House Select Committee on Homeowners Associations

News

robb baerPublic Hearing – February 2, 2010

Robb Baer, CMCA, AMS, PCAM
President – NC Chapter of CAI
828-650-6852
rbaer@ipm-corp.com

Chairperson Weiss, Chairperson McGee and members of the committee. My name is Robb Baer and since 1998 I have owned and operated a Professional Community Management Company in Asheville NC managing over 80 communities through out Western North Carolina. I am also the current president of the North Carolina Chapter of Community Associations Institute.

As you may be aware, Community Associations Institute (CAI) is a national organization dedicated to fostering vibrant, competent, harmonious community associations. For more than 30 years, CAI has been the leader in providing education and resources to the volunteer homeowners who govern community associations and the professionals who support them. Our members include community association volunteer leaders, professional managers, community management firms and other professionals and companies that provide products and services to associations.

Community association Boards and Managers must possess knowledge and skills relating to finance, strategic planning, maintenance, personnel management, insurance, human relations, laws and regulations, communications, covenants enforcement, and provide sound advice on the vast array of topics addressed by the members of the communities in which they serve.

Association management has become increasingly specialized and demanding as communities have become more complex and demanding. The responsibilities have taken on even greater importance as local governments have ceded more and more responsibility to community associations – from road maintenance and street lighting to recreational amenities and communications and utilities such as satellite, cable, water and sewer.

It was with these responsibilities in mind that CAI has developed education opportunities for volunteer boards and the only national certification program designed specifically for community association managers, who are hired to work with the volunteer boards to enhance, preserve and protect the communities.

CAI supports a regulatory system that incorporates adequate protections for homeowners, mandatory education and testing on fundamental management knowledge, standards of conduct, continuing education and appropriate insurance requirements such as Senate Bill 516 (House Bill 762) introduced in last years session. This bill, a collaboration between CAI, the North Carolina Real Estate Commission, and the Attorney General’s office, significantly enhances consumer protection during the ongoing management and operation of community associations.

CAI is dedicated to fostering responsive, competent community associations that promote harmony, community, and responsible leadership. To this end, Community Association Boards are obligated to maintain, repair and replace common property, facilities, and equipment as necessary. Community Associations Boards require assessments from members to fulfill their fiduciary responsibilities. CAI believes it is imperative for all community associations to adopt and use a financial planning and budget process which accurately reflects the projected annual operating costs, as well as long-term capital and reserves that result in a balanced budget. Community Associations should fund, in whole or in part, reserve accounts based upon replacement cost estimates and annual contributions necessary to assure that all or a substantial portion of those funds are available when needed. CAI also supports full and open disclosure to owners and the opportunity for participation by owners in the development of these budgets.

Community Associations need effective methods to ensure efficient, economic and successful community association collection procedures. Like a local government’s dependence on tax revenues, the financial viability of community associations depends on their ability to collect assessments to meet their continuing expenses. Community associations must be able to collect promptly and efficiently their budgetary obligations from delinquent owners avoiding expensive litigation and minimizing the burden on the remaining owners. In times of difficulties, illness, loss of employment or other economic problems, Community Associations should advocate flexibility and compassion in the application of collection policies and procedures.

The enactment of governmental limitations on effective collection of assessments, fees and other charges of community associations jeopardizes the ability of the Board to adopt reasonable and necessary collection procedures to adequately fund the association to pursue unresponsive, delinquent owners or to effectively have a strong lien against the owner’s units. Any state legislation should:

  • Provide for full and fair protection of all the homeowners.
  • Reflect an equitable balance between all the interests and need of the homeowners.
  • Provide adequate standards to promote the operational viability of the community association.
  • Promote reasonable flexibility in application.
  • and Not arbitrarily preclude or inhibit any form of community association housing.

CAI is dedicated to fostering responsive, competent community associations that promote harmony, community, and responsible leadership. Community association members and associations have rights and responsibilities that should be recognized in order to promote positive and thriving communities. The rights and responsibilities of each party are set forth below in the core areas of Governance, Building Community, and Business Administration.

BUILDING COMMUNITY

Community Association Members

Right To:

  • Live in a responsive, competent, and harmonious community association governed by a reasonable, empathetic and impartial board of directors that treats each member with respect.

Responsible For:

  • Complying with the governing documents of the community.
  • Responding to association-initiated surveys and providing personal insight to help the board establish and implement the association’s vision and priorities.
  • Volunteering to serve on association committees and on the board with a sense of goodwill and without any conflicts of interest.
  • Endeavoring to continuously learn about their community association and to provide constructive input to promote the positive evolution of the community.
  • Being informed about issues of concern.
  • Reporting all maintenance problems.
  • Notifying the board or manager regarding possible employee misbehavior as well as good work, and respecting the relationships between the board and its employees and contractors, and the manager and its employees and contractors.
  • Being aware of the contents of the governing documents, and understanding and adhering to their provisions.
  • Damage to the community’s common areas caused or proximately caused by the member, the actions of family, guests and tenants.
  • Being a good neighbor and honoring others’ rights to peaceful enjoyment of their homes and common area.
  • Maintenance of unit and exclusive use common area, as defined in the governing documents.
Association

Right To:

  • Receive goodwill and participation from members to ensure that members live in a responsive, competent, and harmonious community association.
  • Have board members be treated with respect as neighbors and as volunteers who have committed personal time for the betterment of the community.
  • Seek and receive assistance through community volunteers.

Responsible For:

  • Including community building in their short-and long-term goals and planning.
  • Fostering a sense of community spirit and encouraging participation in the community.
  • Encouraging the establishment of committees whose purpose is to build a sense of community.
  • Encouraging all members to have a stake in upholding the governing documents of the community.
  • Acting as a facilitator and regarding organizational power as a temporary stewardship.
  • Creating ongoing systems to welcome and orient new residents, including both owners and renters.
  • Encouraging community activities, programs, and events geared toward openness, fun, and friendship.
  • Operating in a professional manner and being responsive to the community’s needs.
  • Ensuring that community association rules and regulations represent a balance between the needs and obligations of the community and those of the individual.
  • Dedicating themselves to continuous learning about and improvement of their association’s operations.
  • Providing an open forum for member input which may be during board meetings or at such other times as best facilitates communications between members and the association.

GOVERNANCE

Community Association Member

Right To:

  • Be treated fairly and honestly by board members.
  • Obtain all association fiscal information (excluding information concerning a particular owner or individual employee).
  • Quiet enjoyment of residence and common facilities for their intended purpose in accordance with the association’s rules and regulations.
  • Participate in the process of governance through attending meetings of members, participating in the election of board members, serving on a committee, or running for a seat on the board.
  • Have access to association records as specified in governing documents and state law.
  • Attend board meetings in whatever manner such meetings are being held (in person or via electronic or telephonic means).
  • Learn about board actions, and have access to all approved minutes of the association (other than executive board minutes).
  • Live in a home free of conditions within the control of the association that
  • materially interfere with peace, comfort or health.
  • Expect all board members to be fully informed and knowledgeable in the association’s business matters and the contents of the governing documents, to expect them to seek professional advice when appropriate, and to carry out their fiduciary duties with reasonably prudent business judgment.
  • Have legible copies of all governing documents of their community.

Responsible For:

  • Participating in member activities, i.e. attending member meetings, serving on committees and participating in other activities which assist the board in governance or enhance the community.
  • Participating directly in the governance by casting votes or sending proxies for every election or ballot.
  • Respecting the roles of all participants in community governance, and recognizing and honoring those differences of opinion.
  • Notifying board of directors when covenant violations are observed or discrepancies in governing documents are noted.
Association

Right To:

  • Exercise the authority given to the association under the governing documents and the state laws in which the association is located.
  • Make and enforce necessary rules and regulations as authorized in the governing documents.
  • Set assessments, according to the governing documents and state laws, to provide for the maintenance and improvement of the common areas.
  • Expect all owners to be aware of, and abide by, the provisions of the governing documents, and to expect all owners to abide by the governing documents and to carry out their responsibilities.
  • Carry out its duties through the duly elected or appointed board, free of unwarranted interference or threats.

Responsible For:

  • Carrying out the duties of the association through a duly elected or appointed board.
  • Holding effective, efficient board meetings open for owners’ attendance (excluding executive sessions).
  • Providing members with access to corporate records (excluding those which infringe upon the privacy of other owners).
  • Suggesting and presenting amendments to the governing documents for the owners’ approval.
  • Enacting reasonable, enforceable rules and notifying owners in a timely fashion of scheduled consideration or new or amended rules before adoption, diligently enforcing such rules in a non-arbitrary manner, and holding fair and impartial hearings for alleged violations.
  • Conducting open, fair and honest elections.
  • Diligently ensuring each board member fulfills his or her fiduciary duties.
  • Obtaining insurance coverage as is required by the governing documents or which the board deems reasonable, including director and officer liability insurance.
  • Not unlawfully interfering with an owner’s access or peaceful enjoyment of the residence.

BUSINESS ADMINISTRATION

Community Association Members

Right To:

  • Be apprised of and have available the business processes affecting homeowners, such as recreation class sign-up, hall rental, design permit applications, complaints, suggestions, etc. in a user friendly process and format.
  • Have copies of proceedings of the board made available upon request, and receiving communications via media such as newsletters, closed circuit television and Internet.
  • Have an appeals process for decisions made that affect the members, either individually or collectively.
  • Have business decisions of the community association made which uphold a member’s resale value of their ownership and do not lessen the other benefits of owning a home in the community association.

Responsible For:

  • Being aware of the overall direction and condition of the association from a business standpoint, and provide input and personal involvement when and where appropriate.
  • Understanding the tremendous responsibilities of the community association board and that business decisions are based on a variety of viewpoints and legal limitations and requirements.
  • Making timely payments of assessments of all types, fines, and other
  • charges levied by association.
  • Keeping the association aware of their current address.
Association

Right To:

  • Be treated with respect when acting in good faith to make decisions in the best interests of the community association members and the association.
  • Conduct business of the association as prescribed by state and local laws, and association documents.
  • Exercise appropriate business judgment in matters not addressed or directed by state or local laws, or association documents.
  • Diligently collect all monies due from members.

Responsible For:

  • Acting and making decisions that are ethical and fair, and are for the benefit of the association as a whole, with latitude to make exceptions where warranted on an individual basis.
  • Providing for the maintenance of the association’s assets, including common areas (grounds and facilities) and finances, by planning and implementing necessary insurance coverage, reserve studies and the resultant necessary reserves, and financial and management audits and reviews.
  • Ensuring proceedings are efficient and effective in conducting the business of the association, such that decisions are sound and decisive, based on information/data and professional advice where expertise is not available on the board or staff.
  • Making decisions that minimize the exposure of the association to liability and exercising reasonable business judgment in decision-making.

Respectfully Submitted

Robb Baer, PCAM
President – NC Chapter of CAI

Across the country, associations are experiencing cash flow problems because owners are falling behind in their assessments. This cash flow problem has lead to increased enforcement activity and that has led to an increased  number of properties entering the foreclosure process. Thus and, increasing the uproar over whether associations should be able to foreclosure. The cries have caught the attention of the House Select Committee on Homeowner Associations as well as the press.

The House Select Committees official adopted report states “… the Planned Community Act authorizes the use of foreclosure proceedings to satisfy homeowner association liens; the foreclosure statute was never intended for this purpose … Several individuals suggested that the statute should be amended to prohibit or limit the use of foreclosure in all or some cases.”

This statement has left many boards and professionals asking how do community associations endure if the definitive method, after all other tactics of collecting funds have been exhausted, is abolished? Areaonable correlation can be drawn between a municipalitie’s municipality’s right to foreclose to collect a property tax lein and an HOA ‘s right to do the same . They both are obligated to deliver vital services, and neither can meet that obligation without funding.

The overwhelming majority answer is that the associations’ only decisive method of enforcement should not be removed without replacing it with a reasonable alternative to ensure the associations survival. The statutes must provide solutions which guarantee that no one unfairly shifts their responsibilities to others. The Supreme Court has stated “that property which a man has honestly acquired he retains full control of, subject to these limitations: First, that he shall not use it to his neighbor’s injury …” surely this concept applies when a homeowner chooses to shift his or her responsibilities their neighbors by refusing to honor a financial obligation that they signed on for when purchasing their home.

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