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Councilwoman Martha Webster: RPB & The Foreclosure Crisis

Visiting Italy’s Volterra: A Unique Experience

Ron Tomchin On Community Web Sites


A MESSAGE FROM THE PRESIDENT

Welcome To FLNA Magazine

The Florida League of Neighborhood Associations (FLNA) has been very busy working to establish an ongoing dialogue on the issues confronting our Association members. During our Leadership Luncheons, it became readily apparent that the most immediate concern of Associations was how to deal with the problems resulting from foreclosures, bankruptcies, and the rash of vacant and abandoned properties. We hosted an Open Public Forum in late August at which Association and Community leaders as well as Professional experts were brought together to discuss these issues. The Panel members and the Association leaders who attended were able to share ideas. FLNA will continue to facilitate these discussions at such meetings and through this magazine. However, there are more topics of interest to our Associations and their members, and FLNA Magazine continues to bring them to you. In this issue: • We report and expand on the Open Public Forum discussions. Royal Palm Beach’s Councilwoman Martha Webster provides further insight into the concerns of local government. • The FLNA Technical Advisory Group, our team of leading professionals, provides information and advice on issues affecting Neighborhood Associations. • We begin a series of articles on Communication Techniques available to Associations. • We are asking our readers to participate in a survey on the Palm Beach County Health Department’s efforts to address smoking and secondary smoke exposure in Condominiums. Survey Results will appear in a future issue. • Each year, our Florida legislators look into the Condominium and HOA statutes. Check our Letters to the Editor where some proposed ideas are being debated. • And then, if you need a break — or, at the least, a distraction — our new Feature Editor, Tony Consalvi, fresh from his annual jaunt across the Continent, provides us with some of his observations on enjoying life on a hilltop under the sun of Tuscany. FLNA and FLNA Magazine are dedicated to creating the means for an open dialogue and a learning experience for all who participate, and encourage you to communicate with us and our fellow readers. Send Letters to our Editor at editor@FLNA.org or just drop me a line at president@FLNA.org. Drop Tony a note on places you find interesting at TonyConsalvi@FLNA.org. You can also visit www.FLNA.org and learn more about the activities and services we offer, or contact us at the phone number and address in the masthead. Become part of FLNA and participate in our activities!

Winter 2012 FLNA Magazine is published by the Florida League of Neighborhood Associations Inc. Publisher & President Joseph Boyle Director, Member Relations J. Andrew Boyle Project Editor Chris Felker Features Editor Tony Consalvi Photographer Jim Bongiovanni FLNA Magazine 157 Monterey Way Royal Palm Beach, FL 33411 Phone: (561) 758-1618 Fax: (561) 258-0689 www.FLNA.org FLNA Magazine is published six times a year. Copyright 2011, all rights reserved by Florida League of Neighborhood Associations Inc. Contents may not be reproduced in any form without the written consent of the publisher. The publisher reserves the right to refuse advertising. The publisher accepts no responsibility for advertisement errors beyond the cost of the portion of the advertisement occupied by the error within the advertisement itself. The publisher accepts no responsibility for submitted materials. All submitted materials are subject to editing.

ON THE COVER This home will most likely sell for less than half the price it went for just a few years ago! Get all the details on this house, and many others. Call Mark “Action” Plaxen at Rock and Roll Real Estate at (561) 352-0298 or e-mail mark@rockandrollrealestatefl.com.

Joseph Boyle, President Florida League of Neighborhood Associations Winter 2012 • FLNA Magazine • Page 3


Page 4 • FLNA Magazine • Winter 2012


FLNA SURVEY

What’s Your Opinion? The Palm Beach County Health Department’s Tobacco Prevention and Control Program focuses on improving the health of Palm Beach County residents through policy and systems changes. The work of the program falls under four major goals: preventing youth and young adults from beginning to use tobacco products; eliminating secondhand smoke exposure; increasing efforts by current smokers to quit; and maintaining infrastructure. Creating policies to encourage creation of tobacco-free multi-unit dwelling communities is one of the priority activities in their efforts to eliminate secondhand smoke exposure. The United States Surgeon General has determined that there is no safe level of secondhand smoke exposure and includes to-

bacco-free living environments as a key activity in eliminating exposure. Depending on the community’s level of readiness, property managers can implement policies that are either comprehensive in nature — where the whole complex can become 100 percent tobacco-free — or less comprehensive with designated smoke-free buildings and/ or policies that address only the common grounds, such as the pool area.

Winter 2012 • FLNA Magazine • Page 5


FLNA PUBLIC FORUM

THE HOUSING CRISIS The Financial Impact On Neighborhood Associations

FLNA Public Forum Brings Together Community And Association Leaders As the current housing and financial crisis continues, Neighborhood Associations are wrestling with growing delinquency problems and the proliferation of vacant and abandoned homes, both of which are adding to their communities’ significant costs that must be absorbed by the remaining members.

Panel members and attendees explained their individual perspectives, shared ideas, evaluated alternatives and developed relationships for further discussion. Government and Association leaders began a dialogue on how the two groups, with two separate but similar missions, could work together to achieve common goals in a cooperative, costeffective manner. The crisis is real. The cash flow impact on our Association members is real. There is no one-time solution that will solve everyone’s problems. Solutions must be tailored to the individual circumstances of each Association and be adaptable to foreseen and unforeseen events. The following two articles summarize the panel discussions and the general perspectives addressed. We encourage our readers to continue this dialogue through our magazine and elsewhere as they address their individual problems.

Association Boards and Budget Committees in communities throughout Florida and elsewhere are being asked to not just control costs but also find alternatives to assure that assessments do not soar out of control, making them either cost-prohibitive to the members and/or a negative influence on the unit/home value. This situation is too complex to be dealt with as solely an individual Association issue. Association leaders need to tap their collective knowledge and experience to find feasible approaches appropriate for their individual communities. This is the role of FLNA. At a recent FLNA Leadership Luncheon, attendees prioritized the need for more information on this subject and were especially interested in practical, hands-on insight from people who are actually working these issues. In response, FLNA brought together community and Association leaders at a Public Forum in which almost 100 participants provided not only their technical knowledge in the area but also their actual experiences and firsthand knowledge of the pros and cons of their different Attendees enter the Royal Palm Beach Cultural Center for the public forum. approaches. Page 6 • FLNA Magazine • Winter 2012


Public Sector Panelists — Discussion participants (L-R) Palm Beach County Code Enforcement Director Kurt Eismann, RPB Community Development Director Robert Hill, PBSO Chief Deputy Michael Gauger, Wellington Deputy Village Manager John Bonde and West Palm Beach Construction Services Director Doug Wise. (Inset) Moderator Joe Boyle, FLNA President.

PUBLIC SECTOR AND ASSOCIATIONS Similar Functions, Different Concerns

In many ways, local governments have many functions similar to those of Neighborhood Associations, but on a much larger scale. The major difference, other than size, is that the former are public and perform their duties based upon public law while the latter are private and operate under corpo-

rate law and private contract. In the hierarchy of authority, Neighborhood Associations are subordinate to public law. Many of their concerns are similar. Both administer common land and buildings, provide services to their constituents, enforce codes for the

maintenance of private property, are concerned with community safety, are financed by money provided by their constituents (taxes or assessments) and have a fiduciary responsibility to them. While most issues can be readily identifiable as the jurisdiction of one continued on page 8

Association Sector Panelists — (L-R) FLNA President Joe Boyle, Palm Beach County Collections Coordinator Glenn Meeder Jr., the Island at River Bridge HOA President Michael Ecker, Florida Community Management Services President Ted Brown and attorney Randall Roger. (Inset) Moderator Martha Webster, RPB Councilwoman.

THE COLLECTION PROCESS MINEFIELD Difficult Choices, No Guaranteed Results

A Neighborhood Association is a corporation formed by its unit owners to perform those required functions that are for the benefit of the entire community, not any individual unit owner. It is funded pro rata by its members solely to perform its assigned

tasks, and its elected Board of Directors has a fiduciary responsibility to administer these monies as intended by the members. Like any other group, some members either cannot or will not pay that which they have agreed to pay. In such cases, their fellow members

must, at least in the short term, make up that shortfall and hope, in the longer term, their neighbors will catch up. Normally, a business is an entity without human constraint, but a Neighborhood Association is different. The continued on page 9

Winter 2012 • FLNA Magazine • Page 7


PUBLIC SECTOR & ASSOCIATIONS CONTINUED FROM PAGE 7 group or the other, the issues involving foreclosed, vacant and abandoned homes are of concern to both, but from different perspectives. The forum panel discussed the different viewpoints and tried to identify areas where working together would help both groups achieve their goals. SAFETY FIRST PBSO Chief Deputy Michael Gauger opened the forum by reminding participants that the problem of vacant and abandoned homes is more than just a financial issue or even a code enforcement aesthetic issue. The financial consideration for Associations will be resolved in time with good budgeting and proactive collection processes, and remedies for code violations currently exist that eventually bring properties into compliance. However, communities need to recognize that there is one concern that cannot wait for court judgments or other system fixes which, by their nature, are often drawn out over a considerable length of time — that of public safety. Public safety concerns begin the day the property is vacated or abandoned. Deteriorating properties become a magnet for criminals. Everything on the property is fair game for thieves who, with no one to stop them, can and do go on the property and steal almost everything, from appliances to even the house wiring — anything that can readily be turned into cash. Thieves can be brazen, pulling trucks or other vehicles right up to the property and loading them. They look like movers. While free-standing homes such as those in Homeowners Associations without entry restriction are most vulnerable, gated communities and even condominiums are also open targets. Owners who vacate or abandon their properties discover that when they eventually are forced to settle, the property is worth even less. Banks and

other financial institutions discover that the property value has dropped even further than anticipated and that it is almost cost-prohibitive to foreclose on a shell, so they just throw up their hands and decide not to throw more good money after bad. Nearby property owners discover that their property values are also affected. Local governments discover that the property values and thus their tax base have fallen. Neighborhood Association members discover that they are now funding that property’s fair share of common expenses, and the chances for a full recovery are slim. But what is even worse is that these properties could be attracting squatters who might not be just looking for a place to stay, but might be using the property for criminal activities — a no-win situation for everyone involved. Gauger pointed out that the first line of defense is a proactive community where citizens report to the authorities when something seems awry. PBSO has instituted a computerized tracking program and trained volunteers to help identify lending institutions and former owners to determine responsibility and also to secure affidavits of trespass so that intrusions can be reported and the authorities can intervene. REGISTRATIONS Local governments throughout Palm Beach County are attempting to get their arms around the problem, but there is no one single comprehensive database that identifies properties in foreclosure, let alone those vacant or abandoned. Recently, Royal Palm Beach and Palm Beach County enacted ordinances to begin addressing the problem. These ordinances require that covered properties be registered by the mortgage holder when a foreclosure action is initiated and for them to assume responsibility for the maintenance of the property. Such properties can be identified mostly through public record searches, but the ordinances move the responsibility for identification to

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those who must register. Public record searches would be used by the village or county to identify covered properties to ensure compliance with the ordinance. Royal Palm Beach’s Robert Hill explained that there were difficulties in searching the public records to get accurate information. The approach is to identify a property when a measurable action is taken, namely the filing of a notice of pending foreclosure (lis pendens). At that point, the mortgage holder is identifiable and the requirement to register applies, including a fee to defray the administrative costs. “We feel,” said Hill, “that if we can hold the banks and lenders more responsible for these properties, then it pushes things along to help protect those adjacent property values around the neighborhood.” With property registered, the village has a contact. Palm Beach County’s Kurt Eismann pointed out that the registration process is not a total solution and needs to be implemented alongside a vigorous code enforcement policy. Reliance needs to be placed on the identification of properties that show signs of neglect. The registration process identifies another party, the mortgage holder, to be notified and who has an interest to ensure the property is maintained. As an additional incentive, some property owners could be subject to a “super lien” that affects not only the property in question, but also encumbers their ability to sell other properties in the county. Mortgage holders are more likely to have multiple properties and more likely to act if their entire county portfolio could be placed at risk. In order to defray administrative expenses, both Royal Palm Beach and Palm Beach County have chosen to charge a registration fee. Royal Palm Beach had been handling the administration with internal staff while the county was contracting out the service. Recently, the Royal Palm Beach Village Council has acted to contract an outside service.


West Palm Beach’s Doug Wise reported that more than a year ago, the city enacted a registration ordinance and set up a Distressed Property Registration link on its code enforcement website and, because it wanted to encourage registration, decided to not charge a registration fee. He added that this has allowed measures to be taken earlier than they might otherwise have been “because if you’re a neighboring property owner, you don’t want to sit around and wait for lis pendens to be filed.” The city is also looking into adding the reimbursement of any costs it incurs for maintenance to the property’s tax bill. WELLINGTON’S PROGRAM John Bonde said that Wellington has decided to take a less harsh, more in-

tegrated approach by identifying problem properties and facilitating a dialogue between the homeowners, their Neighborhood Associations and their lenders. “Pretty soon,” he said, “people started opening up because they realized that ... [the village] … was really there to help them with their problems.” Bonde also pointed out that the village has implemented a series of metrics to monitor its efforts. Property values have stabilized, code enforcement cases are down, and residents are feeling more secure. THE BOTTOM LINE Local government initiatives have made significant progress in identifying problem properties, but they are incomplete. Waiting for a defined ac-

tion like lis pendens may be a manageable and legally measurable approach, but there are many properties that may not have an interested lender or, by the time of filing, have already deteriorated to an unacceptable condition. Vacant and abandoned homes need to be identified quickly. Community vigilance is needed to identify these properties. However, identification of the property and even a third party is only the beginning of the process for Neighborhood Associations who are interested not only in maintenance issues but also the timely payment of assessments. It is the immediate cash flow drain and the increased period cost to their members that is of the greatest concern to Neighborhood Associations.

COLLECTION MINEFIELD

position than the Associations who oftentimes find themselves engaged in a last-ditch effort to recover their losses when the units change hands while rarely having adequate financial resources and internal expertise to protect their interests. More and more, Associations must seek legal help and incur legal expenses for even the simplest questions and, even then, the very members to be protected must weigh that cost vs. the potential return. The forum panel presented divergent views on how Associations could proceed and participated with the audience in a lively exchange of information and experiences. WHAT IS FAIR? Saratoga’s Joseph Boyle pointed out that, “as president of a Neighborhood Association, I represent all my neighbors and am obligated to look out for all their interests, including those with delinquent assessments. When we have problems, we need to find solutions that are acceptable and fair for our entire community.” He said that when neighbors fall behind on their obligations to the Association, their neighbors, the members of the Association, should first try to find a way to work

with them before working against them. He would hate to see the Association, when it came to collections, turn into a horde of “condo commandos.” People can work together and still manage and perform the Association’s fiduciary duties. People who have occasional problems keeping up with the payments require a more neighborly approach. “These are people who missed a payment, forgot the payment, their dog died this month, they had problems at home with the family, or maybe they recently lost their job. Maybe they just need to catch their breath and are looking for a little temporary understanding? I would hope that if I were in such a situation, someone would at least give me some kind of an opportunity to make it right.” He suggested that Associations seek to develop payment plans before handing over the property to collection. “We try to work with these people because we don’t want to kick a family out of its home because it did not promptly pay its fair share for the grass cutting,” Boyle said, noting that at some point, “you just have to throw your hands up and then get moving to get payment.”

CONTINUED FROM PAGE 7 owners are human beings who live next door to each other, many of their families know each other, socialize with each other, care about each other. The human factor is intrinsic to the Association. However, the financial risk to the members is real, and at some point, compassion must give way to practicality. The elected leaders of the community must wrestle with this dilemma as they meet their mandated fiduciary responsibilities. This is not an easy task. In this current financial crisis, with its unprecedented foreclosure numbers and its vacant and abandoned homes problem coupled with the rash of bankruptcies and questionable business practices, many Association leaders, volunteers with minimal training, are being forced into a mine field where even professionals do not have a decent map. State laws and regulations written to protect the individual unit owner from abuse make the process involved and time-consuming. Some regulations seem to place banks and other institutions in a more favorable

Winter 2012 • FLNA Magazine • Page 9


Boyle suggested that a three- to sixmonth rule would be reasonable. Managing the collection process is important. In the case of his Association, Boyle stated that they categorize their collection problems and have different approaches contingent upon the circumstances. However, in the worstcase scenario, where the house is either in foreclosure, there is a bankruptcy situation, maybe a death, maybe a vacancy or the property is abandoned and it might even be difficult to determine whom to contact or where they are, the situation is critical and requires not neighborly discretion but professional help to protect the Association. In such cases, the Association “turns it over to somebody who knows all the steps, can follow the process and get the problem resolved.” RUN YOUR ASSOCIATION LIKE A BUSINESS River Bridge’s Michael Ecker described how a situation confronted his Association where one of the owners acted as if he “thought he could live scot-free for the next 10, 20 or 30 years in his location” because there was no mortgage holder to assure all property obligations were being fulfilled. “We are in hard times, all of us, and we are not looking to jump down anybody’s throat ... but the Association dues have to be paid. We must maintain the Association at all costs.” He added that the situation “has forced us to now handle everything as a business. If somebody falls behind, we have to take legal steps.” Otherwise, the Association might have to finance a significant bad debt reserve and watch assessments rise and property values fall as the property owner “takes advantage of the community” by not paying assessments and not maintaining the property.” “There is nothing you can do with people like that,” said Ecker. “You have to protect the community. You have to stop being nice when somebody does not pay within a period of three to six months; you must take action immediately.”

He said that communities should not be sitting with properties where the HOA has not been paid for a matter of a year, or two, or three. One alternative would be, if the bank does not care, take over the property and rent it out. “And what that means is you are going to have to invest a few thousand dollars in the house, get it fixed up and get it rented, and be able to get the Association dues and expenses out of that.” Ted Brown of Florida Community Management Services warned of the difficulties in determining the proper point to stop “trying to be nice.” “If you deal with it from the heart, you’ve lost it. You have got to deal with it from the head.” He observed that it is difficult for Association leaders to do that, simply because they are the people living next door and now the Association is seen as the “bad guy.” Brown said that bringing in a third party might be beneficial in such circumstances. He pointed out that, with high delinquency rates and foreclosures, there is a good deal of money at stake and communities are vying for their share with other interested and well-resourced parties such as attorneys, insurance companies and banks. Association leadership cannot do it all itself and will often need to bring in professional help. Palm Beach County’s Glen Meeder stated that local governments are also in the mix and that when a foreclosure takes place, the banks, who are ahead of the code enforcers in collecting at foreclosure, usually move quickly once they have taken over the property to handle these outstanding liens and fines before addressing other claims such as Association liens. He also noted that, in the case of Palm Beach County, when the county code enforcers spend money to assure upkeep of the property, they can place those charges on the tax bill and the tax bill has to be paid. Associations do not have that leverage. “Association leaders should not feel bad about something they have to do,”

Page 10 • FLNA Magazine • Winter 2012

counseled Brown. Associations should review their options and pick the alternative carefully. For example, a cost/ benefit analysis, addressing such options as the feasibility of renting a property, should be performed. Another potential option, when a bank seems to be dragging its feet, could be merely having the Association attorney send a letter to the bank asserting the Association’s intent to file a motion to compel the bank to foreclose. Oftentimes, that will suffice. NO SURE-FIRE SOLUTION Attorney Randall K. Roger said that “Associations do not have a large arsenal of opportunities.” Pursuing liens for unpaid assessments or maintenance fees is necessary and sometimes results in foreclosure by the Association, a path that he cautioned has many pitfalls. There is no sure-fire solution. “The Association,” said Roger, “should be smart and strategic in determining which units to foreclose on. When you have a number of units in your community and cannot afford to pursue all of them, you should identify those units from a business perspective that are most marketable. Again, it is a business decision.” He also noted some other alternatives, including short sales, filing a motion to compel, and simply suspending a delinquent member’s voting rights and/or other entitlements might suffice. Most importantly, don’t give up your rights to collect. Get help before making any concessions. He further added that instituting action also sends a message to other unit owners that they might be next. Roger also suggested that our state government has been slow to act to protect Associations and much of what it has done does not “really go the distance” to solve the current problems. The panel provided a great deal of information in a short amount of time. In future issues of FLNA Magazine, we will look in more depth at specific approaches that Associations can take to maintain their cash flow and minimize their bad debt burden.


GUEST FEATURE

Royal Palm Beach Responds To The Foreclosure Crisis

By Martha Webster tions that should have taken place in borhoods regulated by homeowner asRoyal Palm Beach Councilwoman 2011 have now been moved to 2012. sociations. With the vigorous implementation of It takes an average of 676 days to foreRob Hill, Royal Palm Beach’s directhe Community Reinvestment Act by close on a home in Florida as munici- tor of community development, and his banks in the mid-1990s, is there any palities seek comprehensive solutions staff investigated the intensity of work wonder how we got to where we are to abandoned homes that threaten the to research data and develop a worktoday? CRA became federal law in quality and safety of our neighbor- ing database for the village. This in1977, and it imposed upon banks a new hoods. formation, along with current statistiway of doing business. It mandates that There are many choices that munic- cal foreclosure data, will be evaluated certain mortgages must be transacted ipalities may select, and many differ- by the village council to determine if the lending institution is to be able ent approaches are being implement- whether the best practice is to retain to conduct and expand business. The ed throughout our county. The Village registration of foreclosures in-house or act requires that federal financial su- of Royal Palm Beach voted for Ordi- to outsource the work. Both the City pervisory agencies regulate financial nance 847 Division 3 – “Registration of Boynton Beach and Palm Beach institutions in order to meet the credit of Real Property Subject to Foreclo- County made the decision to contract needs of local communities. To enforce sure.” This ordinance provides for a with an outside firm. One thing for the statute, federal regulatory agencies process to identify and register prop- certain is that the effects of forecloexamine banking institutions for CRA erties with a recorded default notice. sures within our communities will take compliance and take this information The information collected allows our some time to reconcile. Municipal into consideration when approving Community Development Department leaders need to ensure that the method applications for new bank branches or to arrange for maintenance, determined used to remedy the current crisis is for mergers or acquisitions. by code, of property by the lender well-planned in order that the integriAlthough the Federal Reserve does while the property is being litigated to ty of the neighborhoods remains stanot indicate that there exists any em- new ownership. The village code ap- ble and even, in some instances, impirical evidence that CRA practices plies to properties located within the proves. contribute to the rise of mortgage de- municipality, including those in neighThis is a scenario that is particularly faults, there can be little doubt significant as homeowner asthat mandating banks to make sociations define the right apmore loans to groups than can proach. Foreclosures reduce reasonably be accomplished the revenue from assessments contributes to an insecure that finance the maintenance of economic climate. As unemthe full development. At risk ployment continues to rise, is not only the quality of the the ability of homeowners to development, but maybe the repay their home loans decontrol of the HOA itself clines. A glut of homes on the should an investor acquire a market has driven home pricmajority of the board in the es to basement levels, as hoprocess of purchasing and meowners have few options managing foreclosed homes. for financing. The mortgage Recovery in housing is unlikemediation process requires ly until the current and forthconsent by the lender, while coming inventory of distressed processing and procedural properties can be absorbed, delays are pushing forecloand until then, municipalities sures further and further out. will need to be proactive in Realty Trac estimates more protecting the quality of their RPB Councilwoman Martha Webster moderates an August FLNA forum on foreclosure issues. than 1 million foreclosure accommunities. Winter 2012 • FLNA Magazine • Page 11


LETTERS TO THE EDITOR

State Legislature Must Act To Help Associations

The financial situation in many of Florida’s neighborhood, homeowners and condominium associations is getting desperate; most suffer serious budget shortfalls caused by unpaid dues and/or foreclosures. For the past three years, the Florida Legislature has failed to help these associations – meaning the still-paying owners in these communities – that is, if you discount such ridiculous provisions as prohibiting owners who are in arrears to use the community pools. I’m not sure how that is supposed to help with budget shortfalls. Our organization was created with the sole goal of pushing a much-needed bill that would really help associations deal with the financial crisis. Our web site, www.camp2012.net, was created to promote the bill, which has six provisions: • Increase the current statutory cap from 1 percent to 2 percent of the original mortgage debt that a bank is required to pay, once a lender forecloses on a unit in a Florida community association and obtains title. • During the time any foreclosure action is pending by the association against a unit owner, the owner must place the assessments for the association into the court registry as they come due. This is exactly what the current landlord/tenant statute allows for. Failure of the defendant to place this money into the court registry would allow the association to obtain a default. • Finally allow the Department of Business and Professional Regulation to regulate and provide oversight, education and an ombudsman for Florida homeowners’ associations, not just for Florida condominium associations. • Finally require Florida homeowners’ associations to utilize the statutory procedures that condominiums must use for their annual elections, in order to allow more Floridians the opportunity to participate in governing the communities in which they live. • Just as for condominiums, require board members of Florida homeowners’ associations to become “certified” by tak-

ing a course designed to teach the fundamentals of Florida law governing HOAs. • Just as in homeowners’ associations, require that certain minor disputes arising in a condominium to first be mediated before being arbitrated or litigated in a court of law. All these provisions will really help associations – meaning still-paying owners – deal with the financial crisis. It will either directly get money in the association coffers or significantly lower legal bills – which associations are never able to recover. This is a very important bill for homeowners and condo owners living in Florida’s mandatory associations. Association members who have been dragged into dire financial situations through no fault of their own need help, and this bill, if enacted, would be a serious step in the right direction. Many homeowners, and condo owners as well, have suffered losses of income and sometimes life savings. We can’t expect them any longer to pay for their neighbors who stopped paying! If we want to make Florida a welcoming place for retirees, snowbirds and investors again, we have to show that we are willing to protect the rights and finances of these future Floridians. If we don’t attract more of these people to Florida, our economy will suffer even more! Milena D. Macias, President CAMP2012, Miami

Florida’s HOAs Need Some Help No matter who is to blame for the housing bubble and the crisis in its wake, it lured banks to gamble on derivatives or to buy houses they couldn’t afford, and people used equity to buy gas-guzzling SUVs or to flip or buy more houses. Banks and homeowners dug holes they couldn’t get out of anymore — they ran out of money. Banks received bailouts in the trillions; homeowners received nice words but hardly any cash. They couldn’t serve their mortgages anymore, and many stopped paying their fees for the homeowners associations. In some communities, the HOA fees are almost as high as the monthly mortgage rates because too many units are deserted or can’t be sold

Page 12 • FLNA Magazine • Winter 2012

in the first place. The housing bubble not only resulted in public resentment of the exploitative banking institutions, it created the Tea Party and the 99% movements and a political divide between libertarian-leaning groups resenting government and liberal factions calling for better regulations; but, most of all, it created a massive HOA crisis. No wonder that homeowners and HOAs try to find remedies. One group is the Floridian “Community Association Member Party” (CAMP), based in San Antonio, 50 miles north of Tampa. Based on a letter by the organization’s attorney, Eric M. Glazer (Hollywood, Fla.), CAMP is proposing an amendment to the Florida statutes on behalf of HOAs. It has six sections. Together, they are supposed to make it easier for HOAs to get to their money. In review, I believe the effort is commendable. However, I would change the proposed bill in three sections: Section 1: CAMP wants to raise the cap banks have to pay from 1 to 2 percent. I think a percentage is a wrong approach. I prefer a fixed amount. I give two examples: For a home value of $100,000 a bank would have to pay $2,000 instead of $1,000. For a home value of $500,000, a bank would have to pay $10,000 instead of $5,000. In the first example, $2,000 might not be sufficient; in the second, $10,000 might be too much. A better approach could be a fixed amount of $5,000 regardless of the home’s value. Section 3: CAMP wants a mandatory mediation. I believe mediation might not be necessary in all cases. A mandatory mediation would certainly require time and effort, and it would prolong the process. Section 5: CAMP wants board members to be certified by the state. Philosophically, I believe state control and interference should be kept minimal in private affairs, and practically, I am sure, “certifying” requirements for board members would only result in creating further hurdles for prospective board candidates. Educating board members should be offered for voluntary participation. In my opinion, a legislative campaign has more chances when it is supported by many HOAs. Guenter Langer Royal Palm Beach


COMMUNITY WEBSITES BY RON TOMCHIN

Websites Improve Communication While Saving Time And Money

One of the most essential characteristics of a successful neighborhood association is a pro-active fostering of two-way communication between the members of the community and the board of directors they have elected. There is nothing new to this concept. Throughout history, all organizations have had to address communication, and the successful ones have implemented systems that best utilized the tools that were available to them, from smoke signals to the written word and from the telegraph to the telephone. Today’s revolution in technology, however, has provided even greater and more affordable tools to meet this objective. One of the most successful of these for neighborhood associations is the implementation of a community website. Community websites function differently from social pages, such as Facebook, and are more akin to business websites that are used to establish an image and disseminate information. Beyond this, your neighborhood association can also use this facility for administrative purposes by harnessing its many functions to streamline its business-type obligations. But needs and technology change, and the key to a successful website is to assure that it is dynamic and can grow and adapt, with minimal effort, when required. Some possible uses for the community website are: 1. Announcements: calendars of events, due dates for payments, community-sponsored events. 2. Special interests: local news and other items of interest. 3. Board business: meeting dates, agenda, budgets, minutes, financial statements – anything that does not require direct postal mailing (e.g., election ballots).

A look at a sample HOA website.

4. Board contacts: list of officers and preferred method of contact; contact forms for community members to use. 5. Rules and regulations: rules for architectural review and approval, including online blank forms. 6. Community documents: downloadable community documents, such as bylaws and declarations, and other items required by law or regulation to be made available to all homeowners. 7. Publicity: information about the community for outsiders, especially those who might be considering purchasing property, regarding estoppel and other requirements. 8. Administrative: storage of important documents, financial information, e-mails and other items required by law or regulation; association e-mail addresses for board members and committee members to use for official business. There are many other uses that could be considered, which are limited only by the imagination of the community. These ideas come from the community, its board and other leaders,

and sometimes from legal mandate, and can be readily implemented, either by designated individuals or in conjunction with a professional web design service that usually can help translate the idea into technical form at a reasonable cost. In the end, a relatively small investment can result in a website that fosters communication and helps meet legal and other administrative requirements. Most important, the volunteers elected to administer the community can do so — and do it better — while spending less time fulfilling their duties. In future issues, we will explore these different uses in more detail. Ron Tomchin is president of RPB Advisors, web design company that specializes in helping local businesses and neighborhood associations utilize the most current available web technology to achieve better productivity in an efficient and cost-effective manner. Visit www.rpb advisors.com or call the office at (561) 337-7806 for information.

Winter 2012 • FLNA Magazine • Page 13


THE ASSOCIATION ACCOUNTANT BY JOHN SPILLANE

How Should We Handle Reserves?

Question: What is the proper accounting for my association reserves? Answer: The association budget includes an annual assessment for future major repairs and replacements of its common property. This common property may include such things as roads, roofs, swimming pools, clubhouses, parks, and tennis courts or golf courses. Over time, these need to be replaced or to undergo major renovations. Associations may accumulate money for future major repairs and replacements of the common property in a number of ways, such as borrowing, financing through monthly or quarterly assessments over the estimated life of common property, or simply financing through special assessments at the time a major repair or replacement is needed. Most association documents state the requirements for accumulating this money, and some have adopted a financing policy dealing with special assessments or borrowing when needs occur. The reserve assessment is accounted for separately in the books of the association. The amount assessed for ma-

jor repairs and replacements is usually shown on the statement of revenues and expenses or statement of changes in fund balances as a separate line item. The association should also maintain a separate bank account for reserves. Many associations prepare reserve studies internally or hire outside professionals in order to determine when these major items need to be replaced (useful life), how much they will cost to replace, and what the monthly contribution to finance such expenditures should be. The presentation of these reserve studies is required to be shown as “required supplementary information” to be disclosed outside of the basic financial statements of the association. Various methods may be used to calculate the reserve portion of the monthly contribution mentioned above based on the financing plan goals. The two most common methods are the “straight line” and “pooling”

methods. The Community Association Institute has produced a guide titled “A Complete Guide to Reserve Funding,” which can be found at the website www.cairf.org/research/bp.html. The balance in the reserve account should be reduced for any expenditure made for major repairs or replacements. The money in the reserve account must be restricted, and no operating expenses should be paid with reserve money. Please keep in mind that one of the principal objectives of your association is to maintain the common property and accumulate money for their future repair and replacement. J.P. Spillane is a certified public accountant with many years of experience in working with homeowners’ associations. He lives in the western communities, and his office is in Wellington. For more information, call (561) 7901488 or visit www.jpspillane cpa.com.

INSURING THE ASSOCIATION BY RIAZ SINGH

What Coverage Should We Get?

Question: What types of insurance coverage should a neighborhood association purchase? My subdivision doesn’t have any common areas or property, so does the association really need insurance? Answer: Because liability is such a broad and unspecific issue, every association needs a comprehensive insurance program to protect itself from casualty losses, personal injury and property damage claims, as well as miscellaneous areas of liability exposure, such as officers’ and directors’ liability for the association’s board of directors. Even if your association does not have any common areas, coverage is still required. An adequate insurance program should consider how the units are situated or connected. Also, the number of units under control of the association is a primary rating tool for car-

riers. A condominium building will have different needs than a subdivision with a clubhouse and a pool. Even though a condominium is required to obtain a blanket fire and casualty insurance policy covering all units, as well as all common areas, a planned unit development has the option of either obtaining such a policy or insuring only the common areas. A developer usually prefers to have the PUD association insure only the common areas, since that eliminates the cost of fire insurance on individual units. An HOA needs to have insurance, but what is right for one community may not be right for another. Coverage needs to be appropriate for the association involved. The fol-

Page 14 • FLNA Magazine • Winter 2012

lowing coverages should be considered when determining what is right for your association: property insurance, commercial general liability insurance, automobile insurance, directors’ and officers’ liability insurance, employee dishonesty insurance, comprehensive equipment coverage insurance, workers’ compensation insurance, umbrella liability insurance and dishonesty bonds. Riaz Singh is with Tradewinds Insurance Consultants. For information on association protection, call (561) 578-5758 or visit www. floridatradewinds.com. Answers provided here are for informational purposes only. Always contact a licensed insurance agent or surplus line professional for advice.


Winter 2012 • FLNA Magazine • Page 15


FLNA FEATURE

NOT ON THE GRAND TOUR

Volterra, Italy A Unique Experience When The Tuscan Sun Goes Down BY TONY CONSALVI One of the most popular European tourist destinations is Tuscany, where art lovers converge on Florence, the birthplace of the Renaissance; wine lovers make pilgrimages to the homes of the Sangiovese grape, Montalcino for the Brunello, Montepulciano for the Nobile and Chianti for its namesake; and culinary aficionados flock to the many agriturismos to learn how to create and then sample the secrets of northern Italian cooking. But tourism has its drawbacks. In Tuscany’s cities, and even some of its small towns that seem to be listed in every guidebook, tour groups from all over the world clutter the narrow streets with lines of what soon become exhausted, mostly middle-aged or older travelers who follow someone holding aloft an umbrella or a stick topped with a colored marker, speak in their native tongue to their fellow marchers and seemingly try religiously to avoid any contact with the local residents until they reach their designated souvenir stand. The tour group operators try to keep their charges in their native comfort zone, isolating them from the

locals by picking hotels and restaurants that can cater to their ethnic preferences. It is a system designed to check off items on a pre-designated tourist bucket list. For many, it becomes Italy without the Italians. Early each morning in the major tourist cities, buses pull up to the tourist hotels, tour guides account for their charges, and the bleary-eyed travelers slowly clamber aboard, hoping to get a few more minutes of sleep before their tourist day begins. These are the day trippers, who will either return to the same place or move on to another major tourist city in time for dinner. Eventually, they find themselves looking out their soundproof windows as their caravans wind their way through a countryside of poplar trees, rolling hills and fields covered with the legendary grape vines and olive trees of Tuscany, their routine now and then broken by the occasional rustic stone farmhouse. They half-listen to the rehearsed words of their guide, delivered in their native tongue in what is often some droll monotone, describing what they are passing, maybe where they are going, and, most important, when they

Page 16 • FLNA Magazine • Winter 2012

will eat and where they can shop. It is like a televised marathon travel show that has not been cut to fit a shorter time slot. One the most popular day tripper sites in western Tuscany is the hilltop village of San Gimignano, convenient for the tour buses that can leave the autostrada and be there in less than a half-hour. Now and then, however, a tour bus, but more than likely a more adventurous tourist on a local bus, in a car, or traveling by some other means comes to a fork in the road and turns the opposite way to discover another town perched on a hilltop that is not so crowded and has been popular with travellers much longer, Volterra. Volterra provides all the important “bragging” points for day-tripping sightseers. A major crossroad of trade and history on the peninsula for more than 2,500 years, it was a leading city of the Etruscans, those mysterious ancients who populated this area and to whom the term Tuscany owes its name. Its Etruscan Museum, with its extensive collection of artifacts, is one of the oldest public museums in Italy. The city walls, built by those same Etrus-


cans and still almost entirely intact, are more than 7 kilometers long and still outline its confines. The Romans came later and, 100 years before Caesar, the city became a major supplier of the war materials that supported the Roman legions that defeated Hannibal. The remains of a Roman theater from the time of Augustus and a subsequent second-century Roman bath, which was unearthed only a century ago, fill a natural hollow in the Volterra hill. A thousand years later, Volterra was one of the many city-states that vied for control of the region. Its cathedral and baptistry date from the 13th century, there are still some medieval towers scattered throughout the city, and its town hall is one of the oldest in Tuscany. When Florence finally prevailed over the other city-states, its leader, Lorenzo di Medici, under whom the Renaissance began to change the Western world, built an imposing fortress and prison, which is still in use today. The artwork now contained in the religious and public buildings are products of the old masters and even more modern ones, such as Matisse. Through it all, the artisans of the area were famed for their exquisite alabaster creations, and little factories can be found throughout the city. As each day draws to a close, the nature of Volterra changes as it transitions from a “tourist attraction” to a city on a hilltop in which people do not just visit to see the past but where they have always lived and still do. First, the normal everyday businesses – the banks, the realtors, as well as the artisans – begin to close their doors and the buses in the parking lots outside the walls start their engines. Not long after, a line of cars and buses forms and begins its journey down the mountain. There are fewer people walking along the streets, and the large groups are nowhere to be seen. Schoolchildren suddenly appear in the gelaterias. Soon, the owners of the souvenir stands begin to move their wares in-

(Above) Shopping on the less-crowded streets of Volterra. (Below left) The city’s Etruscan gate. (Below right) Get used to the narrow streets in this 2,000-year-old city.

side and close their shutters. Women, some carrying small cloth shopping bags, can be seen going in and out of the local market stores carrying fresh bread, produce and possibly meat for dinner. What tourists remain are mostly walking along the ramparts, photo-

graphing the sun going down behind the Roman theater and the late-evening shadows as they pass across the Tuscan countryside below. As the sun disappears, the remaining stores close. Visitors and townsfolk pass each other by, exchange

Winter 2012 • FLNA Magazine • Page 17


FLNA FEATURE smiles and, sometimes like old friends, maybe even a greeting. The narrow streets have never really suffered the full onslaught of the summer sun, and

now, in this hilltop town, there is a cool breeze running between their walls. Activity has also changed. Waiters are arranging tables and chairs in front of

Remains from an ancient Roman theater fill a natural hollow in the Volterra hill.

Page 18 • FLNA Magazine • Winter 2012

the few small local restaurants and writing the daily menu specials on the outside chalkboards. Later on, the visitors, who had returned to their small, family-run hotels to freshen up, come out one by one or two by two looking for a restaurant whose fare seems the most attractive. Before long, the streets seem almost empty as locals and visitors, whether in their homes or in a restaurant, sit down to enjoy their dinners. When the visitors finally leave their restaurant where, like at home, they have had their table the entire evening, the streets are filled with families and other visitors walking and socializing, the children playing, and all just enjoying the ambiance of the town, of which, tonight, they have been a part. Tomorrow, they’ll wake to sunlight and maybe a rooster crowing as they start the day smelling the local Italian coffee or cappuccino and await the arrival of tomorrow’s day trippers.



FLNA WINTER 2012