CAI-MN Minnesota Community Living - Nov/Dec 2014

In this Issue: The Offseason ....... 6 CAI-MN Vision Awards Recap ...... 10 End of Season ...... 15 November/December 2014

Off Season Evaluating the past year and planning for the future.

Volume 32 • Issue 6

And Much More!

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Minnesota Communit y Living

From the President

Board of Directors

By Gene Sullivan | CAI-MN President

G

oogling your name on the Internet. Tell me if this isn’t something you’ve done. It can seem a bit immature, perhaps, a bit narcissistic; but if we are to be honest, it’s something we have all done at one time or another. Why do we find ourselves doing this?

Before I go any further, let me be the first to say, I don’t think it necessarily stems from either immaturity or narcissism. Deep down, for most of us, what we are experiencing is something very basic to our human nature. A desire to have some living proof that we are both significant and important in the lives of others. That we have made a difference!

That is why it is so important for us as an industry to take a moment, as we do each year, to acknowledge and show our appreciation to those outstanding folks with the Annual Vision Awards Ceremony.

The numbers of those actually recognized that evening do not even begin to represent the legion of others who work diligently to make a difference.

So let me take a moment to try. I must admit that as a member of CAI, I am proud to be associated with a group of colleagues who take their profession and ethics so seriously. To all those who work in this industry, the managers, attorneys, CPAs, and other service providers, thank you.

And next, and certainly not least, we have to take a moment to recognize all who volunteer to serve their association community by being on the board. These folks, without pay or recognition

President

(or perhaps I should say “positive” recognition) serve their communities year in and year out, running multi-million dollar corporations, in order to provide necessary services for the operation of approximately 20% of the housing stock in our country. Not too shabby!

Gene Sullivan Phone 952.922.2500 gene@ncmgi.com

And as I mentioned at the Awards Dinner, according to an extensive study recently done by the American Enterprise Institute: If it were up to municipal and city government to perform the work done by all-volunteer boards for free, the conservative cost estimate is $850 million.

Matthew Drewes Phone 952.835.7000 mdrewes@tn-law.com

In addition, the cost of the services being provided to those HOAs making up that 20% of our national housing stock would increase the taxation burden to local government to the tune of an additional $40 billion.

And the crowning statistic from that AEI study that every association board member should be proud of – 90% of all residents polled stated that they truly believe that their board of directors works hard to protect their interests and their property. No city, state, or federal government can even come close to those approval numbers.

That is our story! That is CAI! As the percentage of homes in HOAs continue to grow, so does our relevance and significance as an organization.

Directors JoAnn Borden, CMCA, AMS, PCA Phone 763.746.1196 jborden@developcommunity.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 Nancy Polomis, Esq. Phone 952.941.4005 npolomis@hjlawfirm.com Jim Rezek Phone 763-424-9984 jimrezek@comcast.net Halo Stafford, CMCA, AMS, PCAM Phone 952.944.2237 edenplacemgr@pinnaclefamily.com Joel Starks, CMCA Phone 952.698.2053 joel@sharpermanagement.com Michelle Stephans, RS Phone 763.754.5500 michelle@reserveadvisors.com

One of the reasons I believe HOA living connects with so many people is because it is so basic to the values that our nation was founded upon. The American Dream, which means our freedom provides us with the opportunity for

Continued on page 4

Committee Chairs CAVL

Lynn Boergerhoff Phone 651.308.1461 lynnab7@gmail.com

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

Membership Chair

Kris Birch Phone 651.481.9180 krisbirch@birchlawn.net

Janice Pyka Phone 612.801.1229 janicepyka@gmail.com

Legislative Action Chair

Social Committee

John Dorgan Phone 612.721.4116 jrd@jdorganlaw.com

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 Jane Bristow, CMCA, AMS Phone 952.277.2722 jane.bristow@fsresidential.com

November | December 2014

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From the President Continued from page 3 prosperity and success, to obtain for ourselves something that belongs to only us. And nothing has been more iconic to that Dream than home ownership.

In addition, we believe in asserting our rights both individually and collectively as owners in an HOA; conceivably perhaps, one of the smallest and most fundamental governing groups that believes in exercising its rights through a democratic process.

In the last few years, when a piece of bad state legislation has been put forward because a legislator did not understand our industry, it has been CAI that has been there to educate and be a positive resource to those at the Capitol. And when we have been in that role, we have been effective, and won.

Therefore, as a chapter this year, let us be committed to the following…

Tell the story.

Stay abreast of what happens with the events that shape our industry on a local, state, and federal level by going frequently to our website at www.cai-mn.com and clicking on the word “legislative” in the upper right of the home page to know what’s going on, and how your voice can continue to make a difference.

Second, we are excited about the launch of our electronic version of Community Living Magazine, which will be available in January 2015.

Feel free to pass this free resource on to others, to share our story.

We hope to use this format in beginning our outreach to those at the City/Municipal level and begin to forge solid relationships as we have at the Capitol these past few years.

Raise the Bar. Why is it that certain industries seem to have less scrutiny by government than others? I think that happens when those in a particular industry practice self-governance and continue to set the bar by raising those professional standards, instead of allowing others to set the tone and pace for them.

I would like to challenge you to take a good look at the seminars and offerings by our chapter this year. There is no better way to become a better board member, manager, or service provider.

Foster Community.

Relevance, significance. These are important attributes we all long for.

More importantly, this can happen, ultimately, when we are a part of something that is bigger than just ourselves, our company, or our homeowner association. It’s when we band together that we can truly make a difference.

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.

Contact us today.

952-941-4005 hjlawfirm.com

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Minnesota Communit y Living

8050 West 78th Street Edina, MN 55439

Series

Index

Calendar 2014 Upcoming Events

6 The Offseason

3 President’s Message

Taxes and Loans

7 Membership Committee News

Tuesday, January 13, 2015

CAI-MN 2015 Trade Show

Thursday, February 26, 2015

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

By Janice Pyka, Keller Graduate School of Management

10 CAI-MN Vision Awards Recap

By Carin Rosengren, Keller Property Management

By Gene Sullivan

8 Ask the Attorney

By Nigel H. Mendez

24 Carin’s Corner

By Carin Rosengren

13 Cedar Management Seeks and Keeps

Professionals with Highest Designation

By Carin Rosengren, Keller Property Management

15 End of Season (Part Two)

By Bob MacDonald

17 Ice Dams: The Cold, Hard Facts

By G. Leonard West, LS West llc

21 2014 Election Recap

By Nick de Julio, Ewald Consulting

27 Flexing, Fidgeting and Figuring Out the Budget

CAI-MN is looking for article contributions.

Submit your article online at www.cai-mn.com under the Resources Tab

Manage your subscription, and more at CAI-MN.com Subscribe and unsubscribe online at www.cai-mn.com by editing your user profile.

By Carin Rosengren, Keller Property Management

28 Insurance Claims — Why Are They So Darn Confusing?

By JoAnn Borden, CMCA, AMS, PCAM

Register online at www.cai-mn.com

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.

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

2014 Annual Partners Platinum

Asset Exteriors

Community Development, Inc.

Complete Building Solutions, LLC

Gassen Management

Gaughan Companies

Sela Roofing & Remodeling

Xtreme Exteriors Gold

Community Advantage

FirstService Residential

Hellmuth & Johnson Silver

All Ways Drains American Family Insurance Jeff Mayhew

Benson, Kerrane, Storz & Nelson

Carlson & Associates

Hammargren & Meyer, P.A.

Levin & Edin

Mutual of Omaha/CA Banc New Concepts Management Omega Management

Sharper Management Schwickerts Roofing

Thomsen & Nybeck

Bronze

American Building Contractors Dougherty, Molenda, Solfest, Hills

& Bauer P.A. Michael P. Mullen, CPA, PLLC SERVPRO of Minnetonka TruSeal America, LLC

Published by Community Associations Institute — Minnesota Chapter, copyright 2014. 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............................................... 7 ADAC-MN, LLC............................................ 18 American Family Insurance – Jeff Mayhew........ 7 APMC - Association Property Management Company................................................. 13 Asset Exteriors............................................. 16 Benson, Kerrane, Storz & Nelson, P.C. . ........ 7 Benson, Kerrane, Storz & Nelson, P.C. . ...... 21 Carlson & Associates, Ltd ........................... 22 Columbus Exteriors, Inc................................. 2 Community Advantage ............................... 25 Community Development, Inc..................... 14 Complete Building Solutions ........................ 9 Construct All-Corporation . ......................... 13

Index of Advertisers

Felhaber Larson Fenlon & Vogt .................. 30 Final Coat Painting......................................... 6 FirstService Residential................................ 23 Gassen Companies....................................... 20 Gaughan Companies.................................... 26 GW Cross, LLC............................................. 18 Hammargren & Meyer, P.A. ......................... 27 Hellmuth & Johnson, PLLC............................ 4 Levin & Edin................................................... 7 LS West......................................................... 18 Mutual of Omaha Bank – Community Association Banking & CondoCerts......... 30 New Concepts Management....................... 23 Omega Management, Inc............................ 29

Reserve Advisors.......................................... 13 Reserve Consultants, Inc. .............................. 6 Reserve Data Analysis, Inc. ......................... 13 Russo Consulting, Inc. ................................. 27 Schwickerts Roofing..................................... 30 Sela Roofing ................................................ 12 Sharper Management ................................... 7 Strobel & Hanson ........................................ 24 Thomsen & Nybeck...................................... 13 Toohey Law Firm, P.A. ................................. 15 TruSeal America........................................... 32 Xtreme Exteriors.......................................... 31

November | December 2014

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The Offseason

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

T

hose of you who have read each copy of this magazine in 2014 (thank you) have hopefully noticed that we on the CAI-MN Communications Committee implemented a baseball theme this year. This was inspired by our fair state’s hosting Major League Baseball’s All-Star Game in July. Now, as we reach the end of calendar year 2014, we will have closed out another baseball season.

And while the Twins lost more than 90 games for the fourth season in a row, baseball has still played a significant role in our lives, and we’ve recognized that throughout the year in the pages of Minnesota Community Living.

This (you may be sad to know) will be the last baseball-themed issue in our series.

In November and December, MLB teams are already making decisions about their rosters for next season. Some players’ contracts provided the team with just a short time after the end of the World Series to exercise clauses allowing them the option of securing the players’ services for another season. Baseball’s winter general manager meetings are held in December, when team management will also meet with the agents for players looking to sign new contracts.

“It breaks your heart. It is designed to break your heart. The game begins in spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone.”

— A. Bartlett Giamatti an evaluation of leadership, of budgets, of service providers, of infrastructure, or of people and their attitudes and behavior.

Now is the time to gather any negative — or positive — feedback (if you haven’t already).

But some may need some encouragement to start. Seasonal contracts often are best renewed in or by the start of November to cover the upcoming winter season as well as the following summer. That way you avoid changing groundskeeping contractors in the spring, when a new contractor would be faced with damage caused by someone else the preceding winter, and the outgoing contractor may be much less motivated to address any damage done. Other kinds of contractors for various projects you may wish to complete next year are likely looking to sign new contracts, as well. They may be more flexible in order to book projects for the upcoming season. Consider how these and other contracts or relationships from the prior year may have influenced the community, or how contracts or relationships may be implemented, changed, or enhanced for next year.

Reserve Consultants, Inc. Association Property Services

Those of us who live in and work with community associations will hope to share some stories with you about how communities can evaluate their past “season” and how they may plan for the future. As with baseball teams, now may be a time to plan for next year’s roster of contractors or personnel who will help with the year. Steve Hovley said: “To a pitcher, a base hit is the perfect example of negative feedback.” Many of you may already have begun or completed 6

Minnesota Communit y Living

We hope you’ve appreciated the direction we’ve taken the magazine this year. It has presented an interesting set of challenges and opportunities. Ultimately, we want to provide a resource that helps to generate discussion and bring new ideas to your communities, while keeping things interesting and engaging in the process.

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952-944-7137 (Office) 952-935-9647 (Fax)

Membership Committee News

By Janice Pyka, Keller Graduate School of Management

M

aintaining and growing its membership are very important elements to the success of any association. Most industry-specific associations, like our local Community Associations Institute (CAI) Minnesota chapter, focus on a few key aspects with regard to membership: Attract (A), Involve (I) and Retain (R), or A.I.R. The new CAI-MN membership committee will make it a priority to recruit new members and Attract them to all of the benefits we offer. First, as the new committee chair of membership, I will build the committee and set a regular meeting schedule. Then, we will begin incorporating the initiatives developed by our board of directors.

Adding and growing an association is all good, and so, naturally, the next step to building an active association is to strive to welcome those new members and Involve them. Everyone in our association has something to offer, and we value the experience, expertise and volunteer efforts of each one. All of this will contribute to a stellar association.

Finally, after Attracting and Involving both new and current members, we will focus on Retaining those members, including the newest ones and the ones who haven’t been as Involved. As a whole, CAI’s committees are growing and working more closely with one another, thanks to our outgoing President Michael Klemm.

These efforts will help in our endeavors to Attract, Involve and Retain our assets, YOU, the member, that make us the Minnesota chapter of CAI. I look forward to seeing new faces in our chapter and in our committees.

From the first window leak to the final drywall repair,

we’re your advisors.

952.466.7574

|

www.bensonpc.com

November | December 2014

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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 standard management contract provides that I receive a portion of all insurance claims that I handle for my client associations; is this okay?

Probably not, unless you are also a certified public adjuster. Minnesota Statute Chapter §72B contains regulations that apply to the adjusting of insurance claims. The purpose of the statute is to “provide high quality service to insureds and insurance claimants in the State of Minnesota by providing for well trained adjusters . . . who are qualified to deal with the public in the interest of a fair resolution of insurance claims.”1 To accomplish this intent, the statute requires anyone who investigates, negotiates or advises individuals or companies in matters relating to an insurance claim, and charges for this service, to be licensed.

Public adjusters can serve a vital role in resolving insurance claims. If an association suffers a loss, a public adjuster can represent the association to ensure that the claim is fully paid by the insurance company. The public adjuster is hired by the association and will review the damages and negotiate on behalf of the association to ensure that all recoverable costs are included in the claim settlement.

While not every claim warrants the services of a public adjuster, many larger claims do.

In Minnesota, all public adjusters must be licensed with the State — and that is where managers can get into trouble.

the real or personal property of the insured, on behalf of an insured in negotiating for, or effecting the settlement of, a claim for loss or damage covered by an insurance contract.”2 In plain language, this means that anyone who helps the holder of an insurance policy negotiate or settle a claim for personal or real property must be licensed by the State as a public adjuster.

In order to understand the type of activities that are not permitted under the statute, here are two recent examples of enforcement actions by the Minnesota Department of Commerce for alleged violations of the public adjuster laws. The first case involved a management company that managed several associations that suffered catastrophic loss as a result of storm damage. The management agreements with the various associations included a provision that management would provide services related to processing insurance claims in exchange for 10 percent of the amount recovered under the insurance policy.

The Department of Commerce alleged that this was a violation of Minn. Stat. §72B because the management company was not licensed as a public adjuster. In addition to charging the association, the Department of Commerce found that the management company received 10 percent of the claim value from the contractor selected for the repair. The association was not informed of this additional payment to the management company. This was alleged to have violated Minn. Stat. §82, the statute governing licensed real estate professionals.

The law defines a “public adjuster” as any person who, for compensation or any other thing of value, on behalf of the insured “acts or aids, solely in relation to first-party claims arising under insurance contracts that insure

The second case also involved a property management company and, amazingly enough, the same building contractor as in the prior example! The association suffered a loss that was covered by insurance. The management company entered into an agreement with the building contractor to be paid a “project management” fee.

This relationship was not disclosed to the association. It was alleged by the Department of Commerce that the project management fee was in violation of Minn. Stat. §72B. It

1 Minn. Stat. §72B.01

2 Minn. Stat. §72B.02 Subd. 6(1)

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Minnesota Communit y Living

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

should be noted that even if it had been disclosed to the association, it may still have been a violation of the Statute.

Both of these situations were resolved via a consent order — where the charged party agrees to an informal disposition of the matter.

Therefore, no hearing was held and no findings of fact were ever produced. But even informal disposition can be expensive. In the first example, the management firm was ordered to pay $200,000. $160,000 was divided among the six associations involved and the remaining $40,000 was paid to the State as a civil penalty. In the second example, even though no direct fee was charged to the association, the management company was ordered to pay $15,000 to the association and an additional $15,000 to the State as a civil penalty.

In summary, managers and their employers need to be careful how they handle insurance claims on behalf of their associations. It is clear that charging a fee to assist an association with a claim is not allowed. If your management contract includes a provision authorizing fees for such work, it should be changed immediately. However, even if your contract does not charge extra for handling insurance claims, the DOC contends that it also violates Minn. Stat. §72B. I would recommend that all contracts that include a provision regarding insurance claims be changed to clarify that no negotiation of a claim will be performed by the manager.

Finally, there are exceptions to the public adjuster licensing requirements. The most notable exception is for attorneys. Attorneys are exempt from the public adjuster licensing requirements. Accordingly, associations may retain an attorney to negotiate an insurance settlement on their behalf.

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.

bS

C

Reputable consultants you can trust

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–Mike Baker Residential Energy Auditor, Complete Building Solutions

Since inception, Complete Building Solutions has helped hundreds of homeowners deal with their ice dams using industry leading products and vendors to stop heat loss in attics. These homeowners have been able to mitigate ice dams and reduce their energy costs by using the system created

by Complete Building Solutions.

Go to cbsmn.com to read more or give us a call at 763.544.3355

November | December 2014

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CAI-MN Vision Awards Recap

By Carin Rosengren, Keller Property Management

Seven winners were named in the categories, which covered business partners, volunteers and property managers for their success in service excellence, including “Rookie of the Year” and honors for going Above and Beyond, plus outstanding vendors nominated for the Business Partner Excellence in Service Award.

F

or the managers who are faithful and strong stewards of their properties; for the vendors who strive to make entire homeowner associations happy; for the association volunteer leaders whose service might draw the vitriol of their neighbors – the annual Vision Awards is an evening of honor and recognition for the dedicated professionals and volunteers who stand out in Minnesota’s community associations industry.

The International Market Square on October 23 was an elegant setting to honor the nominees and the winners of the awards, presented by Community Associations Institute of Minnesota (CAI-MN).

Nominations were open for several weeks before finalists were named and winners were selected in a blind judging process where nominee and/or company names are not revealed until the winners are chosen.

Above & Beyond Award

“I love the atmosphere,” said a first-time attendee. “Having photos taken at the entrance was also a nice touch.”

Although Carla Gruenhagen of Gassen Companies serves in a high-level leadership capacity within her organization, she is a humble leader focused on serving others. Carla’s willingness to assume additional responsibilities to help ensure a highly successful first-time charitable outreach event is what spurred her nominator to make a submission: “It is an honor to nominate Carla Gruenhagen for the Above and Beyond CAI-MN Vision Award!”

Other nominees: Greg Pettersen, Reserve Data Analysis; and Todd Folstad, Gassen Companies.

“The service for drinks and food was wonderful,” said another. “The length of the event was perfect! It was wellcoordinated and thought-out.”

Thank You, Vision Award Sponsors!

Jubilee Sponsors All Ways Drains, Ltd. Asset Exteriors Clean Response Community Development, Inc. MicMak Condo Approvals, LLC Treecology Contributors Carlson & Associates, Ltd. Gassen Company Celebration Sponsors FirstService Residential Hellmuth & Johnson, PLLC Rainbow Treecare Stone Valley Painting, LLC In-Kind Sponsor Blue Diamond Maintenance Company

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Minnesota Communit y Living

Congratulations to all of the nominees and to the winners of the 2014 CAI-MN Vision Awards:

Business Partner in Excellence Award

Excellence in Service Award

Rookie of the Year

Exceptional customer service and quality painting are what set Roell Painting apart from the field of nominees in this category. “They offer options to fit any association budget and provide detail and background as an expert in the field,” said the nominator. “Even when they don’t get a bid they send a personalized thank you to the Board.”

Shaun Zavadsky of FirstService Residential was nominated and named the winner of this award because, according to the nominator, “To him excellent customer service is not something that is achieved once in a while. It is ingrained into his daily routine.” Zavadsky uses research and hard work to conquer obstacles to make sure that all clients are satisfied, and in doing so exhibits a deep commitment to his properties, employees and colleagues.

This year’s Rookie nominations had candidates who embodied the values of all the awards bestowed this night: outstanding communicators and stewards who display humility in their roles as property managers. The 2014 winner, Greg Nelson of FirstService Residential, “does not toot his own horn a lot,” according to his nominators.

“He is professional with a wide range of abilities … Greg is the kind of professional that we ought to be seeking to attract to our industry.”

Other nominees: Joshua Kluver, Gassen Companies; and Kim Rademacher, Marketplace Management

Other nominees: Shayne Damian of Gassen Companies; and Shaleigh Pysick, FirstService Residential.

Other nominees: Andy Banas, Clean Response; and Plunkett’s Pest Control.

Community Management Professional of the Year Award Darlene Henry takes ownership of her associations and helps build them into communities the members can be proud of.

“Anyone that puts as much energy and time into making every association owner’s life better deserves to be recognized,” according her nominator. “She works tirelessly, doing everything she can to save us money on expenses, especially those not created by our association.”

Her most recent and creative problem-solving action: “Who thinks of going to the DNR for help … Need I say more?”

Other nominees: Lisa Murphy, Laukka Management; and Nicole Jones, ServPro of Brooklyn Park Champlin.

Financial Impact Award Transparency is the key to a trustful relationship between a property manager and their clientele.

That’s a primary reason Kate Grutzmacher of FirstService Residential was awarded the 2014 Financial Impact Award. This mantra combined with a high level of commitment showed Grutzmacher to be an outstanding problem-solver who embraces accountability at a high level.

“She has demonstrated interest, engagement and commitment in the broader community,” said her nominator. “Kate is simply an extraordinary Association Management professional.” Peter Ralph accepted the award on her behalf.

Other nominees: Brieanna Olson, Priority One Management, Inc.; and Gail Wright, Wright Management & Real Estate Services.

Outstanding Volunteer of the Year Award Cliff Kurth was honored as an outstanding volunteer with CAI-MN for his dedicated passion toward serving others in our community as he formed and chaired the Charitable Outreach Committee. He has devoted countless hours promoting the committee’s objectives and its annual partner, Minnesota Teen and Adult Challenge. Were it not for Cliff’s vision and leadership, CAI would not have a Charitable Outreach Committee that has been so successful in just its first year. That success has not only been in the form of financial contributions for the organization, but also in bringing focus to

those in our community who are less fortunate.

November | December 2014

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Minnesota Communit y Living

Cedar Management Seeks and Keeps Professionals with Highest Designation

By Carin Rosengren, Keller Property Management

CONSTRUCT-ALL Quality construction for over 30 years

CORPORATION

General Contractors Decks • Siding • Doors/Windows • Water Damage Fire Damage • Budget Proposals • Work Orders Structural Repairs • Investigations

763-427-5900

www.construct-allcorp.com

The Vision Awards ceremony was a special place to announce the new recipients of professional community association management designations, with many earning CMCAs (Certified Manager of Community Associations), fewer with AMS (Association Management specialist) tags and fewer still earning the distinction of being a PCAM (Professional Community Association Manager).

Notorious for its long and at-times difficult journey to completion, the PCAM designation is the rarest among property managers. In fact, a search of Minnesota PCAMs reveals there are about 20 property managers who can put these letters appropriately behind their names.

What is more noteworthy still, despite that the spotlight of Vision Awards has faded till next year? It stands out in a local PCAM search that four of these distinguished professionals work at one company: Cedar Management in Fridley.

Steve Anderson is one of two owners at Cedar Management, where they try to foster a positive work community and, wherever possible, to have fun at their jobs. This helps boost employee satisfaction in an industry where there is not a lot of appreciation at times, he said.

But, what’s with all the PCAMs? “I encourage staff here, the managers, to strive for the PCAM,” Anderson said. The company also pays for their education. But, the benefit of having this designation isn’t the additional decoration on their business cards. The real benefit from having the designation comes purely from the process you go through to get it, including exposure to property managers and real-life situations in other parts of the country. The entire experience, said Anderson, “adds to the depth and the width of the employees who earn them.”

All of our studies now include ForeSite™

www.reserveadvisors.com (855) 575-1121

November | December 2014

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Minnesota Communit y Living

End of Season (Part Two)

I

n the last edition of Minnesota Community Living I ended my article by stating, “The goal of my end of season assessment is to do all that I can to help my team win. I know no other way.” Each year, after completing an end of season assessment, the manager of a baseball team then starts the process of making preparations for the next season. This includes such things as scheduling, changes in the coaching staff and player roster. The same may be said of successful community association managers.

In preparing for the next season, coaching staffs spend time focusing on key scheduling dates such as trade and roster change deadlines. They also have to assess travel dates and how they will impact the team. Scheduling key events and dates is also a post-season task that community association managers should be thinking about now. For example, to avoid conflicting board meeting problems, managers should prepare meeting schedules for each association they manage before the current calendar year comes to an end; if conflicts in schedules exist, they are easier to resolve now rather than later. If meeting rooms need to be booked this task should also take place now, especially the booking of locations for 2015 annual meetings. If you snooze, you lose!

The task of scheduling annual meeting dates should also include preparation and mailing dates. When must the annual meeting packet be completed by and when must they be mailed? Getting these dates wrong can void any action taken at an annual meeting. I’ve seen it happen. Planning is in the details — and the sooner a manager puts a schedule together for next season the less likely they are to fail.

Planning for next season begins now. A good coach plans early if he or she wants next season to be successful. The same can be said about successful community association managers. For example and for the sake of this article let me focus on one topic, 2015 maintenance/capital improvement projects. Success next year begins with proper planning now. Over the next few months managers should ask the community association boards they work with the following questions:

By Bob MacDonald, CMCA, AMS, PCAM

After answers to these questions are obtained a manager can then begin the process of hiring consultants, if needed, and discussing association plans with various vendors and/or contractors. Once a scope of work for each job is developed bids may then be obtained. The goal here is simple: be ready to play ball when spring arrives. Managers who get proposals early get the best pricing and scheduling dates for their clients.

As I stated in a previous article, “The job of a baseball manager is to strive to have the right players on the field whenever possible.

Our job mirrors this. A good manager knows the strengths and weaknesses of his team…Over the years I have attempted to seek out and build a relationship with vendors that will consistently provide my clients with exceptional service at a reasonable price.

Those who do become part of my team. Those who do not meet my expectations don’t get to play another day. And believe me, from year to year the team does not look the same.” With this in mind, part of the planning for next year has to do with roster changes. If a player (vendor) failed to perform adequately this season, he may need to be replaced.

With this in mind, now is the time to start looking for replacement players. In fact, this is one of the benefits of the CAI Tradeshow. It introduces you to a number of vendors who serve the needs of Community Associations. Don’t be bashful. Take the time to meet, greet, and interview vendors who might be a good fit for your team and then check their references. If you find one that impresses you, give them the opportunity to show you what they can do for the team. Perhaps this could be the beginning of a new long term relationship between you and a previously unknown vendor/contractor.

A good season begins with forethought and lots of preparation.

Benjamin Franklin put it this way, “By failing to prepare, you are preparing to fail.” Make next season a good one by starting the planning process now.

1. What work are you interested in having accomplished next summer?

2. How much are you willing to spend on each project?

3. How will you fund each project?

4. Who will determine the scope of work for each project?

5. Does a consultant need to be hired?

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

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

November | December 2014

15

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Minnesota Communit y Living

Ice Dams: The Cold, Hard Facts

A

s a roofing contractor, I have dealt with winters from the rooftop for nearly four decades. Minnesota winters are legendary. Extreme winter conditions will challenge even the best-constructed buildings. The good news is that you can minimize the elements that create roof ice to a point where the chance of roof leaks is near zero. Again, near zero. I am always careful with the word “eliminate” when dealing with ice dams.

3) The Roof System: Workmanship Excellence.

There are three items that when constructed to the best possible finish can minimize the elements that create roof ice:

Low Slope: Low slope/flat roofs should be engineered to eliminate ponding & drain properly. Get the vapor barrier right.

The membrane should be complete at all perimeter and parapet assemblies. Insulation should be detailed & complete. A quality, detailed insulation assembly will not cost, it will pay.

1) Insulation: Not just the minimum.

Upgrade/add if your budget allows. An R-50 plus would be ideal. Be very detailed and complete at bypasses/penetrations and exterior wall/eave assemblies. Exterior wall plates and soffit chutes sprayed in with polyurethane foam (SPF). Excellent Return On Investment (ROI).

2) Ventilation: A uniform & correct airflow.

A correct airflow is a straight line from eave/ soffit to the ridge/peak or side to side as with gable end louvers. Attic spaces can be sectioned with poly sheeting to achieve a uniform airflow. Do not disturb firewalls when adding vents. Intake (eave) and Exhaust (peak) should be balanced. Do not mix and match vent types; airflow will not exhaust in a uniform manner.

By G. Leonard West, LS West llc

Steep Slope: Additional ice shield at bathroom/dryer exhaust vents and roof sections under drip/drain lines. Detailed workmanship – underlayment (ice shield, felt & papers) should be complete to all perimeter edges before installing drip edge or gutter aprons. Turbine vents are excellent when a greater draw is needed from eave to peak.

If you are a DIY (insulation/ventilation), check with your local building official for required permits and inspections. It is critical that items such as firewalls and clearance to combustibles be maintained or properly constructed. Please, always do it safely.

Removing Snow and Ice – Proactive or Reactive?

In a perfect world, it would be ideal if you could completely clean every roof after every snowfall. Fortunately, this is not necessary.

A mix of being proactive and reactive can keep everyone dry, on budget and avoid devastating/expensive insurance claims.

Continued on page 18 November | December 2014

17

Ice Dams Continued from page 17 It is always best to promptly remove snow before it becomes ice. The man-hours required to clean snow from a roof section will always be less than to remove/channel an ice dam. Snow should be shoveled 4-8 feet back from the outside wall. Remove snow from valleys, drip/ drain lines and bathroom/dryer exhaust vents. Be thorough with the snow removal. Exposed shingles will heat up (even in extreme cold) and allow the sun to do much of the work.

Most important of all: only those who are experienced and properly insured should ever be on your roof. Please stay safe, warm and dry this winter.

If your budget does not allow for continual (proactive) snow removal, it is important to monitor the roofs for excessive snow and ice build-up. If/when there is ice damming or a leak call has occurred remember this: •

Ice can be removed by steam or by hand. There are pros and cons to both methods. Remember — it’s not the tool; it’s the guy using it.

•

You do not need to remove all of the ice. You need to get the water to drain. Cut vertical channels (steam or by hand) in the ice dam. Drain channels should be cut a minimum of 1 foot wide.

Do not remove ice from gutters. It is time consuming (costly) and unnecessary. Any melt/run-off will flow over the gutter.

•

Ice melt socks can be used to cut or maintain drain channels.

Socks are excellent for flat roof scuppers/drains. Try to use socks minimally. If gutters are present, aluminum will not rust but may scald if too much ice melt is used. If you need larger amounts of ice melt/socks, try to stay away from Calcium Chloride (CaCi). It works well but can be more corrosive. Try to use an ice melt that has Sodium Acetate (NAAC) or Calcium Magnesium Acetate (CMA).

www.ProfessionalRoofers.net 612-USA-ROOF (872-7663)

G. Leonard West

Helpful CAI Information CAI Webinars—Learning at Your Convenience CAI webinars offer specialized, professional training without leaving your home or office. New, live webinars are presented every month, and more than 100 webinars are available on demand, including education sessions presented at the CAI Annual Conference and Exposition and Community Association Law Seminar. Recorded live, these programs include video or PowerPoint presentations synched with speaker audio.

If you’re a professional in need of CEUs for redesignation, CAI webinars can help you maintain your credential.

Register at www.caionline.org/webinars to keep your community and career on track!

18

Minnesota Communit y Living

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November | December 2014

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Minnesota Communit y Living

2014 Election Recap After months — even years — of campaigning, candidates all over the state ranging from city council to water conservation district, from state House to the U.S. Senate finally got to see where the public was on a number of issues and who the voters chose to lead their local governments, the state and the country.

While early national results were trending toward a big night for Republicans as they tightened their grip on the U.S. House of Representatives and took control of the U.S. Senate for the first time since 2006, Minnesota once again showed it doesn’t always follow national trends. The DFL swept the statewide constitutional offices of governor, lieutenant governor, attorney general, state auditor and secretary of state, and re-elected DFL U.S. Sen. Al Franken.

However, in line with national trends, voters returned control of the state House to Republicans, with a majority largely won by defeating incumbents in Greater Minnesota.

By Nick de Julio, Ewald Consulting

Dayton and Franken Roll to Victory

after the polls closed, the media projected Franken as the winner as he defeated GOP candidate Mike McFadden. Winning 53% of the vote compared to McFadden’s 43%, the final percentage difference was very close to recent polling showing a 10% lead for Franken.

Gov. Mark Dayton and Sen. Franken rolled to victory on election night. Both candidates were subject to statewide recounts following their first elections in 2010 (Dayton) and 2008 (Franken) — but were projected as winners just minutes after the polls closed.

Gov. Dayton defeated GOP challenger Jeff Johnson, receiving 50% of the vote compared to Johnson’s 44.5%. According to experts, the last weeks in the campaign did not see much fluctuation in polling as most polls had Dayton winning the governor’s race. Independence Party candidate Hannah Nicollet received less than 3% of the vote.

While Franken won here in Minnesota, his win was not in step with the rest of the country — where the GOP won contentious races in many other states, flipping control of the U.S. Senate. Franken will return to Washington as a member of the minority these next two years, as will Sen. Amy Klobuchar (who was not on the ballot this year).

Minnesota’s Congressional Seats: No Surprises

In the race for U.S. Senate, incumbent Franken’s wait was much shorter this election to be declared the winner in Minnesota. Six years ago, Franken was sworn into office six months after the election due to a statewide recount that eventually showed him as the winner by 312 votes. This year, just an hour

With all eight U.S. House seats up for grabs on Tuesday night, there were no real surprises. Six of the eight seats were pretty much a lock to stay with incumbents.

Continued on page 22

Benson, Kerrane, Storz & Nelson is pleased to announce that Michael J. Lowder is now licensed to practice in Minnesota.

Mr. Lowder has been with BKSN since 2011, both as a law clerk and as an attorney in the firm’s Colorado office, and during that time, he has gained considerable experience representing property owners suffering from defective construction.

Mr. Lowder’s background in architecture affords him a unique ability to understand construction defect issues and explain them to judges, juries, and clients.

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www.bensonpc.com November | December 2014

21

2014 Election Recap Continued From page 21 However, two seats caught the eye of return watchers — and one had the country’s eye on it right up until the end. The 7th Congressional District, which encompasses much of northwest Minnesota, had incumbent Democrat Collin Peterson running against State Sen. Torrey Westrom.

The district leans Republican in almost every other race, but Peterson has been able to hold it since 1990. History followed suit again as Peterson won by nearly a 10% margin. In the weeks leading up to the election, many thought that this could be the year Peterson lost the grip on his seat.

While the race was not as close as many thought, it will be one to watch again in two years.

With the 7th district safe, both parties really began to watch the 8th district.

Incumbent Democrat Rick Nolan was in an almost dead heat with GOP challenger Stewart Mills most of the night. With many outside resources spent in the district — which encompasses much of northeast Minnesota — many thought that the once-DFL stronghold could flip again, as it has the past few elections. However, by approximately 3,500 votes, Nolan was able to fend off Mills.

In the 6th district, former Minnesota House member and 2010 GOP gubernatorial candidate Tom Emmer won his election easily, and he will replace outgoing Rep. Michelle Bachman.

DFL Wins Attorney General, State Auditor, Secretary of State Incumbent Attorney General Lori Swanson and State Auditor Rebecca Otto beat their respective challengers, with both receiving over 50% of the vote. In the race for Secretary of State, with no incumbent on the ticket, the race was tight and a winner was not declared until late Tuesday night/early Wednesday morning. Current DFL State Rep. Steve Simon defeated former GOP State Rep. Dan Severson 47% to 46%.

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Minnesota Communit y Living

With Simon’s win and current DFL incumbents winning their races, control of all five state constitutional offices will stay under DFL control for the next four years; none of them will be on the ballot again until 2018.

Minnesota State House Flips to GOP Control One bright spot for Republicans that meshed better with national trends was the race for control of the Minnesota House.

Going into the election, the GOP needed to hold its current seats and flip seven DFL-controlled House seats. With all eyes on about 20 seats in play, the numbers were close early in the evening. In Greater Minnesota, however, GOP candidates started to knock out DFL incumbents and momentum started to build for a takeover of the House.

In the end, Republicans captured 11 seats from DFLers and will have a 72-62 majority. With big wins in rural Minnesota, the metro-rural split between the two parties was clear. Current House Minority Leader Kurt Daudt (Crown), who helped lead the GOP win, was selected by his caucus to serve as the Speaker of the House when the new legislative session begins on January 6. The House GOP also selected Rep. Joyce Peppin (Rogers) to serve as the caucus Majority Leader. DFLers elected Rep. Paul Thissen (the current Speaker of the House) to serve as their Minority Leader the next two years.

Over the next few weeks, we will begin to learn more about committee structure, staff and what session could look like with a new House majority. As always, it will take some time to figure these things out as new leadership comes into power. What we do know is that for the first time since the 2005-06 Legislative Session, we will have a split party balance between the House and Senate. As more information becomes available, we will be sure to share updates.

Additionally, what is a Minnesota election without a recount? There could be one in the House for the District 48A race between Rep. Yvonne Selcer (DFLMinnetonka)(http://www.house.leg.state. mn.us/members/members.asp?id=15416) and former Republican House member Kirk Stensrud — which was decided by 36 votes in favor of Selcer. Stensrud could request a recount. (http://www.sos. state.mn.us/Modules/ShowDocument. aspx?documentid=5236) With new members coming to serve the House in January, House Public Information is putting together its New Member Directory. Check out the House of Representatives website (http://www. house.leg.state.mn.us/) for that and other information.

Election Results To find all of the election results — from statewide races to municipal elections — please visit the Secretary of State’s Election Results page. (http://electionresults.sos.state. mn.us/ENR/home/20)

Helpful CAI Information Get Help Getting Your Association to Great CAI offers a free, downloadable brochure—From Good to Great— Principles for Community Association Success—that can help association boards, community managers and homeowners build and sustain better, more harmonious communities. The following four documents—all reviewed and adopted by the CAI national Board of Trustees—are included in From Good to Great: • Rights and Responsibilities for Better Communities—32 principles and practices to help associations promote harmony, enhance communication and reduce the potential for conflict • Community Association Governance Guidelines—12 benchmarks of fair, responsible and successful community governance • Model Code of Ethics for Community Association Board Members—19 things association board members should and should not do • Community Association Fundamentals—a basic primer on how associations should function Preview the brochure at www.caionline.org/good2great.

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November | December 2014

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Carin’s Corner — A Look Back Can Give Focus for the Year Ahead

By Carin Rosengren, Keller Property Management

Why not make 2015 the year you get published?

W

hat a year was 2014! A highlight for many was the All-Star Game, bringing baseball’s greatest players to Target Field and giving Minnesota a chance to showcase this beautiful park for baseball fans everywhere. Now that the season is over, ball clubs are analyzing the year, taking a closer look at what they did (and didn’t do), and determining which strategies worked and which gave way. It’s also time to look ahead to 2015, using this self-assessment to increase the number of successes for your team.

The same goes for us at the CAI-MN Communications Committee.

With our primary responsibility being the magazine in your hands right now (or maybe you’re one of the first to read it online!), the committee members want to make it a valued resource for you and everyone involved with community associations.

We want to present helpful information in the best and most interesting way, bringing you not only expert resources and advice, but sometimes being able to put a real face on the story. We want to tell stories about Minnesotans who live in, work for and contract with homeowners associations. We want to tell stories of people you may know, or who live in a community in the next town over, someone whose experiences you can relate to.

However, our success will take a team effort. As a small group of volunteers with limited contacts and clients, we’re asking you to share your experiences and expertise to help us personalize stories where we can.

Themes and Topics for 2015 The January/February edition will be a special issue dedicated to helping associations make informed decisions regarding proposals for installation of solar systems.

Suggestions for the upcoming 2015 issues: March/April — Storm Season: Disaster recovery, create an emergency box or folder for disaster, remediation, with emergency plans for fire/water, insurance requirements, what to do with kids and pets as part of emergency plans.

May/June — Sustainability topics: fertigation, stone vs. mulch vs. other options, furnace updates; other “spring topics” like walkthroughs, irrigation start-up, launching a landscape committee.

July/August ­­­— Green living: contact at a sanitation company; recycling, water conservation and strategies to reduce consumption; other “summer issues” like strategies for enforcement of pet owners’ compliance and doggy DNA programs; neighborhood get-togethers.

September/October — Energy Efficiency: electric cars and accommodations by associations; lighting strategies; energy audits; moving away from paper and toward electronic communication.

November/December — What is ahead for 2016; holiday hints and tips; surviving winter/beating cabin fever at home.

Additional thoughts, ideas and topics to launch an article, anytime:

Please review the list of story ideas and themes at right, compiled by the committee for the bi-monthly publication, Minnesota Community Living. Maybe there’s a topic you know well and want to try your hand at an article. Maybe you know the perfect interview subject or resource for an article, and can help get that person in touch with a contributing writer. Maybe you see something important, relevant or terribly interesting that is missing from the list. We want to know that, too!

• Managing the board • Filing a complaint • Are the rules working?

• Lackadaisical enforcement of rules and the outcome of ignoring them • Top 10 FAQs • Hints and tips for self-managed associations • What is an association? (some think they are apartment-living instead of owners) • What to know when buying into an association (balance sheet, assessments, learning about the HOA)

In short, all ideas, articles, contacts, photos and submissions are welcome. Please peruse the outline of topics and themes for 2015.

And please, don’t wait until September if you have an idea for October, as the magazine deadline is about 60 days before publication.

So, start thinking, start writing, start an email to me with your ideas, and help us make 2015 a groundbreaking year for an improved Minnesota Community Living.

The topics for 2015 are an outline from a committee brainstorming session, and except for January/February, no issue will be exclusive to the ideas here. Remember, don’t wait to start writing, and don’t hesitate to share information, ideas and resources that could help us attain our goals in 2015.

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Minnesota Communit y Living

Looking to Contribute?

Submit an article to www.cai-mn. com for a chance to be featured in Minnesota Community Living!

We started Community Advantage because we knew

Helpful CAI Information

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

CAI Member Logos Are for Your Use CAI members in good standing can use the official, approved CAI member logo to demonstrate their commitment to building better communities. Color and black and white logos can be downloaded at www.caionline.org/memberlogos in versions suitable for print and electronic use. CAI member logos can be used on websites and in publications, brochures and marketing materials—in any way you want to show that you or your association or business is a member of our respected organization.

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.

CAI Message Board—Any Topic, Any Time A members-only benefit, the CAI Message Board provides a medium members can use get advice, offer advice, share information and discuss issues facing communities. Visit the Message Board at www. caionline.org/messageboard for ideas, guidance and perspectives from fellow members. Topics are limited only by your need for information, perspective and feedback. Discussions can range from community manager evaluation and wastewater management to assessment collection policies and board member conduct.

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

General Counsel for Associations:

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

Einar Hanson Benjamin Kirk

651-222- 0109

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

November | December 2014

25

Community Association Management Accessible. Reliable. Accountable.

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We understand the importance of efficient cost-effective practices that result in the cohesive operations of the community.

Our hands-on management is responsive to the requests of the Board of Directors and Homeowners while preserving the property and lifestyle of the community.

For over four decades, Gaughan Companies has been trusted for our integrity and perspective. Our Management Teams treat your Association as if we owned it. Each member of our team will always be accessible, reliable and accountable to you, the homeowner.

Making the Difference: Gaughan Companies is small enough to tailor their services to meet the needs of the Associations they manage, and large enough to make sure all areas of Associations’ needs are handled promptly and professionally. ~ Susan Sabrowsky Ashbourne Townhomes

26

Minnesota Communit y Living

Flexing, Fidgeting and Figuring Out the Budget

By Carin Rosengren, Property Manager, Keller Property Management

If you close your eyes and listen very hard, you might just catch the audible angst of property managers, board treasurers, presidents and committees who are tasked this time of year with preparing the annual budget for 2015. These folks are spending long days and late nights gathering information and answering tough questions, all while considering whether they must ask their neighbors and fellow members to pay more next year in dues.

Setting the amount of dues is the first step toward filling every little, hungry box in your Excel spreadsheet, as it sits, patiently waiting for input of revenue figures and expenses from a dozen different places, all of which will align in the end with a perfectly, magically, balanced result.

The second step is to ask more questions.

What projects does the board want to accomplish in 2015? How much will the sealcoating program require? How many homes will be painted? What are the projected increases for insurance, for the seasonal services contract, for the management company? And — most critically for most associations — in what areas can spending be cut?

Preparing the budget is a complex activity that has to start early so that it can be finalized and approved prior to the beginning of the new fiscal year, and so that homeowners can be notified in a timely manner. This is usually spelled out in the governing documents. Here is a basic strategy to follow when you begin to prepare a budget for 2015. (Since many hands can make lighter work, the board may appoint a budget committee to help with some or all of the following tasks.)

1. The board and manager work together to gather all financial information needed to project expenses for the coming year. This could be a reserve analysis, bids for contracts, projections for utility or service increases, comparisons of past years’ budget trends and many other details.

2. The board also examines all sources of income — assessments, interest on investments, proceeds from concession or club operation and other types of miscellaneous income.

3. The board creates a working draft by adjusting the expenses and income until they balance. This may be accomplished by foregoing certain expenses to avoid raising assessments. Or it may be necessary to raise assessments to cover increased expenses such as utilities that the board cannot control.

4. When the board has developed the best possible draft budget, the association may choose to send it to every member for review and comment. One of the reasons to start the process early is to allow plenty of time to study the budget, ask questions and offer comments.

5. Based on member comments, the board revises the draft budget as needed.

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6. At the annual meeting, members may have the opportunity to vote to approve the final budget, although for many associations leave ultimate approval up to the Board of Directors alone.

When this daunting task is complete, when all line items are jiving together and when revenues and expenses happily zeroed, surely it is time for a break. After all, the heavy lifting is done! So property managers and board volunteers, put your feet up, settle in for a long, quiet and relaxing winter … enjoy the beautiful snowfall and sip a warm cup of… Wait. Hold on, what are you sitting around for? There’s a foot of snow outside! Where is the snowplow and will someone answer the phone? Call the vendor!

Shovel the roof! It’s winter in Minnesota, for crying out loud!

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

MEMBER

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November | December 2014

27

Insurance Claims — Why Are They So Darn Confusing?

By JoAnn Borden, CMCA, AMS, PCAM

A

s a board member or homeowner, one of the most confusing situations you are faced with is insurance claims, and while you may have your manager to guide you through these insurance claims, it’s important you understand them as well.

Additional coverages can be included. Your insurance agent will review your governing documents, inspect the association, and interview the board/management to determine the necessary coverages for your association. All associations engage in three core activities — business, government, and community — and purchasing a commercial package policy is essential to covering the overall association risks.

Insurance is convoluted at best; two parties (association and owners) having similar responsibility in ensuring they have proper coverage, homeowners not necessarily understanding the association isn’t responsible for “everything”, who owns what, who is responsible for repairs in the event of an insurance claim… I could go on and on.

Convoluted, yes; confusing, VERY. As you read on, I hope to provide you with a broad understanding of the different types of insurance coverage, homeowner vs. association responsibility, and details of how a claim amount is determined.

Homeowners’ personal insurance is important not only for the individual, but also for the association. I’m sure you have heard the term “HO-6”. This type of personal insurance may cover the dwelling, personal property, loss of use, personal liability, and medical payments to others. Now… I want to define the dwelling coverage, because as a board member I’m sure you’re thinking the association covers the dwelling; you are correct, this is because commercial and personal insurance are interconnected on some levels because of the interface between common elements and individual units (condos or townhomes).

HO-6 dwelling coverage of the unit, as defined in the governing documents, may include additions and alterations to the unit, items of real property that pertain exclusively to the unit, and structures owned solely by the owner located at the residence.

Insurance is divided into two broad categories: • Accidental, Life, and Health insurance • Property and Liability insurance Property and Liability insurance is split between two types: • Commercial insurance — A community association purchases commercial insurance • Personal insurance — Homeowners in an association purchase personal insurance Insurance policies are special contracts between the insurer (insurance company) and the insured (association or homeowner).

A commercial package policy may include the following coverages for an Association: • Property and Liability • Boiler and Machinery • Blanket Employee Dishonesty (Fidelity) • Directors and Officers Liability 28

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The type of commercial coverage the association has purchased will define the responsibility of insurance coverage for the homeowner vs. association. There are three types of coverage: • Bare Walls — treats the unit and common elements as entirely separate • Original Spec — treats the unit and common elements as one as originally built • All-In — treats the unit and common elements as one and includes betterments and improvements not originally built Once insurance responsibility has been determined and allocated, it needs to be communicated to all owners. It is important

to remember that homeowner maintenance responsibility does not negate or absolve the association’s insurance responsibility. When the association holds the insurance responsibility it also has the repair/reconstruction responsibility, in the event of an insurance claim.

As a board member, I know that you worry about whether the homeowners are adequately insured. Unfortunately, there is no way to control the effects of an owner’s underinsurance or lack of insurance. So, what can you do? Well, I haven’t talked about the deductible and how important it is to explain the financial responsibility of the deductible to the homeowners. Let’s talk about “Loss Assessment Coverage”. This coverage should be included in an HO-6 policy. The Association must communicate what the deductible amount is for the Association commercial policy to the homeowners so that they are aware of their financial responsibility.

Regardless of an owner having adequate or inadequate loss assessment coverage, the deductible may be assessed back to the unit owner, damage in their home when there is association insurance coverage for a common element. When the association has original spec or all-in coverage, it is the association’s responsibility to perform the work and ensure it is brought back to an insurable state.

Even though the association’s bylaws require the association to obtain insurance, the financial responsibility to maintain and repair individual units is not removed by the insurance provisions of the governing documents. And while the governing documents set forth insurance requirements on the association, they further provide that owners are responsible for the damages and liabilities pertaining to their unit. Since neither the governing documents nor state statutes alter the requirement that the owner is financially responsible for the maintenance and repair of the unit, the responsibility remains with the homeowner.

Regardless of the insurance deductible amount ($2,500, $5,000, $10,000, etc) and because the

financial responsibility for maintenance and repair of the unit lies with the homeowner, if the amount of the repair was under the deductible amount, the expense falls on the homeowner.

At least annually, the management company or insurance agent sends out a letter that details the type of coverage the association has, listing out the common elements covered and stating the amount of the deductible. This letter is commonly called the HO-6 letter. The letter also references the name of the association’s insurance agent, should the homeowner have any questions regarding the type and amounts of personal insurance they should carry.

FAQs How is the value of my insurance claim determined?

The insurance industry generally uses software called Xactimate to value all claims.

Approximately 80% of property claims are written using Xactimate. Xactimate is owned by an independent company called Xactware.

Xactimate has specific pricing by region — for example, Minneapolis, MN. There are over 400 pricing regions in Xactimate. This is done to ensure the price is fair and accurate for a specific region in the country. Xactimate is, in effect, a very robust estimating program.

The software has over 18,000 specific material selections in it, for example shingle types, sheetrock, painting etc. Furthermore, the pricing in Xactimate is updated every month to reflect accurate market pricing. Most insurance companies have adopted Xactimate because it is considered accurate and fair. The insurance adjuster will create the scope of damage (estimate) in Xactimate.

Is the pricing in Xactimate fair?

The short answer is yes. The majority of insurance companies and contractors agree that Xactimate is fair. This is why it has been so widely adopted.

Do I need to get bids for my insurance claim?

No. Xactimate is designed to provide a reasonable and fair estimate for the damage

sustained to your property. When the insured gets bids, it generally only benefits the insurance company as it serves to save them money. If your bids come in below the insurance company estimate, the insurance company will likely lower your claim to the value of the lowest bid. If the bids come in over Xactimate, the insurance company will generally pay out the Xactimate amount.

Getting bids can put the insured in a situation where it is forced to use the lowest bid, which may not be in the insured’s best interest. For this reason, we recommend letting your general contractor work with the insurance adjuster to determine the repair estimate in Xactimate.

Can I profit from an insurance claim?

Most policies require the insurance company to return your property to its pre-event condition. The insurance company is not required to return your property to its preevent condition and give you a financial windfall. There are specific exceptions to these situations; however, they have to be handled very carefully to ensure the insured does not commit insurance fraud. Our advice is to seek a legal opinion from a competent insurance lawyer before trying to achieve a financial gain as a result of an insurance claim. Furthermore, in the case of a large loss claim (over $100,000) the insurance company will require the insured to provide proof that the work was completed prior to releasing the final funds. Proof of work generally consists of the following: the signed contract with the general contractor, copies of check stubs paid to the contractor to date and photos of the completed repairs.

This is standard practice on large loss claims.

Insurance companies require this information to ensure insurance fraud is not occurring.

Insurance claims are and can be confusing.

We can help guide and advise the board and homeowners through the claims process with the assistance of your insurance agent, insurance adjustor, and maintenance repair contractor. Please do not hesitate to contact your association manager or insurance agent with any questions.

Managing to make a

difference 30 years of association management experience Reserve Plans are included in our management program Proactive management, including weekly property visits Smart, expert, professional advice

Omega Management, Inc.

763.449.9100

www.omega-mgt.com November | December 2014

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Helpful CAI Information Professional Development for Smart Managers As the professional backbone of the communities they serve, community managers provide the skills and expertise that are essential to an association’s success. Managers find the knowledge they need through CAI’s time-tested Professional Management Development Program, which offers various education courses that cover a wide variety of topics. These courses are available as live, in-person seminars taught by expert instructors or as self-paced, online learning modules.

Both formats allow users to choose the option that best meets their individual needs and schedule.

Visit www.caionline.org/pmdp to enhance your knowledge and elevate your career.

member of:

The Community Associations Institute & The Minnesota Multi Housing Association

Providing LegaL advice to

Homeowners associations since 1975 • General corporate matters, enforcement of covenants, restrictions and management issues • Document interpretation and amendments

Fred Krietzman 612.373.8418

Mark Radke Timothy Hassett Jake Hendricks 612.373.8409 651.312.6006 612.373.8575

• Replacement reserve analysis • Collection of assessments and foreclosure of assessment liens • Dispute resolution and litigation, including construction defect litigation • Applicability and options under the Minnesota Common Interest Ownership Act (MCIOA) • Project development and documents • Turnover of developer control

Steve Yoch 612.373.8559

Molly Gherty 612.373.8453

Marnie Fearon 612.373.8405

220 South 6th Street, Suite 2200 Minneapolis, MN 55402-4504 444 Cedar Street, Suite 2100 St. Paul, MN 55101-2136

www.felhaber.com

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Minnesota Communit y Living

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