Ask the HOA Expert: Fines Should Be Reasonable
Question: I was recently fined $300 for not letting the board know about a tenant moving into the HOA within a timely manner (I did so within a week). Isn’t there a grace period of sorts to allow for communicating this information? Also, $300 seems excessive.
Answer: A $300 penalty is not reasonable. This is the kind of fining policy that would probably cause a judge to revoke the entire fine and fine the HOA for having such a policy for such a petty issue. Fines should be reasonable and “fit the crimes”.
Question: Our HOA recently completed a major reconstruction project, and the board would like to celebrate the event with a barbeque. Can the HOA pay for the function, or should we have a potluck?
Answer: Most HOAs budgets are barely adequate to cover required expenses, much less socials. Unless the HOA has a social budget, it should be potluck.
Question: Our parking rules do not allow vehicles with dual axles to be parked on the property. But we now have quite a few residents that drive pickups so equipped.
Answer: Restricting certain kinds of vehicles is usually due to size (like an RV), commercial use (like a contractor’s truck) or recreational use (like a boat). Since parking in most HOAs is a limited commodity, it makes sense to limit parking to automobiles, vans and small trucks in residential use. Some small trucks these days have dual axles so rather than focus on the axles, the rule should be interpreted according to vehicle size and use. The board has the authority to amend parking rules and it sounds like it’s time to do just that. There is a sample Parking Policy in the Policy Samples section of www.Regenesis.net.
Question: We have a situation where residents are placing “Children at Play” signs on the streets to slow down the traffic. However, the board is confiscating the signs. What is the board’s responsibility to control children playing in the streets?
Answer: It is the parents’ responsibility to supervise and control their children. They should never allow them to play in the street (duh). But as long as the signs are temporary (only placed when the kids are out near the street), the board should not restrict them. Some things, like slowing traffic, is good for all residents.
Ask the HOA Expert: Time Limits On Board Meetings
Question: What do you think about placing a time limit on the board meetings? There are some members that believe that there should be no time limit and others that believe there should be.
Answer: Generally, board meetings should not go longer than two hours. This seems to be the average time limit for sustained human concentration. Board meetings should always have a set agenda together with proposals, information and recommendations circulated in advance to the directors for review. In other words, the directors should not arrive at the meeting cold and clueless. They should have a good idea about the topics of discussion and be prepared only to clarify the issues before an up or down vote. Board meetings should never involve rambling discussion. Board meetings are intended to transact business. Stick to the agenda, get business done and adjoin the meeting in two hours or less.
Having short board meetings is an effective recruiting tool for good board members. Successful businesspeople value their own personal time and will be more inclined to volunteer if the meetings are run in a businesslike way.
Question: In our HOA, many of the original old wooden fences need to be replaced. The governing documents address fence design and material but do not mention height. The board has issued fence guidelines which state that the maximum height is five feet. Some of our members have challenged the board’s policy since they want a six-foot fence.
Answer: Architectural and design policies like fences are often enacted by the board. If the board has a reasonable basis for setting the five-foot limit (like that has been the standard for years), it has every right to do so. The fact that some may not agree is no surprise. Welcome to America. But the board has the authority to set such policies and amend them later if there is a compelling reason to do so.
Question: Our HOA has a strict policy in order to preserve the streetscape and prevent clear-cutting. The board gets requests from time to time from members asking permission to cut trees. We will inspect and sometimes approve the cutting if there is disease or damage. If not, the requests are denied.
We now have a resident who is requesting to cut two tall pine trees that are close to his house due to the potential of the trees falling. He is stating that the HOA will be liable if the tree falls. Is the HOA exempt from such liability if the governing documents state that significant trees cannot be cut?
Answer: Besides the falling tree issue is the potential fire hazard. Trees should be located at least 30 feet from the structure, especially if they are highly flammable like pine trees. There is also the issue of tree limbs damaging the roof and the trees causing foundation damage when they sway in the wind.
But to address a specific request, it would be prudent to get a licensed arborist to review the trees in question. If the arborist believes they are a danger, they should be removed. Otherwise, they should not. The board is not responsible for acts of God, only for handling business in a prudent manner. Use experts to your advantage.
Question: Our condominium has a member that is eight months delinquent in HOA fees. He says he has declared bankruptcy, but he has renters in his unit and is collecting rent every month. The renters use the facilities and utilities (gas, electricity, water, trash). Is there anything the board can do when someone has declared bankruptcy yet is collecting rent every month?
Answer: Yes, there is a lot the board can do and the sooner the better. The board needs to enact a comprehensive Collection Policy which allows “assignment of rents” from delinquent landlord owners. The Collection Policy could also include interruption of HOA provided utilities in the event of delinquency. The HOA would have to have individual utility unit shut off capability, but this is an extremely effective way to get the attention of the unit owner.
If the board is going to enact a new or amended Collection Policy, it should be circulated to all members in advance with a notice that it is going into effect on such and such date. This may encourage delinquent members to pay up before it does.
And the board should identify and work with an attorney that is knowledgeable in HOA collections to deal with delinquencies in the early stages. If this member has truly filed bankruptcy, the bill may be difficult or impossible to collect. A basic of all HOA collection policies is to act early and aggressively to secure the HOA’s debt. For a sample Collection Policy, see www.Regenesis.net Policy section.
Ask the HOA Expert: Special Assessments
Question: Our pool and clubhouse are 15 years old. The board wants to build a larger pool and upgrade the clubhouse which would require a $200,000 special assessment and drain our reserves.
Answer: The board has no authority to expand the common area amenities. Its authority is to maintain existing amenities in good condition. However, if an appropriate majority of the members are in favor of raising and spending this money for this purpose, that is acceptable. However, the “appropriate” majority may be a super majority of two thirds or more depending on how your governing documents read. This requirement could effectively kill the proposal.
Question: We did not have a quorum at our last annual meeting. So, the manager passed out blank proxies for people to sign just in case they couldn’t attend the rescheduled meeting. When I asked who would be the appointee for the proxies, I was told that they would be divided among the board members. Is this the way it is usually done?
Answer: Proxies should have been distributed and collected in advance of the original annual meeting to ensure there was a quorum. It’s up to the board and manager to make sure those proxies are collected before the meeting to make sure a quorum is secured, not simply hope enough people show up. Getting members to return proxies in advance takes persistence but is extremely important.
As far as the proxy process itself is concerned, a member has the right to designate a representative to act on their behalf at an annual or special member meeting. If that member either does not select a representative or the chosen representative fails to attend the meeting, the proxy could include an alternative to allow “one of the directors of the board” to vote on their behalf. If a member isn’t comfortable with a board member voting, the proxy should include another alternative which states “If my designated representative fails to attend the meeting, this proxy is to be used for quorum purposes only.” This way, the show can still go on. For a sample proxy, see www.Regenesis.net Forms sections.
Question: Safety is a large concern in our HOA. One of our residents wanted to arrange for a Neighborhood Watch representative to speak at the annual meeting. The request went to the manager who said that the board had to approve a speaker. Weeks later, she claimed she could not get a response from the board. Does the board really need to approve a speaker?
Answer: Every meeting should have an agenda that is noticed in advance to all attendees. The typical annual meeting agenda template looks something like this:
I. Call to Order
II. Establish a quorum
III. Approve previous annual meeting minutes
IV. Officer and Committee Reports
V. Election of Directors to the Board
VI. Old Business
VII. New Business
VII. Adjourn Meeting
Since this is a business meeting, the typical agenda does not provide for speakers. However, if there is a proposal under New Business to, say, Improve Security Using Neighborhood Watch, it is entirely appropriate to include a short presentation to reinforce that proposal. In other words, if the speaker is relevant to the business meeting, it should be allowed.
That said, you do have the right to request time for a speaker. Your manager failed to address the request. “Not getting a response from the board” is a lame excuse. The board president is the one that approves the agenda. You could have called that person directly to discuss it and should do so in the future to avoid the bureaucratic bottleneck.
HOA Pencil Sharpening: Crunching The Numbers
Now is the time when most homeowner associations count last year’s costs and crunch next year’s numbers hoping to squeeze blood out of a turnip. Often it’s so dry, there isn’t even any turnip juice left much less any O positive. But crunch you must. Here are some of the ways to make the cash flow more freely.
Adjust by Inflation. This is a no brainer. Check the area Consumer Price Index – CPI and raise all budget items by at least that amount. An exception is utilities which often enjoy a larger rate increase based on the utilities the utility companies expect not to sell added to the cost of maintaining antiquated power generation plants plus a fudge factor they hope to slip by the utility rate commission (a bit of budget humor).
Add a Contingency. A contingency is 5-10% of the total budget which is used to either cover all those things you forgot to include or could not foresee.
Looking Back for Future Savings. Next year’s budget should be based on prior years’ experience. Do a side by side comparison of the last three years’ actual costs. You may learn something like seeing large and unnoticed utility cost variances. You may catch a cost savings that got passed by unscrutinized.
Leave Out Potential Income. Late fees may not happen so don’t count on them. Besides, it’s a bit insulting to plan on owner delinquency.
Assign Expenses by Category.
1. Administrative. Management Contract, Legal, Reserve Study, Accounting, Office Supplies, Postage
2. Utilities. Water/Sewer, Electrical, Phone, Gas, Cable & Internet
3. Maintenance. Landscape Contract, Gutter Cleaning, Pool Maintenance, Elevator Maintenance, Janitorial.
4. Reserve Contribution. To fund painting, roofing, fencing, etc. See Reserve Study for details.
Itemize Significant Expenses. It’s important to know where significant monies are being spent. For example, rather than lumping everything into “General Repairs” divide it among “Plumbing Repairs”, “Electrical Repairs” and “General Repairs”. If this hasn’t be done in the past, start doing it in the future. In other words, when a significant bill is paid, assign it a proper description so that next year the Budget Committee can assess whether there is a trend.
Reserve Intelligently. Reserves are funds collected to pay for periodic maintenance and repair to roofs, siding, paint, pools and other common area components. It’s critical that these relatively expensive events be forecast at least 30 years out so that this year’s budget collects a fair share of future expenses. Failure to forecast and collect from all owners inevitably leads to special assessments. Special assessments are the product of poor planning. Since costs can be accurately predicted, why not let all share the expense rather than penalizing a few? The Reserve Study analyzes these future costs and provides a annual contribution recommendation that can be included in the budget. Reserving properly is one of the most fundamental factor for HOA success. See Regenesis.net/ReserveStudyService.htm
Include Board Education. While the board members are unpaid volunteers, the HOA should invest in educating them to improve their performance. Attending seminars and joining Community Associations Institute will all return enormous dividends as director competence improves.
Other Cost Cutting Hints:
Irrigation Water Costs. Does your system have a rain override that kills the sprinkling cycle when appropriate? You would be amazed how cheap this technology is. Budget for and get it installed before the next irrigation season.
Control Pool Temperature. A solar blanket can pay for itself very quickly. A 3-5 degree reduction in pool temperature heating can result in significant savings.
Solar Pool Water Heating. A pool is one of the HOA’s biggest energy hogs. Solar heating can significantly reduce this cost and pay for itself in a few short years.
Lighting Conservation. Swap all common area incandescent lighting for compact fluorescent or other higher lumen/lower wattage alternatives. Add solar or clock devices to control exterior lighting.
Pay for leaky faucets and toilets. Even though fixing unit owner plumbing is not an HOA responsibility, the resulting water bill is.
Install Programmable Thermostats. For common hallways and clubhouses, these inexpensive controls can slash heating and cooling costs.
Xeriscape. This concept reduces landscape turf area in favor of local, drought resistance bushes, plants and ground covers. Besides reducing or eliminating mowing costs, water savings are impressive.
Sharpening the HOA budget pencil is not near as hard as you thought, now is it? When you see the savings pile up, that pencil will be your best friend.
For more innovative homeowner association management strategies, subscribe to www.Regenesis.net.
Ask The HOA Expert: Parking Rules
Question: Our parking rules do not allow boats to be parked in driveways. However, some folks need to park their boat for a day or two to clean it before taking it to the lake or storage. Is it reasonable to give permission to residents to park their boats for a short time if they first ask? We have a similar situation with RVs, storage containers and construction dumpsters.
Answer: Rather than trying to micromanage these kinds of things, the board should revise the parking policy to allow parking of boats, storage containers and construction dumpsters for a specified period of time. The neighbors will let the board know if the time limits are being abused.
Question: The board wants all contractors together at the same time to walk the property and discuss the project to be done. Is this an ethical practice or should we meet with each separately?
Answer: It makes a lot of sense to have a joint walk through. It will save time for all concerned, all questions get answered at the same time and all bidders get the same information to craft their bids.
Question: Our board publishes a list of delinquent members each month in the HOA’s newsletter. Is this proper?
Answer: Distributing a list of this kind is a very bad idea. It’s akin to the humiliation of the stocks and pillary. But today, it could get the board sued for libel. There are also good and practical reasons for not doing this:
1. All delinquencies are not created equal and not all delinquents are deadbeats. There could be legitimate extenuating circumstances like job loss, disability, divorce, etc.
2. The account might be paid or paid down by the time the list is distributed which makes the information wrong.
3. These are neighbors. Humiliating them is bound to buy long term resentment.
The board should cease this action immediately. If they insist on publishing a list of delinquencies, the amounts, days overdue and action taken will suffice. Names and addresses are unnecessary.
Question: We are in a new HOA where the developer and his employees are still “the board”. They are not paying much attention to financial reporting, make decisions without asking or telling us. They use HOA money for what seems to be “developer costs” such as certain landscaping costs to dress up the HOA for sales purposes. It seems like the fox is in the hen house. Is there anything we could do or must we just wait for their time to be up?
Answer: Developers that control the board always have a conflict of interest. They have homes to sell and having them look nice will help move them. However, if the developer is paying for his marketing costs (like enhanced landscaping) out of HOA fees, you have a right to cry “FOUL”! If the developer wants to add flowers and other eye candy that the HOA normally would not do, he needs to pay for it out of his developer marketing budget.
If you are paying HOA fees, you are entitled to see monthly financial (income and expense) reports that detail how that money is being spent. If the developer is allowing things that are clearly prohibited in the governing documents, again, current owners have the right to hold him accountable. The developer is not above the law when it comes to following the governing documents, rules and regulations that other owners are required to follow.
I suggest that you gather owners and compose a letter to the developer listing specific concerns and what you would like to see happen. This makes your complaints a matter of record. If the developer ignores your reasonable requests, a letter from an attorney may be necessary. Smart developers know that once the HOA is turned over to a board of owners, bad things could happen if he has not acted reasonably. Let’s hope this one gets the message the first time.
HOA Reserve Conundrum
A conundrum is a riddle or puzzle. Many homeowner associations established over 30 years ago now face the conundrum of replacing common elements they were not planning for nor have the money to pay for. While HOAs commonly have responsibility for the replacement of roofing, things like plumbing, wiring, siding, concrete and streets are often not included in reserve planning since they were considered to have much longer lives than 30 years.
But after 30 years pass, suddenly that window is not only cracked, it’s wide open. On buildings older than 50 years, replacement of, elevators, wiring and plumbing is more likely and a hugely expensive repair.
The idea behind updating a reserve study each and every year is that components like these that were not included in the original list a some point in time become eligible to be included in the plan. And these particular components carry larger than average price tags so when they qualify for a 30 year remaining life, they need to be added to the reserve plan so that funds can be properly reserved. If this is not done, you’ll experience the Year of the Killer Special Assessment.
Another reserve plan phenomena has to do with changes in materials and designs. Some of these things are mandated by code like elevator safety or thicker walls for more insulation for improved energy efficiency. Some are triggered by current taste and technology. And now, green and sustainable building techniques add yet another layer of complexity on reserve planning.
The beauty of reserve planning is that it can grow and change as conditions do… as long as the board is doing annual revisions and updates. Keeping up with a changing world is essential in the world of reserves. Last year’s reserve study is old news.
A conundrum is a riddle or puzzle. But in this particular case, the solution is within reach by using a qualified reserve study professional like a Professional Reserve Analyst (PRA). PRAs are members of the Association of Professional Reserve Analysts and have years of experience in this craft. If your HOA is getting up in years or planning a facelift, make sure your reserve plan keeps step with the changes.
Ask the HOA Expert: Improving Neighbor Relations
Question: We are planning to rebuild a wood boundary fence. When the original fence was built, we had no neighbors but now we do. We received a complaint from our neighbor that our fence was “illegal” because the “bad side” of the fence was facing them. Can our defense in this matter be that we are restoring the original fence design and are grandfathered?
Answer: You have a golden opportunity to improve neighbor relations by building a “good neighbor” style fence which looks the same from either side. It costs a bit more than a board fence but maybe the neighbor would be willing to share in the extra expense or even pay 50/50. Even if they don’t, the small increased cost is a great way to improve relations. Win-win. You can find specifications for a Good Neighbor Fence at Regenesis.net in the Specifications section.
Question: We have a unit owner who installed a large wind chime on his balcony. We have received a number of complaints about the noise. How can we approach him about this?
Answer: Complaining about a wind chime sound seems pretty extreme but if your location is given to high winds, the sound could get loud and obnoxious. If this is the case, wind chimes, just like loud music are subject to the “nuisance” restriction which exist in virtually every HOA. This owner needs to remove the wind chime or install one that is small and less noisy.
Question: We recently changed the date of our annual meeting to three months later than in the past. Two director terms expire this month. Is there some protocol to follow to keep them on until the annual meeting?
Answer: Directors terms are tied to the annual meeting which conforms to their term (one, two or three years). Changing of meeting date doesn’t change their term of office. This time around, it will simply be three months longer.
Question: Do you have an opinion about front yard vegetable gardens? Our governing documents only restrict “noxious use of property” and “unsightly growths”.
Answer: The board has the authority to enact reasonable standards to preserve property values. Generally speaking, HOAs should have standards when it comes to landscaping which restricts vegetable gardens to backyards or out of view from the street to promote curb appeal.
63% of Homeowners in an HOA Say They’re Priced Fairly, but Fees Are on the Rise for Many (Lending Tree)
If you want to start a hot debate at your next dinner party, ask everyone their thoughts about homeowners associations (HOAs).
People generally have strong opinions about HOAs, ranging from positive (more orderly landscaping and convenience) to negative (less freedom and higher costs). For our latest report, LendingTree surveyed more than 1,000 homeowners to determine how they feel about HOAs. Here’s what we found.
- 35% of those surveyed say their property is in a homeowners association. Annual dues average $291 a month — or about $3,500 a year.
- When buying their most recent home, 53% of people whose homes are in HOAs say they sought one, 31% say they didn’t think about it and 16% say they didn’t want to be part of one.
- 63% of homeowners in an HOA say they’re priced fairly for the benefits received—in fact, 57% of HOA members say it has made their lives easier.
- 35% report homeowners in an HOA say it’s too expensive. Of those who feel they’re overpaying, 73% say their dues have increased in the past year.
You can check out our full report here: https://www.lendingtree.com/home/mortgage/hoa-survey/
LendingTree’s Senior Economist, Jacob Channel, had this to say:
“HOAs can provide you with the peace of mind that comes with knowing that your neighbors probably aren’t going to do anything crazy, like regularly throwing all-night parties or painting their home bright pink. But HOAs aren’t for everyone, and people who aren’t particularly concerned with regularly mowing their lawn or who want to maximize their freedom to do with their home what they please should probably avoid them.”
Ask the HOA Expert: Collecting Past Due Assessments
Question: Is it permitted for a property manager or board member to go door to door to try to collect past due assessments?
Answer: Sure, but why do it? The HOA has extraordinary collection powers. Ask nicely. If no response, then swing the collection hammer using a qualified attorney whose fees can be charged to the delinquent owner.
Question: Our board enacted a security policy that requires guests to show identification to entry gate guards. Do they have the authority to deny my invited guest onto the property? The board never provided notice that they would be enacting this policy.
Answer: Yes, the board has the authority to enact and enforce this policy. Requiring identification is not the same as denying entry. You live in a gated community for a reason…to restrict access to all but invited guests and vendors. This requires certain protocol. While this policy is certainly more restrictive than some, it does deter those with bad intent.
Question: Have you ever heard of a board doing a straw poll to see where majority of members sit on a touchy issue?
Answer: Straw polls are not very effective, particularly for sensitive issues, since the poll does not allow discussion of deeply held feelings and beliefs. Sensitive issues are bound to set somebody off and create a public relations problem for the board.
If there is an sensitive issue, the board should hold a special meeting to discuss it. Rather than have some rambling discussion, there should be a specific proposal to do such and such. Those that like or oppose it will then have something specific to bounce their ideas off of.
Question: We have a member who likes to tell the board how to do business. She wants one of the directors to read her messages (advice) at the meeting and have them incorporated into the minutes if she is unable to attend the meeting. Is this something we should do?
Answer: No. If she has something to say, she should attend the meetings. And even if she did, what she has to say is not appropriate for the meeting minutes. Minutes should reflect board business decisions, not visitor discussions or opinions.
Question: We have a homeowner who purchased a property and did not receive a copy of the governing documents prior to or after closing. He says that it is management’s responsibility to provide these.
Answer: It is not management’s responsibility. It is the unit seller’s responsibility. The fact that this new owner did not receive them does not relieve him of the obligation to adhere to them. His beef, if there is one, should be with the seller or the seller’s agent. Management can also provide copies at a reasonable charge or post them to the HOA’s website if it has one (highly recommended).
Question: Our six member board voted 5-0 to pursue one course of action and a dissenting board member who was not in attendance at the meeting is now undermining that decision with the membership. What can be done?
Answer: The board president should speak to this board member reminding him that he’s entitled to his personal opinion but is personally responsible for misrepresenting the board. What does that mean? It’s fine for him to state that he did not agree with the vote, but the board is ruled by majority vote. If he continues to undermine that vote, he will find himself marginalized by the rest of the board.
Ask the HOA Expert: Repercussions When A Board Throws Out A Member Decision
Question: What are the possible repercussions when a board throws out a member decision voted on at the Annual Meeting?
Answer: If member approval is required to do what you describe, the board must follow the dictates of the vote. If the vote was advisory only, the board could go a different direction but that clearly would invite well deserved challenge from the member majority who expressed their preference. Smart boards would not do such a thing.
Question: Our HOA is half sold and is being managed by the developer who charges us for it. The outside maintenance is terrible. The sprinkler system doesn’t work and weeds were out of control. Thoughts?
Answer: You need to review your governing documents to see if there is a deadline for the developer to turnover the HOA to a board of owners. There usually is a trigger based on number of units sold or a certain time that has passed, whichever comes first. If there is, you and other owners can demand turnover to the owners. Get an attorney to make the point if necessary. Once an owner board is in place, it can act on behalf of all owners.
If the developer is not yet required to turn over control, you are certainly within your rights to point out the developer’s management shortcomings. You’re paying for the service and failure to maintain the common area diminishes your property value.
Question: We have an upcoming election for directors and two of the candidates are not full time residents. They are from a troublemaker group and plan to participate in board meetings only by phone. Is there anything that the present board can do to prevent this from happening?
Answer: Candidates for the board are not required to be residents. And if all board meetings are handled by phone, no big deal. But if they are saying they won’t attend in-person meetings, this is a big deal and such information needs to be conveyed to the voters. As to what you can do about it… You can encourage and nominate others that are willing to fulfill the board job as intended. If the dissidents don’t get voted in to begin with, the rest of the board won’t have the challenges of dealing with them.
Question: We are nearing completion of our HOA website and getting ready to launch. The board intends to use email for meeting notices, dues notices and event reminders. Right now our governing documents state notices must be sent by US Mail. Is this going to pose a big issue? Also, should we get each member’s written consent to communicate via email?
Answer: Since a high percentage of citizens now regularly use email and it’s free, fast and efficient, many HOAs are now communicating that way. However, since your governing documents require use of mail, the members need to vote to approve a change. I suggest holding a special meeting including distribution of proxies to ensure a quorum to handle this issue as soon as possible.
Yes, you should get written approval from each member to use email. Some don’t have computers or rarely use them. Also, you should consult with an attorney about communicating certain kinds of information like rule violations, delinquency notices and legal notices solely by email. While it may be okay, it’s still a good idea to mail such notices as well.