How The Budget Is Prepared

Each year you receive a draft of the proposed budget for review and comment. A lot of work goes into preparing the budget. It’s a complex activity that has to start early so the budget can be finalized and approved prior to the beginning of the new fiscal year. Here’s how we do it:

• The board appoints a budget committee to help with some or all of the following tasks.

• The board and manager work together to gather all financial information we’ll need to project expenses for the coming year. This could be a reserve analysis, bids for contracts, projections for utility or service increases, comparisons of past years’ budget trends and many other details.

• The board also examines all sources of income—assessments, interest on investments, proceeds from concession or club operation and other types of miscellaneous income.

• The board creates a working draft by adjusting the expenses and income until they balance. This may be accomplished by foregoing certain expenses to avoid raising assessments. Or it may be necessary to raise assessments to cover increased expenses such as utilities that the board cannot control.

•  When the board has developed the best possible draft budget, the association sends it to every member for review and comment. One of the reasons we start the process early is to allow you plenty of time to study the budget, ask questions and offer comments.

• Based on member comments, the board revises the draft budget as needed.

Are You Adequately Insured?

Condominium owners sometimes assume that the association’s master insurance policy is all the coverage they need. The master policy actually only covers the building, not your personal belongings, or any upgrades you’ve made to your unit. For example upgraded flooring, new cabinets or appliances, or renovations are generally not covered by the master policy. Neither does it cover parts of the building that are used only by you—like the balcony or the pipes that feed into your unit from the main pipes.

All residents need their own insurance for the insides of their units, their belongings, and any damage that might be caused by something within your unit (such as a leaking toilet). In a few rare cases where coverage is provided under the master policy, you will still be responsible for the deductible. To have your personal belongings and any deductibles covered, you need to invest in a condominium owner’s insurance policy, available from most carriers. These policies generally cost only a few dollars each month and are well worth it! Be sure to ask about water or sewer backup coverage. Sewer backups are not unheard of, and a standard policy won’t cover the damage to your unit without a sewer backup rider.

If you have any questions regarding what type of coverage you need, please contact your insurance agent. The association’s agent is also very familiar with the type of coverage condominium owners need and can help you avoid double coverage or gaps in coverage between you personal insurance and the association’s master policy.

Here are some tips from the NAIC (National Association of Insurance Commissioners ) to help you prepare for disasters:


Take an inventory of your valuables and belongings. This should include taking photographs or a video of each room. This documentation will provide your insurance company with proof of your belongings and help to process claims more quickly in the event of disaster. 

To enable filing claims more quickly, keep sales receipts and canceled checks. Also note the model and serial numbers of the items in your home inventory. As you acquire more valuables such as jewelry or antiques, consider purchasing an additional floater or rider to your policy to cover these special items. These types of items typically are not covered by a basic homeowner’s or renter's insurance policy.

 Remember to include in your home inventory those items you rarely use such as holiday decorations, sports equipment and tools.

 Store copies of all your insurance policies in a safe location away from your home that is easily accessible in case of disaster. You may want to store your policies and inventory in a waterproof, fireproof box or in a safe location such as a bank safe deposit box.

 Consider leaving a copy of your inventory with relatives, friends or your insurance provider and store digital pictures in your e-mail or on a website for easy retrieval.

 Know what is and is not covered by your insurance policy. You might need additional protection depending on where you live. Make sure your policies are up to date. Contact your insurance provider annually to review and update your insurance policy.

 Keep a readily available list of 24-hour contact information for each of your insurance providers.

 Find out if your possessions are insured for the actual cash value or the replacement cost. Actual cash value is the amount it would take to repair or replace your home and possessions after depreciation, while replacement cost is the amount it would take to repair or replace your home or possessions without deducting for depreciation. Speak with your insurance provider to determine whether purchasing replacement coverage is worth the cost.

 Speak with your insurance provider to find out if your policy covers additional living expenses for a temporary residence if you are unable to live in your home due to damage from a disaster.

 Appraise your home periodically to make sure your insurance policy reflects home improvements or renovations. Contact your insurance provider to update your policy.

For more information, visit www.InsureUonline.org

Avoiding the Rental Pitfalls in Your COndo Association

Approximately four in 10 homes in suburban America are occupied by renters. If your unit is one of those homes—or about to become one—here are a few tips that will help you, your renters, and the association.

If you are an owner who leases your unit, your Association would like to make the leasing experience successful and positive for everyone by informing you of your responsibilities. This will help preserve your property value specifically and maintain the association’s property value in general.

Your tenants may not be familiar with common-interest community living. Please take a few minutes to explain to them that living in a community association is very different from living in a rental apartment community. Specifically, your tenants, like all residents, are subject to the rules and regulations of the association, and it’s up to you to educate them and see that they comply. The association will assist you in this area, but the responsibility lies with you. We recommend you provide your tenants with written copies of all policies and rules and advise them on the proper use of the association’s facilities. You can obtain copies of these and other useful documents from the manager.

Follow these simple steps and you, the tenants and the association will all have a positive community association living experience:

• Talk to the Manager

The association manager can give you important information about what the association requires of owners and renters and tips about the rental process that will be very helpful, especially if you’re leasing for the first time. The manager has sample leases you can use and copies of the association rules to give to your tenants.

• Check the Documents

Make sure you comply with the association’s governing documents—the bylaws and CC&Rs. They may contain special requirements for nonresident owners who lease their units.

• Educate Prospective Tenants

Be sure to inform prospective renters about the special considerations of living in a community association before they sign a lease. The association will be happy to give you a copy of the rules to pass along. If the tenant does not correct a violation, the association will contact you and expect you to remedy the violation using the recourse available to you through your lease agreement. If you are unable to correct the violation, the association may pursue appropriate legal action against the tenant, and possibly against you.

• Use a Lease Addendum

No doubt you’ll have your renters sign a lease. Please attach an addendum to your lease that covers the specifics of the community association and require renters to adhere to association rules. This is very important because it gives you and the association a means of enforcement. A good lease or lease addendum should support the community by-

• Requiring the tenant to obey the bylaws, rules, and regulations of the association. (Attach copies!)
• Requiring the tenant to pay fines for association rule violations.
• Requiring the tenant to vacate if community association regulations are repeatedly violated.

• Keep the Association Informed

The association asks that you provide the manager with the names and contact information of your tenants. The association will add your tenants to its mailing list, and they will receive the newsletter, invitations to participate on committees, notices of social activities and general association-related information. This information will also be used in case of emergency. Once the lease is signed, give a copy to the association manager or a board member. The more information you provide about your renters, the more successful they will be in our community. Please provide the following information to the association:

• Renter’s name (and children or roommates) and phone number.
• Renter’s email address, employer, or other pertinent details.
  
• Renter’s vehicle description and license plate numbers. This will allow us to provide parking information.
• The number and type of pets, if any.
• Your forwarding address and phone numbers.

• Encourage Tenants to Participate in the Association

Be an advocate for your tenants with the association. Make sure they have access to the recreational and parking areas and that they have the keys and passes they need. Please give them the name and phone number of our association manager.

Even though tenants have no vote on association matters, they are an important part of our community. Make them feel welcome, provide information that will familiarize them with the association, and encourage them to participate in community activities whenever possible. Today’s renters may be tomorrow’s owners—or even board members. The more we all do to promote a sense of belonging for renters, the more positive and successful the leasing experience will be for everyone.

Are Our Rules Reasonable?

Your association has a number of rules and regulations that you ask co-owners to observe so everyone can maintain their property values and quality of life. You always try to be reasonable with your rules by following the guidelines of your By-Laws. If you believe a rule fails the “reasonable” test, then you must take a step back and ask how you can modify it.

Any time you begin to discuss rules and regulations within a community you will inevitably find that your have two camps that your association can be divided into; the Maximums and the Minimums.

The Maximums are those who believe that the by-laws of the association should be followed right down to ever word, comma and period. There is to be no variance. In areas that are too vague they believe that the board should adopt rules that address everything from the volume of a child's laughter to the color of the petunias that are planted in front of your unit. They are the first to call about a dog in the complex and the most vocal about parking violations at an annual meeting.

The Minimums are those who answer, "By-laws? What are those?" when confronted about a possible violation. They bought their unit in blissful ignorance to the fact they they were moving into a planned community that was well regulated by a set of governing documents. They are the first to be accused in any possible wrong doing within the association.

So how can the Board meet the needs and concerns of both of these distinct co-owners? The short and simple answer would be communication. Although it might seem redundant to long time residents a periodic update to the Resident Handbook should be done every few years and re-distributed to all residents, as well as any tenants leasing units in the association. If your community doesn't have a recently published Resident Handbook to supplement the by-laws your board should consider publishing one.

Newsletters are also a great way to keep residents up to date on revised rules and regulations. At best your entire board should be up to speed on the most common complaints and violations. With these common instances in hand the board can develop a brief update to include int the next newsletter.

Adopting new rules and regulations is a tricky area in which the board should consult closely with their Association Manager as well as their attorney. Confirm within your governing documents the board's ability to adopt rules and regulations. After confirmation you may elect to develop rules an any number of topics, as long as they are reasonable.

Some examples would be :

• Pet size or breed restrictions
• Parking areas / guest parking restriction
  
• Use of a clubhouse or pool
• Landscaping guidelines
• Holiday Decorations

In developing rules and regulations for your association the board should consider the following criteria-

• We make every effort to enforce rules uniformly, taking into account the consequences.
• We think developing rules for the sake of having rules is unnecessary. The association develops rules only if they’re really necessary.
• All our rules are based on proper authority—either our governing documents or state or local law.
• We don’t make rules to limit your activities. We’re trying to ensure that each resident can enjoy the community free from the disruptive or harmful behavior of others.
• We really don’t want to punish anyone. We try to make rules that encourage understanding and compliance.

Following these guidelines will ensure that you are meeting the needs of both the Maximms and Minimums. Your duty as a board member is simply to maintain the association in a way that benefits all residents. Doing so will ensure that the property maintains its value and that a majority of co-owners are happy.

How Budgets Are Prepared

Each year you receive a draft of the proposed budget for review and comment. A lot of work goes into preparing the budget. It’s a complex activity that has to start early so the budget can be finalized and approved prior to the beginning of the new fiscal year. Here’s how we do it:

• The board may appoint a budget committee or work directly with their property manager to help with some or all of the following tasks.
• The board and manager work together to gather all financial information we’ll need to project expenses for the coming year. This could be a reserve analysis, bids for contracts, projections for utility or service increases, comparisons of past years’ budget trends and many other details.
• The board also examines all sources of income—assessments, interest on investments, proceeds from concession or club operation and other types of miscellaneous income.
• The board creates a working draft by adjusting the expenses and income until they balance. This may be accomplished by foregoing certain expenses to avoid raising assessments. Or it may be necessary to raise assessments to cover increased expenses such as utilities that the board cannot control.
• When the board has developed the best possible draft budget they vote to adopt the budget for the coming year.
  
• Based on member comments, the board revises the draft budget as needed.

So that, in a nut-shell is the process. It is imperative for the board to keep up to date on the performance of the budget and make necessary adjustments along the way.

Clarifying The Role of a Property Manager

Your association may employ a highly-qualified professional community manager, and we think residents should know what the manager has—and has not—been hired to do. The manager has two primary responsibilities: to carry out policies set by the board and to manage the association's daily operations.

Some residents expect the manager to perform certain tasks that just aren’t part of the job. When the manager doesn’t meet those expectations, residents naturally are unhappy. Since we want you to be happy, we’re offering a few clarifications to help you understand what the manager does.

• The manager is trained to deal with conflict, but he or she will not get involved in quarrels you might be having with your neighbor. However, if association rules are being violated, the manager is the right person to call.

• While the manager works closely with the board, he or she is an advisor—not a member of the board. Also, the manager is not your advocate with or conduit to the board. If you have a concern, send a letter or e-mail directly to the board.

• Although the manager works for the board, he or she is available to residents. That doesn’t mean the manager will drop everything to take your call. If you need to see the manager, call and arrange a meeting. If a matter is so urgent that you need an immediate response, call the association emergency number or 911.

• The manager is always happy to answer questions, but he or she is not the information officer. For routine inquiries, like the date of the next meeting, please read the newsletter or check the association website, or call the management office and speak to an assistant.

• The manager is responsible for monitoring contractors’ performance, but not supervising them. Contractors are responsible for supervising their own personnel. If you have a problem with a contractor, notify the manager, who will forward your concerns to the board. The board will decide how to proceed under the terms of the contract.

• The manager inspects the community regularly, but even an experienced manager won’t catch everything. Your help is essential. If you know about a potential maintenance issue, report it to the manager.

• The manager does not set policy. If you disagree with a policy or rule, you’ll get better results sending a letter or e-mail to the board than arguing with the manager.

• The manager has a broad range of expertise, but he or she is not a consultant to the residents. Neither is he or she an engineer, architect, attorney or accountant. The manager may offer opinions, but don’t expect technical advice in areas where he or she is not qualified.

• Although the manager is a great resource to the association, he or she is not available 24 hours a day—except for emergencies. Getting locked out of your home may be an emergency to you, but it isn’t an association emergency. An association emergency is defined as a threat to life or property.