A Condo Association’s Board Responsibilities Defined

A condo association is a miniature form of representative government. The board members are elected by the condominium unit owners (the membership) to run the association and to manage the condominium property. In most cases the board will need to hire a professionally licensed manager to assist in managing the Associations day to day activities. Condominium unit owners rely on the board to resolve community problems ranging from building maintenance to unruly residents.

Rules and Covenants

The first priority for a condo board of directors is to carry out its duties in accordance with state law and the governing documents of the condo association. Directors are also responsible for enforcing the governing documents, the community rules, and doing so uniformly and fairly, including obeying the same rules themselves. This responsibility requires the directors to review complaints, reports from management, and decide if the rules have been violated. The Board (or a committee appointed by the Board) may choose to impose fines on owners who have broken the rules. In the course of business, it may also become necessary to change or revise the association rules, doing so is also the board's responsibility. Beyond the requirements specifically written into the law and the governing documents, directors also have a fiduciary responsibility to the Association and its membership. The board is obligated to always act in the best interests of the association.

Maintenance

Condo owners handle repairs on their own units, but it's the board's job to fix problems with the common areas, this includes the building's exterior, the hallways and amenities such as a pool or tennis court. The board must arrange for regular inspections and maintenance of such elements and, if major repairs or upgrades are necessary, the directors must set priorities for which problem needs fixing first. In most cases, the board will need to put projects out to bid, at which time the directors must review the bids and select the best one. Many associations hire a manager to deal with such issues.

Finance

It's up to the board of directors to handle the condo association's money. Every member of an association is assessed a fee which funds the associations’ day to day operations, such as maintenance, repairs, and administration. It's the directors' job to review and approve the annual budget and reserve schedule for the association. The directors must also take action against owners who don't pay their portion of the assessments; if an owner continues to refuse, the directors have an obligation to the other association members to take legal action against the non-paying unit owner.

As you can see, being on the board of directors of any condominium association takes a lot of hard work, dedication, and responsibility. The hiring of a professional manager will assist your board with many of the day to day activities of the association.

The anatomy of a Great Manager

All communities and Board Members want a “great manager”, because they know that a Community Association Manager can make or break an entire community. However, what differentiates a bad manager from an average manager? And what seperates an average manager from a great manager? What does it mean to be great in Community Association Management?
Over the years, in speaking with Board Members and industry leaders we’ve identified key areas and traits that make a great manager. The below should act as a Code of Conduct for any great manager.

1. Great managers understand the power of effective communication
2. Great managers are effective communicators
3. Great managers present themselves professionally
4. Great managers are organized
5. Great managers follow through, always
6. Great managers do not procrastinate
7. Great managers never give information they aren’t sure of, or hearsay
8. Great managers understand the value of their relationship with vendors
9. Great managers admit mistakes, take responsibility, and then fix them
10. Great managers maintain professional detachment
11. Great managers stay current with their industry and with business in general
12. Great managers deal with change well
13. Great managers have a sense of humor
14. Great managers value their integrity and creditability above all

Top 10 Things to Consider When Hiring a Property Management Company for Your Community.

1) Licensing: Is the property management company licensed in the State of Florida? Unfortunately, many management companies do not have the necessary licensing required by the State and say they do.

2) References: Has the property management company you are thinking of hiring provided you with references? Call current clients and ask – “do they have a good response time, do they provide timely reports, do they provide the service they promised?”

3) Experience: What types of properties do they manage? Are they specialized in any aspect of the industry, or do they do it all (sales, rentals, mortgages, etc.)? They may not be focused or attentive to the services you need.

4) Services: What property management services do they provide? 24 hour emergency service? Collections? Monthly reports? Financial Management? Attendance at all meetings?

5) Response time: What kind of response time can they guarantee, during business hours and emergencies? Do they answer their phones 24 hours a day? Are their emails answered throughout the day?

6) Fees: What kind of fee structure do they have in place? Are fees all inclusive? Do they charge for office supplies? What tracking system is in place for additional fees? Do they nickel and dime you? Sometimes the lower priced companies have add-ons or kickbacks. Ask.

7) Certifications: What organizations are they a part of? Is the property manager an active member of any of the national property management associations, such as CAI (Community Association Institute) or any local chambers of commerce or business organizations?

8) Delinquent Owners: How will delinquent owners’ accounts be handled? Will they charge late fees? Will they send out monthly late notices and demand letters? Do they have a separate Accounts Receivables Department? Will they maintain an open line of communication with the Associations attorney if needed?

9) Violations: How will violations be handled? Will they send violation notices? Will they impose fines? Will digital pictures be taken as evidence? Will they maintain an open line of communication with the Associations attorney if needed?

10) Property Inspections: How often will they personally inspect your property? Weekly? Quarterly? Do they have trained and licensed managers visiting their properties? This can be very important and if not attended to frequently can lead to many disgruntled residents.

The information above was prepared by Marc Rodriguez, a Licensed Community Association Manager and President of Four Points Property Management, Inc., a property management firm specializing in community association management and consulting services throughout South Florida.

This publication was created as a guide to assist members of the Board of Directors when choosing a management company for their community. Mr. Rodriguez can be contacted at mrodriguez@fourpointsproperty.com or you can visit www.FourPointsProperty.com for more information about the company.

Governing Documents

We are frequently asked by Boards which laws or rules govern Associations. Many Board Members are unaware that there is a hierarchy of what laws and rules govern their community.

In this hierarchy, federal and state laws always take priority. However, every community association also has governing documents that are meant to enhance the federal and state laws and are more specific about how the community is to be run.

Below is a list of governing documents most community associations have. The documents have been listed in order of the one with the most authority to the one with the least authority.

The primary document is often called a “Declaration” for Condominium Associations or “CC&Rs” (Covenants, Conditions, and Restrictions) for Homeowners Associations. The Declaration is kind of like an operating agreement for a business; it lists the details of the property included in the development and contains restrictions on use of the individual units or homes. It specifies what authority the association has and how it can or must do certain things, like maintain the common areas. It also defines the rights and obligations of the individual owners and the Association, like paying their maintenance fees.

The next document in the hierarchy of Association governance is the Bylaws. The Bylaws are intended to cover the procedural aspects of how an association is run. For instance, this document will include information on electing a Board of Directors, association meetings, voting procedures, budgeting procedures and guidelines, and much more. The Bylaws should be your property manager’s number one reference tool.

The Rules and Regulations are the next set of governing documents. Every Community Association should have a set of Rules and Regulations. Although some associations do not, we recommend that if your association does not have rules and regulations that the board should consider adopting a set of rules and regulations for living in your community. Rules and Regulations are usually adopted by the Board of Directors and are meant as a management tool to further clarify the rights and obligations of owners and their guests.

The final governing documents, which not every community association has is the Boards Policies and Resolutions. These are voted on by the Board of Directors and are meant to keep consistency among different Boards and management companies through the years. There may also be Amendments to your association’s Declaration or CC&Rs, which can change the terms of the original document.

It’s important to remember that the Declaration is above everything else besides the federal, state, or city laws, so any provisions in your Bylaws, Rules and Regulations, or other documents that conflict with the declaration are probably invalid.

Understanding the contents of your association’s governing documents is an important step towards being an informed Board Member. All unit owners should have received a copy of all governing documents for the association at the time of purchase. If you have misplaced them, please contact our office and request a copy for your records.

If you have any questions or comments, please feel free to leave a comment or contact us.

The Special Assessment and Reserve Account Connection

Tim (fictional) lives in a 30+ year old association. Tim pays his assessments on time each and every month. The association needs to make a major renovation to repair exposed rebar, stucco repairs, and painting. The project will cost the association approximately $375,000 dollars. The association does not have an adequately funded reserve account and a special assessment is necessary. Each unit owner will be assessed between $8,000 and $10,000. Tim cannot afford the special assessment and the association is considering the foreclosure of Tim’s unit.

Does this hypothetical scenario sound familiar? Unfortunately, many older associations are faced with this issue. Special assessments are commonly used to pay for expenses outside of the budget, which can create hardships for both unit owners and associations.

The Florida Legislature has attempted to provide a solution to this issue by requiring Association to fund a reserve account and suggesting that Reserve Studies be performed regularly.

Has your association ever had a reserve study prepared and then adequately funded the association reserve account pursuant to the reserve study recommendations? If so, congratulations! If not, how should your association plan ahead for future repair and replacement projects without causing an additional burden to unit owners by having to adopt significant special assessments?

Step #1, hire a professional to conduct a reserve study. If you are lucky enough to have had a study prepared in recent years, have it updated to reflect the properties current condition. A properly completed reserve study will provide your association estimates and information about the remaining life of the physical components the association is required to maintain and the estimated replacement costs associated with the replacement of and major repairs to those components. A reserve study will significantly help your association in properly budgeting for future repairs so that adequate reserves can be funded, as well as reflect an accurate picture to unit owners of the associations condition, both physically and financially.

Step #2, understand your budget. An association that properly plans in advance should only need to make small increases to its regular monthly assessments in order to properly fund reserves. While the majority of unit owners will not be happy about increases to assessments, homeowners should be educated about the benefits of reserve funding and the possibility of a significant special assessment in the future for major repairs should a reserve fund not be maintained.

Step #3, your association may be able to obtain a loan to cover some or all of the costs associated with a repair or improvement. Although lending guidelines are stricter now than they have been in the past, this option is still available as long as your delinquencies are reasonable and below 7%. In order to obtain an association loan the association/management will need to provide the bank with important information, such as financials, cost estimates for the anticipated project, and collateral (an assignment of the right to future assessments).

Your association should stay ahead of the game and be able to fund significant repairs and replacement projects without the need for special assessments by updating its reserve study regularly, keeping delinquencies low, and creating a plan of attack for raising reserve funds.

We have successfully helped dozens of Associations by performing Reserve Studies, implementing a reserve funding policy, maintaining an adequately funded reserve account, and developing a plan of action for major repairs and necessary funding. For questions regarding this article or for assistance with creating a Reserve Study, please contact us at 305-403-0575 or send us an e-mail to info@fourpointsproperty.com.

"How much money should we have in Reserves?"

A common question I am asked frequently is “how much money should we have in our condo reserve"? Well, according to the Florida Statutes, the amount required is what is considered to be “adequate”. Obviously this is a very vague term.


It's important to understand that there is absolutely no way to come up with a one system fits all formula for establishing reserves. In my opinion the more money available in the condo reserve accounts the better. Condo Associations should include a line item for future replacement cost of common area items in their monthly budget each and every month. These funds should be maintained in a special reserve account. The specific amount set aside each month is determined by the size of the property and the amount of common areas/elements that will need attention in the future.

The best way to determine this is to have a Reserve Study Specialist or Professional Engineer provide you with a Reserve Study. This Reserve Study will determine the expected useful life of all your HOA or Condo Association common area items. The A/C system, roof, painting, structure, lighting, interior painting, pool, gates, etc. are all included in this Reserve Study. The Reserve Study preparer will then apply future expected costs to each element and determine what needs to be put aside each year to meet these goals for you Association.

"How much should you have in condo reserves?" Your Association may have enough money in a condo reserve account if it can address a condo association common area issue without having to implement a Special Assessment. This is a simple definition of what "adequate" reserves really mean.

We always highly recommend that Associations have a Reserve Study completed at least every 5 years. We can assist your Association in having this important study completed. An accurate Reserve Study can save your community from facing large Special Assessments or rushing around to obtain a high interest loan for major repairs. Contact us to find out how a Reserve Study can help your Association.

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