Common Interest · 2018. 4. 2. · Volume I: Issue 5, 2016 Common Interest CONNECT with CAI • 3...

Common InterestCondo for rent. Care-free living in great location.

Inside: Restricting Rentals Associations Seek Reasonable Leasing Controls

Budgeting and Long Term Capital ReservesThe Sharing Economy — Short-Term Rentals, and Your Community Association

...and more!

Vol. XI: Issue 5 • 2016The Official Publication of CAI-Connecticut©

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Volume XI: Issue 5, 2016 • Common Interest

3CONNECT with CAI •

[Continues on page 27.]

We are in full swing of summer and with that brings longer days, sunshine, kibitzing with neighbors and vacations. Many types of housing fall under the umbrella of common interest communities. One in growing popularity is the 55+ age development. According to the U.S. Census statistics, the population estimate in 2015 was 4,553,385 for people who were 55 years of age, the largest population of any other age In the United States. The number of people entering the 55+ category will continue to grow in the coming years. Most residents in a 55+ development come from single family homes into a community that offers several programs and services to meet their needs, an attractive option for many. There are restrictions however as to the occupancy of younger residents. July is also the time for the 55+ Community Association Managers to recertify the Associations’ eligibility to the respective Town Clerks. We all probably know at least one or two people who live in those communities. Why not take a moment to research the 55+ commu-nity lifestyle to see if it would benefit you or members of your family?

When going about running the normal everyday Association activi-ties, sometimes, without intention, a chance is taken on what makes good old-fashioned sense to us, when in fact that may not be the case when it comes to current laws or the interpretation of those laws. If your community is facing a legal issue, there are many attorneys who are CAI business partners willing to help. They provide a plethora of services; creating new documents, declaration, bylaw or rule changes, collections, litigation, arbitration or just general legal advice. Hire a lawyer that understands and practices law pertaining to common interest communities. You know what they say...If you want the cor-rect answer go to the expert.

Proper insurance coverage provides for legal defense in the event an Association is faced with a lawsuit. Now is a good time for the Board of Directors to review the community’s insurance policies before any surprises occur. Several policies afford the Association protec-tion against losses; a general package policy, Directors and Officers coverage, Workers Compensation, Boiler and Machinery, Umbrella, etc. Take the time to contact your insurance agent and invite them to attend a board meeting to discuss and explain the different coverages, deductibles and options offered on the various policies and why the Board may consider them. Utilize the Agent’s professional services to better protect your neighbors, your home, as well as the community’s real estate values.

It is time to celebrate excellence in the Connecticut community asso-ciation management industry. The Annual Community Association Meritorious Service Awards, (the CAMMIES) are being held on September 29, 2016 at CAI-CT’s 40th Ruby Anniversary Party at the Aqua Turf in Plantsville. This year’s categories are: Community

2016 Board of DirectorsDonna Rathbun, CMCA .............................................. Imagineers, LLCPRESIDENT Hartford, CT

Pamela Bowman, CMCA ...................................... Prime Touch ServicesPRESIDENT-ELECT Simsbury, CT

Christine Carlisle, CPA .............................. Carney, Roy & Gerrol, P.C. TREASURER Rocky Hill, CT

Reg Babcock ..............................Westford Real Estate Management, LLC Vernon, CT

Bill Jackson .................................................... Belfor Property Restoration Wallingford, CT

Donna McCombe ........................................................... Simsbury Bank Simsbury, CT

Joane Mueller-London, Esq. .....................................London & London Newington, CT

Mark D. Sperry ..................................Fernwood Estates Association, Inc. West Hartford, CT

William W. Ward, Esq. ..................................................Ackerly & Ward Stamford, CT

Greg Zajac ...........................................................Building Renewal, LLC Durham, CT

Who Is CAI?The Connecticut Chapter is one of 60 Community Associations Institute chapters in the nation. CAI-CT serves the educational, business, and network-ing needs of community associations throughout Connecticut. Our members include community association volunteer leaders, professional managers, com-munity management firms, and other professionals and companies that provide products and services to associations. The Connecticut Chapter has over 900 members including nearly 150 businesses, and over 450 community associa-tions representing 50,000 homeowners.

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

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To submit an article for publication in Common Interest contact Kim McClain at (860) 633-5692 or e-mail: [email protected].

Conference & Expo Karl Kuegler, Jr., CMCA, AMS Education Program Pam Bowman, CMCA Donna Rathbun, CMCACAMMIES Bob GourleyCEO CAM Council Gary Knauf, CMCAFall Fun Carrie Mott

Golf Steve BennettLawyers’ Council Robin Kahn, Esq.Legislative Action Scott J. Sandler, Esq.Marketing Sam Tomasetti, CPAMembership Wendy CollearyParadise Mea Anderson

Publication Sam Tomasetti, CPA Spring Fling Linda SchallerSummer Sizzler Carrie MottWebsite Bob Gourley

Kim McClainChapter Executive Director

Ellen FelixDirector Program Operations

Staff

Committee Chairpersons

President’s Message

Donna Rathbun, CMCA

“Why not take a moment to research the 55+ community lifestyle to see if it would benefit you or members of your family?”

CONTENTS

From the Chapter Executive Director

Common InterestPublication Committee

Sam Tomasetti, CPA Chair Tomasetti, Kulas & Co.

Reggie Babcock Westford Real Estate Management, LLC

Adam J. Cohen, Esq. Pullman & Comley, LLC

Bob Gourley MyEZCondo

Tim Wentzell, P.E. Connecticut Property Engineering

Common Interest is published by the Connecticut Chapter of the Community Associations Institute. All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Common Interest, the official publication of CAI Connecticut or Community Associations Institute. This publication is issued with the understanding that the publisher is not engaged in rendering financial, legal, accounting or other professional services, and the information contained with in should not be construed as a recommendation for any course of action regarding financial, legal, accounting or other professional service by CAI, the Connecticut Chapter, Common Interest or advertisers. If legal service or other expert assistance is required, the services of a competent professional should be sought. The entire contents of Common Interest is protected by copyright. Reproduction in whole or in part without written per-mission is expressly prohibited.

3 President’s Message 4 CED Message 5 Upcoming Events 5 Legislative Update 5 HAM Radio Legislation Update 6 Legally Speaking 7 CAI Membership Application 8 Financially Speaking 12 Statutory Snippets NEW FEATURE! 12 Modernization of Legislation Regarding FHA Condominium Approvals

14 Summer Sizzler Wrap-up & Photos 16 Communication Corner 18 Ask Mr. Condo 19 Environmental Tip 20 Manager’s Column 24 The Checklist 26 Apathy — The Largest Problem Condo/ HOA Boards Face

28 Technical Explanations 30 Resistence to Reserve Planning32 Classified Advertising35 Index of Display Advertisers

Kim McClain

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AI-

CT.

Those words perfectly describe how I feel about the end of summer, my most favorite season! The warm sunshine keeps those long days of summer happy and bright. Some people like the brace of a cold winter day when they walk outside. I, on the other hand, find summer to be exhilarating. Alas, it is over.

But, wait! There is so much going on this Fall with CAI-CT there is no time to mourn the loss of summer. Take a good look at all the events we have in store on the pages of this issue. Condo Inc. I, education for common interest board members, continues to be our #1 program. If you, or other members of your association’s board, have not yet taken advantage of this great program – what are you waiting for? We actually have more than a few members who have attended this program on numerous occasions just because they have learned so much each time. If you are hungry for knowledge, Condo Inc. I will be your buffet!

We are most excited about our upcoming 40th Anniversary Celebration. This will be a truly momentous event in our history. So many of you have helped to sustain this great organiza-tion through challenging and jubilant times. We hope to be able to thank as many of you as possible in person. Folks from the past through the present will be in attendance. Don’t miss out! Register today!!

In late October, our 4th Annual Law Symposium will take place with a new twist. We are adding a wine & cheese (and possibly bourbon) reception to cap off the afternoon of legal learning. We’ll be covering many timely topics with our legal experts. Afterwards, attendees will be able to network and discuss issues with the speakers and attendees. This event sells out as we have limited seating. Your attendance at the symposium is one of the best investments you can make for you and your association.

Did you notice that Little Man – the guy with the tri corner hat - is back? This character was the symbol of all things CIOA when the revisions were enacted back in 2010. We added a new feature in the magazine entitled: “Statutory Snippets.” There are many laws, both Federal and State, that affect the operations of common interest communities. Each issue will highlight a particular area of law. Please let us know if there is one you would like us to cover.

And finally, a special shout out to Bob Gourley for all the great work he does with Ask Mister Condo. TOPS Software recently sent a Tweet that read:

@AskMisterCondo you continue to inspire and inform in a friendly fun way. That’s what makes you a top CAM resource!

Way to go, Bob!Hope to see you soon at one or all of our Fall events! ■

“Don’t cry because it’s over, smile because it happened.”

~ Dr. Seuss

Scott J. Sandler, Christopher E. Hansen, and Michael S. Alexander have formed the new law firm of Sandler, Hansen & Alexander, LLC, located in Middletown, Connecticut. Scott, Chris, and Michael have over 40 years of combined experience in representing Connecticut condominium and homeowner associations. All three of them are active in CAI-CT. Additionally, Scott is a fellow of the College of Community Association Lawyers. They can be reached at (860) 398-9090.

Send your industry-related news to Kim McClain at [email protected].

People in the News...



UPCOMING CAI-CT EVENTSCondo Inc. I The Business of Running Your Community Saturday, September 17, 2016 • 8:30 am - 3:00 pmWallingford, CTDo you serve on the board of your association? Are you considering serving? Whether you are a seasoned board member, a recently elected board member or unit owner seeking to understand more about how an association runs, this course is for you!$50 - CAI Members $75 - Non-MembersGOOD FOR 6.0 CONTINUING ED CREDITS Sponsorships are available for this event.

M-204: Community Governance Thursday & Friday, September 22-23, 2016 Seminar Format: 2 days • 9:00 a.m. - 5:00 p.m.Norwich Learn how to avoid legal problems and gain cooperation when establishing guidelines. This course covers the legal basis of community rules, policies and procedures. You’ll gain a better understanding of board and management responsibilities and a better grasp of the community association as a legal entity. Learn how to advise and support your board and how to revise policies and procedures to comply with current laws and recommended management practices.$445 - CAI Members $545 - Non-Members Visit www.caionline.org to register.Sponsorships are available for this event.

40th Ruby Anniversary Fall Fun Party & the CAMMIES Thursday September 29, 2016 • 5:30 p.m. - 8:30 p.m.Aqua Turf, Plantsville$75

Legal and Legislative Symposium Thursday, October 27, 2016Oronoque Village Clubhouse$50 - CAI Members $75 - Non-Membe

Visit www.caict.org to register and for updated information.

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CONDO, INC. I

Legislative Update

Members of the Legislative Action committee met recently to debrief about the 2016 session and discuss priorities for 2017. We are hoping to develop some new strategies about how we interface with the Legislators in order to continue to build relationships at the Capitol. We will pursue the animal control bill – once again. The Committee will reconvene in the late Fall to determine our limited issues to be pursued when the 2017 Session opens in January.

Please be sure to mark your calendars for our 4th Annual Law Symposium for October 27, 2016. This year, we will be including a Wine, Cheese and Bourbon reception. Expect to learn more about many of the pressing legal issues facing your communities including: adopting a proper collections policy, land use issues effecting common interest com-munities and more. Plan to register early, as this event sells out quickly! More details can be found on our website: www.caict.org. ■

CAI-National Government Affairs:

HAM Radio Towers and Antennas in Your Community —

A Legislative Update

On July 13, the U.S. House Committee on Energy and Commerce gave its stamp of approval to a compromise version of H.R. 1301, the Amateur Radio Parity Act.

Community Associations Institute opposed H.R. 1301 as intro-duced, which preempted association restrictions on HAM radio and drastically limited association architectural control of amateur radio antennas. With approval of the committee, the amended version of H.R. 1301 will be referred to the U.S. House of Representatives for a vote – possibly in September.

CAI’s Federal Legislative Action Committee was able to secure key changes to H.R. 1301. These amendments include:• HAM radio operators are required to obtain the prior consent of the

association to install an outdoor antenna

• HAM radio operators are prohibited from placing antennas on common property, and

• Associations may establish written rules concerning outdoor HAM radio antennas

Is the CAI Member Logo on Your Website?

Display it with pride!

Community Associations Institute—Connecticut Chapter

• CONNECT with CAI6

Adam Cohen, Esq.

LegallySpeaking...

Restricting Rentals Associations Seek Reasonable Leasing Controls

By Adam J. Cohen, Esq.

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One of the most frequently-asked questions that association boards ask their lawyers is how they can limit the number of leased units. Tenants, they find, are less involved in and committed to community governance and character. Enforcing rules against them can also be more difficult than against resident own-ers. Rented units are prone to poor maintenance, since the tenants and off-site owners alike have less incentive to devote the time and expense needed for proper upkeep. As a result, high leasing levels can dramatically increase the cost of both insurance and mortgages while significantly reducing property values. Boards, understandably, often want to know exactly what can be done to keep leasing to a minimum.

Most declarations were originally written to include at least minimal restrictions on leasing, such as prohibitions against “transients” or short-term rentals of less than six or twelve months. These minimums help prevent “revolving door” rentals which would otherwise allow a large number of strangers into the community leading to security concerns, loss of neighborhood cohesiveness, and wear-and-tear on units and common elements.

Connecticut law nevertheless allows association boards to go much further. Communities created before 1984 consisting of twelve or fewer units have virtually complete power to restrict rentals in any way they wish or even ban them completely, except that if they are condominiums (as opposed to planned communities or co-ops), the restrictions generally must appear in their declarations or bylaws rather than in their rules alone. All other common-interest communi-ties in Connecticut, regardless of their type, size, or age, are governed by the Common Interest Ownership Act’s (CIOA) provisions recog-nizing two different categories of leasing restrictions which may be imposed.

The first type includes restrictions on residential units which are rea-sonably designed to meet underwriting requirements of institutional lenders that regularly make loans secured by first mortgages on these units, or which buy those mortgages. Put simply, this means banks are most comfortable giving mortgages to people who are buying or refinancing in communities with the highest levels of owner-occupied units. These are their safest investments and best-protected collateral. Since leasing restrictions tailored for these purposes can be consid-ered expected and desirable, the law says they can be enacted by the executive board alone – without a vote of the unit owners – as long as a copy is filed in the town’s land records so that prospective purchas-ers, tenants, and lenders have easy access to them.

Mortgage underwriting requirements vary by lender and change over time. Government agencies and programs including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal Housing

Administration (FHA), and the U.S. Department of Veterans Affairs (VA) generally require at least 50% owner-occupancy to back or approve a mortgage. Meanwhile, private lenders are more strict: they typically look for at least 70% or 80% owner-occupancy, at least at their most favorable interest rates. Lenders also often allow boards to require that they be provided with copies of a unit’s lease and the names of the tenants, to impose minimum and maximum leasing terms, to cap the number or percentage of units which can be leased at a time, and to require the landlord to check the tenant’s names against local sex offender registries. A community’s board can therefore ordinarily adopt rules imposing these requirements. The board can also choose to allow for “hardship” exceptions on a case-by-case basis where, for example, active military service or an extended hospitaliza-tion would make prohibiting leases in the interim unusually onerous for the owner.

The second type of leasing restrictions include those which insti-tutional and governmental mortgage lenders either will not accept or do not care about. Complete bans on all leases, the need for board approval of leases or tenants, and mandatory credit checks or crimi-nal background checks are all likely to make a community ineligible for institutional financing. The same is true of restrictions which prohibit leases by owners who are delinquent on common charges, who have not occupied the unit for a minimum period, or who own units in addition to the one they use as a residence. Lenders are usu-ally indifferent to other types of restrictions, such as barring tenants (but not resident-owners) from having pets, but such restrictions are therefore not considered designed to meet underwriting requirements. Connecticut law says that these types of leasing restrictions on residen-tial units (as well as nearly all leasing restrictions on commercial units)



CAI MEMBERSHIP APPLICATION1489 Main Street, Glastonbury, CT 06033 Phone: (860) 633-5692

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CONNECTICUT

Seating will be limited. To register visit www.caict.org.

Date: Thursday, October 27, 2016Time: 1:00 - 5:00 pmPlace: Oronoque Village Clubhouse, Stratford, CT

$50 CAI-CT members; $75 Non-members

BRING YOUR QUESTIONS! This will be a great opportunity to ask our legal professionals your pressing questions about association operations.

GOOD FOR 4.0 CONTINUING ED CREDITS

Our panel of legal experts will cover topics important to your community. (All proceeds to benefit legislative advocacy for Connecticut Community Associations).

CAI-CT’S 4TH ANNUAL

LEGAL & LEGISLATIVE SYMPOSIUM

Proceeds to benefit legislative advocacy.

must be couched in the declaration itself rather than the bylaws or rules. Unless they were included in the original declaration by the developer when the community was founded, these types of restrictions will usually require approval by a super-majority of the unit own-ers. That approval will likely make it harder for unit owners to refinance their units and for incoming purchasers to get new mortgages, but the leasing restrictions will be legally enforceable and may enhance property values.

In fact, different communities have different experiences and philosophies with regard to adopting stricter leasing restrictions which they know will reduce the number of lenders will-ing to finance purchases. Some believe that limiting the pool of incoming owners to those with access to the most selective lenders, or who do not need mortgages at all, will attract a higher caliber of buyer and thereby increase market values. Other communities believe that making it difficult for large segments of the market to get mortgages will force sellers to reduce asking prices or turn away would-be purchasers. So while some leasing restrictions are almost certain to improve property values, it is possible that restrictions which exceed the underwriting standards of most lenders may have the opposite affect, depending on the community’s market conditions, sentiment, and objectives.

In recent years, the most common leasing restrictions which communities have been considering are caps on the total number of units which can be leased at one time (usually between one-fifth and one-third of all units in the community) and on the number of units which the same owner can lease out at one time (to discourage a single investor from acquir-ing too many units). Subleases and borders (i.e., renting a single room) are also frequently prohibited. Rules which automatically assign monthly rent to the association to pay any delinquent common charges on the unit may be a good idea, as is requiring non-resident unit owners to keep the board updated on their contact information. Many types of new restrictions should be carefully worded to “grandfather” existing tenants and leases where appropriate.

When considering new leasing restrictions, boards should work closely with their attor-neys and unit owners to ensure the ones they enact will strike the appropriate balance between protecting property values against the freedoms and needs of the owners. ■

Adam J. Cohen is an attorney with the Law Firm of Pullman & Comley, LLC headquartered in Bridgeport, Connecticut. As the Chair of its Community Associations Section, he represents and gives seminars to condominiums, tax districts, and other com-munities in matters ranging from amendments of governing documents to revenue collection strategies and commercial disputes.



FinanciallySpeaking...

Daniel Levine, CPA

Budgeting and Long Term Capital ReservesBy Daniel Levine, CPA

When attending board meetings regarding the accounting services we provide associations, we’ve encountered ques-tions revolving around their long term capital reserve fund (sometimes referred to as future repairs and replacements fund or simply the reserve fund). With the last few articles discussing operat-ing budgeting tips, this is a good opportunity to consider budgeting as it relates to future capital repairs and replacements.

While it can be difficult to accurately predict into the future, and most discussion at a typical board meeting will revolve around cur-rent challenges, that doesn’t make this topic any less important. Often a lack of long term planning can cause the biggest problems for an Association.

Below are some rules of thumb as well as frequent topics that have been asked from our clients that can help you on your way to effective long range planning and budgeting and the challenges therein.

Budgeting for Income and Expenses:Like most areas of Association finances, a large part of the puzzle to

effective management is the budget a.k.a. the plan. An accurate plan serves as a road map to follow and a way to communicate expected results. It also provides a control to know whether the plan is being followed or not.

To start with the planning piece, the Association can use the follow-ing questions and apply them on a long term basis to better under-stand their situation to help create an accurate plan:

1) What is necessary for the Association to budget for? What are you responsible to replace as part of the common elements?

2) Why is the Association funding for the future? FHA approval or an upcoming project?

3) When are expenses expected to occur? How long until the money is needed?

4) Should the Association save away more now or in the future? How are common charge collection and operating costs expected to impact long term funding?

5) Where does the Association currently stand?

To help answer the “what” and “why” for the capital budget many associations utilize professionals who specialize in creating what is known as a “reserve study.” This study breaks down the common ele-ments of an Association, and details their estimated lives and replace-


ment costs. This in turn provides a road map to better understand just what the Association will be responsible for to replace, and what the estimated cost will be.

While the reserve study can create the foundation for the capital budget it also an important piece of the Association’s financial state-ments. To be compliant with U.S. Generally Accepted Accounting Principles these reserve studies, if one is created, are a required dis-closure in your Association’s financial statements. During an engage-ment, your accounting firm will request a copy of the most recent study to make sure it is disclosed appropriately.

After the Association creates its long range plan then comes execut-ing it. While this can overall be simpler than executing the normal operating budget since the amount of income and expense to manage are typically fewer, there are some areas that can cause concern.

Inter-Fund Borrowings:As many boards have learned firsthand, unexpected expenses come

up in the normal course of operations. Whether it is a higher insur-ance premium, excess snow removal costs, an unbudgeted utility cost, there are times an Association’s original operating budget will not have the funds needed.

While an association has some options to handle this, from a special assessment to borrowing from a financial institution, an Association may decide to defer future contributions to, or use money from the long term replacement fund to cover the shortfall. While this can be an easier short-term solution, it can have a large negative impact over time if repayment is never made.

If an Association decides to fund a short fall this way it is important

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CAI-CT will be celebrating our 40th Anniversary at our Annual Night of Fall Fun! Our Ruby Anniversary party will be a night to remember! Follow the Yellow Brick Road to the Aqua Turf Club for the festivities. The food will be terrific! We’ll have a comedian that will be sure to have you in stitches (so to speak). And, our amazing CAMMIE Awards will be a part of the celebration too! Come on over the rainbow with CAI-CT! Buy your tickets today!

CAI-CT Turns 40 —

Ruby Anniversary Party & the CAMMIESThursday September 29, 2016

5:30 p.m. - 8:30 p.m. Aqua Turf, Plantsville

#CAI-CT #NOPLACELIKECAICT

To Register Visit www.caict.org.

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THE

for the board to decide and document that this money should be repaid to the capital reserve fund so it can be tracked. This will gen-erate what is known as an inter-fund loan on the financial statements. This “loan” will be represented as a receivable on the reserve fund financial statements and as the money is repaid this receivable will be reduced. If the board has such a line item and it doesn’t get reduced over time it should take action to find out why.

One method of handling repayment is to include a line item in the annual budget to collect additional funds beyond normal contribu-tions. This will repay the inter-fund loan and by building this into the budget it is more certain the Association will repay the borrowings. This will prevent depleting the future capital project fund over time.

Investments:Since the funds for the capital replacement reserve are often used

years after being set aside, association’s often look to have the time value of money help add to the value of the fund.

As it relates to budgeting and the accounting of the Association, if an Association does invest its money, investment income might become a factor when it comes to long term budgeting. Investment income can affect the amount of funding needed going into the future depending on how much it is, and the investment type could impact whether money is readily available in case of emergency.

Liquidity and investment return aside, there are different rules of accounting for different investments types and the disclosures that must accompany the investments in financial statements. Making sure that your financial statements are accurately reflecting investments is

FINANCIALLY SPEAKING...from page 8. important to make sure the statements are free of material misstate-ments for the readers who use them.

Finally while there are many investment vehicles available to try and capture a return, this can quickly become a complicated sub-ject. The board of directors should bear in mind that they have a fiduciary responsibility when it comes to handling the Association’s funds. While some investments can claim a large return, the risk of loss in such investments must also be weighed. An association should consult an investment advisor to help them in this decision and decide if it’s applicable to create an investment policy to guide future board of directors and structure what future investments can be utilized.

Conclusion:While the operating fund is an annual budget that covers the daily

expenses of the Association it is always important to think long term when it comes to your Association.

Answering questions like “What is our long term plan? What and when should we be spending money on long-term capital projects? How are we doing compared to the plan?” are all important factors when it comes to budgeting in long term just like in the short term.

While those kinds of questions are some of the hardest questions Associations have to tackle there are a wide variety of resources and professionals that can help guide your Association to be prepared for the future. ■

Dan Levine, MBA, CPA is a Certified Public Accountant at Tomasetti, Kulas, And Company P.C. Dan has extensive experience with tax and attestation services to condominium associations from all around Connecticut. Dan is an active participant in CAI-CT related events and can be found presenting accounting best practices at these events throughout the year. Dan is also a new member of our Legislative Advocacy Committee.

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President Obama Signs Legislation Modernizing FHA Condominium Approvals

On Friday, July 29, The White House announced President Barack Obama has signed H.R. 3700, the Housing Opportunity through Modernization Act. H.R. 3700 is now federal law.H.R. 3700 reforms the process used by the Federal Housing Administration (FHA) to determine

if condominium unit owners qualify for a mortgage with FHA insurance. FHA does not originate mortgage loans, but instead insures mortgages against default.

FHA-insured mortgages are widely used by first-time and minority homebuyers to purchase a home. In 2009, FHA changed its condominium qualification rules, leaving the majority of con-dominium homebuyers ineligible for FHA-insured mortgages. H.R. 3700, which CAI strongly supported, is expected to expand the number of condominiums where borrowers can use an FHA-insured mortgage to purchase a home.

“I congratulate Chairman Blaine Luetkemeyer, Ranking Member Emmanuel Cleaver, and the leadership of the House Financial Services Committee on the thoughtful, constructive, and inclu-sive process that produced H.R. 3700,” said Thomas M. Skiba, CAI’s Chief Executive Officer. “This bipartisan approach, furthered by Senator Tim Scott and Senator Bob Menendez, allowed H.R. 3700 to pass the Congress without a single dissenting vote.” Continue reading on CAI’s Government & Public Affairs Blog at www.caionline.org. ■© Copyright Community Associations Institute (CAI). All rights reserved.

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The facility or community complies with rules established by the U.S. Department of Housing and Urban Development (HUD) for verification of occupancy.

Statutory Snippets… As we all know, there are many laws, both state and federal, which dictate how common interest

communities are governed. We will highlight one in each issue.55+ Communities – Are you in compliance?

Federal Register 24 CFR Part 100For a community to be considered “housing for older persons”

as a 55+ community, the housing must be intended and operated for occupancy by persons 55 years of age or older and

meet the following requirements:

At least 80% of the occupied units are occupied by at least one person 55 years of age or older.1. 2.

The facility or community publishes and adheres to policies and procedures that demonstrate its intent to in fact be a provider of housing for older persons.

3.

IF THE ASSOCIATION FAILS TO CONDUCT A CENSUS AND TO MARKET THE COMMUNITY AS DESIGNED FOR ACTIVE ADULTS, THEN IT COULD LOSE ITS PROTECTED STATUS CAN NO LONGER VALIDLY PROHIBIT CHILDREN.



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Providing high quality legal services to condominium and homeowner associations throughout the State of

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• reviewing, negotiating and litigating contracts;• representing associations borrowing from banks; and• maintaining and updating corporate records and filings.



What a delightful evening! On August 4 we held our 4th Annual Summer Sizzler event. Over 100 people joined us for great food, libations and fun! The weather was perfect and the company was even better. This year, we added a Corn Hole Tournament sponsored by Belfor Property Restoration. Our skilled winners were Rich Wechter and Nancy Liskiewics both from Westford Real Estate Management.

The Community Association Managers (CAM) education program that preceded our networking event was also quite successful. A panel of attorneys offered insights on a variety of topics and responded to a multitude of questions.

We are extremely grateful to our many sponsors for supporting this fabulous event!Adam Quenneville Roofing & Siding, Inc.Becht Engineering BT, Inc. BELFOR Property RestorationBouvier InsuranceIon BankNew England Turf ManagementPerlstein & McCracken, LLCSal’s Clothing RestorationSavol Pools

Summer Sizzler – On the Water

(above, left to right) Legal Panel Speakers:Chas Ryan, Esq. - Franklin G Pilicy, Esq.Chris Leonard, Esq. - Collins Hannafin, P.C.Ron Barba, Esq. - Bender, Anderson & Barba, P.C.Greg McCracken, Esq. - Perlstein & McCracken, LLCAdam Cohen, Esq. - Pullman & Comley, LLC

(left) John Mastroianni - Sal’s Dry Cleaners, Gloria Cody and Mike Cody - BELFOR Property Restoration

(below) James Leszuk - New England Turf Management and Donna Rathbun, CMCA - Imagineers, LLC

(left) Heather and Sam Tomasetti - Tomasetti, Kulas, and Company, P.C.

(left) Greg Roberts, CMCA - Westford Real Estate Management, LLC

(below) George Miles, Esq. and Greg McCracken of Perlstein & McCracken, LLC



(above and below) Past & Present CAI-CT Presidents: Bob Gourley - Captain’s Walk; Donna Rathbun, CMCA - Imagineers, LLC; Lynne McCarron, CMCA - Phoenix Property Management; Lon Brotman, PCAM - Westford Real Estate Management, LLC and Scott J. Sandler, Esq., CCAL - Sandler, Hansen & Alexander, LLC

(above) Wendy Colleary - Windsor Federal Savings and Sue Rourke - Alan Barberino Real Estate, LLC

(right) Dan Rys - Windsor Federal Savings and Gail Egan - Old Towne Association, LLC

(right) Scott J. Sandler, Esq., CCAL, Michael Alexander, Esq. and Chris Hansen, Esq. - Sandler, Hansen and Alexander, LLC

(below) 40th Anniversary Committee: Kim McClain - CAI-CT; Greg Roberts, CMCA - Westford Real Estate Management, LLC; Carrie Mott - Bouvier Insurance; Diane Dumais - Safesidewalks.com (Precision Concrete Cutting), Bill Jackson - BELFOR Property Restoration; Ellen Felix - CAI-CT. (not pictured) Mea Anderson - Crystal Restoration Services of CT; Doug Miller - Schernecker Property Services, Inc. and Ken Ursaki - MHA Property Loss Advisors, LLC

(right) Bob Gourley - Captain’s Walk; Donna McCombe - Simsbury Bank and Nancy Gourley - Captain’s Walk

(left) Marcy Lablanca, CMCA - Imagineers, LLC; Reggie Babcock, Lucy Piwnica, CMCA and Rachael Sirica - Westford Real Estate Management, LLC



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Communication Corner...

Bob Gourley

The Sharing Economy, Short-Term Rentals, and Your Community Association

By Bob Gourley

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New businesses like Uber and Lyft have turned common automobile drivers into de facto taxi operators. AirBnB and VRBO are new businesses that can turn regular condominium unit owners and HOA residents right here in Connecticut into de facto hotel and short-term rental operators. The incredible rise and success of these businesses signals a new era of business in what has come to be known as the “sharing economy.” Like it or not, condominiums and HOAs need to be aware of these businesses and the potential impact their operation can have on association members and the guests (wanted and unwanted) that they may bring to the community.

VRBO stands for Vacation Rental By Owner. The business hosts a website at vrbo.com and like most businesses that operate in the sharing economy, offers users an easy-to-use app for smartphones and tablets. Similarly, AirBnB’s business model offers a website and smartphone apps to entice renters to look for that perfect getaway at a fraction of what a fancy resort might charge. Both have made a lot of money and transacted millions of short-term rentals. AirBnB was recently valued at almost $24 billion dollars according to the Wall Street Journal. Clearly, these businesses have found a niche with great demand for their services.

Property owners can list their property for rent in a variety of ways. Rentals can be for weekends, weeks, months, or longer but the typical AirBnB or VRBO renter is looking for a lower cost hotel alternative so week-long and weekend rentals are quite common. Condominiums and HOAs are often attractive to these renters as the amenities are often on par or even nicer than what they might expect at a hotel. Tennis courts, pools, golf courses, workout rooms, walking paths, clubhouses are all just as enticing to short-term renters as they are to permanent residents.

The challenge to the condominium or HOA becomes one of rules enforcement. If the condominium or HOA has no rules in place regarding short-term rentals, it may be powerless to prevent unit owners from using these sharing economy tools to effectively get into the hotel business. For many reasons, this can be particularly bad for the association. While most sharing economy short-term renters are no different than any other user of the common amenities, they clearly have no long-term interest in the care and well-being of the

association. After all, they are only visiting the property and are there to consume as much fun as they can while on vacation.

Even if you have not seen any evidence of sharing economy rentals like AirBnB or VRBO within your association, you should have rules and regulations in place to protect your association. First up is the decision as to whether or not to allow short-term rentals of any kind. If it is permissible to rent out a unit for the weekend, it would be dif-ficult to prevent a unit owner from listing the property with a sharing economy service. If rentals are limited to longer periods of time, say a year or longer, the typical sharing economy rental seeker would likely not be interested. That kind of rule solves any potential prob-lem before it begins yet also allows a landlord purchaser to buy a unit within the HOA and still rent the unit in a more traditional manner as long as they meet the requirements of the association. ■

Bob Gourley is one of the founders of MyEZCondo, a communications firm that specializes in newsletter production and other communication solutions for condominium associations. He also serves as Board President of Captain’s Walk in West Haven, CT. Bob serves on the LAC, Publication, Conference, Fall Fun Night, Membership and Website Committees and is Past President of the Board of Directors for CAI-CT.

“First up is the decision as to whether or not to allow short-term rentals of any kind.”



You Ask Mister Condo, Now Mister Condo Asks You!

Visit www.askmistercondo.com

ASK YOUR QUESTIONS...

Every issue of Common Interest features an “Ask Mister Condo” Question submitted by a reader of the Ask Mister Condo website at http://askmistercondo.com. There are often many reasonable suggestions and solutions to condo questions. Mister Condo is asking you to participate and share your wisdom with the world. Review the question below and submit your answer in an email to: [email protected]. Look for your answers in future issues of Common Interest. Here is this issue’s Ask Mister Condo question:

J.W. from Fairfield County writes:

Dear Mister Condo,My association held a special unit owners meeting to vote on removing a board member. After the petitioner gave the ratio-nale for wanting the board member removed, there were com-ments from individual owners either in support of the removal or not. Do these comments have to be set out in detail in the minutes or can there be a general statement that comments from both sides were given? Thank you.

______________

In a previous Ask Mister Condo column, you were asked to help a reader with the following question:

J.G. from Fairfield County writes:

Dear Mister Condo,We have a board member’s brother who is considered the caretaker / maintenance guy (who has been doing a lousy job here for years). We have complained about it for as long. He is not legally contracted but instead has the approval of the board to do our landscaping, snow removal and unit maintenance (in units) where and when the issues have been determined to be the responsibility of the association. How can we get rid of him and force the board to legally hire a qualified person and not a relative of a high ranking board member?

Mister Condo replies:J.G., you cannot get rid of the caretaker as he is employed by the

Board, with or without contract, legally, illegally or otherwise. What you can (and should) do is get rid of the Board! Any Board that puts its association members at such incredible risk is failing miserably at their primary duty of protecting the association from unwarranted risk. The Board has one primary duty and that is to protect, maintain, and enhance the association and its assets. I can only imagine that this caretaker / maintenance person is not properly licensed or insured and that the association could be found completely liable if he were ever to hurt himself or another person during the performance of his duties on behalf of the association. This is just poor judgment on the part of the Board for allowing this to happen and they should be replaced with Board members that are going to handle the business of the association in a more professional and fiscally prudent matter. But nothing will change if everyone just sits back and lets it continue. It’s time to rally the troops and get some new volunteers to serve as community leaders. Perhaps you’re up to the task yourself, J.G.? Good luck!

Visit us at http://askmistercondo.com. Follow us on Facebook and Twitter and join in the conversation!

HHH A Major Milestone – 1,000 Questions and Answers from Ask Mister Condo! On June 10, 2016, the 1,000th Question and Answer appeared on the Ask Mister Condo website at ask-mistercondo.com. That marks 1,000 times you asked a question and Mister Condo offered a polite response. That’s also 1,000 reasons to keep visiting the site and asking your condo ques-tions. As always, thank you for your support!

■



Visit www.caict.org to register.

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ENVIRONMENTAL TIPINDOOR AIR POLLUTION

Indoor air pollution is one of the most common causes of allergies and respiratory issues. Sources can include: cleaning products, off-gassing from carpets and paint, etc. Many online resources offer information about causes and prevention of indoor air pollution.

Here is one simple idea. Add some plants to your home. Houseplants function as natural air filters that help to remove pollutants and keep indoor air cleaner.

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1. Poor Management - Community associations with poor manage-ment tend to be viewed as less than desirable communities in which to live. They tend to lack proper maintenance, rules enforcement and direction, and have a look and feel as though the future is bleak, with no hope of turning the property around. The failure of a man-agement company to manage effectively and vigorously can result in the perception of a community as a location to avoid at all costs.

2. Poor Leadership - The failure of a community association to have strong leadership in place can also negatively impact the reputation of a community association. While a strong management presence can, to some extent reduce the impact of a void of unit owner lead-ership, the absence of association leaders can, in most instances, lead to the same problems noted above with poor management. It takes fellow unit owners to make the case that their community mat-ters and that certain basic guidelines must be met (adhering to rules, maintaining the buildings and grounds, etc.). People are generally followers, and the lack of leadership prevents the vast majority of unit owners from living by example.

3. Poor Governance Structure - Associations need to be governed and managed with updated governing documents, to provide Boards and Managers the ability to perform their tasks and to pro-vide a mechanism for enforcement of clear and concise rules and regulations. Unit owners, their tenants and their respective guests must know what is expected of them and Boards must have the mechanism to enforce rules consistently and fairly, in accordance with CIOA (Common Interest Ownership Act). Without such safety measures in place, there is no method in place to ensure that there are consequences for “bad” conduct.

4. Poor Financials - Community associations with poor financials also tend to be viewed as less than desirable communities in which to live. They lack adequate reserves and tend to require periodic special assessments to pay for operating expenses, which is not the manner in which association financials should run.

5. Lack of Interest by Unit Owners - A community association can have strong management, strong leadership, an updated and effective governance structure in place, and good financials, yet have a bad reputation simply based upon lack of interest by unit owners in their communities. While this is more likely to take place at community associations where the rental rate is high, apathy by unit owners exists, even in communities with low rental rates. Word spreads readily that a particular association has disinterested unit owners who are not tuned into the affairs of their associations and tend to ignore or be unaware of rules and procedures of their respective associations.

6. Lack of Interest by Tenants - While generalizations can be proved wrong in any particular situation, it is generally accepted

Manager’sColumn...Being Practical, Part XXXIII

The Reputation of a Community Association: Protect and Defend

By Reg Babcock and Rich Wechter, CMCA

In this column we tackle various topics of interest to association Boards of Directors with the intent of imparting practical advice. This column addresses one of the, if not, most important issue that faces community associations; the protection and defense of the reputation of a community association. It is obvious that the reputation of a com-munity association can have significant effect, both positive and negative, on community associations, from the quality of life for the residents to the property values of units. What is not so obvious, however, is how the reputation of a community association can be attacked and how

said reputation can be protected and defended. We will attempt to offer examples of each in an effort to highlight the significance of this most important issue.

A. Setting the Table on this Topic

The great William Shakespeare, in Othello, wrote, “Reputation, reputation, reputation! O, I have lost the immortal part of myself, and what remains, is bestial.” All of us, in our personal and public lives rely on a good reputation to proceed with all aspects of our affairs. How many times do we think about the reputation of one’s family, cemented by gen-erations of descendants building up that reputation, brick by brick, day by day, event by event. That effort can, in a brief moment be

destroyed, or at the very least seriously wounded by the actions, or inactions, of anyone of us. Imagine then, living in a community of families, each of whom, by one single act, or failure to act, can have the same devastating impact on the reputation of an entire community association. What makes this matter even more difficult is the fact that such act or inaction can occur under the radar, without any forewarn-ing. While the picture we are painting does appear to be quite grim, there are ways to protect and defend the reputation of a community association. To accomplish this, we need to first examine what factors can lead to the harming of the reputation of a community association and what can be done to protect and defend that reputation.

B. How the Reputation of a Community Association is Attacked

There are many ways to attack the reputation of a community asso-ciation. The following are just a few examples of such attacks:

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One-third of Americans who are eligible to vote have never registered. Even worse, of those who have registered and are eligible to vote, fewer than 58 percent did so in the last presidential election.

More than 67 million people live in community associations; these individuals can play an important role in building their communities’ political power.

If you or others in your community haven’t registered to vote, CAI has made it easy for you. Register to vote at www.caionline.org/YourVoteCounts. Deadlines vary from state to state, so register today.

Every vote counts—and together, we can have a powerful impact and protect America’s communities.

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doctrine that a community of high percentage rentals will be less desir-able a place to live for resident unit owners than a community where that rental percentage is low. Tenants, with no ownership interest in the association tend to be less concerned about rules and procedures of an association and therefore, less interested in maintaining the good reputation of a community. If a tenant decides to conduct an illegal activity in their unit or on common property (drugs, for example), the exposure of such conduct can taint a community association for years, long after that tenant has left the property (voluntarily or in handcuffs).

7. Actions by Guests - The actions or inactions of a guest of a resident unit owner or resident tenant can have devastating impact upon a community. One forgetful moment at the community pool or one incident while on the common property can place a com-munity association on the lead page of the local newspaper or the head story on the local or state news programs.

8. Actions by Vendors - The work performed by community association vendors can make or break the reputation of a com-munity association. The failure of vendors to perform proper work adequately and timely can result in additional association costs. Vendors are also frequently the channel through which perceptions of a community are conveyed.

C. How to Protect and Defend the Reputation of a Community Association

The best way to protect and defend the reputation of a community association is to avoid the matters noted above. Associations need

MANAGER’S...from page 20.


and are entitled to good management, devoted to aiding a strong and engaged association leadership in the maintenance of the property and the enforcement of the rules. Associations need to have updated governing documents to provide the tools necessary to protect the association and its reputation. Associations should have adequate and properly set financials to cover both operating and reserve expenses. Unit owners, whether they are residents or rent their respective units need to be active members of the community, watching their own activity and watching over the common areas as if it was their own personal home, rather than simply a place to walk on. Unit owners who rent out their units must make their tenants part of the community and part of the effort to protect the community. It is not acceptable in the internet era that owners who rent out their respective units cannot obtain the “moon” from prospective tenants, and conduct a thorough examination of said prospective tenants before permitting them to rent out a unit. Tenants need to have some skin in the game, and their respective landlords must do whatever is necessary to get that mes-sage across. It is most essential that guests of residents (whether owner occupied or rental units) be aware of the rules of an association, and that their conduct be under the watchful eyes of the resident. Finally, association vendors must perform their work properly and timely.

Other ways to protect and defend the reputation of a community association include swift and proportionate enforcement of associa-tion rules; transmittal of timely and regular communications to the community on association affairs; creation and transmittal of periodic safety reminders; establishment of neighborhood watch programs; contact with, and support from local authorities, including the Police, Fire, Health and Animal Control Departments; maintaining a positive relationship with the neighboring properties and the municipality



Joel Meskin, Esq., CIRMS, CCAL

The Checklist The “Checklist” provides you with handy tips and ideas for handling common issues.✔The Ins & Outs of Community Association Risk Management

By Joel W. Meskin, Esq., CIRMS, CCAL

Recently I had the privilege to speak to a lovely group of vol-unteer board members at a Midwest CAI Chapter seminar. The seminar was entitled: “What’s My Line: Will the Real Community Association Risk Manager Please Stand Up?” The semi-nar is basically a college level semester course squeezed into an hour and a half regarding Community Association Risk Management. In this article, I attempt to further distill the key points of the seminar to further assist board members and community association managers to successfully manage the risk of the association.

I have insured over 80,000 community associations nationwide and have touched in one way or another between at least 5,000 and 6,000 director and officer claims. In addition, I have seen pretty much every other type of claim or lawsuit confronting associations; however, I stopped saying a long time ago that I have seen it all. Almost every day we see things that the most imaginative minds could not make up. In insuring these associations and in reviewing the claims, I have discovered a common core of most community association challenges, claims, disputes and lawsuits.

First, unit owners do not read the association governing documents (declaration of covenants, conditions and restrictions, by-laws and association rules) before they buy a unit in a community association. Accordingly, many unit owners do not understand what community association living is about, including what “rights” they have given up in exchange for the “benefits” they obtain from the association man-aging the common elements. As a result, many issues arise because of unit owner’s unfulfilled expectations, or rules they were not aware of prior to becoming a “mandatory” member of the association. This always reminds me of the bumper sticker that said: “America, love it or leave it.” They further do not understand as is clearly set forth in association by-laws that they have given a group of their neighbors, who they may or may not know, or who they like or do not like, the authority to manage the association which is in place to protect the unit owner members’ two greatest assets, their property value and their lifestyle.

Second, unit owners do not understand the “business judgment rule” which is how the conduct and decisions of the elected volun-tary board members are judged. In brief, in the absence of “fraud”, a “conflict” of interest or direct violation of law, no court is likely to overturn a board decision even if it is “wrong,” “stupid” or contrary to common sense. A majority of claims come from those who never have time to volunteer, but have plenty of time to complain. These are the same people who do not take the election of association board members seriously and do not have time to vote.

Third, the elected voluntary board members very often themselves do not read the association’s governing documents. [inconceiv-

able!] If you read any set of governing documents, although they may not use the term “risk manager,” the role of the board is to “manage” the association’s common elements. In other words, protect the assets of the association by enforcing the covenants, conditions and restric-tions. How can this be done if they do not read the documents that tell them what to do. As my wife says to me, why don’t you just ask for directions, or follow the instructions before you put the IKEA bookshelf together. There is never time to do it right in the first place, but there is always time to fix it.

Finally, the volunteer board members turn the job into something more than it is or do not understand their duties and obligations. The board is a “body” of elected individuals who meet pursuant to the by-laws and make management decisions and then delegate how the decisions will be carried out. The board members are not employees! Each member has one vote and decisions are discussed, debated and determined in a properly notice board meeting. Discussions regard-ing issues outside of the board meeting is a violation, including emails between and amongst board members. The delegated matters are del-egated to an employee, a community association professional such as a community association manger, attorney or insurance professional. When a matter is delegated to a board member, it is delegated to them as a volunteer and they must carry it out like anyone else pursuant to the authority given by the board. Failure to stick to these precepts will give rise to unintended consequences.

Each one of these factors can be prevented and in doing so can lead to the reduction of many issues that prevent a successful association. Boards need to avoid turning the volunteer position as a board mem-ber into something more than it is. ■

Joel Meskin, Esq., CIRMS, CCAL is vice-president of community association products with McGowan & Company, Inc.

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“Failure to stick to these precepts will give rise to unintended consequences.”



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Apathy, as described by Webster’s Dictionary, means: “a lack of interest or concern.” It’s a chronic community association prob-lem could it be that owners bought the point of sale jargon?“Enjoy worry-free living… all of your problems are taken care of…

you don’t have to worry about a thing… someone else maintains the property for you…This property has professional management… Never do any yard work….”

Many HOA Boards have a difficult time recruit-ing owners to be on The Board.

In addition, many Associations cannot reach a quorum in order to conduct business at their annual meetings. Here are some ways to combat such apathy.1) In desperate situations, have legal counsel draw up a temporary

plan to have non-owners serve on The Board.

2) Petition The Court to reduce the size of The Board and/or reduce quorum requirements.

3) Make owners who attend the annual meeting eligible to win a $200.00 gift certificate.

4) Provide snacks and refreshments at annual meetings or at board meetings.

5) Try to recruit “fresh faces” get new residents excited about their new living choice.

6) Turn complaints into committees. When an owner expresses a legitimate issue ask them to head up a special committee to address the concern and come up with a plan to fix it.

7) Have a clubhouse? Use it to build camaraderie. Organize a com-munity picnic or tailgate party.

8) A Fun Social Community gets more Board Volunteers than a dicta-torial Board

Apathy — The Largest Problem Condo/HOA Boards Face

By Michele Roper

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9) Send out periodic community Newsletter and email messages with helpful information.

AND MOST OF ALL:Have an informative Homeowners Website for residents to turn to

first before inundating board members with easily answered questions. End the driveway accosting with a simple “Go check out the website, the information is posted on the members page for you to view”

In summary, the association has to “capture the community” to avoid widespread apathy. It has to continuously work to portray the community as a vibrant and active place to live. The board needs to organize “fun social events” in order to avoid the stigma of being viewed as the town sheriff. Funnel creative ways to engage the residents and you will always have enough volunteers to staff your Board. ■

Michele Roper is the Web Developer with Acri Community Realty. They are located in the Greater Pittsburgh Area and specialize in property management. This article originally appeared on their blog and was reprinted with permission.

Editor’s note: Be sure to consult with an attorney prior to attempting to make changes to the composition of your board (See above Items 1&2.)

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Your Association Board of Directors, Volunteers, Community Managers and Business Partners all work hard and take advantage of continuing education for the common goal of providing and using best practices in the daily activities for the betterment of communities across the State. If you have not taken advantage of CAI-CT’s vast education opportunities, please join us.

Enjoy the summer with your family and friends!

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reactive part of the title of this article.Let us consider an alternate which could be considered the proac-

tive approach. Consider a scenario where potentially some or even all of the roofs were potentially replaced five years earlier then this leaking scenario would dictate. Secondly, let’s assume that they were replaced with a roofing system with an expected lifetime of 40 years. This five year or 40 years divided by five would equal 12½ percent extra in costs by having some roofs or on average all roofs potentially replaced before the immediacy of need occurred. One can then read-ily see that this 12½ percent premature replacement cost could be far less then the prior scenario of paying in essence double for the roofing projects or a 100 percent increase in potential cost. This, when you think of it in these terms, is a startling result.

I am in no way advocating simply replacing roofs that are not having problems or of course the generic scope of this article is not about roofs, but is of infrastructure systems in general which could be extended to siding, roofing, windows, etc. When one evaluates the cost of not undertaking a project versus undertaking them, surpris-

ingly in many scenarios the cost of being proactive can ironically be less expensive. I’ve written before in this space about programs such as paving where an association’s pavement may have reached the point at which an overlay is not feasible and a complete reclaiming may be needed. The cost benefit analysis in this scenario can be quite different because it is not collateral damage other than perhaps potholes and property values associated with not undertaking the project; whereas in other projects where there are other associated costs with not undertaking the project, especially relating to leaking. The financial

mix or analysis can be significantly different. Hopefully, this discussion of proactive versus

reactive responses at least causes the decision makers in common interest communities to think carefully about

what makes sense for their community. ■Please address any questions or areas of interest that you would

like answered in future columns to Timothy Wentzell, P.E., Connecticut Property Engineering, 630 Governor’s Highway, South Windsor, CT 06074 (860-289-8121) (e-mail: [email protected]).


TECHNICAL EXPLANATIONSThis column appears in each edition and is intended to touch on technical topics of general interest to common interest associations. Topics will be of a general nature, but I will also accept and respond to questions from readers. On occasion, it will be guest authored when topics can best be addressed by experts in other fields.

Timothy Wentzell, P.E.

One of the most difficult decisions a common interest com-munity needs to make is the timing for major infrastructure replacement or improvement projects. As I often do in these articles, I cite a specific example and in this case I had a very enlight-ening meeting with a common interest community with regard to the timing of their proposed upcoming roof replacement project. In this meeting a very knowledgeable member of the community was raising significant concerns about whether the Association Board was “jump-ing” into a roof replacement project prematurely.

During the presentation of the Board and my presentation, the association’s presentation included the expected cost of the roof replacement project per unit of approximately $8,000. They then explained over the past couple of years when they had had roof leak problems most of them associated with ice damming, that the repairs had ranged interesting enough in a similar range of expenditures of $8,000 - $9,000. The member of the community raising concerns about the project being done prematurely had raised his concerns very articulately that the Association was jumping into the project when a relatively small number of units were hav-ing leaking in the range of 10 - 20 percent per year in a typical winter cycle. Why would it not a better approach be to simply take the units that had had a leaking problem and during the next construction season then undertake their roof replacement? After listening to several speakers stating what seemed like a similar approach that if the program could be put off for a relatively small period of time, savings could be realized and roofs would not be prema-turely done. I sat there thinking that this was a fatal flaw in planning, although seemingly quite logical, however, in essence every roof that would then be replaced would cost double. That result over time would end up with the whole complex paying about twice the amount of money; in this case approximately $400,000, without the repair scenario versus potentially twice that as every roof that would end up being replaced, would pay the $8,000 or $9,000 repairs and then an additional $8,000 to be replaced. This would be the


Reactive Versus Proactive ApproachesBy Timothy Wentzell, P.E.

“When one evaluates the

cost of not undertaking a

project versus undertaking

them, surprisingly in many

scenarios the cost of being

proactive can ironically be

less expensive.”

©iStockphoto.com



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Reserve Planning is a Board’s Responsibility The emphasis for Reserve Plans increases every year. States

are starting to require it. FHA makes it a central part of their project Certification process. New buyers are looking hard at existing reserve balances for capital projects and will adjust their offering price accordingly. Reserve Plans are the sub-ject of many articles in Common Ground and Common Interest magazine and CAI booklets. These can be found on CAI’s website CAIonline.org for members and non-members alike. Even though the message is loud and clear, many associations have not developed a plan.

It is part of the Association’s Directors’ fiduciary duty to tell owners about all the present and future cost of maintenance, repair and improvements of their facility. The Board needs to have a long term maintenance and replacement plan to do this. They need to tell their constituents what that plan contains, how much it costs, and how they plan to fund it. It doesn’t matter if the plan is funded by annual contributions to reserves, special assessments, loans, steal the money, or any combinations of those. Owners should be told the unvarnished truth even if not enough is being saved and special assessments will be needed in the future. Owners need full disclosure. Directors need to provide it.

The reluctance to prepare a plan originates from the perception that owners could not afford to pay more than they are paying now. Take a close look at your owners. You’ll see that many of the owners have new cars, large screen TV’s, take lots of vacations, and have second homes. It’s more an issue of priorities than affordability. Homes often represent a person’s single largest investment and should have the higher priority over other things. People move into condominiums because they want “care-free” living. Well, care free living does not come cheap and owners should be willing to pay for it!

The Board’s fiduciary responsibility is to maintain the physical structures, preserve, protect and enhance the value of the property. Nowhere in the State Statutes, the Declaration or By-Laws does it say the Board’s responsibility is to ignore good judgment to favor the misplaced financial priorities of owners. Of course, the Board should be sensitive to increasing fees. However, the way to keep fees as low as possible is by using the owners’ money effectively (do the right things) and efficiently (do it the right way and get as much value for the money that they can). It is irresponsible to artificially keep fees below a sustainable level. This only defers the inevitable increase, special assessment or causes Associations to raid reserves. No matter how you cut it, future owners will eventually pay.

So, why do Associations resist making a plan? • Reluctance to pay a Reserve Specialist thousands of dollars to pre-

pare a professional plan.

• Overwhelming. It’s a complicated process and mysterious calculation.

RESERVE PLANNING:

Resistance to Reserve PlanningBy William J. Chmura

This is Part 1 of a 5-part series

• Fear of the unknown or unwilling to face reality.

• Afraid to find out that fees might be increased. They feel that doing a plan is synonymous with asking for more money.

• They think it’s hard to do without expert help.

• Laziness. Easier to kick the can down the road.

• We’ve never done it before so why start now? Ideally it should have been started when the Association was first formed.

• The word “reserves” implies

Common Interest · 2018. 4. 2. · Volume I: Issue 5, 2016 Common Interest CONNECT with CAI • 3...

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Transcript of Common Interest · 2018. 4. 2. · Volume I: Issue 5, 2016 Common Interest CONNECT with CAI • 3...