Quorum February — 2018

Washington Metropolitan Chapter Community Associations Institute

FEBRUARY 2018

A Magazine for Community Association Volunteer Leaders, Professional Managers and Business Partners

Financial Responsibility

ALSO IN THIS ISSUE

____________________________ WMCCAI Conference & Expo Overview and Exhibitor Listing ____________________________ Is Death the End of Collections? ____________________________ When the Association is the Highest Bidder

Exceptional Service is Our Mission.

As the Washington DC area’s property management industry leader, we know what it takes to create great communities that residents are proud to call home. We start by putting the right teams in place – local property experts who deliver our best-in-class solutions, along with genuinely helpful service, to enhance the property values and lifestyle of those we serve.

That’s how we make a difference, every day, for great communities like yours… · High-Rise and Mid-Rise Buildings · Condominium & Homeowners Associations · Lifestyle, Large Scale & Active Adult Communities 11351 Random Hills Road, Fairfax, VA 22030 923 Maple Grove Drive, Suite 201, Fredericksburg, VA 22407 703.385.1133 | www.fsresidential.com

2 | QUORUM

Making a Difference. Every Day.

Visit us at the WMCCAI 2018 Conference & Expo Booth 503

FEBRUARY 2018

­CONTENTS 12 Assessment Collection Tools and Tips

BY DOUGLAS S. LEVY, ESQ. AND MARY C. HORNER, ESQ.

16 Is Death the END of Collections?

BY LELLA AMISS “AMI” E. PAPE, ESQ.

18 Payment Plans: An Alternative Collection Method

BY DEBORAH A. CARTER, CMCA, AMS, PCAM

20 To Foreclose or Not To Foreclose? What to Consider When That is the Question

BY CHAD RINARD, ESQ.

22 Simplifying Bad Debt

DEPARTMENTS AND MORE 5 Message from the Executive Director 6 Chapter Benefactor: Hann & Hann Construction Services, Inc. 7 Welcome New Members 8 Upcoming Events 10 People & Places 36 Classifieds 37 Index to Advertisers

BY JOSE IGNACIO

24 Collection Resolution: The Board’s Light Switch to Turn On the Power

BY DONNA M. MASON, ESQ. AND AIMÉE T. H. KESSLER, ESQ.

26 Modernizing Condominium Documents to Streamline Assessment Collection

BY STANFORD L. KIMMELL III, ESQ.

28 WMCCAI Conference & Expo 33 When the Association is the Highest Bidder

BY MICHELLE BAQUERO, CMCA

34 Community Association Insurance Financing

WMCCAI MISSION STATE­MENT To optimize the operations of Community Associations and foster value for our business partners.

BY ALLEN HUDSON

Reader comments and suggestions are welcome. Address your comments to: Quorum 7600 Leesburg Pike, Suite 100 West Falls Church, VA 22043

We also wel­come ar­ti­cle sub­mis­sions from our ­members. For author guide­lines, call (703) 750-3644 or e-mail publications@caidc.org.

Articles may be edited for length and clarity.

FEBRUARY 2018

|3

www.WindowsPls.com Licensed | Bonded | Insured VA# 2705083994 MHIC# 131916 DC PERM# 8402

l

Windows, Doors, Siding and Roofs for single-family

l A+ Rating with Better Business Bureau. l We service Virginia, Maryland and DC.

homes, townhouses, condominiums and high rises.

Call 703.256.0600 for your personal consultation.

Superior performance and excellent customer service for 28 years.

l We provide highly skilled and experienced installers. l We offer service contracts for management companies to keep communities in shape. l Our business is 60 percent repeat and referred customers. l Call 703.256.0600 for your expert solution.

windows | doors | siding | roofs done right, the first time.

703.256.0600

www.WindowsPls.com

President Sarah Gerstein, CMCA, AMS, LSM, PCAM President-elect Rafael A. Martinez, CTP Vice President Airielle Hansford, CMCA, AMS, PCAM Secretary Michael Gartner, ESQ. Treasurer Kristen Melson, CMCA, AMS, PCAM Immediate Past President Bruce H. Easmunt, ESQ. Executive Director Jaime Barnhart, CMP (EX OFFICIO)

Growing up, I never imagined that my huge computer taking up all the space on my desk would be replaced by a handheld device that was my phone. That modem sound as I logged onto the worldwide web still rings in my ears. And just a few years ago, I never thought that this technology would change the way business is conducted.

D IRECTOR S Gordon Boezer, Thomas Burrell, Anthony Humphries, Ruth Katz, Ted Ross, Todd A. Sinkins, ESQ., Stephen Wright, CMCA, AMS, LSM, PCAM

ESQ.,

CO U N C I L C HAI R S Communications Council Leslie Brown, ESQ. Education Council Jennifer Bennett, CMCA, AMS, PCAM Member Services Orlando Ramirez

CO MM I T TE E C HAI R S Conference & Expo William Cornelius and Donna Aker, CMCA, AMS, PCAM D.C. Legislative/LAC Jane Rogers, ESQ. Education Kevin A. Kernan, ESQ. and James Santos, CMCA, AMS Golf Adrienne Zalenski and David Crone, CMCA, AMS Maryland Legislative Thomas Schild, ESQ., CCAL Outreach Elizabeth Kirk and Sara Ross, ESQ. Membership Joe Inzerillo and Noni Roan Quorum Editorial Susan L. Truskey, ESQ. and Christopher Carlson Chapter Events June Chulkov and Lauren Kolb Virginia Legislative Ronda DeSplinter, LSM, PCAM and William A. Marr Jr., ESQ.

QU O RUM Managing Editor Diane Sohn, dsohn@caidc.org Design Six Half Dozen

QU O RUM E DI TORI AL CO M M IT TE E Co-chairs Susan L. Truskey, ESQ. and Christopher Carlson Members Beverly Alston, James Anderson, Noel Arevalo, CMCA, Sarah Auringer, Mira Brown, CMCA, AMS, Leslie Brown, Chris Carlson, PE, Deborah Carter, CMCA, AMS, PCAM, Sara Castle, Crystal Coats, CMCA, AMS, Kenny Cohn, Cheryl Crawford, Christopher Dibble, CMCA, AMS, PCAM, Bruce Easmunt, ESQ., Sarah ElTaher, Matt Gallagher, Michael Gartner, ESQ., Amy Gaynor, Sarah Gerstein, CMCA, AMS, PCAM, Rippy Gill, CMCA, AMS, Laura Goguet, CMCA, AMS, John Goins, Stephen Grant, Scott Greges, CMCA, AMS, Timothy Hipp, Mary Horner, Chase Hudson, Peter Hughes, Iman Jackson, CMCA, AMS, Shannon Junior, Ruth Katz, ESQ., Leisa Keys, Richard Kuziomko, CMCA, AMS, PCAM, Crishana Loritsch, CMCA, AMS, PCAM, Liliana Martinez, CMCA, AMS, Laura McVey, Thomas Mugavero, ESQ., Crystal Partin, CMCA, AMS, PCAM, Joycelyn Peoples, AMS, Kara Permisohn, Nicki Phenneger, Christine Rudert, Brandi Ruff, CMCA, AMS, PCAM, Lauri Ryder, CIC, CRM, CMCA, Scott Silverman, Mark Smith, Chelsie Throckmorton, Olga Tseliak, John Tsikerdanos, Ron Unger, CIC, Kim Veirs, Lee Ann Weir, CMCA, AMS, Doug White, Samuel Wiest, Lakisha Williams, Aimee Winegar, CMCA, AMS, LMS, PCAM, Jim Wisniewski, Kelly Young, Michael Zupan, ESQ. Washington Metropolitan Chapter Community Associations Institute, a 501(c) (6) organization, serves the educational, business and networking needs of the community association industry in 80 cities/counties in Maryland, Virginia and the District of Columbia. Members include community association homeowner volunteer leaders, professional managers, association management companies, and other businesses and professionals who provide products and services to planned communities, cooperatives and condominiums. WMCCAI has more than 3,000 members including 300+ businesses, 1,100 professional managers from 85 management companies, and approximately 1,500 community association homeowners. WMCCAI is the largest of Community Associations Institute’s 62 chapters worldwide.

Quorum is the award-winning premiere publication of WMCCAI, dedicated to providing WMCCAI’s membership with information on community association issues. Authors are responsible for developing the logic of their expressed opinions and for the authenticity of all presented facts in articles. WMCCAI does not necessarily endorse or approve statements of fact or opinion made in these pages and assumes no responsibility for those statements. This publication is issued with the understanding that the publisher is not engaged in rendering legal, accounting or other professional services and nothing published in Quorum is intended to constitute legal or other professional advice and should not be relied on as such.

If legal advice or other expert assistance is required, the services of a competent professional should be sought directly by the person requiring such advice or services.

Articles appearing in Quorum may not be reprinted without first obtaining written approval from the editor of Quorum. In the event that such permission is granted, the following legend must be added to the reprint: Reprinted with permission from Quorum™ magazine. Copyright 2017 Washington Metropolitan Chapter Community Associations Institute. Quorum is a trademark of WMCCAI. Receipt of Quorum is a privilege of WMCCAI membership for which $65 in nonrefundable annual dues is allocated. The subscription price for nonmembers is $75 per year; contact publications@caidc.org or call (703) 750-3644.

A quick email. A Skype conference call. They are fast and get your message into a potential client’s hands quickly. You can load all the information possible into one PDF proposal, attach it, click send, and off to the next to-do list item. But did you connect with that potential business partner? Do they understand their value to you and do you truly understand their needs? Relationships aren’t built through technology; they are built on engagement and experience. Did you know that face to face meetings tend to be shorter in time than conference calls? For these reasons, technology will never replace the true value of face to face meetings and events.

FROM THE EXECUTIVE DIRECTOR

MAKING PERSONAL CONNECTIONS

O FFICE R S

Don’t get me wrong – I love technology! My phone, my laptop, even my wireless outlets at home. They do make things more efficient day to day. I am able to work anywhere and be connected to staff and members any time.

As 2018 goes on, you will see more online education, more online advertising opportunities and more ways to reach the industry through technology.

Technology allows us to reach new audiences and send information quickly.

However, it is just a tool, not the way to truly connect with each other.

We are busy making final preparations for the largest face to face meeting in all of CAI. That’s right – the WMCCAI Conference & Expo is the largest gathering of community association professionals in all 62 chapters of Community Associations Institute. The companies listed in this issue and on our website have invested in this conference because they understand — meeting homeowner leaders and property managers face to face is how they propel their businesses forward, now and in the future.

Sure, technology is a part of the education delivery at Conference & Expo – in sessions, on the expo floor, and post-event. However, the real value is found in the personal connections members will make with each other.

Close your email and Skype screen, set up a face to face meeting and connect with each other. And connect with the Chapter – stop by the office, register for an education session, and attend Chapter events. Engaging with industry colleagues instantly increases your network. Sharing the experience of a chapter event will forge friendships with other members. In 2018, challenge yourself to reach beyond technology.

JAIME BARNHART,

CMP

Jaime Barnhart, as the chapter’s executive director, is responsible for implementing the organization’s mission and goals, and managing its staff. Jaime has worked in non-profits/associations in the D.C. Metro area for over 12 years focusing on program management, events and trade shows, and marketing. She joined WMCCAI as the events manager in 2015.

To advertise in Quorum, e-mail publications@caidc.org.

For more information about Quorum or WMCCAI, visit www.caidc.org.

FEBRUARY 2018

|5

CHAPTER NEWS

C H A P T E R

B E N E F A C T O R

Hann & Hann Construction Services Inc. 12307 Washington Ave Rockville, MD 20852 Telephone: 301-468-3340 Fax: 301-881-5594 E-mail: tel-taher@hannandhann.com Website: http://www.hannandhann.com Facebook: https://www.facebook.com/Hann-Hann-Construction-Services-124438038154947/ Year Established or Incorporated: 1974 • CAI Member Since: 1997

• Certificate of Insurance: Yes • Bonded: Yes • Areas you serve: D.C., Maryland, and Virginia • Corporate Associations: Member of Community Associations Institute (CAI) Washington Metropolitan Region as well as Chesapeake Chapter, Property Management Association (PMA) Services Provided: Hann & Hann provides a consultative approach to the renovation, maintenance and general upkeep of your community. Founded in 1974 we have in-house expertise in painting, wall covering, carpentry, roofing, siding, concrete, lead abatement, and mold remediation, to name just a few of our strengths. Hann & Hann employs a team of highly-skilled professionals ranging from ownership through management into our production staff proudly providing services to HOA’s, Condominiums, and Co-ops.

Hann & Hann has extensive experience in lead abatement and the risk containment for residents through the abatement process and continually train our personnel. With credentials in MD, VA, and D.C. and differences in each jurisdiction, we stay diligent in our continued education of our personnel due to the evolving best practices. With decades of experience in the condominium market, we are poised to continue assisting communities in the Metro D.C. region with their maintenance, repairs, renovations, and remodeling of any interior or exterior need. Our staff is accustomed to working in occupied spaces and makes every effort to reduce the inconvenience felt by residents.

• Licenses Held: MHIC(MD), Class A(VA), General service and repair home improvement contractor(D.C.), Lead abatement • Company Philosophy: Consult with the client to determine the best solution for the need expressed, where possible providing options ranked as good, better and best explaining the advantages or shortcomings of each.

Without hesitation, walk away from projects or requests that have an improper scope of work, risk of ethical conflict, or present risk to building, association, the reputation of Hann & Hann or the management company hiring us. Utilize knowledge, wisdom, transparency, candor and honesty.

Contacts: Todd El-Taher, Vice President, Sales & Marketing

Article Submissions:

Are you interested in sharing your experiences and expertise with our readers? Quorum magazine is always seeking new article ideas, submissions, and content. If you have an idea or would like to submit an article for consideration, please make sure you contact us before you begin writing to see what our upcoming themes are. Questions and interests should be directed to Diane Sohn at publications@caidc.org or by phone at 703.750.3644.

Advertising:

For advertising, availability, rates, and specifications, please contact Diane Sohn at publications@caidc.org. Targeted advertising in WMCCAI’s Quorum, opens the door to thousands of prospective customers and contacts in the community association industry.

6 | QUORUM

WMCCAI proudly welcomes the following members who joined the chapter in December 2017 (as of December 21, 2017).

Community Association Volunteer Leaders from the Following Associations Newington Commons Homeowners Association New Mark Commons Homes Association Spring Woods Homeowners Association Individual Managers Chris Borgal, CMCA, The Peterson Companies Racheal L. Gore, CMCA, Sequoia Management Company, Inc., AAMC Sam Gras, Beekman Place Condominium Liesl A. Hyland Kimberly Nesbitt, Nesbitt Realty Anna Varone, Reston Association Joan Watson, Legum & Norman, Inc., AAMC Jamison Williams, The Colonies of McLean Multi-Chapter Business Partner Kevin Davis Insurance Services

GREAT

PEOPLE

CHAPTER NEWS

Welcome New Members

Committed to

YOUR Association’s

SUCCESS “Sentry provides expert systems, training and advanced technology that allow me to stay on top of community issues. I work hard to communicate and be responsive. Sentry brings real ‘horsepower’ to your association’s management.”

– Susan, Sentry Manager

4401 Ford Avenue, Suite 1150 Alexandria, VA 22302 (703) 642-3246 northernvirginia.sentrymgt.com 602 S. King Street, Suite 400 Leesburg, VA 20175 (540) 751-1888 loudoun.sentrymgt.com

FEBRUARY 2018

|7

UPCOMING EVENTS

FEBRUARY 10

Board Leadership Development Workshop 9 a.m. – 5 p.m.

WMCCAI Chapter Office 7600 Leesburg Pike, Suite 100 West, Falls Church, VA 22043

Early Bird Rates Regular Rates

(before 2/5) (after 2/5) Homeowner Member $65 $80 Nonmember $75 $90 Manager Member $65 $80 Nonmember $75 $90

The Board Leadership Development Workshop teaches the homeowner leader how to communicate with association residents, hire qualified managers and service providers, develop enforceable rules, interpret governing documents and more. It provides a comprehensive look at the roles and responsibilities of community association leaders and conveys information to help create and maintain the kind of community people want to call home.

MARCH 10

WMCCAI Conference & Expo 8 a.m. – 4 p.m.

Walter E. Washington Convention Center 801 Mount Vernon Place NW, Washington, D.C.

Regular Rates Late Registration

(1/22-2/28) (after 2/28) Homeowner Member $45 $60 Nonmember $75 $90 Manager Member $110 $125 Nonmember $135 $150 Business Partner Member $180 $195 Nonmember $210 $220

Washington Metropolitan Chapter Community Associations Institute invites you to attend the largest community association industry event in the Washington metropolitan area.

The 2018 WMCCAI Conference & Expo will feature educational sessions on pertinent topics that affect those who live in and work with community associations.

Approximately 200 companies and organizations will be on the exhibit hall floor showcasing goods and services of interest to community associations.

For more information including a list of exhibitors see page 28 of this issue or visit WMCCAI’s website, www.caidc.org.

For more information on WMCCAI meetings or upcoming events, contact the chapter office at (703) 750-3644, email info@caidc.org or visit www.caidc.org.

8 | QUORUM

Board Leadership Development Workshop

The Board Leadership Development Workshop teaches the homeowner leader how to communicate with association residents, hire qualified managers and service providers, develop enforceable rules, interpret governing documents and more. It provides a comprehensive look at the roles and responsibilities of community association leaders and conveys information to help create and maintain the kind of community people want to call home.

When

Where

How

Who

Credits

Tuesday, February 10, 2018 9 a.m. – 5 p.m.

Registration opens at 8:30 a.m.

Chapter Office 7600 Leesburg Pike, Suite 100W Falls Church, VA 22046

Visit www.caidc.org to register

This program will benefit Homeowners & Managers

This program is worth seven (7) credit hours

Sponsor

Registration Rates EARLY BIRD RATE (before 2/5/18)

REGULAR RATE

Member

$65

$80

Nonmember

$75

$90

Member

$65

$80

Nonmember

$75

$90

HOMEOWNER

MANAGER

7600 Leesburg Pike, Suite 100 West

E-mail: education@caidc.org

Falls Church, VA 22043

Web: www.caidc.org

T: 703.750.3644 F: 703.941.1740

PEOPLE & PLACES

EMPLOYERS: If you are seeking local talent in the community association industry, you’ve come to the right place. List your job opening with WMCCAI and find your next superstar employee.

Online postings are easy to set up.

CANDIDATES: If you are seeking employment or looking for a new career within the community association industry be sure to check the WMCCAI Job Bank frequently.

Learn More: http://caidc.org/job-bank

John Phelps of SOLitude Lake Management Awarded His Efforts in Community Education and Outreach SOLitude Lake Management has made it a team-wide mission to pave a path towards a better tomorrow through The SOLution, a company-wide program that embraces volunteerism, activism and environmental education in the communities in which we live and serve. John Phelps, an Environmental Scientist and Senior Business Development Consultant at SOLitude, was recently awarded for his service efforts through The SOLution by the North American Lake Management Society (NALMS), a national organization focused on the protection of lakes and reservoirs.

10 | QUORUM

Whiteford, Taylor & Preston is pleased to announce that 40 of its attorneys are listed among the 2018 Super Lawyers and Rising Stars in Maryland.

• Adam D. Baker - Real Estate - Rising Stars • Thomas C. Barbuti - Real Estate, Environmental, Alternative Dispute Resolution - Super Lawyers • Erek L. Barron - General Litigation, Appellate, Criminal Defense: White Collar – Super Lawyers • Todd M. Brooks – Bankruptcy: Business, Business Litigation, Appellate Rising Stars • Edward M. Buxbaum - Business Litigation, Insurance Coverage - Super Lawyers • Robert F. Carney - Construction Litigation: Business, Construction, Alternative Dispute Resolution, Community Associations - Super Lawyers • Aaron L. Casagrande – Bankruptcy: Business, Professional Liability; Plaintiff, Business Litigation, Professional Malpractice - Rising Stars

• Peter D. Guattery - Employment & Labor, Immigration, International Super Lawyers • Sigrid C. Haines – Healthcare – Super Lawyers • Kevin G. Hroblak – Business Litigation, Professional Liability: Plaintiff, Bankruptcy: Business - Super Lawyers • Harry S. Johnson – Personal Injury Products: Defense, Class Action/ Mass Torts, Civil Litigation: Defense - Super Lawyers • Frank S. Jones Jr. - Securities & Corporate Finance, Business/Corporate, Intellectual Property - Super Lawyers • George S. Lawler - Business/Corporate, Securities & Corporate Finance, Mergers & Acquisitions - Super Lawyers • Jennifer Ryan Lazenby - Business Litigation, Real Estate: Business, Employment & Labor - Super Lawyers

• Mary Claire Chesshire – Employee Benefits, Nonprofit Organizations Super Lawyers

• Alan C. Lazerow – Bankruptcy: Business, Business Litigation - Rising Stars

• Robert B. Curran - Business/Corporate, Mergers & Acquisitions, Closely Held Business - Super Lawyers

• Richard J. Magid - Business Litigation, Securities Litigation - Super Lawyers

• Gardner M. Duvall - Business Litigation, Civil Litigation: Defense, Insurance Coverage - Super Lawyers

• Roseanne M. Matricciani - Health Care, Business/Corporate - Super Lawyers

• Edwin G. Fee, Jr. - Estate Planning, Probate & Estate Administrations, Trusts, Wills - Super Lawyers

• Kevin C. McCormick - Employment & Labor - Super Lawyers

• Howard R. Feldman - Business Litigation, Business/Corporate, Information Technology, Cybersecurity, E-Discovery - Super Lawyers • Martin T. Fletcher - Bankruptcy & Creditor/Debtor Rights, Business Litigation, Business/Corporate - Super Lawyers

• Albert J. Mezzanotte, Jr. - Business Litigation, Insurance Coverage, Schools & Education - Super Lawyers • Joseph J. Mezzanotte - Real Estate, Land Use/Zoning, Business/Corporate - Super Lawyers • Razvan E. Miutescu – Technology Transactions, Intellectual Property –

PEOPLE & PLACES

Forty Whiteford Attorneys Named Super Lawyers and Risings Stars in Maryland

Rising Stars • Roberto M. Montesinos – Business/ Corporate, Real Estate: Business Rising Stars • Paul M. Nussbaum - Bankruptcy & Creditor/Debtor Rights, Business Litigation - Super Lawyers • Gary S. Posner - Business Litigation, Bankruptcy: Business - Super Lawyers • Herman B. Rosenthal – Continuing Care Retirement Communities, Health Care, Government Finance, Non-Profit, Tax: Business - Super Lawyers • William F. Ryan, Jr. - Business Litigation, Professional Liability: Plaintiff, Intellectual Property Litigation - Super Lawyers • Peter W. Sheehan, Jr. - Personal Injury - Products, Business Litigation Rising Stars • David M. Stevens - Employment & Labor, Employment Litigation: Defense - Rising Stars • Gregory M. Stone – Intellectual Property – Super Lawyers • Brent C. Strickland – Bankruptcy: Business, Business Litigation - Super Lawyers • Steven E. Tiller - Intellectual Property Litigation, Intellectual Property, Business Litigation - Super Lawyers • Warren N. Weaver - Business Litigation, Personal Injury - Products - Super Lawyers • Veronica K. Yu – Civil Litigation: Defense, Personal Injury – Products – Rising Stars • Thurman W. Zollicoffer, Jr. - Business Litigation, Health Care, Criminal Defense: White Collar - Super Lawyers

FEBRUARY 2018

| 11

By Douglas S. Levy, ESQ.

By Mary C. Horner, ESQ.

Doug is counsel with MercerTrigiani and currently serves as a member of the Education Committee for the Washington Metropolitan Chapter Community Associations Institute. He previously served on the Quorum Editorial Committee.

Mary is an associate with MercerTrigiani and serves as a member of the Quorum Editorial Committee for the Washington Metropolitan Chapter Community Associations Institute.

Assessment Collection tools & tips

T

he financial health of a common interest community association is dependent upon the timely payment of assessments by association owners in order to pay the common expenses of the association.

Inevitably, many associations face a difficult, yet common challenge – an owner who is delinquent in the payment of assessments. Both legal and non-legal tools are available to associations to address and collect unpaid assessments that are vital to ensuring the continued success of a community.

Non-Legal Assessment Collection Tools The board of directors has a fiduciary duty to ensure that the business of the association is well managed—including the finances. To help fulfill that duty, directors—and association management—must understand, establish, and implement a robust assessment collection program consistently. In order to ensure a well-developed and closely followed plan, the Board should be familiar with association assessment collection authority and practices, which vary from community to community. It is essential that associations comply with the assessment collection authority established in the recorded governing documents or condominium instruments and as authorized by law.

12 | QUORUM

For example, if the governing documents or condominium instruments do not expressly authorize assessment of administrative charges, such as charges for preparing and sending late notices or for referring delinquent accounts to association legal counsel for collection, the association may not assess such charges to owners—even if the management agreement addresses assessment of administrative charges to owners. Assessing fees and costs to owners that are not expressly authorized in the recorded governing documents or condominium instruments could subject an association to unnecessary and potentially costly liability.

Based on the document-based assessment collection authority, an association should adopt a formal assessment collection policy establishing clear procedures and policy for collecting delinquent assessments. Adopting an assessment collection policy guides an association in handling delinquent assessment accounts promptly, uniformly and consistently. Additionally, if the recorded governing documents or condominium instruments provide authority, an assessment collection policy can establish the late charge amount for unpaid assessments as well as procedures for acceleration of assessments, among other things.

Another benefit of an assessment collection policy is to put in place procedures for reminding delinquent owners that payment of assessments is past due. These procedures may include sending a late notice and notifying owners that a delinquent account may be turned over to association legal counsel for collection action—which may help prompt payment by delinquent owners without the need for further action.

If late notices sent to a delinquent owner have not resulted in payment, an additional step may be taken before turning over the delinquent account to association counsel for collection action. An often overlooked – but effective – means of collecting unpaid assessments is using an association’s due process procedures to incentivize owners to pay.

If the association’s governing documents or condominium instruments authorize the suspension of certain privileges within the association— such as use of recreational facilities or common area or common element parking spaces—summoning the owner to a hearing to discuss the delinquency and advising the owner of the possible suspension of privileges can sometimes be effective in prompting payment. For example, associations with community swimming pools may find that holding such hearings prior to Summer, when the demand for swimming pool access is highest, can be effective in encouraging owners to pay assessments to avoid suspension of use of the pool.

At any time during the collection process, either pre-judgment or post-judgment, an association may encourage delinquent owners to submit payment plan proposals for Board consideration. The payment plan proposal should outline how the owner intends to satisfy the delinquency, including specific amounts and a timeline for payments. Entering into a payment plan agreement may alleviate the need to pursue further remedial action, potentially saving the association both time and money.

If a delinquent assessment account remains unpaid after assessment collection procedures are followed, and non-legal remedies have been exhausted, an association may choose to forward the delinquent account to association counsel to initiate collection action.

Pre-Judgment Collection Once a delinquent assessment account is referred to association counsel for legal action, the typical first step is for counsel to send a demand letter to the owner advising of the delinquency, requesting payment and describing actions that may be taken in the event of non-payment—such as recording liens against the property and filing lawsuits seeking monetary judgments against the owner personally. The demand letter also provides a date by which the owner must pay or dispute the amount of the delinquency before further action is taken. The demand letter serves as a final opportunity for an owner to pay before a lawsuit is filed or a lien is recorded.

When payment is not received in response to a demand letter, an association may take steps to secure the debt by recording a lien against the property among the land records of the jurisdiction in which the property is located. A lien is a legal notice demonstrating that the lienholder has some legal right to the property until a debt owed by the owner of the property is satisfied.

Two types of liens are available to associations—assessment liens and judgment liens. Assessment liens may be recorded among land records against the property prior to— and typically regardless of— obtaining judgment against the owner. Recording an assessment lien against the property creates a cloud on title to the property, which the owner will need to address in the event of sale or refinance of the property.

The laws governing authority to secure unpaid assessments by lien or judgment vary in each jurisdiction and according to whether the

Fair Debt Collection Practices Act The Federal Fair Debt Collection Practices Act (“FDCPA”) limits the nature of activities debt collectors may undertake when collecting a consumer debt and applies to thirty party debt collectors—such as association counsel—who attempt to collect a consumer debt on behalf of another party. Although the FDCPA does not apply to actions taken by the association directly, violation of the FDCPA by parties collecting debts on behalf of the association could cost the association legal fees and other unnecessary costs.

Collection Steps  Late Notice  Demand Letter  Assessment Lien  Personal Suit > Judgment  Judgment Lien Docketed  Post Judgment - Interrogatories - Garnishments

 Wage

 Bank Account

 Rent

association is a condominium unit owners association or a property owners (or homeowners) association. Association counsel handling assessment collections should be aware of and familiar with the laws pertaining to association liens and lawsuits in each jurisdiction.

In Virginia, liens recorded by a condominium unit owners association can secure assessments which are no more than ninety days past due at the time of recordation of the lien. Liens recorded by a Virginia property owners association can secure assessments which are no more than twelve months past due at the time of lien recordation.

Additionally, in Virginia, the statute of limitations for unpaid assessments claimed in a lawsuit against a delinquent owner is five years. By contrast, in Maryland and Washington, D.C., the statute of limitations for assessments claimed as unpaid in a lawsuit against a delinquent owner is three years.

Continued on page 14

FEBRUARY 2018

| 13

Post-Judgment Collection

Assessment Collection Glossary Acceleration – When the payment of an assessment is moved up to the present time due to some event such as non-payment of an installment.

Assessment – Imposition of a sum, such as a homeowner or condominium dues, according to an established rate.

Debtor – Individual who owes money or assessments.

Fair Debt Collection Practices Act (FDCPA) – Federal legislation prohibiting abusive and unfair debt collection practices.

Garnishment – A statutory post-judgment proceeding in which a third party who holds property, money or credits belonging to the judgment debtor is required to surrender such property, money or credits (to the extent of the judgment) to the court or sheriff for application against the judgment awarded against the judgment debtor.

Interrogatory – A set of series of written questions drawn up for the purpose of being asked of a party, a garnishee, or a witness or other party to be answered under oath.

Judgment – A final decision and order of the court.

Lien – Legal document used to create a security interest in another’s property.

A lien can be recorded against an owner’s property for failure to pay money that is owed.

Settlement – An agreement ending a dispute or lawsuit, typically by payment of an agreed upon portion of an outstanding obligation.

14 | QUORUM

Collecting moneys due once a judgment is obtained can be more challenging than obtaining the judgment, particularly if the owner—commonly referred to as a judgment debtor after judgment has been obtained—lacks assets sufficient to satisfy the judgment. However, there are steps an association can take through legal counsel to ensure the rights and interests of the association are protected.

Once a judgment is obtained, one of the first steps an association should consider taking is docketing the judgment among the land records of the jurisdiction in which the property is located. Similar to an assessment lien, docketing the judgment creates a judgment lien against the property and creates a cloud on title to the property, as well as other property owned in the jurisdiction where the judgment is docketed.

One of the most popular methods used to collect on a judgment is garnishment of the judgment debtor’s—typically, by a wage garnishment or bank account garnishment. The amount of money that may be garnished from a judgment debtor may be limited by the type of garnishment pursued. For example, Federal and state laws limit the amount that may be garnished from a judgment debtor’s wages.

In Maryland and Washington, D.C., wage garnishments are not subject to temporal restrictions. A wage garnishment may continue until the judgment is satisfied, thereby avoiding the need for additional garnishment filings. In Virginia, however, a wage garnishment is restricted to collecting a maximum of 180 days of garnishable wages. If the judgment remains unsatisfied, another wage garnishment may be filed.

Additionally, if a tenant resides in the property, a rent garnishment may be filed requiring the tenant to pay rent directly to the association instead of to the landlord in order to satisfy the judgment.

If the judgment debtor’s assets are unknown, the association may file interrogatories against the judgment debtor to

obtain asset information that may be used in enforcement of the judgment. A judgment debtor is required to answer questions under oath to identify assets. An association may also require the judgment debtor to provide documentation of assets, such as tax returns, bank account statements and pay stubs from an employer.

The responses provided through interrogatories or subpoenas for documents may enable the association to locate additional sources to cover the delinquency. Failure to comply with interrogatory or document subpoena requests can potentially lead to the issuance of a show cause summons or even a capias by the court. A capias requires the judgment debtor be taken into custody until compliance with the request is provided.

An additional collection tool that can be pursued for egregious delinquencies is foreclosure. All three local jurisdictions— Virginia, Maryland and Washington, D.C.—permit foreclosure to be pursued either judicially or non-judicially. The type of foreclosure an association chooses to pursue should be determined on a caseby-case basis; there are benefits and consequences to each option, depending on the circumstances of the delinquency.

Unlike Virginia, both Maryland and Washington, D.C. have “super-priority” lien statutes which provide certain delinquent assessments owed to the association priority over the first mortgage or first deed of trust. However, certain statutory restrictions limit what may be recovered by the “super-priority” lien. In Washington, D.C., the “super-priority” lien is limited to the most

recent six months of assessments. In Maryland, the “super-priority” lien is limited to four months of assessments or $1,200, whichever is less, and may not include interest, collection costs, late charges, fines, attorneys’ fees or special assessments. Nevertheless, enforcement of a “super-priority” lien may be helpful in some circumstances and can sometimes force a lender to pay the amount secured by the “super-priority” lien in order to protect the lender’s interest in the property.

Tools of the Trade Assessment collection is a complex and nuanced process—however, it is important to remember that delinquent owners are neighbors and friends. The collections process can be stressful for those facing financial difficulties, which are personal and sensitive. Although an association has a duty to pursue efforts to collect past due assessments, all owners should be treated with compassion and understanding—working with owners is not only kind, it produces results.

Keep Current on Legal News and Trends!

schildlaw.com

Attorneys for Community Associations in Maryland and the District of Columbia Thomas C. Schild  Scott J. Silverman (301) 251-1414

law@schildlaw.com

Not too big ... and not too small.

Finding a management company suited to the unique needs of your homeowner association can be a challenge.

But when you select Barkan Management, AAMC® to look after your condominium you’ll find you’ve made the right choice.

From expert consultative advice to carefully vetted vendors and precisely calibrated accounting systems and services, Barkan has it all. And with our 35+ years of experience and a host of local resources ready to deploy on your behalf, you’ll enjoy the very best in condominium living. So isn’t that just about the right size for you?

Why not find out more?

Contact Michael Feltenberger, Vice President 703.388.1005 mfeltenberger@barkanco.com

703.388.1005 barkanco.com S E R V I N G WA S H I N G T O N D C , M A R Y L A N D , V I R G I N I A A N D N E W E N G L A N D

Barkan Management, AAMC® People you can count on. Experience you can rely on.

Metropolitan Washington’s premier provider of association management services.

FEBRUARY 2018

| 15

By Lella Amiss “Ami” E. Pape, ESQ. Lella is the principle in her law firm located in the City of Manassas, Virginia serving community associations and business clients throughout Metropolitan Washington and the surrounding areas. She is experienced in real estate and residential and commercial collections for associations and corporations. Mrs. Pape practices in the Virginia, Maryland, the District of Columbia, and West Virginia. She has achieved the designations from CAI of Rising Star in 2007, and CAI Certified Trained Business Partner in 2014.

Is Death The END Of Collections?

Y

ou are sitting there enjoying a morning coffee and reading the paper when you receive urgent messages from the other Board members. They heard the horrid rumor that the owner in Unit Z died.

Your first reaction is horror at the early demise of your neighbor, and the second reaction is that gut-wrenching feeling as you recall that the owner of Unit Z was in collections for unpaid assessments, and of a large amount.

You wonder what the Board should do? Can the association recover from a deceased owner? You make the wise move and call your legal counsel for the answer first thing on Monday.

So, is there collections after death? The answer is yes.

Often the association can collect that debt, even from a deceased owner. Local courts and attorneys “probate,” or administer, the estate of the deceased. The granting by a court of probate is the first step in the pro16 | QUORUM

cess of administering the estate of a deceased person. The probate system is designed to resolve all claims and distribute the deceased person’s property. State statutes and codes in our local jurisdictions determine how an estate is paid out to creditors and heirs alike.

Virginia, Maryland, D.C., and West Virginia all have probate divisions that deal with the process of distributing the assets of the dead. Estates are handled differently by probate divisions depending on whether a will exists or not.

Figuring out who is entitled to what under the probate estate is not easy. There are many factors that need to be determined, most which can’t be resolved quickly. While the Unit Z owner’s family is dealing with the grief of sudden death, they typically will not want to deal with the debts of their deceased.

When a board learns of the death of an owner in the community, it is important to file a claim against the estate of the deceased. If at the end of the estate probate process, there is money to pay creditors, the association can get paid, but only if claims are filed with the probate court divisions.

The filing of such claims is handled by legal counsel.

Filing a claim involves a paper form filing in the county in which the owner lived or died, so determining the

First, the board and management should determine what debt the Unit Z owner owes the association. Then, the board can make a fiscally responsible determination of whether the amount of the debt is worth pursuing.

Boards and management should be advised that at the end of the estate, there may be no funds to pay the association, but it is equally likely that there will be funds to pay the amounts owed to the association. Collection from the estate of the Unit Z owner is a fairly long process, best handled by legal counsel, with no absolute guarantee of recovery.

correct place to file is critical. Our local jurisdictions typically have online records, and often searching for estates can be conducted by the association’s legal counsel online; in the alternative, public records can be searched at the local courthouse for information about the estate.

Simply filing a claim in probate does not mean the association will recover, but it is the critical step in the recovery process. What determines whether the association will recover upon death is how the claim is secured. Assessments reduced to judgment and memoranda of lien exponentially increase the chances of recovery. It is critical that the board communicate with the association’s legal counsel, and try to determine if the association has filed liens or judgments against the owner and his unit. When liens or judgments are filed against the deceased, the debt is typically deemed secured debt against any property of the owner.

With community association lending expertise like ours, you’ll get the job done right.

take that to the bank.

Noni Roan CMCA VP - MD, Northern VA, DC 301-639-5503 Toll Free 866-800-4656, ext. 7479 noni.roan@mutualofomahabank.com

Often, the family will pay the decedent’s claims. But, if there is no money in the estate, that may also mean that the mortgage on the unit is not being paid either. The unit may likely go through a first trust lender foreclosure. At the end of the foreclosure process, there could be excess proceeds available for creditors, but that is not always the case.

Probate is a long fairly complex process best left to legal counsel, but there can be recovery of the association debt if the proper steps are taken.

EQUAL HOUSING

LENDER

mutualofomahabank.com AFN45863_0813

Member FDIC Equal Housing Lender

FEBRUARY 2018

| 17

By Deborah A. Carter, CMCA, AMS, PCAM Debbie is the general manager of Westridge Swim and Racquet Club in Woodbridge, Virginia. She is also a member of the Quorum Editorial Committee and the Outreach Committee for the Washington Metro Chapter Community Associations Institute.

Payment Plans: An Alternative

Collection Method

T

here is a myriad of reasons why a homeowner may not pay assessments. The homeowner may have forgotten or is new to the community and unaware of how to pay. The homeowner may be facing personal financial or medical challenges that impact the ability to pay.

They may be the victim of identity theft, or they just may be upset with the association.

Regardless of the reason for non-payment, how an association handles the situation will impact its success in collecting the outstanding debt.

Typically, if a homeowner is delinquent in paying assessments, a reminder is sent by the association, followed by a demand letter.

Often, the homeowner does not communicate with the association, and the account is referred to the association’s attorney for collection. The attorney’s office begins the collection process by issuing a demand letter to the homeowner. In addition, a lien may be filed against the property. Now, the homeowner owes the original assessment amount, any late fees imposed and, potentially, legal fees. If the homeowner feels there is no way they can resolve the debt, they may remain incommunicado.

18 | QUORUM

Offering an alternative to legal action, such as a payment plan, may encourage some homeowners to step forward.

The objective is collection of the amounts due to the association. Making payment more difficult or costly for the homeowner decreases the likelihood of collection. Presenting the option to establish a payment plan creates a sense of cooperation. If the association is willing to work with a homeowner, the homeowner may make a greater effort to pay.

Also, regardless of the language in the governing documents or the association collection policy providing for recovery of legal fees, if the association files suit against a homeowner for delinquent assessments, courts frequently award only a portion of the legal fees incurred.

Hence, there is a tangible cost to the association for collection through legal proceedings. A payment plan may help the association avoid legal expenses that cannot be recovered.

If an owner is delinquent, the sooner they begin to pay, the easier it will be for them to become current. Therefore, it should be made known to the community that homeowners are encouraged to communicate with the board if they are having difficulty paying their assessments. Include this information in notices sent to homeowners regarding assessments, in newsletters, and in reminder notices.

Once a board decides it is willing to consider requests for payment plans, a payment plan request form should be developed. The form should either be reviewed or drafted by the association’s attorney. The form should require the homeowner to state a specific amount and frequency of payment, and it should clearly state that the homeowner is required to make the payments in addition to the current assessment payments. The form should also state the order in which payments will be applied. For example, any outstanding legal fees, court costs and administrative fees, returned check charges, charges incurred as a result of any violation of the Governing Documents, assessments and late fees, applied first to the oldest amount due, and special assessments. Lastly,

the form should include an agreement that default may result in continued collection efforts without further notice, and the homeowner will be responsible for all legal fees and court costs.

Once a payment plan is approved by the board and signed by the homeowner, the association must monitor the account to ensure compliance with the payment plan. In the event of default, the association may wish to send a reminder notice or immediately resume collection effects.

The preferred situation would be for an owner to request a payment plan before their account is referred to association legal counsel. However, the option to establish a payment plan may still be offered through the attorney’s office. If the association is willing to consider payment plans, the board may wish to instruct the attorney to include information about requesting a payment plan in the demand letter or enclose the payment plan request form with the demand letter. Again, entering into a payment plan early in the legal process may help to avoid unrecoverable legal expenses.

Each request must be reviewed individually, and consideration should be given to the amount of the outstanding assessments, the re-payment period, the homeowner’s payment history and the specific circumstances of the request. It can be very helpful for the homeowner to meet with the board to discuss the proposed payment plan. The objective should be a plan that the homeowner can realistically pay.

Successful completion of a payment plan is a win-win for the association and the homeowner. The association collects the past due assessments, and the homeowner brings their account current under a plan that they can realistically meet. The cost of collection is reduced for the homeowner and the association. In addition, the association has created a sense of goodwill with the homeowner, who in turn, may make a greater effort to avoid being delinquent in the future.

FEBRUARY 2018

| 19

By Chad Rinard, ESQ. Chad is an attorney for Whiteford, Taylor & Preston LLP. His practice is focused on the representation of condominium and community association clients in the Northern Virginia and Fredericksburg areas. He has significant experience representing associations in the courts of Virginia as well as before the supervisors of local municipalities.

To Foreclose or Not To Foreclose?

What to Consider When That is the Question A judicial foreclosure requires the filing of a lawsuit that asks a court to sell a property to satisfy an association’s judgments or statutory liens.

oreclosure is a matter of last resort.

Whether an owner is unable to or neglectful in paying assessments owed to an association, the last remedy that should be considered to get paid is foreclosure. A foreclosure takes time, it is costly, and it is designed to displace an association member who cannot or will not fulfill his or her obligation to pay assessments like the other members do. On the other hand, a foreclosure against a property that has sufficient equity in it (meaning the value of the property exceeds the amount of debt owed on it) can be a complete remedy that recovers unpaid assessments, the cost of foreclosure, and eliminates the ongoing hassle for an association by replacing a nonpaying owner with (hopefully) a paying one.

The ultimate goal of the foreclosure is to force the sale of the property at a price sufficient to cover the costs of the sale including the attorneys’ fees incurred, any delinquent real estate taxes, the balance owed on any mortgage senior in priority to the association’s judgment or lien, and, in an order prescribed by Virginia law, the association’s liens, the association’s judgments, and any additional mortgages or liens on the property.

Under Virginia law, an association has two types of foreclosure remedies available to it: a judicial and a non-judicial foreclosure.

In order to proceed with a judicial foreclosure, a Virginia association will have to demonstrate that the rental proceeds from

F

20 | QUORUM

a property over the course of five years would be insufficient to satisfy the association’s judgments. If the rental proceeds are determined to be sufficient, the court may displace an owner for the period of time necessary to allow an association to rent the property until its judgments are paid.

If the rental proceeds for the property are determined insufficient, a court will enter an order allowing the foreclosure to proceed. While a court retains oversight of the foreclosure, it will likely seek assistance by appointing a commissioner in chancery to hear evidence about the value of the property and the payoff amounts for any delinquent real estate taxes or liens against it. An association will be expected to give evidence of the value of the property, likely through a professional appraisal, and identify any delinquent taxes and other recorded liens against the property. The association will also have to solicit from those other lien holders the payoff amounts for their liens.

The commissioner in chancery will hear the same and report back to the court his or her findings.

Once those findings are received, the court will appoint a commissioner of sale, who in many cases is the attorney for the association. The commissioner of sale can sell the property either via an auction or a realtor.

Once a bid has been received it will have to be accepted by the court. The commissioner of sale will also ensure the safe deposit and distribution of funds from the sale and prepare a deed for the new owner.

In addition to the expense, the downside to any type of foreclosure is that the process may be stopped or stayed at any time by the filing of a bankruptcy petition by the delinquent owner. If the owner files for bankruptcy, an association will have to cease all efforts to foreclose the property and the cost expended in the foreclosure action will be lost unless the bankruptcy is dismissed without a discharge of the debt.

A non-judicial foreclosure involves the foreclosure of an association’s statutory lien and, as the name implies, does not require the filing of a lawsuit. The non-judicial foreclosure remedy is a statutory right provided to associations through the Virginia Con-

dominium Act and Property Owners’ Association Act. The process for a non-judicial foreclosure is faster and less complex than a judicial foreclosure and results in a sale on the courthouse steps. But not surprisingly, because this type of foreclosure occurs outside of a court, there are some disadvantages to a non-judicial foreclosure compared to a judicial foreclosure. For a non-judicial foreclosure to succeed, the auction must attract a bid that is sufficient to satisfy any delinquent real estate taxes, the balance owed on the first deed of trust, and the association’s statutory lien or the sale will have to be cancelled and the costs of a non-judicial foreclosure will have been incurred, but will not be collected. With a non-judicial foreclosure, in particular, great care should be given to ascertain the value of a property before the process is ever started to predict the bids that

may be received at the auction. Equity in the property is a necessary component for a successful non-judicial foreclosure.

An association can have success with either a judicial or a non-judicial foreclosure. Upon receiving notice that a foreclosure is proceeding, some owners will submit payment in full right away.

There is always the hope with a foreclosure that it will induce an owner to repay any assessments owed, perhaps using the equity in the property to complete a loan modification, and pay to the association the delinquent assessments from the proceeds of the loan. For those owners who do not pay, a foreclosure may be an effective remedy available to the association for the recovery of delinquent assessments. When all other collection options have been exhausted associations should work with legal counsel to identify delinquent properties that may be candidates for foreclosure and receive consultation about the benefits, risks, and costs of foreclosure of any particular property.

Achieving your community’s vision with national resources and local expertise?

Challenge accepted.

Associa brings qualified people, advanced technology and the latest best practices to successfully overcome any challenge. We believe you deserve a team who has seen it all and is ready to help your community achieve its vision.

CONTACT ONE OF OUR VIRGINIA OFFICES TO START YOUR PARTNERSHIP TODAY!

Need a reliable maintenance partner?

We’ve got you covered!

Community Management Corporation 703.631.7200 | www.cmc-management.com Legum and Norman 703.600.6000 | www.legumnorman.com Select Community Services 703.631.2003 | www.scs-management.com Delivering unsurpassed management and lifestyle services to communities worldwide.

• Interior/Exterior Painting and Carpentry • Commercial Flooring Installation • Turnkey Office and Hallway Refreshes • Aluminum and Vinyl Siding Cleaning • Wallpaper Removal & Installation

• Color Consulting • Power Washing • Caulking and Joint Replacement • Decorative Striping/Faux Finishes • Lead Paint Certified by the EPA

(703) 768-8143 - Virginia • (202) 751-2026 - Washington, DC

WILLIAMS PROFESSIONAL PAINTING williamsprofessionalpainting.com

FEBRUARY 2018

| 21

By Jose Ignacio Jose is a partner in Johnson, Bremer & Ignacio CPAs. P.C., formerly Ahlberg & Company, P.C. where he has worked for the last 20 years. He previously served for two terms on the board of WMCCAI, a past board treasurer, and has been a council chair for both the Communications Council and the Education Council.

Simplifying Bad Debt G

iven the new focus on revenue recognition by the Financial Accounting Standards Board (FASB), those that set the rules governing the proper presentation of financial statements, it is important that we revisit the issue of bad debt and the methods used to measure and recognize the effect on the financial statements properly. Although I have personally written on this subject matter in the past for Quorum magazine, most recently in the September 2014 issue, the need to deal with bad debt remains an important matter. Admittedly, in performing a large number of audits for common interest communities, our firm has noticed a significant improvement in the way our clients have set procedures to determine the level of bad debt. Most have established formulas to estimate bad debt for financial statement purposes. However, questions persist as to the effectiveness of those measures and the compliance with generally accepted accounting principles, and there remains continued reliance on the auditor to determine if the method used is acceptable.

The basic methods of writing off bad debt are the allowance method and the direct method. The allowance method is preferred because it follows GAAP (Generally Accepted Accounting Principles) and is essential when financial statements are audited.

22 | QUORUM

ALLOWANCE METHOD: The allowance method estimates the portion of the receivable that is uncollectible and applies that measure to the total of the delinquencies.

PROS: Minimizes large swings in expense recognition. Follows GAAP CONS: Sometimes more complicated and not always exact DIRECT METHOD: The direct method expenses any receivable when the amount is deemed uncollectible.

PROS: The direct method is simple CONS: The method allows for swings, sometimes significant, in expenses and not considered GAAP. Both methods help properly value the receivables of the association. If an association chooses to ignore bad debt and presents the receivables on the balance sheet, the receivables become improperly valued. The association represents that the entire delinquency is receivable when in fact the uncollectible portion is not presented. Proper valuation is key with regards to receivables as an asset. The proper valuation becomes the basis of analysis by potential homebuy-

ers, lenders, auditors, and the Federal Housing Administration (FHA).

And don’t overthink the issue, so it prevents you from taking the first steps. The proper method tends to show up naturally after regularly looking at the receivables. Ask this basic question, are we having significant swings in bad debt from year to year. If the answer is yes, can the method be improved or are there other factors such as a change in the economy or issues in the community that caused the change and should the method be adjusted? At the very least, the proper application of either method will improve the financial statements significantly.

Not properly addressing bad debt in the budget can lead to cash shortages.

For example, if an association with significant collection issues budgets to receive 100 percent of assessments and receives only 75 percent due to delinquencies, then the association cannot expect to spend 100 percent of the cash for expenses. This situation became very apparent during the mortgage crisis with associations not having the needed cash to pay for regular operating expenses.

RESERVE STUDIES

Easy Does It To use.

Pretty much everything.

Our remarkably simple reserve study system.

Our advanced reserve studies help you achieve a deeper engagement with your properties and a more effective way to manage them. Both today and tomorrow.

And with total confidence.

For your reserve study proposal, contact Michelle Baldry at (844) 701-9884 or visit reserveadvisors.com.

It is imperative that the board of directors establish a method to estimate the amount of bad debt and look at the association’s receivables frequently to see if the method used is effective. In your analysis, consider collection history, collection actions taken, the communication received from the homeowner and any indication that they are making an effort to pay, i.e., establishing a payment plan. And remember that the association retains the ability to pursue collection even if accounts are considered uncollectible for financial statement purposes.

Your Local, Independent, Woman Owned & Operated Choice for Trash Removal & Recycling Services

Some things remain the same, simply ignoring bad debt is bad business. And stay tuned. Even newer changes in the standard may lead bad debt to be recognized as a reduction in revenue instead of as an expense.

Connnect with Us Now! 703.339.4560 TrashAway.com FEBRUARY 2018

| 23

By Donna M. Mason, ESQ.

By Aimée T. H. Kessler, ESQ.

Donna is a shareholder with Segan, Mason & Mason, P.C. and has over thirty years’ experience counseling communities in Northern Virginia as well as in estate, bankruptcy, contract, and real estate law.

Aimée is a senior associate with Segan, Mason & Mason, P.C. and has over ten years’ experience counseling communities in Northern Virginia while also bringing her experience clerking for the court, and in estate, bankruptcy, contract, and real estate law to the firm’s practice. She has appeared as a guest speaker for Fairfax County public television and is a member of the Virginia Legislative Committee.

Collection Resolution:

The Board’s Light Switch to Turn on the Power

W

hy does my association need a collection resolution? The recorded governing documents of your condominium (Declaration and Bylaws) or homeowners association (Declaration) are the power source for the communities’ collection tools. But if the board doesn’t turn on the light switch and use that power, then it is as if it didn’t exist at all. The collection resolution is that light switch!

 DO review your power with legal counsel Courts require express authority in the recorded governing documents before the board can act. What is considered “express authority” is not always easy to determine.

Your counsel is in the best position to advise you as to the latest in the law and to interpret your governing documents.  DO write it down Legal counsel should draft, and the board will need to adopt, the collection resolution to turn on the light switch. One size does not fit all so do not use a form collection resolution. All governing documents are unique, so the resolution must be customized to fit your community. It’ll have to be in writing in order to be distributed to the members and included in a resale package. Board minutes are not enough!

24 | QUORUM

 D O clearly communicate to members the collection policy Let members know what to expect if delinquent. Have a summary of key provisions in a newsletter or on the website. The more advertisement, the better.  DO be specific in the collection resolution It is critical that the resolution details the collection policy.

Good: late fee of $25.00 after 10 days. Bad: late fee as determined by the board.  D O establish the order of application of payments made on delinquent accounts Requiring payments to be applied to legal fees and cost before assessments optimizes the Association’s recovery of collection expenses.

 DON’T discuss the assessment account with delinquent owner once turned over to legal counsel Once an account is turned over to legal counsel, neither board members nor management should discuss the delinquent account directly with the owner. The owner should be directed to legal counsel. This will prevent confusion and help ensure collection of all amounts due to the association.

No board member wants to be a witness for the delinquent owner in court!  DON’T pass it and forget it!

Your collection resolution needs to be reviewed every couple of years to ensure it still comports with the law. What the courts were accepting in 1995 bears little resemblance to what they are accepting now!

Any change to your collection procedures, i.e., an increased late fee, requires a Board vote and an update to the collection resolution. The regular review ensures that your collection resolution matches your practice.

 DON’T attach form letters Courts have already created enough obstacles for the board to collect. Don’t adopt unnecessary restrictions like mandating a certain form be used. If forms change without the resolution being updated, the failure of the association to follow its own resolution could result in a loss to the association.  DON’T include hardship clauses As the expression goes, no good deed goes unpunished. Including hardship, clauses puts the board in the dangerous position of subjectively deciding what hardship bears exceptions. Although the board may have the power to waive a late fee, including a hardship clause in the resolution, can be viewed as a right not to pay when an owner feels their situation warrants a waiver.  DON’T enforce suspension if an owner files bankruptcy When an owner files for bankruptcy, continuing to suspend use of facilities, parking, services, etc. is considered a violation of the federal Automatic Stay that could result in sanctions against the board. Legal counsel should be consulted as to what is permitted.

FEBRUARY 2018

| 25

By Stanford L. Kimmel III, ESQ. Stanford is a Maryland attorney and partner in the law firm Cowie & Mott, P.A., and has been practicing community association law for more than 10 years. Cowie & Mott, P.A. provides Maryland and D.C. community associations with comprehensive legal services and advice on a range of matters, including governance, contracts, litigation, and assessment collection.

Modernizing Condominium Documents to Streamline Assessment Collection This article provides an overview of important provisions and issues to be considered in modernizing condominium governing documents in order to streamline the collection of delinquent assessments.

A

ssessment collection is critical to the efficient operation of a condominium. Governing documents play an important part in the collection process by establishing a condominium association’s collection authority and collection procedures. Therefore, it is important that governing documents clearly define procedures and comply with current laws. Some collection procedures in governing documents are outdated or lack specificity. For example, governing documents often afford broad discretion to directors and management, permitting them to set interest rates, late fees, and apply acceleration. While such provisions can provide flexibility in administration, they can also create additional work and risk inconsistent application.

Modernizing governing documents to clarify and update collection provisions can provide continuity and consistent application for owners, directors, and management.

Below are some provisions and issues that should be considered when modernizing governing documents for the purpose of streamlining assessment collections.

26 | QUORUM

Assessment Calculations Some governing documents use formulas to calculate assessments, including, for example, to address shared utilities or units of varying types and sizes. Such formulas can be complicated and sometimes result in assessments being calculated and collected incorrectly.

An association should review any assessment calculation methods in its governing documents and attempt to clarify or correct any ambiguities or errors so as to foster simplicity and avoid miscalculations.

charged in an amount equal to the penalty for unpaid taxes, currently 5%. Va. Code §§ 55-79.83 & 58.1-3915. In Virginia, 6% interest from the due date can also be recovered for sums secured by a lien. VA Code §§ 5579.84 & 6.2-301.

Acceleration

Associations should consider updating governing documents to include clearly defined interest rates and late fees, consistent with state law.

Most governing documents provide for a yearly assessment to be paid in monthly installments and permit an association to accelerate the entire remaining annual assessment following nonpayment of an installment. Associations should consider updating governing documents to include clear acceleration provisions that specify when an annual assessment will be accelerated, consistent with applicable laws.

In D.C., after payment is 15 days late, interest can be charged from the due date at either 10% per year or the maximum first mortgage loan rate in D.C., whichever is less. D.C. Code §§ 42–1903.12(e).

In D.C., governing documents can provide for acceleration after one unpaid installment, which can be mandatory or at the option of the association, board, or manager.

D.C. Code § 42–1903.12 (d).

In Maryland, interest can be charged from the due date at up to 18% per year, or less if specified in the governing documents. Md. Ann. Code, Real Property (“RP”) § 11-110(e) (1). In Maryland, bylaws can also impose a one-time late charge of $15 or 10% of a delinquent assessment, whichever is greater, after 15 days. RP § 11-110(e)(2).

In Maryland, a declaration or bylaws can provide for acceleration after one unpaid installment, but only if the association notifies an owner within 15 days of nonpayment that if not paid in 15 more days, the entire annual assessment will become due and constitute a lien on their unit. RP § 11-110(e)(3).

Interest & Late Fees

In Virginia, after 60 days a late fee can be

The Virginia Condominium Act does not specifically address acceleration.

Liens D.C., Maryland, and Virginia associations can lien condominium units for unpaid assessments. D.C. Code §42-1903.13; Md. Ann. Code RP § 11-110(d). Va. Code § 55-79.84. Maryland’s highest court recently held, however, that governing documents alone are ineffective to create a lien unless an association complies with the procedures in the Maryland Contract Lien Act. Select Portfolio Servicing, Inc. v. Saddlebrook West Utility Company, LLC, 455 Md. 313 (2017); RP § 14–201 et seq. Therefore,

governing documents should be updated to specify when and how unpaid assessments constitute a lien on a unit consistent with applicable laws, including, in Maryland, the Maryland Contract Lien Act. The above is intended as an overview. Each individual condominium association will need to consider its community’s particular circumstances, needs, and location when contemplating modernizing collections provisions in governing documents.

Protecting your largest investment and your peace of mind for years to come?

Challenge accepted.

Secure your community’s future with national resources and local expertise.

Associa Legum & Noman’s national resources and local expertise have uniquely positioned us to help your community accomplish any goals your community sets. Top-tier management, bulletproof finances, comprehensive maintenance and a customizable menu of additional services ensure your community thrives, and our local, qualified staff are committed to being your trusted advisors every step of the way.

Legum & Norman is up for the challenge. CONTACT US TODAY!

3130 Fairview Park Drive | Suite 200 Falls Church, VA 22042 703.600.6000 www.legumnorman.com

FEBRUARY 2018

| 27

Schedule at a Glance (subject to change)

Registration Open 8 a.m. – 2:30 p.m.

Exhibit Hall C Opens 8 a.m.

Education Sessions 8:30 – 9:30 a.m.

Education Sessions 10 – 11:30 a.m.

Exhibit Hall Activities, Lunch, and Grand Prize Drawing 11 a.m. – 2:00 p.m.

Education Sessions 2:15 – 3:30 p.m.

Exhibit Hall C Closes 2:30 p.m.

Event Ends 3:30 p.m.

For more information on the WMCCAI Conference & Expo:

www.caidc.org 28 | QUORUM

M A R C H 1 0, 2 0 1 8 Gain exclusive access to the community association industry’s most powerful decision-makers! All in one place - on one day - at one time The 2018 Conference & Expo is Saturday, March 10 from 8:00 a.m. - 3:30 p.m., at the Walter E. Washington Convention Center in downtown D.C. The show features 15 education sessions and over five hours of exhibit time. We have some special things planned throughout the day on the show floor, and there will be a $2,500 grand prize drawing at the end of the day!

Over 200 companies exhibit at the event each year. In 2017, we had over 2,100 community association industry professionals attend Conference & Expo, and we expect even more this year!

Register to Attend!

Regular Registration (1/22-2/28)

Late Registration (After 2/28)

Member

$45

$60

Nonmember

$75

$90

Member

$110

$125

Nonmember

$135

$150

Member

$180

$195

Nonmember

$210

$220

HOMEOWNER

MANAGER

BUSINESS PARTNER

Sponsorships available!

To view a listing of education sessions, event details, or to register, visit www.caidc.org.

Sponsorship opportunities are still available, contact events@caidc.org.

EXHIBITOR LISTING 2018 Conference & Expo Exhibitors as of December 21, 2017. New exhibitors are signing up every week! Visit www.caidc.org for a current listing.

COMPANY NAME

BOOTH NUMBER

Abbey Commercial Flooring www.abbeycommercialflooring.com

205

Advantage Waste Removal www.cleanadvantagecorp.com

722

All Plumbing, Inc. www.AllPlumbing.com

230

All Recreation www.allrec.com

131

Alliance Association Bank www.allianceassociationbank.com

425

Aquasafe Pool Management, Inc. www.aquasafepool.com

607

Associa-Community Management Corporation, AAMC www.cmc-management.com

506

Association Dues Assurance Corporation www.associationdues.net

623

Barkan Management, LLC, AAMC www.barkanco.com

532

Becht Engineering BT, Inc. www.bechtbt.com

420

BELFOR Property Restoration www.belfor.com

117

COMPANY NAME

BOOTH NUMBER

Berman & Wright Architecture, Engineering & Planning, LLC www.BermanWright.com

630

BrightView Landscape Services www.brightview.com

225

Brothers Paving & Concrete Corporation www.brotherspaving.com

619

Building Envelope Consultants and Scientists, LLC www.becsmd.com

133

BuildingLink.com 313 www.buildinglink.com

COMPANY NAME

BOOTH NUMBER

CertaPro Painters of Arlington www.arlington.certapro.com

229

CertaPro Painters of Loudoun, Reston & Tysons www.loudoun.certapro.com

504

CertaPro Painters of Rockville www.rockville-bethesda.certapro.com

84

Chamberlain Contractors, Inc. www.chamerblaincontractors.com

812

Clean Advantage Corporation www.cleanadvantagecorp.com

720

Commercial Waterproofing, Inc. www.cwi-inc.net

628

Community Advantage, a Wintrust Company www.communityadvantage.com

320

Community Association Underwriters of America www.cauinsure.com

507

C & C Complete Services, LLC www.cnccompleteservices.com

511

Capital One Bank www.capitalone.com

709

Capitol Boiler Works, Inc. www.capitolboilerworks.com

411

Cardinal Management Group, Inc., AAMC www.cardinalmanagementgroup.com

524

Comsource Management, Inc., AAMC www.comsource.com

308

Cascade Insurance Group www.Cascadeig.com

706

Cowie & Mott, P.A. www.cowiemott.com

403

CSC ServiceWorks www.cscsw.com

106

Danaher, Skewes & Associates www.danaher-skewes.com

326

DeLeon and Stang, CPAs www.deleonandstang.com

406

DMA Interactive Reserves www.dma-va.com

531

Dominion Paving and Sealing www.dominionpaving.com

311

DoodyCalls 527 www.doodycalls.com Down To Earth Landscaping, Inc. www.DownToEarthLandscaping.com

207

Duradek MidAtlantic www.duradekmidatlantic.com

233

FEBRUARY 2018

| 29

EXHIBITOR LISTING CONT’D COMPANY NAME

BOOTH NUMBER

COMPANY NAME

BOOTH NUMBER

COMPANY NAME

BOOTH NUMBER

Eagle Protection Services, Inc. www.eagleprotectionservices.us

624

Finley Asphalt and Sealing, Inc. www.finleyasphalt.com

603

JMR Concrete www.JMRConstructionservices.com

704

Electronic Security Services, Inc. www.ESSI-Security.com

212

FirstService Residential www.fsresidential.com

503

Kastle Systems International http://security.kastle.com

125

ePipe Restoration www.restoremypipes.com

824

GAM - Graphics and Marketing www.gamweregood.com

103

King Contracting, LLC www.kingcontracting.net

733

ETC, Inc www.etc-web.com

602

Gates Hudson Community Management www.gateshudson.com

318

Kolas Contracting www.kolasinc.com

203 625

Goldklang Group CPAs, PC www.ggroupcpas.com

613

Kolb Electric, Inc. www.kolbelectric.com

322

Hann & Hann Construction Services www.hannandhann.com

312

Kone Elevators and Escalators www.kone.us KPA Management, AAMC www.kpamgmt.com

732

HiRise Windows www.hirisewindows.com

219

Lancaster Landscapes www.lancasterlandscapes.com

526

Homefix Custom Remodeling www.homefixcustomremodeling.com

323

Legum & Norman-Falls Church www.legumnorman.com

402

Mainstreet Mailboxes & More, Inc. www.mainstreet-mailboxes.com

408

eUnify, Inc. www.eUnify.net

78

Exterior Medics, Inc. www.exteriormedics.com

717

Facility Engineering Associates, P.C. www.feapc.com

128

Falcon Engineering, Architecture & Energy Consulting www.thefalcongroup.us

414

Feather Free Zone www.featherfreezone.com

304

HomeWiseDocs.com 328 www.homewisedocs.com

Roofing, Gutters, Siding, and Exterior Painting Over two decades commercial and residential roofing, gutters, siding, and exterior painting BBB A+ rated Repair and replacement Licensed VA contractor, fully insured

6872 Wellington Road Manassas, VA 2019 30 | QUORUM

Ph. (703) 393-8000 info@kingcontracting.net

EXHIBITOR LISTING CONT’D COMPANY NAME

BOOTH NUMBER

COMPANY NAME

BOOTH NUMBER

COMPANY NAME

BOOTH NUMBER

Majerle Management, Inc. www.AccessMMI.com

232

OneSource Window Systems www.onesourcewindow.com

405

PSI 424 www.psipropertyservices.com

Matrix Fitness www.matrixfitness.com

227

Palmer Brothers Painting and General Contracting www.palmerbros.com

631

Purofirst of Metropolitan Washington www.purofirst.net

802

Paul Davis Restoration & Remodeling www.pdrestoration.com

519

Quality Air Services www.qualityairservices.com

204

Quest Insurance www.questinsurance.us

432

Rainbow International of Northern Virginia www.rainbowintl.com/alexandria

202

433

McFall and Berry Landscape Management 213

www.mcfallandberry.com

Metro Engineering Services www.MetroEngServices.com

404

Miller Dodson Associates, Inc. www.MillerDodson.com

206

PBI RESTORATIONS www.pbirestores.com

332

502

PCM Services www.pcmservices.com

827

Morgan Stanley 604 https://fa.morganstanley.com/hartgroup

Planned Companies www.plannedcompanies.com

327

RBC Wealth Management www.stuarteisen.com

Mutual of Omaha Bank/CondoCerts 211 www.mutualofomahabank.com

Playground Specialists, Inc www.playspec.com

426

RCN 809 www.rcn.com/dc-metro

Nabr Network www.nabrnetwork.com

118

Ploutis Painting & Contracting Co., Inc. 718 www.ploutispainting.com

Reserve Advisors, Inc. www.reserveadvisors.com

611

National Cooperative Bank www.ncb.coop

621

Power Systems Electric Corporation www.psec.net

310

Revere Bank www.reverebank.com

819

NVM Paving & Concrete www.nvmpaving.net

104

Premier Aquatics, Inc. www.premieraquatics.com

725

Rogal Management Group www.rogalrealestate.com

731

O&S Associates, Inc. www.oandsassociates.com

813

Premium Lawn & Landscape www.premiumlawncare.com

711

Rolyn Companies, Inc. www.rolyncompanies.com

629

Minkoff Company, Inc. www.minkoff.com

O’Leary Asphalt, Inc. 302 AAB_Innov_Burkhammer_HorzQtrPg_120115.pdf 1 www.olearyasphalt.com

Pro-Pave, Inc. www.propaveinc.com

12/1/2015 5:46:30 PM

70

SageWater 113 www.sagewater.com Sahouri Insurance www.sahouri.com

419

Savatree 606 www.savatree.com SC Companies Inc www.sccincva.com

708

Scheffres Laundry Service, LLC www.scheffreslaundry.com

412

Sentry Management www.sentrymgt.com

429

SERVPRO 321 www.servproofwashingtondc.com Shenandoah Landscape Services, Inc. 305 www.shenlandscape.com SIGMA Real Estate Services www.sigmares.com

223

FEBRUARY 2018

| 31

EXHIBITOR LISTING CONT’D COMPANY NAME

BOOTH NUMBER

COMPANY NAME

BOOTH NUMBER

COMPANY NAME

BOOTH NUMBER

SOLitude Lake Management www.solitudelakemanagement.com

307

The Professional Documents Service 309 www.ThePDService.com

Valcourt Building Services www.valcourt.net

428

South River Restoration www.SouthRiverRestoration.com

528

Tibbs Paving, Inc. www.tibbspaving.com

224

Virginia Playground Services www.vaplaygrounds.com

821

Standard Striping www.standardstriping.com

427

Tidewater Property Management www.tidewaterproperty.com

331

Virginia Waters and Wetlands, Inc. www.vawaters.com

Structural Rehabilitation Group, LLC 712 www.SRG-LLC.net

Toepfer Construction Company www.toepferco.com

407

Weaver Bros. Insurance www.weaverbros.com

713

Studebaker Submetering, Inc. www.studebakersubmetering.com

430

Total Asphalt Technology www.totalasphalt.com

505

Wellness Solutions, Inc. www.wellnesssolutionsfitness.com

609

Sunset Pools, Inc. www.sunsetpoolsmgmt.com

306

Trash Away, Inc. www.trashaway.com

333

Williams Professional Painting www.williamsprofessionalpainting.com

324

Supreme Aluminum Products, Inc. supreme-window.com

626

TRC Engineering www.tedrossconsulting.com

703

Windows Plus, LLC www.WindowsPls.com

303

TWC Services www.twcserv.com

525

Winkler Pool Management, Inc. www.winklerpool.com

209

Texacraft 705 www.texacraft.com

Twin Oak Tree Care, LLC www.twinoaktreecare.com

627

Winston’s Chimney Service www.winstonsservices.com

633

The Kauffman Group, Inc. www.thekgi.com

Union Bank HOA Services www.HOAbankservices.com

605

Zalco Realty, Inc. www.zalco.com

529

T. Cooper, Inc. www.tcooperinc.com

88

422

Reserves on your mind?

Just kick back and relax!

Reserves on your mind?

Just kick back and relax!

Worry Worryfree: free:aastate state not not often often associatedwith withcapital capital reserves. reserves. associated For 3030 years, Miller+Dodson Associates has been partnering with Community Forover over years, Miller+Dodson Associates has been partnering Managers to promote Financially Sustainable Communities. Our accurate and with Community Managers Financially Sustainable easy-to-understand Reserve Studiesto andpromote practical Strategic Funding Plans make Communities. accurate andexperts easy-to-understand Reserve Studies your job easier. Our Our team of industry provides the technical support that you need toStrategic guide yourFunding clients’ toward goal your of financial sustainability. and practical Planstheir make job easier.

Our team

of industry experts provides the technical that you need to Contact Miller+Dodson Associates for support a no-obligation quote: guide your clients’ toward their goal of financial sustainability. millerdodson.com 800.850.2835

Contact Miller+Dodson Associates for a no-obligation quote: 800.850.2835 millerdodson.com

32 | QUORUM

83

By Michelle Baquero, CMCA Michelle is a “homegrown” portfolio manager for National Realty Partners, LLC. Michelle started in the industry in 2012 and recently celebrated her 5-year anniversary at NRP.

when the

association is the highest bidder

M

any associations have at least one troublesome house in the community. They do not pay their assessments, they are crappy neighbors, they do not maintain their home properly, and they probably leave their trash cans out all week long. Aside from sending violation letters, issuing liens, and garnishing wage/rent boards do not often know what else to do in this unfortunate situation.

Association X in Chantilly, VA recently decided that enough was enough and the

board moved to take action against their troublesome owner and move forward with foreclosure. This decision was not made lightly and was a result of consistent delinquency over the years, numerous failed payment plans, countless violation letters, the utilization of the self-help clause, one awful tenant after the next and still no real progress was being made. The owner ran a rent-to-own scam on tenants who were downright awful. Management received a call in 2015 that the tenant at the time was dumping all of their trash (food included)

Downtime is not an option.

Use our ServiceAbility phone app to request service instantly.

ServiceAbility NO ADMINSTRATIVE FEES! COMMERCIAL LAUNDRY PROFESSIONALS

1.800.927.9274 • caldwellandgregory.com

out of the second story windows allowing it to accumulate in the front and backyard which led to neighbors calling the health department for unsanitary conditions. With neighbors knocking on board member’s doors constantly, management and legal counsel recommended to the board that it was time to take a more serious approach and resolve this issue permanently.

Once the board approved to move forward, and the paperwork was signed; foreclosure process officially began in March 2017.

There were several key steps the association had to complete throughout the process. The board first had their legal counsel perform a title search to determine whether there were any other outstanding liens and if so how large they were so that the association could ensure they would get back the money that they were owed. After a judge determined that the $13,000 in attorney’s fees was acceptable, the process moved quickly, and the association took over ownership of the property in mid-October 2017. Legal counsel connected the association with a real estate agent who handled listing the property and evicting any residents (both human and four-legged creepy crawlies) from the property. The property immediately sparked interest-as most fixer-uppers do-and should be closing in early January 2018.

Legal counsel expects the board to recover all of the money they are owed as well as any the attorney’s fees. Any funds that are left over from the foreclosure after the other debtors have been paid will go back to the owner. All in all, this is a win-win situation for the community as the bad debt allowance will be lowered, and the negligent owner and their awful tenants are long gone.

Like many other communities, Association X was stuck in an awful situation that was resulting in lofty legal fees and bad debt allowances. By working with their legal counsel, they took a risk and foreclosed on a property. The process moved quickly, and the association will be able to recover the money that was “invested” in this property.

Other communities that are dealing with similar situations should take relief that there are other options when dealing with difficult properties.

FEBRUARY 2018

| 33

By Allen Hudson Allen is a current faculty member and professor for the National Alliance of Insurance Education & Research (NAIER) and the Professional Insurance Agents Association (PIA). The Alliance is one of the most prestigious insurance schools in the country and is the ONLY facilitator of the CIC and CRM designations. Allen has been named Business Insurance Magazine “Top 40 Under 40” and IBAs coveted “Top 100 Brokers in the Country” both in 2016 and again in 2017. He is the Vice President of Commercial Risks at Sahouri Insurance & Financial headquartered in Tysons, VA, as well as the architect of the Community Underwriters Specialty Program (CUSP).

Community Association Insurance Financing

I

t’s important to begin with a brief explanation of how insurance for master homeowners and condo associations are rated. The primary “Package” policy coverages are property (first party) and liability (third party). Property rates are established based on building construction, building occupancy, building protections and exposure (to different types of losses). These factors are underwritten to calculate a property rate which varies from $0.05 cents to as much as $0.50 or more (per $100 in building value). Liability is comparatively simple and is rated based on a number of units or homes and is somewhat affected by the litigiousness of locality and state.

The other factors that affect rate (to a lesser extent) are the ancillary coverages chosen. Flood and earthquake are very rarely included in a package policy and should be explicitly requested if you decide your association needs them. If you live in an older building that would be considered antiquated by new construction standards, you MUST make sure you carry enough “Ordinance or Law” coverage. This is coverage above and beyond the costs to repair with like kind and quality (replacement cost definition in policy).

Don’t make the mistake of assuming that having guaranteed replacement cost coverage will protect you.

Alone this only guarantee’s that the building will be reconstructed in the same fashion it was before the loss. Ordinance/Law costs can be 10-20% of reconstruction costs to an older building.

Building Valuation and the Coinsurance Clause The simple way to avoid coinsurance is to request (at a minimum) an Agreed Value (AV) endorsement. There are even broader endorsements available, but AV will at least pay for loss up to the building limit listed on the policy. Unendorsed, the standard ISO property policy WILL include a coinsurance clause. Most often we see 80, 90 or 100% requirements. Avoid the latter at all costs.

Without over complicating things, an 80% coinsurance clause means that there will be a penalty to the loss reimbursement equal to the difference between what it was insured for (building limit) versus what it should have been insured for (80% of actual building value). And don’t incorrectly assume it’s a moot point because you aren’t worried about a total loss. This clause can be calculated and applied to a loss of any size!

How do we make sense of these (and dozens of other) coverage differences? There is a generally accepted standard community association RFP spreadsheet that has been in circulation for years. It was industry developed gradually over time, as opposed to being created by an agent with their own interests in mind. You can request a free (independent) copy by emailing cusp@sahouri. com. Having a bidding agent fill this out cuts

34 | QUORUM

through any ambiguity in terminology, ensures an equitable comparison and holds the agent accountable in the form of a warranty if there are coverage discrepancies.

Budgeting for Claims Look back at your loss frequency and determine the estimated number of claims in each given year. Now round up any decimal and multiply by the per loss deductible. If you can comfortably afford that number in your budget; INCREASE YOUR DEDUCTIBLE! Insurance companies are not in the business of losing money over the long term. So, with that in mind, the more you can “self-insure” (within reason), the lower your loss costs will be over the long term. In most cases, I advise my condo clients to carry a $10K deductible. Why? Would you file a $7,000 claim with a $5,000 deductible? I certainly hope not unless it’s your first claim and the only one you plan on filing for 3-5 years. Otherwise, you will pay that $2,000 check back in the form of increases to premium. Trust me; it’s better to budget for a couple of smaller $10,000 self-insured losses than to rely upon insurance. Don’t forget the added benefit of a nice premium discount for assuming the higher deductible! Ask your agent what the difference

in premium would be; and just for comparison sake, ask another agent for a number as well.

Having extra money set aside for self-insured claims will also leave you better prepared for the losses not covered by insurance. Damage to property resulting from system failures is covered, but repairing or replacing those systems (wear and tear) is not. Mold testing and remediation, unless the result of a covered cause of loss (water damage from a burst sprinkler head in the event of a fire) is also not covered.

Finally, check your policy for special deductibles. Flood and earthquake always carry higher deductibles, and we see a lot of carriers issue higher/separate water damage deductibles.

In summary; play with the numbers, review your policies and your insurance loss history.

Most importantly, ASK FOR OPTIONS! After all, you are already paying your agent to work up some numbers for you. It’s called commission. If you use a standardized “bid spec” you remove the headache of comparing proposals when you go out to bid, and you put all the work back on the agent.

FEBRUARY 2018

| 35

Directory and Classifieds AMUSEMENT & PARTY RENTALS

ENGINEERS (CONT’D)

Fantasy World Entertainment 124 Jibsail Drive T: (800) 757-6332 Prince Frederick, MD 20678 www.fwworld.com Brooks Grady brooks@fwworld.com

ETC Engineering and Technical Consultants Inc. Water intrusion, roofing, exteriors, windows, balconies, property studies, structural & architectural services www.etc-web.com T: (703) 450-6220 Mindy Maronic mindy@etc-web.com

ASPHALT PAVING

The Falcon Group 7361 Calhoun Place, Suite 325 www.falconengineering.com Rockville, MD 20855 T: (240) 328-1095 Stew Willis info@falconengineering.com

Brothers Paving & Concrete Corporation 9469 Hawkins Dr T: (703) 393-1927 Manassas, VA 20109 F: (703) 393-1928 Paul Battista info@brotherspaving.com Espina Paving, Inc. Asphalt/Concrete 15441 Farm Creek Drive T: (703) 491-9100 Woodbridge, VA 2191 F: (703) 491-9101 Serving: MD, DC, VA info@espinapaving.com

TRC Engineering 9210 Wightman Rd., Ste 110 www.tedrossconsulting.com Gaithersburg, MD 20886 T: (301) 869-6446 Ted Ross ted@tedrossconsulting.com JANITORIAL

ATTORNEY

Segan, Mason & Mason, P.C. Donna Mason dmason@seganmason.com

www.seganmason.com T: (301)251-1414

Thomas Schild Law Group, LLC www.schildlaw.com 401 North Washington Street, Suite #500 T: (301)251-1414 Rockville, MD 20850 Thomas, C. Schild, CCAL tschild@schildlaw.com Scott J. Silverman ssilverman@schildlaw.com BANKING AND FINANCIAL SERVICES

Alliance Association Bank T: (703) 856-7463 Direct Tracy Burkhammer tburkhammer@AllianceAssociationBank.com Mutual of Omaha Bank Community Association Banking/CondoCerts Noni Roan T: (301) 639-5503 Noni.Roan@mutualofomahabank.com ENGINEERS

Becht Engineering BT, Inc. 10717 Birmingham Way www.bechtbt.com Woodstock, MD 21163 T: (410) 461-3904 Bill Hasselman info@bechtbt.com

36 | QUORUM

Clean Advantage Corporation 4000 Pen Belt Place T: (800) 315-3264 District Heights, MD 20747 F: (301) 595-3331 www.cleanadv.com info@cleanadv.com LAUNDRY ROOM EQUIPMENT

Caldwell & Gregory, Inc. Your Commercial Laundry Professionals 129 Broad Street Road Manakin-Sabot, VA 23103

T: (804) 784-6100 F: (804) 784-7418

MANAGEMENT SERVICES

Associa-Community Management Corporation, AAMC 4840 Westfields Blvd., Suite 300 T: (703) 631-7200 Chantilly, VA 20151 F: (703) 631-9786 11300 Rockville Pike, Suite 907 T: (301) 692-1700 Rockville, MD 20852 F: (240) 221-0443 Nick Mazzarella, mba, cmca, pcam, lsm NMazzarella@cmc-management.com Barkan Management Company, Inc 8229 Boon Blvd., Suite 760 T: (703) 388-1005 Tyson Corner, VA 22182 F: (703) 388-1006 Michael Feltenberger, cmca, ams, pcam Capitol Management Corporation 12011 Lee-Jackson Highway, Suite 350 T: (703) 934-5200 Fairfax, VA 22033 F: (703) 934-8808 L. Peyton Harris Jr., cmca, cpm lph@capitolmanagementcorp.net

MANAGEMENT SERVICES (CONT’D)

Cardinal Management Group 4330 Prince William Parkway, Suite 201 T: (703) 569-5797 Woodbridge, VA 22192 cardinal@cardinalmanagementgroup.com Thomas A. Mazzei, cmca, ams, pcam cardinalmanagementgroup.com CFM Management Services, AAMC 5250 Cherokee Ave, Suite 100 T: (703) 941-0818 Alexandria, VA 22314 F: (703) 941-0816 Christiaan Melson, ams, pcam c­­­­­­­­melson@cfmanagement.com CAMP (Community Association Management Professionals) 1921 Gallows Rd., Suite 320 T: (703) 821-CAMP (2267)Tysons Corner, VA 22182 Heathergraham@gocampmgmt.com Susanblackburn@gocampmgmt.com Comsource Management, Inc. AAMC www.comsource.com 3414 Morningwood Drive T: (301) 924-7355 Olney, Maryland 20832 F: (301) 924-7340 Gary M. Simon, cmca, ams, pcam gsimon@comsource.com FirstService Residential DC Metro LLC, AAMC 11351 Random Hills Road, Suite 500 T: (703) 385-1133 Fairfax, VA 22020 Robert Teeling robert.teeling@fsresidential.com KPA Management, AAMC www.kpamgmt.com 6402 Arlington Blvd., Suite 700 T: (703) 532-5005 Falls Church, VA 22042 F: (703) 532-5098 Offering personalized service Ed Alrutz, cpm, cmca, pcam ealrutz@kpamgmt.com Legum & Norman, Inc., AAMC 3130 Fairview Park Drive, Suite 200 T: (703) 600-6000 Falls Church, VA 22042 Direct: (703) 970-8844 Marc B. McCoy, cmca, ams, president mmccoy@legumnorman.com Sentry Management www.sentrymgt.com 4401 Ford Avenue, Suite 1150 T: (703) 642-3246 Alexandria, VA 22302 602 South King Street, Suite 400 T: (540) 751-1888 Leesburg, VA 20175 Dave Ciccarelli, ams, pcam dciccarelli@sentrymgt.com Sequoia Management Company Inc., AAMC 13998 Parkeast Circle www.sequoiamanagement.com Chantilly, VA 20151-2283 T: (703) 803-9641 Craig Courtney, pcam ccourtney@sequoiamgmt.com Zalco Realty Inc., AAMC, AMO 8701 Georgia Ave., Ste. 300 Silver Spring, MD 20910 Arthur Dubin,cmca, pcam, cpm

www.zalco.com T: (301) 495-6633 adubin@zalco.com

­­INDEX TO ADVERTISERS A Alliance Association Bank...............................................................................................................31 Associa-Community Management Corporation, AAMC....................................................................21 B Barkan Management, LLC, AAMC..................................................................................................15 C Caldwell & Gregory, Inc...................................................................................................................33 Capital Painting Co.........................................................................................................................38 Clean Advantage Corporation..........................................................................................................40 Community Advantage, a Wintrust Company..................................................................................35 Cowie & Mott. P.A...........................................................................................................................38 PAINTING SERVICES AND RETAILERS

Capital Painting Co. www.capitalpainting.net 5520 Oakwood Road T: (703) 313-0013 Alexandria, VA 22310 F: (703) 922-1826 George Tsentas george@capitalpainting.net

D DoodyCalls.......................................................................................................................................7 F Falcon Engineering, Architecture & Energy Consulting....................................................................38

Ploutis Painting & Contracting Co., Inc. T: (703) 360-0205 8365 Richmond Hwy F: (703) 360-5439 Alexandria, VA 22309 info@ploutiscontracting.com Stella Ploutis www.ploutiscontracting.com

Fantasy World, Inc. dba Fantasy World Entertainment.....................................................................19

Reston Painting & Contracting 619 Carlisle Drive Herndon, VA 20170 David Hamilton

King Contracting, LLC.....................................................................................................................30

T: (703) 904-1702 F: (703) 904-0248 dave@restonpaint.com

Williams Professional Painting 110 S. Floyd Street VA: (703) 768-8143 Alexandra, VA 22304 DC: (202) 751-2026 williamsprofessionalpainting.com Rick Williams Rick@williamsprofessionalpainting.com PET WASTE REMOVAL

DoodyCalls Pet waste management solutions and services 13923 A Willard Road Chantilly, VA 20151 T: (800) DoodyCalls (366-3922) www.DoodyCalls.com RESERVE STUDIES

FirstService Residential, AAMC.........................................................................................................2 K

L Legum & Norman, Inc., AAMC.......................................................................................................27 M Miller-Dodson Associates................................................................................................................32 Mutual of Omaha Bank...................................................................................................................17 N National Cooperative Bank..............................................................................................................29 P Ploutis Painting & Contracting Co., Inc..............................................................................................2 Q

PM+ (Specializing in Reserve Studies Since 1990) A Veteran Owned Company T: (703) 803-8436 www.pmplusreserves.com engineer@pmplusreserves.com or Ben Ginnetti, pra, rs, p.e. pmplusreserves@cox.net

Quest Benefits, Inc.........................................................................................................................32

Reserve Advisors 4600 North Fairfax Drive, Suite 404 T: (844) 701-9884 Arlington, VA 22203 www.reserveadvisors.com Michelle Baldry mbaldry@reserveadvisors.com

Reston Painting Company..............................................................................................................17

RESTORATION SERVICES

Sentry Management, Inc...................................................................................................................7

Titan Restoration Co Warrenton, VA T: (540) 349-1503 www.titanrestoration.com F: (540) 349-1512 Anita Puckett apuckett@titanrestoration.com

Thomas Schild Law Group, LLC......................................................................................................15

R Reserve Advisors, Inc.....................................................................................................................23

S Segan, Mason & Mason, PC...........................................................................................................25

T Trash Away, Inc...............................................................................................................................23 TWC Services, LLC..........................................................................................................................10

WINDOWS & DOORS

Windows Plus, LLC & Allied The Window Center, LLC 4321 Markham Street T: (703) 256-0600 Annandale, VA 22003 F: (703) 942-6987 Kimberly Wayland kknight@windowspls.com

W Williams Professional Painting.........................................................................................................21 Windows Plus and Allied the Window Center, LLC.............................................................................4

FEBRUARY 2018

| 37

ACCURATE, REALISTIC FUNDING PLANS OVER 2,000 RESERVE ANALYSES PERFORMED

The Falcon Group prides itself on having a strong, talented team of ďŹ ve (5) licensed Reserve Specialists (RS). Since 1997, we have provided over 2,000 Reserve Studies to communities and building owners.

We want to be your partner for success to protect your assets through an accurate, pro-active and realistic reserve funding plan and with your next capital planning & improvement project. Contact us today for more information.

info@falconengineering.com www.falconengineering.com 908-595-0050

38 | QUORUM

WASHINGTON D.C. METRO 7361 Calhoun Place, Suite 325 Rockville, MD 20855

CHAPTER BENEFACTORS 2018 Chapter Benefactors as of 1/15/17

PRESORT STANDARD US POSTAGE PAID WASHINGTON, DC # 3070

C

WMCCAI 7600 Leesburg Pike Suite 100 West Falls Church, VA 22043 www.caidc.org (703) 750-3644

OUR MISSION To optimize the operations of Community Associations and foster value for our business partners.

4000 Pen Belt Place District Heights, MD 20747 T: (800) 315-3264 F: (301) 595-3331 www.cleanadv.com info@cleanadv.com

Serving MD, VA, & DC! Annual Janitorial Agreements Temporary Staffing Solid Waste and Recycling Services Garage Clean Up • Pressure Washing • Bulk Trash Removal Storage Room Cleaning • Stripping and Waxing Floors Trash Chute Cleaning • Graffiti Removal Carpet Cleaning • Roll off Services Hoarder Unit Clean out Construction Clean up Fire Watch Services