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Commons

Third Quarter 2013

g e o r g i a

A Publication of Community Associations Institute of Georgia, Inc.

Inside:

HOT & COLD

Protecting Your Landscape from Extremes!

TURNOVERS

Don’t Get Stuck in Transition

CONDENSATION Common Causes

NEGOTIATIONS

Know When to Hold Your Feet to the Fire and When to Walk Away

...and more!

© istockphoto.com

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Congratulations...

QUARTERLY QUOTE

“If it doesn’t challenge you, it doesn’t change you.”

Congratulations to Michele Richards, CMCA, AMS, PCAM of Community Management Associates for receiving her PCAM designation, which is the highest level designation a community association manager can receive. 2 0 1 3 EDUCATION Colby Shear, CMCA, AMS, PCAM, Co-Chair Homeside Properties Julie Stephens, CMCA, AMS, Co-Chair Exclusive Association Management Sandy Depa, CMCA, AMS, PCAM, Board Liaison Kent Atzinger, CMCA, AMS Access Management Jane Beasley, CMCA, AMS, PCAM Homeside Properties Glenda Bromer CMCA, AMS Homeowner Management Services Mike Crew, CMCA, PCAM Homeowner Management Services John Farrell, Esq. Lazega & Johanson LLC Mickel Graham, PCAM Union Bank Ron Jockers, CMCA, AMS, PCAM Homeowner Management Services Dee Neighbors, CMCA, AMS Parkside Management Tamalla Mallet, CMCA Community Club Management Michael Tisma GW & Associates Merrill Walker, CMCA, AMS, PCAM Advantage Community Management FUNDRAISING Barry Coleman, Chair Association Capital Bank Sara Hicks, Board Liaison Parker Young Construction Jessica Artt ValleyCrest Ken Baggs, CMCA, AMS, PCAM Homeside Properties Jeff Creecy Greenwood Group Veronica Cuellar Horizon Painting & Renovations Mike Curtis Union Bank Dana Tucker Davis, Esq. Tucker Davis Law Bryan Doran Unlimited Landscaping Ashley Fullenkamp Disaster One Richard Gailey American Pool Service of Georgia Derek Johanson, Esq. Lazega & Johanson LLC Tracy Lanard Community Management Associates Tracy Lettsome, Esq. Lipshutz, Greenblatt & King, P.C. Mary Masi Community Management Associates Peter Petropoulos Unlimited Landscaping Michele Richards, CMCA, AMS, PCAM Community Management Associates Sean Rucker, CMCA, AMS, PCAM Community Management Associates Ryan Stoll First Citizens Bank Mike Tolley Tolley Community Management Miye Yi, Esq. Lazega & Johanson LLC GOLF Shaune Huysamen, CMCA, Co-Chair Homeowner Management Services Kelley Moon, Co-Chair EPIC Response Ashlie Bisig, Board Liaison SERVPRO of North Fulton Neal Bach, CPA Bach, James, Mansour & Co. Kevin Carnes Arborguard Tree Specialists Mike Dangler Nature Scapes Jay Fraiser, Esq. Lazega & Johanson, LLC Kim Gaddis Gaddis & Lanier, LLC

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Gary Kart Kart’s Landscape Mark Moore, Esq. Lazega & Johanson, LLC Rob Stein, Esq. Weissman, Nowack, Curry & Wilco, P.C. Mindy Waitsman, Esq. Moore & Reese, LLC Stephen A. Winter, Esq. Winter Capriola Zenner, LLC Steven M. Winter, Esq. Winter Capriola Zenner, LLC Marc Wise Sweetwater Pool Service GREEN COMMITTEE Barry George, Chair Crabapple Landscapexperts Sean Ruthven, CMCA, AMS, Board Liaison Access Management Kimberly Addison PDQ Services Michael Anthony Gray Contracting Christy Barber, CMCA, AMS, PCAM Homeside Properties Emily Cantrelle Weissman, Nowack, Curry & Wilco, P.C. Evan Carpenter Aquascape Environmental Carlyle Douglas First Citizens Bank Leslie Fellows, CMCA Homeside Properties Mark Greer Tower Roofing Rob Lafayette Lueder, Larkin & Hunter, LLC Chuck Negas Northwest Exterminating Dick Patterson Team Pest USA Paul Slovisky Aquascape Environmental Terrence Spires Team Pest USA Brandon Thomas Russell Landscape Group Bekke White, CMCA Union Bank LEGISLATIVE ACTION Julie Howard, Esq., Chair Weissman, Nowack, Curry & Wilco, P.C. Floyd Dickens, Esq., Board Liaison Gaddis & Lanier, LLC Sally Butler-Lewis Insurance Marketing Group, LLC Lanier Coulter, Esq. The Coulter Law Firm, LLC Mike Crew, CMCA, PCAM Homeowner Management Services Celia Ebert, CPM Parkside Management Wayne Forrester Timbers of Vinings Dennis Hoffman, CMCA, PCAM Community Management Associates Tim Huffman, CMCA, AMS, PCAM Colony House Condominiums Brendan Hunter, Esq. Lueder, Larkin & Hunter, LLC Randy Lipshutz, Esq. Lipshutz Greenblatt LLC MAGAZINE David Hill, CMCA, AMS, PCAM, Chair Access Management Anne Melanson, Board Liaison Sutton Pines Condominiums Faith Brown Tower Roofing Gary Caruso, PE, RS Criterium-Caruso Engineers Lee Cope Wiss, Janney, Elstner Associates Amy Davidson Aquascape Environmental Rebecca Drube, Esq. Weissman, Nowack, Curry & Wilco, P.C.

— Fred Devito

C O M M I T T E E S

Stacy Hanley, Esq. Lazega & Johanson LLC Christopher Hartzog First Citizens Bank Laura Horlock, Esq. Pankey & Horlock, LLC Pam Irwin, CMCA, PCAM Community Management Associates Joe Larkin, Esq. Lueder Larkin & Hunter, LLC Michael Leavey, Esq. Dorough & Dorough, LLC Marilyn Ratzel, Esq. Lazega & Johanson LLC RC Shanks, CMCA, AMS, PCAM GW & Associates Lisa Simmons Weibel Beacon Management Services Whitney Stuckart Nature Scapes Teresa Womack Northwest Exterminating MEMBERSHIP Kevin Carnes, Chair Arborguard Tree Specialists Dale Pendergraft, Board Liaison P3 Painting & Renovations Erin Byers Silverleaf Management Group Tracy Chambers Daniel Corporation Russell Estey RooterPLUS! Chris Goss Access Management Stacy Hanley Lazega & Johanson LLC Sarah Jockers GW & Associates Tracy Lanard Community Management Associates Chuck Negas Northwest Exterminating Ashley Pafford Community One Associates Ben Rosenquist Blueprinting Painting & Renovations Dawn Shaddix Northwest Exterminating Beth Todd Russell Landscape Group Teresa Womack Northwest Exterminating PROGRAMS Jamie Platt Lyons, Esq., Chair Lazega & Johanson LLC Scott Douglas, Board Liaison Community Funding Corporation Tom Bartolozzi Taylor English Duma Stephen Connor Community Management Group Jeff Creecy Greenwood Group Mike Crew, CMCA, AMS, PCAM Homeowner Management Services Lisa Fuerst, Esq. Pankey & Horlock, LLC Beryl Grall-Petty Piedmond Management Dan Henning, CMCA, AMS, PCAM Community Management Associates Tim Huffman, CMCA, AMS, PCAM Colony House Condos Clarence Lau, Esq. Winter Capriola Zenner, LLC Jason LoMonaco, Esq. Weissman, Nowack, Curry & Wilco, P.C. Sarah Pritchard, Esq. Lazega & Johanson LLC Louis Rosas Home Asset Protection Services Sheri Stebbins 4 Seasons Landscape Rob Stein, Esq. Weissman, Nowack, Curry & Wilco, P.C.’

TRADESHOW Ashley Fullenkamp, Chair DisasterOne Sandy Depa, CMCA, AMS, PCAM, Co-Board Liaison Homeowner Management Services Ashlie Bisig, Co-Board Liaison SERVPRO of North Fulton Dotty Bonds, CMCA, AMS Lake Arrowhead Resort Emily Cantrelle Weissman, Nowack, Curry & Wilco, P.C. Kim Coomer, CMCA, AMS Access Management Andrea Evans All Pro Pest Services Laura Guilmette Unique Environmental Kenneth Hair Access Management Tracy Henson Access Management Erin O’Connell, Esq. Dorough & Dorough, LLC Crystal Pelkey Access Management Michelle Riley First Citizens Bank Teddy Russell Russell Landscape Group Lana Shelton Lazega & Johanson LLC Sheri Stebbins 4 Seasons Landscape Bekke White, CMCA Union Bank PUBLIC RELATIONS Amy Bray, Esq., Co-Chair Andersen, Tate & Carr, P.C. Lisa Turner, CMCA, AMS, PCAM, Co-Chair Silverleaf Management Group Laura Lazar, CMCA, AMS, PCAM, Co-Board Liaison Parkside Management Anne Melanson, Co-Board Liaison Sutton Pines Condominiums Leisa Ballew Association Management Advisory Group Rick Barnes NatureScapes Alex Berkowitz ColorBurst Amy Bray, Esq. Andersen, Tate & Carr, P.C. Mike Curtis Union Bank Janet Druckett Ray Engineering Pat Hillen, CMCA, PCAM Promanage Communities, LLC Ron Jockers, CMCA, AMS, PCAM Homeowner Management Services Kellan Presley Elite Landscape Frank O’Brien Vinesyards of Kennesaw Courtney Steele, Esq. Weissman, Nowack, Curry & Wilco, P.C. Marc Thomes, Esq. Weissman, Nowack, Curry & Wilco, P.C. SOCIAL COMMITTEE Darren Thurmond, CMCA, AMS, PCAM, Co-Chair Atlanta Community Services Terrence Spires, Co-Chair Team Pest USA Scott Douglas, Co-Board Liaison Community Funding Corporation, Sara Hicks, Co-Board Liaison Parker Young Construction Jessica Artt ValleyCrest Hollie Battle, CMCA Community Management Associates Skip Breeden, Esq. Lueder, Larkin & Hunter, LLC Elina Brim, Esq. Lueder, Larkin & Hunter, LLC

Eleanor Burris, CMCA Homeowner Management Services Veronica Cuellar Horizon Painting & Renovations Dean Donald, CMCA, AMS, PCAM Bayview Community Services Derry Duncan Unlimited Landscaping Amanda Evans, CMCA Community Management Associates Ashley Fullenkamp Disaster One Billy Gray Gray Contracting Gary Griffin, CMCA, AMS, PCAM GW & Associates Eric Henning, CMCA, AMS, PCAM Community Management Associates Kathy Kendrick American Disposal Tamalla Mallet, CMCA Community Club Management Lindsey Malone Access Management Group Jessica MacAllister Lazega & Johanson LLC Cal McShan Sentry Management Michael Sedacca P3 Painting & Renovations Dawn Shaddix Northwest Exterminating Jodi Vasquez, CMCA Community One Associates Lisa Warren Weissman, Nowack, Curry & Wilco, P.C. Bill Wetter, CPM Team Management Chaya Woodcox First Citizens Bank TENNIS COMMITTEE Jennifer Hardy, Co-Chair Gibson Landscape Billy Gray, Co-Chair Gray Contracting Jannette Shockley, Esq., Co-Chair Lazega & Johanson LLC Sandy Depa, CMCA, AMS, PCAM, Board Liaison Homeowner Management Services Marian Adeimy, Esq. Andersen, Tate & Carr, P.C. Jonathan Benator, Esq., Weissman, Nowack, Curry & Wilco, P.C. Dan Crossland Phoenix General Contracting Amy Davidson Aquascapes Environmental Joe Dreher Dreher Insurance Becca Drews Homeowner Management Services Barbara Graves Ray Engineering Cindy Hodge, Esq. Lueder, Larkin & Hunter, LLC Shaune Huysamen, CMCA Homeowner Management Services Kerrie Napoli Taylor Commercial Brian Praver First Citizens Bank Tammy Quinn, CMCA, AMS Heritage Property Management Services Inc.

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

A Letter from the Chapter President

Georgia Chapter of CAI

2013 PRECIOUS METALS SPONSORS PLATINUM

“One of the major challenges we face in the community association industry is managing differing homeowner expectations.” Jay Lazega, Esq.

I

t’s July, and it seems like everyone in Atlanta is feeling the heat, including the community association industry. As temperatures rise here in Georgia, so do the tempers of many homeowners. Increased homeowner participation in summer months due to swim teams, tennis teams, community socials and events, in combination with capital improvement projects and increased covenant enforcement bring a myriad of homeowner opinions to the table. One of the major challenges we face in the community association industry is managing differing homeowner expectations. A board of director’s inability to effectively accomplish this task can incite tempers, alienate homeowners and create a chilling effect in a community. Just like Georgia weather, homeowner temperaments can be fickle and unpredictable. This quarter’s issue of Georgia Commons highlights some of the ways in which boards and managers can manage these often unpredictable homeowner temperaments. Pam Irwin’s article in this issue, Hot Tempers and Cold Shoulders, touches on these concerns and identifies ways to navigate the delicate balance of homeowner opinions to effectively manage flared tempers and cold shoulders. Lisa Simmons’ article in this issue provides great ideas for ways in which communities can enforce covenants without isolating violating owners or creating negative perceptions of the association in the community. As many of us are all too aware, however, it is not just homeowner opinions that can be divisive. Sometimes, flared tempers and passive aggressive relationships within a community’s board of directors can make effectively running an association challenging, and leaving what should be simple dayto-day tasks of management unnecessarily arduous. In these instances, many board members feel trapped on a deadlocked and ineffective board, unsure about how to improve board relations or perhaps even whether to resign. Marilyn Ratzel’s article in this issue, If You Can’t Stand the Heat…, provides practical advice on these issues and helps board members determine when to take the heat of conflict and when to simply get out of the kitchen. On a final note, I hope each of your communities has a wonderful and safe summer. Remember to keep in mind that increased activity in your community often means increased risks of liability for your association. I encourage every association to make sure that the community is protected by making sure that there is sufficient insurance coverage in the event of an accident or incident on association property. As the old adage rings true, it is better to be safe than sorry. Jay Lazega, Esq. Georgia Chapter President Lazega & Johanson LLC jayl@ljlaw.com .

Mission Statement: The Georgia Chapter of CAI assists community associations and their service providers through educational programs, networking, legislative advocacy and publications. Vision Statement: To be the voice of community associations throughout the state of Georgia.

Access Management Group Austin Outdoor Community Association Mgmt., LLC Community Association Underwriters Community Club Management, Inc. Community Management Associates Dorough & Dorough, LLC EPIC Response GW & Associates, Inc. Homeowner Management Services, Inc. Lazega & Johanson LLC P3 Painting & Renovations Parker Young Construction Russell Landscape Group, Inc. SERVPRO of North Fulton Unlimited Landscape & Turf Mgmt., Inc. Weissman, Nowack, Curry & Wilco, P.C. Winter Capriola Zenner, LLC

 GOLD

Allsouth Renovations, Inc. American Painting & Renovations, Inc. Association Capital Bank Association Management Advisory Group Heritage Property Mgt. Services, Inc. Homeside Properties, Inc. Horizon Painting & Renovations, Inc. Ray Engineering, Inc.

SILVER Lueder, Larkin & Hunter, LLC AAA Painting & Staining Advantage Pool Management Services, Inc. McCreary Realty Mgmt., Inc. Moore & Reese, LLC Atlanta Community Services, Inc. Owens & Mitchell, PC Bayview Community Services, Inc. RooterPLUS! BB&T Association Services Shaben & Associates Community Club Cleaning, Inc. Sweetwater Pool Service, Inc. Community Management Group Taylor Commercial Crabapple LandscapEXPERTS Tower Roofing, Inc. Dynamo Pool Management Union Bank Exclusive Association Management

BRONZE 4 Seasons Landscape A Tow Atlanta Abacus Property Management, Inc. Addresses of Distinction Advantage Community Management Affinity Pools Alexander Termite & Pest Control, Inc. Andersen, Tate, & Carr, P.C. Arborguard Tree Specialists, Inc. Bach, James, Mansour & Co., P.C. Blueprint Painting & Renovations, LLC Capitol Community Management CertaPro Painters Color Burst Community Association Banc Construction Solutions of Georgia, LLC The Coulter Firm LLC Criterium-Caruso Engineers Davis Landscape

FirstService Residential Gaddis & Lanier, LLC Georgia Community Management Greenwood Group Insurance Marketing Group, LLC Jowers & Company, Inc. Lipshutz Greenblatt LLC Marquis Management Meridian Restoration, Inc. NatureScapes Neighborhood Management Associates Northwest Exterminating Pankey & Horlock, LLC Sears Pool Management Silverleaf Management Group, LLC Stillwater Pool Management Team Pest USA zumBrunnen, Inc.

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Georgia Commons • Second Quarter 2013

Hot & Cold:

Protecting Your Landscape from Extremes! By Rick Barnes NatureScapes

I

t may seem strange at first to think in terms of protecting our landscapes: usually we conceptualize the landscape as a protective, nurturing environment for ourselves and our property. Trees help us heat our buildings in the winter because they shed their leaves to allow sunlight to moderate building temperatures. Those same trees and turf areas provide a cooling effect when extreme summer heat is present. Lawn areas and ornamental plantings stabilize the soil to prevent erosion of soils, and certain plants moderate the adverse effects of drainage problems. Extremes of any description — hot and cold, dry and wet, wind, storm, lightning — can work to weaken and destroy those elements of the outdoor environment that make our properties so colorful, pleasant, and protective of our investment in property. As a matter of fact, while our landscapes are fairly resilient to any of these extremes, it is the wide swing from one to another that can cause the most damage. So, what can we do to protect our landscapes from extreme hot and cold, or other radical shifts? The predominant weather patterns during the summer of 2013 provide a perfect example of how little control we actually have over the extremes that Mother Nature can bring to bear. A simple change in the jet steam, with a southerly “dip” in wind patterns, has triggered record heat and deadly wildfires in the western U.S., and excessive rainfall and

flooding in the east. Powerlessness notwithstanding, there are things that can be done to moderate the extremes: Extreme Hot: Last summer, temperatures exceeded 100 degrees F during the worst of the heat wave. Plants have built-in cooling systems that can protect them from short stretches of high temperatures, but adequate hydration is required. When extreme hot is predicted, properly irrigate the landscape to allow for these cooling systems to work and to minimize the ravages of extreme hot. Extreme Cold: Adequate hydration is exactly the same prescription for extreme cold. In the early 1980’s, a “Christmas Freeze” resulted in temperatures that dropped to 0 degrees F in Atlanta! This extreme cold came at the end of an extremely dry fall, resulting in plants that were not well hydrated. These conditions were devastating for many common ornamental plants, such as Camellias and Crape myrtles, that are near the northern extent of their hardiness range in Atlanta. As a result, many such plants were killed down to the ground. Proper irrigation would likely have moderated the devastating effects. Extreme Water (Too Little-Drought): While the average annual rainfall in our area over the past 30 years is nearly 50 inches, we have fallen short of that amount for 10 of the past 15 years*. As with extreme heat, proper irrigation is the key when we endure

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

drought periods. The simplest and best way to water imitates our average rainfall of 1 inch per week. Work with Mother Nature! If we get ½ inch of rain next week, then the plants only need enough extra water to make up the other half inch. Many of our water woes point back to the fact that we tend to over-water our landscapes! Extreme Water (Too Much-Flood): At this writing, the metropolitan Atlanta area is over 13 inches above normal rainfall for 2013. We have had more rainfall in the first 6 months of 2013 than we had in all of 2012*! While there is little that can be done about too much water, its presence allows us to identify drainage problems that can be corrected to facilitate extreme amounts of water and also helps us observe areas in the landscape that could benefit from plantings that mitigate the effects of excess H2O. Landscape Maturity: Extremely young and extremely old landscapes are ill-equipped to handle Hot and Cold, or other extremes. Young, vigorous landscapes can best dispel the ravages caused by extremes. Therefore, it makes sense to develop and implement long-range plans and to wisely invest in your outdoor environment each year so that a viable percentage of the landscape is in that adaptable stage of life. Watch the Prevailing Conditions — Act to Moderate Them! Keeping a watchful eye toward extremes such as Hot and Cold empowers us to apply these techniques as conditions dictate to minimize damage to our outdoor environments. In protecting our landscapes whenever we can from extremes, our landscapes are better able to protect our facilities and provide us with functional and nurturing outdoor environments. n

GEORGIA CHAPTER OF CAI

2013 BOARD OF DIRECTORS

*Source Cited: National Weather Service web site, weather.gov.

President............................................... Jay Lazega, Esq. Lazega & Johanson LLC Immediate Past President.......Laura Lazar, CMCA, AMS, PCAM Parkside Management President Elect..........................................Scott Douglas Community Funding Corporation Treasurer.............................................Richard Brumley The Glens at Mountainbrook Vice President..................................... Dale Pendergraft P3 Painting & Renovations Secretary................................................Anne Melanson Sutton Pines Condominiums Directors:

Ashlie Bisig SERVPRO of North Fulton Sandy Depa, CMCA, AMS, PCAM Homeowner Management Services Sara Hicks Parker Young Construction Sean Ruthven, CMCA, AMS Access Management Mindy Waitsman, Esq. Moore & Reese

Executive Director.......................................... Julie Jackson Georgia Chapter of CAI

Dorough & Dorough A T T O R N E Y S

A T

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Providing Exceptional Service No retainers...No fine print 160 Clairemont Avenue, Suite 650 Decatur, GA 30030-2534 Phone: 404-687-9977/Fax: 404-687-0011 www.dorough.com

Georgia Chapter of CAI PO Box 2943 Peachtree City, GA 30269 Tel (770) 736-7233 Fax (770) 736-7232 E-mail: juliejackson@earthlink.net

OUR MISSION: The Georgia Chapter of CAI is the voice of the community association industry in the state. Our purpose is to facilitate the professional creation and operation of community associations through the delivery of high quality education for our multidisciplinary membership. We are committed to building cohesion, integrity and respect.

■■■ The materials contained in this publication are designed to provide accurate, timely and authoritative information with regard to the subject matter covered. The opinions reflected herein are the opinion of the author and not necessarily that of CAI. Acceptance of an advertisement in Georgia Commons does not constitute approval or endorsement of the product or service by CAI. CAI-Georgia reserves the right to reject or edit any advertisements, articles, or items appearing in this publication.

■■■ To submit an article for publication in Georgia Commons, contact Julie Jackson at (770) 736-7233. 5

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Georgia Commons • Third Quarter 2013

HOA and Community Association Tax Returns:

Think you don’t need to file an annual tax return?

Think again! By Neal Bach, CPA Bach, James, Mansour & Company

W

hen meeting with a community association client (homeowner association, condo association, etc.), one of the first questions I ask is whether they’ve filed a tax return this year. Too often, the answer is no. Unfortunately, that’s the wrong answer. I bet that at least 35% of all HOAs and condo associations fail to file annual tax returns — especially selfmanaged communities.

All community associations need to file an annual tax return This is one of the most overlooked association responsibilities. Most board members think that since their associations are non-profit organizations, no tax returns need to be filed. That is not correct. For tax purposes, Georgia and the IRS treat community associations like corporations and require them to file federal and state tax returns. You may have to pay tax on net income not related to standard association activities. While requirements vary based on the filing criteria that you choose, here are some examples of income streams that are normally not taxed (exempt) and taxable. Association membership income is not taxable • HOA dues and assessments • Owner fines, like $25 for a pine straw violation • Interest on late payments as well as late fees • Resident clubhouse and facility rentals Net outside income is generally taxable • Bank account interest and dividends • Guest fees, such as a charge to non-resident for playing tennis or using the pool • Non-resident clubhouse or facility rentals, minus costs How do we file? Tax returns are due March 15th, or 75 days after the close of your tax year if your association is not on a calendar year basis. With an extension, you have up to six extra months to file. I won’t get into the details here, but there are two possible IRS forms to use – 1120-H or 1120 – depending on some specific requirements listed below. Your best option is to review your association’s situation with a qualified CPA. What if we’ve never filed a tax return? The sooner your association files back tax returns, the better. Just because previous boards may have failed to do this, that doesn’t absolve you of the responsibility. Technically, you need to file tax returns for every year that has been missed. Since you may not have records that far back, focus on where you do have the information first and at least get something filed as soon as possible. Here are some real examples of tax return filing challenges faced by community associations: • Association A had not filed tax returns for about ten years. They asked three CPAs what to do, but only one provided the right answer — Association A had to file ten back returns. Just filing a few is not enough. • Association B filed as a non-profit 501(c)(3) one year, then failed to file in subsequent years. Other than in rare exceptions, community associations

“Don’t be the Board member who got the IRS involved in your association...” are not considered non-profit organizations. Association B had to change their entity status with the IRS, re-file that return, and file all other back tax returns. • Association C was paying income tax when they didn’t have to. On the Federal return, they weren’t offsetting outside income with expenses, which artificially inflated income. Also, they were paying Georgia net worth tax, something that associations are exempt from paying. Fortunately, the mistake was caught, and they were able to file an amendment to get that money back. Choosing the right IRS form Form 1120-H is geared toward community associations, but under the IRS rules, a community association must satisfy these requirements to use it: • At least 60% of the association’s gross income consists of “exempt function income.” This includes membership dues, fees, or assessments of owners in the association. • At least 90% of the association’s expenses must consist of expenses to acquire, build, manage, maintain, or care for its property. • No private shareholder or individual can profit from the association’s net earnings except by acquiring, building, or managing association property, or by a rebate of excess membership fees. • At least 85 percent of the units are used by individuals for residential purposes. You can read complete details about Form 1120-H requirements by searching online for IRS Regulations section 528. IRS Code section 277 discusses the filing of form 1120. Individual community associations vs. master associations In some very large or mixed-use communities, the individual community and business associations roll up to a master association. The individual associations pay into the master association so the master association is also required to file an annual tax return. Don’t be the Board member who got the IRS involved in your association If you hire a CPA with community association experience, filing tax returns (even back returns in most cases) is a pretty straightforward process. Get caught up and make annual tax returns an agenda item for the first board meeting of every year. Please let me know if you have specific questions. n

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Georgia Commons • Third Quarter 2013

TURNOVERS: Don’t get stuck in Transition By Gary J. Caruso RS, PE Criterium-Caruso Engineers

“Besides the actual condition assessment of the property, there is a wealth of documentation that usually changes hands at this point in a project...”

T

here is a point (turnover) in the development of a new condominium project or a conversion when it is important for the newly formed association to determine if the project is in reasonable compliance with the original construction documents, municipal approvals and construction industry standards. This is the transition from developer control to homeowner control. What the developer is obligated to provide to the condominium association is not always clear and will be the primary subject of negotiation. In order to develop a reasonable idea of the finished product that the association should expect, the construction documents, municipal approvals, and the buildings themselves should be reviewed by a knowledgeable consultant. When discrepancies between the standards established and the actual construction are found, repairs generally should be completed in order to comply with the standards noted. This transition inspection generally is not intended to be a final punchlist, design review, an exhaustive code compliance review or an intensive review of components installed in the building. The determination of whether the developer or the association would be responsible for any repairs or additional costs and the oversight of the work required is left to the association to negotiate with the developer. The transition report is used as a tool for the association to evaluate the condition of the property it is about to accept and to determine what, if any, negotiations are needed with the developer to ensure smooth transition. The recommendations in the report should also be tempered by any agreements in the bylaws or other documents related to the development and ownership of this association. Besides the actual condition assessment of the property, there is a wealth of documentation that usually changes hands at this point in a project, whether it is a new project, a major renovation or a conversion. Boxes of books and rolls of drawings get deposited on the property. Apartment to condominium conversions will have drawings as well as a mandated property condition report. Whether the work occurred recently or in the last few years, the association should request the appropriate close out documents from the developer and take the time to review the documentation that it has received. This information may have been stored offsite, stored digitally or be located in the Chief Engineer’s office at the property. If you have lots of documentation in a storage room from when the project was completed, it may be time to review and preserve it before this information is essentially lost to you forever. Make an inventory of the documents that you have in your possession. Typical close out documents may include some or all of the following documents. • Operation and Maintenance (O&M) manuals • As built drawings • Construction drawings • Shop drawings

• • • • •

Certificates of Occupancy Governmental approval documents Project Manual and Specifications Test reports Warranties and Guaranties Typical large projects have a series of design drawings used to construct the building. Standard nomenclature uses numbers to identify the drawings with a prefix starting with A as architectural, S as structural, M as mechanical, P as plumbing, E as electrical and C as civil. There may also be other specialized drawings starting with other letter prefixes. As built drawings should be stamped as such. The quality of as built drawings can vary dramatically. As built drawings are supposed to reflect the actual way the building was built. Usually the design drawings with the latest dates and/or the as built drawings are of most value. Drawings are essential as an aide for the maintenance personnel, outside contractors and consultants when they are diagnosing problems that may arise in the building and its systems. Well kept legible drawings should be preserved and kept in a safe place on the property for ongoing use. Drawings can be digitized as an aide to preserving them. The close out documents are very valuable documents that, if lost or damaged, may never be able to be recovered. O & M (operation and maintenance) manuals, shop drawings and the project manual/specifications can assist the maintenance personnel, outside contractors and consultants in determining the products that were actually used in the building. This may be essential when you have to replace the equipment, diagnose a problem or contact the manufacturer of the product. The O&M manuals typically follow a standardized numbering format. These documents have the manufacturer’s sheets for almost all of the originally installed equipment. Many portions of the building have warranties. Major equipment will carry a manufacturer’s warranty. Roofs, glass, windows, doors, special finishes etc. may have long warranties. Some warranties have very strict provisions and notification guidelines that must be followed to keep the warranties in force. Voided warranties can translate into major additional expenditures for the Association. Governmental approval documents such as certificates of occupancy, fire department inspections, zoning variances etc. should be preserved in case any regulatory issues arise with the building. Test reports, property condition reports and maintenance histories can be crucial in reconstructing the history of the building, developing projections and the development of a reserve study. We recommend that you preserve these records in a safe place so that they can be used with the current records of the building long into the future. Having these records will translate into dollar savings when they are needed for the project. n

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

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Georgia Commons • Third Quarter 2013

Negotiations: Know When to Hold Your Feet to the Fire and When to Walk Away By Amy Davidson Aquascape Environmental

I

“...an impartial third party clarifies and reframes problems and helps the two sides talk...”

n suburban Washington, D.C., a four-year long neighborhood feud recently cost a community hundreds of thousands of dollars. Residents of Olde Belhaven in Fairfax, Virginia, were divided over one neighborhood family’s 2008 presidential election yard sign, which stood four inches taller than the HOA covenants permitted. The family that posted the sign believed they were standing up to an out of control HOA, while those on the HOA’s side of the matter were dismayed at the eventual legal cost incurred to prove a point. Ultimately, a difference of four inches cost the entire neighborhood its common park area, as the land was put up for sale to cover the debt of the HOA, which had been bankrupted by the legal expenses.1 Experts say such feuds are becoming more common with the tremendous growth of HOAs, which typically require residents to sign covenants governing architecture, landscaping and other matters when they move into an association neighborhood. The HOAs collect dues and often have the power to fine residents who don’t comply with the covenants. Whether you’re an HOA board member or simply a resident, the day may come when you have to decide whether a disagreement is worth the cost and ill will.

day life by another. If the homeowners association is approached with these types of complaints, a good place to start is asking the resident to gently raise the issue directly with the neighbor and try to work out a resolution. Often, residents will find that treating a neighbor the way they themselves would like to be treated can lead to both parties being satisfied.

First Decide: Do You Have a Dog in the Fight? Some situations may arise that do not really require HOA involvement. Typical HOA covenants contain language regarding “nuisance,” but this is often a broad term. For example, you may consider the barking dog next door a nuisance; the dog owner, on the other hand, probably believes that’s just what dogs do. Parking issues, loud teenage children, dog poop – any of these may be viewed as a nuisance by one party and simply as a part of every-

At what point should you settle? It is important to maintain perspective when dealing with conflict. Don’t let emotion cloud the issue. For one Florida couple, fighting a $2,100 resodding bill from their homeowner association seemed like the right thing to do at the time. They eventually won $85,000, but at what cost? After 11 years of litigation, they spent over $200,000 in legal fees.2 Even when there is financial gain to the HOA board, such as going after unpaid dues and assessments, C O N T I N U E S O N PA G E 12 . ®

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Georgia Commons • Third Quarter 2013

NEGOTIATION...from page 10. there may come a point where you need to settle. The costs must be weighed against the gains, financial and otherwise. Resolving conflict without litigation Lawsuits should be a last resort, and all courses of action should be examined before going to court. Here are some proven methods of conflict resolution: • Mediation — an impartial third party clarifies and reframes problems and helps the two sides talk to each other and discuss solutions. The mediator does not decide who is right or wrong, but creates an environment in which the two parties can discover possible solutions to settling their dispute. • Informal Dispute Settlement — a process in which two parties present their views of the dispute to an impartial third party, called a hearing officer. The hearing officer then makes a non-binding decision on how to resolve the dispute. Both parties agree to comply with the decision. • Arbitration — both parties sign an Agreement to Arbitrate that describes the specific issues and the scope of the arbitrator’s authority. The arbitrator is asked to consider all relevant facts and to make what he or she considers a fair decision. These decisions can be binding. The bottom line We all want to fight for what’s right, and HOAs exist to protect the property values of all of a community’s residents. But whichever side of a fight you find yourself on, depleting the resources of your family or your association may not be worth it for a minor dispute. When at all possible, try compromise. Maintain perspective throughout all negotiations. Taking a stand, drawing a line in the sand, and refusing to give is often a recipe for disaster. n Notes: 1. Washington Post, February 9, 2013 2. Tampa Bay Times, September 28, 2012

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Georgia Commons • Third Quarter 2013

How to Make Sure Your Community is Winter Ready… By Dot Edwards Peachtree Lofts Community Manager/Access Management

T

he Association is responsible for properly preparing the community for the impact of fall and winter weather. This task is often carried out by the Association Manager. A carefully developed and executed preventative maintenance program helps to protect property values. Here are some great fall maintenance tips in preparation for the winter months… • Work closely with your landscaper to determine when if/pruning should be completed on certain plant material. Healthy trees are an asset for any community, and proper pruning and fertilizing are integral to tree health. • Work closely with your pool vendor to shut down your pool area. Remember that carefully planned storage of pool furniture and other items will allow for ease of start up in the spring. Protect items so they don’t become damaged in the process of being stored. Inspect items before they are stored to determine if you need to budget for potential replacements for the following year. • Stock up on products to protect your entry ways in the event of ice or snow. Use calcium chloride for snow and ice on sidewalks, driveways, and stoops. Calcium chloride melts ice faster than salt and salt can damage concrete and plant material.

“Here are some great fall maintenance tips in preparation for the winter months…”

winter months. Garden hoses should be disconnected and exterior faucets and sprinkler systems should be weatherized.

• The Maintenance staff or a trusted contractor should make an effort to make repairs to potholes, depressions, and cracks where water could accumulate and freeze, and otherwise form a tripping hazard even without ice. Cracks in walkway surfaces and roadways will worsen throughout the winter season if not properly fixed.

• If you have a parking garage, you likely have a dry sprinkler system that needs to be drained frequently during the fall and into the colder months to prevent sprinkler pipes from bursting.

• Ensure that your irrigation system is properly winterized, and a sprinkler blowout is completed to prevent costly breaks in the lines from freezing water. Make sure to do this before the winter months. Backflow devices should also be insulated for extra protection against freezing water in the

A preventative maintenance plan protects community assets, reduces the risk of costly repairs, and can ultimately limit costly for after hours emergencies. Take a moment to assess your community’s needs, establish a Winter Ready checklist/plan, and follow your plan. n

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Georgia Commons • Third Quarter 2013

Condensation — Common Causes By Lee Cope, P.E. and Nathan Reynolds Wiss, Janney, Elstner Associates, Inc.

D

uring the hot summer months, condensation is rarely a problem for most associations in the Atlanta area. However, as fall and winter approach, condensation issues will likely arise. Uncontrolled condensation is a complex issue related to the building envelope that continues to be faced by a number of condominium associations, community association managers, and individual homeowners. Condensation can form on windows, doors, interior finishes, exterior cladding materials, or even within the wall system itself and can lead to staining or deterioration of building materials. Often times, the causes of condensation are not readily apparent and, as a result, budgets can be misallocated to repairs that are not necessary or do not remedy the problems. When dealing with condensation, it is critical to fully understand the issue(s) causing the problem. Once the source or sources are fully understood, appropriate repairs can then be developed. Condensation occurs when warm, moist air comes into contact with surfaces that cool the air temperature below its dew point (the temperature at which the relative humidity reaches 100 percent), causing water vapor from the air to condense on the cooler surfaces. It is important to understand that warmer temperatures have a higher capacity to carry water vapor than colder temperatures. This capacity increases exponentially as temperatures increase. Thermal differences between the interior and exterior spaces can enable condensation to form within wall systems, on window and door assemblies, and on the outside of the cladding materials. The following briefly describes how each of these components can play a role in the formation of condensation in the building. Window and Door Systems Aluminum or steel door and window systems provide a direct path for heat transfer from the interior to exterior spaces. In new construction, window systems are typically specified to be thermally improved or thermally broken, placing an insulating material between interior and exterior portions of the window frame. If this line of insulation (factory installed) is not properly aligned with the building insulation, cold air from the exterior can short circuit the factory installed thermal breaks and create a direct path for heat transfer. As a result, the likelihood of condensation forming on the window system is significantly increased. In some instances, even a properly placed window system can be subject to condensation at unseasonably low temperatures or elevated interior air temperatures or relative humidity. Exterior Wall System Wood or metal stud framed wall systems with fiberglass batt insulation create thermal bridges for heat transfer through the wall system at the stud locations. This allows heat transfer to short circuit the thermal insulation and can heat or cool the wall cavity or uninsulated, direct applied exterior cladding materials (such as cement board siding, vinyl siding, etc.). Condensation within the exterior wall system or on the cladding system can result in organic growth (in the form of mildew, moss formation, or even potentially mold). Mechanical System Building mechanical systems provide heated or cooled air to each individual unit, corridor, or public space. Oftentimes, supplemental exhaust fans are located in the bathroom and kitchen to help remove occupant moisture loads (shower, boiling water, etc.). However, these systems are only effective if they are turned on by the occupant, and if they properly ducted and vented to the outside. Supplemental exhaust fans can also result in negative internal pressures if they are not considered in the design of the mechanical system or appropriately sized. In addition to exhaust systems, the building mechanical systems provide supply air to each individual unit. In condominium buildings, supply air is often provided through an air gap beneath the individual unit entry doors. If this gap is blocked by homeowner installed floor finishes or draft stop

Relative Humidity

Dew Point Temperature (°F)

10%

11.9

20%

28.7°

30%

38.9°

40%

46.4°

50%

52.4°

60%

57.4°

70%

61.7°

80%

65.5°

90%

68.9° Table 1: Dew point Temperature in relation to Relative Humidity

material, the mechanical systems will not function as intended. The resultant increase in the interior humidity can cause condensation issues to occur. If not properly tested and balanced, mechanical systems may not provide the appropriate amount of supply air to the individual units, create positively or negatively pressurized buildings, or condition the air to the appropriate moisture content. Table 1 illustrates the dew point temperatures in relation to relative humidity for interior conditioned space at 72 degrees Fahrenheit (°F). For typical occupant comfort, the relative humidity in the interior conditioned spaces is maintained at 30 to 40 percent. In Atlanta, the low temperature used for design is typically 20°F. Therefore, if the building systems (exterior wall, window, and mechanical) are not designed, constructed, or maintained properly, and the surface temperature on the interior walls (typically window glazing and frames) drop below the dew point, condensation will occur. Occupant Usage A level of moisture can be anticipated from typical occupant usage (showers, boiling water, etc.); however, in some instances, the occupants can artificially increase the relative humidity; thereby increasing the potential for condensation. Occupants with a large number of plants, large fish tanks, and humidifiers can increase the moisture load beyond the moisture load the space was designed for. In many cases, these increased levels can be mitigated by a properly functioning mechanical system; however, if the mechanical system is not functioning at its peak performance, added loads can result in condensation issues. Summary Condensation can occur from a wide range of sources and is often a combination of several of the sources described above. As a result, it is important for the owners to assemble a reputable project team for all construction or renovation work. However, even with an experienced team, some of the sources are difficult or impossible to account for in the design and construction phases of projects, based on standard design and budgetary constraints. If faced with a condensation related issue after the construction project has been completed, it is important to investigate the problem to identify the source(s) of the moisture related issues (not just identify symptoms), in order to perform appropriate repairs and prevent misallocating funds to repairs that will not resolve the issue. It is also a good idea to perform a mock-up of a trial repair to help ensure that the solution is a viable solution prior to implementing the solution on a full scale. n

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Georgia Commons • Third Quarter 2013

The Right to Repair Act:

Getting Too Hot Under the Collar Can Leave Your Association in the Cold By Rebecca Drube, Esq. Weissman, Nowack, Curry & Wilco, P.C.

A

s the real estate economy improves, many community associations are gearing up to start on major renovation and repair projects to their common areas, such as pool and tennis court renovations, that they put aside during the economic downturn. While this is an exciting turn of events, such a rise in construction activity unfortunately comes with the inevitable downside of a rise in construction disputes. If your association finds itself in such a dispute with a contractor, it should be aware that the provisions of a Georgia law commonly called the “Right to Repair Act” (the “Act”) may apply to its dispute. The purpose of this article is to provide a brief overview of key provisions of the Right to Repair Act so you will be cognizant of the Act’s potential implications for your Association in dealings with contractors. Enacted in 2004, the Right to Repair Act’s stated purpose is to give contractors a fair opportunity to fix their mistakes before being sued by property owners over residential construction disputes. It generally requires homeowners, home buyers, community associations, and other claimants, follow very specific dispute resolution procedures before suing a contractor, builder or developer over construction defects. Notably, while the Act is commonly referred to as the “Right to Repair Act”, it does not give the contractor an automatic right to repair. Rather, it requires that the claimant, or individual or entity asserting the construction defect claim against the contractor, provide the contractor the right to propose a repair and/or make a monetary payment to settle the construction defect claim before the claimant files suit. Under the Act, “construction defect” means “a matter concerning the design, construction, or repair of a dwelling, or an alteration of or repair or addition to an existing dwelling, or of an appurtenance to a dwelling on which a person has a complaint against a contractor.” Under the 2006 amendments to the Act, the definition of “contractor” covered under the Act is limited to those contractors who are required to become licensed under

“...The Right to Repair Act’s stated purpose is to give contractors a fair opportunity to fix their mistakes before being sued by property owners over residential construction disputes.” Georgia’s contractor licensing law. Still, the contractors covered under the 2006 amendment to the Act may include developers, builders and vendors such as pool contractors, painters and roofers. One of the most significant aspects of the Right to Repair Act is its requirement that a claimant provide the contractor with a written Notice of Claim before initiating legal action based upon a construction defect. The written Notice of Claim (“NOC”) required under the Act must be sent out by the claimant no later than ninety (90) days prior to filing a legal action against a contractor covered by the Act. If the claimant institutes legal action prior to filing the NOC, the Court may stay the legal action until such time as the claimant provides the required NOC. In the NOC, the claimant must include a statement that it is asserting construction defect claims and describe the claim in detail to explain the nature of the alleged construction defects and the results of the defects. The claimant must also include with the NOC

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

any evidence depicting the nature and cause of the defects that would be discoverable in a lawsuit, including expert reports, photographs, and videotapes. After the claimant sends the NOC, the contractor then has thirty days to respond by either (1) offering to settle by monetary payment and/or making repairs without inspection or (2) proposing to inspect the dwelling or common area that is subject to the NOC. If the contractor offers to inspect the construction defect, they will then have a period of at least 30 days to inspect the alleged construction defect and another 14 days after the inspection to provide the claimant with a written statement where either the contractor rejects the Association’s construction defect claim or makes a written offer to resolve the matter by monetary payment, repairs or any combination of payment and repairs. If the contractor fails to respond to the NOC within 30 days or wholly rejects the claim, the claimant may then file suit against the contractor. Notably, the claimant is not obligated by the Act to accept any settlement proposed by the contractor; however, the claimant must respond to a contractor’s settlement offer in writing within 30 days or the offer will be deemed accepted. Further, if the claimant rejects a contractor’s offer, they are required to include the reasons for the claimant’s rejection of the offer in its written notice of rejection to the contractor. In addition to providing the required NOC, the Act requires that a community association claimant, before bringing a lawsuit or pursuing arbitration against a contractor for construction defects, obtain a two-thirds membership vote in favor of pursuing the construction defect action. Further, at least three business days prior to holding the membership vote to approve the lawsuit or arbitration, the association must provide each owner with a copy of the NOC given to the contractor and an additional written description of claims and the reasons that the Board is recommending consideration of the litigation. Finally, before bringing a lawsuit or arbitration against a contractor, the Board of Directors of the association and the contractor must also meet in person and confer in a good faith attempt to resolve the association’s claim, or the contractor must have definitively declined or ignored the Board of Director’s requests to meet. It should also be noted here that the Act contains stringent requirements that a community association must follow prior to performing destructive testing to determine damage or injury to a unit, common element or limited common element caused by a construction defect. Prior to performing destructive testing, the association must meet the following conditions: (1) the association has obtained the prior written approval of each unit’s owner whose dwelling will be directly affected by such testing; (2) the person performing the tests is a licensed contractor and has provided a written schedule for repairs; (3) the person performing the tests is required to repair all damage resulting from such tests in accordance with state laws and local ordinances; (4) the association or employed person obtains all permits required to conduct the tests and to repair the damage resulting from the tests; and (5) the association provides reasonable prior notice and an opportunity to observe the tests is given to the contractor against whom an action may be brought as a result of the tests. As you can see, the Right to Repair Act imposes numerous requirements on a community association contemplating filing suit against a contractor for construction defects covered by the Act. While it is understandable that the tempers of Board members, community association managers and association members often get heated when faced with defective construction work performed on the Association’s common area, Board members and community association managers should keep in mind that failure on the part of the Association to comply with the requirements of the Right to Repair Act may ultimately leave the Association “cold” by negatively impacting the Association’s position in a legal action against the contractor. Thus, no matter how heated things may get between association representatives and a contractor, association representatives should remember the Right to Repair Act and consult the Association’s attorney before taking any action as a result of the defective work, such as hiring another contractor to repair the previous contractor’s work and/or performing destructive testing on the common area with the potential construction defect. As a final note, this article only provides a brief overview of a few of the provisions of the Right to Repair Act that may impact an association in a construction defect dispute and does not provide an overview of all aspects of the Act. Any association involved in a potential construction defect dispute with a contractor or who believes they may become involved in one should consult with its association counsel. n

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Georgia Commons • Third Quarter 2013

Green Corner

We had great speakers, learned a lot and had a wonderful lunch from Affairs to Remember, Atlanta’s first Zero Waste Zones caterer. Our lunch boxes were all totally compostable.

The September 2012 Green Class! Upcoming Events Trade Show - August 24th Cell Phone Recycling to benefit Georgia Special Olympics.

Trivia Night September 19th Come out to Trivia Night for some social networking at Hudson Grille in Sandy Springs

Golf Tournament - October 10th The green committee will be actively recycling at the this event.

Last Road Cleanup of 2013 November 6th, 3-5pm Come out and help us clean up roadway and then join us at Taco Mac for a networking event. We start at Holcomb Bridge Park - 4300 Holcomb Bridge Road and go to Barnwell Road.

Green Committee Meetings Sept. 3rd • Oct. 1st • Nov. 5th at Homeside Properties For more information about the Green Committee contact Barry George at b.george@crabapple.com or Bekke White at bekke.white@unionbank.com

We support other CAI committees.

Our Magazine Recycling at Casino Night was a huge hit!

We want to thank all the management companies that supported this effort!

This is where we took the magazines we collected.

Roswell Recycling Center

11570 Maxwell Road • Alpharetta, GA 30004 770.442.8822 • www.roswellgov.com MATERIALS

WHAT TO RECYCLE

Large Metal

Grills, lawn mowers (fluids removed), appliances*,etc. Aluminum cans, aluminum pie plates and clean foil Steel cans (rinsed), wire coat hangers, screws, nails, punctured helium tanks All glass food and beverage packaging containers – colorless, brown, green and blue (rinsed with all lids & corks removed) Computers, monitors, printers, peripherals, televisions*, stereos and speakers (no wood cases), all telephones, CDs, DVDs, VCR tapes, etc. Corrugated cardboard such as moving and shipping boxes, single layer cardboard such as cereal, gift and shoe boxes, all paper bags plastic food and beverage containers #1 through #7 (except polystyrene #6), plastic bags and bubble wrap Newspaper including any inserts that came in the newspaper, white packing paper

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Georgia Commons • Third Quarter 2013

CAI Green Committee Award Winners

Evergreen Winner

Crabapple Lake/Parc Community Homeowners Association It’s no wonder why Crabapple Lake/Parc Community Homeowners Association won the CAI Green Community Evergreen Award. This community is a shining example of how an Association of homeowners can come together to make a difference for their community, the environment and teach future generations about conservation. The driving force in becoming a green community was its board members, but many of the homeowners are active participates in the green movement as well. They all understood from the beginning that by implementing environmentally responsible practices within their community they would lead by example, save money, and create a sense of community. Crabapple Lake/Parc Community Homeowners Association was built in 1994 as cluster homes. They have a good mix of ages, families and retirees which they feel makes Crabapple Lake/Parc Community Homeowners Association a community rather than just a subdivision. These homeowners have continually taken steps since being built to work towards their common goal of keeping their property valuable and green. They added a playground, built a fitness /social area with environmentally friendly materials and they have a group of homeowners that plant memorial gardens around the community using native plants. Below are some of the green projects they have put into effect: • Instead of a traditionally printed newsletter, they have a website that is used to get information out to all the homeowners • Utilize rain barrels to capture rainwater for watering their container gardens at the pool • Dredged a lake onsite. Rather than having the silt removed and dumped, which would have cost money, they gave the silt away so it was picked up at no cost to them. • Certified wildlife habitat community by the National Wildlife Federation. • Native plant program. • Pet waste stations throughout the community which homeowners volunteer to empty. • Salt water pool system. • Participation in the “Keep Roswell Beautiful” and River Alive events • Started recycling clubs in their local schools and scouting troops. • High walk ability index and have worked diligently with the city of Roswell to install sidewalks and radar speed limit readers to encourage local elementary school families to walk to school instead of car pooling Future projects include: • A tennis court repair project will have them reusing the old surface to create the subsurface for new the tennis court, which will keep the old rubble out of the landfill. • Talks are ongoing with the Mayor of Roswell who is a supporter of local green initiatives, about the effectiveness of digging a well to supply water to the pool, tennis facilities and for irrigation. • Consideration of solar/wind energy for common area needs. This community will no doubt continue to be a forerunner within the green movement. The CAI green committee would like to thank all the board members and homeowners of Crabapple Lake/Parc Community Homeowners Association for their commitment to the environment. Crabapple Lake/Parc Community Homeowners Association is managed by: Darren Thurmond, CMCA, AMS, PCAM of Atlanta Community Services.

Forest Green Winners Lake Arrowhead Yacht and Country Club - 425 Points, Managed by: Dotty Bonds, CMCA, AMS - Lake Arrowhead and Country Club The Landings - 355 Points, Managed by: Sean Burgess, Environmental Coordinator

Garden Green Winners Tuxworth Springs - 215 Points, Managed by: Leslie Fellows, CMCA - Homeside Properties Towne Lake Hills - 190 Points, Managed by: Dotty Bonds, CMCA, AMS - Sixes Management Compnay Riverbrooke - 185 Points, Managed by: Shaune Huysamen, CMCA Homeowner Management Services, Inc. Centennial Park West - 150 Points, Managed by: Christy Barber, CMCA, AMS, PCAM - Homeside Properties

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Georgia Commons • Third Quarter 2013

Shoes for Souls donations at the 2013 Tennis Tournament The Green Committee thanks everyone for supporting our Shoes for Souls collection. We collected a bunch of shoes to donate to those less fortunate.

The Green Committee has completed three communities container gardens so far!! Tuxworth Spring’s Container Garden Special thanks to Blueprint and Crabapple for donating supplies and labor.

Walden on Lenox

Crabapple supplied the wood, CCI built the containers and NatureScapes supplied the soil. A big “Thank you” goes out to Gray Contracting, Crabapple and Russell Landscaping for the container garden at Walden on Lenox.

The Green Committee at the Adopt a Highway Day!

Come out to our last highway clean day for the year on November 6th~

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Georgia Commons • Third Quarter 2013

What’s Hot in Pest Control and What’s Not By Teresa Womack Northwest Exterminating What’s Not Hot Do you remember the days when you would call a pest control company out to deal with a problem and they would spray everything that they came in contact with? With no questions asked, they would spray baseboards, windowsills, backsplashes and anything else that they thought needed spraying. When the job was done, the odor of chemicals was left in their wake and the technician left without much of an explanation of why the problem existed and what could be done to prevent it in the future. The chemical smell gave the homeowner a false since of security, thinking that nothing could penetrate through it. However, their bug problem might be temporarily gone but what they didn’t always consider was the fact that the surfaces that they use every day were coated with chemicals. Children and pets that play in the floor would come in contact with the baseboards. Overspray could have easily reached toys and other belongings that were in the floor and pets could lick the base boards due to new smells that peaked their curiosity. But the homeowner was happy…for a while until the problem happened again in a few weeks. Then, the process would start over. What’s Hot Well those days are long gone, or at least they should be. With the research and education that we have today, common sense tells us that we shouldn’t want chemicals sprayed haphazardly in and around our homes or the homes that you manage. Today’s reputable pest control companies have changed the way pest control issues are handled. Instead of treating the symptoms, they treat the problem. The premise is inspected first to see where and why there is a problem. They are like investigators searching for the hidden passage ways that bugs use to get

inside and where they are coming from. If the problem is corrected then the bug issue is as well. They no longer use chemicals throughout the home on baseboards. Using a targeted approach, key areas are treated with baits and gels to keep the treated areas consolidated and out of reach of everyday use. Not only have treatment procedures changed, but so have the pest control products that are used. Through research and development, a full line of earth-based products has been developed that has low toxicity to people and pets, but high toxicity to insects. These earth-based products are just as effective as the harsh chemicals that were once used. If smells are left behind, it’s not the offensive odor of yesteryears’ chemicals, but a fresh clean fragrance that only last a few hours at

the most. In addition to green pest control, there are also options for earth friendly termite control. Instead of pumping gallons of chemicals into the soil to fight against termites, bait stations are used that contain only a few grams of the product.

What’s Really Hot Your pest control company should do more than just kill bugs; they should be your eyes and ears into the homes that you manage. Since they are in and out of these living spaces, they see what is causing the pest problems, whether it’s shrubbery that needs to be pulled away, garbage that should be removed, sanitation problems, or maintenance issues. These situations can cause other problems for you. Talk with your technician or representative so he can inform you of what needs to be corrected or if other issues were observed during the inspection that could be important for you to know. The right partnership will help you perform your job more efficiently. n

Neighborhoods Deserve Legal & Professional Management So you don’t have to, we can . . . Police your neighbors for covenant violations, Collect association dues from the guy across the street, and if necessary, file suit for nonpayment of dues or noncompliance of the covenants. The integrated services of CAM and the Law Offices of Lee Mason cover all these!

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www.camga.com

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Georgia Commons • Third Quarter 2013

Be Cool By Russell Estey Atlanta Cooling Pros / RooterPLUS!

I

t’s summertime again and the temperature is going up. This is our favorite time of the year to spend time with family and friends. Whether it’s on vacation, at a BBQ or at the pool, this is definitely a fun time of year. Summertime here in Georgia is also when the combination of heat and humidity outside can be dangerous. When we return to our homes from all the activities we enjoy during the Summer months, we want the air to be comfortable. Here are a few tips to help improve air quality, prolong the life of your system, help conserve energy, and reduce utility costs. • Set the thermostat to approximately 17-20 degrees below the outside temperature. Georgia Power recommends setting the thermostat to 78 degrees during hot days to conserve energy costs. For every degree below this setting, you can expect an additional 5% increase on the cooling portions of your monthly utility bill. • Caulk and apply weather stripping where needed. Check all your windows and doors. This will help prevent heat and humidity from entering the homeand keep the indoor relative humidity low. The first thing the air conditioner must do is lower the humidity level in order to properly cool the space. • Set the fan switch to the “auto” position. A fan in the “on” position during the Summer results in warm, humid air being circulated throughout the home. Only set the fan to the “on” position in early Spring and mid Fall. • Close blinds and curtains on hot days.

Jeff Hope President/Owner

P.O Box 1656 Dallas, GA 30132 (O) 770-443-2391 (C) 404-583-6734 www.ActionCommunityMgmt.com jeffhope@ActionCommunityMgmt.com

• Replace standard filters once a month and replace pleated filters every three months. (This may vary depending on pets,) Dirty or clogged filters restrict the air flow of the system, which results in higher operating costs and may cause damage to the system. • Do not close off or block more than 20% of the vents in your home. This restricts air flow and could cause the system to freeze up. Do not close off or block ANY return air grills. • If the system freezes up, turn the system off immediately. A system freezing up results in low air flow at registers, water in the overflow pan, and/ or ice forming on refrigerant lines and/or the air conditioner. Do not leave your system off for any extended period of time. When leaving your home for vacation or work, adjust your thermostat to a higher temperature. Also, by turning the system “off” you are allowing humidity to build up within the home resulting in possible mold growth and longer run time for the air conditioner. • Don’t ever cover your air conditioner. Maintain 24 inches of clearance around the unit and 6 feet above the unit. This will help maintain the proper air flow into and out of your air conditioner. • Use ceiling fans to circulate air instead of lowering the temperature on your thermostat. Remember that your air conditioner accounts for nearly 50% of your Summertime utility bill.

SALLY LEWIS-BUTLER

Some of these things you have heard before and they still bear repeating. Hopefully, there are a few things here that you didn’t know that will help you save money on energy costs and system repairs and replacements. We cannot control what Mother Nature has in store for us, but we can educate ourselves as to how we can save literally hundreds of dollars each month on our energy bills. It is also important to make energy savings a family affair. Remember, it is never too early for kids (often the largest energy users) to develop energy saving habits. These tips will also help you and your families, including your pets, stay safe and cool during these hot and humid Georgia Summer days. n

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Georgia Commons • Third Quarter 2013

Courtside with CAI-Georgia — April 26th 2013...

(left) Dan Crossland of Phoenix General Contracting and Sandy Depa

(right) Billy Gray and Michael Anthony of Gray Contracting

(below) Joe Larkin & Brendan Hunter of Lueder, Larkin & Hunter, LLC

(above) David Tishey of Greenwood Group and Barry George of Crabapple LandscapExperts

(below) Julie Howard of Weissman, Nowack, Curry & Wilco, P.C. and Joe Dreher of Dreher Insurance

(above) Shaune Huysamen of Paramount at Buckhead Condominium Association

(above) Dawn Shaddix of Northwest Exterminating and Kerrie Napoli of Taylor Commercial (right) Sarah Magee and Jeanie White of Homeside Properties, Noreen Balcer and Jodi Vasquez of FirstService Residential and Veronica Cuellar of Horizon Painting & Renovations

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org (left) Bill Wetter of Team Management and Teddy Russell of Russell Landscape Group (right) Tennis Tournament Award Winners with Championship Award Sponsor Sandra Mokan from Affinity Pools

(left) Massages are enjoyed by everyone at the tournament!

(below) Cal McShan of Sentry Management and Veronica Cuellar of Horizon Painting & Renovations

(above) The Sentry Management Team of Spectators

(below) Peter Mokan of Affinity Pools and Doris Lawrence of Heritage Property Management Services, Inc.

(left) Merrill Walker of Advantage Community Management & Judy Dreher of Dreher Insurance

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Georgia Commons • Third Quarter 2013

Litigating Attorneys’ Fees: A Community Association’s Hot to Cold Guide By Julie Liberman, Esq. Moore & Reese, LLC

W

hen negotiating a settlement on behalf of a community association in litigation, typically, we are working with four categories of damages: 1) fines for a covenant violation or unpaid assessments, 2) late fees, 3) interest, and 4) attorneys’ fees. To many Boards of Directors, fines are “gravy,” late fees are desirable but not required, and interest is perceived at times as nominal. Attorneys’ fees, however, are no less than “mandatory.” Even from the Georgia courts’ perspective, attorney’s fees, happily, are often “mandatory.” But when a settlement fails and an association is in litigation through judgment, it will need to know from the outset: what is the hottest ticket to an award of attorneys’ fees? And which path is more likely to lead to the judge’s cold shoulder?

A. It’s Hot Off the Press: Read Your Declaration The most basic rule governing recovery of attorneys’ fees is that Georgia, like most states, follows the so-called American Rule. Under the American Rule, attorneys’ fee awards are not granted to either party absent a contractual or statutory provision on point. Fortunately, the Georgia courts view an association’s governing documents as a contract between the association and the community’s residents. Thus, a well-drafted declaration will ordinarily provide an exception to the American Rule, which is clearly your hottest ticket to full recovery of litigation expenses. An association’s declaration of covenants usually contains one or more relevant provisions concerning an award of attorneys’ fees. For example, when an association files suit to collect assessments, the declaration ordinarily provides that all such “costs of collection, including reasonable attorney’s fees actually incurred” shall be collected from the defendant. The Georgia courts have consistently approved of these contractual provisions in associations’ governing documents and have upheld awards of attorneys’ fees granted under those provisions where the contractual language is clear and unequivocal. Similarly, when an association files suit against an owner, either to enforce covenants, or for some other reason such as a separate contractual dispute or another wrong, whether the association is awarded attorneys’ fees depends primarily on the language in the governing documents. Some declarations contain a provision for the award of attorneys’ fees incurred to bring a homeowner into compliance with the governing documents. The declaration may also include a provision that sets forth that in the event of litigation, when the association prevails, the association shall be entitled to recover reasonable attorneys’ fees and costs of litigation actually incurred from the defendant. Often, this language is couched within a provision stating that attorneys’ fees and costs “shall be granted to the prevailing party” in the dispute. This language can be useful from the perspective that an association may also defend a lawsuit filed by an owner, and upon prevailing, be entitled to recoup its attorneys’ fees. However, there are two main issues to keep in mind with “prevailing party” provisions. First, there is a body of law in Georgia that explores what it means to be the “prevailing party” under various scenarios (for example, prevailing at different stages of litigation, such as at summary judgment or at trial) or through some other procedural event that terminates the lawsuit. Many of these scenarios are not simply cut and dried and even a “win” by all accounts may be subject to scrutiny by the courts as to whether a party “prevailed” nonetheless. Second, the use of such “prevailing party” language may cause the association to be responsible for paying a defendant’s attorneys’ fees and costs if the association does not prevail in litigation as a plaintiff. In summary, exercise caution when deciding how the association allocates the risk of attorneys’ fee awards in litigation against homeowners. Another important factor to be aware of is that whenever an award of attorneys’ fees is granted, the amount is subject to review by the courts for “reasonableness.” From time to time, Georgia courts will cut an award of

attorney’s fees to an amount that the particular trial judge believes more adequately fits the particular circumstances of the case. B. Judges Warm to Them: Statutory Bases for Attorneys’ Fee Awards The Georgia courts are also inclined to award attorneys’ fees where a statute on point dictates it. For community associations, the most relevant statutory provisions concerning attorneys’ fee awards hinge on the language in the governing documents themselves. The Georgia Condominium Act (“Condo Act”) and the Georgia Property Owners Association Act (“POA”), for example, state that “to the extent provided for by the governing documents,” attorneys’ fees shall be awarded. What this means is that associations cannot rest on the Condo Act or the POA alone. A Georgia court will only award attorneys’ fees to an association whose governing documents contemplate such an award. The Condo Act and POA are, in essence, back-up authority for an attorneys’ fee request when the governing documents entitle the association to that request. Where the governing documents are well-crafted and echo the Condo Act or POA with regard to attorneys’ fees, that combination of authority means that an attorneys’ fee award is “mandatory.” As an added bonus, an award of attorneys’ fees under these circumstances does not require a hearing by a fact-finder (judge or jury), and thus may be awarded. An example is when a court does this in a summary judgment order. C. The Common Cold: The “Bad Faith” Provision When an association’s governing documents do not provide clear authority for an award of attorneys’ fees, the association can nevertheless seek attorneys’ fees by alleging that the defendant has “acted in bad faith,” been “stubbornly litigious” or has caused the association “unnecessary trouble and expense.” Quite often this is no stretch from the truth. Long before filing suit, the association has likely verbally warned the defendant of the violation, sent one or more written violation notices, held a hearing with the Board of Directors in an attempt to resolve the dispute, and generally pleaded with the neighbor to act in a more neighborly manner, all perhaps to no avail. Nevertheless, an award of attorneys’ fees under O.C.G.A. § 13-6-11 is more difficult and, sometimes, more costly to obtain than the methods described above. A factual determination must be made by judge or jury that this allegation of “bad faith” or “stubbornly litigious” behavior by defendant is an apt description. This is chillier territory, in terms of time expended on convincing a judge that the description fits the bill, likelihood of success in securing the award, and likelihood of eventually repairing what may likely be damaged relations with the defendant. D. Into the Tundra: The “Lack of Substantial Justification” Provision Another avenue for potential recovery of attorneys’ fees, resorted to often after a party wins its case on the merits, is to argue that the opposing party lacked “substantial justification” in its legal position. A recent decision, Michelman v. Fairington Park Condominium Association, Inc., suggests the perils faced by an association relying exclusively on this provision. Granted, when defending litigation against a third party who is not bound by the association’s governing documents, a provision like O.C.G.A. § 9-15-14 may be the only realistic avenue for attempting to recover litigation expenses. In Fairington Park, an association was defending a personal injury claim brought by an unauthorized tenant. The plaintiff in that case voluntarily withdrew the complaint before the court issued a ruling on the merits. In

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

essence, the tenant gave up, conceding that his case was doomed. The association had been forced to litigate an admittedly meritless case! Thus, the association sought an award of its attorneys’ fees under O.C.G.A. § 9-15-14, and the trial court granted the award. However, the Court of Appeals of Georgia surprisingly reversed the trial court’s award of attorneys’ fees. Why? The Court of Appeals determined that the precedent relied upon by the association,which likely persuaded the trial court concerning the merits of the personal injury claim was arguably distinguishable from the facts involved in the Fairington Park case. Importantly, the Court of Appeals did not rule that the facts were distinguishable in any particular manner; it did not rule either way on the merits of the case because the plaintiff had withdrawn his claims. Instead, the Court found that the facts were arguably distinguishable from the precedent relied upon by the association. The message is that if an association’s opponent has even an arguably valid position, the association will be treading on thin ice indeed in reliance on O.C.G.A. § 9-15-14 alone for an award of attorneys’ fees. E. Conclusion: Plan for the Heat; Forecast for the Cold The foregoing avenues for seeking attorneys’ fee awards in litigation are by no means exhaustive. The most common scenarios encountered by associations in litigation; however, can be accounted for through well-crafted language in the governing documents. In order to ensure that your association’s declaration maximizes the opportunity for attorneys’ fee awards to the association, you should consult with your community association attorney, who should review and discuss the language of the declaration and recent updates in Georgia law with you. n

A SPECIAL YEAR!

CAI is celebrating its 40th anniversary in 2013. Review CAI milestones and our history through the eyes of past national presidents. Visit www.caionline.org/CAI40

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Georgia Commons • Third Quarter 2013

Hot Tempers and Cold Shoulders By Pamela J. Irwin, CMCA, AMS, PCAM Community Management Associates

Sometimes, human interaction can be unpredictable. We may encounter less than stellar behavior that can astonish even the most seasoned veterans of this industry. It’s difficult to keep calm and constructively address the behavior while controlling the urge to say what we really want to say.

I

’ve witnessed two Board members expressing passionate opposing views on the verge of a physical fight. My first reaction is terribly inappropriate. I want to laugh out loud at the ridiculousness of the situation. I can hear Michael Buffer in my head, “Let’s get ready to rumble!” Then I remember I’m at work; I have to do something! Should I let this go like a referee in a hockey game allowing the frustration to vent until there’s blood or someone goes down on the ground before stepping in to break it up? How can I get these people to calm their tempers to bring the discussion down to a manageable tone? Can I get these people to agree to disagree? The other Board members look on in horror and are no help whatsoever! Here’s another shocking experience. A homeowner requests a hearing before the Board of Directors. He’s so angry things aren’t going his way that he throws a chair across the room! Wow, I thought this type of thing only happened on the Jerry Springer Show! The Board members are visibly shaken by this reaction. I don’t remember what was said but we were able to calm the homeowner down enough to ask him to leave and he did without further incident. I’m certain he was embarrassed about his behavior later. It surely didn’t help his case before the Board. CAI strongly advises all meetings should be held in neutral territory as opposed to a Board member’s home. If we were meeting at the public library, fire station, community center, church facility, etc… perhaps the escalation would not have been so severe. The venue sets the tone of the meeting. How you run your meetings matters. Professionalism is important. These are corporate meetings and not social events and should be conducted as such. Boards must be mindful not to be perceived as a group of select homeowners gathering to socialize, gossip and force rules onto other homeowners. Many managers may have had the unpleasant experience of attending a contentious homeowner meeting for a proposed special assessment. One such meeting, we had to hire security guards to attend. The most outspoken and angry homeowners were selected to count the votes for the proposed $10,000 per unit special assessment. We counted and recounted those votes at least three times. The final vote approved the special assessment. There were some tears and angry words, but most went away peacefully. Thankfully, the security guards kept the outbursts to a minimum, but this was a very difficult and stressful meeting for all involved. If you believe your meeting may get out of hand or you know there are certain homeowners who are unreasonable or who may act out, consider hiring a security guard to attend the meeting. Discuss this option with your Board. It may put their fears and anxieties at ease as well. No one wants to be caught in the crossfire of disrespectful individuals who are bent on being dis-

ruptive and/or destructive. The very presence of a security guard may help control the meeting to keep the discussions productive. Another strange experience can occur when you attend a Board meeting where all goes well, and you receive your action items and say good night. The next morning, you get into the office and you have the most scathing email from the Board president. She’s unhappy about several topics that were discussed during the prior evening, but never mentioned these concerns during the Board meeting in front of the others. You feel blindsided. Is this the same person you met with the night before? It becomes a pattern. You are so puzzled by this passive-aggressive behavior because she’s so nice in person. You wonder how you can manage effectively when dealing with a Dr. Jekyll and Mr. Hyde personality. “He’s so angry things aren’t going Do your best to be transparent with all communications, makhis way that he throws a chair ing sure every communication is addressed to all Board memacross the room!” bers. Try to address the concerns expressed to you individually and not shared during the Board meetings. Be extra professional and proactive in this situation. Do not have one off conversations with the other Board members as well. Here’s another challenge, the shutdown of a Board member. A Board member may get shutdown by the other Board members for championing an unpopular suggestion or idea. The cold shoulder kicks in. They may answer, “fine” curtly when asked to participate. People who are excluded frequently become destructive and vindictive. They feel their opinion holds no value with others so they give up. The silent treatment is used to express their displeasure or manipulate the others into trying to get what they want. They may even feel they are taking a virtuous path by not being confrontational. If the person giving the cold shoulder doesn’t want to speak, let it go and shift the focus to the task at hand instead of them. It may take a little time, but they will determine that this behavior is not going to produce results they are seeking. If the other Board members allow this behavior to continue, you may need to step in to assist. Express to all the Board members that they each were elected to represent the community and although their views or suggestions may not always be adopted by the majority, each of their opinions matter and should be welcomed and respectfully considered. They all are equal partners serving the community. Intentionally avoiding tough conversations and “freezing” others out is dysfunctional; it hurts relationships and the function of the Board to reach a consensus. Try to seek an agreement as to how all will interact respectfully moving forward. We can’t always control the situations we are thrown into. It’s our duty to do our best to control our own human emotions in reaction to the poor behavior of others. We hope to facilitate constructive meetings allowing all views to be expressed safely and respectfully. n

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

Taste of Spring on May 9th...

(below) Teddy Mathis of One Stop Communications, Julie Ketner of FirstService Residential, Steve Weibel of Beacon Management Services LLC and Anne Dover of Community Management Associates

(above) Carlyle Kent of Atlanta Community Management, Jessica MacAllister of Lazega & Johanson LLC, Chad Burchfield of Northwest Exterminating and Keith Shaddix of ValleyCrest Landscape Maintenance (below) Marilyn Ratzel and Patrick Pou of Lazega & Johanson LLC and Lisa Simmons Weibel of Beacon Management Services LLC

(above) Jeff Creecy of Greenwood Group, Sandy Depa and Jeff Gray of Phoenix General Contracting

(above) Sara Hicks of Parker Young Construction and Faith Brown of Tower Roofing (below) Tracy Lettsome of Lipshutz Greenblatt, Barry Coleman of Association Capital Bank, & Mary Masi of Community Management Associates

(above) Morgan Hall of Sugarloaf Residential Property Owners Association, Tami Moore-Reed of G4S Secure Solutions USA and Paige Perkins of Sugarloaf Residential Property Owners Association (right) James Bradley of BB&T Association Services, Todd Kohan of AssociationREADY and Leeanne Harsh of AtHomeNet

(above) Michael Sedacca of P3 Painting & Renovations and Jarrett Smith of G4S Secure Solutions USA (below) Kristle Steinberg of Community Management Associates and Sara Pritchard of Lazega & Johanson LLC

(above) Ron Peck of BB&T Association Services and Patrick Hixson of AssociationREADY (below) Bryan Howell and Chad Moffitt of Parker Young Construction

(above) Karly Snyder and Kim Blair of NFC Amenity Management

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Georgia Commons • Third Quarter 2013

If You Can’t Stand the Heat… GET OFF THE BOARD? By Marilyn Ratzel, Esq. Lazega & Johanson, LLC

S

erving on a board of directors is not easy. It is typically purely a voluntary position that often turns into a high-stress second job. While most people step up to the plate with the best of intentions of serving their community, sometimes things don’t work out. The way a director or officer chooses to handle a situation when things get too hot can greatly impact both the community and the director or officer himself. Duties of Directors and Officers. Every person serving on a board of directors has two overriding duties that should guide every action he takes as a director: • Duty of Care. Under Georgia law, directors and officers must discharge their duties in a manner the director/officer believes in good faith to be in the best interest of the corporation and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. To comply with this duty of care, directors must: 1) make educated decisions; and 2) vote in a manner that the director believes, in good faith, is in the best interest of the corporation. • Duty of Loyalty. Directors and officers must: 1) put the interests o f the association above their personal interests; 2) protect the association’s money; 3) avoid undisclosed conflicts of interest; and 3) avoid competing with the association’s interests and opportunities. The first step for any person wishing to serve on the board of directors is to recognize and understand these guidelines and all that they entail. Even if an officer or director comes to the board with the best of intentions, if he cannot abide by these two essential duties to the association, he should not serve on the board. Doing so would not only create potential liability for the association, but could also create personal liability for the director. Majority Rules! Any time you get a group of people in a room and ask them to come to a consensus on a major decision, there are bound to be moments when not all of the people see eye to eye. Ask any community association manager, and they can probably give you a number of examples of verbal arguments and perhaps even physical fights that have broken out during board of directors meetings. Disagreement in and of itself is not necessarily a bad thing—a healthy debate often can yield good results. However, when a dissenting director allows a disagreement to supersede his duties as a director or officer of the association, the results can be disastrous and divisive. Association members often misunderstand the roles of directors and officers. Many owners will approach the board with the understanding that the president of an association is afforded with the final decision making power. This is not the case. Any decision for the corporation should be made by a majority of the quorum of the directors. Sometimes, however, boards run into situations where a dissenting director or directors fail to recognize the majority decision of the board and choose to take their displeasure with board decisions to the court of public opinion or to disclose private board discussions with non board members in an attempt to sway the membership. Doing so undermines the actions and decisions of the board and constitutes a breach of the directors’ duty of care and loyalty to the association. In circumstances where the majority decision is truly detrimental to the interests of the corporation and its membership, there are proper channels in

“Many times it becomes necessary... to seek the removal of a disruptive director.” which to handle a dispute with the decision that do not place the association or the dissenting directors at risk of liability. In cases where the dissenting members are simply failing to recognize a valid board decision, the dissenting members should question whether or not they can abide by their duties as directors and recognize their responsibility not to undermine the majority decision of the board. If the answer is no, the dissenting members should consider stepping down from the board. Removal of Officers and Directors. Sometimes, however, it is not so easy as a dissenting director simply resigning from the board on his own volition, whether out of a recognition of a duty to the association or out of self-preservation. Many times it becomes necessary, in order to protect the interest of the association and its members, to seek the removal of a disruptive director. This can often be accomplished by requesting the resignation of the director, but more often than not, it requires the board to take affirmative action to seek the removal of the director. When it comes to removal of directors, the governing bylaws for the association will always control. In general, however, one of the biggest mistakes that boards will make is treating officers and directors the same. The term “officer” and “director” are not always one and the same. A director does not always necessarily serve as an officer, and sometimes, officers are not directors. Understanding that the two are not one and the same is important, as most bylaws will contain a different removal process for officers versus directors. The typical bylaws for an association will provide that an officer of the association may be removed from his position by a majority vote of the directors. This does not mean, however, by removing an officer from his position as an officer, that the officer is also removed as a director. Again, it depends on the bylaws for an association, but in most cases, there is a separate process for the removal of that person as a director. Removing someone as an officer simply removes him from the officer position, not from the director position. The removal process for a director can be a little bit harder. If an association’s bylaws allow for removal of a director by the board itself, the circumstances for removal are usually limited to removal for unexcused absences or for delinquency. Outside of those limited circumstances, in most cases, removal of a director must take place through a vote of the membership. It is unfortunate when circumstances get to the point that the removal of a director must be sought, but it is in the best interests of all involved to ensure the correct procedure for removal is followed. The Board is Fed Up... To say that serving on a board of directors is no cakewalk would be an understatement. Whether deserved or not, directors often have to endure criticism from various members, mountains of emails, and, in some cases, harassment. It can be stressful as a volunteer to run a corporation, and it takes a lot of work with little to no appreciation. Sometimes the stress gets to C O N T I N U E S O N PA G E 4 3 .

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

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Georgia Commons • Third Quarter 2013

COLD CASE: Collecting From Difficult Owners By Joseph C. Larkin, Esq. Lueder, Larkin & Hunter, LLC • www.luederlaw.com

Services:

Repairs:

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ity services. Sadly, however, it seems that the worst Deadbeat is somehow able to live without these conveniences and continues to go deeper and deeper into debt with the association. When an association is faced with a person who cannot even be forced to pay, it is probably time to make some tough decisions. If the community is a condominium or has submitted its covenants to the Georgia Property Owners’ Association Act, and if the Deadbeat is more than $2,000.00 delinquent, the association has statutory authority to foreclose its lien subject to superior liens and encumbrances, and sever the Deadbeat’s ownership interest in the home. If this extreme step is taken, the end-goal is generally to “stop the bleeding,” get rid of the owner that we know will never pay, and, hopefully, replace him with someone who will. Sometimes, the mere threat of foreclosure will cause even the most stubborn Deadbeat to come to the table. If not, however, after the foreclosure takes place, the association should have a new owner in place soon, which will help keep the association within budget. Then, months and months (or maybe even years) from now, when Deadbeat is long gone and is probably making a different association’s Board miserable, he probably thinks we have forgotten all about him. Maybe he has a new job? Maybe he’s signed up for a bank account? Maybe he’s gotten his act together? That is when we strike. Don’t forget, a judgment lasts for seven years and can be extended for an additional seven more! Hold onto the judgment and have your attorneys periodically check for assets. A lot can change in 14 years! n

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ommunity associations are entirely self-funded from the assessment payments of their members. When members (owners) do not pay, an association’s revenue is reduced, along with the association’s ability to satisfy its continuing obligations. Simply put, when owners become delinquent, such nonpayment directly affects the association’s ability to operate. Because of this, it is hands-down one of the most important functions of an association’s Board of Directors to go after the bad guys. Generally, most associations seem to have a good handle on the collection procedure – perhaps starting with a few friendly reminders and then some less-than-friendly reminders before ultimately turning the collection matter over to the attorneys. And overall, thankfully, after some effort most owners will pay. Alas, there is always at least one owner who, no matter how much heat he comes under, simply refuses to pay. Every neighborhood has him – the worst of the worst – the Deadbeat. Knowing that the Deadbeat is not going to pay voluntarily, the association is going to have to sue him. Fortunately, Georgia law favors a community association’s ability to recover from delinquent owners. In most cases, the community association is going to win a money judgment against the Deadbeat without the need for trial. Once the money judgment comes in, the association gets the legal authority to file bank and wage garnishments and literally take money from the Deadbeat against his will. But what happens when the Deadbeat has no bank account and no job? By this time, most communities will have already reached into their “bag of tricks” and taken some of the more creative collection measures. These vary from community-to-community, but some common examples are: suspension of the use of the community amenities, suspension of voting rights, suspension of parking privileges, and suspension of common-expense util-

“When an association is faced with a person who cannot even be forced to pay, it is probably time to make some tough decisions.”

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Georgia Commons • Third Quarter 2013

Hot Topics for Board Members:

Worried About How to Enforce Covenants in Your Community? 5 Simple Tips to Help Boards Handle Complex Issues By Lisa Simmons Weibel, President Beacon Management Services • www.beaconmanagementservices.com

On the Hot Seat: Board Members and Covenant Enforcement At one time or another, many associations are faced with the task of taking an owner to court to enforce restrictive covenants. While the general rule is that the covenants must be enforced, there are common defenses that an owner can raise to sometimes thwart the enforcement effort of the association. The good news for associations – and their board of directors - is that these defenses are most often based upon the conduct of the association.  Therefore, with the careful implementation of a thoughtful plan for enforcement, they can be avoided. The defenses frequently raised with success by owners are estoppel, laches, waiver, abandonment, and selective enforcement. Owners asserting these defenses seek to use some act or failure to act by the association to convince the court that enforcement of the covenant would be unfair. Although closely related, each of these defenses has distinct elements that the owner must prove in order to prohibit enforcement. 1. To establish the defense of estoppel, an owner must prove that the association, or one of its officers, directors or agents, has done or said something on which the defendant relied to his detriment. Commonly, this defense arises in the context of architectural control committee (ACC) approval. Often a member of the board or committee tells a homeowner something to the effect of “I’m sure your plan will be approved as submitted, don’t worry about it.” After hearing that, but before any official ACC action, the homeowner then proceeds to landscape or complete construction according to the submitted plan, spending thousands of dollars. In the event that the plan is subsequently not approved, the homeowner is able to show that: • The association, through its agent, made a statement; • The homeowner relied on it; and • The homeowner spent money as a result. Most often, the association will be held to the statement of the committee member and the restriction requiring approval is unenforceable. These situations can be avoided by carefully instructing all board members, architectural control committee members and managers not to make any statements with respect to any covenant enforcement matter outside of official committee meetings, board meetings, or written decisions. 2. Laches is a defense closely related to estoppel. An owner can establish laches if there is a failure by the association to enforce a restriction for an unreasonable period of time, and as a result of the delay, the owner has suffered some disadvantage. There is no specific length of time that the homeowner must show to establish a defense of laches, but rather that the passage of time was unreasonable or unexplained and that there was some action by the owner based upon the inaction of the association. This is a defense that can be easily avoided by vigilant covenant enforcement. The association must act quickly upon receiving notice of a violation, and should have a specific enforcement policy. Warning letters should have a specific date for required compliance, and there needs to be diligent follow up by the association. The owner should never be given the impression that the association has no intention of enforcing the restrictions.  3. Waiver is somewhat different from estoppel and laches in that the owner does not have to show reliance to his detriment on some act of the association. Waiver is generally defined as an intentional relinquishment

“A variance is a good example of a waiver.” of a known right. To establish a valid waiver, the owner must show that the association both knew that it had the right to enforce a provision, and intentionally failed to enforce it. Many declarations explicitly provide that if the association waives the right to enforce a covenant once, that waiver cannot then be held to apply to all situations. A variance is a good example of a waiver. Although the association has the right to enforce a provision, it intentionally grants a variance, or exception to the provision, to an individual homeowner under the specific circumstances of that situation. Many homeowners will try to “bootstrap” themselves into the defense of waiver based upon a variance granted to another homeowner by the association. It is essential that the association be very precise with respect to the granting of a variance, limiting it to the specific homeowner, and quoting any applicable sections within the declaration, so that other homeowners may not claim that variance constitutes a waiver of the provision as to other owners. 4. Abandonment is the fourth defense commonly raised by owners in covenant enforcement cases. In order to show abandonment, the owner must prove that a reasonable person observing the neighborhood, with knowledge of the existing covenants, would conclude, due to the substantial and widespread violations within the neighborhood, that the association has abandoned the enforcement of the particular covenant at issue. The usual situation where this arises is where a homeowner would claim that there are numerous violations of that particular covenant throughout the subdivision, and based upon those violations, he or she reasonably believed that the covenant was no longer being enforced, and had been abandoned. There is no explicit numerical test or formula which can be relied on with respect to abandonment. It is a very subjective test which rests in the discretion of the Court. The association can take many steps to prevent the appearance that enforcement has been abandoned. Distribution of Rules and Regulations, accompanied by an explanatory letter, in a “Welcome Packet” to each new homeowner is an effective way of giving notice to new owners that the restrictive covenants are being enforced and help to rebut the abandonment defense. Signs at the entrance of a community indicating that the community is covenant protected and that the restrictive covenants are enforced can also help to convince a court that a reasonable owner would not think that covenant enforcement had been abandoned. The best insurance against a defense of abandonment is regular monitoring, and enforcement of covenants throughout the neighborhood coupled with effective communication to the owners of the intent of the association to pursue enforcement. 5. The fifth defense commonly raised by owners is selective enforcement.  It is closely related to abandonment as it is the situation where some homeowners are allowed to do something that another homeowner is not.  In order to show selective enforcement, the owner must prove that the Board C O N T I N U E S O N PA G E 4 4 .

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Georgia Commons • Third Quarter 2013

Keep Your Association Out of Hot Water: Follow the Rules By Jenny Smith, Esq. Dorough & Dorough, LLC

P

rocedures matter. It is easy to fall into patterns and rely on the “usual way” of doing things when it comes to operating an Association. However, straying from the procedures mandated in your Association’s governing documents can leave your Association “in hot water” when legal issues arise. It is critical that Associations comply with the specific provisions contained in their Declarations and Bylaws. When dealing with assessment collection or covenant enforcement issues, an Association’s ability to enforce the rules against a homeowner is predicated upon the Association’s own compliance with the rules. A recent case highlights this principle. In Hall v. Town Creek Neighborhood Association,1 a case regarding delinquent assessments, the defendant/owner argued that the assessments sought in the case were not properly levied, and the Georgia Court of Appeals agreed and reversed a judgment in favor of the Association. Defendant Hall challenged the obligation to pay assessments in this case by arguing that no Board of Directors had been appointed, or that the Board was not legally constituted, and therefore the assessments were not validly levied. The plaintiff Association argued, on the other hand, that during the period in question the Declarant could act as the Board of Directors and therefore the assessments imposed by the Declarant were enforceable. The Association presented evidence to the trial court that it is common for developers to act as the board of directors in new Associations. The Court of Appeals said that it is irrelevant whether it is common for a declarant to act as a board. What matters is whether the Declarant was entitled to act as the Board of Directors instead of appointing members to the Board, and in this case, it was not. The Court noted that the Association’s Declaration provided that the Board of Directors had the power to levy the assessments, and the Bylaws granted the Declarant the power to appoint and remove members of the Board during the period in question. Nothing in the documents gave the Declarant the right to refrain from appointing members, or to act in place of the Board instead. Since no Board had been appointed, the Court found that there was “no body that had the authority to levy the assessments at issue,” and thus the homeowner was not required to pay them. The lesson of this case is obvious: know what the rules are and follow them. An Association, just like any corporation, is bound by its governing documents. The structure of an Association, and any action that it takes, should conform to the specific procedures provided in those documents in order to be valid. In the assessment collection and covenant enforcement arena, this prerequisite condition should be considered by developers, member-controlled Boards, and community association managers alike. The following are just a few examples of questions that should be considered: • Are the directors and officers being appointed or chosen correctly? Special attention should be given to election procedures when applicable. For example, many Associations’ bylaws provide that directors are to be

elected by the membership, but then the directors should appoint officers. In practice, these two steps are often incorrectly folded together into an election of officers. Particular care should also be taken to comply with requirements for meeting and proxy vote notices. • Are assessments being properly levied? For example, has the developer or the board prepared and disseminated an annual budget in the required timeframe? If a written budget needs to be adopted at the annual meeting, or a special assessment has been proposed, have owners been given proper notice of the annual meeting or special meeting? Are the notices being delivered in accordance with the notice provisions of the applicable declaration or bylaws? • When dealing with covenant violations, have violating owners been given proper notice of the alleged violation and the sanctions to be imposed? If the Board is required to offer a hearing before imposing fines or suspending membership rights, did the hearing notice contain all of the required

“Finally, remember that following the rules is not enough if you cannot prove that you followed them.”

information? Some documents provide that an owner has the right to request a hearing before sanctions are imposed, while others provide that the Board must hold a hearing, regardless of whether an owner requests it. Some documents require several notices be sent to an owner over set periods of time and with specific information contained in each different notice. Associations should take care to ensure that their procedures and form documents conform to such specific requirements. Finally, remember that following the rules is not enough if you cannot prove that you followed them. Without copies of all required notices, resolutions, budgets, and other necessary documents, it is much more difficult to demonstrate that actions taken are legitimate. Obviously the above suggestions and considerations are not an exhaustive list — consult with your Association’s legal counsel to ensure that your procedures comply with your documents’ requirements, and keep your Association out of hot water. n

1. No. A12A1972, Court of Appeals of Georgia, March 28, 2013.

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Georgia Commons • First ThirdQuarter Quarter2013 2013

CAI-GA 2013 CALENDAR OF EVENTS JANUARY

APRIL

SEPTEMBER

Networking Luncheon 01/10/13 The Retreat 11:30 AM – 1:30 PM

CAI National Conferece 04/17/13 - 04/20/13 San Diego, CA

Manager Education Class 09/17/13 Location TBD

Homeowner Education Class 04/24/13 Location TBD 11 AM – 1:00 PM

Trivia Night 09/19/13 Hudson Grille – Sandy Springs

M-100 Class: Essentials of Community Associaton Management 01/10/13-01/12/13 Century Center Marriott 8:30 AM – 5:30 PM Manager CE Class Foreclosures & Bankruptcy 01/17/13 Location TBD 8 AM – 12 PM CAI National Law Seminar 01/24/13-01/26/13 Tucson, AZ Social 01/31/13 Location TBD 6 PM – 8 PM FEBRUARY Community Association Volunteer Leadership Class 02/12/13 Location TBD 3:00 PM – 9:00 PM

Tennis Tournament 04/26/13 Windward Lake Club 11 AM – 5 PM

M-310 Class: Management Company Administration 09/26/13 - 09/27/13 Century Center Marriott 8:30 AM – 5:30 PM

MAY

OCTOBER

Social: Wine Whiskey & Beer 05/09/13 Ye Olde Blind Dog 6 PM – 8 PM

CAI-Georgia Golf Tournament 10/10/13 Heritage Golf Links 11:00 AM – 5:30 PM

Networking Luncheon 05/16/13 Location TBD 11:30 AM – 1:30 PM

Speaker Luncheon 10/24/13 Maggiano’s Buckhead 11:30 AM – 1:30 PM

JUNE/JULY

DECEMBER

Manager Education Lunch & Learn 06/13/13 Atlanta REALTORS/R Center

Sponsor & Volunteer Appreciation Luncheon 12/13/13 Georgia Tech Conference Center 11:30 AM – 1:30 PM

AUGUST MARCH Casino Night 03/01/13 Northwood Country Club 4:00-8:30 PM M-203 Class: Community Leadership 03/07/13 - 03/08/13 Century Center Marriott 8:30 AM – 5:30 PM

M-205 Class: Risk Management 08/08/13 - 08/09/13 Century Center Marriott 8:30 AM – 5:00 PM CAI-Georgia Neighborhood Expo 08/24/13 Crowne Plaza Ravinia 8:30 AM – 3:00 PM

Manager CE Class: Fair Housing/ADA/ Documents/Leasing 03/14/13 Location TBD 8 AM – 12 PM Speaker Luncheon 03/21/13 Maggiano’s Buckhead 11:30 AM – 1:30 PM

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Community Associations Institute—Georgia Chapter • www.cai-georgia.org

...GET OFF THE BOARD?...from page 34. be too much and the board is tempted, as a whole, to simply walk away. As tempting as it may be, any time things get to a point where the whole board is looking for a way out, each director and officer still must remember that he has a duty of care and loyalty to the association. This means that the last director standing cannot resign unless and until he has arranged for a replacement to continue the business of the association. The duties owed by officers and directors to an association are actually very simple, but they should not be taken lightly. In a community of 200 homes worth about $250,000 each, the board is responsible for managing and protecting the value of a $50 million asset! It is no wonder that sometimes even the most well oiled train can run off the rails. When it does, it helps for each director and officer to take a step back and to focus on the core responsibilities of care and loyalty. Even with the most well intentioned directors or officers, it does not always work out. Knowing when to exit gracefully from the board in tough situations ensures that these duties are being met. n

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Georgia Commons • Third Quarter 2013

HOT TOPICS...from page 38. allowed one homeowner to do something and then disallowed another homeowner to do the same thing in the same set of circumstances.  One such situation might be where a Declarant has allowed a homeowner to install a shed and once the association has transitioned to homeowner control the Board refuses to allow homeowners to install sheds.   In this type of circumstance it is necessary for an Association to show that the Declaration granted a variance and that the Association has acted consistently in its refusals and that no similarly situated homeowners were treated differently.  The Court will look at the consistency in the application of the rules by the Association and the documentation by the Association for any variances granted. The defenses of estoppel, laches, waiver, abandonment, and selective enforcement can be avoided by the adoption of written policies and procedures (and accompanying forms) that address the application and approval process, as well as the enforcement process. The association should be vigilant and prompt in enforcement and keep detailed records pertaining to the association’s enforcement actions.   And the enforcement of the rules needs to be consistent and fair.  These simple precautions can help the association avoid a losing day in court. n

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Georgia Commons • Third Quarter 2013

CAI-Georgia Social on June 27th...

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(above) Barry Coleman of Association Capital Bank, Jessica Artt of ValleyCrest Landscape and Glenda Bromer of Homeowner Management Services (left) Marvin Pastel of Winter Capriola Zenner, LLC and Vivian Corley of NWP Services Corporation

(above) Dwayne Gillmore , Brandon Bean, and Tyler Recker of Sweetwater Pool Service (below) Jamie Platt Lyons of Lazega & Johanson LLC and Tamalla Mallet of Community Club Management

(above) Kevin Carnes of Arborguard Tree Specialists and Faith Brown of Tower Roofing

(above) Andrea Roderick of United Fire, Teresa Kissell of Heritage Property Management Services, Inc., Veronica Cuellar of Horizon Painting & Renovations, Stuart Thiel of PuroClean and Doris Lawrence of Heritage Property Management Services, Inc.

(right) Amanda Evans of Community Management Associates and John Dellapina of Northwest Exterminating

(left) Terrence Spires of Team Pest USA, Billy Gray of Gray Contracting and Dean Donald of Bayview Community Services (above) Hollie Battle of Community Management Associates, Thomas Cyphers of Addresses of Distinction, Jennifer Fratesi of Addresses of Distinction and Melinda Banks of Lazega & Johanson LLC

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