The landscapers that serve our community associations offer many different services ranging from landscape architecture & design, maintenance, arborist services to pest control and irrigation.  The first challenge is to identify your needs and focus on the qualifications of the vendor to be sure there is a match in needs vs. services.  The detail of what is promised and what is delivered is the key to receiving value. 

The overall awareness that curb appeal is a primary determinant in creating market value is the concept that must be kept in the forefront of each board member's mind.  It is easy to understand how $1,000 spent on attractive landscaping along the entry to the community can translate into $100,000 worth of increased aggregate property market value. It's also easy to forget when looking over landscaping bids for the coming year.  People still buy their homes based mainly on cosmetic appeal.  How fresh is the paint? How neatly trimmed is the lawn?  How attractive are the shrubs and signing? How clean are the parking lots?  Books will always be judged by their covers and homes will always be judged by their appearance.  Landscaping is the most obvious facet of appearance in most suburban communities.

Poorly maintained lawns with bald patches and overgrown areas are a major turnoff.  A well-designed landscape plan will dazzle a new buyer.  A Landscape Maintenance Manual will ensure that the property continues to provide an attractive facade to the public.  To accomplish your overall goals, you need a plan.  A Landscaping Committee is a good place to start. Here's a few ABC's.

Identify your needs.  

The most obvious is maintenance.  The lawns must be cut. The shrubs must be trimmed.  Fertilizer must be applied. These three tasks can often be accomplished by a single vendor.  In order to get a proper bid, outline exactly the areas to be maintained and the expected frequency of trimming and fertilization.

Secondly: Do you wish to do any improvements on your landscaping plan?  Do you want to invest a few dollars to add more shrubbery? Remove some dead plantings? Restructure an existing area?  A Landscape Architect is what you need.  Not every maintenance company provides a trained professional.  Ask for credentials.  Ask for pictures and other references from previous work.  It will be more expensive than you think.  But keep in mind that expenses incurred to purchase long-lasting trees, shrubs and other permanent improvements to your landscape are legitimate Reserve Budget items and can be paid from that fund.  Just be sure to make note of it and include future purchases in your Reserve Study Budget.  When you consider how trees and other plantings increase in value as they mature, you might well consider these purchases as one of your most profitable investments.  Spend $300 for a young sapling today and it could be worth $1,000 or more five years from now.  You sure don't get that kind of value in re-painting.

Third on the list should be special needs like services of an arborist for your existing trees or an irrigation specialist to address your water usage and its effectiveness.  Make sure you go to specialists.  

Pest Control is a fourth area of concern.  We all know about the need for fertilizer.  What about preventive maintenance for things like chinch bug or army worms? Pest Control vendors are often specially licensed and trained to apply the often dangerous chemicals that are needed.  Check out the state-mandated requirements in your area. This function should be covered under a separate contract from your overall landscaping needs.

Do you have a Landscaping Maintenance Manual? Do you know what one is?  They are volumes of information compiled by your manager in conjunction with the landscaping professionals that outline all of your landscaping assets, their original cost, expected life, their on-going care, and a record of regular maintenance activities to be performed. History of infestations and their treatment should be recorded. Fertilization schedules should be noted. Any kind of guarantees or warranties on plantings, pest control projects, and maintenance equipment should be in writing in one reference manual.  In the case of irrigation equipment, manufacturers' names and warranties should be recorded.  The Landscaping Maintenance Manual is your bible that ensures continuity and the consistent quality of your curb appeal that translates into re-sale value for each individual owner. 

Landscaping is a multi-faceted responsibility that invites community participation.  The Landscaping Committee is second in popularity to the Budget Committee.  Take advantage of the neighbors in your community with a feel for greenery and the willingness to donate their time.  Examine all the aspects of your landscaping needs and professionalize the whole package with a Landscaping Maintenance Manual.     

Consider risk management

Depending on the area of the country you live in, insurance is either the largest single line item on your homeowner association budget or at least in the top five.  In two surveys we took six years apart we found that in homeowner associations with home values in excess of $200,000, 25% of the total budget was spent on some aspect of security with insurance being the largest portion.  We are an acquisitive society that likes to protect what we’ve earned.  In communities with older residents, that feeling is stronger.

Buying the best policy is an obvious starting point.  Understanding what makes the best policy is what we hope we can teach you.  Certain critical issues must be addressed and understood, not the least of them is loss control and loss prevention.  That’s the real key to lowering insurance costs and overall risk management.

Here are some questions that you must address. Ask your insurance agent and manager.  Make sure you get a full understanding of the answers and the consequences.  There is nothing here that is so technical that it is not understandable by every one of you.  If they can’t explain it, don’t do business with them.  

            Question #1: Are the policies we are buying based on “occurrence” or “claims made” basis?  In simplest form, this means “Are we insuring ourselves for losses that occur during the life of the policy or for claims made during the life of the policy regardless of when the actual loss event occurred?”  Either policy is acceptable, but it is very dangerous to switch from one to another.  Ask the agent to explain why.  

            Question #2: What are the exclusions in the Directors & Officers (D&O) policy? Go over each one of them and understand what you are not covered for.  This aspect of your insurance is the most meaningful to you, the board member. You’re doing a volunteer job for the good of the community.  It would be a shame to end up losing your home because you made an error.  

            Question #3: Will your agent provide a definitive statement to all homeowners outlining the limits of the master policy?  This is so the individual unit owner can use that document to purchase their own supplemental coverage for their personal property or other aspects of their home not covered.  

            Question #4: Does the broker carry Errors & Omissions Insurance? This is a kind of malpractice insurance that every agent should have. If they make a mistake in advising you on coverage, you’ll be covered anyway.  They should all have it.         

            Question #5: What impact will a Loss Control Committee have on our premiums?  A Loss Control Committee is a group of homeowners that meet regularly (quarterly is fine) to examine the property for potential hazards.  Looking for cracked or raised pavement, problems around the pool, checking on fire extinguishers, holding classes on fire escape routes and procedures.  These meetings should be documented in writing and submitted as proof of activity.  Most insurance carriers will provide some rate reduction for this activity. 

            Question #6:  This one might be more for the board to discuss with the manager first and then bring to the agent.  How will my rates and liability be effected by raising the deductible by $5,000-$10,000 or more and self-insuring for those smaller losses? If the association were to have a small special assessment of $25 or so per unit, that could create a special self-insurance fund that over the years could save tens of thousands of premium dollars.  If raising your deductible can save you $5,000 on your premium, take that $5,000 savings and add it to your self-insurance pool created by the small special assessment.  Treat that money as you would your reserve fund, i.e. invest it.  The return makes it grow.  Have an accountant or other numbers kind of person work out the different scenarios for you.  What happens if there are no losses for the first year, two years, three years?  What happens if there is?  What is your loss history?  This is a creative area of cost savings that can be enormously efficient in reducing your premium.  It has its risks.  But that’s what we’re talking about, risk management.

            Question #7: Ask about pooling insurance.  No it’s got nothing to do with diving boards and swim fins.  Some management companies will get one blanket policy for all their associations.  There are many ramifications to this concept.  Here are the two most important.   

There are tremendous savings to be had by reducing the administrative activity.  There’s more savings to be had in the area of sales commissions.   I know of one California association that reduced its premium by 50%.  There is a trade-off.  Better associations with a more attractive loss history (non-loss history) are mixed in with those that have a bad loss history.  The result is that the bad risks get a better rate and the good ones don’t get quite what they would normally get.  This is often more than compensated for by the overall savings.  Talk to your manager about the possibilities.

These are seven pointed questions that should be asked and answered.  They are not the only questions.  Your agent should have measurable experience in homeowner association insurance.  The rest is not germane.  You should understand that the three areas of coverage are for property, overall liability, and Directors & Officers Liability.  Understand that if you have other recreational facilities, you require additional coverage.  

Keep in mind that the insurance companies are suffering their worst economic crisis since insurance was invented.  The recent group of natural disasters from Florida & Hawaiin hurricanes, Mississippi flooding, and California fires have put some companies out of business and driven others out of certain states.  Premiums are rising and will continue to rise for the next few years.  Be creative.  Measure your risks and concentrate on preventing losses as much as you concentrate on selecting your policy.  Loss Control Committees can be very effective. Listen to the experts.  The lowest insurance bid must be understood. It is not the obvious choice. Coverages vary tremendously. 

“Governance”: Its time has come. Has yours?

It seems like an easy concept. It’s not. In theory, maybe. In practical pervasive application, not at all. Governance is simply the concept that allows community association board members to fulfill their fiduciary duty to their neighbors with a minimal amount of time spent at maximum efficiency. Simple enough.

 The job of the board member is not unlike a member of the Board of Selectman for a small town. Oversee the policies and planning. Leave the execution to the professionals. If the job is not being done satisfactorily, replace the professionals. There’s no need to get involved in micro-managing and doing the job yourself. When was the last time you saw a Selectman directing traffic because there was gridlock downtown, or teaching school because the SAT scores were falling behind the national average? You are a member of the Board of Directors, not a landscaper, lawyer or community manager. Just because your vendors aren’t performing as you hoped does not mean you should jump in and do it yourself. It doesn’t even mean that you need to get so involved as to fully understand their job so you can direct the new vendors in a more successful effort. That’s the community manager’s job. 

It sounds so simple. Actually nobody disagrees with the concept. Certainly not the community manager who just wants to do her or his job without a board member sitting on their shoulder. Certainly not the harried over-worked under experienced board member who just wants to be able to enjoy that second cup of decaf after dinner and not sit through another 4-hour board meeting. The vendors are the problem and the solution. Our problem is that as an industry we present an unavoidable temptation to the lazier unscrupulous vendor who knows they can win business by low-ball bidding. They do a terrible job, get fired, wait a few years till there’s a new board elected, go right back to the same property and do a poor job again. The professional community managers with experience get over-ruled in vendor selection by novice board members looking to be heroes by shaving $1,000 off a budget.

Well maybe, just maybe that is coming to an timely end. We’re sure going to try and make it happen by chatting with the most successful community managers in the country and finding out how they successfully implement varying forms of Governance in their diverse community association clients. One of the hallmarks of successful professional community management has been the flexibility to work with all kinds of boards. There are those run by demanding upper demographic professionals who establish high standards of performance, run their meetings themselves with the community manager as a bystander and call all the shots. There’s the community with a board of tired overworked volunteers who don’t know what they are doing, know that they don’t know, don’t want to know and just leave everything up to their community manager. When it comes to fiduciary duty, they kind of “phone it in” literally. Then there’s all you folks in between. So how can we establish guidelines to make this a successful survivable experience that you can look back at with fond memories? Watch this web site.

We’ll find out in the coming months as individual community managers share their specific experiences. We’ll look at all kinds of client boards in all kinds of different circumstances facing the varied challenges that you face, or will face, every month. We’ll look at how such complex and confusing jobs as roofing are handled with a minimum of board member time and confusion. Even the typical and usual repaint can become a nightmare if the board and manager are not working from the same theory of Governance. 

Rules enforcement, budgeting, insurance and even reserve funding can all be sailed through with pleasure, a sense of satisfaction and little conflict when the right community manager is working with a board that understands how proper Governance can get the job done and aggressive micro-management can sink any ship.

We can look forward to narratives from professionals from the Left Coast, the Right Coast and the Gulf Coast. We’ll discover the commonality that makes it all work properly regardless of the personalities involved. The land of “Fruits and Nuts” can operate just as effectively as the Elitists from the Northeast. Then they each migrate to the Sunshine State and deal not only with the hurricanes, but the “don’t buy green bananas” theory of management that can still survive within the proper and comfortable confines of good Governance.

Coming soon will be the first person words of the most respected community association in the country. You’ll get the view from the smaller community as well as the large master association that oversees thousands of homes. The board members will chime in too with their view of why it works and how it can get sabotaged. Look for the first installment next month.

Conflict in the community association board room is a challenge.  We’ve probably spilled more ink on these pages relating to conflict resolution than we have on replacing a roof or selecting a landscaper. The reality is that roof replacement is inevitable, conflict is not.  Roof replacement and landscaping decisions are accepted responsibilities that are dealt with in a rational logical sequence.  Conflict in the boardroom is comparatively rare, yet when it occurs, all else fails.  Understand that conflict and its resolution is at the core of good community management.  Can we take another look and see if there is just one more lesson to be learned?

Simple things first. 

Unresolved conflict festers and carries over into other issues. Resolve it when it happens or face it again next month with some other non-related issue.  It only gets tougher to deal with as it ages.  

Recognize when there is a conflict and address it. Too often the biggest problem is that everybody has their dander up and nobody wants to do anything except be heard. Normally it would be said that it is the president’s responsibility to keep order and decorum.  What if the president is the one embroiled in the conflict? Then it becomes the responsibility of each individual board member to use maturity and rational thinking to first defuse the emotional situation and then help recognize that a conflict exists that requires resolution. Recognizing that there is a problem first and then identifying the problem may be about as much as these pages can offer today.  If so, it’s enough. 

Keep in mind that it’s not always necessary to announce that there’s a conflict. It’s not a bad idea, but sometimes it just fans the flames. Use your conflict defusing techniques with or without the announcement.

The problems themselves come in all shapes and sizes. Some are more frequent than others, but David Letterman’s List of Top Ten Community Association Management Problems might make for a good column next month. Today let’s deal with style and motivation. Leave substance for tomorrow once we understand the basics.

An essential ingredient of conflict is frustration. Frustration stems most often from a person feeling that their point of view is not being heard or not being seriously considered.  A first step in returning order to the board room is to identify that frustrated person, usually easy enough, and ask them to state their opinion as succinctly as they can. The first problem is that emotional people tend to be less than succinct. Many intelligent people with good ideas just don’t have the mental dexterity to organize their thoughts in a logical easy to understand way. It doesn’t mean their thoughts are worth any less. It doesn’t mean they’re stupid people. It just means they’re not great orators.  Some people just can’t dance. My mother-in-law can’t cook. We all have strengths and just a few weaknesses.  Help the poor communicator by being a good listener. It’s for everybody’s benefit.  It is your responsibility as a board member to have the patience to dig out the best of what is available. If an emotional person is having difficulty getting a thought out coherently, try to listen patiently and ask the right questions in a non-threatening way. Elicit the information you need to understand the point of view. There is a basic rule that we should all take to the bank. “We are each capable of positive and productive thought.  If it sounds dumb or irrational, work at it until you see the logic.” You may not agree with the position. It may be self-serving, vindictive, emotional, uninformed or downright dumb because the person has not taken the time to think it through.  You don’t have to agree. You do have to understand. 

Once you understand you have a second major challenge.  It could be the most difficult.  If you disagree with the position, you must agree with the person’s right to their thoughts and affirm the value of their contribution.  Why in the world would you want to affirm a vindictive stupid self-serving contribution? Because it is essential to clearing the emotional obstruction to doing the business of the board.  In the first place, your feeling that the thought may not be of great value is only your position. Others at the table may have a slightly different view.  Even if you’re all rolling your collective eyeballs at the absurdity of the position you still must affirm the person’s right to their thoughts and the right to express them without derision.  Argument, yes. Derision, no.  The stupider the thought, the more likely somebody is going to respond in an insulting way and the more likely the originator will feel frustrated and escalate the dispute.  

Listen to a position, understand it, affirm that you have understood it by asking non-threatening questions that demonstrate your candid interest in the position.  Thank the person sincerely for offering their thoughts and move on to another person’s position.  Once the source of the conflict has been satisfied that they have been heard, understood and respected, they must then show the same respect to the others at the table.  If not, throw the bastard out.   

Pool care need not be problematic.

15 minutes reading will get you started

You're opening up your pool in a few weeks. You're a new board member and relying on your property manager and pool maintenance company to handle all the details. That's as it should be. What are the questions you'll have to deal with? What kinds of decisions will you be making or deferring? Pool maintenance is a frequently deferred item. The pool rarely gets the use for which it was designed. There's frequently a small contingent of homeowners who want to fill it in and grass it over. It would certainly save a pile of money on your insurance policy to say nothing of the ongoing maintenance and repair expense. But that kind of decision usually requires a vote of from 75%-100% of the individual homeowners. It's a change in the "capital equipment" of the community and regardless of the state you're in (mentally or geographically), it's not a decision the board can make unilaterally. On to the things you do have control over.

            Legal

Legally speaking you ought to be aware of any new laws that have been passed in your state or town regarding safety around the pool. Certainly your manager ought to be on top of that particular item, but if things go wrong, it's not the manager who is responsible. You'll soon learn the real meaning of "fiduciary". It wouldn't hurt to put a call in to your association attorney just to check and see if there are any updates. Your local CAI chapter may also have information.

            Heating Equipment 

Pool heating equipment requires preventive maintenance. Whether you have solar heat or conventional heating equipment, there is a preventive maintenance program that should be in place. It usually consists of very inexpensive cleaning, lubrication and adjustment items. An hour or two of labor can save you thousands in premature part replacement. Your pool maintenance company or on-site handyman should be able to handle it. You might want to check with the property manager to be sure it's on the "to-do" list.

            Pool Furniture 

Decisions on pool furniture are more visible. The decisions there are less technical and easier to understand. It usually comes down to "replace or repair".  When you consider that the main value of the pool is in its "eye-appeal" and the resultant impact on overall property values, it seems reasonable to make sure that the pool furniture isn't getting shabby looking. 

            Rules Enforcement

The pool is often a center of rules controversy. Kids and pools require some level of governance, or you face the prospect of armed warfare between the young adults and their offspring versus the quietly retiring folks who seem to have absolutely no appreciation for that great cannonball the tubby ten year old is so proud of. Or that wonderful game “Marco Polo”.

Rules enforcement with children is a little bit of a different matter than with the adults. Please expect to have a little more patience and flexibility. Don't just take the attitude that the parents are responsible and "rules are rules". In fact we were all ten years old at one time and ought to try and put the value of community harmony over the importance of a "zero-tolerance" rules policy.

New laws, heating equipment, pumps, chemicals, furniture and rules enforcement all offer you an opportunity to exercise your fiduciary responsibility in varying degrees. Remember that the basic rule is to understand and be aware and informed on situations.  Your decision-making should be educated. You can't always be right, but you can be informed. Get out the Coppertone and enjoy.

Roofing is often the largest single expense of a condo or HOA.  In New England it’s an event that occurs about every 20-25 years.  In California it sometimes seems that it happens every 24-25 months.  Florida roofing projects seem to follow the patterns of the hurricanes.  In every corner of the country the choices are critical.  The expense is enormous. The inconvenience is measurable. The consequences of a bad choice mean lawsuits, uncontrollable leaks, a community fighting amongst themselves and another sometimes larger expense to correct the errors.

Board members of America unite! Do not simply go for the low bid on your next roofing project.  Go through the process or hire a consultant to help you through the process.  The size of the expense can run from $50,000 to $5,000,000.  You can’t afford to make a mistake. If the roof is to be replaced with a different material than is currently in place, get the advise of an architect and/or an engineer.  When roofs collapse or blow away there’s tremendous collateral damage.  When roofs leak, the problem has an effect on multiple homeowners who have their personal property damaged. Insurance claims are filed. Rates go up.  Do not be suckered into a low-bid contractor.  

Each year we try and explain the basics of going out for bid on a new roof.  

#1. Create a committee.  

#2 Establish your expectations. 

#3 Select your material choices.  

#4 Evaluate manufacturer warranties & guarantees.  

#5 Consult with an architect or engineer to determine potential problems.  

#6 Get a proper professional job specification written. 

#7 Have your choice of contractors bid on the same spec. 

#8 Make sure you thoroughly check references.  Get references of all jobs performed in the last year. 

#9 See if your attorney can run a court check on the contractor to see if any lawsuits have been filed, are pending, or if any judgments have been levied.   Then get a list of jobs performed 5-6 years ago.  Don’t be put off.  If the contractor doesn’t keep good records, go somewhere else.  The current jobs will tell you about their punctuality, cleanliness, and customer service.  The 5-6 year old jobs will tell you a bit more about their quality.  Ask if they have any claims made in the past 5-6 years on their warranties or guarantees.  There should be some.  Nobody is perfect.  How did they handle these problems?  

Of course the contractor should have proper insurance for his crew, vehicles, and general liability. Is the contractor willing to post a performance bond?  Rely heavily on your manager and in-depth investigation by the committee.  Assign everybody just a little bit of homework.  Make sure it is done properly.  If not, reassign it.  

Bids on large projects often vary by tens of thousands of dollars.  There should be an explanation that you should be able to understand.  Ask the right questions.  Did one contractor estimate 200 hours of labor while the other estimated 250?  If the job runs to 300 hours, who pays?  If it’s the contractor you have to ask yourself if they will just absorb all that extra cost.  What did each bidder budget for insurance.  Are the materials costs similar?  It is your opportunity to ask the right questions and your obligation to understand the answers.  Does one contractor pay the roofers $12/hr while the other pays $18/hr and provides uniforms?  Proper scheduling can have a big impact on the overall cost.  What happens on rain days?

I think someday we might put out an entire handbook on selecting a new roof.  For now, rely on your manager, professional engineer or architect, roofing consultant and your own common sense.  But do your homework and don’t go for the low bid.  You are bound to lose big in the long run.

Community association insurance has become simpler over the years as the major carriers and agents have ironed out most of the problems that come with having an association insure one part of a property and the individual homeowners pick up the rest. It used to be the main point of essential education to avoid overlapping coverage, and more importantly, coverage gaps. It seems that the problems these days center around the major carriers willingness to offer coverage at all. Too many have dropped out of the market entirely.  They just don’t want to bother with community associations, especially those high profile oceanfront associations that need it the most.

          The issues to be understood today would focus around umbrella coverage and Directors & Officers Liability (D&O) insurance. It’s still astounding to me to see how many boards do not have adequate D&O coverage. There you are, unpaid volunteers giving hundreds of hours for the good of your community, facing the slings and arrows of outrageous homeowners along with potential lawsuits for what could be breach of fiduciary responsibility, and you don’t get adequate insurance coverage for yourselves. You try to pinch the insurance penny in the one area that will hurt you personally. Isn’t it enough that you donate your personal time? Why expose yourself to the costs of defending against a frivolous lawsuit brought by that nut in unit 317? If you take the time to really understand just one part of your overall responsibilities, make it the D&O policy.  

          An important adjunct to D&O is additional umbrella coverage.  It is very inexpensive and provides the community the total protection it requires. 

          Selecting an agent has also become much simpler. Over the years there have been a small handful of individuals in each market that have taken community association insurance as their major focus and have learned through experience how to deal with the carriers as well as the clients. I suggest you listen to your property manager’s advice and look at the track record of the agent. Most of the strong players have 15-20 years experience in this field. Don’t settle for anything less. You don’t want to have to make claims against your agent’s Errors & Omissions policy, though you might ask if they have one.

          D&O coverage and umbrella coverage: learn about these two aspects of insurance and you’ll have the major bases covered. There’s plenty to learn for the new board member in regard to the “normal” coverage areas, but your agent should be able to walk you through the questions and answers. Most of them are accustomed to attending board meetings. Some even bring the donuts.

A homeowner in Pennsylvania who also happened to be an attorney has made a dent in our collective consciousness in regard to the powers of the community association board.  Free speech was the issue. A “For Sale” sign was the focus.  You will read many other opinions about the future effects of this case.  Every lawyer across the country will be putting their thoughts in words.  Here’s the skinny.

It was previously considered acceptable that community association boards had the power to do just about anything that wasn’t illegal, immoral, or fattening.  It was also a matter of course that when you bought into a community association, you checked a large chunk of your personal freedom at the gated entry.  Most every condo I’ve heard of has a rule against “For Sale” signs.  The theory is that it cheapens the look of the neighborhood.  Not such an unreasonable judgment, unless you’re the unit owner trying to sell.  It clearly seems like a reasonable rule when you look at the ancient Greek standard for judgment of “the greater good for the greater number.”  Not so anymore.  It seems to be a clear violation of Free Speech. Community associations cannot abrogate constitutional rights even if the homeowners agree to give them up.  If that’s all there is to this issue, then it would be enough.  I think there’s more.

The consistent theme of this column is that community associations are a microcosm of our country and world.  The human interaction problems we face with our neighbors are the same ones faced by our governments.  The solutions to one should mirror the solutions to the other. I also remember a quote from a Nobel prize winner who said “For every great and complex problem someone will come up with a simple solution. And that solution is always wrong.”  Let’s not get too carried away with the  “For Sale” sign prohibition. Let’s look at the real issues.

We live by a document called The Constitution. We the people  and all that. The folks who wrote it were smart enough to realize that they were human and could make mistakes and also that 18th Century America might not have precisely the same needs as 21st Century America.  Therefore they put in an amendment process to allow for change.  This was such a good idea that they immediately recognized errors and omissions already made in the document while the ink was drying.  Thus we have the first ten amendments that most school kids know as The Bill of Rights..  Freedom of speech shows up pretty close to the beginning.  Now here’s the issue.  We recognize the possibility of error and have a process to deal with it.  We even recognize that we may make a change that doesn’t work and can go back and re-change it.  The best example would be the failed effort at prohibition.  Anybody who suggested we go back and amend The Bill of Rights. would be met with derision and hostility.  Those ten amendments have taken on a greater emotional importance than the whole Constitution;  something akin to the Ten Commandments. They have entered the realm of the politically holy.  

I think it is OK to take a second look at The Bill of Rights. .  I think it is OK to reexamine the rules about free speech.  I think that the idea of “shouting fire in a crowded theater” is not the only restriction to free speech.  I think that free speech in the form of lies should be dealt with in a more meaningful way than we currently are accustomed to.  At this writing a former LA policeman is picking potatoes peacefully in Idaho while the rest of the country chokes on their gorge after listening to his sworn testimony and follow-up interview tapes.  Freedom of speech is certainly integral to our whole country.  The abuse of that freedom is the core of the cancer that weakens us daily.  

This is not about a “For Sale” sign in Pennsylvania. This is not about the ammo that decision will give to the rabid Kondo Kommandos in Florida.  This is not about a Libertarian view of the world. It’s about the ability to examine ourselves with an open mind and see what’s wrong and then figure out how to fix it.  The throne of free speech is in the courtroom on the witness stand.  Its everyday realm is the schoolyard, the neighborhood and the workplace.  There must be more attention paid to the value of truth and a more significant penalty for lies.  It is not unlike the right to bear arms. Might as well get the NRA involved here.  They are right.  Guns don’t kill people.  People kill people.  It’s the consequences of an abused Bill of Rights that is the core of our problem.  We hold some thoughts in such unassailable esteem that we refuse to acknowledge that some facet of them may need improvement.  

If we focus that thought down to our own little industry of community associations and look at CAI, we see the same thing.  CAI is the biggest and best thing that has ever happened to our industry.  I don’t need to go through the litany of accomplishment here.  I’ve recruited over 100 individuals into the fold because I believe in it.  But it needs change.  It always has.  Just like any other organization.  When the areas for change are pointed out, the loyalists come out of the woodwork with contempt and disgust for any low-life that might suggest that the great organization is less than perfect.  They point to their many committees that are constantly reexamining themselves.  Unfortunately the self-examinations create little real change.  Let me close this paragraph with the clear statement that CAI is the best thing we’ve got in this country for the community association industry.  It just doesn’t move as quickly and as incisively as some of us would like.  CAI isn’t the point, just an example of “holier than thou” thinking that gets in the way of change.

Where do we go after “Cappuccio”?  We’d better get a dispute resolution system in place real quickly.  Florida will lead the way and California will be right behind.  The Northeast will lag a bit. It’s probably the cold weather.

Secondly, expect some broad reevaluation of the rights of board members to enforce rules and then the overall questioning of anybody to enforce rules.  What we have is the essence of our societal problems.  Rules are essential to living together.  The improper enforcement of those rules destroy that which we wish to preserve.  Just ask Marcia Clark.  

There is an embarrassingly high level of resistance to reserve studies and reserve funding throughout the country. The pervasive attitude reflects an abandonment of long-term fiduciary responsibility. “I really don’t care about your tomorrow, because I won’t be here.” It certainly has its practical side for the elderly retirees who have no interest in investing in their neighbor’s future or the newly married young couple using their condo as a short-term bridge to individual home ownership.  If only the value of the reserve fund were somehow transferable on sale of the unit, or at least recognized as having some measurable value, the problem would not be the crisis it is.  Individual states like Florida, California, and Massachusetts all require reserve studies to exist by statute.  Banks and other lenders all require some kind of statement as to reserve fund adequacy before granting a mortgage. When will we pull this all together in a package that recognizes the importance of these funds and makes them meaningful to those just passing through as well as the long-term community association residents?

       There are many alternative reserve study strategies available.  This month’s installment in the Reserve Study series focuses on just that.  There are some clearly significant pros and cons attached to each strategy. The important thing is to take advantage of at least one of the methods and be aware of the consequences of your choice.

       The first thing to recognize is that the formal reserve study performed by a credentialed practitioner is not a marketplace sand trap designed to take advantage of callow unsuspecting condo and HOA owners. These studies are basic to almost all professionally managed real estate. They are integral to good management.  Having your manager do the reserve study seems like the simplest and cheapest way out. After all, isn’t it a basic responsibility of the management company to be aware of the state of repair of the building?  Aren’t they on-site regularly and the most familiar with the property nuances? Why pay a hired gun to come in and reinvent the wheel?  

       Here’s a thought. The reserve study embraces two important specialties: Accounting & Engineering. The manager is familiar with both arenas, but far from expert.  The manager can identify hidden problem areas that have a structural and maintenance impact, but the manager has no real background to evaluate adequate replacement costs and remaining useful life.  Many managers will call in individual contractors specializing in the various areas of need to get their professional opinion. Sometimes the opinion is free, sometimes for a small fee, but never without prejudice.  The physical evaluation can be carried out to a measurable degree of effectiveness in this manner. Save thousands of dollars for the community.  What are the liabilities? Just ask the property manager in Florida who was held personally responsible for bad guesses in his report. Ask the management company named in the lawsuit. Ask the board members of the community named in the lawsuit. The incident is not an isolated one. When new homeowners submit their mortgage applications, somebody has made a statement as to the adequacy of the reserves. If an unanticipated special assessment arises in the next 12 months, look for the lawyers to appear. You’d better have fulfilled your fiduciary responsibility.

       The accounting facet of the reserve study seems simple enough. Take the replacement cost and divide it by the projected remaining life of the item. That gives you your annual contribution. Divide it by the number of homes in the community, then divide by 12 and that gives you your monthly contribution.  Pretty simple. Interest will balance out inflation and call it a day. So why are there so many complex software packages out on the market?  There’s more to it. Your first stop might be the “Do-it-yourself” package offered at a minimal price by Robert Nordlund, one of California’s oldest reserve study specialists. You may consider it adequate, maybe not. What you can count on is that for less than $200, it will open your eyes to the potential complexities of the process. You’ll gain an understanding of the theories and procedures. You may stop there and say that this is enough. You may go on to examine some of the more complex programs used by such companies as PRA and really get overwhelmed by all the bells and whistles possible. Either way, you have a responsibility to explore and a decision to make.

       Understand what your fiduciary responsibility is and how to protect yourself and your community.