Ask the Expert

Marjorie Jean Meyer, CMCA®, PCAM®
Vice President and National Director of Education and Certification
ASSOCIA

I am a Board Member, and as such find that our Board is instituting too many Executive meetings. Have read Robert's on the subject, but I am still puzzled. How often can a Board declare Executive meetings and under what circumstances? I believe that our officers are doing so in order to inhibit unit owner attendance, which sets us up for suit.

- Esther C.

Many state legislatures have limited the use of executive session in order to avoid what both the legislators and you perceive to be an effort to eliminate or reduce owner attendance at board meetings. In addition, many community association governing documents also severely limit a board's authority to adjourn to executive session. In general, both legislatures and governing documents permit boards to reconvene in executive session to discuss: 1) litigation; 2) contract negotiations; 3) personnel matters; and 4) issues that both the board and the owners/residents involved agree are of a sensitive nature and should not be discussed in an open board meeting (such as an illness or inappropriate behavior).

However, I must caution you that while the four situations described above are the typical reasons for reconvening in executive session, your state statutes or your association's governing documents may allow other reasons. Be sure to check both places before discussing this matter with your fellow board members.

Sincerely,

Margey

Our board president was voted out last year in the yearly elections. The month after the elections another board member resigned and the board president took his seat saying that since he had the next largest number of votes it was ok for him to take that seat and be board president again. But I checked the bylaws and if a board member resigns and they have more than 270 days left to their term a special election must be held. The board member that resigned had 365 days left to his term. Is there any course of action that can be taken against the board president? He is illegally holding that seat according to the bylaws and I find that very disturbing.

- Emily L.

Not being an attorney, I hesitate to comment on matters of law. I suggest that the other members of your board consult with legal counsel regarding the most appropriate method of ensuring that the composition of the board conforms to the requirements detailed in your Bylaws.

Sincerely,

Margey

If a board is not unanimous in agreeing on a yearly budget, do the board members who are not in favor of the yearly budget have the right to inform the homeowners that they are against it and can they offer their own budget to the homeowners at a open regular board meeting before the vote to approve the budget is taken. There are 3 board members for the budget and 2 against it. The 3 want to raise the fee by $35 and the other 2 feel that $20 is sufficient.

- Emily

Your question is one that goes to the heart of the administration of all organizations, whether incorporated or not.

In order to lead an organization, the board of directors must feel comfortable in discussing issues and presenting disparate opinions. Each director must commit to listening to his or her colleagues and respecting opposing viewpoints.

However, once the board votes and a majority of the group agrees to a specific decision or course of action, it is the duty of the other board members to support the will of the majority. It is certainly appropriate to request that a dissenting vote be recorded in the minutes, but it is not proper for a board member who disagrees with the vote to publicly oppose it.

If the director feels strongly that the board's decision was in error, he or she should resign his position as a director and campaign to have his supporters elected directors at the next annual meeting, or even to recall the current directors.

Serving as one of the volunteer leaders of a community association sometimes means learning the democratic principles first hand. Unfortunately, it can also result in emotional, sometimes irrational behavior. By learning the basic rules of parliamentary procedure and the meeting process, cooler heads will prevail and community associations can operate more effectively.

Sincerely,

Margey

I live at the ***** ***** community and I want some answers on the way billing and inspecting the neighborhood works. I received a letter from the association on March 16, 2004 and it was a reminder letter about my late payment. I want to get an answer on why I have received a notice for late payment, and this is just the second letter I have received from the association. I have spoken to some of my neighbors and other community members and no one seems to know why there was not more then two bills sent to me and within time to pay for it, instead I pay for late fee, I have other important things that I have to attend to, like school and two jobs and need to get the answer to these questions asap.

- T.

Paying the homeowner association's maintenance within the time frame established by the governing documents (primarily the "Declaration") or board resolution is a critical responsibility of each owner. If the association doesn't collect enough money from its members, it can't pay the bills. Without adequate funds, the common areas can't be maintained, utilities will be shut off, amenities will have to be closed and, as a result, property values will drop. That's why the governing documents for most associations require the board of directors to promptly pursue owners who have not paid their assessments. The documents may detail the process your board must pursue in order to collect delinquent assessments, or your board may have approved an administrative resolution that details the collection process.

If you are experiencing financial difficulties, talk with your board. Your directors may be able to work out a payment arrangement with you that will help you resolve short-term problems. However, it's possible that you could lose your home to foreclosure if you are unable to pay your assessments and don't contact your board to discuss a payment plan, so keep those lines of communication open.

Sincerely,

Margey

Our 2003 BoDs showed overspending the yearly budget by $43,000.00 on the budget comparison sheet. A new BoDs took over this year. However after adding up all the checks that were written in 2003, I'm finding they overspent by $88,000.00 and that the budget comparison is not accurate. It's as if they are hiding the money that was spent. Money has just disappeared. What could and should be done about this?

- B.

Before you and your neighbors fear the worst with regard to possible misappropriation of your community's funds, let's review the difference between a Budget Comparison Report and a General Ledger. It's possible that the money is not missing at all but, instead, is accounted for differently than you may have expected.

The Budget Comparison Report normally details expenses paid by operating account funds. For example, payments for lawn maintenance, maintenance supplies and repairs, utilities, common area insurance and management would appear on the Budget Comparison Report.

On the other hand, payments made from the reserve account for major replacement projects such as reproofing, pool resurfacing and road repaving would normally not appear on the Budget Comparison Report because they are not operating expenses. Instead, such expenditures would appear in a special report detailing reserve expenditures and/or in the General Ledger, which is a detail of every financial transaction which occurred during a specified period of time.

So, if the total amount of all checks written doesn't equal the total expenses on your Budget Comparison Report, don't panic just yet. Take a look at the General Ledger to determine if the balance of expenditures is detailed there. If you still have doubts or questions, check with your board of directors to find out if an annual audit is conducted by an independent CPA, perhaps required by state statute. If not, perhaps you should consider hiring a CPA to take a look at your community's records on your behalf.

Sincerely,

Margey

Thank you for the advice. (see above) I did as you suggested and asked to see the general ledger. The management company said they do not have anything called a general ledger or ledger, only a budget comparison sheet. You had said "The Budget Comparison Report normally details expenses paid by operating account funds." I understand this, but lets say under sprinklers: the checks written to the sprinkler company during the 2003 year total $ 6,700.00 however, the budget comparison YTD only shows $1,600.00. How can this be? The YTD just doesn't add up to the checks written under many categories.

I have asked many questions as to why, and no one wants to give me a straight answer, not even the board. I was told, if there were problems from 2003, that it's from last years BoDs and not this years BoD's problem. I'm not pointing fingers at anyone, I just want to know why the checks written for the 2003 year totals $434,000.00 and the budget comparison YTD totals $388,000.00. Appreciate your help and time.

- B.

Is your question about a possibly incorrect Income Statement, or about association funds that may have been misappropriated? From your initial question to Ask the Experts, it appears that you had access to the checks and, after totaling them, determined that the total amount of checks written exceeded the total amount of expenses appearing on the Income Statement. As you reviewed each check, did you notice any unusual payments? If not, perhaps the only problem that exists is poor accounting practices. However, if you saw checks paid to questionable recipients or to pay for questionable services or products, there may be cause for concern.

If your manager and board cannot provide the information you requested, such as the invoices that substantiate each check, is it possible for you to talk with the CPA who prepared the annual audit and tax return about the discrepancy between the Income Statement and the total amount disbursed by checks? If your management company does not provide computerized financial reports, it is possible that a general ledger, which contains a list by income and expense category of all transactions, is not prepared. However, if your board is not receiving a monthly balance sheet which describes the financial condition of your community at a specific point in time, your directors may not have a big picture understanding of your community's ability to effect necessary repairs and pay bills on time -- but that's a discussion for another day.

If your concern is that association funds may have been misappropriated, and you are unsuccessful in obtaining the information you requested from either your board or association's accountant, there are other alternatives to pursue. However, these options are more drastic, so I encourage you to first exhaust all other efforts to obtain the information. Here they are: 1) contact the insurance agent for the association and advise him or her of your concerns; and 2) advise your association's general counsel of your concerns. Both of those representatives should relay your conversation to the board, and advise them how they should respond to your inquiries.

Your interest in your community association's financial condition is commendable. Perhaps you should consider volunteering to serve on the board yourself!

Regards,

Margey

I need some clarification on Amendments to the By-Laws and CC&R's. When is it an Amendment and when is it a Resolution? I have a Board that wants to change length of terms from one year to staggered two year terms. The CC&R's allow for an amendment to the By-Laws, how is this done?

- C.S.

There is indeed a significant difference between an amendment and a resolution, and it's important to understand how each is a useful component in the operations of community associations.

In a nutshell, amendments formally change or add provisions to legal documents. Resolutions clarify ambiguities in the documents, and can also establish new rules that were not addressed in any of the documents.

As you mentioned, most documents (primarily the Declaration and the Bylaws) contain a provision detailing how they can be amended. There is no other way to change the documents without following that detailed procedure to the letter, unless there is a state statute that overrides the amendment provision. There's another issue to remember when considering amending a provision in the governing documents -- the hierarchy of those dedicatory instruments. That means that certain documents have more authority than others, so if there's a conflict between two documents, such as between the declaration and the bylaws, one provision will supersede the other. Here's the typical hierarchy of the documents in a community association, starting with the most important: (1) recorded plat; (2) declaration/master deed; (3) articles of incorporation; (4) bylaws; (5) rules and regulations. What does this mean? Well, if the rules and regulations allow owners to have two dogs of any size, but the declaration limits pets to one dog or cat less than 15 pounds, then an owner with two Collies is in violation of the declarationand has to decide whether to give away the dogs or find a home in another community that allow pets like his. The hierarchy concept also means that a provision in the bylaws cannot be amended or added to conflict with a provision in the declaration.

Resolutions, on the other hand, are usually used to pass a set of rules and regulations or to clarify a provision in the documents. For example, a declaration may state that assessments are due on the first and late after the tenth, and that the board may establish penalties for late payment and procedures for collecting those payments. The board should use the resolution process to establish an assessment collection procedure that can be implemented fairly and impartially with all owners. Resolutions include the following four sections: (1) what document grants the board authority to pass the resolution; (2) the purpose of the resolution; (3) the scope, or who is affected by the resolution; and (4) the specifications, or "guts" of the resolution. In written format, these four sections respectively begin as, (1) "Whereas . . .; (2) "Whereas . . .";(3) "Whereas . . ."; and (4) "Now, therefore, . . .".

All that being said, even armed with this knowledge, you should advise your client to consult with legal counsel before attempting to amend any of the governing documents. There may be state laws that impact the ability to change certain provisions of HOA documents, or there may be unintended consequences that an attorney would be on the alert for.

As a manager of a community association, you are expected to wear many hats and be an expert in many fields. To protect yourself and your company from potential litigation, let your boards know that they need to seek advice from competent experts and not ask you for advice beyond your expertise.

Sincerely,

Margey

Please list advantages/disadvantages of having an on-site manager vs. management company for a hundred unit complex.

- Jane W.

Here's a chart that may clarify the benefits and disadvantages to each form of community association management. Please note, however, that the advantages listed in the management company category are general to the extent that they are benefits that SHOULD be offered by all professional community association management companies. Not all management companies are capable of performing everything on the list, so it's important to ask the right questions during the interview process.

Sincerely,

Margey

I am on the Board of Directors in our Condominium Association. We are in the process via legal, of asking for a final settlement from our builder for ongoing problems/completion of punch lists. In the formal wording to the builder, the attorney stated that our requested amount would be a final settlement for any further problems we might have. Our complex is approximately 4 years old. Does this seem wise to you? Is it unusual to pull back from any builder liability after four years? Thank you for your advise.

- C.

Far be it from me to second guess your attorney! I can tell you, though, that it is standard to execute a complete waiver of all future litigation when agreeing to a settlement.

If you're not comfortable with waiving those rights, why not hire an engineer experienced in condominium construction to conduct a complete and thorough inspection of all the common elements and physical components for which the association has maintenance responsibility? That way, you should have the big picture of what other problems may be lurking in the background. If the report indicates additional construction defects that will eventually result in major expenses to the association, include those repair costs in the final settlement. Your attorney should have the names of some qualified licensed engineers to perform the evaluation, or you can go to www.caionline.org, the website for the Community Associations Institute, to see if there is a link to a chapter in your area which may have those specialized engineers as members.

Sincerely,

Margey

Do you have any information regarding pin hole leaks in copper pipes. Has any cause been established? Is there something a homeowner or Association can do? I am mainly interested in the area of Anne Arundel County, City of Annapolis and Bowie, MD in Prince Georges County.

- Angie G.

Since I'm not familiar with the issue of pin hole leaks in copper pipes in your specific area, I went to my favorite resource -- Google. I was amazed at the number of hits I received by entering "water pipe pin hole leaks" in the key word search field -- including information specific to your area!

The issue of pin hole leaks in copper pipes is not specific to your area, and the Google links provide a lot of material addressing the cause and solutions to the problem. Why not go to Google to see for yourself the wealth of information available to you on this subject?

Sincerely,

Margey

If you own a condo and there is a water leak outside the condo under the sidewalk (which is from your water supply), who is responsible for the repair when you have a HOA and pay dues. Who pays the plumbing bill?

- Shoms

Since I am not familiar with your state's statutes or your association's governing documents, I can only address your question in general terms. In most condominium communities, everything outside the airspace of the unit is considered a common or limited common element and therefore the maintenance responsibility of the condo association.

However, it is critical that you read the provisions in your Condominium Declaration, and perhaps Rules and Regulations, that address maintenance responsibilities of both the association and each owner. It's possible that the documents mandate that any utility servicing only one unit must be maintained by that unit owner. Under those circumstances, a leak in the water supply line that services only your unit would be your responsibility to repair. If neither your documents nor state statute are specific regarding the situation you describe, then look to any Resolutions or Rules and Regulations of your association that your board may have created to address the omission. If you find no document that addresses this issue, your board would be prudent to approve a resolution describing responsibilities and repair processes in such situations so that they can ensure a consistent and reasonable policy for all similar situations.

Sincerely,

Margey

If an owner has not repaired or is refusing to repair a limited common element (storm door) for over 6 months, can the managing firm be held liable for inaction? Relatives, friends and other guests of other owners must walk by to reach the owners who maintain their properties. It is not only an eyesore but has degraded the value of the building.

- Leslie R.

Your question addresses a frequent misconception regarding the role of a community association manager. While the manager would appear to residents to be the person responsible for the operations of the community, it is actually the board of directors that is ultimately accountable for the enforcement of deed restrictions, the maintenance of the common elements, the timely payment of bills and the collection of assessments.

So, before faulting the manager for failing to make your neighbor replace his/her screen door, find out what's going on behind the scenes. Do you governing documents (primarily the Declaration) authorize your board to enforce architectural violations? Did your board authorize the manager to pursue the replacement or repair of the door and the manager failed to follow through with the owner? Or, is the board reluctant to impose a possible hardship on the owner of the unsightly door and, therefore, has not instructed the manager to require the owner to resolve this issue?

Community association managers have much less authority than many homeowners realize, although they're often blamed for situations beyond their control. Check the facts regarding your neighbor's storm door, and let your board know you're not happy with its appearance.

Sincerely,

Margey

What can I expect as a price range to hire a management company for 200 units in the South Florida area?

- Betty J.

I wish I could give you a specific price range for management companies in the South Florida area, but there are too many variables involved. Here are just a few considerations that will affect the management fee:

1. age of buildings
2. frequency of board meetings
3. physical condition of common elements
4. type of service required -- just professional management, or full service, including landscape maintenance, trash removal, pool maintenance and other services
5. professional qualifications of the management company
6. professional qualifications of the community association manager -- be sure he or she is licensed as a Certified Florida Manager

The Community Associations Institute has a monograph in its Bookstore entitled "Choosing a Management Company (GAP #8)"; it contains some excellent nuts and bolts information about the process involved in selecting a managing company for a community association. If you're interested, go to the CAI Bookstore to check it out.

Sincerely,

Margey

Property Manager inspection for condominiums.

- Dorothy S.

I'm not sure I understand your question, but I can address, in general, the need for site inspections for a condominium community.

You indicated that there is a management company involved with your community, so the first place to look for site inspection requirements is the management contract. If there is a provision specifying the number of site inspections per month, then your community manager should be on the property according to the frequency stated in the contract. If there is no provision, then your manager is not required by contract to inspect the premises.

Then again, there's a big difference between site visits and site inspections. An "inspection" connotes an extensive and thorough observation of each and every building and common area. A "visit" indicates more of a general overview of the premises. Both are appropriate in certain circumstances, and both might require a written report to the board. It is therefore critical that the management contract is clear with regard to expectations of the board with regard to the duties of the manager when on your property.

Please let me know if I did not address your question. If you would be more specific in your question, I will do likewise with my response!

Sincerely,

Margey

Re: Basketball goal structures. A new homeowner moved into a house on my street, and they have placed a tall basketball goal in the front of the property at the curb on the concrete slab that covers the drainageway where the street drainage goes. I called our homeowner's association representative and asked her about it, and she said that there is no violation to our covenants.

Our homeowners association covenants read as follows, and I would welcome your interpretation:

Playground and Recreational Equipment. No jungle gyms, swing sets, similar playground equipment, basketball backboards, tennis courts, or such other recreational equipment shall be erected or installed on any Unit without prior written approval in accordance with Article XI hereof (Article XI addresses the procedure for approval of installations). Any playground or other play areas or equipment furnished by the Association or erected within the Properties shall be used at the risk of the user. The Association shall not be held liable to any Person for any claim, damage, or injury occurring thereon or related to use thereof.

- Nancy B.

Based on the provision you quoted, it would certainly appear to me that the basketball goal is in violation of your community's deed restrictions. Have you sent a copy of the provision to your manager, who may not be as familiar with them as you, especially if s/he is a portfolio manager responsible for several communities? If you have and s/he still is not acting on your complaint, try sending a brief note to your board of directors or to the manager's supervisor.

I'm hoping that once your manager is aware of the provision, s/he'll act on it immediately, of course with your board's approval. Sometimes it takes some gentle prodding and rational discussion to resolve these kinds of issues. Don't be disheartened.

Sincerely,

Margey

My question is in regard to enforcing speed limit violations. We have several offenders lately and have sent notices that provides a temporary fix. Do we need to establish a fine schedule and is a hearing necessary to legitimize the fine. Thanks.

- Ray S.

It's certainly unfortunate that some residents of or guests to your community are so thoughtless as to jeopardize the lives of those who live there by speeding through the community. There are several ways to enforce speed limits, and notices are a good start. While peer pressure is frequently the best motivator for compliance issues, crafting an enforcement resolution that establishes specific procedures and penalties is the next best alternative.

Many states require due process before imposing fines or other penalties on a member of a homeowners association, so I would first suggest that you check your legislature's website to determine if there is such a requirement for your type of homeowners association (condominium or townhome/subdivision). Next, take a look at your association's governing documents, particularly the Declaration, to determine if there is a proscribed process for enforcing rules violations.

Once you've completed your investigation regarding mandated procedures, develop an enforcement resolution that reflects applicable laws and your governing documents, and also includes sufficient leeway for the board to consider individual circumstances. You don't want to make the process so strict that you don't have the flexibility to bend the rules if necessary. You DO want the policy to be reasonable, fair and easily enforced.

Enforcing community rules can be one of the most stressful responsibilities of a volunteer board of directors. By remaining reasonable, rationale and unemotional, you and your board can ensure compliance while maintaining harmony among your homeowners.

Sincerely,

Margey

Question 1.
We are a 174 unit complex and are having issues with non-residents using our pool & laundry facilities. (Previous residents or owners who don't live on property have given keys to friends or relatives.) We are investigating any security system (card reader, etc.) that might be affordable for our size complex or suggestions for dealing with this.

Question 2.
Another issue is too many automobiles - interested in perhaps using a decal system to account for card supposed to be there and appropriate action for others. Any suggestions or experience?

- Rebecca A.

Before you go to the expense of installing an expensive security system to prevent nonresidents from using your pool and laundry, why not consider replacing your access keys on a regularly scheduled basis, such as every year? Or, to make is easier, consider installing a keypad entrance lock and changing the combination every three months, notifying all residents by mail or email of the new access code.

With regard to too many automobiles on the premises, are your streets owned by your association or by a municipality? If they're owned by the latter, you may not have any authority to develop and enforce rules regarding vehicles on the property. If your homeowners association owns the streets, do your governing documents (Declaration, Bylaws or Rules) contain a provision limiting the number of vehicles each owner may bring and park onto the property? If so, it would be appropriate to develop a resolution requiring residents to attach decals to their vehicles identifying them as community residents, issuing only the number of decals to each resident as proscribed in your documents or as approved by your board. Include in your resolution sufficient leeway for the board to consider individual circumstances. You don't want to make the process so strict that you don't have the flexibility to bend the rules if necessary. You DO want the policy to be reasonable, fair and easily enforced.

Enforcing community rules can be one of the most stressful responsibilities of a volunteer board of directors. By remaining reasonable, rationale and unemotional, you and your board can ensure compliance while maintaining harmony among your homeowners.

Sincerely,

Margey

If the Association puts in to place a resource, such as a playground, which has established "Rules of Use" with posted signs, what, if any, responsibility does the association have to enforce those "Rules of Use?"

- T. S.

I've been trying to figure out if your question is hypothetical or real, so decided to respond to it in broad terms.

First, the board should survey the association members to determine if a playground is indeed an amenity desired by a reasonable number of residents. Since the cost of installation is one consideration, and the continuing expense of maintenance and insurance another, the homeowners should have input into the decision.

Next, the board must establish its authority to improve the common elements by installing a new amenity such as a playground. Do the Declaration of Covenants, Conditions, and Restrictions/Condominium Declaration/Master Deed/Bylaws authorize the board alone to determine whether or not to expend association funds on a new amenity, or must a specific percentage of the membership approve such expenditure? Are there state statutes that address improvements to the common elements? Your association's legal counsel may be the one to answer these questions.

If the board has confirmed that it does indeed have the authority to add an amenity, the next step is to determine the process for developing rules for the playground. Again, it's time to look at the association's governing documents and state statutes. More and more state legislatures have imposed strict limitations on the rules development process, requiring that the owners have an opportunity to voice their opinion regarding the proposed regulations.

Once the board has "vetted" the rules as required by document or by law, it's time to publish them to all the owners and residents and record them if required, remembering to provide them to all new owners. Then, finally, the playground can be constructed and the board can begin the rule enforcement process. It is particularly important to ensure compliance with rules regarding playgrounds, since it's there that our youngest and most helpless family members trust us with their safety and their lives.

That last sentence should make every board member sit up and take notice. Installing an amenity such as a playground increases the liability of the association and the potential for a tragedy in the community. While I'm not saying it's unwise to install the playground, I would certainly encourage the board to discuss the idea with both legal counsel and insurance agent to make sure all liability issues have been addressed.

Sincerely,

Margey

We have been asked by residents to look into Satellite Dish possibilities. We want to avoid having small ones all over complex and are ready to look into details of one general dish. What are the pro's and con's of this? What are likely costs, names of vendors, key issues? Thanks for responding.

- Candace

Satellite dishes are often a source of heated discussion in a community. Since the Federal Communications Commission (FCC) regulates condominiums differently than planned unit developments (townhomes and subdivisions), here's a link to their website page that provides a FAQ sheet for all types of community associations: http://www.fcc.gov/mb/facts/otard.html.

If your community is a condominium, you might be interested to know that residents are allowed to install dishes 39 1/3" wide or less ONLY in areas that they own or in which they have exclusive use. For example, if your buildings have balconies and/or patios that are declared limited common elements in your Condominium Declaration, then the board may prohibit residents from installing satellite dishes above the top plane of the railing/fence or through the pickets. In addition, residents may not attach the dish or wiring to the walls, patio/balcony ceiling, or any other surface that is deemed a common element.

On the other hand, owners of single family homes or attached homes that are defined as townhomes or planned unit developments in the Declaration of Covenants, Conditions and Restrictions may install a satellite dish almost anywhere on their home so long as they comply with association rules requiring the dish to be placed in the least visible spot possible that does not diminish the signal, delay installation or increase the cost of installation.

With regard to deciding among individual dishes, a common satellite dish, and cable television, I suggest you interview local providers to learn as much as possible about the benefits and disadvantages of each. Check with your local Better Business Bureau as well to discover any serious complaints about the company. If there is a local chapter of the National Apartment Association or the Community Associations Institute, you might also check with them for a list of member providers.

Satellite dishes can impact the appearance, attractiveness and even the property values of your community. Good for you for exploring all alternatives!

Sincerely,

Margey

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