CAI-MN Minnesota Community Living - Mar/Apr 2012 by CAI-MN

Minnesota’s premier homeowners association magazine

March/April 2012

Volume 30 • Issue 2

Pavement Maintenance In this Issue: Neighborhood Watch Programs – A Message from CAI’s CEO Association Turnover: Making the Transition from Declarant Control And Much More!

Visit us online at www.cai-mn.com.

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Minnesota Communit y Living

Board of Directors

From the President

that is golf.

By Jonathan Edin | CAI-MN President

An exceptionally mild winter has turned into the instant summer of 2012. As our communities engage in spring cleaning, some of us are getting a very early start on our summer passions. For me (and several of you out there),

For those who play, and even those who do not, the concept is clear – you can’t hit just one good shot to be successful. You have to string two or three together. Sometimes it all comes together for a few holes, or a round, and the experience of success makes you think that just maybe you can do it again. Success begets success. Recently here at CAI-MN we experienced a similar synergy of volunteer efforts combining to a very satisfying effect at the CAI-MN Trade Show. This year’s effort, in a greatly expanded format,

was the equivalent of a 300 yard drive, second shot to the pin, and sinking the birdie putt. The RiverCentre set-up was great for the exhibitors. The educational sessions and speakers were fantastic. The food and happy hour were, I’m sure, never before experienced at a trade show. Kudos to the volunteers who pulled this off. Each of you – Thomas Engblom, Mary Felix, Joni Goodmanson-Stulac, Melinda Johnson, Bradley Larson, Sara Lassila, Deanna Cort Price, Mark Schoenfelder, Halo Stafford, Kelly Sprague, Paul Hanscom – all deserve a special thanks. Thanks also to Tim Broms for the contributions of the Education Committee. This type of success makes me think that CAI-MN can do this again, and again. We can build on this success and grow. It makes me optimistic about our future, which is fitting with the coming of Spring.

President Jonathan Edin Phone 651.222.2155 JEdin@mncondodefects.com President-Elect Traci Lehman, CMCA, AMS, PCAM Phone 612.381.8600 tracil@citiesmanagement.com Treasurer Michael P. Mullen, CPA Phone 952.928.3011 mike@cpamullen.com Secretary Halo Stafford, CMCA, AMS, PCAM Phone 952. 277.2785 hstafford@gittleman.com Directors Tom Engblom, AMS, ARM, CMCA, CPM, PCAM Phone 866.800.4656 tengblom@cabanc.com Steve Hoogenakker Phone 763.213.2410 steve@landscape.pro Michael Klemm, Esq. Phone 952.953.8832 klemmm@seversonsheldon.com Rich Klobuchar Phone 763.551.9827 rklobuchar@usinternet.com

Contact John Russo, Ph.D. 952-944-7137

Nancy Polomis, Esq. Phone 952. 941.4005 npolomis@hjlawfirm.com Member

Jim Rezek Phone 763-424-9984 jimrezek@comcast.net

• Consulting Services • Specifications, Bidding, Contracts, Inspections of All Exterior Replacement Items including Asphalt, Concrete, Siding, Roofing, Windows, Doors • Litigation Support • Insurance Claims and Appraisal Support • Problem Solving and Investigations

Gene Sullivan Phone 952.922.2500 gene@ncmgi.com

CALL THE PROFESSIONALS ASSOCIATION SERVICES

Committee Chairs Legislative Action Chair Joe Crawford Phone 952.212.2216 joe.crawford9@gmail.com

Vision Awards Chair Lisa Astelford, CMCA Phone 952.277.2787 lastleford@gittleman.com

Golf Tournament Chair Tosh Tricas, CMCA, AMS, PCAM Phone 888.219.2534 capt.tosh@gmail.com

Communications Chair Joel Starks Phone 952.224.4480 joel@sharpermanagement.com

Education Committee Chair Traci Lehman, CMCA, AMS, PCAM Phone 612.381.8600 tracil@citiesmanagement.com

CAVL Chair Sara Lassila, CPA Phone 952.474.1631 sara@saralassila.com

Tradeshow Committee Chair Mark Schoenfelder Phone 952.345.2900 mark@schoenfelderpainting.com Membership Chair Dennis Merillat Phone 952.997.2320 March | April 2012 dmerillat@certapro.com

Ask the Attorney by

his column is comprised of questions that have been posed to me by homeowners, property managers and related professionals regarding legal issues they have encountered with respect to their associations. “I just became president of my association and was given a stack of binders to ‘hold onto.’ The binders seem to have everything the board has ever done, including all financial records. Do I have to keep all this ‘stuff’”? Yes, for a while anyway. In Minnesota, a corporation (associations are non-profit corporations) must keep complete copies of its governing documents, accounting records, voting records and all minutes of meetings of the members, of the board and of any committee that has the authority of the board for six years. Anything older than that can be discarded from a legal standpoint. However, although you can discard information older than six years, many associations find that it is inexpensive and easy to maintain records for longer. Your binders full of paper can be reduced to electronic format and stored on a flash drive, DVD or even your association website (but please password protect your financials!). By utilizing electronic storage of documents, you will be able to retain documents well past the six-year minimum. This may be useful in the future to see how an issue was addressed previously. “Is my association governed under the Minnesota Common Interest Ownership Act (MCIOA)?” While I am tempted to give the common legal answer here – “it depends,” I will instead provide a brief overview of which associations are governed under MCIOA (or “the

Minnesota Communit y Living

Act”). MCIOA is located in section 515B of the Minnesota Statutes. Minn. Stat. §515B1.102 provides the gritty details on which associations are governed by the Act, which ones are not and if only certain sections of the Act apply. Although there are exceptions, the easiest way to break down the governed/ not governed by MCIOA is with these simple rules: 1. If the association was created on or after June 1, 1994, it is, by default, governed under MCIOA; 2. If the association is a condominium, and not a townhome or a single family association, it is, by default, governed under MCIOA regardless of when it was created; 3. If the association is a single family or a townhome association and it was created before June 1, 1994, it is NOT governed by MCIOA unless the association votes to amend its declaration and “opt-in” to MCIOA. Again, as with all rules, there are exceptions. However, these three rules cover most associations in Minnesota. Here are some examples to show how the rules play out in more practical terms: • A condominium association that was created in 1978 is governed by the Act. (See Rule #2) • A townhome association created in 1991 is not governed by the Act unless it has taken specific actions to amend its declaration for the purpose of opting-in to the Act. (See Rules #3) Whether your association is or is not governed by MCIOA, keep in mind that all associations are required to comply with the Minnesota Nonprofit Corporation Act, which is found at Minn. Stat. §317A. These statutes provide details on running a conforming nonprofit corporation in Minnesota and must be followed.

Nigel H. Mendez, Esq., Carlson & Associates, Ltd.

“I heard that my association has to register with the state each year. How do I do that?” As I stated above, associations in Minnesota are nonprofit corporations. They are required to file an annual corporate renewal with the Secretary of State. There is no charge for filing the renewal and it is very simple to complete. The one page form can be submitted online via the Secretary of State (SOS) website or can be printed and mailed in to the SOS. The renewal process ensures that the State has current contact information for the association. Failure to file the annual renewal will subject the association be being involuntarily dissolved, thereby losing its nonprofit status. Should this happen, an association can retroactively reinstate its corporate existence by simply filing the annual renewal form. To check the status of your association’s standing with the State, please visit http://mblsportal. sos.state.mn.us/ and enter your association name. If your association is not found by this initial search, click on the “Advance Options” link and select “inactive” and re-run your search. If you are inactive, the website has a link to the form that should be completed and returned as soon as possible. To have a question answered in a future article, please email it to me at nmendez@carlsonassoc. com with the subject line of “Ask the Attorney.” While I can’t promise that all questions will be answered, I will do my best to include questions that have a broad appeal. Questions will also be answered by other attorneys practicing in this area of law. The answers are intended to give the reader a good understanding of the issue raised by the question but are not a substitute for acquiring an opinion from your legal counsel.

Calendar

Index

2012 April

CAVL: Association Governing Documents

April 18, 2012, 5:45 - 7:45 pm AAA Minneapolis $15 for members (early); $25 for members (regular); $30 for nonmembers (early); $40 for nonmembers (regular)

features

Managers Seminar

May 15, 2012, 11:30 am - 1:30 pm Bloomington DoubleTree Hotel $35 for members (early); $45 for members (regular); $50 for nonmembers

Transition from Declarant Control

2012 CAI-MN Vision Awards

June 7, 2012, 6:00 - 9:00 pm International Market Square $45 for members (early); $55 for members (regular); $65 for nonmembers

By Jonathan Edin

By Michael D. Klemm

4 Ask the Attorney

8 Pavement Maintenance

By Mitchell H. Frumkin

By Nigel H. Mendez

13 Self-Management Series

12 Neighborhood Watch Programs –

From Community Associations Institute

2012 Annual Partners

A Message from CAI’s CEO

15 Spring Training: Community Policies

June

3 President’s Message

7 Association Turnover: Making the

May

series

By Gene Sullivan

17 We Did it Ourselves…

By Steve Hoogenakker

18 Reserve Software – What You Do and

Don’t Get

By John P. Poehlmann

Register online at www.cai-mn.com For more information regarding an event, call the office at 651.203.7250 or visit the CAI-MN website. Online registration is available at www.cai-mn.com.

Published by Community Associations Institute — Minnesota Chapter, copyright 2012. All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Minnesota Community Living or CAI–Minnesota Chapter. The information contained within should not be construed as a recommendation for any course of action regarding financial, legal, accounting, or other professional services by the CAI–Minnesota Chapter, or by Minnesota Community Living, or its authors. Articles, letters to the editor, and advertising may be sent to Chapter Staff Editor Jane Duntley at janeyd@cai-mn.com, or at CAI–Minnesota Chapter, 1000 Westgate Dr., Suite 252, St. Paul, MN 55114.

By Joel Starks

Platinum Gassen Companies Gittleman Management Hellmuth & Johnson Sela Roofing & Remodeling Xtreme Exteriors Gold Complete Building Solutions, LLC Silver All Ways Drains Carlson & Associates Community Advantage Community Association Banc/ CondoCerts Hammargren & Meyer PA Jeffrey Mayhew Agency, Inc. Levin & Edin Omega Management Sharper Management Thomsen & Nybeck Tru Seal America, LLC Bronze American Building Contractors Construct-All Corporation Michael P. Mullen, CPA, PLLC Schoenfelder Painting SERVPRO of Brooklyn Park/Champlin

[ ADS Index ] of Advertisers All Ways Drains................................................ 16 American Family Insurance – Jeff Mayhew.... 11 APMC – Association Property Management Company ....................................................... 3 CA Banc/CondoCerts...................................... 11 Carlson & Associates, Ltd .............................. 11 Community Advantage................................... 16 Complete Building Solutions ........................ 15 Construct-All Corporation ............................. 13 Final Coat Painting.......................................... 11 Gassen Companies.......................................... 10 Giertsen Company of MN............................... 15

Gittleman Management.................................... 5 Gopher State Seal Coating ............................ 11 Hammargren & Meyer, P.A. ............................ 16 Hellmuth & Johnson, PLLC......................... 2, 14 Levin & Edin..................................................... 14 LS West............................................................... 2 MN Roadways ................................................. 13 Omega Management, Inc............................... 12 Plehal Blacktopping, Inc. ................................. 4 Reserve Advisors.............................................. 16 Reserve Consulting ......................................... 16 Restoration Technologies ................................ 2

Russo Consulting, Inc. ...................................... 3 Sela Roofing ...................................................... 9 Sharper Management .................................... 14 Strobel & Hanson ........................................... 14 Thomsen & Nybeck......................................... 15 TruSeal America ........................................ 16, 20 Warner’s Outdoor Solutions........................... 14 Xtreme Exteriors.............................................. 19

March | April 2012

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Minnesota Communit y Living

C O M M U N I T Y A S S O C I AT I O N M A N A G E M E N T

Association Turnover: Making the Transition from Declarant Control

By Michael D. Klemm, Dougherty, Molenda, Solfest, Hills & Bauer P.A.

ne of the most important stages in the development and operation of a community association is the transfer of control from the declarant to the unit owners, commonly known as “turnover.” This article provides an overview of many issues associated with turnover under Minnesota Statutes Chapter 515B, the Minnesota Common Interest Ownership Act (MCIOA). Typically, declarations provide for a period of declarant control of the association, during which the declarant may appoint and remove the officers and directors of the association. This gives the declarant control over the association, because the board of directors has broad authority to carry out and enforce the governing documents and statutes and to act on behalf of the association. However, during the period of declarant control, the declarant and any of its representatives who are acting as officers or directors of the association must cause the association to be operated and administered in accordance with its governing documents and applicable law, comply with fiduciary obligations and obligations of good faith, cause the association’s funds to be maintained in separate bank accounts solely in the association’s name, and maintain complete and accurate records. The period of declarant control terminates upon the earliest of the following events: (i) five years after the date of the first conveyance of a unit to an owner other than a declarant in the case of a flexible common interest community (one that is subject to the declarant’s right to add additional real estate) or three years in the case of any other common interest community, (ii) the declarant’s voluntary surrender of control by giving written notice to the unit owners as provided in MCIOA, or (iii) the conveyance of 75 percent of the units to unit owners other than a declarant. MCIOA requires the board appointed by the declarant to cause a meeting to be called and held within 60 days after termination of the period of declarant control, for the purpose

of the unit owners, including the declarant, appointing or electing a board of directors. This is commonly known as a “turnover meeting.” If the board fails or refuses to cause a turnover meeting to be called, then the unit owners other than a declarant and its affiliates may cause the meeting to be called pursuant to the statute under which the association was created (typically the Minnesota Nonprofit Corporations Act), and the declarant and its affiliates will be deemed to be present at such meeting for purposes of establishing a quorum even if they do not attend the meeting. After the turnover meeting, the declarant must deliver to the board elected by the unit owners exclusive control of all funds of the association, all contracts and agreements that are binding on the association, all association records, copies of all CIC plats, personal property owned or represented to be owned by the association, assignments of third-party warranties relating to common element improvements or other improvements the association is obliged to maintain, repair, or replace, if not in the name of the association, and, to the extent they are in the control or possession of the declarant, copies of all plans and specifications relating to buildings and related improvements which are part of the common elements, and operating manuals and warranty materials for any equipment or personal property used in the operation of the common interest community. The declarant has a continuing obligation to turn over additional new or changed items in its possession or control. However, the declarant is not obligated to assign any third-party warranty if assignment is prohibited by the warranty or applicable law or if assignment would prevent the declarant from enforcing the warranty. After termination of the period of declarant control, the declarant is obligated to make up any operating deficit resulting from an alternative common expense plan that reduced the declarant’s liability for common expenses. The applicable requirements and procedures for CICs created before August 1, 2010, are stated in Minn. Stat. § 515B.3-115, and the applicable requirements and procedures for CICs created on or after August 1, 2010, are stated in Minn. Stat. § 515B.3-1151.

Under MCIOA, an alternative common expense plan cannot reduce the declarant’s liability for replacement reserves required by Minn. Stat. § 515B.3-114 (for fiscal years commencing before January 1, 2012) or Minn. Stat. § 515B.3-1141 (for fiscal years commencing on or after January 1, 2012). An association may have a claim against a declarant if the replacement reserves are underfunded or if the declarant did not pay the replacement reserves required for units owned by the declarant. Within two years after termination of the period of declarant control, the board elected by the unit owners may terminate various contracts, leases and licenses made during the period of declarant control, without penalty. The applicable requirements and procedures for CICs created before August 1, 2010, are specified in Minn. Stat. § 515B.3-105, and the applicable requirements and procedures for CICs created on or after August 1, 2010, are specified in Minn. Stat. § 515B.3-1051. Review of the association records and inspection of the property may reveal additional issues. For example, the declarant may have failed to complete improvements that the declarant is required to complete under express or implied warranties; a physical inspection of the property may reveal construction defects; or, in a planned community, the declarant may have failed to record a deed to convey the common elements to the association. Many of the issues addressed in this article, and other issues that may confront an association in connection with turnover, are time sensitive and may be subject to statutes of limitation or other deadlines. The information in this article is general information and does not constitute legal advice regarding action to be taken in any particular case, which may vary depending on the facts, governing documents and applicable statutes. An association should obtain advice from legal, accounting and other professionals promptly after turnover as necessary to timely address these issues. Minn. Stat. § 515B.3-103(c) (2011). Minn. Stat. § 515B.3-103(a) (2011). Minn. Stat. § 515B.3-120(a) (2011). Minn. Stat. § 515B.3-103(c), (f) (2011). Minn. Stat. § 515B.3-103(d)(1) (2011). Minn. Stat. § 515B.3-103(d)(3) (2011). Minn. Stat. § 515B.3-120(b) (2011).

March | April 2012

Pavement Maintenance By Mitchell H. Frumkin, PE, RS, CGP, President, Kipcon, Inc.

urt Vonnegut Jr. once said that it is a “flaw in the human character that everybody wants to build and nobody wants to do maintenance.” Although he spoke of more worldly topics, Vonnegut’s sentiment could not be more true for pavement. Properly maintaining pavement helps it reach its intended useful life and postpones the need for future remediation. In many cases, routine maintenance can suspend the need for community associations to uproot and repave entire roadways and parking lots.

and decreases the strength of its sub-grade or support system. As mentioned earlier, it is lack of support that causes most pavement damage and the problem is further exacerbated by seasonal freeze – thaw cycles.

All pavements, even those currently in the best of shape, require maintenance because expansion and contraction are year round stresses that continuously cause damage. Cracks, potholes and other types of visual distress are the evidence and end result of the pavement wear process that begins the moment construction ends.

Routine Professional Inspection: Keeping paved areas clean is a good start, but the most important task of proper pavement maintenance is routine inspection, which allows for the early detection and swift repair of minor defects. Small cracks and surface splintering are almost unnoticeable in their first stages, but typically develop into serious defects (such as alligator cracks, potholes and raveling) if not repaired promptly. For this reason, routine inspections of the pavement should be performed by qualified and experienced inspectors. For a community association, these inspections generally take place whenever a Reserve Study is performed.

Bituminous asphalt, otherwise known as roadway pavement, is made from a mix of aggregates and asphalt binder. It is a flexible structure, which will crack and eventually fail if not properly supported. Although lack of support is where most pavement problems begin, improper maintenance can be equally at fault for the accelerated deterioration and eventual failure of pavement. Minor issues such as cracking can turn into major problems if not maintained in a timely manner. Cleaning: Maintenance begins with keeping paved areas clean. In addition to making the community look neglected and feel unwelcoming, an unkempt pavement may also cause physical damage to a community’s roadways and parking lots. Like a sheet of sandpaper, loose gravel, clumps of dirt and broken glass can grate down the surface of pavement, substantially reducing its useful life. In addition, litter, fallen leaves and other items found in parking lots can clog runoff drains, causing back-up and water collection. Ponding is the kryptonite of pavement because water eats away the layers of the road

Many community associations hire street cleaners to regularly sweep their streets and parking lots. These companies use vacuum sweepers, backpack blowers and mechanical gutter brooms to clear debris from their parking lots and streets before pavement damage begins.

Regular inspections performed by professionals allow for timely detection, prompt repairs as well as the remediation of the root of the problem. In all cases of pavement distress, it is best to initially determine the cause or causes of the problem. Then repairs can be made, which will not only correct the damage, but will also prevent or delay the defect from happening again. Since water is the kryptonite of pavement, these inspections should include an evaluation of drainage patterns. Time and money for such maintenance are well spent because the same repairs will not have to be made over and over again. Pavement repairs should be made as quickly as possible so that the extent and expense of the damage is minimized.

Sealcoating: The most common type of maintenance performed by community associations is sealcoating, sometimes referred to as slurry sealing. Sealcoating asphalt is very similar to painting wood. It provides a new, aesthetically-pleasing look to the property and shields the pavement from its environment. A thin asphalt surface treatment made up of fine aggregate and mineral fillers, a fresh sealcoat gives paved areas a fresh, clean and spotless appearance. Sealcoating also improves the texture of the roadway, offering skid resistance and improved handling for drivers. In addition, slurry sealing treatments create an all-weather, long-lasting surface that is waterproof and sun protected. Like water, ultraviolet rays from the sun can cause pavement, to fail. Sunlight oxidizes the pavement causing the asphalt to become brittle and begin to ravel. Unprotected, those pavements will fall apart sooner rather than later. Crack Sealing: Another type of pavement remediation is crack or joint sealing. The first line of defense against water intrusion, crack sealing is a method of filling in pavement factures to plug the voids and minimize water infiltration. Pavement generally splits from the bottom and the fracture works its way to the surface. Once a break reaches the surface, the amount of water that can sink down to the base increases severely. If left alone, the crack will continue to widen, the sub-grade support will continue to weaken, and the pavement will eventually fail. The material used to seal cracks is heavier than the seal coating applications. Unlike fillers, which do not expand and contract with the movement of the pavements, crack sealer is a flexible rubberized asphalt that bonds to the crack walls and moves with the pavement. Preventing water intrusion helps to maintain the structural capacity of the pavement and limits future degradation. Some experts estimate that sealing pavement cracks will extend the pavement life by three to five years.

Pavement Maintenance continued on page 17 8

Minnesota Communit y Living

March | April 2012

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March | April 2012

Neighborhood Watch Programs – A Message from CAI’s CEO From Community Associations Institute

he death of Trayvon Martin, a 17-year-old high school student in Stanford, Fla., is a vivid reminder that neighborhood watch programs, even with the best intentions, can trigger tragic results for families, residents and entire communities. “We know neighborhood watch programs can reduce crime and ease the fears of residents, but they also pose major risks when appropriate procedures aren’t followed,” says Thomas M. Skiba, CAE, chief executive officer of Community Associations Institute (CAI). “It’s essential that those who organize and lead watch programs work with local law enforcement authorities to ensure that all volunteers understand and accept the extent and limitations of their responsibilities.” Skiba said it’s not CAI’s place to pass judgment on the criminality of the events in Florida or the state’s stand-your-ground law. “But the horrible fact remains that family and friends now grieve for a young man,” he says. “As the father of a 17-yearold son, I can’t begin to imagine the horror facing Trayvon’s family. If nothing else, the regrettable confrontation that night reminds us that such programs must be carefully implemented and rigorously monitored.” Skiba urges all community associations— even when a watch program isn’t managed by the association—to review procedures and to do everything possible to prevent confrontations that should be handled by police. For communities considering neighborhood watch programs, Skiba offers the following advice: • Contact the local police department for start-up support, guidance and training. Volunteers who skip this critical step can find themselves on the wrong side of the law—or worse.

• Seek the advice of an attorney with • • •

expertise in community association law. Create processes for recruiting only responsible volunteers who will follow all procedures. Develop methods, such as websites and e-mail, to keep volunteers and residents informed. Continuously reinforce all procedures—including do-not-engage rules for resident volunteers.

“Community associations should proceed very carefully before they decide to create or manage a neighborhood watch program or before they even formally endorse a watch program organized by residents,” Skiba says. He says association boards considering this issue need to ask three fundamental questions: • What is the extent of the association’s powers under its governing documents? • Does the association have the authority to establish a community watch? • What are the legal and ethical liabilities of an association-sponsored watch program? “These questions should be answered— definitively—before board members take formal action to establish a watch program or even lend support to such an initiative,” Skiba concludes. “Communities that can’t or won’t answer these questions should drop the idea altogether.”

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Minnesota Communit y Living

Self-Management Series

Self-Managed Association Boards: What Gives Way When a Board Does Not Know the Basics By Joel Starks, President, Sharper Management

n this series we are focusing on you, the board member, and the challenges you face each day when running your homeowners association. We are exploring the challenges of self-management and ways to work through them. This series will answer questions from readers. If you see something that seems common or you identify further challenges, email joel@sharpermanagement. com. I will add your comments and feedback as the year goes on. Board Members and Owners, Speak up! 1. Deferred maintenance: When should it be fixed, replaced or maintained? 2. Trusting a board: Get involved and go to meetings. 3. Contracts: Not just for their sake but yours as well. 4. Board fraud: Boards make mistakes, but what if? 5. Agendas and announcements: Where do I find our info about meetings?

Deferred maintenance: When should it be fixed, replaced or maintained? Wikipedia defines deferred maintenance as “the practice of postponing maintenance activities such as repairs on both real property (i.e. infrastructure) and personal property in order to save costs, meet budget funding levels, or realign available budget monies.” Deferred maintenance is one of the biggest issues facing self-managed boards. With the economy tight, most boards think they should just hunker down until things get better and protect what they have. Instead, one year leads to two and three and soon the maintenance costs that once were manageable have become uncontrollable and almost debilitating. Now the association has both a maintenance issue and a property value issue. For example, let’s say a homeowners association has masonite siding that is rotting. Instead of replacing the siding, the HOA decides to paint the rotted siding. But there may be underlying issues like rotted fiber board, insulation and sheetrock. Water may be a couple inches away from entering your home at any time. “A board should never shy away from taking on one piece of a bigger project at a time,”

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says Greg Snow with Maverick Construction. Each year a board puts off replacing masonite siding for one unit brings them closer to the time in which they will be forced to replace siding for all units. Work towards a rotating maintenance schedule. Each year, paint a few units, refresh a few landscapes, and do some brush clear-cut around the perimeter; every bit helps. You may think it is too late to get on a schedule, but think again. Most self-managed boards lack the guidance of experts or the partners that are willing to take the time to consult and not sell. If you feel overwhelmed, take a step back and form a committee to take some of the research time burden off of you. Knowing the difference between maintenance and replacement will have a key effect on your property appearance, attractiveness to interested buyers and homeowner pride. In addition, it hits the bottom line at the time you are trying to sell. That value is something you don’t take lightly. If you split the responsibility among other owners and board members, you will have a better chance of avoiding deferred maintenance and having a plan for years to come. It’s not too late!

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March | April 2012

Minnesota Communit y Living

Spring Training: Community Policies By Gene Sullivan, New Concepts Management

With so much on a Volunteer Board’s plate, it can be easy to assume that once you have decided upon a course of action for any policy and procedure at the property, one can move on without having to give it much thought again. However, it makes good sense to review your polices on a yearly basis. What would some of those policies be?

•

warranty? Identify those items and the contractor(s) who did the work. Do they have an emergency number and contact to call when something fails? This allows you to call upon them to guarantee their work and ensures that those precious dollars of the association go further and on other needed issues. Have all preferred contractors been identified? It makes sense to have the proper protocol in place and work being accomplished by those who know the intricacies and eccentricities of the property in order to have work done in an efficient and cost effective manner. Does the Association have a policy in place for those situations where at first you don’t know whether the repair is a Homeowner or an Association issue? It is impossible to determine sometimes with afterhours and weekend calls; who is the responsible party for a matter until someone goes out to inspect the issue? When this occurs, is it the policy of the Association to pay for the initial discovery? Or is it the policy of the Association to say to Homeowners, “If we send someone out initially and a matter is found to be your responsibility, you will have to pay for that contractor and their time.” And if it is the latter of these two that is the Association’s policy, have you

reminded your homeowners of this on a regular basis so they are not surprised when they are charged for the call? When any Association Board works to clarify and communicate their community’s policies and procedures on a regular basis, they will begin to see the following benefits:

• Board Unity, because everyone is on

•

the same page. Veteran Board Members are reminded of proper protocol, while new Board Members go through a proper and thorough orientation. Decisive Action; time is not spent asking the question “what are we going to do?” Instead, the property manager is empowered to act on behalf of the Board’s wishes, allowing more, not less, to be accomplished. Happy Community, because everyone understands what is expected of one another and how things are accomplished.

Associations, like ball clubs, when they are running smoothly and professionally, become the type of organization that everyone wants to be identified with.

Ask any athlete and they will quickly tell you that a huge reason for their success is reviewing and practicing the fundamentals of the game, so when they are in that tough spot, they are able to quickly react and execute perfectly. It is this same commitment and discipline by both Board and Management that allows all Association Members to see their communities run smoothly.

• What work at the property is still under

here’s nothing like the baseball season opener – especially with our very own Minnesota Twins outside in their nearly new ball park. For most of us, we look upon a game that is made to look easy, not only because of the athleticism of the players, but because of the hard and grueling practices that take place before the season starts.

763.544.3355

763.544.3366

March | April 2012

Concrete – Asphalt – Seal Coating Peter Tjornhom Phone: 952-994-9029 www.trusealamerica.com

Call for Nominations To run for a position on the board of directors, please fill out the online candidate form at www.tieivote.com. For a username and password contact Kurtis Peterson at info@ theinspectorsofelection.com. You have the opportunity to add a picture of yourself to the statement. Candidate information will be available for the CAI-MN members to view prior to the official election. To complete the form or to view candidate information, go to www.tieivote.com and enter your username and password. To be included as a candidate the online form must be received no later than 5:00 p.m. on April 21, 2012. The information provided herein will be presented to the members exactly as provided to The Inspectors of Election (TIE). Election results will be presented at the CAIMN Annual Meeting on June 7, 2012 at the International Market Square.

Minnesota Communit y Living

Reserve Consultants, Inc. Association Property Services Specializing in RESERVE PLANS that are • Easy to Understand • Practical (Around 12 to 13 Pages) • Color Photos Included • Fee will be the Least Expensive Quoted John Russo has more than 20 Years Experience in Reserve Planning; Is the only Ph.D. Reserve Analyst in the Midwest. 952-944-7137 (Office) 952-935-9647 (Fax)

SMART & DECISIVE The Best Value in Construction Law for Community Associations

That’s what our clients tell us. At Hammargren & Meyer, we’re smart, decisive lawyers focused exclusively in the areas of law that we know best. For prompt responses and straightforward answers, call Hammargren & Meyer. (952) 844-9033 www.hammarlaw.com

We Did It Ourselves… by

ear with me, this will all tie out in the end.

Scene 1: It was November 4, 2011. My daughter was getting married the next day. In preparation for the father of the bride toast, I spent hours searching for the profound piece of advice I could give them for the rest of their lives. As I lay in bed with my laptop, I looked over at my sick wife. What had gotten us through 33 years of marriage? The answer wasn’t to be found with a fancy platitude. Looking at her, I settled on the thought of “When You’re Right, Shut Up!” It felt right. That was my toast. The lesson? Better to be quiet. Scene 2: My brother Mike always loved the saying “You Don’t Know what You Don’t Know,” reminding me that I can’t see the blind spots I have. It’s not what I know that’s the problem, it’s what I don’t know. The lesson? Others see your blind spots, learn from others. Scene 3: I love music. In a similar vein to blind spots, I think music has the most impact between the notes, when there is silence between eighth notes that build anticipation. It takes discipline for a musician not to fill in those quiet instances that drive the human ear to fill in. The lesson? Listen to what’s not said. Which brings me to the reason for this discussion today. You see, in leadership, it’s not always what is said, what is known or

Steve Hoogenakker, Natural Green Landscape Management

what is heard that brings about fundamental change. Many times it’s what’s not said. It’s not the note that’s played, it’s the note that’s not played. When you value the understated nature of bringing people together, it gives you the experience of the miracle of the human spirit. When you want to make changes, shouting orders will bring about quick, resentful change. The employee, like a rubber band, will bounce back with equal force at its earliest opportunity, the change undone with long-lasting resentment. Certainly leading by example is a great way to show people what is important. But if you’re the leader of a large organization, it’s hard to show someone leadership by planting trees, running the meetings or answering every customer call, so what’s the answer? It lies in principle. I firmly believe “When the Principle is understood, every decision is already made!” Get your principles right. Make sure they align with your people and your customers. I don’t mean with a cheesy wall sign that says “The Customer is Always Right!” I’m talking about an internal compass that says “People are all that’s important. Take care of your people (customers, vendors and employees) and the business will take care of itself.” I’m not saying that this principle will make you rich. It can, as I know, cost you a lot. When I talk about success, I talk about a lasting success. How do you measure it? In a P and L? A balance Sheet? YES! Of course, but consider that years after your last fiscal quarter ended, the money long spent, you’ll still be reaping the rewards of your actions towards others. Yes, finances are important, but they are quick to measure, quick to evaporate.

Scene 4: August 1, 1993; my motto was to spend money on capital equipment. That investment was MINE and I owned it. Big employee paychecks were a waste of money because they could walk out the door forever on a whim. On that day, I had a change of heart like the Grinch at Christmas. I decided that my biggest asset wasn’t a bunch of shiny skid loaders, but were in fact walking out the door every Friday, and I needed them to come back every Monday, and that was OK. What was equipment without good people; what were sales without honorable salespeople? The growth of my business exploded, and I was just along for the ride. This principle is not for the faint of heart. This principle has caused me to suffer epic failures and enjoy successes over the years. I enjoyed having others in front. I got more enjoyment out of watching other people learn and succeed. If I’ve conveyed my message, I hope you are hearing me say, “It’s not about me, it’s about others, and because it’s about others, my success is ensured!” Finally, here is my favorite saying of all time. It was written long ago by Lao Tzu, yet its meaning is timeless. “A leader is best when people barely know he exists, not so good when people obey and acclaim him, worse when they despise him. But of a good leader who talks little when his work is done, his aim fulfilled, they will say, we did it ourselves.”

Pavement Maintenance continued from page 8 Clearly, the less that pavement is maintained, the more it will cost the association in future repairs. With this in mind, communities should keep their roadways clean, frequently inspect the paved areas for wear and tear, and remediate even minor problems quickly to prevent further damage.

By examining their roadways on a consistent basis, boards will be able to take note of cracks and pot holes and have them corrected before they become larger and more problematic. Remedial maintenance, such as sealcoating and crack filling, also help black tops endure years of being driven and walked upon.

Overall, proper pavement maintenance prevents the need to rebuild and although building may be more fun, maintenance is definitely more cost-effective.

March | April 2012

Reserve Software – What You Do and Don’t Get By John P. Poehlmann, Reserve Advisors Inc

hen thinking about funding for future capital projects such as re-roofing or replacing asphalt, Association Board members often ask the $64,000 question: How much should we budget for future capital projects? A Reserve Study is the only way to determine appropriate reserve contributions to ensure that capital projects can be conducted without the fear of special assessments. A Reserve Study is a physical analysis of the association’s common property (minimum 30 year forecast) and a financial analysis that determines appropriate homeowner contributions into a reserve fund to conduct capital projects when necessary. Determining appropriate reserve contributions is no easy task. Professional Reserve Studies have been available to community associations for only about the last 15 years. The Association of Professional Reserve Analysts and CAI have issued standards and a designation program for Reserve Study providers. An alternative to hiring a professional reserve consultant became available in recent years: reserve software. Software has been developed by a number of firms and marketed as a low cost alternative to using specialists. Easily, the biggest advantage to using reserve software is the price, while investing in a professional Reserve Study offers many other advantages. The benefits of hiring a reserve professional include accuracy, independent third party opinion, consistency, reliability, and saving the Board valuable time in conducting the Reserve Study. How would one conduct a Reserve Study using purchased software? The Board member or association representative who is going to conduct the Reserve Study internally with purchased software often gets more work than he anticipated. The individual must first identify all the common elements that the Board is responsible for maintaining such as exterior walls, roofs, asphalt pavement, clubhouse flooring and wall coverings, mechanical systems such as boilers and cooling towers, retaining walls, pool, sidewalks, to 18

Minnesota Communit y Living

name a few. Associations generally will maintain anywhere from 10 common elements up to 100 elements that should be a part of the Reserve Study. The second step is to quantify the common elements. This step includes taking measurements such as square feet of roofing, exterior walls (excluding windows), pavement, sidewalks, linear feet of curbing, or number of exterior lights. The association should make sure that those conducting the measurements are measuring in a consistent way. Next is the condition analysis of the common elements – determining the remaining useful life or “how much longer before we need to repair or replace.” This analysis plays a very large role in determining the appropriate amount of reserve contributions by the homeowners. This is an area where the expertise of a specialist is extremely valuable. The individual who conducts the study with software should consider whether the development was constructed in phases and whether it makes sense to consider replacements in a phased manner or to project partial replacements. This is also where the individual must make judgment calls about such items as asphalt pavement or sidewalk deterioration. Issues one should consider include the soil conditions beneath the pavement, likelihood of tree roots displacing sections of sidewalk, etc., and the percent of the total square foot area that will require replacement earlier than is typical. Should the association conduct replacements earlier than necessary due to aesthetics? Many Boards view lobbies and entry signage as reflective of the image of the association. In order to maintain a positive image, refurbishing and redecorating are conducted for aesthetic purposes rather than wear and tear. Additionally, specialists can often make engineering recommendations based on success stories observed at other associations that prolong the lives of the common elements and reduce the long term costs to the association. Historical information, maintenance contracts and association records, if available, are helpful in identifying patterns of repairs and

replacements. Another method of obtaining remaining useful life information is by asking qualified contractors. The individual should obtain a minimum of three bids. It is also recommended to check references of the bidders to ensure the level of quality that is consistent with the Association’s long range goals and objectives. Some software programs will provide replacement costs of most common elements under normal conditions and average costs. These replacement costs are general in nature and do not consider factors that may reduce remaining lives such as extreme weather conditions like several consecutive harsh winters, poor workmanship, construction defects, lack of aggressive maintenance by previous boards, etc. Does the Board want to replace carpet with $20/yd. or $60/yd. carpet? Upon completion of the physical analysis (30 year forecast of capital projects), one must then conduct the financial analysis to establish a funding plan. The individual should consider the current reserve balance, the rate of return on reserves invested, the inflation rate, and the anticipated future capital expenditures. Some software programs will include the construction inflation rate to project future costs while others ask the user to enter the U.S. inflation rate. The software enables the individual to conduct various scenarios to help determine a level of reserve funding that is consistent with the Board’s long term objectives. Life is full of tradeoffs and the issue of software vs. investing in a Reserve Study conducted by a reserve professional is a great example of tradeoffs. A professional Reserve Study by a specialist offers better accuracy in condition assessment, an independent third party expert opinion, reduction of claims of financial mismanagement, compliance with state legislation and the AICPA (American Institute of Certified Public Accountants) Audit Guide for associations, and valuable time savings every year in budget meetings, and peace of mind for the homeowners.

March | April 2012