Tag Archives: condo

The Benefits of a Condominium Association Website

Posted on July 30, 2013 | 5 Comments

If your condominium association doesn’t have a website, I strongly recommend you get one. They can provide a plethora of services at a relatively reasonable cost and can be a self-managed association’s best friend when trying to provide large quantities of information to residents in an efficient manner. Further, they are a great way to publicize your property as most prospective buyers and renters begin their condominium search online.  Not sure that a website would be of that much use? This post is dedicated the many ways that self-managed condominium association Boards can use a website to their advantage.

Don’t have a tech savvy Board? No problem! Services like AtHomeNet provide websites exclusively for community associations that can be customized to meet the needs of your property for as little as $35/ month. All of the website perks I discuss below are available through this service.

Community Photographs

A gallery of quality photos can make your property appealing to potential buyers. If you make them available on your website, you will find that realtors will begin to actively use these pictures in their property listings.

General Communication

Associations have an unending list of things to communicate to their residents. Your website can be used to post and send email notices about association projects, policy updates, cable and internet options, homeowner maintenance reminders such as air conditioning service, Board meeting agendas and minutes, social events, and much more.

Board Member Contact Information

One way Board members can make themselves more accessible to homeowners, which in turn tends to make homeowners more confident about the Board’s ability to management of the property, is to make their contact information available to homeowners. I recommend that each Board member establish a unique email address used exclusively for association business.

 Events Calendar

A website events calendar is a great way to community upcoming events to residents. This can be used for association-sponsored social events, area events, board meetings, proxy/ voting deadlines and timelines for major association projects, just to name a few.

 Classified and Condos for Sale/ Rent

Most association websites offer homeowners a place to list personal items for sale, condos for sale or condos for rent.

 Community Policies and Forms

It’s smart to keep all frequently requested policies and forms on your website. Good examples of this would be the property’s rental policy, the association’s bylaws and declaration, insurance certificates, maintenance fee schedules, or a frequently asked questions sheet.

Credit Card Maintenance Fee Payments

Many association website companies offer homeowners the ability to pay their maintenance fees by credit card on the website. Usually there is a several dollar convenience fee but for residents that need to make a payment immediately, this can be a good option.

Official Record Storage

As discussed in our post about the Official Records section of Florida Statute 718, condominium associations have a responsibility to maintain certain Association records and make them available to homeowners upon request. What would be easier than to direct homeowners to the property’s website to review specific records? It probably isn’t feasible to store all of the Association’s records on the website; however, the most commonly requested documents certainly can be. These documents include recent meeting agendas and minutes, monthly financial statements, the Association’s budget and maintenance fee schedule, and any property rules and policies. The website also serves as a web-based backup system for your key official records.

Area Information

Though not a necessity, providing information about your property’s surrounding area can be a nice addition to your website. You can include emergency contact information (e.g. the local fire and police departments, emergency hotlines), evacuation information if you are in a flood zone (e.g. shelter locations), additional parking options if parking on your property is limited, local restaurants and sites, local government website and information on recycling programs. Further, your website can be a great way to communicate with residents before or after a hurricane (learn more about hurricane preparedness for your association here).

In all, a website can be a tremendous tool for condo association Boards and is definitely worth the reasonable annual fee. As always, if you have any questions, feel free to contact us.
Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

→ 5 Comments

Posted in General, Self-Management

Tagged , , , , , , , , , , , , , , ,

Condo Association Reserve Funding: Component Method or Pooling Method

Posted on July 2, 2013 | 43 Comments

Anyone who has been involved with condominium associations knows about reserve funding. Chapter 718.112(1)(f) of the Florida Statutes requires that all associations put aside funds for large future projects such as building painting, roof replacement and any other project expected to cost more than $10,000. The amount of money that the association is going to contribute in any given year to reserves is included in the annual budget and is based on the expected cost and timing of future large projects. As Board members are not generally qualified to determine the remaining useful lives and replacement costs of the various parts of the condominium property, it is imperative that the Association hire a professional engineering firm that will complete a reserve study of the property and provide guidance to the Board. Reserve studies should be updated every 2-3 years to ensure that all estimates are still accurate. There are many different reserve study firms out there but I have had good experiences with Reserve Advisors in the past.

There are currently two different methods used to account for reserve funds. Below I have provided a brief comparison of the two methods.

The first method is called the Component or Straight Line Method. Here are several important things to consider about this method:

  1. Each maintenance project has its own reserve account and annual contributions to each account are determined by taking the current year’s project cost, subtracting the current value in the reserve account, and dividing it by the remaining useful life of the item.
  2. Once money is allocated to a specific reserve account, the Board cannot utilize those funds for any purpose other than that particular project without a majority vote of the homeowners. For example, if the Board has allocated $200,000 to the building painting reserve account based on expected cost, and the project’s actual cost only ends up being $150,000, they cannot use that additional funds for any other purpose. The extra $50,000 would be the initial value of the reserve account for the next time the buildings need to be painted. Likewise, if the project’s actual cost was $250,000, the Board cannot use reserves from any other reserve account to cover the additional $50,000 without a vote of the majority of the homeowners.
  3. Interest earned on reserve funds is kept separately and can be used for any reserve project.
  4. By using the current year project cost, as opposed to the expected project cost at the time of completion, this method does not take inflation into account. For projects that are expected to be completed in 1 or 2 years, this has a limited effect; however, for projects that are not expected to be completed for 15 or 20 years, this can cause an underestimation of the project cost.
  5. Expected interest that the reserve funds will earn is not taken into account in the association’s budget. If your association has material reserve funds, annual interest earned can be a material amount of money which, when using the component method, cannot be included in the reserve contribution calculations. Therefore, in essence, homeowners have to contribute more (the amount of interest earned annually) to the reserve accounts annually under the component method than they would if interest could be taken into account.

The second method utilized is called the Pooling or Cash Flow Method. Here are several important things to consider about this method.

  1. This method is similar to the component method; however, instead of having individual reserve accounts for each project, there is one pool of funds that can be used for any reserve project.
  2. Inflation is taken into account. For example, if a project is scheduled for two years from now, the current estimated cost of the project is $100,000, and annual inflation is expected to be 1%, then this method would require that the reserve pool have $102,010 available two years from now to complete the project. This is calculated as follows: $100,000*(1.01)^2.
  3. Earned interest is included in the reserve pool and anticipated future interest is taken into account. For example, let’s say that the reserve funds are held in a money market account with a .5% annual interest rate. If the pooled reserve account currently has $300,000, annual interest could be roughly estimated at $1,500. This is $1,500 that does not need to be contributed to the reserve pool from maintenance fees.
  4. Reserve studies anticipate property projects thirty years into the future and provide a schedule of annual reserve contributions for each of those thirty years. These schedules are set up to increase by no more than the estimated rate of inflation annually.

The following is an example that shows how the component and pooling methods would work in the same situation. Let’s assume the time has come to replace the roofing on all of the property’s buildings and the reserve account for this project has $250,000. Let’s also assume that the total amount of reserve funds for all projects is $750,000. If the actual cost of the project is $300,000, under the component method, the Board has several options. (1) The Board can wait to do the project until there is $300,000 in the roofing reserve account. If the roof replacement is urgent due to leaking or other issues, this may not be a feasible option. (2) The Board can issue a special assessment on the unit owners to make up the $50,000 deficit. (3) The Board can wait until the following year and increase maintenance fees substantially to make up the $50,000 deficit. (4) The Board can have a homeowner vote to take $50,000 from a different project reserve fund. This 4th option would require at least 51% of the homeowners to vote. Under the pooling method, the Board would be able to pay the $300,000 out of the $750,000 total reserve funds to complete the project in a timely fashion. The Board would then need to determine how to earn back the extra $50,000 that was used for the roofing project over future years. This could be done through an increase in reserve contributions in future years or, if lucky, another reserve project(s) will cost less than estimated. In the end, the pooling method provides significantly more flexibility to the Board and allows for more efficient project completion. However, it is also possible that the Board could decide to approve a $400,000 roofing proposal even though only $250,000 has been allocated for this project and, in doing so, could set up the community to not have enough funds down the road to complete the next big reserve project. In this case, a special assessment may be required which puts and unfair financial burden on the current homeowners.

So which method is right for your community? That decision is up to the homeowners. In order to switch from the component method (the method the majority of associations use) to the pooling method, a majority vote of the membership is required. If you are considering a switch to the pooling method in your community, there are several things to consider:

  1. When was the most recent reserve study completed? You should obtain a current reserve study using both the pooling and component methods to compare the required annual reserve contributions (typically the component method calls for higher contributions as it is the more conservative approach). If you are trying to avoid an increase in maintenance fees, switching to pooled reserves may help in that effort; however, this should not be the primary factor when deciding whether or not to switch to pooled reserves.
  2. Is the current Board fiscally responsible? Will future Boards be responsible with reserve funds? Pooled reserves allows the Board much more flexibility in reserve spending and, in the case of an irresponsible Board, this can lead to overspending.
  3. Is there a Board member that is comfortable enough with Excel to take the thirty year reserve schedule and adjust it based on actual project costs, changes in interest and inflation rates, and/ or changes in annual reserve contributions? This is very important because before a Board can decide if they should spend more on a particular project than estimated, or if they should complete a project sooner than anticipated, the impact on the reserve pool and future reserve contributions will need to be analyzed. You may be able to have the engineering firm that completed your reserve study complete this analysis for you but there would likely be a fee involved.
  4. How many reserve projects does your property have coming up? If you have a large property with many reserve projects, pooling reserves may benefit your community. Let’s examine why. Large communities may have one or two reserve projects annually and maybe more on rare occasions. If the community uses the component or straight-line method, they can only look to the reserve account for that particular project, and the earned interest account, when determining how much they can spend on that project. If the Board does not have sufficient funds in these accounts to complete the project and they don’t want to use operating funds or issue a special assessment, they may want to use some funds from a different reserve account (one that they think is overfunded or one that has funds remaining after a recently completed project). In order to do this, they would need a majority vote of the membership. Given that the estimates used to determine how much should be reserved for each project can often be inaccurate, it is possible that the Board could need multiple votes of the membership each year to move money between accounts in order to complete reserve projects. If your community is very active and obtaining a majority vote of the membership is easy to do, then this is no problem. However, in many communities, convincing a majority of the homeowners to submit a limited proxy can be a very time consuming task.

This post only serves to provide a brief overview of reserve funding methods. If you need any assistance in determining what the best path is for your community, feel free to email me.

Emily

→ 43 Comments

Posted in Financial

Tagged , , , , , , , , , , , , , , , , , , , , ,

Florida Condo Association Accounting Records: Fl Statute 718.111(12)(a)(11)

Posted on June 27, 2013 | 46 Comments

As promised in the discussion of condominium associations’ Official Records, we have dedicated a post exclusively to the accounting records that are required to be maintained pursuant to Florida Statute 718.111(12)(a)(11).

 All accounting records of a condominium association must be maintained for at least 7 years. To be prudent, an association may decide to keep all association records since developer turnover. If your property does not have a lot of storage space for hard copy records, there are many companies that specialize in scanning records electronically and/or storing hard copy records. These services are relatively inexpensive and serve to both reduce clutter and protect the association’s records from fire, theft, or natural disaster.

Most professional management companies use high-end accounting software to maintain the bulk of their associations’ accounting records. This software can cost thousands of dollars so purchasing software like this doesn’t make much sense for the self-managed condominium. For very small condominiums, a program such as excel can be used to maintain the association’s financial statements, including homeowner ledgers. However, for larger condominiums, accounting software such as QuickBooks, which costs in the $300 range, likely makes the most sense. As I have mentioned in previous posts, if the Board of Directors does not have a member with a strong accounting background, hiring a 3rd party accountant to maintain the association’s books may be necessary.

Here’s what the FL Statutes say condo associations must maintain:

1.    Accurate, itemized, and detailed records of all receipts and expenditures.

If this seems very broad to you, that’s because it is. The FL Statutes leave it to each condominium to determine exactly what they need to keep, and in what format, in order to meet this requirement. As part of the association’s routine bookkeeping, all monies received and spent will be entered into the association’s accounting software. Generally, these programs allow the user to enter a description of each deposit or expense. Be sure to enter detailed descriptions for each entry including the parties involved and the reason that the funds were received or paid. You’ll thank yourself for doing this the first time you try to look back at specific transactions from previous years. Further, I strongly recommend you keep all of the following either electronically or in hard copy:

  • Copies of all checks received and written by the association
  • Copies of all monthly bank statements for all association bank accounts
  • Copies of all “lockbox” payment detail if this service is used by the association
  • Copies of all final invoices paid by the association (typically these invoices are kept with the copy of the check that paid the invoice)
  • Copies of all reconciliation reports (showing that the bank statements and the association’s bookkeeping reconcile each month-end)

2.    A current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and amount of each assessment, the amount paid on the account, and the balance due.

This refers to the balances owed by each homeowner for their maintenance fees. This information should already be maintained in the association’s accounting system and there is nothing else special that needs to be done. These balances should include any accrued late fees or interest. I recommend you keep any other amounts owed to the association (e.g. fines, charges backs for work completed by the association on behalf of the homeowner) on a separate ledger for each homeowner as the association may only lien and foreclose on a unit for past due maintenance fees (and associated late fees/ interest). This makes it easier for the association to provide accurate account balances to the association’s attorney (during collection efforts) or prospective buyers. Along with this requirement, I recommend that the association maintain monthly A/R aging summaries (showing those units that are 30, 60 or 90 days past due).

3.    All audits, reviews, accounting statements, and financial reports of the association or condominium.

What an association must maintain specifically under this requirement depends in large part on the size of the association. According to Florida Statute 718.111(13), each association must produce a year-end financial report (or have contracted for the production of this report) within 90 days of fiscal year-end. The type of report required is as follows:

  • An association that operates fewer than 75 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare GAAP compiled financial statements.
  • An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare GAAP reviewed financial statements.
  • An association with total annual revenues of $400,000 or more shall prepare GAAP audited financial statements.

Details on how to prepare the above financial report are provided in Rule 61B-22.006 of the Florida Administrative Code. The Florida Statutes allows the voting interests of the association to approve a waiver of compiled, reviewed or audited financial statements for up to three consecutive years.

Along with the above described report, I recommend that the association maintain copies of balance sheets and income statements for each month-end that have been approved by the Board.

4.    All contracts for work to be performed. Bids for work to be performed are also considered official records and must be maintained by the association.

This requirement is relatively self-explanatory; however, there are some simple ways to keep track of all of this information in an organized fashion. I recommend that all long term contracts approved by the association be kept together for reference. It may be helpful to keep a list of all contracts including their maturity dates and renewal/ termination provisions. As mentioned above, all other contracts/ invoices can easily be kept along with a copy of the check that was issued by the association to pay the contract/ invoice. Lastly, all bids that were received for work must be kept as well. I recommend keeping these separate from those bids that were actually approved to avoid confusion.

As was mentioned in a previous post, it is a smart idea to keep a copy of each packet that is provided to the Board at each meeting. These packets typically include all bids related to agenda items so maintaining the packets would comply with the above contracts requirement. These packets also typically include recent financial statements, minutes from the previous meeting, the meeting agenda, and more of the items that are considered part of the official records of the association.

I am available via email if you have any questions or comments.

Ryan

 

Ryan Koski is a condominium homeowner in Tampa, Florida and a CPA and Attorney with Accounting Clinic, Inc. He is also a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

→ 46 Comments

Posted in Financial, Florida Statutes

Tagged , , , , , , , , , , , , , , , , , ,

Save Time and Money using Email to Communicate with Homeowners

Posted on June 26, 2013 | 9 Comments

For all condominium associations, but especially for self-managed condominiums, any means to save time is essential. If a change in process means you are able to save money too, then it’s a no-brainer. Taking advantage of the Florida Condominium Statutes’ electronic transmission policy does exactly this. In today’s post I am going to outline when associations are allowed to communicate information with residents electronically (i.e. via email) and ways the association can take advantage of this method to save time and money.

Chapter 718 of the Florida Statutes outlines all of the required written communications condominium associations must provide to residents (e.g. annual budget drafts, year-end financial statements, Board election information). In the past, these communications were typically delivered to residents via “snail mail” and, depending on the size of the community, associations were spending hundreds or thousands of dollars per year on paper, printing, envelope and postage costs, not to mention the countless hours of envelope stuffing and label posting involved. Using email can eliminate all of these burdens; however, there is one important step the association must take before shifting to electronic communication.

All association electronic communications must comply with Rule 61b-23.0029 of the Florida Administrative Code. As detailed in the rule, prior to providing communications via email to a homeowner, the homeowner must consent in writing to receive communications electronically. In this day and age, it usually isn’t difficult to encourage residents to agree to receive communications electronically as most prefer this method. The association is required to keep all consents as part of the official records. A simple form with the following language should suffice:

I agree to receive all communications from the Board of Directors of <Name of Condominium Association>, either directly or on behalf of the Association by the current Property Manager, in electronic format utilizing the email address provided below. Communications that are required to be provided in hard copy by Florida Statute will continue to be hand-delivered or sent by mail. 

For those homeowners that have consented to receive communications electronically, the following communications can be sent via email according to the Florida Statutes (718.112):

  1. Notice of any meeting where nonemergency special assessments will be considered
  2. Notice of the Annual Meeting
  3. First and Second Notices of a Board Election
  4. Proposed Annual Budget

Two notable times where the Florida Statutes do not specifically allow email communication are:

  1. Notice for a special budget meeting when the proposed budget is greater than 115% of the previous year’s budget
  2. Year-End Financial Reporting

There is one more important thing to note about electronic communication. Per the Florida Administrative Code, it is the association’s responsibility to shift from electronic communication to traditional mailing if attempts to send a communication via email to a homeowner have failed two consecutive times.

If you haven’t done so in your community already, consider taking advantage of email! Your budget and the environment will thank you.

Emily

emily@flcondoassociationadvisor.com

 

→ 9 Comments

Posted in Florida Statutes

Tagged , , , , , , , , ,

Finding the Middle Ground between a Professional Management Company and Self-Management

Posted on June 24, 2013 | 6 Comments

Many condominium association Board members find themselves in what seems like a no-win situation: unhappy with professional management companies but unsure if they have the experience or available time to completely self-manage their communities. What options does the Board have in between these two extremes?

In fact, there are innumerable ways that a Board can manage a condominium association. Boards should not be afraid to think outside the box and create a management structure tailored to both the needs of the property, and the availability and knowhow of the members. In this post, we will look at three commonly used structures that Boards can consider.

Self-Management + Accounting Firm and Legal Counsel

Condo association accounting (includes bookkeeping, issuing checks, processing maintenance fee payments, producing routine financial statements, maintaining financial records etc.) is one of the most time-consuming and detailed aspects of condominium association management. Chapter 718.111(13) of the Florida Statutes has specific guidelines on how association financials should be maintained and I think it goes without saying that erroneous accounting can create many problems for association Boards. Unless the Board has a member with material accounting experience that is willing to dedicate between 5 and 20 hours per week (depending on property size) completing the duties mentioned above, it is wise to consider hiring an accounting firm familiar with condominium association accounting to handle this aspect of management.

When an association is self-managed, the Board members are left to handle the collection efforts related to delinquent maintenance fees. For smaller, close knit communities, this can create difficulties when Board members have to collect from friends. Further, it is very important that an aggressive and consistently implemented collections policy be established as increases in delinquencies (and subsequent reductions in maintenance fee revenue for the association) can make properly managing the condominium very difficult for the Board. As such, a self-managed association may consider contracting with a condominium association attorney to handle all collection efforts from delinquency letters (can also be handled by an accountant), to lien placement, to foreclosure, to rent garnishment, to eviction. The attorney and accountant will likely work together in handling collection efforts as the attorney will need homeowner financial ledgers from the accountant to prove delinquency. Both vendors should provide routine reports (at least monthly) to the Board outlining the status of collection efforts and the association’s financial position. If a well-formed process is implemented, these two vendors can take a significant burden off of the Board members’ shoulders and allow them to focus their efforts on the many other aspects of condo management.

Self-Management + In-House Administrator

The Board of a self-managed condominium association may feel comfortable handling all of the major aspects of managing their property but may not be able to commit the time necessary to address the daily needs of residents, vendors, prospective buyers, etc. In this case, it may be wise to hire an administrator as an employee of the Association. This administrator could work from an office on the property, if available, or even from their home. The number of hours worked per week and the administrator’s job description can be customized by the Board. Responsibilities would likely include responding to association phone calls and emails, maintaining the association’s records, sending all resident communications on behalf of the Board, coordinating property projects, updating the association’s website, etc. A sample of a job description for condominium association management personnel is provided below.

While a property administrator can be a huge benefit to self-managed condominium Boards, there are many things that need consideration prior to an association hiring an employee for the first time. Here are some of the highlights:

  • Will the employee be salaried or paid hourly?
  • How with the association handle payroll? Will it be completed internally or will a payroll service be utilized?
  • Will the association offer benefits such as health and disability insurance?
  • Is the association obligated to have worker’s compensation insurance and what will it cost?
  • If salaried, how many sick days and paid vacation days will the employee have?
  • During days that the employee is not working, who will handle management of the association? A Board member or perhaps a temp?
  • Which Board member will the employee report to? How frequently will performance reviews occur?
  • Will there be a severance package if the Board terminates the employee?

 In-House Community Association Manager (CAM)

Many condominium association Boards would prefer more control over the daily management of their property than they would have with a professional management company. However, due to a variety of reasons, true self-management is not an option. These Boards may consider hiring a licensed community association manager (CAM) directly as an employee. All of the issues related to hiring an employee discussed above (payroll servicing, employment taxes, benefits, time off/ sick days, etc.) are relevant in this scenario as well. If the Board feels capable of handing these items, an in-house CAM can be the best of both worlds, allowing the Board to directly oversee the management of the community while having a knowledgeable professional dedicated full-time to property.

 

Before hiring an administrator or CAM, it is important to develop a job description to ensure that whoever the Board hires will be able to adequately fill the role. To assist in this effort, I have created a sample job description for a CAM that would handle essentially ALL aspects of managing a condominium including all administrative duties. This should serve as a starting point and should be tailored to your community and the Board’s specific needs.

Community Association Manager Job Description

 Knowledge of the Law and Board Guidance:

  • Maintain strong knowledge of Florida’s Condominium Statutes and advise the Board of Directors (“BOD”) regarding them
  • Participate in all continuing education requested by the BOD
  • Have in depth knowledge of the condominium documents (Declaration, Bylaws, Rules and Regulations) and advise the BOD regarding them
  • Ensure that the Association is operating with the guidelines of the Florida Statutes and the condominium documents at all times

Performance Reviews:

  • Meet weekly with the Board President to discuss the week’s work and the next week’s priorities
  • Meet quarterly with the Board President to discuss performance and improvement opportunities
  • Meet annually with the Board President to discuss year-end performance and compensation increases

Record Maintenance:

  • Keep track and inform the BOD of relevant Association dates including contract expirations, insurance maturities, CD maturities, tax and annual report filing due dates and any other information deemed relevant by the BOD
  • Maintain a property maintenance log
  • Maintain a violations log
  • Maintain an owner and tenant database to include all relevant information including electronic communication consent forms. Consistently work to ensure all information is accurate and contact information is available for every owner/ resident
  • Maintain organized vendor and unit files
  • Ensure that all of the official records of the Association are maintained in accordance with Florida Statutes. Provide official records to unit owners upon request.
  • Maintain the Association’s website to include all relevant property information for owners and residents

Finances (my be handled by an accountant):

  • Complete all bookkeeping duties for the Association’s finances and backup all information appropriately
  • Provide the BOD monthly financial statements. Items to be included will be decided by the BOD.
  • Bring checks to the Association’s bank as necessary
  • Compile Association invoices weekly to be approved by the President of the BOD
  • Cut checks weekly to be signed by the manager and the Treasurer of the BOD
  • Maintain appropriate reserve balances in the Association’s accounts and make recommendations regarding reserve investments
  • Prepare the annual budget for the Association in accordance with Florida Statutes
  • Provide financial statements to the unit owners as required by Florida Statutes

Meetings:

  • Prepare agendas for each BOD meeting and post according to Florida Statutes.
  • Attend all meetings of the BOD and prepare the meeting location appropriately
  • Prepare packets for each BOD meeting. Items to be included will be decided by the BOD
  • Provide management report at each meeting to provide updates on projects, contracts coming up for renewal and any other pertinent information
  • Complete meeting minutes within 5 days of the meeting
  • Prepare all required communications and proxies for residents as required by Florida Statutes

Unit Owner Delinquencies (may be handled by an attorney):

  • Send out delinquency and pre-lien letters as necessary
  • Contact delinquent owners to discuss options including payment plans
  • Advise the BOD on next steps for delinquent units
  • Fulfill estoppels requests and provide accurate delinquent amounts to the Association’s attorney
  • Maintain a log of delinquent units including, but not limited to: owner name, amount owed, status of bank foreclosure case, recommendations on next steps
  • Provide updates to the BOD at monthly meetings

After-Hours Emergencies: Answer all after-hours emergency calls promptly

Property Issues/ Projects/ Contracts:

  • Conduct  daily property walks and address any noted issues
  • Complete thorough weekly property walks and maintain a list of items which need improvement
  • Ensure all contracts are being fulfilled
  • Collect bids for property vendor contracts and projects as directed by the BOD. Meet with each vendor in person and discuss all relevant aspects of the contract/project before providing bids to the BOD
  • Take the lead on all property projects and provide routine updates to the BOD
  • Effectively communicate key issues to the BOD and contact the appropriate Board member when issues arise

Owners & Residents:

  • Handle all resident issues within the guidelines of the various property policies, the condominium documents and the Florida Statutes
  • Ensure all owners are informed of key property events and ensure that communications are timely, thorough, proof read, and utilize a format approved by the Secretary.
  • Ensure all Association policies are being followed
  • Enforce fines for those residents in violation of Association rules
  • Send out property newsletters on a routine basis
  • Maintain working keys for entry into each unit

Association Office (relevant if the CAM will be working from an office on property)

  • Maintain consistent business hours at the Association Office (as decided  by the BOD)
  • Greet all visitors to the Association Office during business hours and address their concerns/ needs within the guidelines of the Association policies, the condominium documents and Florida Statutes
  • Maintain all areas of the Association Office in a neat and organized fashion
  • Ensure there are sufficient office supplies (paper, ink etc.) on hand at all times
  • Ensure Association Office is locked/ secured prior to leaving daily

Rentals (relevant if the Association has title to any units):

  • Address all needs of the Association’s tenants
  • Maintain security deposits in a separate, non-interest bearing account
  • Find new tenants when units are vacant
  • Complete background searches and credit checks on potential tenants
  • Execute leases within the guidelines of the property’s leasing policy

As always, I am available if you have any questions.

Emily

emily@flcondoassociationadvisor.com

→ 6 Comments

Posted in Management Companies, Self-Management

Tagged , , , , , , , , , , , , , , , ,

Condominium Association Management Company Contracts: Negotiating the Points that Matter

Posted on June 23, 2013 | 14 Comments

The contract that a condo association Board signs with a professional management company is far and away the most important agreement that the Board must review, negotiate and approve. These contracts typically cover everything from monthly management fees, to financial statement reporting, to after-hours emergency services, to the amount of time the manager will be on property each week, just to name a few. Still, all too often these contracts are only given a cursory review before they are signed and it is only when Board members are dissatisfied with the management company’s performance that they take the time to read the fine print.

It is critical that condominium association Boards review their management contracts in full and negotiate their terms. Many inexperienced Board members may not think they have the leverage to negotiate contract terms but that is assuredly not the case for the following two reasons: (1) most management companies make their money by managing many properties at once, earning only small profits from each, and are therefore always hungry for new business, and (2) most urban areas are saturated with management companies and therefore competition is stiff.

Given the impact the management contract can have on the success of the association, I will provide some insight below into the key aspects of a standard management contract and highlight the details to which the Board should pay the most attention and negotiate if necessary.

Contract Length and Termination Provisions

The management contract will specifically detail how long the contract is in force and what the termination provisions are. While the length of the contract (ex. 1 year, 2 years) may seem like the key factor here, it is actually the termination provisions that need careful evaluation and negotiation to ensure the association’s interests are protected. Termination provisions specify when the association can cancel the contract and how they must provide notice to management of their decision to cancel.

When starting with a new management company, Boards should consider requiring an early termination provision that allows the association to terminate the manager at anytime with 30 – 90 days’ notice. This serves three major purposes. The first is straightforward. If the Board is unhappy with management’s services, they can terminate the agreement and begin looking for new management immediately without having to wait until the contract term is up. Of course, you can always terminate a manager at any time but if you do not follow the termination provisions within the contract, the association may be responsible for paying monthly management fees to the terminated manager until the end of the contract term, essentially double-paying for management services.

The second benefit to a 30-90 day cancelation provision is subtler than the first. Managers are more likely to continue to work hard for the association if they know that their services can be terminated at anytime. Multi-year management contracts with no early termination provision encourage complacency on the part of the manager. If a potential manager refuses to allow an early termination provision, then at the very least the Board will want to negotiate a contract term of at most one year with no auto-renew clause.  If the Board is able to negotiate an early termination provision, it is then wise to obtain a long a contract term to lock in the monthly management fee (i.e. avoid fee inflation).

Monthly Management Fee and Other Expenses

The monthly management costs is typically one of the largest line items in an association’s budget so it is obviously important to consider the cost of a management company with which you are considering contracting. Understanding what the monthly fee includes and what services the management company will charge separately for is more important that the actual dollar amount of the monthly fee. These extra charges can be as much as half of the cost of the monthly management fee so it is very important to read the contract carefully, prepare a list of what the monthly fee does and doesn’t include, and estimate what the association’s additional monthly expense may amount to. If the monthly fee is too high for the association’s budget, the Board may have more luck adding extra services as part of the monthly management fee versus attempting to negotiate a lower monthly management fee. Further, the more that the Board can incorporate into the flat monthly fee, the easier budget preparation will be as there is less guesswork involved. I’ve provided a brief overview below of the main services included in the standard management contract and highlighted certain items that are frequently billed separately from the monthly management fee:

Administrative Costs

This includes items such as copies, envelopes, faxes, stamps and phone calls. Some management companies will absorb the costs associated with the association’s legally required annual mailings (e.g. budget meeting notices) but not the costs associated with Board-directed mailings such as violation letters, newsletters, policy updates, etc. If the manager will be charging for mailings, consider if the management company would be willing to provide residents the option of receiving these mailings by email (when allowed by statute), as this could save the association significant cost.

Financial Services

This includes bookkeeping services, financial statement preparation, paying association invoices, processing monthly maintenance fees from residents, collection efforts, and tax-related items. Management companies typically included the above in their monthly management fee. However, it is important to confirm if there are any additional costs associated with:

  1. Preparing delinquency letters, pre-lien letters and/ or sending financial information to the assocation’s attorney
  2. Completing and mailing out Form 1099s to appropriate vendors
  3. Processing returned check fees
  4. Budget preparation
  5. Issuing coupon books
  6. Preparing estoppel letters
  7. Providing financial statements to the Board above and beyond a balance sheet and P&L (e.g. check register, bank statements, A/R detail etc.)
  8. Reserve analysis
  9. Providing information to the association’s CPA for the purpose of completing tax returns, audited financial statements, etc.

Management Services

This includes attending Board meetings, completing property walks, bidding out maintenance projects, providing a website for your property, meeting with Board members, emergency preparedness, afterhours emergencies, handling resident complaints/ concerns, etc. Usually all of these services are included in the monthly management fee; however, sometimes there are provisions in the contract aimed at keeping total management hours below a certain threshold. Here are two examples:

  1. Manager attendance at one Board meeting a month (within certain hours) is included in the monthly management fee but there will be an hourly rate for any additional or afterhours meetings. If your association Board tends to meet multiple times per month or tends to meet on evenings/ weekends, this could be an additional expense.
  2. Bidding and overseeing all property projects is included in the monthly management fee but there may be a provision that specifies additional charges for projects that will cost above a certain threshold. The idea here is that a $100,000 project (e.g. painting, roofing, paving, etc.) will take much more of the manager’s time than would a small project. If you have large projects coming up, this additional cost would need to be included in the budget.

I encourage all Board members to take the time to read management contracts in detail, and to consider the items outlined above, before moving forward. Management contracts are all drafted differently so when comparing multiple management companies, be sure you are doing an “apples to apples” comparison (including all additional fees) as opposed to just comparing the fixed monthly management fee. Lastly, don’t forget to negotiate! The Board has more leverage than members typically realize.

I hope you have found this discussion of management contracts helpful. If you need any assistance in reviewing a management contract, feel free to email me and I would be happy to take a look.

Emily

emily@flcondoassociationadvisor.com

→ 14 Comments

Posted in Contracts

Tagged , , , , , , , , , , , , , , , , , , , , , , , ,

Florida Statute Review: 718.111(12) Official Records

Posted on June 21, 2013 | 37 Comments

The Florida condominium statutes are very specific about what records an association must keep and for how long. For a self-managed condominium, one Board member (typically the Secretary) should be responsible for ensuring that the association’s records comply with 718.111(12) at all times. I will provide a brief review of the requirements of this statute here as well as some helpful tips to maintaining your association’s records.

What are the key items you are required to keep?

  1. All plans, permits, warranties and other items the developer provided to the association upon turnover.
  2. The Declaration of Condominium and any approved amendments.
  3. The Bylaws and any approved amendments.
  4. The Articles of Incorporation and any approved amendments.
  5. The current Rules & Regulations (old versions do not need to be maintained)
  6. Meeting minutes of all association meetings for the last seven years.
  7. Any audio or video recordings of association meetings (at least until the minutes from the meeting has been approved)
  8. A current roster of all homeowners’ unit numbers, mailing addresses and telephone numbers.
  9. A current roster of all homeowners’ email addresses and fax numbers if the owner has consented to receive notice by electronic transmission. This information is not available to other homeowners unless the homeowner has consented to receive notices by electronic transmission.
  10. Current insurance policies (old policies do not need to be maintained)
  11. Every contract to which the association is or was a party (including management, janitorial and landscaping contracts, to name a few) over the last seven years.
  12. All accounting records of the association for the last seven years. Details surrounding accounting record retention will be discussed in a separate post.
  13. Ballots, sign-in sheets, voting proxies and any other documents related to a homeowner vote for one year from the date of the vote.
  14. A copy of the current question and answer sheet referenced in FL Statute 718.504. As sample of this sheet is available from the Florida Department of Business Regulation (Form CO 6000-4).
  15. All other pertinent records of the association.

The association’s official records must be available for homeowner viewing. Homeowners have the right to view and photocopy all of the association’s official records with the exception of (1) documents protected by lawyer-client privilege; (2) information associated with the sale of a unit; (3) homeowner medical records and other confidential information such as Social Security Numbers; (4) association security information; and (5) personnel records (if the association has employees). If the homeowner requests a hard copy of a specific record, the Association may charge the homeowner its actual costs to prepare those records for the homeowner. It is very important that the association comply with requests from homeowners to view association records as failure to do so can lead to monetary damages.

I strongly recommend that self-managed associations follow these guidelines to ensure that the association’s records are protected and also easily accessible for viewing by homeowners. Official record transparency is a great way to keep homeowners confident in the Board’s ability to successfully manage the association.

  1. Keep hard copies of the Declaration of Condominium, Bylaws, Rules & Regulations, meeting minutes, and budget with maintenance fee schedule available for homeowners and prospective buyers at all times. Establish a reasonable fee schedule for these items ahead of time based on production costs and ensure these fees are enforced consistently.
  2. If the association has a website, keep all of the association’s records on the website for homeowners to access at their convenience. Not only does this provide complete transparency but it also provides a web-based backup of the official records so there is no concern about them being destroyed due to theft or natural disaster.
  3. Keep binders with hard copies of all of the association’s records on property. A simple way to do this is to have binders for each key item (e.g. meeting minutes, contracts, historical budgets, etc.).
  4. Keep a binder with all Board member meeting packets (the information provided to each Board member prior to a meeting). All of this information is considered official records of the association, and it is a great way to look back at exactly what the Board discussed in past meetings.
  5. Keep electronic copies of all association records on one designated association computer and backup all of these records routinely onto an external hard drive maintained by one of the Board members.

Two other items that I think are worth keeping in both hard and soft copy include:

  1. Any opinions provided by the association’s attorney. Often these are kept in the email of the Board member that asked the question and, therefore, when new Board members join, they waist association resources by asking the same questions again.
  2. Any email communications where a quorum of Board members discuss or take a vote on an association issue. Email communication between a quorum of Board members should be limited as much as possible as these email chains technically constitute a Board meeting which must be open to homeowners. However, in certain circumstances this cannot be avoided so my advice would be to use email to communicate to a quorum of the Board as little as possible and to keep copies of those communications for homeowner review.

I hope this overview of the official records statute has been helpful. As always, feel free to comment or reach out to me via email if you would like to discuss this topic or any other.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

→ 37 Comments

Posted in Florida Statutes

Tagged , , , , , , , , , , , , , , ,

Condominium Self-Management: The Pros and Cons

Posted on June 17, 2013 | 3 Comments

One of the primary goals of this blog is to provide Florida condominium association Boards with the information necessary to properly self-manage their condominium. However, before a Board can make the decision to become self-managed, it is necessary to consider the pros and cons of self-management. As such, I feel it is important to briefly address this topic before providing any additional advice. If you are considering becoming a self-managed condominium association, I also recommend you read my blog post “What does condominium association self-management require?”.

 

Condominium Self-Management Pros:

1.    Financial Savings

Probably the most appealing reason for Boards to self-manage their association is the potential savings created by not having to pay a management company. Depending on the size of your community and the breadth of services offered, a professional management company may cost anywhere from $30,000 – $70,000 per year. This reduction in operating expenses can be put towards needed property repairs, community improvements, reserves, or reduction in maintenance fees, just to name a few.

 2.    Alignment of Interests

With community owners managing the association, the interests of residents and management are completely aligned. When managers have a vested interest (through homeownership) in the property they manage, they are likely to be more committed to the success of the community, be more prudent when spending funds, and take resident comments/ concerns more seriously.

 3.    Elimination of Middleman

With the elimination of a professional management company serving as a middleman between the community’s residents and the association’s Board, there is often more rapid response to, and resolution of, resident concerns. And, as I have mentioned in other posts, timely and detailed communication with residents is the key to a successful association!

4.    Complete Control

This factor needs very little qualification. Professional management companies tend to have control over all aspects of association management including Board meeting agendas, timing of property projects, operating and reserve expenditures, annual budget drafting, etc. Being self-managed allows the Board to have complete control over every aspect of management and, if the Board has specific goals they aim to achieve, the likelihood of doing so increases when self-managed.

 

Condominium Self-Management Cons:

1.    Board Time Commitment

Self-management of a condominium is a very timely venture. The President of the Board should expect this to be a full-time job. On top of handling routine resident issues and meeting with vendors during the day, at least one member of the Board will need to be on call at all times to handle emergencies. The novelty of handling 2am water leaks can wear off fast and many Board members burn out rapidly.

2.    Board Turnover

Condominium association Boards typically see some member turnover annually. This lack of consistent leadership can be very detrimental to the health and functioning of the Association, particularly when a veteran Board member leaves or when new Board members do not work together well. Professional management eliminates this issue as experienced managers can provide advice and guidance to new Board members while keeping the association running smoothly. To help mitigate these issues, the Board members of self-managed associations should be willing to commit to at least one year of service, and a training process for new Board members should be established.

 3.    Lack of Experience

Lack of experience in property management can get many self-managed associations into trouble. Managing a condominium requires not only an understanding of accounting and legal issues, but knowledge of landscaping, building maintenance, annual corporate filings, permits for amenities such as pools or elevators, and much more. Failure to comply with local, state and federal laws, as well as the communities governing documents, can land Board members in hot water and be costly for the association. Board members must dedicate themselves to learning about all of these different topics and should enlist the help of a professional accountant and experienced condominium attorney to provide routine guidance.

 

Lack of Industry Contacts: a Pro and a Con

One factor that you will frequently see on self-management “con” lists is that Board members lack professional contacts. The argument typically goes like this. Unlike professional management companies, which have lists of plumbers, contractors, pool repairmen, etc. that they can use to obtain bids for maintenance projects, Board members usually have to start from scratch in developing a list of vendors that they can rely on. Further, as management companies tend to be involved with numerous properties, they have leverage with their vendors (helping to ensure reasonable pricing and quality work) as the vendors would not want to risk falling out of favor with management companies and losing significant business. While I think there is some merit to this argument, I have a different perspective and, as such, did not want to include this in my list of “cons”.

In my experience, management companies tend to work very closely with a small subset of vendors and though they could use their relationship with these vendors to push for more competitive pricing and guarantees for the condominiums they manage, they tend not to in practice. I believe this is due to a combination of complacency and being overworked. Given this, many vendors learn that they can charge higher prices and their bids will still land in front of condominium Boards for approval. Further, without proper management oversight of each project (which is again a product of managers being stretched too thin), vendors learn that they can get away with mediocre work. I’m certainly not suggesting that all vendors do this, or that those that do have bad intentions. It is very common for vendors who initially did stellar work to slowly (and perhaps unintentionally) let their work product deteriorate somewhat overtime as they become more confident that the Board will continue to use them.

All of this leads to my feeling that Board members’ lack of industry contacts can actually also be a self-management “pro”. With Angie’s List and similar websites flourishing, Board members can easily identify vendors for all types of maintenance projects. With no historical biases, they can objectively assess vendors and begin to create their own preferred vendor list. Further, as most Board members live on the property, they can routinely monitor project progress to determine if they continue to be satisfied with a vendor or if they need to once again obtain competitive bids from other companies.

I hope this overview of self-management pros and cons was helpful. Please feel free to contact me if you have any questions or if you would like to discuss the pros and cons of self-managing your particular property.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

→ 3 Comments

Posted in Self-Management

Tagged , , , , , , ,

What does condominium association self-management require?

Posted on June 14, 2013 | 11 Comments

One thing is certain: self-management of a condominium association is no easy task. However, despite what professional management companies and other websites may lead you to believe, it is an achievable one for the right Board of Directors. I’m certainly not suggesting that the decision to shift from professional to self-management should be taken lightly. When considering this, the Board should take the time to discuss the realities of self-management and how Board members will divide responsibility to ensure that the association continues to function properly. Not sure what the realities of self-management are for your community? Feel free to email me and I will gladly discuss with you the specific challenges you are facing.

Each community is different and some are better suited for self-management than others. So, what do you need to successfully self-manage a condominium association? Here are my four absolute musts:

1. Dedicated Board Members

It is impossible to properly self-manage a condominium association without at least two dedicated Board members. Usually, these two Board members will fill the President and Vice-President (or Treasurer) roles. Depending on the size of the community, the President will likely have to be willing to dedicate 15-30 hours/ week handling association issues. The time commitment will likely be greater than that during the first few months of self-management as all of the kinks are worked through. The second dedicated Board member will need to assist the President in handling the daily ins and outs of the association and will also need to serve as back-up in the event the President is unavailable to fill his/ her daily duties. Ideally, these Board members will be retired or will have flexible work schedules in order to meet with vendors and residents during normal business hours.

2. Accounting Experience

One of the most important aspects of condo management is maintaining the financial records of the association. The Florida Condominium Statutes (Chapter 718) have very detailed requirements for record keeping and annual disclosures. The requirements become more sophisticated the larger the association becomes. Further, it will be the responsibility of the Board, among other things, to collect maintenance fees, issue delinquency letters, pay all of the association’s expenses, properly manage the association’s reserves and file the association’s taxes. Given this, it is extremely important that at least one Board member have sufficient accounting experience to maintain the association’s books. QuickBooks is a user friendly and moderately priced accounting system that the Board can use. There are many others available as well. If you do not have anyone on the Board with enough experience to feel comfortable handing the financial records of the association, another option would be to hire a 3rd party (a bookkeeper, accountant, CPA firm, etc.) to handle the financial aspects of the association.

3. An Experienced Lawyer

Without a professional property manager to look to for advice (though in my experience their advice is often incorrect), an experienced condominium lawyer will become the Board’s new best friend. A quality lawyer will be able to handle your collection efforts, answer any questions you have about the FL Statutes or your governing documents (bylaws, declaration, rules & regulations, etc.), review association policies prior to Board implementation, and provide guidance on many of the other issues that are certain to arise.

4. Communication Skills

Last, but certainly not least, there needs to be at least one Board member with solid written communication skills who will be willing to draft emails to the community, send out newsletters, answer resident complaints/ questions, etc. Do not underestimate the importance of this factor. One of the most common complaints I hear is that information is not well communicated to residents. Lack of communication on important issues can create frustration for residents and this often leads to threats of lawsuits or other action when residents are unhappy with a decision that the Board has made. Detailed and timely communication helps to keep residents satisfied which, in turn, makes running the association that much easier.

If your Board meets the above four criteria, then you are likely well poised to self-manage your condominium association. As always, I am available via email to discuss any questions or comments you have.

 

Emily

emily@flcondoassociationadvisor.com

→ 11 Comments

Posted in Self-Management

Tagged , , , , , , ,

Need help managing your Condominium Association?

Posted on June 13, 2013 | 1 Comment

My name is Emily Shaw. I am a resident of Tampa, Florida and have served as the President of a self-managed Condominium Association of 206 units since 2010. Prior to becoming President, I served as the Association’s Treasurer. Prior to 2011, several professional management companies, with which we were consistently disappointed, managed our Association. Anyone who has worked with management companies likely knows what I am talking about. The entire system is structured to the detriment of Associations. Most managers are stretched thin, paid too little (preventing talented managers from staying in the business) and are responsible for too many communities to give each the attention it deserves. Most board members volunteer with great intentions but little knowledge of the complexities of managing an Association and have to look to their managers for routine guidance. Further, many management companies, thinking about their bottom line, charge ridiculous fees for small things (like faxing, printing, phone calls, etc.) and earn kickbacks from certain vendors that they go to for bids on Association maintenance projects. This, of course, incentivizes more frequent maintenance projects, more expensive contracts, and a less competitive bidding process, all at the expense of the condo owners’ pockets.

But management companies are able to get away with this because the thought of self-managing an Association is often too much for most Boards to handle. Further, when interviewing management companies, many Boards rush into a decision, don’t ask the right questions, and don’t negotiate the terms of the contract to the Association’s advantage. This is where I step in. My goal, and the purpose of this blog, is to provide Association Boards with the knowledge to either: (1) step out on their own and self-manage their community or (2) conduct a detailed and thorough review of the management companies available, pick the one that will best suit their community, and negotiate a management contract that will benefit the community.

After our condo association became self-managed, we discovered all of the inefficiencies, FL Statute violations and maintenance oversights that were plaguing our community. Issues were frequently handled with temporary Band-Aids instead of big picture solutions. Within a year of becoming self-managed, we were able to reduce expenses (through contract renegotiations and better project oversight), reduce delinquencies (though aggressive collections and stricter Association policies), keep maintenance fees stable, and create enough surplus to complete many improvement projects. All of this made our community a more enjoyable place to live and more appealing to prospective buyers. Though I have to give the recent turn around in the housing market most of the credit, I truly believe that the changes we have made have helped to increase the number of sales on our property.

Every few days I will post a discussion of a key issue in condo association management. I am also available via email if you would like to discuss any specific issues.

Emily Shaw

emily@flcondoassociationadvisor.com

→ 1 Comment

Posted in General

Tagged , , ,