What Fannie Mae’s 2027 Reserve Change Means For HOAs

Jodi Horne  00:00

These repairs have gone neglected for a very long time, because the association lacked the reserve funding to move forward. It’s not that you know that they’re trying to neglect these issues; they simply don’t have the funds on hand. So, the key goal of our reserve policy change is to put associations in a stronger financial position to address these repairs and capital improvement needs before they become emergencies that have to be funded with expensive special assessments or before they become problems from a mortgage financing perspective.

Announcer  00:35

HOA Insights is brought to you by five companies that care about board members: Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You’ll find links to their website and social media in the show notes.

Robert Nordlund  00:51

Welcome back to HOA Insights: Common Sense for Common Areas. I’m Robert Nordlund, and I’m here today for episode number 160 with a special guest I’ve known for years, Miss Jodi Horne, she’s principal of single family collateral risk management at Fannie Mae, and that’s a long title, but what that all means is that she’s the one at Fannie Mae ultimately responsible for lending standards affecting community associations and their latest lending standard update in particular, so at any time Fannie Mae or Freddie Mac make an adjustment to their lending standards. It sends ripples throughout the community association and the entire lending industry. So, to lower your anxiety and to hear what’s really going on, we’ve gone through a number of hoops, administrative hoops, to have Jodi here on the program today, speaking publicly on this issue. Well, we’re here weekly, so if you missed last week’s episode, number 159 Julie Adams, insightful, insightful, and candid conversation with Rolf Crocker. He’s the CEO of Omni Community Management in California. Or if you missed any other prior episode, take a moment after today’s program to listen from our podcast website, HOA insights.org or watch on our YouTube channel, but better yet, subscribe from any of the major podcast platforms or our YouTube channel, so you don’t miss any future episodes. Becoming a subscriber also increases the podcast’s position in search results, helping others find this free resource, so they can be better equipped to lead their association. Well, those of you watching on YouTube can see the HOA Insights mug that I have here that I got from our merch store, which you can browse through from our HOA insights.org website, or the link in our show notes. You’ll find we have some great free stuff there, like board member Zoom backgrounds, and some specialty items for sale, like this mug. So, go with the merch store, see what we have for sale, and at least download a free Zoom background to use for your next online meeting. Well, we enjoy hearing from you, responding to the issues you’re facing at your association. So, if you have a hot topic, a crazy story, I think there’s an unlimited number of those, or a question you’d like us to address, you can contact us at 805-203-3130 or email us at podcast at HOA insights.org But today’s episode is on me. I read the march 18 lending standards update, and I found them pretty straightforward and reasonable, but it created a stir in the community association industry with managers and reserves a professionals and homeowners all asking, what does this all really mean? So relax, adjust your volume, and we’ll shortly have some answers for you. So, Jodi, welcome to the program.

Jodi Horne  03:45

Thank you, Robert, for having me. It’s so great to be here.

Robert Nordlund  03:48

Oh, I love hearing your voice. It’s so.. it’s always been reassuring through the years as I’ve checked in with you. Before I get talking about the march 18 lender letter, why don’t you start telling your audience about what role Fannie Mae has in making standards that associations are supposed to follow.

Jodi Horne  04:03

Sure, sure. Well, at a high level, Fannie Mae helps provide liquidity to the mortgage market by purchasing loans that meet our requirements. Those loans are packaged into securities and sold to investors, which frees up capital for banks and mortgage lenders to be able to lend more loans to consumers, so in the project space that means lenders look to our eligibility requirements when evaluating whether a mortgage secured by a unit and a condominium co-op or a PUD project may be eligible for sale to Fannie Mae, so while we don’t regulate associations directly, our standards matter because they influence practices and help promote sustainable home ownership, prudent risk management, and confidence in the mortgage market.

Robert Nordlund  04:51

Okay, I like sustainable home ownership, and I like confidence. That’s a great thing. Before we get into details, tell me what Fannie Mae was trying to accomplish here. What’s their. Goal with the standards, and why make a change? Just recently,

Jodi Horne  05:05

sure. Yeah, I’m so glad you asked this. So, our goal is to support sustainable home ownership by promoting financially resilient condo projects. So, you’ll hear a lot about sustainability in my comments today. We, there was a concern that underfunded reserves are often associated with critical repairs, and these can translate into high special assessments and higher dues that create hardship for unit owners and elevate mortgage risk. So, from Fannie Mae’s perspective, this is really all about sustainable home ownership. When a condo project is not financially or physically sound, that risk doesn’t just stay with the association, it flows directly to homeowners through higher cost financing challenges and reduced marketability.

Robert Nordlund  05:54

Yeah, we’re talking about homeowners that, if they get hit with a special assessment, all of a sudden that bump in the road makes it challenging for them to pay their mortgage that month. It’s really just simple.

Jodi Horne  06:05

It’s pretty simple, and it’s not just about mortgage. I mean, you think about how that flows to the whole household budget. It’s really about, you know, how those families are able to weather those those challenges.

Robert Nordlund  06:18

Yeah, it could be groceries, it could be vacations, a sustainable stable association, which is what we’re trying to move towards, is a good thing for everyone involved, and boy, a lot of homeowner associations in the country, a lot of homes, and a lot of people, so it’s a big deal. One thing I want to compliment you on is how Fannie Mae and Freddie Mac seem to coordinate their standards is that is that exactly the case.

Jodi Horne  06:47

Yeah, so in this case we did take time to align our standards. They were announced by each company on the same day. We did that, so to reduce friction in the mortgage market, we don’t always align on all standards, but in this case we took great care to make sure that happened.

Robert Nordlund  07:07

Well, as a what do I say, a citizen and a homeowner and someone who lives in a homeowners association, I really appreciate that. So, thank you for having the rules the same way we get in baseball for years, there’s been the National League and the American League and designated hitter rules that differ between the leagues, and that just creates confusion. Jodi, why should the average community association, or want to say a condo association, right? Okay, condo association, why should the condo association homeowner care about these Fannie Mae and Freddie Mac updated standards,

Jodi Horne  07:45

so homeowners should care about these standards, because they affect mortgage availability, pricing, and marketability. We play an important role in the secondary mortgage market, and these requirements help lenders offer mortgage products at scale, so when product, when projects are financially stronger and better maintained, that can support both homeowner success and long-term property values, not to mention mortgage availability.

Robert Nordlund  08:12

Okay, so we’re talking about more competitive rates, which makes the home more saleable and saleable at a higher price when the prospective buyer can get a more competitive interest rate, is that kind of what boils down to?

Jodi Horne  08:29

Yes, that can be one of the dynamics that we see play out in the market, for sure.

Robert Nordlund  08:33

Got it. Okay. Well, tell me, from my point of view, two things changed with respect to reserve compliance. So, can you walk us through those two things?

Jodi Horne  08:42

So, first, the minimum budgeted contribution to reserve increases from 10% to 15% of the association’s budgeted assessment income. So, we’re not talking special assessment income or other kinds of income, we’re just looking at the budgeted special assessment income, and it’s going from 10% to 15% and importantly, a large number of associations already set aside 15% or more for reserves, or they’re very close to meeting this target, and then secondly, when an association is seeking to support a lower reserve amount, lower than that right now, 10% but soon to be 15% contribution. That justification for the lower reserve amount must be supported by a reserve study, and we’re looking to have the lender confirm that the association is reserving the highest recommended amount in that reserve study to cover the cost.

Robert Nordlund  09:41

I heard you say that a lot of associations are already above 15% so this change really sounds to me isn’t going to affect most of the associations in the country.

Jodi Horne  09:52

It will affect those that aren’t reserving 15% so they will have to do something different going forward, but for those that are already. Meeting that requirement, there will be no impact.

Robert Nordlund  10:03

I love that. That’s the sky is not falling

Jodi Horne  10:06

right, exactly.

Robert Nordlund  10:08

All right, if they are not funding at the minimum, which is 10% now and 15 in the near future, when they use their reserve study published within the last 36 months. Yes. Okay.

Jodi Horne  10:22

Yes. that’s correct.

Robert Nordlund  10:23

To say, hey, our association is special, we can get by with, you know, 8% or whatever the number is. When they’re showing that reserve study, they can’t use that. Now I’m stumbling on my words, they can’t justify it with a baseline funding plan, because, and that baseline funding is just keeping the reserve funding barely above zero, so no baseline funding,

Jodi Horne  10:50

correct? So adequate reserve practices are so critical to projects long-term financial and physical health, so when the reserve study flexibility is used to sidestep that 15% requirement. The lender has to verify that the budget includes the highest recommended reserve allocation that’s identified in the reserve study. The key takeaway here is for your listeners is that baseline funding, which allows the reserve to get dangerously close to zero is expressly off the table.

Robert Nordlund  11:24

Okay, but if they’re funding at 18 or 25% of total budget, you would never know.

Jodi Horne  11:31

Yeah, it doesn’t. So then the lender is not using the reserve study for that purpose at that point. So, as long as they’re meeting that minimum requirement, that is the lending standard, but if they’re seeking to go below that, then we are looking for that reserve study, and we’re looking for the association to be reserving to that highest recommended amount in the study.

Robert Nordlund  11:53

You know, that is so reassuring, because I’ve heard some people concerned that lenders are now going to be half to reading a reserve study for every single loan, and I couldn’t imagine that, and I’m so thankful that you, and I say you, Fannie Mae, and Freddie Mac, didn’t go down that path, that it’s just you set the bar, and it’s an easy bar to measure where you are, are you above it, you below it, and you want to see people above that, that bar. Okay, so we talked about two changes. When do these two changes go into effect?

Jodi Horne  12:24

Yeah, so they, the reserve increase from 10 to 15% goes into effect with the new loans on January 4, 2027 to give associations time to approve their budgets that reflect that new allocation. So, for those associations that aren’t currently reserving 15% this gives them a little bit of time to go ahead and reset their budgets or get a reserve study to justify that lower amount, and then for the other change, which is when they’re using the reserve study as an exception to our allocated reserve requirement amount, that change goes into effect sooner with new loans on august 3, 2026 and that’s because they should already be meeting that requirement. So, if, if they are going with that lower amount, they’ll just need to produce that reserve study, which is essentially what they would do today. It’s just really a clarification that we’re requiring that highest recommended amount versus something like baseline funding.

Robert Nordlund  13:26

Yeah, in my words it sounds like you’re starting with one of the two, you’re not hitting associations both at the same time, and for associations seeking an exception, you don’t want them to be, you don’t want them to be using a risky methodology to establish an excuse to go below the minimum. You want substantial, cool. Okay,

Jodi Horne  13:52

exactly.

Robert Nordlund  13:53

I like that. So, and I also like that you give associations time to set their budget, and with so many associations on a December 30-first fiscal year end, this gives him a chance to say, okay, we were setting 11% towards reserves, and beginning in 2020-seven needs to be up to 15. It’s really that simple. I love that. Okay, and this being Fannie Mae and Freddie Mac, this is national, not regional.

Jodi Horne  14:22

That’s right. So we always set our policy at a national level for our lenders and servicers, though I will say we did have some specific requirements for lending in Florida, and those are being retired or were retired with that lender letter. So now all of our condo policies really reflect the national policy. There’s no regional difference.

Robert Nordlund  14:45

That’s fantastic, because after Champlain Tower South, and that tragedy that killed 98 people, there’s law states reacting, and now as a reserve state provider, we’re seeing a checkerboard of things, and it is reassuring to have a. Couple of national standards, Fannie Mae and Freddie Mac, saying everyone here’s the bar, it’s not a problem, and get everyone on board. Is it that straightforward?

Jodi Horne  15:11

I think so. I think you’re right there,

Robert Nordlund  15:13

Jodi. Thank you so much. I look at the clock, and it’s time to take a break and hear from one of our generous sponsors, after which we’ll be back with more common sense about common areas.

Paige Daniels  15:24

Are you part of a homeowners association or condominium board? Making the right financial decisions for your community’s future is crucial. At Association Reserves, we’re proud to serve communities nationwide, specializing in reserve studies tailored to your community’s unique needs. Our expert team helps you accurately assess your property’s assets, forecast future expenses, and develop a solid funding plan. Whether you’re a small HOA or a large condominium association, we’ve got you covered. Visit reservestudy.com to learn more and get a proposal for your association.

Robert Nordlund  15:56

And we’re back. Well, Jodi, we had an interesting conversation over the break, trying to figure out what are we clearly stating, or what kind of questions have we left unanswered. So, let’s start with one of the questions that we talked about, that is, was this percentage increase from 10 to 15% Was that chosen to keep things pretty easy for lenders to validate?

Jodi Horne  16:17

The increase in budget reserves from 10 to 15% provides a modest increase to our minimum reserve thresholds that’s more consistent with higher reserve contra contributions that we see many associations will need to make in order to meet their short and long term needs. What’s really important for your listeners is that many associations will actually need to reserve more than our minimum threshold to maintain their physical assets over the over the long run. One of the best things that an association can do to determine how much they should be reserving is to get a quality reserve study, keep it updated, and follow its funding and maintenance recommendations.

Robert Nordlund  16:58

Well, as a reserve study provider, I love that. So

Jodi Horne  17:01

I knew that would make you

Speaker 1  17:02

smile,

Robert Nordlund  17:04

but one thing I liked in that to answer was again, your focus is on sustainability. What’s good for the association, and you’re trying to raise the minimum standards to help the sustainability of the condominium association projects all across the country. Just saying, hey guys, we can do a little bit better job, and our data supports it, and there’s not much to ask.

Jodi Horne  17:25

Exactly right,

Robert Nordlund  17:27

a measured increase, you know, it was.. it was careful. I don’t think you guys just picked it out of the air.

Jodi Horne  17:32

We’re really thoughtful about the impact that we have on the market, you know. We want projects to be sustainable, we want communities and home ownership to be sustainable, and at the same time we have to think about the impact that we have on the market anytime we make a change, whether it was this change we’re talking about or any other change.

Robert Nordlund  17:50

Yeah, you want to be careful. Well, who’s actually looking at this information? This budget number that we’re talking about is that Fannie Mae or is it the individual lenders?

Jodi Horne  17:58

Both. So lenders will look at reserve studies to determine if a project’s adequately funded, and also to identify red flags for critical repairs and significant deferred maintenance, which is another one of our policies that we’re not really talking about today, but they’ll use the reserve study to look at those factors, and we also use the reserve studies for exactly the same reason, so we have a team here that looks at condo projects in very much the same way that our lender community does.

Robert Nordlund  18:29

You know, I think I focus so much on preparing our reserve study for the board and the homeowners, and now I’m much more aware that there’s probably a whole lot of lenders looking at our reserve study too. So, their lenders are looking at the budget. Well, the budget is where they’re getting the 10 or the 15% or more, right? You’re trusting them to make that calculation. Yes,

Jodi Horne  18:48

that’s exactly right.

Robert Nordlund  18:49

We’re talking about the reserve say. Tell me more about the reserve say that’s used if they, if the association wants to justify a lower funding amount. Tell me more about what that reserve study really is I’m a credentialed professional. Tell me more about what you’re looking for.

Jodi Horne  19:06

What we’re typically looking for is that that reserve study is completed by an independent reserve study professional that can include a reserve study analyst, like, like folks that work for you, an engineer, an architect. Sometimes we see those kinds of folks doing reserve studies, so we really are looking for a professional that specializes in this kind of an analysis, and that resource study must not be more than three years old at the time that the lender is underwriting that project, so I know some state laws allow reserve studies to go out for five years for this purpose. For the purposes of our policy, it has to be within that three year time frame. I do know that sometimes you have a reserve study where there’s been a site inspection, and then sometimes they’ll do a follow-up adjustment to that study without a site inspection. And either of those can count, so our policy isn’t specific about that, because we understand that most qualified reserve analysts will do a site inspection typically every three to five years.

Robert Nordlund  20:13

I like that our numbers show that there’s a real, there’s a significant increase in special assessments among our clients when you wait longer than three years, and national best practices in the national reserve study standard says every third year. So, again, I like that there’s alignment with now the lending industry on a lot of what we see when we’ve spoken about the highest funding goal in the reserve study. Why did you choose that or state that, rather than saying we want to see specifically X.

Jodi Horne  20:45

Yeah, that’s a really great question. You know, as I’ve said before, we just believe so strongly that, and the importance of projects being financially and physically sound, and so reserve methodologies that allow that reserve balance to approach zero, they don’t give associations that cushion for unexpected expenses or emergencies, so that’s why we went with that highest amount, and the reason why we we weren’t looking at something like percent funded again, you know, our policy has historically fallen along that budgeted reserve requirement, so we wanted to stick to that, and then we thought it was more appropriate to say, okay, if the reserve study says they should have this much money in the bank by this time, that’s what we’re wanting to see, because we want to support that project’s long-term financial success.

Robert Nordlund  21:43

Yeah, I keep hearing the word sustainability in my brain, and this is not Fannie Mae and Freddie Mac being mean. They’re just saying, hey, if you’re driving a car, wear your seat belt, you’re talking about take good care of your place, and don’t be pursuing a risky funding plan, so just to be clear again, if there, if the association is trying to get an excuse to, or an exception to use a lower percentage of total budget than the minimum standard, if there’s two funding plans suggested in the reserve study of baseline or threshold, then the lender is going to look at the threshold funding plan.

Jodi Horne  22:26

Yes, they’re going to look at the highest recommended amount, but if it just only has baseline, that would be unacceptable.

Robert Nordlund  22:35

Got it. Okay, so baseline is automatic DQ disqualification, and same question, then, is if the reserve study has a threshold and full funding plan, the lender would look at the highest standard, because again,

Speaker 1  22:49

you’re

Robert Nordlund  22:50

looking for sustainability,

Jodi Horne  22:51

that’s exactly right, and remember that reserve study for this purpose is only going to come into play when that association is not reserving net right now 10% of their assessment income, and in the future, 15% and by what we see in the industry is that most associations are going to need to reserve more than that, right? So this is this is really that reserve study really only comes into play in an exception basis,

Robert Nordlund  23:18

right, Jodi, our data shows our association reserves data shows that the typical association needs to be funding anywhere from 15 to 45% of their budget, and so when I read this again, like I said at the beginning, this is no big deal. Most associations need to be setting aside about 25% of their budget to avoid running into special assessments. It’s really that simple. So, it’s just a matter of raising that minimum standard to prevent a few associations from making their own mistakes. This one, I don’t know what responsibility does the association have in helping a prospective homeowner gather that necessary budget information.

Jodi Horne  24:05

I’m so glad you asked that. The association, or its management company, is often the primary source of this type of information for the lending community, so it’s really important that the association may maintain accurate records for lots of reasons, and these records, for our purposes, help to facilitate access to mortgage financing. So, if a homeowner is looking to sell or refinance their home, they may actually run into trouble with a lender if, if the lender can’t get the documentation that’s required to do the underwriting of the project itself, so super important for associations to do that.

Robert Nordlund  24:50

Got it? So the associate, it’s in the association’s best interest to support lenders to help prospective homeowners come in. It’s good for the association. Association is good for home values, that the association is doing the right thing. Okay, and again comes back to sustainability. Talk about the history of this. Was this change anticipated months ago? How long does a change like this take for you, and you, for Fannie Mae and Freddie Mac, to get it figured out? Agree, pick a date, coordinate your announcement, all that kind of stuff.

Jodi Horne  25:23

Well, you know, there’s a lot of sausage making that happens behind the season, and I think this podcast probably is not long enough to talk through all of that. But yes, these changes were in the works for quite some time. We spent a lot of time researching what we saw in the industry, talking to reserve study professionals, engineers, and others that do this day in and day out, looking at, you know, other standards, looking at state requirements. So, there was a lot of research that went into this, and it did take a while to land on the where we landed from a policy perspective, and then some coordination around stakeholder outreach, and so forth, to roll it out, but we also recognize that it takes associations a while to come into compliance with the new requirements, which is why we’ve given a lengthier time than we typically provide in terms of adoption of the new requirements for the lending community. When

Robert Nordlund  26:24

I read it, I thought that’s a good number. 15% just cozies up to the bottom of what we see as normal, and yeah, I appreciate the coordinated effort in getting this rolled out. And was this change driven by Champlain Tower South, and that tragic collapse, or was just part of following the data and modernizing, yeah, responding to data and modernizing Fannie Mae and Freddie Mac’s safety standards, and learning what you need, learning what you know about sustainability, and just a normal update.

Jodi Horne  27:00

So, Robert, that’s a really big question, and it’s a question we get a lot, so I’m really glad you’ve asked. There are, in fact, a lot of drivers were a change like the change changes we’ve made here, but the primary driver was that we saw too many associations struggle with having funds on hand to make needed repairs. You probably see this all the time, and we do too. In fact, one of the top, or the top reason I was just looking at the data around this, that a project would be ineligible for financing for our program is because they need critical repairs, and so often these repairs have gone neglected for a very long time, because the association lacked the reserve funding to move forward. It’s not that you know that they’re trying to neglect these issues, they simply don’t have the funds on hand. So, the key goal of our reserve policy change is to put associations in a stronger financial position to address these repairs and capital improvement needs before they become emergencies that have to be funded with expensive special assessments, or before they become problems from a mortgage financing perspective.

Robert Nordlund  28:13

Now, you got me slowing down because I’m writing notes down. I like that the reality is owning and maintaining real estate is expensive, so all you’ve really done, it seems like, is raise the minimum standard, and I think I captured your words to put associations in a stronger position before bad things happen.

Jodi Horne  28:33

That’s right.

Robert Nordlund  28:34

Okay,

Jodi Horne  28:35

that’s right. And who can argue with that?

Robert Nordlund  28:38

I hope that’s the summary, and let’s, let’s use that to bring this program to a close. Thank you, Jodi. It was great having you on the program to share some of your insights on this important subject, helping settle people’s minds, and I like it when people are able to take something complicated and explain it in a simple way. So, any closing thoughts to add at this time?

Jodi Horne  28:59

Yeah, yeah, so you know, Robert, we’ve covered a lot of ground here. I would encourage folks to go out and look at our march 18 lender letter. If you’re curious about our other condo and insurance eligibility requirements, all of that information can be found easily by searching online for the Fannie Mae selling guide. We publish it all there, so anyone can look at it. I would be remiss to not plug our condo status finder, which is an online tool that allows condo associations to connect directly to Fannie Mae to resolve known eligibility issues. So, a quick search for the Fannie Mae condo status finder will take you to a web page and a tool where you can research eligibility issues that your project may be having and support documentation directly to Fannie Mae to resolve those issues, so important plug there. And then after listening today, I hope associations can take a fresh on. Honest look at their long-term financial and physical health now, not when a lender or a buyer or an insurer forces the issue. That means understanding whether reserves are truly aligned with the project’s physical and condition and its future needs, making sure insurance coverage is adequate and well understood by the members, staying ahead of maintenance before it becomes a crisis for the association. You know, the strongest projects are the ones that are proactive, transparent, and that are planning for long-term sustainability. So, with that, Robert, I just want to thank you so much for having me on your show. It’s been a pleasure to connect with you and your audience about this really important topic today.

Robert Nordlund  30:49

Jodi, again, it’s I think our audience is so rich to be able to have someone like you on the show. Let me add a couple more things for everyone’s information. I’ll put a link to Fannie Mae’s march 18 lending letter that Jodi referenced. I’ll put that link in our show notes, and I will make sure I get a link to the condo status finder. Jodi, good idea, in the show notes. Also, okay, cool. Well, it’s a treat to have influential national figures like Jodi on the program. We certainly hope that you learn some HOA insights from our discussion today that helps you bring common sense to your common areas. We look forward to having you join us for another great episode next week.

Announcer  31:36

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159 | Why Your “Full Service” HOA Contract Isn’t What You Think It Is

Rolf Crocker  00:00

There’s a bandwidth problem in terms of what a manager can reasonably do within a period of time. How many operations can one person reasonably control without losing bandwidth? That number is seven to 10, which means a manager can manage seven to 10 associations, a supervisor can manage seven to 10 employees, direct reports. Beyond that, you can get help, but still the bandwidth thins out to where it would not be effective.

Announcer  00:27

HOA Insights is brought to you by five companies that care about board members: Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You’ll find links to their website and social media in the show notes.

Julie Adamen  00:42

Hi, I’m Julie Adamen, President of Adamen Inc,

Rolf Crocker  00:45

and I’m Rolf Crocker, CEO of Omni Community Management in Northern California.

Julie Adamen  00:49

And this is HOA Insights, where we promote common sense

Rolf Crocker  00:52

for common areas.

Julie Adamen  00:54

Hi everybody. Well, we’re doing something a little different this episode. Normally, you notice it’s Robert Nordlund or Kevin Davis or me or all three together sometimes, but now we’re branching out a little bit. Robert has passed the reins for a little bit of the time to Kevin and I to start interviewing other folks. And with me today is Ralph Crocker, as said he’s the president of Omni Communities, an association management company located in Northern California. He’s also my best industry bud. So we thought we would regale you with all of the information we have about management companies and their relationships with boards and boards’ relationships with management companies, but first I have a little bit of housekeeping to do. So last week’s episode was episode 153 This is episode 154 and that featured Kevin Davis and Sherry having another great discussion on HOA insurance, and just want to remind everybody that if you’ve missed any of our episodes, you can go to our website, which is HOA insights.org or search for HOA Insights on any one of your favorite podcasts, including YouTube, and remember to subscribe, because then you will not miss an episode. For those of you watching on YouTube right now, I can tell you we have our own merch. Look at that, Rolf. Don’t you wish you had.. Oh yeah, that’s my old hair. I need to have a note with my new hair. This is a problem for women. It’s always a problem. But so you can go to our merch store on HOA insights.org and we have some free gifts on there for board members, and you can get things like these mugs and other stuff as well, so download a free Zoom background. We have that for board members, and take a moment, just look around. Also, we do enjoy hearing from you, board members. We get some very interesting questions and interesting stories that go on. So, if you have issues that are facing you at your association, you have a hot topic, crazy story, or a question, or what often happens is we get a big vent from board members, which always gives us stuff to talk about. You can always contact contact us at 805-203-3130 or email us at podcast at HOA insights.org Okay, so with that, we’re going to dive right into this, so when I asked Ralph to be on the podcast with me today, I thought, you know, I think we should just talk about some of the basic things that board members typically don’t get to talk to any experts or people who are embedded in the industry about, and that is what should we as board members expect from our management companies, now typically HOAs are managed by a company that each of their managers has a portfolio of accounts, meaning they have 567, 1012, whatever it is, depending on the location, the type of accounts, etc. etc. but it always seems to be a tension there between what the management company is providing, and what the board members expect. So, Rolf, I want you to speak to that, and let’s first talk about the thing that always comes up, the full service management contract, which you and I have been pulling our hair out about for, I don’t know, 40 years something now. So, why don’t you go ahead and talk about that from the management company perspective, and where you see where it goes off the rails, or at least misunderstood by board members, especially those new to being managed, they could have been self-managed previously, or something like that.

Rolf Crocker  04:12

Well, first of all, thanks for having me on. It’s a pleasure to be here. It’s always good to hang time with you is always great, but being able to talk about this issue, because this really is the central focus for most boards who are professionally managed on some level, you’d mentioned self management, and then there’s onsite management, or full time management, and then, but most boards will fall into a category we call portfolio management. Portfolio management is more like timeshares, people understand in a timeshare, you buy into something where you get a slice of time, so many days a year to be able to utilize it, but you don’t get to use it whenever you want, however you want. When we sell management services, the tendency is not trying to impugn any of. My colleagues in the industry, or myself, from time to time, we want to get the contract, but we’re not always forthcoming in terms of the fact that the only way you can get true full service management is to hire a full-time manager. First eight years and two months to the day of my career, I was an onsite manager. I still have information tattooed in my head, and I left that gig in 1996 In portfolio management, as you said, you have a manager who’s managing anywhere from seven to 10 associations, sometimes less, sometimes more, and they have to be able to balance out the interests of everybody, and the challenge becomes there’s not really.. there’s a lot of wrong ways you can manage a community, but to me, what I’ve kind of settled on is the only real effective way to manage a community is the board and management have to get together, you have to define and then manage the expectations of what can be done for the slice of time that you’re buying of the manager,

Julie Adamen  05:58

that’s exactly right, and you are buying a slice of time, as Ralph and I. He just told me before we got on air that saying our only widget is time in the community management industry, that’s all we have is time. That came from a boss of his from the 90s, 2000s

Rolf Crocker  06:15

early 2000s

Julie Adamen  06:17

That’s right. And I was looking at some of the stuff he’d put together for me, and I noticed that our speaking gigs have kind of melded together, because I use Widget of Time, and that time is the only widget all the time, so you know, Rolf, I think the biggest problem it seems to me is management companies, and I know I used to work for a guy who did this all the time, he would say, he would say, I get the contract, and then we’ll worry about how to manage it well, that’s kind of a business truism, right? But still, that’s like, huh, deer in the headlights, because if the association, which maybe is only paying $1,000 a month for full service management,

Russell Munz  06:54

really

Julie Adamen  06:54

low, they don’t realize that they only get how much of that widget a week,

Rolf Crocker  06:59

however much they’re willing to pay for, because you have to pay a manager in order to give them a wage that works. There’s a certain minimum amount of associations they will need to manage to make the number work. In portfolio world, time is finite, it’s not infinite. So that effort up front about defining and managing the expectations, and people will say, well, we’re a smaller association, we can’t afford X, but if you think about it, just in terms of pure business practice, the same basic work goes into managing any association, whether they’re five units, 50 units, 500 units, or 5000 units. It’s the number of board meetings CACM, California Association of Community Managers, 30 years ago did a time motion study of what it takes to prepare for travel to when we used to travel before COVID, attend, travel back, and disseminate from a board meeting. Time motion, soup to nuts, is eight to 10 hours, just for board meeting prep. To prep, get there, have the meeting, come back, do your action item list, site inspections. If you have to look at what’s in the file, what was noticed previously, site inspector goes out, looks for violations, looks for maintenance issues, comes back, uploads it to the system, and gets the letters out, that can easily be three to four hours, and by the end, you have an accounting cost, so by the time you put all of that in, that’s the same basic work, regardless of time, so, or regardless of size, rather, really understanding up front between the manager and, or, the management company and the association, it really requires a great deal of candor up front. What do we need from you as a manager? And then, what does the manager need from you in terms of, you know, what your list

Julie Adamen  08:35

is? Rolf, would it be? Do you think it would be helpful for board members who, let’s say, okay, they’re going out to bid, let’s just say, for sake of argument, they’re currently self-managed, but they’ve got their financials farmed out, and they’re not too big, maybe they might be 150 units, maybe. And they want, let’s take a look at getting a management company. Would you suggest that they have a listing of things they believe they want from their management company? Would that be helpful to you as a management company owner?

Rolf Crocker  09:03

I think that can be helpful, but one thing to realize, most of my colleagues in the industry who are doing what I’m doing, we’ve been doing it long enough to where we all do the basic stuff all relatively well. We know how to prepare for meetings, we know how to deal with vendors, we know how to do the accounting piece, so all that stuff is fairly locked in. There are times where we’ll get an RFP, a request for proposal, from an association that they got online somewhere. It’ll be 50 questions asking all kinds of arcane things that are kind of just stuff that we do anyways.

Julie Adamen  09:35

Do you even answer all when they send you those? I’ve seen those, by the way. Do you answer all? Do you answer all of them, or think, “Oh yeah,

Rolf Crocker  09:41

we did receive one a couple years ago where the cover letter said, well, we view the association as being like the Supreme Court, and management is basically being the clerk of the court. Needless to say, we respectfully declined that one, because if I wanted to clerk for a Supreme Court justice, I. Gone to law school after all, and so going from self-managed to professionally managed on any level, that’s always a challenge, because you’re coming into a completely new space in terms of responsibility. But for those that are portfolio managed currently, the thing, another analogy I would give is that you know, if you, if full service management is only having a full-time manager on some level, portfolio management is still partial self-management from volunteers, because if the association could pay for all the services that needed to get done, then they would have hired that person. So, there is sort of a push-me-pul me working with volunteer boards to understand there are things that management can and wants to do and is able to do, but there are other things that, if the board wants, is willing to engage to help with some of the work, then that could actually save the money from the billable and the reimbursable piece, because it really is still kind of this push me, pull me of trying to figure out what the balance is between board and association, and I’ve joked for years, if I could develop a 29 degrees of compatibility eHarmony site between board members and management companies. I’d be Dr. Neil Clark Warren, I’d have my tweed suit

Julie Adamen  11:08

patches on the elbows, yeah,

Rolf Crocker  11:10

instead of, you know, just slogging it out in the trenches. But

Julie Adamen  11:14

the funny thing is, is that when you go to bid, I, as a lot of you out there know, I used to work for a management company, it’s been years 30 wait wait, 3030, years, 30 years. So, there we are. So, 30 years since I worked for a management company, but all of my managing experience was with, as a management company executive, and then as an on-site manager. But I used to go and do a lot of the presentations, you know, to go and, because I was real good at the sales part, right? It seems to me that the hard part of all of this, from dealing it from the management company perspective, which, of course, throws the board for a loop, because this isn’t their discipline, they’re the volunteer, right? And so that we come in, we’re like, okay, this board that I’m bidding to right now, they’re really engaged, they’re gonna, they’re gonna talk to homeowners, they’re not going to be hiding in their homes, they’re going to be out, you know, kissing babies and shaking hands with the homeowners, which a good board member should be, I mean, pretty well versed politically to keep everything on an even keel in an association. And then that board leaves and a new board comes in, and they’re like, well, what do you mean, what do you do for this money, you know? And I always thought that was the most difficult thing, because then you have to go in on the back end for people that have no idea what you do, and all of a sudden want you to do a whole lot more for the same amount of money. Just as an aside, way, way back in the day, in the late 80s, when I started in this industry, I worked for a company called Mercury Property Management, and it was based in Orange County is now defunct, but because we did everything for one low price, that was always the motto, but because we, and all management companies, do this, they do charge extra for, you know, insurance claims and hourly for over things over and above. They always thought that was one of the biggest challenges we had.

Rolf Crocker  13:00

I think that’s still a challenge, because if you’re going for me, for bidding an association for a portfolio managed client, this candid conversation we have, like, a 20, we get RFPs, we actually send out like a 25 question questionnaire, where we’re asking questions to try to get a feel for what the workload is, if they have amenities, if there are condominiums, there’s more moving parts to do that, so it takes more customer service hours to do that. If they have a clubhouse that needs to be managed, if they expect somebody to be on site one day a week, all of those things play into it. To do it all for one low price, at that point you’d have to estimate what your copies are and what your other billables would be, so then you have to pad the contract by probably 20 30% like a contingency, basically, for what I do, what we do, and what a lot of the folks in the industry do. We have a candid conversation about routine services, things we know we do month in, month out, and that’s the flat fee, but anything that has a beginning and an end, major project oversight, not just litigation, but any legal work, a governing document revision project could easily take dozens of hours of management time that is not accounted for in the monthly flat fee. So, in a fair exchange of value for the work being performed, those are things that have to be reimbursable outside of the contract, because you don’t know if it’s going to be one hour, 10 hours, or 30 hours. There has to be again a candid conversation about the understanding that the stuff we do month in and month out, the number of meetings, walkthroughs, vendor management, customer service, all that stuff, that’s flat fee, because nobody really wants to nickel and dime. Well, guy I worked for was famous for nickel and diming, and boards hate that, and I respect that everything within the price,

Julie Adamen  14:44

exactly, exactly, and I think that’s, you know, that boards often have a heart, and I get it, I totally get it, they have a hard time understanding that, you know, especially if it’s a 55 and better community like I live in, but there are people here who I mean. Mean, I, I’m in my late 60s, and so, but I have people that are my friends who’ve been retired since they were 52 because they were, they were government workers, typically that’s because they’re able to get out there and do that. My sister retired not far from that age, and I’m like, all right, I missed that. I think an entrepreneur, you missed that, but it’s, you know, and if you have people who are in their 70s, or and then on the board that I’m actually running for the board this year, I don’t know what I’m thinking, but I’m doing it.

Rolf Crocker  15:26

We not had this conversation, do we need another intervention?

Julie Adamen  15:29

No, we do it. No, they do need.. there’s a big thing coming up, and I want to be a part of it, because I’m going to be living here for another 20 years. So, anyway, is that people who’ve been retired, and God love you, I wish I’d been retired for 20 years, but if they’ve been retired for 20 years, they retired in your 50s and you’re now in your 60s and 70s, you’re way far off of what the cost is to manage and to the cost of labor, the cost of paper, I mean, we could go and gas, though gas went down, and you know, right now, where we are right now, folks, is we’re in May. What was this? We’re in March of 2026 so right now the Iran kerfuffle is going on, so gas is kind of spiked. It depends on where you are now. Rolf is in California. You got to think, how much gas is a gallon in California right now, and we get this, the area of Phoenix, the greater Phoenix area, gets its gas from California, so their gas, regular, is five plus a gallon right now. Now I’m down in Tucson, and we have our own pipelines that come up from Texas, so ours, ours is up, but it’s not that much, so that’s things people don’t think about, and especially if you’ve been out of the workforce for a while, these things could come as a shock.

Russell Munz  16:44

Well,

Rolf Crocker  16:44

labor costs, in particular, that’s another one. Oh, for you guys, in 2019 there was a minimum exempt salary amount for managers,

Julie Adamen  16:51

and managers are exempt employees, people.

Rolf Crocker  16:53

They should be exempt employees for a lot of good reasons, that would be another whole topic of conversation. But in 2019 the minimum amount was like 45,500 Well, now in California, in 2026 the new minimum exempt salary amount is $70,320 So you’re talking almost a 50% increase of cost, and everybody wants certified, caring, competent managers who stick around and don’t rotate, and put them in a situation where they’re having to manage multiple accounts to retain them to do that work. You’ve got to be able to pay them a wage that’s competitive, so all of these things come into play in terms of having developed the pricing, and again, we could probably do a whole nother podcast on labor pricing and where AI and offshoring, and all of that stuff would come into play, but

Julie Adamen  17:44

we, Robert and I, have touched on that a few times, because I see that I, we talk about that. So, yeah, go ahead. I’m sorry, go ahead.

Rolf Crocker  17:50

Yeah, but really, the goal becomes ultimately everything’s predicated upon trust in the relationship between the management company, the manager, and the board of directors. It’s very difficult to build. It’s very easy to break. I believe it was Gandhi who said once trust is breached, everything else is viewed with suspicion.

Speaker 1  18:09

Yep,

Julie Adamen  18:10

actually, and our entire, our entire country is operating on that now. You know, after the last six years,

Rolf Crocker  18:15

sure, we all operate on that, right? Is so critical to making it work, and as you mentioned previously, there is a bit of a tra, there’s a transitory nature of board service where you, a single annual meeting can turn the whole board upside down, and so it’s never a one and done conversation, it’s a continual conversation of not just doing the work but doing the educational piece to get boards plugged in, which is why I love this podcast, I love that you and Robert and Kevin are doing this because the educational side of the boards who want to be educated, who don’t come into it thinking they know it all, but they’re willing to have a humility about them and be teachable to say, “Hey, let me get some information that could help me do what I do better. What you do here is in service to that and super helpful, and Lord knows we need so much more of this.

Julie Adamen  19:01

Well, and I appreciate that, and yeah, I believe it is as well. So, with that note, let’s do.. we are going to take a commercial break here. So, we’re going to take just a few minutes off, and so everyone, hang on. We’re going to have a word from our sponsor, and we’ll be right back.

Russell Munz  19:15

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Julie Adamen  19:46

Hi everybody, and we’re back with Rolf Crocker, the CEO of Omni Community Management in Northern California, and this has been such an interesting conversation, because Ralph, having been in the industry a little bit less than I have. Have, but not by much, but a slightly different trajectory than I took while I was in management. So he is looking at it from a management company owner’s perspective. And when we were on the break, we were talking about things that boards to this day, and from way back in the day when I was doing this, they’re always like, can’t we, can’t we, you know, interview or talk to the person who’s going to manage us, and so let’s talk a little bit about that. That’s so, as we said earlier, folks in the podcast, that most community associations that are managed by a management company, their community is part of a portfolio of communities that one manager manages. That’s where you are, because if you could afford to have an onsite full-time manager, you do that because that would obviously be the best thing for everybody, because they’re they’re at your beck and call, but they also have all of your interests at heart and no one else’s, because they’re not being pulled in several directions, but financially just not feasible for the vast majority of community associations. So, Ralph, I’m a board member, and I would like to know why can’t I interview, you know, the managers that might be our manager.

Rolf Crocker  21:06

That’s a great question, and I would get back to the eHarmony 29 dimensions of compatibility compatibility conversation. It’s most portfolio management companies do not have a bench of people that they can just put out there for an individual association to select, most companies have managers that are already managing a portfolio, so I know at least how we look at this. We look at this from several different angles in terms of who we think would be a best fit. Manager is already managing a number of associations, do they have quarterly meetings by, you know, every other month or every every month, monthly meeting.

Julie Adamen  21:44

Do you mean their, their current portfolio? Oh,

Rolf Crocker  21:46

yes. How does

Julie Adamen  21:47

it align? But, and the potential new client, and the new client,

Rolf Crocker  21:50

right? So, I’ve had several tours of duty, as Julia alluded to. Been an on-site manager, I’ve been a portfolio manager, been a high-rise manager, I’ve been an executive for a couple of management companies. Also, spent time on the vendor side in HOA construction and HOA banking. My first tour of duty in a portfolio management situation, I was managing 10 associations. If you’re familiar with Northern California, from Geyerville all the way down to Redwood City, with monthly meetings and no administrative help, and this, but it was shared by the company owner, so I probably got her maybe 5% of the time

Julie Adamen  22:25

way before Zoom. Everybody, these were not

Rolf Crocker  22:27

Zoom. I was driving to Geyserville and to Novato and three associations in San Francisco and all the way down the peninsula, and it just is not sustainable because again there’s a bandwidth problem in terms of what a manager can reasonably do within a period of time, and it’s well settled in business circles that span of control is recognized. What, how many operations can one person reasonably control without losing bandwidth? That number is seven to 10, which means a manager can manage seven to 10 associations, a supervisor can manage seven to 10 employees, direct reports. Beyond that, you can get help, but still the bandwidth thins out to where it would not be effective. So, long-winded answer, but to say that, so when we’re talking with a client and they want to interview the person that is managing them, we, we oftentimes will allow them the opportunity to interview who we think would be the best fit, but it’s not like, oh, we don’t like this person, bring me another, because at that point we are, we don’t have extra people that we have in rotation. So on our side, we’re looking at the number of meetings they’re doing, what is the geography, if they have to travel on site, you know, what is the personality of that particular manager

Julie Adamen  23:41

and board and board, you have to mesh those, have to mesh.

Rolf Crocker  23:46

We try to make a good faith estimate, but one of the things that we’re able to do is we have a phenomenal executive team and a great senior management team that when they meet with the clients, they will get a feel for who they think would be best, and there are times with, and they’re fully involved in that process for the first 90 days, 120 days, that doesn’t seem like it’s working. We’re happy to look in and see if we can put somebody else in there, but to select it up front, in terms of being able to choose, that becomes a difficult proposition for most portfolio management companies, because it really depends on what the availability is in a particular manager’s portfolio, and what we think the fit is going to be.

Julie Adamen  24:24

Yeah, and you know the same thing is in onsite world. So, if you’re an association that is large enough to be able to afford a full-time or even part-time onsite manager, and you are with a management company, it’s kind of the same thing, because I get this a lot on my recruiting end of the industry, I do recruiting of typically large scale managers, that type of thing. I’ll tell the boards, you know, that you know there’s not going to be 12 candidates, you’re great, but, but the pool is such that if I can bring you two that are qualified, I’m not meaning people off the street, but two that are qualified, I will be thrilled. World, and that’s in the upper end, where people are getting paid well into six figures, well into six figures. It’s just that the market is such that it’s the worst I’ve ever seen, and I know for management companies, they.. it’s.. I don’t think most board members recognize that the average life of a portfolio manager is about.. I mean, I’m in the year and a half world right now, that’s

Rolf Crocker  25:22

2018

Russell Munz  25:25

to 36

Julie Adamen  25:25

months, because, and you board members out there, you know how difficult it is to be a board member. Think about it on the other end of the people who are taking what can be abusive, you know, behavior from high,

Rolf Crocker  25:41

high emotional impact, high motion. Every board meeting is of job performance review.

Julie Adamen  25:45

It is, and it’s very tough. I mean, and I know you guys know it as board members, and I’ve been a board member several times over the years, like a crazy person, but it’s true, though. It’s there’s your one removed, these people are your peers, that person’s the employee over there, and so they have a tendency to be treated with somewhat more disdain from people who are the, the high maintenance folks. Y’all know who I’m talking about in your association. If you’re sitting next to them, don’t look at them, but it’s a very difficult industry to be in, and there is, there is a lot of churn, no matter where you are, except in the very, very top echelon of golf, food and beverage, large scale associations, those people, because the job becomes much more like a city manager, and even those folks, their average life is only about five years. I mean, there are folks that have been the gala managers, our place has been here 18 years, I think, highly unusual, but that’s she’s been here since I think that went from developer to homeowner control. The thing is, the delicate dance that you do as board members, and Rolf does as the management company side of it. My best advice to the board members out there is that recognize that it is a dance and recognize that your community needs to mesh in with the person who is going to be your portfolio manager. You may not always have the choice of who it is, but typically the management companies try to get the best fit in there, because it behooves them as well. You know, if you’re just shoved into the next person who’s up, well, you know, unless that person is really good, that could not, that could be terrible, but the management companies don’t want to lose your business, even though they know there’s going to be churn, they don’t want to. So, go ahead, Rolf. Sorry, I went off. You’re all

Rolf Crocker  27:29

good. I think all that gets into it. But about that delicate dance, I mean, it just, if we’re to jump up to like a 35,000 foot level, I mean, this is a whole nother podcast we can do. But a brief history of HOAs at the end of the 1950s early 1960s housing developments in post World War Two were these sprawling concrete jungles. So, the Federal Housing Administration, on a $300,000 grant, took a three year study to look at these things called homes associations, and in October of 1964 they published a book called The Homes Association Handbook Technical Bulletin 50, published by the Urban Land Institute. This is a 408 page manual that was developed to give to developers to say go forth and build housing that actually has volunteer leadership, communal living, green space amenities to try to have a different vibe than these sprawling concrete jungles that were appearing in the, in the late 40s and not the 1950s

Julie Adamen  28:28

Think of Los Angeles, yeah,

Rolf Crocker  28:29

right. So, from October of 1964 to 1970 we went from 500 homes associations to 10,000 in little less than five, little less than six years today, in California alone, there are 57,000 homeowners associations in California. Nationally, there’s like 370,000 homeowners associations. You’re talking about millions of dollars in home value, billions of dollars in real estate, trillions of dollars in financials, all predicated upon a relationship of volunteer directors who are governing their peers and willing to serve as fiduciaries on behalf of the whole and management companies who are the professionals who are certified and educated and caring and want to help them do what they’re help them manage their responsibilities, because at the end of the day, you can delegate authority, but you can’t delegate responsibility. So, recognizing that unique dynamic and doing everything we can to support it to make it better is everything. Because talk about something to fail, you’ll hear people defund the HOA. It’s like, okay, great. Tell me, any municipality that if you defund the HOA, that they’re going to want to come in the local city public works and take over the streets and the drives and the sewers and the lighting.

Julie Adamen  29:45

They won’t,

Rolf Crocker  29:47

you can’t even

Rolf Crocker  29:47

build in most municipalities without an HOA, because they don’t want to maintain the structure. This whole thing, most, most of us couldn’t spell HOA when we showed up, right? So this really is, I think, Evan. Kenzie, who wrote the book Privatopia, who was no fan of HOAs. He says HOAs are an experiment that became an institution, and I think that’s accurate. I think we’re still trying to find our way, but the next person says they want to defund it, it’s like, great, go to your next city council meeting when they’re approving a subdivision, and tell them you don’t want HOAs anymore, and see if they stop approving them, they’re not going anywhere, so it behooves all of us together to figure out, and there’s again now there’s a lot of wrong ways, there’s a lot of right ways, but it behooves us to work together, because everything rises and falls on volunteer leadership, and I tell our our board members, you are truly doing the Lord’s work, because none of this would work.

Rolf Crocker  30:43

It

Rolf Crocker  30:44

is the truth. Without you, everything’s predicated on this relationship. It’s not going to be perfect. We’re human with human condition, right? So, a lot of this gets down to, yeah, Julia mentioned politics. You know, I hate politics. Well, welcome to HOA World, because,

Julie Adamen  30:59

well, welcome to all the world. Yeah, really.

Rolf Crocker  31:01

Decisions have two components: an economic component and a political component. The economic component is a math exercise, right? You try to figure out, you have to repair something, you have to get something done, you get the price. The political cost, being able to navigate the political waters of a local homeowners association to try to do the right thing and not have your neighbors despise you for taking swings that are necessary on behalf of the whole, that is everything.

Julie Adamen  31:27

It is everything, and without the board, it’s the truth. And right as we’re going to land the plane, I’m going to give you some information. Board members, I want you to put this in your hat and think about this, because this was mind-boggling when I heard it. There are about 2 million community association board members in the United States, compared to about 500,000 elected officials at the federal, state, county, and city level. That’s a four to one ratio. Board members have the greatest impact on the day-to-day lives of people than any elected official, you people in your association, so if that either doesn’t make you think, “Wow, I’m doing a great job, or “What am I doing here? It’s kind of.. it’s or both. That’s what this.. this is our world. And those of us who are on the.. on the.. I’ve always been on the management side, the consultant side, for a long, long time now. And I’m.. but having been in all three positions, I can tell you it’s absolutely wonderful industry, but it could not work without the volunteers. So, with that, everyone, I think we’ve about gone to our time limit. We’re going to take off now. So, if anyone wants any more information on this, you can go check our show notes at HOA insights.org or give us a call at the phone number that you’ll also find on there, Ralph. Any more words of wisdom?

Rolf Crocker  32:42

God bless you for your service. Don’t lose hope, because were it not for you, standing post on the wall, a lot of bad, lot of things worse. People say it can’t get worse. No, it can always be worse. So, having civic-minded board members serving is everything for your property values, for your neighbors, and for the industry at large, so you know, keep hope alive, just you know, you got to keep hope alive.

Julie Adamen  33:06

Couldn’t have said it any better. All right, everybody, have a great day. Thank you for watching.

Announcer  33:09

You’ve been listening to HOA Insights: Common Sense for Common Areas. You can listen to the show on our podcast website hoainsights.org or subscribe on any of the most popular podcast platforms. You can also watch the show on our YouTube channel. Check the show notes for helpful links. If you like the show and want to support the work we do, you can do so in a number of ways. The most important thing you can do is engage in the conversation, leave a question in the comment section on our YouTube video. You can also email your questions or voicemails to podcast at hoainsights.org or leave us a voicemail at 805-203-3130. If you gain any insights from the show, please do us a HUGE favor by sharing the show with other board members. You know, you can also support us by supporting the brands that sponsor this program. Please remember that the views and opinions expressed by the podcast do not constitute legal advice. You’ll want to consult your own legal counsel before making any important decisions. Finally, this podcast was expertly mixed and mastered by Stoke Light Video & Marketing. With Stoke Light on your team, you’ll reach more customers with marketing expertise that inspires action. See the show notes to connect with Stoke Light

158 | How HOA Board “Poor Decisions” Become $20K–$3M Lawsuits

Sherry Branson  00:00

The training is really important. And consulting the experts and the professionals, like attorneys, your insurance agent, your broker, risk management professionals, you know, people who have our policy, our DNO policy, have access to a risk management helpline, which is free, one hour free of legal advice. So that’s a great resource, a great tool. So if you have access to risk management professionals, or you want to hire one, I highly recommend it. I think it’s well worth the money and the investment and the time.

Announcer  00:31

HOA Insights is brought to you by five companies that care about board members: Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You’ll find links to their website and social media in the show notes.

Kevin Davis  00:47

Hi, I’m Kevin Davis of Kevin Davis Insurance Services,

Sherry Branson  00:50

and I’m Sherry Branson of Kevin Davis Insurance Services, and this is HOA Insights, where we promote common sense

Kevin Davis  00:57

for common areas. Welcome to Episode 158 where we’re again speaking with Sherry Branson, my co host for my own monthly webinars at Kevin Davis Insurance Services. Hi sherry.

Sherry Branson  01:08

Hi Kevin. Thanks for having me today.

Kevin Davis  01:10

Yeah. Welcome back. Welcome back. This is actually a follow up episode of 153 where we talk about no decisions, and we discussed the dangers of not making the decision, and how no decision is actually a decision. Today we’re discussing the costs associated with no decision or a poor decision. Now, if you missed that episode or any other prior episode, take a moment after today’s program to listen from our podcast. Website www.hoainsights.org or watch on our YouTube channel. Buddy up, SUBSCRIBE from any of our major podcast platforms so you don’t miss any future episodes. Now, those of you watching from our YouTube channel can see that our HOA Insights mug, I hear from our merch store. Yes, we have a merch store, visit our hoainsights.org website, or link to any show notes, and you too can get one of these things. Sherry, have you gotten yours yet?

Sherry Branson  02:09

I haven’t gotten mine yet, but I’ll have to call Robert. I keep forgetting to call Robert, but I will call him.

Kevin Davis  02:13

Alright you gotta give him a call because we have a merch store and you get lots of stuff in there. We have some free things in there, like board member zoom backgrounds and some specialty items like this, like the mug, okay for sale now, we enjoy hearing from you responding issues that you are facing at your community association. So you have a hot topic, crazy story or question you’d like for us to address. You can contact us at 805-203-3130, or email us at podcast@reservestudy.com So Sherry, we’re back again, and we’re talking about a topic we just talked about in my webinar, just what, a few days ago?

Sherry Branson  02:54

Yes, Kevin, very recently, this is a fresh topic, and we talked about claims that we saw in 2025 and trends that are happening, and the fact that there’s, you know when boards don’t make a decision, a simple claim can be very costly.

Kevin Davis  03:08

and that’s the key thing that’s we’re gonna talk about today. We talked about last, last time, a month ago, how just there’s dangers between not making this make a decision, in terms of just the overall appearance of the Community Association the way it looks, the maintenance of it, collecting assessments, but today is a cost associated with it. And we’re talking about the simplest of simplest claims. Okay, not complicated claims. We’re talking about me as a unit owner or Sherry you as a unit owner, saying, “I don’t like what the board has done. They treated me unfairly. They’re inconsistent. They didn’t hear me.” And they take a simple thing, and guess how much the cost of a simple claim is? 17,800 so less than $20,000.

Sherry Branson  03:54

Yeah. And Kevin, you know, we’ve talked about the fact before that. You know claims, most of the claims that you see in community associations are not about money, but they do end up costing money in the end. But they’re very emotional. You know, it’s regarding the flag, flying the flag, or parking in a spot, or I want to paint my house in unusual color, or plant a special tree in the front yard, and they don’t approve of the tree, that kind of a thing. So the very emotional claims,

Kevin Davis  04:21

that’s a great point you’re saying, because most of these claims are procedural claims, meaning that, guess what? “The board did not allow me to do something I wanted to do.” In other words, “I want to paint my house a certain color, and they didn’t allow me to do it.” Okay? “They didn’t. They didn’t say no. They made no decision at all, so I went and started painting my house.” Now, eventually, what happens, they come back to me and say, well, guess what? It was not approved. Now, I did the work, you know, so the delay that they made ended up costing me. Now I get a lawyer because they made no decision. And I’m upset with them, and now sudden, the judge has got to come back and say, yes, what? Yes or no, and I get to keep my painted house, or have to repaint it or do something else. So these are kind of decisions, you know, pets, parking, you know, these are the simple decisions that the board has to make a decision as outlined in the governing documents, and that’s the key thing. When they don’t make decisions as outlined in the governing documents or state law or whatever they have, then guess what happens now, all of a sudden, you face what you call a procedural lawsuit against you. Perfect example. Here’s one that we I love talking about the trash can, right? The 48 hour trash can.

Sherry Branson  05:43

Oh, yes, those trash cans. Yeah.

Kevin Davis  05:46

I mean, you know, for where, where you live at, where I used to live at, grew up, you know, if trash cans not removed, them in certain at the time, I’d knock on the door, pick the trash cans back myself. It’s a day. Guess what happened? They end up following a going to the board. It’s like, guess what? Board you need to find this individual, because trash cans were out more than 48 hours. So now it’s been three or four days, I want you to send out a fine and notice of fine. So when you do that now that you now, you have a person there who sits back there and gets upset, because guess what? You’re inconsistent in your rules enforcement. Because I see a lot of trash cans out there that’s been there for three for a week long, and now you’re going after me, so because you’re inconsistent, now, all of a sudden, there is a claim made against you. Again. These are procedural claims. These are basic claims that the board has to follow again. These are documents that says, That’s outline that okay, you live in a community association. If you have election, you have to notify people within maybe 30 days. Okay, but what happens if you it’s been, you know, 45 days and you haven’t sent out the documentation? We have people in that community association. This community association says, Guess what? What you’re doing is unfair. You know, what you’re doing is inappropriate, therefore, I’m going to file a claim against you to make sure you do things in a more timely manner. And

Sherry Branson  07:10

you know, the sad part of these procedural claims, Kevin and like you said, small claims, is that people were never looking for money. They were not looking to, you know, to sue or file a claim or to get money. But it does end up costing the association 1000s of dollars,

Kevin Davis  07:24

$1,000 and it’s the key thing to it, the reason why it costs so much money, because once you get a lawyer involved, and a lawyer is looking at procedures, if lawyers looking at the fact that, wait a minute, it’s been 30 days, or four days, your trash cans been out, you’re now not conforming to the governing documents. Your document says you have to have these things done over certain length of time. If you don’t have it, then that attorney who’s handling that case is looking forward to it, because most states have what’s called prevailing party fees, and basically that means is that if I win the case, I win back my attorney fees so that I win, so I don’t lose. You didn’t

Sherry Branson  08:04

have to spend any money to spend money so that then the association is paying for their attorney fees

Kevin Davis  08:11

Exactly So, so the lawyer wins, because the association failed to just conform to the government and documents. So these are small procedural claims that we see constantly. And guess what? These kind of claims can be stopped.

Sherry Branson  08:27

What would you advise? You know, the board members listening today, Kevin to how would they what is the best way to handle this, to stop it? What do you recommend?

Kevin Davis  08:35

The number one reason that a lot of these things happen is procedural claims is because the board failed to communicate properly. Okay, communication is the key. They either ignore it, okay, afraid of it, or say that it’s that crazy guy in unit number six, again, he always complains about everything, okay, but what they’ll do, they do not respond, and or if they respond, they don’t do it in a timely manner.

Sherry Branson  09:05

So decision or a delayed decision,

Kevin Davis  09:07

exactly, and when you have that delayed decision now of a sudden, as you said before, it becomes emotional, and as it becomes more emotional, guess what happens now? Of a sudden, it gets more and more intense, yes, yes,

Kevin Davis  09:22

and

Sherry Branson  09:22

more and more expensive.

Kevin Davis  09:24

That’s the point, see, right now we’re talking about $20,000 claims, basically $20,000 or less. Okay, now we get a point, though, when we get past that $20,000 and hit that 100,000 to $250,000 range, that’s where things actually just starts to escalate. That’s the problem that we see today, because we’re living in a time where we have community associations and we have people who live there that are not they’ll like each other.

Sherry Branson  09:56

Unfortunately, yeah, more people at home, and there’s. Lot more stress and, you know, and things, and it just ends up turning into a lot of claims, because there’s, you know, houses are closer together. You have shared walls and condos, that kind of a thing, noise.

Kevin Davis  10:12

And we live in that post covid world where, right right now, here is what, two o’clock, two o’clock in the afternoon, where you’re at, okay, it’s 11 o’clock here, and the last Skipper coming in, and you can’t hear it.

Kevin Davis  10:23

I’m

Sherry Branson  10:24

here

Kevin Davis  10:25

exactly. So now, if I live in the condo, and it’s this time, and I hear pickleball people, pickleball noises, I hear the dog barking because he had a covid pet. So we’re living in a time now where things are heightened and because they’re hiding, I don’t like the fact that the board is not listening to me. They’re not responding. So it gets heightened when I’m saying, guess what? I don’t agree with decisions you made. That’s the $20,000 claim. But now I disagree decision you made. I think decision you made is inappropriate. It’s unlawful. You lack the authority to do it.

Sherry Branson  11:04

Okay? So now it’s gotten to that point where it’s contentious, where they’re, yes, very contentious. And, you know, lawyers are billing more hours. Let’s you know, they’re they’re getting more involved. They’re filing more paperwork. So the costs are going up and up.

Kevin Davis  11:18

That’s the problem. So the biggest problem our fear, you know, again, we’re handling insurance for directors and office of community associations. Our goal is, first of all, is to eliminate that $20,000 claim, and we do that by doing one thing is, communicate better. If you communicate better, guess what happens? You do not have those $20,000 claims. Okay, but now comes the next area now that only you haven’t done your job of communicating properly, okay? You now you heighten a situation, because the person on the other end lives in a community association where they are seeing things that haven’t been done well, they’ve seen things that have been kept up. Whenever I start these community association talks, we talk about the board of directors have a basic job. They do three things, they enforce the rules, they collect assessments, and they maintain the association. So if you ever what you want to see is somebody being upset by one of those three things, or maybe all three of those things. So what happens now if you have a situation where I’m upset because I fail to pay my assessment in a timely manner, I send them a nice note. They didn’t respond to my note, and I’m keep getting fees. I keep getting fees. I keep getting fees. Now of a sudden, I’m on the phone my lawyer, because guess what, you’re being unreasonable.

Sherry Branson  12:39

We’re targeting you with fees and fines and letters and you feel discriminated against and picking on you.

Kevin Davis  12:47

That’s the next word. So all of a sudden, again, we went from a $20,000 claim, now we’re into the 100 to $200,000 claim. That 100 $200,000 claim happens because you, as a board member, did not respond to me. It could be about the money, it could be about maintenance, it could be about the rules. You know, right? You would pass a special assessment where, guess what? I told you that the balcony that you said was cosmetic damage that was done, it was structural damage. I’ve been looking at this for the past two years. You didn’t listen to me. Now, all of a sudden, you were in special assessment. Your special assessment for $10,000 after you failed to do your job appropriately. So now all of a sudden, guess what you have? You have a bigger claim. You have a claim that’s gone from something really, very, very small to something very, very big. Because what happens is, again, once you get to that point where I’m excited or I’m upset or I’m emotionally charged with it, now all of a sudden, more money is involved. So you went from a $20,000 case to now because of my emotions, my lawyer is now more involved because I’m upset, because of special assessment, right? So now that lawyer had to go out and do his job and find out, well, guess what? Did the association have the right to have a special assessment? Did he have the authority to write the special assessment? Because I’m saying the board lacked the authority to do it.

Sherry Branson  14:15

So went from mild emotions to mildly upset to very upset, and since the temperature has gone so far up, now the price is going up. The lawyers, more involved, more legal fees, that kind of a thing. So everything has gone up. And it could have all you said, it could have been stopped in the beginning. It could have been stopped in the very beginning.

Kevin Davis  14:35

And the question is this, how do you end something like this? How do you say, Okay, guess what? You know, everybody go back to the corners, figure out it’s hard to because you’re looking at something that’s really, really important to the person who lives there, right? A special assessment, right? Okay, but it could be, you know, a parking situation, you know, no matter what it is, again, it could be a pet. You know, “I’ve had this pet.

Kevin Davis  15:01

I have a dog.” Okay? Dog is over the weight restriction that the board has said I have now have a 35 pound dog. The weight restriction is 25 pounds. “I believe that rule is unreasonable. I believe you are discriminating me, because guess what? You inconsistently apply that rule. You’re applying it to me.” So all of a sudden now you take a small claim and you heightened it,

Sherry Branson  15:29

and now it’s a medium getting even getting bigger and bigger with no end in sight, really no end in sight to come at all. In order to solve it is going to be more much more challenging and more complicated.

Kevin Davis  15:40

And it makes it more complicated because the board doesn’t do the simple things they should be doing. Okay? Again, communicating, effectively, asking experts, you know, the simple thing they can do, go out a higher attorney and say, Can you please look at this and respond to this for me. Don’t go to chat GPT and say how the best response, because chat GPT is not a defensible position if youre in court,

Sherry Branson  16:08

right, right. Yeah, they should speak to their attorneys. Call a risk management professional, or higher risk management professional, somebody who knows how to navigate this, Kevin, without escalating it and to calm it down, to cool it down and hopefully stop it, you know, before it gets to an even higher level.

Kevin Davis  16:27

And that’s the whole point there, Sherry, is that we have to calm down the people are involved. Because right now you have the union owners upset. Believe they’re being mistreated, okay, but you have the board member there who’s uncomfortable, because, guess what, they may not have enforced the rules the way they should have enforced the rules. So in other words, if I’m complaining about, you know, me parking my car in the wrong spot, or my dog or the balconies, and they choose not to do anything about it, they now will defend themselves. Now what they should do, what they could do, is step in early and resolve this thing in an early manner. Okay, don’t let it escalate. Don’t let it get bigger and bigger and bigger. Try to have it, you know, more manageable.

Sherry Branson  17:21

Absolutely, absolutely. But a lot of times, you know, the board member may be defensive or not feel, you know, well, you know they might want to dig their heels in and say, I’m going to defend myself and defend the association. But you’re right. I think hiring somebody from the outside to come in, an attorney or risk management person, somebody who could help bring it down and handle it so that it’s resolved in a, you know, a way where everybody’s happy, or at least, you know, at least reduce the heat and the emotions of it to the point where they just, you know, like a mediator, mediator type person would be good.

Kevin Davis  17:58

And one word I used last time, when we talked about this a month, they have to learn to board if they can be just a little bit kinder to the people who bring any things against them, they can avoid a quarter of a million dollar lawsuit. Okay, that’s what we’re talking about right now. We’re talking about 100,000 to a quarter million dollars because the board of directors. Okay, again, the union owner there, who lives there, is complaining to the board, because I don’t like decision you made, but the way you handle it was inappropriately, the way you handle it, I believe it was wrong. The way you handle it was unlawful. You know it was unreasonable. When they start throwing out words like this, you lack the authority. Now I’m challenging the board. Once I challenge that board, we’re not talking about $20,000 anymore. We’re talking about 100 $200,000 I’m challenging that board’s authority to act.

Sherry Branson  18:55

Yeah, you know, Kevin, people receive a letter in the mail saying, you know, you have to do this to your lawn, or you have to take that flag down, or you you have to stop painting your house. I know you’re in the middle of it, but rather than having board members talk, maybe have a meeting with the homeowner, you know, and saying, I understand this is not a popular decision. Or, you know, sorry, have to tell you this, but you know, there’s, there’s ways to handle things. With a letter, just a cold letter, saying, you know, I’m sending you a 50, $50 fine over your trash cans, you know. I mean, as opposed to, you know, I mean just talking to the person and saying, hey, you know, I’ll let it go this time. You just want to let you know that the rule is, you know, I know it’s, it’s a pain, but you know, you have to have the cans in, in a cup, in 48 hours, and you know, something like that.

Kevin Davis  19:42

And that’s what I always say is about this, as board of directors of community associations, is your job, your job to kind of lower the temperature so you don’t end up with a $20,000 claim, let alone when that $20,000 escalates to 100

Kevin Davis  19:58

A $200,000

Kevin Davis  20:01

claim, and it’s easy for it to happen. You know, it’s easy. All you have to do is say you’re being unreasonable. Okay? You don’t have the authority now of a sudden, you take it that much bigger, and all you have to start by doing is communicating effectively, but communicating in a kindly way, communicating the kindly way, it’ll allow you that ability to be able to handle things a lot better.

Sherry Branson  20:27

Absolutely, that’s the key, I think. And I think, you know, it’s it’s nice, it’s every HOA has to have rules. Everybody knows that. But there are ways, I think, in some situations, to communicate them, where you can understand that a homeowner would be upset about a pet if you’re telling them they can’t have their pet anymore, or paint the house their favorite color, or whatever. You know, these are, like we said. They’re emotional decisions and emotional claims. So I think handling it with some discretion and kindness and communication, I think goes a long way, and could save the association a lot of money, and everybody wouldn’t be so stressed out, you know, they wouldn’t. It wouldn’t get worse. Put it that way,

Kevin Davis  21:06

and you’re right, too, in terms of all these decisions are mostly emotionally based, you know, which at the end of the day, which means that once it goes to a judge, right? The judge is sitting there, and all these, most of these cases, they’ll say, Okay, I understand. You don’t like the election. You like the fact that your car was towed. You don’t like the fact you can’t have a pet. Well, how will you harm financially? So what kind of judgments? What do you want as a result of this?

Sherry Branson  21:35

If they don’t want money, they don’t want that’s the thing. They don’t want the money. They want to be able to keep the pet.

Kevin Davis  21:40

And that’s the whole point. So a lot of times when we talk about these lawsuits that end up costing $20,000 or go from 100,000 100,000 to a quarter of a million day, almost 500 million. You’re talking about defense costs. It’s rare where there’s a judgment, settlement, damages involved,

Sherry Branson  21:57

yeah. So it’s just such a unique situation that, you know, the board members, I don’t think, realize, you know that they’re in. And I think that if you have people skills and communication skills, and maybe, you know, get, maybe get take some training, some courses regarding that, maybe mediation skills would be a good class to take, just something like that would really go a long way in saving everybody a lot of headaches and a lot of money.

Kevin Davis  22:27

How true? All right, share, this is break time. Let’s take a break and hear from one of our sponsors. Then we’ll come back and talk about big million dollar claim, how we hit them, and how do we stop that from happening? Okay, let’s take a quick break. Hi, I’m Kevin Davis, the president of Kevin Davis insurance services, our experienced team of underwriters will help you when you get that declination. We provide the voice of reason, someone who will stand by you. Our underwriters bring years of knowledge to our clients that can’t be automated by technology or driven by price. As a proud and women’s company, we bring true value to your community association clients. We are your community association insurance experts, and we’re back. Let’s talk about the big claims. A million dollar claim. Last year we had a $3 million claim. Okay,

Sherry Branson  23:18

yes, three million dollar– That’s the biggest one that Kevin Davis insurance has ever had, correct,

Kevin Davis  23:23

biggest one they ever had. Let’s talk about how you’re going to see a large claim. Okay, a large claim happens in about a couple areas. Number one, structural damage, like the one I talk about with the balcony. In California you have balcony laws that you have to have a balcony inspected. Again. What happened to the one we’re talking about, They thought it’s cosmetic. It’s structural damage. And when you have structural damage, we have a million dollar claim. It’s no longer about me. It’s about the association in general. That’s the difference,

Sherry Branson  23:54

right, right.

Kevin Davis  23:55

$20,000 claim is about me. $100,000 claim is about me. Million dollar claim, it’s not just about me, it’s everybody who lives here,

Sherry Branson  24:06

right, right. That’s an extremely expensive claim, and one that will go on for years, right Kevin?

Kevin Davis  24:12

eight years, 8, 10, 12 years. Million dollar claim, a curse. Number one reason structural. That’s the big reason why. Second reason is really we have our severe weather, so they kind of go hand in hand. But you have when we had the wildfires out here last year, a year ago, the amount of claims that we are seeing today is unbelievable. We’re starting to see claims from them because the board of directors were not prepared for this. There was no they didn’t do the proper notifications. They didn’t have a manual that tells them what they do in the event of a major disaster. We see them with fires. We saw the earthquake we had in California. We saw with wind damage whenever theres a major disaster. We’re looking at million dollar, oh, the main one that went down the one in Florida, Surfside.

Sherry Branson  25:08

Surfside, yeah, Surfside, that’s structural. I mean, that was the board member. They had done the this study where they had the engineering study, they had had the building inspected. They knew the work needed to be done. Kevin and they had the money. They had the money sitting in the account. They delayed it and delayed it and delayed it. And, you know, we, and I have talked before about, you know, a lot of board members, they don’t want to be the ones to say, Oh, we have to pass a $10,000 special assessment, you know, we all have to fix the the parking garage or the foundation or the roof or something. And they don’t want to be the bad guys. They don’t want to deliver the bad news, you know, so they don’t make that decision, they don’t pass the special assessment, and don’t spend the money even though they have it.

Kevin Davis  25:47

And guess what? Money is the next big, big one. Next big area is we talk million dollar claim. There’s money. We’re talking about fraud. We’re talking about embezzlement. We talk about mismanagement, because we’re talking about a special assessment of millions of dollars, there’s always somebody going to say, Guess what? You did not handle it properly. Reserve study told you 10 years ago, five years ago, that you needed X number of dollars. You didn’t do it. So therefore I get it doesn’t just impact me, but impacts the entire association. So we’re going to hold you board members responsible for that special assessment or for the lack of money we need to make the appropriate repairs. Again, another large claim, yeah, structural damage, you know, financial you know, severe weather. The next biggest one we’re talking about is discrimination. Discrimination is a big one. Is discrimination a big one in community associations, because a lot of times, most people don’t realize they’re discriminating until they go look and go, Oh, guess what? The only person that hasn’t been impacted was, guess what, a person of protected class, the only person that we end up repairing the roofs on everybody, but we left one person out. Now the reason why we let that person out is not because we discriminated against them, because they happen to be the person that we don’t like any associations.

Sherry Branson  27:14

You don’t like that person, so you’re gonna, yeah, exactly single that person out because you don’t like them. You know what I mean? And yeah, yeah. Emotional. These things are all emotional. The board members, they live in the association. They know their neighbors. They have, you know they they know who the complainers are, the people who complain all the time. And yeah.

Kevin Davis  27:31

And what happens is, now what happened? We found out a couple times when a judge comes in and says, Guess what? Yes, you did discriminate against that one individual. You have to buy their place. We have to buy their place,

Sherry Branson  27:43

right, right? So, right.

Kevin Davis  27:44

So you end up now all of a sudden, you have, again, a huge it could be a half million dollar home. You talking about the defense and everything that we had to be a part of in this one claim. So now you’re in that million dollar zone, that million dollar zone, that $2 million loan, a $3 million loan, a $3 million loan.

Sherry Branson  28:03

Kevin, I know the $3 million claim that we saw discrimination was part of that one right? It

Kevin Davis  28:08

was a discrimination case, and it was from a massive hurricane wind damage in Florida, where the person we started receiving monies to repair the Community Association, and one person was left out, and one person had to be a protected class. Yes, that we do the work, and we did the research. You find out the reason why a person left out. It was just going back and forth. It’s communication issues. There’s a problem with it. The person wanted more than they were entitled to and going back and forth, but had to be a protected class. And what happened to protect the class? You end up, it’s just, you add them all up, and it ended up being a major, major deal for this one situation, yeah,

Sherry Branson  28:54

yeah. 3 million. That’s a huge claim.

Kevin Davis  28:57

And then the final area is just a major breach of fiduciary duty. If board breach of fiduciary duty, because they fail to inspect this one unit, they fail to inspect it because, again, by law, you know you have to do either, like in Florida, you have structural integrity laws. In California have laws. So in certain states, you have these laws if you’re not complying with these laws. So now, all of a sudden, I can’t sell my unit,

Sherry Branson  29:23

right, right.

Kevin Davis  29:25

I can’t sell my unit because Fannie Mae, Freddie Mac says, Guess what you in the blacklist,

Sherry Branson  29:31

right? Right? Yeah, problem, right. Now,

Kevin Davis  29:35

it’s a big problem.

Sherry Branson  29:37

Blacklist is for people who might not be aware.

Kevin Davis  29:40

Well, okay. Well, Fannie Mae and Freddie Mac has this list of associations that does not comply, because either the reserves are not adequate, they have structural issues, or they have insurance issues, one of those three usually are the problem. Well, what happened is the Community Association breached their fiduciary duty, major fiduciary duty, because all of a sudden. I can’t sell my unit, but nobody else can either.

Sherry Branson  30:03

Yeah, so that’s

Kevin Davis  30:04

all of a sudden you’re talking about talking about a claim that’s impacting more than just me. When that happens is you’re talking about a million dollar claim, because guess what happens now, my unit is not worth a half a million dollars anymore. It’s only worth $400,000 if I can sell it at all, because I can’t get a Fannie Mae, yeah, exactly.

Sherry Branson  30:25

Wow. And the sad thing about that is, a lot of homeowners don’t even know that their association is is on the black list

Kevin Davis  30:34

until,

Sherry Branson  30:35

until they go to sell,

Kevin Davis  30:37

yes, until

Sherry Branson  30:37

until they go to sell.

Kevin Davis  30:38

And then all of a sudden they find out the hard way. But again, the difference between the large cases the large ones is that it impacts more than just me,

Sherry Branson  30:48

impacts everybody,

Kevin Davis  30:49

impacts more people.

Kevin Davis  30:51

So

Kevin Davis  30:52

So let’s summarize what we learned today. Okay, for documentation, deferred maintenance, inadequate reserves. Okay, no decision or a bad decision all leads to losses, costly losses, okay, at the minimum, 20 less, little less than $20,000 but the maximum it can be in the millions of dollars. So what Association you do about it? Number one, enforce rules consistently. Number two, communicate decisions clearly. Number three, address problems early. Number four, seek advice from the experts. And number five, board members should seek training, get some little bit of education on how to run a board of directors.

Sherry Branson  31:46

It’s a job. Kevin, it’s a job. And training is is so important. And you know, we’ve discussed it, you touched on it today, and when we’ve talked about another or other webinars, you know you you’re following state laws, county laws, city laws and federal laws, and as a board member, you’re a volunteer, and you don’t, you’re not going to know all the laws and ordinances and requirements in that each particular area. So that’s, it’s a lot to know,

Kevin Davis  32:13

it’s a lot to know. It’s a lot to know. So any closing comments there, Sherry, we got anything

Sherry Branson  32:18

I just want to you know, piggyback on what you said, which is, you know, the training is really important, and consulting the experts and the professionals, like attorneys, your insurance agent, your broker, risk management professionals, you know, people who have our policy, our DNO policy, have access to a risk management helpline, which is free, One hour free of legal advice. So that’s a great resource, a great tool. So if you have access to risk management professionals, or you want to hire one, I highly recommend it. I think it’s it’s well worth the money and the investment and the time.

Kevin Davis  32:53

I have one that we didn’t say and treat it as a business.

Sherry Branson  32:59

That’s

Kevin Davis  32:59

okay.

Kevin Davis  32:59

That is key, yeah.

Kevin Davis  33:01

You’re running a multi million dollar corporation. Treat it as a multi million dollar corporation, not as a social club where you get to decide what books you’re going to read or what Netflix show you want to watch. You get it. Treat it as a business. When you treat it as a business, and you act as a business if you get sued, and on those $20,000 claims, you have insurance to pick it up. What you don’t want to do is to get that $20,000 claim into that $100,000 claim, or a million dollar claim. So the one thing we did, we hope we did, was give you some advice, or some reasons or some ways to make sure you lower the temperature. You know, be kind to one another. Be kind in your communication so that we don’t end up hearing about that $1 million claim on TV or the newspaper. So anyway, thank you a lot, Sherry. I look forward to doing this again sometime in the future. I enjoyed doing it back to back with you.

Kevin Davis  33:54

Yes, I

Sherry Branson  33:54

did, too, Kevin, thank you for having me today. I had a lot of fun. Thanks so much.

Kevin Davis  33:57

All right. Take care. Thank you very much.

Announcer  34:04

You’ve been listening to HOA Insights: Common Sense for Common Areas. You can listen to the show on our podcast website hoainsights.org or subscribe on any of the most popular podcast platforms. You can also watch the show on our YouTube channel. Check the show notes for helpful links. If you like the show and want to support the work we do, you can do so in a number of ways. The most important thing you can do is engage in the conversation, leave a question in the comment section on our YouTube video. You can also email your questions or voicemails to podcast at hoainsights.org or leave us a voicemail at 805-203-3130. If you gain any insights from the show, please do us a HUGE favor by sharing the show with other board members. You know, you can also support us by supporting the brands that sponsor this program. Please remember that the views and opinions expressed by the podcast do not constitute legal advice. You’ll want to consult your own legal counsel before making any important decisions. Finally, this podcast was expertly mixed and mastered by Stoke Light Video & Marketing. With Stoke Light on your team, you’ll reach more customers with marketing expertise that inspires action. See the show notes to connect with Stoke Light

157 | What Happens When ICE Comes To Your HOA?

Sandra Gottlieb  00:00

If something looks dangerous, we are not about advising obstruction. We’re about advising lawful caution, protection of members’ rights and privacy, and I said before constitutional rights. We don’t want to decide that at the front desk, but if there is a threat of force, get out of their way. Leave it to the attorneys for the association to clean it up after the fact.

Announcer  00:26

HOA Insights is brought to you by five companies that care about board members: Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You’ll find links to their website and social media in the show notes.

Announcer  00:42

Welcome back to HOA insights: Common Sense for Common Areas.

Robert Nordlund  00:45

I’m Robert Nordlund, and I’m here today for episode number 157, with a prominent industry attorney I’ve had the good fortune to know for decades. I heard her speak on this topic at the CAI law conference, where I was fascinated. After the program, I went right to the front and asked her if she could present the same material to our podcast audience. And this is because complying with law enforcement or people in uniform is something that we just do as part of living in our ordered society, but that has traditionally been for issues having to do with life safety. You got to think about letting a fireman into your house, or when a policeman pulls you over for speeding, or when the FBI raids the office of a corrupt politician, things like that that you want to support. So without touching the political sensitivities of this topic today, we’ll learn if we should put ice officials in the same automatic compliance category, or if they belong in a different category. So today I have with me and with all of us here, Sandra Gottlieb, a founding partner and the senior managing partner of the prominent California law firm, Swedelson Gottlieb, Swedelson Gottlieb exclusively represents community associations across California, and Sandra is also a member of the College of community association lawyers, also known as C Cal or c, c, a, l, c Cal members are the top approximately 200 attorneys who’ve been recognized for their excellence in the practice of community association law. So Sandra is an influential force in the community association industry, and I’m lucky, and we’re lucky to have her here as a guest, and I’ve had the pleasure of enjoying her as a friend for many years. But before we get to today’s program, let me remind you of last week’s program, number 156, with Curtis Peterson of the inspectors of election, if you ever put in some long hours preparing for an election vote or special assessment vote, or if you were anxious about getting the result right, or if it could stand up the challenge. That’s why the inspectors of election exists. They make those problems go away. Listening to that episode will help you learn another way you can simplify your life as a board member and lower your concerns about something complicated and getting that done well. So if you missed that episode or any other prior episode, take a moment after today’s program to listen from our podcast website, Hoa insights.org,

Robert Nordlund  03:09

or watch on our YouTube channel. But better yet, subscribe from any of the major podcast platforms so you don’t miss any future episodes. Becoming a subscriber also increases the podcast ranking in search results, helping others find this free resource so they can be better equipped to lead their association. Well, those of you watching on YouTube can see the HOA insights mug that I have here. I get a kick out of it regularly that I got from our merch store, which you can browse through from our Hoa insights.org website, or the link in our show notes, you find that we have some great free stuff there, like board member zoom backgrounds and some specialty items for sale, like mugs. So go with the merch store, see what we have for sale, and at least download a free zoom background. Well, we enjoy hearing from you and responding to the issues you’re facing at your association. So if you have a hot topic, a crazy story, or a question that you’d like us to address, you can contact us at 805-203-3130,

Robert Nordlund  04:11

or email us at podcast at Hoa insights.org, but today’s episode is on me.

Robert Nordlund  04:18

As I said moments ago, I was fascinating listening to Sandra’s presentation at the CAO law conference, thinking about its implications on my way of thinking, my way of living, and the implications for all my clients. So Sandra, welcome to the program and tell me there’s got to be a story about what got you started on this road to becoming an expert on ice and community associations.

Sandra Gottlieb  04:43

First of all, I want to say how honored I am to be here, and I mean that sincerely when I reflect on how many years we’ve known each other and grown in this industry and what you bring to this industry, it truly is amazing. So thanks for this opportunity.

Robert Nordlund  04:57

You’re very kind

Robert Nordlund  04:58

Well, you know, I’m that kind.

Sandra Gottlieb  04:59

You know, I only say what I believe. So how did this happen? For me? It happened because I received a number of phone calls all in the middle of the night. Little ping on my phone causes me to look over being a parent. You’re always a parent. You never shut off completely. And I’d see general managers of high rises throughout California that we work with, and they were all 911, type of calls got up called back in the middle of the night, and I realized that ice was using the play used by the FBI for two decades, which is come into associations in the middle of the night, when the A and B teams are gone, when the skeleton staff are there not anything wrong with them, but not the people who are equipped to people who are showing them a badge or not saying they have a badge, showing them in their face, or not saying they have the authority to be there, let us in. It created panic where Panic was not necessary, and I realized the tools that we have had for the longest period of time. How do you deal when the police come or the sheriff come, when they make a demand for footage? Is we say, Where’s your warrant that doesn’t change with ice. That’s led me to really study this on both a national and state level, put together a proposal for Cai national, was honored to share the podium with two other great presenters, and we taught about it. We had a full house with attorneys who didn’t realize at the time this was a story and the skill set they had to bring back to their clients, right?

Robert Nordlund  06:36

Well, that’s That’s fascinating. I I’m glad to hear you keep your cell phone on and available, that’s a wonderful thing, but it keeps making me think, have I learned the wrong thing for years, but you gave us a clue there that we kind of already know this, we’re not going to slow down a fireman when they’re rushing into I hope they’re going to break down my front door and

Robert Nordlund  07:02

take down the fire, but that clue that we already kind of know what the right thing is. And can you

Robert Nordlund  07:07

go a little bit further on that?

Sandra Gottlieb  07:10

Well, sure, of course, I can. First of all, if this is not political, and I really mean that it’s not political, but ice and DHS, they are no longer just abstract acronyms to community associations. So we can’t pretend it’s just people in uniforms without

Sandra Gottlieb  07:30

causing us to take action on information, as I said, that we already had. And the most important thing for us to know is this applies to all kinds of common interest, developments, residential, commercial, mixed use. It happens every time we face an encounter at the door. And what we’ll do by talking about the things that we already know is try to demystify this so that associations can know what they can and can’t do and what their risks are and what they aren’t are. And the distinguishing feature, however, is that ice is different because it forces us to look at a couple of things that we’re not used to looking at, which is sort of the intersection when federal immigration enforcement, ice crosses, property rights, privacy laws, discrimination, discrimination laws and association governance, we don’t usually look at all of that every time the fire department comes at our front door to see if we have a permit.

Robert Nordlund  08:26

Yeah, you’ve given us a handful there. Intersection of ice with property, privacy, association, governments, a lot of things. So is your council just slow down, take a pause. This is not an emergency.

Sandra Gottlieb  08:39

My Council is slow down, take a pause, and always ask this question, who are you? What agency do you belong to?

Sandra Gottlieb  08:50

Can I see documentation that supports that, and where is your warrant for access? And you alluded to something brilliant, which is, we’re already doing this. How is it different? We never would let police come in and say, give us your surveillance footage without a warrant. We would never say

Sandra Gottlieb  09:08

you can come into our common area without a warrant or a subpoena for something, some court order. And so we’re not treating them differently. We’re treating them exactly the same with the same governance tools we already have in place.

Robert Nordlund  09:24

And I’m thinking it’s fundamentally because it’s not an emergency. It’s they’re transacting business, and business you can do business on your schedule. Is that one way to look at it?

Sandra Gottlieb  09:35

It is. It’s an excellent way to look at it. One of the things that I’d like to say to expand upon that is the rushing factor is making mistakes, and what we are seeing that is communities are over sharing, opening up the privacy door where there’s could be a potential exposure to liability if sued for violating privacy.

Sandra Gottlieb  10:00

Laws, and we don’t want anybody in our associations, management or the board, to be exposed to that liability. So it is really slow down. Don’t panic. Check out that authority. You want something. Tell us what you want and what your authority is for it, and we will look at it. One of the most important takeaways from today is have a policy on what to do when ice is at the door. So whoever is at the door when they’re knocking will be able to pull out that policy and see step one, step two, steps three.

Robert Nordlund  10:32

So that’s kind of like your emergency policy that everyone should have. What happens if there’s a fire, we do this, we do this. We do this. An earthquake, a power outage. You smell smoke. What any of these things you should know what to do. So it’s not catching you by surprise, even if it’s, and I, like you, alluded even if it’s the night shift where they’re trying to probe for a weakling to get entered to the association

Sandra Gottlieb  10:56

exactly, if you don’t have a protocol, you’re literally negotiating constitutional issues at the front desk of your associate not a good not a good thing to do.

Robert Nordlund  11:05

Yeah, we don’t. We don’t want that happening.

Robert Nordlund  11:09

I don’t think front desk people are the right people to be. And again, no offense. You need front desk people. You need and in town home, if there’s someone trying to buzz in to the gate saying I am the sheriff, or I’m ice, or whatever, just you want to slow things down. Okay, I get that. Now, one thing that I caught my attention at your seminar was, when I think of ice, I think of,

Robert Nordlund  11:40

well, yeah, I’m a middle aged white man, so English speaking, so a lot of this hasn’t touched me personally. So I think of other people. I think of other places. I think of borders. I think of people trying to smuggle in things at the airport, just a lot of things that don’t touch me. But now this is my association and the ICE agents. When I see pictures, I see a lot of them dressed like a SWAT team. I would think that would put us on our heels and make us think, uh oh, there’s an emergency here. There’s a rush. Is that part of

Robert Nordlund  12:17

their strategy,

Sandra Gottlieb  12:18

from my investigation and analysis, that’s absolutely part of their strategy. That’s how they get people to let them in and sort of do their bidding for them, so that they can get access into that community. It’s not our job to do their job for them, and when they at the beginning, let’s be honest with each other, they weren’t dressed like law enforcement agency. They were dressed like thugs. They were dressed like people who were grabbing people and throwing them in back of trunks, and instead they were putting them in vans or in the backseat of a car. I can’t even imagine the fear factor of your next door neighbor, just because he might be a brown man in his 50s or 60s who’s born in this country, whose parents were born in this country, who’s gotten caught up in all the perilous politics of all of this, how scary that must be. So it was really hard to take away that fear when I was analyzing this, to really say what’s in front of us so that we can make sure that we don’t make mistakes, to protect our associations, our board members and our personnel.

Robert Nordlund  13:22

So what are we protecting here? It’s not like we’re the place is on fire, so we’re not protecting property, but we’re protecting our owners. We’re protecting our staff. Are we protecting the

Robert Nordlund  13:35

business providers, the landscapers, the

Robert Nordlund  13:41

team doing the elevator modernization. Who are we protecting?

Sandra Gottlieb  13:44

So we are protecting everybody. I’m going to talk about the landscapers first, because this has happened to me twice, two in different take on this. Once was the association landscaper. We had a planned development, rather large planned community, and they came in in vans. I believe there were three vans, and they came in. They literally rounded up all of the landscape personnel of our vendors, who were hysterical as they were being taken away, and nobody could have the time, the or the ability to make calls. Fortunately, residents ran to the General Manager, they do have an on site location, and they said, this is happening. And got us involved. The other situation was even more tricky, and that was the landscaper of a homeowner. So ice came in, and it was a third party. It was the homeowner’s vendor, their employee. How does this even touch us? That might be a distance too far for it touching us, for the vendors, employees who work for the association, we have different codes, even the Unruh Civil Rights Act, that allow and guarantee people the right to work.

Sandra Gottlieb  15:00

In a hostile, free work environment. Ah, who would think about that? Do we have intercede to protect those people so we are not the recipients of a HUD claim. Who’s thinking about that at 3am

Sandra Gottlieb  15:12

so you asked who are protecting?

Sandra Gottlieb  15:16

And the answer is probably all of the above, but our client, mine and yours is the it the homeowners association, and then the corporation, and then everything that stems from the it Okay, in those two HOA or planned development situations, was there a gate? How did they get through the front gate? In the situation where the they were the association landscapers, the personnel allowed them in at the front gate because they said they were there on an emergency, forgot all protocols and opened the gate in the situation where it was the home owners, landscaper. It was a non gated community, okay?

Robert Nordlund  15:58

So if we’re talking about

Robert Nordlund  16:01

the homeowners landscaper. That means that could be a homeowner’s domestic

Robert Nordlund  16:07

help, housekeeper. It could be anything, okay, anybody. And we live in a world. Our current world is where there’s a lot of the

Robert Nordlund  16:15

economy. A lot of the jobs here in our country are done by how do I say this people from another country, whether here, legally or illegally, is really not the point, but they’re doing a lot of the jobs that make this country run. And I didn’t know that there’s laws that say that you have a right to a hostile, free work environment. Isn’t that something? Yeah, I know that as a boss, I’m supposed to have safety training and sexual harassment training, those kinds of things regularly. I think it’s every year, but I can see the extension of that is, yeah, hostile, fear free. Fear free. Yeah, well, I’m certainly glad there’s people like you around and Sandra, I’m looking at the clock here and thinking that it’s probably time to take a midpoint sponsor break. So let’s do just exactly that. It’s time to take a quick break to hear from one of our generous sponsors, after which we’ll be back with more common sense for common areas and the tricky topic of what to do when ice comes to the door.

Kevin Davis  17:13

Hi. I’m Kevin Davis, the president of Kevin Davis Insurance Services. Our experienced team of underwriters will help you when you get that declination, we provide the voice of reason, someone who will stand by you. Our underwriters bring years of knowledge to our clients that can’t be automated by technology or driven by price. As a proud and women’s company, we bring true value to your community association clients. We are your community association insurance experts,

Robert Nordlund  17:41

and we’re back. Well, Sandra, before the break, we were talking about the client is the association. So, yes, we have to be careful that the client and everyone who’s underneath it is somewhat we are responsible for. But take me to the issue of access control. You talked about the ice getting into the association, whether it’s a front door, front gate. Are there keywords or things to look for when

Robert Nordlund  18:11

you have a situation on your hands?

Sandra Gottlieb  18:13

Yeah, the first thing that you need to

Sandra Gottlieb  18:16

to look for is, do they have a warrant? We all watch TV. We all know those words, even if it’s not part of your everyday vernacular, and there’s two types of warrants, there’s an administrative warrant, and that’s issued by Immigration and Customs Enforcement and judicial which is signed by a federal judge. Administrative warrants have no authorization powers for ice to actually enter private or restricted access areas, which most common areas are in gated or secured communities. So associations have the right, and frankly, I think the obligation to ask to see, as I mentioned before, the identification ask not just to see that warrant, but to have a copy of it so we have it as part of the corporate record and consult with counsel before granting access. Slow your role. It is not where the fire department is at the door and you open the door or they break the door down. Fear has created this anxious response to do things before we really need to do so policies will help us adhere to the slow the roll philosophy, because we can just look at it. Oh, did we get the copy of that? Do we ask for that? So I think that really helps. Robert, yeah, and

Robert Nordlund  19:35

I’m thinking I’ve watched enough TV to see the good guys outside the door, and they bang on the front door, and we have a warrant, and the homeowner, or the bad guys usually inside,

Robert Nordlund  19:47

you know, they start running out the back door. But it was key for you to say that there are two different types of warrants, and who am I to know if it’s the administrative warrant or the judicial warrant?

Robert Nordlund  20:00

I don’t know, and I wouldn’t that’s not my job to know. And my first reaction is to, I want to call my attorney again. You keep saying, slow your roll. Slow it down. This is not an emergency, so let’s not make an emergency, and let’s not do something wrong by making it a problem, making it a bigger problem, exactly 100% correct.

Sandra Gottlieb  20:20

But we are about educating our staff so that they can see a picture of what an administrative warrant looks like and what a judicial warrant looks like. So if somebody is throwing the administrative warrant in front of them, saying, hey, you know this is an administrative warrant, I’m going to call the attorney. But this doesn’t actually

Sandra Gottlieb  20:37

require us to grant you access so that they are informed when they are actually making those statements. I do want to say for the record to protect you, to protect me, and to protect everybody who is listening, no matter what we tell you today, if something looks dangerous, we are not about advising obstruction. We’re about advising lawful caution, protection of members’ rights and privacies. And I said before constitutional rights, we don’t want to decide that at the front desk, but if there is a threat of force, get out of their way. Leave it to the attorneys for the association to clean it up after the fact.

Robert Nordlund  21:19

Sandra, I was doing a site inspection at a high end planned development, multi million dollar homes, doing my pre site inspection, meeting with the general manager, and a call came in from the gate. I could hear their voice, all excited. There’s a van of FBI agents here saying they want to get in. Do we let them in? And the GM said they’re the good guys. Let them in, and that was that. And I still can hear that they’re the good guys, but you’ve said it a number of times here, slow things down, find out who they are. They’re ice. Oh, why are you here? Oh, you have a warrant, and we got to erase that automatic thing that we’ve heard in our brain that when someone throws a warrant in your face, or

Robert Nordlund  22:03

your search warrant, or whatever it is, you let him in that. In this case, you say, okay, that’s nice. Let me get a copy and let me contact my attorney. There is no emergency here,

Sandra Gottlieb  22:14

exactly, whether the good guys or not. You know, it’s really important. I really want to say that. I am not saying that ice are the bad guys. I am saying our introduction to ice as a country was not a good rollout for who ice was and what their role is in the protections of our rights and in our government, and so it created the perception that those were the bad guys at the gates. I didn’t call them the bad guys at the gates. I called them ice at the gates. And I did that on purpose.

Robert Nordlund  22:50

Yeah, well, we need protections in our society. We are an ordered society. We need law enforcement. We need fire thinking. We need the postal people out here. My son’s in the military. We need that also. It’s just how an ordered society runs. But I think we need to be careful, as you said, that ice is not don’t automatically throw them into the same bucket as policemen and FBI and those things that we’ve known for a long time, because ice is something kind of newish. Is that fair?

Sandra Gottlieb  23:22

It’s completely fair with no established training protocol to be hired as an ice officer. Let that sink in for just a moment.

Robert Nordlund  23:33

Yikes. Okay, so we don’t want our clients, your my clients, or even non clients. Everyone listening to this to automatically jump in and comply, slow them down, find out who they are. What reason do they have to be here? Get a copy of it and slow it down and push that to your attorney.

Sandra Gottlieb  23:52

 All of that’s true. I want to say one more thing, because I failed to say it previously. Do not respond to verbal requests. Require to be in writing so that our managers or our board members, depending on the type of communities they are, are able to establish what they were asked and what they gave in response to what they were asked. Who asked it, what the warrant looked like, what information we provided in response to the warrant, and when we’re talking about, as you repeated already, to slow the roll, one of the things we want to do is make sure we don’t violate a homeowner or residents or even personnel’s right to privacy because we overshare too quickly in a manner which we were not supposed to do.

Robert Nordlund  24:40

 My pen is about the smoke I’m taking notes so fast,

Robert Nordlund  24:44

okay, so, yeah, slow it down. And we need to understand this is an important factor in our world, and we just need to treat ice differently than other law enforcement agencies, and it’s okay to say, and I’m thinking of a you.

Robert Nordlund  25:00

A nice person at the front gate,

Robert Nordlund  25:03

a nice person at the front desk

Robert Nordlund  25:06

who

Robert Nordlund  25:09

is just uninformed, but we just need to counsel them to slow it down. It’s not an emergency. Treat them as an admin type person. What are you here for? And let me get

Robert Nordlund  25:22

clarification, and we’ll get back to you maybe tomorrow. I’m not authorized to provide consent.

Sandra Gottlieb  25:28

May please take down your contact information and I will make certain that whoever is authorized contacts you, and I like what you said tomorrow. So we have time to go through this process to make sure that we are responding correctly.

Robert Nordlund  25:43

Okay, last thing, give that person the consent. Last thing, you troubled me a little bit at the beginning when you realized that there weren’t a lot of attorneys who had a lot of experience. And again, this is a new thing. It’s a real part of our industry. Do you go to your attorney? Answer is, yes. What do you do? If they like, Gee, I hadn’t thought about that.

Sandra Gottlieb  26:01

Ask them to think about it. Tell them that they heard about that this. Direct them to this and other, to this podcast, to Cai seminars, so that they can put a different lens on and look at these protections in a different way. Until those 3am phone calls, I hadn’t thought about it either. I was forced to think about it at those times in the moment, because they were happening with rapidity, and I had to get prepared, right?

Robert Nordlund  26:30

 And that’s part of the way you and I, even though we’ve been in this industry for many years, we have to keep adjusting, learning what the new things are, and guiding our clients safely and successfully into the future, and I still get pleasure knowing that you got your cell phone at the side of your desk. I’m glad that you’re that annoying my husband, too, by the way, I understand that, but

Robert Nordlund  26:53

it takes people who care, and that’s why we’re presenting this podcast episode, because we care that our audience knows the right things and to stimulate this conversation with your attorney. So Sandra, it’s great to spend a few minutes with you addressing how ice and immigration related demands have added a new layer of complexity to our lives in community associations, and what we can and should do about it. So any closing thoughts to add at this time.

Sandra Gottlieb  27:21

Don’t be scared. Don’t make yourself a target. Be prepared. We all know the more prepared we are for anything, the easier it is to get through the day and to conduct the business of each one of our different jobs. And we see now that it is an imperative as community associations, that we act as communities together to get through this difficult time.

Robert Nordlund  27:42

Fantastic. Yes, I like that. Well, if you’d like to get in touch with Sandra, remember, she’s a California Attorney, you can find her in the entire team at laws for Hoa, l, a, W, O, Singler law for HOA com Cool got it. Well, we certainly hope you learned some HOA insights from our discussion today that helps you bring common sense to your common areas. And we look forward to having you join us for another great episode next week.

Announcer  28:14

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156 | Stop Wrestling With HOA Votes!

Kurtis Peterson  00:00

I want to blanket every Association out there in that fashion. I mean, there’s some that run smooth. They don’t need our services, and that’s all there is to it. And I’m comfortable with that.

Robert Nordlund  00:11

We love those associations,

Kurtis Peterson  00:13

doesn’t it doesn’t go that way forever. You know? I mean, change is inevitable. Something’s going to change. And you know, you do only takes one, you know, one individual and an association to really make things interesting. And it’s been my experience that there’s always at least one, at least one in every Association, and that’s regardless of the size, right?

Announcer  00:35

HOA Insights is brought to you by five companies that care about board members: Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You’ll find links to their website and social media in the show notes.

Robert Nordlund  00:51

Welcome back to Hoa Insights: Common Sense for Common Areas. I’m Robert Nordlund. I’m here today for episode number 156, with a special guest appearing on the program for a second time. You heard him previously on our episode number 133 because we felt that what he had to say to our board member audience continues to be true. Why should a board put in long hours preparing for a vote of any kind and then struggle to support or defend it. So we’ve titled this episode. Why wrestle with a vote? Well, of course, I’m speaking about Curtis Peterson from the inspectors of election. I’ve seen Curtis at Cai national trade shows, wherever it appears in the country, over decades, starting from the early days when online voting was novel, and nowadays, the firm has grown and matured with the industry, and he’s serving clients all around the country with confidence and efficiency, with an entire team supporting all their projects. There’s so many types of elections and ways you can stumble setting up a vote of any kind, whether it’s getting quorum or an election of new board members seeking approval for a special assessment, or any one of these different types of voting situations where you need to reach out to your ownership in an official manner. Need to get it done, and get it done in a way that there is no question of the validity the results, so you don’t have to do it over again. Well, we’re here weekly, so if you missed last week’s episode number 155 with two banking professionals about the riskiness of relying on getting a bank loan, you missed hearing that about 50% of loans get denied. So if you’re relying on a loan, raise your assessments now in preparation, that’s because the money to pay for a project or repay the loan that you’re trying to get that’s going to need to come from somewhere. It needs to come from your association, homeowner members. To catch that episode or any other prior episode, take a moment after today’s program to listen from our podcast website, Hoa insights.org, or watch on our YouTube channel. But better yet, subscribe from any of the major podcast platforms or our YouTube channel so you don’t miss any future episodes. Becoming a subscriber also increases the podcasts ranking and search engines, helping others find this free resource so they can be better equipped to lead their association. And those of you watching on YouTube can see the HOA insights mug that I have here, that I got from our merch store, which you can browse through from our Hoa insights.org website, or the link in our show notes, you’ll find we have some great free stuff there, like board member zoom backgrounds and some specialty items for sale, like this mug. So go to the merch store, see what we have for sale, at least download a free zoom background for use in your next online meeting. Well, we enjoy hearing from you responding to the issues you’re facing at your association. So if you have a hot topic, a crazy story, or a question you’d like us to address, you can contact us at 805-203-3130, or email us at podcast at Hoa insights.org, but today’s episode is on me, and checking in with Curtis. He’s part of my circle of friends and industry resources, and he’s also one of the sponsors of this webinar. He said he was crazy busy, and I was interested about that when we’re recording this, it’s in April, and so I was trying to think, why is he crazy busy? So want to find out the problems he’s solving, the boards he’s serving. So welcome back to the program. Curtis. Tell me right here at the start, what’s causing the inspectors of election to be so busy right now?

Kurtis Peterson  04:39

Well, you know, springtime is, is normally a busy time for us. We have a lot of large associations that are that are conducting their annual meetings and and election of directors, and so, you know, we’re doing a lot of production, getting getting product out the door, as well as facilitating. For the execution of the tabulation for those, for those large elections as well. So just a lot of work and lot of new clients coming in, especially with the advent of online voting in California. And since we’ve been, you know, performing online elections across the country since 2010 you know, we were pretty prominent in that arena. So just, you know, a lot of lot of moving parts, crazy time of the year

Robert Nordlund  05:34

that’s interesting. Well, in the reserve study business, our busy time is in advance of the fiscal year end. So with most associations having a December 31 fiscal year end, our busy time is in the summer and fall. And so it sounds like after they close and they get to January, February, then it becomes annual meeting time, and that’s where

Kurtis Peterson  05:56

you fit in. Yeah, not only, not only annual meetings, but you know, we’ve been increasingly busy throughout the year with with a lot of amendments to governing documents, a lot of special assessments, especially here in California, and other variety of votes, some you know require true membership approval, Whether that’s capital improvement, you know, grant of exclusive use. You know, some of these other approval votes by the membership. So lots of things, a lot of things going on in associations right now. You know, I don’t think

Robert Nordlund  06:33

I was aware that California had, I don’t want to say banned, but online voting wasn’t an option in California, so with that legislative change, yeah,

Kurtis Peterson  06:47

yeah, that happened at the beginning of 2025, okay, cool.

Robert Nordlund  06:51

So you’ve been able to do online voting in California, and so being positioned where you are, a lot of California associations are all of a sudden knocking on your door.

Kurtis Peterson  07:04

Yeah. And you know, we’ve been preparing for California to allow for online voting for really quite some time. Okay? And you know, have had our platform in place. Part of the biggest problem with with the California online voting is the actual legislation itself. You know, elections in California are difficult to begin with, with just regular paper voting, and the new law is, is a little bit makes it, makes it more tricky. It’s not very streamlined, and hopefully they’re going to clean that up. I’ve seen inklings of that, and I’m trying to get involved to help them smooth out some of that language so it’s a cleaner process for everybody, and especially the voter. Because right now, the California online elections are they’re just difficult, got it. They’re just

Robert Nordlund  07:56

tough, that’s got it. We see that again in our world, when the legislators all of a sudden want to legislate something with respect to reserves, and the people writing those laws are not really sure what a condo is, and I imagine it’s the same thing that, yeah,

Kurtis Peterson  08:14

I don’t know where they come up with some of this stuff, to be honest with you, one of the things that you Can’t do online in California is a special assessment vote that has to be paper, really? Yeah, yep. So that why that is, I couldn’t say, other than the fact that it’s dealing with a lot of money, or specifically money for the associations. But nobody’s given me an answer on that, and I don’t expect they will maybe it was to ease the process of allowing for online voting in California, because there’s been a lot of kickback in previous years for that to happen.

Robert Nordlund  08:51

Can we say pushback and not kickback?

Kurtis Peterson  08:55

Pushback is probably a more appropriate term, especially when

Robert Nordlund  08:59

we’re talking about money here.

Kurtis Peterson  09:01

It’s been a lot of pushback, absolutely, but here we are. So they took that element out of it and massaged other other areas of the language in the Civil Code, just to accommodate for it. But it really needs to be cleaned up to make the elections in California, especially online, a far more streamlined process?

Robert Nordlund  09:23

Well, I would think that just as a culture, we are comfortable buying things off eBay from a stranger at a negotiated price. We’re comfortable buying things from Amazon. We’re comfortable checking our bank balances online,

Kurtis Peterson  09:39

yeah, absolutely, and processing processing money with the IRS online. Oh, gee, yeah. Who didn’t do that yesterday? Yeah, did you write a check? I don’t know. I didn’t write a check. I was

Robert Nordlund  09:50

online for our audience. We’re recording this on April 16. So yes, yesterday was Tax Day. We have a number of companies, and some of them were. Checks, and because I made a run to the post office yesterday, and some of them were online, and I think they just differed in different states and different requirements. But yeah, we we move a lot of money electronically, and Zell and Venmo, we’re doing so much electronically, I would expect that an election could be so much more efficient done online. Am I missing something?

Kurtis Peterson  10:25

No, sir, no. It is 100% you know, there’s some, some associations. We don’t touch any paper ballots. It’s, it’s either all online or it’s not at all. So I did, you know, that’s just the way it is. And they get Satan turnout, and everybody seems happy with it. There’s some election companies out there that don’t touch paper ballots. They only provide online voting structures. It’s the way the world. You know, everybody works online.

Robert Nordlund  10:59

Yeah. So you’re saying that the inspectors of election also supports associations when they have

Kurtis Peterson  11:06

paper ballots? Yeah, you know, in California, it’s going to be a hybrid. Pretty much all of the time, there’s different levels of hybrid. There’s partial hybrid and there’s full hybrid. In California, it’ll be a partial hybrid scenario. You know, even in a 20 unit Association, you’re going to have one member that doesn’t have an email address or opts out of voting electronically. So you know, you’re creating one election package, one paper election package for that one member, and then the rest vote online. So you know, you just got to take it as it goes.

Robert Nordlund  11:41

Yeah, I don’t think I’d really appreciated that that in your little 20 unit hypothetical, there you’re almost running two elections in that case,

Kurtis Peterson  11:54

and then, yeah, that’s exactly what you well, you know to some degree that that is what it is. I mean, you’ve got to tabulate both, right? You’ve got to set up both. You got to set up a paper election package, and you got to create the online election package. They have to mirror each other, and then you’re facilitating both simultaneously. And we’ve done that since day one. Really, we’ve always run a hybrid scenario, but it’s, you know, frustrating to create an election package for one or two people, you know,

Robert Nordlund  12:24

well, there goes the secret vote. You know, well, to

Kurtis Peterson  12:30

some degree for ballot,

Robert Nordlund  12:33

yeah, there was 19 and one. Everyone knows who that number one was. It was unit number 13.

Kurtis Peterson  12:38

Who just, well, we follow the construct of the Civil Code and says that, you know, you put out a ballot that doesn’t have any identifying information of the voter on it.

Robert Nordlund  12:48

That’s good point, except that it’s the only one that came in with a postmark.

Kurtis Peterson  12:53

Right, from our perspective as the inspector of election, when we produce the results, we don’t tell anybody whether they voted via paper or online, here’s results, right? So even though there was that one paper voter, you know, I guess we would know, because it’d be the only one, but that certainly would information

Robert Nordlund  13:10

that would be shared. That’s a good point. That’s another reason to have an election company facilitating this, because it’s not like all the ballots are going to George the president’s house, because otherwise, George the President would know exactly what’s going on with that one. Tell me, every time I talk to you about the actual process of doing an election, I’m amazed how complicated it is. So are there some clients that come to you and say, we need your help, and you look at what they’ve been doing and you’re saying, I’m surprised you made it this long without us, or is there some things that make you think that this Association’s election process is doomed from the start?

Kurtis Peterson  13:57

Well, you know, we don’t usually look at previous election product when we get a new client per se. You know, we just kind of work them into our realm of what we know is legal, not only in accordance with their governing documents, but also with the state statute or civil code here in California that we need to accommodate. So whatever they’ve done in the past may be changed. You know, a lot of times we don’t know whether they’ve been doing it properly or not. Sometimes we will request something from a previous year to make sure that the structure that we’re putting together this year is coalescent with what they’ve done previously. And when I say something like that, an example would be, well, how many open positions did you put up for election last year? If it’s a five member board and they’re staggered, and last year they had, you know, three open positions. For a two year term. Then this year, we know that we would have two open positions for a two year, so we may request it in that, in that sense. And sometimes, yeah, we have to roll our eyes and say, oh my, what happened here? This is, this is gonna look a little bit different this year, no doubt, a lot cleaner and and, you know, just, just our balloting process and the fact that we have a animal ballot versus, you know, check marks or ticks on an eight and a half by 11 piece of papers. You know, it’s just, it’s kind of a real learning curve, and a good one for people saying, Well, why didn’t we do it like this before? So you know, having, having being our 20th year now, Robert, I don’t know if you knew that, but we started in 2006 we’re celebrating our 20th year.

Robert Nordlund  15:55

I thought you said since 2010

Kurtis Peterson  15:57

that’s when we started our online voting. Was in 2010 but we we started the company in 2006 Oh, congratulations.

Robert Nordlund  16:05

Happy anniversary. Yeah,

Kurtis Peterson  16:07

thank you. Yeah. So we’ve seen a lot, done a lot, and we’ve, you know, seen what’s what works and what doesn’t, and what’s what’s legal and what’s not, you know, yeah, I

Robert Nordlund  16:19

would imagine there’s a pretty healthy chunk of your clients that you come in, you bring order to the situation, and just like you said a moment ago, they realize, oh, wow, there’s law about this. And why are we doing this? You say, Well, it’s been law in your state for seven years now. And they scratch their head and say, okay, they bury that thought and glad that they didn’t have it contested previously. Well, let me ask, is having an Independent Election? I got at least a couple questions. Is it more valuable to have an Independent Election supervisor for a small association where you don’t want to be bumping elbows you know each other too much, or is it more important? With a large Association, where, if it’s a couple 1000 people, then I don’t mean to say this casually, but if you miss count by one or two votes, it’s almost no big deal. The majority is the majority, and it’s going to work out. Is there one or the other that is actually clearly more important? And I just don’t get it?

Kurtis Peterson  17:25

Well, I don’t know if one or the other is really more important. The smaller the association, the more contentious it can be, right? Because you’re always seems to be somebody that’s at odds with the other ones. And we’ve done associations as small as three units, right? Okay, you know. And they came to us because they knew that they couldn’t handle it internally. And this was for special assessment, you know. And that requires more than 50% to vote. And of course, it requires then more than 50% of those that do vote to approve, okay, so when a three unit Association, more than 50% is two, yep. But if you only have two ballots, you can’t get that measure to pass, because you can’t get a majority vote, even if they, you know, well, I suppose you could voted if they both voted for it. So, you know, it’s it’s tough in those situations, and so for an independent third party like us to handle it, it takes all that guesswork out, right? We’re following the law. These guys know what they’re doing. They’ve done it over and over and over, and this is going to be a valid election at the end, because it is an independent third party. They did follow the law. There’s no room for contest, right? I like that.

Robert Nordlund  18:47

Well, I’m looking at the clock. It’s time to take a quick break and have one of our here time to hear from one of our general sponsors. But I want to come back, and I want to talk about that. What’s a contentious voting situation look like? So everyone will be right back in a few minutes with more common sense for common areas.

Paige Daniels  19:05

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Robert Nordlund  19:37

and we’re back. Well we’re discussing over the break, Curtis and I on the value of the work he does. And even in the first half of the program, my anxiety was going down just thinking of having someone like inspectors of election on my team. So Curtis, you tell me the value of having someone like inspectors of election on their team. So. Specifically in a situation where it’s a sensitive vote, maybe a special assessment, or, you know, it’s going to be a contested election, there’s been a opposition faction trying to win votes, and you know, it’s got to be right. Tell me how you bring value to the table there?

Kurtis Peterson  20:18

Well, you know, one of the biggest values that we set for starting out was just that, you know, we’re an independent third party. We don’t have any interest in the outcome of any of the elections. Our only interest is to make sure that they’re facilitated legally and fairly to the members of the association. So I think that’s where the real value is, and value we’ve added would be the fact that we’ve got a ton of experience. We’ve been doing this long time, you know, we’re familiar with, you know, governing documents, how to read them, what to look for, and then, of course, the state statutes and civil codes, and how that affects, you know, how we’re going to, you know, conduct the election, whatever that may be. And when we’re talking about contentious elections, you know, the toughest ones are always the recalls, right? Special assessments are interesting as well, because you’re dealing with money. But you know, the platform for a special assessment is usually set forth very, very clearly if there’s a reason for this, and boards are doing it Nilly.

Robert Nordlund  21:29

Willy. Roofs, leaking, folks,

Kurtis Peterson  21:32

roofs, roofs need repair. You know, our reserve funds are crazy low. We got to get those back up to where they need to be. No, we’ve got failing pipes, you know, all kinds of things for a special assessment. But the recall elections really seem to get, you know, personal. That’s personal for people, as you know, the people that are signing the petitions to get to get these board members recall, you know are very serious about what they believe the reason for these board members to be recalled, and we just don’t get involved in any of that. We’re not interested in the politics of any one Association. We’re interested in facilitating a fair and legal election for everybody, abiding by their governing documents and abiding by the state statutes.

Robert Nordlund  22:22

And, yeah, you don’t know who the good guys are. The bad guys are the we don’t want to know that’s not the opposition party may be the good guys coming in to rescue an association, and the opposition may be the bad guys just hating their HOA running on the election platform that they’re going to disband the association. And we,

Kurtis Peterson  22:45

you know, we, we tend to see an uptick in in recall elections after special assessments.

Robert Nordlund  22:54

Interesting, but I’m not surprised.

Kurtis Peterson  22:56

It’s like, oh, you’re having a special assessment. Well, should we go ahead and get your pricing for a recall right after

Robert Nordlund  23:02

Yeah, I get it. Well, let me ask you about that you handle voting. You handle elections. I wonder if your end product is really peace of mind that you are providing transparency. You’re providing confidence that this portion of a board’s responsibilities is going to be a, okay, no special interest involved, yeah?

Kurtis Peterson  23:26

You know, yeah, not only the boards, you know, like that, that they’re, they’ve got a company like ours, you know, conducting the election, but, but also management, you know, nobody’s pointing fingers at management, saying, Hey, you’re doing this, or you’ve got all the ballots. Why are they going to you know, where are they? What’s what’s our cow? Where’s mine? You know, you’re mishandling them. And so when the board in management passes that off to an independent third party like us, yeah, it is, it’s, it should be, if it’s not, you know, a sigh of relief, saying, Thank God we don’t have to deal with this, you know. But you know, on the flip side, I’ve seen other associations that they grip on to, you know, some of the control of these elections, you know, with an iron fist, and it’s like, oh, you get it. You get it. You don’t. You don’t need to tell us how to do our job here, you know, albeit you’re the lead of the election committee, you know, you don’t have any real responsibilities if you’re going to contract with us, you know, and still oversee the vetting of the candidates, or you can, you know, conduct the candidate forum, you know, whatever the case may be, but we’re going to be preparing the election packages. You can review it for accuracy. We’re going to be sending out all the ballots. They’re going to come back to us, and then, you know, we’re going to be tabulating the results and then providing them to you for announce. Met, or whatever the case may be. So you know that’s a hands off approach for the associations, which is how it was designed in the California Civil Code, in any way that an independent third party must, you know, perform this process. Now, you know the state or the civil code does allow for a volunteer homeowner to do that, but having done this for 20 years, I can’t imagine anybody that would want to take on this kind of responsibility and the potential for litigation really right if they don’t know what they’re doing, and they don’t, they’re not privy to the Civil Code, and they’re governing documents, and the managers facilitating in seeing here they’re putting their head on the chopping block.

Speaker 1  25:44

Yeah, that’s a lot of risk.

Kurtis Peterson  25:46

Big deal. Yeah, do that as a volunteer. That’s crazy.

Robert Nordlund  25:51

Well, I think there’s some things that are pretty obvious that volunteers shouldn’t be doing. They shouldn’t be putting a new roof on the building that requires special insurance, special skills. It’s not something you want the average person up there doing and falling off a roof and just everything unwinding. And I think elections is moving into that area where my sense is it’s becoming more and more something that the average board member, the average volunteer, shouldn’t be messing with this. They’re just too much of a minefield.

Kurtis Peterson  26:22

Yeah, I don’t recommend it. You know, there are some associations, you know, I don’t want to blanket every Association out there in that fashion. I mean, there’s some that run smooth, you know, they consistently have a good people stepping up and, you know, serving on the board, and they don’t need our services, and that’s all there is to it. And I’m comfortable with that.

Robert Nordlund  26:47

We love those associations, doesn’t?

Kurtis Peterson  26:48

It doesn’t go that way forever, you know? I mean, change is inevitable. Something’s gonna change. And you know, you do only takes one, you know, one individual and an association to really make things interesting. And it’s been my experience that there’s always at least one, at least one in every Association, and that’s regardless of the size, right? Interesting. You know, I just don’t, don’t get caught.

Robert Nordlund  27:17

Don’t get caught. Well, how much of this movement towards needing inspectors of election is driven by legislation, or is it the rising incivility that we see in our society?

Kurtis Peterson  27:30

Well, in California, it certainly was legislation in 2020, that came around that required that nobody under contract. And this is California. Only California says that anybody under contract with the association cannot act as the inspector of election other than being the inspector of election. So management companies used to be primarily spearheading the the voting processes for their associations, but when that that law passed and that they could no longer do it, and I think that’s a good thing, and I’m not saying that because it affected our business one way or another. I just working with managers in this industry, know that they’re real close to the boards, and if the boards don’t like something. It’s a real pressure on on the manager to accommodate them to some degree. Now, whether that affects the outcome of an election or not, I wouldn’t say, and I couldn’t say, Yeah, but they’ve got to live with those boards, right? We just come in and do the election and then we walk away. So we’re not we’re not stuck in there. If something doesn’t go the way the board likes it, next thing you know, the manager, the manager or the management company is out the door.

Robert Nordlund  28:47

Well, you’ve mentioned many times your experience, specifically in California. And you and I are from California, full disclosure. Are there other states that are not allowing online voting at this time. Is it a checkerboard or is it majority type situation?

Kurtis Peterson  29:04

No. California was the only one that I know of that prohibited or didn’t allow. I mean, no, the way that the civil code is set up that it was only paper valotting. There’s other states that don’t say either way. Okay, you know that you just have to get a ballot out there. Got it. And then other states came came into online voting, like Florida quite a while ago, 2015 2017 something like that, or maybe even earlier, where they implemented online voting, and they did it in what I felt to be a very nice, structured fashion that it was more of an opt in scenario. Or if you wanted to vote electronically, you certainly could, but you needed to opt in to do so got it. And then once you opted in, you were, you were, you know, you’re opted in for good, unless you’d like to opt out again, yeah, which is

Robert Nordlund  29:59

like you. Said, it creates a hybrid situation where you have some people voting the old way and some people voting the new way. And I think of me in I want to say regular government elections, I’m a permanent mail in voter. I don’t like to go to the voting booth and stand in line. I like to lay out my options and figure them out and take the time I need, and when I’m done, I pop it in the mail. And that’s a nice thing to be able to do. I think one last thing we need to talk about is, and you mentioned it a few times, making sure the candidates are selected correctly, that they they’re the right candidates for the right reasons. How much, how long in advance of an election does someone need to reach out to you? Sounds like there’s a lot of prep involved.

Kurtis Peterson  30:49

Will it that’s that hard to say? It is. Well, it’s hard to say. It’s not hard to say for me, but it’s not an easy answer. It’s not a, you know, for every election you call us nine months ahead of time, or every election you call us six months ahead of time. It depends on, number one, the state. Number two, it depends on the voting scenario. Whether that’s an election of director, there’s an amendment, you know, a special assessment, whatever the case may be. And then, you know, in California here, there’s a election by acclimation, where you really need to start it early, because the nomination period is 90 days. Okay, so you’ve got a three month nomination period. So if you’re planning on doing election by acclimation in California, specifically, yeah, you better be calling us seven, seven to nine months ahead of time so we can prepare appropriately.

Robert Nordlund  31:46

Acclimation is election

Kurtis Peterson  31:49

by acclimation is when you go through the nomination process and you’d have the same number or fewer candidates than you do open positions on the board,

Robert Nordlund  31:57

three people for three spots. Why are we voting?

Kurtis Peterson  32:00

Right? Yeah, there’s no need to put out a ballot in that case. So other states, it’s automatic, and it’s, you know, a domination period of 30 days, or sometimes even 15, you know, that allows just automatically for election by acclimation. But, you know, in this state, specifically California, it’s a much longer process, and I think they’re working on changing that. I have seen the language for that where they’re going to knock the 90 days down to a normal 30 day period.

Robert Nordlund  32:29

Advantageous. Sacramento is listening to this.

Kurtis Peterson  32:33

Yeah, you know, you don’t need 90 days to figure out whether you’re going to run for the board, right? And, you know, the fun thing is, is even after 90 days, we get these candidates that come in five minutes late, you know, we’ve got a five o’clock deadline and this date, and they come in a day later, or five minutes late after the deadline. And, you know, you had 90 days, yeah. So it’s almost like too long anyway, right? You know, 60 days would probably be even. It would be better, but 30 days is appropriate. And if you’re serious about running for the board, and you’re a viable candidate, in my mind, anyway, that you take that seriously to serve your community, and you get your nomination in a timely fashion. You know, if you’ve got bigger things going on and you don’t got time to get your nomination in, then guess what? You know, maybe, maybe you should focus on something else. Then, yeah, serving your association. And I don’t want to prohibit anybody from doing this important volunteer work for their association. Don’t get me wrong. I just, I always find it funny that after 90 days, we get a couple people. You know, from time to time we get somebody that comes in a few minutes late, yeah, well, someone,

Robert Nordlund  33:48

yeah, someone, I can imagine, someone on the East Coast Association who lives out in the west coast, and he’ll, they will miss it by the difference between Eastern Time and Pacific time, just because they’re chasing a deadline, yeah, but we’re all about trying to encourage and equip board members on this podcast. So we want the best board members. We want the right board members sitting on the board, and it’s just great courage to have you on the program to talk about insights on how to do this whole process. Well, any closing thoughts to add at this time?

Kurtis Peterson  34:24

You know, I just want to reiterate that, you know, we’re here, you know, really trying to serve the association the best way that that we can. You know, we, we really appreciate all the all the board members that do spend their time and efforts trying to help not only their association, but the industry, fantastic.

Robert Nordlund  34:44

Well, if you’d like to get in touch with Curtis or learn more about online voting, you can go to their website simply enough, at the inspectors of election.com just write it out, and that’s their URL. The. Inspectors of election.com. Well, we certainly hope you learned some HOA insights from our discussion today that helps you bring common sense and maybe some peace of mind to your association and your common areas. We look forward to having you join us for another great episode next week.

Announcer  35:18

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