Journal_08_08 by Echo

August 2008

A Journal for Community Association Leaders

echo-ca.org

ALSO INSIDE THIS ISSUE:

• Funding for Large Projects • Optimizing Committees • Perspectives from a Building Inspector

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Contents The Future of Associations on page 6

The ECHO Journal is published monthly by the Executive Council of Homeowners. The views of authors expressed in the articles herein do not necessarily reflect the views of ECHO. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent person should be sought.

Predicting the Future of Associations California’s experience with CID housing dates back less than 50 years. With so little history to go on, predicting the future requires a lot of speculation. There is some data, however, and from those sources Tyler Berding has pieced together a picture of how community associations might evolve over the next 50 years.

Funding for Large Projects Once an association decides to proceed with a large project, the next question is how to pay for it. Learn more about the options for funding in this article.

Optimizing Committees in Governance A common question is whether it is prudent to use committees as a tool in association governance. The answer is that committees can be an excellent resource if harnessed properly. This article offers some tips that every board should take into consideration when creating and utilizing committees.

24 18

Perspectives from a Building Inspector Author Hermann Novak summarizes a recent interview relating to HOA construction issues with one chief building inspector for the city of San Francisco. You will learn about the rapidly rising requirements for extensive product knowledge, system and technical knowledge required in the industry today.

Departments 22 News from ECHO 28 Calendar of Events 31 Ask the Maintenance Panel

Copyright 2008 Executive Council of Homeowners, Inc. All rights reserved. Reproduction, except by written permission of ECHO, is prohibited. The ECHO membership list is never released to any outside individual or organization.

Executive Council of Homeowners, Inc. 1602 The Alameda, Suite 101 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org Office Hours: Monday–Friday 9:00 a.m. to 5:00 p.m.

Board of Directors and Officers President David Hughes Vice President Karl Lofthouse Treasurer David Levy Secretary Dorothy Kopczynski Directors Paul Atkins Lori Burger Robert Rosenberg Richard Tippett Steven Weil

Jerry L. Bowles John Garvic Diane Rossi Wanden Treanor

Executive Director Oliver Burford Communications Coordinator Tyler Coffin

34 ECHO Bookstore

Acceptance of advertising does not constitute any endorsement or recommendation, expressed or implied, of the advertiser or any goods or services offered. We reserve the right to reject any advertising copy.

38 ECHO Volunteers

Legislative Consultant Government Strategies, Inc.

38 About ECHO 41 ECHO Marketplace

Design and Production George O’Hanlon

41 Advertiser Index

ECHO Mission Statement

On the Cover Page 6

August 2008 | ECHO Journal

The mission of ECHO is to advance the concept, interests and needs of homeowner associations through education and related services to board members, homeowner members, government officials and the professionals in the industry.

2008 Legislation at a Glimpse As of July 23, 2008 Bill No.

Author

Subject

Status

Position

Summary

AB 567

Saldana

Common Interest Development Bureau

Amended. Support Senate Appropriation s Hearing August 4

Until January 1, 2014, would establish in the Department of Consumer Affairs the Common Interest Development Bureau. The Bureau would, among other things, provide board member education and training resources, and would be paid for by a biennial fee on associations. Authority to enforce CID law has been removed.

AB 1892

Smyth

Solar Energy Equipment Restrictions

Signed by Governor

Neutral

This bill would render void and unenforceable any restriction in the governing documents of an association that effectively prohibits or restricts the installation or use of a solar energy system.

AB 1921

Saldana

Statutory Revision of CID Law

Withdrawn for further study. To be introduced in 2009

Watch

This bill would renumber, consolidate, make minor changes to, and remove discrepancies in those sections of California law that govern common interest developments. If passed, the bill would replace the existing Davis-Stirling Act.

AB 2180

Lieu

Solar Equipment Approvals

Amended. Senate Third Reading

Support

This bill would compel associations to provide written approval or denial of an application to install a solar energy system. The approval or denial must be given within 60 days of the receipt of the application, or the application is deemed approved, unless the delay is the result of a reasonable request for additional information.

AB 2259

Mullin

Rental Restrictions

Amended. Senate Third Reading

Oppose

This bill would prevent common interest developments from imposing rental or lease restrictions upon an owner, unless that owner expressly consents to the impairment of that right.

AB 2806

Karnette

Board Member Education

Amended. Senate Third Reading

Support

Will require every member of the board serving at least 12 consecutive months, and each candidate for the board, to provide a statement indicating whether or not they have completed an educational course on the law of common interest developments. This information must be included in the ballot material for a board member election.

AB 2846

Feuer

Dispute Resolution Procedures

Amended. Senate Third Reading

Support

This bill would permit homeowners who are involved in a dispute over assessments with their association to request alternative dispute resolution or to pay under protest and commence an action in small claims court, provided the amount of the dispute does not exceed the courtâ&#x20AC;&#x2122;s jurisdiction.

SB 127

Kuehl

CID Sale Disclosure Deadlines

Amended. Assembly Third Reading

Support

This bill would impose disclosure deadlines for the seller of a unit in a common interest development. Unless the parties agree otherwise in writing, it would require that all disclosures be made no later than 20 calendar days after the execution of a purchase agreement or the opening of escrow, whichever is later. An association must continue to provide documents to the seller within 10 days. The bill affects both mobile home and CID owners.

SB 1511

Ducheny

Super Liens

Amended. Assembly Third Reading

Support

Would allow an association to request that the mortgagee of a property provide the name and address of anyone who purchases that property at a foreclosure sale. The mortgagee or trustee must provide the information within 15 business days.

ECHO Journal | August 2008

August 2008 | ECHO Journal

Predicting the Future of Community Associations An Outline for the Next 50 Years By Tyler P. Berding, Esq.

ooperative, private maintenance of commonly owned land and facilities in small villages and towns has been around for hundreds, probably thousands of years. But although early examples can be found, such forms of ownership have only been regulated by statute for a few decades in California. The first Condominium Act was passed in 1963. The Davis-Stirling Act, in use today, was enacted in 1985. We began seeing Continued on page 8

ECHO Journal | August 2008

condominiums mass-produced for California consumers in the early Sixties when the McKeon Corporation started building their ubiquitous fourplex buildings throughout California.1 Our state’s experience with this form of housing dates back less than 50 years and with so little history to go on, predicting the future requires a lot of speculation. We do have some data, however, and from those sources we can piece together a picture of how community associations might evolve over the next half century. Some of this comes from other writers’ accounts, and some from our own experience. We tried to make practical predictions, based on presentday examples; so you won’t see anything about future moon condominiums here!

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Community associations are aging Instead, we look at some practical concerns. First and foremost, community associations are aging. The earliest, built in the Sixties, are now approaching 40 years old. 20 and 30 year-old buildings built as condos are not unusual, and then we have to consider all of the old apartment buildings that have been converted to condos. These buildings are wearing out and must rely on the owners to fund their restoration. Second, neighborhoods and whole cities are changing and will change a lot more in the next 50 years. Projects that were appropriate 30 and 40 years ago will become space and energy inefficient, as well as functionally obsolete, and redevelopment of these projects will be necessary. Finally new methods of constructing buildings, organizing common elements, funding and managing community associations will evolve from what we see today. The future of community associations is and should be of concern to every professional in the association business and every owner of a real estate interest in common with other owners. For one thing a profes1 We wrote about two specific examples, and their ultimate demise, in 2005 in our treatise: “The Uncertain Future of Community Associations.”

August 2008 | ECHO Journal

sional’s livelihood depends on his or her ability to predict the future direction of an industry. For another, owners must be able to do financial planning. Finally, governments need to solve many housing problems that arise from an increasing population and serious energy concerns. Anyway, with all of those concerns and caveats in mind, let’s look at the next 50 years! Redevelopment Older community associations will be used to improve the suburbs by recycling open space, or an entire project, into higher density projects. How will that happen? Ask yourself this question: What is the service life of an entire condominium project? Fifty years? One hundred years? It’s not just the life of the physical components of the building. It’s also the life of the funding plan that supports it and the market in which it exists. All three must remain viable for the project to survive. But what are the chances that the buildings, the financing and the neighborhood will be viable and valuable indefinitely? Most neighborhoods underwent significant economic change during the last century. Some improved, but many got worse. We’ve written reams about the failure of funding plans, and to think that a community association will always be able to rely on its members for funding is naïve. For one reason or another, all community associations will become obsolete. But the law as written perpetuates a theory of “unlimited” useful life; i.e., no obsolescence. In California we must include in a reserve budget everything that has a service life of 30 years or less; and if so, how do we then deal with economic or physical obsolescence? The answer is obvious: recycle it. Owners can approve a partition (sale) of the property by an appropriate vote either under the governing documents or by statute; so redevelopment is largely market-driven. Owners who perceive that their property is worth more redeveloped will begin to search for ways to sell off the entire project. We will see more pressure on old projects to redevelop as the urban core extends outward and upward to accommodate larger populations in and around existing cities. Urban density will reach 50–60 stories in San Francisco, San Jose, and Oakland. Walnut Creek will see high-rise construction reach 20-30 stories, as will Pleasanton and San Mateo. Environment and energy concerns as Continued on page 11

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ECHO Thanks the Benefactors of the 2008 Annual Seminar PLATINUM BENEFACTORS Angius & Terry, LLP Berding & Weil, LLP First Bank GOLD BENEFACTORS American Management Services County Bank Bayridge Group Hughes & Gill, PC Community Association Banc Richard Avelar & Associates Construction Performance Builders OCR Solar & Roofing Cool Pool Saarman Construction SILVER PATRONS Advance Construction Technology Massingham & Associates Draeger R. E. Broocker Co. ERTECH Statcomm Wanden Treanor, Esq. PATRONS Cagwin & Dorward Serpico Landscaping 10

August 2008 | ECHO Journal

Predicting the Future Continued from page 9

well as natural boundaries will prevent further development of outlying or agricultural lands. People will not be able to commute 50 miles to their jobs. Density will increase appreciably in present urban cores and former suburban locations like Oakland, Walnut Creek, Fremont, San Mateo, and San Jose in concert with, and clustered around, expansions of rapid and mass transit options in those locations. This will be a response to European-style gasoline prices and environmental concerns that will make commuting from present-day suburban neighborhoods prohibitively expensive and socially unacceptable. Transit will include small electric vehicles that can be checked out when needed.

Density will increase appreciably in present urban cores and former suburban locations... Architectural Changes The generations of low-rise condominium structures built during the last 50 years were constructed primarily of wood—wood framing, roofing, siding, window frames and staircases. Condominium complexes composed mostly of wood will reach obsolescence faster than buildings with stucco or glass skins. Similarly, steel and glass high-rise condominiums will survive longer not only because of the construction materials used, but also because the owners have higher incomes and because, with higher densities, the cost of maintaining the structure is shared by more owners. Construction materials will evolve from wood to synthetics, steel, glass, and masonry —all of which will last longer and require less maintenance than wood. More building components will be manufactured of synthetics that look and function like wood. Vinyl windows, concrete tile roofs, fiber cement siding and both steel and composite framing are all

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products we have now. This will be dictated not only by the obvious longevity benefits but also by environmental and energy concerns. Structures will be taller and larger overall as economies of scale begin to pay off. Developers will build more homes on the same parcel of land than they do now because density will dictate more volume to preserve the few remaining open spaces. This will drive the move to redevelop the low-rise, low-density wood-frame condominium projects that presently are the dominant form of attached housing in California. Vertical steel, glass and concrete cities will replace horizontal ones. These will include mixed-use structures with not only private common areas, but also public common areas and public services mixed in with private services as well. Residences, commercial spaces, government facilities will coexist in the same shell. This multi-use mix will require carefully drafted governing documents to accommodate the needs of these diverse constituencies. New Methods of Funding These large expensive buildings will require reliable sources of funding to sup12

August 2008 | ECHO Journal

Vertical steel, glass and concrete cities will replace horizontal ones. port them. Todayâ&#x20AC;&#x2122;s condos require consensus among owners to fund critical building maintenance properly. Lack of that consensus will financially cripple those condo associations that do not have the ability to assess without restrictions. There will have to be changes in the assessment rules if large multi-family, multi-use structures are to survive in the future. By law in California, owners of units in common interest developments cannot be assessed beyond a statutory maximum.

Single-family homeowners have no such cap on maintenance expenses; good judgment, expertise, and a desire to maintain value drive those owners to pay the actual cost of maintaining their properties. Necessary maintenance is not deferred. What would happen if we eliminated the statutory caps on assessments in common interest developments and allowed owners to be assessed the actual cost of maintaining the common property? Many owners would initially abandon their properties, but eventually those who could afford to maintain them properly would occupy them or they would be sold and redeveloped. Different methods of collecting assessments will evolve from the regular monthly assessment we see today. Deferred assessments collected out of escrow at the time of sale will encourage greater funding of reserves since the non-operating portion of assessments, those intended to fund reserves, could be paid from equity instead of income. Developers will couple these deferred reserve assessments with a partial developer contribution to reserves when the project is new to limit monthly assessment payments to operat-

ing expenses only, qualifying more potential buyers. With some help from the Legislature, quasi-governmental special districts or Maintenance Trusts could be used to maintain large portions of projects, which would be funded by a tax rather than a voluntary assessment. This type of treatment could lead to assessments that are largely tax-deductible. Less Litigation To avoid litigation over construction or reserve funding issues and to encourage investment in these large projects, developers will create “hybrid” or dual-ownership buildings by separating ownership of common areas from the separate interests. The common area will be owned by investors. The investors will maintain the common areas in perpetuity. The developer would be responsible to the investors for construction issues. The community association would enforce the governing documents and deal with all other non-building related issues. In essence, the developer or its designee investors will be a landlord who “leases” the common area to the individual owners or to a residence association. All building-related

issues will be the responsibility of the “landlord” as they are in commercial buildings today. The community association will not be involved. This arrangement will eliminate the problem of underfunded reserve accounts because necessary maintenance will be performed as needed and funded by the investors from the “lease” payments of owners. Equity appreciation will be shared between the investor group and the owners on the basis of a pre-determined formula, giving incentive to both groups to maintain the building properly. Disputes over building maintenance or services will be referred to an outside mediator/arbitrator for resolution.

Management Governing documents will be maintained on the Internet with online legal and accounting advice in widespread use along with other management services, especially for smaller associations without in-house management staffs. College degrees in community property management will be required of managers of these large complexes. The curriculum will include maintenance, information technology, accounting, psychology and law. Online management “packages” will be widely available which will include financial, legal and maintenance services from consortiums of professionals.

Member Discipline

We hope you enjoyed this glimpse into the future of common interest developments. Who knows? We could be right!

Community associations, with many more owners living in high-density buildings, will create ombudsperson-judge positions inhouse to resolve issues among neighbors and to enforce the rules. These positions will derive their authority from contractual arbitration provisions written into all governing documents and their rulings will be enforced by a simple application to local courts.

Tyler Berding is a founding partner of Berding & Weil, LLP, a community association law firm located in Alamo, CA. He has taught real estate and community association law at California State University East Bay and is the immediate past president of ECHO. He is a frequent contributor to the Journal. Questions or comments can be directed to him at www.berding-weil.com or www.condoissues.com. ECHO Journal | August 2008

By Geri Kennedy, CCAM

Funding for Large Projects O

nce an association board has made the difficult decision to proceed with a large association project—whether it is to replace the roof, siding, windows or to update the overall look of the property—the first question will be how to pay for all that work. Unfortunately and all too frequently, the existing reserve funds are inadequate. This can be a result of under-funding over time, or a reserve study had not anticipated the full scope of work required—hidden damages, 14

August 2008 | ECHO Journal

construction management, code changes, etc. There are only few options for funding: • a special assessment • an increase in regular assessments • further deferral of the work • a bank loan in conjunction with assessment increases. Deferring the work won’t generally save much and may in fact increase the overall project costs because of inflationary factors and the possibility of additional damage to

the buildings. In addition, your annual budget disclosures will have to indicate the deferral and plans for future funding. Also to be considered are projects looming in the future that will continue to need funding. That leaves special assessment or ongoing increases in the regular assessments. In conjunction with either of these options, a bank loan is often a good choice, allowing the association immediate access to funds so the work can be completed. Then payment for

ECHO Journal | August 2008

the project is made over time as the income is received from the membership. While an increase in the regular assessments may generate sufficient funds to make the monthly loan payment and to continue to fund for future projects, it is generally better to consider a special assessment for the following reasons: From the Bank’s Perspective 1. The bank’s collateral is the association’s future assessment stream. A special assessment represents a more secure collateral for the loan. 2. Once a special assessment has been voted and levied, it is a “done deal.” Homeowners are obligated to pay the full amount, whether all up front or on a payment plan that matches the bank loan terms. 3. If the loan payments and funding for future reserve expenses are coming from future increases in regular assessments, the bank has no guarantee that future boards of directors will actually approve and implement the increases. Granted, this requirement would be a part of the loan agreement and, in theory, the bank could force the increase; but banks don’t like to go into a project, especially for a loan of a substantial amount, with that sort of uncertainty. From the Homeowner’s Point of View 1. The special assessment gives owners the options of paying all at once or by a series of payments over a year or so, or longer time. Homeowners may have an existing home equity line of credit or other funding source that they could utilize. By using an equity line, owners may be able to deduct any interest paid on the borrowed amount. 2. Some owners may prefer to pay up front and get it over with, rather than paying a higher assessment rate for an extended period. 3. Using regular assessments, your assessment rate will quickly increase more than the other associations in the area, making the units less attractive to future buyers. 4. When a special assessment is chosen, only those owners choosing to pay over time will bear the burden of the bank loan interest. If regular assessment increases are used, everyone pays the interest. Owners have no option. 5. When regular payments are made to the reserves, in accordance with a good 16

August 2008 | ECHO Journal

reserve plan, unit owners are paying their share for the wear and tear (i.e., using up) of the reserve components while they live/own in the complex. When owners fail to fund the reserves, they are pushing the burden of paying for those components on to future unit owners and are in essence getting a free ride on their fair share of payment for the depreciation. If regular assessment increases are used to fund the current project, future owners will be paying not only for their share of the reserve funding while they are owners, but for the failure of past unit owners to fund adequately.

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From the Associationâ&#x20AC;&#x2122;s Point of View 1. When a special assessment is used, as units sell the balance of the assessment will be due and payable at the close of escrow. The association can then use those payments to pay off the loan more quickly. If owners are paying through their regular assessments, it is unlikely that an early payment would be feasible. 2. Future budget disclosures will be cleaner without the need to disclose the ongoing assessment increase plan. In other words, rather than having to disclose in the budget that there will be a minimum 12 percent (for example) increase each year, a board will be able to note that the project has been completed and that no other major increases are anticipated for reserve items! This is certainly a much better picture to show any future buyers.

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Conclusion It is generally better to allow the membership to have input on how to proceed with and fund large projects. If good presentations and information are provided by the board, management and your project coordinator, most owners will understand the need to proceed with the proposed work in order to enhance and protect their property values. When unit owners are given more choices, they then become vested in the success of the overall project, and there are fewer contentious meetings, letters and complaints.

Geri Kennedy is a vice president at First Bank Association Services. Previously she was an association manager and co-owner of a large management company. She is the co-chairperson of the South Bay Resource Panel, a member of the ECHO Legislative Committee and a past member of the ECHO board of directors.

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By Molly A. Foley-Healy, Esq.

Optimizing Committees in Association Governance A

common question from homeowner association boards is whether it is appropriate or prudent to use committees as a tool in the governance of associations. Clearly, the answer is “Yes, committees can be an excellent resource if they are harnessed appropriately.” However, if committees are not organized or do not operate effectively, they can become a waste of time or even a

August 2008 | ECHO Journal

runaway train that can lead to anger and resentment for everyone involved. Here are some tips that every board should take into consideration when creating and utilizing committees: 1. Determine whether the governing documents of your association provide for “standing committees.” References to committees in governing documents will

most typically be found in the bylaws and/or declaration of covenants, conditions and restrictions (CC&Rs) in most associations. It is common for the governing documents of many associations to create standing committees, such as an architectural review committee or design review Continued on page 20

ECHO Journal | August 2008

Optimizing Committees Continued from page 18

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committees to address requests by homeowners to make improvements to their homes or lots. Some governing documents also require a budget committee to be utilized in financial planning of the association. If the governing documents of your association provide for standing committees, take steps to ensure those committees are organized and function according to the requirements contained in the documents. Board-appointed committees should be carefully structured to ensure they operate at optimal and efficient levels. A common mistake boards make is the failure to outline clearly the parameters and expectations of committees. This can lead to committees that are out of control or are unable to function effectively because the members of the committees do not have a clear understanding of their roles. Therefore, boards should take the time necessary to draft a clear and concise “committee charter,” which should include the following: Purpose of the Committee. The exact purpose of the committee should be outlined in the charter. Is the purpose of the committee to provide the board with a recommendation on an issue? Is the purpose of the committee to carry out a specific task? Whatever the purpose of the committee is, make sure it is spelled out in a clear and understandable manner. Timeframe for Committee Action. Be clear about the timeframe of the committee. Is the committee to meet during a period of six weeks or a year? Is the committee a standing committee that will meet until the governing documents are amended or until the board takes action to dissolve the committee? Work Product Expected from the Committee. Be clear about what the committee is expected to produce. Is the committee expected to provide a detailed recommendation to the board? If so, what must be included in the recommendation? Is the committee expected to take some sort of action on behalf of the board or association? If so, be very clear about the action the committee is expected to take. Also, it is important to remember that a board of an association is permitted to delegate a duty to act but it cannot delegate responsi-

bility for any action that is ultimately taken by the committee. â&#x20AC;˘ Budget for the Committee. Does the committee have any money to utilize in carrying out the task outlined for the committee? You should be clear about the amount of money the committee has to operate with. You should also be clear about the process the committee should go through to obtain the funds. If the committee is not being provided with funds, you should be upfront with that information. 3. Residents living in associations have a wide array of expertise, talents, and life experiences. An important key to successful committees is to appoint individuals to serve on committees who are able to make valuable contributions to the committees. Do you have landscape architects or gardeners who would be willing to serve on a committee to make recommendations to the board on xeriscaping (landscaping in ways that do not require supplemental irrigation)? Do you have accountants or individuals with a business background who would be willing to serve on a budget committee? Taking time to identify and build relationships with individuals who may ultimately become valued resources will be time well spent. 4. Another great tool to keep committees on track is to appoint board or staff members to be liaisons to the committees. This can be a valuable resource in providing background and information committees may need to operate more effectively. However, care should be taken to ensure these individuals do not dominate or take over the work of committees. In the world we live in today, association boards have a lot on their plates. By using the tips outlined in this article, boards will be able to effectively harness committees to work in a collaborative environment to benefit their communities.

Molly Foley-Healy is an attorney at the Colorado law firm HindmanSanchez. She counsels homeowners associations in transactional matters ranging from document reviews and amendments to opinion letters on matters affecting the operations and governance of community associations. Previously, Ms. Foley-Healy was a senior vice president and the general counsel for Community Associations Institute and was the chief lobbyist for CAI National. ECHO Journal | August 2008

News from ECHO

Funding for Large Projects Once an association board has made the difficult decision to proceed with a large association project—whether it is to replace the roof, siding, windows or to update the overall look of the property—the next question will be how to pay for all that work. Unfortunately and all too frequently, the existing reserve funds are inadequate. This can be a result of underfunding over time, or a reserve study that had not anticipated the scope of work required—hidden damages, construction management, code changes, etc. There are only few options for funding: • a special assessment • an increase in regular assessments • further deferral of the work • a bank loan in conjunction with assessment increases. Deferring the work won’t generally save much and may in fact increase the overall project costs because of inflationary factors and the possibility of additional damage to the buildings. In addition, your annual budget disclosures will have to indicate the deferral and plans for future funding. Also to be considered 22

August 2008 | ECHO Journal

are projects looming in the future that will continue to need funding. That leaves special assessment or ongoing increases in the regular assessments. In conjunction with either of these options, a bank loan is often a good choice, allowing the association immediate access to funds so the work can be completed. Then payment for the project is made over time as the membership income is received. It is generally good to allow the membership to have input on how to proceed and fund large projects. If good presentations and information are provided by the board, management and your project coordinator, most owners will understand the need to proceed in order to enhance and protect their property values. When unit owners are given more choices, they then become vested in the success of the overall project, and there are fewer contentious meetings, letters and complaints.

Optimizing Committees in Association Governance Homeowner association boards frequently wonder if it is appropriate or prudent to use committees as a tool in the governance of associations. The clear

answer is that committees can be an excellent resource if they are harnessed appropriately. However, if committees are not organized or do not operate effectively, they can become a waste of time or even a runaway train that can lead to anger and resentment for everyone involved. Here are some tips that every board should take into consideration when creating and utilizing committees: 1. Determine whether the governing documents of your association provide for “standing committees.” References to committees in governing documents will most typically be found in the bylaws or declaration of covenants, conditions and restrictions (CC&Rs) in most associations. 2. Board-appointed committees should be carefully structured to ensure they operate at optimal and efficient levels. Boards should take the time necessary to draft a clear and concise “committee charter:” • Purpose of the Committee. Whatever the purpose of the committee is, make sure it is spelled out in a clear and understandable manner. • Timeframe for Committee Action. Be clear about the timeframe in which the committee will work. • Work Product Expected from the Committee. Be clear about what the committee is expected to produce. • Budget for the Committee. You should be clear about the amount of money the committee has to operate with. 3. Appoint appropriate individuals to serve on committees.

An important key to successful committees is to appoint individuals to serve on committees who are able to make valuable contributions to the committees. 4. Another great tool to keep committees on track is to appoint board or staff members to be liaisons to the committees. However, care should be taken to ensure these individuals do not dominate or take over the work of committees. Association boards have a lot on their plates these days. By using these tips, they will be able to harness committees to work effectively in a collaborative environment to benefit their communities.

Important Upcoming Events Thursday, September 18 San Francisco Luncheon 11:45 a.m. Speaker: Kerry Mazzoni Topic: Insider’s View of Legislation in California St. Francis Yacht Club San Francisco Saturday, September 20 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m. Best Western Seacliff Inn, Aptos

n thirty years as a general contractor, a project manager and a construction manager, I have had my share of encounters with building officials in many cities around the Bay Area and beyond. I wish I could say that the encounters were always pleasant, but unfortunately they were not. Sometimes they were full of arguments and, in the end, the clients were always the ones adversely affected and ended up paying the price, subsequently placing me a position to deal with an unhappy client. Having dealt with construction defects for some time, I have discovered the wisdom 24

August 2008 | ECHO Journal

behind many of the building departments’ regulations and my clients’ frequently perceived “hardships.” Today, as construction mangers, we are diligent in the creation of construction documents as complete as possible. These documents are used as the first line of inspection to see that everything is built to code or better. Yes, even better, because using code as your guide is not always enough. Ultimately, this is my opinion and perspective as the interviewer and an active construction manger. Over the years, I have met many excellent building inspectors but one person particu-

larly stands out, Laurence M. Kornfield, the chief building inspector who heads the technical services division at the San Francisco Building Department. At a social function I asked him for an interview so that his experience could be shared with ECHO Journal readers. Here are excerpts from that interview with Mr. Kornfield. Hermann Novak (HN): Having spent so many years in our industry, how do you see a building today, using a comparison from when you first started in construction? In other words, when you look at a building,

By Hermann Novak

Perspectives from a Building Inspector HOA Construction Issues

what does it mean to you? How does it make you feel and what does it trigger inside you? Laurence Kornfield (LK): Interesting question. I was in Kobe, Japan in 1994 for the great earthquake of Kobe, and I had an opportunity to witness the strength of the buildingsâ&#x20AC;&#x2122; infrastructures perform during this earthquake. High rises would wiggle back and forth and then translate into a rotational motion and then settle down. Another building, with a clay tile roof, shook and then slid into the street. I walked around the city afterwards, wondering what the expectations of these buildings were for the people of

Kobe. In months to follow, people were infuriated because they had been led by the government to expect solid standard dependable building construction from the design of their buildings that was not provided. The buildings were not expected to collapse during an earthquake. The people assumed the buildings had been designed and inspected with safe fire protection. The people were undoubtedly upset and apparently had been misled about the safe design of their buildings. HN: Having spent many years in the industry, Iâ&#x20AC;&#x2122;m sure what you see in the indus-

try must range from the pathetic to the excellent. LK: Yes, there have been many big changes in building inspection since 1986. Things have changed a lot because there are twice as many building codes and even more technical regulations. We have more engineers and architects because we have higher requirements for technical knowledge, but job experience still plays a major role in making everything happen. You need to under-

Continued on page 27 ECHO Journal | August 2008

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Building Inspector’s Perspective Continued from page 25

stand how to work with people, but technical knowledge is still valuable. HN: So, what I hear you saying is that traditional craftsmanship is still essential. However, technical knowledge such as reading blueprints accurately, knowing the latest chemical reaction of caulkings, new construction materials and flashings etc. is also a very essential component. Is this correct?

1 The International Code Council, a membership association dedicated to building safety and fire prevention, develops the codes used to construct residential and commercial buildings, including homes and schools. Most U.S. cities, counties and states that adopt codes choose the International Codes developed by the International Code Council. 2 The International Conference of Building Officials publishes the family of Uniform Codes, each correlated with the Uniform Building Code to provide jurisdictions with a complete set of buildingrelated regulations for adoption. Thirteen Uniform Codes cover all aspects of safe and efficient building construction, maintenance, and decommissioning of public and private buildings.

LK: Yes. About 10–15 years ago when I took the ICC1 and ICBO2 certification exams, I suggested that all my fellow inspectors take the international exam to become certified building inspectors. Several of them took the exam, but no one passed because they didn’t know the minute technical aspects of chemical components, such as the detail you just mentioned. They were surprised and I was surprised. California passed a law that requires all inspectors and plant checkers to be certified by a state or national accreditation agency; now all of our inspectors are certified inspectors or plant examiners. But I fully understand the level of details you are referring to such as product composition and how it should be used. That’s a huge change in the last 20 years. HN: Do you see the necessity for technical knowledge in the construction industry becoming even more extensive? LK: The requirements are increasing daily. The amount of information is endless, and things are being regulated that we never dreamed existed. People are in careers to do things that were never even imagined in our childhood days. It’s hard to conceive of the

jobs that people will be doing in 20, 50 or 100 years from now. HN: Will construction require more education? LK: Absolutely and in some ways it’s out of respect for the people with whom I work who have a concept of what makes a good building. We also have to be aware of what people bring sociologically and psychologically from their heritages. The technical aspect is important but understanding people and their needs and what makes then comfortable are also crucial. HN: Interesting you say that. An effective construction manager will truthfully inform a client that construction problems will surface, but he will also emphasize that effective people management skills can go a long way in reducing problems. Do you see that as a correct statement? LK: The people who do well with construction projects and achieve comfortable solutions are people who built a team of people with whom they enjoy working and have confidence in that team. Teamwork is critical to a successful result. It’s not always just about the cheapest, fastest, sleaziest way to get a job ECHO Journal | August 2008

done. Homeowners have an impossibly hard time trying to build a team. For one thing it takes time. A team is something that you develop. Most homeowners have a hard time giving up authority because they have invested so much in their homes. They can’t leave it to others to solve it for them. HN: I want to be careful in what I’m going to say: Do you see homeowners being a part of the problem when bad and defective construction occurs? And having asked this, may I also ask how can homeowners get better work done? From your point of view what do they need to do and how can they change their behavior? LK: Every couple of years we do a videotape on “How Do You Get A Successful Construction Project Done?” First and fore28

August 2008 | ECHO Journal

most is to have realistic expectations. Most homeowners know what they want the finished project to look like, but they don’t know the details of product durability, cost of future repairs, and maintenance that may be necessary. We need to advise homeowners of the reasonable expectations of the product performance. Most homeowners are more interested in the way it looks and not how it’s built, maintained or how durable it is. So what would really be helpful to homeowners is having a professional such as an architect help them identify reasonable expectations, costs and maintenance. HN: Do you like construction managers, often referred to by clients as the threaded middle layer?

LK: Yes, I think they are almost essential. People tend to say it is a middle layer and that they add confusion. Then, on the other hand, you have the homeowner saying, “Do I need to get a permit?” I respond by telling the homeowner, “I have a 2,200 page Building Code and you also need the Planning Code and a Public Works Code.” The homeowner doesn’t want to become an expert in this. I tell them to get back to what they do best—financial management, dentistry, or whatever it is. Don’t try to become a construction expert. The same is true in the construction world; very few contractors can be expected to be advocates for the person for whom they are working. In the best world, the contractor is the one who gets the job done to the homeowner’s satisfaction

and makes the homeowner happy. One big problem with residential construction is the homeowner thinks that the contractors have expertise with all sorts of problems. Or the homeowner relies on friends, family and unlicensed professionals; only Heaven can help when this happens. So you really do need the construction management layer or some other professional such as a design person, project manager or engineer. HN: And there are very few who are great contractors and great designers. I have only met several in my thirty plus years in the construction business. LK: That’s right, and that is more than I have met. They don’t have a lot of detail. Their job is to rely on someone else to tell them what to do. They are technicians. The lines between professional and technical work seem to blur. But basically a professional person is someone who has a lot of technical knowledge with a breath of understanding so they can make a judgment call. Building inspectors are technicians. For years, we gave them a lot of discretion to work with the building owners in the field to solve problems. HN: The professional persons you are referring to are the project and construction managers, architects, engineers, contractors and building inspectors. LK: Yes HN: Thank you for your good comments. ——— I hope that you have gained knowledge from one of the Bay Area’s important city officials by listening to his point of view based on his extensive work experience in the construction industry and the rapidly rising requirements for extensive product knowledge, system and technical knowledge required in the construction industry today. After all it is you, the volunteer director, who represents the HOA community and has to make the decision on how your ongoing maintenance and the major construction needs of your complex will be planned, executed and maintained.

Hermann Novak is the President of Bayridge Group Inc. a Construction Management firm in the Bay Area. He has over 25 years of experience in the architectural, engineering and construction world. He is a licensed general contractor, a certified mediator and a director on the board of the American Institute of Ethics.

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Directory

UPDATES Updates for listings in the 2008 ECHO Directory of Businesses and Professionals.

New Associate Members Apollo Property Management P.O. Box 1945 Campbell, CA 95009 Contact: Kathleen Angel Tel: 408-370-0456 Fax: 408-317-0339 Email: kitty_angel@yahoo.com We have been in business for twenty years, providing personalized homeowner association management services. We treat every property and every homeowner with respect and care. Comerica Bank Two Embarcadero Center, # 300 San Francisco, CA 94111 Contact: Cecille Strong Tel: 415-477-3216 Fax: 415-477-3240 www.comerica.com Email: cstrong@comerica.com

Green My Condo 2220 Sacramento St., # N Berkeley, CA 94702 Contact: Raines Cohen Tel: 510-868-1627 www.GreenMyCondo.com Email: raines@mac.com

Continued on page 32 30

August 2008 | ECHO Journal

Ask the Maintenance Experts By Dick Tippett

Proper Property Maintenance uestion: We are a four-member board of directors. All of us are professionals and this is our first home. What is considered “proper” property maintenance in a common interest development and how do we go about protecting our property and residents? Our answer this month comes from Dick Tippett, the president at ERTECH. nswer: There are three basic purposes for doing maintenance on a property. The first purpose of property maintenance is to protect a community association from “life safety” threats in commonly held areas. Typical threats include: • Roof leaks into units; • Mold growth in units and on walls; • Rot in building, balcony and walkway structures; • Fence collapses; • Trip-fall hazards, such as tilted sidewalks, slippery stairs, missing pool tiles and paving potholes; • Tree damage to landscape and tree damage in the form of falling trees or tree limbs; • Flooding due to clogged drains; • Paving failures; • Broken pipes. The second purpose of property maintenance is to preserve the property held in common, the “common areas” belonging to the whole associa-

tion. This includes the building structures, the landscaping, the hardscape (paving, sidewalks and driveways) and the recreation facilities. The third purpose of property maintenance is to keep the property in good operating condition and to enhance the value of the property. While the first two purposes consume the most amounts of money over the years, the third purpose is what makes your homes pleasant to live in day to day. All of these assets require regular inspection and periodic maintenance or replacement. The cost of this maintenance or replacement must be accounted for in the association’s reserve report. Carefully check your reserve report to be sure that all such assets that are part of your association are included. In order to get at least part of the maintenance managed, most boards establish committees to handle different facets of the work: architectural, landscape, reroofing and painting committees for example. A fifth committee, to oversee general maintenance, should be added to this list. The general maintenance committee should be tasked with regularly inspecting and reporting on the needs and condition of such things as common area lighting, drainage, paving, sidewalks, fencing and security gates, pool and spa areas,

This column addresses specific maintenance concerns that most associations face. Our panel of experts is here to help answer questions you might have. We hope that you will find this page to be informative and— please—Ask The Maintenance Experts!

ECHO Journal | August 2008

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tennis or sport courts, laundries, clubhouses, elevators, hallways (paint and carpets) and garages or carports, for example. The maintenance committees should also check that the normal, ongoing weekly maintenance and “on-call” maintenance work is being properly done. This ongoing work should normally include: • Replacing broken sprinkler heads and piping; • Control of termites, ants, squirrels and landscape pests; • Minor paving repairs or sidewalk grinding; • Replacing burned-out light bulbs; • Pool cleaning; • Common area laundry and restroom cleaning; • Gutter and roof cleaning; • Lawn mowing and fertilizing; • Tree trimming, hedge trimming and leaf removal; • Root pruning; • Replacement of dead or overgrown landscaping; • Pool and spa cleaning and filter cleaning; • Community building cleaning; 32

August 2008 | ECHO Journal

• Cable TV or shared satellite dish maintenance.

What is considered “proper” property maintenance in a common interest development? Reserving For Capital Maintenance California law requires that every three years associations prepare reports of what money will be required to maintain or replace capital common area items. The usual list includes roofing, paving, painting, waterproofing or decks and balconies, siding, plumbing and a host of other items. The report is also supposed to set forth the amounts that must yearly be set aside (reserved) for the replacement of repair of those components. Ideally, the report should show project funding needs based on a straight-line depre-

ciation formula. This method of calculation precludes a lot of financial sleight of hand. It is a calculation standard developed within and strongly supported by ECHO. The reserve study should spell out the amount of money to be set aside for maintenance based on need and planning. It should not be a document that sets capital maintenance quality and schedules based on the unwillingness of board members to confront the discomfort of raising fees. Specifically the reserve study should: • Set forth the schedule for major maintenance work; • Establish the amount of money required for annual capital maintenance; • Establish the amount of money required for long-term capital maintenance and replacement; • Be tailored to the specific needs of the association for which it is prepared; • Be based on actual physical measurement of the capital components it inventories and budgets for; Continued on page 39

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10 ECHO Journal | August 2008

Books and DVDs from ECHO

Homeowners Association and You $13.00 2008 ECHO Business & Professional Directory $20.00 This directory lists all business and professional members of ECHO as of December 2007. Current addresses, telephone and fax numbers, email addresses, and a short description are included. This directory is an invaluable tool for locating service providers that work with homeowner association.

Condominium Bluebook 2008 Edition $18.00 This well-known compact guide for operation of common interest developments in California now includes a comprehensive index of the book and a chapter containing more than 200 frequently-asked questions about associations, along with succinct answers.

This is a valuable guide to all aspects of community association living designed as a practical problem solving guide. Written by two long-time association residents, it provides an insightful overview of community living from the viewpoint of experienced owners in readable language. Recently revised and expanded.

The Board’s Dilemma Homeowners Associations— How-to Guide for Leadership $35.00 This well-known guide and reference is written for officers and directors of homeowner associations who want to learn how to manage and operate the affairs of their associations effectively.

Questions & Answers About Community Associations $18.00 For 12 years, Jan Hickenbottom answered homeowners’ questions in her Los Angeles Times column on community associations. Now collected in one volume, readers can find answers to almost any question about CIDs.

Robert’s Rules of Order $7.50 A step-by-step guide to the rules for meetings of your association, the current and official manual adopted by most organizations to govern their meetings. This guide will provide many meeting procedures not covered by the association bylaws or other governing documents.

Reserve Fund Essentials $18.00 This book is an easy to read, musthave guide for anyone who wants a clear, thorough explanation of reserve studies and their indispensable role in effective HOA planning. The author gives tips to help board members mold their reserve study into a useful financial tool.

This edition contains the 2008 version of the Davis-Stirling Common Interest Development Act, the Civil Code sections that apply to common interest developments, and selected provisions from the Civil, Corporations, Government and Vehicle Codes important to community associations.

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In this essay, attorney Tyler Berding confronts the growing financial problems for community associations. Mr. Berding addresses board members who are struggling to balance their duty to protect both individual owners and the corporation, and gives answers to associations trying to avoid a funding crisis.

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Community Association Statute Book—2008 Edition $10.00

California Building Guidelines for Residential Construction $52.50 This easy-to-read manual is an excellent tool to understand a new home. It contains chapters covering more than 300 conditions that have been sources of disputes between homeowners and builders, offers homeowner maintenance tips, and defines the standards to which a residence should be built.

CID Leadership Two-Disc DVD set $15.00

An excellent guide to understanding the rights and responsibilities of condo ownership and operation of homeowner associations. The question-and-answer format responds to more than 125 commonly-asked questions in an easy to understand style. A great resource for newcomers and veteran owners.

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Board—An orientation for new board members and a refresher for current members. Meetings—How to conduct effective meetings that stay focused and achieve results. Reserves—How adequately-funded reserves prevent problems in associations. Insurance—Considers insurance to protect multi-million dollar community assets.

Dispute Resolution in Homeowner Associations $20.00 This publication has been completely revised to reflect new requirements resulting from passage of SB 137.

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Board Memberâ&#x20AC;&#x2122;s Guide for Contractor Interviews $20.00 This report is a guide for directors and managers to use for interviews with prospective service contractors. Questions to find out capabilities and willingness of contractors to provide the services being sought are included for most of the contractor skills that associations use.

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Board Memberâ&#x20AC;&#x2122;s Guide for Management Interviews $20.00 This guide for use by boards for conducting complete and effective interviews with prospective managers takes the guesswork out of the interview process. Over 80 questions covering every management duty and includes answer sheets matched to the questions.

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Calendar of Events

Make a note of these ECHO Events Friday, August 1 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd. Suite 950, Walnut Creek

Monday, September 8 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland

Wednesday, August 6 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Suite 101 San Jose Wednesday, August 20 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, September 4 North Bay Resource Panel 9:30 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, September 5 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd. Suite 950, Walnut Creek

Tuesday, September 9 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, September 17 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, September 18 San Francisco Luncheon 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club San Francisco Saturday, September 20 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m. Best Western Seacliff Inn Aptos

the r o f e t a d is Keep th Seminar l a u n n A O ECH 2009 , 3 1 – 2 1 e n u J

Friday, October 3 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd. Suite 950, Walnut Creek Wednesday, October 8 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose Saturday, October 11 Finances and Accounting Seminar 8:00 a.m. to 1:00 p.m. Crowne Plaza 32083 Alvarado-Niles Road Union City Wednesday, October 15 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park

Friday, October 17 Annual Membership Meeting 10:00 a.m. ECHO Office 1602 The Alameda, Ste. 101 San Jose Saturday, October 25 Mastering the Board Game 8:00 a.m. to 4:00 p.m. San Ramon Marriott 2600 Bishop Drive San Ramon Saturday, November 1 Peninsula Fall Seminar 8:00 a.m. to 1:00 p.m. Hyatt Regency 1333 Bayshore Hwy. Burlingame

Wednesday, October 1 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101 San Jose

Regularly Scheduled Resource Panel Meetings Resource Panel Maintenance North Bay East Bay Accountants Central Coast South Bay Wine Country Legal 36

August 2008 | ECHO Journal

Meeting

Location

First Wednesday, Even Months First Thursday, Odd Months First Friday, Monthly Second Monday, Odd Months Second Tuesday, Odd Months Second Wednesday, Even Months Third Wednesday, Monthly Quarterly

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Honor Roll

About

ECHO Honors Volunteers 2008 Volunteer of the Year Mike Muilenburg ECHO Resource Panels Accountant Panel William Erlanger, CPA, 415-981-9350 Central Coast Panel Jim Harmon, 831-425-3622 East Bay Panel Scott Burke, 408-536-0420 Legal Panel Mark Wleklinski, Esq., 925-691-1191 Maintenance Panel Mike Muilenburg, 408-996-3897 North Bay Panel Diane Kay, CCAM, 415-846-7579 Stephany Charles, CCAM 415-458-3537 San Francisco Panel Jeff Saarman, 415-749-2700 South Bay Panel Geri Kennedy, CCAM, 650-348-2691 ext. 1006 Kimberly Payne, 408-200-8470 Wine Country Panel Ron Hamann, 707-584-4788

Legislative Committee Paul Atkins Jeffrey Barnett, Esq. Sandra Bonato, Esq. Jerry L. Bowles Joelyn Carr-Fingerle, CPA John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

August 2008 | ECHO Journal

2008 Annual Seminar Speakers Jeffrey Barnett, Esq. Sandra Bonato, Esq. Lori Burger, PCAM, CCAM Doug Christison, PCAM, CCAM Rolf Crocker, CCAM Jeffrey Draeger James Ernst, CPA Lisa Esposito, CCAM John Garvic, Esq. John Gill, Esq. Sandra Gottlieb, Esq. Walt Grady, CPA Beth Grimm, Esq. Robert Hall, Esq. Linnea Juarez, PCAM, CCAM Geri Kennedy, CCAM David Kuivanen, AIA Karl Lofthouse Kerry Mazzoni Ann Rankin, Esq. Rob Rosenberg, CCAM Kurtis Shenefield, PCAM, CCAM Dennis Socher Paul Terry, Esq. Wanden Treanor, Esq. Stephen Weil, Esq. Glenn Youngling, Esq.

SF Luncheon Speakers John Allanson Tyler P. Berding, Esq. Ronald Block, PhD. Doug Christison, PCAM, CCAM Karen Conlon, CCAM Rolf Crocker, CCAM Ross Feinberg, Esq. David Feingold, Esq. Tom Fier, Esq. Kevin Frederick, Esq. John Garvic, Esq.

Beth Grimm, Esq. Brian Hebert, Esq. Roy Helsing Julia Lave Johnston Garth Leone Nico March Larry Russell, Esq. Steve Saarman Nathaniel Sterling, Esq. Debra Warren, PCAM, CCAM Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.

Recent ECHO Journal Contributing Authors April 2008 Frank Arms Michael Biel Tom Fier, Esq. Walt Grady, CPA Michael Hardy, Esq. May 2008 Meghan Connolly Haupt Beth A. Grimm, Esq Garth Leone Lise K. Ström, Esq. June 2008 Tyler P. Berding, Esq. Tina Wang, Esq. David West Mary L. Wulf July 2008 Doug Christison, PCAM, CCAM Mary Filson, Esq. Monty Hollingsworth Brian Seifert

ECHO

What is ECHO? ECHO (Executive Council of Homeowners) is a California non-profit corporation dedicated to assisting community associations. ECHO is an owners’ organization. Founded in San Jose in 1972 with a nucleus of five owner associations, ECHO membership is now 1,525 association members representing over 150,000 homes and 325 business and professional members.

Who Should Join ECHO? If your association manages condominiums or a planned development, it can become a member of ECHO and receive all of the benefits designated for homeowner associations. If your company wants to reach decision makers at over 1,525 homeowner associations, you can become an associate member and join 325 other firms serving this important membership.

What are the Benefits of ECHO Membership? • Subscription to monthly magazine for every board member • Yearly copy of the Association Statute Book for every board member • Frequent educational seminars • Special prices for CID publications • Legislative advocacy in Sacramento

ECHO Membership Dues HOA Size 2 to 25 units 26 to 50 units 51 to 100 units 101 to 150 units 151 to 200 units 201 or more units Business/Professional

Rate $120 $165 $240 $315 $390 $495 $425

ECHO Journal Subscription Rates Members $50 Non-members/Homeowners $75 $125 Businesses & Professionals

How Do You Join ECHO? Over 1,800 members benefit each year from their membership in ECHO. Find out what they’ve known for years by joining ECHO today. To apply for membership, call ECHO at 408-297-3246 or visit the ECHO web site (echo-ca.org) to obtain an application form and for more information.

Ask the Maintenance Panel Continued from page 32

â&#x20AC;˘ Be funded by the association annually at the level set forth by the preparer. Reserve Component Categories There are five of these. They are, in no particular order: Cyclic Regular Components. These are tasks such as slurry sealing paving, painting the buildings and reroofing shake and shingle roofs that recur on a regular, predicable schedule. Cyclic Irregular Components. These are tasks such as repairing wood or waterproofing at walking decks and balconies, replacing flat roofs or tile roofs, replacing dead shrubbery and trees and rebuilding fences. We know that these tasks are repetitive but donâ&#x20AC;&#x2122;t really know if all roof/deck/fences will have to be done at one time, or even at regular intervals. One or two years before replacement of a major cyclic component is scheduled, it is wise to have that component inspected by a professional to see if replacement is actually required. You may be pleasantly surprised to learn that the component has several years useful life remaining. Predictable But Irregular Components. We know that water heaters will corrode, pool pumps will wear out, the pool interior will need to be coated, that termites will move in, unit interiors will be damaged by leaks, and that water lines will wear out. We just donâ&#x20AC;&#x2122;t know exactly when. Catastrophic Failure Component. There is almost never reserve for but should be. Catastrophic failures are frequently the result of maintenance too long deferred (see the section on board unwillingness to increase reserve assessment). Typical examples include; hydraulic elevator failures, trees blown down, balcony collapses/structural failures, and deductible or uninsured storm or earthquake damage. Outdated Design/Aesthetics Component. This also is an important reserve component. Properties that look the same as when they were built twenty-five years ago do not have the same resale value as fresh updated one. Examples here include paint color changes, landscaping makeovers, redecorated clubhouse, a retiled pool, new entry signs and resurfaced tennis courts. Continued on page 40 ECHO Journal | August 2008

Ask the Maintenance Panel Continued from page 39

Reserves Are Not an Operating Budget Reserve studies do not include the everyday costs of operating your association. These everyday costs typically include: • Landscape maintenance, including lawn care, ground planting care and sprinkler maintenance; • Water costs for irrigation; • Electricity and bulbs for common area lighting; • Drain cleaning and roof and gutter cleaning; • Pool and spa maintenance and heating; • Garbage collection and recycling; • Security; • Management company costs. These costs go up annually, because the cost of doing business for each of these contractors goes up annually. Increased insurance, increased worker’s compensation and, particularly new this year, increased fuel costs must all be recovered somehow. There are only two ways to do this—decrease service either directly or by using lower-cost (and less skilled) employees and components, or increase prices. The board needs to accept the reality of these annual cost increases and increase membership assessments accordingly. Decreasing the level of service costs more than it saves because it ultimately winds up depreciating the value of the property. More importantly, capital reserve money should not be spent to cover shortfalls in funding everyday operation. All too often, the money spent in that manner isn’t put back in the reserve account.

Dick Tippett is the president of ERTECH Inc., one of the original condominium reconstruction management companies. He is a member of ECHO’s board of directors and former chair of both the Maintenance and the Central Coast Resource Panels.

Please use this information as a guide. It is recommended that you seek advice from your professional association manager or affiliated service provider. If you have a question for the ECHO maintenance experts, please contact us at the ECHO office via email at info@echo-ca.org or Fax the panel at 408-297-3517. 40

August 2008 | ECHO Journal

ECHO Marketplace

Advertiser Index

The place to find business and professionals for your association Alpha Restoration and Waterproofing .8 American Management Services . . . . .9 Angius & Terry . . . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . . .33 A.S.A.P. Collection Services . . . . . . . .16 Association Reserves . . . . . . . . . . . . .41 Bayridge Group . . . . . . . . . . . . . . . . .20 Berding & Weil . . . . . . . . . . . . . . . . . .44 Burdick Painting . . . . . . . . . . . . . . . . .12 Cal Bay Builders . . . . . . . . . . . . . . . . .21 California Sub-Meters . . . . . . . . . . . .27 Community Association Banc . . . . . . .30 Community Management Services . . .30 Compass Management . . . . . . . . . . .33

Your Ad Seen Here You read this, didn’t you? Thousands of officers and directors of homeowner association boards also read the ads each month in the ECHO Marketplace.

Cool Pool Service . . . . . . . . . . . . . . . .30 Cornerstone Community Mgmnt . . . . .8 County Bank . . . . . . . . . . . . . . . . . . . .2 Draeger . . . . . . . . . . . . . . . . . . . . . . .11 Ekim Painting . . . . . . . . . . . . . . . . . . .28 ERTECH . . . . . . . . . . . . . . . . . . . . . . .28 First Bank Association Bank Services . .40 Flores Painting . . . . . . . . . . . . . . . . . .29 Helsing Group . . . . . . . . . . . . . . . . . .20 Hill & Company. . . . . . . . . . . . . . . . . .21 Jeff Atkinson Construction . . . . . . . . .39 Louis & Riparetti . . . . . . . . . . . . . . . . .23 M&C Association Services . . . . . . . . .29 M. L. Nielsen Construction . . . . . . . . .40 Massingham and Associates . . . . . . .32 Pelican Management Group . . . . . . .41 PML Management Corp. . . . . . . . . . .11 Pollard Unlimited . . . . . . . . . . . . . . . .17 Popular Association Banking . . . . . . .37 Pratt & Associates . . . . . . . . . . . . . . .20 R. E. Broocker Co. . . . . . . . . . . . . . . .17 Rebello’s Towing Service . . . . . . . . . .13 REMI Company . . . . . . . . . . . . . . . . .39 Saarman Construction . . . . . . . . . . . .16 Statcomm . . . . . . . . . . . . . . . . . . . . .17 Steve Tingley Painting . . . . . . . . . . . .37 Steve’s Painting Services . . . . . . . . . . . .9

ECHO Journal | August 2008

Mastering the Board Game Defining Board Roles, Relationships and Leadership Do you want to become a better board member or association manager? You can in only one day at the Special ECHO Fall Seminar on October 25, 2008 at the San Ramon Marriott Hotel. Mastering the Board Game is an intensive seminar where you learn the importance of relationships and how to build them effectively by identifying owners’ needs and defining board and staff roles. The seminar also helps you to become an effective leader by giving you the skills to: • Differentiate board from executive leadership • Determine direction with a long-range perspective—delegate effectively • Create effective policies • Monitor policy implementation—exercise group authority • Define success in terms of outcomes, not activities Make effective plans that find success when you learn at the seminar to: • Create a vision • Launch your work • Plan your path for success • Fulfill all legal and fiduciary duties

What to Expect After attending this seminar, you will leave with a clear understanding of the distinctions between governance and management, and how boards can achieve more by empowering staff, but with systemic accountability. You will also learn: • Ten state-of-the-art Policy Governance® principles • Why boards should, and how they can, focus on purpose rather than process • The fiduciary and legal duties of directors • How to have control operations without “micromanaging” • How to delegate clearly to staff, committees and officers and hold them accountable • A new way to make board officer and committee structures more effective • Four categories of governing policies necessary for accountability and role clarity • Key policy topics with examples of policy development

Special ECHO Fall Seminar October 25, 2008 8:00 a.m.–4:00 p.m. San Ramon Marriott Hotel

Central Coast Fall Seminar Make Plans Now to Attend Central Coast Fall Seminar Saturday, September 20 8:00 a.m. to 1:00 p.m. Best Western Seacliff Inn, Aptos