When selecting a vendor or contractor, it is critical to use due diligence and have a process in place for making these selections. By having a thorough process, you will satisfy your obligation as a board member while also protecting from potential liability.
When evaluating vendors or contractors for selection, there are some key pointers to follow:
- Establish a thorough process for vendor “vetting.” Better yet, document the process for future boards to ensure consistency.
- Conduct personal interviews (or engage in some kind of personal contact).
- Confirm insurance coverage/documentation. Note that not all vendors need or have insurance, but this is an important aspect to take note of.
- Confirm any licensing, credentials, or certifications a vendor may have depending on its specific industry.
- Request multiple references and check them.
- Proposals are not contracts, even if all parties sign it. Always ask for a formal contract that includes important terms regarding the relationship (i.e. termination, dispute resolution).
There are also special considerations for specific types of vendors and projects:
- Always get multiple bids to compare costs, operations, and qualifications. Ask for Certificate of Insurance and ensure that it is current and up to date through the anticipated length of a project.
- Check with the Minnesota Department of Labor and Industry to confirm license status, learn of potential enforcement action, or history. Follow up on any issues.
- Explore resources such as BBB, Angie’s List, Google reviews, and more. However, take all reviews with a grain of salt.
- Confirm contractor’s ability to complete project within your desired timeframe.
- Clarify methods of communication for project ahead of time.
- Consider the amount of control you are relinquishing—full management? Partial?
- Ensure agreement covers what is expected in as much detail as possible, including things like termination options, governing documents, and auto-renew provisions.
- Have a thorough understanding of what services are included and what may require payment of additional fees.
- Understand the relationship between management and the Board and how it translates in terms of a contract.
Routine/Ongoing Service Vendors
- Ensure there is a termination or dispute resolution process in place in the event there is an issue.
- Understand the schedule of services and what triggers action (i.e. inches of snowfall, days for garbage collection).
As general rules of thumb, you can (and should) always negotiate a contract if there are concerns over the terms proposed. If multiple bidders are involved, allow for a process to give all bidders a fair chance at the project. Finally, make sure there is always a way to end the relationship if needed.
At the end of the day, it is important to do your homework on the front end of the relationship to circumvent future issues. Do thorough research and check all available resources and negotiate for terms that you find acceptable.
Luckily, Sharper Management offers a Preferred Vendor Directory. All preferred vendors are required to provide a certificate of insurance and be in good standing with the state of Minnesota. This can be a fantastic starting point in the vendor selection process: https://sharpermanagement.com/preferred-vendors/
As the pandemic continues, most people have adjusted to the “new normal” that is affecting everyone in the community association industry, the associations, and the owners. While we may be exhausted by the restrictions and repercussions of the coronavirus, we need to remain cognizant of actions needed to prevent the spread.
There are several areas that associations should continue to monitor:
- CDC Guidance: Provided by the CDC, there is specific guidance for “shared or congregate housing,” which includes condominiums and other multi-family buildings. This information is comprehensive and includes many guidelines to maintain safe operations, acknowledging community associations’ unique needs and challenges.
- Declaration, bylaw, rules, and regulations: While there may not be specific COVID-19 related provisions, these documents provide insight on what general terms could impact or govern steps taken to respond to these issues.
- Social gatherings: Social gatherings should be continually evaluated, especially those seeking to occur indoors. Recommendations and restrictions are fluid, and it is important to stay abreast of these changes. Outdoor events are typically easier to implement, however with cold weather, indoor facility use may be more common.
- Construction projects: Continue to appropriately manage access to buildings by vendors. Create and maintain appropriate protocols, emphasizing the steps these vendors will take to ensure proper cleanliness and sanitization while working.
- Usage of amenities: There is ample information regarding access to amenities such as pools, fitness centers, etc. within associations. As this is an ongoing, fluid situation, it is important to create a schedule to evaluate these aspects. Adjustments should be continually made based on the latest data and guidance available.
- CDC Fact Sheet: Communication is critical to avoiding issues or misunderstandings in operations. Posting the updated/current CDC guidelines or fact sheet in buildings ensures that owners and others entering the building are aware of the standards and protocols in place.
There is an overwhelming amount of information and suggestions for safety guidelines out there but keeping up to date on the aspects above is a good foundation. Balancing safety issues with common sense and community spirit is the best remedy available to us during this time.
One of the silver linings from the pandemic’s impact on the economy are the historically low interest rates. Due to concerns about the stability of the economy, most financial institutions have adjusted their traditional credit evaluation and standards. Because of the relatively low interest rates, now could be a good time for community associations to obtain or refinance a loan.
HOA loans can help fund capital improvements and projects in the community—from common area improvements, to maintenance and repairs. Typically, HOAs utilize loans as alternatives to a special assessment for unexpected expenses. HOAs can also use loans for pay annual insurance premiums up front—which is especially beneficial if the insurance company offers an incentive for paying in advance.
Additionally, loans allow HOAs to spread out the cost of common area improvements over time, while also allowing repairs and maintenance to be performed in a timely manner at today’s prices.
With historically low interest rates, now is a good time to reevaluate current loans and see if a refinance would be beneficial for your community. The biggest advantage to refinancing is lowering the interest rate, which can have an incredible effect on monthly payments. Long term, this strategy could save the association hundreds (if not thousands) of dollars each year.
There are a few types of loans that are pertinent to HOAs:
Term loans are a type of loan where the funds are taken at loan closing and the monthly payment is fixed, usually ranging from three to 15 years in length. Term loans are typically utilized for capital improvement projects, deferred maintenance, property acquisition, reserve replenishment initiatives, refinancing existing loans, common area improvements, and construction defect repair.
Non-revolving lines of credit are a type of credit where HOAs are required to pay interest on the borrowed balance. These lines of credit are typically shorter term (approximately 12 months) and are converted to a term loan before or at maturity.
Emergency lines of credit are typically used for disaster relief. Instead of having to wait for insurance funds to arrive, HOAs can make any necessary repairs in a timely manner, and then pay back the loan once the claim has been paid. Interest would only be paid while waiting for insurance funds.
If an association enters into a loan agreement, it is important to determine what method will be used for repayment. For smaller loans, HOAs could utilize an increase in monthly assessments. For larger loans, HOAs could create a special assessment that would allow each owner to pay up front or participate in the loan program. In both situations, transparency is key and board and homeowner approvals must be considered.
Loans provide financial relief to associations with unexpected expenses and lessen the burden to homeowners. If your association could benefit from a new loan or refinancing an old, now may be the time to get a historically low rate.
One of the benefits of living in a community association is the set of rules and regulations that everyone must abide by. These rules help the community preserve the aesthetics and enhance home values due to the increased maintenance of the property. The Board of Directors usually has the authority to enact and enforce these rules and regulations. However, the most difficult part is often determining what regulations are enforceable or not.
Enforceable rules are easily seen and able to be followed up on. Additionally, these rules fall within the powers given to the board by the Declaration. If, for example, the Declaration restricts specific use of the property such as renting, smoking, or pets, then it would be up to the Association to create rules around those provided the declaration gives them the authority to do so.
Examples of rules that are enforceable:
- Picking up pet waste immediately
- Where garbage and recycling receptacles must be stored
- Guidelines for placement and installation of satellite dishes (following FCC guidelines)
- Architectural regulations for windows, garage doors, etc.
Unenforceable rules are not easily seen, tracked, or followed up on. These rules also fall outside the authority provided to the Board in the Declaration and Bylaws. Rules cannot violate any fair housing or human rights laws such The Minnesota Human Rights Act, Fair Housing Act, etc.
Examples of rules that are unenforceable:
- Requiring homeowners to replace their air filter monthly (Unreasonable to verify or track)
- Neighbors shall keep a reasonable level of noise at all hours (What is “reasonable?”)
- Dogs cannot weigh more than 50lbs (Who is in charge of weighing the dog? What if the dog weighs 48lbs one time then 52lbs another?)
When creating rules, make sure they are authorized by the Declaration. As with many things in an HOA, always check governing documents, ask your property manager, and consult with an attorney.
It’s a great idea to review insurance policies occasionally. If you’re considering changing your HOA homeowners insurance you’ll want to keep in mind what kind of coverage you need.
For most types of HOAs where there are shared walls and common spaces, you will need to understand how the HOAs master insurance affects your property.
Walls-in (Studs-in) This is the policy you, as the property owner, need to be the most concerned about. Just as the name states, this kind of homeowners policy covers what is inside your owned space. Things like the carpets, cabinetry, walls all fall under a walls-in policy.
Walls-out (Studs-out) Most of the time the HOAs master policy will cover damages that could occur to outside your owned space. This would include the roof, probably the windows, fencing, carpet in the hallway of a condo complex etc.
However, it is very important to understand who is covering what when you’re searching for a new homeowners policy. Not all HOA insurance is the same. Knowing the finer details of your the association’s policy and your homeowners policy could save you money and headaches in the future.
- Snowshoeing. Head over to Lebanon Hills over in Eagan and, for only $7/hour, you can explore the trails above the snow using snowshoes! This is great for those that like to hike and go on walks but don’t like getting their socks wet from snow.
- Ice sports. The Minneapolis Parks Department is still hosting skating, hockey, pond hockey, and broomball on their ice rinks. While the numbers of lakes this year are reduced and there is a limit on how many people can be in a warming room at once, you can still lace up your skates and get your blood pumping.
- Hiking to frozen waterfalls. While Minnehaha Falls is pretty in the summer, it is are absolutely stunning in the winter. Hiking to the frozen falls and then following the trails by the water is a great weekend activity.
We have already had some snowfalls this winter, meaning most of us are already back in the swing of driving in the snow.
Understanding your HOAs contract for snow removal is key to knowing when you can expect your lot and drives to be cleared.
A trigger depth is the minimum amount of accumulation a snow-removal company requires before they will plow the streets. The average trigger depth is between 1-2”, and most contracts say this much snow needs to fall in a single event. A “single event” policy means that the minimum trigger depth must be reached during one snowfall; if you reach the trigger depth in 2-3 snowfalls, they will not plow.
Most snow-removal contracts also specify the timing of snow removal, as well as “open-ups” for heavy snowfalls. Timing is the amount of time the company has after snowfall ends to finish clearing the roads; in most contracts this is between 6 and 12 hours depending on how much snow accumulation there is. Open-ups are single passes plows make through the roads when it is still snowing but accumulation has already hit high levels, which makes it easier for people to get in and out of the HOA community, especially if there is an emergency.
- Establish a potty routine. When potty training a dog, it is important to establish a routine that includes potty times, location, affirmation, and phrasing. Take your puppy our after certain times of day, go to the same part of your yard, give your dog affirmations when they are done, and say a word or phrase that you can eventually use to remind them what to do when distracted.
- Crate training is essential. Whether you need time to do housework without a puppy underfoot or you are going out to run errands, crate training your dog will help them feel at peace when you are gone. Slowly introduce the crate, then lock them up for short periods of time. When they can go 30 minutes of crate time while you are home without whining, you can start to leave the house. Keep initial trips short, slowly lengthening your time away from home until your dog is comfortable.
- Leash train your dog. Especially in a shared living community, having your dog used to being on a leash is important. Most communities have rules that animals must be on some type of leash, so by training your dog you will also be adhering to your HOA’s standards. Start leash training by putting the leash on your pet while they are spending time indoors. When they are used to it, start walking your dog around your house so they know what it will feel like and don’t have as many distractions as they would outdoors. Finally, take them outside with their newly developed leash skills!
- Nuisance behavior. Lack of physical control over your dog, your dog relieving itself on walls or floors of common areas, aggressive and/or dangerous behavior, and conspicuous uncleanliness or parasite infection.
- Barking problems. If your dog barks continually for a period of 10 minutes or intermittently for a certain amount of time at any time during the day or night, you could be in violation of noise rules.
- Picking up poop even in winter weather. No one likes to spend more time outside than needed when it’s cold and snowy, but that doesn’t mean you can leave your dog’s poop outside until spring.
- Rising interest rates. No matter what we do, we can’t escape rising prices. As prices increase and dues stay the same rate, your spending will become unsustainable. Even if you have a modest budget, you can never tell when an emergency could occur that forces you to use up any extra money you had.
- Ease of payment. Doing small but steady price increases will be much easier on HOA members’ wallets than sudden price jumps every few years. Small increases normally have less backlash and are easier for homeowners to budget around than large, irregular increases. Larger increases are also more likely to go unpaid, reducing your budget even further.
- Caps on annual increases. In most association’s governing documents, there is a maximum percentage that you can increase your dues every year. When you try to catch up with a large due increase, the cap percentage may not be large enough leaving your HOA to run at a deficit until you can increase prices again next year.
- Developer/declarant rights. If your HOA is new, it important to understand what declarant control is and why your governing documents need to be updated. Before an HOA is controlled by a board, the association is under “declarant control”, meaning the developer or other involved party has control of the property. If you have an operating HOA board, you no longer need sections or wording associated with developer/declarant rights, so you can either edit them to reflect the Board’s leadership position or get rid of them all together.
- Not in alignment with state laws. One way to quickly check if your document aligns with state laws is by comparing the dates of the laws mentioned in your bylaws to the date your bylaws were signed into effect. If your bylaws are older, it is good practice to review them to ensure your HOA is still in compliance.
- Outdated communication and voting requirements. The COVID-19 pandemic changed many things, but one of the most significant is how people vote and everything from their HOA boards to our elected officials. Make sure your voting options are updated by including options for voting by mail, online, and by proxy. If your bylaws also state that the only acceptable way of voting is via mail, make sure you update them to reflect current technology that your HOA uses when voting.
- Difficult to understand. If you feel like you need a team of lawyers to decipher your bylaws, it is worth the time to edit them to make them clear for all to understand. If there are words that you had to look up or phrases that left you scratching your head, it’s time to reword them for clarity.