Minnesota’s premier homeowners association magazine
In this Issue: CAI-MN Vision Awards and Golf Tournament Photos 2012 Legislative Recap
July/August 2012
Volume 30 • Issue 4
And Much More!
Summer Fun The Floating Target of Swimming Pool Safety Compliance
Visit us online at www.cai-mn.com.
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Board of Directors
From the President
By Traci Lehman | CAI-MN President
The outstanding outcomes that CAI-MN had this year are due to the participation of our members. It is also due to the countless volunteer hours that our committee members, chairs and our chapter board of directors generously committed throughout the year. Thanks for your dedication. It does not go unnoticed. Over the past year, the CAI-MN Board of Directors has worked tirelessly to make the vision and strategic goals of our chapter a reality. I would like to give special thank-you to Jon Edin for his leadership and guidance over the past year. It is truly appreciated. I hope to catch up with you on the golf course one of these days, Jon. Also thank you to Mike Mullen for his years of expertise on the board serving as Treasurer. In addition, I would like to welcome the incoming board members: Russ Lis, Michelle Stephans and Gene Sullivan. Each year we celebrate the rich accomplishments and recognize the best in community association leadership at the Vision Awards. This year was no exception. It was a wonderful evening thanks to the hard work of the Vision Awards Committee. Kudos to all of you! And again, big CONGRATULATIONS to the winners! YOU ROCK!
I have found over the years that there is no better way to develop personal leadership skills than by serving on a committee or board. Volunteer leadership has been one of the biggest contributions to my personal growth. You get to hear so many different perspectives on issues which help broaden your ways of thinking. It also expands your network of contacts both professionally and personally. Committee and board service takes a commitment of time and energy, but it is one of the most rewarding experiences and contributes to so many areas of professional and personal growth. So my challenge to all of you in the coming year is to get involved and help provide actions, ideas and solutions that make a difference. I hope you enjoy the rest of the summer with your family and friends. Warm regards,
President Traci Lehman, CMCA, AMS, PCAM Phone 612.381.8600 tracil@citiesmanagement.com Vice President Michael Klemm, Esq. Phone 952.953.8832 klemmm@seversonsheldon.com Treasurer Halo Stafford, CMCA, AMS, PCAM Phone 952. 277.2785 hstafford@gittleman.com Secretary Nancy Polomis, Esq. Phone 952. 941.4005 npolomis@hjlawfirm.com Directors Tom Engblom, AMS, ARM, CMCA, CPM, PCAM Phone 866.800.4656 tengblom@cabanc.com Steve Hoogenakker Phone 763.213.2410 steve@landscape.pro Rich Klobuchar, CFP 速 Phone 763.551.9827 rklobuchar@usinternet.com
Traci Lehman
Russ Lis, CMCA, AMS Phone 763.225.6452 rlis@developcommunity.com
facebook.com/CAIMinnesota
As I look to the year ahead serving as President of CAI-MN, I get very excited because I have the distinct pleasure of working with some of the best and brightest professionals in our industry. I promise we will work together in pursuit of our mission: to provide knowledge, education, networking and legislative leadership needed to run competent and prosperous community associations.
Jim Rezek Phone 763-424-9984 jimrezek@comcast.net Michelle Stephans, RS Phone 763.754.5500 michelle@reserveadvisors.com
twitter.com/CAIMN
Gene Sullivan Phone 952.922.2500 gene@ncmgi.com
VEC TO R B U TTO N S.C O M
Find articles from this issue and archived articles online at cai-mn.com VEC TO R B U TTO N S.C O M in the Minnesota Community Living Resource Library.
Committee Chairs Legislative Action Chair Joe Crawford, CMCA, AMS, PCAM Phone 952.212.2216 joe.crawford9@gmail.com
Vision Awards Chair Jane Bristow, CMCA, AMS Phone 952.277.2722 jbristow@gittleman.com
Golf Tournament Chairs Paul Brownlee Phone 414.918.4494 paul@reserveadvisors.com
Tradeshow Committee Chair Mark Schoenfelder Phone 952.345.2900 mark@schoenfelderpainting.com
Communications Chair Joel Starks, CMCA Phone 952.224.4480 joel@sharpermanagement.com
Education Committee Chair Kirk Gassen Phone 952.253.4911 kgassen@gassen.com
Tom Engblom Phone 866.800.4656 tengblom@cabanc.com
Membership Chairs Dennis Merillat Phone 952.997.2320 dmerillat@certapro.com
CAVL Chair JoAnn Borden, CMCA, AMS, PCAM Lisa Astleford, CMCA, AMS 3 JulyPhone | August 2012 Phone 763.746.1196 952.277.2787 lastleford@gittleman.com jborden@developcommunity.com
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The Floating Target of Swimming Pool Safety Compliance By John Gitzinger, Platinum Poolcare, Reprinted from CAI-Illinois Chapter Monthly Digest
T
he current state of affairs The relationship between condominium/townhouse associations and their swimming pools has become more and more complicated over the last three to four years. Many factors have contributed to this complexity, which include: The federal Virginia Graeme Baker Act (VGB), Americans with Disabilities Act (ADA), the requirement of Certified Pool Operator status and the more active policing role played by the Illinois Dept. of Public Health (IDPH). The IDPH has closed many a pool for failure to meet the minimum requirements of the VGB code, and safety seems to be at the top of the list for IDPH enforcement agents. Trying to learn all code requirements for swimming pools can appear to be a daunting task, as those who take care of the pool without the help of guards or attendants can attest. IDPH and Cook County are looking closely at existing facilities to determine code compliance, and have begun to levy fines on properties deemed to not to have met minimum code requirements. Additionally, these agencies are issuing monetary fines for properties for not completing the minimum repairs required to meet the code in a timely fashion. The agencies have historically been noting these warnings on the inspection reports, and are now turning to enforcement for laggards. The associated fines are generally assessed on a per diem basis, and will add up quickly if not addressed. Many association pools are granted “grandfather” status, thereby reverting to past code requirements for compliance. Every issue is not necessarily covered under this exception, however, and certain renovation projects may require the association to bring additional seemingly unrelated safety items up to current minimum standards. It is important to understand that while some renovation work does not require a IDPH permit, most work done on the swimming pool actually will. For example, IDPH will require a permit for any changes to existing equipment unless it is an exact replacement. 4
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This is true even if the existing equipment is undersized, or incorrectly installed. It is the responsibility of the association to make sure all permits have been obtained and all inspections have been completed.
(CPO) oversee that all chemical checks are done properly. IDPH has not adopted this rule yet but may in the future. If it does, a CPO will be required to oversee the operation of each pool.
Basic items to ensure compliance Pool barriers such as fences need to be kept in proper structural condition to avoid being written up during a licensing inspection by IDPH. The maximum allowable distance between the ground and the fence is 4”. This is also the maximum distance allowed between any openings in height and width. Any type of gate or door that is not a locked service entrance will need to be self-closing and self-latching.
How can our association hit the target? For properties that do not desire to put the on-site maintenance person through the rigors of a CPO certification program, there is a viable alternative. Many pools have made an attempt to bring in outside consultants in the form of Pool Management and/or Professional Swimming Pool Service companies to help them comply with the new codes. These companies supply professional service technicians, lifeguards and/or pool attendants whose job it is to clean the pools, check chemicals and filter operation, monitor and complete repairs and renovations as needed, and keep an eye on patrons to assure a safe environment for all pool visitors. A knowledgeable and competent commercial pool professional can help the association safely navigate the increasingly murky waters of modern municipal safety compliance.
IDPH requires several items that need to be available at all pools while the pool is open for use. These include: proper signage, an emergency phone, a working drinking fountain and required safety equipment (including a Coast Guard approved ring buoy with throw rope, life hook with 12’ pole and a first aid kit). The safety equipment needs to be mounted on the deck and accessible for all patrons. For everyone’s safety the pool deck and pool structure should be inspected regularly. Decks will sometimes sink over time. A deck that has sunk or has large cracks in the concrete will result in a trip hazard. The interior of the swimming pool is also an area that can become a danger to patrons. Cracked and chipped tile, peeling paint and delaminating plaster can all be sharp, causing cuts and scrapes. The coping on top of the pool wall above the tile can also crack and chip. All deck equipment should be checked to assure that it is properly secured to the pool deck. Proper pool chemistry is one of the most important safety concerns for every pool. Chlorine and pH need to be checked twice a day every day that the pool is open. IDPH has daily forms that need to be filled out by the person doing the testing. Cook County requires that a Certified Pool Operator
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Calendar
Index
2012 August
Managers Seminar: Managing Foreclosed Units, Collections & Delinquencies
August 14, 2012, 11:30 am - 1:30 pm Ewald Conference Center $35 for members (early); $45 for members (regular); $55 for nonmembers
features 4 The Floating Target of Swimming Pool Safety Compliance
By John Gitzinger
8 CAI-MN Vision Awards and Golf Tournament Photos
September
Managers Seminar: Certification, Recertification Processes & Options
September 11, 2012, 11:30 am - 1:30 pm Ewald Conference Center $35 for members (early); $45 for members (regular); $55 for nonmembers
13 Congratulations Lifetime Achievement Award Winners, Welcome 20122013 Chapter Board
14 Did You Know? HOAs Can Recover
Their Attorney Fees in Construction Defect Actions Under MCIOA
CAVL Seminar
September 12, 2012, 5:45 pm - 7:45 pm AAA Minneapolis $15 for members (early); $25 for members (regular); $30 for nonmembers (early); $40 for nonmembers (regular)
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.
By Paul Hanscom
By Alex Nelson
17 2012 Legislative Recap
By Dea Price
18 Old Age and Treachery Will
Overcome Youth and Skill! Really? By Steve Hoogenakker
21 Open Board Meetings
By Rich Klobuchar
21 Governing Documents 101
By Nigel H. Mendez
Published by Community Associations Institute — Minnesota Chapter, copyright 2012. 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 Chapter Staff Editor Jane Duntley at janeyd@cai-mn.com, or at CAI– Minnesota Chapter, 1000 Westgate Dr., Suite 252, St. Paul, MN 55114.
series 3 President’s Message
By Traci Lehman
6 Ask the Attorney
By Nigel H. Mendez
19 Self-Management Series
By Joel Starks
2012 Annual Partners Platinum Benson, Kerrane, Storz & Nelson Gassen Companies Gittleman Management Hellmuth & Johnson Sela Roofing & Remodeling Xtreme Exteriors Gold Complete Building Solutions, LLC Silver All Ways Drains Carlson & Associates Community Advantage Mutual of Omaha Bank - Community Association Banking & CondoCerts Hammargren & Meyer PA Jeffrey Mayhew Agency, Inc. Levin & Edin Omega Management Sharper Management Thomsen & Nybeck Tru Seal America, LLC Bronze American Building Contractors Construct-All Corporation Michael P. Mullen, CPA, PLLC Schoenfelder Painting SERVPRO of Brooklyn Park/Champlin
[ ADS Index ] of Advertisers All Ways Drains................................................ 18 American Family Insurance – Jeff Mayhew.... 16 APMC – Association Property Management Company...................................................... 14 Benson, Kerrane, Storz & Nelson, P.C. .......... 25 Birch Lawn Maintenance................................. 24 Carlson & Associates, Ltd .............................. 16 CityView Property Services............................. 22 Columbus Exteriors, Inc.................................... 2 Community Advantage................................... 24 Complete Building Solutions ........................ 20 Final Coat Painting.......................................... 16
Gassen Companies.......................................... 15 Gates General Contractors, Inc. .................... 23 Giertsen Company of MN............................... 22 Gittleman Management.................................... 7 Gopher State Seal Coating ............................ 16 Hammargren & Meyer, P.A. ............................ 26 Hellmuth & Johnson, PLLC....................... 11, 22 Levin & Edin..................................................... 19 LS West............................................................. 24 Mutual of Omaha Bank – Community Association Banking & CondoCerts........... 16 Northrup Roofing & Remodeling................... 19
Omega Management, Inc............................... 21 Plehal Blacktopping, Inc. ............................... 24 Reserve Advisors.............................................. 22 Reserve Consultants, Inc. ................................. 4 Russo Consulting, Inc. .................................... 24 Sela Roofing .................................................... 12 Sharper Management .................................... 22 Strobel & Hanson ........................................... 21 The Inspectors of Elections ............................ 13 Thomsen & Nybeck......................................... 24 TruSeal America ........................................ 18, 28 Xtreme Exteriors.............................................. 27
July | August 2012
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Ask the Attorney by
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his column is comprised of questions that have been posed to me by homeowners, property managers and related professionals regarding legal issues they have encountered with respect to their associations. Are electronic signatures acceptable for proxy forms, ballots, etc., from members of homeowner associations? If so, what are the restrictions such as they apply to annual meetings versus amendments to declarations, bylaws, etc.? My answer to this question would have been no until a 2010 amendment to the Minnesota Common Interest Ownership Act (MCIOA), which is found at Chapter 515B of Minnesota Statutes. This amendment leads me to interpret Minnesota law as permitting the acceptance of electronic proxies and votes as long as your governing documents do not restrict that ability. Minnesota community associations usually are subject to MCIOA, and are almost always non-profit corporations formed under the Minnesota Nonprofit Corporation Act (Chapter 317A, or “Nonprofit Act”). I will assume both of these authorities apply to the association in question. Proxies: Under the Nonprofit Act, so long as your governing documents allow the use of proxies, a proxy form may be submitted as a “nonelectronic written appointment . . . signed by the member,” or as an “authenticated electronic communication.” Minn. Stat. § 317A.453, Subd 1. A communication is “authenticated” if it contains information from which the association “can reasonably conclude that the communication was sent by the [owner in question].” Minn. Stat. § 317A.011, Subd. 3a. MCIOA is much less clear in its intent. It states only that a proxy must be “executed by the unit owner. . . .” Minn. Stat. § 515B.36
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110(b) (emphasis added), but does go on to allow the board to specify the “form of proxy and proxy rules, consistent with law.” Id. Caselaw exists that has interpreted the term “executed” to mean “signed,” which in general might require a hand-written signature. See, e.g., Minn. Stat. 645.44, Subd. 14 (stating that a “signature” must be in writing). However, for purposes of the Nonprofit Act, “if a provision requires a signature, an electronic signature satisfies the requirement.” Minn. Stat. § 317A.015. As discussed below, a 2010 amendment to MCIOA signaled the Minnesota legislature’s apparent intent to allow community associations to transact business electronically. So, it would presumably be “consistent with law” (and therefore within the board’s discretion) to accept electronically-signed proxies pursuant to the Nonprofit Act. Ballots and Voting: Where MCIOA applies, it permits voting “on any issue” by electronic means (and mailed ballots too), if that option is “authorized by the statute under which the association is created,” is “not limited or prohibited by the articles of incorporation, bylaws, or declaration” and as long as the vote is held “in compliance with the applicable statute.” Minn. Stat. § 515B.3-110(c). The “statute under which the association is created” refers in almost every case to the Nonprofit Act, which authorizes electronic notice and balloting “unless prohibited or limited by the articles or bylaws,” and so long as each member participating electronically has consented to use that method. See, e.g., Minn. Stat. §§ 317A.447 and 317A.450. When read together, this means your association can vote electronically on any issue unless your articles, bylaws, or declaration say otherwise. But you cannot use mailed or electronic ballots “in combination with a vote taken at a meeting of the unit owners.” Minn. Stat. § 515B.3-110(c). If your association wishes to accept mailed or electronic votes on a particular item of business, then it cannot allow votes on the same business at a member meeting. “However, voting by
Nigel H. Mendez, Esq., Carlson & Associates, Ltd.
electronic means and by mailed ballot may be combined.” Id. Also, be aware your existing documents might not permit electronic ballots, and may still require that board elections be conducted at owner meetings. Until the 2010 amendment, MCIOA required in-person votes for the election of board members. Most governing documents written prior to 2010 followed form with that requirement. This means your governing documents may very well contain a provision stating that member votes on any matter, except the election of directors, may be by mailed ballot. If this is the case, you will not be permitted to accept electronic votes at all, and not even mailed ballots may be accepted for the election of directors. If this is the case, and you believe your association would achieve greater member involvement by permitting electronic voting, your association must amend its declaration before entering the electronic age. This answer was provided by Matt Drewes, Shareholder, Thomsen Nybeck, Attorneys | (952) 835-7000 or mdrewes@tn-law.com. To have a question answered in a future article, please email it to me at nmendez@carlsonassoc. com with the subject line of “Ask the Attorney.” While I can’t promise that all questions will be answered, I will do my best to include questions that have a broad appeal. Questions will also be answered by other attorneys practicing in this area of law. The answers are intended to give the reader a good understanding of the issue raised by the question but are not a substitute for acquiring an opinion from your legal counsel.
July | August 2012
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ANNUAL
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Congratulations, Winners! Lifetime Achievement Reginald Gassen, founder of Gassen Company
Homeowner Association of the Year: Under 100 Units Trailhead at Jeffers Pond Association
Lifetime Achievement Melvin Gittleman, founder of Gittleman Management Corporation
Rookie of the Year Spike Squire, Gittleman Management Corporation
Excellence in Service Darlene Henry, Priority One Management, Inc.
Outstanding Chapter Volunteer John Dorgan, Dorgan Law Office
Service Professional of the Year Kym Leaf, Bredhal Plumbing, Inc. Recruiter of the Year Award Shelly Muelke, Marketplace Management, Inc. Outstanding Community Building by an Association Award The Jonathan Association July | August 2012
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th Annual
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Golf Tournament
Minnesota Communit y Living
July | August 2012
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Congratulations Lifetime Achievement Award Winners; Welcome 2012-2013 Chapter Board By Paul J. Hanscom, CAE, CAI-MN
T
he Community Associations Institute of Minnesota (CAI-MN) recognize industry icons with Lifetime Achievement Awards and best performers of 2011 at its Annual Meeting, Thursday, June 7.
As Reginald looks to the future of the company, his priority is to remain a Minnesotaowned company committed to being the very best at providing its association clients with superior customer service that is beyond their expectations!
CAI-MN recognized two leading figures in Minnesota’s community association management industry with the association’s highest honor, the Lifetime Achievement Award – Reginald Gassen, founder of Gassen Company; and Melvin Gittleman, founder of Gittleman Management Corporation. Both were recognized along with top performers in community management at the CAI-MN Annual Meeting & Vision Awards Ceremony held at the International Market Square on June 7, 2012.
Melvin Gittleman is widely recognized as one of the pioneers and leaders in condominium development and management in Minnesota.
Reginald Gassen has been serving the real estate and property management industry since 1969. In 1989, Reginald, along with his business partner and wife, Catherine Gassen, made the decision to focus exclusively on association management in Minnesota. Today Reginald, Catherine, son Kirk and daughter Beth are active in the daily operation of the business. Gassen Company has earned its excellent reputation through the dedication of its educated, professional team of employees. The professional organizations in which Reginald is a member assures clients the company is run with high standards and integrity. Reginald holds the Certified Manager of Community Associations designation through Community Associations Institute. He holds the designation of Certified Property Manager with the Institute of Real Estate Management. As a member of the Minnesota Realtors Association, Reginald holds a Broker’s license. Gassen Company is a member of Minnesota Multi Housing Association. Reginald is most proud of the company’s achievement of earning the Accredited Association Management Company (AAMC) designation from Community Associations Institute in 2011.
In the 1970s and ‘80s, Mel Gittleman developed 15 condominium developments and three apartment communities in the Twin Cities, all of which exemplified Mel’s vision for a community association experience that was beautiful, sophisticated, built with an unwavering commitment to quality, and well managed. Some of the more notable residential buildings that he developed – Loring Green East and West and Marquette Place – remain fixtures in the Downtown Minneapolis skyline. All of the condominium associations that Mel created, both urban and suburban, have remained long-term successful condominium associations in the marketplace. In fact, it has been common for knowledgeable shoppers of condominiums over the last 30 years to search for a “Gittleman” built building in their marketplace.
On behalf of CAI of Minnesota, we thank Mel for all he has done for our industry. Preceding the Vision Awards Ceremony, the 2012-2013 Board of Directors was seated at the association’s annual meeting. Those serving on the CAI-MN Board of Directors include: President: Traci Lehman, CMCA, AMS, PCAM Vice President: Michael Klemm Treasurer: Halo Stafford, CMCA, AMS, PCAM Secretary: Nancy Polomis, Esq. Director: Thomas C. Engblom, CMCA, AMS, PCAM Director: Steve Hoogenakker Director: Rich Klobuchar, CFP ® Director: Russ Lis, CMCA, AMS Director: Jim Rezek Director: Michelle Stephans, RS Director: Gene Sullivan CAI-MN thanks the numerous volunteers who have dedicated their time and talent to making CAI-MN relevant and valuable to all of those involved in community leadership in Minnesota.
As CEO of Gittleman Management for more than 25 years, Mel offered – day in and day out – his compelling vision for community living, dedication to clients, and commitment to quality until his retirement in 2009. During this time period, the company grew substantially and expanded its management services to condominium, townhome, mixed use, and single family home associations across the metropolitan marketplace. Mel was instrumental in the growth of Gittleman Management. A key part of his success was the dedication and commitment to clients that he fostered among employees of the company, which helped set a standard of quality and excellence within the industry. Mel enjoyed and maintained many ongoing, long-term relationships with clients over the years and was pleased to have had the opportunity to contribute to a high quality of life within their communities.
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Did You Know? HOAs Can Recover Their Attorney Fees in Construction Defect Actions Under MCIOA By Alex Nelson, Esq., Benson, Kerrane, Storz & Nelson, P.C.
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nder the Minnesota Common Interest Ownership Act (MCIOA), a condo or townhome association, or an individual unit owner that prevails on legal claims against its Declarant (the developer who creates the association) can receive an award of attorneys’ fees and litigation costs in addition to recovery of defect-related damages. To recover attorneys’ fees (absent an attorney fee-shifting agreement in writing elsewhere), a construction defect claimant needs to demonstrate that the Declarant violated either a provision of MCIOA or a provision of the association’s Declaration, Bylaws, or Rules & Regulations. See Minn. Stat. § 515B.4-116; 301 Clifton Place LLC v. 301 Clifton Place Condo. Ass’n., 783 N.W.2d 551 (Minn. App. 2010). Some common Declarant violations of MCIOA relevant to construction defect cases: 1. The Declarant drafts invalid or unenforceable provisions of the Declaration that attempt to override provisions of MCIOA (such as impermissible prohibitions, conditions precedent, or limitations on construction defect claims). See Minn. Stat. § 515B.1-104. 2. The Declarant inserts an unconscionable provision in the association’s governing documents. See Minn. Stat. § 515B.1-112. 3. The Declarant does not act in good faith. See Minn. Stat. § 515B.1-113. 4. The Declarant drafts invalid or unenforceable provisions of the Declaration that attempt to improperly limit the association’s ability to amend its own Declaration. See Minn. Stat. § 515B.2118. 5. The Declarant attempts to limit the powers of the association to bring legal action or otherwise handle its construction defect problems in accord with the powers granted to it by MCIOA. See Minn. Stat. § 515B.3-102.
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6. The Declarant-appointed HOA board members violate their fiduciary duties to the association. See Minn. Stat. § 515B.3-103(b)(i). 7. The Declarant (and/or its HOA appointed board members) do not properly maintain the community. See Minn. Stat. § 515B.3-107. 8. The Declarant must indemnify the association for liability to a unit owner because of an act or omission of the Declarant during its period of HOA control. See Minn. Stat. § 515B.3-111. 9. The Declarant does not turn over all required records to the owner-elected HOA. See Minn. Stat. § 515B.3-118. 10. The Declarant fails to provide unit purchasers with the required disclosure statement. See Minn. Stat. § 515B.4101 through 102, 105. 11. The Declarant violates its express or implied warranties of property suitability or quality. See Minn. Stat. § 515B.4.112 through 113. 12. The Declarant does not complete construction of portions of the association indicated on the plat, or it does not repair or restore portions of the association that it itself damages. See Minn. Stat. § 515B.4-118. Provisions of an association’s Declaration, Bylaws, or Rules & Regulations often violated by a construction defect defendant: 1. The Declarant-controlled HOA is required to adequately maintain all common elements. 2. Specific construction standards may be laid out in the Declaration that apply not only to subsequent owner improvements, but also to original construction. 3. The Declarant often covenants in the Declaration to: a. protect the health, safety & welfare of the owners; b. protect property values; and/or c. provide peaceful use and enjoyment of the property.
A post-litigation award of attorneys’ fees allows HOA construction defect claimants to be made “whole.” Absent a separate award of attorneys fees (or a payment for attorneys fees as part of a settlement agreement) a construction defect claimant may have to pay its attorneys some portion of its actual damages award, and may be left short of funds to make all needed repairs. Thus, the incentive to allege and prove violation of MCIOA and/or violation of the association’s governing documents is significant. An association that receives an attorney fee award and that has a contingent fee agreement with its attorney may be able to entirely avoid outlay of its own funds for attorneys fees both during and after the litigation.
July | August 2012
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Minnesota Communit y Living
2012 Legislative Recap By Dea Price, New Concepts Management Group, Inc.
A
gain this year, the CAI-MN Legislative Action Committee (LAC) was hard at work at the Minnesota State Capitol lobbying on behalf of the interests of the roughly one-fifth of Minnesotans who live in common interest communities. This year’s legislative session was another busy one, with many bills affecting our industry. The LAC worked hard to track all bills that pertain to common interest communities and issued position statements, met with lawmakers and other interested parties, and testified at hearings in the House of Representatives. Following is a recap of the LAC’s work over the 2012 legislative session. Before the session had even begun, the LAC was working on fundraising efforts in order to retain Lobbyist Bill Amberg of Ewald Consulting. Because of the influx of proposed legislation affecting our industry in the past few years, it became apparent that the support of a professional lobbyist would be necessary to increase CAI’s presence on the hill and keep tabs on bills coming down the pike. LAC members sent out letters to board members at community associations they manage asking for their support in our legislative efforts. The LAC set a goal of raising $7,000 to help fund the lobbyist’s contract. With funding coming from CAI advocacy support fees, the Minnesota chapter of CAI, homeowners’ associations, association management companies and a one-time grant from CAI National, we were able to surpass that goal and sign Bill Amberg on part-time. With our lobbyist in place, we got to work at the Capitol, meeting with legislators in the House and Senate to let them know who we are and what CAI does. Our main goal was to increase visibility among lawmakers so they would know that CAI is the foremost authority on community associations and to educate legislators and their staffs on association issues, answer any questions they have and offer guidance on policy matters that affect our industry. LAC members met with several legislators prior to session
beginning including Representatives John Lesch, Sheldon Johnson, Torrey Westrum and Joe Atkins and Senator Warren Limmer. We also attended an informal hearing with the House Civil Law Committee regarding HF 1254, the so-called “flag-pole bill” that we began working on last year, and had a lengthy discussion with the author of the House file, Kurt Bills, regarding CAI’s opposition to the bill and our concerns regarding its consequences. HF1254, and its companion, SF 926, was introduced in spring of 2011 and had several provisions, each of which was damaging to community associations’ ability to govern themselves and serve their members. The bill had been tabled in the House Civil Law Committee in May 2011, but was expected to reappear early this session. In its revised form, the bill sought to revoke a community association’s authority to enforce rules and regulations within the association as they may pertain to the installation of flagpoles and political signs in areas where a homeowner has exclusive use. More devastating yet, the bill also would have removed the association’s ability to foreclose a lien on a property for fines for rule violations. This would have severely diminished an association’s ability to enforce the association’s governing documents, even though each owner in an association voluntarily agreed to abide by them at the time of purchase. After much work, including an impressive grassroots effort by CAI members to contact committee members regarding their opposition, the bill was referred without recommendation from the House Civil Law Committee by Representative Mary Liz Holberg to the House Commerce Committee, where it died due to a lack of hearing. In January we learned of a proposed amendment to MN Statute 515B (MCIOA) that would have made it more difficult for an association to commence litigation for construction defect claims. A position paper outlining our concerns with the proposed language was forwarded to the party proposing the changes and we were able to avert
the bill from moving forward at its early stages. Utility shut-off: The LAC is still working to pass legislation that would provide notice of a pending utility shut-off to an association so that heat could be maintained in a vacant unit to prevent frozen and burst pipes and the water damage that they cause. We learned of a proposal to set up a call center for utility shut-off notifications to banks that are foreclosing their mortgages. LAC member Dea Price sat on a work group on the issue and worked with Senator Bakk trying to get language included that would provide notice to CICs. The bill did not make the hearing deadline in the House this year, but we will be working in the interim on getting language for CICs added and hope to have a bill reintroduced next session. Late in the session we learned of SF2137, which was a bill on weather related insurance claims practices regulation. The LAC had a number of concerns with the bill and went to work trying to get language removed from the bill that would have prevented contractors from negotiating on behalf of homeowners in insurance claims. The bill was passed as amended, with the removal of provisions of the bill that were of concern. Each year, the Minnesota Revisor of Statutes drafts a bill to correct erroneous, ambiguous, and omitted text and obsolete references, to remove redundant, conflicting, and superseded provisions, and to make miscellaneous corrections to laws, statutes, and rules. The 2012 Revisor’s Bill, enacted as 2012 Minnesota Session Laws Chapter 187, makes several corrections to MCIOA. Most of the changes are technical in nature and are beyond the scope of this article. However, the 2012 Revisor’s Bill makes one significant change that applies to all condominiums, cooperatives and planned communities created under MCIOA on or after August 1, 2010. The 2011 amendment to MCIOA inadvertently changed Section 515B.1-102 (Applicability) to provide that Legislative Recap continued on page 20 July | August 2012
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Old Age and Treachery Will Overcome Youth and Skill! Really?
By Steve Hoogenakker, Natural Green Landscape Management
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t was a Friday afternoon this past November. We were sitting down having pizza in the company “War Room.” A young man came in, a new employee on the rise. One of the managers introduced us. He introduced me as “The Big Boss.” People who know me know I’m uncomfortable with titles, and I don’t think the statement is even important. In business, titles can sometimes fool the new employees for a time and might scare some others. In both cases, demanding respect of my title will only hinder the efforts of the company and its employees. As we were eating the pizza, it got me to thinking. What does this young guy think of me, now that I’m the old guy (51 years old)? Also, what would make him respect me or even listen to what I might have to say? I mean, I was his age once. Granted, I was
better looking, more intelligent and knew what real music sounded like. I could disco and still believed the Vikings could win the SuperBowl in the 1990s so surely, he would revere every word of advice, right? When it comes down to experience versus youth, consider one of my favorite beliefs from 1970, Shunryu Suzuki said this: “In the beginner’s mind there are many possibilities, in the expert’s mind there are few.” It’s an amazing sentence that cuts both ways. Read it again slowly and read between the lines. In its simplicity, it is at once advocating youth with its many possibilities and also the expert’s ability to cut through the extra fat of too many possibilities. And it implies warnings for each position! Yes, my youthful counterpart has many ideas. Many ideas I might discount out of hand, using my experience to say why his idea wouldn’t work. Yes, the young man might see things that I have long forgotten. This brings me to my second point. I have forgotten more things about business than this guy has learned. While true, what better opportunity for me to learn what I’ve forgotten than to listen to him? Being a great leader is very important to your association or organization, no matter your position. Whether you are the CEO, a Property Manager or a Board Member of an association, leadership starts with you the moment you wake up each morning!
Concrete – Asphalt – Seal Coating Peter Tjornhom Phone: 952-994-9029 www.trusealamerica.com
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So, why should a new employee listen to someone like me? We’ve determined the title isn’t important. We’ve determined that they might have a different outlook than me, and in some things, even though they don’t disco dance, they may be correct. I think it boils down to this: “You should respect my ideas, not because of my title and not because of my successes, but because of my failures.” The irony of this statement is that while the older readers are nodding their heads, the younger ones are saying, “What a loser!” Yes, I have made nearly every mistake a leader can make! Not only that, but when it comes to decision-making, I’m certain I have repeated more mistakes than my young friend has even had the chance to make. It’s those repeated mistakes that leave their lasting imprint. The scars and the wrinkles were hard earned with each learning experience. These are the events that teach me the choices are few. At the same time, I have to respect my young associate’s ideas. Not only do I want to encourage him, I have to work even harder than he at keeping an open mind. After all, his mind is a floodgate of ideas, while mine is a focused “narrow” stream with the emphasis on narrow. Suzuki also said this: “Our tendency is to be interested in something that is growing in the garden, not in the bare soil itself. But if you want to have a good harvest, the most important thing is to make the soil rich and cultivate it well.” If you want your organization, your association to be fruitful, then make sure your soil is rich with the wisdom of some and cultivate the ideas and enthusiasm of youth as the basis for your success! Questions? Contact Steve Hoogenakker, Steve@Landscape.pro
Self-Management Series
Self-Managed Association Boards: What Gives Way When a Board Does Not Know the Basics By Joel Starks, President, Sharper Management
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n this series we are focusing on you, the board member, and the challenges you face each day when running your homeowners association. We are exploring the challenges of self-management and ways to work through them. This series will answer questions from readers. If you see something that seems common or you identify further challenges, email joel@sharpermanagement. com. I will add your comments and feedback as the year goes on. Board members and owners, speak up! 1. Deferred maintenance: When should it be fixed, replaced or maintained? 2. Trusting a board: Get involved and go to meetings. 3. Contracts: Not just for their sake but yours as well. 4. Board fraud: Boards make mistakes, but what if? 5. Agendas and announcements: Where do I find out info about meetings? A contract is a beginning…and end A contract documents the terms of your agreement with a vendor and is the official
beginning of a project. However, the signed contract signifies the end of a process that must start long before that. That process includes a written scope of the project and detailed requests for proposal that help boards compare “apples to apples.” These efforts are the board’s job. Scope out the project Outline the needs of the association clearly and with detail. This will allow the board to collect consistent proposals and make a quicker decision on which vendor to use. For instance, a landscaping proposal may include mowing and snow removal, but it may also include weeding, hedge trimming, fertilization and frequency of service. The scope should include exactly what the board expects. RFP should not be RIP Create a request for proposal (RFP) that relates to your situation. Be careful not to overthink it. It can be as simple as a request that includes: • What the project is (scope) • Proposal due date • Proposal format (email or hard copy) Don’t get bogged down in RFP clutter. Get it down to 10 real things you are trying to accomplish. If there are more, create subcategories. Include the scope of work as a driver in the RFP.
Signed contracts Now you have done all the work on the front end and you just want to get the project started. When you have chosen a vendor, do the following to finalize the contract: 1. Set a clear start date. Put it on the first page of the agreement. 2. Include the outlined scope as an addendum you can refer to any time. 3. Get written confirmation from the vendor in regards to: • Who is responsible for the work • When will it be complete • How many updates to expect • What communication avenues will be used • How much money down is required • Progress checks • Any change orders are in writing and approved by the board 4. Include a statement that explains that final payment will be remitted when the board approves the completed work. 5. Include in the contract the vendor’s warranty or workmanship guarantees. Next issue we will talk about board fraud and misuse of power. How do you know when your board is above board?
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Legislative Recap continued from page 17 Section 515B.3-116 (Lien for Assessments) applies only to common interest communities created before August 1, 2010. The 2012 Revisor’s Bill amends Section 515B.1102 to remove this limitation. Thus, all common interest communities that are subject to MCIOA will have a statutory lien for assessments under Section 515B.3-116. The LAC is keeping an eye on an issue known as the Cooperative Act, which seeks to carve cooperatives out of MCIOA by creating a new statute to govern them. The statute would apply to new residential cooperatives, and existing cooperatives could opt-in if they chose. HF2955 and SF2543 did not pass this year, but we expect similar bills to reappear next year and will be tracking them.
We also expect solar panel and other energyrelated bills to be a big issue in upcoming sessions and will be monitoring for activity on these issues as well.
Thanks to the Legislative Action Committee volunteers who have dedicated resources toward these legislative accomplishments:
As you can see, the LAC was very busy this session watching out for potential legislation that affects our industry. We will continue to work hard between sessions by building relationships with lawmakers and looking out for future bills of interest and/or concern. Please keep watching for action alerts that will be sent out as needed as new issues arise. Thank you for your past and continued support!
John K. Bouquet, Hellmuth & Johnson, PLLC Walt Burris, BEI Exterior Maintenance Corp. Joseph Crawford, Crawford Management, Inc. John R. Dorgan, Dorgan Law Office Michael Klemm, Dougherty, Molenda, Solfest, Hills & Bauer P.A. Gregory Pettersen, Reserve Data Analysis Dea Price, New Concepts Management Group, Inc. Charles Schneider, Community Development Inc. Cheryl Selinsky, Woodbridge Townhouse Association Gene Sullivan, New Concepts Management Group, Inc.
Questions? Contact Dea Price, deanna@ ncmgi.com, 952-224-2666
CAI-MN – Who, What, Why? Join the Fun
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CAI-MN members include homeowners, board members, property managers, property management companies, real estate agents, and myriad professional partners who serve community associations in our state. Through CAI, you can take advantage of a range of education courses and the opportunity to become professionally certified. You’ll have access to best practices and knowledge that you can put to immediate use.
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Minnesota Communit y Living
763.544.3366
Open Board Meetings By Rich Klobuchar
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he following recollection is inspired by and based on an actual board meeting. The year was 1997. I was one of the first to move into our newly developing townhome association. The builder was still on the board and I did not have access to the board meetings. I wanted to become more knowledgeable about townhomes so that I could be prepared when the builder turned over the association to the unit owners. In the summer of 1998, I found out that a neighboring townhome association was having a board meeting. I asked if I could attend as an observer. “Sure” was the answer.
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
At 7:00 pm on Wednesday night, I went to the meeting place. Some of the board members and unit owner observers seemed agitated. It quickly became apparent that the source of the frustration was grass. The problem was, the grass was not being watered properly. The “vendor” who was in charge of watering the grass was lazy and not doing his job. A discussion ensued. One board member said the “vendor” was lying on the grass and was not moving the water hose very often. Another board member said she saw a girl with him. Another said he saw the “vendor” eating something while he was supposed to be working. After a few more complaints were lodged, the discussion started to turn. One board member said that maybe it was the Association’s fault. An underground sprinkler system was under consideration at one time,
but due to money concerns, it had been voted down. At the time of hiring the “vendor,” there had been no other applicants. Even if there were applicants, who would really work for the low pay the association was offering? Perhaps the job was boring and the girl wasn’t any trouble. After all, a “vendor” has to eat. At times, it was pretty hot out there. And the “vendor” did show up most times he was supposed to. And then the conversation became even more positive. One board member said we are sure lucky to have him. Another said I think we should give our “vendor” a little raise. Another board member said he thought some bottled water would be nice. The last board member to speak asked how about if we bring our “vendor” and his girlfriend some brownies? After the board meeting was over, I reflected on how I felt and what I learned. I felt grateful that a board let me attend one of their open board meetings even though I wasn’t one of their unit owners. I learned there is no substitute for actually observing board meetings; they can be very interesting, and open board meetings are important. The advantages are that you get to hear and see things that are not reflected in the minutes. Of course, timely minutes of board meetings are also important, because if one can’t make it to the board meetings, at least the board minutes should summarize the issues being discussed.
Omega Management, Inc.
763.449.9100
www.omega-mgt.com July | August 2012
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Minnesota Communit y Living
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Contact John Russo, Ph.D. 952-944-7137
Member
• Consulting Services • Specifications, Bidding, Contracts, Inspections of All Exterior Replacement Items including Asphalt, Concrete, Siding, Roofing, Windows, Doors • Litigation Support • Insurance Claims and Appraisal Support • Problem Solving and Investigations CALL THE PROFESSIONALS ASSOCIATION SERVICES
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Minnesota Communit y Living
July | August 2012
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Governing Documents 101 By Nigel H. Mendez, Esq., Carlson & Associates, Ltd.
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recently gave a presentation, organized by the Community Association Volunteer Leadership Committee (CAVL), on documents and statutes that govern associations in Minnesota. You can view the full presentation, along with many others, by visiting the CAI-MN website (www.cai-mn.com), and selecting Video Library from the Events tab. This is a brief summary of the presentation.
The Governing Documents Besides the statutes that provide general governance structure, each association is also subject to a set of governing documents. These documents (articles of incorporation, declaration of covenants, conditions and restrictions, bylaws and rules and regulations) are often collectively referred to as the governing documents.
Homeowner associations are governed by certain Minnesota statutes, that are are the same for all associations, as well as by governing documents that relate to a specific association. Together the statutes and governing documents detail how the property can be used (rental restrictions, pets, parking restrictions, etc.) as well how the association operates (i.e. number of board members, notice requirements for meetings, quorum requirements.)
The articles of incorporation create the nonprofit corporation with the State. They are filed with the Secretary of State and are rarely amended. The Declaration of Covenants, Conditions and Restrictions are sometimes referred to as covenants or CCRs, but most commonly, in Minnesota, are simply called the declaration. The declaration creates the Common Interest Community (CIC) and establishes restrictions on the use of the property. The declaration is filed with the county recorder. The declaration usually contains information such as whether rentals are allowed, pet restrictions, what maintenance is provided by Association and how common expenses are assessed.
The Statutes The Minnesota Common Interest Ownership Act (MCIOA), Minn. Stat. Chapter 515B, governs all condominiums as well as all townhome associations that were created on or after June 1, 1994.1 Older townhomes (pre-June 1994) can opt in to MCIOA via an amendment to their declaration. MCIOA provides specific reserve requirements, audit requirements, stronger collection powers and well thought out and tested provisions. Even if your association is not covered by MCIOA, it would be covered by the Minnesota Nonprofit Corporation Act, Minn. Stat. Chapter 317A. This statute governs all nonprofit corporations in the State. Homeowner associations are created as nonprofit corporations. The Nonprofit Corporation Act provides guidance on such things as meeting requirements, voting, proxies, etc. If there is a question about voting or running of a meeting, it is probably covered by this statute. Unlike MCIOA, the Nonprofit Corporation Act covers all homeowner associations regardless of age, and there is no need to “opt-in.”
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The bylaws detail how the association conducts its corporate business. The bylaws contain information about the officer and director positions and powers, meeting requirements of the board and the association members, what notice is required to have a meeting, how many members must be present to obtain a quorum and how proxy votes can be used. The bylaws are not required to be recorded with the county, but sometimes are. The fourth governing document is the rules and regulations. The rules are usually adopted by the board of directors to further clarify the restrictions or powers created in the other governing documents. Rules created by the board cannot be in conflict with the articles, declaration or the bylaws. The rules are easy to create and update and are not filed with the county or the Secretary of State.
Conflicts Any conflicts among the four governing documents are resolved using this hierarchy: The highest document is the articles of incorporation, followed by the declaration, the bylaws and finally the rules and regulations. Any item contained in a “lower” document must not be in conflict with a “higher” document. If a conflict does exist, the higher document controls. It is proper to have items contained in a lower document that clarifies or adds to a higher document. For example, if the declaration states that pets are allowed, subject to the regulation of the board of directors, a rule could require the registration of any pets with the association. Taken together, the governing documents and the relevant statutes provide the details on how your association should operate. While many governing documents are similar, it is important to review the ones that apply to your association to ensure that they are being complied with. Some condominium associations are also governed by certain provisions of Minn. Stat. Chapter 515 and/or Minn. Stat. Chapter 515A.
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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. For prompt responses and straightforward answers, call Hammargren & Meyer. (952) 844-9033 www.hammarlaw.com
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