Association Management: Associations Have Options

Association Management: Associations Have Options

Choosing management assistance is one of a board’s most important decisions. Even the smallest associations will benefit from some form of professional management. What is a “Manager”? Managers carry out the association’s day to day operations, advising and providing information to the board and carrying out its policies and instructions regarding association property and funds. A manager may be an unpaid volunteer or may be paid. The paid manager may be an association employee, a consultant, or an employee of an outside company. In California, no license is needed to manage HOAs. Volunteer management Many associations use volunteers for their management functions. The motivation for volunteer management is primarily to save cost. In volunteer management, volunteers place themselves in the role of an unpaid manager – with all of its risks and no reward. Volunteer managed associations often find it difficult to find candidates for the board, since directors work so much harder when they are also managers.  Financial management This involves collecting assessments, paying bills, and preparing monthly and annual financial reports, disclosures, and budgets. A financial manager typically does not visit the property. Management companies often prefer financial management because it is more predictable and less prone to the extra work of managing the property. Some accountants also offer financial management services. Associations struggling with the cost of full association management may wish to consider at least financial management. Property management Property management involves responsibility for keeping up the condition of the buildings and grounds and may include routine inspections for architectural violations, maintenance items and repair needs. The plumbing leak on a Sunday afternoon and the...
2019 Bills Proposing New HOA Laws Are A Mixed Bag

2019 Bills Proposing New HOA Laws Are A Mixed Bag

This year Sacramento presents another spring season full of ideas for HOAs – some bad, some good, and some well-intentioned but needing revision. SB 323 Senate Bill 323 is a recycle of last year’s SB 1265, a bill vetoed by Governor Brown in September 2018. SB 323 would add burdensome new elements to the HOA election process and dictate to HOAs who could or could not serve as directors. The bill is as bad an idea this year as it was last year. As Governor Brown wrote while vetoing its predecessor, SB 323 “takes a once-size-fits-all(sic) approach, but not all homeowner associations are alike. If changes to an election process are needed, they should be resolved by the members of that specific community.” Associations should set their board eligibility standards, not Sacramento. SB 652 SB 652 addresses the conflict between architectural conformity and religious observance. Does a Jewish Mezuzah or Christian cross violate rules banning alteration of doorways? SB 652 would add a new Civil Code 4706, prohibiting associations from limiting or prohibiting display of religious items on entry doors of a member’s residence. There is no limitation on size, number, or appearance of doorway decorations, so long as they are religious. Perhaps some reasonable limit could be stated. Coauthored by sixteen legislators, it awaits committee assignment. SB 434 SB 434, authored by Senator Archuleta of Southeastern L.A. County, proposes to add a new Civil Code 5382. The proposed statute would require managing agents to produce the association’s records and property (manuals, transponders and keys, for example) within a certain time after termination and/or association request. Managers could not...
Why Governing Documents Matter

Why Governing Documents Matter

Governing documents are critical for HOA communities and are literally the legal glue which holds the association together. Civil Code Section 4150 defines “governing documents” as articles of incorporation, CC&Rs, bylaws, and operating rules, but I think subdivision maps and condominium plans also should be regarded as governing documents. Each has a distinct purpose and function, and every HOA member should have copies. Subdivision map and condominium plan This document breaks up land into separate pieces of land or airspace sold to homeowners in planned development (“lots”) or condominium (“units”) projects. This document is recorded (i.e. filed) with the County Recorder, is easily retrieved, and defines the “common area” as well as the “separate interest” (i.e., the lot or unit). Sometimes it also delineates exclusive use common areas or maintenance easement areas. It establishes the real estate interests owned, so any amendment requires agreement of 100% of association members and their mortgage holders, and consequently amendment is highly unlikely. Articles of incorporation Articles of Incorporation establish the legal “person” of the association. Filed with the Secretary of State, this document can be retrieved from that office. Older Articles sometimes contain important information about limits on the association or board’s powers. The Articles list the association’s legal name and can be amended by membership vote, although amending is rarely necessary. Check the association’s corporate status at https://businesssearch.sos.ca.gov. CC&Rs The CC&Rs document is recorded (amendments also must be recorded), and therefore is also a public document. Associations often use unrecorded, unofficial copies, but official copies can be retrieved from the County Recorder. CC&Rs are a long contract automatically binding all owners,...
What Makes a Director Outstanding [Part 4] – Participation in Board Meetings

What Makes a Director Outstanding [Part 4] – Participation in Board Meetings

Productive and efficient meetings are not happenstance but are the result of committed and prepared volunteers, normally assisted by a great professional manager. To help bring about the best board meetings: Read the agenda packet Come to the meeting prepared, having already read the agenda and the supporting materials. The packet is provided in advance to prepare you to make the decisions presented. Reading it for the first time at the meeting disrespects the other directors, indicates lack of commitment, and delays meetings as one “gets up to speed.” Stay on topic A single director can derail discussions by moving on to a different topic before the current one is concluded. Politely remind colleagues when deliberations stray from the matter at hand. Talk to the board, not the audience Directors attend board meeting to deliberate with board colleagues, not the audience. Grandstanding by speaking to the audience disrespects other directors and encourages raucous meetings. Ask the manager for input on most motions The board’s most frequent protector under the Business Judgment Rule is the manager, so seek the manager’s input. The manager often has years of experience and training; take advantage of that background. If a manager’s input isn’t being sought, why have them in the meeting? Treat open forum as an important event and pay attention California law requires open forum at all membership meetings and open board meetings. That is the time for the board to listen to the community. Take notes and don’t interject or argue. Open forum reminds directors that they are there to serve their community, and often helps the board learn things they...
What Makes a Director Outstanding [Part 3] – Understanding How The Role Is DIFFERENT

What Makes a Director Outstanding [Part 3] – Understanding How The Role Is DIFFERENT

All the knowledge and experience from the working world (“day job”) can actually hinder a volunteer’s effectiveness in the world of HOA governance if the differences between the two worlds are not understood. Outstanding directors have learned that much of what worked for them in their day job will likely work poorly in the context of board governance. The chain of command is completely different in a community association. In the workplace, there is usually a person who is the “big boss”, somebody who is your immediate supervisor, and someone who you supervise. In the association, no single person is in charge. Decisions are made by the board, so the chain of command is horizontal and not hierarchical. The president in a common interest development is not the “big boss.” The president has far less power in most nonprofit corporations since all important decisions are made by the board, and so the president’s vote is no more important than any other. In this very different paradigm, the individual director typically has no personal power. Once directors embrace the framework of the board as decision-maker, they understand that they cannot make individual promises. This restraint can be very freeing since no individual is responsible for the association and its actions, as all decisions is made by board vote. So, when confronted at the pool or parking garage by homeowners demanding action, the director can truly say they can’t individually do anything and suggest the homeowner bring their concern to management or to a board meeting. Directors failing to adapt to the group decision-making process will often stray outside of corporate...
What Makes a Director Outstanding [Part 1] – Attitude

What Makes a Director Outstanding [Part 1] – Attitude

A community association is no better than the board of directors which leads it, and excellent associations require excellent volunteer leaders. Truly exceptional volunteer governance is not a happy accident, and it often has little to do with a volunteer’s background, training, and experience. Instead, it is the result of hard work and the pursuit of proper values, foundational understandings, and perspectives. This week launches a four-part series regarding what makes (or should make) a volunteer director truly outstanding. Attitude makes the difference All the knowledge in the world and the best experience means nothing if the volunteer has the wrong attitude regarding the position of HOA director. Look for people who demonstrate the attitudes described below. Excellent board members understand that their position is one of service rather than control. They serve their neighbors; they don’t supervise them. A service-forward attitude fosters a less defensive perspective in which new ideas and opinions are welcomed and not perceived as insults or threats. The best leaders know that board service is not an accomplishment or distinction to be defended and preserved. Directors seeing the position as an achievement will be less likely to receive criticism and new ideas in a healthy manner, may be less willing to listen to the advice of others, will be threatened rather than encouraged by new ideas, and will be more deeply offended by disagreement. Directors concerned about their status may be prone to overly attend to protecting their reputation rather than the association’s welfare. Directors must understand their limitations The best accept that they do not know everything; they rely upon managers, consultants, and...
Make a Target! Goals for 2019

Make a Target! Goals for 2019

The late and legendary coach John Wooden said “The most important key to achieving great success is to decide upon your goal and launch, get started, take action, move.” Your association might benefit from setting a few goals, and then moving to achieve them. Here are some ideas for goals in the coming year: Increase the association’s reserve funds by 15%. The closer the association is to a fully funded reserve account, the more financially secure it is. Reduce assessment delinquencies by 20%. Make sure the association has all the Annual Budget Report (Civil 5300) and Annual Policy Statement (Civil 5310) items and annually provides them to owners. Improve member communication and save money by encouraging members to accept communications by email. The law now allows such a consent to be sent by electronic mail. Update the association CC&Rs and bylaws if they are the original documents or are at least 15 years old. Make sure the documents use the current Civil Code references which have been in effect since 2014. Updating the statutory references can be accomplished by board motion (in an open meeting) under Civil 4235. Review and update the rules. Remove rules discriminating against children or which are outdated and no longer enforced. Make sure the HOA has all the legally required rules. Hire an independent consultant to provide a comprehensive assessment of association maintenance and repair needs, to discover any overlooked problems before they become more expensive later. The consultant should NOT be a candidate for the work, so there is no mixed motive in their recommendations. Re-evaluate and update the association web site (or...
Preparing for and Dealing with Disaster

Preparing for and Dealing with Disaster

An unfortunate reality is that occasionally communities can be confronted with disaster, when earthquake, wildfire, or other calamity can transform a community within a few hours. Planning for the unthinkable can improve the association’s recovery prospects. Preparedness: Enhance communication. Embark upon an aggressive campaign to build email contact points for every association resident or owner. The ability to flash bulletins to owners is critical in emergencies and saves labor and postage and increases communication in normal times. Check the association insurance. Does the association have replacement cost or code upgrade coverage? What is covered? Some years ago an association sustained hundreds of thousands of dollars of landscaping and irrigation equipment destroyed in a major brush fire. Fortunately, their policy covered landscaping and the insurance paid to restore common area hillsides. Does the association have earthquake coverage? Check the deductible and inform members of the amount that will be association responsibility in the event of major seismic damage. A meeting with your broker may reveal gaps or inadequacies in the association’s insurance protection. Create emergency policies and plans. The manager should be empowered to respond to emergencies, and each director should know association policy regarding who makes emergency calls to vendors if the manager is not available. Risk management. Is the association adjacent to any hillsides or other brush areas? When was heavy vegetation last cleared from the association perimeter? Your local fire department or a consultant may provide a risk assessment. The Emergency: Immediate Actions. Call first responders. Call management. Issue an update via email and bulletin board, avoiding unsubstantiated reports or anything promoting panic. If evacuation is not...