CAI-MN Minnesota Community Living - Jan/Feb 2016

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In this Issue: Basic Training. . . . . . . . 3 New Year, New Ideas. . 6 The Call to Lead. . . . . . 8 The Elusive One Hour Board Meeting. . . . . . . 12 January/February 2016

Volume 34 • Issue 1

Board to Tears? Not If You Know Your Role. . . . . . . . . . . . . . . . . . . . . . . . 14 Basics for the Beginners . . . . . . . . . . . . . . . . . . . . 22

Back to the Basics Association Tips for your Board Meetings and More

Ask the Attorney. . . . 26 And More!

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Basic Training

What you need to make you a strong communicator By Joel Starks, CMCA, Sperlonga Data & Analytics

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hat is an education? What does it stand for?

Many of us grew up with an urge to learn. A desire to gain a better understanding of our surroundings. Over the Christmas holiday, I watched this urge in action. My one-year-old nephew, Brooks, was crawling around the house, exploring, laughing and learning. Sometimes he slowed enough to eat and sleep. I also watched his parents work to keep up with Brooks’ big brother, three-year-old Cooper. Cooper, too, is in a learning and growth stage. He tries his parents’ patience and resolve. I was impressed with their grace in handling the boys. Frustration and exhaustion did not deter from their ability to entertain and manage the ever-changing attitudes of two boys in different stages of learning. We adults are always in learning mode too. Boards work with owners, and owners interact with board members with personal agendas; managers answer homeowner emergencies; vendors respond to complaints; board members hear the complaints, managers take the heat and try to resolve the issues with grace, compassion and skill. It’s a constant circle, and we must figure out roles and responsibilities, accept accountability and grow in our roles through education and not frustration. Board members must keep their fiduciary duties in mind. Each board member should seek more education in handling homeowner disputes and complaints, emergency situations and insurance claims. Each circumstance lends itself to learning. I encourage you to learn from others by participating in local CAI CAVL events and education seminars, reading trade magazines, or attending lunch-and-learn events at your management company. Or simply look

online. There are several resources available through our website and the national CAI website. Visit www.caionline.org and click Learning Center and then Education for Homeowners. Through professional development, knowing where the resources are and trusting in the systems that are in place, homeowners can be better armed with information to make sound decisions for the association. Education can help you learn about proper meeting agendas, staying on task, use of committees to decrease the burden on individual board members, easy-to-read finances, or simply creating a list of action items that lead to accountability and satisfaction when completed. Boards are constantly changing as owners move, terms are completed or members choose to step down. Homeowners need to know that they are not alone. CAI is here to be a guide in learning and a focal point for good discussions based on best practices and time-honored traditions like Robert’s Rules of Order. Don’t forget that you are all volunteers. Recognize your fellow homeowners, your board members and committee chairs. Without them, things would fall apart fast. Growth is knowing something we did not know a day ago, an hour ago or even a minute ago. Growing through proactive approaches and seeking out the resources that can make us stronger homeowners, board members, managers and companies will help us all achieve better cooperation in our communities and cities. As we watch our infants grow into toddlers, toddlers to children and so on, we must not forget that we are all lifelong learners. Enjoy this issue that focuses on the who, the what, the duties, the descriptions and most importantly the development of us all. January | February 2016

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Partners 2016 Annual Partners

Platinum Columbus Exteriors PCS Residential Sela Roofing & Remodeling Xtreme Exteriors Gold Benson, Kerrane, Storz & Nelson CertaPro Painters Community Advantage, a Wintrust Company FirstService Residential Gassen Management Hellmuth & Johnson Silver All Ways Drains American Family Insurance – Jeffrey Mayhew Agency Mutual of Omaha/CA Banc New Concepts Management Omega Management Company Reserve Advisors TruSeal Ammerica, LLC Bronze 24 Restore Allied Blacktop Company Allstar Construction & Maintenance American Building Contractors Clean Response Gates General Contractors, Inc. Michael P. Mullen, PLLC

Volunteers

Leadership

Committee Chairs

Board of Directors

Charitable Outreach Carla Gruenhagen cgruenhagen@gassen.com

President Joel R Starks, CMCA Phone: 952.500.1068 j.starks@sperlongadata.com

Communications Carin Rosengren CRosengren@kellerpm.com Community Association Volunteer Leaders (CAVL) Gene Sullivan gene@ncmgi.com Education Nigel Mendez nmendez@carlsonassoc.com Golf Tournament Kris Birch krisbirch@birchlawn.net Legislative Action (LAC) Randy Christensen randy@actmanagementinc.com Membership Paul Lawson paul.lawson@fsresidential.com Social Ben Brueshoff bbrueshoff@pcsrenew.com Tradeshow Michele Ramler mramler@cedarmanagement.com Tom Engblom TEngblom@cabanc.com Vision Awards Shaun Zavadsky, CMCA shaun.zavadsky@fsresidential.com

Vice-President JoAnn Borden, CMCA, AMS, PCAM Phone 763.746.1196 jborden@developcommunity.com Treasurer Halo Stafford, CMCA, AMS, PCAM Phone 952.944.2237 edenplacemgr@pinnaclefamily.com Secretary Nancy Polomis, Esq. Phone 952.941.4005 npolomis@hjlawfirm.com Directors Kris Birch Phone 651.481.9180 kris@wearebirch.com Matthew Drewes Phone 952.835.7000 mdrewes@tn-law.com Joseph Fadell Phone 952.392.9208 fadell.joseph@gmail.com Jared Lawrence Phone 612.251.7078 jaredlawrence@compassmanagement. com Crystal Pingel, CMCA, AMS, PCAM Phone 952.277.2703 Crystal.Pingel@fsresidential.com Michelle Stephans, RS Phone 763.754.5500 michelle@reserveadvisors.com Larry Teien Phone 952.888.8093 lteien@aol.com

Published by Community Associations Institute — Minnesota Chapter, copyright 2016. All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Minnesota Community Living or CAI–Minnesota Chapter. The information contained within should not be construed as a recommendation for any course of action regarding financial, legal, accounting, or other professional services by the CAI–Minnesota Chapter, or by Minnesota Community Living, or its authors. Articles, letters to the editor, and advertising may be sent to Paul Hanscom at paulh@cai-mn.com, or at CAI–MN Chapter, 1000 Westgate Dr., Suite 252, St. Paul, MN 55114.

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Calendar Upcoming Events February 25 2016 CAI-MN Tradeshow (3 credits) March 24 CAI-MN Social Event – Happy Hour Bowling March 10 – 12 CAI National Course: M-100 April TBD Charitable Outreach Silent Auction May 4 – 7 CAI National Conference, Orlando, FL June TBD CAI-MN Social Event - Baseball Outing July TBD CAI-MN Social Event – Boat Cruise August 8 Golf Tournament September 22 Vision Awards

Series

Index 6

New Year, New Ideas By Kate-Madonna Hindes, Director of Marketing, Ewald Consulting

8

The Call to Lead

By Arletha Grandison MBA, CAM, Portfolio Manager

12

3

President’s Message — Basic Training By Joel Starks, Sperlonga Data & Analytics

26 Ask the Attorney

By Nigel H. Mendez, Esq. | Carlson & Associates, ltd.

The Elusive One Hour Board Meeting

By JoAnn Borden, CMCA, AMS, PCAM. Associa

14

Board to Tears? Not If You Know Your Role

By Matt Drewes, Shareholder, Thomsen & Nybeck, P.A., Attorneys

22

Basics for the Beginners

By Carin Rosengren, CMCA, Keller Property Management

28

Have Comments? Email your feedback on articles to suey@ cai-mn.com for a chance to be featured in Minnesota Community Living!

CAI-MN Tradeshow Information

By Cai-mn

October TBD CAI-MN Social Event - Oktoberfest November 3 - 4 CAI National Course: M-203

Register for events online at www.cai-mn.com

October 11 MGR Seminar (3.75 credits)

For more information regarding an event, call the office at 651.203.7250 or visit the www.CAI-MN.com.

November 8 MGR Seminar (3.75 credits) December TBD CAI-MN Social Event - Holiday Party!

Index of Advertisers Advanced Innovative Management. . . . . . . . . . . 21 All Ways Drains . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Allstar Contruction . . . . . . . . . . . . . . . . . . . . . . . . . 13 American Family Insurance – Jeffery Mayhew Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 BEI Exterior Maintenance . . . . . . . . . . . . . . . . . . 25 Benson, Kerrane, Storz & Nelson, P.C. . . . . . . . 24 Carlson & Associates, Ltd . . . . . . . . . . . . . . . . . . . 16 CertaPro Painters . . . . . . . . . . . . . . . . . . . . . . . . . 20 Clean Response. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Columbus Exteriors, Inc.. . . . . . . . . . . . . . . . . . . .30 Community Advantage . . . . . . . . . . . . . . . . . . . . 27 Final Coat Painting . . . . . . . . . . . . . . . . . . . . . . . . . 9

FirstService Residential . . . . . . . . . . . . . . . . . . . . 24 Gassen Companies . . . . . . . . . . . . . . . . . . . . . . . . . 13 Hellmuth & Johnson, PLLC.. . . . . . . . . . . . . . . . . . 10 Mutual of Omaha Bank. . . . . . . . . . . . . . . . . . . . . . 19 PCS Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Reserve Advisors. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Reserve Data Analysis . . . . . . . . . . . . . . . . . . . . . . 17 Sara Lassila, CPA. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Sela Roofing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Strobel & Hanson, P.A. . . . . . . . . . . . . . . . . . . . . . . 15 TruSeal America, LLC. . . . . . . . . . . . . . . . . . . . . . . 10 Xtreme Exteriors . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 January | February 2016

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New Year, New Ideas By Kate-Madonna Hindes, Director of Marketing, Ewald Consulting

As 2016 is here, it’s time to look towards the NEW: New ways to engage homeowners and board members alike to make your community safer, stronger and better than ever before!

Idea: Have some

Idea: Thank Board

With more families and individuals opting for a “staycation,” or the practice of staying home to save money, instead of travelling, associations can take the hint as well. Involving neighbors and homeowners in “fun activities” can not only strengthen relationships between neighbors, but also between board and member. Recreational activities such as potlucks in the fall, picnics in the summer and hot cocoa in the winter can bring out the inner “fun” in any homeowner. Most importantly, studies have found that activities which allow homeowners to connect with one another not only improve neighborhood relationships, but safety as well. Consider encouraging homeowners to host evenings for those closest to them geographically, to collect emergency phone numbers and contacts, should something occur. Who knew Pinterest was more than home décor and fashion ideas? There is a booming trend of individuals “pinning” or sharing ideas on the social network that are related to HOA activities. Pinterest is a great place to start when planning a party or get together for the HOA members.

Board members who give their time in monthly meetings and planning activities deserve a special, “thank you!” Consider recognizing board members with a special call-out in the neighborhood publication or a small sign during a set period every year. Often individuals in the HOA aren’t aware of who resides on the board. If they knew their neighbor was a board member, they may reach out with questions or activity ideas. A simple thank you can lead to better engagement and community involvement!

FUN!

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Members More Often

Collaborating for Success

Did you know that many HOAs are banding together to share ideas and collaborate? By connecting on LinkedIn, or Facebook, associations can lend their best practices to one another creating stronger communities for all. Consider joining forces with nearby HOAs to share information about crime, community and beyond. Often, new ideas take shape from old, successful ideas. Consider revising your 2016 activities to reflect new ways of thinking, collaborating and doing. If you have any ideas you’re excited to implement, we’d love to hear from you! Email katemh@caimn.com.


January | February 2016

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The Call to Lead By Arletha Grandison MBA, CAM, Portfolio Manager

T

wenty years from now, what will your homeowners’ association look like? How did your management of it, as a board, affect its current financial position? Did you make mistakes you could have prevented just by reading the governing documents? Were you fully committed to your duty to serve? Were you the leader you thought you’d be? Did you ask yourself why you made the decision to answer the call? Could you not shake the unction? Ultimately, did you realize the responsibility is all about preservation and what you did, as a board, to make your community thrive in the long-run? As a board of directors for a homeowners’ association, when answering these questions, how do you measure up? The will to answer the call to lead a community association for homeowners, condominium owners, or property owners is a strong driving force. It separates you from the association membership of owners who just chose not to serve. This could be due to lack of time, other commitments, or disinterest in general. Whatever the case may be, as a member of the association, they are not the board of directors or officers, it’s you, upon election. That driving force, if used properly, could be the point at which levels of excellence could pour from a competent and dynamic board, most especially if it uses its force for the greater good of the association. As the board, or the leaders, the driving force you have inside speaks volumes about you with regard to your desire to serve your community, as well as the desire you have to make sure your community either, 1. Sustains its value; 2. Enhances its value; or 3. Diminishes it value

Of the three, which would you choose? If you choose to enhance the value of the community, then your call to lead is more than just about being elected to serve your community association. You are called to learn, evaluate, adapt, and deliver. As a new Board, you have been called and you must learn, therefore, there is a learning curve. The learning curve will not be easy, but well worth the efforts you put toward becoming a productive, knowledgeable, and responsible board. You will definitely be a more educated board as a result of investing time in learning what the fundamental association responsibilities 8

Minnesota Communit y Living


are for board members. Furthermore, if needed, there are management companies who specialize in training boards and providing guidance, knowledge, as well as, direction for the association’s board, if they feel the need to seek management professionals for assistance. Consequently, in this call to lead, you must not only learn, but you must evaluate your situation. You should read the governing documents of the association, review the board minutes for the past several years, and find out how the previous board made decisions about how to invest the association’s assets within the community for maintenance and for its financial future. You should also, evaluate the demands of the job as a board of directors, being always mindful of the association being a non-profit corporation. As the board, you will need to be committed to providing brainwork, time, ideas, innovation, direction, motivation as well as, letting members know when they are in violation of the association’s governing documents. Additionally, as you learn and evaluate, you must also adapt to your situation. Though you are not fully responsible for the decisions of the previous board, you are connected in a large way, because you both have directed the same homeowners’ association. In this adapting, you must know, business as usual is not business as usual. You are now responsible for ensuring compliance, ensuring assessments get paid in a timely manner, making sure the landscape is maintained, making sure the common elements are maintained, and making sure you enhance the value of the asset and preserve its existence as an association. This is the challenge, and now since you have answered the call to lead, what will you do?

Furthermore, as previously mentioned, the business as it exists, is a non-profit corporation, and you, as leader, can get business guidance about how to lead and what to do as a corporation. Using this tool, along with the governing documents will provide you a framework. The governing documents, though, set the stage for what directors should do in order to lead and have the knowledge, as provided by the declarant, of their associations. As you are called, know that knowledge is power and having knowledge about what you have been elected for in this role of leadership is not to be taken with a grain of salt. Make no mistake about it, you are leading a non-profit corporation, therefore, as a corporation, it is the management of a business, which is not a casual responsibility. Also, in order for you to run your corporation as an effective business, it is imperative for you choose to enhance the value of the community, as well as, consider your decisions that will lead to its preservation. As an HOA, COA, or POA, the declaration of covenants, by-laws, and articles of incorporation are considered to be the governing documents. These documents govern how the board of directors and officers are to do business as a community association. They also provide the information and knowledge you will need as a new team, in order to lead the association in the direction you see fit for its future. Answering the call comes with hopes that your board will prevail and continue to move the community toward being consistent, persistent, efficient, and proficient in managing the corporation, as a healthy non-profit organization.

The combination of learning, evaluating, adapting, and delivering are all the components of the call to lead. It is in delivery that the results we are expecting from using Robert’s Rules of Order during board meetings, that the decisions we made shall come to pass. Owners paid assessments, therefore, you are able to fund the reserve study, you are able to open the pool, maintain the common elements, pay for miscellaneous expenses, consult an attorney, if needed, and save funds for the reserve in order to ensure preservation. You are called to learn, evaluate, adapt, and deliver, or “LEAD,” and you must be equipped with the proper tools, or what I call “board basics” in order to be effective at making decisions for your association. As a board, you are responsible for different duties. You have two commonly known duties, the “duty of care” and the “duty of loyalty,” but you also have a duty to serve. Fulfilling these duties gives you an opportunity, as the board, to shape the future of your association and its members, so the responsibility is multitudinous.

January | February 2016

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The Elusive One Hour Board Meeting By JoAnn Borden, CMCA, AMS, PCAM, Associa

A

one hour board meeting? “What can be accomplished in one hour, everything would be tabled; it can’t be done!” Oh, but it can be done and I have had the pleasure of being a one hour board meeting participant. That said, it would be an unrealistic expectation to think every meeting will be an hour, but the following tips will help guide you through a quicker and more productive meeting.

Prepare:

Make sure you are prepared for the board meeting. Read any reports and financial statements before the meeting. There is nothing greater than a well-informed meeting participant. Reviewing the board packet and being prepared lends itself to a more efficient board meeting.

Ask Ahead:

Ask any questions BEFORE the meeting – Especially if you want the answer by/for the meeting. Contact your community manager, board secretary, treasurer, etc… and ask ahead. It will be appreciated. Most or all the reports included should house the answers you are looking for. If you don’t understand a report or the information provide, don’t be hesitant to ask. The intent is to provide all the information needed so the board can make informed decisions at the board meeting.

Stick to Business:

I definitely want to hear what happened to your son, daughter, grandchild, spouse, etc. that made you laugh so hard you cried, but if it doesn’t pertain to the meeting, don’t bring it up at the meeting. Having a social gathering before or after the board meeting is a great way to develop a strong community and a more appropriate time to tell that funny story. Go through the agenda and discuss each item, but stick to the agenda and don’t get sidetracked on items not related to the issues at hand.

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Time Limits: Add time limits to each discussion, use a

timed agenda. Give each person a short period of time (3 – 5 minutes) to discuss the issue and stick to it. Most meetings last longer than needed because a subject is discussed in length and the same points are repeated unnecessarily. Use time limits during homeowner forums as well. A good rule of thumb is to have owners sign-in listing the subject they wish to discuss – then listen. If questions are asked, let the owner(s) know that the board will research the answer and respond to them after the board meeting or at the next board meeting.

Be On Time: It is important that owners know you take

your responsibility as a board member seriously. Of course, emergencies happen, but try to arrive at least 10 minutes early to get organized and settled in to your seat. Look over your report(s) and make sure you have all of the documents you need for the meeting.

Don’t Take It Personally: This can be the most

difficult for everyone and can take up a large portion of the meeting if handled incorrectly. When an owner is upset about an action they disagree with, they can come to a board meeting ready for attack. When we feel like we are being personally attacked, we become defensive and engage the outraged person. Instead of going in to battle, sit back, relax, take a deep breath, and listen. Hard as this may sound, sometimes the outraged person just needs to vent and if someone listens, they feel like their concerns have been heard. This is not to say that they should be allowed to verbally abuse the board, manager or other owners – Only given their 3 – 5 minutes to speak and be heard. So, whether the elusive one hour board meeting ends up being found, using the tips above will definitely get you started in the right direction. And who knows, maybe you will prove wrong those who believe it can’t be done!


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Board to Tears? Not If You Know Your Role By Matt Drewes, Shareholder, Thomsen & Nybeck, P.A., Attorneys

S

o, you’re wrestling with whether you want to be a member of your community association’s board of directors. Or, maybe you’ve been asked to serve, and are intimidated by the unknown. This can be a daunting proposition, but if you keep in mind some of the information from this article, you should feel more up to the task.

Community association basics.

To know your own role, you should first understand the role of your community association. The association is a nonprofit corporation, which means it acts through its board of directors. The corporation has the responsibility to guide and direct the operation of the real estate, homes, and other

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improvements where the members live, known as a common interest community (CIC). The association generally should preserve architectural consistency, maintain common elements and facilities, as well as building exteriors of the CIC (with certain exceptions), and it usually arranges for certain services (such as trash pickup), and sets a budget and allocates the costs of those functions. This generally serves an overall goal of providing a stable community for all members and promoting property values. The CIC functions best when owners understand that they have certain obligations simply by becoming members of the community. These include certain individual maintenance duties, financial responsibilities, and an obligation to comply with certain restrictions on the use of their

units and the rest of the property to maintain peace and order. Everyone must contribute in some way for the community to function properly. Engaging members to recognize their own importance helps encourage positive contributions from more of them. The specific functions assigned to the association vary depending on the type of CIC it is (e.g., townhome, condominium, single-family association, etc.), the particular provisions of the association’s governing documents and, to some extent, whether the association is governed by the Minnesota Common Interest Ownership Act (MCIOA). This article will assume MCIOA applies, because it usually does, but each board member should at least review and understand the matters covered in the governing documents.


Getting to know your governing documents and rules and regulations. Articles of incorporation. Community associations are almost always nonprofit corporations, which are formed by filing articles of incorporation with the secretary of state’s office. This document rarely contains terms that impact the board’s duties, but the applicable statutes do permit certain actions (such as sending meeting notices by email) only if they are allowed by the articles or bylaws. Also, the articles occasionally do contain restrictions on certain activities by the association. The association should have a copy of the filed articles, and any amendments, to be sure it knows whether they contain any important provisions. Bylaws. The bylaws describe how the corporation performs its functions. This includes when and how to call and conduct meetings of the board and the members, how many directors the association must elect and how to elect them, selection of officers (i.e., president, secretary, treasurer, etc.), establishing a quorum, and voting, to name a few components. Even though it may be recorded against the real property in the CIC, this not conventionally a real estate document and would not usually contain covenants or restrictions relating to the use of the property in the CIC.

Declaration. Unlike the first two documents, the declaration is a real estate document. It must be recorded with the county in order to be effective, and establishes the owners’ various rights and obligations as covenants that run with the real estate they purchased. The declaration should explain the association’s obligation to set a budget, its rights and procedures for setting and collecting assessments, and the use of assessments to maintain and operate the community, as well as members’ obligations to pay assessments, and which portions of the property are to be maintained by the association and which are to be maintained by the homeowners. Architectural controls, use of the units and common elements, and insurance requirements should also be addressed. This is the document that must state any kind of limitation or restriction on the use or transfer of the owner’s interest in the property (including his or her unit). Other documents should be more procedural or clarifying on these items, but should not carry the same authority to dictate use and enjoyment of the property. Make sure you not only have a copy of your declaration, but that the copy you have has been recorded with the county (it should have a stamp or sticker marking the date it was recorded, and assigning it a document number). Many associations don’t even have a signed copy of this document.

Rules and regulations. The declaration, and MCIOA, authorize rules and regulations. In most communities, the board may pass these without member vote or approval, although the declaration may require notice to the members before any change in the rules becomes effective. Rules and regulations generally are required to be “not inconsistent with” the terms of the declaration. In other words, they should not conflict with the declaration, and they shouldn’t expand or go beyond any restrictions in the declaration. Rather, the rules should regulate compliance with the declaration.

Where do board members and officers fit in?

The board of directors is the nerve center of the association. The board’s primary role is to set policy, to ensure the association performs its own obligations, and to enforce the restrictions and obligations of the members, so that the goals of peace and order can be achieved. Board members are elected by the members (unless a board position is vacated due to a board member’s resignation or death). Directors also may be removed with or without cause, unless the articles or bylaws provide otherwise. The process for removing directors, filling a vacant board seat, and any required qualifications for being on the board (e.g., must be a unit owner, must be current on dues, etc.) will be stated in the bylaws, or occasionally the articles. Continued on Page 16

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January | February 2016

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Continued from Page 15 “Officers” of the association are generally titles or designations given to particular individuals by the board of directors through its own appointment or election. The governing documents should identify the officers contemplated for operating your association and any qualifications they must possess. Most associations have a president, secretary, and treasurer and may have a vice president. These roles are usually filled by the members of the board (your bylaws may not require all officers to be board members). The board should generally elect the officers at its first meeting following the most recent regularly-scheduled board election. The bylaws should address this process and may address each officer’s role, but each is generally discussed below. The president is the leader of the board, and presides over board and member meetings. This person usually signs contracts on behalf of the association as its agent, and similarly is in charge of making sure that the directives and policies set by the board are being executed. The vice president’s role is primarily to fulfill the duties of the president when the president is absent or unavailable. The board may also assign additional duties to the vice president. Sometimes this involves serving as the chair of one or more committees.

General standards and responsibilities for board members.

The secretary is the custodian of the association’s books and records, including board meeting agendas and minutes, board resolutions, governing documents and rules, and all other official records the association is obligated to maintain (including “material correspondence” and contracts). This office is responsible for maintaining the roll of authorized voting members of the association, and receiving and verifying any approved proxies and ballots. For associations that hire professional management, the daily functions of this office are most frequently handled by the property manager. However, the proper performance of these functions is ultimately the responsibility of the secretary. The treasurer is responsible for the finances (and financial statements). This office’s functions also are frequently farmed out to professional management, or even a bookkeeping service where the association is otherwise self-managed. However, the holder of the office is still responsible to ensure these duties are fulfilled. Usually, the treasurer is also responsible for preparing (or coordinating the preparation of ) the association’s annual budget and for preparing and giving the annual report on the association’s financial condition. Despite these responsibilities, the treasurer usually does not have inherent authority to sign contracts or issue large payments unilaterally.

According to MCIOA and the Minnesota Nonprofit Corporation Act (Nonprofit Act), a director of a nonprofit corporation is required to act (i) in good faith; (ii) in a way reasonably believed to be in the best interests of the corporation; and (iii) using the care that an ordinarily prudent person would use in similar circumstances. The statutes say a board member won’t have personal liability for his or her actions as long as performed under those circumstances. Board members may also rely on information and advice received from professionals, and even committees of the corporation, as long as the issues are something the director reasonably believes is within the competence of the committee members. This reliance is not permitted if the director has reason to know the information or opinion is invalid (e.g., as sometimes happens, the professional is given incomplete or inaccurate information).

“Oh, uh, there won’t be any money. . .”

As Carl Spackler (played by Bill Murray) famously quoted the Dalai Lama in the movie “Caddyshack,” “Oh, uh, there won’t be any money, but when you die, on your deathbed, you will receive total consciousness.” While this article can’t promise you total consciousness, believe it or not, you don’t want to be compensated for your efforts as a board

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member. As noted, board members generally will not be personally liable for the results of their actions. This protection exists for members of the board of nonprofit corporations as long as they act in good faith and within the scope of their responsibilities as a director or officer, and don’t commit willful or reckless misconduct. The standard for the level of care required to show good faith is relaxed when the nonprofit board member is not compensated. Note, compensation does not include reimbursement for actual expenses, or per diems for appropriate, reasonably-anticipated expenditures. Premiums spent to insure the board of directors against claims against them or the association for any acts or omissions committed as part of the director’s good-faith effort to fulfill his or her responsibilities as a board member also do not count as compensation. In addition, corporations often are bound to indemnify (or hold harmless) the director for any alleged liability arising out of the director’s good faith performance of his or her duties.

Conflict avoidance.

As part of the obligation to act in good faith, a board member must avoid conflicts of interest, which include making decisions about matters that personally or uniquely benefit the director or the director’s family (or a company or organization on which the director or a member of the director’s family is also an officer or director).

For example, don’t repair or upgrade a board member’s unit before, or to the exclusion of, other members of the association. However, if an otherwise appropriate measure might also impact one or more board members, the association can still proceed if there is a fully-informed vote of either the other directors, a committee, or the members as a whole (where the involved director doesn’t participate in the discussion or the vote), or if the person supporting the contract or transaction can prove it was fair and reasonable to the corporation when it was approved or ratified.

Meetings.

There will be meetings. But, if you engage yourself in the process and the purpose of what you’re doing, you will appreciate meetings as opportunities to move forward on projects and initiatives that will preserve or even improve your community. Learning what the members may want or need, evaluating the best options, and pressing forward with those that merit more attention will help pass the time. On the other hand, if you use the time well, and everyone plays their parts, you should also find that the group has the resources to get the important things done. Check your bylaws to see whether they set the frequency for board meetings. When you have meetings, make sure that members receive proper notice of

the date and time.1 There should be at least one per year (but many meet each month). Members are allowed to attend the meetings, but do not have to be allowed to participate or speak during board meetings. The board can have meetings by conference call or other live remote communications where everyone can participate in real time. Meetings and votes by email are generally going to be improper because that is inconsistent with having meetings that members can attend, and does not sufficiently permit real-time discussion, as is required for a valid board meeting. However, the board is allowed to act without proper notice in an emergency and that won’t invalidate the board’s actions. As mentioned, members should be notified about board meetings and be permitted to attend. For this reason, while a board may make use of the time between formal meetings to discuss whether to place matters on the agenda or even the issues that such a topic may raise, the board should not decide or vote on any matters outside a properlyscheduled meeting unless there is an emergency. The only reasons a board 1) For more information on meeting notices, including the possibility of electronic notices and voting, or meeting by means of remote communication, see the article “PLASE CONSIDER THE ENVIRONMENT BEFORE PRINTING THIS MESSAGE: Can (and should) your HOA use electronic meeting notices and ballots?” appearing in the May/June 2015 issue of this magazine, available online at www.cai-mn. com/Resources/MCLMagazine Library, or http:// issuu.com/cai-mn/docs/cai-mn-mcl-may-jun-2015online/14?e=13881026/13139739.

Continued on Page 18

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Continued from Page 17 may “close” meetings to the rest of membership will be to discuss personnel issues, pending or potential litigation or adversarial matters, or criminal matters. If this is done, members should be advised of the general topic of discussion warranting closure of the meeting, but not the particular subject discussed or any notes or minutes of the meeting. You might also be tempted to conduct board business solely in writing (such as by email), but it is strongly discouraged. The Nonprofit Act may permit boards to act in writing (without a meeting) by unanimous approval, and there is an exception to the unanimity requirement if the association’s articles or bylaws permit the board to conduct business in writing on the basis of a vote by the same percentage that required to approve the measure in person. However, members cannot participate

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or observe the meeting if business is conducted via email, which violates MCIOA’s open meeting requirement. The Nonprofit Act further requires that board members must be able to simultaneously participate in the meeting. Directors cannot sufficiently participate “simultaneously” in an email exchange. Again, certain practices might be available, but these shortcuts should be avoided absent a true emergency. The board must also conduct member meetings, with the president again presiding. Member meetings must be held at least once each year. The board sets the agenda, but the business at each annual meeting must include at least electing directors to any seats for which the term is up, providing a report of the activities and financial condition of the association, and discussing any other matters included in the notice of meeting. The board may find the need

to call one or more special meetings, or may be petitioned to call a meeting by a certain percentage of the owners. The purpose of a special meeting may include voting on an amendment to the declaration or bylaws, obtaining any required member approval of a proposed special assessment, or voting to remove one or more directors. Some people believe that Robert’s Rules of Parliamentary Procedure should be followed in order to conduct a “proper” meeting. There is no requirement to use parliamentary procedure. In fact, such rules may be more formal than is required, and wind up causing the board to spend more time than is necessary to complete the business at hand. Meetings should simply be conducted in an orderly fashion. There should be an agenda, which is followed and all items addressed or postponed by proper vote. Those in attendance should


not speak unless recognized by the person presiding over the meeting (i.e., the board president or committee chair). Members should vote on each proposed resolution or transaction before the board, and the results of those votes (along with the general points raised in the discussion of the measure) should be recorded in the minutes. You should familiarize yourself with the kinds of records the association is required to maintain, as well. These include member lists and contact information, agendas, minutes, and action items from unit owner and board of director meetings, as well as any minutes or recommendations from committee meetings for the past six years. Associations also are required to maintain copies of contracts, leases, and other agreements to which the association is a party, “material correspondence” and other documents relating to its operations, its governing documents, accounting records, and financial records. All of these records, except for records relating to a closed board meeting, must be made available for examination by any unit owner so long as the owner has a “proper purpose” for inspecting or copying the records. A proper purpose is the protection of the interests of the association as a whole, and not serving a member’s own private agenda or harassing the board or other members.

Particular areas to address.

More specifically, board members should: • Become familiar with the governing documents. This doesn’t mean memorizing them, but knowing what general information each contains so they function as reference tools when a question arises. Hopefully the above discussion regarding the purpose of each document will help with understanding them and when each applies. • Attend and participate at meetings; • Develop a budget (including reserves), monitor collections, and remain attentive to financial management; • Pass rules; • Enforce the governing documents (not just collections, but architectural issues, noise, restrictions on business activities, etc.), and do so in a fair manner; • Provide adequate insurance coverage, as required by the declaration and applicable laws (including MCIOA); • Maintain appropriate records and keep the members informed; and • Consult with appropriate professionals to understand insurance, accounting, and legal questions, including whether certain exceptions to any of the above may apply.

Understanding the areas where a board of directors may get itself into trouble may also help in avoiding certain pitfalls. Problems that most often can arise include: • failure to maintain the required areas within the community (or failing to communicate those areas that are not the association’s job to maintain) • failure to fully insure the property as may be required by the governing documents or MCIOA • discrimination or selective enforcement claims alleging inconsistent or improperly-motivated enforcement decisions2 • poor financial planning, such as under-funding reserves, using reserves for something other than replacing a building component the association is obligated to replace, or spending excessive sums on “elective” projects. • scrutiny for failing to detect or prevent theft or embezzlement by management, employees, or even another director.

Also, it’s better to set a responsible budget that causes certain members to grumble than to underfund the association’s operations or reserves. 2) For more information about rule enforcement, see the article “Stick to Your Guns Without Shooting Yourself in the Foot: Enforcing Your Governing Documents and Rules,” appearing in the May/June 2012 issue of Minnesota Community Living, available online at www.cai-mn.com/Resources/MCLMagazine Library, or http://issuu.com/cai-mn/docs/caimayjun20 12nl/4?e=13881026/10531935.

Continued on Page 20

Tom Engblom CMCA, AMS, PCAM VP, Regional Account Executive 312-209-2623 tom.engblom@mutualofomahabank.com mutualofomahabank.com AFN45462_0213

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Continued from Page 19 Budget shortfalls that result in large special assessments or mid-year corrections create a great deal of angst that might be avoided if members are prepared for certain financial realities as part of a realistic budgeting process. If your governing documents limit you to an unreasonable or under-funded budget, tell the members and seek approval to pass an amendment to the applicable document, or vote to override the limitation, and explain any consequences you have identified for failing to do so. Most volunteer boards are not prepared to make effective employment decisions, which can lead to wrongful termination or unemployment disputes.

Smell the roses.

If you keep in mind the general principals in this article, you’ll be well on your way to doing the job you set out to do. And don’t forget that what you’re doing matters to yourself and your neighbors, and should serve the

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interests of all involved. You should take pride in that responsibility, and that your neighbors put their trust in you to see it through. But through all of these responsibilities, remember that being a board member is a policymaking role. You establish the direction for your community, hopefully with the advice and assistance of professionals and committees. You should also lean on the time and expertise of these people to help keep the wheels turning smoothly. Don’t micromanage each project, and don’t get bogged down in the minutiae of each item that comes before the board. Delegate items, and focus on each task based on the collective prioritization the board determines. This will help you stay focused and productive, and you just might have fun doing it. Also, be sure to set an example and create a culture that other productive members of the community will want to join. Welcome new members to

the community, use board meetings as a segue into social gatherings. Some communities have parties after each board meeting or member meeting, and the community rallies around the board and knows that these are their neighbors who are only trying to do what they think is best. This also allows for informal feedback on the board’s progress, which reduces rancor and dissent during board meetings. If parties aren’t your style, think of other ways the board and members can stay in positive communication so the board can not only fulfill its duties, but service on the board can be fulfilling to its members. *Note: The information in this article is provided solely as general information and not as legal advice. Your receipt, and even your use of this information, does not establish an attorney-client relationship. Readers are urged to speak with a qualified professional in the appropriate arena, including a property manager, accountant, insurance agent, or attorney, who focuses on community association law, when making decisions regarding a specific issue.



Basics for the Beginners By Carin Rosengren, CMCA, Keller Property Management

To Boldly Buy

You bought a home that is part of a community association. Now what? Well, you’re a propertyowning, dues-paying member, bound to a real estate organization with a set of governing documents that require you to adhere to the rules. Sounds like a barrel of fun, doesn’t it? Hopefully, you read the documents before you signed on the dotted line for your home and you had a good idea of what you were getting into. If you didn’t read them or know what an association is, you may be in for a bright surprise.

to, as they move into an association, is this: If the association is strong, it’s because it doesn’t care about what you want as an individual. That’s a harsh way to say it, and a further truth is that it simply can’t care. Maybe it is better phrased another way if you allow the use of a Star Trek reference as illustration. Eloquently put to Capt. James T. Kirk by a radiation-stricken Mr. Spock, dying in a locked chamber so the lives of the Enterprise crew will be spared, “The needs of the many outweigh the needs of the few.”

That’s because things are different around here. A good association is run like a tight ship, with clear structure and rules to which all must adhere, creating an attractive, valuable, maintenance-free and downright livable home environment for every member. This makes for content homeowners and residents who are self-governed and secure in their investments. Happy homeowners, that is, as long as they don’t want to have it their own way.

What am I into now?

Purchase of your home came with mandatory membership in a community association. Whether or not you want to be part of this club, you are in it, and everyone is in it together. And like most clubs, membership doesn’t come without a price. All community associations have fees, or assessments, that are paid to the association monthly, quarterly or annually. These are going toward future replacements of roofs, siding, sidewalks, driveways and other common elements; insurance; seasonal services like lawn care and snow removal; street lighting; and sometimes trash collection, water and sewer. Forward-looking association boards will raise the dues on a regular basis, in increments that aren’t too drastic, to keep up with the rising costs of everything and to fulfill their legal responsibility as stewards of the association. Unless there’s a specific or special need for fund-raising you can expect the dues to creep up without cease. Makes a person wonder what they’ve bought into. As a whole, your new condo or townhome community provides a communal basis for preserving, maintaining and enhancing homes and property. What can be difficult for some to ascribe 22

Minnesota Communit y Living

Of course, this is from “Star Trek II: The Wrath of Khan”. Good picture. A perfect example of the “uncaring association” will be found throughout the winter. As a homeowner, you may have shoveled your driveway after a half-inch of snow, or after every couple of inches during a continuous snowfall. You certainly would not have waited for three hours after the snow stopped to begin clearing the snow! As an association member now this is no longer your responsibility. Just sit back, relax and watch the association’s snow-removal company do the work for you … If you can wait that long. Some folks can’t abide waiting for the plows and shovels to show up, even if the response time is spectacular. They will take shovels into their own hands time and again, eventually making a complaint to management that they “had to shovel their own driveway all winter.” In fact, they don’t have to, they choose to. There is a big difference, and homeowner education about contractual obligations related to the snowfall cease-time may only help so much. It can only be reiterated that the association cannot operate if it caters to individual desires.


Know What is Yours

The specifics of ownership will differ between the types of community associations. Do you own the roof, the land around the structure, or only from the wall surface-in? Are you allowed to trim the tree in your front yard? Is it really “your” front yard? CIC members will own some of their space but likely not all of it, because with planned communities, cooperatives and condominiums, the specifics of ownership are slightly different. It may include a share of the building, a portion of the land, or walls-in as is typical with condominiums. Look for a chart or graph that spells out what building components the association is responsible for. These are generally roofs, siding, driveways, private streets and other shared amenities. A well-organized association might have created this for homeowners based on the declaration. But if your association doesn’t have an easy reference like this, the declaration is the place to begin looking for the information.

Governing Docs Rule

Now that you are a member of a community association, it is important to become familiar with the governing documents. Here is where to find the basics for the legal structure and the operation of your association. They define how the association is funded and set rules and standards that are meant for the protection of everyone. Basic elements of the governing documents include a recorded map, plat or plan; declaration; articles of incorporation; bylaws; rules and regulations; and other resolutions and amendments. Of these, the declaration reigns supreme. It is in the chain of title for each piece of real estate and its terms are binding on the real estate itself as well as owner. It defines the bundle of rights of each owner in the community association. Depending upon the community type, the declaration is also called the master deed or covenants, conditions and restrictions (CC&Rs).

Articles of incorporation may or may not be a legal requirement for a community association. The developer is responsible for filing articles of incorporation with a state agency, with the purpose to bring the corporation into existence, define its basic purposes and powers, and indicate the initial board of directors, if any. And then there are the rules and regulations, with the fundamental purpose to provide a framework that, if enforced evenly and fairly, help create harmony in a common interest community. The rules may restrict and govern the use of common areas and amenities, contain architectural guidelines, set rules for the use of amenities and clarify or expand the broader restrictions of other governing documents. Rules may not contradict the declaration or bylaws.

Resistance is Futile

Another, less-common name for a common-interest community is a collective. The aforementioned Star Trek fans might experience an involuntary shudder as they recall the alien species that tortured Capt. Picard and crew on the TV series, “Star Trek: The Next Generation”. The cunning Borg queen and her collective’s singular drive to assimilate all humanity that it encountered is downright spooky. However, one quality of the Borg relates in a very positive way to common-interest communities. Whether in a galaxy far, far away or at the block party down the street, it remains true that many hands make light work. As a member of an association, if you see neighbors working together on something, consider joining in. It’s a great way to get to know your neighbors and they will appreciate it. This can also help prevent the association from feeling like it’s full of aliens, as well as to help you get to know neighbors by their names instead of the numbers on their homes. (Borg survival note: If they begin referring to you as a number instead of your name, step back immediately and look for a robotic tendril approaching your skull.)

The declaration assigns every owner a binding relationship in the association including architectural standards and restrictions on activities, all in the name of compatible living. The declaration gives the administrative framework for the operation and management of the association, sometimes with details spelled out in the bylaws.

Every dismal situation has a solution if you’re willing to take the extra step. Even though it may operate as a collective, you should be more than a faceless number within your homeowners association. If you feel this isn’t the case, consider the following solution: Run from the Borg! I mean, run for the Board!

Bylaws inform about the administration and management of a community association. Sometimes they are developed as part of the declaration, and at other times, are adopted when a corporation (association) is established. The bylaws explain association membership, meeting requirements, voting rights, elections and board of director procedures, powers and duties and more.

Written with liberal use of definitions and language from the CAI publication, An Introduction to Community Association Living. (www. caionline.org)

January | February 2016

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Ask the Attorney

Q:

I Was Told That I Can Not Be on the Board of Directors as They Say That Only My Husband Is an Owner. We Are Married, and I Have Lived Here for Over 10 Years. Are They Correct?

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By Nigel Mendez, Esq., Carlson & Associates, Ltd.

This column is comprised of questions that have been posed to me by homeowners, property managers and related professionals regarding legal issues that they have encountered with respect to their associations. Discussion of these questions, as well a prior questions, can be found on the CAI-MN LinkedIn page: www.linkedin.com/groups?gid=1769135

A:

If your husband owned the property prior to your marriage, the association is probably correct in stating that you are not eligible to serve. Associations typically define the members (or owners - these terms are often used interchangeably) as the “person who owns a unit.” This definition is also in the Minnesota Common Interest Ownership Act (MCIOA), found in §515B of the Minnesota Statutes. In Minnesota, an owner of property is the person, or persons named on a document of conveyance, most often a deed. Put more simply, the owner or member of an association is usually the person(s) named on the deed. If your husband purchased the property alone, and did not issue a new deed to both of you upon marriage (rarely done), then he alone would be the member. So, if you are not a member, why can’t you serve on the board? The qualifications to serve on the board of directors is usually contained in the association bylaws or articles of incorporation. These documents frequently state that to be elected as a director, you must be a member of the association. In those instances, residents who are not named on the deed, are not eligible to serve as director. However, keep in mind that some associations’ documents do allow non-members to serve on the board. This issue can confuse some people as Minnesota law grants spouses a marital interest in real property. Should your husband wish to sell the property, he would be unable to do so without your consent. Regardless, a marital interest does not equate to the ownership interest frequently required to serve on an association board.


What can be done?

Associations can allow non-owner residents to serve on the board by amending the qualifications provision in the bylaws or articles of incorporation. A simple change can be made that states that members and resident spouses are eligible to be elected to the board. The amendment provision for your documents will provide the details on how the proposed amendment must be approved.

If non-members can’t serve on our board, can they be officers?

Maybe. There is a distinction between directors and officers (president, vice-president, secretary and treasurer.) As a refresher, directors are elected by the members and have a vote on the board of directors. Officers are elected by the directors. The qualifications for the officer positions will usually be stated in the bylaws. It is not uncommon to find that not all officers have to be elected to the board of directors. Usually the positions of president and vice-president must be members of the board of directors, but it is not unusual to see bylaws that allow for the other officer positions to be held by non-directors. If there is no requirement that the officers be directors or members of the association, then the board could appoint non-member spouses (or anyone for that matter) to an officer position. Most often the elected directors also serve as the officers of the association, but sometimes it may make sense to have a non-director serve in an officer position. For example, if there is an accountant in the association that is willing to handle to books for the association that individual may be able to hold the position of treasurer. As always, be sure to read your association’s governing documents to fully understand what is permitted with your specific association. To have a question answered in a future article, please email it to me at nmendez@carlsonassoc.com with the subject line of “Ask the Attorney.” While I can’t promise that all questions will be answered, I will do my best to include questions that have a broad appeal. Questions will also be answered by other attorneys practicing in this area of law. The answers are intended to give the reader a good understanding of the issue raised by the question but are not a substitute for acquiring an opinion from your legal counsel.

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Program 2 Spring Walk Through: “Multi Housing, Concrete, Asphalt and Seal Coating” Peter Tjornhom, TruSeal America, LLC

A basic understanding of the installation, maintenance and replacement of concrete asphalt and seal coat products, in the Multi Housing industry.

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2016 Tradeshow Program 3 Spring Walk Through: “Building Envelope - Problems and Solutions” Jeffrey Michael Sigler, Co-Owner, Xtreme Exteriors N.A., Inc.; Jean Marie (Jeannie) Sigler, Co-Owner, Xtreme Exteriors N.A., Inc.

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Electro Watchman, Inc. Final Coat Painting, Inc. FirstService Residential Hellmuth & Johnson Hoffman Weber Construction Homewisedocs.com Irrigation by Design, Inc. Marsh & McLennan Agency/V3 Insurance Partners Metro Paving, Inc. MicMak Condo Approvals, LLC Minnesota Exteriors, Inc. Mutual of Omaha Bank Pacific Premier Bank Paul Davis Restoration PayLease PCS Residential Rainbow Treecare

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comm.



Bears Hibernate During the Winter. But We Don’t. Offering Dependable Expert Craftsmanship Year Round.

It’s a misconception that home exteriors projects can’t take place during the winter months. At Xtreme Exteriors, we know that with careful planning, just about any home improvement project is possible. With most home exteriors projects, at any time of year, Xtreme Exteriors takes extra care to ensure homeowners remain comfortable and experience the least amount of disturbance or inconvenience. A seasonal bonus is dormant landscaping, no tender shoots to be concerned about.

Want your home to feel like a cozy den? Our expert inspections identify where your home can function more effectively and efficiently. We offer reliable, affordable solutions to make your home both beautiful and more comfortable this winter and for years to come. Ice dams “a real bear” every winter? Let our experience and multi-faceted approach minimize this seasonal expense. Heavy snow fall? Count on us for expert rooftop snow removal. With all that we offer, you’ll come know us as your home exteriors contractor for all seasons.

Expect the Best.

MN License: BC362463

WI License: 962215

Call Us Today at 763.441.1334. Visit Us at www.xtremeexteriors.com

Making Homes Beautifully Functional Year Round.

Jeff and Jeannie Sigler, Owners of Xtreme Exteriors. Your Dependable Single-Source Solution for Your Entire Home Envelope.


cai-mn

Show

TRADE Where:

Saint Paul RiverCentre 175 West Kellogg Boulevard Saint Paul, MN 55102 (651) 265-4800

When:

Thursday, February 25, 2016 11:30 am - 6:00 pm

More Information on page 28 Minnesota Community Living 1000 Westgate Drive, Suite 252 St. Paul, MN 55114 Phone (651) 203-7250 Fax (651) 290-2266 Email info@cai-mn.com


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