Community Association Matters

Special Assessment! I am sure those two (2) words alone got your attention. It probably even made the hairs on your body stand up. Condominium and homeowner association Boards hate those words, but it is a necessary evil. Especially for associations that do not have reserves in place to cover their major assets, such roof, pool equipment or resurfacing, replacement of gates, painting, or resurfacing of the roads. However, if your community has to replace its roof and you do not have the reserve funds available to cover the cost, your association must pass a special assessment.

What happens if you have to replace the roof now and cannot wait until the special assessment is paid in full by all members? Is a loan the right fit for your association? Only you as a Board can determine what is the best solution for your community, but if you decide that getting a loan is the right thing to do then I recommend that you listen to this week's podcast of Community Association Matters. I sat down with Cesar de la Noval from Executive National Bank to discuss their process for approving loans to associations.

Before I go any further, it is highly recommended that you contact your association's attorney to determine that you (1) have the ability to request a loan on the association's behalf and (2) whether there are any specific requirements, voting or otherwise, that can significantly hinder the process.

It is important to note that not all banks are the same and not all banks understand community associations. Some conventional banks have requirements that do not apply to condominium or homeowner associations. Before selecting a bank you should ask them what are their requirements for qualifying your association, in addition to their rates and term.

For example, Executive National Bank does not require that the individual Board members sign personal guarantees and they do not file a lien on the association's property, thus allowing owners to freely sell their unit. This is very important, especially since members of the Board change from year to year.

The bank will most likely ask for the following documents:

• A completed application;
• List of Board members;
• A roster of owners;
• A list of the units rented;
• Current budget;
• Two most recent year end financial reports;
• Two most recent tax returns;
• Most recent interim financial statements;
• Aged Accounts Receivable Report;
• Complete set of the association's governing documents;
• Letter from attorney certifying that the association may borrow the funds; and
• Copies of the signed contract and other proposals.

Once they receive these documents, the bank may perform a physical inspection of your community.

There are several factors that are taken into consideration when underwriting a loan. Executive National Bank requires that the delinquency rate be no higher than 10%. They specifically look at units that are more than 60 days delinquent. Some banks look at anything over 30 days. It is important to know where your community stands in this regard. Many banks will not even bother moving on to the next step if the association is unable to qualify for this basic requirement.

Executive National Bank also considers the number of rented units in your condominium or homeowner association. If you have more than 80% of the units rented, they may not approve your loan. They also take into consideration whether one (1) investor owns multiple units and the impact the special assessment or increased payment may have on that one (1) investor.

They would also like for the special assessment not to exceed 50% of the maintenance fee amount. For example, if your maintenance fee is $200 a month, the special assessment monthly installment cannot be greater than $100. The process can take weeks or months; it all depends on how quickly you are able to get the documents to the bank and whether or not a vote of the membership is required. Your association documents may have some other sort of requirement; it is crucial that you get your association attorney involved early on in the process.

Cesar recommends that if you do take out a loan make sure it does not have a prepayment penalty. If an owner is able to pay the special assessment early, you want to make sure that the association is not penalized for that action. Most banks require that the association's bank accounts are transferred to the bank that provides the loan. This is because they want to establish a relationship with you and for them to have a better picture of your financial situation.

There a lot of factors that you as a board member must take into consideration when considering to get a loan for your next project. Loans can certainly help cash flow and allow you to resolve a serious problem now rather than later. But it does not come without risk. It is important that you get your association attorney involved early on in the process so that you can prevent potential problems. To listen to the podcast in its entirety click here. Don't forget to check out our Facebook page for upcoming seminars and events. To get more information on how Executive National Bank can help your community, you may reach Cesar de la Noval at (305) 256-3311 or email him at [email protected].

During one of our previous podcast and blog, we discussed how to properly vet your vendors to help ensure that you have picked someone reliable and who will execute a timely and professional job for the association. But who manages the vendor? Who inspects and creates the punch lists throughout the job? Who checks up on inspections and the results of those inspections? In short, who supervises the supervisor? In the end, the vendor will be the expert and it is imperative that the right company is chosen for the job.

While Board members and property managers are not project managers, there is a list of things that they can do to help keep the project in question moving along.

1. Meet with the vendor often to discuss what was completed and what is next. The vendor should provide to you an understanding of the work, which was just completed and what to expect next. You should be able to track the work and look for proper workmanship. Did they clean up after themselves? Were they timely, did they properly relay any issues to you and offer solutions? Be wary of constant change orders and it is important you do whatever you can to keep them honest. Again, picking a good vendor is paramount.
2. What inspections will be involved? Track the inspection by visiting the municipality's website (time and day if possible) and to view inspection results. The inspectors will ensure that the follow-up inspections will have corrected deficiencies. It is highly recommended that you keep a record of those inspections and when they were finalized.
3. Ensure that you have money on the association's side. Whenever possible do not pay the vendor too much in advance. Too often paying the vendor in advance leads to gaps between phases of work. In South Florida, we see a high volume of vendors that are more interested in being paid and not as interested in whether they took pride in their work. Look for vendors who take pride in their punctuality, cleanliness, and workmanship.
4. Once you pass final inspection, print it and keep a copy for your records. You want to have that in your hands prior to releasing any payments. Sometimes the vendor will press you for final payment prior to passing inspection or prior to providing you with a release of lien.
5. Even if you pass final, ensure the vendor has been provided a final punch list of items so those items can be corrected prior or immediately after final inspection passes. I personally always try to have the punch list provided prior to final inspection so as to give the vendor ample time to correct any deficiencies. If you pass final and the punch list has still not been cured, I do withhold payment (of course you want to check with the attorney to ensure that you can do this). A lot of times there is a small 10% retainer built into the vendor and association contract specifically for this reason. The association attorney would come into play with a review of the contract prior to the commencement and that retainer to ensure that said language has been inserted into the contract.
6. Ask for a release of lien (if applicable) prior to releasing any final checks. This is very important. I have seen associations come to Allied from other management companies and one of the issues they have is that a supplier has filed a lien on the association for lack of payment. The vendor was paid in full and failed to pay the supplier; this could be done by a roofing material supplier or a painting manufacturer. The association would then either be involved in litigation or pay the amounts owed to the supplier after all due diligence has been exhausted.

I strongly recommend that you pay attention to detail along the way so as to avoid surprises. There will be issues along the way. Construction is at times unpredictable and unforeseen issues do arise. Look for all possible alternative solutions and not necessarily the least expensive ones. The long term success of the project depends much on making the right decisions regarding work order changes, materials used, and how you handle certain construction issues that arise during the project.

For more information please visit our website www.alliedpropertygroup.net.

I went to a presentation before an HOA a few years ago. I remember being all excited about the presentation and the possibility of picking up the business. We had just opened Allied Property Group and any business at the time would have been welcomed. The Board for that community had decided to schedule the presentation during a Special Assessment meeting. From the moment I walked in to that meeting, I felt the tension. The owners were all talking at the same time and some were even screaming.

The Board was engaged in this screaming match with the owners. I kept thinking of my mother and how she calls me everytime there is a condominium meeting gone wrong being showcased on the Spanish news. It truly felt like this meeting was evolving into its own telenovela. After sitting in the meeting for 30 minutes, and all of a sudden, a board member picked up a chair and was about to throw it at an owner in the audience.

Needless to say, I walked out of the meeting and did not make the presentation. All too often this is common place in Association meetings. Especially during Special Assessment and Budget meetings. After managing for almost 15 years and serving in this industry for more than 25 years, I have learned there are three (3) things that can help you run a successful meeting in a tense situation. The first thing you want to make sure you do is set the stage early on; review the agenda and do not deviate from it. The second thing is provide supporting documentation that the owners need to better understand the circumstances surrounding the special assessment or maintenance fee increase. Last, but not least, is that as a Board you always must maintain control.

It is important that associations consult their attorney for the best way to implement this procedures. Every association is different and so are their governing documents. You want to make sure that before you implement any new rules you are aware of the proper procedures. So how do you set the stage? You set the stage by introducing yourself and the other board members. If you have a professional present at the meeting to provide a more detailed explanation, introduce them as well and explain why they are there. You then state the procedural rules that you have adopted and carefully review the agenda to make everyone aware of the topics you will discuss.

It is always a good idea to have extra copies of the agenda. Sometimes we have a section on the sign up sheet where the owner can indicate if they wish to address the board on any particular matter on the agenda. You should be clear that everyone who signs up to speak will have the opportunity to address the board and/or ask questions. Inform the owners that they will have a 2-minute limit in which to address the board. The time limit is irrelevant, you can make it 2, 3 or 5 minutes; the point is to set a limit for each owner to ensure that everyone has an opportunity to address the board. I recommend that you inform the owners the reason for having time limits. People are more open to accepting procedures that they understand.

You can give the owners this opportunity to speak at the beginning or end of the meeting. Some would argue that you can put it at the beginning of the meeting so that the owner can express their concern and not have to sit thru the entire meeting. I am a fan of doing it at the end of the meeting. If you did a good job during your meeting and explained everything, the number of questions that remain to be asked will be minimal.

It is fine if you do not use this method. There are a variety of other ways in which to control owner participation and maintain order. Whatever method you choose is fine, just have a method in which to recognize owners and give owners the opportunity to speak.

Secondly, you should provide as much information as possible related to the subject matter. I say this because a lot of times owners do not attend the board meetings where the actual discussion and considerations that lead to the decision to increase the maintenance fee or that led to the special assessment. It is important to have your documentation ready to show to the homeowners that you need to pass this special assessment.

If you are replacing an item that breaks down or the roof, it does not hurt to have owners present at the meeting that are suffering from a leak in their unit. The owner affected by this roof leak will become an advocate for the new roof and the special assessment to cover it. In addition, have the invoices present to show the amount spent on those repairs. A professional opinion to show the cost savings by replacing the item versus repairing it is also helpful. As a qualified specialist, vendors are in a unique position to offer more details than you or your manager.

You also want to provide the proposals that you have acquired from the different companies/ vendors. If it is an increase in the budget that is making the meeting contentious – provide evidence of the expenditures that caused the increase. If it was an insurance premium – provide copies of the invoices. If you are not able to bring these documents to the meeting, in the very least post them on your community website or ask owners to provide their email address so that the proposals can be emailed to them. Make it as easy as possible for the owners to access this information.

Don't forget to bring the minutes of past board meetings where these items were discussed or again, inform the owners that it is available to them at the association's website. Do not chastise owners who did not attend past board meetings. They may not have been able to attend for a valid reason.

But all of this is lost if you do not gain control of the meeting and stick with the agenda. As Board members you have business to discuss; business the affects the association. Your Board meetings is where you discuss this business. If you allow owners to run the meeting, you will never discuss that business and you will not achieve your goal. If owner is being disruptive, in a polite but firm manner inform the homeowner that he is being disruptive and is out of order. If the owner continues to be disruptive then ask the owner to leave the meeting. Everybody should follow the rules as they allow everyone the opportunity to get the information that they need.

My experience has been that if you lay this groundwork, state the rules, you provide the documentation and you give everyone an opportunity to speak, the owners will respond positively. Do not forget to always consult with your attorney before implementing any of these rules so that he or she can guide you as to the proper way in which your Board can implement these procedures.

Don't forget to visit our website www.alliedpropertygroup.net for more information. Please like us on our Facebook page and send in your contact information to receive future blogs and information on upcoming educational seminars free to Board members.

Now a days everything is smart? We have smart phones, smart TVs, and even smart watches! But smart cameras? Believe it! Most communities have surveillance cameras to deter crime or property damage. Something happens in the community and then we look at the video footage to see if it captured the event.

What if the cameras can be reactionary and not just preventative? Jason Mulhilvill of Kent Services sat down with us this week to discuss Kent's vertically integrated services. By introducing analytics, they now offer smart cameras. Analytics can turn a traditional passive system to a smart camera. This allows them to provide real time information and is a proactive security measurement. Now you are thinking that this can be expensive or you will have to purchase new equipment, not so says Jason. They can go into most existing systems and add that analytics platform to the cameras.

A community will most likely not have to purchase new equipment to make it match with the new software. So what is video analytics? It is a platform that is installed in the equipment. The area covered by the camera is then masked. If someone encroaches in that area, the cameras will pick it up and send an event notification. The cameras can distinguish whether it is an animal, a vehicle, or a person entering that area. The event notification is sent to the designated individual(s); whether it is the manager, a board member, or an onsite security guard.

The event notification feature gives real time information and allows the parties to receive information as soon as the event is triggered. For example, if your community has surveillance cameras in the pool area and your pool hours are from 9am to 8pm. Then someone enters the pool area at 8:30pm; an email is sent to the designated parties. Lets say you wish to search for this event/incident. With this system, you now have the ability to search for this event. Rather than spending hours reviewing video footage, your security team, committee, or property manager can merely type in a certain time frame and it will take them directly to the event within the search criteria.

With the analytics platform, the cameras also become interactive. When there is an event, the command center receives a notification and can see the event occur in real time. The cameras will also be able to identify the location of the event. The guards at the command center, thru a speaker, can communicate with the perpetrator and/or call the police as soon as the incident occurs. This is an extremely effective tool and can prevent a crime from being committed or a tragedy from occurring.

This system can also work in tandem with Kent's BMX software. BMX is a video tele-entry system. This system allows residents to provide a virtual key, which is a QR Code, for special visitors, such as their landscape crew, a nanny, or a housekeeper. The resident can control who receives them and on which day and time that individual is allowed to come in. Management can then run reports to determine who has received a QR code.

This system can also be used as a Smart Guard; where the camera system and intercom can eliminate the guardhouse position. This can represent a significant savings for many communities. The association can also restructure their budget and perhaps add other security measures, such as a roving patrol. There are a variety of ways in which this system can be implemented. In one case there is a guard that will tend to the visitor and the other a computer that greets the visitor. This system also makes it easy to run reports to show when someone gains entry. For communities that have unmanned gates, an LPR (license plate reading) camera and an overview camera can be installed at the entrance to capture and record who is coming in.

For more information on these systems, you may call Jason at 305-815-2789 or email him at [email protected]. You can also visit kenttechnologies.net. As always Allied Property Group is here for your management needs. Please call us today at 305-232-1579 and find out how we can help your community.

It's the middle of the night. Everyone is fast asleep and all of sudden you hear the water trickling down. You wake up thinking that you left the kitchen faucet on but you wake up to find that your entire apartment is flooded! You immediately get out of your sleepy haze and wake up to the sobering reality that a common area pipe has just burst. Do you know what to do? More importantly, does your property manager and maintenance staff know what to do?

More often than not, this situation is overwhelming. However, it doesn't have to be. According to JP from Super Restoration, having a plan of action and preparing for these scenarios can make an unbearable situation a little easier to deal with. In addition to ensuring that your association has an Emergency Plan of Action and a Maintenance or Preparedness Manual, it is equally important to train your staff and run thru a drill on a quarterly or semi-annually basis. Front desk personnel, the concierge, maintenance staff, the manager, security personnel, as well as several Board members should be acquainted with the location of the buildings' shut off valves.

In case of a pipe burst, those individuals should know where to turn off the water to prevent additional damage. Next, they should identify of the source of the leak. Whether it is a fire sprinkler head that needs to be replaced or a common area pipe that needs to be repaired; it is important to identify the source so that you can make the necessary repairs and get the water turned back on.

Once the water has stopped and other mitigating measures have been taken, you should notify the insurance agent and begin getting insurance involved. Identifying the responsible party is part of their job. Most likely insurance will name their own private adjuster to investigate the cause of the loss. Most of the time these acts are normally covered by insurance. It is important to ensure that as a Board member you are familiar with what is and is not covered by your insurance policy. Ask the agent for a meeting and ensure that you understand your insurance policy. Ask your agent what are the exclusions in the policy? Mold is more often than not an exclusion to most policies.

Your next step should be to get a restoration company out to the property. Super Restoration assigns a crew to each floor. They begin by extracting the water to prevent it from moving further and causing more damage. They then install blowers to begin drying the affected areas. Dehumidifiers are then brought in to evaporate the water that made contact with any surfaces, i.e. walls, carpets, etc. The dehumidifiers will remove any humidity and will dry the surfaces to prevent mold.

JP adds that mold can start growing within 24 hours or 2-3 weeks depending on the temperature in the room. It is important that the temperature in the walls and floors be taken to identify secondary damage. This is the water damage that you cannot see; a common example of this is water that gets into drywall, the wall absorbs it like a sponge and those walls remain wet. We cannot see or even touch this type of water damage; you need specialized equipment that helps identify those locations. It is important that these areas be identified so that the appropriate measures can be taken to immediately dry those areas and prevent a more costly loss, such as replacement of the affected areas.

This step alone can save associations and property owners thousands of dollars. According to JP, the drying process takes three (3) to five (5) days. Super Restoration returns every day to measure and re-evaluate what the moisture content is and ensure that it is going down. If the moisture content is not decreasing and it is not at the industry standard for mold content by the fifth day, you must replace the affected areas.

JP recommends that the every Association invest in a high capacity water extraction machine. These machines cost anywhere from $700 to $1,000 and can extract 100-150 gallons of water at a time. He also recommends that associations purchase a moisture detection device. These typically cost anywhere from $300 to $500. They help to identify water damage inside the drywall or carpeting. This will allow maintenance personnel to immediately react and begin mitigating damage.

Now to prevent this from happening in your community, associations should have their maintenance staff be pro-active and reach out to the air conditioning tech, mechanical engineer, and plumbers to perform a preventative inspection to make sure the building is running as it should. These inspections can help identify possible areas of concern and allow you to address the issue before it becomes a problem. Be proactive!

JP recommends that when you have a large loss a third party environmental company be contracted to ensure that the mold remediation company is doing their job and meeting industry standards. Remember, mold is a licensed industry and mold extraction can only be done by licensed personnel. Having the maintenance man remove mold on their own can expose the association to major liability. Hire a licensed mold remediation company - period.

The safety and health of the residents is what is important here. For more information on how your association can formulate an Emergency Preparedness Plan you can contact JP from Super Restoration at 800-516-8059 or visit their website at www.superrestoration.com. Please visit our website at www.alliedpropertygroup.net for more information.

Terrorism! It is a scary word and to think that it can happen anywhere is an even scarier thought. But it is the reality we are faced with today. Despite the increase in terrorist threats in the United States, not a lot of condominium or homeowner associations are discussing this and even less have a plan in place in case a terrorist attack occurs in their community.

In this episode Ana Sanchez Rivero of Allied Property Group interviews Victor Guembes, Corporate Manager at Regions Security Services. They discuss the methods used by terrorists and the key role that we can play in prevent a terrorist attack. Information on how an Association can formulate an Emergency Plan are also discussed.

You would think that association board members know better than to hire a contractor that is unlicensed. But sometimes in an attempt to save money, associations hire unlicensed contractors. In the long run, however, this practice can be more costly than hiring a licensed contractor. Here is an example:

An association in Miami Beach contracted a construction company recommended by a homeowner to remodel the association's lobby. The homeowner swore up and down that this contractor had done a great job remodeling their unit and by far was the least expensive.

Because the contractor was recommended by a homeowner, the board did not vet the contractor and did not have their attorney review the contract. After all, the contractor was highly recommended by this very active homeowner and the contractor's price was well beneath all other proposals. This was too appealing to pass up.

The project was a disaster!

The contractor was over budget and took three times as long to complete the job. In the end, the contractor abandoned the job and disappeared with the association's money. The homeowner, who highly recommended this contractor, sold his unit and was never heard from again.

Fortunately, this example is fictional, but situations like this occur more commonly than we think. To help in avoiding these horrible situations, associations should always hire a licensed contractor where the work being performed requires a license. Vetting a vendor is actually easier than one thinks, and with a few key strokes, association boards have a tremendous amount of information at their fingertips. Some of these issues, and other things an association may want to think about prior to choosing a contractor were discussed during a recent interview in Allied Property Group's podcast, Community Association Matters.

In the State of Florida, an association can visit myfloridalicense.com to verify that a Contractor is licensed with the state; and sunbiz.org to confirm that a corporation is active. They can also visit their county clerk of court websites and / or conduct a records search to find out if there are any pending or past law suits against the contractor and / or the qualifier or any unsatisfied judgments. It is a good idea to also ask for a Certificate of Insurance and request that the Association be added as an Additional Insured where legally permitted, and review the coverage to make sure it is adequate. All of these, and many other factors should ultimately be discussed with the Association's attorney prior to entering into a contract.

Lastly, the association should ask the contractor to provide references. Although this may seem trivial, think of it this way: isn't it a potential red flag if the contractor will not provide references? Isn't it a potential red flag if the references provided were for jobs very different in scope than the job being considered? You should accordingly contact the references and ask a series of questions, such as:

• Whether the project was completed on time and in budget;
• Were there any issues with the city or county inspectors;
• How communicative was the contractor during the process.

Now what happens if things go wrong? Hopefully you have consulted with an attorney prior to signing a contract, and they have worked with you throughout the process to help add layers of contractual protection.

These are basic suggestions for associations to consider when hiring a contractor. Every association is different, and every situation is unique. Get management assistance from Allied, and get legal assistance from your lawyer. For more information and in depth thoughts, you can also listen to our podcast, Community Association Matters.