Over the last twenty years I have had the privilege of meeting with many condominium and HOA boards and leaders. Some were seasoned and experienced while others were new and exposed to the culture of community living for the first time. All wanted to do their best, yet failings and mistakes were acknowledged. With the hope of being forewarned is being forearmed, I thought I would share with you some of my observations of the ten most common condo board mistakes to avoid future do overs.
Not Understanding the Governing Documents: It is so basic. New board members are asked to read all the governing documents, but long-time members should also periodically review the association’s rules and regulations, especially when an important matter is to be considered. And of course, the corollary to this recommendation is these governing documents must be consistently followed and fairly administered. Erratic enforcement of the rules will never foster harmony in the community.
No Confidence in Your Management Company: This problem can be avoided from the start by hiring the right firm for your community. Interview the best candidates; ensure their proposed scope of services meets the specific needs of your community; and periodically review the selected firm’s performance and share your concerns. Once the board sets the goals and policies it should step aside and let the management firm enforce them without micromanaging the daily operations.
Not Maintaining Accurate and Timely Financial Statements: Loss of control over your financial statements is a guaranteed path to chaos in the community’s future. Good financial statements promote confidence amongst the unit owners; good relationships with your bankers and insurance representatives; and accurate information for reserve and operational planning and budgets. Up to date financial information is the engine driving revenue collections; trouble-free payables; and payroll processing.
Unreliable Reserve Fund Studies: If your reserve fund study is over seven years old, it is almost useless. Having the study sitting in someone’s bottom drawer and not referring to in that time is almost worse. Reserve studies are living documents whose basis is always changing. Construction and repair costs have skyrocketed. Inflation over the last two years has made most budgetary schedules obsolete and underfunded. A board does not want to be in the position of releasing the start of a major project only to discover more money needs to be raised.
Contribution Shortfalls to the Reserve Fund: The source of this problem is a failure within the management team. Either your accountant has not billed the proper assessments; your engineer has not estimated the necessary capital repair budget; or your property management firm has allowed deferred maintenance to get out of hand. Underfunded reserve budgets can damage the community’s image; impact unit owners’ future sale plans; and require future special assessments. The board is ultimately responsible for maintaining adequate operational and reserve fund balances. Not facing the need to raise assessments or delaying the decisions for necessary capital expenditures are classic board mistakes.
Communication Failures: Condo communities not only must be transparent in their communications with the unit owners but must be perceived to be transparent. Confidence in the board is built over time and will be called upon when difficult decisions need to be made. When everyone has the same set of facts, common decisions are much more likely. Today the media to get the word out is vast including bulletin board postings; community websites; email bursts; postal flyers; texting; etc. A well-run community has its members fully engaged as much as possible. Good and bad news should be dealt with on a timely basis. The community motto should be: “When it hits the fan, run at the fan.”
Uninformed Team Members: We Yankees like to fix things ourselves. However, in community living this can get a board in trouble. When a problem arises, there may be a tendency to save some money by not calling the condo’s lawyer, engineer, or insurance agent. The other Yankee saying is ‘penny wise and pound foolish’. If a liability issue arises or a conflict over the interpretation of a bylaw phrase, a quick phone call to your condo attorney might avoid unpleasant future consequences. The same is true for building safety issues or the discovery of water infiltration in the condo complex. Building problems rarely improve on their own.
Board Disunity: Disagreement among board members is bound to happen. Everyone’ opinion matters but everyone can’t be right all the time. The board members must follow established decision-making protocols and once a decision has been made each board member must stand behind the consensus. Anger and lack of respect have no place in community governance.
Not Following the Chain of Command: In general board members and committee chairs want to do the right thing. Sometimes in their enthusiasm to get things done in a timely manner they may take matters into their own hands and act without authority. Condo leaders must be reminded from time to time that they are dealing with community money, and they should not direct on-site contractors and vendors to supply services or make repairs without specific direction from the board. This type of lack of discipline can create unnecessary liability or costs easily avoided.
Improper Vendor Selection: Perceived vender service dissatisfaction is often the reason for a new member joining the board. All should be reminded before terminating a vendor service an exit interview should be held to determine all the facts. With a bit of due diligence, the true problem can be revealed resulting in better service with less trouble.
Community living require forbearance and respect for volunteer efforts. All things are possible with village unity.
Written by Jack Carr, P.E., R.S., LEED-AP, Senior Consultant Criterium Engineers
Published in Condo Media