer depends on whether or not such authority is granted to the board under the documents. Many, but certainly not all documents, do grant some form of "self help" that boards can utilize to solve a violation when all else has failed. Of course, there are several factors to consider when deciding whether or not to take this route.
1. Do the documents allow the board to perform maintenance or repairs that are the responsibility of the unit owner when he or she refuses to do so and specially assess the owner for those costs? If the documents allow the board to perform the work but not to charge the owner directly for those costs, that is usually the dealbreaker for most associations contemplating self help.
2. Does the association know a reliable contractor willing to undertake the work knowing that the homeowner is not in agreement with the board? Many contractors are understandably reluctant to step foot on private property under these circumstances.
3. Will the owner or other resident become violent once an attempt is made to undertake the work? Many associations choose to commence the necessary repairs or maintenance while the owner or resident is vacant from the property to avoid an escalation or possibly violent encounter.
4. If towing is contemplated, is the proper authority for same provided in the documents and is the proper signage installed on the property?
5. Has the proper notice been given to the owner demanding that the violation be cured and failing compliance, notice given that the board will be exercising its right to perform the maintenance, repairs or other corrective action itself and bill the owner accordingly?
The upside to self help is obviously the ability to fix the immediate problem without having to wait forever for an owner to do so. Being able to specially assess the violating owner for the work without having to incur attorney's fees to otherwise pursue the matter is also a benefit. The downside includes potential liability should the contractor hired by the association injure person or property and the possibility that the situation could quickly become hostile during the performance of the project.
As with every other enforcement method, self help must be applied routinely and uniformly. If your association documents do not provide for this method of enforcement, you should discuss the pros and cons of such a provision with your association attorney.
Monday, December 07, 2009
Florida as "the condo promised land"?
That was the description of our state given to me by a frustrated condominium owner living in Virginia. After dealing with Floridians' issues concerning mandatory community associations for a while now, it was a real revelation to hear an outsider's admiring take on us.
Jack wrote to me about the ongoing struggle he is having in his Reston, VA homeowners' association. Among other issues, the board president has apparently claimed the association's website as his own private turf. Jack also expressed concerns about the integrity of his community's annual election. I asked him if Virginia Statutes provided for a Condominium Ombudsman (to monitor the election) and he said the Office of the Common Interest Community Ombudsman was recently created there in 2008 but with relatively little enforcement authority.
In Florida, we certainly are a lot farther down the path than most other states with common interest ownership communities. We definitely have the lengthiest common interest statutes if not the clearest. We have the most organized advocacy groups and perhaps the most educated legislators on these issues. For $4.00 per unit, the following resources are supposed to be available to a condominium owner in the State of Florida: the Division of Florida Condominiums, Timeshares and Mobile Homes (for education and enforcement), the Condominium Ombudsman (a neutral resource to defuse situations that might otherwise escalate to the point of needing the Division's investigatory resources) and a host of Select Committees designated at varying times by the Legislature to address condominium and homeowners' association issues.
Jack ended his email to me with the following sentiments: Florida may have problems but from what I see, you have more legislative "teeth" to protect the homeowners. I am jealous as to how much more "advanced" you are in FL.
It was nice to hear, for a change, that a citizen of another state looked at those of us living down here with envy rather than pity. I only hope someone from Montana (with its extremely concise and well worded Unit Ownership Act) doesn't write in to tell me we have it all wrong!
Jack wrote to me about the ongoing struggle he is having in his Reston, VA homeowners' association. Among other issues, the board president has apparently claimed the association's website as his own private turf. Jack also expressed concerns about the integrity of his community's annual election. I asked him if Virginia Statutes provided for a Condominium Ombudsman (to monitor the election) and he said the Office of the Common Interest Community Ombudsman was recently created there in 2008 but with relatively little enforcement authority.
In Florida, we certainly are a lot farther down the path than most other states with common interest ownership communities. We definitely have the lengthiest common interest statutes if not the clearest. We have the most organized advocacy groups and perhaps the most educated legislators on these issues. For $4.00 per unit, the following resources are supposed to be available to a condominium owner in the State of Florida: the Division of Florida Condominiums, Timeshares and Mobile Homes (for education and enforcement), the Condominium Ombudsman (a neutral resource to defuse situations that might otherwise escalate to the point of needing the Division's investigatory resources) and a host of Select Committees designated at varying times by the Legislature to address condominium and homeowners' association issues.
Jack ended his email to me with the following sentiments: Florida may have problems but from what I see, you have more legislative "teeth" to protect the homeowners. I am jealous as to how much more "advanced" you are in FL.
It was nice to hear, for a change, that a citizen of another state looked at those of us living down here with envy rather than pity. I only hope someone from Montana (with its extremely concise and well worded Unit Ownership Act) doesn't write in to tell me we have it all wrong!
Thursday, December 03, 2009
More financial questions your board should be asking.
One of an elected board's most significant responsibilities is the handling of the members' money. Every director should understand that being a good steward of the common funds is paramount to the job. Part of that job is spending common funds in accordance with the statutes and the association's governing documents and the other part of the equation is ensuring that there is a system of checks and balances in place to detect and prevent possible fraud.
Here are some more questions your board and association manager need to be discussing:
1. Are all supporting documents properly canceled at the time checks are signed to prevent duplicate payment?
2. Is signing blank checks prohibited?
3. Are dual signatures required on checks and must a member of the board serve as one of those dual signatories if a manager can sign checks?
4. If check signing machines are used, are facsimile signature plates adequately safeguarded, used in the presence of the custodian and controlled by using numbering devices?
5. Is custody of checks after signature and before mailing handled by an employee independent of all payable, disbursing, cash, receiving and general ledger functions?
6. Are bank accounts reconciled within a timely specified period after the end of each month?
7. Are reconciliations made by someone other than persons who receive or disburse cash?
8. Does the President, Secretary or Treasurer receive the bank statements unopened from the banks?
9. Are checks that are outstanding for more than 90 days investigated and payment stopped?
10. Does the Treasurer or other director periodically compare actual cash receipts and disbursements to budgeted cash receipts and disbursements and investigate further when there are significant variances?
If you sit on a board of directors and you have never asked or been asked any of the questions outlined in today's blog and yesterday's, it's time to find out who is minding the store.
Here are some more questions your board and association manager need to be discussing:
1. Are all supporting documents properly canceled at the time checks are signed to prevent duplicate payment?
2. Is signing blank checks prohibited?
3. Are dual signatures required on checks and must a member of the board serve as one of those dual signatories if a manager can sign checks?
4. If check signing machines are used, are facsimile signature plates adequately safeguarded, used in the presence of the custodian and controlled by using numbering devices?
5. Is custody of checks after signature and before mailing handled by an employee independent of all payable, disbursing, cash, receiving and general ledger functions?
6. Are bank accounts reconciled within a timely specified period after the end of each month?
7. Are reconciliations made by someone other than persons who receive or disburse cash?
8. Does the President, Secretary or Treasurer receive the bank statements unopened from the banks?
9. Are checks that are outstanding for more than 90 days investigated and payment stopped?
10. Does the Treasurer or other director periodically compare actual cash receipts and disbursements to budgeted cash receipts and disbursements and investigate further when there are significant variances?
If you sit on a board of directors and you have never asked or been asked any of the questions outlined in today's blog and yesterday's, it's time to find out who is minding the store.
Wednesday, December 02, 2009
Internal financial controls for your association.
It's the calendar year-end which means boards must be in the mindset of planning financially for the upcoming year. Financial statements need to be prepared as well as new budgets. This is also a good time to start thinking about what internal controls your association has in place to protect you from fraud and waste.
Here are some tips gleaned from the Guide to Homeowners' and Other Common Interest Realty Associations (a publication widely used by accounting professionals):
Ask yourself these questions about your association's current financial practices:
1. Is the bank immediately notified of all changes of authorized check signers?
2. Does the association require dual signatures on withdrawals from reserve funds?
3. Are all employees handling cash bonded?
4. Are checks restrictively endorsed "for deposit only" by the individual who opens the mail when received?
5. Are receipts (checks and currency) deposited intact on a daily basis?
6. Does the association use a lockbox or electronic transfers to collect assessment revenue?
7. Do adequate physical controls exist over cash receipts from the time of mail opening until the time of bank deposit?
8. Are monies designated for future repairs and replacements deposited to separate bank accounts?
9. Is access to computerized cash receipts records limited to those with a logical need for such access?
10. Are checks prenumbered and used in sequence?
11. Are controls over unused checks adequate?
12. Prior to checks being prepared are the following compared: (i) purchase order (ii) receiving report (iii) vendor invoice?
13. Do only persons authorized to prepare checks have access to blank checks?
14. Are checks made payable to specified payees and never to cash or bearer?
15. Are all check numbers accounted for?
16. Are voided/spoiled checks properly mutilated (signature portion removed) and retained?
With some associations handling operating budgets in the millions of dollars, these are just a few of the questions your board should be discussing as you plan for another year of "doing business". I'll give you more financial food for thought throughout this week.
Here are some tips gleaned from the Guide to Homeowners' and Other Common Interest Realty Associations (a publication widely used by accounting professionals):
Ask yourself these questions about your association's current financial practices:
1. Is the bank immediately notified of all changes of authorized check signers?
2. Does the association require dual signatures on withdrawals from reserve funds?
3. Are all employees handling cash bonded?
4. Are checks restrictively endorsed "for deposit only" by the individual who opens the mail when received?
5. Are receipts (checks and currency) deposited intact on a daily basis?
6. Does the association use a lockbox or electronic transfers to collect assessment revenue?
7. Do adequate physical controls exist over cash receipts from the time of mail opening until the time of bank deposit?
8. Are monies designated for future repairs and replacements deposited to separate bank accounts?
9. Is access to computerized cash receipts records limited to those with a logical need for such access?
10. Are checks prenumbered and used in sequence?
11. Are controls over unused checks adequate?
12. Prior to checks being prepared are the following compared: (i) purchase order (ii) receiving report (iii) vendor invoice?
13. Do only persons authorized to prepare checks have access to blank checks?
14. Are checks made payable to specified payees and never to cash or bearer?
15. Are all check numbers accounted for?
16. Are voided/spoiled checks properly mutilated (signature portion removed) and retained?
With some associations handling operating budgets in the millions of dollars, these are just a few of the questions your board should be discussing as you plan for another year of "doing business". I'll give you more financial food for thought throughout this week.
Tuesday, December 01, 2009
Victim or Victimizer? It's not so easy to distinguish in association land.
I am often asked if my law firm represents owners in disputes with their associations or only represents "the board". My first response is that we represent the association which is comprised of the individual owners but we must, of necessity, take direction from those owners' elected representatives. Imagine trying to serve 100+ individual masters and the resulting legal fees!
My second response is that yes, we represent owners in disputes depending, naturally, on the validity of the owner's complaint. I will never forget the time I met with a couple who came to my office to discuss the wife's need for a "prescription pet". This couple was being fined on a daily basis for a dog they were keeping in their unit despite a longstanding no pet restriction in the community. The husband gently caressed his wife's arm while describing her depression and the fact that only their new Westhighland Terrier Sparky could alleviate.
The association was represented by a highly respected attorney. I looked over his correspondence to this couple and found nothing overtly disrespectful or incorrect but still felt there was room to negotiate to keep the dog in the home. I took the case and was ultimately successful in not only keeping Sparky in the unit but also having the association waive the accumulated fines. My clients' unit in their high-rise was on the ground floor and bordered the pool. As part of our settlement agreement, they were asked to not allow Sparky to use a small dish garden on their terrace as a litter box of sorts since the odor was problematic.
If you already guessed what came next, you've lived in an association for far too long already! I was contacted 4 weeks later by opposing counsel to say that my clients had not only breached the agreement by allowing Sparky to continue using the litter box but they had moved a new puppy into the unit as well. Apparently one dog alone was not enough to alleviate the depression notwithstanding the fact that the odor from Sparky and the new puppy crying was creating a new tier of depression amongst my now former clients' neighbors. In short, I had been had. It got me to thinking that determining who is the victim and who is the victimizer is not always as easy as it seems at first blush.
My second response is that yes, we represent owners in disputes depending, naturally, on the validity of the owner's complaint. I will never forget the time I met with a couple who came to my office to discuss the wife's need for a "prescription pet". This couple was being fined on a daily basis for a dog they were keeping in their unit despite a longstanding no pet restriction in the community. The husband gently caressed his wife's arm while describing her depression and the fact that only their new Westhighland Terrier Sparky could alleviate.
The association was represented by a highly respected attorney. I looked over his correspondence to this couple and found nothing overtly disrespectful or incorrect but still felt there was room to negotiate to keep the dog in the home. I took the case and was ultimately successful in not only keeping Sparky in the unit but also having the association waive the accumulated fines. My clients' unit in their high-rise was on the ground floor and bordered the pool. As part of our settlement agreement, they were asked to not allow Sparky to use a small dish garden on their terrace as a litter box of sorts since the odor was problematic.
If you already guessed what came next, you've lived in an association for far too long already! I was contacted 4 weeks later by opposing counsel to say that my clients had not only breached the agreement by allowing Sparky to continue using the litter box but they had moved a new puppy into the unit as well. Apparently one dog alone was not enough to alleviate the depression notwithstanding the fact that the odor from Sparky and the new puppy crying was creating a new tier of depression amongst my now former clients' neighbors. In short, I had been had. It got me to thinking that determining who is the victim and who is the victimizer is not always as easy as it seems at first blush.
Monday, November 30, 2009
It's all in the family!
Hopefully you all had a wonderful Thanksgiving. If the leftovers are still good and the out of town visitors are safely on their way back home, consider yourselves fortunate!
If you're like me, you try to keep discussions of work out of your family gatherings. However, with so many people living in common interest ownership communities around the country these days it's inevitable that someone sitting at your table lives in one and has a problem or knows someone who does. My holiday gathering was not immune to the issues plaguing many of you who read this blog.
My older brother lives in a homeowners' association in Indiana that denied his request to build an 8-foot high fortress-like enclosure around his lot; they weren't too crazy about his pool plans either. My sister lives in a Broward County condominium association that is struggling with delinquencies hovering near the 40% mark and further struggling with an unreasonable land lease on their recreational facilities. After paying the lessor each month, the association barely has enough left over for basic community maintenance. As a result, they have been unable to pursue any sort of beautification or improvement projects for years. She'd like to sell her unit and move but its current value is about $50,000 less than what she owes to the bank.
My parents live in a homeowners' association in Weston where they both have served on the board or a committee at one time or another and have seen firsthand how difficult it is to get people to attend the association meetings or even send in their proxies instead. A neighbor has been the subject of bank and association foreclosure actions for well over a year but the parties and parade of new cars in their driveway continues.
My mother-in-law lives in a "55 and Over" community that has its own constant challenges as to whether or not senior housing communities can be realistically maintained in this day and age. If you polled her community members about whether or not they are happy, there would certainly be no consensus about whether the current reserve levels were correct, management was efficient and the vendors used were the best and cheapest out there.
The only one quiet at the table was my baby brother; he and his wife rent an apartment
If you're like me, you try to keep discussions of work out of your family gatherings. However, with so many people living in common interest ownership communities around the country these days it's inevitable that someone sitting at your table lives in one and has a problem or knows someone who does. My holiday gathering was not immune to the issues plaguing many of you who read this blog.
My older brother lives in a homeowners' association in Indiana that denied his request to build an 8-foot high fortress-like enclosure around his lot; they weren't too crazy about his pool plans either. My sister lives in a Broward County condominium association that is struggling with delinquencies hovering near the 40% mark and further struggling with an unreasonable land lease on their recreational facilities. After paying the lessor each month, the association barely has enough left over for basic community maintenance. As a result, they have been unable to pursue any sort of beautification or improvement projects for years. She'd like to sell her unit and move but its current value is about $50,000 less than what she owes to the bank.
My parents live in a homeowners' association in Weston where they both have served on the board or a committee at one time or another and have seen firsthand how difficult it is to get people to attend the association meetings or even send in their proxies instead. A neighbor has been the subject of bank and association foreclosure actions for well over a year but the parties and parade of new cars in their driveway continues.
My mother-in-law lives in a "55 and Over" community that has its own constant challenges as to whether or not senior housing communities can be realistically maintained in this day and age. If you polled her community members about whether or not they are happy, there would certainly be no consensus about whether the current reserve levels were correct, management was efficient and the vendors used were the best and cheapest out there.
The only one quiet at the table was my baby brother; he and his wife rent an apartment
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