Renovating a Home in an HOA: What You Should Know

Living in residences that are part of the homeowner association has its perks. The associations help maintain an organized and cohesive atmosphere in the neighborhood and spare homeowners from some responsibilities.

However, homeowners have to adhere to the strict regulations usually spelled out in HOA’s CC&Rs (covenants, conditions & restrictions). Thus, if moving to such residences, homeowners need to join the existing HOA community and pay fees to cater to the cost of upkeep of common areas, exteriors, and shared structures.

What’s more, if planning to undertake a renovation project, you need approval to ensure compliance with the community’s rules and regulations. HOA rules vary from one community to another, but there are basics every homeowner should acquaint themselves with when undertaking a renovation project.

What is a Homeowner’s Association?

It is a governing body operated by an elected board of directors to manage a residential community. Members make annual, quarterly, or monthly payments to the association to facilitate the management of day-to-day operations of the community.

The primary objective of HOAs is to improve property value by holding homeowners to the same set of standards. It explains why you may be required to follow specific design, color or height restrictions when building a property.

Renovation Projects the Need HOA Approval

You need to seek HOA approval for exterior renovations like painting the exterior of a home, building a fence, and even changing the front door of your home. Similarly, the HOA requires homeowners should seek approval when undertaking interior renovations like replacing bathroom tiles.

This is because such a project affects the waterproofing of a bathroom and cause flooding. Of course minor projects like replacing a wallpaper with https://www.photowall.co.uk/canvas-prints may not need HOA approval as they barely affects other homeowners. Other interior renovations that need approval include:

  • Flooring, rewiring
  • Structural projects like adding or changing rooms, plumbing, removing exterior or interior walls, kitchen renovations
  • Exterior changes like landscaping, adding a new roof, front door trim, gutters, and exterior paint
  • Replacing the ceiling

Projects that Don’t Need HOA Approval

  • Light fixtures like electrical outlets and switches
  • Interior trim work
  • Bath fixtures like the shower and the sink
  • Landscaping a fenced backyard

The HOA may order you to stop the work or redo the project if you don’t seek approval even when you have complied with its rules. As such, it is imperative to seek approval before starting the project to avoid wasting time and resources.

Also, HOA communities require homeowners to hire a licensed professional (with all permits) to perform all such renovations. You may be provided with a list of contractors experienced in working on HOA properties, but if the recommendations are not available, you still need to find the right contractor.

Be sure to discuss the CC&R regulations to avoid pitfalls. Emphasize on sticking to the scheduled work times and inquire where the contractor intends to store the work materials and dispose of debris.

Sanitation haulers prohibit homeowners from disposing of construction materials in the trash receptacle. The HOA also inspects the project after completion to ensure such garbage has been disposed of properly, and the project complies with the community’s rules and standard of quality.

Getting HOA Approval for Renovation

The process varies from one association to another, but the standard procedure involves filling out an application that explains the renovation plan. It would help if you engaged an expert to help you fill out the form as it increases your chances of getting approval.

Provide as much information about the project as the HOA will use it to approve or deny the proposal. Essential information to include:

  • The timeline
  • The type of work and its effect on common property
  • Common areas that will be used during the renovation
  • Sometimes the HOA approves the project based on conditions concerning:
  • Hours the project should take place
  • Types of materials to be used in the project
  • Licenses tradespeople and contractors should have
  • Separating the work area and the common area

The approval process takes 14-30 days once you submit the proposal. Factors such as the complexity of the project and the need to verify if the contractor is licensed and insured can prolong the approval time.

Once the proposal is approved, you can commence working on the project. Since renovations are noisy and disruptive, it is imperative to work during HOA-approved construction hours (usually 7 am-7 pm, and 9 am-9 pm during the weekends).

Consider alerting your neighbors via email or a letter explaining the length of the project. Be ready to answer questions they may have to prevent conflict and reduce the chances of getting complaints.

Before embarking on a renovation project in an HOA community, check its CC&Rs to find out the specific approvals required. Also, talk to the correct people to determine the renovations do’s and donts in the neighborhood.

6 Typical Rules For an HOA

If you haven’t dealt with a homeowners association before, you should prepare for rules. HOA rules govern many of the activities of daily residents. HOA’s aren’t for everyone, so before you make an offer on a home and move-in, you should understand how one may affect your living experience. 

 

HOA’s are more commonplace in certain parts of the country than others. Their main goal is to maintain increasing property values by creating a positive quality of life.  Usually it’s the developer that governs the HOA until a certain amount of homes are sold and then it will eventually be turned over to the homeowners. These fees go towards, parks, pools, garbage, etc.   Here are six common HOA rules that you should be aware of.

 

Parking

This is one of the major causes for concern. When you live in community with limited parking, visitors and homeowners tend to park in a highly unorganized manner. This might be reminiscent of living in big apartment community that you can find here https://www.rentkidz.com/apartments-tx-dallas/. These communities have many cars and often not enough spots to park.  Guests may block your garage or park in the middle of the street. This can also create an eyesore.

 

If you’re the type of person who has lots of friends and family who visit,  then you will want to check out the parking situation. Is there adequate guest parking? What happens when guest parking is full? Many HOA’s have a parking policy that you should review. 


Fees

You will be responsible for paying your HOA fees, also called the “assessment” or the “dues.” These fees will vary based on the community size, amenities, and the physical property maintenance that the association is responsible for providing.  What do they cover in the community? Usually these fees cover the street, gates, landscaping, insurance, and utilities for the association. In condominium associations, the fees are typically higher because they also cover exterior maintenance of the building and all the common elements in the association. HOA’s also like to keep reserves in case of an emergency. Fees are always a major of a topic if you live in an HOA.

 

Pets

Dogs bark and they leave messes. When homeowners walk their dogs and don’t clean up after their pets this can create frustration for other owners in the community. Some HOA’s have pet restrictions and may even not allow certain size or breeds of dogs. Condominium buildings may also restrict animals and not allow pets of any kind in the building. Other associations may allow pets but require them to be registered so the association has the information on file.

Renters

Some homeowners will at one point start to rent out their home. You will find that there are also rules that govern this as well. The tenants who move-in will not have voting rights. Some associations will place restrictions on the number of renters in the association or may not allow renters at all. Many associations will also not allow short term or vacation rentals. Be sure to review the association’s governing documents carefully to ensure that the proper guidelines are being followed.

 

Keep Up Appearances

Homeowners must make timely repairs and maintain certain standards that are specified in the governing documents of the association. If you choose to repaint your home or replace your fence, chances are there are certain rules to abide by and you must request approval for any changes to be made. Changes or architectural modifications that are made without approval can be considered to be in violation and the HOA may levy fines if the changes are not corrected or brought up to the architectural standards in the community.

 

An HOA offers many benefits, but buyers must be aware of the rules that govern them. If you are considering purchasing a home that is in an HOA, you should request a copy of the governing documents in order to perform proper due diligence and make an informed decision.

 

Easily Manage your HOA Pool with Task(and Time) Eliminating Software

Pools managed by HOAs are easily susceptible to losing revenue channels and offering freedom that
is often taken advantage of. Without the ability to constantly overlook the pools management
elements, it is difficult to control important aspects such as access control for members and
guests, employee relations, and membership payments.

Many HOAs accept these disadvantages and allow members and nonmembers to abuse the pools benefits.
However, that does not need to continue any longer. There is a simple solution to these issues, a
management software. This software can handle each of the previously mentioned problems with HOA
managed swim clubs while decreasing staff time and increasing revenue.

Access Control:

Member Check-in
Tracking member check-in is a vital aspect to any successful pool. With HOAs, there is variability
in the membership aspect. Your HOA pool may offer the pool pass within the HOA pool while another
HOA may offer pool access for an extra fee. Since both of these options exist, being able to track
the people accessing the pool becomes a priority. The software features that are offered to deal
with this aspect of pool management includes the option of check-in through barcodes or by last
name. Barcode check-ins typically involve having a member ID number or a member card to scan when
entering the pool. That option is simple but even more straightforward is the last name check-in
process where members will give their name or put it into a check-in system.

Guest and Childcare Passes
With members comes the desire to bring in guests or have childcare bring their children to the pool
while they are unavailable. With a strict membership check-in procedure through the software, it is
a necessity that there is an offer for guests and babysitters to attend the pool. A software will
have the ability for your members to purchase guest and childcare passes as well as be able to
track the use of the passes. Typically, childcare passes will be offered for the entire season,
while guests will use one-day passes that will be sold individually or in packages.

Employee Relations
Members are not the only ones that seem to take advantage of the lack of management that an HOA
pool has; the employees are also known to work the system to their advantage. Without a

software, what is to stop employees from closing the pool a little early or showing up to their
shift a late? With the software, the employee check-in system will enforce the hours of each shift
and eliminate any opportunities for employees to abuse their freedom. The time clock feature will
track employee clock-ins and clock-outs. Another feature helpful in employee relations includes the
calendar schedule. This gets rid of shift confusion and allows staff to keep track of their
coworkers.

Membership Payments:
As the leading revenue channel for HOA pools, the membership fees/dues need to be the easiest
process of pool management. Software systems will eliminate the manual payment process that most
pools use now, and replace it with an online format. Not only does this stop the transaction of
physical money, but it also offers 24/7 access to the system for people who want to be able to
purchase their memberships, guest passes, and childcare passes on their own time. Whether it be
five minutes before or two weeks ahead, the system will track each purchase and make it accessible
to the member.

If your HOA already has another system for payments, the software can also work with third parties
to gather the membership information and place the members and their extra passes into the system.

To learn more about a pool management software with features that specialize in saving you
time and money, check out: https://www.esoftplanner.com/packages/swim-club/

No Condo or HOA Management Company Near You? – No Problem

A lot of towns around the country may not have a company that provides management services that cater to condo communities and homeowner associations.  Maybe an experienced manager hasn’t moved to town or the market is not large enough to support a company that specializes in community association management.  Or there is someone but their service is terrible. What is a board to do?

Hiring someone without condo or HOA expertise usually leads to problems.  You may be tempted to work with a generalist property manager. Someone that manages some houses, a few small apartment buildings and a commercial property or two.  This person will reduce some of the workload of the board but they lack critical understanding about community associations and their needs.

Wouldn’t it be great if you could hire a specialist that understands community associations?  The company would know about declarations and bylaws, about any state regulations and also help advise the board on industry best practices.  If applicable, the business would be licensed to work with community funds and would carry insurance required by the state. Additionally, the business would be using the latest community management specific technology that would make the board’s job easier and make unit owners happy with features like online payments.

What if I told you there is a way to get over 55% of the work of operating a community done remotely by a company that understands community association management?  In the process you could get better information and financial transparency that would give you more peace of mind. You could go from having a full-time volunteer “job” to enjoying the stress-free lifestyle that community living promised.  Plus, you may even be thanked by unit owners for giving them the latest online tools.

Enter Remote Financial & Administrative Management

Remote Financial Management handles the following accounting tasks: invoicing owners, collecting and depositing funds, answering payment questions, mailing late letters, working with collection agencies and attorneys with delinquent owners, paying bills, answering vendor questions and providing financial reports.  Depending on its capabilities it may also help with the following administrative tasks: sending out violation letters, processing community mailings, handling lender questionnaires when an owner refinances and resale certificates when an owner sells.  

Skeptical of Remote Services?

You may think that working with a service provider located out of town is spooky or something.  However, you already receive all sorts of similar services from companies that are not located in your area or the actual processing of the services are handled from outside your area.  Here are some examples: Collection – loan invoices, loan coupon books, credit card and utility bills are generated and mailed from a far off location; you also mail the payment to a distant location where they open, record and deposit the funds. Bill Payment – you receive an online payment request for a bill.  You have set up an online account and review the charge, and approve it by pay the bill online – this happens by debiting your bank account, entering information from a check or by credit card.  Financial Reports – you own shares in an investment and you receive financial reports in the mail or online from an investment manager or other business that is not located in your area.  Customer Service – you call or email support and the customer service representative is not located in your town, plus it is much faster than getting in your car, driving and waiting for an answer.

If remote service works for all these businesses it can work for your community.  To learn more about remote financial management and if it may be a fit for your community click here: Remote Financial Management – What it Is and How it Works.

Eight Golden Rules for Boards of Directors

This article originally appeared on Associaonline.com’s Living Better Blog.

By Mike Packard at Associa

Board members must interface with their membership, management team, association vendors and other members of the public pragmatically at all times. Following are my personal “Eight Golden Rules” to assist you with achieving that goal:

  1. Always be a straight shooter.People admire this trait in other human beings more than almost every other characteristic. Those who quibble or, at worst, lie about something are destined for failure. Effective and respected board members always practice this principle.
  2. Praise in public; criticize in private. Never publicly ridicule nor scold someone. “Someone” is any of the many, many people that you interface with as a board member. People who rebuke in public are neither respected nor admired. When I was an officer in the military, I never, ever witnessed someone being admonished publicly (except in “boot camp”!).
  3. Read, read, read.The world, and certainly the responsibilities of serving on a board of directors, require staying abreast of legal issues, state statutes, finance, insurance, risk management, etc. Unless you keep current on public events and issues, you will suffer in terms of lacking a better understanding of how to perform your job as a board member.
  4. Emulate the quality traits you see in others.To do so is “OK plagiarism”!
  5. What goes around really does come around. Treat others as you would like to be treated. An axiom for this is “never throw anyone under a bus as there will certainly be a bigger bus coming for you”. This rule complements rule # 1 but deserves its own place in the hierarchy of “golden practices”.
  6. Never get in a hissing contest with a snake.Those few people in your community who may want to pick a fight are not worthy of your energy and time. When confronted, turn the other cheek as you cannot nor will not win battles with those kinds of folks!
  7. Don’t put something where you don’t normally put it. If you violate this edict, men, it’s in the back seat of your car, and ladies, it’s in your purse. Life is too short to be looking for stuff when you should know where it is in the first place.
  8. Don’t borrow something of value from a friend or a team member. How many times have you violated this important universal rule and damaged or lost that item of value? Be honest! Too many times?

 

These tips will help you become a better person and, most importantly, a person of influence. Influential people are the most respected in any profession, and this is especially true for the profession of leading community associations as a board member.

 

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5 HOA Terms Every Board Member Needs to Know

Whether you just got elected to the community association board or you’ve served for years, you want to make a good impression. Knowing these common HOA terms will help you sound like you know what you’re doing while you get up to speed or serve as the refresher you need to keep growing as a community leader.

  1. Fiduciary Duty

The highest ethical and moral obligations and duty of good faith a person is charged with for fulfilling their responsibilities. The board of directors of a community association has a fiduciary responsibility to act in the best interests of the association.

This is a fancy sounding term that applies to the board of directors of a community association. It boils down to trust. The straightforward definition of “fiduciary” alone is stated as: involving trust, especially with regard to the relationship between a trustee and a beneficiary.

That definition is not very practical. In a nutshell, when you are a board member for a community, you need to act for the good of the community as a whole and not for yourself. You have a duty to make decisions for the benefit of all instead of just your home or your friend’s homes nearby.

I know of one board member in a condo association who was great friends with one of her neighbors, but that neighbor fell behind in their assessment payments. Even though it might’ve been tempting to look the other way, the board member joined the rest of the board in applying their community association’s written collections policy in this situation. This put the community first over the board member’s personal interest and ensured equal treatment of all homeowners.

 

  1. Governing Documents

The declaration, bylaws, operating rules, articles of incorporation or other documents which govern the operation of the association.

The governing documents, sometimes referred to as the CC&R’s (Conditions, Covenants, and Restrictions) is where the HOA and the board get their authority. They will spell out exactly what you can and can’t do when governing the community.

Governing documents are arranged in a hierarchy of descending authority:

  • Plat map
  • Articles of Incorporation
  • Declaration
  • Bylaws
  • Rules
  • Manuals/Policies

In general, the documents above the line cannot be changed by the board alone; it will be spelled out in the documents themselves how to do so. They will require a vote of the membership, usually an approval of 66 percent or more of the residents, to actually pass changes to these documents.

The documents below the line are more fluid and can clarify the property restrictions in the documents above them, but cannot contradict documents higher in the hierarchy. For instance, if the Declaration says rentals are allowed, the board cannot pass a Rule saying no rentals are allowed. You may, however, be able to set parameters around rentals or procedures to follow if the Declaration is vague. Always check with an attorney for your state’s specific laws when implementing Rules.

As a board member, you should actually read these documents and understand the hierarchy of them.

 

  1. Business Judgment Rule

Actions taken by directors of a community association in good faith, that are within the powers of the association, and that reflect a reasonable and honest exercise of judgment, are valid actions.

The business judgment rule is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation, in this case, a not-for-profit corporation or homeowners association.

Given that the directors cannot ensure success, the business judgment rule specifies that the court will not review the business decisions of directors who performed their duties (1) in good faith; (2) with the care that an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) in a manner the directors reasonably believe to be in the best interests of the corporation.

The business judgment rule along with directors and officers insurance will cover you as a board member for any decisions you make, even if they turn out to cause more problems than they solve for the community. However, the big caveat is that you must follow the spirit of the rule.

Did you act in good faith? In other words, did you deal with homeowners, vendors, and management in an honest and fair manner. Did you utilize care? In other words, did you read the board packet and understand the information in it prior to the meeting when making your decisions. Finally, did you act in the best interests of the community? This goes back to the fiduciary duty: acting in the best interest of the entire community and not in the interest of your friends, your neighbors or yourself.

 

  1. Insurance

A practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

In light of the natural disasters in 2017, including multiple hurricanes on the east coast and wind and hail damage in the midwest, you’ll want to make sure you understand your community’s insurance policy.

You’ll want to know terms like “per building” versus “per occurrence” deductibles, and the answers the key questions: Is there a per building cap? Is there a percentage wind or hail deductible? Do you have or need flood insurance? Do you have a basic, broad, or special form property policy (sometimes referred to as “all risk” coverage or “named peril” coverage), and what does that even mean?

Just for the record, “special form policy” covers everything except what is specifically excluded within the policy. “Basic and broad form policies” only cover the perils that are specifically named in the policy and excludes everything else!

Invite your insurance agent to a board meeting or schedule a conference call to ensure you know and understand what kind of coverage your community has so you can effectively communicate that to your members and/or homeowners. Condominium and townhome owners will need to have a personal lines policy (HO-4, HO-5, HO-6, etc.) to cover their personal belongings, their personal liability, to cover a possible deductible assessment, and for any physical property not protected by the community’s property policy. It’s also wise to ensure your community’s insurance agent specializes in community association coverage and can readily explain the insurance needs of your community according to its governing documents (including any insurance-related amendments or resolutions).

As mentioned above, you’ll want to ensure you have a directors and officers policy that covers the association and its board of directors for both monetary and non-monetary claims. Some policies in the marketplace exclude coverage for non-monetary claims, so it’s especially vital for the board to review this policy closely since non-monetary claims make up roughly 60 percent of most association-related D&O claims.

You cannot expect a homeowner to understand the association’s insurance policies if you as a board member don’t understand them. That’s why it’s imperative that you partner with an experienced agent to ensure your association’s policies make sense, and that they address all of the community’s exposures to loss.

 

  1. Objectivity

The quality of being objective; not influenced by personal feelings, interpretations, or prejudice; based on facts; unbiased.

As a board member you are going to be making decisions for the community, and you’ll never be able to please everyone. Some owners will want more services and be willing to pay for those services; other owners will want to keep assessments as low as possible by any means possible; some owners will have purchased in the neighborhood because of the rules in place; others will want there to be absolutely no rules whatsoever.

You may have to make unpopular decisions such as raising the assessments to cover increasing costs for insurance, landscaping, or repairs and maintenance expenses as buildings get older. You’ll be selecting contractors, and sometimes they will do a poor job. Or, in trying to keep costs low you will choose fewer services and then owners will complain that they aren’t getting the service they “used to” receive. You are in charge of enforcing the Rules and Regulations and governing documents, making decisions on possibly fining owners that do not comply or enforcing them to remove that fence that is too tall. You just have to remember that all owners agreed to abide by the governing documents when they purchased in the community and apply the standards fairly and uniformly to everyone.

Don’t take it personally when someone acts inappropriately in response to you simply performing your duties as a board member. They are usually not mad at you but mad at the situation, and they may even apologize in the future.

Be prepared for these conflicting situations and act objectively knowing deep down you’re being a true community leader.

 

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9 Crucial Items That Should Be Part Of Your HOA Yearly Checklist

Your HOA likely already has a list of events and to-dos for the association that must happen each year, such as inspections, renewals, and maintenance. But, there are a few extra items that might get overlooked yet are essentials each year. Construct an HOA yearly checklist to ensure you don’t miss any important items.

What to Include in Your HOA Yearly Checklist

Every year, an HOA board must carry out specific tasks so that the association can function normally. Each board member fulfills their respective obligations, and the board as a whole works together to achieve common goals. But, sometimes, tasks can fall between the cracks and be forgotten. In order to avoid this, it’s a good idea to put together an HOA yearly checklist.

Certain things, like preparing the annual budget, having maintenance services performed, and organizing yearly events, are a given. Those are staples usually found in every HOA annual calendar. For this HOA checklist, we’ll be focusing on tasks a lot of associations mistakenly leave out.

1. Review Rules and Regulations

It’s always a good idea to schedule a comprehensive HOA review of your rules and regulations to make sure they are still being fully followed and enforced. Sit down with your fellow board members to see which rules still apply. You may also want to consider amending parts of your governing documents if there are any stipulations that conflict with others.

In addition to reviewing your own governing documents, make sure to check if there are any new or amended state laws that apply to HOAs. If you’re unsure about these things, it’s best to consult with your HOA attorney. This way, you can cover your bases and limit the possibility of liability or misinterpreting the law.

contract | hoa checklist2. Leases and Contracts

Look over all tenant leases to review renewal dates. It will also give your board a chance to discuss solutions for any problem tenants. You will need to approach the way you handle difficult tenants carefully, though. One wrong move or accusation could result in legal repercussions.

Additionally, if you have a “Housing for Older Persons” community, make sure your leases in the past 12 months still put your association at an 80 percent occupancy rate or more for residents aged 55 and above.

You’ll also want to review your contracts with vendors and when they expire. Discuss how each member feels about the quality of work and whether or not you plan to renew the contract. Additionally, check whether there are any automatic renewal clauses in HOA vendor contracts. You might miss the deadline to terminate business with a vendor you dislike and end up having to pay a hefty fine.

3. Security and Safety Plans

Re-evaluate your HOA’s disaster preparedness and recovery plan. Ensure everyone is up-to-date on any changes and understands their role in the plan. Also, review any issues with security or safety that have been reported or noted in the last year and decide on a plan for continued resident and guest safety.

It’s a good idea to hire a professional to perform a security assessment of your community. This will reveal any vulnerabilities, even subtle ones, that you need to address. A security assessment will also give you a general idea of how much it will cost to address these security issues.

4. Frequently Asked Questions

Any condominium association boards will need to look over their Frequently Asked Question and Answer sheet at least once a year. Since a lot can change with an association in a year, you’ll want to make sure it is still accurate. If it’s not, then make sure to make the necessary adjustments to it. After that, see to it that every homeowner in your community knows about these changes.

guide dog | hoa checklist5. Emotional Support Animal Cases

If your community has any service animals or emotional support animals, mark your calendar each year. All approved pets will need to undergo an annual checking, in case they have been retired from service. This is likely more relevant to 55+ or condominium communities.

6. Access Devices

If your HOA uses any devices for member access, such as gate cards, vehicle permit tickets, or other exclusive access items, protect your community and double-check any inactive ones that are no longer functioning. If you change vehicle ID stickers every year, make sure to have a new one ready by the time the new year comes around. Notify all homeowners of the new stickers, how they can get it, and any other pertinent details.

7. Taxes

Although this is an obvious one for most HOAs, there are still associations that miss it. Your HOA yearly checklist should include when to file taxes. For many associations, the deadline for filing taxes is on March 15. Allow enough lead time to prepare your taxes. If you’re not sure whether to use Form 1120 or Form 1120-H, ask your accountant or management company for help.

8. Holidays

One of the HOA action items that only a few consider is holidays. No, this doesn’t mean scheduling a time to decorate (though that can also be part of it). Instead, mark your calendars for any closures during the holiday season. Decide which buildings or offices should close and which days HOA employees can take off.

9. Newsletter

If your HOA sends out regular newsletters, decide on how often you intend to distribute it. You don’t need to follow the schedule of your predecessors (unless your governing documents say otherwise). You may also want to reconsider the design of your newsletter. If you have a resident with a background in layout design, consider asking them for help.

Preparation Is Paramount

The HOA board carries a world of responsibilities on its shoulders. When left unprepared, any association opens itself up to consequences, legal or monetary. The more steps toward prevention that your community board can take each year, the better equipped you will be in avoiding any unnecessary risks or challenges. Take the next step by ensuring these items appear in your HOA yearly checklist. Doing so can help your HOA in saving a lot of money on otherwise unanticipated emergencies.

 

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How Does Risk Management For HOA Protect Your Community

Running an HOA is similar to running a business. It involves aspects of finance, communication, and management. One of the most important of these is risk management for HOA.

 

A Guide to Risk Management for HOA

Is risk management a priority for your homeowners association management? If you’re not sure, it’s time to start accessing the best way to prepare for any possible disasters. Whether that means developing your own HOA risk management plan or delegating the planning to a management company, it’s important to spend some time thinking about your association’s future.

With a proper risk management plan, you can reduce the chance of loss or disaster in your community. Adhering to certain risk management standards ensures your association is protected at all times. If you don’t know where to begin, here’s your guide to risk management for homeowners associations.

 

Step 1: Pinpoint Possible Risks

You’ll want to consider and be prepared for any risks, both obvious and expected. That could include fraud or crime within the association, lost contracts, natural disasters, or conflicts within the community. Here are the most common areas of risk management for HOA:

 

1. Property

House model with real estate agent and customer discussing for contract to buy house, insurance or loan real estate background. | hoa risk management Natural disasters and property damage both fall under property risk. When a hurricane strikes or flooding occurs, your association must be prepared.

Similarly, HOA facilities and amenities must remain in tiptop shape. If not, homeowners may get injured.

For instance, when playground equipment isn’t properly maintained, children can get hurt. Parents can then claim negligence and sue the association or individual board members.

The same can be said for improperly maintained pools, gyms, and clubhouses. After all, board members have a legal responsibility to keep the community safe.

A good way to avoid property risk is to perform thorough inspections. When inspecting the community pool, for example, make sure to check for everything. This includes the tiling, chlorine content, and the surrounding areas. See to it that there are no cracks on pavements or slippery surfaces. For inspections, it’s a good idea to hire a professional to do it on a regular basis.

 

2. Homeowner Disputes

Disagreements between neighbors are more common than you think, so your HOA must be prepared. A small argument could escalate into something uncontrollable. Before you know it, the police become involved or both parties are already suing each other.

Out of all neighbor disputes, the most frequent complaint has to do with noise. Problems with pets take second and child complaints follow in third. The fourth most common cause of dispute between neighbors is home and property appearance.

Most of these disputes come from a place of ignorance. More often than not, it’s because a resident isn’t all that familiar with the rules and regulations of the HOA. To counteract this, make sure every homeowner is well-informed. If your board has come up with a new rule or altered an existing one, update everyone.

 

3. Personnel

Disputes can also arise between contractors and the HOA board. Oftentimes, these disputes occur as a result of building defects. When a contractor has failed to do their part well, the HOA will naturally react negatively. Heated disputes can escalate quickly, becoming a risk to the association. Additionally, any employees or vendors working under the association who behave badly are also risks.

 

4. Net Income

The net income of the HOA can also be threatened. As mentioned previously, a homeowners association is similar to a business in many ways. Both rely on revenue to operate. When revenue decreases or expenses increase, the HOA is at risk of loss. There is an even higher level of risk when members of the HOA board have no experience or expertise in finance.

Managing net income risk is tricky. You must ensure revenue doesn’t decrease. And, since revenue comes from HOA fees, it’s imperative to collect them from homeowners regularly. You can either invest in a collection agency or partner with an HOA management company with collection services. The latter has an edge over the former in that management companies usually have staff members who know how to handle finances well.

 

5. Cybersecurity

Close-up image of male hands using computer laptop with icon graphic cyber security network of connected devices and personal data information | hoa risk managementIf you have a relatively modern HOA, there’s a good chance you digitize everything — from resident information to financial documentation.

While a digital system is certainly convenient, it also comes with its fair share of risks. Although unlikely, your HOA could face a cyber attack in the form of hacking.

This is particularly dangerous for your association since important and sensitive documents are stored there.

To protect yourself from this, make sure to place a good amount of focus on cybersecurity. That means putting up firewalls and password-protecting everything. Don’t use a password that anyone can easily guess. Go with special characters and unconventional spellings. Also, make sure not to use a master password for everything or reuse the same password.

Furthermore, you and your fellow board members mustn’t share any of this information with unauthorized or untrusted contacts. Set up a spam filter for your emails and make sure not to click on any suspicious links. It’s also a good idea to invest in antivirus software.

Finally, since everything is in digital form, remember to back up your files to an external hard drive. Alternatively, you can also partner with a cloud provider with reputable security measures.

 

6. Social Media

Social media has become a medium of communication for most HOAs. It’s a way to disseminate information and updates fast and without much effort. However, it also opens up your association and board to risks and liabilities.

Before setting up a social media platform for your HOA, make sure to create a social media policy. Set ground rules that everyone must follow, such as what they can and can’t post. Stay away from personal posts. Stick to the facts like meeting dates, road closures, and event information.

 

Step 2: Evaluate Risk Severity

Once you’ve considered all possible risks associated with your community, rate each one by how likely it is to happen. This way, you can know which ones are the biggest priorities to address. After evaluating each risk, it’s time to move on to the next and final step.

 

Step 3: Develop a Plan

plan writing top view | hoa risk managementConsider each area you have listed that could go wrong and have your board determine a plan for protecting yourselves from it and/or recovering from it.

If you already have a plan or protection in place, make sure each board member understands how it works. Although some will be more simple than others, such as having plans for backup if something happens to a board member, it’s important to consider each risk and know what actions will be taken if needed.

However, to spend this time most efficiently, it’s a good idea to focus on the higher risks first. That way, if time is very limited, you can work on the lower risk disasters later. It’s most important to reduce the highest vulnerabilities at the get-go.

 

Community Risk Management Is Key

Risk management is extremely important when running a homeowners association. This process should be repeated and your list amended in a board meeting each year. Not only will it protect you from legal or personal nightmares if you’re left unprepared, but it can also strengthen homeowner confidence in your association and lead to better relationship building.

 

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Why Accrual Accounting For HOAs Is The Best Accounting Method

When it comes to HOA accounting, the foundational step to success is to use the right basis of accounting. Learn why accrual accounting for HOA is the best accounting system you can use.

 

The Importance of Accrual Accounting for HOA

Do you know which accounting system is best for your homeowners association?

It’s an important question that all board members and HOA managers should be considering. Choosing the correct accounting method is an important decision, as it can affect how a business’s financial state is managed. You also don’t want to find yourself choosing the wrong system then experience the pains involved with trying to switch.

There are three primary methods of accounting: accrual accounting, cash accounting, and modified accrual accounting. For homeowners associations, there is a preference for accrual accounting over the other two methods. To understand why this is so, let’s first take a look at these three bases of accounting.

 

What Is Accrual Accounting?

Using the accrual accounting method, your association reports all revenues and expenses the moment you earn or incur them. It doesn’t take the date of the actual exchange of cash into consideration. It’s also the only basis of accounting that conforms with GAAP, also known as Generally Accepted Accounting Principles.

Under this basis of accounting, it’s normal for your HOA to use account titles like “Prepaid Assessments” and “Assessments Receivable” in the books and statements. So, when it’s time to collect assessments, you can expect to see the “Assessments Receivable” increase. As homeowners pay their dues and the HOA receives them, the “Assessments Receivable” account decreases, and the “Cash” balance increases.

The process is similar when it comes to recording expenses. Liability titles like “Accounts Payable” appear on the balance sheet and books. When you incur expenses (i.e. when the services are provided), this account title increases. It only decreases when you settle your payables. At the same time, the “Cash” balance decreases because you made payments.

 

What Is Cash Accounting?

banking loan, or cash concept | accrual accountingCash accounting, on the other hand, takes a completely different approach. It heavily relies on when cash is actually exchanged, which is why it’s called cash accounting.

Using this method, you only record revenues when you receive the money. In a similar fashion, you only record expenses when you make payments.

Under this basis of accounting, account titles like “Assessments Receivable” or “Accounts Payable” don’t appear on the balance sheet.

 

What Is Modified Accrual Accounting?

Finally, modified accrual accounting is a combination of accrual accounting and cash accounting. Using this basis of accounting, revenues follow the timing of the accrual basis while expenses follow that of the cash basis.

To explain, you record revenues as you earn them. Under the modified accrual accounting method, you use account titles like “Assessments Receivable” and “Prepaid Assessments.” Once the association charges its members with assessments, the “Assessments Receivable” account increases.

Conversely, under this accounting system, you only record expenses upon payment, regardless of when they were incurred. So, for instance, after a vendor delivers their products or services, the HOA will not record the expense yet. It is only when the association pays for the products or services that the transaction will be reported.

 

The Disadvantages of Cash Accounting and Modified Accrual Accounting

While the cash accounting system can be ideal for small or cash-based businesses, there are some real downsides when using it for a homeowners association. The cash accounting method involves only recording expenses when the association makes payment and only recording revenue when the association receives payment.

While this makes the process less complex, it also leaves out the option to track beneficial information, such as accounts receivable or accounts payable. It is also possible to leave unseen expenses unaccounted for, which can make it seem like your HOA has more money than it actually does.

The cash accounting method can skew the numbers and be more deceiving, which can lead to doubt from residents and other board members.

Modified accrual accounting involves the same disadvantage, albeit only when it comes to recording expenses. Nevertheless, such a disadvantage can significantly influence your association’s finances. Therefore, it is not worth taking that risk. If nothing else, both cash accounting and modified accrual accounting aren’t in conformity with GAAP.

 

Why Accrual Accounting Is the Best Accounting Method for HOAs

Hand writing the text: Best Practices | accrual accountingThe accrual accounting for HOA method involves recording your revenue when you earn them and your expenses when you incur them.

For example, if you hire a vendor for a property repair, the payment to them would be recorded as soon as the vendor performs the duty as opposed to when the payment goes through at the first of the month.

Using this accounting system helps your board keep track of the HOA’s actual profitability, regardless of cash present on hand or in the bank. You can also maintain a more accurate picture of your community’s financial health than with cash accounting or modified accrual accounting.

 

Refer to Your Governing Documents and State Laws

Accrual accounting for HOA remains, hands-down, the best method of accounting. However, it is still important for your HOA board to check your state laws and governing documents for any stipulations concerning accounting methods.

Some governing documents dictate a different method of accounting, while others permit using the cash basis or modified accrual basis for interim reports. In any case, referring to the governing documents and state laws can save you a lot of time and trouble.

If your governing documents mandate using the cash basis or modified accrual basis, consider amending them. After all, most experts consider the accrual basis as the best accounting system. Consult your association’s attorney on what you can do to remedy the situation.

 

The Right Homeowners Association Accounting Method

Overall, accrual accounting is more beneficial to HOAs over the cash accounting method or the modified accrual accounting method. Having a more accurate status of your financial situation will help in planning for things in the future, such as the budget for the next year. When in doubt, go for accrual accounting for HOA.

 

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Tips For Running Successful HOA Board Meetings

HOA board meetings can dictate the pace of your community management. Knowing how to run an HOA meeting, and run it well, can make such a huge impact on your HOA decisions. So, take the time and prep up your HOA board meeting agenda with care. Having a productive HOA board meeting can really set the tone for the rest of your association projects. In this guide, we’ll look at some tips on how to run a homeowners association meeting and have it be a successful one.

The Secret to Successful HOA Board Meetings

What’s the secret to successful HOA board meetings? Is it the venue? Should you spend more time doing meetings? A good venue and enough time to hold the meeting certainly helps. But, the secret to smooth, effective HOA board meetings is the preparation.

That is, you need to spend time preparing for HOA board meetings. So, you can save time during the meeting itself. Odd how that works, yes? But, when it comes down to it, successful HOA board meetings are not necessarily the ones that go on for hours. Oftentimes, it’s in the shorter HOA board meetings that the decisive votes are cast.

When you take the time to prepare ahead of the meeting, the benefits can really add up. Your homeowners association board members, who in most cases are volunteers that donate their time to the cause, will certainly appreciate it. By having short, successful HOA board meetings, you’re showing them that you care about their time.

Being prepared means less time fumbling about finding the information you need. It also gives each member more time to voice out their opinions. That’s how being organized leads to snappier decisions, to the appreciation of everyone who attends.

presentation | hoa board meeting agenda1. Study Your Agenda, Then Organize, Organize, Organize

Even if you are not presenting during the meeting, preparation is a normal part of HOA board meeting protocol. A well-organized agenda is a key to having successful HOA board meetings. Having a meeting agenda that’s well put together is right up there with attendance in terms of importance. Without attendance quorum, the group can’t take decisive action. And without an organized agenda, the group wastes time and energy getting to the voting points as well.

So put together the agenda for the next meeting, and study it. First, make sure it’s complete. The list of items that should go into your agenda should be mentioned in the governing documents for your HOA. Your state laws may have a say on it as well. So, it’s never a bad idea to check them first for any updates that may come up.

Do you have all the old business to be taken up? How about the new business – preferably listed in order of priority? Committee reports need to be added in as well, and you need to make sure you get every report. It helps to have a review of the action items from the previous meeting as well, just to keep everyone on the same page.

Then, make sure to cover the important presentations. There’s a report from the treasurer on the financials over the past month or quarter. Any new contracts with vendors? Make sure to go over them as well. Let’s not forget the open forum for homeowners, too.

2. Keep It Simple And to the Point

So now you’ve got an exhaustive list of every issue that can be brought up. You’ve now made sure that you haven’t missed anything. So, now’s the time to prioritize. Keep the agenda brief, and focused on the most urgent items, if possible. A short but relevant list of agenda items will keep the group focused on the important issues.

It helps to orient your agenda towards the people actually attending the meeting. Is it a board of directors meeting? Then you’ll need to prioritize items that will call for a vote. Check your HOA bylaws if it has a set of guidelines for agenda items. More often than not, some of your agenda items should be handled another time.

How simple and short should your meeting be? For your typical number of HOA board members, aim for an hour. Larger groups may need a slightly longer running time, so consider ninety (90) minutes for them.

3. Make an Agenda Schedule and Stick to It

You have studied your agenda items, right? Then you have a good idea of the time budget you need to allocate for each of them. Time management is key to successful HOA board meetings, so don’t hesitate to stick to your guns. If it’s an item with 10 minutes allocated to it, then 10 minutes is what it should get. If you’re involved in the discussion itself, then have someone keep time for you.

Your HOA guidelines should provide you with options on how to table an agenda item if the group cannot wrap it up. Be familiar with those, and use them judiciously. Just make sure that everyone knows the agenda schedule as well. So, that way, everyone is on the same pace as the meeting proceeds.

If your agenda includes an open forum for HOA homeowners, make sure to carefully limit their speaking time as well. It’s likely that your HOA members have more things to say than you have time for. So, to make sure that you get the opinions from everyone, have them submit their questions before the forum. It will help your HOA board save time by having answers ready, so they can address these questions in a timely manner.

discussion | hoa board meeting agenda4. Keep Reminding Everyone About Meeting Rules

HOA board meetings are all about organized discussion, and meeting rules establish that. So, remember that not everyone may not be as familiar with them as you are. Take the time to go over the rules every now and then. It will help save you trouble later on.

Make sure to neatly wrap up the meeting, too, by having a short overview of what was discussed. So, try to make time after the meeting to review action items, especially the ones you have just voted on. A bit of extra effort now to keep everyone on the same page will save your board from possible disagreements later on.

Make Successful HOA Board Meetings A Routine

Successful HOA board meetings can be the norm and not the exception. A bit of extra work now in preparing and timing your agenda items will save you a lot of effort later on. More importantly, it will make sure that your HOA board can decisively act on action items as a cohesive team. Now that’s the secret for a successful association.

 

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