Published February 2017
Editor’s Note: The following advice is presented to aid board members in carrying out their responsibilities. While it is not exhaustive, there is much useful information provided by industry experts.
It started as an innocent ride to the third floor. The result was me sitting on the floor of the cab waiting to be rescued by the elevator company. It became apparent that our condominium needed an internal phone system in the cab to dial out for assistance. This worked well the second time I was stuck, and the fire department came since the elevator company had a two-hour rescue wait.
The culprit was leaking oil that diminished the hydraulic power of the circa 1974 elevator. The ensuing saga of the elevator consisted of annual angst over the expense of keeping it operable—the board was advised to maintain the elevator as long as possible since they “don’t make ‘em like they used to.” The board realized that the contract with this particular company automatically renews every five years, and to cancel the company needs 30 days’ notice prior to the renewal date. Beware of recurring contracts!
Some sage advice is to review your service annually and ask for proof of monthly service calls via a signature sheet. Do not commit to long-term contracts that you will be obligated to maintain even if your community is displeased with the service it is receiving. Finally, have an independent engineer inspect the elevator before a repair, so you know where you stand and how to proceed.
Lisa D’Addio is Business Marketing Manager with TRC Worldwide Engineering. For more information on TRC Worldwide Engineering, visit www.trcww.com.
Congratulations on your recent election to the board of directors! I highly recommend meeting with and getting to know your managing agent. He or she is your resource for all aspects regarding your community, from your property’s history to board meeting minutes to the day-to-day operations and financial records. With years of experience, your managing agent should be able to assist with any questions you may have.
What should you expect when hiring a collection agency? The answer is simple—results and communication. Collection agencies can do just that. Provide results. Beware that there is a difference between a collection agency and one loaning moneys against your receivables. I always recommend that the board remain in control of the decisions.
Also, ask a very simple question. What will it cost me to fire you? If there is an expectation that fronted fees must be reimbursed, then re-think the arrangement. Most agencies will work on straight contingency. Do you know the internal collection plan? Whatever it is, stick with it. Turn files over immediately to someone. The lower the balance at placement, the faster the file is to collect and recover.
Having a receivables specialist and a collection plan when a file first becomes delinquent can result in positive cash flow back to the association. The focus should be on the processes to decrease your outstanding accounts receivable.
Melissa Nash is President/CEO of ARI–Accounts Receivables Inc. For more information, call (561) 697-4911 or visit www.4aronline.com.
Water and sewer costs are on the rise, and if not effectively managed they can and will cause problems for HOAs, condominiums, and townhome owners. During budget meetings, the three most discussed topics are insurance, real estate taxes, and—you guessed it—utility costs.
So, how do you bring them under control? What is the permanent solution to expense management? The answer is simple, affordable, and permanent—submetering. Submetering is the act of installing a meter to measure the water use in each home. In doing so, each resident receives their own bill for their own consumption. The days of simply increasing HOA fees in order to cover use and often misuse of water are over. Each home receives their own utility bill and pays for their own usage. As the saying goes, “use a little, pay a little”—use a lot, pay a lot.
Submetering is fair and lawful, and it lowers overall consumption and waste; it’s the cost effective/green approach to saving precious resources. With an investment return of 100 percent in 14–18 months, submetering is commonplace, fair, and the best way to say “No” to increasing rates and waste.
The Condominium Act prohibits any “material alterations or substantial additions” to the common elements or association property without compliance with preconditions stated in the Declaration. If the Declaration is silent, approval of 75 percent of the membership is required. Material alterations or substantial additions are defined to include palpable changes to the form, shape, function, appearance, elements, or specifications of a building, appreciably affecting its appearance, use, or function. Maintenance, repairs, and necessary improvements and modernizations are exempt.
Declarations often require membership approval for association alterations and only board approval for owner alterations, which should be reasonably conditioned on association protections. Commonly flagged concerns are insurance, indemnification, lien removal, post-tension cables, soundproofing, unit combinations, and enclosure of common elements.
How do you know that your reserve study has all the components necessary to evaluate whether the reserves are adequate? It can be answered with, “You don’t know what you don’t know”! Unless you are very experienced with the construction environment, you will likely miss some significant components that should be included in your reserve study without even knowing it.
It is very common during reserve projects to end with a meeting with the client to go over the results of the investigation or study. Often one or more of the components that are discussed in the meeting were overlooked in the association’s current reserve funding. This is often followed by the question, “How much and when do we have to repair or replace the component,” and, “Is there any way to extend its life so that we don’t have to utter those dirty words ‘special assessment’?”
Another twist to reserve studies is that every association is slightly different and has its own documents that often provide some specifics as to which components an owner is responsible for versus the association. Common items that vary between associations for responsibility are doors, screen enclosures, windows, and balconies. This can be further complicated by owner-installed finishes/components.
Unfortunately, many times an association’s reserve consultant was selected based on price rather than qualifications. There are several firms (accounting type) that offer what they call reserve studies for as much as half the fee of what an engineering firm will charge. These studies inevitably only include items that are already on an association’s reserve list and more simply, are an economics study rather than a reserve study, leaving out the most critical part of a reserve study, a real analysis of the actual condition or remaining useful life or current replacement cost of all of the components for accurate reserve funding.
Based on experience some of the items typically not included in reserve studies include expansion joint replacement, below-deck/grade surface waterproofing, planter waterproofing, pool refinishing, seawall replacement, as well as other important components.
With that all being said, the only true way to determine if your reserves include all of the components that will require expenditures during the life of the property is to retain a firm whose professionals are experienced with all types of construction.
Because of their importance to the environment, all species of Florida bats are well protected by Florida state law; but, when they begin to intrude into homes and businesses that people occupy, they can cause significant concern and ultimately damage to the structure of buildings and to the health of the inhabitants.
Fortunately, the Florida Fish and Wildlife Conservation Commission permits Friends of Bats to perform exclusions (removal) under very strict conditions. A valuable bat exclusion company should guarantee their work and the work should be exclusively dedicated to safe, effective, and humane bat colony exclusions.
Hopefully you enjoy the challenge of responsibility and decision-making that comes with helping to run your community association. While they may not always show it, your fellow residents will surely appreciate your efforts on their behalf. In our experience, one of the best things a new board of directors can do is to surround themselves with a supportive team of experts who can help provide guidance and insight, making your experience easier and more valuable to your association. Think of these individuals as your community’s “All-Star Team,” who can draw on a wealth of experience and expertise in helping you with your new role. A reliable property manager, accountant, and attorney are three of the most important positions to fill for any association. Of course, when it comes time to bring in a reserve specialist (RS) to help you with your reserve study and annual budget, we hope you’ll keep Association Reserves in mind!
As a CPA and treasurer of my own HOA board, many would consider it predictable that my advice to help educate new board members on what you should know about taking better care of your community is this: Understand the finances of your association. However, as typical and probably boring as it might appear, almost every important decision you consider and vote on as a board member has a financial foundation and/or result. Choosing a property manager, changing cable/communications providers, types and amounts of insurance coverage, funding reserves for long-term projects such as a clubhouse renovation, and disaster recovery planning all intensely involve dollars. The basic document that determines residents’ maintenance—the budget—intersects every aspect of community life. Managing the collection of the receivables generated by those assessments is critical to a successful association. As a new board member, your ability to understand the basics of budgets, cash flows, and financial reports are keys to your effective stewardship and in turn the community’s achievements. That success earns you your fellow residents’ appreciation or at the least their understanding. Make an effort to “comprehend the numbers.” Ask for help if you don’t understand, and it can make your board tenure truly more rewarding.
You have been elected to the board of your condominium association and are now an expert in pavement, roofs, walls, and accounting. The question is, are you? Unless your life experiences have prepared you for all these different trades, you’re probably not.
Since my expertise is in the roofing industry, let’s look at what you would do in some different roofing situations. A penthouse owner calls to say that his roof is leaking and demands a new roof be placed over his expensive furnishings. Is a new roof always necessary when there’s a leak? The following is a list of steps I would suggest that you take:
• Call a roofer to stop the leak.
• Talk to the bookkeeper or property manager about the history of the roof, such as how old it is and if it has been experiencing a lot of leaks lately.
• If the roof is more than 15 years old and you’ve been getting more than one leak call a year, then you need to go to the next step.
• The next step is an assessment of the roof by an independent expert. This could be an engineer, but most engineers do not have a lot of expertise in roofing. A roofing contractor would have a lot of difficulty in being unbiased since he makes his living reroofing buildings. A registered roof consultant has demonstrated expertise in all types of roofs and can furnish unbiased opinions on whether the roof can be repaired or needs replacement. They can also provide construction budgets for both along with reserve studies, so whether it is roofing or paving or walls, call an expert.