Sharper Management


Board Meetings: Virtual or In-Person?

After a year and a half of virtual meetings, many HOA boards are going back to in-person now that COVID-19 vaccines are widely available. In October, many meetings will involve homeowners as well, as the fall is a common time for board elections. If you’re on the fence about whether your meetings should be held virtually or in-person, here are a few things to consider that will help inform your decision. Virtual: Pros and Cons Pros: More people can attend. Virtual meetings allow people to log on just a few minutes before the meeting starts, rather than having to worry about getting to the in-person meeting on time if they have a busy schedule. Immunocompromised individuals or those who don’t feel comfortable attending in-person can still be part of the meeting. Information can be shared easily with screen-sharing, and attendees can take screenshots of important points. Cons: There’s chances of technical difficulties, like internet connection. It can be harder to keep the attendees’ attention. Without that in-person interaction and physical presence, attention span drops. Talking over each other can become an issue. Even with an organized agenda, slight lags in video can cause attendees to talk over each other without realizing. In-Person: Pros and Cons Pros: Better connections can be formed. Residents want to get to know their board members, and this is easier to do when meetings are face-to-face. It’s more organized. Communication is better, agendas are clear, and the meeting can still run even if there’s a technical difficulty along the way. Attention is improved. Since the chance to do work or shop online is eliminated with an in-person meeting, you have the full attention of attendees. Cons: It’s not as inclusive. Those who are not comfortable attending in-person get left out of the conversation if virtual isn’t an option. It takes more time. In-person meetings tend to take longer—some think that in order for the meeting to be worthwhile for in-person attendees, it has to be long. This isn’t true, however, but it can be hard to shake that mindset. Attendance may not be as high. Some people don’t have the time to get to a meeting after work or other commitments, whereas attending virtually can be done up to the last minute and not cause any disruptions. So, how do you make the decision? If possible, give attendees the option. Meetings can be held in-person while still allowing people to attend virtually. This is typically done on a large screen so that in-person attendees can still see and hear those online. If you do make the call to go in-person, be safe. Practice social distancing and provide masks and hand sanitizer to reduce the risk of spreading the virus. Lead by a team of industry experts, Sharper Management is proud of both the caliber of clients that we serve and the Minnesota marketplace that we call home.

Vendor Checklist

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: Construction 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. Management Companies 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/

Low Interest Rates and Your HOA Loans

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.

Online Meetings Tips – Never Miss a Meeting

Whether you are out of town our out of commission, you can keep tabs on association board meetings by tuning in online.   Online meeting tools (Skype, GoToMeeting, Google Hangouts) allow board members to hear each other through microphones and speakers, and to see each other through video cameras regardless of where everyone is located. You’ll be able to follow all of the action virtually; and you can even share documents that are circulating during the meeting. Whether you’re physically present of calling in for the meeting, all participants should be reminded to: Be professional, courteous and considerate Avoid rustling papers or creating noise if near a microphone Refrain from talking while others are speaking If you are calling in; Announce yourself (maybe even before talking if needed) Mute your phone unless you are talking, especially if there is background noise, such as a barking dog, at your location You’re still encouraged to join in person onsite for the meeting, but if you can’t there is that opportunity to follow the proceedings.   [taken from “Tips from CAI”]

Creating Successful Annual Meetings

For some Board members, the annual meeting can be a source of anxiety. And for many community associations, the annual meeting has become the collective wasteland for complaints, critiques and requests from residents. The first step in creating constructive and beneficial annual meetings is understanding the definition and primary purpose of it. Definition & Function – Minnesota Statute 317A, Nonprofit Corporations Act, mandates that all corporations with members (which all homeowner associations are) “shall hold at least an annual meeting of members with voting rights.” Minnesota Statute 515B, Minnesota Common Interest Ownership Act, mirrors the language, “a meeting of the association shall be held at least one per year.” Perhaps more importantly, though, is understanding the primary role of this meeting. Once again, both 317A and 515B provide context. The fundamental reasons for an annual meeting are as follows: (i)    an election of successor directors for those directors whose terms have expired (ii)    a report on the activities and financial condition of the association, and (iii)    consideration of and action on any other matters included in the notice of meeting. Put simply, the purpose of the meeting is to vote in board members, approve the minutes from the previous year, and give a brief financial and activities report of the past year. That’s it. Rarely are there other items requiring a membership vote. And never should that vote happen unless it is included in the notice of the meeting. Pitfalls – where many associations might struggle with the annual meeting, it typically comes down to the same reason. The perception is that it is the annual meeting of the members, therefore owners should have a say and a vote on various matters. Many associations have years of precedence that’s been set where there is no control and other topics dominate the meeting. Solutions – first, control and order must rule at an annual meeting. The meeting facilitator, typically the Board President, should open the meeting by stating the expectation that the purpose of today’s meeting is to vote in Board members. Other operational business should be brought more appropriately to an open Board meeting, where action can be taken. It is so important to recognize section III. of the state statute cited above. “Consideration of and action on any other matters included in the notice of meeting.”  To reiterate, no other business can be conducted at the annual meeting if it was not included in the meeting notice. Any motion from the membership on this or that could be grounds for an illegal vote.  Think about it.  What if you choose not to go to the annual meeting because there was nothing listed on the agenda (which is typically the case for an annual meeting) and then you learned that at the meeting the membership voted to raise dues?  You probably would have gone had you know that was going to be voted on. While it might seem counter-intuitive and cold to keep an annual meeting of members very brief and matter of fact, it is important that it be run as a business meeting. If an association wants to use the meeting as an opportunity to hear concerns and have dialog between the board, management, owners, etc., have an open forum session after the annual meeting is adjourned. No minutes. No votes to be taken. Just a forum for dialog.  And, once again, try to push those conversations and request to a Board meeting, where action can be taken. Hopefully a more thorough understanding of the definition and function of the annual meeting, along with the pitfalls and solutions mentioned above, can help your association create more successful and constructive annual meetings going forward.

The Three “P’s” of Decision Making

When it comes to the decision-making process, Board members should check the three P’s. Policy. Practice. Precedence. No matter how large the decision or how small the conversation, Board members should be methodical and intentional throughout their discourse. Policy – this is the easy one. When making decisions, responding to homeowner requests and issues, applying, and enforcing rules, or creating new policies, the Board should check the governing documents to see what policies, ordinances, laws, etc. that may apply. The governing documents are the playbook to how the association is governed and managed. Practice – where policy may not exist, the Board should be aware of past practices. A good example of this would be how Limited Common Elements are handled. Does the association take on the expense of replacing the patio slab and then bill it back to that benefiting homeowner?  Does the association treat it as a common expense and absorb it?  Does the association make a list each spring of the patio slabs to be replaced and then replace them at the same time?  Limited Common Elements and how they are handled can be a good example of something that the association may not have a written policy for (the governing documents typically give the association options), which makes it all the more important that the Board’s past practice is consistently followed. Another example might be how homeowners are incorporated into a Board meeting. Does the association have an “open forum” part of the meeting? Do homeowners need to email the Board or Management prior to the meeting to be put on the agenda? It is also wise for a Board to review their common practices and consider incorporating it into policy for continuity sake. Adding Board meeting conduct and procedures to the Rules & Regulations being an example.  Past practice is what can get Boards into trouble. Often times it is wise to make practice in to policy. Precedent – at the end of the day, policy, and practice all goes to set what the Board should keep in the back of their mind. Whatever you do or decide today will set an all-important precedent. The best litmus test a Board can do for themselves is to ask – if we allow this homeowner request, change this service, engage this contract, etc. – will we and all Boards to follow do it every time? The three P’s all come full circle. Policy leads to Practice. Practice is your Precedence. Or…. Practice should lead to Policy, which sets Precedence. Whatever order it might take, when going through the decision-making process, check the three P’s.