Both sides are saying the same thing. I'm right and you're not. The issue doesn't even matter. Just watching the interactions is what makes this situation so sad. It didn't need to come to this, but each party felt the need to be right.

The association Board of Directors announced that it had decided to pursue a project. An interested homeowner with some knowledge on the subject began asking questions regarding the project based on his perception. His questions were ignored because those questions placed him at odds with the direction established by the Board of Directors. This particular homeowner is smart, clearly had some knowledge, and the questions he asked were legitimate. The board would have been far better off had they been willing to seriously listen to his questions in the months leading up to the vote. However, they did not, and worse yet, treated the homeowner disrespectfully by dismissing and ignoring his legitimate concerns. In retrospect, it is clear that the board simply could not comprehend a position that differed from their own, and they made no attempt to understand. They were locked into their position.   Had they listened they may have at least understood that there could be a legitimate alternate point of view.

As things progressed, the homeowner missed a couple of meetings and was unaware that the issue had now come up for a vote. Partially his fault, partially due to poor communications from the Board. The homeowner, realizing that, in his opinion, a bad decision was imminent, asked those questions again, in a more forceful manner, and in a public forum with far more people in attendance. He requested that further consideration be given to the matter. The homeowner was perceived by the Board as being late in asking questions on a matter they considered a done deal. But he had been asking questions for months, so his questions should not have surprised anybody.

But, the board was determined to move ahead, because they already had a plan. So again, they disrespected the homeowner by stating that discussion was closed and the vote would take place as scheduled. And the vote did take place, and the Board moved ahead with its plan because they had successfully stifled the dissent.

But this homeowner was really interested in the matter, and refused to let it drop. He now went out and performed his own research, the research that should have been done by the board. And he came up with some significantly different answers than those arrived at by the board. The homeowner knew that the board would refuse to hear any further discussion on this matter from him, particularly after they have already taken a vote and approved going ahead with the project. But, as a homeowner, this was partially his money, and his future, being decided by a board that hadn't done their job. So he took what he believed it to be the only course of action open to him, which was to publicly disclose his findings.

This disclosure finally forced the Board to address his written findings, and they had two effective options available to them; (1) they could recognize that his findings had value and were worthy of discussion, or (2) they could reject his findings outright and continue on the current path. The board decided to double down and take option number two, reject his findings and continue on the current path. If you’re counting, the Board has now effectively flipped this guy off three separate times.

It's easy to see why the board made this decision. Had they selected option number one it would have made the board look rather foolish or incompetent for failing to have discovered or considered these findings themselves. By selecting option two, they reinforce their own thought process and position and at the same time attempt to discredit the homeowner. The problem with this approach? When other homeowners read the findings, they realized that the homeowner who had done the research had really raised some significant legitimate issues, even if they did not agree completely with his findings. So now the board not only it looks foolish, but also stupid because they doubled down on a losing hand.

Human nature? Let's wait and see how this one plays out. It’s not done yet.

This series of events demonstrates two things the board did wrong. The first thing was failing to recognize that one of the problems that a board can sometimes encounter is lapsing into “groupthink,” which Wikipedia defines as “Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative viewpoints, by actively suppressing dissenting viewpoints, and by isolating themselves from outside influences.” That appears to pretty much describe what we saw above.

The second thing the board did wrong was to aggravate the situation by its callous treatment of one of its homeowner members. Had the board simply respectfully listened to the homeowner during the investigation phase, with an open mind, the situation could have turned out differently in a more harmonious atmosphere. Instead, we now see an entire community that is aligning themselves into one of the two camps, and a future battle brewing.

Being right isn't always the answer. Doing the right thing is the answer. Once the situation has deteriorated this far, it is difficult to get back on track, and may require different people (a different board) to resolve the situation. Suggestions anyone? Is there a way to salvage this situation?

I was working in our Association office one day when I overheard my office manager's half of a telephone conversation. I was surprised at what I was hearing, because I thought the misunderstanding was a thing of the past these days.

The caller was a new owner in a rural, sprawling, single-family home community. He was calling because he had just received a notice of delinquency for nonpayment of Association assessments. The issue? This new owner did not have a clue that he was a member of the Association. Ironically, this happened to be in California, where disclosures to buyers have been mandated for decades. How did this happen? When asked by the office manager, the new owner explained that he had purchased this property directly from the previous owner without the benefit of a professional real estate agent or an escrow company. The previous owner had simply executed a deed to the new owner in exchange for money - a classic private transaction. Neither the seller nor buyer had had any knowledge of the disclosure requirements mandated by law.

Had either a professional real estate agent or an escrow company been utilized as part of this transaction, both buyer and seller would have been informed of the disclosure requirements, and there would have been no surprise to the new owner.   As it was, the new owner was not just surprised, he was downright angry. The only target remaining in sight was the Association office, as the seller was long gone. So the new owner decided he needed to visit the Association office.

The new owner came into the Association office to "get to the bottom" of this situation. He was apparently convinced that he was going to find a way to get out of paying these assessments. I suspect this gentleman was just used to getting his own way. The office manager provided him with all the documents he should have received in a disclosure statement, including the CC&Rs, rules and regulations, Member's Handbook, and Association budget. The new owner looked these documents over while in the office and asked for an explanation of their content . The office manager patiently and politely explained that the CC&Rs (Covenants, Conditions, and Restrictions) were recorded documents, and indicated that if the gentleman would examine his recorded deed, he would see that it made reference to these recorded CC&Rs. These CC&Rs are a part of his property and may not be separated from the property acquired.

The rules and regulations explained the operating rules established by the Association. The Member’s Handbook explained the amenities provided by the Association. Once the new owner realized what amenities existed and quickly looked at the budget, he demanded that his assessment be reduced, since he had not been aware of, nor would he be using, any of the Association amenities. Again, the office manager patiently explained that the assessment was not a buffet where owners could pick and choose what amenities they wanted to use or pay for. All members shared the cost of the amenities, whether or not they used those amenities.

The new owner then challenged the "exorbitant" amount of "General and Administrative" costs in the budget, stating that the cost was simply too high. (This is really good feedback coming from someone who never even knew he was a member of the Association and had had the budget for all of 15 minutes). Again, the office manager explained the basis for the costs and assured the new owner that the Board of Directors, who were also dues-paying members, did everything within their power to keep assessments as low as possible. Perhaps if the new owner would like to attend a board meeting and discuss this with the Board of Directors, he would get some answers? He would be allowed five minutes to make a statement. The owner declined, stating that he didn't have time to waste with this Association.

Interestingly, the man's comments caused me to look at the budget numbers again from a different perspective. The budget was essentially laid out by department, and He was right: the total for general and administrative expenses was a large amount. I asked our outside accountant about this, and wondered if there was possibly any different way to present the information that could be more informative and less confusing.

Our accountant explained that he had previously tried to introduce the concept of ABM (Activity-Based Management) to a group of Association managers as an alternate manner of presenting financial information, but that there had been little interest in the topic. He also explained that in the nonprofit organization world, their practice of presenting a required "Statement of Functional Expenses" was a similar concept.

He described how a manager's salary, shown by department, ends up in the “General and Administrative” section. However, upon analyzing how the manager actually spends his time, one realizes that his salary should instead get spread around to Maintenance, Recreational Amenities, Security, Member Services, and Governance.   Except for the Governance portion, none of that manager's salary remains in the General and Administrative section. If all expenses were examined in the same manner, one would see a completely different picture of how the Association spent its money. The accountant also explained that, with planning and the correct software, it would be possible to present the same information in both the traditional departmental format as well as the activity-based management format.

Maybe that's something to consider.

Thanks to Gary Porter, CPA for insight on activity-based management.

Most managers tend to know a little bit about a lot of things, and may even be experts in a few aspects other than Association management. But there are generally large gaps in other areas of their knowledge. As a result, managers often rely on various service providers to provide expertise for the Association that they are lacking. This certainly doesn’t minimize the manager’s role; it enhances it. The manager still retains overall authority, pulls projects together, and communicates results back to the board of directors who are ultimately responsible.

The Association’s service providers are actually a critical element in the overall success of the Association. The industry has quietly begun recognizing this over the last few years and has modified terminology accordingly. While the term “vendor” is still used frequently, the term “business partner” is becoming a more commonly used term. The Community Associations Institute (CAI) has taken the lead in this effort by creating a Business Partners Council as part of the management structure of CAI. That action has caused many in the industry to reevaluate how “vendors” are treated.

The term “business partner” is more appropriate.  The term "vendor" simply implies one who sells to the Association, without recognizing the added value that a business partner can bring to the table. In contrast, the term "business partner" conveys the added value that service providers can offer, and infers to managers and service providers that “vendors” are not simply disposable objects, but are also valuable resources that can help improve the entire management effort. Association management has grown more complex over the years, and the constant development of new methods and materials channels the manager towards collaborative relationships with what were formerly just “vendors.” Service providers are partners in creating excellence in community management service to their mutual Association clients.

Below are some suggested guidelines for “getting the best” out of your business partners:

Respect the business partner’s time - Just like managers, business partners are busy. They don’t want their time wasted. Those who serve the industry are well aware that most products and services are competitively bid by associations, and accept that as the norm. But, they also don’t like to be “used.” If the manager or board has effectively already made a selection, then the bid process just becomes window shopping. Most business partners will quickly see through this type of sham, and, at an extreme, may even stop providing bids for you. The bid process takes time, and that time is wasted if the business partner does not occasionally “win” a bid. You should only ask business partners to bid jobs they actually have a fair chance of getting. Typically, the larger the job, the more effort is required in the bid process. If you “burn” a service provider with too many “no win” requests for proposal (RFP), that partner may just be too busy to help you out when you need him most. You also need to provide the business partner with complete information so he can prepare an accurate bid. You will quickly lose the trust of your business partners if you withhold information, either purposely or by simply being too busy, that would help a prospective bidder.

Respect the business partner’s knowledge - Business partners provide the manager with a path to expertise in their various disciplines. Managers should pay close attention, even if - and especially if - that business partner is giving information that the manager doesn't want to hear. When receiving surprise information, the manager shouldn’t simply dismiss the information, but rather should attempt to use it as a learning experience, recognizing that your business partner probably has more expertise than you do.  If the expert advice you are receiving isn't what you were hoping to hear, ask questions and gain clarity. The wider your knowledge base, the more valuable you are to your boards and your employer. The information business partners have to impart is invaluable - if not for the problem at hand, then for the next. Rejecting a business partner's expertise is risky if you’re the manager, as it will reflect poorly on you if you’re wrong. While the board of directors can’t expect the manager to always be right, they do expect him to bring the best knowledge and expertise to bear on any given matter. 

Remember that business partners underwrite industry events and education - Business partners provide the funding for almost all industry events, often spending thousands of dollars each for the opportunity to get your attention in a non-bid situation. Talk to them. Let them educate you about their products or services. While they’re engaged in a marketing activity, you are engaged in an educational activity. Business partners want you to be educated about their products and services, because they know that the more you know, the more likely you are to request a bid from them. By making you more knowledgeable and successful, they also make themselves more successful. It is this mutually beneficial relationship that brings the “partnership” concept into play.

Don't blame the partners – What? Never? I had a hard time trying to figure out how to phrase that. The fact is, some business partners, even very good ones, will occasionally make mistakes. In those cases, they may deserve blame. But the point I’m really trying to get at here is something I’ve seen too many times, unfortunately, where the business partner is blamed (“thrown under the bus” is the current terminology) for bad outcomes that are completely beyond their control - or even worse, to deflect blame from the person actually responsible. Sometimes, that person has been the manager. (A couple of stories below illustrate this point.) Chances are, most managers have done this - maybe not knowingly, but it does happen. Don’t ever deflect blame by pointing towards the business partner. Your temporary benefit will likely be short-lived, and the potential long-term damage to yourself is much larger than any temporary gain. Once this type of deception is discovered, your credibility will suffer. This industry is still so small that word gets around.

Story # 1 – This was told to me by a CPA that I have used in the past. The manager called the CPA to say he needed the audit report for a board meeting that night. The CPA responded that the manager had still not provided the final information that would allow the CPA to complete the audit, and reminded him of the two emails requesting information to which the manager had never responded. The manager stated that he would just inform the board of directors that he had requested the audit report from the CPA (and he had), and that the CPA said he didn’t have it completed (which was true), and that it was the CPA’s fault that the manager couldn’t present the draft audit report at the board meeting (which was completely false). When the CPA protested, the manager told him that he (the manager) was in charge and had the ear of the board, and he could tell them anything he wanted to. Here’s an egregious example of a purposeful act of blaming the service provider.

Story # 2 – This was related to me by a reserve study professional with whom I have worked in the past, and found to be very knowledgeable and reliable. A month after receiving the draft reserve study report for review, the manager called the reserve professional to express his extreme frustration with the reserve study report: some cost numbers were too low; he couldn’t find certain components in the report; and why didn’t the report look just like the prior report that had been prepared by someone else? This guy was loaded for bear. He had already decided that the reserve professional was wrong, and nothing was going to change his mind. In discussion, the reserve professional pointed out that certain component costs had been decreased because the manager indicated that a lesser scope of repair work was to be performed. The manager pushed back, saying the cost on one component was far too low, as he had bids for the work. The reserve professional asked why that information had not been provided if it was available. No response. Regarding the “missing” components, the reserve professional pointed to a report by location to demonstrate that the components were, in fact, included. Again, no response. Regarding report formats, the reserve professional indicated that he could provide reports in exactly the same format as the prior reserve study report, but that he felt they were not the best format to present the report. The manager said he didn’t care at that point.

The manager should have contacted the reserve professional far earlier in the review process to avoid the frustration that built up, and should not have acted in such a belligerent manner when contact was made. One can’t back down from a belligerent position without losing face, and this manager was not willing to lose face. Can this manager cause the reserve professional some damage? Yes, but he would be very unwise to do so because (1) other managers do know and respect the reserve professional, and (2) it is more likely to be perceived by knowledgeable people that the problem lies with the manager, not with the reserve professional. This is an example of an inadvertent misunderstanding where the service provider got the short end of the stick.

Business partners can work collaboratively with management to form a better team in solving problems that face community associations. They can leverage managers to make them more effective.

One of the things that all association members can agree on is that they want their Association to look nice. The common name for this is “curb appeal,” something that real estate sales agents emphasize when marketing homes for sale. In an association, the individual homeowner has little control over the curb appeal of his or her Association. By default, the maintenance task is the responsibility of the board of directors.

Landscaping is the most immediately visible area impacting curb appeal. Can you rely on your landscape service provider to accomplish this task for you? The answer is no. While that service provider is a very important part of the process, somebody needs to have overall control of the management of the maintenance process. This process involves looking through two different lenses. One lens deals with day-to-day maintenance and upkeep issues. The other lens focuses on the long-term maintenance plan of the Association, which should be reflected in its reserve study. Having the ability to see both the short-term and long-term aspects of Association maintenance is not something that can be expected of any single contractor or service provider - with the exception of your management company, which generally has a team of people involved in the management of your Association. If no management company is involved, you generally rely on an experienced on-site manager.

While it is possible that one or more board members, or the board as a group, may possess the ability to perform this task, you then have to ask the question - is this board going to be here one year from now, three years from now, five years from now? The answer is, probably not. The most common solution, then, is to hire an outside independent management company or on-site manager for the overall management of the Association, including oversight of both the short-term and long-term maintenance plan. While working with other associations, experienced managers have already dealt with most of the issues they are likely to encounter. They bring this experience into play for the benefit of your Association.

Several aspects of this truth have already been explored in other articles published in HOA Pulse. The manager is primarily beneficial to the Association in knowing:

• what to do.
• when to do it.
• who should do it.
• how to design specifications for the request for proposal.

An experienced manager will also provide on-site supervision and inspection, an important part of the Association management process. S/he can perform regular inspections of each building and property common areas, as well as evaluate on-site equipment. The goal of these activities is to provide the board of directors with enough information so that they can make repairs earlier rather than later, when the expense could be greater. Preventative maintenance is the name of the game. It is the best course of action for the board to take to both keep costs as low as possible over the long term while also keeping the curb appeal as high as possible.

One struggle that affects many associations is the fact that keeping long-term costs under control may require expenditure of more money in the short run. This seems to be a particularly difficult situation for board members who have campaigned to get elected to the board by promising to reduce costs and keep assessments low. Too many times, that short-sighted attitude results in larger overall costs in the long run.

The manager can also provide useful insight to the board regarding normal degradation of facilities which inevitably occurs over time. Because s/he has a number of business contacts, s/he knows which contractors are reliable, have good pricing, and possess the specific knowledge needed to accomplish a given task.

Because neglected short-term maintenance can lead to much larger expenses in the long-term, it is important that the current operating budget be adequate to perform the maintenance tasks that are needed. It is also critical that the reserve funding is adequate to perform the long-term maintenance tasks when necessary. Even new properties require maintenance that must be completed on a regular basis. An Association is wise to create a maintenance plan that is designed to both maintain and improve the quality of the community. It must consider both current day-to-day activities, as well as long-term major repair and replacement activities that are commonly funded in the reserve plan.

We find that too many associations are under the impression that the reserve study is in fact their maintenance plan. It should not be. The reserve study should be a reflection OF the maintenance plan that the Association has put in place.

Curb appeal is important to the satisfaction of members of the Association and often determines whether they are happy with their lifestyle or if instead they constantly complain to management and the board of directors regarding the Association. More importantly, everybody is ultimately hit in the pocketbook if an association is not well-maintained.

What does an association do when the money runs out? I hope we’re not going to find out too soon, but we are living in interesting times.

Despite government assurances that the recession is over and things are getting better, the real story on the street seems different. The most recent jobs report indicated that unemployment has dropped from 6.7% to 6.6%. While that’s being spun as an “improvement” in the economy, what it actually represents is that hundreds of thousands of workers have simply given up looking for employment, so they are no longer included in the jobless statistics. They certainly aren’t showing up in the new jobs gained. In fact, job gains aren’t even keeping up with the number of new people entering the workforce. To make matters worse, unemployment benefits, which had been extended for longer than any time in history, are also now ending for hundreds of thousands of workers.

The American economy hasn't seen anything like this in the nearly 100 years since the Great Depression of 1929. Have we really come out of the current recession, or are things simply changing from “very bad” to “less bad”? And will that be good enough? The Federal Reserve is “tapering” the quantitative easing, which is estimated to remove nearly a quarter trillion dollars from the economy in 2014. The Fed has acknowledged that the “taper” will hurt job growth. What will happen? The fact is, nobody knows for sure, and while nobody can predict what’s next, it appears that we’re in for several more years of financial uncertainty.

Let’s return to the question posed above. What does an association do when the money runs out? Homeowners’ associations can also face a time of financial uncertainty. Many associations have entered a period when the available cash pool is drying up. The reasons are many: foreclosures, job layoffs, developer bankruptcy, or owners simply deciding to conserve their cash for personal needs rather than paying assessments. The reason doesn't matter; the result is the same: fewer assessments being collected, and less cash in the association's bank accounts.

Association assessments move down the list of priorities for an owner when times are tough. The fact is that many owners see no value in continuing to pay a mortgage - much less assessments - on a condominium unit that has no equity due to the major hit that the real estate market has taken. As a result, many associations face tough collection situations. Collection actions don't work when the owner is out of work and is struggling to feed his family. You can't garnish wages that don't exist. Recording a lien and foreclosing is difficult when the lender has a senior lien and there is no equity in the property. Small claims court may get you a judgment, but it is of little value if there are no assets to attach.

So what does the association do when the money runs out? If there’s not enough money to pay all of the association’s expenses; and you can’t get any more from assessments; and you can’t borrow any more from reserves; and you can’t borrow from a bank; then it's time to prioritize expenses. Who does the association pay? Who does it not pay? Imagine discussing that in your next board meeting.

When considering priorities, you may have to (for the first time) ask the question of what is the most important obligation of the homeowners’ association. The health and safety of the owners should be top priority. Here is a list of typical expenses that should have very high priority:

• Water bill
• Electricity bill
• Garbage collection
• Security services
• Insurance premiums

The next tier of expenses to be paid would include management services and accounting services.

Other operating expenses and contributions to reserves come next.                                           

What expenses should be last in terms of priority - or better yet, what services should be postponed or cancelled, at least for the short-term? How about closing down the pool? That saves money on gas for the heater, electricity for the pump, and water for the pool. Reducing frequency of landscape services is another short-term option. Postponing or cancelling window washing is another possibility. Cable TV service for the clubhouse is another expense that is a convenience, but since it does not promote health or safety for members, it can be eliminated. Lastly, consider postponing any repairs that do not promote health or safety for the members - but be cautious of postponing any repairs that might result in much larger long-term costs.

Most directors have never had to face a situation like this - and should they ever, feedback from those members that are still paying assessments is likely to be very loud and very negative. If you do find yourself in these circumstances, you should communicate with all members, share your decisions and reasoning, and perhaps even ask for other suggestions.

Before taking any of the above actions, consult with your manager (assuming he or she is not the one that first brought this matter to your attention). Consider consulting with your accountant, as he/she is the financial expert. Contact your reserve professional to recast the reserve study funding plan to shift dollars away from immediate years to future years ( a short-term solution only). Most importantly, consult with association legal counsel to make sure your actions are in compliance with both statutes and the association’s governing documents.

Worst-case scenario? Well, it could be worse - bankruptcy of the association is the next step.                       

The Manager’s Job

By: Chuck Miller

I was asked once about the skills that are required to be a manager of a community association. The young man questioning me was considering the possibility of a manager position among options as he tried to forge a career for himself.

From my own years in HOA and condo association management, I learned that it takes a variety of skills to make a good association manager. A manager must interact with a variety of people who have different needs and wants, and must deliver positive results in a very timely fashion, executed with a smile and accomplished on budget. The managerial position also requires good organizational abilities, personal attentiveness, and a variety of property management skills.

When looked at from this perspective, it becomes apparent that the association manager position is really several jobs in one. Below is a list of some essential skills that go into making a good HOA manager.

Communication Specialist
The association management business is not really about "property management" as much as it is about "people management." By this, I don’t intend to imply that people need to be managed, but that the job of manager is more about interacting with people and solving problems than anything. This role can involve supervising staff, leading by example, acting as advisor to the Board of Directors, etc. A good manager must be able to communicate and work with people of all shapes, sizes, and backgrounds. Some boards of directors have a “hands off” approach, while others are very involved - perhaps sometimes too involved. When the contractors and homeowners are added in as well, the result is that you’ll be dealing with many different people - some friendly and some not so friendly. A good manager will find that right mix of communication based on experience and working with their audience over time. The better the communication is between the manager and the board of directors, the more secure they will feel with you as their community manager – and the easier your job will be!

Consultant / Advisor
Consulting with and advising the Board of Directors is an important aspect of being a good community manager. I have observed managers who simply take orders from their Board as opposed to advising the Board about the appropriate course of action. This can happen for several reasons. The manager could be just taking the path of least resistance, or perhaps interpreting what the board wants or needs as the correct answer. The board of directors could also be a group of “Type A” personalities who believe they have all the right answers. An experienced manager shouldn’t be afraid to speak up if he sees the community headed towards a bad decision. In fact, it would be a mistake to not speak up and simply watch an association make mistakes that could be prevented. There is a fine balance between acting as an advisor as you assist a community versus trying to completely calling the shots yourself.

Accountant
An association manager should have a good understanding of the financial basics of the association. He should be aware of the standard monthly, quarterly, or annual cash inflows and outflows for an association. Knowing these basics is important when creating the annual budget for the association. In fact, without basic accounting and financial knowledge, it is difficult to plan for maintenance and other projects. The most important question that every HOA manager faces is, "Where does our money go?" A good manager needs to be prepared to answer this question.

Contractor
While an association manager does not need to have a contractor license to be a manager, he does need to be familiar with contractors and how they operate. This means knowing a few key things to help projects progress smoothly. Your contractors, just like you, are professionals in their line of work. They deserve to be compensated for their time when they assist you. At the same time, the more you know about routine repair and replacement projects that are common to associations, the better off you will be as a manager. By having an understanding of approximate costs of small projects and the time frames that are associated with completing them, you will be able to better coordinate completion of the jobs with minimum disruption to association members, as well as understand jobs specifications and project bids.

Negotiator
Negotiation skills are something you expect an agent or lawyer to have, but good negotiation skills are also very helpful for an association manager. Because the manager has to answer to many people with different agendas, being able to negotiate and mediate different issues is very important. Whether it is negotiating a better price from a contractor, solving a neighbor vs. neighbor dispute, or pleasing the different personalities on your board of directors, the ability to be a problem solver is invaluable. Unfortunately, it is not possible to please everyone. The job of the association management professional is simply to please as many people as possible, while still upholding the responsibilities for which you were hired: maintaining and improving property values, and managing the community with efficiency, while still acting within the constraints of state laws.

It takes a variety of skills to make a good association manager. Not all managers are the same, nor should they be. In fact, many managers have skills in addition to those listed above, which just adds to their overall value as an association manager.

One of the facts of life about being a manager is that you get to observe the behavior of lots of people. Not spying, just noticing what goes on around you.   Conflict is inevitable in a community association. My interest is in observing how different people react to conflict.

Living in a condominium project means that people live closer together than they do in single-family detached housing. Diverse individuals living in relatively close proximity can create the perfect atmosphere for conflict unless everyone tries to work together. Everyone has expectations about almost everything in their lives. We have expectations about how our family, friends, and neighbors should behave. When they don’t act in the manner expected, people often react by falling into a state of anger. Expectations aren’t limited just to people we know, but also extend to most of those with whom we come into contact or depend upon. We have an expectation that our leaders should make decisions that we believe to be right.

Road rage is often the result of failure to meet expectations. We expect the drivers of other vehicles to obey the rules of the road. Their failure to meet those expectations causes some people react with anger. Many times, what we expect of others is a reflection of what we expect of ourselves.

For most people, anger is not an emotion that feels good. It’s a negative emotion that disrupts your daily flow and brings out the worst parts of your personality. Anger generally makes people more aggressive and limits how they think about and treat others. It is usually directed outward towards someone else and creates distance between people. You isolate the party to whom your anger is directed, but, more importantly, you isolate yourself. Anger becomes a prison that keeps people from making better choices that reflect understanding, compassion, and caring. Those are attributes that contribute to your own happiness and the happiness of those around you.

One way to avoid anger is to transform your habit of expectations. That doesn’t mean that you allow people to walk all over you. It means you change what you expect of others. You understand that people can’t read each other’s mind, and their reasons for doing what they do usually have nothing to do with you.

Your neighbor didn’t take your assigned parking spot to make you angry; she did so because she couldn’t carry her groceries the longer distance from her own parking spot. Your neighbor didn’t let his dog poop on the lawn in front of your unit to make you angry; he did so because he hasn’t read or understood your Association’s rules. Changing your expectations to better understand other people’s positions will do a lot to disarm your anger.

If your neighbor behaves in a manner that fails to meet your expectations and makes you angry, the only way you are going to resolve the problem is by choosing to make an honest effort to remedy the situation “together” with your neighbor, not by creating an even wider distance between yourself and them through anger. Effective communication can only occur when there is a process of two-way listening. Anger prevents people from honestly listening to anything but your anger. Transforming your expectations reduces your opportunities to get angry, and puts you in a position to make better choices about how you relate to the people around you - and in turn, how they relate to you. When people work together, anything is possible!

Almost every manager experiences difficulties with Association members at some point in time, but board members can also catch their share of grief. Governing a homeowners’ association can be challenging. Though there are many personalities and attitudes to deal with, former board members who become argumentative and angry represent a special group, especially if they lose a contested election to someone holding an opposing view. Because of their former leadership role on the board, they can often develop a following of members. If they are particularly vocal in their disagreement, they can become disruptive to Association operations. Occasionally, some people even go a step further, carrying out completely inappropriate actions, such as sending wrathful emails or spreading untrue rumors.

An instance several years ago demonstrated to me how bad it can get. One board member was very insistent that, because the board had made a tax election to “roll over” excess income to the following year, the board was “required by (tax) law” to refund that excess to the members immediately. Another board member joined him in this interpretation. The board consulted with their CPA, who stated that there was no such requirement. But why let facts get in the way? Still upset that he had lost a contested election, he became even more vocal as a former board member.

Inappropriate activities followed, including sending accusatory emails to board members, spreading false rumors, disrupting board meetings, harassing professionals hired by the Association, establishing an “anti-Association” website which included statements taken out of context (partial sentences grabbed from his opponents that were reconstructed to indicate the exact opposite of what was said), and even making complaints of fraud to the police department and IRS. This continued for months because, although every professional consulted with disagreed with this former board member, he refused to accept any position other than the one he had staked out. The complaint to the IRS actually resulted in an IRS audit that cost the Association a small amount of money. The IRS audit defense costs were higher than the tax paid.

It also seemed that any member that had a complaint against the Association for any reason joined with this individual, because he was “leading the charge” against the existing board. The net result was that this individual created considerable acrimony in the Association, and ended up costing all members money because of his antics. But because he had developed a loyal following, he was actually re-elected to the board at the next election. That slowed him down, but at least he now had a voice back on the board. It was widely believed that he had made so much noise as a former board member just to keep the spotlight on himself.

That series of events caught the Association somewhat unprepared to respond to those kinds of personal attacks against board members. Although it was a little too late to make a difference in the above instance, that Association later developed a set of general guidelines for the Association and board members to follow:

• Always take the high road. Don’t get embroiled in heated discussions. Stick to the facts.
• Always refer to the Association documents for support of positions taken by the Association. Try to answer any questions or comments by applying them to a rule or regulation within the documents.
• Have a process in place for logging and responding to member complaints.
• Board members should be addressed as a unit and not individually. Bring all complaints to the board meeting for discussion. If they are unjustified, they can be acknowledged, placed in the minutes, and then tabled. If the complaint is found justified, discuss it. Then discuss how to fix the issue and follow through.
• If a resident feels the Board has broken any rules, it is his or her job to prove so. Documentation is the key to support the Association’s actions.
• If incorrect information is being provided to members by a third party, the Association can respond with newsletters or notices that state the facts. These communications should be careful to not further inflame a situation.
• The Board’s actions should be open and transparent. Boards are allowed executive session meetings only for very limited purposes. All other business should be conducted in open session, with due notice to members of matters to be discussed.
• Board members have a duty of confidentiality to the Association and other board members.

Open communication with the community is important at all times, but particularly when unfounded accusations are made. The Association should always keep members informed about what is happening, or not happening, within the community. The Board is the voice of the community. They have been voted to a position of authority and leadership, and it is their job to keep members up to speed on all actions taken by the Board. Minutes of meetings must be available, and all meetings should be open. Do not do anything in secrecy unless you are discussing personnel, litigation, or contract negotiations. Always try to be as transparent as possible.

One caveat relates to the “send all” option in email communications. If you have seen the television commercial regarding the guy trying to grab everybody’s computer before they can read the email he sent after inadvertently hitting “send all,” you understand. One advantage of email communications is that email is a quick response vehicle and establishes a permanent record that, while it can be misunderstood or misconstrued, can’t be modified by a recipient to say something else entirely. One disadvantage of email communications is that email establishes a permanent record that may not be what you really wanted to say. Emotions and context aren’t communicated in email, just text. Email can be easily misconstrued. It’s best to always stop, count to ten, and then compose your email. It’s also always a good idea to have a separate email account for Association business. Keep it separate from your personal email account. Your email is discoverable in the event of litigation.

Remember that there will be homeowners with differing opinions. That’s generally a good thing, as it forces all parties to consider alternate positions that they may not have considered. Listen to the homeowners’ concerns and opinions. Consider if they can easily be resolved. Consider how many people feel an issue is important. Consider if actions are cost-effective and reasonable.

Some people can go too far. The situation described above is a clear example of someone with whom you could not reason. If a board member is a victim of libel or slander, then it’s time to consult with an attorney to discuss options. It’s even been suggested that in more extreme situations, it may be helpful to hire a mediator to assist in the communication and resolution process.

No matter how the situation arises, board members were elected to a position of leadership because people thought they could do the job. Board members should lead with patience and professionalism, and more importantly, integrity.

1. How many different associations does each community manager handle in your company? How many units? Do they represent different types of properties?

Association management companies are in business to make a profit. In too many instances, this has led to management companies overloading their portfolio managers with too many associations to adequately provide management services. If community manager’s portfolios are too large, some of their association clients could be underserved.

2. How long does it take for your manager or other team members to respond to calls and e-mails? Do you have an emergency, after-hours contact telephone number and procedure?

Most management companies are acutely aware that they should respond to homeowners’ and homeowner's association board members’ correspondence as quickly as possible. Twenty-four hours is a good rule of thumb, except for on weekends. Board members should have either the manager's cell phone number or another emergency contact number for after-hours emergencies.

3. Is the Association inspected regularly? If so, how often? Does the inspection include maintenance issues as well as rules compliance issues?

Many association managers perform a routine visit to the Association on a weekly basis, but it should be inspected for violations at least every other week. The compliance inspector should take a digital photo of the violation to be sent out with the violation letters.

The inspection should also include an evaluation of ongoing maintenance. For instance, does the landscape maintenance crew appear to have properly trimmed grass and shrubs? Are there any dry spots where irrigation is inadequate, or water accumulation indicating overwatering? Are any sprinklers misdirected towards buildings? Is there any peeling paint on siding? What about uneven concrete, loose fences or railings, or potholes? Catching problems early through regular, ongoing inspections can significantly reduce long-term repair costs.  

When the Association is being inspected by either the compliance inspector or association manager, notice should be given so that board members and homeowners have an opportunity to get answers to questions. This face-to-face access to the manager in a casual setting can avoid problems that often arise when board members and homeowners don’t have easy access to the manager.

4. Other than the community manager, how many people in the management company will support the overall management efforts of our Association?

An association management company typically has a team of people to properly service their association clients. A complete team may include the association manager, accounting staff, compliance staff, escrow staff, a client services representative, and a supervising manager. In a smaller management company, one individual may be handling multiple tasks. In a larger management company, these tasks are more likely to be assigned to different individuals.

5. Does the association manager have appropriate licenses or industry credentials or certifications? Does the manager take ongoing education and training courses? Does the manager have adequate knowledge of state laws affecting associations?

Association managers should have appropriate industry training and credentials. The Community Associations Institute (CAI) offers AMS (Association Management Specialist), PCAM (Professional Community Association Manager), and LSM (Large Scale Manager) designations. The National Board of Certification of Community Association Managers (NBCCAM) offers the CMCA designation. In addition, managers are required to be licensed in Florida and Nevada. California does not require licensing, but the California Association of Community Managers (CACM) offers the CCAM (California Community Association Manager) credential to recognize those individuals that have demonstrated knowledge of California’s unique laws applicable to associations.

6. Is an association website included in our monthly management fee?

An Association website not only provides information to members, but also helps to build a sense of community in your Association. Advanced site features may provide access to board reports and allow homeowners to check their account information.

7. What are the hours that the Association manager can be reached?

A community manager should be available during regular daytime business hours, and 24 hours a day on an emergency basis. Daytime access should be through office phone, e-mail, or cell phone. Evenings and weekend access should be available through an emergency answering service, should an emergency situation arise.

8. Does the management company aggressively pursue homeowners that don't make timely assessment payments?

Delinquent member assessments are an unfortunate way of life in homeowners’ associations, particularly in today’s economy. The management company should work with the Board to make sure that appropriate collection policies and procedures are established, and closely monitor receivables and send notices to members delinquent on their assessments. If an outside collection agency is used, the management company acts as a liaison to provide information to assist in collection of those funds.

9. Does the management company inspect lots/units before they are transferred from one homeowner to another?

When an escrow request is submitted by a title company, the manager or compliance specialist should visit the lot/unit, take pictures, and note any violations. Violations should be communicated immediately so that they can be resolved prior to closing of the transaction, to avoid problems between buyers and sellers.

10. Does the Association management company exhibit professionalism?

The management company should consist of a team of experienced experts demonstrating the professionalism and commitment required to provide quality service to their association clients.

The quality of vendor services your Association receives impacts the value of member property. While this is apparent in virtually all maintenance activities, it is particularly true in landscaping, painting, roofing, fencing, streets, and parking areas. Additionally, security services (although not a maintenance activity) potentially affect ALL maintenance activities and are the most visible “personal” service provided for most Associations.

Selecting vendors can be a challenging process. There are different sets of criteria for selecting each of the above described services. Many Associations hire a professional management company just to handle the vendor selection and oversight process. With experienced professional managers representing the Association, you can generally have confidence that a vendor will be selected only after a rigorous qualification process.

In addition to specialized criteria that relate specifically to a particular service, the following general criteria are very important.

Specialization of Services

The quality of vendor services is often determined by their specialization. This can be evaluated on two levels: (1) the vendor’s overall background and experience in the services they offer, and (2) the vendor’s experience in working with homeowners’ associations. Working with an Association of 100 members is not the same as providing the same services for a single homeowner. Membership in CAI should often be one of the first questions to ask a vendor. If a vendor does not value CAI membership enough to join, it is often a sign that the company does not have experience working with associations or an interest in specializing within the homeowners’ association industry. Some management companies will not even consider selecting vendors unless they are members of CAI.

Reputation

Before a business is considered as a candidate for the job, an HOA service professional reviews the company's reputation using a variety of resources, such as customer references, Better Business Bureau (BBB) records, and the business history of the company. Only the most reputable companies become candidates to receive a contract. An even more important indicator of reputation is previous work provided for other associations. Managers gain confidence in vendors that provide good services on a regular basis.

Insurance

A business must carry insurance that covers injuries to residents, injuries to its employees, and damage to the property of either residents or the vendor that occurs during the fulfillment of the contract. Proper insurance protects both the vendor and the community from financial damages that occur in relation to the work performed. This is an often overlooked criteria, as too many managers assume that proper insurance is carried without ever requesting proof of insurance.

Licensing

Some states require a business to be licensed before it performs a particular service. Before a contract is executed, a professional management company should make sure that any vendors requiring licensing do, in fact, have the appropriate licensing to legally render their services.

Contracts

Contracts should only be executed when they contain the proper provisions and information. This includes credentials of the contractor, the start and end date of the contract, compensation and terms of payment, description of work to be performed, provision for the termination of the agreement, provision for warranties for services and materials, proof of insurance, and provision for legal costs. It is generally wise to have Association legal counsel review contracts prior to execution. This is one of those areas where the saying “an ounce of prevention is worth a pound of cure” really applies.

Conclusion

Unless an Association uses its own employees to perform ongoing services, it must generally outsource to third-party vendors to provide the necessary services. If the board of an Association is inexperienced at selecting vendors, the best first step is to select a qualified management company that has experience in the vendor selection process. With years of experience in performing the vendor selection process, such companies ensure that vendors are chosen based on their specialties, excellence in working for other communities, financial protections, and licensing, and that they have appropriate contract provisions.