CAI-MN Minnesota Community Living - Mar/Apr 2015 by CAI-MN

In this Issue: From the President. 3 Carin’s Corner.......... 6

March/April 2015

Volume 33 • Issue 2

Disaster Restoration Preparation.............. 8 Mastering Disaster? — How to Handle Insurance Claims ... 10

When Disaster Strikes

Online Magazine Now Available! www.cai-mn.com/ magazine

Personal Disaster Planning................. 14 Coordinating Emergency Preparedness......... 16 Managing the Aftermath of a Fire......................... 18 Ask the Attorney ............................... 22 And Much More!

Minnesota Communit y Living

From the President

Board of Directors

The Wisdom of Lincoln by

Gene Sullivan | CAI-MN President, New Concepts Management Group, Inc.

eloved for so many reasons, is there any past president more often quoted for his every-day common sense observations than Abraham Lincoln? Yet here was a man that many could dismiss. Without a formal education, here was someone many called merely a backwards country bumpkin. Yet it was Lincoln — this same man, many found easy to poke fun of — who arose to be the right person at the right time in the darkest hours of our country. In a very prophetic moment while still an Illinois legislator, Lincoln was quoted as saying… “I will prepare and someday my chance will come.” When we think of great people through history who have done extraordinary things, are they great because they are someone special, set apart, with a calling or destiny to greatness? When you look at the success that some people seem to always have in their life, do you find yourself saying, “Some people just have all the luck!” Greatness, success, are these qualities that come by the luck of the draw? While many folks might think so, take a closer look at what Lincoln was really saying — “I will prepare and someday my chance will come.” The key to handling a disaster, when everything seems to be coming apart around you, is simple — be prepared! When you think about our job in property management, what we do is not rocket science, yet it is very profound; we are caretakers of the

lives and well-being of many others. Don’t think so? Think again: property fires, water line breaks, people get snowed in; what we do affects the lives of thousands of people each and every day. What we do does make a difference. If everything ran on autopilot, we wouldn’t be needed, we wouldn’t have a job. What is required of us in our responsibilities — more than anything else — is that we need to be at our very best, when everything is at its worst. This is property management, this means being prepared! Please take time this month to peruse through all of the valuable articles written around the topics of dealing with disaster prevention. When you can’t prevent that terrible thing from happening, learn how to manage the crisis when it comes. Lastly, because we are on the topic of being prepared, I can’t go without giving a huge thanks to the CAI Board of Directors, the Tradeshow Committee, and the Presenters of each breakout session for the preparation and time put into what many are saying was the best Tradeshow they have attended here in Minnesota to date. Everyone involved was so attentive right down to all of the details needed to pull this off, from the topics, to timing, to the food and venue. Many came up to me and commented on how valuable and fun that day truly was. The attendance by Board Members and Homeowners was the highest we have ever seen at this event. This was only made possible by the folks who really were founders of the event — the business partners who took time to come out to exhibit, and really are the ones who funded and made this day happen.

President Gene Sullivan Phone 952.922.2500 gene@ncmgi.com Vice-President Joel Starks, CMCA Phone 952.698.2053 joel@sharpermanagement.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 JoAnn Borden, CMCA, AMS, PCA Phone 763.746.1196 jborden@developcommunity.com Matthew Drewes Phone 952.835.7000 mdrewes@tn-law.com Joseph Fadell Phone 952.392.9208 fadell.joseph@gmail.com Russ Lis, CMCA, AMS Phone 612.805.6111 rlis@reconstructionsolutionsgroup.com Crystal Pingel, CMCA, AMS, PCAM Phone 952.277.2703 Crystal.Pingel@fsresidential.com Jim Rezek Phone 763-424-9984 jimrezek@comcast.net Michelle Stephans, RS Phone 763.754.5500 michelle@reserveadvisors.com

Thanks to all of you. You are making a difference!

Committee Chairs Communications Chair

Carin Rosengren Phone 952.432.3722 CRosengren@kellerpm.com

Charitable Outreach Committee Chair Cliff Kurth Phone 763.248.1047 cliff@aemn.co

Education Committee Chair Nigel Mendez Phone 651.287.8640 nmendez@carlsonassoc.com

Golf Tournament Chair Kris Birch Phone 651.481.9180 krisbirch@birchlawn.net

Minnesota Communit y Living

Legislative Action Chair John Dorgan Phone 612.721.4116 jrd@jdorganlaw.com

Membership Chair

Paul Lawson FirstService Residential Phone 952.277.2792 paul.lawson@fsresidential.com

Social Committee

Jenna Wright Phone 303.547.7848 jwright@bensonpc.com

Trade Show Committee Chair Michele Ramler Phone 763.231.9809 mramler@cedarmanagement.com

Vision Awards Chair Shaun Zavadsky, CMCA Phone 952.277.2786 shaun.zavadsky@fsresidential.com

Letters from Readers Required Reading?

Loyalty Article Strikes a Chord

The article on snow removal in your magazine was excellent (“Dealing with Snow Removal in a Minnesota HOA,” Jan/ Feb 2015) and every association resident should be required to read it!

I want to give you kudos for the excellent article [Bob MacDonald] wrote (“Building Better Business Relations,” Jan/Feb 2015). It should be required reading for business management students, and anyone in business nowadays for that matter!

Brian Johnson, Johnson Service Company

Gratitude for Positivity The article that [Bob MacDonald] wrote for the Jan/Feb issue of the CAI Minnesota Community Living is absolutely wonderful. Thank you for being a positive face for Cedar and a mentor to all. Rox Ann Hazelton, CMCA, AMS Cedar Management, Inc.

Articles Were Informative Thank you so much for the excellent articles in the Jan/Feb CAI-MN magazine on snow removal and salt (“Dealing with Snow Removal in a MN HOA” and “The Skinny on Salt”). I had researched the salts earlier in the season, because one of the homeowners had requested that the HOA provide salt, which we do not do. I was surprised to find that none of them are really safe for concrete or pets, and so one hopes to use one that is the least damaging. We had not discussed solar panels in our HOA, but those articles were also excellent. I’m all for using alternative energy, but solar panels in town homes seem to be a migraine headache of the largest magnitude. Delores Petersen President Rice Creek Park HOA, Blaine

Minnesota Communit y Living

You provided sage advice that’s both timetested and timeless. Not to sound like a crotchety old school guy, but the younger sect in the workforce could certainly benefit from your recommendations and observations … especially in our respective industries. As you know, State Farm has been one of the most successful companies in the history of American business. The main reason? We focus on relationships. I’ve always subscribed to your advice of doing good by others and helping them in any way, whether they had a current business need I could fill or not. I call it planting seeds. And good always comes from it. I’ve been fortunate to have a lot of success in my 29 years so far. A lot of it from hard work, but equally from planting seeds and building relationships. I’ve always liked getting to know my clients and people I partner with in business. Whenever possible, I reach out to them via phone. A conversation far and away still trumps an e-mail for relationship building. To me, the essence of your article is that at its core, as in life, business is still about people. That’s a basic premise I feel is getting lost in this ever faster paced, technology driven society. Lord knows we’ve all heard the stories about two people sitting in the same room and texting versus talking!

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

SMART & DECISIVE The Best Value in Construction Law for Community Associations

That’s what our clients tell us. At Hammargren & Meyer, we’re smart, decisive lawyers focused exclusively in the areas of law that we know best.

Once again, great article!

For prompt responses and straightforward answers, call Hammargren & Meyer.

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(952) 844-9033 www.hammarlaw.com

Calendar 2015 Upcoming Events Gathering of Angels: Charitable Outreach Silent Auction Monday, April 23, 2015

CAI National Conference in Las Vegas

Index 8

Disaster Restoration Preparation By Russ Lis, CMCA, AMS, MAOM, ASD, WRT, FSRT | Restoration LLC.

10 Mastering Disaster? — How to Handle Insurance Claims

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

Series 3 President’s Message By Gene Sullivan, CAI-MN President, New Concepts Management Group, Inc.

4 Letters from Readers 6 Carin’s Corner

April 29 – May 2, 2015

14 Personal Disaster Planning

CAI-MN Social Event: Twins Baseball Game Outing

By Bob MacDonald, CMAC, AMS, PCAM

By Carin Rosengren, CAI-MN Communications Committee Chair, Keller Property Management

16 Coordinating Emergency Preparedness

22 Ask the Attorney

Wednesday, June 10, 2015

CAI-MN Social Event: Boat Cruise July 16, 2015

CAI-MN 2015 Golf Tournament Monday, August 10, 2015 Midland Hills Country Club

CAI-MN 2015 Vision Awards

with

Police and Fire

By Michael Klemm, Dougherty, Molenda, Solfest, Hills & Bauer P.A.

18 Managing the Aftermath of a Fire By Scott Clemente, ServPro

20 Highlights of the 2015 CAI-MN

Calendar of Events

Thursday, September 17, 2015 International Market Square

24 Qualifying for a Community

CAI-MN Social Event: Wine Tasting

By Ron Ornatowski and Peter Santangelo, CMCA, Community Advantage, A Wintrust Company

Thursday, October 1, 2015

CAI National Course: M-206

Association Loan

27 Preventive Health Care Tips for Your Home

October 1 – 2, 2015

By Rick Rasmussen, Rasmussen Cleaning Service

CAI-MN Manager Seminar (1/2 day)

28 CAI-MN Tradeshow Turnout Is Tops

Tuesday, October 13, 2015

CAI-MN Manager Seminar (1/2 day) Tuesday, November 10, 2015

CAI-MN Social Event: Ugly Sweater and White Elephant Holiday Party

By Carin Rosengren, CAI-MN Communications, Committee Chair, Keller Property Management

30 How’s Your Hearing?

By Bob MacDonald, CMAC, AMS, PCAM

Thursday, December 3, 2015

CAI-MN Manager Seminar (1/2 day) Tuesday, January 12, 2016

For more information regarding an event, call the office at 651.203.7250 or visit the CAI-MN website. Online registration is available at www.cai-mn.com.

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

2015 Annual Partners Platinum Asset Exteriors Community Development, Inc. Sela Roofing & Remodeling Xtreme Exteriors Gold Benson, Kerrane, Storz & Nelson Community Advantage, a Wintrust Company FirstService Residential Gassen Management Hellmuth & Johnson Silver All Ways Drains American Family Insurance Jeff Mayhew Carlson & Associates Gaughan Companies Hammargren & Meyer PA Mutual of Omaha/CA Banc New Concepts Management Sharper Management Bronze American Building Contractors Clean Response Gates General Contractors, Inc. Levin & Edin Michael P. Mullen, PLLC TruSeal America LLC

Published by Community Associations Institute — Minnesota Chapter, copyright 2015. 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 Monte Abeler at montea@cai-mn.com, or at CAI–MN Chapter, 1000 Westgate Dr., Suite 252, St. Paul, MN 55114.

[ ADS ] All Ways Drains............................................. 15 Allied Blacktop............................................. 29 American Building Contractors.................... 29 American Family Insurance – Jeff Mayhew...... 15 Asset Exteriors............................................... 7 Benson, Kerrane, Storz & Nelson, P.C. ........ 26 Carlson & Associates, Ltd ............................. 6 Clean Response............................................ 12 Columbus Exteriors, Inc................................. 2 Community Advantage ............................... 19 Community Development, Inc..................... 13

Minnesota Communit y Living

Index of Advertisers

Final Coat Painting....................................... 27 FirstService Residential................................ 26 Gassen Companies....................................... 16 Gaughan Companies.................................... 29 Hammargren & Meyer, P.A. ........................... 4 Hellmuth & Johnson, PLLC.......................... 23 New Concepts Management....................... 23 Omega Management, Inc............................ 25 Plehal Blacktopping..................................... 19 Reserve Advisors.......................................... 15 Reserve Consultants, Inc. .............................. 4

Reserve Data Analysis, Inc. .......................... 29 Russo Consulting, Inc. ................................. 27 Sara Lassila, CPA Inc..................................... 29 Sela Roofing ................................................ 17 Sharper Management ................................... 6 Strobel & Hanson, P.A.................................. 15 Toohey Law Firm, P.A. ................................. 11 TruSeal America LLC.................................... 32 Xtreme Exteriors.......................................... 31

Carin’s Corner

Carin Rosengren | CAI-MN Communications Committee Chair, Keller Property Management

When Disaster Strikes

or the past several months, the Communications Committee has been referring to this edition of Minnesota Community Living as “the disaster issue,” of course working with the ultimate hope and goal that it won’t BE a disaster. And today, looking at the great lineup of contributing writers who helped fill this magazine, I think we can claim success. Consider the association(s) you manage or where you serve on the Board of Directors. Is your HOA prepared in the event a tornado takes a turn down your street? How about in the event of a fire, or a flood? What if there was an accident that took someone’s life? What would you take with you if you had to evacuate quickly? Do you have a plan? • “Everyone needs to be prepared for the unexpected and the unexpected will occur here in Minnesota.” This truth is found in Bob MacDonald’s wonderful article, “Personal Disaster Planning,” in which he shares personal stories and speaks from years of experience living and working in the Florida Keys. This is a must-read for anyone who wants to be ready to evacuate (or to hunker down with the basic supplies for survival) in the event of any kind of disaster. • Look locally for assistance in planning for disaster, as every city has resources that HOAs can use. Attorney Michael Klemm discusses gathering information, making a point of contact and evaluating your association’s potential strengths and weaknesses, in his contribution, “Coordinating Emergency Preparedness with Police and Fire.”

Minnesota Communit y Living

• In his article, “Disaster Preparation and Restoration,” contributor Russ Lis frames the issue in a succinct way: “The time for action is long before the disaster happens. The time to plan is NOW!” He gives FEMA’s four steps to get started, as well as a guide for actions to take after the disaster has passed. Lis also touches on an uneasy situation that managers easily can find themselves in — the ultimate disaster — when someone dies on your property. A restoration professional, Lis has solid tips on how to plan for this unexpected event. • Attorney Matt Drewes, in his article, “Mastering Disaster? How to Handle Insurance Claims,” offers a comprehensive look at the myriad aspects of a claim. This is a must-read to understand ways to protect your property and yourselves throughout this process, plus pitfalls to avoid when expecting an insurance company to cover the damages. • Remediation and restoration specialist Scott Clemente uses a real-life example as evidence in his article, “Managing the Aftermath of a Fire: Once the Fire Department Leaves, Your Work Has Just Begun.” The property manager’s job at this point can be quite complex, but attention to prevention and to response are two of the fundamentals of success. We hope you will find these stories compelling and informative. If just one person or community benefits from this series, I would consider it a job well done. As always, the Communications Committee wants our product to be useful. But with the disaster issue before you today, we hope this is information you will never have to use.

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Minnesota Communit y Living

Disaster Restoration Preparation By Russ Lis, CMCA, AMS, MAOM, ASD, WRT, FSRT | Restoration LLC

hroughout your life there are many things that you plan for. You try to structure your education so that you’ll have a fulfilling job. You may plan for a vacation for weeks or even months ahead. Maybe you’ll plan for the type of home you want, gathering blueprints, getting contractors lined up, choosing color swatches, etc. But unfortunately, many of us do not plan for disasters, whether they’re from natural causes or man-made. When they happen, you may hear people say things like, “But I never saw it coming,” and “We didn’t have time to react.” Well, the time for action is long before the disaster happens. The time to plan is NOW!

family will meet in case you get separated from one another. Depending on the type of emergency, this may be a location inside your home or in a completely different spot. Know how and when to turn off water, gas and electricity at the main switches or valves and share this information with your family. Have fire extinguishers ready and show everyone where they’re located and how to use them. Inventory your possessions and keep that list along with important documents in a safe deposit box. Keep your homeowners or renters insurance company’s telephone numbers readily available and make sure you understand the difference between actual cash value (ACV) and replacement cost value (RCV) for your contents. It’s also a good idea to have the contact information of a local disaster restoration company, or companies, at hand.

Assemble a Kit. This is a collection of basic family needs you’ll

need after a disaster. These should be stored in a portable container and be enough to last you three days. It’ll include food, water, a battery powered radio, a flashlight, etc. You can find a full list of items for your survival kit at redcross.org.

Maintain Your Plan. Every six months, review your plans with

your family, conduct evacuation drills and restock expiring food and perishables in your kit. Also make sure your fire extinguisher is recharged and smoke alarm batteries are replaced.

Planning

After the Disaster

According to FEMA, there are four things you should do immediately:

You never thought it could happen to you but it has. You now have damage to your home. As long as it’s not totaled, you need to take steps to protect your property from further damage by performing temporary repairs like boarding up windows and patching or covering holes in your walls and roofs as soon as possible. If you do not do this, your insurance company could deny any additional damages. Here’s a list of other things you should do:

Get Informed. Many communities have local emergency

management offices and/or a Red Cross Chapter. These organizations can give you information concerning any local emergency response plans, evacuation plans and emergency shelters. It’s also a good idea to invest in a NOAA Weather Radio that will alert you during any time of the day or night for when possible destructive conditions materialize.

Make a Plan. Have a family meeting to let everyone know what

your emergency plans are. Have an out-of-town contact, whose number is programmed into all cell phones and written down. This is the person you’ll call to let them know where you are after a disaster strikes. Teach your children how and when to call emergency numbers. Also, have a prearranged location picked out as the place your 8

Minnesota Communit y Living

• Take plenty of pictures to show how things looked before you started cleaning up and making repairs. • If your utilities are affected (water pipe breakage, gas leak, etc.), call your provider to have them shut off. • Keep detailed records of your receipts for any temporary repairs. • Just because some items may look like they’re a total loss, don’t throw them away until an insurance company representative has inspected them. • If there’s a lot of water in your home, try to get it out and ventilate the area to allow for drying. A disaster restoration contractor has the equipment to get this done quickly and thoroughly. The earlier you can get one started on the job, the less damage will occur (mold, rot, etc.) from lingering moisture. This means more of your possessions and more of the structure can be saved. • Be careful when signing repair contracts. Only work with local, trust worthy, ethical contractors whom you have interviewed and feel comfortable working with. When a disaster occurs many contractors from outside your community will attempt to get work because of the disaster your community has sustained. The best situation would be choosing your disaster restoration contractor before the disaster even occurs. This way you will be prepared in advance.

Call the police. Don’t touch anything and stay out of the property until the police arrive and they tell you that you can re-enter. The police will want to begin their investigation and preservation of evidence is extremely important when a death occurs.

2 3 4

Contact the next of kin. When speaking to family members, don’t speculate on the cause of death. Leave that to the police. Call the property owner, let them know what’s happened and keep them informed as new information becomes available.

Contact the property owner’s insurance company. Make sure that the restoration contractor you hire is qualified and licensed to complete this type of cleanup. In many scenarios the police and/ or fire department will be able to give you recommendations.

If it was a violent death the press will most likely contact you to give a statement; again, don’t speculate and pass on private information about the deceased. It’s never a bad idea to hire an attorney to give a statement, written or oral.

Once the police have done their job, make sure that the unit is completely secured by locking all doors and windows in order to protect the tenant’s personal property until it’s legally claimed by family members. Releasing any personal property will most likely involve a court order, so check with your attorney. Dealing with a disaster is never a fun situation. In Minnesota we deal with a variety of disasters — such as storm damage which could be from a hailstorm or wind damage, water damage, fires, tornadoes, deaths occurring in our homes, and many other things. By preparing now, in advance of the disaster, you will save yourself many headaches and make the process easier to navigate when it occurs. Every situation is different, but the time to get prepared is now. That means everything from preparing a disaster restoration plan to having a list of disaster restoration contractors ready to assist you if and when that disaster occurs.

The Ultimate Disaster — A Death Occurs One of the worst things that can happen is a death on your property. If it’s a friend or family member, it’s particularly devastating. Finding a dead body is very disturbing and can be a difficult thing to process for a long time. Because that situation is such a shock to the system, you may not make the best decisions about what to do at the time it occurs. You may never have to experience this, but since unexpected events happen to us all, it’s a good idea to have a plan ready for this emergency also. Here are a few guidelines to help you out.

Minnesota Communit y Living

Mastering Disaster?

How to Handle Insurance Claims By Matt Drewes | Thomsen & Nybeck, P.A., Attorneys

s we near the end of another Minnesota winter, it’s nice to think about warm spring and summer days. What we don’t prefer to think about are the storms that sometimes come with them. These storms have the potential to cause damage that is (or should be) covered by your property damage insurance policy. This article will seek to address some of the important points you should keep in mind the next time you hope to rely on the property insurance policy you purchased for your community association.

Time is of the essence The Board of Directors is usually charged with the duties to adjust insurance claims and to act in the best interests of the association. It’s important to take this role seriously or lapses could result in a claim the Board failed to fulfill its duty to preserve the property and property values of the members. Many insurance claims are denied or delayed because the insurance company believes it can argue the damage occurred before the policy period. Proving the damage occurred while your insurance company was “on the hook” becomes harder if you don’t report a claim promptly after damage occurs. A delay may also mean that reserves set aside to cover claims arising out of a particular storm may have been exhausted, or may no longer be set aside. There also are deadlines that apply to the claim adjusting process and to any necessary litigation that start from the date the damage occurs. All parties associated with a community association should be aware of the importance of reporting storm damage right away. If numerous branches or trees are knocked down, shingles have blown off, siding is loose, or you’ve seen significant hail stones, take a close look at areas that can be viewed safely, or have a professional assess building conditions. Investigate any reports of damage as soon as possible.

Play it safe: Protect yourself, and the evidence If the damage was severe enough, secure the property and the safety of your residents. Prevent further loss, if you can, by tarping the roof, drying up any water leaks, boarding up broken windows or doors, and restricting access to damaged areas. But also preserve the scene as best you can. Balance your obligations to mitigate (or avoid) preventable damage, but also to make the damage available for inspection. If it does become necessary to make repairs while the insurance company is processing the claim, communicate your intentions to 10

Minnesota Communit y Living

the insurance company first, and allow it to inspect the damage before you start. Document the work and your costs in securing, preserving, and repairing anything, as a part of your claim.

Gather or prepare important documents If you don’t have a copy of your entire property insurance policy, ask your insurance agent for one, including the declarations pages, “boilerplate” and endorsements. Make sure you have the policy that was in effect as of the date(s) of your loss. If you aren’t sure about your date of loss, begin investigating it as soon as possible. Obtain photographs of the damage, and any that pre-date the loss. You may need an expert’s report to show the date the loss occurred, and that it was due to a covered cause, to put the burden on the insurance company to disprove such facts. Consult a meteorologist, if needed, to confirm the suspected date of the storm. Get a contractor’s or adjuster’s estimate of the cost to repair the damage. Be sure your documents address issues like changes in code requiring additional work, or whether the products used can reasonably be matched. If do you provide any letters, documents, videos, photographs, or other materials to the insurance company, keep copies of what you sent and a record of when it was sent. When working with professionals, keep in mind that only insurance adjusters licensed to work with property owners (called “public adjusters”) and attorneys are authorized to negotiate with insurance companies on someone else’s behalf. Property managers may be able to facilitate the process by producing information, conveying the communications of the Board, or granting access to the property for insurance company representatives, but the industry has been under scrutiny lately for managers allegedly acting as adjusters without a license. Contractors are similarly constrained. The safer practice is to get someone involved in the process early on who is authorized to negotiate with the insurance company.

Choose your words carefully As early as possible, notify your insurance company of the claim. Most people contact their insurance agent, but the policy should provide a way in which you are required to report the loss. Submit the claim in writing and describe it carefully. If you have not completed your investigation and documentation, provide notice of the loss without speculating at details you don’t know. Insurance companies may focus on any technicality that might arise (reporting wind damage when there was hail damage, or an inaccurate date of loss) to deny or delay processing your claim. All that is required at this stage is the insured’s name, the policy number, the location of the loss, and a general description of the loss.

Mold is another example. It may be present if you have had water intrusion, but insurance companies often seek to deny (or limit) coverage whenever mold is present even though water intrusion might otherwise be covered. Referring to mold (or rot) might also suggest that the problem developed over time, or due to some other cause that isn’t covered, rather than a particular accident or “occurrence.”

The more you know It’s important to know your coverage, such as whether you’re entitled to replacement cost value (“RCV”) or actual cash value (“ACV”). Community associations should be covered for RCV. Generally speaking, this is the amount necessary to repair the damage using new materials. ACV is the value of the damaged property minus depreciation. Insurance companies customarily determine both values when adjusting a loss, and will provide the ACV initially until repairs are complete, after which the amount that was deducted will be paid to get to the full RCV. Insurance companies have tried to suggest that you must notify them within six months of the date of the loss if you want to receive RCV, otherwise they will be permitted to pay ACV. This argument has been rejected in at least the Minnesota Federal District Court, but you should specify you’re seeking RCV within the first six months anyway, just to be safe. Do not be misled by the confusing terms “independent adjuster” or “third-party” engineer. Independent adjusters are paid by insurance companies, and may be biased by their dependence on insurance companies for business. An engineer retained by the insurance company should be regarded in the same way. Insurance companies may also offer to send a contractor to estimate the repair cost, and to pay for whatever work that contractor recommends. Never assume these people are interested in helping you get an appropriate repair. It helps to know going in what an insurance company may argue about. Although it may say otherwise, your insurance covers any physical damage to covered property (i.e., your buildings) due to a covered event (like a storm) and is not limited only to “functional” damage. Also, if the products that are available do not match your existing materials (including a reasonable color match), a complete replacement is appropriate to ensure consistent appearance. An insurance company may also argue there are other causes for the damage, including improper construction, “mechanical” (i.e., manmade) damage, wear and tear, neglect, or product defects, when these terms usually are not defined in the policy. It may argue it doesn’t have to pay for repairs that comply with current code, when it does. Or it may argue that the damage occurred before the date you reported or before the date of your policy. You need to prepare and educate yourself so you aren’t susceptible to these arguments when they’re raised solely to deter you.

Cooperation and good faith The policyholder has an obligation to cooperate with the insurance company. But don’t let the insurance company get carried away. Examples of necessary (and appropriate) cooperation include 11

Minnesota Communit y Living

providing documents and granting access to the damaged property. You don’t have to go to the ends of the earth, or provide irrelevant information. Failure to cooperate occurs if you refuse to assist or impede the investigation in a meaningful way that undermines the insurer’s ability to adjust the claim adequately. One example of this cooperation, and a separate requirement under the policy and Minnesota law, is a proof of loss. Most policies require the insurance company to request it, but check your policy to be sure, because it sometimes is due within 60 days of the loss with or without a request. Typically it should be provided within 60 days of the insurance company’s request, and calls for the value of the insured property, any other party with an interest in the property, the cause and date of the loss, and any supporting documentation (like estimates, or engineer reports). Be prepared to complete this form as fully and accurately as possible. Arguably, there is no reason the insurance company should be harmed if the form is returned late, but you should get an extension (in writing) if you need more than 60 days. Also, prepare an amended or supplemental proof of loss if new damage or a change in repairs arises, or if repair costs change while the claim is in progress. A representative of the policyholder should also be made available if requested for the purpose of giving an “examination under oath,” in which the insurance company’s attorney may ask questions while a court reporter prepares a written transcript of the questions and answers. This process may be used as often as the insurance company may request. Typically, however, only one person must be produced for this, unless there is an additional named insured involved (which may include the property management company). A lawyer may be present to represent the party being examined, or to help prepare beforehand, and the testimony can be used if there are later legal proceedings. If the insurance company wants to send people to visit the site, facilitate the inspection, but you are entitled to find out who will be there, why they’re there, and what they plan to do. You’re also allowed to monitor the inspection and to have your own representative(s) present. Continued on page 12

Vigorous, cost-effective community association representation and outstanding customer service

Jennifer C. Toohey 763-746-0845 | tooheylawfirm.com

Mastering Disaster Continued from page 11

Good faith is a two-way street. Isn’t it? There are statutes that are supposed to regulate “unfair service” by insurance companies, including lists of standards for handling and settling insurance claims. However, the Minnesota Supreme Court has held that private parties can’t sue insurance companies based on non-compliance with these statutes. You can report your insurance company to the Minnesota Attorney General or Insurance Commissioner’s office, who are authorized to oversee compliance with these laws, but this rarely has the effect people hope to achieve. Often, when the claims process isn’t working, the policyholder is on its own to pursue the proper remedy. If this is where you find yourself, be aware that most insurance policies require the insured to bring any lawsuit against the insurance company within two years from the date of the loss. Some policies say one year. The statutes do not provide an exception if you get bogged down in the alternative dispute resolution processes required under most policies, so don’t assume this will postpone the lawsuit deadline.

available replacement materials are an appropriate match for the existing materials. Appraisal awards are subject to court review, but the review generally will not result in a change to the panel’s determination of the amount of the loss, and is intended to ensure the panel correctly applied the terms of the policy.

There ought to be a law There also is a statute that purportedly gives insureds a claim for an insurer’s bad faith handling of claims. Unfortunately, the statute was badly flawed when it was passed in 2008 and the legislature hasn’t bothered to fix it. It requires a showing that the insurer unreasonably denied coverage and that it knew its position was unreasonable or acted in reckless disregard for its lack of a reasonable basis for its position. The statute also limits the relief for such bad faith to one-half the difference between what the insured recovers and what the insurance company offered, or $250,000, whichever is less, plus attorneys’ fees of no more than $100,000 as long as they were incurred solely for the purpose of establishing a violation of the statute. Other limitations apply to the statute as well, further impairing its effectiveness.

Often, when the claims process isn’t working, the policyholder is on its own to pursue the proper remedy.

For example, Minnesota law requires insurance policies to provide for “appraisal” to resolve a dispute about the amount of the loss, and provides that either party may demand that appraisal be used. Our state Supreme Court has now also effectively mandated it before filing a lawsuit when the amount of the claim is in dispute. In appraisal, each side picks an “appraiser,” and the two appraisers pick an “umpire,” who together form a three-member panel. The appraisers and the umpire are to be qualified and neutral, so you can’t pick the contractor who is going to do the work to be your appraiser. You can’t even pick someone who has been out to view the property with you without other members of the panel present. The umpire should determine the manner in which the appraisal is conducted. Usually the appraisal panel inspects the property, and then it is to accept whatever information either party wants to provide it (within reason). The appraisers are supposed to try to agree on the “amount of the loss,” and if they can’t agree the umpire is to decide. Any two members of the panel can together determine the amount of the loss. Appraisal panels are not supposed to make “coverage” determinations, which means they shouldn’t interpret what is or is not covered by the policy. That is a question for the courts. However, recent cases have held that the amount of the loss can be determined based on the policy language, including what caused the damage (i.e., was it hail or a loose nail that damaged the shingle), and whether the amount of the loss should be the cost of making a proper repair. This involves an evaluation of whether 12

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Conclusion The insurance claim process can be lengthy and daunting. But if you prepare yourself well, protect your property, assemble a good team of experts and advisors, gather important documentation, facilitate the insurance company’s investigation without being intimidated, and pursue your claim in the right way, you can still make it through when a disaster does strike.

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 attorney focusing on community association law when making decisions regarding a specific legal issue.

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Personal Disaster Planning By Bob MacDonald, CMAC, AMS, PCAM

ugust 22, 1992, all was quiet in the Florida Keys but a hurricane was approaching from the east—one named Andrew. It was not supposed to hit the mainland but it did. And, unfortunately, my wife and I were not totally prepared for what was about to occur two days later. So, we packed up early on the morning of August 23 and headed to Homestead where we unfortunately stayed in a home that ended up being in the direct path of the eye of the storm. Unfortunately, like so many others, we were not totally prepared for the pending disaster. As a Community Association Manager in South Florida, I was told that I should have the following mindset when it came to Hurricane Season; don’t plan as “if ” a hurricane might hit land. Rather, think about “when” it will happen. The reality was and is this; a hurricane will, at some point in time, make landfall anywhere you live in South Florida. It’s inevitable and every family needs a plan. When Mary and I evacuated for our first hurricane, Andrew, we were not properly prepared. This did not happen again and we evacuated the Keys a couple of times a year over the 9 years that we lived in Key Largo. Everyone needs to be prepared for the unexpected and the unexpected will occur here in Minnesota. Count on it! Your friends and family may not be together when disaster strikes. How will you find each other? Will you know if your children or parents are safe? You may have to evacuate or be confined to your home. What will you do if water, gas, electricity or phone services are shut off? Bottom line, you will need a plan, one developed before a disaster occurs, not in the midst of the storm. After Hurricane Andrew passed and some sort of stability returned to our lives the first thing Mary and I did was to put together a “disaster supply kit.” The purpose of this article is to encourage each of you to do the same. In Minnesota we are faced with a number of varying seasonal disasters such as tornadoes, flooding and blizzards; remember the Halloween Blizzard of 1991? Clearly, this was a disaster.

Whether a person lives in Florida or Minnesota a basic emergency supply kit should contain the following1: • Water, one gallon of water per person per day for at least three days, for drinking and sanitation • Food, at least a three-day supply of non-perishable food • Battery-powered or hand crank radio and a NOAA Weather Radio with tone alert and extra batteries for both • Flashlight and extra batteries • First aid kit • Whistle to signal for help • Dust mask to help filter contaminated air and plastic sheeting and duct tape to shelter-in-place • Moist towelettes, garbage bags and plastic ties for personal sanitation • Wrench or pliers to turn off utilities • Manual can opener for food • Local maps • Cell phone with chargers, inverter or solar charger • Disposable diapers if you have young children • And, from personal experience, a tire repair kit and a pump (After Hurricane Andrew, the streets were strewn with roofing nails that flattened innumerable tires) • Candles • Matches • And finally, since we are Minnesotans, some SPAM We who love Minnesota are not too concerned about being affected by a hurricane, but we face tornadoes and major winter events that often involve lots of snow and the loss of power in frigid weather. Each year, hundreds of Minnesotans find themselves stranded on the roadside during the winter. Winter weather can kill in mere minutes an unprepared person exposed to the elements. Although this might not rise to the same threat level as a hurricane, death from exposure is a reality. Knowing this, winter disaster preparedness is a must. In fact, the Minnesota Department of Public Safety annually reminds us to carry a variety of items in our car such as booster cables, a shovel, scraper, sleeping bag, warm clothing, basic tools and flares. For more information on making a winter driving survival kit, go to the Minnesota Department of Public Safety Homeland Security and Emergency Management website. 2 Besides having an emergency supply kit it is recommended that copies of all important documents be placed in one briefcase, 1 http://www.nhc.noaa.gov/prepare/ready.php 2 https://dps.mn.gov/divisions/hsem/weather-awareness-preparedness/Documents/ WinterSurvivalInYourCar.pdf

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Personal preparedness includes being ready for summer or winter emergencies at home, in your car, or anywhere else you may spend time.

preferably one that is water tight. Each time Mary and I evacuated the Keys, this was the first thing I threw in the car. Here in Minnesota we continue to follow this advice. This case should contains such items as: • Mortgage papers • Title insurance • Birth certificates • Marriage certificate • Pictures of the interior and exterior of your home, including pictures of all valuables • Auto and life insurance policies • Vehicle information — registration and loan information, if applicable • Passports • All “plastic” cards

Personal preparedness includes being ready for summer or winter emergencies at home, in your car, or anywhere else you may spend time. “Being prepared can reduce fear, anxiety, and losses that accompany disasters. What you do now can help you and your family better respond to and recover from any disaster or emergency, as well as contribute to the overall readiness of your community.”3 When disaster strikes, according to the Humane Society, “the same rules that apply to people apply to pets: Preparation makes all the difference, and if it’s not safe for you, it’s not safe for them.” So, as part of your disaster planning process, take the time to think about what you will do with your pets. The Humane Society has a mobilefriendly checklist that will help you assemble an emergency kit for your pet.4 In summary, first MAKE A DISASTER PLAN. Plan knowing that a disaster will happen and it will affect your community as well as yourself. Once you are confident that you and your family are ready for any emergency, help others do the same. Keep in mind that you may need to help a community recover and rebound quickly following any emergency. Second, PUT TOGETHER A BASIC EMERGENCY SUPPLY KIT. When you have to evacuate, your life and future may depend on it. Trust me, I’ve been there. 3 https://dps.mn.gov/divisions/hsem/planning-preparedness/preparedness/Pages/ personal-preparedness.aspx 4 http://www.humanesociety.org/issues/animal_rescue/tips/pets-disaster.html

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General Counsel for Associations:

Construction Defect Representation

Einar Hanson Benjamin Kirk

651-222- 0109

All of our studies now include ForeSite™

www.strobelhanson.com

www.reserveadvisors.com (855) 575-1121

Coordinating Emergency Preparedness with Police and Fire

omeowners associations that desire to be prepared have valuable resources in their local police and fire departments. Three ways to enhance safety and emergency preparedness are: (i) compile information, (ii) establish a point of contact and (iii) participate in safety and emergency preparedness programs appropriate for your common interest community.

By Michael Klemm | Dougherty, Molenda, Solfest, Hills & Bauer P.A.

Information can make the difference between life or death in an emergency. Public safety personnel can do their job best if they receive accurate information about the people and the property as soon as possible. For example, in the event of a fire, it may be helpful to provide floor plans, the number of residents, and information about children or people with disabilities. Establishing a point of contact before an emergency occurs facilitates communication. In some cases, police or fire personnel need to provide information to unit owners or occupants, and it is helpful if they have contact information for a representative of the association. From the association’s perspective, it is important to designate someone to compile information and take the initiative to establish communication with emergency responders.

• • • • •

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Many police and fire departments offer safety and emergency preparedness programs, such as neighborhood watch, crime-free multifamily housing/ condominium programs, and fire safety workshops. Associations may also request assistance evaluating their property for safety and security issues related to doors, windows, locks, exterior lighting, landscape maintenance, fire safety and emergency plans. The city website is a good place to begin exploring resources available through police and fire departments. However, I recommend calling your local police or fire department’s non-emergency number to make a connection and find out what they recommend for your association.

Minnesota Communit y Living

Managing the Aftermath of a Fire

Once the Fire Department Leaves, Your Work Has Just Begun By Scott Clemente | ServPro

ur company recently began restoration services on a home damaged by a significant kitchen fire. The morning after it happened I walked the property with the homeowner to scope out the project and get the necessary paperwork signed. I then went to another meeting and returned to my office about three hours later. In the three hours I was out, eight different people had left me messages relating to the fire. There was a message from the Fire Marshall telling me that they had released the scene, one from the homeowner’s insurance company and one from the HOA’s insurance company. Then there were messages from the independent adjusters each company had assigned, one from a cause and origin specialist and one from the community manager asking for a status update. Finally there was one from the homeowner with some follow-up questions from our meeting. The point is that managing the aftermath of a fire loss is a complex job. Many are stakeholders involved, plus an emotional family who has probably just lost some of its most important possessions. If not properly prepared, the job of managing the restoration and rebuild can overwhelm you as a community manager and become a full time job on its own. To avoid this pitfall it is important to have a plan and system in place before a fire happens. To do that, there are two areas to focus on: Prevention to keep a fire from happening and then the Response plan to limit the damage to your customers’ homes and the disruption to their lives.

Prevention It is easy to put the idea of a fire in the category of “Well that would never happen here,” but the reality is fires happen every single day in Minnesota. According to the State Fire Marshall’s report, in 2013, there were 6,330 structural fires in the state which caused over $220 million of property damage. To put that in perspective, that is over $600,000 of damage caused every single day! As a community manager, there are several things you can do to help prevent becoming part of these statistics:

1 Educate Homeowners:

This can be as simple as putting an insert in community newsletters that outlines a safety checklist or providing seasonal information (keeping Christmas trees well watered).

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a fire officer to come address the 2 community: Invite

Local fire departments will be more than happy to send out a department member to talk to your community about the dangers of fire and how to be prepared.

your grounds so that if a fire occurs 3 itMaintain doesn’t move from building to building:

Make sure there is a buffer between the buildings so the fire can’t “jump.” To do this, remove any large bushes or trees that are up against multiple buildings. Trim down any large bushes that have become overgrown and prune branches that are within six feet of any rooftops. Finally, any dead trees should be removed from the property as soon as possible.

Response Despite your best efforts, fires will still happen. When they do, your response will go a long way to not only helping your customers but displaying your value as the community manager. There are several things you will need to address in the aftermath:

1 Mitigation/Restoration Vendors:

Companies like ours will respond to a fire to begin mitigation and restoration efforts as soon as possible. This includes everything from restoring the contents, clothes and electronics for the homeowners to cleaning and restoring the structure. In choosing a vendor, you should consider: Response Capabilities — Do they have the resources to respond to a loss regardless of the size? Do they have the ability to secure the property via a board-up if needed? Response Time — How quickly will they be on site in the event of a fire? Customer References — Who have they worked with in the past and how have they performed? On-site Technicians — Who will be showing up on site at your customers’ homes? Are they full-time employees or does the company use temporary laborers? Are they certified in Fire & Smoke restoration by the IICRC? Once you have chosen your vendors, make sure it is clear who the contact person is and that they are personally available 24/7. You don’t want to be dealing with a call center at two in the morning after the fire department leaves.

2 Limiting the damage to the property:

After the fire, there are several things you can do to limit additional damage to the property and any adjacent units. Limit movement around the property. The soot from a fire can be severely corrosive to everything it touches. A fire contained to a kitchen can quickly cause damage to other rooms if homeowners track soot from room to room. Protect the HVAC system. The soot left over from a fire and the smoke particulates that linger in the air can destroy HVAC systems. To help limit this secondary damage, you can put cheese cloth over the registers to help filter the soot. You should also change filters that are part of the heating/cooling system daily for the first week. Communicate to homeowners. This is the biggest issue we see after a fire. As outlined in the first paragraph of this article, even for a small fire, many people will be involved in its aftermath. If not properly managed, you will find you will have a new full-time job answering phone calls and emails from upset homeowners and other stakeholders. Specifically, make sure you cover the following: 1. Which insurance companies are covering what? Policies differ with HOAs and the homeowners will more than likely not be aware whether they are responsible for structure or not. Make this clear as soon as possible to avoid misunderstandings. 2. In a multi-family building, send an email to all owners letting them know about the fire as soon as possible. Unaffected units several floors away may still smell the smoke and start asking questions.

We started Community Advantage because we knew condominium, townhouse and homeowners associations had a unique set of financial needs. Fifteen years later, we are one of the Midwest’s leading industry providers. That’s because, while other financial companies may offer some services to these groups, this is our focus. We understand no association is the same, so we work to tailor services for each individual association’s needs. But, we also ensure that each group has access to a full suite of financial resources, including reserve investments, lending solutions and treasury management services. Our Trusted Industry Experts have the experience and dedication to offer an unmatched level of customer service. THAT’S PART OF OUR STORY.

3. Post notices/send emails informing homeowners of the vendors that will be on site so they know people will be in the building. In summary, managing a fire loss can be an incredibly complex and lengthy process. Being prepared beforehand and having a plan in place for the aftermath will help you effectively manage the loss and ensure that you don’t have to neglect all of your other properties to do so!

CALL RON AT 952-835-2780 OR emAiL Him AT RORNATOwSki@COmmUNiTYAdvANTAge.COm FOR mORe iNFORmATiON.

110 W. Palatine Rd, Ste. 2 | Palatine, IL 60067 5001 American Blvd. W., Ste. 1000 | Bloomington, MN 55437 847-304-5940 | www.communityadvantage.com

Community Advantage is a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank.

Minnesota Communit y Living

March | April 2015

Highlights of the 2015 CAI-MN Calendar of Events

Regular Meeting Date Hit a Holiday? When the snow cover is gone and winter festivities fade into memory, property managers and board members can be faced with a unique seasonal task: reminding their

The 9th Annual CAI-MN Golf Tournament will take place on August 10, 2015 at Midland Hills Country Club.

straggling homeowners to remove the wreath from the door and lights and decorations from the roofs and trees. After all, now is the time to pay bills from the recent

The Social Committee is working hard to get more people involved in CAI on a fun level by planning several Social Events!

holiday and look forward to the next one! Maintenance issues aside, it can be helpful to have a

CAI-MN is holding its 2nd Annual Charitable Outreach Silent Auction on April 23, 2015, at Jax Café in Minneapolis from 2 to 4 PM. The organization’s charitable partner is Minnesota Adult & Teen Challenge. All proceeds (sponsorship, silent auction, and registration) go to Minnesota Adult & Teen Challenge. APRIL 23••••••• CAI-MN Charitable Outreach Silent Auction APRIL 29 – May 2•••• CAI National Conference in Las Vegas JUNE 10•••••••••• Social Event: Twins Game Baseball Outing JULY 16••••••••••••••••••••••••••• Social Event: Boat Cruise

schedule of holidays and observances on-hand as you plan events and schedule board meetings in 2015. Of course, not every holiday will apply to all of the owners and residents in your association, but it’s important to be respectful of major dates that may be important to some. By no means intended as a complete listing (and excluding those that fall on a weekend), here are some of the known holidays in 2015 that might conflict with a weeknight meeting or event: • Thursday, April 2 – Maundy Thursday (Christian) • Friday, April 3 – Good Friday

AUGUST 10• •••••••••••••••••••••• CAI-MN Golf Tournament SEPTEMBER 17•••••••••••••••••••••••CAI-MN Vision Awards OCTOBER 1•••••••••••••••••••••• Social Event: Wine Tasting

(Christian) • Monday, April 6 – Easter Monday (Christian) • Thursday, May 14 – Ascension Day (Christian)

OCTOBER 1–2•••••••••••••••••• CAI National Course: M-206

• Monday, May 25 – Memorial

OCTOBER 13•••••••• CAI-MN Manager Seminar (1/2 day)

• Thursday, June 18 – Ramadan

NOVEMBER 10••••••••••CAI-MN Manager Seminar (1/2 day)

• Monday, July 13 – Lailat al-

Day (national holiday)

starts (Muslim)

Qadr (Muslim)

DECEMBER 3• •••••••••••••••••• Social Event: Holiday Party

• Monday, Sept. 7 – Labor Day (national holiday)

JANUARY 12••••••••••••CAI-MN Manager Seminar (1/2 day)

• Monday/Tuesday, Sept. 1415 – Rosh Hashana (Jewish holiday) • Tuesday/Wednesday, Sept. 22-23 – Yom Kippur (Jewish holiday) • Monday, Sept. 28 – Sukkot (Jewish holiday)

Minnesota Communit y Living

• Tuesday, Oct. 6 – Simchat Torah (Jewish holiday) • Monday, Oct. 12 – Columbus Day (national holiday in 33 states) • Thursday, Oct. 15 – Muharram (Muslim) • Tuesday, Nov. 3 – Election Day • Wednesday, Nov. 11 – Veterans Day (national holiday) • Thursday, Nov. 26 – Thanksgiving Day (national holiday) • Monday, Dec. 7 – Chanukah/ Hanukkah, first day (Jewish holiday) • Monday, Dec. 14 – Last Day of Chanukah (Jewish holiday) • Thursday, Dec. 24 – Christmas Eve (Christian) • Friday, Dec. 25 – Christmas (Christian) • Thursday, Dec. 31 – New Year’s Eve (Observance)

Save the Date! Please join us for the 2015 Annual Vision Awards on September 17, 2015! Recognize those outstanding in the community association business! Nominate someone—or an association—for a Vision Award today: www.cai-mn.com/nominate

Save the Date! CAI-MN 2015 Vision Awards

International Market Square Nomination Information Available now at www.cai-mn.com

This issue’s focus: Community Management Community Management is part art, part science—and part professional experience. Three Vision Awards recognize community management personnel: The Community Management Professional Award recognizes those

professionals who, through their excellence, enable community managers to do their jobs even better!

Gala Sponsor:

Jubilee Sponsor: Community Development Inc. CAI/CAI-MN Event

Nominees for these awards may include any community management professional other than community managers. Recognition is given to a community management professional who displays integrity; reliability; commitment to the industry; loyalty to consumer clients and the ability to interact well with board members, managers, service providers and other industry professionals. Promotion of ethical conduct and competence are included as part of the qualifications for this award.

Community Managers, of course, are those magicians that keep everyone happy: owners, Board members, vendors...everyone. Time and again, they share their experience and expertise with their associations, helping them operate effectively and efficiently. The Excellence in Service Award

recognizes a community manager who displays integrity; reliability; commitment to the industry; loyalty to consumer clients and the ability to interact well with board members, managers, service providers and other industry professionals. Promotion of ethical conduct and competence are included as part of the qualifications for this award. The Financial Impact Award recognizes

a community manager who has positively impacted a community in a significant manner from a financial standpoint. A nominee for this award might, for example, have been instrumental in helping an association complete a capital improvement project on (or under) budget, or may have helped an association work through the complexities of a major insurance loss. The nominee may simply have recognized areas in which an association could realize savings, helping the association survive a budget crisis or weather an unforeseen but necessary expenditure without “breaking the bank.”

New time of year!

September 17, 2015

Weekday Holidays

2015 CAI-MN Events Calendar

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Ask the Attorney by

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 as prior questions, can be found on the CAI-MN LinkedIn page: www.linkedin.com/ groups?gid=1769135

My association has obtained judgments against homeowners who did not pay their assessments, but we have not done anything else. Is there anything we can do to collect these judgments? We are noticing a trend away from personal judgments and back towards foreclosure for association collections. This is due to the recovering economy and the slowdown in mortgage foreclosures. When the mortgage companies were foreclosing at a higher rate, associations needed to turn to personal judgments to collect delinquent assessments due to the liens being extinguished by the mortgage foreclosures. Now that the mortgage foreclosures have slowed, associations are more frequently choosing assessment lien foreclosure as the preferred means of collecting delinquent assessments. However, many associations are still sitting on judgments that they obtained over the past several years. The collection process should not stop once judgment is obtained. As a judge in Hennepin County is known to say, â&#x20AC;&#x153;A judgment is just a piece of paper that says one person has to pay another person a sum of money.â&#x20AC;? The payment does not occur automatically, and often an association will often be required to take further steps to collect on the judgment.

Information In order to collect a judgment, some basic information about the debtor must be known. The best information is often where the debtor banks or works. If the association has checks that the debtor used to pay assessments 22

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previously (always keep copies of checks for this reason!), or knows where the debtor is employed, it is in a good position to start collection. However, if that information is not known, your attorney can issue a Demand for Disclosure. The Demand is an order from the court requiring the debtor complete a Financial Disclosure Form (FDF). The FDF requires that the debtor disclose current banking information, employment information (location and salary), real property owned (including estimated value and amount owing on the property), as well other collectible assets such as vehicles and investments. The homeowner is required to complete and return the FDF within 10 days of receipt. Failure to do so leads to an Order to Show Cause (OTSC) hearing where the debtor will be required to explain to a judge why he/she failed to complete the form. If the homeowner appears at the OTSC hearing, which is rare, they usually complete the disclosure form in the presence of the court. However, if the homeowner fails to appear for the OTSC hearing, the judge will find them in contempt of court and issue a warrant for their arrest. Some counties will actively pursue these individuals, while other counties will simply wait until the individual is stopped for another reason (most commonly a traffic stop) and arrest them at that time. Upon arrest, the individual, after being booked, is able to complete the disclosure form, or pay bail.

Bank Levy If the association has bank account information, or even just the bank name, its attorney can levy the accounts held by the debtor. Notice is not provided to the debtor first, as that would allow them to either change banks or empty the account. Therefore, the bank, upon receipt of the levy notice, will freeze the account. All funds in the account at that time will be held for a period of 14 days. During this period,

Nigel H. Mendez, Esq. | Carlson & Associates, Ltd.

the account holder has the opportunity to produce documentation showing that the funds being held are exempt from levy. The most common exemption is for government benefits (Social Security, Medicare, etc.) Once the hold period has expired, and the exemptions have been sorted, the remaining funds, up to the amount of the judgment, are released to the association. A bank account can be levied repeatedly, but if you succeed in obtaining funds via a second levy, the debtor will usually wise up and change banks preventing a third levy of the same account. If a bank account is closed, a new FDF can be issued to ascertain the new bank information.

Wage Garnishment If you donâ&#x20AC;&#x2122;t have bank information, or are not able to obtain enough to satisfy the judgment via a levy, the association can garnish wages. Prior to starting a wage garnishment, a notice must be sent to the debtor stating that a garnishment will be starting in ten days. This gives the debtor a chance to satisfy the judgment prior to his/her employer being notified about the situation and also provides an opportunity for the debtor to claim that his or her earnings are exempt from garnishment. If the judgment is not satisfied after the ten day period, garnishment documents are sent to the employer. The employer is required to withhold a portion of each paycheck for the following 70 days. The exact amount is calculated based on the number of hours worked, pay rate, and other garnishments that may be pending. The law requires that the employer hold all funds for 70 days and then remit the holdings to the the association. However, in practice many companies will send the association a check each pay period rather than wait until the end of the 70 days. In addition, the garnishment is meant to be re-submitted by the association every 70 days, but if the judgment amount is not satisfied, many companies will simply keep garnishing the debtor until they are told to stop. Your

attorney should be sure to track how much money is garnished as there have been occasions where I have seen a garnishment continue after the judgment amount had been satisfied. Excess funds should be returned to the employer with instructions to cease the garnishment.

Other real estate

To have a question answered in a future article, please email it to me at nmendez@carlsonassoc.com with the subject line “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.

Judgments will automatically attach to all abstract real property held by the debtor in the county where the judgment was issued. Torrens (registered land) parcels need to have the judgment memorialized on the certificate of title. It is often worth doing this, so that if the debtor attempts to sell or refinance any of his/her properties, the association’s judgment must be paid. If the debtor has real property in other counties, the judgment can be transcribed to that county to ensure it attaches to those parcels as well. Judgments will remain valid for ten years from the date of entry, and can be renewed for successive ten year periods. Judgments obtained by your association don’t just have to sit on the books — take action to collect!

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We’re the pillar of your association. Very few law firms in Minnesota even practice in this area of law, much less wield the talent we bring to it. In any measure of ability – from years of experience, to leadership in state and national organizations, to the size and diversity of our client portfolio – our attorneys’ knowledge of community association law places Hellmuth & Johnson in a community of one. Our clients benefit from our experience in the following areas: Collection of Association Fees • Judgment Collections • Construction Defects & Warranties Property Insurance • Claims Enforcement of Covenants and Rules • Foreclosure of Liens

On your side. At your side.

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8050 West 78th Street Edina, MN 55439

Qualifying for a Community Association Loan By Ron Ornatowski and Peter Santangelo, CMCA | Community Advantage, A Wintrust Company

ccording to the IBOPE Zogby International 2012 survey on Community Associations:

• 62 million Americans live in an estimated 315,000 association governed communities • Seven out of ten residents are satisfied with their association living experience • Residents rated their community experience as positive where they believed: 1. Association board members strive to serve the best interest of their communities 2. The association rules protect property values and they value the return received on their association assessment payments Elected association board members have the fiduciary responsibility to protect and enhance the association common elements and unit owner’s investments, by maintaining and preserving the property values of the community. In order for the Board to maintain the association’s property value, they may contract to have a Reserve/ Engineering Study completed to define to the Board/Unit Owners the nature, timing, and cost of future capital replacement projects and assessment dollars needed for each project. In difficult economic times, boards and unit owners are reluctant to raise assessments for future replacement projects and frequently delay projects in order to raise the necessary funds. This increases the probability that repair costs for the later “fix” will be greater due to the problem becoming broader and deeper (or as our grandmothers always told us; “An ounce of prevention is worth a pound of cure.”) In a capital replacement project, boards and unit owners have the following options: • Pay for the project from the accumulated reserve dollars 24

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• Implement a special assessment • Obtain a commercial bank loan • Or a combination of any of the above options Paying for the capital replacement project from accumulated reserves dollars based on the reserve study is the best option, as dollars are set aside over time. The yearly reserve assessment increases are smaller and less of a burden on the unit owners to pay for the replacement projects. Special Assessments are usually implemented when there is a shortage of reserve dollars to pay for a capital replacement project and unit owners are given a limited period of time to pay their portion of the project cost. If the Special Assessment is large, this may place a burden on unit owners who are unable to pay the one-time assessment charge and default on their payments, which places additional stress on the association in trying to complete and pay for the project. With a commercial bank loan, the capital replacement project is completed in a short period of time, the unit owners are not burdened with a one-time large assessment payment and are able to spread their portion of the project cost over time. There will be an increased cost to the project due to interest payments; however, this still may be more palatable to the unit owners than a one-time large Special Assessment payment. If the board decides to borrow dollars to complete a capital replacement project, a Community Association Lender will look most favorably (the best loan terms) to boards and unit owners that are proactive, well prepared and meet all the bank guidelines. Community Association Lenders may require the following information: • • • • •

Average unit market value Number of units Delinquent payment of assessments Contingencies for bad debt Assessment levels

• • • • •

Owner occupancy ratio Insurance Present and pending lawsuits Repayment plan Reserve funding

An association should surround itself with qualified professionals to ensure the project goes smoothly and is completed correctly. The lender will need to understand how the scope of work was identified, the duration of the planned repairs, and the process for selecting the professionals to complete the projects. Prior to loan approval, the lender will require copies of the executed contracts for the work to be performed. Depending on the size of the project, an independent engineer or architect may be required to supervise the project and approve all advances on the loan and payouts to contractors. Average unit value and number of units is taken into consideration to determine if the size of the loan requested meets the bank’s guidelines. For example: • A 50 unit building requests a $1,000,000 loan • The units are valued at $100,000 each • The assessment per unit would be $20,000 (20% of its value), which the bank may consider high. Assuming a 5 year repayment, the amount due per unit would be about $333 per month, which does not include interest, regular assessment or mortgage payments. Such an expense has the potential to monetarily stress unit owners, which may increase delinquencies and cause the association to default on its loan. To prevent this, it is imperative that associations reserve funds for future capital expenses to reduce or eliminate the need for a loan. If an association has reserves and is able to fund 50% of the project, this reduces the financial impact to owners and increases the probability of acquiring a loan.

Collateral for a community association loan is the assignment of future assessments of the association. Most lenders have internal guidelines regarding delinquent assessments that associations must meet, to both qualify for a loan and maintain while the loan is in place. Typically no more than: • 5% - 10% of the total number of units can be delinquent on assessment payments • 5% - 10% of the annual assessment income Prior to obtaining a loan, an association should establish a delinquency collection policy and adhere to it. The association’s assessment income is the bank’s source of repayment so the association must be diligent about collecting all assessments. Delinquent accounts should be turned over to the association’s attorney as the association’s delinquency collection policy allows. Associations with high delinquencies may not be able to secure a loan. Associations considering whether or not to take out a loan should incorporate a reserve for bad debt into their operating budgets. In the event of non-payment or late assessment payments, this reserve will help to ensure the association has sufficient cash flow to meet debt and operation obligations. The board should determine the number of non-owner occupied units and what is currently allowed by association policy. The lender’s guidelines for non-owner occupied units range from 20% to 30% of the total units. Community associations are also required to carry adequate insurance per Minnesota Statutes governing Common Interest Communities. The lender will require proof of adequate insurance as a condition of the loan. Insurance will be required to be maintained while the loan is in place and the lender will require that it be added to the policy as additional insured or loss payee. Boards should review their insurance levels annually with a qualified association insurance professional.

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Litigation against the association is also reviewed by the bank. As plaintiff or defendant, an association that is a party to a lawsuit complicates matters for owners trying to buy or sell units and can inhibit an association’s ability to obtain a loan. Lawsuits against the association may impact the ability to repay its loan due to increased or unbudgeted legal fees and the potential for a monetary settlement payout not covered by insurance or reserves. Association boards should act to resolve lawsuits in order to focus on day-to-day operations of the association. Community Association Lenders vary in documentation they require, their evaluation processes, and loan terms. Lenders with dedicated association staff, broad experiences, and strong portfolios are generally the easiest to work with and can guide you through the process. Associations considering a capital replacement project should contact a Community Association Lender early in the process, to acquire guidance and options in financing. This will aid in ensuring the loan is acquired in an expedient manner. Community Association Lenders know that association boards with strong leadership, that are well managed and proactively plan, demonstrate to the unit owners that the board members are exercising their fiduciary duty to ensure the financial integrity of the association and property values.

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Preventive Health Care Tips for Your Home By Rick Rasmussen | RasmussenCleaningService.com

reventive health care for you and your family is being recommended more and more by medical professionals and is discussed frequently in the news. But did you know that your own wellbeing is closely intertwined with your home’s state of health? The indoor air we breathe has become an increasingly important health factor since, according to the EPA, it is up to 70 times more polluted than outdoor air. Add to that the fact that most people spend 60-90% of their time indoors and taking care of the health of your home is clearly not something to be ignored. Get a better glimpse into how much your home impacts your health by considering these stats: • 50% of all illnesses are either caused by or aggravated by polluted indoor air (American College of Allergists) • 1 of 6 people who suffer from allergies do so because of the direct relationship to fungi and bacteria in the duct systems where they spend their time (Better Health Magazine) • an average 6-room house collects 40 pounds of dust each year (Discover Magazine) Heating and air conditioning systems act in a respiratory function much like your lungs. Air is brought into your house, conditioned or filtered, and then distributed throughout the building. It needs to be cleaned on a regular basis to keep your house in optimal overall health. This type of cleaning is especially important when: • family members have allergies, asthma or similar respiratory issues • you experience symptoms like headaches, nausea or burning eyes, nose or throat when inside the home • your family has any pets • you discern any odors when the HVAC system is used 27

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Other clues that your home may need a health check-up include seeing regular dust on the furniture and not getting enough airflow from vents. The use of standard replaceable fiberglass furnace filters doesn’t by itself ensure a high quality of air. When accumulated dirt and dust is exposed to a certain level of moisture, a home’s air duct system can actually become a breeding ground for a significant health concern: mold spores, bacteria, fungus or mildew. Preventive air care and sanitization for your home is much more cost effective than trying to rid your house of these adverse contaminants after they have settled in. Indoor air quality also directly impacts the health of the carpet, as does foot traffic of both the two-legged and four-legged kind. On a daily basis your carpet absorbs and holds crumbs, spills, odors from pets, cooking and smoking as well as tracked-in residues, so a semi-annual deep cleaning, deodorizing and sanitizing of your carpet is a must. Steam cleaning equipment does the most thorough job without leaving any soap buildup. Carpet is best cleaned with a two-step process: 1) a special heated solution is sprayed deep into the fibers to loosen hard-to-reach dirt; 2) an empowered water formula is used to lift and remove dirt. Similarly, upholstery, rugs, drapes and furniture can be included in your annual “spring cleaning” Beyond air ducts and carpet, dryer vent and chimney cleaning are a must to maintain a healthy home. Lint from your dryer is very flammable so ventilation ducts should be cleaned on a 3-year cycle. Regularly cleaning your chimneys prevents fire disasters caused by build-up. The National Fire Protection Association recommends that homeowners have a chimney inspection done annually. Together, these preventive health care steps will help maintain the wellbeing and longevity of your residence and in turn enable your family to be happy and healthy at home.

Find articles from this issue and archived articles online at cai-mn.com in the Minnesota Community Living (MCL) Resource Library.

Contact John Russo, Ph.D. Reserve Specialist 952-944-7137

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CAI-MN Tradeshow Turnout Is Tops By Carin Rosengren | CAI-MN Communications Committee Chair, Keller Property Management

he CAI-MN Tradeshow just keeps getting better. The annual event in February had something for everyone, plus fun extras like Plinko, shooting basketballs and rolling dice for prizes. Once again, the Xcel Energy Center proved to be a great location for this event. Educational offerings designed for property managers highlighted relevant topics like cyber protection and liabilities, and using mediation to solve disputes. Sessions for homeowners included a full hour to ask any question of a panel of experienced professionals such as an experienced reserve specialist, attorney and property manager. Between the continuing education credit-worthy sessions, more than 60 vendors greeted attendees with information, giveaways and drawings for prizes. Some raised the level of excitement around their booths and giveaways, including the aforementioned Plinko and hoops, plus rolling the dice for a Yahtzee, all yielding great prizes. Breiwick Companies showcased some of their all-electric lawn mowers, demonstrating their nearly soundless operation when the equipment was brought in and out of the Tradeshow floor. From drains and plumbing, to exterior renovations, roofing, disaster specialists and financial and reserve advisors, this yearâ&#x20AC;&#x2122;s CAI Tradeshow offered the full package to the people who work for and who volunteer their time for the benefit of community associations. The Tradeshow Committee deserves a big THANK YOU. Your hard work was evident. Thanks also goes to Ewald Consulting for being a great member of the CAI-MN team, as well as to all the vendors, home owners and property managers whose attendance is what really makes the event special. See you there next year!

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The Members-Only page has direct links to the Research Library, with thousands of articles from Common Ground and other CAI periodicals. Archived past issues of CAI publications are linked as well. The Message Board, where members can join or start discussions on virtually any topic, is also just a click away. So are sample forms and templates commonly used by association managers and boards.

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How’s Your Hearing? By Bob MacDonald, CMCA, AMS, PCAM

ecently I went through the process of having my hearing tested and discovered it was even worse than I thought; therefore I begrudgingly ordered hearing aids. This morning they were fitted and tested and I walked away simply saying WOW! When I got into my car the volume of the radio almost blew my ears out and, for the first time in a long time, I could actually hear the blinkers. When I got to my office and started to use my computer I could hear the mouse click and the tapping of the keys on my keyboard. YIKES. These events beg the question: How’s your hearing? It has been said that the best communication tool is the ability to listen or hear what others are saying. Good communication promotes better understanding of people, reduces conflict, and enhances relationships. In this article I will briefly touch on the importance of “listening” as the foundation to good communication. In fact, my mom used to remind me that since, “I had two ears and only one mouth,” I should to learn to listen twice as much as I speak. I’m still working on this. Good listening skills are essential for meeting customer needs. But it’s easy to get sidetracked by co-workers, cell phones, other customers, and more. When your clients call or you’re speaking with a vendor, “how’s your hearing?” Do you take the time to actively listen or are you more interested in speaking. Often, as a community association manager, when starting a relationship with a new client, the inability of former managers to “listen” repeatedly comes up. In the process of doing some research for this article I came across the following comment, “Listening is one of the most valued skills companies seek in employees, according to studies posted at the International Listening Association website. Other studies showed business personnel spent nearly 60 percent of the workday either speaking or listening. That’s why it is important to develop listening skills for improved customer service. Customer service employees with effective listening skills strengthen business relationships. On the other hand, customer service staff who lack listening skills can get tied up in misunderstandings. There are a number of ways to develop listening skills for customer service, but it takes practice and commitment.” 1

1 http://www.ehow.com/how_4827837_develop-listening-skillscustomer-service.html 30

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Listening does not come easy to many of us and it is hard work; it is an acquired skill. But, if we really want to know what a person wants, we need to train ourselves to be good listeners. This removes the guess work. I would never suggest that I am expert on the topic of being a good listener, but I know what happens when I don’t hear (listen) well. Just ask my wife. Bad hearing is never good for a relationship. Thus the need for hearing aids. Snicker, Snicker! We can consciously enhance listening skills. It’s about paying attention, tuning in to others, and limiting distractions. That helps us to hear and to be heard. Often we’re forced into circumstances that aren’t conducive to listening. The potential distractions are greater than ever. Ear buds in, smart phones on, TV screens blaring in all but a few restaurants and waiting rooms. What we find ourselves doing is multitasking our way to fractured attention and limited listening. As a result we don’t hear, really hear. And we don’t feel heard. So, I must ask, how do you feel when you are speaking to another person and it appears that answering their cell phone seems to be more of a priority than LISTENING to you? For many of us this is frustrating and simply annoying! After listening to others, we too want to be heard. John Wooden, the famous UCLA basketball coach once said, “Listen if you want to be heard.” As we all know, it doesn’t feel good to be disregarded. It shuts us down, diminishes our sense of worth. It even leads to misunderstandings that can be epic in scale. And you know when you aren’t being really heard. By actively listening to others, you come to know why they think the way they think. People who listen “are trusted more than those who adopt an indifferent attitude during conversation.” Careful listeners get the benefit of credibility. Your good listening leads to the indirect benefit of making others also good listeners. In closing let me share the following “listening” illustration from an old text book: “There is a story involving two 19th century British Prime Ministers — Gladstone and Disraeli. If you had dinner with Gladstone, you came away believing that he was the most intelligent person in the country. However, if you had dinner with Disraeli, you came away believing that you were the most intelligent person in the country. Clearly, Disraeli knew how to listen better than Gladstone.” When you communicate who are others “hearing,” Gladstone or Disraeli?

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