25 minute read
The Self-Managed Association Thoughtful Project Preplanning Ensures Project Success
For the most part, boards of directors are optimistic about their odds of success in accomplishing their goals and objectives in the first quarter of a new year. With one or two board meetings under their belt, chances are that the board has outlined some projects for 2022.
Before getting too deep into potential projects, let’s back up the bus and consider the importance of careful, thoughtful, and deliberate project preplanning. Taking the time and effort to preplan can ensure that 2022 projects are successful and meet project objectives.
Proj·ect – Definition: “an individual or collaborative enterprise that is carefully planned to achieve a particular aim.” The Project Management Institute defines a project as “any temporary endeavor with a definite beginning and end.” For homeowner associations, projects can take many forms. Boards most often consider “capital” projects, better known as common area maintenance, repair, and replacement projects funded by the association’s reserve account. Examples are roofing and building envelope repairs such as dry rot and painting.
However, a capital project may also include governing document revisions and common area improvements and enhancements that are not included in the association’s reserve study. These could be things like adding security equipment or renovating common area landscape. A final category of projects includes evaluations and searches for new service providers, such as community association management companies or landscape maintenance companies. All of these fit the definition of a “project,” and both require and deserve careful and thoughtful project preplanning.
Project preplanning basics. A critical error that most homeowner association boards make when considering a project is to jump right to the development of the request for bid (RFB), quote (RFQ), or proposal (RFP). Before committing the time and energy to create a meaningful RFB, RFQ, or RFP, take a step back and consider these project preplanning basics:
1
What is the aim or objective of the
project? Project aims or objectives can be straightforward, such as “to replace the common area roofing on all the residential
buildings and the community room” or “to repaint the exterior trim, fascia, and siding on all residential buildings,” or they can be more abstract, such as “to amend the association’s bylaws to conform to the new California state statutes regarding member meetings and voting and election laws” or “to add video surveillance and monitoring equipment at the common area mailbox kiosks and bicycle racks” or “to remove water-intensive lawns and plants and replace them with drought-tolerant plants and ground cover.” The project aim or objective is a general statement of project intent and does not include project specifics, the scope of work, or project specifications.
2
What is the project’s funding mechanism, or, more plainly, where is the money
coming from to pay for the project? In the case of a roofing or painting project, the funding mechanism most likely is the association’s reserve account. For projects that are not included in the association’s reserve study, such as a governing document revision, adding video surveillance equipment, landscape renovations, or installing electric vehicle charging stations, the board will need to determine where the money will come from to pay for the project. In many cases, this is more complicated than it seems. California common interest law and an association’s governing documents set forth certain requirements for funding capital projects not listed in the reserve study, and boards will need to consult their attorneys and CPAs before moving ahead with project planning to identify funding sources and legal requirements.
3
Once the project’s funding mechanism is determined, the next question is, is it reasonable and adequate to meet the aims and objectives of the
project? In other words, is the project feasible? Given the association’s financial resources, can the project be completed successfully? This is a critical step in project preplanning and success. Using the roof replacement project as an example, the funding mechanism was determined to be the reserve account. However, the million dollars in the reserve fund may not seem reasonable or adequate today, because the estimate was made 30 years ago and remains unchanged. Now is the time to consider other funding sources and options before completing the RFP and having to delay, postpone, or defer the project because of concerns about adequate funding. Plan ahead and project shortfalls can be mitigated by using assessment increases, special assessments, bank loans, or completing the project in phases. If projects are outside of the reserve study or operating budget, the funding can be much more challenging and likely will require a separate action of the board to complete, and in many cases capital enhancement or improvement projects will need to be approved by a vote of the membership.
4What are the potential risks associated with the project? Identifying potential risks during the preplanning phase is essential to successful project planning, management, and execution. This task is best accomplished with the project team and a whiteboard. All potential project risks should be considered. For instance, back to the roofing project example: project risks to consider include how change orders will be handled, where workers will park their cars, where workers will eat lunch, and whether or not workers will have access to the community room bathrooms. How will management of roofing debris in the common area be handled? What about flat tires of residents due to roofing nails? What if the special assessment or bank loan isn’t approved? What will the protocol be for worker or resident construction-site accidents, and does the association have workers’ compensation to cover them? Can any of the potential risks be covered by insurance? Not only is an analysis of project risks important, but the project team needs to address and consider how these risks can be managed and mitigated so that in the event something happens, the board or project team is ready and able to resolve conflicts, keep the project moving ahead, and ensure community support and harmony.
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The Self-Managed HOA Continued from page 19
5Identifying the project team. A project has been defined as “an individual or collaborative enterprise that is carefully planned to achieve a particular aim,” and as “any temporary endeavor with a definite beginning and end.” The project team can be as small as a single individual or it may include many individuals, depending on the size, scope, and complexity of the project. In many cases, the community manager or management company staff may be adequate to oversee the project; in the case of the reroofing project, the board may consider a project team that includes an engineer, a construction manager, an attorney, an on-site project supervisor, a resident communication liaison, and a project finance auditor. Of particular importance is determining who will approve change orders and how they will be approved to ensure that the project stays on schedule. In some cases, appointing an executive committee of the board may be appropriate to expedite decision making.
A wise person once said, “Failure to plan is planning to fail.” Project preplanning is good governance and demonstrates effective and proactive leadership by the association’s board of directors. As residential communities age and environmental sustainability becomes commonplace, boards will be challenged by both reserve account and capital improvement project considerations. Careful, thoughtful, and deliberate project preplanning is the key to completing a successful project.
John Cligny, AMS, PCAM, CCAM-HR, is a veteran portfolio manager and community association management executive. As co-founder of Association Consulting Group, John is a trusted advisor primarily focused on educating and advising community association board members on effective governance to promote a positive public opinion of homeowner associations and community management. John is a frequent speaker and panelist on a wide range of community association topics and issues. To learn more, visit www.myassociationadvisor.com.
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by Miguel Sanchez, Chair
The March meeting of the Echo Board Members’ Club was another insightful and educational success! Approximately fifty Club members attended and broke into three small chat room groups to discuss and share their best practices and challenges on the topic of keeping current and compliant with existing homeowner association (HOA) laws, and how to deal with the neverending new ones. During the meeting, board members were able to express their frustrations about the onslaught of regulations and laws and discuss how to stay compliant and ensure that HOA governing documents reflect the legal mandates.
The Club members shared practical and actionable insights addressing the frustration with laws and their implementation strategies, and ways other HOAs have dealt with the many issues facing the management of an HOA. The Club members were open and supportive in their comments and grounded in a special “board member to board member” way.
Here is a small sample of big takeaways from the discussions:
Whose responsibility is it to know and implement the laws? Who in the community is responsible for knowing about new laws? Whose job is it to make sure the association is compliant with the law?
• Club members generally agreed that, ultimately, the board is fully responsible for knowing the law and making sure the association is compliant. It was suggested that others might be enlisted to help. It is critical that all board members understand their duties, since they are on the hook for making sure the association is knowledgeable about all new HOA legislation and is either compliant or in the process of being compliant. • It was noted that homeowners need to be involved in the process. Education, awareness, and engagement can help homeowners understand the HOA legislation that will impact them directly. As registered voters, homeowners can also reach out to their legislative representatives to express their needs and concerns about new and existing HOA laws. • Boards can seek assistance from their trusted service providers to keep them informed, knowledgeable, and compliant with the law. Receiving legal counsel is an obvious resource for HOAs, but other professional service providers can be very helpful in regard to complying with laws and regulations and staying abreast of legal changes. Useful and helpful resources can include the association’s insurance provider, accountants, building contractors, and community management teams.
How does one stay informed and knowledgeable? What resources and best practices are out there?
• It was clear that Club members use a wide range of resources to obtain a variety of information. The sources varied in their depth of information,
readability, and timeliness according to members’ specific needs, so each community needs to find what works best for them. • Good resources include Echo newsletters and seminars, newsletters from HOA law firms, and setting up Google alerts to stay informed on an automated and regular basis. • Many Club members expressed disappointment in their management firm or manager for not keeping them informed of legal changes. The hot tip shared by some was to incorporate a requirement in the professional services contract that their management company or manager keep the board members abreast of legal compliance concerns, and advise them of new laws that would impact the community. • A few members said they had established an
HOA Legal Compliance Committee whose duties were to monitor pending legislation, evaluate community impact, and routinely inform the board and homeowners. Committees can also coordinate efforts to engage political representatives to provide input on any pending legislation.
How does the HOA implement new laws? When do the governing documents or rules get updated?
• Club members immediately identified that new laws could come from several sources (federal, state, county, or city), and even though they may not involve a change in the governing documents of an association, the association may still be required to be compliant. Two examples are California Senate Bill 326 (balcony inspections) and individual city “No Smoking” ordinances. • In cases where governing documents may be impacted, board members should engage legal counsel and develop a plan for amending the documents. Many Club members expressed their concern with the need to constantly update the governing documents and the accompanying hassle and cost. A suggested hot tip was to set up an “update governing documents” line item in the reserve study to ensure a timetable for completion and the funds to do the work properly. • Many expressed that when they are informed about upcoming laws, they can accurately plan for obtaining legal counsel and updating governing documents. Often, however, board members express frustration with community apathy and lack of homeowner involvement. Homeowners are more likely to positively react to changes to governing documents and board decisions to remain compliant when they understand what the new law(s) is and how it impacts the community and them personally.
SEE YOU AT THE NEXT CLUB MEETING! April 12, 2022 | 5:30 pm - 7:00 pm TOPIC: Maintenance: Common Area, Landscaping & Buildings
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The Pacific InterWest Apartment Inspection program is designed to offer both the minimum inspection requirements and a complete package of services including repair design, repair inspections, and even annual inspections to extend the serviceable life of every element. PIWAIS can be a small component in an already established capital repair program or the entire infrastructure to manage small and large portfolios for compliance with SB721 and SB326.
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The Echo Legislation Tracker: California State Legislative Session 2021–2022
For more information on HOA Advocacy, visit the Echo website: www.echo-ca.org/article/hoa-advocacy/
The second half of the 2021–2022 California legislative session reconvened on January 3, 2022. After a few years of significant changes to law that materially impacted how common interest developments are operated, this year has started relatively calmly. The last day for bills to be introduced in either house was February 18, 2022. The session concludes, sine die, November 30, 2022.
Echo hopes legislators slow the amount and impact of new legislation. The past few years have resulted in a whirlwind of changes to laws governing HOAs and hampered the ability of well-functioning association boards to manage their business. The legislature is becoming more prescriptive, attempting to fix the problems of a few with broadstroke legislation affecting a very diverse set of common interest developments.
Last year, for example, the legislature took away the ability of boards to invest in financial vehicles that could help them keep up with inflation. AB-1101 (Irwin), now law, (Chaptered 270), is a landmark bill that was designed to protect the investment principal of HOA homeowners. It does this by requiring investments (reserves) to be placed in federally insured financial instruments such as certificates of deposit. These investment vehicles, in real terms, likely will result in loss of buying power, since the earned interest rate is usually below the inflation rate. In some communities this makes sense, but for communities that understand investing, a valuable tool to manage funds has been taken from HOA boards.
Echo will continue to work for the entire community of HOAs, including those of every size and shape, for boards and homeowners alike. Echo will support the independence of boards to manage their business with limited governmental interference, respectful and supportive of its homeowners and residents. By doing this, Echo advances its mission to build better HOA communities through education and advocacy.
ASSEMBLY BILLS
AB-1410 (RODRIGUEZ) – OPPOSE UNLESS AMENDED
SUBJECT: Free speech and mandatory fiduciary ethics and harassment prevention, use of metadata STATUS: In Senate, Read first time. To Com. On RLS (rules) for assignment (2/1/2022) POSITION: Oppose unless amended The bill clarifies existing freedom of speech rights. It speaks to the importance of education of HOA board directors, and makes harassment prevention and fiduciary ethics mandatory for all board directors. Further, it requires photographic metadata
to be included in any enforcement activity that uses photographic evidence. The presumption is that the photographic evidence is not useable unless the metadata is supplied. The bill goes too far. Regarding social media and other online speech, the language does not allow boards to limit comments that could be “fake” and used to disrupt community harmony. We appreciate that the bill shows an understanding of the need for an educated board of directors, which speaks loudly to the Echo mission. However, we are concerned about making education mandatory for the approximately 750,000 board members in California. This requirement likely will drive away prospective board members from service, which is an acute issue for many HOAs. Finally, the bill requires the release of photographic metadata before enforcement action. Given the technological aptitude of the membership and the varied sophistication of equipment used to document violations, we feel this mandatory requirement for metadata is not practical and will delay important enforcement responsibilities of the board. We oppose this language, and it should be stricken from the bill. For these reasons, Echo opposes AB-1410 unless amended.
SUMMARY: It is the intent of the Legislature to ensure that members and residents of common interest developments have the ability to exercise their rights under law to peacefully assemble and freely communicate with one another and with others with respect to common interest development living or for social, political, or educational purposes. Requires fiduciary ethics and harassment prevention training of board director and full-time employees.
AB-1755 (LEVINE) – WATCH
SUBJECT: Homeowner wildfire insurance, home hardening and grant funds Status: Referred to Asm Committee on Insurance (2/10/22) POSITION: Review. This appears to be good legislation. We will investigate expanding it to common interest developments. Hardening of CIDs makes sense. The bill will be reviewed by the Echo Legislative Committee and the Echo member Legislative Advisors.
SUMMARY: On and after January 1, 2025, an admitted insurer licensed to issue homeowners’ insurance policies shall issue a policy to a homeowner who has hardened their home against fire, regardless of the home’s location. The insurer shall make conforming changes to its internet website and print materials on or before July 1, 2025. The Wildfire Protection Grant Program is hereby created to help homeowners pay for costs associated with wildfire mitigation improvements.
SENATE BILLS
SB-869 (LEYVA, DODD) – WATCH
SUBJECT: Mobile home parks manager training STATUS: Joint Rules 55 Suspended (2/7/2022) POSITION: Review. Many mobile home parks are common interest developments and fall under the Davis-Stirling Act. This legislation would require significant manager training for mobile home park managers. The costs of the program, including the increased cost of compensation for a trained manager, as well as the ability to recruit managers, make this legislation difficult. The implications could be extensive; we are reviewing.
SUMMARY: (a) The Legislature finds and declares that the quality of services provided to homeowners within manufactured
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homes, mobile home parks, special occupancy parks, and recreational parks by on-site management depends on the adequate training of management, particularly with respect to addressing common complaints from homeowners relating to the Mobile Home Residency Law and the Recreational Vehicle Park Occupancy Law. (b) It is the intent of the Legislature in enacting this act to ensure that the management of mobile home parks, special occupancy parks, and recreational vehicle parks have the knowledge, proficiency, and skills needed to carry out the duties of their jobs.
OTHER BILLS UNDER CONSIDERATION
The following bills are under review: AB-916 (addition of bedrooms), AB-682 (building density), AB-1674 (ADUs), AB-1710 (LED lighting pollution), AB1738 (EV charging stations), and SB-897 (ADU/JADU). More on these bills in future issues of the Echo Journal, Echo Insight, or at www.echo-ca.org.
Coastal Resource Panel Builds Ties to Protect Seaside HOAs
Echo’s Coastal Resource Panel held its first panel meeting on March 16, 2022, and added several new members, including HOA attorneys and coastal HOA residents, to address the California Coastal Commission’s (CCC) growing regulatory efforts that threaten property rights and property values.
At the panel meeting, a representative from Smart Coast California presented an outline of the work the realtor-sponsored advocacy organization is doing that is in sync with Echo’s efforts.
The two organizations are pursuing strategic cooperation on California Coastal Commission issues and are working to ensure that communities are represented in the conversations. Concern has been voiced about recent policy “guidelines” that are directly impacting HOAs, including a proposal for the CCC to ban shoreline protection for coastal bluff and beach homes, and the forced taking of private property through policy fiat in a “managed retreat” strategy without compensating homeowners, even if they are not threatened by sea-rise. Understanding and then educating homeowners about these complex issues is the aim of Echo.
As mentioned last month, because of these and other CCC actions, some individual property owners and HOAs have been forced to abandon some of their homes or shoreline protection measures, or to spend hundreds of thousands of dollars to provide mitigation pursuant to CCC demands.
Echo’s Coastal Resource Panel was created to educate, inform, and alert coastal HOAs, homeowners, and government officials on concerns about the actions of the California Coastal Commission and to activate coastal HOA support to understand the impacts of implementation of the CCC policy guidelines on private property and property values. Echo is delighted to collaborate with Smart Coast California as a resource for information and open discussion. They will help Echo stay abreast of local and statewide issues related to coastal policy and help us identify when action is needed.
On September 10, 2022, Echo will be hosting an online educational seminar entitled The Coastline, Environment, and Impacts of Global Warming on HOA Communities, featuring scientific findings, policy implications, and positive solutions for coastal communities. We will develop the program over the summer; stay tuned for more on this landmark educational webinar.
For those wanting a special experience with the experts, Smart Coast California will be holding an in-person policy conference on May 19-20, 2022, at The Westin Long Beach. To learn more about the event, please visit the Smart Coast Policy Summit website: https://bit.ly/3D8wjVv.
Echo invites you to stay informed about coastal issues by signing up to be on its Coastal Resource Panel. We are always looking for interested individuals and volunteers to participate locally and to serve on the panel.
Jeff Raimundo is a member of Pajaro Dunes North Association and volunteers as the Echo Coastal Resource Panel chair. His email address is jeffraimundo.coastal@gmail.com.
