Fiduciary Duty
According to Webster Dictionary, Fiduciary Duty is “the legal duty of a fiduciary to act in the best interest of the beneficiary.” Yeah, OK. That’s well enough. In the context of your role as a Board member, however, we can dig a little deeper.
As a governing body, the Board of Directors has three primary functions:
- A policy making body (creating Rules)
- An approval body (approving a budget, managing architectural controls or contracting services)
- An oversight body (reviewing financials or evaluating vendor services)
- Duty of Care – making reasonable and informed decisions; regularly attending and participating in Board meetings; exercising independent judgement; relying on experts, but still exercising good business judgement; and acting in the best interest of the Association as a whole.
- Duty of Loyalty – putting aside all personal interests; eliminating conflicts of interests; and exercising power in good faith to benefit the best interests of the community.
Association Funds – Operating vs Reserve
Since most association’s are on a calendar fiscal year, the Board of Directors and Management will soon begin, or have begun already, working on the 2019 Operating Budget. This budget, essentially, sets the “dues” – so we thought it would be a timely opportunity to explain the difference between the “operating budget” funds, vs the “replacement reserve” schedule and funds.
Operating Budget – Each association varies, of course, but an overwhelming majority treat “operating” and “reserve” (or “capital”) funds differently. And they should. Associations work within an operating budget to pay for necessities and recognized amenities. These items are set by the Governing Documents. Common examples include lawn care, landscaping, snow removal, insurance, management services, repairs and maintenance, utilities, amenity costs for pools or other recreation, etc. These are the costs to run the association on a day-to-day basis. This budget makes up what becomes the homeowner’s assessment – commonly called “dues.”
Little known fact – for most associations, did you know that the monthly “dues” payment is technically called an annual assessment? The common practice is to break it up into 12 equal monthly installments and call them “dues.” But, for most associations, the adopted operating budget and your share of those expenses (be it by ownership percentage in a condo or your equally divided share of the planned community) is legally recognized as yearly assessment.
Reserve Fund – The association’s “reserve” or “capital” fund is essentially the savings account to pay for large replacement projects such as re-roofing, re-siding, concrete and asphalt replacement, etc. Most associations work off of a professionally developed “Reserve Study” that lays out the plan for which components should be replaced which year, and a funding plan to pay for those replacements.
Now that you know the difference between the two funds – how do they work together? The reserve fund is “contributed” to via an expense listed in the operating budget. If the Reserve Study says in 2019 the association should contribute $120,000 to the Reserve Fund, typically each month the association will take $10,000 generated from the dues revenue and deposit into the Reserve Fund account. This is a set line item in the operating budget.
It’s a lot like a savings and checking account. You deposit your paycheck into your checking account which you use to pay your regular bills. It’s your “operating account.” You might also plan an amount each month you send to your savings or retirement account to pay for those big expenses down the road. It’s your “reserve account.”
Hopefully this helps to explain two very different funds your association is working with.
Fountainwoods II Condo Association and Sharper Join Forces
Eden Prairie, Minn – (August 17, 2018) – Effective August 1st, Sharper Management is pleased to welcome Fountain Woods II Condominium Association to the stable of clients managed in the Edina area. Originally constructed in the early 70s and incorporated as Condominiums a decade later, Fountain Woods is a beautiful community made up of four condominium complexes tucked in a quiet area of Edina off of highway 169 and 62. There is a shared tennis court, shared pool and in each building there are multiple amenities such as party rooms and expansive common areas. The Fountain Woods II phase is made up of twin four-story buildings that house 154 units. 
“We are so excited to be a part of the Fountain Woods community,” said Dan Cunningham, Owner of Sharper Management. “We have had the great fortune of managing a number of condo buildings in Edina. This is certainly a special one. We look forward to the opportunity to work with the Board to help keep, and enhance, property values in this expansive and complex community.”
Founded in 2010, Sharper Management is a locally-owned, mid-sized property management company offering a full suite of premiere services to homeowner and commercial associations of all sizes. Sharper Management currently provides services to the Minneapolis-St. Paul seven-county area.
Sharper Management Welcomes New Assistant Community Manager
Eden Prairie, MN, (September 20, 2018) – Sharper Management is pleased to welcome Grant Peterson to its team as the newest Assistant Community Manager.
Peterson brings a strong background in real estate through his experience as an agent selling in the condo, co-op, townhome and other multi-family property markets. Additionally, he serves on the Board of Directors in the condominium association where he resides. “Being a homeowner in an association, I get to learn what works well and what is missing from the management side of things. I get to incorporate that into my management style,” said Peterson. “I am excited for the opportunity to be a ‘professional problem solver’ and work with Boards to help increase property values, benefiting all homeowners.”
“Grant brings a unique perspective and solid skills set to our team of managers,” said owner and chief operating officer, Matt Froehlich. “We are excited to see how he can make an impact on the team of Community Managers he works with day-in and day-out – and to one day grow into a strong portfolio manager himself. We are excited to have him aboard.”
Peterson is assigned to support a group of Community Managers, all of whom are overseen by Candy Lee and Josh Reams as the directors of community management.
Founded in 2010, Sharper Management is a locally-owned, mid-sized property management company offering a full suite of premiere services to homeowner’s associations of all sizes. Sharper Management currently provides services to the Minneapolis-St. Paul seven-county area.
For more information on Sharper Management services and employment opportunities, call 952-224-4777 or email to info@sharpermanagement.com.
Sharper Management Adds Manchester Village Owner’s Association
Eden Prairie, Minn – (August 17, 2018) – Effective September 1st, Sharper Management will add Manchester Village Owner’s Association to the full-service management client list. Manchester is a single-family home community located in Minnetonka and consists of 51 homes built in the late 80s.
“Manchester is a unique community association,” said Dan Cunningham, Owner of Sharper Management. “It is a single family development; however, the lots are maintained by the association. We look forward to the task of working to keep the grounds and architectural continuity equal to the beauty of the homes through the community.”
Founded in 2010, Sharper Management is a locally-owned, mid-sized property management company offering a full suite of premiere services to homeowner and commercial associations of all sizes. Sharper Management currently provides services to the Minneapolis-St. Paul seven-county area.
Cimarron Home Owner’s Association Joins Sharper
Eden Prairie, Minn – (August 17, 2018) – Effective August 1st, Sharper Management is pleased to have taken over full management services for the Cimarron Home Owners Association in Chanhassen. The Cimmaron development is a large 156-unit quad home community built in the late 70s-early 80s..
“We are very please to have the opportunity to step in to the Cimarron development,” said Matt Froehlich, Owner and Chief Operating Officer of Sharper Management. “It is a large association on a large lot of land. As a 40-year old community, they have reached that critical age where maintenance and revitalization is their key focus. We look forward to working with the Board to help them continue to make Cimarron a wonderful community association.”
Founded in 2010, Sharper Management is a locally-owned, mid-sized property management company offering a full suite of premiere services to homeowner and commercial associations of all sizes. Sharper Management currently provides services to the Minneapolis-St. Paul seven-county area.
Smoking Hot Real Estate Market. Are You Thinking of Selling?
* Pending litigation about the association
* Up-to-date information about assessments
* The Association’s financial status
* Covenants and restrictions within the HOA
* Any violations about the unit you are selling
* Governing documents for the HOA
Annual Board Meeting Season
October is just around the corner and for some Associations, they may have their Annual Meeting to close out the year. By state statute, association meetings are open to members year-round, however if you’re only going to attend one meeting each year, the Annual Meeting is the one to choose.
The annual meeting is a requirement of an association’s governing documents and the Minnesota Non-Profit Corporations Act (317A). As Associations are considered and registered as a non-profit corporation with the state of Minnesota, they must then have a “meeting of the members” (owners of record) on an annual basis. Members are to be mailed an official “notice” of said meeting within a certain period of time (usually 20-60 days in advance), and the notice should include an official Agenda listing items to be addressed by the Board and requiring membership approval.
The main primary, and often time sole, purpose of the Annual Meeting is to elect members to serve on the Board of Directors. Often times a statement of the financial condition of the association is provided by the Treasurer, a “President’s Report” is given on activities and projects, and sometimes committee reports are provided. But generally, the purpose of the Annual Meeting is to elect Board members. By state statute, no other business can be conducted unless is was “properly notified” in the Agenda and/or official Notice of the meeting. Often times members view the Annual Meeting is the forum to raise concerns and bring forward motions to take action on this or that. Board meetings are really the place for such requests, as, again, the association cannot take action on an item that was not presented on the agenda and/or notice.
The Annual Meeting is a great place to participate in your association by hearing about what is going on – and voting in the members you want to represent you on the Board. Be sure to watch for notifications about your Annual Meeting and make plans to attend.
Contractor Chat: Weathering Expectations
One of the great construction debates is to sealcoat or not to sealcoat asphalt pavement. Let’s review the primary purpose of sealcoating and then the common complaint. Sealcoating asphalt (usually driveways or streets) provides a thin layer of fine aggregate, oil and minerals to help protect and “seal” the aggregate asphalt materials that make up the pavement. It protects it from environmental factors that breakdown asphalt such as water/moisture, UV rays, and temperature change. Sealcoating is similar to painting. It protects the surface, while at the same time giving it an aesthetically pleasing and uniform appearance.
Which brings us to the primary criticism of sealcoating. Everybody loves a freshly sealcoated driveway. It looks all shiny and new! But after one plow season, you’re left with blade marks and tire tread patterns. After a year or so, light spots start appearing from areas that hold water or are exposed to heavy traffic. What a waste of money that sealcoating was! After a couple of years the asphalt blends back to that uniform gray look. Did it really matter or make a difference spending the money to sealcoat?
Yes, it did! Unprotected asphalt will undoubtedly break down sooner than asphalt that has been sealed. This is a similar process to what happens with exterior wood surface. If left unprotected by paint or stain, fibers will break down and rot away. The secret to sealcoating is having realistic expectations on how long that shiny new looking driveway will last.
How Association Boards and Management Companies Work Together
In an HOA, there is often confusion about who is responsible for what between the Board and Management Company. While each association and their contract with a management company is unique, we have gathered some general guidelines to help clarify these roles.
The HOA and its Board are responsible for the overall operations of the community. The Board makes all decisions regarding rules and they are responsible for maintaining the value of the property through maintenance, collecting dues, paying bills, and filing taxes.
The confusion often comes into play because Boards delegate certain responsibilities and administrative tasks to management companies. In a nutshell, the management company carries out the directives of the Board as their administrative arm. Management companies do not set policy.
Full-service and financial-only management contracts can further add to misinterpretation of responsibilities of a management company. A full-service contract will include things like general maintenance of the association’s common areas, financial and administrative duties such as paying the bills and collecting dues, and tasks such as facilitating meetings and taking/distributing notes and notifications to residents.
A financial-only contract for management is just that. The management company takes care of things relating to finances such as paying the bills, managing dues and collections, and management of the reserve fund.
With many different options and the unique needs of each association, it’s easy to see why questions arise regarding who is doing what!
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