By Susan Fitch / Published February 2019
We are already a couple of months into the new year, and whether you are a newly elected board member or someone who was reelected, you are in the full swing of executing your fiduciary duties.
What can you do to better your community in 2019? Some of the key areas that you can positively and proactively assist your association with include capital improvements, negotiating contracts, and taking measures to cut costs.
On the heels of a healthy economy for quite a few years now, associations have had and will continue to enjoy low unit owner delinquency rates. Unit owners may also be willing to spend money on things such as capital projects. As a result, associations are taking on beautification projects as well as moving ahead with deferred maintenance. While the economy could slow down to a moderate growth, now is still the time to get these types of projects done as a structurally and aesthetically sound building drives unit values up.
Examples of capital improvement projects include lobby renovation, painting, concrete restoration, balconies, amenity repair or replacement, seawalls, elevator modifications, corridor interiors, and so forth. With some of these being multi-million-dollar projects, the association should consider hiring a third-party owner representative for certain projects to assist (in conjunction with the engineer and contractors) with the oversight and logistics of the project. Your on-site community association manager should not be expected to run the day-to-day operations of the association while also having to worry about the day-to-day operations of a multi-million-dollar project. Regardless of the expertise a board member may have as it relates to projects, it is not advisable to take on this role for many reasons, including liability.
Financing options for capital improvement projects include reserves, bank lines of credit/loans, and special assessments. Depending on the type of project and on the scenario of the association, management will work with you to come up with the most feasible option (and payment period), which could end up being a hybrid of the various financing options.
As a board member and unit owner representative, adequate due diligence should be conducted at every level before a capital improvement is undertaken. Making responsible decisions and ensuring that these projects are conducted in an ethical and thorough manner are keys to the process. As liability is a major factor when organizing a capital project, the board should work in conjunction with the association attorney and management team to ensure that all contracts entered into with the engineers, contractors, etc., are reviewed and provide the association with sufficient insurance and indemnification coverage. It is also important that your third-party professionals ensure that all applicable laws and county codes are obeyed and complied with from day one all the way through the completion of the project.
Negotiating contracts is a major responsibility conducted by your management representatives. They can and should assist the board with innovative ways to save the association money on all perpetual contracts and one-off expenses. Contracts, including long-term ones, should be bid out on a periodic basis. When negotiating contracts, it is important not to cut or reduce the level of services (unless your association does have financial issues) provided by your current service providers. Rather, the board should ensure that you are receiving the highest level of service at the best rate possible. This is not to say that you should only be focused on cost, as quality of service, among other factors, is just as important. Instead, you should make sure that you are getting the best deal possible while being able to justify to the unit owners why your service providers are in place.
When bidding out your contracts, ask your management representatives to create an “apples to apples” comparison chart so that all variables such as price, quality of service, relevant resources, track record, contract cancellation terms, annual price escalators, etc., can be considered. During this process, it is also important to truly understand the costs associated with the contract. All service providers are in business to make a profit (including your management company); however, it is important when bidding out your contracts that you are aware of and able to visualize the bottom line price when factoring in all profit centers of the contract. It is in the best interest of your association to facilitate this exercise, and in most cases, to request that service providers also quote a flat fee. The goal of the bidding process is transparency while giving the board the proper information to make educated decisions.
Along with your contracts, ask your management representatives to look into related concepts such as water usage monitoring technology to constantly detect for leaks, LED lighting programs, utility bill and meters review, and so forth.
Being a board member is both rewarding and challenging at times. With this being said, it is key to surround yourself with competent third-party professionals who can assist in facilitating the execution of your duties. You are a volunteer, and the association should provide you with the resources necessary to do so. Your management representatives should stay current with all new initiatives in the marketplace and bring suggestions to you, whether it be a savings initiative or a new major capital project. The condominium association industry is relatively young in South Florida and is ever evolving, with some of the brightest minds entering every year bringing new ideas and concepts to enhance upon the proven, existing ones.
President, AKAM On-site, Inc.