CATS is pleased to provide our monthly newsletter
with real questions posed at our Bi-Annual Seminars. We hope that you
find this information useful and will share it with others.
This month's questions are answered by a variety of the CATS
faculty. You can learn more about our professional faculty by
visiting our website: www.catsmn.com!
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Bringing homeowner expectations into line with reality is a
constant challenge, but it's worth the effort as it pays off by
reducing the number of phone calls and emails from disgruntled
homeowners. Each year in the November monthly assessment
billing we include a two-sided sheet discussing snow removal.
On one side is a brief summary of the snow removal contract
specifications. On the other side are the FAQ's, with the
response to the complaints we are most like to receive from the
property (this varies among properties, of course).
For example: Q:Why do
they plow part of the driveway even though the snowfall has not
ceased? A:Your contract requires that for major snowfalls the
center of the drives are to be plowed even before the snowfall
stops.
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Q:
How frequently does a developer complete a good reserve study at
the time of turnover?
 A: Not very often.
Why?
The developer, in most cases, wants to hold down the monthly
assessment for marketing purposes. The developer is focusing
on selling out the project, not necessarily the long term viability
of the project. Legislation is being proposed that will make
association finances more transparent. The consumer will have
information available to compare the financial strength of
associations, which may cause developers to pay more attention to
the finances of the association and the quality of the calculation
for reserves going forward.
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Q:
How can a new owner tell if the Association is adequately funded in
the reserve account? What would be the red flags to look for?
 A: Ideally,
they should have asked that question while they were still a
prospective buyer, not after they became a 'new owner'! But
the fact is that it is quite difficult for the average buyer/owner
to make that evaluation. After all, many Board members and
even managers don't really know how well the Association is
funded. A good starting point is to ask to see a most
recently prepared Reserve Plan which hopefully will have a 30-year
horizon. Then compare the recommended annual funding amount
in the Plan to what is funded in the current Annual Operating
Budget. If the budgeted annual contribution is less than what
the Plan indicates it should be, there is a problem. If there
is no Reserve Plan, that is definitely a red flag. Common sense
and experience tells us that if an Association does not have a
Reserve Plan, the chances that they are adequately funding reserves
is virtually zero.
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Q:
What is the best method for handling a hearing for rules
violations? Before, during or after the meeting, or in
executive session?
 A: If
the issues are fairly simple and does not involve witnesses with
opposing testimony, then a quick hearing 15 minutes before the
start of the scheduled Board meeting should suffice. An example is
where an owner is asking for a waiver of a proposed fine due to
some mitigating circumstances. However, if the facts are in
dispute and there will be witnesses offering testimony disputing
that of the alleged violator, the hearing should be held completely
aside from a regularly scheduled Board meeting. It is too
difficult to anticipate how long a hearing can take, there may be
privacy issues to consider, and those types of hearings have the
potential for getting ugly. Therefore, it is best to conduct
those in private.
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Q:
How does a management company determine when the lack of
participation or "noisy" Boards warrant an increase in
management fees beyond the normal cost of service increases?
 A: To
address the tendency of some Boards to abuse their manager's time,
we are now writing strict two-hour time limits for Board meetings
into our Management Agreements. There is nothing like getting
a bill for a too-long Board meeting to help the Board gain an
appreciation for the value of time. For Boards who want to
load down the manager with busy work that is clearly not included
in the Management Agreement, the best approach is to politely
remind them that there will be an hourly charge for providing that
service. But when a client just needs much more time than the
management fee covers, and you realize this is not a temporary
situation but instead appears likely to continue indefinitely, the
only reasonable business decision is to either increase the fee to
the level where it will become a profitable account, or terminate the
client.
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The comments
and answers above are general in nature. Specific interpretations
should be confirmed with the existing legal counsel.
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