Tag Archives: self-management

Florida Statute 718.111(12): Unit Owner Access to Florida Condominium Association Official Records

Posted on March 8, 2014 | 57 Comments

A reader recently asked how frequently a unit owner has a right to view the official records. In this person’s case there was a unit owner requesting official record documents on a weekly basis. This question prompted the following post on unit owner official records access.

Every Florida condominium association is required by law to maintain official records. An overview of what constitutes official records is provided here with a more detailed overview of financial records here. Florida Statutes 718.111(12)(b) and 718.111(12)(c) provide unit owners the right to view and make copies of official records; however, aside from very basic guidelines, the association remains responsible for creating reasonable rules surrounding the frequency, time, location, notice and manner of unit owner record inspections. Because associations are left to construct official record inspection rules, I recommend (as I always do) that the board create and distribute a policy around official records access. In general, it is my opinion that the more official records transparency the better; is a great way to earn unit owner trust.

This post will review the access provisions laid out in the Florida Statutes and provide general guidelines on constructing a reasonable official records access policy.

Florida Statute Guidelines

  • Official records must be maintained within the state for 7 years
  • Official records must be made available within 5 days of a unit owner’s written request
  • Official records must be available to unit owners within the condo’s county (or within 45 miles if the county boarder is more than 45 miles from the condominium)
  • Official records must be open to inspection at reasonable times
  • Associations may charge a reasonable expense for copies of official records
  • Associations may approve reasonable rules surrounding frequency, time, location, notice & manner of inspections
  • Unit owners who are denied access to the official records 10+ days after a written request are eligible for damages no lesser than $50 per day and reimbursement of any attorney’s fees.
  • Unit owners may take photos of official records with a camera, phone or other electronic device.
  • The association must maintain copies of the declaration, articles of incorporation, bylaws, rules & regulations, frequently asked question & answer sheet and most recent year-end financial report on the condominium property for unit owners and prospective purchasers. The association may charge its actual costs of preparing these documents.
  • The following documents are protected and NOT available to unit owners: (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 (e.g., passwords); and (5) personnel records (if the association has employees).

NOTE: Personnel records include items such as the health records, W-4s and performance reviews. This records exemption does not include salary details of the employee as this information should be readily available in the association’s budget.

 

Official Records Storage

Before an association can establish reasonable rules around unit owner access to official records, the board must have a good handle on how/ where official records are stored. Associations that are self-managed or in-house managed have much more control over the storage of their official records than do professionally managed associations. As I discussed in length in my post on management transitions, I strongly recommend that boards of professionally managed associations complete official records “audits” from time to time to ensure proper records maintenance. I also recommend that boards provide guidelines to their management companies on how they would like their records organized and stored. Here are a few recommendations:

  1. If the association has an on-site office or lobby, consider keeping a computer with all official records on it for unit owners to review at any time.
  2. If the association has a website, keep the association’s key records (e.g., financial statements, meeting minutes, agendas, budgets, reserve studies, insurance information) on the website for unit owners to access at their convenience. This 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 frequently requested records on property or at the manager’s office. A simple way to do this is to have a binder for each key item.
  4. Store any hard copy records that will be accessed infrequently (e.g., copies of checks, invoices from prior years) in a professional storage facility designed to withstand hurricane force winds.

 

Official Records Access Policy

Given that the Florida Statutes provide associations with the flexibility to create reasonable rules surrounding official records access, I believe establishing a policy is prudent in that it specifically informs management how to proceed and ensures consistent unit owner treatment. Of course, if your association has its official records readily available on property or electronically for unit owner viewing at their convenience, the majority of this policy becomes irrelevant. If unit owners in your community are frequently asking for official records documents and your records are primarily in hard copy, it may be worth contracting to have all of your records scanned and made available via the web. From personal experience, the time saved by directing every official records request to one website is well worth the upfront cost.

I would recommend that every official records access policy include the following:

Governing Documents, FAQ Sheet & Year-end Financial Report: While the Florida Statutes specifically say “copies” of these documents must be available on property, the association should focus instead on compliance with the spirit of the law. If the association would like to keep paper copies of these documents on property, that’s great. If that doesn’t make sense for your association, I believe the following options also comply with the law: (1) making the documents available on a website, (2) making them available on a CD/ thumb drive, (3) emailing them to the requestor.

 The policy should specify how these documents will be provided to unit owners/ potential buyers and any costs associated with these documents. The law specifically states the association may charge actual costs of these documents. If they are available via website or email, there should be no charge. If available via hard copy, CD, or thumb drive, the association should charge whatever amount the manager or document preparation services (e.g., Kinkos) charges the association. For self-managed associations completing printing work in-house, a cost of $.10 – $.15 per page for black and white or $.50 for color is reasonable. This range should cover your paper, ink and printer wear and tear. If creating CDs or thumb drives in-house, the cost should reflect the actual cost of the CD or thumb drive.

 Copying Fees: For official records excluded from #1, the association may charge a reasonable fee for copies, CDs or thumb drives of these records. I don’t see this as much different than actual cost given that it seems unreasonable for the association to make a profit (even if a small one) on official record distribution. As mentioned above, unit owners should charge the exact cost charged to them by the manager or other professional preparing the records. For self-managed associations, the cost guidelines mentioned in #1 remain reasonable though the association may charge an additional amount for time spent making copies so long as the amount is defendable.

 Viewing Location:  The policy should specify where unit owners may view the records. There may be multiple locations. For example, meeting minutes, budgets and monthly financials may be available on the association’s website while copies of contracts and invoices are available at the management company’s office.

 Frequency of Requests:  The policy should specify how frequently a unit owner may request records and clarify that any requests in excess of the frequency limitations will not be accepted. There is no right choice: daily may be too burdensome on the association but quarterly may be too limiting for the unit owner. It may be worthwhile here to distinguish between how frequently a unit owner may request electronic records (i.e., those that can be easily emailed) and how frequently they may request viewing of hard copy records.  These specifics will entirely depend on how your property is managed and how records are stored.

Viewing Times: The policy should specify when documents are available for review. For those available on the web, there is no limitation on viewing time. For all other documents, viewing times may be by appointment during the management company’s business hours.

Making a Request: This section should indicate how the unit owner makes a request. It should specify who the unit owner contacts and what information to provide. I would recommend associations require unit owners to select specific records or groups of records (e.g., 2009-2011 budgets, March 13, 2013 invoice from Joe Plumber). This avoids the “I’d like to see all your records” requests which are nearly impossible to accommodate. Generally these requests arise if a unit owner feels the association is hiding something. All requests should be in writing (mail or email). The policy may also require the unit owner to provide his/ her availability over coming days (if applicable).

Request Response: This section should indicate how and when the association will respond. The law states that documents must be made available within 5 days of a written request. Do not read this to mean that in all circumstances the documents must be in the hands of the requestor within 5 days. If the association has the requested documents available electronically, they should certainly be emailed within 5 days. However, for hard copy documents, the association should respond as promptly as possible (I’d recommend within 1 business day) and offer reasonable viewing time(s) that fall within the 5 days window.

 

As I recommend with all policies, the association’s attorney should review the policy before it is finalized. Further, the board should re-review and re-approve the policy annually to ensure continued compliance with applicable law.

Feel free to reach out with any questions.

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. 

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Your Florida Condominium Association’s Collections Policy and Procedures

Posted on August 3, 2013 | 14 Comments

One of the most important responsibilities of condominium associations is to actively collect maintenance fees from each homeowner. To avoid various legal and reputational issues, Boards of Directors must be sure that the process the association uses to collect maintenance fees is consistently applied. Many associations prefer to leave the majority of their collection efforts to their attorney; however, with a thorough collections policy in place, the Board of Directors (or the property’s manager) can easily handle the majority of the association’s collection efforts, which, in turn, can materially reduce the association’s collection-related expenses.

The association’s documents (i.e. Declaration and Bylaws), along with Florida Statutes Chapter 718, provide various collection methods for Boards to use in an effort to keep past-due maintenance fees to a minimum. These tools provide the foundation for successful collection efforts and will be discussed in detail below. We will only be focusing on past due maintenance fees in this blog post and will not be talking about fines, utility bills or any other monetary obligations of homeowners to associations.

I strongly recommend that prior to implementing a new collections policy, the Board have the association’s legal counsel review the policy. Further, I recommend the Board update and re-approve this policy annually to ensure continued compliance with Florida Statutes.

Maintenance Fees

The collections policy should specify how frequently (i.e. monthly, quarterly) and on what date (typically the first day of the month or quarter) maintenance fees are due.

Late Fees and Interest

Most associations’ declarations or bylaws outline whether or not late fees and interest can be charged to homeowners that have accrued past due maintenance fees. If your documents silent on the amount of interest that can be charged, Florida Statute 718.116(3) specifies that interest should accrue at 18% per year. Further, 718.116(3) allows for a late fee for each delinquent payment of up to the greater of $25 or 5% of the monthly/ quarterly maintenance fee.

The Board should determine when and how they will apply interest and late fees to a delinquent homeowner. More specifically, by what date each month must the homeowner have paid their monthly maintenance fee, in full, to avoid accruing a late fees and interest? Will interest begin accruing immediately upon the homeowner’s account becoming delinquent (i.e. after their first missed payment) or will the association wait unit some later date (e.g. after the account becomes 90 days past due) to begin accruing interest? The relative difficulty of properly calculating and accounting for accrued interest should be considered when making these decisions.

The Board should also determine a procedure for waiving late fees and interest in certain situations. For example, the Board may include in its policy that the late fees and interest associated with a homeowner’s first delinquent payment may be waived upon request of the homeowner but that all other late fees and interest may not be waived. Or, they may decide that late fees and interest will never be waived except as part of a settlement or payment plan approved by the Board (we will discuss this more below). Again, it is very important that these rules be applied consistently. The Board must take care not to provide special treatment to certain homeowners based on personal relationships.

Delinquency and Pre-Lien Letters

The association’s strongest weapon against maintenance fee delinquency is their right to lien and foreclose on a unit if the homeowner fails to make maintenance fee payments when due. As such, the lien and foreclosure process should be included in the collections policy.

When a homeowner fails to make a maintenance fee payment when due, the homeowner’s account becomes delinquent and most associations will send a letter to the homeowner informing them of the past due balance on their account (including all late fees and interest accrued) and the next steps the association will take in the event the homeowner fails to pay. This letter should include a copy of the homeowner’s ledger (supplied from the association’s accounting program) and a date by which the homeowner must pay all past due amounts to avoid additional fees. The collections policy should specify when these letters are sent (i.e. how many days after the homeowner’s account becomes delinquent) and through what method(s) they are communicated (e.g. email, USPS).

As required by FL Statute 718.121(4), the association must provide a notice of intent to file a lien (f.k.a. pre-lien) to the homeowner. This notice should also comply with the Fair Debt Collection Practices Act. The above mentioned delinquency letter may serve as the association’s pre-lien letter or the association may send a separate letter to the homeowner. If you would prefer to send a second letter as your pre-lien notice, the collections policy should specify when these letters are sent (generally some point in the second month of delinquency) and through what method(s) they are communicated (e.g. certified mail, return receipt requested as required by FL Statutes).

Lien Filing and Foreclosure

If delinquency and pre-lien letters failed to encourage a delinquent homeowner to cure the past due balance on their account, the association may choose to have their attorney file a lien on the unit. Filing a lien (which is only good for one year) is a prerequisite to foreclosure. If the association has chosen not to foreclose on any units, it may not be worth accruing the attorney’s fees to file a lien. The collections policy should state when the association will direct its attorney to file a lien against a unit (generally when the homeowner is more than 90 days delinquent), and what information should be provided to the attorney at that time.

Whether or not to foreclose a lien (which typically results in the association taking title to the delinquent unit) should be discussed on a case-by-case basis with the association’s attorney as there are many factors to consider including whether the unit is owner-occupied, rented or abandoned, and if there is a mortgage foreclosure case in process. Most importantly, the association should consider if they intend to rent the unit after they have taken title to it through foreclosure. While acting as a landlord can be time consuming for associations, the rental income earned often more than covers the past due fees owed by the old homeowner. The collections policy should outline the broad scenarios in which the association would foreclose on a unit.

Amenities Restrictions

Florida Statute 718.303(4) allows associations to suspend a homeowner’s (and their tenants’ and guests’) right to use the common elements of the property if the homeowner is more than 90 days delinquent in paying their maintenance fees. When possible, associations should use this to their advantage by restricting the homeowner’s access to the property’s pool, gym, clubhouse, car wash, laundry facilities or any other amenities the property offers. For occupied units (and particularly for rented units where the tenant is restricted from using the amenities), this inconvenience can often be enough to encourage homeowners to pay their past due balance. The collections policy should specify which amenities would be restricted as well as how and when they would be restricted. According to FL Statute 718.303(6), the Board must vote to suspend a homeowner’s right to use the common elements at a Board meeting and must notify the homeowner of the amenities restriction via mail or hand delivery.

Lease Restrictions and Rent Garnishment

If a property’s declaration or bylaws allows the Board to approve or deny a proposed lease of a unit, FL Statute 718.116(4) allows Boards to deny a proposed lease of a unit due to a homeowner being delinquent in the payment of maintenance fees. Preventing homeowners from leasing their units is a very important tool for associations and, if allowed by the property’s documents, should be included the collections policy. The policy should specify when a homeowner becomes ineligible to lease their unit, how they are informed of their inability to lease their unit, and what will happen if a unit is leased by a homeowner that is ineligible to lease their unit.

Rent garnishment is the association’s primary weapon against homeowners with past due maintenance fees that are renting their units. Florida Statute 718.116(11)a allows the association to demand that the tenant make lease payments directly to the association until all past due maintenance fees have been paid. Further, if the tenant refuses to make payments to the association, the association may sue for eviction of the tenant. The collections policy should specify when the association will attempt to rent garnish and the process for doing so (the FL Statutes provide specific details on how the tenant and homeowner must be informed). Further, the collections policy should specify when the association would begin eviction proceedings should the tenant fail to make lease payments to the association.

The leasing section of the collections policy should be reinforced by a separate and distinct Leasing Policy (to be discussed is a separate blog post).

Voting Rights

Florida Statute 718.303(5) allows associations to suspend a homeowner’s voting rights if the homeowner is more than 90 days delinquent in paying their maintenance fees. This particular restriction does not tend to do much to encourage homeowners to pay past due balances as those with past due balances tend not to care enough to vote. However, it is worthwhile for the association to include suspending homeowners’ voting rights in their collections policy as the association may reduce the total number of votes necessary to constitute a quorum of the membership by the number of voting rights suspended. This can be a difference maker if the association is struggling to obtain enough votes for their annual meeting, for amendments to the association’s documents, or for any other vote. Similarly to the common elements restriction, according to FL Statute 718.303(6), the Board must vote to restrict voting rights at a Board meeting and must notify the homeowner of the voting restriction via mail or hand delivery.

Payment Plans

If a homeowner has accrued past due maintenance fees and would like to avoid having the association foreclose on their unit, they may wish to establish a payment plan with the association. While each payment plan approved by the Board may be customized for each homeowner, the collections policy should establish the basic guidelines for when the Board may consider a payment plan, how the homeowner should request a payment plan, how a payment plan is approved, who (the association or its attorney) will receive the payment plan installments, whether or not late fees and interest continue to accrue during the implementation of the payment plan, and what will happen if the homeowner fails to abide by the payment plan (typically foreclosure). The collections policy may also want to specify that the Board will not accept any payment plans that reduce the total amount owed by the homeowner.

 Settlements

A homeowner with past due maintenance fees may wish to come to a settlement with the association where by they would negotiate with the association some reduction in the amount owed. This typically occurs when the homeowner is looking to sell their unit. The Board will typically negotiate settlements on a case-by-case basis but some basic guidelines can be included in the collections policy including when the Board may consider a settlement, how the homeowner should request a settlement and how a settlement is approved. As I have mentioned before, consistency is key. Whatever the logic the Board choses to use in determining if a settlement is acceptable, they should be sure to apply that same logic to all homeowners and not allow personal feelings enter into the decision making process.

Repayment Order

The collections policy should specify how payments are applied to a homeowner’s past due balance. More specifically, Florida Statute 718.116(3) specifies that payments should first be applied to interest, then to late fees, then to attorney’s fees and costs associated with collection, and then to the delinquent maintenance fees.

Verbal Communications

The collections policy may want to specify the situations in which a member of the Board or the association’s manager will actively reach out (via phone or email) to a homeowner with past due maintenance fees in an attempt to encourage the homeowner to pay. An appropriate time to do this may be prior to the Board voting to lien and foreclose on the property as there is no point in accruing additional legal fees if the homeowner is planning to make payment in full in the coming days or weeks. Further, it may be wise for a representative of the association to offer the homeowner a payment plan, as the homeowner may not have realized this was an option. In my experience, actively communicating with homeowners makes collection efforts more successful.

This post addressed all of the key components of a quality collections policy. If your Board does not have a collections policy, I strongly recommend this be an agenda item at an upcoming Board meeting. If you have any questions or would like our assistance in drafting a collections policy for your property, feel free to reach out to us.

Ryan

Ryan is a Florida condo owner and a director of VERA Property Management, a condominium and homeowners’ association management and consulting firm. VERA will gladly draft a Collections Policy (including delinquency letters, pre-lien letters, rent demand letters and all other relevant notices) for your Association based on the desires of the Board, your association’s declaration and bylaws, as well as the Florida Statutes.  Please contact us today for a quote!

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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. 

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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

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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. 

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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

 

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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

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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. 

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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. 

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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

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