Journal_11_08

August 2011

A Journal for California Community Association Leaders

echo-ca.org

How Your Maintenance Plan Affects You ALSO INSIDE THIS ISSUE:

• Six Ways to Minimize Reserve Contributions • Real Estate Agency and Your HOA • Did You Record That Judgment?

Change Service Requested ECHO 1602 The Alameda STE 101 San Jose, CA 95126

Save these dates for the 2012 ECHO Annual Seminar June 22, 23

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How Your Maintenance Plan Affects Your Property In recent years many associations have chosen to defer maintenance to save money, resulting in special assessments or buildings in disarray. It is not too late to develop an annual maintenance program that will save money and bring properties to the standards they once enjoyed. This article tells you how.—Cover story on page 6

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Six Ways to Minimize Reserve Contributions

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Copyright 2011 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.

Real Estate Agency and Your HOA

Executive Council of Homeowners, Inc.

As an architect and property manager, the author found much food for thought on a wide range of subjects at the ECHO Annual Seminar. To his surprise, he did not meet any real estate agents but encountered complaints about the profession. Get tips on dealing better with these professionals.

1602 The Alameda, Suite 101 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org

Did You Record That Judgment?

If You Fail to Plan, You Plan to Fail This article applies to associations because of the high levels of expertise required to perform the duties of the association. Board members volunteer personal time to serve the association and tools, such as an annual operating plan, are imperative to meet the goals of the community. Learn more about operating plans in this article.

Departments 32 News from ECHO 33 Legislation at a Glimpse

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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.

You don’t want to reserve too small an amount that may lead to a special assessment, borrowing, or the high costs of deferred maintenance; but you shouldn’t put away too much either. This article outlines six ways to minimize your reserve contributions.

A recent appellate decision highlights the necessity to record foreclosure judgments. In that case the association failed to record promptly in the relevant county the judgments it obtained for unpaid assessments and so lost its priority for collecting.

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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.

34 Directory Updates 36 ECHO Bookstore 38 Events Calendar 40 ECHO Volunteers

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 Diane Rossi Secretary Dorothy Kopczynski Directors Paul Atkins John Garvic Robert Rosenberg Richard Tippett Steven Weil

Jerry L. Bowles David Levy Kurtis Shenefiel Wanden Treanor

Executive Director Oliver Burford Communications Coordinator Tyler Coffin Legislative Consultant Government Strategies, Inc. Design and Production George O’Hanlon

41 ECHO Marketplace 41 Advertiser Index

On the Cover How Your Maintenance Plan Affects Your Property—page 6 4

August 2011 | ECHO Journal

ECHO Mission Statement 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.

PRESENTING THE

ECHO Annual Seminar Sponsors American Asphalt Angius & Terry American Management Bob Tedrick Construction Berding|Weil Common Interest Management Community Management Services Cool Pool ERTECH First Bank The G.B. Group Hughes Gill Cochrane Massingham & Associates Mutual of Omaha Bank PetersenDean Pro Solutions Ram Olson Cereghino & Kopczynski Saarman Construction

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August 2011 | ECHO Journal

By Regan Brown and Mark Greening

How Is Your Maintenance Plan Affecting Your Property?

HETHER YOU ARE A HOMEOWNER, building owner or board member, the concept of saving money for the association or facility has come to the forefront of homeowner association concerns. Private sector buildings, on average, spend $1.80 per square foot on repair and maintenance, or approximately 25 percent of a building’s annual operating expenses, to keep their properties maintained. Historically, homeowner associations have spent similar percentages on their properties to maintain their associations’ buildings and common area. Unfortunately, in recent years many associations have chosen to defer their maintenance into future projects without

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allocating money to provide adequate funding, resulting in special assessments or having buildings in disarray. But for many associations it is not too late to get involved with a planned annual maintenance program that will save your association money in the long run and bring your properties to the standards they once enjoyed.

This economic downturn for most associations has affected their annual budget for repairs on their properties to a “must-do basis,” also known as “reactive maintenance.” This method of deferring repairs has led to larger problems, often creating big projects that require difficult special assessments. For associations facing this dif-

ECHO Journal | August 2011

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ficult decision, it will require careful planning so the necessary work will not only meet the building needs but will also provide benefits to the association never available before.

Managers and owners believe that saving money is the greatest motivation to improve energy efficiency and building management.

Today, new building products have been introduced into the market that provide good economical options that will benefit an association. These new products are providing longevity to the building and in many cases increase energy savings and rebates to help save money and reallocate precious funds. This means that buildings need the entire exterior to be maintained actively as a complete system, not just by component. An example would be replacing siding on an elevation of a building; many associations are now using fiber cement products, which provide greater longevity, as an alternate to wood products. In addition, this work offers homeowners the opportunity to install new energy efficient windows (at the owner’s expense) and utilize paint products that provide reflective qualities to provide additional insulation properties for a building. In addition to energy savings, many manufacturers are offering extended warranties on their products that provide future savings to associations.

Campaigns by gas and electric companies to “Go Green” or to save energy conscientiously have flooded the mass media market.

Currently, commercial buildings are responsible for 39 percent of all energy used in the U.S. and 76 percent of all electricity consumed. With energy costs rising steadily for the last 10 years, methods to save energy have become increasingly important. It is for these reasons that the results of those campaigns show that 65 percent of homeowners are paying more attention to energy efficiency than in previous years, while 85 percent say energy efficiency is a priority in their construction and retrofit projects.

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The rising cost of electricity is depicted in this graph.

How will the push to “Go Green” affect budgets and reserve studies? Information provided through surveys shows us that managers and building owners believe that saving money is the greatest motivation to improve energy efficiency and building management—whether through reserves, capital improvement, purchased equipment, etc.

The most commonly adopted measures are the following: • Staff related: Educating community managers, homeowners and contractors • Equipment and systems: Adjusting HVAC controls, updating systems • Lighting: Switching to energy-efficient lighting and/or control sensors • Exterior building upgrades: Using Energy Star or value-rated products—paints, roof material, windows and solar products.

Surveys have also told us that managers and owners are resistant to starting an energy-saving “predictive maintenance” program because they feel it requires a capital investment and is not a controllable cost. They also believe that they “don’t really waste much” and “savings are always less than promised.”

For those managers and board members having a difficult time determining which products and services will provide the best return on investment, there are many business professionals and groups approaching the market with promises of money savings.

There are the conventional resources such as architects, construction management firms and engineers. Additional resources are the manufacturers of building products, utility bill auditors, insurance companies, LEEDcertified individuals and even financial con-

sultants offering analysis and rebates to benefit the associations and owners.

Some associations have taken another approach to the economic challenges. They utilize planned monthly and annual maintenance programs to provide stability to the buildings. This type of maintenance approach is known as a preventative maintenance program.

For communities and boards to be better educated, they must understand the three different types of maintenance programs.

The first is Reactive Maintenance—“If it’s not broke, don’t fix it.” This “wait and see” approach, or “don’t do anything until it fails” approach, requires a reactive repair, usually at an increased cost. Many boards fall victim to this type of maintenance when they become financially stressed or when unforeseen financial constraints prematurely use allocated maintenance monies, thus forcing bigger problems and more costly decisions.

The second is Preventative Maintenance— when some type of regular service or maintenance cycle is scheduled. Examples would include general decay repairs, deck coating, regular paint cycles, pool equipment maintenance, gutter cleaning and light bulb replacement. This method can become a problem for communities if boards or management companies change. Often a new manager or board member doesn’t read the warranty requirements, unknowingly voiding one or more warranties.

The third is Predictive Maintenance—consistent monitoring of the buildings, its components and equipment, thus allowing early detection of common problems to promote efficiency, life expectancy and planned budECHO Journal | August 2011

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• Have you read what your management company has provided you?

• Are you asking questions?

• Are you utilizing resources that are free to the association?

• Do you review these items with your insurance agent?

• How relative is your reserve study?

– When was the last one done?

– Is it for a general plan or a specific plan?

– Current legal requirements.

– What is included in the reserve study?

geted repairs. Associations are trending to this approach and finding great results over a specific time period; but like most things that produce results, this also requires an implementation of the maintenance needs.

There are three rules commonly used in predictive maintenance: 1) Monthly property site inspection of the building components. The newest resources for accomplishing this goal in conjunction with visual inspections include the use of infrared thermal imaging cameras for structures and the use of handheld ultrasound units for evaluating mechanical components, HVAC units, pool equipment and fountains or other pumps and motors.

2) Maintaining building components and building systems on a regular cycle in accordance with the manufacturers’ specifications and requirements.

3) Maintaining a log of all product warranties and contractor warranties to promote the continued life cycle of each product or installation.

Using predictive maintenance programs allows for better tracking for financial and energy savings. Most of the repairs can actually be broken down to the exact cost of 10

August 2011 | ECHO Journal

repair and the actual savings return. The following list of items can be a useful tool for getting a property from a “Reactive Status” to a “Predictive Status” program: Maintenance Logs • Should include product warranties • A unit by unit history • Documentation of vendors that have provided services or repairs • Dates of required maintenance to maintain warranties • Monthly inspections on property • Noting items requiring maintenance and setting an action item • Following up to ensure the corrections or repairs are completed Where to Begin Reviewing Your Risk Exposure • Site survey of property • Determine priority issues • Create a budget • Develop a plan • Establish a timeline • Get started Evaluate Your Association—Are You Doing What It Takes?

• Do you keep logs on-site? Are you selfmanaged?

What Areas Have Ongoing Maintenance Requirements?

• HVAC, large system water heaters, firesprinkler systems • Parking lot reseal and striping • Deck coating systems, elastomeric paint systems • Windows can also be monitored for both leaks and energy loss.

• Some items are deferred to later maintenance and must be documented and future repairs planned.

• If your association has gone through a reconstruction, reserve studies are mandatory because items that were repaired require maintenance to keep warranties active.

Additional Areas for Review • What components does your property have that are unique to the property?

Today, the challenge for associations is to get their properties from the “Reactive Status” to the “Predictive Status.” The first step is identifying the current methods your association has adopted for its maintenance plan. This is an essential starting point for having a successful program. The second step is taking a hard look at where your association currently is and what your goals are for the next couple years. The use of industry professionals and new technology together with a good plan to maintain your property and protect your investment will be required.

Regan Brown is a founder and principal owner of The GB Group Inc, a general contracting and consulting firm located in Morgan Hill.

Mark Greening is the president of The GB Group.

The company is a member of ECHO, and both authors have had a long-time involvement in ECHO activities.

How to make your investment safer Condos, townhomes, homeowner associations and other “shared expenses” housing is the wave of the future in the United States and around the world. But to make it a sustainable investment, new buyers, owners and volunteer board members need to understand “best practices basics” of how this form of housing works and have more realistic expectations of this form of “carefree, maintenance free” living.

The new book, Condos, Townhomes, Home Owner Associations—How to Make Your Investment Safer, provides essential training and checklists for • Association Board Members • Owners in Associations • Prospective Buyers of Association Property The book answers vital questions that can help to keep your association from financial ruin: • What overview training should board members have before beginning their service?

• What critical financial and mechanical information should

board members track each month?

• What information should a buyer look for before buying in an association?

The author provides lessons that help you to: • Protect property values • Gain peace of mind • Lessen the need for large, unexpected special assessments Patrick Hohman, author of the book and a 22-year association president, compiled these userfriendly, colorful lessons with the help of industry experts throughout the United States.

The paperback, Condos, Townhomes, Home Owner Associations—How to Make Your Investment Safer, is now available from ECHO for only $29 for members and $45 for nonmembers. Order today by calling (408) 297-3246 or order online at www.echo-ca.org.

By Robert M. Nordlund, P.E., R.S.

Six Ways to Minimize Your Reserve Contributions W

HY PUT MORE MONEY

into your Reserve Fund than necessary? I can’t think of a good reason! You don’t want to make reserve contributions that err on the side of being too little because that may lead your association toward a special assessment, borrowing, or the even higher costs that come with deferred maintenance. But you shouldn’t put away too

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August 2011 | ECHO Journal

1. The best way to minimize reserve contributions is to make sure your reserve study provider uses the “cash flow” method of calculating your recommended reserve contribution.

points your association towards full (100%) funding in a relatively short number of years. But there’s no reason to be that aggressive. You can still achieve a fully funded objective (a good idea, by the way) using the “cash flow” calculation method.

Your association will get to full funding, but more

The alternative “straight line” calculation method

Continued on page 14

much either. Let me give you six ideas how to minimize, responsibly, your reserve contributions.

ECHO Journal | August 2011

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Minimize Your Reserve Contributions Continued from page 12

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smoothly and over a few more years. This can make a big difference in lowering your calculated reserve contributions along the way.

2. Allow an outside organization to pay part of your contributions.

How is this done? It’s called reserve interest, and you get it from the institution that holds your reserve funds. Even with today’s low interest rates, outside money helps, and it adds up to a surprisingly significant amount over the years as it gradually compounds. Too many associations aren’t getting any interest or aren’t making timely deposits (or insufficient deposits) because they don’t think that 0.5% or 1.0% interest is worth earning. That kind of thinking is just plain wrong. Maximize your reserve interest earnings. Then stand back and watch it compound, slowly and steadily, over the years.

Every dollar earned in interest is one less dollar contributed by the homeowners.

3. Perform timely ongoing maintenance.

A touchup paint project, paid for through the operating budget on the high-exposure surfaces that get the most weathering, may allow you to extend the useful life of a repainting project from 5 years to 6 years.

Look at it this way: Suppose a repainting project has a useful life of five years and costs $20,000. The value of its deterioration is $4,000 per year. If the association can pay for a $500 or $1000 paint touchup to extend that useful life to six years, the deterioration is reduced to about $3,500 per year. You just saved $500 per year on an ongoing basis!

This same principle can be applied to other components, including roof maintenance, gutter cleaning, carpet cleaning, asphalt cleaning and sealing.

4. Review your actual replacement needs.

Don’t execute a reserve project just because your reserve study indicates it has a remaining useful life of zero years. If a fence is still standing and strong, don’t replace it prematurely. If that pool heater is still serving well, don’t replace it prematurely. This is another way to “extend” the useful life of your reserve components, stretching the replacement cost over a larger number of years. It’s a also a good reason to update your reserve study every year because extending the useful life of your reserve components generally translates to a lower reserve contribution.

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August 2011 | ECHO Journal

5. Review your operating budget to verify that you are not “double-budgeting.”

Double budgeting happens when a reserve project is funded both in operating and reserves. If you are successfully repainting 20 percent of the buildings every year using the operating budget, you don’t need to include a repainting component in your reserve study! Look closely to find if this is true with tree trimming, pool furniture, smaller mechanical components, etc. You only need one replacement budget for a component, not two.

6. Avoid these three common mistakes that will make reserve expenses higher: Deferring projects. Avoiding a repair or replacement project “just because” is a bad idea. Deferring the expense doesn’t just postpone the expense. Deferred projects tend to get more expensive due to deterioration of underlying materials. This is especially true of asphalt, painting, and roofing. By deferring, you’re doing your association a financial disservice.

Thinking you can cut your full funding contributions in half typically leads to running out of reserve funds in just a few years.

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Thinking 50 percent funded means making 50 percent of your full funding contributions. Funding reserve projects is expensive.

Even a baseline funding objective (where your contributions are designed just to keep the reserve fund barely positive) requires a lot of money. For this reason, baseline funding contributions average only 13 percent less than full funding contributions.

Thinking you can cut your full funding contributions in half typically leads to running out of reserve funds in just a few years.

Head in the Sand. Thinking that asphalt will “essentially never” need resurfacing or that a roof or elevator is a “lifetime component” are both critical mistakes. Calculating reserve contributions without those influential components is irresponsible. Asphalt, ECHO Journal | August 2011

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roofing, and major mechanical components are destined to deteriorate or fail. Ignoring that reality will only commit your association and future homeowners to an unstable financial future that includes special assessments or borrowing.

The bottom line: The primary responsibility of a board of directors is to maintain the physical assets of the corporation, many of which will deteriorate on a fairly regular cycle. These assets can be translated into a list of reserve components, each with its own useful life, remaining useful life, and replacement cost.

There are many wise steps to minimize your reserve contributions necessary to 16

August 2011 | ECHO Journal

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ensure timely repairs and replacements, but it is unrealistic to expect a substantial reduction. Like so many things in life, if an idea looks too good to be true, it’s usually too good to be true.

Robert Nordlund is the principal at Association Reserves, Inc., which he founded in 1986. He has pioneered many widely used reserve funding concepts. He is recognized nationally as an expert on reserve funding issues and has authored numerous articles on the subject.

Association Reserves is a long-time member of ECHO.

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August 2011 | ECHO Journal

By Joseph Stein

Residential Real Estate Agency and Your HOA CHO’S ANNUAL SEMINAR IN JUNE brimmed with a diversity of vendors and participants, all offering stimulating discussion on many a hot topic. The subject of energy savings alone offered a host of innovative approaches, ranging from contingency fee-based energy audits to sev-

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eral solar and alternative energy providers. As both an architect and property manager, I enjoyed mingling and mixing with colleagues at the event, finding valuable food for thought on a wide range of subjects in the most efficient manner. To my surprise, I did not meet any real ECHO Journal | August 2011

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estate agents. I did however encounter complaints about the profession. Several association managers shared their stories, including: • New residents left to their own devices; • Rogue sales signage; • Random lockbox placements; • Transactions or resident changes not communicated to HOA; • Spotty or erroneous HOA information passed on to residents by agents.

One example stuck out: an association manager told me how she received a phone call on a Friday evening and drove back to the HOA to help a new owner gain access to her unit that had closed escrow that day.

While the association manager helped the buyer sort out her envelope of keys and unlock the front door, the grateful buyer asked her many questions, including such basics as whether a storage locker came with her condominium. “I wouldn’t have minded so much,” the manager told me, “but the buyer’s real estate broker was also a resident owner and a board member and should have really known better.”

All association managers seem to ask brokers the same question: Why does there seem to be such a gap between the real estate industry’s understanding of HOA-governed properties in comparison to, say, the singlefamily housing market?

The Dilemma: Twice the Work, Half the Pay After working primarily in the condominium industry for the past decade, I have met a good number of qualified agents who specialize in condominiums, and who care about the communities they serve. Usually these agents are stakeholders themselves (i.e., owner-residents) and have a long-term, vested interest in the community in which they work and live. However, this specialized group comprises only a small minority of agents, and there are several reasons that make condominiums in some sense the ‘stepchild’ of traditional residential agencies.

The two most important differentiating factors are differences in sales price and disclosure.

Since residential sales and leasing is a commission-based business, the difference in sales price affects the attention of agents.

Depending on the local market, the median sales price for condominiums can be significantly lower when compared to the median sales price of single-family homes. For example, the median sales price for a single-family 20

August 2011 | ECHO Journal

home in the San Francisco Bay Area in April 2011 was $490,670; in comparison, the California median condominium sales price for the same period was $238,220. (Source: California Association of Realtors.) The difference in commission right there is $15,000.

In other words, the agent selling condominiums by and large receives less pay for essentially the same work.

Twice the disclosures for half the pay—this may be one of the reasons that so many agents take so little time to understand HOA-governed properties.

In addition, for many agents, the proper disclosure and documentation of condominium sales is somewhat of an unknown. Most brokers offer their agents transaction training; more often however, the emphasis is the single-family home—the bread and butter of the residential sales industry. The additional disclosure requirements for condominiums can catch agents off-guard, especially if they have not dealt with a specific HOA before.

Often, there may be a lack of understanding of the mutually protective intent of certain rules or disclosures. One example is the stubborn inquiry of a buyer’s agent, asking repeatedly whether her clients could install an illegal washer/dryer in a top-floor unit: were it a single-family house the same agent would probably react very differently. However, the desire to ‘do the deal,’ in combination with a poor understanding of the nature and raison d’être of CC&Rs, can lead even seasoned agents to take ill-advised short-cuts.

In a nutshell: twice the disclosures for half the pay—this may be one of the reasons that so many agents take so little time to understand HOA governed properties. Where does this leave managers and boards?

What to Offer: Carrots or Sticks?

When analyzing MLS sales data, usually a small group of agents has an enormous impact on the value retention and enhanceECHO Journal | August 2011

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ment of the properties sold in a given complex. Where such groups exist, homeowner associations are well advised to foster the relationship with the agents responsible for the majority of the listing, sales and leasing activity in their association. Investing in that relationship can take on different forms: reduced rates for long-term advertising contracts in the HOA newsletter; a referral system for sales and leasing inquiries that reach the HOA office; preferred on-site advertisement; and so forth. However, even without these measures, most ‘agents in residence’ are usually more likely to feature higher average list prices and create less confusion for new buyers in the sales process than agents who only have an occasional transaction at the complex or who act countywide as a short sale or bank owned specialists.

Many associations across the U.S. have adopted non-invasive signage, displaying only the words “For Sale” alongside the broker phone number in a uniform color and font type.

The two latter groups may be less familiar with the association to begin with, and have little vested interest in learning more about it, as well. Here, a few preventive steps may help the association better influence the sales and leasing processes, and keep the activity in line with its rules and regulations.

For example, if random Open House and For Sale signage is repeatedly affecting the architectural control of the association, management and the board could consult with counsel and revise its signage rules to create a uniform, simple signage policy. Since most condominium complexes disallow directional Open House signage, one solution might be to have the appropriate generic signage pre-made with generic lettering kits (for agent name & number), and offered for sale through the HOA, including unobtrusive directional yard signs or condo-appropriate 22

August 2011 | ECHO Journal

window signs that meet community colors and architectural guidelines. Many exclusive neighborhood associations across the United States have adopted such non-invasive signage, displaying only the words “For Sale” alongside the broker phone number in a uniform color and font type. By offering a better solution than signage removal alone, everybody—the HOA, the seller and the agent— wins. And while some agents may balk at the additional cost, this measure makes longterm agent vestment attractive and rewards agents that are willing to play by the HOA rulebook.

Another measure that assists sales activity while restricting its impact on the community is a centralized lockbox station. While each HOA should review its CC&Rs and insurance policies with counsel to determine any liability or feasibility concerns arising out of lockbox stations, many communities seem to prefer them to the ‘organic’ growth of lockbox areas out of the customs of local agents. A security/courtesy patrol office or well-monitored clubhouse/HOA office area is the perfect location for the installation of a lockbox station. Smaller HOAs may consider installing a lockbox and ad window prominently at a main entrance. Any lockbox station will require monitoring, to avoid overcrowding of suprakey boxes. A policy for removal should be in place and prominently posted for agents to review. If possible, metal bars should be avoided; a numbered slot system for suprakey lockboxes and instructions on how agents are to use the numbered slots is preferable for eliminating lockbox overcrowding. As an incentive, the lockbox station should feature a locked advertising window. This creates additional usage incentive for the lockbox station, while offering sellers a forum and providing prospective buyers easy access to information.

These are just two examples of simple measures and systems that assist both rules compliance and agent activities, making it easier to market and transact in a manner consistent with HOA policies.

Other measures may require more investment by the HOA. One possibility includes offering digital versions of HOA documents and streamlining certification requests online. Especially when confronted with typical ‘eleventh hour’ documentation requests by agents during escrow, a digital cert approach can avoid upsetting day-to-day HOA management activities and interruptions.

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Brief info packets for agents and new residents may also be helpful. While such one page abstracts do not replace rulebooks and other documents by any means, highlighting the most common questions (FAQs) and move-in or marketing mistakes may alleviate the majority of the headaches, especially for move-ins.

The How-to Guide for Homeowners Associations Hailed as the most complete and useful reference available for homeowners associations, members, officers and directors.

If you want to learn how to manage, operate and participate effectively in your association, you will want to read this book.

Order the book today from ECHO Call 408-297-3246, fax 408-297-3517 or email: info@echo-ca.org 24

August 2011 | ECHO Journal

Another advanced, long-term measure is the creation of a database ‘mash up’—the combination of public records, MLS sales data and unit information for long-term data tracking of the complex. Having such data available may prove invaluable in accurate tracking of value development, especially since it is usually hard to come by data that reaches further back than ten years. Often, this is the domain of an on-site sales and leasing office that has an interest in providing this information as a proprietary advantage.

Data ‘mash ups’ of this sort can be reverse engineered, but should be only conducted by knowledgeable professionals.

These are some observations of what has worked for some communities in the past.

Individual implementation requirements may vary—any changes or measures consid-

ered by a particular association must first be thoroughly reviewed and adopted in close consultation with the association’s general counsel.

If a few preventive measures can eliminate potential problems, then the life of general managers, staff and boards has been made that much easier.

The Pareto Principle: Achieving More With Less HOA governance goals and free enterprise sales may never fully reconcile in the course of a given business week. However, if a few preventive measures can eliminate potential problems and assist the good faith effort of agents, then the life of general managers, staff and boards has been made that much easier. At the end of the day, most agents will appreciate any support they receive to conduct their business in an efficient manner.

Any such proactive support will hopefully eliminate the worst offenses of the general agency public and tie those agents with a vested interest even closer to the HOA they serve. Agents are multipliers, and investment in such relationships offers an HOA smart leverage and great potential returns in terms of marketing, exposure and ease of transaction. Especially during times affected by short sales and foreclosures, such value-enhancing activities are more necessary than ever.

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ECHO Journal | August 2011

25

By Paul W. Windust, Esq.

Did You Record That Judgment?

Tips on Maintaining the Critical Priority of Your Foreclosure Judgment RECENT APPELLATE DECISION FROM THE FIRST DISTRICT COURT OF Appeal in San Francisco (Diamond Heights Village Association v.

Financial Freedom Senior Funding Corp.) highlights the necessity to record judicial foreclosure judgments. In that case, the association recorded assessment liens against a condominium unit after the unit owner failed to pay maintenance assessments for several years. Rather than non-judicially foreclose those assessment liens, the association sued the owners for judicial foreclosure of the assessment liens.

Judicial foreclosure is a remedy available to associations to obtain a court-ordered sale of a condominium unit to satisfy unpaid assessments. An important distinction between non-judicial and judicial foreclosure is the ability in a judicial foreclosure to obtain a deficiency judgment (a money judgment) against the owner in the event that the foreclosure sale of the unit does not satisfy the assessment obliga-

A

26

August 2011 | ECHO Journal

tion. In other words, a judicial foreclosure does not limit the association to recover just the unit; it allows sale of the unit and a potential money judgment as well.

In Diamond Heights, the association judicially foreclosed the assessment liens but did not record the foreclosure judgment in the applicable county. Due to several bankruptcy filings by the owner, the association was prevented from selling the unit. After the association obtained its foreclosure judgment, the owner applied for and obtained a reverse mortgage on the unit that became a first mortgage on the unit. Because the association did not record its earlier obtained foreclosure judgment, the title report obtained by the

Continued on page 28

ECHO Journal | August 2011

27

Record That Judgment Continued from page 26

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lender apparently failed to identify the association’s judgment.

When the association learned that the owner had obtained a new first mortgage, it sued the owners and the mortgage lender, challenging the priority of the mortgage lender’s lien. The court held that because the association obtained a foreclosure judgment, the earlier recorded assessment liens no longer had effect. Because the association did not record the foreclosure judgment, it did not have a security interest in the unit, and even if it did, it was junior to the mortgage lender’s lien. Even though the association recorded its assessment liens before the mortgage lender recorded its mortgage lien, the association was held to be in a junior position to the mortgage lien. This is because the assessment liens were “merged” into the association’s foreclosure judgment, but that judgment was never recorded, depriving the association of priority over the mortgage lender.

This case illustrates the importance of promptly recording in the relevant county any judgments obtained for unpaid assessments. California follows the “first in time, first in right” rule with respect to lien priorities. That means that the party that records its lien first has the first right to any foreclosure sale proceeds.

One way to avoid this result is for an association to take advantage of a special exception afforded to community associations under the Civil Code. Usually, a holder of lien on real property must look to the real property first to satisfy any obligation secured by the real property. For instance, a mortgage lender must foreclosure its mortgage lien on the real property collateral before attempting to collect from the borrower. In fact, in residential lending, the mortgage lender may only collect the loan by foreclosing on the underlying real property. Community associations enjoy an exception to this rule. A community association can record an assessment lien for unpaid assessments, but it is not required by law to foreclose on that lien. Instead, an association can record its assessment lien and then sue the owner in court for a money judgment in the amount of the unpaid assessments. This, in effect, gives the association a security interest in the unit at the time the assessment lien is recorded (establishing its priority) while it

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pursues the defaulting owner in court for a money judgment of the unpaid assessments.

foreclosure, judicial foreclosure, or by pursuing a money judgment.

While judicial foreclosure can provide an association with an effective way to collect unpaid assessments, the decision on how to proceed depends on the circumstances of each case. Consultation with experienced legal counsel can assist an association in making the best decision on how to collect unpaid assessments, either by non-judicial

Paul Windust is a partner at Berding|Weil in Alamo, California. He has over 15 years of experience in both commercial and residential real estate law, commercial and contract law, creditor’s rights and bankruptcy. He speaks regularly at ECHO seminars and writes articles for the ECHO Journal.

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ECHO Journal | August 2011

29

By Walter Campbell, CMCA, PCAM

If You Fail to Plan, You Plan To Fail and committee members of the goals and objectives to be completed each month and by year end. Items to be included in the annual operating plan can consist of the following: • Board Meeting Dates • Board Orientation Date • Annual Meeting Date • Committee Meetings • Newsletter Schedule • Contract Renewals • Community Social Events • Budget Timelines • Maintenance and Replacement Schedules • Audit Schedule and Tax Filings • Reserve Study Plan and Schedule OU MAY HAVE HEARD THE SAYING, “If you

Y

fail to plan, you plan to fail.” This statement especially applies to community associations because of the high levels of knowledge and expertise required to perform the required duties of the association. Board and committee members volunteer their personal time to serve the association, and management tools are imperative to meet the goals of the community as expeditiously and productively as possible. An annual operating plan will assist in accomplishing these goals.

An annual operating plan for the coming year is a schedule of events and responsibilities that defines and describes actions to be completed in order to accomplish the goals and objectives. The operating plan ensures that all involved know what needs to be completed, defines the timeline for actions and allows for monitoring as well as a proactive approach to managing the community.

The operating plan should include enough detail to inform management, board 30

August 2011 | ECHO Journal

A consensus should be achieved on maintenance items that need to be completed and the timelines to be followed. The reserve study should be reviewed and incorporated into the operating plan. For example, if the pool needs resurfacing, provide information in the operating plan on the process that will be followed to obtain proposals, including the date the project should be approved.

This should be completed for each component of the reserve study that requires completion in the year the operating plan is developed. This would prevent multiple projects being performed at one time because proper planning enabled the major projects to be scheduled at appropriate intervals.

Contract renewal dates should be included, especially if a timeframe is required within which to cancel the contract prior to expiration. The following is a sample of one month of an annual operating plan:

JANUARY 2011 ACTIVITIES: Board Meeting: January 12 Social Committee: January 13 GOALS: • Organize files • Meet with board to approve auditor • Twice-monthly lawn service; pick up litter • Prepare 2010 files for audit. Set up 2011 files • 1/1/11- landscape contract renews • 1/1/11- deadline for canceling waste removal contract • Discuss 2011 preventative maintenance plan • Organize committees for 2011 • Approve shrub fertilization and inspect spraying • Update maintenance calendar The operating plan should be reviewed at each board meeting. Include a review of the operating plan on the agenda, so you can ensure the plan is reviewed and adjusted if necessary. Monitoring of the operating plan is vital to the success of achieving the stated goals and objectives.

Effective use of the annual operating plan will assist in operating the community as efficiently as possible and go a long way in preventing failure that results from the lack of planning.

Walter Campbell is a vice-president at Community Group in Virginia Beach, VA. Community Group is the largest manager of community associations in Virginia, representing more than 290 condominium, townhome and single-family home communities. Community Group is an Associa Company. This article has been previously published in Association Times, the monthly newsletter for Associa companies.

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ECHO Journal | August 2011

31

News from ECHO

If You Fail to Plan, You Plan To Fail You may have heard the saying, “If you fail to plan, you plan to fail.” This statement especially applies to community associations because of the high levels of knowledge and expertise required to perform the required duties of the association. Board and committee members volunteer their personal time to serve the association, and management tools are imperative to meet the goals of the community as expeditiously and productively as possible. An annual operating plan will assist in accomplishing these goals.

An annual operating plan for the coming year is a schedule of events and responsibilities that defines and describes actions to be completed in order to accomplish the goals and objectives.

The operating plan ensures that all involved know what needs to be completed, defines the timeline for actions and allows for monitoring as well as a proactive approach to managing the community. The operating plan should include enough detail to inform management, board and committee members of the goals 32

August 2011 | ECHO Journal

and objectives to be completed each month and by year-end.

The operating plan should be reviewed at each board meeting.

Include a review of the operating plan on the agenda, so you can ensure the plan is reviewed and adjusted if necessary. Monitoring of the operating plan is vital to the success of achieving the stated goals and objectives.

Effective use of the annual operating plan will assist in operating the community as efficiently as possible and go a long way in preventing failure that results from the lack of planning.

Did You Record That Judgment?

A recent appellate decision (Diamond Heights Village Association v. Financial Freedom Senior Funding Corp.) highlights the necessity to record judicial foreclosure judgments. In that case, the association recorded assessment liens against a condominium unit after the unit owner failed to pay maintenance assessments for several years. Rather than non-judicially foreclose those assessment liens, the association sued the owners for judicial foreclosure of the assessment liens.

Judicial foreclosure is a remedy available to associations to obtain a court-ordered sale of a condominium unit to satisfy unpaid assessments. An important distinction between nonjudicial and judicial foreclosure is the ability in a judicial foreclosure to obtain a deficiency judgment (a money judgment) against the owner in the event that the foreclosure sale of the unit does not satisfy the assessment obligation. In other words, a judicial foreclosure does not limit the association to recover just the unit; it allows sale of the unit and a potential money judgment as well.

In Diamond Heights, the association judicially foreclosed the assessment liens but did not record the foreclosure judgment in the applicable county. Due to several bankruptcy filings by the owner, the association was prevented from selling the unit.

After the association obtained its foreclosure judgment, the owner applied for and obtained a reverse mortgage on the unit that became a first mortgage on the unit. Because the association did not record its earlier obtained foreclosure judgment, the title report obtained by the lender apparently failed to identify the association’s judgment.

When the association learned that the owner had obtained new first mortgage, it sued the owners and the mortgage lender, challenging the priority of the mortgage lender’s lien. The court held that because the association obtained a foreclosure judgment, the earlier recorded assessment liens no longer had effect.

Because the association did not

record the foreclosure judgment, it did not have a security interest in the unit, and even if it did, it was junior to the mortgage lender’s lien. Even though the association recorded its assessment liens before the mortgage lender recorded its mortgage lien, the association was held to be in a junior position to the mortgage lien.

Governor Signs HOA Legislation The Governor has recently signed two bills that affect HOA operations. The first, SB 150, allows an owner of a unit in an association to rent his or her unit or lot unless rental restrictions were already in place when the unit was bought. The existence of such restrictions must be disclosed by owners to renters or prospective buyers. The second bill signed, SB 221, increases the small claims court jurisdiction for personal claims from $7,500 to $10,000, but it does not change the limits for corporations; i.e., homeowner associations.

Important Upcoming Dates Thursday, September 15 San Francisco Luncheon 11:45 a.m. to 2:00 p.m.

St. Francis Yacht Club, San Francisco Saturday, September 24 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m.

Hilton Hotel, Scotts Valley Friday, October 14 ECHO Annual Membership Meeting 10:00 a.m.

ECHO Office, San Jose

Legislation at a Glimpse As of July 20, 2011 Bill No.

Author

Subject

Status

Position

Summary

AB 19

Fong

Submetering

Failed passage in Assembly Housing.

Support if Amended

For new construction of multi-unit structures, requires the installation of water sub-meters.

AB 20

Halderman

Construction Defect Disclosure

Failed passage in Assembly Judiciary.

Oppose

Requires that an attorney make certain written disclosures to a client in a potential construction defects action. Failure to disclose would constitute cause for professional discipline.

AB 579

Monning

Mobilehome Attorneys Fees

Hearing 5/10 canceled at author’s request.

Support

Would permit the award of attorney's fees to local governments in an action brought by the owner of a mobilehome park to challenge the validity of a local ordinance.

AB 771

Butler

Sale Disclosure Amended.

Documents To Senate Consent Calendar.

Neutral

Provides that the time frame and fee limitation for providing specified documents to an owner of a separate interest apply to an agent of the association.

AB 805

Torres

Davis-Stirling Revision Part 1

Passed Assembly 5/2.

Two-year Bill.

Support

This is the first of two bills from the California Law Revision Commission that restate and clarify the Davis-Stirling Act.

AB 806

Torres

Davis-Stirling Revision Part 2

Passed Assembly 5/2.

Two-year Bill.

Support

This is the second of two bills from the California Law Revision Commission that restate and clarify the Davis-Stirling Act.

AB 818

Blumenfield

Right To Recycle

Senate Watch Third Reading.

Would establish “Renter’s Right To Recycle Act.”

SB 150

Correa

Rental and Lease Rights

Signed by Governor.

Support if amended

Would require associations to permit rentals by unit owners.

SB 209

Corbett

Electric Vehicle Charging Stations

Passed Legislature.

To Governor.

Support

Makes void and unenforceable any prohibition by an association that restricts the installation or use of an electric vehicle charging station. Requires homeowner to pay for all charges and damages associated with installation and maintenance.

SB 561

Corbett

Third Party Collections

In Assembly Judiciary.

Two-year Bill.

Oppose

Would require any 3rd party acting to collect payments or assessments on behalf of an association to comply with the same requirements imposed on the association. Makes statement of legislative intent.

SB 563

Transportation & Housing Committee

Electronic Meetings

Amended.

In Senate Unfinished Business.

Support

Prohibits electronic meetings except for emergencies. Prohibits boards from taking action outside of a meeting. Requires boards to provide agendas of executive sessions. Requires boards to give notice two days before an executive session.

SB 759

Lieu

Artificial Turf

Vetoed.

Oppose

Voids provisions in governing documents that prohibit artificial turf.

Allows associations to establish design and quality standards.

ECHO Journal | August 2011

33

Directory UPDATES Updates for listings in the ECHO Directory of Businesses and Professionals, now available online at www.echo-ca.org.

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3 3OHDVDQWRQ ‡ )UHPRQW ‡ 6DQWD &ODUD OHDVDQWRQ ‡ )UHPRQW ‡ 6DQWD &ODUD S Stockton tockton 209.644.4900 209.644.4900 ‡ ‡ 0RGHVWR ‡ &RSSHURSROLV 0RGHVWR ‡ &RSSHURSROLV For management proposal information, please visit www w.mccommunities.com or email inffo@mccommunities.com 34

August 2011 | ECHO Journal

By Richard Tippett

Don’t Waste Your Existing Assets

A

BOARD OF DIRECTORS OCCASIONALLY ASKS

us to provide construction management services for complete replacement of some asset, usually roofing or paving, that isn’t completely worn out yet.

Telling the board that all of the roofing or paving doesn’t need to be replaced is not always greeted favorably. We are generally told “we have to replace all of it to be fair to everybody,” or “if we don’t replace them for everyone, the owners that don’t have theirs replaced won’t vote for the assessment.”

On the surface of it, this is logical.

Everybody gets treated equally, everybody shares the cost equally, everybody feels the pain equally. The approach seems very politically correct—very warm and comfortable, very egalitarian.

Let’s pull back a bit and really think about this for a minute. Consider a couple of similar examples: 1. You have three children with autos. You buy new tires for one of them whose tires are worn out. Do you, just to be fair, buy new tires for the cars of the other two children even if they don’t need them?

2. One of these same three children injures her leg while playing soccer. Do you, just to be fair, insist the other two children stop playing soccer while the first one recovers?

3. Your husband has an accident with his car and his auto insurance doubles. Do you insist that your insurance rates be raised also, just to be fair?

I didn’t think so.

In the commercial/industrial world, building components are regularly maintained yet

are not replaced until they are worn out. This is considered to be simple common sense—if the roof doesn’t leak, or can be repaired, it stays in service. This procedure keeps costs down. To remove and replace the roof before that time would be a waste of money that can be kept in reserve for other things.

It is the same for the maintenance of condominiums. Not every roof on every building wears out at the same time. Replacing all of the roofs at one time is not really fair to anyone. It is, in fact, unfair to everyone because it makes the cost of reroofing much higher than it really should be.

Nor do all building components wear out at the same rate. Some roofs, balconies, siding, paving and trim boards will last two or three times longer than others. The

Continued on page 41 ECHO Journal | August 2011

35

n ditio E 1 e l 201vailab A

2008 ECHO Business & Professional Directory $20.00 Non-Member Price: $25.00

Condominium Bluebook 2011 Edition $18.00 Non-Member Price: $25.00

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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 associations.

This well-known compact guide for operation of common interest develop ments 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.

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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.

Community Association Statute Book—2011 Edition $15.00 Non-Member Price: $25.00 Contains the 2010 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, Govern ment and Vehicle Codes important to associations.

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Reserve Fund Essentials $18.00 Non-Member Price: $25.00 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.

The Condo Owner’s Answer Book $15.00 Non-Member Price: $20.00 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.

2011 ECHO Annual Seminar Program Book $25.00 Non-Member Price: $35.00 This 300+ page reference book contains the presentation outlines, text and handouts from the sessions at the 2011 ECHO Annual Seminar held on June 18, 2011. It also contains vital information for association directors, such as assessment collection policies, internal dispute policies, and much more.

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Bookstore Order Form Board Member’s Guide for Contractor Interviews $20.00 Non-Member Price: $25.00

Executive Council of Homeowners 1602 The Alameda, Suite 101, San Jose, CA 95126 Phone: 408-297-3246 Fax: 408-297-3517 TITLE

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ECHO Events Calendar

Save these dates Wednesday, August 10 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday, August 12 East Bay Resource Panel 12:00 Noon Massimo Restaurant 1604 Locust St., Walnut Creek Wednesday, August 17 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, September 1 North Bay Resource Panel 11:45 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Monday, September 12 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant Oakland Tuesday, September 13 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz

Thursday, September 15 San Francisco Luncheon 11:45 a.m. to 2:00 p.m.

St. Francis Yacht Club Northwest Room San Francisco Wednesday, September 21 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Saturday, September 24 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m.

Hilton Santa Cruz 6001 La Madrona Dr. Santa Cruz

Save these dates for the 2012 ECHO Annual Seminar June 22, 23

Friday, October 14 ECHO Annual Membership Meeting 10:00 a.m.

ECHO Office 1602 The Alameda, Suite 101 San Jose Wednesday, October 19 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Saturday, October 22 Peninsula Fall Seminar 8:00 a.m. to 1:00 p.m.

Crowne Plaza Foster City 1221 Chess Dr., Foster City

Wednesday, October 5 Maintenance Resource Panel 12:00 Noon 1602 The Alameda, Suite 101 San Jose

Thursday, November 3 North Bay Resource Panel 11:45 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Wednesday, October 12 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose

Tuesday, November 8 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz

Friday, October 14 East Bay Resource Panel 12:00 Noon Massimo Restaurant 1604 Locust St., Walnut Creek

Monday, November 14 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant Oakland

Wednesday, November 16 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Wednesday, December 7 Maintenance Resource Panel 12:00 Noon Location TBD Friday, December 9 East Bay Resource Panel 12:00 Noon Massimo Restaurant 1604 Locust St., Walnut Creek Wednesday, December 14 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Wednesday, December 21 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Friday and Saturday June 22, 23, 2012 ECHO Annual Seminar Santa Clara Convention Center Santa Clara

Regularly Scheduled ECHO Resource Panel Meetings Resource Panel Maintenance North Bay East Bay Accountants Central Coast South Bay Wine Country Legal 38

August 2011 | ECHO Journal

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

Location ECHO Office, San Jose Contempo Marin Clubhouse, San Rafael Massimo Restaurant, Walnut Creek Francesco’s Restaurant, Oakland Pasatiempo Inn, Santa Cruz Il Fornaio, San Jose Eugene Burger Management Co., Rohnert Park Varies

San Francisco Luncheon Thursday, September 15 11:45 a.m. to 2:00 p.m.

Debora Warren Cinnabar Consulting

Luncheon Price: $75 Non-Members: $90 Advance reservations are required for this event.

Cell phone use is not permitted inside the St. Francis Yacht Club.

Yes, reserve _____ spaces for the ECHO San Francisco Luncheon.

Amount enclosed: $__________ (attach additional names) Name: HOA or Firm: Address: City:

State:

Zip:

Phone: Visa/Mastercard No.

Exp. Date:

Signature: Return with payment to: ECHO, 1602 The Alameda, Ste 101, San Jose, CA 95126 Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Telephone: 408-297-3246; Fax: 408-297-3517

ECHO Honor Roll

About

ECHO Honors Volunteers Beth Grimm 2011 Volunteer of the Year ECHO Resource Panels Accountant Panel Richard Schneider, CPA 707-576-7070 Central Coast Panel John Allanson 831-685-0101 East Bay Panel Beth Grimm, Esq., 925-746-7177 Mandi Newton, 415-225-9898 Legal Panel Mark Wleklinski, Esq. 925-280-1191 Maintenance Panel Brian Seifert, 831-708-2916 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 Toni Rodriguez, 408-848-8118 Kimberly Payne, 408-200-8730 Wine Country Panel Maria Birch, CCAM, 707-584-5123

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

40

August 2011 | ECHO Journal

SF Luncheon Speakers John Allanson Jeffrey Barnett, Esq. Tyler Berding, Esq. Ronald Block, PhD. Sandra Bonato, Esq. Wendy Buller 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. Beverly Gordon, CCAM Sandra Gottlieb, Esq. Beth Grimm, Esq. Brian Hebert, Esq. Roy Helsing Stephen Johnson, CFP Garth Leone Nico March Kerry Mazzoni Thomas Miller, Esq. Larry Pothast Larry Russell, Esq. Steve Saarman Jim Shepherd Nathaniel Sterling, Esq. Debra Warren, PCAM, CCAM Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.

Seminar Speakers June 18, 2011 ECHO Annual Seminar Julie Adamen John Allanson Jeffrey Barnett, Esq. Tyler Berding, Esq. Jacquie Berry Sandra Bonato, Esq.

Jeffrey Cereghino, Esq. Timothy Cline Paul P. Cordova, PE Alan Crandall Bradley Epstein, Esq. Lisa Esposito, CCAM John Garvic, Esq. Beverlee Gordon Sandra Gottlieb, Esq. Patrick Holman Linnea Juarez, PCAM, CCAM David Kuivanen, AIA Kerry Mazzoni Evan McKenzie, Esq. Steven Saarman Brian Smith Deon Stein, Esq. Wanden Treanor, Esq. Steven Weil, Esq.

Recent ECHO Journal Contributing Authors April 2011 Beth A. Grimm, Esq. Steven Saarman John R. Schneider Steven S. Weil, Esq. May 2011 Tyler P. Berding, Esq. James O. Devereaux, Esq. Sherry Harvey, PCAM Susan Oliver, CCAM Richard Tippett June 2011 Beth A. Grimm, Esq. Steven Saarman John R. Schneider Steven S. Weil, Esq. July 2011 Charlotte Allen Beth A. Grimm, Esq. Larry Mesplé Lise K. Ström, Esq.

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 1,450 homeowner associations, you can become an associate member and join 350 other firms serving this important membership.

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 Non-members/Homeowners Businesses & Professionals

$50 $75 $125

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 408-2973246 or visit the ECHO web site (www.echo-ca.org) to obtain an application form and for more information.

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Advertise your business to thousands of association directors in California in the ECHO Journal.

Don’t Waste Your Existing Assets Continued from page 35

difference in working life can be due to better workmanship, better material quality, a different weather exposure, a different phase of construction, even a change in design.

Replacing components that are not ready for replacement, just to be “fair,” is equivalent to destroying the value of that component. For example, if a deck that is worth $20,000 and has a working life of 25 years is torn down and replaced after only 15 years, 2/5 of the value of that deck, or $8,000 was thrown away.

Another example: Replacing a stucco wall that has a working life of fifty years after only 23 years, just because it has a few cracks, is equivalent to throwing away more than half of the value of the wall. That is a lot of money wasted.

Directors should also take into account the inconvenience and unpleasantness of turning their complexes into a construction site.

Construction is intrusive, noisy, disturbing and can create a lot of dust and debris.

Here is the best way to insure that any proposed major maintenance or reconstruction project truly is fair and equitable to all of the owners:

1. Do only the maintenance/construction work that is really necessary. This may require a partial site survey by a construction specialist.

2. Assure all of the owners whose units will not be worked on this time that, by following this optimal strategy, you are lowering the cost of ownership for everyone.

3. Remind those owners whose units will be worked on in future years that they will be treated equally, and that their work will ultimately have a longer useful life than the units being done now.

4. Continue to build reserves based on both the present cost of replacement and on the (future) staggered schedule for the work.

This will actually reduce the monthly assessment.

By following this strategy, a board can lower the overall cost of ownership for all, as well as minimizing the disruption that accompanies reconstruction.

Ace Property Management . . . . . . . .17 American Asphalt . . . . . . . . . . . . . .10 American Management Services . . . .8 Angius & Terry . . . . . . . . . . . . . . . . .3 A.S.A.P. Collection Services . . . . . . .22 Association Reserves . . . . . . . . . . .24 Berding | Weil . . . . . . . . . . . . . . . . .44 Collins Management . . . . . . . . . . . .17 Community Management Services . .14 Compass Management . . . . . . . . . .15 Cool Pool Service . . . . . . . . . . . . . .20 Cornerstone Community Mgmnt . . . .20 Ekim Painting . . . . . . . . . . . . . . . . .25 First Bank Association Bank Srvcs . . .8 First Bank Association Bank Srvcs . .23 Flores Painting . . . . . . . . . . . . . . . .34 Focus Business Bank . . . . . . . . . . .15 Gachina Landscaping . . . . . . . . . . . .9 Helsing Group, The . . . . . . . . . . . . .25 M & C Association Services . . . . . . .34 M. L. Nielsen Construction . . . . . . .28 Massingham and Associates . . . . . .24 Mutual of Omaha Bank . . . . . . . . . .16 Oliver Management Network . . . . . .25 Pelican Management Group . . . . . . .20 PML Management Corp. . . . . . . . . .16 Pollard Unlimited . . . . . . . . . . . . . .28 R. E. Broocker Co. . . . . . . . . . . . . .17 Rebello’s Towing Service . . . . . . . . .31 REMI Company . . . . . . . . . . . . . . . .21 Saarman Construction . . . . . . . . . .22 Scuba Pool Repair . . . . . . . . . . . . .14 Statcomm . . . . . . . . . . . . . . . . . . .28 Steve Tingley Painting . . . . . . . . . . . .2 Steve’s Painting Services . . . . . . . .21 Trex . . . . . . . . . . . . . . . . . . . . . . .23 Valley Landscape Management . . . .29 Varsity Painting . . . . . . . . . . . . . . . .31

Richard Tippett is a member of ECHO’s Board of Directors, past chairman of the Maintenance and Central Coast Resource panels and is the principal at ERTECH, Inc. a company specializing in condominium reconstruction.

ECHO Journal | August 2011

41

New election rules: $500 In today’s economic crisis, there may be some items that associations can cut to reduce costs. ECHO membership is not one. Let’s face it, educated board members are better fiduciaries, which helps them to avoid costly law suits and possibly personal liability.

ECHO is the premier resource in California for board member education. ECHO offers new articles each month with practical and easy to understand advice about current California requirements, and what may be on the horizon. ECHO staff is available by phone or E-mail to answer members’ questions about association problems or to recommend competent professional services when necessary.

And with discounted member rates at more than a dozen educational events throughout the year, ECHO is simply the best educational resource for California homeowners.

Avoid Litigation Each year, as a member benefit, ECHO sends every board member a copy of the updated Community Association Statute book. Every issue of the ECHO Journal and every seminar examine one or more aspects of compliance with association law, because one of the major causes of expensive litigation is ignorance of the law.

Mailing ballots: $200 Make Better Financial Choices Many associations struggle to understand reserve funding requirements and strategies, the benefits and disadvantages of using special assessments, proper collections practices, and even how to determine what components the association is required to maintain.

At a time when wise financial planning is essential, ECHO members have access to a wealth of articles about reserve funding, budgeting, insurance, collections, and much more.

Fight Costly Regulation Every year, Sacramento legislators introduce more legislation that confuses the job of California board members and increases the costs of compliance. ECHO is committed to fighting unnecessary regulation in California and promoting the interests and welfare of common interest developments.

Hire Competent Professionals ECHO offers a variety of articles and publications to help members evaluate their service providers, including questions to ask prospective management firms and contractors. All ECHO Journal articles are available to members at no cost, and publications are sold to members at a discount.

Avoiding a lawsuit: Priceless.

Spend a Little, Get a Lot The cost of ECHO membership is minimal. In a worsening economy, associations are looking to cut big expenses from their budgets. Yet, ECHO membership is as little as 25¢ per unit each month. For that small cost, here’s what every board member receives as part of being a member of ECHO: • A subscription to the ECHO Journal • An annual copy of the current Community Association Statute book • Unlimited access to ECHO’s library of past articles • Telephone consultations with ECHO staff about their problems • Reduced fees for ECHO events • Discounted prices on publications • And much more…

In These Tough Economic Times, ECHO Membership is a Necessity As the only California organization devoted exclusively to board member and homeowner education, ECHO is a one-of-a-kind resource that your association can’t afford to lose.

ECHO Central Coast Fall Seminar Central Coast Fall Seminar Saturday, September 24, 2011 8:00 a.m. to 1:00 p.m.

Hilton Santa Cruz/Scotts Valley 6001 La Madrona Drive, Santa Cruz Registration Fee: $45 Non-Members: $55 Members can register online by Sep 15 for only $40.

Don’t forget to save the date for the Central Coast Fall Seminar in your calendar.

Yes, reserve ___ spaces for the Central Coast Seminar.

Amount enclosed: $__________ (attach additional names) Name: _______________________________________________________ HOA or Firm: _________________________________________________ Address:_____________________________________________________ City: __________________________ State: _____ Zip: ____________ Phone: ______________________________________________________ Visa/Mastercard No._______________________ Exp. Date: ________ Signature: ___________________________________________________ Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Return with payment to: ECHO, 1602 The Alameda, STE 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517