CAI-MN Minnesota Community Living - Nov/Dec 2010 by CAI-MN

Minnesota’s premier homeowners association magazine

November/December 2010

Volume 28 • Issue 6

In this Issue: Should That Guy Be Doing That? Townhome Living is Carefree Living! – That’s What the Realtor Told Me

Self-Management Enforcing the Rules

Home Warranty Dispute Resolution And Much More!

Visit us online at www.cai-mn.com.

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Minnesota Communit y Living

Board of Directors

From the President

By Holly Johnson | CAI-MN President

Priorities. This word means different things to different people. Your spouse or significant other and your boss or clients certainly differ in what they believe your priorities should be. Which is wrong? Neither. We all need to find a work/home balance. For most of us, there are days that are devoted more to one thing than another—but we try to make the “whole picture” balance. Family and friends are crucial; but quite frankly, a successful work life and career is probably just as important to you. You would not be working in this industry, or volunteering with your Association, if it were not an important part of your life I hit a “significant” birthday last year, and have taken to questioning what really matters in my life. I think we all do this at some point. Whether it is a birthday or another event that makes us sit down and think this through, it is a critical point to ponder. Without knowing what your real priorities are, you will have a harder time making decisions on a daily basis. You will have a harder time prioritizing your already busy day, and you may find that you are feeling burned out. Don’t jump to conclusions. The feeling of “burn out” may just be the need for you to refocus your priorities to better fit what your needs are now. Things change. Your priorities at 20 are often a lot different than at those at 40! Right now, at this point in your life, if you could do or focus on only ONE thing, what would it be? What if you were able to add a second thing? What would that be? How about a third? A fourth? A fifth? If you answer these questions honestly you will see the top five things that motivate and keep you going. You will also see a list of what your priorities should be. Now, if everyone reads this, answers these questions, and decides that they need to quit their job and join the Peace Corp because their daily priorities don’t line up with their list, I am going to get a LOT of mail. Not necessarily good mail. This is not an exercise in finding out what we could be or do if you had all the money in the world and no responsibilities. This is really more of an exercise to get you to see your deadlines, duties, and priorities differently and approach them in a new way.

What the answers to those questions will give you is a starting point. We would all love to do something that is inherently altruistic and selfless; however, most of us are not independently wealthy and able to jet off to do good deeds. There is a BALANCE. That is what the answers to these questions can open to us. Once you have these answers, it may be easier for you to schedule your daily duties, calendar, and deadlines. You may find that you begin filling your calendar with only the things that are either on your list, or will help you elevate an item on your list. You may find that you are dropping items from your to-do list or calendar that are unnecessary or do not fall in line with your answers. You may also find that you are more vigilant and protective of your private time. We all know that work can creep into our private time pretty easily. It is just as important to schedule personal commitments as it is work commitments. You are in control of your calendar. Schedule dinner with a friend if maintaining close friendships is a priority for you. You will be happier if you do, and a better, more well rounded person in all aspects of your life. A difficult thing for many people is to ask for help to keep things in balance. Some of us that are reading this magazine are a bit controlling (I will not name names to protect the innocent—but you know who you are) and have a hard time accepting the fact that we cannot do it all. Women have been known to have the Superwoman disease, but I don’t believe it is a gender issue. I know all too many men that are facing the same challenges. Ask for help. Be grateful that it is there. You cannot do it all. That is ok. Just focus on doing the best that you can with the things that you have made a priority. We each make choices in our lives. This time of year, as we gather with friends and family, take a moment to be thankful for the things that you do have, and make a conscience effort to put your priorities in order. Deadlines come and go, however, our to-do list and calendar at the end is meaningless unless we were happy and whole during the process.

President Holly Johnson, CMCA, AMS, PCAM Phone 763.225.6400 hjohnson@developcommunity.com President-Elect Jonathan Edin Phone 651.222.2155 jedin@mnconstructiondefects.com Treasurer Michael P. Mullen, CPA Phone 952.928.3011 mike@cpamullen.com Directors Tom Engblom, AMS, CMCA, PCAM Phone 866.800.4656 tengblom@cabanc.com Mark Johnson Phone 612.381.9951 mjohnson@associationsonline.com Michael Klemm, Esq. Phone 952.953.8832 klemmm@seversonsheldon.com Traci Lehman, CMCA, AMS, PCAM Phone 612.381.8600 tracil@citiesmanagement.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. 277.2785 hstafford@gittleman.com Gene Sullivan Phone 952.922.2500 gene@ncmgi.com

Committee Chairs Legislative Action Chair Patrick Hynes, Esq. Phone 651.388.1891 phynes@strobelhanson.com

Annual Meeting Chair Lisa Astelford, CMCA Phone 952.277.2787 lastleford@gittleman.com

Golf Tournament Chair Tosh Tricas, CMCA, AMS, PCAM Phone 888.219.2534 capt.tosh@gmail.com

Nominating Chair Jonathan Edin Phone 651.222.2155 jedin@mnconstructiondefects.com

Communications Chair Steve Hoogenakker Phone 763.213.2410 steve@landscape.pro

Education Committee Chair Gene Sullivan Phone 952.922.2500 gene@ncmgi.com

Home Owner Training Chair Sara Lassila, CPA Phone 952.935.6868 November slassila@jmm-cpa.com

Membership Chair Rachel Wexler Phone 763.225.6400 December 2010 3 rwexler@developcommunity.com

Self-Management Series

Self-Managed Association Boards:

The Top Six Challenges That Face a Board Today By Joel Starks, Sharper Management

n this series we will focus on you the board member and the challenges you face each day when running your homeowners association. We will explore six challenges and ways to work through them. If you see something that seems common or you identify further challenges, do share. I will add your comments and feedback as the year goes on. You can email your comments to joel@sharpermanagement.com. A Board President Speaks A small-association board president reported the following struggles—not to mention the earful she gets from frustrated homeowners who don’t know how hard it can be to manage an association and work full time. 1. Enforcing rules: it is difficult to confront friends and neighbors. 2. Knowledge of pertinent statutes: trying to understand the ‘legalese.’ 3. Developing meaningful specs for services/vendors, etc.: not my area of expertise and requires time. 4. Frequent phone calls from members with matters that need attention: Time. 5. Keeping track of paperwork: Time. 6. Foreclosures: How can we protect the investment? What if they vacate? In this article we will focus on the first of the six issues: Enforcing the rules. A Reason for Rules No one likes confronting his or her neighbor. For many boards it becomes a struggle to protect the investment while enforcing rules that are as simple as the color of the landscape rock—or more complex, as in shared common elements, which lead to privacy and liability issues.

Each day board members find rules and regulations that are either relaxed or not enforced. When rules are not enforced to the word, it can lead to frustration for new members or even liability and litigation. “Association directors have a fiduciary duty of care to the membership as a whole,” says Joel Hilgendorf, a certified real property specialist with Hellmuth & Johnson. “Directors sometimes struggle with taking their ‘member hat’ off, especially when it comes to enforcing covenants and rules against their neighbors and fellow members. Where a board carries out its duties and policies objectively and uniformly, it lessens the chance that members will raise claims against the association of disparate treatment, favoritism, Fair Housing violations, and breach of duty. Correspondingly, the association should have less collection issues and covenant violations. On the other hand, if the Board is unable to act objectively, and treats certain members differently from others, the chances are that such claims will increase.” Becoming the Rules Police There is a lot that a board can do to enforce rules, but in the long run, it is difficult to be a part of a community when you feel like you are the local “rules police” instead of great neighbors and sometimes close friends. Boards are put in place to take care of the collective investment, both in the short-term care of day-to-day operations and long-term financial solutions that allow reinvestment in the property and property integrity. Eventually we all look to turn over or increase the value of our assets. It is that attitude that drives good stewardship and objectivity when dealing with vendors, homeowners and each other on a daily basis. Next issue, we will further explore the legal side of association management: statutes, changes, and updates as they relate to associations and their liability to stay informed, educated and up to date.

Minnesota Communit y Living

Managing to make a

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Calendar

Index

2010/2011 December

CAI-MN Holiday Trade Show

December 10, 2010, 11:30 am–1:30 pm Sheraton Bloomington Hotel Free for Property Managers; Free for Associated Board Members; $50 for nonmanagers

features 7 Should That Guy Be Doing That?

By Clay Curran

8 Condominium Insurance

By Tony Poetz

January

9 Townhome Living is Carefree

January 11, 2011, 8:30 – 10:30 am Sheraton Bloomington Hotel $30 for members (early); $40 for members (regular); $50 for nonmembers

Living! – That’s What the Realtor Told Me

Strategic Planning for Communities

By Steve Hoogenakker

10 Gutters Protect Against Soil Expansion & Frost Heave

Register online at www.cai-mn.com For more information regarding an event, call Taryn Ayres at 651.265.7856 or visit the CAI-MN website. Online registration is available at www.cai-mn.com.

By Mark Petersen

12 Home Warranty Dispute Resolution

By Michael D. Klemm

13 Vendors and the Self-Managed HOA

By Tony Poetz

14 Time, and the Statute of Repose,

d? ] [ Have You Hear 67 percent of community association volunteer leaders responded to a recent CAI-MN survey that they find Minnesota Community Living Magazine provides them with very useful and timely information.

series

Wait for No Man (or Woman, or Community Association)

By David J. McGee and Mathew A. Drewes

19 Salt Solutions for Townhome Associations and Condos

By Steve Hoogenakker

President’s Message By Holly Johnson

Self-Management By Joel Starks

Thank You 2010 Annual Partners Platinum Gassen Management Gates General Contractors, Inc. Gittleman Management Hellmuth & Johnson New Exteriors by SMA, Inc. Sela Roofing Gold BEI Exterior Maintenance Community Association Banc Silver Allstar Construction Management American Building Contractors Carlson & Associates Complete Building Solutions, LLC Hammargren & Meyer, P.A. Johnson and Lindberg Levin & Edin Omega Management Bronze BNC National Bank Homeowner Association Website – HOA WEB Michael P. Mullen, CPA, PLLC RJF Agencies Schoenfelder Painting

[ ADS Index ] of Advertisers Allstar Construction Management................. 18 American Building Contractors, Inc............... 18 Association Property Management Co. ....... 16 BEI Exterior Maintenance................................. 2 CA Banc/CondoCerts...................................... 18 Carlson & Associates, Ltd............................... 18 Complete Building Solutions .......................... 7 Construct-All Corporation.............................. 12 Final Coat Painting.......................................... 18

Gassen Companies.......................................... 11 Gittleman Management.................................... 6 Hammargren & Meyer, P.A. . .......................... 19 Hellmuth & Johnson, PLLC....................... 16, 20 Johnson & Lindberg, P.A................................. 20 Levin & Edin....................................................... 7 Michael P. Mullen, CPA, PLLC........................... 9 Minnesota Exteriors Inc................................... 15 New Exteriors by SMA, Inc............................. 17

Omega Management, Inc................................. 4 Reserve Advisors.............................................. 20 Reserve Data Analysis, Inc.............................. 13 Rick’s Roofing & Siding Inc.............................. 16 RJF Agencies..................................................... 8 Sara Lassila, CPA, Inc. . ................................... 10 Thomsen & Nybeck......................................... 15

Published by Community Associations Institute — Minnesota Chapter, copyright 2010. 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.

November | December 2010

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Minnesota Communit y Living

C O M M U N I T Y A S S O C I AT I O N M A N A G E M E N T

Should That Guy Be Doing That? by

hen you review your criteria for hiring a contractor, where are “Safety Program” and “Safety Record” on your list? Is it something you even ask about or consider? While you would like to think safety would be the primary concern of every contractor, way too many companies seem to put expediency, cost-savings and any number of other things in front of it. This is completely the wrong attitude for a company doing any kind of construction work, where dangerous conditions abound. Of course one should value the health and well being of every employee and sub-contractor, but from a bottom-line, business standpoint, very little is more detrimental to the success of a construction project than having a worker hurt on the jobsite.

will provide adequate supervision and make certain the program is followed in all aspects of the project.

You should be aware, it’s also no picnic for the person or company on whose property the work was being done. OSHA has the authority to shut down a jobsite causing delays and disruptions in the schedule. Property owners may get dragged into investigations and sometimes litigation. An accident can create negative publicity for everyone involved. If you hire a contractor with a poor safety record, and there is an accident, it may appear that you condone their relaxed attitude towards safety. That is why it is in everyone’s best interest that every jobsite be kept as safe as possible and that no unnecessary risks are taken. This can only be achieved by hiring a contractor with a comprehensive safety program and who

An effective safety program should be written down and presented in a format that is easily understandable for people with any educational background. It should clearly state what the policies are and what the consequences are for failing to comply with those policies. It should define the roles of each person who will be at the jobsite with regard to the program. It should also give detailed instructions for what to do if an unsafe condition occurs and/or someone is hurt. When it comes to safety training, it should be an ongoing process, not something that happens for twenty minutes right after someone is hired and then is never brought up again. Unfortunately construction workers are noto-

Substantial experience in the successful resolution of construction defect claims. Contingent fee option in most cases. To schedule a free initial consultation with us, or a free initial inspection by a qualified consultant, contact managing attorney Jonathan A. Edin at 651-222-2155

The program should include job specific training, monthly safety awareness meetings and weekly “Toolbox Talks” which can occur right on the worksite. The meetings can be on any number of safety issues, but it’s also important to mix things up so the meetings stay fresh and people don’t “tune out.” Even if the subject matter is not exactly apt for that particular day’s work it still demonstrates the employer’s strong commitment to jobsite safety. When it comes to enforcing the policies at the jobsite, constant supervision by a veteran, on-site project manager with the authority to send workers home and, in extreme situations, shut the jobsite down, is essential. Without the constant presence of this type of supervision, safety practices, which may start out fine, will begin to degenerate over time. Workers get too caught up in the job at hand and even the most seasoned veterans will start to let safety practices slip. A supervisor can remain objective and remind all workers about the company ‘s commitment to the safety program. While quality of work and price will always be major factors in the decision to hire a contractor, make sure the people you hire are also firmly dedicated to keeping your property accident-free. It will be good for the workers, good for the project and it will be good for you, as well.

750 Landmark Towers 345 St. Peter Street St. Paul, Minnesota 55102 PHONE (651) 222-2155 FAX (651) 222-2156 jedin@mnconstructiondefects.com

If you are interviewing contractors for work on your building or a building for which you are responsible, don’t be afraid to ask about their safety program and make them spell out the steps they take to ensure that no accidents occur on your property. If their reaction is to point to their insurance binder, you may want to keep looking. While it is imperative that your contractor and all of his subs are insured, that should not be the first line of defense against accidents. Accident prevention starts by having effective safety policies in place. The second step is to train workers to understand and act in accordance with those policies. The third step is to firmly enforce those policies at the work site through careful supervision, daily reminders and, if necessary, the removal of any workers who aren’t able to stay in compliance.

rious for taking the hazardous conditions in which they work for granted and becoming complacent about safety (“I’ve been roofing for 30 years. I don’t need a harness!”). Workers need to be reminded routinely about the importance of staying compliant with the safety program.

EDIN

Clay Curran, American Building Contractors, Inc.

SPONSOR MINNESOTA STATE CHAPTER

November | December 2010

Condominium Insurance by

Tony Poetz, Spectrum Home Services

ondominium owners often have questions about the proper insurance coverage for their home. It’s a bit confusing when part of the building is insured as an entire structure, yet the owner is responsible for their own space and belongings. Whereas a traditional home is normally covered with homeowner’s insurance, a condo is usually covered with condominium insurance.

We’ve been here. We’ll be here.

Long-term dedication to your association.

A condominium’s association insurance typically covers the building, commonly owned property and liability for the association. In many cases that policy is restrictive to the point of not covering break-ins, injuries caused by the structure inside your space or even water damage to the inside of the walls. Condominium policies applied specifically to the unit can provide coverage for everything inside the unit as well as most natural disasters and injury liability. We say “most” natural disasters because there are often special policies required for a certain geographic area...flood insurance is more expensive (and sometimes required) next to the river. There are some basic steps you can take to ensure the right insurance on your condo.

1. Check your association’s master policy. It will detail what’s covered 2.

and what’s not. Then, you can tailor your personal policy to safeguard what the master policy doesn’t. How much is the right coverage amount? It’s tough to estimate what replacement counter tops or cabinets might run. A home store website often shows pricing for these items or your agent can often provide an actuarial estimate based on previous cases. Some suggest asking other homeowners what they paid for their upgrades on similar items, but that conversation might be considered invasive. Minnesota politeness, ya know. Make sure you have coverage for contents AND structure. What’s the difference? Imagine tipping your condo upside down. Everything that falls out is content. Flooring, carpeting and light fixtures are part of the structure even if you put them in yourself. Again, check the master policy to see how far its structure coverage goes. In a general sense of financial protection, check your association’s deductible. A group of 10 owners means each is responsible for 1/10 of the deductible. Some policies carry a $50,000 deductible. Ouch. Consult an agent to see how much of the association’s deductible can be covered by your own policy.

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Neighbors will often recommend an agent if you ask about their experience. The main thing is that you ask. Ask your neighbor. Ask your agent. Insurance only works when you ensure proper coverage.

Community Association Insurance Services (763) 746-8000 www.rjfagencies.com 8

Minnesota Communit y Living

Townhome Living is Carefree Living! – That’s What the Realtor Told Me

By Steve Hoogenakker, Concierge Landscape Environments

aintenance Free Living! Really?

When a member asked me to address the belief of homeowners – that HOA living is maintenance free living – the zippy Green Acres theme song came to mind immediately. “Green Acres is the place for me, farm livin’ is the life for me…” It continues on, “The Chores... The Stores... Fresh Air… Town Square…” I mean, the whole premise of the show was about Eddie Albert and Eva Gabor moving from a complicated city life to their own piece of “the promised land” to enjoy nirvana. Nearly all the comedy revolved around the Douglas’s interactions with “real” people and misconceptions about a simple lifestyle they thought they would enjoy. This isn’t much different than the belief that moving from a single family home to an HOA would make life carefree. Well, without the comedy and Arnold Ziffle, the pig. Where does the thinking come from? In general, many developers sell units implying the Association repairs everything and pays for everything, via dues. They don’t explain that some items, like a leaky or clogged kitchen sink or a low battery in a smoke detector is the homeowner’s responsibility. They also don’t understand the concept of a benefit assessment – i.e. a certain element is used exclusively by one homeowner so the association assesses the cost of repair back to the unit owner who benefits from said element – like a waste pipe or a fence or whatever. In addition, some people think they live in an apartment – or assisted living. People call the property manager complaining about smoke detectors beeping because of a low battery or burned out light bulbs in their living rooms and are aghast when I tell them I’m happy to send someone over there, but they’ll get charged for it. One woman called a manager three days in row to keep the manager updated on her fight with a spider web in her garage. If you think that homeowners are entirely responsible for this thinking, you’d be wrong. In a quick search of one local real estate’s com-

pany, using the term “maintenance free,” there were over 1,200 homes for sale! There were even 4 farms listed as maintenance free. Now, that’s funny. Senior communities tout the maintenance free benefits and for good reason. Many of the seniors have health problems that keep them from doing a lot of maintenance. Townhome living is meant to be easy. Think about the term “maintenance free” during the winter. I’m sorry to say, snow season is expected to make another surprise entrance in about 90 days. Yuk. One of the biggest benefits of living in an association is that the lawn care is done, the driveway is plowed and the sidewalks are shoveled. Is there some maintenance required by the homeowner if the downspout is spilling water that freezes onto a sidewalk? It’s certainly not in the governing docs, but some common sense is in order here. What would a good neighbor do? What if you had a pregnant daughter coming to visit? Do you say well, it’s not my responsibility so c’est la vie, or do you get out there and do something about it? At the very least, call and let someone know about the dangerous situation or make sure the outside lights are working.

Don’t believe everything the developer and salesperson said about maintenance free living. What’s wrong with doing your part and maybe just a bit more to realize the feeling at the end of the theme song… “You are my wife... Goodbye city life, Green Acres we are there!”

[ Join us! ] CAI-MN Holiday Trade Show Friday, December 10, 2010 11:30 am–1:30 pm Sheraton Bloomington Hotel

It amazes me that during a snowfall at an HOA, there are always a handful of people who shovel their driveway and sidewalk off, even before the snow has stopped and while our trucks are working down the street. I often wonder what drives these people to do something they don’t have to do. I just assume they care about their association and neighbors. Maybe they’re doing their neighbors sidewalk, maybe they’re trying to help us? If we all thought and acted like these neighbors, I don’t think worrying about light bulbs would even come up. Association living isn’t responsibility free either. A homeowner who just sits back and waits for the board to decide everything to their satisfaction is not going to work out for that homeowner or anyone else in the association who might be experiencing the same thing. Boards and property managers really need more (quality) inputs from the homeowners so they can do their job. Contribute your time and ideas to make your association a better place to live for everyone.

November | December 2010

Gutters Protect Against Soil Expansion & Frost Heave By Mark Petersen, Access Builders/Exteriors

any people install gutters on their house with hopes of keeping water out of the basement. Some people get tired of raking landscaping woodchips out of their yard after a good gully-washer. Others don’t like how the melting snow from their roof transforms their sidewalk into a skating rink. Some just like the way gutters look. All of these are valid reasons to install gutters on your home, but most people are unaware of the most important reason of all to install them—gutters protect your home’s foundation from winter soil expansion. Consider the following facts: Obvious fact #1: When it rains, a whole lot of water runs off the roof and is dumped onto the ground right next to your house. Not so obvious fact #1: In a rainstorm that produces a 1/2 inch of rain, the roof of a 30x50 foot rambler will shed over 600 gallons. That’s a lot of water! Obvious fact #2: It gets cold here in Minnesota. Rosy cheeks and dead car batteries are a frequent reminder of this fact to many Minnesotans. Not so obvious fact #2: Cold temperatures not only affect the air and water, but they also affect the soil. In our area, on average, the top 4 feet or so of the ground freezes. Under certain conditions ground frost can reach depths up to 7 feet! Obvious fact #3: Water expands when it freezes. If you have ever forgotten an unopened soda in the back seat of your car in January, you are painfully aware of this obvious fact. Not so obvious fact #3: Soil with a higher water content expands more than dry soil—it only makes sense, right? Heavy soils like clay retain more water than porous sandy soils; consequently, heavy soils are more prone to winter expansion than porous ones. Obvious fact #4: If a whole bunch of water lands on the ground, the soil in that ground gets wet. Not so obvious fact #4: If that wet soil next to your house doesn’t get a chance to dry out 10

Minnesota Communit y Living

before the onset of winter, the freezing/expansion process can cause serious damage your foundation. Final fact: Gutters help keep the soil next to your foundation relatively dry, thereby protecting it from cracks that can lead to water intrusion. Many of our customers can’t figure out why, after living in their house for 10 or 15 years with no problems whatsoever, they suddenly have water in their basement. Sometimes the damage that occurs can go undetected for years or may never be discovered. Even if water never finds its way into your basement, installing gutters can literally add decades to the structural life of your foundation. Even newer homes are susceptible to foundation damage. The waterproofing measures on new homes are considerably better than they have ever have been, but waterproofing doesn’t prevent foundation damage caused by soil expansion. Once a large crack occurs in the foundation, most standard waterproofing measures are rendered useless.

cracking in porches and sunrooms caused by the effects that frost heave have on the footings. The frost heave process is the primary contributor to the creation of those lovely potholes that trash our suspensions and rattle our teeth each and every winter. The same force that creates winter potholes on our roads is being exerted on your driveway, patios, landscaping walls and sidewalks. If you want to keep your landscaping wall straight, your pavers smooth, your sidewalk crack free, try to keep as much water away from those areas as possible. Installing gutters will help. Gutters can be installed for as little as $6-8 per linear foot depending on the situation. There are several profiles to choose from, and color matching is usually not a problem. Also, there are multiple products available to keep leaves and other debris from clogging your gutters. These products can range from $3-10 per foot. Gutters are relatively inexpensive compared to sidewalk replacement and foundation repairs, so if you’re looking for another easy way to protect your investment long term, consider installing gutters.

Your homes foundation isn’t the only item on your home that is in jeopardy due to wet frozen soil. “Frost heave” is another force caused by wet soil that can wreak havoc on your home. Frost heave is the force that pushes objects Sara Lassila, CPA, Inc. upward during the freeze Certified PubliC ACCounting thaw cycle, but just like soil expansion, the wetter the “It’s not just the numbers!” soil, the more destructive the process.  Tax Planning & Return Preparation We once encountered a house where a large amount of runoff water was winding up on and around the pier footings which were holding up a four-season porch. Every year the saturated soil created a strong frost heave process, which would lift the footings so much that the porch was literally being pried off of the house. This was an extreme case, but it’s not unusual to encounter seasonal drywall



Developer transition audits (new requirement)



Annual reviewed financial statements conforming to the Minnesota Common Interest Ownership Act



Quickbooks accounting services customized for Associations

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Financial analysis & reporting for specific Association needs

Contact: Sara M. Lassila, CPA, Certified Quickbooks Pro Advisor “2010 CAI-MN Service Professional of the Year”

Even under construction, visit my website

www.saralassila.com

470 West 78th Street Suite 225 Chanhassen, MN 55317 952.767.3132  Fax: 952.906.4006

November | December 2010

Home Warranty Dispute Resolution By Michael D. Klemm, Esq., Severson, Sheldon, Dougherty & Molenda, P.A.

innesota Statutes Chapter 327A has been amended to add a new Section 327A.051, effective January 1, 2011, creating a home warranty dispute resolution process that must be completed before commencing a lawsuit under Minnesota Statutes Chapter 327A, except as otherwise provided in the statute. Purpose Prior to the amendment, the process for resolving a home warranty dispute typically involved giving notice of the claim pursuant to the statute, completion of an inspection, service and filing of a Summons and Complaint, completion of formal discovery, mediation, and finally a settlement or a trial. The Homeowner Warranty Task Force of the Minnesota Department of Labor and Industry, composed of homeowners, builders, insurance professionals and attorneys, designed the home warranty dispute resolution process to facilitate early resolution of warranty disputes without lengthy and expensive litigation. The statute provides that the purpose of the dispute resolution process is “to assist parties in determining an agreeable scope of repair or other resolution of their dispute.”

Early Neutral Evaluation Process The standard process under Minnesota Statutes Section 327A.051 is an early neutral evaluation process. The Commissioner of Labor and Industry will maintain a list of qualified neutrals approved based on their education, training, experience, and potential conflicts of interest. The dispute resolution process will be commenced by submitting an application to the commissioner, who will provide each party with a list of three randomly-selected qualified neutrals within ten days. If the parties do not agree on a neutral within five days, the vendor or home improvement contractor shall strike one of the neutrals from the list, then the vendee or owner shall strike one of the remaining neutrals from the list, and the remaining neutral shall serve as the qualified neutral for the dispute. The parties will share the expense of the qualified neutral’s billed time equally, unless otherwise agreed. The neutral must identify the neutral’s hourly rate to the parties. The neutral’s billed time for evaluation of documents, meeting with the parties, and issuing a written determination must not exceed six hours, unless agreed to in writing by both parties. In addition, the neutral will collect from each party an administrative fee of $25 and submit those fees to the commissioner.

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The qualified neutral must hold a conference with the parties within 30 days after the neutral’s selection, except by mutual agreement of the parties. The qualified neutral will select the date for the conference after consulting with the parties. At least seven days before the conference, each party must provide the qualified neutral and the other party with all information and documenta-

tion necessary to understanding the dispute, or the alleged loss or damages. Within ten days after the conference, the neutral will mail to the parties a nonbinding, written determination, which must include, to the extent possible, findings and recommendations regarding the scope and amount of necessary repairs, if any. Confidentiality The written determination issued by the qualified neutral and all communications relating to the dispute resolution process, except those between any party and the commissioner, are considered confidential settlement communications. No party may use a written determination issued by the qualified neutral as evidence of liability in subsequent litigation between the parties, and the qualified neutral may not be called to testify regarding the dispute resolution proceedings. Alternative Process If both parties agree, they may designate an alternative dispute resolution process instead of the early neutral evaluation process established by Minnesota Statutes Section 327A.051. For example, some parties may prefer mediation, in which the qualified neutral facilitates discussion to help the parties reach their own mutually acceptable resolution of the dispute. The information in this article is general information and does not constitute legal advice regarding action to be taken in any particular case, which may vary depending on the facts, applicable statutes, governing documents and other variables. If a homeowner or an association has a potential construction defect claim, they should consult with an attorney as soon as possible, because their claims may be subject to applicable statutes of limitation. 1 The statute provides that the home warranty dispute resolution process is not required in certain situations, for example, if the vendor or home improvement contractor fails to perform an inspection of alleged defects, fails to make an offer to repair defects or fails to perform agreed-upon repairs, as provided in the statute. 2 “Early Neutral Evaluation Process Created to Reduce Costly Litigation,” CCLD Review (Minnesota Department of Labor and Industry – Construction Codes and Licensing Division), Summer 2010. 3 Minn. Stat. § 327A.051, Subd. 1 (2010).

Vendors and the Self-Managed HOA By Tony Poetz, Spectrum Home Services

endors and property management groups traditionally work in a relationship based on a combination of past performance, current vendor capabilities and budget. The property management group and its represented HOA usually benefit by paying diligent attention to those currently contracting to HOAs in the area. If a landscaper is maintaining a beautiful façade along a well-traveled avenue, property managers should know who’s responsible. Likewise (and probably more important) for who’s performing poor work. If an HOA in Blaine has experienced severe attic condensation resulting in mold growth due to a roofer’s neglect, a property manager in Chaska should definitely know to avoid that roofer or at least ensure that it doesn’t happen on the Chaska project. But what happens when an HOA is self– managed and doesn’t have such resources to identify which vendor to choose for a project? We spoke to Rita A. who is part of an HOA board that self-manages. Some of the pros for group’s self-management include: • Improved cost • Closer to problems within the community • Closer to the vendors • Control over cost and quality of vendors Some of the cons for her group’s self-management include: • Time consumption • Lack of homeowners willing to sit on the board • Each homeowner has a personal agenda • Difficulty sourcing vendors • Cost accountability With these pluses and minuses in mind, Rita explained that their group’s process for finding vendors is similar to that of a traditional property management company. “We typically rely on board members to locate a vendor and gather references and have a Certificate of Insurance on file.

“ ” Vendors must have a stellar work record, competitive pricing, and insurance. – Self-managed HOA member

This too is difficult for some board members who do not have this experience. I typically have a performance clause in the contract with a start/stop date and quality standard. We have been fortunate to have a good number of retired business people who have the experience in handling vendors.”

Rita explained that her group’s number one concern is staying within budget which doesn’t necessarily translate to getting by as cheaply as possible. Her HOA understands that you get what you pay for and that’s why, according to Rita “vendors must have a stellar work record, competitive pricing, and insurance. Years in business is not a huge issue, but does play a part. Size of the company is definitely important since they must have enough personnel to complete the job in a timely manner. “ Cheap is not usually better, so the budget is planned to get the best possible product at the best possible price. Work record and insurance requirements are testimonials to quality. Vendors can create long-term relationships with self-managed associations just as easily as they do with property management groups. Performance, responsible business practices (insurance, licensing) and honest pricing matter for everyone and will make the difference for a project’s success.

November | December 2010

Time, and the Statute of Repose, Wait for No Man (or Woman, or Community Association) by

David J. McGee and Mathew A. Drewes, Thomsen Nybeck

ou have all heard the adages about time: time waits for no man; time marches on. These sayings have appropriate application to some aspects of the law, especially in the area of construction defects. Many people are aware of, and many pages have been written, about statutes of limitation. These laws (there are actually several limitations periods provided under several different statutes or parts of statutes) require a party who knows of a defect in the construction of its property (including community associations) to bring an action to address that problem or condition within a certain period of time after the triggering event. Usually, that trigger is the date the party learned of the problem or condition at issue.

construction. It is the proverbial finish line for contractors that; once they have crossed it they are free from liability for defects.

The Statute of Repose, however, is even more likely to cause claims to slip away with the sands of time than any statute of limitation. This is because, while the limitations period may wait for your discovery of the problem, the repose period can march on whether you discover the problem or not. Additionally, despite its potential to run without notice or warning, the Statute of Repose has the same potentially devastating effects as a statute of limitation.

How Does a Community Association Protect Itself From the Effects of the Running of the Repose Period? First, the association needs to know when its buildings or units were substantially completed. This may have occurred in phases. A review of the association’s governing documents and early Board meeting minutes may provide insight as to when construction was substantially completed. Municipalities should also have documentation showing when certificates of occupancy were issued, and may have copies of the certificates themselves. Count forward 10 years from the earliest date that appears applicable to estimate the applicable deadline. Any estimates should err on the side of assuming the repose period will end earlier, rather than later. An attorney can help to advise you regarding the anticipated expiration of your particular repose period and whether any exceptions may apply to you.

What is the Statute of Repose? The Statute of Repose is found in Minn. Stat 541.051, the same statute that gave us the two-year limitation period to commence a lawsuit for defective and unsafe conditions caused by an improvement to real property. The Statute of Repose acts like a statute of limitation because it will bar claims if the claim is not brought within the stated period of time. The difference between the two, however, is when they start to run. The repose period is 10 years and begins to run upon “substantial completion” of the construction. It is different than typical limitation periods because it does not matter when the association discovered, or even if it has discovered, the defective condition. Once the 10 years expire: time’s up! No claims can be brought against the contractor for the

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The term “substantial completion” of construction is important because this is the event that triggers the commencement of the 10-year repose period. The statute defines substantial completion “as the date when construction is sufficiently complete so that the owner…can occupy or use the improvement for its intended purpose.” In most cases this will mean the date the local municipality issues a Certificate of Occupancy. Ten years later, and often after many properties have been sold at least once, the repose period may sneak past an owner or community association.

Second, the association should undertake property reviews, especially when the repose period is set to expire. Associations should always be inspecting or at least performing a “walkthrough” of its property annually or semi-annually and be on the lookout for potential defects or dangerous conditions. However, when the end of the repose period

appears close (think about years eight, nine and ten) a more detailed and earnest evaluation of conditions should be undertaken. Simply walking around is not enough to accomplish this more thorough kind of examination. Consider hiring an engineer, experienced contractor, or other professional who will look at your roofs, examine your windows and flashings, and is prepared to look behind the surface of your building(s) to truly see whether damage may be lurking unseen in the walls, roofs, basements or crawlspaces. Third, understand that the Statute of Repose operates as a complete bar to a suit to seek reimbursement for damage or the cost of repairs arising from construction defects. Unless you can show fraud was involved, it does not matter that the condition may have been hidden and not discoverable until after the repose period expired. Can We Call A Timeout? Even 10 years after “substantial completion” you may still have a claim if you have the right gameplan. Like most areas of the law there are few absolutes, even when dealing with statutes of limitations or the Statute of Repose. Particularly in the area of community associations, it may be possible to pursue some warranty claims even after the repose period in certain factual situations. That is why it is critical when problems are discovered, whether through periodic property inspections or just randomly, that you immediately contact legal counsel. Going Into Overtime There are other possible means for extending the game as well. If a defective condition or problem is discovered before the end of the 10th year, the association then has an additional two years to bring a claim. For example, if a building was substantially completed on January 1, 2000, and a condition is discovered on December 31, 2009, the association would then have until December 31, 2011 (11 years and 364 days) to bring suit and not run afoul of the Statute of Repose. Statute of Response continued on page 15

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Statute of Response from page 14

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marches on unabated for a 10-year period tlemke@mnext.com (other than in the exceptional cases noted herein) and will become a complete bar if the association seeks compensation or repairs for conditions that it may discover after the period expires. The owner should identify when the property was substantially completed so as to know the date of expiration of the repose period. The property should be inspected periodically, especially as the expiration of the repose period approaches.

The information contained in these materials is intended to provide legal information in general terms and is not intended to be used as a basis for specific legal advice. The facts and circumstances specific to a particular association or matter may dictate a certain course of events or necessary action which may require specific legal advice or assistance.

Like time, the statute of repose will not wait for you. It is important for property owners and community associations to watch the clock so they can make sure they beat the buzzer.

November | December 2010

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Salt Solutions for Townhome Associations and Condos By Steve Hoogenakker, Concierge Landscape Environments

he use of salt as a deicer on townhome roads and sidewalks is the preferred method to promote safe motor vehicle and pedestrian travel during winter months. The most commonly used deicing salt is sodium chloride (NaCl). Sodium chloride effectively depresses the freezing point of water to melt ice. But what are the impacts of salt applications to drinking-water supplies and watershed ecosystems? The application of NaCl and its environmental consequences have come under scrutiny from the environmental and scientific communities as well as regulators and legislators. There is growing concern over plant habitat, wildlife kills, and water-quality issues. It is estimated that the United States applies 8-12 million tons of salt on the roads annually. Living in Minnesota, we certainly get more than our share of this total. The question is, how much damage to the environment is caused by dumping the equivalent of 20 pounds of salt on the ground for every man, woman and child in the U.S. each year? Environmental Fate Soil with high salt concentrations affect biotic communities, hinder plants ability to uptake nutrients and reduce root growth. Wildlife Damage to vegetation hurts wildlife habitat by destroying food resources, shelter, and nesting sites. There have even been reports of bird kills. The thinking is that birds might not be able to distinguish between salt crystals and the grit their diets require. Salt can be an irritant to dogs and cats too. Infrastructure Impacts In addition to the public health and environmental problems associated with chloride deicers, the corrosivity of road salt adversely impacts motor vehicles and infrastructure. In vehicles, corrosion can affect critical vehicle parts, such as brake linings, frames, and bumpers, and of course, surface rust on the body. Townhome sidewalks receive a lot of damage each year.

“Pet Safe” products Many bags of salt promote the fact that they are pet safe. In practice, most pet safe salts have a blend of different chemicals, some of which can be an irritant to pets. Magnesium chloride and CMA are more “pet and environmentally friendly” than sodium chloride, but there still may be other salts in the blend. So, what is the solution for townhome associations and condos? 1. Review your winter maintenance contract. Does your contract call for auto salting by the contractor whether the site needs it or not? Although the numbers vary widely, most snowfalls in the Twin Cities don’t require salting. If we have 20 snow events in a season, Maybe 4-7 need salt. So salting 20 times is not only damaging your property and the environment, but you’re throwing dollars out the window as the contractor has built in the cost of the 20 saltings in your contract.

It’s better to have your board or manager determine when and where salt is applied on your property. Since the board lives on site, you’ll have a constant watch of your sites conditions.

2. Even if a site requires salt, many times putting the proper amount of salt on intersections, hills and underground parking ramps are all that is needed. That alone will save at least 50 percent of the salt applied. 3. Temperatures matter! At 30 degrees, one pound of salt melts 40 pounds of ice, while at 20 degrees, one pound of salt melts only10 pounds of ice, a 400 percent difference! And the air temperature is a minor part of the equation. Does your contractor apply varying amounts of salt to your property at different temperatures? Do the varying amounts show up when they bill for salt, or does it always seem to be “2 tons” every time?

4. Barrels of salt/sand. 10 years ago, we were applying mixtures of 80 percent sand and 20 percent salt as THE standard application for townhomes. The salt was in there basically to keep the sand from freezing solid in the spreader. Nowadays, sand is rarely used on private lots, but there is still a place for sand. Your contractor can usually provide sand barrels for your association. They’ll place them next to hills and parking ramps, or wherever you want them. It’s that same 80/20 mix of sand/salt. They’ll provide a cover and a scoop for residents to use whenever needed. When a barrel runs low, call the contractor and he’ll refill it. At the end of the season, the contractor picks up the barrel and stores it. Road-Salt Alternatives There are many salt blends and alternatives available. Most are very expensive, but some are still a good value because they do minimal damage to concrete and less damage to the environment. Materials like CMA and magnesium chloride are two alternatives. Work with your contractor to discover which methods they are currently using and to see if a change in tactics can keep your site safe while keeping your environment beautiful.

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November | December 2010

The Easiest Maintenance Decision You Can Make. Associations face numerous maintenance decisions. However, when it comes to maintaining your association’s legal affairs, look no further than Hellmuth & Johnson. Hundreds of associations and property managers look to us as the definitive source for legal expertise, education and counsel. As one of the first firms in Minnesota to focus on this specialized area of law, we know the many challenges of running and managing an effective home owners association. For attorneys who know associations, call us or visit our web site www.mncommunityassociation.com.

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