Financial Issues Facing Associations

A CAI document is circulating among the board, and is the result of a survey by the Community Associations Institute.

It was published in October and is entitled "CAI Survey: Associations Hit Hard by Housing, Economic Slump."

The survey has some interesting statistics, but it may not be very useful. According to the CAI, there are 310,000 community associations in the U.S.; the survey is based on the responses of 1,500 managers. That's less than 0.5% of the associations in the U.S. Nevertheless, there are some interesting statistics.

I've included a link to CAI's website and the published survey, in Note 1 of this post.

Thomas M. Skiba, CAI's Chief Executive Officer is quoted in the survey:

"High delinquency rates put a lot of pressure on associations to meet their obligations to the homeowners who are paying their fair share....When some owners—including banks that have foreclosed on homes and now own them—don’t pay their share, other homeowners often must make up the difference in higher regular assessments or special assessments." Mr. Skiba goes on to say that "Many associations are also forced to curtail services, which can further depress property values," and that "Association boards strive to maintain the nature and character of their communities and meet the established expectations of all homeowners, but that’s often a daunting task in this kind of environment. They are making difficult choices because they have few alternatives. Board members in every community association manage the business of their communities, and businesses must pay their bills."

It would seem that vigilant collection procedures are necessary or, failing that, associations face falling revenues and with them, falling property values.

Of the 1,500 associations that responded for the survey, these are the steps that are quoted as being taking to "address budgetary shortfalls":

• 38 percent have postponed planned capital improvement projects.
• 35 percent have reduced landscaping services.
• 31 percent have reduced contributions to their reserve accounts, funds that are set aside for major maintenance and repairs.
• 23 percent have borrowed from the association’s reserve account.
• 16 percent have levied special assessments.
• 12 percent are allowing residents to perform minor tasks in the community.
• 6 percent have borrowed from banks and other lenders.

Comments, Corrections, Omissions, References

Note 1. This is the link to the published CAI survey:


CAI - Association Survey, October 25, 2010

Note 2. Mr. Skiba's statement that "When some owners....don’t pay their share, other homeowners often must make up the difference in higher regular assessments or special assessments" is not news to this association. Earlier this year, our attorney attended an association meeting and addressed the owners and the board, and answered questions. He stated exactly the same thing, but used somewhat stronger language, and went so far to state that collections procedures must be rigidly and diligently enforced. He stated that not to do so is "unfair" to the other unit owners, because they must make up these differences. So now we have this from several competent sources. 

Rights and Responsibilities as Published by the CAI - Part I

In your October/November newsletter, you received a copy of the CAI "Rights and Responsibilities for Better Communities".

I made a preliminary comment on this in the blog posted October 26, 2009. The document which was included with the newsletter was published by the CAI with this disclaimer, reprinted from their website (Reference 1):

"Rights and Responsibilities was developed as an ideal standard to which communities could aspire, a goal-based statement of principles designed to foster harmonious, vibrant, responsive and competent community associations. The principles were not designed to be in complete harmony with existing laws and regulations in 50 states, and in no way are they intended to subsume existing statutes. Where there are inconsistencies, community associations should adhere to the spirit and letter of all applicable laws. If you have a question, we suggest you consult with your attorney."

The bolded words are mine. For our association to adapt the CAI document, it should be reviewed as suggested and a revised document submitted to unit owners for comment. Of course, that may not happen. A reader of another HOA with whom I correspond recently had this to say "The more one learns about HOA boards (horror stories abound online), the more one is shocked by the dictatorial tendencies of otherwise ordinary people.  Perhaps it’s in the genes of the human race…"

In reading the "Rights and Responsibilities" you will notice some items which are similar to the Illinois Condominium Act, and our bylaws. I'm not going to take the time to compare the three documents, but if there are any disagreements, as stated in earlier posts, the order of precedence would be the Act, then the bylaws and finally the Rules and Regulations. Publishing the original, unedited CAI document leaves interpretation in the hands of the reader.

You might be wondering what is the source of this document. Our board has been enrolled in the Community Associations Institute for a number of years. This is a dues paid subscription, paid by our association. The CAI is considered by some to be a trade organization, which provides "education, tools and resources to people who govern and manage homeowners associations, condominiums and other planned communities." (Reference 1).  The CAI markets and provides training and certification materials for professional managers and also promotes managers who meet CAI's qualifications. It has an elaborate series of "awards" and certifications for such managers. The CAI sales materials state, in part: "Do you want to gain a competitive advantage, earn more money and obtain valuable experience? Learn how you can stand out from the crowd and enhance your career. If you already have a designation, you can download redesignation forms and stay on top in your career."


 The CAI has about 29,000 members. To provide some perspective, the CAI states that there are an "estimated 57 million Americans who live in more than 286,000 community associations."  Using the CAI numbers indicates that their membership could be as high as 10% of the HOAs in the U.S.


There are other organizations that provide training materials to HOAs. For example, the 
Community Association Training Resource Center




Reference 1: http://www.caionline.org/Pages/Default.aspx

The Newsletter Has Arrived!

Got my copy of the October/November newsletter today. Here are my initial observations.

The newsletter was further expanded and uses the same "upgraded" glossy paper. Photos are dark and I assume that this is because the original documents are being sent to the printer in color. Hint: conversion to "gray scale" and tweaking for contrast prior to submission would significantly improve the quality of the photos. Now that the "old" board has been removed, there are no longer any excuses about the newsletter, website, etc.

Did you notice that our CD is now our "Secretary, Recording Secretary and Communications Director?" I'll use the title "Communications Director" so as to provide continuity in this blog. For those who are interested, the "Secretary" is the named representative on legal documents for the association. According to the Society of Corporate Secretaries and Governance Professionals, the "Secretary" of a corporation has a "key responsibility to ensure the the board has the proper advice and resources for discharging its fiduciary duty under state law, and to ensure that the records of the Board's actions reflect that the Board has done so." Reference 5.

The newsletter stated that for the present we don't have a treasurer. However, as stated the board is planning to fill a vacant position, unless unit owners create a petition as specified in the newsletter.

The newsletter confirmed that our former Architectural Director "declined to fill the one-year term." Reference 1.

The new president made a statement encouraging unit owners to attend association meetings. The president stated that "the more engaged each homeowner is in the association's affairs, the better the board will be able to understand and address our community's needs." I underscore this. In a statement pertaining to the 2010 budget, the president stated that the board expects "there to be no increase to your 2010 assessment." That underscores the information and statements made by management at previous association meetings. So the new board concurs. That should make people happy, or not? There was no mention of the "reserve study". I am very interested in seeing the details of the study and the budget. But the study has been one of those "secrets" I guess.

The association website is coming "soon".  One of our unit owners has volunteered to do this. I am not certain if that is the same gentleman who was acknowledged during the annual meeting.

In the "Director Reports" our outgoing Architecture Director stated that driveway replacements were approved during the September association meeting for 1600T, 1601T, 1604T, 1706L, 1725L, 1733H and 1774G. I had written to management in the first week of October pertaining to the apparent delays to this work as well as to the roofing project at 1730-1732H.  My letter stated,  in part "...the board has authorized the driveway work and the roof...The Communications Director was the only board member who voted "NO" regarding the driveway repairs. However, it would be an inadequate excuse for the board to forego [sic] its responsibilities, and it would seem necessary for the board to act in compliance with the wishes of the vote." etc. I closed with the comment "I am very concerned about the current state of affairs at BLMH."

In the "Management Report" section of the newsletter, the statement was made that "There are several projects underway and scheduled for completion yet this year."  The newsletter went on to state that "The asphalt replacements and drainage improvements will be an ongoing project for the next several years until all of the driveways are completed." One aspect stood out. That was the statement that several projects are "scheduled" for completion this year. A careful observer will note that the languaging was "scheduled" and not "will". So perhaps we should keep our fingers crossed, and hope the work is completed. As a unit owner who gets a bill each and every month for the payment of my fees, I don't think our board and management would accept my statement that "I am "scheduled" to send you a payment each month." What is expected each and every month is that I "will" send my payment. For those who are about to quibble, the difference is significant and is one of "commitment".

I found it interesting that the new "Rules and Regulations" Director made the statement that "I suggest that instead of regarding our R&Rs as annoying restrictions, we think of them more as responsibilities that we share with our neighbors." Gee, I thought that is what the "old" board kept telling us. Now it was not only stated, but it was actually PRINTED in the newsletter. How did that get past the censor?

Pertaining to the "resetting of storm drains" you can see photos at Reference 2.

It was stated that the maintenance company will be "coming around in the next few weeks to break up the garage salt buckets and fill them for the beginning of the winter season." I thought that was performed by our snow removal contractor. But then, I am a relative "newbie", so perhaps I am mistaken. My building has a 50 gallon plastic container. Perhaps I am lucky and the rest of the unit owners have "buckets" in their garages. There is an explanation, of course. I have a large container because this is "another perk for the favored few." Oops, sorry for blowing it for the other three unit owners who share the garage. Perhaps we'll be demoted or whatever to a "bucket" this winter.

The newsletter stated that "Monthly assessments can be paid automatically". That's attractive, but would filling out a debit form also provide for "automatic" collection of fines, etc.? No explanation was given in the newsletter. I'd be unwilling to have fines automatically debited from my bank account. I'll explore this further with a letter to management.

The newsletter contained a reprint of the "Rights and Responsibilities for Better Communities" as made by the CAI, which is online at caionline.org. These are "Principles for Homeowners and Community Leaders."  There was no statement accompanying this document. On its website, the CAI states that "By encouraging community associations to adopt Rights and Responsibilities for Better Communities, CAI strives to promote harmony, community, responsible citizenship and effective leadership.

The CAI website makes the following recommendations for adopting the "Rights and Responsibilities":

"Adopting Rights and Responsibilities for Better Communities is easy!

• Download the Rights and Responsibilities document.
• Distribute the document throughout your community, announcing and publicizing where and when adoption will be considered.
• Explain why this is important to your community and the benefits it can create.
• Review and discuss the merits of the principles at an open meeting of your board.
• Solicit input from homeowners.
• Have your board vote to adopt a resolution endorsing Rights and Responsibilities for Better Communities. The principles will be more meaningful to homeowners and community leaders if they are formally adopted."

The newsletter does not indicate this is to be a process, with unit owner input. There are several possible explanations:

1. There is no intention for formal adoption at BLMH on the part of the board. The "R&R for BC" is merely a suggestion.
2. Our board intends to adopt the "R&R for BC" by decree.
3. Input is being solicited, but only from specific unit owners.
4. This will be posted as part of the agenda for the next association meeting, thereby continuing a bias in favor of unit owners living on the property.

I'll be providing more on the CAI "R&RforBC" in a later post. You are encouraged to go to the CAI website and review their statements about the use of this document and recommendations for boards, unit owners and professional managers. Reference 3.

The newsletter did not provide a statement about the oaths for our Board of Managers. It is unclear if the newly elected members of the board signed the oath. Reference 4.

The Communications Director provided a "Meet Your Neighbor" page and the following statement at the bottom of the page: "NOMINATIONS: If you'd like to nominate someone you know for the "Meet Your Neighbor" column, send the name and address of your nominee to: [our Communications Director] or email __________. Nominees will be contacted and asked if they wish to be interviewed." From this, am I to conclude that my earlier request to the "Communications Director" regarding the interview of current and former board members did not occur because they declined the interview? Or perhaps my request was simply ignored??? Nah, that wouldn't happen here, would it? I'll resubmit my nominations with addresses, but I won't be holding my breath.

In the "Meet Your Neighbor" interview for the month, the selected nominee stated that her personal motto is "What doesn't kill you makes you stronger".  Choosing to paraphrase Friedrich Wilhelm Nietzsche was interesting and I can only say, "you have come to the right association, lady."

The "red stuff on my shoes" article does "officially" answer the question brought up by a unit owner at an earlier association meeting.

No mention of the "vandalism" or recent theft brought up by a unit owner was made in the newsletter. If you want to be informed of some of these items, you will have to attend association meetings, or be fortunate to spot a piece in the local paper. Of course, you may also use one of the rumor mills in operation at BLMH, including the "official" and board member sponsored and "unofficial". However, in so doing you will possibly not get accurate information and you may also be spreading gossip. I appreciate that in the absence of published statements, unit owners have few choices.

Did you notice the statistics for unit owners who cast their votes? The statement is on page 1 in the second paragraph.   I'll state this "positively": 57.14% of the unit owners at BLMH aren't apathetical about their association, and did vote. The remaining 42.86% just don't give a hoot. Gee, and it was only a year ago that "a majority of us" were up in arms, according to the Communications Director. Amazing what a difference a year can make. Now nearly 40% are simply going about their daily business. I guess things aren't that bad here, are they? I state that because in my limited experience, most people go about their day to day business unless something personally significant intervenes in their lives.

The newsletter does not provide a current list of contractors. At several association meetings, unit owners have asked about "Ron's TV" which has left the downtown area. Their replacement is used for work on TV and coaxial cabling in units, maintaining the rooftop and in-attic antennas, etc. The new information for contacting "Ron's TV" was promised to be included in the newsletter. I suggest that unit owners contact the professional management for this information.

Sorry, but I've got to go. Despite what my critics say, I do have a full time job and I have spent the last 40+ years improving American industry, "committed to the elimination of all preventable industrial accidents in my lifetime", etc. Besides, I've got a  "quick banana bread" to remove from the oven. I prefer the recipes in a January 1967 version of the Rombauer-Becker "Joy of Cooking", you know, the version prior to the time they took butter out of the recipies and became "politically correct". So this bread was made with honest to goodness real "shortening". As we are approaching winter, I'll soon be making home-made cinnamon rolls. However, as I am currently working on a project about 650 miles distant, that may interfere with my baking schedule. Blogging however, can be accomplished from anywhere. From personal experience, I have been able to "carry on" from 7,000 miles away "as the crow flies."

Reference 1:   http://briarcliffelakes.blogspot.com/2009/09/post-election-2009.html
Reference 2:   http://briarcliffelakes.blogspot.com/2009/10/somebody-is-on-job.html
Reference 3:   http://www.caionline.org/info/help/Pages/RightsandResponsibilities.aspx
Reference 4:   http://briarcliffelakes.blogspot.com/2009/05/board-of-managers-part-2.html
Reference 5:   http://tinyurl.com/ygodh6n