If you manage a community association, whether residential or commercial, no doubt you have witnessed the effects of the economy.  As you fulfill your management duties perhaps you have discovered that portions of your duties have changed.  For instance, years ago you may have focused only 3% of your work week on delinquent maintenance fees and now you find yourself spending an increasing amount of time weekly on collection efforts and delinquency problems.  You are not alone.  However, there are options available to you and resources within your reach.

As an experienced Community Association Manager, I understand the struggles that can exist.  Services must continue to be provided at a level of quality and standards according to Board expectations while also monitoring operations within approved budgets.  Inspections, routine maintenance, preventive maintenance, repairs and projects all must be completed within the approved budget and cash flows maintained. 

Part of effective management is preparing for disasters and having a plan of action in place.  Proper planning can expedite preparations, response and recovery.  There are numerous disasters that can happen to an Association.  Some disasters are man-made and some are natural.  A community can fall victim to a hurricane, tornado or to the hands of a failed budget and decreasing cash flow.

Now is the time to evaluate the operations of your Association and examine the processes in place. 

Alliance, Community Association Solutions can assist you in the review of your current collections process at no charge.  Alliance, C.A.S. is a licensed collections firm specializing in successful collections for Associations, both residential and commercial.  Associations NEVER have to pay Alliance, C.A.S. for anything.  If we do not collect, we do not get paid.  It is truly that simple.  Regardless of the circumstance, the Association NEVER pays Alliance, C.A.S. 

A FREE service may sound too good to be true. However it is true.  If you would like more information about our services or a complimentary presentation, please contact us.  Our sole focus is providing successful collections and solutions to community associations.  Guest post by Wendy Murray, FEMV, CMCA, CAM; 954-668-3306; wmurray@associaonline.com

Q: Why should property management companies, community associations and landlords be concerned about protection of bank balances?

A: Deposits of real estate owners and managers follow a predictable pattern attractive to thieves – rent deposits or maintenance fees are deposited at the beginning of the month, thus creating large balances.

Q: How can property managements and associations protect their balances?

A: In addition to the security measures that most banks offer with business checking, Positive Pay is a fraud detection tool that represents an extra layer of security.

Q: What is Positive Pay?

A: A Positive Pay user transmits account number, check number and dollar of each check to his or her bank, either through an online interface or transmittal of a file. Checks presented at the bank that do not match are not paid.

Q: What does Positive Pay cost?

A: Positive Pay usually has a cost associated. The fee is a tradeoff in return for extra protection. Check with your banker.

Thanks to JJ Majeski and Tom Iversen of Regions Bank for their help and contribution to this post. You can reach JJ at 407-294-3336.

Experia, one of the big three credit reporting agencies, is now including rent payment data in credit reports. As Experian now owns RentBureau’s multi-family division, landlords and property managers can now help good tenants by reporting prompt payments.

According to Brannan Johnson, VP and Managing Director of Experian RentBureau, over one third of “consumers in the highest risk VantageScore® score band will improve to at least the next score band with the addition of positive rental data from RentBureau. According to Multi-Family Housing Council, about 96 million people, or about one third of the US population, live in rentals.

It sounds like a lot of people could benefit from this. RentBureau currently collects rental data representative of 8 million tenants. Millions of tenants can help their credit. Property Managers and landlords are equipped with a new tool to reward prompt rent payments.

The upside is clear. Is there a downside?

Condominium associations, gated communities and high-end apartment buildings can improve security and lower operating costs by availing themselves of new access control technology. Guests and residents can be verified at gates, lobbies, garages and other points of access for pennies a day.

How can access control technology save money? A kiosk replaces a live security guard. From an easy-to-use kiosk at point of entry, video and audio is transmitted to a central monitoring station. The guest is greeted by a security professional from the monitoring station. The professional verifies permission based on information supplied by the resident and remotely opens the door or gate. The solution represents significant savings compared to a live security guard.

It’s also safer and more professional than those boxes at points of entry that simply transmit a phone call to a resident. Who hasn’t ignored those systems? It’s not just honest people like myself that drive through a gate that hasn’t yet closed or ask strangers to hold the door open. Criminals aren’t shy about breaking rules either.    

Visitor logs and images are recorded in a secure database and are available for security audit if needed for law enforcement purposes. Lobbies and garages can be monitored 24/7 with video surveillance and two-way radio. Communities can protect against expensive theft and  increased insurance premiums that are a result of claims.

Savings can amount to hundreds of thousands of dollars and more. 24/7 guards can costs upwards of $150,000 per point of entry. Security professionals from a remote station combined with state-of-the-art technology can save half the budget. Some communities prefer to combine live guards with a high-tech access control system. The system can control points of access at night while a live guard patrols the property.

Similar technology for monitoring pools can also be a life saver.

Thanks to Bill Seng of Envera Systems for his patient help and contribution to this post. You can reach Bill at 813-504-6881 or bseng@enverasystems.com. Developers such as Lennar, GL Homes, Starwood Land Ventures, Taylor Morrison, Pulte Group and Neal Communities rely on Envera for cost effective solutions to safety and security.

During the board meeting, the property manager holds up a stack of bills and asks the board which vendors should be paid and which will have to wait. It’s an all too common event that is played out during condo and HOA meetings throughout the United States. At each meeting the decisions get harder and harder to make.  Eventually, the choice is often made to go back to the well and drop another special assessment into the laps of the condominium owners who pay on time.

It’s still possible that community associations can reduce expenses but that strategy is limited because there is not much meat left on that bone. We are three years into this crisis.  Reserves have been depleted and all but essential services have been cut back. Delinquencies and defaults are the villains, but it is the service providers and responsible owners who are being punished. What most associations and their boards of directors do not realize is that the problems of cash shortfalls and bad debt be solved by establishing structured and intelligent collections policies and procedures and enforcing them. It is the most effective way to bring in errant dollars.

The first and perhaps most important step in this process is realizing that condominium associations and HOA is just like any business and that cash losses and delinquent accounts cannot be tolerated. The second step is determining which debts can be collected and which debts are stone cold dead. And finally, using all available resources to recover what can be collected and making a policy that establishes consequences to prevent future delinquencies.

Many boards are surprised to learn that most of what is owed and considered “bad debt” is actually collectible. When an owner has their home foreclosed upon, the debt they owe the association is by no means erased. When a bank forecloses on a unit that is in a non-equity position (sometimes called being upside down or underwater), somebody needs to fight tooth and nail on behalf of the homeowner association to collect it.

If your condominium or HOA is like any other business, when faced with defaulting or slow paying accounts, you would bring in professionals to collect for you.  To send an account directly to an attorney is premature and perhaps not the most cost effective method of collection. There is an art and science to professional collections work.

There is a myth among motivational speakers that the Chinese word “weiji” means both opportunity and crisis. While this is not quite true regarding the Chinese language, it is certainly true regarding good old fashioned American business innovation.  Where there is a demand you can be sure that American business will find a way to satisfy it. A cottage industry has been born out of this housing and foreclosure crisis that brings funding and other innovative financial solutions to community associations. With almost 20% of Americans living in common interest residential associations, one would almost expect that new businesses would evolve out of sheer necessity, and such has been the case. Community associations need to seek out collection services and specialty finance lenders to help them through this crisis. Open up any community association trade publication, find an industry specific collection company and let business take care of business.

Thanks to Kenneth M. Arnold for this valuable information. He is Co-Founder and Chief Executive Officer of Association Financial Services, a Miami, Florida-based company specializing in debt collections, specialty lending and other financial solutions for condominium and homeowner associations. He is also a licensed Florida Community Association Manager and Licensed Florida Mortgage Broker. Feel free to contact Mitch Drimmer with any questions 1-866-736-3069, #804 or mdrimmer@associationfs.com

fire sprinkler accident

Expect the unexpected

At a NARPM insurance seminar that I attended last week, Christopher Yarn of Lykes Insurance stressed the importance of practicing good risk transfer. An insurance claim against an upscale condominium association brought to light some issues that property managers should consider.

The community association hired a drywall contractor to do work on a high-rise. The community association required that the drywall contractor name the association as additional insured.  The drywall contractor had $1 million general liability insurance. The drywall contractor, in turn, hired a painter to do some of the work. The painter had $500,000 general liability.

Sounds like good risk transfer practice so far, right?

The painter’s ladder struck a sprinkler head, causing flooding of the unit where he was working and two units below. The water destroyed very expensive paintings on the walls of one of the units plus other significant problems. Property damage totaled over $2 million.

Though the painter had general liability coverage, the drywall contractor had neglected to require that the painter name him as additional insured. If the drywall contractor had been named on the painter’s policy, the painter’s carrier would have paid the first $500,000 before affecting the drywall contractor’s insurer. But since that was not the case, the painter’s and drywall contractor’s carriers shared 50/50 in payments until the painter’s 500,000 limit was exhausted. The drywall company’s insurance paid the next $500,000. Now both contractors’ limits were exhausted.

The association was left with about $800,000 of claims.

Morals of the story:

  • Although the fact that the drywall contractor had neglected to get named as additional insured had no impact on the outcome - both contractors’ limits were exhausted nevertheless – property managers should take note. Even if your contractor is fully insured, if you don’t practice good risk transfer, your carrier will pay bills that it didn’t have to pay, thus increasing your insurance premiums.
  • Because the community association had adequate coverage and had had the drywall contractor name it as additional insured and sign a proper vendor agreement and because the association agreement had verified the vendor’s license, its insurance carrier settled the claim.
  • The community association had practiced fairly good risk transfer. What could the association have done better? Had the association required a $1 million umbrella policy from the drywall contractor, the association would have been better protected.

Thanks to Christopher Yarn for his help with this post and for his expertise. Mr. Yarn can be reached at 407-319-2937 or by email at cyarn@lykesinsurance.com.

gray security cameraA commercial broker friend was on her way to a closing last week. It was for sale of a vacant multi-unit property. My friend’s client, the seller, was prepared to come out of pocket in order to pay off the bank – something a lot of sellers have been forced to do in this economy.

But it wasn’t to be. On the way to the title agent, buyer and seller met to do a final walk-thru. The entire property had been ransacked for all copper. Wiring, air conditioning, water heaters and pipes were all gone. So was all hope of the closing. A theft of about $500 copper value cost hundreds of thousands in damage.

The copper theft epidemic is causing massive losses for owners of vacant properties, utility companies, schools, construction sites, office buildings, shopping malls, insurance companies and others. Typically the thieves make profit of a few hundred dollars and cause hundreds of thousands in damage. Catching the thieves after the fact may serve some small measure of justice but at that point, the damage is done. To add insult to injury, copper thefts are typically classified as misdemeanor so prison time is usually light.

Video and Sensor Detection Alarms as well as warning signs are probably the best prevention. In the case of vacant property, a wireless system can function if there are no active phone lines. Most important is that police are notified very fast – the arrest needs to take place before the copper is ripped out. A CCTV feed into a DVR is great for some things but is of little to no value in the war against copper theft.

While browsing one of one of my favorite blogs covering community association management, a community association volunteer asks Richard White from TC Palm if it is really necessary to hire only licensed and insured contractors. The volunteer is worried that hiring an unlicensed contractor might increase the condo board’s insurance premium.

It’s great that the volunteer took the time to make the question but his concern is misplaced. The risk is not that his association’s insurance premium would rise. It’s that hiring an unlicensed, uninsured contractor would leave the association with no coverage in case of injury or property damage.

Your association’s General Liability carrier isn’t going to cover you if you hire just any Joe. The unfortunate fact is that too many self-managed community associations don’t realize the liability that they are assuming when they hire some unlicensed, uninsured character.

As Richard White points out, there is only one way to insure that a contractor is insured.  You need to request and receive a Certificate of Insurance (COI) that names your association as additional insured. The contractor must instruct his insurance agent to email or fax the certificate to you. If the document does not name your association, it is not valid.

Speak to your insurance agent about what you should require from different types of contractors. And of course, consult with your attorney about contracts with vendors.

According to a recent survey by National Association of Realtors, some lower cost and even higher cost remodeling projects can result in extremely high return on investment ROI. Among the more expensive projects, siding and window replacement rates very high. Adding an attic bedroom is also estimated to attain high ROI.

  • Conversion of an attic into a bedroom costs an average of $50,000. On average, the extra living space increases property value 83% more than the $50,000.
  • Replacement of entry door with mid-range product is estimated to yield an ROI of 128%.
  • Vinyl window replacement costs about $14,000 on average and fetches about 76%.
  • As professional investors and real estate brokers know, kitchen and bath upgrade is one of the wisest investments a property owner can make. Upgrading to mid-range brought estimated 72% return on investment. Upgrading to upscale brings 61% average.
  • Adding a breakfast bar changes the character of a kitchen and typically is not expensive.
  • A professional can replace kitchen cabinet doors and fronts. If done properly, appearance look almost the same as a new kitchen.
  • Fiber cement siding cost an average $13,000. The report estimates an excellent 83% return by way of increased property value.
  • One of the smartest moves is to upgrade is to upgrade kitchen counters with twelve- inch granite tiles. They look upscale and cost can run as little as 10% of what it would cost to replace with granite slab.
  • In the bathroom, updating light and plumbing fixtures makes a big difference for very little money.
  • We also should note that specialty contractors can intall bathtub liners or refinish bathtub or shower without expensive re-plumbing work.
  • Hiring a waterproofing company to waterproof basements can add great value. Even if you dont make it into a finished basement, painting the floor and keeping out the moisture makes a basement into a selling feature.

Make sure your contractor is licensed & insured. Damage or injury caused by an unlicensed contractor can result in denial of coverage. If an uninsured contractors employee gets hurt on the job, you can be liable. If you didnt pull a permit when required, you might be forced to undo the work. If an unlicensed contractor fails to fulfill terms of contract, you may not be able to win a lawsuit the contract might be deemed illegal.

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