Making Sure That Your Association Is Prepared for the Unexpected
By Mariann Gerwig, CFO, Primary Qualifier, CGC, HI, CFCAM / Published April 2020
Most association boards of directors are prepared for the responsibility of the normal day-to-day operations they are responsible for. Association documents usually state that the board is responsible to run the daily operations and has the authority to do so. However, most documents do not address, or at best are vague on, the responsibilities or procedures for unexpected events.
Normally, the documents are not reviewed periodically to make sure that they comply with changes in State statutes and to incorporate addendums that have been filed over the years. Many are still the same documents created by the developer decades ago. Over the years boards have become aware of situations that were never addressed in the association’s current documents and bylaws that could have prevented conflicts with unit owners and legal fees.
The following is a list of a few ways to help the board become more comfortable in knowing what to do in unexpected situations and to eliminate some conflicts with the members of the association.
Have your attorney review with the board your current association documents, bylaws, and any addenda that may have been filed.
Try to make them easy to understand for the members. This eliminates or greatly reduces misinterpretation by members.
Make sure that they include any State statue changes that would make sections of your documents invalid.
Your documents may limit the percentage by which maintenance dues can be increased annually without a membership vote. That amount may no longer be a realistic amount.
There may also be wording like this regarding special assessments.
An example—An association of 200 units had maintenance dues of $250 per month. The documents allowed the board to issue a special assessment no more than once per year, not to exceed $250 per unit. Being a small association, the membership voted not to maintain reserve funds. This decision led to the result that the board was only allowed to issue one special assessment for a total of $50,000. Several years ago, when South Florida was affected by several hurricanes, it made it very difficult to quickly repair damages that posed immediate danger.
NOTE:In an effort to not upset the membership, some boards avoid increasing regular assessments. However, when unit owners understand reserve accounts are being funded to possibly avoid special assessments, it is easier to accept.
Architectural committee rules should also be reviewed and updated. If not already included, for example, an association should require it be named as an additional insured on any certificates of insurance from contractors directly hired by unit owners. In addition, the architectural committee should inspect the completed work to make sure that the improvements were done as approved by the committee.
The board may want to add a clause requiring owners to reside in the unit for a certain amount of time before being allowed to rent the unit to avoid the increased property flipping that has become very popular.
An appraisal should be done on the common areas every three years.
These appraisals will give you a report of the replacement value, expected life, and remaining life of your replacement items and improvements. This is a great tool for the board to make sure that they have sufficient reserve funds for property improvements. For the associations that do not have existing or adequate reserve funds, it will allow you to plan how to go about funding them.
Many times, painting the building is overlooked. The impression that you may have a ten-year warranty on your last painting project can give a false sense of security. You should ask the paint manufacturer that issued the warranty for a complimentary inspection at least halfway into the warranty. The manufacturer will let you know if the millage of the paint (thickness) is appropriate for the age of the paint and may also be able to point out any other issues that may be having a negative effect on the paint.
The State of Florida requires regular inspection of elevators and commercial pools. Some counties are now requiring 40-year inspections on condominium buildings. However, 40 years is a long time. Some of the best proactive boards have been having structural engineers inspect their buildings periodically (every three, four, or five years) long before the counties were requiring inspections. The advantage in doing this is to discover repairs that were needed before they became extensive. It is much easier to budget small projects over a scheduled period of time. Also, the project can be scheduled to affect only certain parts of the building at a time. An experienced contractor may be willing to negotiate a contract for a phased work project. Depending on the time between the phases, they may be able to hold unit prices or minimize any increases due to material costs.
The best way to prepare for the future is planning, and it will also help future boards. Making a list of projects that may be required now or five or ten years from now allows for planning. It gives the board time to make sure reserve funds are adequate or decide if other funding options will be needed as well as put together teams to research the proper professionals you will need and options that are available.
In closing, you may find that creating a special committee for this purpose alone is a big advantage. The committee can create a list of projects and meet with the board to prioritize the list. Having a committee of owners involved in this manner helps two-fold. First, the membership does not get the impression that the board comes up with projects due to some self-serving agenda; and second, the committee answers to the board, so control of what projects have priority is still a board decision.
Mariann Gerwig, CFO, Primary Qualifier, CGC, HI, CFCAM, is with Promar Building Services LLC CGC 060027 You can contact her at Mgerwig@Promar Building.com or learn more about the company by visiting www.PromarBuilding.com.
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FCAP (Florida Community Association Professionals) is a member-based professional organization dedicated to training, equipping and advocating for Florida community association professionals including managers, service providers and community volunteer leaders.