Community
Winter 2022
CONTACT A Resource For Homeowners Associations, Condominiums, Townhomes, and Cooperatives
www.dfwcai.org
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Community
CONTACT Winter 2022
Sponsors Upcoming CAI Events Upcoming Community Events Membership Report
Preparing for a Texas Winter Texas Legislative Action Committee
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WHO WE ARE? HOW YOU CAN HELP?
Water Heater Leaks
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COMMON, COSTLY AND CONCERNING FOR CONDOMINIUM ASSOCIATIONS
The Definitely Existing Fiduciary Duties
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IN COMMUNITY ASSOCIATION
Getting Ready
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FOR THE ASSOCIATION AUDIT AND TAX RETURN
2021 Golf Tournament Recap
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2021 Clay Shoot Recap
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Community Associations Institute is a national, non-profit, membership organization dedicated to the successful creation and operation of community associations. The Dallas/Fort Worth Chapter was established in 1980 to provide support for the North Texas area. Community Contact is published by the Dallas/Fort Worth Chapter of Community Associations Institute and is issued with the understanding that the publisher is not engaged in rendering financial, legal, accounting or other professional services, or be construed as a recommendation for any course of action regarding financial, legal, accounting or other professional services by Community Contact or its authors or advertisers. The services of a competent professional should be sought where professional services are required. The articles appearing in Community Contact do not necessarily reflect the opinion of CAI or the DFW Chapter, and acceptance of advertising does not constitute an endorsement of the products or services. All contents of Community Contact are protected by copyright. Reproduction in whole or in part without written permission is expressly prohibited. AAMC, AMS, and PCAM are registered trademarks of Community Associations Institute. CMCA is a registered trademark of the Community Association Managers International Certification Board. Many of the designations used by manufacturers and sellers to distinguish their products are CONTACT | WINTER 2022 claimed as trademarks. Use of a term in this publication should not be regarded as affecting the validity of any trademark or service mark.
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2021 BOARD OF DIRECTORS Clayton Hearn - President Roberts Markel Weinberg Butler Hailey PC chearn@rmwbhlaw.com Chris Broach, CMCA, AMS, PCAM - President-Elect Blue Hawk Management cbroach@bluehawkmgmt.net Anne Bernhardt - Secretary Park Towers Condominium Association anneb972@gmail.com Diana R. Larson, AMS, PCAM - Treasurer Assured Association Management, Inc. dlarson@assuredmanagement.com Olivia Hurtado, CMCA CIT olivia.hurtado@cit.com Mark Norton Insight Association Management Company mnorton@insightam.com Wendy Hazelwood Alliance Association Bank whazelwood@allianceassociationbank.com Joe Veach Globus Management Group jveach@globusmanage.com Kevin Cavanaugh - Immediate Past President Cavanaugh & Company, PLLC kcavanaugh@cavanaughcpas.com
MESSAGE FROM THE CED
2022 is finally here! I think there was a global sigh of relief when we flipped the calendar from December 31 to January 1 a few days ago. And just like 2020, it is safe to say that 2021 tested us in ways few of us could have imagined. I am the first to admit that the past two years have been a rocky journey and – truth be told – I may have uttered a few choice four-letter words during the year. But now that 2022 is here, I am shifting my focus from negative four-letter words to positive four-letter words: Hope, Grow, Give, and Care. With a new year brings a renewed optimism and excitement for the possibilities that lie ahead, and this year we are switching things up a bit with a new luncheon schedule and venue! Instead of monthly events, we will gather every other month, and we will be meeting at Maggiano’s Little Italy - I HOPE that this new schedule will allow us the opportunity to bring in more high-end speakers and reenergize our members to help our attendance numbers GROW to what they were preCOVID. We also plan to move our Expo to a Spring event in April, and will host our first ever Legal Forum in November, which will take our usual luncheon format and expand it into a half-day event. A number of our tried-and-true social events will return, including our North Texas Food Bank service day, Loot 4 Boots, and our food and toy drives later in the year – allowing our chapter to GIVE back to the communities we live in. Our members never fail to show how much they truly CARE about the surrounding North Texas community. We are continually striving to improve our website, magazine, and social platforms to allow for them to become resources to reach our membership. We are a continual work in progress, but you can be sure that we always try to keep your investment of time and money in our chapter as our main priority in creating a platform that you deem valuable.
MANAGEMENT James Nicholson, Chapter Executive Director DFW Community Associations Institute 14070 Proton Road, Suite 100 Dallas, TX 75244-3601 (972) 246-3540 www.dfwcai.org office@dfwcai.org
James Nicholson DFW-CAI CHAPTER EXECUTIVE DIRECTOR
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Diamond Sponsors Cardinal Strategies CCMC RTI/Community Management Associates, Inc. “CMA”, AAMC Texas Disaster Restoration Insight Association Management, AAMC Magnolia Fisheries & Lonestar Fountains McKenzie Rhody, LLP Neighborhood Management, Inc., AAMC Roberts Markel Weinberg Butler Hailey, PC Southern Botanical Staying-A-Float Lifeguarding (S.A.F. Guarding) Texas Security Bank Worth Ross Management Company, AAMC Platinum Sponsors ACME Roof Systems, Inc. Alliance Association Bank Blackmon Mooring/BMS CAT Brightview Landscape Services CIT Five Star Pools Globus Management Group Kerrane Storz, PC Kilowatt Partners Robert's Pool Service Scarbrough, Medlin & Associates SOLitude Lake Management Timothy, DeVolt & Company, P.C.
Gold Sponsors BB&T - Now Truist Davis-Dyer-Max, Inc. EmpireWorks Henry Oddo Austin & Fletcher, P.C. The Playwell Group Yellowstone Landscape Services Silver Sponsors Advanced Association Management Amtech Solutions Bob Owens Electric Co., Inc. Castle Group Classic Property Management, AAMC Excel Association Management, Inc. Landscape Professionals of Texas Riddle & Williams, PC Bronze Sponsors Allegra Print & Imaging Association Reserves - Texas Canady & Canady, LLC Cavanaugh & Company, PLLC Kraftsman Playground and Park Equipment Master Systems Courts RealManage Reserve Advisors, LLC SBSA, LLC, a Charles Taylor Company Education Sponsors Randolph Brooks Federal Credit Union
This “Deep In The Heart of Texas” logo recognizes our Business Partners who are apart of all four CAI Texas Chapters.
2021 DFW CAI COMMITTEES Ambassadors of Fun
Committee Chair: Montana Hantes
Community Affairs
Committee Chair: Wendy Hazelwood, CMCA
Expo
High Rise Managers Forum
Committee Co-Chairs: Kathy Epperson, PCAM and Matt Kopchak, PCAM
Magazine
Committee Chair: Chris Broach, CMCA, AMS, PCAM
Committee Co-Chairs: Betty Clarady and Robin Anderson
Membership
Gala Committee
Programming
Golf Tournament
Sporting Clays Committee
Chair: Mark Norton, AMS, PCAM
Committee Chair: Jeff Higgins
Committee Chair: Cindy Martin, CMCA, AMS, PCAM
Committee Chair: Ruth McLaughlin, CMCA, AMS
Co-Chairs: Wendy Hazelwood, CMCA & Alicia Speer
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PREPARING FOR A TEXAS WINTER By: Jason Dove | Classic Construction and Restoration
You don’t have to live in Texas long to realize just how unbalanced the weather can be at times. 2021 was a year for the record books! Texas suffered a brutal arctic blast that lasted for days, resulting in more than 456k insurance claims to be filed for water damage to homes and businesses across the state due to frozen pipes. Cold temperatures are around the corner and now is the time to prepare for what mother nature can have in store. With proper planning, you can lessen the risk of damage to your community and homes due to frozen pipes. Here is a list of some of the overlooked items that you should think about when winterizing your community or home. ✔ Fire suppression lines and control valves are often installed in attics, parking garages, balconies and closets that are completely susceptible to the elements. While insulating these lines and rooms is not common, by doing so you can protect your community and home from costly repairs and damage. When these lines burst, they release thousands of gallons of water in a short period of time causing serious damages. ✔ Caulking gaps, voids and penetrations around the home and facility where cold air can enter the wall cavity and get to the pipes- This includes doors, windows, spigots, vents in the brick, stucco, or siding facade. ✔ Closing off ventilation to the foundation of your home or facility if it has a crawl space. If your community is pier and beam and you have pipes underneath, ensure these pipes are properly wrapped and protected. Seal any gaps around pipes and wires that enter the home or facility from underneath. ✔ Ensure that pool pumps, irrigation lines and outside water fountains have the water lines properly insulated ✔ Exposed drainpipes in parking garages can freeze at the elbow or p-trap of the plumbing. When water freezes in the p-trap, this causes the pipe to expand and ultimately crack. Although not as common, by wrapping and protecting these pipes you can avoid costly repairs due to cracked pipes. According to the Farmer’s Almanac, Texas is in for another frigid winter. Taking the steps above into consideration combined with other commonly performed items inside and out can decrease your overall risk of having frozen pipes. While we hope to have a winter that is forgiving this time around, the most we can do is prepare for the worst and expect the best! CONTACT | WINTER 2022 • 9
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SBB Management Company is dedicated to providing professional homeowners association management and consultation to Texas communities.
Accredited Association Management Company (AAMC)
45 Years of Association Leadership!
• Enduring Client Relationships • Unparalleled Staff Longevity • Industry Leading Technology • Continuing Education Programs • Senior Direct Support Personnel • Robust Accounting Analysis Tools • Mobile Management Platform • Digital Document Management • Family Corporate Culture
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Find us on Access Your HOA - Anytime, Anywhere
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retail | office | mixed-use | multi-family | civic | education healthcare | lodging & hospitality
www.cleanscapes.net | info@cleanscapes.net 12 • CONTACT | WINTER SUMMER2022 2021
AAMC®- Accredited Association Management Company®
We Can MANAGE IT ALL DISCOVER THE NEIGHBORHOOD DIFFERENCE NMI is an Accredited Association Management Company that has been expertly managing a variety of community associations, including master planned, single family, condos and townhomes, in the DallasFort Worth metroplex for nearly two decades. We are dedicated to building better communities! NeighborhoodManagement.com NMI@NeighborhoodManagement.com Beverly Coghlan, CMCA, AMS, PCAM Beverly@nmitx.com 972.359.1548 CONTACT | WINTER 2022 • 13
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2022 Calendar of Events January Wednesday, January 26th Membership Luncheon & Annual Meeting 11:30 AM - 1:00 PM Maggiano’s Little Italy | Willow Bend
February Wednesday, February 9th to Friday, February 12th Community Association Law Seminar *National Event AOF - NTFB Service Day Date and Time To Be Determined North Texas Food Bank - Plano, TX
March Wednesday, March 9th Membership Luncheon 11:30 AM - 1:00 PM Maggiano’s Little Italy | NorthPark Cornhole Tournament Date and Location To Be Determined
April
(No luncheon...) Wednesday, April 13th 18th Annual Expo & Trade Show Watters Creek Convention Center | Allen 8:00 AM - 5:00 PM
May Wednesday, May 11th Membership Luncheon 11:30 AM - 1:00 PM Maggiano’s Little Italy | NorthPark Wednesday, May 4th to Saturday, May th CAI National Conference Orlando, FL *National Event Annual Awards Gala Saturday, May 21 7:00 PM - 10:00 PM Marriott Quorum by the Galleria
June High Rise Manager’s Forum Friday, June 10th 11:00 AM to 4:00 PM Location To Be Confirmed
July August Wednesday, August 10h Membership Luncheon 11:30 AM - 1:00 PM Maggiano’s Little Italy | NorthPark AOF - Annual Bowling Tournament Thursday, August 25h 5:00 PM - 8:00 PM Bowlmor Addison
Some dates are subject to change. Please check www.dfwcai.org to confirm all dates as we approach events. You can also sign up for the email updates, which will let you know if any dates have changed.
September AOF - Loot 4 Boots: Homeless Vets Date and Location To Be Determined 3:00 PM - 6:00 PM
October Wednesday, October 12th Membership Luncheon 11:30 AM - 1:00 PM Maggiano’s Little Italy | NorthPark *Canned Food Drive In Conjunction With The October Luncheon Annual Golf Tournament Monday, October 24, 2021 11:00 AM - 6:00 PM Brookhaven Country Club | Farmers Branch
November Wednesday, November 10th Legal Forum 1:00 PM - 5:00 PM Date and Location To Be Confirmed Annual Sporting Clays Tournament Wednesday, November 17th 12:00 PM - 7:00 PM Elm Fork Shooting Facility
December Wednesday, December 14th Membership Luncheon 11:30 AM - 1:00 PM Maggiano’s Little Italy | NorthPark *Toy Drive In Conjunction With The Member Luncheon
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UPCOMING COMMUNITY EVENTS City Mardi Gras Events – February – March 1, 2022 McKinney – The Krewe of Barkus Lake Dallas - Mardi Gras Event Oak Cliff – Mardi Gras Parade Dallas – Annual Mardi Gras Texas Style DFW West – Mardi Gras Mad Dash Sherman – Mardi Gras in Downtown February – Frisco Starfest – 2nd Saturday of Month Frisco www.visitfrisco.com February – Annual Spring Clean Up Prosper www.prospertx.com February – Annual Fishing Derby Prosper www.prospertx.com Feb. 12 - Hot Chocolate 5k Dallas hotchocolate15k.com/city/dallas/ Feb. 26-27 – Cowtown Marathon Fort Worth cowtownmarathon.org March – Texfest – Texas Independence Day Celebration Carrollton March – Spring Fling Rockwall Mar. 4- 6 – North Texas Irish Festival Dallas www.carnifest.com/north-texas-irish-festival-2022/ Mar. 12 -St. Patrick’s Parade Dallas www.dallascitynews.net/st-patricks-day-events-on-greenville-avenue March 22 – 28 – Celebrate Southlake Southlake Apr. 30 - Peticolas 5k Velvet Hammer Dallas www.velvethammer5k.com
Committed to communities For more than 35 years, we have provided solutions specifically designed to meet the needs of property management companies and community associations. You can count on us to be your trusted partner. BBT.com/AssociationServices. n n
Payment processing services Association loans
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Payment by ACH and online Coupon books and statements
Alan Alanis, VP / Relationship Manager 512-482-0103 | AAlanis@BBandT.com BB&T now Truist. Truist Bank, Member FDIC. Loans and lines of credit are subject to credit approval. ©2021 Truist Financial Corporation. All rights reserved. 16 • CONTACT | FALL 2021
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SMILES. HARMONY. JOY. ............
Authentic relationships set us apart, honesty rules, optimism thrives and great people show up with passion and purpose to deliver unprecedented service to dynamic communities. This is community management by CCMC.
To learn more about our services, visit CCMCnet.com. To join the team, visit https://www.linkedin.com/company/ccmc/jobs/.
469.246.3500
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RMWBH Attorneys and Counselors at Law
LEAH K. BURTON
Get to know your DFW area attorney.
5 FACTS ABOUT LEAH K. BURTON 1. Leah represents POAs of all sizes from small condominium complexs to large multi-thousand lot master-planned communities. 2. Leah has practiced POA law in both Texas and Florida and understands the complexities that associations face around the U.S. 3. Leah was raised in Anchorage, Alaska and is no stranger to the cold winters that sometimes visit Texas, but she enjoys the Texas summers more. 4. Leah’s experience practicing civil litigation in California prepared her to better advise her POA clients on the risks they may face from litigation. 5. Leah has been recognized for her continued work to increase diversity within our communities. Her work on the topic has been featured by CAI on an international scale and formed the basis of CAI’s renowned Diversity and Inclusion Guide.
Learn more about Leah at www.RMWBH.com.
COMING SOON! RMWBH DFW One Cowboys Way Frisco, TX 214.365.9290
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Serving North Texas Since 1991
Texas’ most highly qualified lake and pond management company serving all of Dallas/Ft Worth and surrounding areas
Our Services
Our Staff
• Aquatic Vegetation Control
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of combined experience on staff
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Magnolia Fisheries • 217 N Coppell Rd • Coppell, TX 75019 972-724-0071 • www.magnoliafisheries.com • info@magnoliafisheries.com
Fountain and Aeration Products and Services Since 1997 We sell and represent all major fountain manufacturers, including Aqua Control, Aqua Master, Airmax and Kasco Marine. We are the world’s largest Aqua Control distributor. Our services include: • Fountain and Aeration Installation • Waterfall Pump Sales and Installation • Solar and Wind Aeration Products
• Fountain and Water Aeration Preventive Maintenance Programs • Troubleshooting and Repair Services for All Brands
Lone Star Fountains • 217 N Coppell Rd • Coppell, TX 75019 972-471-3810 • www.lonestarfountains.com • info@lonestarfountains.com 20 • CONTACT | WINTER 2022
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Commercial Landscaping to Make You Look Your Absolute Best Reliable Solutions • Beautiful Properties • Lasting Impressions
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yellowstonelandscape.com
Texas Legislative Action Committee (TLAC) is CAI’s only official voice with legislators and regulators in the State. This committee allows CAI to speak with a cohesive voice on legislative and regulatory matters that affect community associations, community association managers, and business partners. Our mission is simple – together, CAI’s TLAC advances, defends, protects, and strengthens public policy for the community association housing model. Although the Texas Legislature is not in session, advocacy efforts do not stop, and we must remain proactive during the interim. Here is our mission and promise to you: •
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We will work together in educating our members, volunteers, and homeowners of our community associations on all proposed legislation that may be forthcoming. Ensure that CAI members and Texas Chapters have regular opportunities to provide input on the development of state advocacy priorities.
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Identify, analyze, monitor, and actively participate in the development of state legislation, regulations, or other public policy initiatives of relevance to the creation and operation of community associations, supporting or opposing proposals as appropriate.
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Serve as the CAI point of contact for state government officials and the media regarding state legislation, regulations, or other public policy initiatives of relevance to the creation and operation of community associations.
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Disseminate information on state legislative, regulatory, or other public policy initiatives and developments to CAI members and others as appropriate, to involve interested and affected individuals in advancing CAI’s Texas advocacy efforts.
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Educate and inform state government officials regarding the interests and concerns of community associations, their residents, and the professionals who serve them.
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We will engage a lobbyist to represent the interests of Texas community associations.
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To fulfill our mission and promise, we will need to build a funding base that starts with YOU! Your contribution makes TLAC’s legislative efforts possible — without your financial support, we cannot be as effective in promoting sensible community association legislation. We urge you to consider contributing to TLAC and engage in an advocacy process that has already begun.
TO MAKE A CONTRIBUTION TO TLAC VISIT https://advocacy.caionline.org/lac-donation-form/ If you have any questions or concerns or if you are interested in serving on a committee, being an advocate, or just staying informed, please let us know by emailing your chapter Executive Director – James Nicholson – at office@dfwcai.org. Wishing you and yours a very happy, healthy 2022! CONTACT | WINTER 2022 • 23
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© 2021 Sotheby’s International Realty. All Rights Reserved.The Sotheby’s International Realty trademark is licensed and used with permission. Each Sotheby’s International Realty office is independently owned and operated, except those operated by Sotheby’s International Realty, Inc.The Sotheby’s International Realty network fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. All offerings are subject to errors, omissions, changes including price or withdrawal without notice.
NOTHING COMPARES
Why Shannon Spizman makes a difference
Only one agent has the unique experiences — as an attorney working with HOAs, boards, community associations, management companies, rules, regulations, ins and outs — that Shannon Spizman does. Whether you are buying or selling, you should talk to Shannon.
SHANNON SPIZ MAN
Global Real Estate Advisor | 909-532-9224 | sspizman@briggsfreeman.com
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Water Heater Leaks Common, Costly and Concerning FOR CONDOMINIUM ASSOCIATIONS
By Steven Fielding
The governing boards of condominium associations worry about many things. Reserves, rules enforcement, insurance costs, maintenance, pets, parking and COVID are on a long list of things that keep trustees and association managers up at night. Water heaters probably are not always on that list—but they should be. Here are a few hard – or soggy – facts: • Water damage is one of the two leading property damage risks faced by homeowners, representing nearly one-third of all homeowner claims filed annually, exceeded only by wind and hail damage. • One in every 50 insured homeowners files a water damage claim every year; the average claim cost is about $7,000, adding up to more than $2.5 billion in insured losses annually, according to the Insurance Information Institute. • There are no statistics on how many of those claims are attributable to water heaters but 75 percent of all water heaters will fail – usually without warning – within 12 years of their purchase. So it is probably safe to assume that a sizable percentage of those water damage claims result from water heaters that leak or fail entirely. • It is also safe to assume that if a water heater leaks in a condominium building with attached units, the damage won’t be confined to the unit in which the offending heater is located; the water and the damage will spread to adjacent units and common areas. So multiply that average $7,000 claim by 10 or 20 units; add the potential damage to common areas; consider the risk of mold (a byproduct of water damage), the cost of remediating it, and the potential legal liability for the 26 • CONTACT | WINTER 2022
association if mold sickens some residents. Insurance industry analysts report that water damage claims in excess of $500,000 have doubled since 2015; claims exceeding $1million have tripled in that time period. Also consider that associations dealing with common area damage will be paying a large deductible and may be filing an insurance claim, which could increase the association’s premium costs. And now, perhaps, you begin to understand why water heaters should be on that list of association concerns.
PREVENTING DAMAGE Why do water heaters fail? Age is the primary culprit. Water heaters have an average useful life of about 12 years. But the operative word here is “average.” Some water heaters fail well before that 12-year mark; others perform like champs for much longer. The problem is – you can’t predict when any given water heater is going to fail. There is no equivalent of a car’s ‘check engine’ light to alert you to an issue you must address; you don’t usually know a water heater is failing until it has dumped 80 gallons of water in your basement or your garage or your kitchen. As early warning systems go, this isn’t terribly effective. Fortunately, there are some alternatives. • Automatic shut-off valves. These units typically consist of a high quality valve installed directly into the plumbing line, and moisture sensors that send a
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‘shut-off’ signal to an electric control box. The WAGS valve my company sells works on the same general principle, but it isn’t powered by electricity. We use a spring mechanism wrapped with a water soluble sensor element that is placed in a drip pan under the heater. When water hits the sensor, it weakens, releasing the high-pressure spring and shutting the heater off after no more than one inch of water has accumulated in the pan. Water leak alarms. These units also use sensors that sound an alarm when water is detected, but owners must remember to turn the alarm on (they don’t always) and someone has to be around to hear the alarm and able to act quickly, by turning off the water supply. A lot of water can leak and cause a lot of damage in a very short period of time.
FAILED WATER HEATER | FLOODING
EFFECTIVE MAINTENANCE Shut-off valves and alarms can prevent damage – or reduce it – if a water heater leaks. Maintaining the heaters can go a long way toward preventing those leaks. Plumbers suggest that owners have their water heaters inspected – and drained – annually. Drainage will eliminate sediment that can build up inside a heater, reducing its effectiveness and possibly making the interior of the tank rust. Regular inspections can also assess the condition of the temperature and pressure valve and monitor the condition of the anode rods (some units have one, others have two) that protect the tank from hard water minerals. As these rods erode over time, the protection diminishes, reducing the water heater’s life and increasing the risk that it will fail prematurely. Replacing the rods when necessary can extend a water heater’s life.
WHAT HOAS CAN DO Condominium boards should deal with hot water heaters the same way they deal with other risks affecting the health and safety of residents or the community’s property values and finances: By providing information that encourages responsible behavior by owners and adopting association policies that require it. A few specific suggestions: 1. Educate homeowners. Explain the damage leaking water heaters can cause to individual units and common areas. 2. Encourage owners to have their water heaters inspected at least annually by a qualified plumber. 3. Consider making annual inspections mandatory, for the same reason that many associations require annual inspections of fireplaces – because poor maintenance of the equipment poses a potential risk to other residents and the entire community. 4. Encourage – or require- owners to install automatic shut-off valves or water sensor alarms on their water heaters. 5. Require owners to replace water heaters older than 11 years, with an exception for those who install automatic shut-off valves. Units with these devices can operate safely until they fail. 6. Consider making the purchase and/or installation of shut-off valves an association expense. Leaks pose risks to other units and common areas — risks that owners have a shared interest in mitigating. 7. Consult your insurance agent. Some insurance companies require leak prevention devices on water heaters or strongly encourage them. Ask if your association’s insurer is one of them. Installing shut-off valves community-wide may not reduce the association’s insurance premium, although it would give your agent a strong argument for requesting a discount. But proactive risk management policies like this will improve the association’s overall risk profile, which may help you secure a favorable premium rate. Preventing water heater leaks will also avoid the costly damage claims that can increase your premium and may make it more difficult to obtain the coverage the association needs. About the Author: Steven Fielding is president of AQUAGUARD, LLC, which manufactures the WAGS Valve — a product he discovered as a consumer and liked so much, he bought the company that produces it. He is now on his third water heater with a WAGS valve. When the previous two heaters (operated long past their estimated useful life) failed, the valves worked perfectly, protecting his finished basement from water damage.
AQUAGUARD LLC | 780 Wellington Avenue Cranston, RI 02910 | 1-844-GET-WAGS | WAGSVALVE.COM
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Put the power of more than 20 years of engineering experience to work for your Homeowners Association (HOA): Reserve Study - a clear road map that helps your HOA budget maintain its assets and assure stability for your association Transition Study - to confirm that you are getting what you should be receiving when your association takes over Construction Monitoring - the HOA's advocate on the construction site Consulting Services - evaluate site issues and create specifications to help field proposals from contractors Criterium Dotson Engineers 972-562-1011 info@criteriumdotson.com www.criteriumdotson.com 30 • CONTACT | WINTER 2022
WHAT’S IN YOUR POND WATER? Most of the issues lake or pond owners and managers will face can be traced to an imbalance in the water quality. SOLitude begins with strategies to establish a baseline understanding of the current conditions to develop a water quality restoration program tailored to your specific needs and goals. This approach increases long-term success to achieve ecological balance and sustainability.
Download our FREE Report - 8 Questions to ask when hiring a lake and pond management company solitudelakemanagement.com/questions
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855-534-3545 • solitudelakemanagement.com
For a full list of our services, visit solitudelakemanagement.com/services CONTACT | WINTER 2022 • 31
association managers. Part three will cover the business judgment rule. “When someone has a fiduciary duty to someone else, the person with the duty must act in a way that will benefit someone else, usually financially.” --Legal Information Institute, Cornell Law School Going back at least to 1888, the same year the Texas capitol was dedicated and opened to the public, the Texas Supreme Court ruled that corporate directors owe fiduciary duties to the corporations they serve.i Because condominium associations and subdivision developments are generally non-profit corporations, this rule applies to these community association boards.ii
The Definitely Existing Fiduciary Duties in Community Association (Part 1—Board Members) By: Jeff Kerrane
Generations later, this fiduciary duty was codified in the Texas Non-Profit Corporations Code,iii which requires non-profit directors to act: (1) in good faith; (2) with ordinary care; and (3) in a manner the director reasonably believed to be in the best interest of the corporation. These three separate standards all apply to board members.iv Texas courts have specifically held that HOA board members owe fiduciary duties to their associations in addition to their duties of good faith and ordinary care.v
This is the first of a three-part series on fiduciary duties in community associations. This article covers fiduciary duties of board members. PartUniform two will cover fiduciary dutiesapplies of community The Texas Condominium Act, which generally to condominium associations created on or after January 1, 1994, also spells out this fiduciary duty. However, Texas courts association managers. Part three will cover the business judgment rule. have made clear that even the boards of condominium regimes created before 1994 owe vi
fiduciary duties.vii
“When someone has a fiduciary duty to someone else, 1: the person with the duty must act in a way thatFig. will benefit someone else, usually financially.” --Legal Information Institute, Cornell Law School
Going back at least to 1888, the same year the Texas capitol was dedicated and opened to the public, the Texas Supreme Court ruled that corporate directors owe fiduciary duties to the corporations they serve.i Because condominium associations and subdivision developments are generally non-profit corporations, this rule applies to these community association boards.ii Generations later, this fiduciary duty was codified in the Texas Non-Profit Corporations Code,iii which requires non-profit directors to act:
Fig. 1: Do board members owe a fiduciary duty to an
Do board members owe a fiduciary duty to an association? association?
Condominium Associations Subdivision Developments
Associations Created Before 1994
Associations Created After 1994
YES!
YES!
YES!
YES!
Texas’ Non-profit Corporations Code § 22.223 states that a director of a corporation is not considered to have the duties of a trustee of a trust.viii Trustees are specifically obligated to carry out the instructions in the trust or face personal liability. A community association board member is therefore specifically relieved of personal liability for not acting to strictly enforce the covenants and conditions imposed in the community association’s declaration. Boards have some limited discretion to take a more relaxed approach to enforcing the governing documents, so long as they do not breach their fiduciary duties.
(1)
in good faith;
(2)
with ordinary care; and
(3)
in a manner the director reasonably believed to be in the best interest of the corporation. Texas’ Non-profit Corporations Code § 22.223 states that a director of a corporation is not
considered toThis have is the commonly duties of a trustee a trust. boards Trustees are specifically seenof when give owners obligated to These three separate standards all apply to board carry out the instructions in the trust or face personal liability. A community association board reasonable extensions to ofpay assessments fornot reasons members.iv Texas courts have specifically held member that is therefore specifically relieved personal liability for acting of to strictly enforce financial hardship. Other allowing HOA board members owe fiduciary duties to their the covenants and conditions imposed in the examples community include association’s declaration. Boards have some limited discretion to take activity a more relaxed to enforcing the governing limited commercial to be approach conducted in a unit, associations in addition to their duties of good faith documents, so long as they do not breach their fiduciary duties. v such as working from home, storing work materials in and ordinary care. a closed garage, or even operating a personal services This is commonly seen when boards give owners reasonable extensions to pay assessments for business (ex. lawyer, realtor, or website designer) be The Texas Uniform Condominium Act, which reasons of financial hardship. Other examples include allowing limited to commercial activity to be conductedoperated in a unit, such from home, materialsare in a closed garage, fromas aworking residential unit storing if thesework activities generally applies to condominium associations created or even operating a personal services business (ex. lawyer, realtor, or website designer) to be not visible from the exterior of the unit. on or after January 1, 1994, also spells out this fiduciary operated from a residential unit if these activities are not visible from the exterior of the unit. duty.vi However, Texas courts have made clear that even 2: Whatofare examples of fiduciary duties? the boards of condominium regimes created before Fig. 2: WhatFig. are examples fiduciary duties? 1994 owe fiduciary duties.vii viii
Type of Duty Duty of Care
Duty of Loyalty Duty of Disclosure Duty of integrity
Description of Duty Prior to making a decision, directors must inform themselves of all material information reasonably available to them Directors must act without personal economic conflict Directors must act with complete candor Directors must act fairly and honestly
32 • CONTACT | WINTER 2022
Jeff Kerrane is a shareholder with the construction defect law firm of Kerrane Storz, P.C. Jeff can be reached at jkerrane@kerranestorz.com. i
“The fiduciary character of directors referred to, is such that the law will not permit them to manage the affairs of
Jeff Kerrane is a shareholder with the construction defect law firm of Kerrane Storz, P.C. Jeff can be reached at jkerrane@kerranestorz.com. i “The fiduciary character of directors referred to, is such that the law will not permit them to manage the affairs of the corporation for their personal and private advantage when their duty would require them to work for and use reasonable efforts for the general interest of the corporation and its stockholders and creditors. The confidence thus reposed in them cannot be thus abused with impunity, and they cannot use their position to promote their own interest, in respect to anything thus intrusted to them, to the prejudice of creditors or other members.” Seale v. Baker, 7 S.W. 742, 745, 70 Tex. 283, 291 (Tex. 1888). ii For the extremely rare circumstance where a condominium association or a subdivision development is not incorporated as a non-profit, different rules may apply. iii Tex. Bus & Org. Code § 22.221. iv Beck v. Law Offices of Edwin J. (Ted) Terry, Jr., P.C., 284 S.W.3d 416, 428–29 (Tex.App. Austin,2009). v “The directors and officers of a nonprofit corporation (such as the HOA) must discharge their duties ‘in good faith, with ordinary care, and in a manner the director reasonably believes to be in the best interest of the corporation.’ … ‘Under Texas law, corporate officers and directors owe fiduciary duties to the corporations they serve....’. The provisions of Texas law that Whitaker cites as eliminating his fiduciary status do no such thing. Those provisions merely align the fiduciary duties of nonprofit directors with those of directors in for-profit corporations. In re Whitaker, 642 Fed.Appx. 345, 348 (C.A.5 (Tex.), 2016). vi Tex. Prop. Code § 82.103(a). vii The board of a condominium regime created in 1982 owed fiduciary duties to the association. Myer v. Cuevas, 119 S.W.3d 830, 836 (Tex.App. San Antonio,2003). viii Tex. Bus. Org. Code § 22.223 states: “A director of a corporation is not considered to have the duties of a trustee of a trust with respect to the corporation or with respect to property held or administered by the corporation, including property subject to restrictions imposed by the donor or transferor of the property.”
CONTACT | WINTER 2022 • 33
McKenzie Rhody has represented thousands of homeowners and homeowners associations affected by defects in their townhomes,
Member of the Community Association Institute
condominiums, lofts, high-rises and single-family homes.
– Balconies – Patios – Expansive Soils – Roof Defects – Structural Defects – Foundation Defects – Water Intrusion – All Other Construction Defect Claims
If you believe construction defects exist at your project, call (800) 996-1770 for a FREE initial investigation or visit us at mrcdlaw.com for more information.
Serving the Dallas Metroplex and all of Texas | (469) 587-6800 | www.mrcdlaw.com 34 • CONTACT | WINTER 2022
1st
TDJ Contractors
2nd
Classic Construction
2021 CAI Golf Tournament October 25th
Thank you to all the players, sponsors and volunteers for a fun day of golf at Brookhaven Country Club Golf Course.
3rd
Dryman Construction
Closest toThe Pin: Max Elliot
Longest Drive: Wendy Hazelwood and Joe Kemph
36 • CONTACT | WINTER 2022
GETTING READY
for the Association Audit and Tax Return Well, you have made it through the budgeting process, enjoyed the holidays, and closed the year and now it time for the audit preparation and tax return. I am sure that is what all of you managers and association accounting staff enjoy the most about your job…the audit! Seriously, I really do understand if it is not your favorite task. I my prior career life, I was “the audited” rather than “the auditor” and I understand that the audit is something you “have to do” after your day job is complete, i.e.: it is not your TOP priority. When I was the Controller of GE Asset Management Business, I had audits going on all the time and often had multiple portfolios being audited at the same time. Thanks to this experience, I was forced to learn a thing or two. The main concept I learned and would like to share with you is you can “pull things together for the audit” or “set up your financial closing process so that you ARE prepared for the audit”. I found that the latter was a much better solution than trying to “pull it all together” when the audit begins. So, what are the key bullet points that will have you prepared for an audit and that you can incorporate into your regular closing process…especially at year end? Below is my summary: 1. First and foremost, keep lead schedules for each balance sheet account. On these schedules, keep up with the details that make up a balance sheet account balance. For example, if you have a prepaid balance on the balance sheet, the lead schedule should show the details (vendor, original invoice amount, period covered, amortization methodology, and calculation of the remaining prepaid). The total of remaining
prepaid balances by vendor/transaction should tie to the balance sheet account. Keep up with the lead schedules throughout the year is my recommendation. It is an effective tool for financial statement review and accuracy. It was something that I always required for my review in the closing process. I would recommend a more intense review every quarter and make sure you have good documentation at year end. If you have this and provide to your auditor, it will drastically reduce the work you have to support the audit. 2. Obvious, but worth repeating, have timely bank reconciliations of all bank accounts. However, do not stop with the reconciliation, often the overlooked and harder work is to resolve lingering reconciling items. I would recommend the 3-month rule, if it is still a reconciling item after 3-months, action should be taken. 3. Support for all adjusting entries: In today’s accounting systems, many entries are system generated based on rules put in place. However, manual entries are made to correct something, whether a reclass, deferral, allocation, etc. Make sure you have good support for each adjustment and store them in a way that they can be provided to the auditors. In so doing, you should have already done the work to prepare the entry and you can eliminate a lot if not all the time Continued on next page
CONTACT | WINTER 2022 • 37
Continued from previous page
explaining when the audit is underway. In summary, save yourself time! 4. AR write-offs: Keep up with these, have clear support and provide with audits 5. A lead schedule that provides support and backup for major revenue accounts. Your assessments should be fairly straightforward to schedule; the number of units per period times the assessment rate. If the number of units are moving throughout the year, track the changes that affect the assessment billing in your schedule. Also, if you have special assessments, keep a schedule for the special assessment and have the related special assessment expenses tracked in a schedule. 6. Prepare and keep a lead schedule for insurance claims and related expenses. 7. Expense records: It’s obvious…. but have a good system that allows the auditor access to all these records. It will save you a lot of time if it is complete, organized, and accessible to the auditor. While all the above are applicable for good financials for the tax return, there are a couple of additional items that I would mention specifically for an Association tax return. 1. Interest Income, Investment Income, Royalty Income, Sales of land/units/assets are significant items
38 • CONTACT | WINTER 2022
for an Association tax return. If your association has such transactions in the year, providing support for those items along with the financials will assist in properly preparing the tax return and will limit the amount of follow up required. 2. Also, if your association has income statement items that are non-descript such as “other income” or “miscellaneous income”, provide detail of what makes those up. The tax preparer needs to determine if they are “exempt function income or non-exempt function income” for an 1120-H return or “member vs. non-member” income for an 1120 tax return. If you can get ahead of it and provide that up front, or have such activity in a more descriptive account, it will reduce follow up, improve the return. While none of these bullet points are revolutionary or surprising, I remember how the day to day demands of accounting, controllership, etc. for an operating entity goes. You are constantly being asked to provide various financial breakouts, budgets, explanations, etc., and the straightforward items I mentioned can be compromised if it is not done as you go. Also, remind yourself of the “WHY” very often. The “WHY” for all of these bullet points is “IT WILL SAVE YOU TIME AND IMPROVE THE QUALITY OF YOUR FINANCIAL REPORTING”….make that the reason you do it, rather than doing them to “provide to the auditor”. Having the right mindset will make this rewarding rather than a chore!
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DECEMBER 2021 LUNCHEON The last luncheon of 2021 was a great success. We had a very busy luncheon with a Toy Drive, Tacky Outfit Contest and presentation by Tom Coverly. Thank you to Everyone who brought Toys to Support Toy for Tots. We collected over 100+ toys. Bringing in the holiday spirit were a number of tacky outfit wearers. Congratulations to our Tacky Outfit Contest Winners Homer Green and Claudia Hunt. What a great way to end the year with Tom Coverly. Tom is a great entertainer and illusionist. Interacting with the whole group, creating some good laughs and producing some pretty impressive tricks and illusions.
CONTACT | WINTER 2022 • 41
2nd Annual DFW CAI Clay Shoot November 18, 2021
Thank you to all the shooters, sponsors and volunteers for such a great day of shooting at Elm Fork Shooting Sports. Also, a thank you to Roberts Markel Weinberg Butler Hailey PC for putting on the continuing education class for our association managers.
42 • CONTACT | WINTER 2022
Clay Shoot Winners 1ST PLACE FEMALE
1ST PLACE MALE
Misty Rae
1st
Joe Veach
2nd
TDJ Contractors
3rd
Globus Management
Cardinal Strategies
CLAY CONSERVATIONIST
SHOTGUN GOLF CLOSEST TO THE PIN
Watercentric
Steve Bone
CONTACT | WINTER 2022 • 43
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44 • CONTACT | WINTER 2022
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MEMBERSHIP
REPORT New Members
Ms. Brittany Bruner Bridlewood Homeowners Association (214) 519-1310 brittanydbruner@yahoo.com
Mr. Smokey D. Kowaleski RTI/Community Management Associates, Inc. (817) 939-2502 skowaleski@cmamanagement.com
Caroline Perry Greenhouse Management Association (214) 215-3693 caroline.perry@greenhousemgt.com
Ms. Angie Buhler-turner SBB Management Company (214) 235-4425 angieturner77@gmail.com
Mrs. Belia Larkin (817) 897-6655 belia.creeksidehoa@gmail.com
Mrs. Candy Peak Ross (818) 400-8485 candypeak@candypeak.com
Mrs. Cindy Lynn Martin, CMCA, AMS, PCAM PMP Management (972) 433-0646 cmartin@PMPManage.com Mrs. Christina Mccafferty Association Insurance Partners (972) 539-8181 christina@associationtx.com
Mr. Tom Scheetz Bridlewood Homeowners Association tscheetz.hoa@gmail.com
Mr. Alan Carrette, CMCA, AMS (713) 449-5818 hotelier1@att.net Mr. Thomas M. Czaus CCMC (214) 952-4971 tczaus@ccmcnet.com Mrs. Christina Marie Fountain Neighborhood Management, Inc. (972) 359-1548 cfountain@nmitx.com Mr. Donn S Gilray, Jr. CiraConnect (214) 536-8355 donn.gilray@gmail.com Maranda L Hall SBB Management Company (214) 551-4034 marandalhall@gmail.com Ms. Sharyll A. Haney Panorama Land Owners Association (214) 577-2294 Mr. Douglas Hasty Vensure Group (972) 877-0921 doug.hasty@vensuregroup.com Ms. Sheri Hawkins MAC Group Management Company (972) 955-7698 shawkins@themacgroupco.com
46 • CONTACT | WINTER 2022
Mr. Vaughn Miller (214) 3903444 vaughn@vcmdevelopment.com Scott Miller Next Door Painting (512) 680-4837 scott@nextdoorpainting.com
Mr. Kevin Michael Schoolcraft (817) 914-0752 kschoolcraft@gmail.com Mr. Noah Schottenstein Bridlewood Homeowners Association (972) 899-5678 Noah.Schottenstein@gmail.com Shannon Spizman (909) 532-9224 Spizm001@gmail.com
Mr. Joseph Mitchell (469) 768-2411 joseph.mitchell@marriott.com
Mr. Alex Valdes, Esq. Winstead PC (512) 370-2842 avaldes@winstead.com
Ms. JoAngela Morin Associa Client Shared Services Center (214) 627-1128 joangela.morin@associa.us
Mr. Tom Womack Associa (214) 272-4136 tom.womack@associaonline.com
Ms. Lori Norman Panorama Land Owners Association (214) 810-9831 lorilynn-78258@yahoo.com
Mrs. Bryanna Wright (972) 741-5356 Bryannapcox@gmail.com
Mr. George Nyamapfumba Worth Ross Management (972) 503-5200 georgen@bonaventuredallas.com
MEMBERSHIP
REPORT
Renewed Members
Ms. Kristi Leann Adair Mrs. Michelle Alvarez Ms. Diane Barta, CMCA, AMS Ms. Adrienne Brewer, CMCA Mr. Gregory S. Cagle Mrs. Jennifer Calyer Mrs. Yolanda Nicole Cantatore, CMCA Mr. Adam Clark, CMCA, AMS Mr. Ronald B Clark Mr. Bruce Crawford, AMS, PCAM Ms. Michele Drain, CMCA, AMS Mrs. Amanda A Duckworth, CMCA, AMS, PCAM Mr. Jason Edmundson Mr. Richard Ellis Ms. Chelsea Faxon-Reeves Ms. Anne C. Fay, CMCA, AMS Ms. Marian Gardner, CCM Mr. Elon Goldman, RS Ms. Debbie Gschwend, CMCA, AMS Mr. Todd Gschwend, CMCA, AMS Mrs. Jessica Guevara, CMCA Mrs. Melissa Hamilton Mr. Anthony Hawkins Mr. Carl Hedrick, CMCA, AMS Ms. Michele Hernandez, CMCA, AMS Ms. Jowanna Hill Mrs. Brandy Hotchkiss Ms. April Hubler Mrs. Dawn Jackson Mr. Vidal Jones Ms. Terry L. Jones Mr. Michael Kan Mr. Robert J. Koop, CMCA, AMS, PCAM Mr. Charles Lamb Ms. April Little Ms. Sarah Lopez Mr. Robert M. Mackay Mr. Jason Madden Ms. Kia Mastey Ms. Francisca Micaela Mata, CMCA, AMS Mr. Branson Thomas McCallister Mrs. Martha Lynn Mccaskill, CMCA, AMS Ms. Michelle Annette McFarland
Mr. Kenneth H. Mitchell Mr. Stephen Paz Mrs. Kelly Sue Peterson, CMCA Mr. Andrey Pevnev Mrs. Judi M. Phares, CMCA, PCAM Mrs. Linda Razzano, CMCA, AMS Ms. Susan Riley Mrs. Kay Rinker Ms. Nicole Rodieck Mrs. Susan S. Ross Mr. Worth W. Ross, CMCA, AMS Mr. Philip John Sahuc Mr. Laurence E. Scott, Jr. Ms. Tia K. Singer, CMCA, PCAM Mr. Daniel C. Thomas, CMCA, AMS Mrs. Phonemany Webb Ms. Marilyn Weinberger Ms. Lori R. Welsh, CMCA, AMS Ms. Melissa Zacha, CMCA, AMS
Rejoined Members
Diana Franklin Mr. John Jima Ms. Sarah Hunsinger, CMCA, AMS Mrs. Pamela Andersen-Balash, CMCA, AMS Ms. Kristi Bruening, CMCA, AMS Mr. David Patterson Mr. Rolando Coronado Mr. Gerald Arthur Towner, III Mrs. Claudia Ivonne Hunt, CMCA Ms. MaryKathryn Lightsey Mr. Jamie Don Coker, CMCA, AMS Ms. Rochelle Mercier
CONTACT | WINTER 2022 • 47
MEMBERSHIP
REPORT
New Designations
Congratulations to our fellow CAI members who achieved new designations! Mrs. Lori A. Jones, CMCA, AMS, PCAM PCAM 12/10/21 Ms. Brandi Head, CMCA, AMS, PCAM PCAM 12/10/21 Ms. Rachael Eileen Carmichael, CMCA CMCA 11/30/21 Ms. Marie Herrera, CMCA CMCA 12/2/21 Mrs. Mallory Nombrano, CMCA, AMS AMS 12/28/21 Mr. Scott Andrew Ehrenberger, CMCA CMCA 12/10/21 ***Certified Manager of Community Associations (CMCA®) From CAMICB - “As a CMCA®, you have shown a commitment to your profession by staying informed about current community association issues and holding yourself to a high standard of professional conduct.” ***Association Management Specialist (AMS®) The second level in the career development track for community association managers. The AMS® designation demonstrates a higher level of commitment to your career and the community association industry. An AMS® designation is recommended for managers who want to enhance their career opportunities by increasing their knowledge and expertise. ***Professional Community Association Manager (PCAM®) The pinnacle of community association management. The PCAM designation is the highest professional recognition available nationwide to managers who specialize in community association management. Earn your PCAM and join the elite—the select—the best. Recommended for experienced managers who want to demonstrate advanced skills and knowledge and who wish to be recognized as one of the best and most experienced managers in the nation. ***Reserve Specialist (RS®) Community associations rely on qualified reserve specialists to assist them in extensive reserve planning to keep their communities running smoothly. Gain the confidence of board members by obtaining the Reserve Specialist® (RS®) designation. The RS designation is awarded to qualified reserve specialists who, through years of specialized experience, can help ensure that community associations prepare their reserve budget as accurately as possible.
48 • CONTACT | WINTER 2022
CONTACT | WINTER 2022 • 49
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One account. One statement. One trusted bank. Olivia Hurtado, CMCA Vice President 214.717.2718 866.800.4656 x7567 Olivia.Hurtado@cit.com ©2020 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. MM#7205