Thinking Again About Funding that Reserve Account

Last year we wrote about the consequences of under-funding a reserve account. Well, there’s another, maybe even more compelling reason to keep a well-funded Reserve account, and that’s the value of individual properties within a community. A recent study indicates that home values were 12.6% higher in associations with a strong (over 70% Funded) Reserve Fund than homes in associations with a weak (under 30% Funded) HOA Reserve Fund. You can read about it here.

This is worth considering while we look at 2018 budgets.


Security, Safety and Property Surveillance

digital-wireless-LWU3622-L1Smartphones, companies like Nest and Ring and many others offer internet-enabled video recording devices that today are affordable to most homeowners. The technology makes it easier for us to keep ourselves and our property safe and secure. In many of the communities we manage, homeowners are increasingly installing surveillance equipment that is as good as professional technology.

If you’re about to install video surveillance around your own property, it’s good to know the limitations of the law and to consider your neighbor’s privacy and possible reaction. This blog, while not all-inclusive, will discuss some things to consider when you’re installing video equipment. If you want to dig further into the law, please refer to your state and its specific laws around the issue.

Most technology now records video AND audio, and while this is great for some things like meeting minutes or other activities, in New Jersey, making certain types of audio recordings can be illegal under current laws. And, some areas are completely off-limits for video recordings, like the private property of others and in public places like restrooms where people expect a reasonable amount of privacy. Other public places are okay to conduct video surveillance.

New Jersey residents should know that in 2014, Bill (A-3843) was introduced that enables a municipality to enact an ordinance that would require the registration of private outdoor video surveillance cameras. This was passed to assist local law enforcement in resolving crimes that may be captured by a close-by camera’s surveillance range. The owner of the camera, along with their contact information, the location of all the cameras installed on their property, the areas they’re recording and how the footage is saved would be registered with the local police department.

You can’t stop someone from installing cameras on their own property, but if their video is recording your private property, it’s problematic. The same applies to you and cameras you place around your property. The placement of the cameras, what they are actually recording and how it affects neighbors are all important and priority considerations. Know the facts before you install cameras on your own property. Using the newest and coolest technology to do a good thing might ultimately land you in court in a complicated lawsuit if you’re not careful. While local, state and federal laws supersede any made in your community, before you press the “record” button it’s best to confirm with your association about additional rules or regulations regarding video cameras and surveillance.



2017 Resolutions – Transparency, Truth and Trust

Happy New Year!

New year, new year resolutions, 2017, preparation, success, business people, concept.

New year, new year resolutions, 2017!

As we mark new beginnings, it’s a great time to commit to things that matter most. It’s up to the manager to ensure the community is running as outlined in its governing documents, and then, up to the board to lead the community with sound decisions on its behalf. And yet, there are times when board members work independently of the manager, and without recourse. When this happens, the community loses all faith in its leadership, and maybe a whole lot more.

That’s why it’s so important to keep the sun shining on your activities as an elected board member.

Be Transparent – As much as possible, use the regular meetings to conduct the business of the community. Working meetings are completely acceptable, just as long as no votes/decisions are made, minutes are kept, and they are available for membership review. This shows that the board is operating with utmost transparency. Not everything needs to be discussed in a closed or an executive session.

Be Truthful – If you have to conduct business in an emergency or executive session, relay that information to the members truthfully. I was recently at an annual meeting where owners wanted to discuss individual assessments. Members are reasonable when you share the parameters by which you can and can’t share personal or sensitive information. Being truthful with owners goes a long way.

Be Trustworthy – Work every day to maintain and gain the trust of your members. At Sterling, our highest priority is excellent service to our clients and their communities.  They deserve nothing less, and if you follow the two rules before this, you’ll be trusted by the community to work and do the right thing on their behalf.

Resolve for 2017 that you’ll conduct the business of the association in the sunlight, take the work seriously and share information broadly with the people who’ve entrusted you to lead.



Hosting Successful Community Association Meetings

Gavel and book on a table

Gavel and book on a table

For years, I’ve heard complaints from colleagues about “never-ending” or dysfunctional board meetings, where everything gets discussed, but nothing gets decided. As I prepare for an upcoming annual meeting, I thought it might be useful to review here what makes a successful board meeting, annual meeting, and the difference between the two. Thanks to the CAI for giving a blueprint for property managers.

So, as with most communities, the requirements for your meetings are determined by state statutes and your governing documents. If you don’t have a copy of your governing documents, get them! They outline your meeting frequency, whether you can hold open or closed meetings, the timing for sending meeting notices, and lastly, voting procedures for annual meetings.

As the CAI so deftly notes, the board meeting is the end of a decision-making process, not the beginning. The manager has a responsibility to prepare the board members with this goal in mind. Committee reports, budgets and minutes from the last meeting are just some of the items the manager needs to produce in the board meeting packet.

The Open Board Meeting

The Agenda: In addition to alerting people to the items, the agenda serves as a tool to keep the meeting on track, to specify the order of business and for the voting to take place.

Following basic parliamentary procedure is the most effective way to keep board meetings on track. Most community associations use Robert’s Rules.

Do you have a quorum? It refers to the number of owner/members required to be present for the board to legally conduct the business of the association. If no quorum exists at a meeting, then no business can be voted on.

Approve previous meeting minutes  – Easy enough.

Reports – If the president, the treasurer or any committees have reports to share, they present their reports. If it’s an open meeting and members are present, make sure the presenters remind owners that they welcome feedback during the public comment section of the meeting.

Public Comment – This is where members make comments on or share ideas about the proposals (limit remarks to 2-3 minutes each). Keeping a formal format helps to keep your meeting on time and structured, especially if there are hot topics on the agenda. This format gives everyone a chance to speak but keeps the environment calm. Note that although owners have a right to express themselves, final decisions are voted by the board.

Motions – A board member makes a motion to vote on the agenda item, another seconds the motion, and a vote is taken. The majority of votes decides the issue and the decision is recorded in the minutes.

Motions can also be debated, or discussed prior to voting on an issue. But, in many cases, the committee or board members have already done this. As with all discussions, civility and staying “on topic,” is paramount.

Budget Ratification – At the right time of year, the budget should be ratified after presented by the treasurer or finance committee.

Adjourn Meeting

The Annual Meeting

An agenda and quorum are needed, but if the meeting is truly an annual meeting, then the goal of the meeting and the only motion put forward is the election of officers.

Board Elections – Candidates give some background on themselves, then the vote takes place, with ballots counted by pre-designated third parties.



The Unintended Consequences of Altering Common Property

Many years ago, while living in a new town home community in Old Bridge, two of my neighbors with homes on the edge of the community decided to improve the nearby common ground with shrubs and trees. While their actions came from a good place, helping to beautify the property, it was a violation of our community’s CC&R (covenants, conditions and restrictions). One of the planting beds was elaborate, and would have required quite a bit of work to remove and take back to its original state, which was a simple lawn.

Overgrown Fall Garden

The board decided to accept the plantings as part of the community’s responsibilities. At the time, the little shrubs weren’t a big deal, and no one was complaining. But in hindsight, perhaps there was a reason why the builder cleared trees and didn’t plant shrubs. The shrubs grew out of control, became an eye sore, and blocked views for neighbors of oncoming traffic?  The small pines became huge trees, obstructing light, and completely changing the aesthetics of the corner property. It was the responsibility of the association to care for the plantings that, years later, became a problem.

In most all cases, owners cannot make changes to common property, and if they have a desire to do so, they have an obligation to obtain permission from the community’s board. Without review and approval from the board, it will ultimately become a problem for the owner and their neighbors. In my old community, it ended with unexpected consequences  – high costs to maintain the beds, and removal of large, overgrown trees. The original owner had literally moved on, and it’s now the responsibility of the community to maintain what he placed there.

Community living isn’t right for everyone. When you want to improve your property with autonomy and without permission, buying a property in a planned community or condominium complex may not be the right answer for you.

Summer Safety Tips

Can you believe it’s already July! As I sit outside on this cool Saturday afternoon, it’s hard to believe half the year has gone already. Backyards are filled with blooming gardens, and we’re enjoying the outdoor life for which New Jersey is notorious. Sterling manages a lot of New Jersey properties, and we are blessed with a host of outdoor activities to partake in the warm weather. To further enjoy your time in the sun, here are a few simple things to remember that’ll keep you, your guests and your pets safe:

Make sure your barbeque grill is a safe distance from your property. We’ve seen too many units damaged by the effects of the barbeque’s heat. And, after you’re finished with your outdoor eating, clean everything up so the area doesn’t become attractive for the wildlife around.Young-boy-rides-his-yellow-bicycle-down-a-sidewalk-000013650330_Medium

As you drive through your community, keep your eyes open for children playing in the streets, balls rolling in front of your car and bicyclists enjoying a ride. And, always remember to be aware of early-morning or after sunset runners.

Make sure you understand plant life around your property, and whether it’s safe for animals and humans. You remember the poison Ivy rule, “If there are leaves of three, let them be.” If you believe you see Poison Ivy, it’s best to notify your property manager. He or she will have the landscapers take care of it. And, just in case, have some hydro-cordizone cream on hand to handle the itch and rash.

While you’re protecting yourself with sunscreen and bug repellent, let’s not forget your four-legged companions. Dogs with light noses should have sunscreen applied to their snouts too! And make sure they’re hydrated more than you are. If you let your dog in the water, make sure you dry him well, as some are prone to “hot spots,” or skin irritation and infections from moisture.

Recently we were just in our own backyard, and found a tick on our dog, so you don’t have to be in the State Park to bring home an unwanted friend. Check yourself and your animals for ticks each day, and it’s always good to protect yourself with repellent.

If your community has a pool, please abide by the pool rules, never leave children unattended, and never swim when the pool is closed or without lifeguards. Make sure those in your family that can’t swim are protected with life vests or other certified flotation devices.

So whatever it is you love to do in your community this summer, have a safe and fun time!

The True Cost of a Low Reserve Account Balance

When a community is new, a study is produced that outlines a budget to fund a reserve account in preparation for future expenses related to the inevitable deterioration of major components of the common property. The study can include things like entrance signs, light poles, siding, roofs and sidewalks.  New community boards sometimes don’t see a need to build a reserve fund when everything is new, and therefore elect to put minimal amounts in the reserve account. In some cases, they choose not to fund the reserve account at all.

So what happens during those first few years if the the reserve account gets less than the recommended amount of funding? Frankly, not much. The community is still relatively new, and no major projects are undertaken. Some of the original owners sell to new ones.  With each passing year, the reserve account continues to fall behind, despite the community’s age or the manager’s recommendation to fund the reserve account.

Now it’s 10 or 15 years from the community’s inception. What’s happening?

The cost of everything has gone up, but remarkably, maintenance fees have remained flat since 2000. Weather has battered decks or siding, roofs or sidewalks. They need to be replaced. The cement is crumbling on the front sign. The total cost of repairs for projects lDesign element. A housing subdivision sign with the name removed and ready for your customization.ike these could reach in the tens of thousands of dollars. There’s a new management company handling the property. The association has seen several board members come and go. The current board is forced to make the tough decision to assess owners several thousand dollars in order to fund needed repairs. Owners are angry, especially ones that haven’t been living there since the beginning. They call the management company, they may even blame the management company (which has all along been guiding the board to raise dues in order to properly fund the reserve account and maintain the property). So, the consequences of early actions to barely fund the reserve account, now fall upon the current owners who must now bare the full burden of making repairs. There is no other choice.

As your community ages, the projects, and the bills that come along with them increase. The association will need to use its reserves to fund these projects. So, the next time your association proudly reports that maintenance fees have remained the same, question whether the reserve account balance is enough- because down the road, the pain of paying a special assessment may not be worth the pleasure of a smaller maintenance fee today.

Related post: “What’s the Big Deal if I Don’t Pay My Maintenance on Time?


The Benefits and Burdens of Association Board Leadership

There are several reasons for a person to run for a community board position, and one is because he or she wants to improve their community through service. While it may seem like a simple job, being an active member of an association’s board can be a bit more complicated, especially if the community has issues that require decisive actions and attention where none were taken; or, if it’s low on necessary resources to keep the community running properly.

While you’re not handed a manual when elected, nor particularly expert at conflict resolution, by the sheer fact that you were elected, there is an expectation that you can run and are comfortable making decisions for all of the property owners, manage budgets, facilitate communications, conduct productive owner meetings, oversee committees and handle thorny issues that arise.

So there’s a good amount of grit that goes with the job, which of course, is a volunteer (and some might argue “thankless”) position. Residents need to be informed properly about the issues and opportunities for the community, and the board is the elected body responsible for managing the community on behalf of the owners.DoorKnocker

If you’ve been elected to a board and would like to further educate yourself on your roles and responsibilities, and conducting them in the most professional manner, you should contact your community manager and schedule a time to go through the community’s plan, schedule of activities and maintenance. Learning all that you can is paramount to managing a successful community. You should review the governing documents and financials and ask as many questions as you need to understand the status of your community.

Board members can also download a Board Member Toolkit, available free online through the Community Association Institute(CAI). There are a number of downloadable documents for homeowner leaders. Board members can also join the CAI to unlock other areas for exploration, and to become more educated and engaged in managing a community successfully.

As in any circumstance where humans are involved, it’s always helpful to keep perspective and exercise calm judgement – personal preferences and biases should be put aside – and once the full board has voted on a decision, even if it’s one with which you don’t agree, “disagree and commit.” It’s important to be united with your fellow board members and produce the best results for your community. Your community manager is always available to assist and guide decisions, but in the end, the responsibility is up to you.


The Importance of a Well-Maintained Property

The third of the five key attributes to a happily  managed community is thorough and regular site maintenance.  As spring gets into full bloom, maintenance crews and landscapers are out in full force repairing damage from the last several months.

I once lived in an apartment building where the owner took preventive maintenance to an extreme – painting, improving and investing in the building well before it was necessary. The lounge area was completely renovated years before it actually needed to be redone. The rent wasn’t low, but I witnessed weekly something being improved. And for me, it was worth the slightly higher rent payments to live in a clean, safe, well-lit and maintained property.

For planned communities, taking care of the little problems while they’re small is the best and most responsible way a Board can use the community’s money to keep the property from looking tired and getting run down. Although decisions aren’t easy when it comes to spending community money, especially when special assessments are required, the Board, with help and counsel from its management company,  must make those decisions to keep property desirable for existing and future owners.

In order to fit properly shingles are cut.

In order to fit properly shingles are cut.

Some communities are simple – single family homes with just landscaping maintenance, so there are no questions about keeping the property well-groomed; but other projects are lot more complicated when maintenance is more extensive, and expensive. However, letting these maintenance jobs linger is far worse.

Sterling keeps abreast of maintenance needs by doing regular site checks, by having good working relationships with contractors who alert our team to issues, and by working with the Board to plan for those projects that will take more of the community’s resources.

Sometimes it’s not easy making decisions to replace things like roofs, decks or siding, but in the long run, the community’s needs must come first and foremost.


What’s the Big Deal if I Don’t Pay My Maintenance on Time?

I attended a homeowners meeting earlier this week, and the subject of delinquencies came up. Of course, this community had its fair share, but the overall sentiment was that the delinquencies weren’t necessarily because owners couldn’t afford to pay. This community has a low annual assessment (maintenance fees), as it’s a simple homeowners association with not much common property to maintain. The thought was that owners fall behind because paying their maintenance isn’t a priority, and they just simply forget. I can see  how that happens if you’re not using auto-payment methods. After all, the community’s monthly/quarterly assessment doesn’t mean as much as paying other bills, right? WRONG.

The annual assessments are based on the community’s yearly budget. The total annual assessment is the amount of income that the board decides is needed to manage the property. Remember, a community association is a corporation that needs income to operate. The community usually has no other income sources, so the assessments, or fees, are what makes it run. Think of it like public broadcasting, without support of its membership, the money runs dry. But even public broadcasting has other means of income, like corporate or government sponsors, that community associations do not have.

Let’s think about the consequences of delinquent payments, and the downward spiral it could create:

  • Increased annual assessment to cover the deficit – the annual maintenance fees increase for all owners.
  • Important maintenance projects get deferred due to lack of funds.
  • Your property begins to look run-down due to lack of maintenance, sinking the community’s overall property value.
  • Shortfalls piled on to the following year’s budget, again driving your fees up.
  • The association is sometimes forced to borrow from other restricted funds, like reserve accounts; or from a bank or other lender for important maintenance projects.
  • Frustration and potential conflict between paying owners and delinquent owners.
  • And lastly, if it’s gotten very bad, the inability for new owners to obtain mortgages on properties in your community.

So it’s significant for all association members (owners) to support their community by paying their maintenance fees regularly.  Even when owners fall on hard times and need some relief,  Sterling managers have found that boards are reasonable with owners and happy to work out a mutually beneficial payment plan. But without that communication,  the board has no choice but to enlist the help of legal counsel to collect delinquent fees. And, if letters from the management company or the lawyer go unanswered, the lawyer then accelerates the collection process through the filing of liens, or even foreclosures against the property, or a personal money judgement on the owner. All of these actions cost money that the owner is ultimately obliged to pay.  In the end,  it’s the entire community that really ends up paying.

Everyone who lives in a community is interested in keeping its property values high, no question; and that’s directly related to the money collected regularly from the association’s members.

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