Sample of ByLaws for a Condominium Association or HOA

Association Membership

Section 1. Members. All residents of this community association, condo association or homeowners association who are 18 years of age or older are eligible to be members of this Corporation. All members of the Corporation may vote for and are eligible to be officers of the Corporation.

Section 2. Annual Condo Association Meeting. The membership shall elect a Condo Board of Directors at the annual meeting to be held in the community at a time designated by the President of the Corporation. The membership and Board of Directors shall be notified not less than 15 days before the date of the annual meeting. Notice shall be given by posting the scheduled date, time, and place of the meeting in at least three prominent public locations in the community. The annual meeting shall be open to the public.

Section 3. Regular Condo Meetings. The Condo Board of Directors will meet regularly on the __________ of every month. These meetings shall be open to the public and shall be publicly noticed by posting the scheduled date, time and place of the meeting in at least three prominent, public locations in the Community.

Section 4. Special Condo Meetings. Special meetings of the membership may be called by or at the request of the Chair or any three Directors or by a petition of ten percent of the registered members. These meetings shall be public and shall be publicly noticed at least 15 days in advance by posting the date, time, place and purpose of the meeting in at least three prominent, public locations in the community. The members may not address any matter which is not stated in the public notice as the purpose of the meeting.

Section 5. Quorum. members of the Condo Board of Directors constitute a quorum for the transaction of business at any meeting of the Board. affirmative votes are required for any action taken by the Board.

Section 6. Condo Association Voting and Voting by Proxy. All members are entitled to vote and shall have the right to do so in person or by an agent authorized by a written proxy executed by the member filed with the Secretary of the Corporation. Such proxy shall by valid only if executed in favor of another member and no proxy shall be valid after the expiration of eleven months from the date of its execution.

Section 7. Order of Business. The order of business at all meetings of the members shall be as follows:

A. Roll Call

B. Proof of Notice of Meeting or Waiver of Notice

C. Reading and Approval of Minutes of Preceding Meeting

D. Reports of Directors

E. Reports of Committees

F. Unfinished Business

G. New Business

H. Election of Directors (if applicable)

I. Adjournment

Board of Directors

Section 1. Condo Directors. The number of directors shall be seven. Directors shall be members of the Corporation and shall act on good faith charge of the members of the Corporation.

Section 2. Term of Office. The term of office for each director shall be for three years from the time of his or her election at the annual meeting until his or her successor has been elected and qualified. All officers are elected by and from the directors for one year terms. To allow for terms to expire each year, initially the directors’ terms shall be as follows:

1. Director Three Years Term Expires 2013

2. Director Three Years Term Expires 2013

3. Director Three Years Term Expires 2014

4. Director Three Years Term Expires 2014

5. Director Three Years Term Expires 2015

6. Director Three Years Term Expires 2015

7. Director Three Years Term Expires 2015

The initial seats shall be assigned by drawing straws.

Section 3. Vacancies. Except as otherwise provided, any vacancies occurring in the Condo Board of Directors, whether by resignation or removal, shall be filled by the majority vote of the remaining Directors. In the event of the simultaneous resignation and/or removal of three or more Directors, the membership shall hold new elections to fill those vacant positions on the Board. Those Directors so elected will serve for the remaining portion of the unexpired term.

Section 4. Removal of Directors. Any Director may be removed by a majority of the members who vote on the issue providing that just cause has been established and whenever, in their judgement, the best interests of the Corporation would be served by doing so.

Condo Association and Election Voting Rules

Section 1.Condo Association or HOA Election Notice. A notice of vacancies for expired terms of office for Board of Directors and a notice that an election shall be held shall be prepared and posted by the Secretary and shall contain the following:

1. Whether the election is general or special

2. Date of the election

3. Location of the meeting where the election will be held

4. Time of election meeting

5. Seats or office to be filled

6. A statement describing voter qualifications

Section 2. Nominations. Nominations for Board of Directors shall be open nomination from the floor at the annual membership meeting.

Section 3. Ballots. Ballots will be on plain white paper with a space for writing in the nominee’s name and a blank square for marking a vote next to the nominee’s name.

Section 4. Voting Procedures. Voting procedures are as follows:

1. The Secretary shall check for the member’s name on the Master List of members. If the member’s name appears on the master membership list, that person is deemed qualified to vote.

2. Qualified voters shall give his/her name to the Secretary and then write it on the blank list or membership roster.

3. Voters shall mark the ballot next to the name of the nominees they wish to vote for, as provided in

Section 3: Ballots.

4. Voting will be by secret ballot. Ballots will be marked in pen. After the ballot is marked, the voter will fold it and deposit it in the ballot box.

Section 5. Tallying Procedures. Before counting the ballots, the Secretary shall check to make sure that the number of member’s names signed on the membership roster is equal to the number of ballots in the ballot box.  The ballot box shall be opened in public. The ballots shall be tallied by the Secretary or a committee of judges selected from the membership and recorded by the Treasurer.

Section 6. Certifying the Election. The election shall be certified by the President and Vice-President of the Corporation. Nominees receiving the greatest number of the votes cast shall be considered elected

Directors. For example. If two seats are to be filled, the top two vote getters are the newly elected directors.The Secretary shall post a copy of the report of election results in three public places the day after the election results are known. The notice shall include:

1. That the election has been certified by the President or Vice-President,

2. That the final results of the election, and

3. A list of the names of the new Directors.

Officers

Section 1. Selection of Officers. The Board of Condo Directors shall elect from among themselves the following officers; President, Vice-President, Secretary and Treasurer. This shall be the first order of business of the first meeting of the Board of Directors following the elections of Directors at the annual meeting.

Section 2. President. The President is the principal executive office of the Corporation and shall, in general, supervise and control all of the business and affairs of the Corporation. He/She shall preside at all meetings of the Board of Directors. He/She shall sign contracts or other instruments which the Board of Directors has authorized to be executed.

Appendix C

Section 3. Vice-President. In the absence of the President, or in the event of his/her inability or refusal to act, the Vice-President will perform the duties of the President, and when so acting will have all the powers of and be subject to all the restrictions upon the President.

Section 4. Secretary and Treasurer.

The Secretary shall:

1. Keep a journal of proceedings of the Corporation, record all votes at meetings of the Corporation,

and provide for the electronic recording of meetings of the Corporation when possible,

2. Provide for the standardization and maintenance of all forms, books, and records of the Corporation, and

3. Keep the Corporate seal and affix the seal to all contracts and instruments authorized to be

executed by the Corporation.

The Treasurer shall:

1. Manage, deposit, and invest all funds of the Corporation as directed by the Board of Directors,

2. Disburse money for all corporate obligations, and

3. Keep regular books or accounts of all corporate financial transactions, and provide for financial

reports or audits as directed by the Board of Directors.

Chapter Five

Contracts, Checks, Deposits and Funds Finances

Section 1. Contracts. The Board of Directors, at the direction of the membership, may authorize any officer or officers, agent or agents of the Corporation, in addition to the officers so authorized by these Bylaws, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances as authorized by the Board of Directors.

Section 2. Checks, Draft Signing Authority. All checks, drafts, or orders for payment of money, notes or other evidence of indebtedness issued in the name of the Corporation and in such a manner as shall be determined from time to time by the Board of Directors, shall be signed by the Treasurer and shall be countersigned by the President or Vice-President of the Corporation.

Section 3. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositories as the Board of Directors may select.

Section 4. Gifts. The Board of Directors may accept on behalf of the Corporation any contribution, gift, bequest, or device for any special purpose for the Corporation.

Section 5. Grants. No grant monies from the State, federal or other governmental entity shall be applied for without the majority vote approving such application at a meeting of the members of the Corporation.

Section 6. Dues. Dues may or may not be assessed by the Board of Directors, but may not exceed five dollars per member per year.

Section 7. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of July and end on the last day of June the following year.

Books and Records

The Corporation shall keep correct and complete records of financial transactions and accounts, and shall also keep minutes of the proceedings of its Board of Directors. All books and records of the Corporation may be inspected by any member, or his/her agent or attorney, for any purpose at any reasonable time.

Amendment to Bylaws

The bylaws may be amended by an affirmative vote of two-thirds of the members voting at an annual meeting. The text of the proposed amendment must be included in the public notice announcing the time, date and place of the annual meeting.

Adoption of Bylaws

This is to certify that the above bylaws were adopted by the Board of Directors at a meeting on the day

of , 200_.

_______________________________

President

_______________________________

Secretary

The Dynamics of an Association Board

How the Board of Directors (BOD) members  interact says a lot about the state of a condominium or homeowners association.

 

Leadership is the ability to do things by encouraging and channeling the contributions of others, take a position on and address the issues, and acting as a catalyst for change and continuous improvement.

Yesterday’s leaders in for-profit businesses could demand performance.  Today we face a more educated workforce that is democratically oriented. In a volunteer organization, as a condominium or homeowners association BOD, problems and opportunities can be even more complex and challenging. As a result, today’s BoD must promote and implement the contributions of all members, both individually and in groups.

Here are some ways in which members of  the BoD can initiate effective and ineffective actions:

Ineffective teams: People shield those in power from unpleasant facts, fearful of penalties and criticism for shining light on the rough realities

Effective teams: People bring forth grim facts—”Come here and look — this is ugly”—to be discussed; leaders never criticize those who bring forth harsh realities

Ineffective teams: People assert strong opinions without providing data, evidence, or a solid argument

Effective teams: People bring data, evidence, logic, and solid arguments to the discussion

Ineffective teams: The BoD president has a very low questions-to-statements ratio, avoiding critical input and/or allowing sloppy reasoning and unsupported opinions

Effective teams: The BoD president employs a Socratic style, using a high questions-to-statements ratio, challenging people, and pushing for penetrating insights

Ineffective teams: Team members acquiesce to a decision but don’t unify to make the decision successful—or worse, undermine it after the fact

Effective teams: Board members unify behind a decision once made, and then work to make the decision succeed, even if they vigorously disagreed with it

Ineffective teams: Team members seek as much credit as possible for themselves, yet do not enjoy the confidence and admiration of their peers

Effective teams: Each Board member credits other people for success, yet enjoys the confidence and admiration of his or her peers

Ineffective teams: Team members argue to look smart or to further their own interests rather than argue to find the best answers to support the overall cause

Effective teams: Team members argue and debate, not to improve their personal position but to find the best answers to support the overall cause

Ineffective teams: The team conducts “autopsies with blame,” seeking culprits rather than wisdom

Effective teams: The team conducts “autopsies without blame,” mining wisdom from painful experiences

Ineffective teams: Team members often fail to deliver exceptional results and blame other people or outside factors for setbacks, mistakes, and failures

Effective teams: Each team member delivers exceptional results, yet in the event of a setback each accepts full responsibility and learns from mistakes

What is the Average Cost for a Condo or HOA Management Company in the Atlanta Area?

HOA management companies often work under a contract for a monthly fee. But how is that the amount calculated? In general, it is based on the estimated time needed to perform the tasks outlined in the Management Contract. There is often a workload of tasks that are not considered routine.

So what goes into the monthly management fee? There are fixed costs such as rent, phones, copiers, computers, insurance, and the internet. The workforce is based on the estimated time needed to perform the prescribed work. Total fixed costs and labor plus profit margin are equal to the monthly management fee. It is common to divide this number by the total number of units / lots. (In Georgia, the average is between $ 10-25/door for condominiums.)  Size and staff required matters: HOA’s pay less per home.

Typically, an Owners Association will be assigned a manager, an accountant, a maintenance supervisor, and possibly an administrative assistant to the account. The administrator can manage 10-15 accounts.

Staff salary levels can have a major impact on management fees. If a Homeowners Association wants experienced professionals, there is a price to pay. A qualified HOA manager attends seminars, has credentials and professional designations and focuses exclusively on HOA management. The Homeowners Association will benefit from this training and experience so expect to pay accordingly.

Managers spend much of their time to prepare and monitor Board and Annual meetings. For a typical board meeting, the manager gathers information and prepares  reports, reviews the financial statements and relevant correspondence.  The Board puts together packages or emails messages to each member.

Most Board and Annual meetings are held in the evenings from Monday to Friday at the Homeowners Association so that the manager is not required to work weekends; which costs money to Homeowners Association, this is incorporated into the contract. After the meeting, the Community Association Manager has a long list to follow-up on which occupies most of the following week. A manager can spend many hours on business related to the meeting.

Another cost savings is in charge of managing insurance claims and damage reconstruction. Insurance inquiries can take many hours of a manager’s time. If the management contract specifically provides that the insurance claim work is an additional cost to the HOA, the management company can collect the insurance claim by the time it takes to manage a claim and the renovation work. A similar principle is the time spent on collections or legal action against a delinquent account. This time, management will be charged to the HOA.
Are disclosure statements provided to homeowners who are selling their homes and lenders to buyers? The management company  bills owners and buyers so that the Homeowners’ Association does not assume the costs.

These are just some ways that management costs can be cut. Be sensitive to the time of your manager and not pile on unnecessary tasks that ultimately increase the costs. While it is important to get what you pay for, it is equally important to pay extra for additional services. The best approach is to establish an alliance with the management company and adjust the time and workload demands.

HOA managers are dedicated and waiting to serve. Put them to work for your homeowners association and actually rejoice in the carefree lifestyle advertised in the brochure.

Keys to Protecting Your Condominium Association’s Board of Directors

Can Atlanta Condominium Board Members Be Personally Liable?

We frequently are asked whether volunteer board members can be civilly liable for actions taken while a board member.  This issue is of serious concern because lawsuits tend to be over inclusive, naming every possible defendant in the initial complaint. Why sign up as a volunteer board member if it could bankrupt you?

The Good News

The good news is that your liability as a board member can be limited as provided in the Articles of Incorporation or Bylaws of the association.  Georgia Code 14-3-858(a). Georgia Code 14-3-858(a) authorizes a non-profit corporation to include a provision in the Articles of Incorporation or Bylaws to indemnify and reimburse directors to the fullest extent provided by law and to advance expenses to a director who is the subject of any legal proceedings. However, if a director engages in willful misconduct or a knowing violation of criminal law, he or she will be liable for damages and cannot be indemnified by the association.  Georgia code 14-3-851.

The Bad News

Although you may not be liable for damages, these statutes do not make you immune to a lawsuit. You can still be sued because, as we say, “anybody can be sued by anybody for anything at any time.” In that case, you will want to know who will pay or reimburse you for your attorneys’ fees.

Does Your Atlanta Condominium Association Have D&O Coverage?

Again, there is good news here, also, but it is important to know a) whether your organization has a directors’ and officers’ insurance policy (known as D&O coverage) to cover your attorneys’ fees in defending a lawsuit and b) whether your governing documents indemnify you for any expenses you incur in such a lawsuit. Most indemnification provisions for directors and officers will be found in the corporation’s articles of incorporation or bylaws.

Permissive Indemnification of an Atlanta Condominium Board Member

There is also statutory indemnification. Georgia Code 14-3-851 does not require a corporation to indemnify you but it does permit a corporation to indemnify a director against liability incurred in the proceeding. The statute permits indemnification if the director conducted himself in good faith and believed that, in the case of conduct in his official capacity, that his conduct was in the best interest of the association, and in all other cases that he had reasonable cause to believe that his conduct was not opposed to its best interest. If the case involves a criminal proceeding, the corporation may indemnify the director if he had no reasonable cause to believe that his conduct was unlawful.

Mandatory Indemnification of an Atlanta Condominium Board Member

There is also mandatory indemnification provided by statute in Georgia Code 14-3-852.  Georgia law requires a corporation to indemnify a director who is successful in defending a proceeding where he is a party because he is or was a director of the corporation.

Know What Your Atlanta Condominium Association Covers

It is important to know whether you are protected from the expenses of a lawsuit when you volunteer to serve as a director or officer of a community association. Have your association attorney review the D&O insurance policy. The attorney can also review the articles of incorporation and bylaws to determine whether the association is obligated to pay or reimburse you for any expenses incurred in a lawsuit. Your volunteer service as a board member should not cause you financial ruin, make sure you are protected.

Sample ByLaws for a Condo Association or HOA

Association Membership

Section 1. Members. All residents of this community association, condo association or homeowners association who are 18 years of age or older are eligible to be members of this Corporation. All members of the Corporation may vote for and are eligible to be officers of the Corporation.

Section 2. Annual Condo Association Meeting. The membership shall elect a Condo Board of Directors at the annual meeting to be held in the community at a time designated by the President of the Corporation. The membership and Board of Directors shall be notified not less than 15 days before the date of the annual meeting. Notice shall be given by posting the scheduled date, time, and place of the meeting in at least three prominent public locations in the community. The annual meeting shall be open to the public.

Section 3. Regular Condo Meetings. The Condo Board of Directors will meet regularly on the __________ of every month. These meetings shall be open to the public and shall be publicly noticed by posting the scheduled date, time and place of the meeting in at least three prominent, public locations in the Community.

Section 4. Special Condo Meetings. Special meetings of the membership may be called by or at the request of the Chair or any three Directors or by a petition of ten percent of the registered members. These meetings shall be public and shall be publicly noticed at least 15 days in advance by posting the date, time, place and purpose of the meeting in at least three prominent, public locations in the community. The members may not address any matter which is not stated in the public notice as the purpose of the meeting.

Section 5. Quorum. members of the Condo Board of Directors constitute a quorum for the transaction of business at any meeting of the Board. affirmative votes are required for any action taken by the Board.

Section 6. Condo Association Voting and Voting by Proxy. All members are entitled to vote and shall have the right to do so in person or by an agent authorized by a written proxy executed by the member filed with the Secretary of the Corporation. Such proxy shall by valid only if executed in favor of another member and no proxy shall be valid after the expiration of eleven months from the date of its execution.

Section 7. Order of Business. The order of business at all meetings of the members shall be as follows:

A. Roll Call

B. Proof of Notice of Meeting or Waiver of Notice

C. Reading and Approval of Minutes of Preceding Meeting

D. Reports of Directors

E. Reports of Committees

F. Unfinished Business

G. New Business

H. Election of Directors (if applicable)

I. Adjournment

Board of Directors

Section 1. Condo Directors. The number of directors shall be seven. Directors shall be members of the Corporation and shall act on good faith charge of the members of the Corporation.

Section 2. Term of Office. The term of office for each director shall be for three years from the time of his or her election at the annual meeting until his or her successor has been elected and qualified. All officers are elected by and from the directors for one year terms. To allow for terms to expire each year, initially the directors’ terms shall be as follows:

1. Director Three Years Term Expires 2013

2. Director Three Years Term Expires 2013

3. Director Three Years Term Expires 2014

4. Director Three Years Term Expires 2014

5. Director Three Years Term Expires 2015

6. Director Three Years Term Expires 2015

7. Director Three Years Term Expires 2015

The initial seats shall be assigned by drawing straws.

Section 3. Vacancies. Except as otherwise provided, any vacancies occurring in the Condo Board of Directors, whether by resignation or removal, shall be filled by the majority vote of the remaining Directors. In the event of the simultaneous resignation and/or removal of three or more Directors, the membership shall hold new elections to fill those vacant positions on the Board. Those Directors so elected will serve for the remaining portion of the unexpired term.

Section 4. Removal of Directors. Any Director may be removed by a majority of the members who vote on the issue providing that just cause has been established and whenever, in their judgement, the best interests of the Corporation would be served by doing so.

Condo Association and Election Voting Rules

Section 1.Condo Association or HOA Election Notice. A notice of vacancies for expired terms of office for Board of Directors and a notice that an election shall be held shall be prepared and posted by the Secretary and shall contain the following:

1. Whether the election is general or special

2. Date of the election

3. Location of the meeting where the election will be held

4. Time of election meeting

5. Seats or office to be filled

6. A statement describing voter qualifications

Section 2. Nominations. Nominations for Board of Directors shall be open nomination from the floor at the annual membership meeting.

Section 3. Ballots. Ballots will be on plain white paper with a space for writing in the nominee’s name and a blank square for marking a vote next to the nominee’s name.

Section 4. Voting Procedures. Voting procedures are as follows:

1. The Secretary shall check for the member’s name on the Master List of members. If the member’s name appears on the master membership list, that person is deemed qualified to vote.

2. Qualified voters shall give his/her name to the Secretary and then write it on the blank list or membership roster.

3. Voters shall mark the ballot next to the name of the nominees they wish to vote for, as provided in

Section 3: Ballots.

4. Voting will be by secret ballot. Ballots will be marked in pen. After the ballot is marked, the voter will fold it and deposit it in the ballot box.

Section 5. Tallying Procedures. Before counting the ballots, the Secretary shall check to make sure that the number of member’s names signed on the membership roster is equal to the number of ballots in the ballot box.  The ballot box shall be opened in public. The ballots shall be tallied by the Secretary or a committee of judges selected from the membership and recorded by the Treasurer.

Section 6. Certifying the Election. The election shall be certified by the President and Vice-President of the Corporation. Nominees receiving the greatest number of the votes cast shall be considered elected

Directors. For example. If two seats are to be filled, the top two vote getters are the newly elected directors.The Secretary shall post a copy of the report of election results in three public places the day after the election results are known. The notice shall include:

1. That the election has been certified by the President or Vice-President,

2. That the final results of the election, and

3. A list of the names of the new Directors.

Officers

Section 1. Selection of Officers. The Board of Condo Directors shall elect from among themselves the following officers; President, Vice-President, Secretary and Treasurer. This shall be the first order of business of the first meeting of the Board of Directors following the elections of Directors at the annual meeting.

Section 2. President. The President is the principal executive office of the Corporation and shall, in general, supervise and control all of the business and affairs of the Corporation. He/She shall preside at all meetings of the Board of Directors. He/She shall sign contracts or other instruments which the Board of Directors has authorized to be executed.

Appendix C

Section 3. Vice-President. In the absence of the President, or in the event of his/her inability or refusal to act, the Vice-President will perform the duties of the President, and when so acting will have all the powers of and be subject to all the restrictions upon the President.

Section 4. Secretary and Treasurer.

The Secretary shall:

1. Keep a journal of proceedings of the Corporation, record all votes at meetings of the Corporation,

and provide for the electronic recording of meetings of the Corporation when possible,

2. Provide for the standardization and maintenance of all forms, books, and records of the Corporation, and

3. Keep the Corporate seal and affix the seal to all contracts and instruments authorized to be

executed by the Corporation.

The Treasurer shall:

1. Manage, deposit, and invest all funds of the Corporation as directed by the Board of Directors,

2. Disburse money for all corporate obligations, and

3. Keep regular books or accounts of all corporate financial transactions, and provide for financial

reports or audits as directed by the Board of Directors.

Chapter Five

Contracts, Checks, Deposits and Funds Finances

Section 1. Contracts. The Board of Directors, at the direction of the membership, may authorize any officer or officers, agent or agents of the Corporation, in addition to the officers so authorized by these Bylaws, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances as authorized by the Board of Directors.

Section 2. Checks, Draft Signing Authority. All checks, drafts, or orders for payment of money, notes or other evidence of indebtedness issued in the name of the Corporation and in such a manner as shall be determined from time to time by the Board of Directors, shall be signed by the Treasurer and shall be countersigned by the President or Vice-President of the Corporation.

Section 3. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositories as the Board of Directors may select.

Section 4. Gifts. The Board of Directors may accept on behalf of the Corporation any contribution, gift, bequest, or device for any special purpose for the Corporation.

Section 5. Grants. No grant monies from the State, federal or other governmental entity shall be applied for without the majority vote approving such application at a meeting of the members of the Corporation.

Section 6. Dues. Dues may or may not be assessed by the Board of Directors, but may not exceed five dollars per member per year.

Section 7. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of July and end on the last day of June the following year.

Books and Records

The Corporation shall keep correct and complete records of financial transactions and accounts, and shall also keep minutes of the proceedings of its Board of Directors. All books and records of the Corporation may be inspected by any member, or his/her agent or attorney, for any purpose at any reasonable time.

Amendment to Bylaws

The bylaws may be amended by an affirmative vote of two-thirds of the members voting at an annual meeting. The text of the proposed amendment must be included in the public notice announcing the time, date and place of the annual meeting.

Adoption of Bylaws

This is to certify that the above bylaws were adopted by the Board of Directors at a meeting on the day

of , 200_.

_______________________________

President

_______________________________

Secretary

Are You Ready for the New Insurance Required for Condominiums?

This is a quiz:

Assume you are asked to insure a condominium. Section 107 of the Georgia Condominium Act (GCA) requires an association to obtain insurance covering the structures for full replacement cost.

Do you know what to insure? What is the “structure”? Does it include the units?  What about wall coverings, appliances, fixtures and floor coverings within a unit?

Give up?

Don’t.  Effective July 1, 2008, these questions will be answered when a comprehensive amendment to Section 107 becomes law.

Prior to the 2008 amendment, the word “structure” has not been defined in Section 107.   That is a significant problem.  Prior to the amendment, the answers were determined by the scope of coverage in each policy. ISO forms provide three (3) different levels of coverage for condominiums.  They are known as bare walls, single entity and all-in.

1.  Bare Walls Concept – It provides that an association has no duty to insure a unit inside the unfinished surfaces of the perimeter walls, floors, and ceilings.  The owner has the responsibility to insure not only personal property, but partitions, paint, cabinets, and all other property located within the finished surfaces of the perimeter walls, floors, and ceilings.

2.  Single Entity Concept – It provides coverage to replace a unit to its condition as originally constructed.  The policy insures paint, partitions, cabinets, plumbing, and fixtures.  It may also cover appliances.

3.  All-In Concept – It provides coverage to replace a unit to the condition it was in at the time of the loss, which includes all betterments and improvements made to the unit from the date of its original construction.

Single entity is the most prevalent type of coverage. It provides coverage for the building, including the units. It also provides coverage for wall coverings and floor coverings, appliances, and fixtures within a unit to the extent required by the association documents. If the declaration requires coverage for these items, they were included in the coverage.  If the declaration did not specifically require coverage for those items, they were not included in the coverage.  Since condominium documents are not uniform, the scope of coverage of the interior of the units depended solely on what the declaration required.  That left agents, underwriters, board members and managers responsible for reviewing each declaration to determine the scope of the required coverage and then confirming the policy provided that coverage.

Determining the scope of an association’s policy became more complicated when adjusters attempted to apply traditional insurable interest analysis to damage to units.  Adjusters looked at the documents to determine the boundaries and the maintenance responsibilities for a unit.  Adjusters took the erroneous position in determining coverage for unit damage that there was no coverage because an association had no insurable interest in the units since the association had no ownership interest in a unit.  Adjusters also erroneously determined that an association’s policy only covered portions of a building which were the maintenance obligation of the association.

Both of these analyses ignored the insurance contract – the policy. Section 107 of the  GCA creates the insurable interest by requiring an association to insure a structure to its full replacement cost. Losses must be adjusted in accordance with the terms of the policy.  The policy (bare walls, single entity, all-in) determines the scope of the coverage. Coverage has nothing to do with maintenance responsibility and maintenance responsibility has nothing to do with coverage.

The differences in coverage created by the three (3) forms of coverage and the lack of a uniform provision in documents resulted in countless disputes between associations, owners, adjusters, agents, managers and board members. On a number of occasions it resulted in a “black hole” – a unit whose interior was not covered by the association policy and the owner did not have an HO-6 policy.  The unit was rebuilt to the bare walls, but was not habitable.

Those unfortunate scenarios will become a thing of the past beginning July 1, 2008.  As of that date, the GCA will require association policies to cover the costs to return the building and each unit to the condition that existed when they were originally constructed.  It will require single entity coverage that also mandates coverage for the interiors of the units including appliances and fixtures. Regardless of the boundaries of the units, an association policy will have to cover all portions of a building which are common elements, the limited common elements and the units. The policy must cover all foundations, roofs, exterior walls, including windows and doors and the framing.

The new law requires coverage of the following items, regardless of who is responsible for maintaining them under the condominium declaration:  The HVAC system serving the unit, and sheetrock and plaster board comprising the walls and ceiling of the condominium unit.

The law also specifies the items within a unit that must be covered by the association policy to prevent black holes.  An association policy will be required to cover the following items within a unit:

1. floors and subfloors;

2. walls, ceiling and floor coverings;

3. plumbing and electrical lines and fixtures;

4.  building-in cabinetry and fixtures; and

5.  appliances used for refrigeration, cooking, dishwashing and laundry.

Those items must be repaired or replaced with the type and quality initially installed or replacements of the like kind and quality as existed at the time the condominium unit was originally sold.  This will require a unit be returned to a habitable, turn-key condition.  It does not require coverage for betterments and improvements made by unit owners.

Assume a condominium unit is damaged by a fire.  The damage is limited to the unit.  The fire started in the dishwasher from an electrical short. The dishwasher and the countertop and a part of the floor are damaged. The dishwasher is the original Maytag. The units were originally built and sold with Corian countertops and vinyl flooring.  At the time of the fire, the countertops were marble and the floor was tile.

The new law will require the insurer to pay the full replacement cost, subject to any deductible, for the dishwasher, the value of Corian countertops and the value of the vinyl flooring.  If the marble and tile cost more than the Corian and vinyl, the unit owner will be responsible for the difference in cost because those are betterments and improvements.

The new law also creates a requirement for coverage of shell units. A shell unit is a unit that has not been built-out when sold to purchaser. Shell units are custom units so the build-out is considered betterments and improvements. The new law will require the unit owner, not the association, to insure the five (5) items within the unit.  The association policy will only be required to cover the portion of a shell unit constructed by the developer.

The new law also changes the minimum limits for the association’s commercial general liability policy from a $1,050,000 to $1 million for a single occurrence and $2 million aggregate.

Returning to the quiz, effective July 1, 2008, the answers are clear and are applicable to every condominium. Association insurance policies, subject to applicable deductibles, must cover the building – common elements, limited common elements and units – for full replacement cost. The policy must also insure the interior of a unit to cover the cost to return the unit to a habitable, turn-key condition using materials, fixtures and appliances comparable to the materials, fixtures and appliances used in the original construction. Unit owners will only be  responsible for insuring betterments and improvements made to the interior of a unit.

SOURCE:  http://www.wncwlaw.com/news/whitepapers/details.cfm?id=66

Mr. Nowack is one of the attorney’s who worked with IIAG to draft and achieve passage of the 2008 amendment to the condominium law, H. B. 1121.

Atlanta to Cut Water to HOA

Do not let this happen to your condominium association!!

Seek professional and organized management TODAY!

www.riversidepropertymgt.com

Atlanta Threatens to Cut Off Water to 126-Member HOA for Delinquent Bills

By IULIA FILIP

ATLANTA (CN) – A homeowners association admits its members owe more than $60,000 in delinquent bills, but says that doesn’t give the city the right to cut off the HOA’s water on Friday, as Atlanta plans to do.
The Villages of Cascade Homeowners Association sued the City of Atlanta Watershed Management and 23 of its own members in Fulton County Superior Court, claiming it’s impossible for the HOA to collect all the delinquent bills by Friday, and the city is overcharging for water anyway.
“Shutting off the water even to those residents who have contributed to payment of the water bills irreparably harms the innocent residents of the Villages of Cascade, as those residents will suffer incompensable damage being deprived of water for no reason other than mere misfortune of having neighbors who failed to do their part,” the HOA says.
The HOA claims that Atlanta has been overbilling it since October 2009. It says it has been disputing the unfair bills, with little success, since then.
“To avoid shutoff, Villages of Cascade paid $10,000, but it noted in writing a dispute of the December 2010 bill in an amount greater than $66,000 and questioned the validity of water bills greater than $25,000 for a townhome community of only one hundred and twenty-six (126) units,” the complaint states.
“In July 15, 2011, Villages of Cascade continued to receive high water bills, and again, Villages of Cascade disputed the amounts in writing with the City of Atlanta.” The lawsuit is the latest in a string of Atlantans’ complaints about exorbitant water bills, since Atlanta raised its water rates by 12.5 percent in July 2009. While the city has acknowledged that there could be technical problems with its billing system or its new technology, it claims that new meters installed in the past 2 years, which more accurately report water use, are partly responsible for the higher bills.
The Villages of Cascade HOA claims it “was negotiating payment arrangements to pay the undisputed amounts on a payment plan when the president was given approximately two weeks’ notice that if Villages of Cascade could not pay at least 25 percent of the total delinquent amount due, the water would be shut off to the entire community.”
The townhome association collects monthly water fees from its residents, whose units are linked to a single water meter. The HOA blames its delinquent residents for its inability to pay the past-due bills.
“Villages of Cascade is suffering a delinquency assessment rate of approximately 63 percent,” the complaint states. “The named co-defendants are delinquent owners whose combined total unpaid assessments is $60,067.56, more than sufficient to satisfy the delinquent balance owed to the city of Atlanta.”
The HOA claims that “Despite the large delinquency in assessments, Villages of Cascade has been making consistent payments to reduce its balance.
“Villages of Cascade does not have the funds to pay in full the balance demanded by the city of Atlanta in the time frame demanded by the city of Atlanta without completely depleting the association’s funds and bankrupting the community.”
The HOA says it has been arguing with Atlanta about the billing since October 2009.
But, “While the city of Atlanta has conceded that there were some water leaks and made some adjustments to the bills for Villages of Cascade, Villages of Cascade still disputes that the balance demanded is accurate.
“Since the balance on the Villages of Cascade’s bill remained inaccurate for so long and the city of Atlanta failed to properly adjust for interest accruing during that period of time, Villages of Cascade is being penalized for not having paid the inaccurate balance at the time it was initially charged.”
Atlanta says it will cut off the water on Friday unless it receives 25 percent of the past due amount.
The HOA says that’s not only unfair, it’s illegal to do it while a dispute is pending.
“Villages of Cascade should not be penalized for the fact that the appeals process at the city of Atlanta moves slowly,” the HOA says.
The HOA says it could raise its monthly assessments to cover the water bills, but it cannot do it by the July 29 deadline “arbitrarily instituted by the city of Atlanta.”
It wants the city enjoined from cutting off the water on Friday, and from charging interest and penalties on disputed amounts. And it wants to recover the past due amounts from unit owners.
The HOA is represented by Dana Tucker Davis with Taylor English Duma.

Due Diligence for Buyers of Condos

Several bloggers and industry experts have posted blogs or articles on the completion of due diligence before buying a condo. A common theme among the suggestions include:

•     Conduct a visual inspection
•     Review minutes of meetings
•     Review the operating budget
•     Review the current reserve study
•     Review the association rules and regulations
•     Policy Review of the insurance association

I would say that is not enough to “review” the operating budget. I recommend examining each item in the current budget, and its comparison with the budgets of the previous two years to identify trends and accuracy. With regard to the study of the reserve, if you have no experience in construction or maintenance of the building, passing the report to a friend or relative who may have knowledge and can provide valuable assessment. Also, be sure to check out the escrow account, in addition to the actual subject of study.

As for the rules and regulations, we also recommend reviewing the statement of the association and the bylaws. You do not have to be a lawyer to identify gaps and potential problems. In reviewing insurance, be sure to look at the limits of the policy, deductibles, Directors and Officers coverage and endorsements for specific multifamily residences, such as sewer backup, code compliance and coverage of the demolition to name a few. There is no substitute for review by a professional insurance agent or consultant.

I would also add the following to the list of due diligence:

When performing visual inspection, stopping to talk to homeowners and ask them a few strengths and weaknesses of the community. You may be surprised by what you discover, both positive and negative.
Call the manager of the association and ask them the same question. They are not paid by such calls, but can provide a brief summary of the community.
In these times of economic crisis, be sure to examine not only the operating budget, but bad debts and collections / foreclosure rates.

Finally, I believe the above steps are not limited to condominiums, but the evolution of the Planning Unit (“PUD”) or Communities of Common Interest (“CIC”), too.

Buying a condo can be more complex than buying a house. For a successful purchase, be sure to perform your due diligence.

Green Community Initiatives

The phrase captures the word these days is “everything should go green.” The dictionary defines the green in relation to the environment:

“Green” – (made with the least damage to the environment, renewable resources, or the policy of promoting the protection of our environment.)

In community associations, individuals may have a positive impact on the environment, and in some cases, you can save money by going green. Imagine supporting a cleaner and more efficient community and be a manager for environmental health.

When we think green communities, we must look at the cost of making and keeping ourselves green.
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You need the commitment of the Board and community members to make a work of the community green. All efforts were focused on Green Communities philosophy can make a difference in not only their community but also the world around you.

The management company of the community association must be committed to “Green Sustainable Communities” and has developed a system of paperless technology, which reduces the need for the more traditional role of communication for the electronic version. In the past, companies had property management drawers in file drawers containing the file after file of information that is important.

Today almost all of that information can be stored digitally and several filing cabinets full of information can be stored on the hard disk of a computer.
What does this mean to the community green? This means that you just saved reams of paper, printing ink, and the energy of the copier is used to print the document. In other words, every step we take to save the environment and consume less energy is contributing to a greener community, all adds up.

Green Meetings of the Board of Directors

An example would be the Board has reduced the multiple pieces of paper used in creating packages for board meetings. In some cases, leading to 50 to 100 pages now may be only 8 pages. The rest should be available electronically and the Board has reviewed before the meeting or the manager can display the information in digital format. This method saves time, money and contributes to a green community. In many cases, you create a document and then reviewed by several people, but never printed.

Did you know? If you do not use a ton of paper saves 17 trees that, 380 gallons of oil, 3 cubic yards of landfill space, 4000 kilowatts of energy, 7,000 gallons of water and 60 pounds of air pollutants.

It is possible that the meetings by phone or email, however you have to consider the availability of members and compliance with state laws governing electronic meetings. By holding electronic meetings, you can save the association time, money and volunteer board members more time with their families.

Paperless Technologies, along with the state of the art software for property management can enable a greener community. A board member can quickly look at the financial health, writing constraint violations and all major areas of management of the association from your computer without having to print a sheet of paper. In fact, Council members should have access to more digital information than ever. In this case, the information green means more information.

Community Green Energy Reduction and Recycling Plan

A community has the ability to assess and control a number of issues to have a positive impact by adopting a green philosophy.

Associations responsible for providing waste disposal contractor should select one that has a recycling plan. For years, almost all waste disposal companies have been using recycling techniques. Use this as an important component in the selection of a contractor and working with community members to use the recycling programs.

Did You Know? Recycling one ton of plastic bottles saves 318 gallons of gasoline, or enough energy to run a refrigerator for a month.

Energy audit of an energy audit of their association. It’s simple to do. In reviewing most of the energy bills, you can see the historical consumption and consumption. Look at the possibilities of developing an energy plan for the association encourages members to use renewable energy or the inventory of energy consumption and develop an energy reduction plan. Invest in your community renewable energy sources. Increasing demand for renewable energy, energy industry moves to accommodate demand. The Board of Directors of the Association has the ability to shape the green communities and working with members must exercise that capacity.

Your management company should work with suppliers of power in communities regulated and deregulated for the best price available and work with power companies who are concerned about the environment. You should also work with them to conduct an energy audit to determine areas where you can save money and energy.

Each community is different and some are large consumers of energy than others. Here are a few areas of revision to the green community.

Exterior lighting: They are solar energy? If not, what is the cost of switching to solar energy? This would also help in the case of a power development. Are you using energy efficient light bulbs light?

Lights inside: are turned off when not in use? Consider switching circuit switches or motion timers. Are you using energy efficient light bulbs light?

Did you know? Every incandescent bulb that is replaced by a compact fluorescent light (CFL) can save up to 56 watts per hour.

Electronics: Electronics usually have a way of saving energy, but even so, they still consume electricity. Make sure the electronics are turned off when not in use.

Did you know? Monitors usually use about 80% of the energy used by a computer, so you can use that to calculate how much energy you save by turning off the monitor. For example, a team of 200 watts to 160 watts would be saving time by turning off the monitor.

Pools: Are the timers used for swimming pools and hot tubs, or left for the year is warm? Lights are energy efficient?

Community Center: How often HVAC filters changed? How old is the system? Major engine system fans and compressors were built when energy was not a concern. Devices are turned off when not in use?

Did you know? By adjusting the thermostat in the winter or in summer to reduce CO2 emissions of 500 pounds per year for each grade.

Tennis: Is there light? Are they efficient? Could it be solar?

Recreation Indoor facilities: There is an air conditioning system? Is it energy efficient? Must it be changed to be more efficient? Is the system of regular maintenance? Lights are energy efficient?

Gates: power doors are usually easy to convert to solar energy and not very expensive. In the case of power outages in the long term, solar energy power doors can be very useful.

Park Bathrooms: Is energy efficient water heater? Lights are energy efficient? It is the efficient use of water could be reduced? These were just some of the steps a community can take to adopt a philosophy of community green. Communities need to be aware of their energy consumption, recycling opportunities and the steps they can take to be proactive in creating green communities.

For more information on condo or hoa management, please visit: http://www.riversidepropertymgt.com

If You Build It…

Working With Architects

By Greg Olear

Whether you’re talking about an individual unit owner’s renovation project or a major capital improvement that affects the whole building, chances are that there will be an architect involved at some point, to a greater or lesser degree. Sometimes this person will interact mostly with the board and management, sometimes with just the individual resident, sometimes with a board-appointed design committee, and sometimes with all of the above.

Let’s take a look at the two ways that architects typically liaise with boards and property managers:

Capital Improvement Projects

Let’s say the board decides—after the usual period of review and back-and-forth with the shareholders—that it’s time to renovate their building’s lobby, or replace the roof, or (as sometimes happens) squeeze a 2,000-square-foot gym into the 1,000-square-foot basement space. It’s time to find an architect.

“We get involved at the initial stage,” says Howard L. Zimmerman, AIA, founder and president of Howard L. Zimmerman Architects, P.C. in Manhattan. “Once the decision is made to re-do the lobby, or whatever the project is.”

The first step is the bidding process.

“The board solicits bids for architects,” Zimmerman says. “Then an interview process is put in place. They interview architects, engineers, landscape designers—whatever the project requires.”

Assisting in the selection of the architect is usually a committee, generally comprised of board members and residents, who ideally have some experience working with designers.

“There’s usually a decorations committee,” Zimmerman says. “The members come from different backgrounds, have different skill levels, and different aesthetics.”

Management plays a role as well, according to Jeff Heidings of Siren Management Corp. in Manhattan. “Choosing an architect or firm for a job is a matter of knowing the building, understanding the project, and hiring a professional who will be a good fit,” he says.

“We deal with many shops,” says Heidings. “Some are a little more tailored to certain types of projects than others. We use smaller firms for some things [because] they’re a little more nimble, often a little more cost-effective, and a little more hold-your-hand design oriented. If you’re talking about a Local Law 11 project or a big masonry project, I’d use a firm with more muscle, a broader experience level, because that’s a more comprehensive type of job.”

“Usually we’ll have one or two companies in mind,” Heidings continues. “We select those based on familiarity, price, efficiency, staffing and capabilities for our time frame. Once a proposal has been offered we sit down with the architect and a board officer or two, fine-tune the proposal, and get familiar with the staff person it will be assigned to.”

It’s during this phase that the board may come to their collective senses about the quixotic plan for that basement gym. Indeed, one of the main tasks of the architect is to manage the expectations of so many disparate people. This job, too, is an art. “You have to listen, be respectful, take some suggestions, disregard others, and make everyone as happy as you can without compromising the design,” says Zimmerman.

The trump card the architect can play is their portfolio. After all, the board hired the particular architect to do the design, and in the process, turned down others. “You are trained,” Zimmerman says, “and you have an aesthetic that they hired you for.”

Buying In

When the architect is engaged, “You want to define the scope of their services,” says Heidings. “The soft costs—filing fees, packages—are fairly standard from shop-to-shop. Most architects and engineers fall into the same price points for stuff like that, but you want a contract that allows for negotiation of fees along the way, because they tend to pile on. I’ve had situations where there have been discrepancies. You have to have it an arrangement that adjustments can be made on both parties. That’s where management comes in, and where you can save your client a lot.”

Once the board and the decorations committee are on the same page and the contract ink is dry, it’s time to roll out the plan to the rest of the building. The unveiling can be emotionally charged, as whatever change being proposed is sweeping, and people tend not to be crazy about change.

“Usually, there’s an angry, hostile meeting held in the lobby,” Zimmerman jokes. “I stress to the board that this is very important. Whether it’s a lobby, a roof, a roof deck, it’s important to get everyone on board.”

Kevin Lichten AIA, of Lichten Craig Architects LLP in Manhattan, agrees. “Design is a two-way street,” he says. “It’s important for the architect to listen carefully to the aspirations of the board, the shareholders, and the managing agent—not all of which may be in total agreement.”

Often, the chance to vocalize objections is enough to pacify a potentially contentious shareholder. What people want, generally, is to be heard; they don’t need to have their way to get on board with the project as long as they are treated with respect.

“We can be the ‘outside experts’ and take the heat off the board,” says Lichten. “Often we can make a presentation to the assembled shareholders, prepare renderings and other drawings for display in the lobby, and prepare facts and figures for a newsletter. We are used to making presentations to large groups and building a consensus.”

“Our job is to sell what the board has spent months working on,” Zimmerman says. “I stress to the board: don’t do it yourselves! Bring an independent person in. As a third party, we take away a lot of animosity,” or whatever conflict that could stymie a fruitful discussion. “This is an important political and practical thing for a board to do.”

These meetings can get out of control if they aren’t well managed. One tip: don’t show the plans that were rejected. Present the plan that the board agreed on as fait accompli, and sell that and only that to the residents.

“An architect should never force any design down a client’s throat,” Lichten says. “I like to say that we articulate their dreams and aspirations and facilitate their decision-making. But all of these tasks require strong leadership skills on the part of the architect. The owners should feel like they fully participated, if not as if they came up with the ideas themselves.”

Individual Apartments

Architects are also involved with a co-op or condo when they are renovating an individual apartment. This requires perhaps less political deftness than does a capital improvement project, but the cooperation of the board is still essential. When an individual apartment is being renovated there will be two architects at work: one architect in charge of the project, called the design architect; and one architect acting on behalf of the building, called the reviewing architect.

“The reviewing architect protects the building and the other residents,” Zimmerman explains. “He wants to make sure the marble flooring isn’t going to be a noise problem for the apartment downstairs, or the vibrations from the new Jacuzzi don’t bother the next door neighbor. He sees to it that nothing impinges on another [tenant’s] right to privacy and enjoyment.”

If apartments are renovated, the construction tends to happen when they are first purchased, before the new owners move in.

“We like to be involved as early as possible,” says Lichten, “ideally before an offer is made. The process of obtaining management and board approval and then Landmarks and Department of Buildings permits can take up to 6 or 8 weeks, so we want to get a head start on that task.”

This is inherently a delicate situation, as the first impression the new shareholders make on their new neighbors will be a big rebuilding project. Good architects will dedicate as much attention to liaising with the board as they do to the project itself.

“We ask our clients to let us do all the communicating with the board and management for them,” says Lichten. “This has two advantages. We can be dispassionate and professional with our counterparts at the managing agent. In fact, most agents would rather deal with us than with the owner. We can also be the aggressive ‘bad guys’ in pushing for approval. This allows the owner to keep out of the fray with their future neighbors and board.”

On Site

The lion’s share of the architect’s job is at the front end of the project. Without a solid plan—whether that plan is a blueprint or a budget—the project will never get off the ground.

“In addition to running the design process in collaboration with a board subcommittee or an owner, we prepare all the filing and bid documents, run the bidding process, and then monitor the construction, usually attending weekly site meetings,” says Lichten. “For a building, we would perform all these tasks in tandem with the managing agent.”

Architects don’t need to be on-site 24/7 once work is underway, but they are always actively involved with the project.

“We’re very proactive,” says Zimmerman. “You can draw the nicest drawings, but things always happen when construction begins.” For example, digging in the basement to create more headroom, you might hit water ten feet higher than where it’s supposed to be.

“Because all residential work in New York City is ‘high-end’ by national standards, all these projects, whether for individual owners or for buildings, require regular hands-on participation by the architect,” Lichten says.

Zimmerman says he is generally on-site at critical stages, and he conducts meetings on- site 2 to 3 times a week. He advises keeping everyone—the board, the property manager, the super—up to speed throughout the process. “This way, if a shareholder says, ‘Why did we do it this way? I have a nephew who says we should have done it that way,’ the property manager can respond with, ‘I was there, and we thought about doing it your nephew’s way, but we had to do it the way we did because…’” he says. “Transparency is key.”

In the end, most professionals agree that the biggest challenge boards face is one of expectation management. “The client will need to reconcile their dreams with [the reality of] their budget,” Lichten says, “and the two are seldom closely related. Every client wants more than they can afford. Every client ends up paying more than they planned because they want more than they budgeted for.”

In the end, compromise and consensus can make for a smoother project all around and ensure everyone’s input is taken into account.