1. Check Your Wallet More Closely
It seems there have been more news reports of loss from theft and embezzlement in the past year than during the past 10 years, says Lisa A. Magill, a shareholder and association attorney at Becker & Poliakoff PA in Fort Lauderdale, Fla. "Board members aren't necessarily businesspeople or people with financial backgrounds. The combination of the generally trusting nature of people and the lack of experience has been debilitating to many communities—some of which report losses in excess of $1 million. Moreover, some associations didn't have the proper insurance coverage for these types of losses or didn't obtain enough coverage to satisfy the claims.
"Every account needs proper supervision," Magill adds. "Evaluate all vendor payments to determine whether the payee is the correct person or entity and whether the invoice is appropriate. It's perfectly acceptable to hire management or a bookkeeping or accounting firm to handle accounts payable and receivable. But at least one board member must review the bank statements and all accounts. And while year-end financial reviews—by an independent accountant not referred by management or by the person handling the day-to-day books—are absolutely important, they don't replace constant oversight by individual board members."
2. Get Tough On Collections
"Many boards need to get educated by their attorneys and be more aggressive on placing liens and proceeding with foreclosure," says Robert White, managing director of KW Property Management & Consulting in Miami, which oversees about 125 associations totaling 30,000-35,000 units. "A lot of times, associations don't want to pay the money to place a lien and go ahead with foreclosure, but often it makes more financial sense to push forward."
3. Get Homeowners More Involved
"My goal—it's not so much a resolution—would be to solicit more involvement from homeowners," says Ana Gramling, board president at Metrome in San Diego, who submitted her resolution through her manager, MERIT Property Management. "We find this to be the biggest challenge to our association. Our fees are some of the lowest in our zip code, and because of this we feel our homeowners don't participate until there's a problem (for example, they're called to a hearing for some type of violation). If the association were financially impacted and had to assess a special assessment or substantially increase our fees, you could guarantee we'd have more participation! "How do we resolve to do better in 2012?" Gramling continues. "Our board members have made a commitment to make ourselves personally more visible to our residents, both homeowners and tenants. We want them to know that we care enough to not just serve on our board, but to make ourselves available to them. We have also extended our maintenance contract from three to five days per week. The visibility of having full-time maintenance personnel available has provided our homeowners with the security of knowing their community is well taken care of."
4. Hold Regular Meetings Open to all Homeowners
"More than anything else, boards need to do a good job of motivating members to come to meetings," says Jeff Vinzani, an attorney at Nexsen Pruet LLC in Charleston, S.C., who represents associations. "At most associations, 10 percent of the people do 90 percent of the work, and a lot of times it's the same people coming to meetings. You often have a group of folks who just don't care unless there's a controversial issue that will affect their pocketbook. Boards need to come up with ways to make meetings exciting. I've seen them do that by offering food, beverages, or a party after the meeting. However, that can take away from the businesslike atmosphere of the meeting."
Vinzani does offer a caution. In your zeal to attract owners to meetings, don't go too far. "I've seen boards offer alcoholic beverages," he says. "If there's any anger at all over any issue, I wouldn't recommend that."
5. Don't Take It Personally
"There's a lot of pressure and tension that boards face because of challenges with delinquencies and slower-paying residents," says Matt Zifrony, who advises homeowners and condo associations at Tripp Scott, a Ft. Lauderdale law firm, and who's also the president of a 3,000-home association. "At times, that can make board members react toward their fellow residents in a more adverse way than I think they should.
"Remember that whether homeowners are delinquent or violating rules, everybody is still a neighbor," Zifrony continues. "There are a lot of extenuating circumstances in today's economy that people have never faced in their lifetime. Because of that, everybody needs to take a deep breath and not take things personally. That doesn't mean boards shouldn't pursue payments or enforce rules. But they should do those things in a businesslike manner and not take things personally. Rather than thinking, 'Dammit, why aren't they paying their assessments? I'm paying mine!' They should think, 'It's unfortunate they're not paying. I hope things improve for them.'"
6. Check Your Contracts
"Many boards should be reviewing vendor contracts," says White. "For a lot of associations having financial difficulty related to delinquencies, reviewing contracts to change the way services are delivered may help them save money. Consider waste management. Instead of having three or four garbage bins, you might want to have two larger bins. And instead of having the waste company come three times a week, maybe you can lower it to two times a week, and you'll save a lot of money for the association. Or maybe you should look at landscaping. Eliminate three or four grass-cuttings a year while you're having financial difficulty. Your yard probably won't look as immaculate, but you'll save a little money."
Along the same lines, resolve to rethink the length of your contracts. "If you must sign a one- or two-year contact," says White, "make sure there's a 30- or 60-day cancellation clause so you're not locked in with that vendor if it's not doing the right thing—and that includes your management company. We have that type of clause in our contracts with associations, so we practice what we preach."
7. Plan, Plan, And Then Plan Some More
"So many association problems result from a lack of board foresight," says Magill. "Do you understand what projects are due, perhaps overdue? What about changes in laws that impact operations or the physical property? What's the current status of the physical improvements? Creating long-term goals can help associations avoid a piecemeal approach to maintenance and repair issues that's likely to save money in the long run."
8. Do More Fun Stuff
"People aren't traveling as much and are spending more time at their houses," says Zifrony. "Because of that, I think associations should go out of their way to plan more association-type events and use the association's buying power to allow the residents to get together in fun settings. Throwing a party at an association is going to cost pennies compared to what it would coast each family to go away, and it gets everybody together and out of their homes. I've been encouraging people as much as they're able to do a movie night or to have an end-of-year or Fourth of July party. That allows everybody to get together, not spend a ton of money, and take pressure off their personal lives."
9. Get Professional Help
"Whether associations should be member-managed or hire professional property management comes up a lot," says Vinzani. "I'm on the fence on this issue, but I think if boards take the time to interview and find the right property management firm, that often helps them run better because often property managers are an asset to an association. Like everybody else, unless they're retirees, board members have jobs and must also deal with running the association. For things like collecting dues and pushing to enforce covenants, it helps to have a professional handle that while letting the board oversee meetings and manage the owners."
10. Be More Transparent
"Board members should practice what they preach and focus on open communication and homeowners' perceptions," says Zifrony. "If there's some type of capital improvement the board has been planning to do, perhaps it's a good time to defer it. While people are struggling to pay their bills, they don't want to see their board paying money on projects they don't think are necessary. Also, make sure everybody is well aware of the association's financial strengths and weaknesses. People are more diligent and a little more paranoid about how association money is going to be spent, and you don't want accusations [about improper expenditures] to fly."
Magill agrees. "Owners constantly complain that boards seem to be 'hiding' something—that there's a lack of transparency. Communicating by newsletter, publishing board meeting minutes on a website, and holding frequent meetings gives owners the opportunity to learn and understand how difficult board service may be in a particular community. Publishing accounts payable ledgers on a password-protected website lets owners understand exactly how the association's funds are used. Describing the process of selecting a contractor in a newsletter helps owners understand why the board chose one vendor over another. Having the contractor or vendor come to an owners' meeting to discuss the project is even better."
White concludes: "A lot of boards think they might be doing the community a favor by doing things quickly, but that leaves a lot of homeowners in the dark. To reduce the level of frustration, a great resolution for the board would be to be more transparent and to put the items and decisions being made on meeting agendas and have discussions."