Tag Archives: Liability insurance

Think Before You Lease Your HOA Amenities to Outside-Residents


Many associations are considering a range of revenue-generating measures to offset ever-tightening budgets. But before you rent out your clubhouse or sell memberships to your golf course, pool, tennis courts, or other facilities to non-owners, keep a few critical rules in mind.

Think About It

1) Consider the liability. The biggest issue that keeps associations from renting out their facilities to non-owners is liability. Check with your insurance carrier to find out if injuries to non-owners and injuries caused by non-owners would be covered under your current policy. Chances are they won’t, and it’ll be much more expensive to expand your policy to include that coverage. Once you know the additional insurance costs, you need to weigh them against the potential new revenue to determine whether the financial gain adequately offsets the added cost.

2) Which facilities will you rent? Don’t automatically assume that you should rent all your facilities to the public. For example, you may find that it’s too expensive and the liability is too great to allow public assess to your pool, but the increased insurance costs and limited risk of personal injury in allowing non-owners to use your clubhouse is acceptable. Evaluate each amenity individually before making any decisions.

3) Who’s in, and who’s out? Ask yourself whether it’s necessary—and permissible—to place limits on whom you’ll allow to be guests. For instance, your association might be heavily populated by seniors who prefer not to lounge at the pool while children happily scream and perform cannonballs. But banning children might open your association up to family law discrimination claims, even if those claims end up being frivolous. Similarly, opening your golf course to novice and sometimes ill-behaved players may transform your residents’ peaceful round of golf into a high-tension activity. On the other hand, allowing an aerobics instructor to conduct classes in your gym or allowing personal trainers to use the same facilities to train nonresidents during certain hours may not bother residents—who may actually appreciate the convenience of those services. In addition, you may be able to require instructors or trainers to include your association as an additional insured under their liability insurance policy, which would limit your liability. Whatever the amenity, get residents’ feedback on whether they’ll feel comfortable sharing it with non-residents.

4) Know the laws that apply. Remember that once you allow the public to use your facilities, your association will be subject to new laws, such as the Americans with Disabilities Act (ADA). Do your facilities meet the requirements of the ADA? If not, what would it cost to bring them up to compliance, and do those costs outweigh the revenue? Also, renting out your clubhouse for such events as weddings and parties will open up the issue of liquor liability. You can require that guests not bring alcohol onto your property, but that rule can be hard to enforce, and it may limit the facility’s appeal. If you allow the consumption of alcohol, you’ll again have to check with your insurer to determine how that affects your coverage.

5) Don’t forget the added expenses. It sounds great to be able to supplement your association’s income, but how many people will sign up to use your newly available facilities if you don’t market them? You’ll probably have to pay a salesperson or marketing firm to advertise your facilities, so be sure to add those expenses into your cost versus revenue calculation.

There are so many issues to consider before allowing nonresidents to use your facilities that it’s unwise to make the decision without professional guidance. So be sure to run your ideas by an attorney or professional management association with experience on the issue. Reviewing these five questions with your board and researching insurance costs in advance will help you be prepared and minimize the time and money you spend to get that critical advice.

Source: http://www.communityassociationmanagement.com/facilities-a-maintenance/amenities/

Call Riverside Property Management of Kennesaw for more information!

678-866-1436 or www.riversidepropertymgt.com

Think Before You Lease Your HOA Amenities to Outside-Residents


Many associations are considering a range of revenue-generating measures to offset ever-tightening budgets. But before you rent out your clubhouse or sell memberships to your golf course, pool, tennis courts, or other facilities to non-owners, keep a few critical rules in mind.

Think About It

1) Consider the liability. The biggest issue that keeps associations from renting out their facilities to non-owners is liability. Check with your insurance carrier to find out if injuries to non-owners and injuries caused by non-owners would be covered under your current policy. Chances are they won’t, and it’ll be much more expensive to expand your policy to include that coverage. Once you know the additional insurance costs, you need to weigh them against the potential new revenue to determine whether the financial gain adequately offsets the added cost.

2) Which facilities will you rent? Don’t automatically assume that you should rent all your facilities to the public. For example, you may find that it’s too expensive and the liability is too great to allow public assess to your pool, but the increased insurance costs and limited risk of personal injury in allowing non-owners to use your clubhouse is acceptable. Evaluate each amenity individually before making any decisions.

3) Who’s in, and who’s out? Ask yourself whether it’s necessary—and permissible—to place limits on whom you’ll allow to be guests. For instance, your association might be heavily populated by seniors who prefer not to lounge at the pool while children happily scream and perform cannonballs. But banning children might open your association up to family law discrimination claims, even if those claims end up being frivolous. Similarly, opening your golf course to novice and sometimes ill-behaved players may transform your residents’ peaceful round of golf into a high-tension activity. On the other hand, allowing an aerobics instructor to conduct classes in your gym or allowing personal trainers to use the same facilities to train nonresidents during certain hours may not bother residents—who may actually appreciate the convenience of those services. In addition, you may be able to require instructors or trainers to include your association as an additional insured under their liability insurance policy, which would limit your liability. Whatever the amenity, get residents’ feedback on whether they’ll feel comfortable sharing it with non-residents.

4) Know the laws that apply. Remember that once you allow the public to use your facilities, your association will be subject to new laws, such as the Americans with Disabilities Act (ADA). Do your facilities meet the requirements of the ADA? If not, what would it cost to bring them up to compliance, and do those costs outweigh the revenue? Also, renting out your clubhouse for such events as weddings and parties will open up the issue of liquor liability. You can require that guests not bring alcohol onto your property, but that rule can be hard to enforce, and it may limit the facility’s appeal. If you allow the consumption of alcohol, you’ll again have to check with your insurer to determine how that affects your coverage.

5) Don’t forget the added expenses. It sounds great to be able to supplement your association’s income, but how many people will sign up to use your newly available facilities if you don’t market them? You’ll probably have to pay a salesperson or marketing firm to advertise your facilities, so be sure to add those expenses into your cost versus revenue calculation.

There are so many issues to consider before allowing nonresidents to use your facilities that it’s unwise to make the decision without professional guidance. So be sure to run your ideas by an attorney or professional management association with experience on the issue. Reviewing these five questions with your board and researching insurance costs in advance will help you be prepared and minimize the time and money you spend to get that critical advice.

Source: http://www.communityassociationmanagement.com/facilities-a-maintenance/amenities/

Call Riverside Property Management of Kennesaw for more information!

678-866-1436 or www.riversidepropertymgt.com

Think Before You Lease Your HOA Amenities to Non-Residents


Many associations are considering a range of revenue-generating measures to offset ever-tightening budgets. But before you rent out your clubhouse or sell memberships to your golf course, pool, tennis courts, or other facilities to non-owners, keep a few critical rules in mind.

Think About It

1) Consider the liability. The biggest issue that keeps associations from renting out their facilities to non-owners is liability. Check with your insurance carrier to find out if injuries to non-owners and injuries caused by non-owners would be covered under your current policy. Chances are they won’t, and it’ll be much more expensive to expand your policy to include that coverage. Once you know the additional insurance costs, you need to weigh them against the potential new revenue to determine whether the financial gain adequately offsets the added cost.

2) Which facilities will you rent? Don’t automatically assume that you should rent all your facilities to the public. For example, you may find that it’s too expensive and the liability is too great to allow public assess to your pool, but the increased insurance costs and limited risk of personal injury in allowing non-owners to use your clubhouse is acceptable. Evaluate each amenity individually before making any decisions.

3) Who’s in, and who’s out? Ask yourself whether it’s necessary—and permissible—to place limits on whom you’ll allow to be guests. For instance, your association might be heavily populated by seniors who prefer not to lounge at the pool while children happily scream and perform cannonballs. But banning children might open your association up to family law discrimination claims, even if those claims end up being frivolous. Similarly, opening your golf course to novice and sometimes ill-behaved players may transform your residents’ peaceful round of golf into a high-tension activity. On the other hand, allowing an aerobics instructor to conduct classes in your gym or allowing personal trainers to use the same facilities to train nonresidents during certain hours may not bother residents—who may actually appreciate the convenience of those services. In addition, you may be able to require instructors or trainers to include your association as an additional insured under their liability insurance policy, which would limit your liability. Whatever the amenity, get residents’ feedback on whether they’ll feel comfortable sharing it with non-residents.

4) Know the laws that apply. Remember that once you allow the public to use your facilities, your association will be subject to new laws, such as the Americans with Disabilities Act (ADA). Do your facilities meet the requirements of the ADA? If not, what would it cost to bring them up to compliance, and do those costs outweigh the revenue? Also, renting out your clubhouse for such events as weddings and parties will open up the issue of liquor liability. You can require that guests not bring alcohol onto your property, but that rule can be hard to enforce, and it may limit the facility’s appeal. If you allow the consumption of alcohol, you’ll again have to check with your insurer to determine how that affects your coverage.

5) Don’t forget the added expenses. It sounds great to be able to supplement your association’s income, but how many people will sign up to use your newly available facilities if you don’t market them? You’ll probably have to pay a salesperson or marketing firm to advertise your facilities, so be sure to add those expenses into your cost versus revenue calculation.

There are so many issues to consider before allowing nonresidents to use your facilities that it’s unwise to make the decision without professional guidance. So be sure to run your ideas by an attorney or professional management association with experience on the issue. Reviewing these five questions with your board and researching insurance costs in advance will help you be prepared and minimize the time and money you spend to get that critical advice.

Source: http://www.communityassociationmanagement.com/facilities-a-maintenance/amenities/

Call Riverside Property Management of Kennesaw for more information!

678-866-1436 or www.riversidepropertymgt.com

 

How to Organize a Fall Festival for Your HOA or Condo Association


https://i0.wp.com/pumpkins.yellow-dog-publishing.com/images/pumpkin.jpg

Many Homeowners Associations plan fall festivals. Some celebrate the end of the harvest, while others use a fall festival to provide a safe alternative to traditional Halloween trick-or-treating. Whatever the reason for thecommunity activity, with a little bit of planning the festival can be a lot of fun for all home owners.

Instructions

    • 1

      Decide who is eligible to participate. For a project like this, the more community involvement you have, the more likely that the event is fun and successful.

    • 2

      Set a location and time. Advertise it on the street corners. Schools regularly host fall festivals, as do churches. In larger communities, the neighborhood holds the fall festival in one of its parks or grassy areas. Whatever location you choose, secure a backup location in case of bad weather.

    • 3

      Check out any insurance coverage you might need. Also, apply for any legal permits.

    • 4

      Enlist volunteers. This is sometimes the trickiest part of the equation. Recruit dependable people for key positions so you don’t have to scramble to do their job at the last minute.

    • 5

      Arrange for food kiosks. You might have apple pie stands, pumpkin bread stands and chili booths. Or, you might just decide to have a potluck-type meal where everyone brings a covered dish or two. Rent a cotton candy or hot dog machine.

    • 6

      Decorate your fall festival site. It can be as simple as setting out some pumpkins or more elaborate.  A decoration committee is well advised for this chore.

    • 7

      Set up games. Carnival-type games, such as cake walks and fish ponds.  Rent a bounce house…these are great for children. Going along with the fall theme, pumpkin carving competitions are fun as well.

Enjoy!  But alas, make sure there is a clean-up committee designated to tidy up after all of the fun!

What do Board Members do anyway?


Some people might wonder what Board Members do. Hopefully, this will shed some light on their duties and responsibilities for your community.

Homeowners Association Board

Board Members have a set number of responsibilities when they volunteer for your community.  Remember, they volunteer! So make sure you thank them for what they do.

Board Members are challenged typically on a daily basis with different aspects from personalities and duties and responsibilities within the community.  They have a definite purpose and specific duties to fulfill for your community.

 

The role of the Board is to set policy, standards, budgets and procedures for the association.

Probably the most important duty is the fiduciary obligations to the association.  This can be characterized into two parts; the duty of loyalty and the duty of care.  The duty of loyalty is requires the Board Member to act in good faith always in the interest of the community.  Never acting in their own interest or in the interest of another person. The duty of care requires the Board Member to act in a reasonable, informed manner when participating on the Board and making decisions for the day to day community’s care.

Board Members are able to delegate the duties of the association, but not the responsibility of their positions. It is the Board that is ultimately responsible for the association even if the Board hires a management company.  They can direct actions on behalf of the association, but the Board is completely responsible to the community. 

The governing documents as well as state and federal statues outline the Board responsibility within the community.  Areas of responsibility typically include:

  • ·         Care, maintenance and enhancement of common areas including facilities and physical property.
  • ·         Management of community finances and any reserve funds.
  • ·         Community harmony.
  • ·         Any employment the association has and the human resources of the community.
  • ·         Interpretation, creation, enforcement of the rules and regulations of the community.
  • ·         Community insurance needs and making sure guidelines for such are followed in the declaration.

This is in no way a full compilation of everything your board members do, just an overview of some of their duties.

Source: http://www.hoamanagementdirectory.com/blog.html?action=more&id=79

CONDOMINIUM INSURANCE – WHO COVERS WHAT?


Most condominium association‘s “Declaration of the Condominium” (hereinafter referred to as declaration) follow the wording of Chapter 47C of the North Carolina Condominium Act with regard to the definitions of “common elements” and “units”.  The Declaration specifies what insurance is to be provided by the association and what insurance is to be provided by the unit owners.In the statute, 47C-2-102, Unit boundaries it says: “Except as provided by the declaration:

(1)   If walls, floors or ceilings are designated as boundaries of a unit, then all lath, furring, wallboard, plasterboard, plaster, paneling, tiles, wallpaper, paint, finishes flooring and any other materials constituting any part of the finished surfaces thereof are a part of the unit; and all other portions of such walls, floors, or ceilings are a part of the common elements.

(2)   If any chute, flue, duct, wire, conduit, bearing wall, bearing column, or any other fixture lies partially within and partially outside the designated boundaries of a unit, any portion thereof serving only that unit is a limited common element allocated exclusively to that unit, and any portion thereof serving more than one unit or any portion of the common elements in a part of the common elements.

(3)   Subject to the provisions of paragraph (2), all spaces, interior partitions, and other fixtures and improvements within the boundaries of a unit are a part of the unit.

(4)   Any shutters, awnings, window boxes, doorsteps, stoops, decks, porches, balconies, patios, and all exterior doors and windows or other fixtures designed to serve a single unit but located outside the unit’s boundaries are limited common elements allocated exclusively to that unit (1985 (Reg. Sess., 1986), c.877, s.1.)”

The Declaration of most associations specify that the association shall provide coverage for “common elements” and each unit owner must insure his “unit”.  This would suggest that a unit owner would need to include Coverage A Building under the standard condominium unit owners HO6 to cover the elements of the unit that are actually part of the building (contrasted to “contents” such as clothing, TV‘s, etc.).  The parts of the “unit” which cause concern are building type items such as floor covering, wall covering, built in cabinets and appliances, and interior non-load bearing walls and partitions.

Under 47C-3-113, Insurance (a), “Commencing not later than the time of the first conveyance of a unit to a person other than a declarant, the association shall maintain, to the extent available:

(1)   Property insurance on the common elements insuring against all risks of direct physical loss commonly insured against including fire and extended coverage perils.

47C-3-113 (b) “In the case of a building containing units having horizontal boundaries (multi-story buildings) described in the declaration, the insurance maintained under subdivision (a)(1), to the extent reasonably available, shall include the units, but need not include improvements and betterments installed by unit owners.  This seems to imply that the master policy should include all that comes with the unit at the time of purchase (with standard) allowances.  The unit owner would need to insure the value of any upgrades under the Coverage A Building part of his HO6.

An attorney who has much experience in preparing Declarations has responded to an inquiry as follows: “In response to your memo, please note that, per section 47C-1-104(a) of the Condominium Act “Except as specifically provided in specific section of this chapter, the provisions of this chapter may not be varied by the declaration or the by-laws.”  Section 47C-3-113 (the insurance provision to which your memo refers) states that it may be varied or waived “in the case of a condominium all of whose units are restricted to nonresidential use.”  Accordingly, regardless of what the declaration or by-laws say, unless the insurance is not “reasonably available”, if the condominium contains residential units with horizontal boundaries, the insurance must include the units (but need not include improvements or betterments installed by the unit owners.)

Therefore, we conclude that the Association master policy must cover these described items and the amount of insurance selected should reflect these values.

Another issue is the association policy deductible which can be as much as $10,000.  Perhaps the individual unit owner is uncomfortable with such a large deductible.  A solution would be to purchase an amount of Coverage A Building under the HO6 equal to the cost of his upgrades plus $10,000.  The association policy is primary but it does not cover “upgrades” nor anything under $10,000, so the solution suggested will work.  Also, the HO6 building coverage is not subject to a coinsurance clause.

In order for this solution to work, the association Declaration must follow 47-C-113 (b) of the statute.  The alternative method is to say in the Declaration that the associations will provide coverage on the “common elements” only and each unit owner will have to cover all parts of the unit (including walls, floor coverings, built-ins, etc.)  This method calls for the developer/builder to inform each unit owner as to what the replacement cost of such items is so that the proper amount of Coverage A Building coverage can be obtained by each owner.  Not only is this a cumbersome method, but it appears to be contrary to what is dictated by the statute.

Energy Efficient Lighting


Saving Money Without Sacrifice

By Angelina Esposito

Full Color Brochure

The agenda for your monthly board meeting is to find ways to save money, and in the long run, increase the

building’s reserve fund. Each board member has been asked to compile a list of ideas on areas of possible savings. One board member suggests eliminating the fresh flowers in the lobby. Another proposes turning off the air conditioning in the laundry room. And on everyone’s list is the dreaded maintenance increase. As usual, everyone begins to argue. Then a third board member mentions energy efficient lighting and explains how the building can save money and cut back on energy consumption at the same time by replacing the incandescent lights with fluorescents. The room becomes silent and everyone is listening.

According to George Nunez, vice president of sales at Energy Saving Technologies, Inc., a full-service energy company that provides energy analyses for buildings, Co-ops and condos never really consider energy efficient lighting, they just buy new fixtures. We, on the other hand, look at the long-term results.

Energy Efficient Products

There are many different forms of energy efficient lighting and all offer significant energy and financial savings. Although they emit a very good quality of light and are used most often, incandescents are the least efficient light bulbs available. Fluorescents produce four times as much light per watt, meaning that a 40-watt fluorescent bulb gives more light than a 150-watt incandescent bulb. They are a little more expensive but last up to ten times as long. According to the National Lighting Bureau in Washington D.C., a fluorescent bulb has a life span of up to 20,000 hours, whereas an incandescent bulb lasts a maximum of only 2,500 hours.

The quickest payback is switching from incandescents to fluorescents, says Tom Sahagian, senior associate at the EME Group, a consulting engineering firm. In a cooperative corridor where two 60-watt incandescent bulbs comprise a light fixture, a 75 percent reduction of power and a savings of about $100 per fixture per year can be experienced if you install two 15-watt fluorescent bulbs, says Peter Berger, owner of Energy Saving Technologies. You can expect to save a little more than one dollar per watt per year in New York City if the fixtures are on 24 hours, he says.

Fluorescent lighting is typically used in hallways, mail rooms, laundry rooms and other service areas, but there are other potential locations for energy efficient lighting sources throughout the building. Replacing the existing bulbs used for the EXIT signs with LED (light emitting diode) bulbs can reduce the wattage from a 40-watt incandescent to a one-watt LED. Although these lights are on 24 hours a day, seven days a week, they do not need a lot of light. The LED bulbs burn out once every 25 years. According to Nunez, the LED bulb will result in a significant savings within only a year.

Exclusive to Energy Saving Technologies is the LESS System, a new technology installed in about ten Manhattan buildings. With this system, an occupancy sensor is installed in the fixtures in stairwells. When no one is in the stairwell the sensor will dim the lights to 20 percent illumination and when someone is in the line of sight, the sensor brightens to 100 percent illumination, reducing overall power consumption by 80 percent.

Outdoor lighting als ffb o accounts for a big expenditure of money and energy, especially if incandescents are used. HID (high intensity discharge) bulbs emit a very strong light and use a lower wattage consumption. The bulbs maximize efficiency and minimize operating costs and the number of fixtures needed. These lights cannot be used indoors because they emit a purplish hue, but are at least five times as efficient as incandescents.

Big Savings

Con Edison offers a rebate program for buildings that switch to more energy efficient lighting. According to a marketing representative for Con Edison’s enlightened energy services, buildings can experience a rebate of ten cents per watt of electricity saved when switching from either incandescents to fluorescents, from incandescents or fluorescents to HIDs or LEDs or from standard fluorescents to compact fluorescents. The rebate, which was offered at 25 cents, has been reduced to ten cents as of August.

Con Edison also offers a rebate of 60 cents per watt of electricity saved for outdoor security lighting. The cost for parts and labor for any rebate project is not covered by Con Edison. However, your bill will be reduced if the existing fixtures are replaced or converted. Eighty to 90 percent of existing fixtures can be converted to fluorescents, says Nunez. It’s a great time to upgrade and you can justify the costs by converting. As long as the building is a commercial customer and a customer of record it can qualify for the rebate. Contact Con Edison for an application.

Savings have been seen at The Pinnacle, a condominium in Forest Hills, since it replaced incandescent lighting fixtures with fluorescent lighting in the hallways about three years ago. The 926 fixtures each used two 40-watt bulbs, which were replaced with two ten-watt fluorescents that produce the same amount of light as a 60-watt incandescent bulb. The project reduced the daily energy consumption from 74,080 to 18,520 watts. It doesn’t make sense not to switch, says superintendent Angel Carregal. The savings can be seen within months, not just with Con Edison, but also because fewer bulbs are being purchased and less manpower is needed. The annual electrical costs for the 219-unit building dropped from about $159,000 to $129,000a savings of $30,00 per year.

In addition, The Pinnacle replaced the 75-watt incandescent lights in the lobby and banquet area with 15-watt screw-in fluorescents. The result was a daily energy savings of 4,620 watts.

At a small co-op on Central Park West, Nunez recently helped replace the 65 incandescent fixtures in the hallways with fluorescent lighting. What was once costing the building $75 per fixture per year, is now costing only $15 per fixture per year, for an annual savings of $3,900 per year.

Standard vs. Compact Fluorescents

While it is clear that significant savings result from switching to fluorescents, the switch from standard fluorescents to compact flourescents also results in savings. The standard fluorescent tubes, usually two or four feet long, use a magnetic or electronic ballast in or near the fixture which consumes a minimal amount of energy, usually two or three watts depending on the size of the ballast. The ballast is a device that provides the starting or stabilizing of the voltage needed in a circuit. If you still have the old fluoroscents, you can replace the larger bulbs that use a magnetic ballast with a smaller bulb that uses an electronic ballast. This will cut your electrical consumption in half, says Manuel Patino, director of project development at EUA Cogenex Inc., a nationwide company specializing in energy conservation projects.

The new compact fluorescent lighting is a smaller bulb, emits brighter light, comes with the ballast already built-in, uses screw-in bulbs and replaces incandescents. A seven-watt compact fluorescent can replace a 40-watt fluorescent.

An Interior Design Approach

George Stanton, vice president of Sygrove Associates, an interior design firm, recommends fluorescents in the hallways an c11 d service areas but not in the lobbies unless there is a ceiling cove. Lobbies should have a nicer quality of light, an intimate homey feeling you can’t achieve with fluorescents.

Over the years fluorescent lighting has become more attractive and it now comes in different temperature controls which offer different degrees of color and design. When Sygrove Associates designs a hallway, they use three fixtures with different fluorescent bulbs and hang up sample wall coverings and carpeting to see what light looks the best with the materials. There is a lot of flexibility and improved quality of light with the new fluorescents. The old ones are slowly being phased out, says Stanton.

Saving money is the driving factor for co-op and condo buildings, says Nunez. Some buildings have the same fixtures for years. But technology has come a long way. Switching will result in the same amount of light but a cheaper electric bill and less energy consumption, he says.

Source: http://cooperator.com/articles/199/1/Energy-Efficient-Lighting/Page1.html

Keeping Children Safe at Play


http://genomaru.files.wordpress.com/2010/08/00005134.jpg

What would be more delightful or heartwarming than the sights and sounds of laughing and playing in your community?

 

Every effort should be made to ensure that the joys of childhood continue in associations, especially with the importance of putting community back into community associations.  From a child‘s perspective, “kid friendly” means fewer rules and restrictions. From the adult’s perspective, it means only implementing and enforcing those rules that are absolutely necessary to protect themselves, the children and association property.

 

The existence and enforcement of reasonable rules can protect an association from liability, but liabilities remain, especially when the association doesn’t or can’t enforce those rules all the time. Just as an owner might sue an association based on the board’s failure to enforce a nuisance rule, an owner also could sue if the association failed to enforce a rule that prohibits children from climbing common element trees or playing in common element parking areas. Theoretically, the association passed the rule because of the inherent danger associated with the activity, thus the association had a duty to enforce its rule to prevent the danger. Would such a theory hold up in court? Much stranger things have happened.

 

Summer Fun at the Homeowners Associaition Pool

Associations should pass only rules that are essential to the health, safety and welfare of their residents–and ones that they can and will enforce. But what rules are essential? Each association must answer that question based on the circumstances and needs of the community. However, let’s take a look at the tree-climbing and parking-lot rules mentioned earlier.

 

A rule against children climbing trees on common elements could recognize both that children occasionally fall out of the trees they climb and that the trees can be damaged. Often the tree is too small for the size of the climber or the climber has tried smaller and weaker branches. In both cases, the damage to the tree may be accompanied by injury to the child. These certainly are legitimate interests, but do they warrant a rule? The association should ask first whether it needs the rule as a warning. In my opinion, most courts will recognize that children are naturally interested in climbing trees and may be injured by doing so. The courts also will recognize that it would be difficult, at best, to keep children out of a good climbing tree. Moreover, every child and parent already knows that if a climber falls from a tree, he or she likely will be injured. Thus, the rule is probably not necessary as a warning

 

The association should explore next whether it needs the rule as a deterrent-preventing climbing through fear of consequence. If the fear of falling is not a natural deterrent, I suspect that the fear of a fine or sanction (which mom or dad would have to pay) is not likely to do the trick–at least from the child’s perspective. Nor will it have a deterrent effect on parents. Those parents who would keep their children out of trees even if no rule existed don’t need the rule. Similarly, those who feel it is OK for their child to climb trees probably would find the rule silly and would not be deterred.

 

Then, does the association need the rule to protect association or owner property, or limit association liability? As for the property issue, trees lose limbs and branches naturally, so the loss of a few to climbers probably isn’t a big deal. If damage occurs to a tree on a lot, the owner probably has the right to make a claim against the master policy as well as his or her homeowners insurance policy.

The liability issue is more problematic. The mere existence of the rule may invite liability because the association will not be able to monitor all trees all the time. In actuality, most associations will not watch their trees unless a board member or manager just happens along and sees a climber.

 

Although it might seem ludicrous, a litigant certainly could claim that he or she relied upon the association’s rule to keep his or her child out of trees, and thus out of harm’s way.

 

The real problem, of course, is that this rule is not kid friendly. And, if the association passes such a rule without one or more of the elements mentioned earlier being of primary concern to the welfare of the association, the rule is not likely to have a positive effect.

 

Similarly, a rule prohibiting children from playing in common element parking lots appears to be a no brainer because it benefits all. However, looks are deceiving. In this case, both children and parents should know that playing in the parking lot is inherently dangerous. Parents also know that smaller children must be watched because a passing motorist may not be able to avoid a child darting between parked cars. Motorists also know to drive cautiously in a residential parking lot. Accordingly, a rule against playing in the parking lots is superfluous for warning purposes.

This rule won’t deter children from playing in the parking lots. Presumably, smaller children will be kept from these areas by parents or older siblings. Older children probably will play there whether the rule is known to them or not. Kids have been playing ball and skating in streets and parking lots as long as there have been streets and parking lots.

 

Finally, the existence of this rule is likely to have little positive effect on the association’s liability in the event of a tragedy. Let’s say that a child is injured by a vehicle in the parking lot. The association’s liability for such an incident, if any, will probably concern the lighting level in the parking lot or perhaps poorly placed plantings that impeded the driver’s view. If these circumstances contribute to the likelihood of the injury, having a rule against playing in the parking lots will not protect the association from liability. And, as in the previous example, a grieving parent could claim that, had the association enforced its rule, the child would not have been injured or killed.

 

So what appear at first impression to be two reasonable rules really have no redeeming value; they are not kid friendly. They are difficult or impossible to enforce. If anything, they might add to an association’s potential for liability. In short, they’re unnecessary.

 

The only kid-centric rules associations must have are those related to the swimming pool. Some associations also have rules related to the minimum age for use of tennis courts. Associations with a workout facility may need to have rules about equipment use as well. Otherwise, the best rules for children are the ones imposed by their parents.  After all, the parents will be held responsible for damage done by children that is not covered by insurance.

 

Source: http://www.communityassociationmanagement.com/rules/violations-and-enforcement/2473-children-at-play.html

Avoiding the Special Assessment Trap


Don’t think owners won’t notice an extra charge from the association.  Prepare for a fight and plan ahead to avoid special assessments altogether.

Special Assesments for Necessary Repairs

Many community associations turn to special assessments when confronted by unanticipated repairs, but boards need to avoid making hasty decisions to fund these surprise expenses.

Special assessments should be the last resort – not the first step -in funding an expensive repair; they’re unwelcome surprises and can cause financial hardship.  Moreover, they are inherently inequitable because they fall on the people who happen to own at the time payment is due, without regard to length of ownership – a measure of how much an owner “consumed” the component being repaired.  Given these dynamics, it should not be surprising that some owners will search every nook and cranny of a special assessment decision and may emerge with troublesome defenses.

Owners may dispute a special assessment for many underlying reasons.  The challenges come from the disgruntled owner who simply doesn’t like the board or from the guy who disputes the wisdom of the project, timing, cost or the specifications.

The owner’s personal agenda doesn’t matter because he refuses to pay, but he will not stop there; misery loves company.  He will organize his neighbors, start a petition, appear at your next board meeting with a circle of supporters and wag his finger or wave his fist in your face.

Worse, he will encourage others not to pay.  Then the board may realize it doesn’t have enough support for the project.  Further, the board may be faced with difficult collection actions, lawsuits that cost money and create tension, and may need to delay the very work that the special assessment was intended to cover.

LITIGATION LEADER

In the experience of my law firm in collection work for community associations, special assessments are one of the leading sources of litigation.

Just when you think you have done everything correctly, you may find yourself embroiled in a legal dispute.  There will be a clever attorney on the other side, skillfully probing every step in your decision-making process.  Believing his claim has great merit, he will cloud the issues with distracting defenses, bury you under an avalanche of paper discovery, file an endless stream of meddlesome motions and posture for his client who sits by his side cheering him into battle.   It won’t be fun.

THE NEED FOR A PLAN

Hopefully, a special assessment will never will be necessary.  If a board plans properly and builds up its reserves, it may not be.

Unfortunately, some boards want to keep general assessments low, believing that owners consider only the monthly fee when determining how much they pay the association.  This is fiction; you can’t play hide-the-ball with a history of special assessments.

The association needs to engage in strategic planning to avoid the necessity of a special assessment; the adverse impacts of financial surprise and inequity are often too much to overcome.  Many managers are particularly good at initiating strategic planning because of their professional knowledge and experience, but even self-managed communities can map out a well-developed plan.

Strategic planning calls for an objective look into the future to minimize surprise.  What components and systems will need major repair or replacement in the future?  How much will they cost?  How will these needs be funded?

The board is responsible for preparing the annual budget, including reserves.  When asked how they determine reserves, some of my boards say they have been to Disney World, using the Magic Kingdom Formula of 5 percent.  Others simply contribute “whatever is left at the end of the year.”  Both approaches are arbitrary and subjective.

Many state laws and governing documents call for reasonable reserves for repair and replacement.  The key word is “reasonable.”  Since every community is different in terms of construction, quality of materials, level of maintenance, climate and other factors, each must be examined on its own.

The basis for determining what’s reasonable for your particular community should be a reserve study by an independent expert – one who does not stand to obtain the repair work, who has professional qualifications in this field and is designated by CAI as a Reserve Specialist (RS).  Couple the study with an energy audit to buffer rising energy costs.

If your association does not have a financial plan for reserves, is this a failure to plan or a plan to fail?  And what if the association has some reserves, but they are either inadequate or the board doesn’t want to spend the entire fund on one project?  If that happens, the next best approach is to borrow funds from an institutional lender, using an assignment of assessments as collateral.  Many lenders now offer such loans for community associations.

Borrowing has many of the equitable features of reserves because the debt service is paid in modest amounts over a period of years.  The obligation transfers from one owner to the next as sales occur, thus spreading the costs and benefits in the same manner as reserves.

Of equal importance is that the association would have all the funds up front to complete the project, and would be able to enter into contracts without worrying about whether all owners will pay a special assessment in full, on time and without the delay and cost of chasing delinquent owners.

Without a financial plan, how do you know where your community is going?  John Irving wrote in Hotel New Hampshire, “If you don’t know where you’re going, you don’t belong where you are.”  The challenge for associations – volunteer leaders, homeowners and managers – is to find out where they’re going by engaging in strategic planning, starting with an objective reserve study and an energy audit, followed by setting a realistic level of funding.  This is the best way to minimize the need for a special assessment.

If your homeowners or condominium association doesn’t have a financial plan, it also may fall out of favor with the Federal Housing Administration.  The agency frowns on special assessments, and it requires that the budget contain a line item of at least 10 percent for reserves.  Since Feb. 1, 2010, condominium associations need to get on FHA’s approved project list before it supports any mortgages in the communities.  Failure to be on FHA’s approved project list will discourage real estate listings, leading to reduced marketability and resale values.

DUE DILIGENCE

Sometimes, not even fully funded reserves can prevent a special assessment.  When it’s unavoidable, the board must exercise due diligence before imposing the additional fee.  Due diligence can be tedious and time consuming.  To cover everything, use the following 10-point checklist and document each step:

1.     Ask your attorney to review your plans, applicable statutes and governing documents.  Get suggestions for improving them to foster success.

2.     Follow all applicable procedures in the governing documents for approving the budget.

3.     Make sure you have a full board that is properly elected.

4.     Be sure all voters are qualified.

5.     Make sure you comply with provisions in statutes and governing documents for adopting a special assessment.  Some states have special approval procedures.  Virginia, for example, authorizes members to rescind or reduce a proposed special assessment by majority vote at a meeting.

6.     Be diligent in identifying and evaluating options.  Prepare a comparative analysis.  Be objective.  For example, if you are replacing the siding because it would cost less than continued repairs, collect reliable data to support this finding.

7.     Keep the owners informed throughout the process.  Remember your obligation to disclose information about the special assessment on resale certificates.  Better to include it, even if it is merely under consideration, than to surprise a new owner.

8.     Use competitive bidding to find the lowest and best proposal.  Three are usually enough; any more will just drive you and your manager nuts.  In selecting a contractor, remember lowest cost is not always best value.  Many of us have learned the hard way that the lowest bidder is usually lowest in quality and reliability, but highest in terms of contract management.

9.     Make sure the components and systems to be repaired or replaced are within the association’s authority.  For example, if you want to replace all the windows in the condominium, make sure the windows are common elements, not part of the units.

10.  Get an opinion letter from your attorney to make sure that you have satisfied all substantive and procedural requirements of your state statute and governing documents.

The old carpenter’s adage, “measure twice, cut once” is good advice for board members because it’s essentially encouraging due diligence.  If successfully accomplished, the tasks on your checklist will not only create the foundation for a successful project, but also will minimize the possibility of litigation by contrarian homeowners.

After your due diligence is complete, engage the owners in the process.  Avoid top-down implementation or the appearance that the project is entirely driven by the board.  Appoint a committee of homeowners to take ownership of the project and be responsible for presenting it to the members.  Even if you do everything properly, you will not succeed without broad owner support and acceptance.

Indeed, there is nothing special about special assessments.  They present lots of moving parts and traps for the unwary.  They can lead to litigation involving issues far more complex than the problems they are intended to resolve.  The better approach is to build reserves based on an objective reserve study and to augment funding through a loan.  If you have absolutely no alternative to a special assessment, exercise due diligence in your preparation.  And remember that old carpenter’s adage.

By Marvin J. Nodiff, esq.

Get the Right Insurance for Your Atlanta HOA or Condo Association


What Kind of Insurance Does Your Atlanta HOA or Condo Association Need?

Atlanta homeowners associations (HOA’s, POA, Property Owners Association and Community Improvement Associations) normally carry four different types of insurance:  property, fidelity, general liability, and directors and officers (D&O) Insurance.

Property Insurance. Property insurance covers all of the common structures and amenities in the association.  Some examples of structures that property insurance will cover include monuments, common walls and fencing, clubhouses, pools, play structures, and sport courts.  For example, if a person crashes into a monument with their car and drives off, the association’s property insurance will cover the costs to repair the monument.  Another scenario that often plays out is when a driver fails to negotiate a curve along the main street in the neighborhood and runs into the association’s perimeter fencing.  If the driver does not have insurance to cover the damage, the association’s insurance will pay to have the fence repaired.

General Liability Insurance. Another type of insurance that the association should carry is general liability insurance or what some people call “slip and fall” insurance.  If a homeowner slips and falls running on the wet deck of the pool area and sues the association, the General Liability insurance will pay for a legal team to defend the association.  General Liability insurance becomes even more important if the association has a pool, pond, lake, or playground.  These are the places where homeowners are most likely to get hurt while on association owned property.  Association’s can protect themselves somewhat, by having homeowners sign a liability release form before they are issued keys to the pool, playground area, etc.  This liability release form should state that the homeowner understands that there are certain risks associated with using amenities and releases the association from liability should an accident occur.  The homeowner should be required to initial certain areas of the form and sign at the bottom.  It is recommended that all homeowners sign a liability release form before enjoying the association’s amenities.

D & O Insurance. The third type of insurance that an association should carry is directors and officers (D & O) insurance.  This insurance protects the board members from personal liability.  All associations, whether they are under developer control or homeowner control, should carry directors and officers insurance.  Board members can be held personally responsible for acting on behalf of the association. For this reason, most board members demand that they be protected from claims being filed against the association and the board.  Also, homeowner board members are volunteers and are not willing to serve on a board of directors if they are not personally protected from liability.  Please note, however, that directors and officers insurance typically will not cover a claim of discrimination of any kind.   If a homeowner files a claim of discrimination against the board of directors, typically the association will be responsible for paying any legal fees to defend the board and any judgments that may be awarded to the opposing party.

Fidelity Insurance. Fidelity insurance covers theft of association funds.  Unfortunately, theft happens all too often so fidelity coverage is essential for every association.

Get the right insurance for your Atlanta HOA or condo association so you can sleep at night with one less worry.