Moving Communities Forward
Official Publication of Advance HOA Management, exclusively for board members
Board Newsletter | Issue 3
Fannie Mae and Freddie Mac Announce New Lender Requirements
Association Records Requests
What You Should Know About Homeowner Requests
RECORDS REQUESTS BASICS
As a nonprofit corporation in charge of operating and carrying out duties set out in the governing documents, a community association generates A LOT of paperwork. Colorado law provides guidance about which documents constitute association records and which do not. Colorado also defines whether these records are available to owners or whether they are documents that need to remain confidential and requires every association to have a Records Inspection Policy. Knowing this information in advance will make it easier to respond to an owner’s request for records.
Here are the basics you should know:
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What you must provide upon request: The list of documents to be maintained as records by an association and provided to owners upon request is extensive and includes records such as financial statements, meeting minutes, most recent reserve study, proxies, ballots, written communication among Board members related to any action taken without a meeting, current written contracts, and names, emails, and physical mail addresses of its current Board members. As part of facilitating the review, the association may require the owner to describe the records with reasonable particularity, however, the association cannot require the owner to state the purpose for requesting records.
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What you can withhold or shall not provide: The association can withhold certain documents, such as bids under negotiation, architectural drawings, executive session records, or records related to individual owners other than the requesting owner. Depending upon the nature of the record, the association should consider having legal counsel review the record before it is released. There are also records that are expressly prohibited from being disclosed, and those are mostly related to privacy matters such as personnel/salary records to a specific individual and personal identification and account information of a member. Additionally, the association cannot provide emails and contact info for owners.
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The Records Inspection Policy: An association should always check its Records Inspection Policy to see which records must be made available for review. In addition to which records are available for inspection, the policy should contain provisions regarding the submission of owner requests, timelines for responding, and the ability of the association to charge for fulfilling the request. Once adopted, strict adherence to the policy can minimize the risks of discrimination allegations against the association and of financial consequences for an association’s failure to allow inspection of requested documents in a timely manner.
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Cost for Processing Requests: The Association may charge a reasonable charge for costs of labor and material for copies. In addition, the association may now include the costs of copying, mailing, and any necessary special processing.
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Document Request Timelines: All records maintained by an association that are subject to inspection must be made available for examination per the Records Inspection Policy. Failure to allow inspection or copying within 30 days after written request (by certified mail) and payment of fees, the association is liable for penalties of $50/day commencing on the 11th business day after the association received the written request. Max penalty is $500 or the Owner’s actual damages, whichever is greater.
Electronic Communications
How to Communicate Effectively and Responsibly
In our day and age of electronic communication via e-mail, text messaging, social media and the like, we must remember that these forms of electronic communication create documents, just as if they were written in a paper correspondence and sent to the recipient via postal mail. The informal nature of e-mail and text messaging often results in informal and candid communications that would never be included in paper correspondence.
With that in mind, we all need to be reminded that e-mail, text message or any other electronic communication that refers to association business could be used as evidence for or against the association in the future if subpoenaed.
Therefore, be cautious about what you say in your e-mails and any other electronic documents. Assume that electronic communications are on the letterhead of the association. Assume that the recipient will share or forward your e-mail with another party(s). We have even witnessed emails being copied/pasted into Facebook, without the permission of the originator. Below are a few tips for Board members (and Managers!):
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All Boards are encouraged to obtain an e-mail account that is for board-related business only. This action will provide an isolated location for all HOA-related items and reduce the chances of an entire computer system being subpoenaed for information. This is particularly important for those board members who use e-mail addresses from their place of work.
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Don’t discuss multiple subjects in a single message. If you need to discuss more than one subject, send multiple e-mails. This makes it easy to scan subject lines later to find the message you need.
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Understand the difference between “To” and “CC.” As a rule of thumb, the more people you send an e-mail to, the less likely any single person will respond to it, much less perform any action that you requested. The people you include in the “To” field should be the people you expect to read and respond to the message. The “CC” field should be used sparingly. You should only CC people who have a need to stay in the know. The “BCC” field should be used even more sparingly. People you include in the “BCC” field will not be visible to others
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Be concise and to the point. Remember that reading an e-mail is harder than reading printed communications and a long e-mail can be very discouraging to read. Use proper structure & layout. Use short paragraphs and blank lines between each paragraph. When making points, number them or mark each point as separate to keep the overview.
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Don’t use e-mail to discuss confidential information. Sending an e-mail is like sending a postcard. If you don't want your e-mail to be displayed on a bulletin board, don't send it. Moreover, never make any libelous, sexist or racially discriminating comments in e-mails, even if they are meant to be a joke.
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Don't send or forward e-mails containing libelous, defamatory, offensive, racist or obscene remarks. The reasons for this should be obvious.
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Don’t overuse Reply to All. Only use Reply to All if you really need your message to be seen by each person who received the original message.
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Don’t use e-mail to criticize others. Don’t use e-mail to criticize a third party. E-mail messages live forever. They are easily forwarded. You can create a firestorm of conflict if you are not careful.
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Don’t overuse the “high priority” flag. “High priority” should be reserved for messages that are truly urgent. If you use it for every message, you will simply be ignored. It’s like the boy who cried “wolf” one too many times.
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We hope these tips prove useful to you as you go about your Board business. Thank you for all you do!
Winter Watering in Colorado
Why It's Important
Colorado's naturally semi-arid climate can pose a risk to the landscape when faced with below-average precipitation during the winter months. It is important to budget and plan for winter watering to ensure the health of both new and established plantings. Winter watering is often an overlooked aspect of plant maintenance.
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New Plantings Need More Water
Newly planted trees are most susceptible to winter drought injury. Woody trees generally take one year to establish for each inch of trunk diameter. For example, a two-inch diameter (caliper) tree takes a minimum of two years to establish under normal conditions. Similarly, newly planted shrubs require more water than established shrubs that have been planted for at least one year. If your association invested in new plantings this summer, work with your vendor to see if winter watering is needed to protect the plantings and maintain material warranties if relevant.
Winter Watering Tips
Frequency: Water deciduous and evergreen trees up to two times a month between October and March. Ensure the soil remains adequately moist around the dripline of the tree.
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Timing: Water during the day when temperatures are above 40 degrees Fahrenheit to allow the water to penetrate the soil before freezing nighttime temperatures. Avoid watering if the soil is frozen.
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Methods: Use soaker hoses, soil needles, or hoses with a soft spray attachment for winter watering. Do not activate your irrigation system for this purpose.
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Quantity: The amount of water your tree or shrub needs depends on its size and establishment status. For newly planted shrubs, apply 5 gallons two times per month. Small established shrubs (less than 3 feet tall) should receive 5 gallons monthly, while large established shrubs (more than 6 feet) require 18 gallons on a monthly basis. Decrease amounts to account for precipitation.
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Watering Area: For deciduous trees, focus on watering within the dripline (from the trunk to the outer edges of the tree's branches). For evergreens, water 3-5 feet beyond the dripline on all sides of the tree. For shrubs, water within the dripline and around the base.
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Protecting the common area plants and trees by ensuring they receive adequate moisture during the winter is crucial. Work closely with your community manager and landscape professional to keep your plants healthy this winter.
Source: Colorado State University fact sheet No. 7.211
Financials Corner
The Investment of Reserve Funds
Investment of Reserve Funds
With the recent hike in interest rates, we have seen a rise in inquiries from our boards regarding investment options for Association reserve funds. Boards must review and assess their reserve funding and make informed and careful decisions that are in the best interest of the entire community. The following information outlines several of these considerations and options for your Association.
Investment Policy
Boards have a fiduciary duty to ensure the Association’s funds are protected and invested per the needs of the Association. One of the governance policies required under Colorado law is an Investment Policy. This policy outlines the objectives, procedures, and practices for the board to follow when making investment decisions with Association funds to ensure the safety of its assets. Some of the key components of this policy include:
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Safety of Principal – the most important factor to consider is if the principal value of the investment will be available at maturity.
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Liquidity – the board should consider when funds will need to become available for Association expenses to ensure there are no penalties for early withdrawals.
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Types of Investments – some policies may specifically restrict certain types of investments. Money Markets and CDs are the most common and low risk investments available to Associations.
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Yield – subject to the restrictions on the types of investments, the return received on the investment should be considered, with the goal of a competitive rate of return.
FDIC Limits
It is essential to monitor Association fund amounts and consider limits provided by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures up to $250,000 per account holder, per bank. Any amount over $250k would be uninsured in the case of a bank failure. Advance HOA Management partners with First Citizens Bank, which is a participant in the IntraFi Network Program. This program offers FDIC insured products.
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Insured Cash Sweep (ICS). This is one of the most common products opened for Association’s with funds exceeding $250k. This is an interest-bearing money market account where the excess amount is transferred through ICS to multiple qualifying banks in increments below the FDIC insurance coverage. This guarantees the Association’s principal and interest are eligible for FDIC insurance. The funds are fully liquid and integrated with existing accounts at First Citizens Bank.
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Certificate of Deposit Account Registry Services (CDARS ). CDs opened through the IntraFi Network, which allow for higher yield options while maintaining FDIC limits.
(More information visit www.FDIC.gov and www.intrafi.com)
Investment Options
With its partnership with First Citizens Bank (FCB), Advance HOA Management is able to offer various options for investments of reserve funds.
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Money Market Accounts – with Advance HOA Management, every Association holds its reserve funds in a money market direct deposit account. These accounts are extremely safe, fully liquid, and there is no fluctuation on principle; however, the yields fluctuate and are generally lower than other investment options. (ICS accounts are also considered money market accounts.)
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Certificate of Deposits (CDs) – a CD or CDARS CD is a receipt issued from the bank for a deposit that pays a fixed rate of interest over a specific period. CD maturities offered by FCB range from very short terms (30 days) to up to five years. The benefit of CDs is their safety: the funds are guaranteed, not affected by market fluctuations, and pay interest at maturity. There are penalties if the Association redeems the funds before maturity, and the yields may be lower than other options.
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Laddered CDs – another type of CD option that allows for maturity in laddered terms. The benefit allows for varied fund availability.
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Money Market Mutual Funds – typically non-insured mutual funds opened by the board through a bank outside of First Citizens Bank. Advance HOA has no control over these outside bank accounts; therefore, statements must be provided by the board for reconciliation.
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US Treasuries – a product not offered through Advance HOA Management but are considered a very safe investment option. An Association may invest in various treasuries, to include bills, notes, bonds, and zero-coupon bonds. Advance HOA has no control over these outside bank accounts; therefore, statements must be provided by the board for reconciliation.
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The Board may seek other banking options for investment and Advance HOA happily facilitates whatever option the Board desires.
As you and your fellow board members are reviewing your financial statements, consider how your reserve funds are being invested. Refer to your Investment Policy before making investment decisions, and feel free to reach out to a member of the Advance HOA Management accounting team to understand the options available through our partnership. If mutual funds or treasuries are of interest, we will be glad to refer you to contacts at banks offering those products.
Reference: GAP Reserve Funds: How & Why Community Associations Invest Assets
Say It Ain't Snow
Preparing Your Community for Snow Removal
Snow season is upon us! The information below can help facilitate a better understanding of snow removal procedures and help Boards and associations best position themselves for dealing with the snow removal season.
Confirm Responsibility and Scope
Review the governing documents to determine the responsibilities for snow removal. Confirming and adhering to responsibilities is crucial as failure to comply could result in legal ramifications for the association. Once responsibilities are outlined, determine the appropriate standards for snow removal in a reasonably safe and prudent manner. Work with your snow removal vendor to determine the best trigger depth for certain common areas within the association (such as 2” for sidewalks and 4” for streets) and locations for snow storage. If your community utilizes ice melt buckets, confirm those locations with your vendor and the frequency in which they are refilled. Your snow removal vendor can also help analyze problem spots around the community, such as particularly shaded areas where snow lingers, drainage areas where water pools, steps, etc.
Understand Liability
The Board should understand potential liabilities when negotiating snow removal contracts. Given the Snow Removal Service Liability Act, liability cannot be passed on to the snow removal contractor, which could result in association responsibility for injuries from snow and ice accumulation on common areas. Therefore, it’s important for Boards to implement proper risk management. Also consider discussing your association’s insurance coverage with the association’s broker to understand your coverage and the process should there be a slip and fall claim.
Manage Owner Expectations
Before snow starts, it’s important to educate your homeowners about the snow removal protocols, risks on the property, and how to protect themselves during Colorado winters. The association should create and distribute a snow removal map informing homeowners of trigger depths, snow storage and ice melt bucket locations, and hazardous areas. Provide homeowners with details on how and when to report problems. Actively communicate with homeowners during storms, and remind owners that snow removal companies will arrive as soon as they can, and that snow removal protocols are subject to change during major snow events and multiple visits may be necessary. Also remind owners of the inherent risks associated with winter weather conditions in Colorado stressing that they should exercise particular caution when walking outside and to take extra care when walking on exterior staircases exposed to the elements.
Financial Considerations
While budgeting for snow removal is difficult as no one can predict the weather, the Board needs to ensure there are adequate funds for the snow season. Most snow removal vendors contract for snow removal services on a time and material basis, and due to the nature of the job, we are seeing higher hourly rates for vendors. With the liability connected to snow removal, the association shouldn’t risk being unable to perform snow removal services due to lack of funds. It’s also important to consider trigger depths when setting a snow removal budget. Trigger depths set in the contract drive both the cost to the association and the priority for vendor mobilization. It’s important to note that if an association chooses a higher threshold of, for example three inches, the association will pay less - but will also fall farther down the line of vendor priority when a heavy snowfall occurs because vendor crews will tackle one inch and two-inch trigger properties first. Association boards must weigh these factors and make business decisions according to their communities’ needs when deciding on contract terms.