Mike Stonestreet Attends and Speaks during Februrary 2, 2010 Public Hearing

Mike Stonestreet, Co-Owner/President of CAMS, addressed the  House Select Committee on Homeowners Associations during a public hearing February 2, 2010 regarding two important issues of community association management:   Manager licensing, and developers turning control of the association to the owner members & deeding the common areas to the association. 

North Carolina lawmakers are studying homeowners associations and what rules they have to follow.  The House Select Committee on Homeowners Associations, formed in 2009, held a public hearing Tuesday afternoon to hear from homeowners, homeowner association board members, attorneys and management companies.  Most attorneys, board members and managers represented stated they wanted the laws to stay in tact for assessments, liens, covenant enforcement, etc.

One of the biggest complaints from people at the hearing was that there is no governing agency to regulate HOAs, to enforce regulations, or mediate disputes between HOAs, homeowners and developers.  State lawmakers say it’s a delicate balance to give homeowners associations the power to serve their communities, without having too much power over homeowners.

The House Select Committee on Homeowners Associations hopes to have an interim report on their research completed before the General Assembly goes into session in May.

You Have a Replacement Reserve…Now How About an Operating Reserve?

It happens to most associations in one form or another every year. That new larger insurance deductible of $5,000 has kicked in for a fire loss claim for the association. More small snowfalls or really cold weather requires many more ice melt applications than anticipated and has resulted in additional expense of $7,000. More rotten wood to replace in the painting cycle than was planned costs over $4,000. More landscape died as a result of a very hard winter or some foreign insect costs the association an additional $10,000 in shrub removal and replacement. A co-owner was foreclosed by their mortgage company while owing $6,000 in past due assessments and collection costs thereby eliminating any hope of collecting that money. Since most associations budget by balancing their assessments and expenses to zero, there is often little or no extra money available to pay for these “surprises”. 

When this occurs, it usually places tremendous pressure on cash flow, creating problems for the board treasurer, the community manager, and the payables clerks who are not able to provide checks to bellowing contractors who call daily in order to meet their payroll at the end of the week. Ultimately, these situations could result in losing good contractors or getting priced higher in anticipation of slow payment.

Problem: No $
Where does the association get the funds to pay these unanticipated costs?

Unfortunately, often it is “borrowed” from the replacement reserve account which really is a “no-no”. In fact, in some states, it is simply not permitted by statute. Even in states where it may not be addressed in the law, since the need for extra money was not budgeted, there is no repayment plan or interest in repaying it to the replacement reserve account – - even with perhaps the best intentions of doing so. The result, of course, is that the replacement reserve remains under-funded when those physical components need to be replaced. Since the necessary funds are not available, we end up in an additional assessment for replacement situations that were thought previously to have been planned for.

Another scenario might include the board of directors levying a special or additional assessment to directly pay for the unbudgeted expense. This is usually an unpopular choice resulting in ill will, much administrative and bookkeeping work, payment timing problems and, in many cases, additional cost.

Solution: Planned Operating Reserves

It seems more business-like and prudent to accept that these surprises are going to occur and to plan ahead to have operating funds available to cover them. An Operating Reserve Account or Contingency Reserve can be created and budgeted with money contributed monthly just as we fund the Replacement Reserve accounts. A set amount each month put into a money market account will gain some interest while being liquid and accessible when needed.

How Large an Operating Reserve?

How much should be targeted for the fund? Perhaps 10% of the operating budget on a non-cumulative basis, with a $10,000 minimum. Or perhaps set aside an amount equal to one month’s assessment income as a target. Once that is attained you could stop contributing until funds are required for one of the surprises, then begin contributing again. Larger associations are prone to more surprises and smaller ones seem to be impacted more by a surprise (a large and small association can have the same deductible on their respective insurance policies which would impact the smaller association by a larger percentage than the large association) and may want to contribute and maintain a higher percentage level of reserve. $10,000 can go quickly with an insurance claim, a hard winter, and a few delinquencies.

So, as you are creating your budget, now is the time to get started on funding the Operating Reserve. Any prudent business owner budgets contingency funds. We must remember that we are running a business with millions in assets when we deal with the typical homeowner association. Your next budget year and subsequent years will be far less stressful with this planned solution to the inevitable surprises we face each year.

Margot Raynor, Special Projects Consultant
North Carolina Senior Games, Inc., Raleigh NC

HOA Investments

The December 9, 2009 CAMS Managers Meeting included an educational session regarding Investing for Community Associations.  Chip Finley of North State Bank reviewed the various investment options available and the CAMS Community Managers participated in a Q&A session.

The Managers benefited from the seminar and learned information that will be helpful in fulfilling their management responsibilities.

Delinquent Assessments

Options Available to Collect Delinquent Association Assessments

Options for Collection of Delinquent Assessments

Options for Collection of Delinquent Assessments

CAMS Advised FHA Condo Guidelines Revised

CAMS recently received an email from the Community Associations Institue (CAI) with an update of developments related to FHA’s condominium mortgage insurance guidelines. On Friday, November 6, 2009, the Federal Housing Administration (FHA) issued two documents related to FHA mortgage insurance requirements for condominium associations.  These two documents: HUD Mortgagee Letter 2009-46A and Mortgagee Letter 2009-46B provide an overview of the FHA-proposed transitional criteria and successor criteria for condominium association requirements for FHA mortgage insurance.

These letters replace earlier proposals issued by FHA that triggered a strong response from affected industries.  CAI provided FHA with its feedback on the earlier drafts of the criteria. The new transitional criteria and the successor criteria found in these documents demonstrate a positive movement by FHA in areas in which CAI provided comments, but will continue to pose a challenge for condominium associations. Read more … 

CAI has also prepared a short FAQ for condominium associations on this matter. That document may be viewed here.

CAMS’ Managers Stay Well Informed of Current Laws

Recently, Ward and Smith, P.A. Attorneys-at-Law conducted a Learning Luncheon for community managers and executives of CAMS, an active community association management company in Southeastern North Carolina.  The luncheon was an opportunity for CAMS’ managers to stay abreast of current industry trends, practices and laws in community association management. This session focused on three hot topics for homeowner associations:  Liens & Foreclosures, Robert’s Rules of Order and Special Meetings. Below are just some of the topic discussion highlights:

• New laws have taken effect in regards to Liens, Foreclosures and Collections. For example, HB 806 reiterates the importance of maintaining a current owner database and that “reasonable and diligent efforts” must be taken to contact owners prior to filing a lien on a property.
• Robert’s Rules of Order covers meeting conduct.  Robert’s Rules do not trump any law, act, statute or an association’s governing documents.
• Special Meetings – Topics that are not on the agenda may not be voted on. Owners must be given proper notice prior to voting on any items of business. 

CAMS takes pride in empowering their Community Association Managers with effective tools, information and business relationships in order to provide their associations with the highest level of professional leadership and management services available in the community association industry. CAMS also sincerely values building and maintaining connections with home owners, homeowner associations, developers, vendors, and other professionals, like Ward and Smith, P.A. Attorneys-at-Law, who support our clients’ needs. Additionally, CAMS emphasizes continuing education through the Community Association Institute (CAI) for professional certification, and provides semi-monthly in-house training to ensure staff have the knowledge, experience, and integrity to provide the best possible service to condominium and homeowner associations.

CAMS is an expert in condominium and community association management, currently serving in the New Hanover & Brunswick counties, Raleigh/Triangle area, as well as Brunswick, GA.  For more information on HB 806, see our Resource File/Library of Articles at our website at www.camsmgt.com.

2 CAMS Managers Earn CMCA Designation

CAMS is pleased to announce that Linda Senelick and Nicol vonSchummer recently earned the  national CMCA designation through NBC-CAM. 

The CMCA (Certified Manager of Community Associations) designation is awarded to association managers that have completed educational requirements and pass a thorough exam that focuses on the many areas of expertise required to successfully and professionally manage property owner associations.

Linda Senelick is a portfolio manager in the New Hanover County area and Nicol vonSchummer is the CAMS on-site manager at Brunswick Forest.

CONGRATULATIONS LINDA & NICOL!!!

CAMS Managers Meeting – August 26 2009

A meeting of the CAMS Community Managers was held on Wed, August 26th.  The topics of this meeting included:  Insurance; Collections; and Association Annual Budgets. 

Mike Stonestreet, President and Partner, addressed the importance of working with insurance agents that are specialists in owner association policies and that some agencies consider themselves one of the partners working in conjunction with a professional management company to provide excellent coverage and service to their clients.

Bonnie Braudway was introduced to the managers by Mike Stonestreet.  The collection services offered by Ms. Braudway’s practice were reviewed for the managers.

Dave Sweyer, CEO and Partner, emphasized that the 2010 Annual Budget season is here, with many associations and managers pulling together the information required to determine 2010 assessments.

Greg Rohde, CAMS portfolio manager, was congratulated on receiving his CMCA designation from the Community Associations Institute.  Allen Elkins, on-site manager at Station One, was recently recongnized for this accomplishment as well. 

CONGRATULATIONS ALLEN & GREG!

Collection of HOA Assessments

Collection of HOA Assessments by Charles D. Meier