153 | How ‘No Decision’ Becomes a Legal & Financial Risk For Your HOA

Kevin Davis  00:00

It’s a job that, if you look at and say, You know what my job is to act in the best interest Association, but what I really want to do is increase the value of my association. If I believed, if they’re worth $100,000 I wanted to be worth $110,000 I wanted to be worth more than a community association across the street or down the street or a mile away. And if that board goes in there and say, This is our job, then it’s easier to make decisions. And the likelihood of not making a decision or turn your head or putting your head in the sand, or kicking your head, kicking the can down the road, is avoided all the way.

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.

Kevin Davis  00:51

I’m Kevin Davis of Kevin Davis Insurance Services,

Sherry Branson  00:54

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

Kevin Davis  01:00

sense for common area, and welcome everybody to episode number 153, where we’re talking to right now. Sherry Branson, my co host, for how many webinars we’ve been doing over the past? How many years? Kevin, we have dozens.

Sherry Branson  01:15

We definitely have dozens of webinars. We have a whole library going back about 14 years. So we’ve done webinars about every topic imaginable, related to community associations, Rick claims, risk management, the policy, the dino policy, really just everything under the sun. Cyber. So it’s fun to do a podcast for a change. Kevin, we haven’t

Kevin Davis  01:34

done in a while. I’ve been trying to get you to go to these, one of these things for a while, and I’m glad I talked you into and guess what? We’re gonna do another one next month. Also we got we’re gonna do better. We’re gonna do back to back ones.

Sherry Branson  01:43

Great, fantastic, looking forward to it.

Kevin Davis  01:45

But this one, we’re gonna talk about something really special that’s really going to impact the podcast listeners. And that is how no decision is a decision.

Sherry Branson  01:55

Absolutely. A lot of people don’t realize that, Kevin,

Kevin Davis  01:57

and that’s what. And so we’re gonna do, go into what, how much it costs, what’s it about and why and what stops them from making a decision as always. If you miss any prior episodes, you can find them at WW, W dot Hoa insights.org, on YouTube or your favorite podcast platform, and those you watch on YouTube can see, we have a special HOA insight mug here. I love it. Kevin, that’s a

Sherry Branson  02:24

great mug. Yes, got it from merch store. They can get them in the merch store. Is that where they can get them?

Kevin Davis  02:30

Yes, yes. You got to get one, because you’re going to be one of my regular people. You’re not gonna be talking a lot on these podcasts over the next couple of years. So you got to get one. And there’s other free stuff in there, yeah, like zoom backgrounds, but go there and you’ll find really some great things in there. And we also love hearing from you. If you have a topic like for us to address, you can reach us through our website or on the show notes. But today, program is about leadership under pressure. What happens when issues sit unresolved, how boards can approach difficult decisions more confidently.

Sherry Branson  03:05

Great topic, Kevin, great topic, and you know, you’ve been working in the community association industry for decades. Save you lots of experience. What do you think is the number one reason why board members are indecisive, why they don’t, they don’t make decisions. You know what?

Kevin Davis  03:23

To me, there’s a lot several reasons why, but fear is the number one reason why they don’t make decisions. They’re afraid because they make a decision, and if they’re wrong, guess what’s going to happen? They’re not liked anymore. And being liked is a really, very, very important item if you’re in the community association, board of directors, and that’s the problem we when we talk about in decisions, board members of community association understand one thing, that it is your job to make decisions. It is your job to run the association, to manage the association, to make sure that the people who are living there is just feeling a little bit better about the association then the association next door. That’s all you want to do. You know, there’s a lot of community associations out there, and the bottom line is, is that, you know, we want to make sure that ours association is well respected, that’s doing its job, that’s managing its best of its

Sherry Branson  04:16

abilities, absolutely. And it’s a fine line. Kevin, where they you know, of course, the board members want the best for their association, and so do the homeowners. They want it to look nice. They want the landscaping to look great and things to be maintained as they should be. But that does cost money. So, you know, sometimes you know the association, the board members might you know, if a poor decision is made or delayed decision, though, you know those two things can happen, and board members are nervous about making any decision. Basically, you just hit the

Kevin Davis  04:48

nail on the head. We talked about decisions about money. That’s probably the number one area when we talk about indecision. Indecision happens when it’s about special assessments. Increase. Increasing assessments, you know, have to build, build a fence, or fix a fence, or any kind of repairs whenever that has to be done, the first thing the board does is make no decision,

Sherry Branson  05:13

unfortunately, and you know, Kevin, from a fiduciary, from a money standpoint, if the board member fails to act, does that carry the same weight as if they made a bad decision or a poor decision or important decision? Are they

Kevin Davis  05:29

the same? You know what? It’s good question, because when we talk about boards, has a fiduciary responsibility, that means they have a job to act in the best interest of the association without conflict of interest. So now, if you’re talking about boards who fail to make a decision, that means they’re not acting in the best interest of the association, that’s the bottom line of we know every association or every these meetings, we talk about breach of fiduciary duty. The number one claim that we see in DNO for community associations is the board breach their fiduciary duty, which means a board failed to act in the best interest of the association. So when you’re talking about it’s my turn. I’m the board president, and my number one job is to look and see I have a reserve study. And a reserve study tells me that I have to increase the assessments, you know, 10, 15% more so that I could comply with my reserve study. Now if I choose not to do it, if I say, You know what, I’m not going to do it, because if I do that, unit owners will be mad at me, okay, and they don’t like my decision, therefore I’m going to not make a decision or just ignore it for now, I’m only going to be on this board for another 12 months. The new board it’s gonna be their problems. Now, guess what happens when that new boy gets in and they find out that I, who was on the board for the past 10 years, fail to make that one decision

Sherry Branson  06:52

right, which could be a huge decision, the garage might be deteriorating, or the foundation or the roof. I mean, these are major decisions that cost a lot of money, but also can basically snowball and get worse as time goes on. Could somebody be sued? They could be sued for this, right, Kevin, if the new board comes in and says, Wait a minute, you guys were supposed to fix that roof or fix that foundation, and now it’s going to cost double the amount to fix it than it would have cost five years ago.

Kevin Davis  07:20

And that’s the whole point. That’s again, we talked about indecision. You see, I would rather to get the research done and say, Listen, the decision is to have a special assessment of $50,000 okay, that way we honored our fiduciary responsibility. Now we know the people not going to like us. They may vote us out. They may say, Guess what? We don’t like the job you’ve done. Realistically, that could happen and has, and it happens more often than not, because again, if I’m the board president and I look at my reserve study, my reserve study says my roofs are going to be need to be placed the next five years. We’re going to need x number of dollars to do it. I have a fiduciary responsibility to make sure that I honor it, because if I don’t, what’s going to happen to me now, all of a sudden, I refuse to you have a new board of directors involved. I guess that new board is going to want to do, and that’s hold me responsible for a decision I didn’t make three

Sherry Branson  08:15

or four years ago. Absolutely, absolutely. Yeah, so it’s really just makes the situation basically worse. And, you know, Kevin, with this, we were just talking about like deferred maintenance, because it could be expensive, it could be a large special assessment, that kind of a thing. How often do you think deferred maintenance starts as a financial decision and ends up as a legal or insurance problem?

Kevin Davis  08:36

Well, you know what I would say, deferred maintenance start off as a observation. Problem first, okay, meaning that I’m walking through the association, and I start noticing things that the association is not being taken care of. Okay, once I noticed that, and I’m a board member, and I ignore it. It’s a decision I’ve made. I made a conscious decision to ignore, you know, certain things in there, I start noticing that there’s the balcony railings are not as tight as they should be, okay? First thing you notice that the balcony railings are not as tight. Another thing you notice is this plaster falling off into my garage, okay? Or cracks appearing, you know? But again, as a board member is my I have a fiduciary responsibility to act in the best interest Association, but I walk around with blinders in my association because I see maintenance issues that I am ignoring. Now the bigger problem with that is that if I have a maintenance contract or maintenance agreement, or I have a manual, maintenance manual again, and I choose not to file the manual. So now the manual tells me that once a year, these are the four or five things I need to do if I not only see them, but I ignore them again. Am I acting in the best interest

Sherry Branson  09:50

of the association? Yeah, you’re not. If you’re if you’re avoiding it or delaying it, or kicking the can down the road. And you know, if they delay raising these assessments. To avoid the backlash. You know that we just talked about, what risks are they building? Kevin, what? What’s building up from there?

Kevin Davis  10:06

This is where it gets. Really gets tough for board members, because, again, I know as a board member that there’s, there’s deferred maintenance issues, like I just said, there’s a railings, okay? And we just, we just see certain things. We see the cracks, but then we ignore it. What we end up doing is defending our position. So in other words, if the union owner, you’re a union owner, and you see if something hasn’t been done, guess what happens now, all of a sudden, you come to me, as the President of the Association, and say, Wait a minute. I see, look, I’m holding on the railing. Well, guess what? I think you’re overreacting. You know, that really has been there for 20 years. Nobody ever fell no I ever hurt themselves to Why don’t you? So we become defensive, and when the board becomes defensive, then all of a sudden, it creates a bigger problem. You know, we can’t address things if all of a sudden I disagree with what you’re doing. Because again, I see, I’ve walked around and I see we have a manual, we have a maintenance manual that says that we have to do these things, but because if I do them, I know it’s gonna cost money, and it costs money, the associate’s not gonna like me. They don’t like me. They may throw me out, or they may hassle me at the pool, a lot of stress. Yeah, a lot of stress. And the easiest thing to do again is to do what, make no

Sherry Branson  11:27

decision, right? It’s the easy way out. Is basically the easy way out, Kevin, and you know, something I’ve seen before is inconsistent enforcement. So how does that increase the likelihood of discrimination, her or harassment claims.

Kevin Davis  11:42

This interesting one was when we talk about something like inconsistent again, indecisions is bad, but then inconsistent decisions, it’s just as bad as no decisions. In fact, it probably isn’t no decision, if you think about it, you know, in other words, inconsistent decision is for me. Okay, all of a sudden, Sherry, you are the person everybody loves in the association. Everybody gets along with you. You can. You’re a great person, and you know, you do the best job you can do. You rarely get into any complaints or anything like that. So all of a sudden, I realized that you’re parking your car and visitors parking. Okay, fine, that’s not a problem there. But guess what? Now, I’m Sonia, the guy who I don’t like, who’s on the other side of the association, right? He parks his car in visitors parking, and I don’t like him at all. I’m waiting for him to put that car in there. So guess what my decision now is to say, Guess what, you in violation. You’ve been in visitors parking for the past 48 hours, and therefore I’m going to find I’m going to notify I’m going to penalize you now I haven’t touched you at all because, you know, you’re my co host. We like each other. We get along well, you know, you come in, you pet my dog, you take good care of me. So that, again, that is a no decision. So I passed on you. So inconsistent. You know, be inconsistent is another way of saying, no decision. I allowed you to get away with parking and visitors parking. Mike, who lives in, you know, unit number x, you know, he, I don’t like him. So soon as he parked 48 hours, he has a violation letter. You know, he can’t park more than 48 hours. So now it’s been 4950 hours. He’s been there. He’s in violation. He gets that violation letter, and I’m going to really nail it to him, because here’s a guy don’t like. That’s what happens when we have these inconsistent inconsistent is the same as treating some people with the no decision part, that no decision is really, really important, because again, we’re mistreating people, and you mentioned the word like discrimination or bullying and harassment. Those are three things that we see more and more in community associations. Okay? Because what happens is, is that as board members, if we’re indecisive, the reason why we’re indecisive is because we again, if you’re not, if you’re indecisive, we believe that you don’t want to act in your responsibly as a board member, do you? Don’t forget, as a board member, you know, you are a business. You’re in a business, okay? You have to make decisions. You’re in the business. If you have 10 units, you know, and each unit is worth 100,000 Guess what? You have a $10 million corporation. Okay? So you got to treat it like it’s Corporation. You can’t walk in there and go, You know what? I’m going to treat the people who I like differently than people who I don’t like?

Sherry Branson  14:28

Right, right, favoritism, that kind of a thing and and treat it like a, you know, just like a fun kind of hobby, you know, it’s, it really is a job. It’s a

Kevin Davis  14:38

job that, if you look at and say, You know what my job is, to act in the best interest Association, but what I really want to do is increase the value of my association. If I believed, if they’re worth $100,000 I wanted to be worth $110,000 I wanted to be worth more than a community association across the street or down the street or a mile away. And if that board goes in there and says. This is our job, then it’s easier to make decisions. And the likelihood of not making a decision or turn your head or putting your head in the sand, or kicking your head, kicking the can down the road, is avoided all the way,

Sherry Branson  15:14

absolutely, absolutely. I think, if you know people are homeowners, understand, I mean, they’re not going to be happy. I’m not saying they’re not going to be happy and they’re not going to complain, but if you explain clearly to them why the assessment has to happen, or why the the fees have to go up, the monthly fees, that kind of a thing, you know, if it’s clearly explained to them in, you know, with documentation and stuff like that, I think that’s much better than avoiding it all together, or just, you know, delaying it, basically delaying it. And that’s

Kevin Davis  15:42

what it all boils down to. So I guess what? That’s a perfect time to take our break, and then we’ll come back and give some more give some more answers. Let’s give some more advice to people out there who really are afraid to making some decisions. So let’s take a quick break, and we’ll come back and finish our conversation with Sherry.

Russell Munz  16:00

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Kevin Davis  16:32

And we’re back. So we know that indecision creates a problem for the association because we make no decision, it is a decision, so we start from there, and we talk about the three areas really talked about in terms of where no decisions are made. Is number one, when it comes to money, when it comes to money, we recognize that the best course of action is to do nothing at all. The second area was maintenance. We see things that need to be done. We have the railings out there, you know that we see that, but looser than they should be, and we ignore it because it’s still there. It doesn’t fall completely off. Nobody’s gotten hurt yet, you know? And the third one is inconsistent rule enforcement. Those are the three areas when we talk about indecision. Those are three areas that really, really, truly impact community associations more so than any other area facing in decisions. Now, let’s talk about what happens, though, when you make it just when there’s no decision in those three areas. Well, we’re saying right now you as a as a person lives in that community association. You’re not happy.

Sherry Branson  17:38

Yeah, I feel that repairs aren’t being made. That kind of a thing, you know. Let’s say, I see, you know, problems with the foundation or balconies or something like that. And I just say, wait a minute, you know, why isn’t this stuff being fixed? Because people do notice. People notice and they and they know, and you know, an inspection was done, a structural inspection of the building, and it’s showing, you know that’s public information shared with with homeowners, and they know, you know that repairs do need to be made and it’s not being done. Well, that could be a problem,

Kevin Davis  18:10

yeah, and that’s the key thing we’re talking about, because we all know it’s a problem. We all know that that railing is loose, you know, we all know that roofs should be repaired. And what happens is, we say we’ll wait till next board comes in, or we don’t believe it’s our responsibility, or we just put our head in the sand. We’re looking down the road, and we are seeing a potential lawsuit against us for breach of fiduciary duty. You know, I spent 40 years I’ve been selling insurance, DNO, insurance for board members. The number one area that we see when there’s a claim against a board members is the board breach their fiduciary duty. And when you breach your fiduciary duty, it’s going to be, you know, basically a like I said, it’s financial enforcement or maintenance. Those are the three areas that constantly get done. So when we talk about things to help you do a better job. And you mentioned the one right off the bat was communication. Okay, communication is so important because you’re giving news that people don’t want to hear, right? Okay, it’s not good news, yeah, normally it’s not good news, you know? And normally it starts with not good news if I want more money if I’m limiting you from doing certain things in a common area, if you can’t park where you want to park, you can’t go swimming whenever you want to go swimming. You can’t certain things you can’t do. I’m telling you you can’t do it. You don’t like that. So the easiest thing for us to do is to ignore those things. And same thing with maintenance, we want to ignore those three things because I want, I want freedom to walk through my community association as the president, and people walk up to me and say, great jobs, because you kept the assessments low, great job. You kept the assessments low, wonderful job. Kev, you kept those assessments low. That here over and over again. But what happens is that we know the insurance rates are going up. Okay? We know maintenance rates are going. Enough we know the content to get a new roof, that hire a contractor, get the equipment cost more than it costs in any time in the past. So if you communicate right off the bat and say, Guess what, you know, our assessments will go up higher. We may need a special assessment to make some of the repairs that we have. It’s going to cost money, but our goal is to do one simple thing, decrease the value of our unit over time,

Sherry Branson  20:27

and Kevin in your you in your 40 years in the industry. You know, when you think about the most serious claims that you’ve seen, you talked about breach of fiduciary duty being the number one claim you’ve seen. How often do you know, with your recollection? Do they start with a delay rather than a reckless decision?

Kevin Davis  20:45

We talk about a reckless decision. We can’t determine when a reckless decision is in other words, a decision is a no decision is a reckless and no decision is couldn’t be a reckless decision. In other words, the board of directors has a job to make a decision. Yeah, okay. And that decision is well thought out, okay, but to you, it could be reckless. In other words, a reckless decision. Can say, Guess what? We need to increase the assessments more than it’s allowed by law, okay? Or we need to have a special assessment, a special assessment to repair the roofs. That special assessment may be for you reckless. You can say you, who live in unit number 52 say, Guess what? This is a reckless decision on your part. There’s no way in the world that that roof should cost that much money. I believe that you’re getting kickbacks. I believe you having special, special treatment done, and that’s the reason why it is a problem. So we should just open up another can of worms. There, Sherry, in the sense that as board members, you have a job to do. And again, if you act in the best interest Association, you don’t care if somebody in unit number 32 says, Guess what? I believe your decisions are reckless. He goes, guess what? I did the best job I can do again. Number one, we communicated that’s really very, very important. The second one is, get outside advice. Get advice,

Sherry Branson  22:09

absolutely professional advice. Professional advice.

Kevin Davis  22:12

Yeah, getting a reserve study done. You know, don’t go up on a roof and figure out that. Guess what? This roof should last for another five to 10 years. Get a reserve study.

Sherry Branson  22:20

If you’re not a roof expert, don’t try to do it yourself. Don’t try to do it, you know, say, oh, I can figure all this out. No, you know, hire the professionals, the reserve specialists. You know, all the

Kevin Davis  22:31

professionals out there that specialize in community associations, bankers. There are bankers out there that teaches you what to do in your reserve account to make sure that you don’t end up putting it in a bank where it can lose because you put in the wrong bank. Get experts. I’m glad you talked about that recklessness, because when somebody says, when you say, that was a reckless decision, I want to say, Guess what? It was decision based on the information that I have and my information I have is from experts in the industry. I got experts in the industry, guess what you can do? You as person lives a unit who’s upset with me because I increase the assessments now more than allowable by law, or I want a special assessment that you feel is reckless, then guess what happens? Now, I’m feeling vindicated because I’m being sued now, okay, because of my quote, reckless decision. But the bottom line is, is that I’ve done my job. I communicated to you. I’ve used experts. And here’s the final thing I love to do. I give piece of advice to is kindness. Okay, if you act in a kind way, people will be more responsive

Sherry Branson  23:39

to you. That’s true. Yeah. I mean, you’re, it’s a very difficult, it’s a challenging job being a board member, you know, and, and I know some people want to be popular and want to be well liked by everybody in the community, but I think if it’s if the news is presented in such a way where it’s not, you know, antagonistic or not, you know, not hostile, just like a, you know, in an in the right manner and the right tone. I think it can be, you know what? I mean, it’s still going to be difficult, but I think people will understand more. They’ll definitely understand more. And we

Kevin Davis  24:12

live it in the world too, that right now, that we are heightened right now, we all feel uncomfortable. We all feel like, you know, we stress, lot of stress, exactly, lot of stress. I always said, like a low level depression going on because, you know, it’s these are challenging times we all living in. So if all of a sudden I’m saying, guess what? We need a special assessment. If you pair the roof or repair some the common area, and you are saying, wait a minute. I you know, I believe it’s reckless. I think it’s a reckless decision on your part. Now I have two choices. I can say, Who are you to tell me is reckless or not? Or I can go, guess what? Lower my voice. Guess what. I’m sorry you feel that way. Sherry, I’ve done my research. I have professionals out there who told me that this is our best course of action, you know, sorry, you feel that way. So. Now, all of a sudden, I can’t control how you feel. You can still believe it’s a reckless decision on your part, but I maintain some control on my part. I’m treating you kindly rather than arguing.

Sherry Branson  25:11

You’re just saying. I’m going by what the professionals are telling me is the best way to go, the best route, and to keep the value of your property. Maybe you know, to talk to them about the fact that you’re you want to preserve, preserve the value of their property, and the whole Association as a whole,

Kevin Davis  25:29

that’s it. So that’s what we’re doing there. So we’re talking about answers. And guess what? We’re coming to the our time now. And I think that’s some of the key things we need to talk about, you know, in terms of answers, breach of fiduciary duty is the number one claim that we see as insurance professionals. And breach of fiduciary duty is you did not act in the best interest of dissociation, and we don’t act in the best interest associations. Usually because a you’re you’re afraid of the financial part of it. You don’t want to ask people for how much money it cost. It costs, or you don’t want to be upfront. On a financial side, you don’t want to enforce the documents correctly so you don’t enforce them. Guess what happens? You have things like discrimination and bullying and harassment, and a third one is maintenance. If you don’t maintain the building, guess what happens to the value of my unit in my quarter million dollar Community Association, unit I live in is now worth only $200,000 so guess what you’ve just done? You’ve reached your fiduciary duty, because I’ve lost $25,000 on my unit, right?

Sherry Branson  26:34

Yeah, people, if they think of the big picture as as a homeowner, they’ll realize, oh, this makes sense, because they’re trying to help me keep the value of my property in everybody’s property. They’re trying. They’re doing the best they can as board members, yes.

Kevin Davis  26:49

And so the answers are like we said, communication. Gotta Communicate. Communicate in a kind way. That’s it. Communicate in a kind way. That way you lower the temperature, you make people feel that they matter, that they’re important, and what their issues are, are important to you if they’re if you do that, it happens to be able to talk to somebody who says, Guess what? You just made a reckless decision. Just by saying reckless, you know, it brings up the you know,

Sherry Branson  27:18

it brings up the height. Get defensive. People get defensive. Yeah? Defensive. You’re accusing somebody of doing something.

Kevin Davis  27:24

Yeah? And as a board member, what we don’t want to do is get into a fight or get into a battle. What we want to do is lower the temperature. Look at the person and say, I’m sorry you feel that way. But guess what I’ve done? I have experts, professional experts, that guided me in terms of what we need for the next five to 10 years, exactly.

Sherry Branson  27:44

That’s the perfect way to do it, the perfect way to do it. Just explain it in a very calm, low key way, in not try to, you know, bring the temperature up, kind of bringing the temperature down. Yes.

Kevin Davis  27:56

So guess what? I think this is good. I think that’s a good ending. I think that I think we did good on anything you want to add to what you said. What do you think?

Sherry Branson  28:03

You know, I think it’s a great topic. Kevin, and I think a lot of board members will get a lot out of this and realize that if they just don’t try to look at it so much as a popularity contest, you know, and treat it like a business, I think that’s the key. I think that’s really the key. And to be like you said, kind about it, and just presented in such a way that they’re working in the best interests of the homeowners and of the association. And I think everybody would, you know, as a homeowner myself, you would, you would understand, you know what? I mean, it’s not to hurt somebody. It’s not just for for the heck of it, you know, to write to raise the condo fees or the HOA fees, is to help them, basically

Kevin Davis  28:45

to help them out. You nailed it. So listen, join us again next week for another HOA insight, where we promote common sense for common areas and Sherry, we’ll see you again in a few more weeks, but we’ll see you definitely for our webinar. So look forward to it. Look forward everybody. Thanks a lot. And take care. Thank you.

Sherry Branson  29:04

Thanks, Kevin. Take care everybody. See you soon.

Announcer  29:10

You’ve been listening to HOA Insights: Common Sense for Common Areas. You can listen to the show on our podcast website, Hoa insights.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 Hoa insights.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

EP 152 | What Do You Learn From Your Reserve Study?

Robert Nordlund  00:00

Money is tight everywhere, and your opponent is mother nature and Father Time. And you just have to appreciate that they are running your association down. We’re not the bad guys. Legislators are not the bad guys. Governing documents are not the bad guys. A conservative board is not the bad guys. That’s not you. You’re not the bad guys if you’re asking for a reserve study, if we’re asking to increase the assessments, your insurance company is not the bad guy for saying, Do you have a reserve study, and are you funding for it?

Announcer  00:32

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  00:47

Welcome back to HOA Insights: Common Sense for Common Areas. I’m Robert Nordlund, and I’m here today for episode number 152 on my own. So we’ll call this episode Robert On Reserves. We’ve been careful to not overload you with reserve study information that I of course find absolutely fascinating, but we’ve had enough questions that it’s time for an episode dedicated to reserve study issues. 

Robert Nordlund  01:11

Specifically, what do you learn from your reserve study? What does it tell you about how your association is doing, and how does it help you make better decisions? But before I dive into that content, I hope you enjoyed last week’s episode with board hero Hal Hovey he reminded us that training is everywhere, even in podcasts like this one, free training is everywhere. 

Robert Nordlund  01:34

Money is always tight, and communication is an important tool that most Association boards underutilized, keep the owners informed and minimize problems, keep them from spreading and minimize suspicions due to the rumor mill. So be transparent. If you missed that episode or any other prior episode, you can find them all on our podcast website, hoainsights.org on your favorite podcast platform, or you can search for HOA insights on YouTube, but better yet, subscribe to the podcast on our YouTube channel in order to get every episode delivered right to your phone or mobile device. 

Robert Nordlund  02:16

Now, almost half of our audience stumbles on to the podcast based on a search, so subscribing not only gives you regular reminders when we drop a new episode, which is, I think, as you know, once a week, but more subscribers increases our ranking in podcast search engines, and that helps even more searchers find us. So we can help them lead their associations effectively. Well, those of you watching on YouTube, can see my favorite HOA insights mug here, talking about deferred maintenance at associations. I got that from our merch store, which can browse through from our hoainsights.org website or today’s show notes. You find we have plenty of these items available for sale. We also have some great free items, like board member zoom backgrounds. So take a moment after the show, see what we have for you in the merch store, and at least pick up one of our free items before your next board meeting. Well, we enjoy hearing from you, and most episodes are indeed in response to a topic that you’ve recommended. So stay in contact letting us know what questions you have or topics that you’d like to hear more about. So leave us a voicemail at 805-203-3130, leave a comment on our YouTube channel or send us an email at podcast@hoainsights.org 

Robert Nordlund  03:41

and like I said, earlier Today’s episode is meant to catch up on a backlog of reserve study questions that our audience has asked. And they are questions like: “How much does a reserve study cost? How long is a reserve study good for? How can you expect me to trust your estimates for things 20 or 30 years into the future? and what value to me is it if we already know we can’t afford to increase our assessments?” Well, these are some good, challenging starting questions, and I’ll start with those first before I get into some material that I want to share with you, material that I think, I believe, will give you an edge in planning for the inevitable projects facing your association. So start with that first question. How much does the reserve study cost? Well, we just finished our 100,000th reserve study Fall of 2025. we are diving into that data to learn what we found out about different things. 

Robert Nordlund  04:47

And one of those answers is, how much does a reserve study cost? The answer is, it’s on average over the last six years at least, We thought that was a nice capsule point in time, in the last six years, The average reserve study was 0.8% of an Association’s annual budget, so a little bit less than 1%. we have spoken in the past, Our target is to keep it under 1% and it was nice to see the data support us. So a reserve study, no matter what we do, full update with site visit, Update no site visit, the three types of reserve studies, They all are, Put them all together, they’re averaging a little less than 1% 0.8%. 

Robert Nordlund  05:27

How long is a reserve study good for? Well, we talk about reserve study is based on moving information. every year, the costs of the things at your association are changing, the conditions of the things that your association are changing, and the cash in reserves changes – costs, conditions and cash, all those three things are changing. So we’re talking about budgeting when all the information is moving around. So we prepare a reserve study with the expectation that it’s going to have, going to give wise counsel for one year, for the year that you prepare us to do the reserve study for national reserve study standards talk about best practice is to have a reserve study update with site visit at least every third year. 

Robert Nordlund  06:17

So that kind of gives you a national perspective, if you think backwards in time, three years ago, we had some pretty darn high inflation. So if your reserve study is older than three years, you’re getting into some costs that are way low, inappropriately low. We had to Jack a lot of costs up significantly faster than we would like, honestly, but that’s just the nature of it. So a with site visit update every third year is best practice across the country. I gotta say, in some states, they don’t have any legislation on reserves. In some states, they say you need to update a reserve study on a with site visit basis at least every third year. Some states say, update it on a with site visit basis at least every fifth year. And I can tell you that what we learn is that now I should have had this ready. I think it’s 65% of our clients hire us every year. So that’s just what we do. We are the reserve planning partner for our clients. They hire us primarily for a with site visit update every third year and a very inexpensive update no site visit in the two years in between, and that’s so we keep their budget tuned. And I can tell you that the tell you two things, the reserve states that we update every year end up being just a revision, just a tweak. 

Robert Nordlund  07:51

The reserve studies that we update every third year. We call those a revision, because there’s a number of things that need to change. There’s been storms. There has been accelerated deterioration. There’s been some things that lasted longer than we expected. There’s some costs that accelerated, some costs that were remained flat. But every third year, there’s a lot that needs to change. Yet when it’s every fifth year, we talk about those as rescues, they are so far off that it’s almost like starting over their reserve funding is not tracking with what is currently necessary. So those are just a couple insights. The other thing I wanted to add on that is that when we track what’s happening with our clients. 

Robert Nordlund  08:41

When we look at our data, there’s measurably fewer special assessments among the associations that we update annually. There’s more assessments in the associations we update every third year, and even more, higher percentage of special assessments in the Reserve says that we do every fifth year. That tends to put some numbers to what our project managers feel when they’re updating them. So there’s measurable benefit to your association if you don’t want special assessments, if you want to know, what’s it take to keep our association budgeting safely and successfully for the future. Regular update reserve studies, not only get them, but follow them, and the numbers are significant for supporting that that opinion. 

Robert Nordlund  09:35

Okay. Number three, how can you expect me to trust your estimates for things 20 or 30 years into the future. And that’s a great question, honestly. And I’ve had some insurance agents, some and some insurance professionals ask me about that. They’re like, Robert, we’re just insuring for this year. How can you make an estimate for a. Roof that’s going to fail 17 years into the future. How can you do that? And I answer with a grin. I guess it’s a so commonly, do we don’t. All we do in a reserve study is identify what’s there now, and we have enough experience to know that

Robert Nordlund  10:21

a roof, for instance, typically lasts about 20 years, depending on the type of roof, depending on the environment, it will last 15 to 25 some roofs may last 30 years. But you know, it’s in that range. And we know if it’s new, it’s got a lot of life left, and we can see the Telltales. We can see when it looks old. And so add that with some information we can get from our satellite tools. The information we get by asking you, when’s the last time you replaced your roof, or is it original? We can pretty much triangulate on how old the roof is, and therefore how much life it should have left. And then, of course, you update that reserve study annually, or every third year. So we get a new opportunity that thing that was far away. We get an opportunity to see that in three years come closer. How are we doing another three years come closer. How are we doing another three years? So we’re not making any guesses about things far into the future. We’re making findings and recommendations for this year and the most that well after that first year, it starts to drift and get out of being current. 

Robert Nordlund  11:47

But the most we expect a reserve study to stand or for anyone to call it reliable, even Fannie Mae, Freddie Mac an insurance company, anything like that. If it’s older than two years. It’s time to start updating your reserve. Say, so already. Already talked about that. How long is a reserve? Say, good for the question about, How can we make estimates for things this far distant into the future? Again, we don’t we look at things the way they are now. We can determine their condition based on how many reserves days we do. We have a good sense of what our clients are actually paying in your region for a roof painting asphalt. Help you know what’s responsible planning at this point in time. And then for you to retain or reserve, say professional at least every third year, to do an on site visit update at your property, to get a new baseline, a new benchmark, at what things are looking like, how things are changing. If your trees are now overgrown and now hitting the roof and damaging the roof, there’s so many different things that start to happen at an association. We want to stay current with what’s happening at your association so you don’t get surprised by the things that should not be surprising, the things that deteriorate in plain sight or on schedule, right? According to their design lives. 

Robert Nordlund  13:20

Okay, Number four, what value to me… How are we doing on time? Okay, I lose track of time when I’m doing this kind of stuff. So I’ll get to the first four. What value to me is it, a reserve study I’m guessing, Why should we pay to get a reserve study if we already know we can’t afford to increase our assessments? and that’s a legitimate question. We know a few things. We know that deterioration is part of life here on planet Earth. We know that mother nature and Father Time are vicious opponents to anything that is built. Okay, they’re formidable opponents. We also know that because of that, owning and maintaining real estate is expensive. We also know that every association is nonprofit, and therefore money is tight. I have yet to meet an association that is not extremely careful with their money. 

Robert Nordlund  14:26

So we’ll just leave that as a definition, that money is tight everywhere, and your opponent is mother nature and Father Time, and you just have to appreciate that they are running your association down. We’re not the bad guys. Legislators are not the bad guys. Governing documents are not the bad guys. A conservative board is not the bad guys. That’s not you. You’re not the bad guys. If you’re asking for a reserve study, if we’re asking to increase the assessments, your insurance company is not the bad guy for saying, Do you have a reserve study and are you Funding per it did I say Fannie Mae and Freddie Mac they want to know that you are setting aside funds towards reserves, at least if you’re a condominium association. My answer to that is, on one hand, it’s not my problem. 

Robert Nordlund  15:17

My job is to provide you with insights, I can tell you, and others in my profession can tell you what’s around the corner. You may not be able to see it, but a reserve say provider can see it. It’s what we do all the time, all through the year. Your doctor can help you diagnose why your elbow is sore. Your optometrist can diagnose why you’re having a hard time reading well, you need new prescription of glasses. We’re in the reserve study business to help you see the future and be able to get prepared for it. So my answer to that is, why get it Well, number one, reserve planning does not affect the cost of home ownership. Okay? Reserve planning is driven by mother nature and Father Time. They’re the ones ruining your roof. Without Mother Nature and Father Time, your roof would last, I don’t know. Long time, forever, and you as the board, are responsible for your governing documents, to provide for the needs of the association, to budget for your association. That’s in every set of governing documents. 

Robert Nordlund  16:28

And the bottom line is, the roof will fail. And it really doesn’t care if you have set aside funds or not, if you have a reserve study or not, it will fail on or about again, I’m picking on roofs today, on or about 20 years. And so you and your homeowners will pay for it, either with ongoing funding, budgeted funding, or as a special assessment. You’ll still pay for the roof. So if you say you can’t raise your assessments because you can’t afford it, well, obviously, then you can afford a special assessment, because the costs are the costs. There’s some nuance to that. 

Robert Nordlund  17:08

The nuance is that if you pay through budgeted assessments, then your money is in the bank earning, today, hopefully about 4% interest, and that’s compounding. And so if you have 100 unit Association and you’re funding reserves, it’s almost like having 104 people funding reserves, because the bank is paying 4% on everything and it’s compounding. That’s just absolutely fantastic. So if you care about saving your homeowners money. The way to do that is by funding reserves on an ongoing basis and getting your friendly bank to kick in 4% along the way. Otherwise, the roof will leak and you’ll have to say, Oh no, we need a special assessment. You’re wringing your hands like I am, and if it’s a $500,000 roof project, you’ll need a $500,000 special assessment. Now, if you say, well, we’ll get a loan, then I say, Well, fine. But again, that doesn’t change the nature that everything is deteriorating. And now, instead of getting money from the bank in terms of interest. Now you’re paying the bank interest, and I think that ends up I should have come prepared with this. I tend to wander. That ends up making a project I believe, about 20% more expensive to your homeowners because of the compounding effect of getting interest from the bank versus paying interest to the bank. 

Robert Nordlund  18:46

So if indeed you are really concerned about saving money for your homeowners, you need to face the truth of the matter and say, Hey, there’s nothing we can do about the roof failing, the paint getting dry, the asphalt deteriorating, the carpet getting stepped on and worn on, etc, etc, etc, everything that’s at your association. So those are the costs, and you’re the board. You’re responsible to budget for it. If you fail at that job, you will budget for it via a special assessment. I wish it was different or simpler than that, but those are answers to the first four questions. I look at the clock. I’m burning a lot of time here, so let me take a quick break and say that it’s time to hear from one of our generous sponsors, after which we’ll hear more reserve say tips and tricks that will help you communicate to your homeowners and set your association up for success. Are you

Paige Daniels  19:48

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 reserve study.com to learn more and get a proposal for your association, and we’re back.

Robert Nordlund  20:20

Well, thank you for helping being hanging with me as I was talking through the first four questions. Let me get to a little what I might call curriculum that can leave you with some of the foundations of the reserve study industry. I talked about deterioration. It’s driven by mother nature and Father Time. Also, deterioration happens gradually, one day at a time. And so that’s that concept of as things gradually deteriorate, the smooth and fair and appropriate way to provide for them is to fund them on an ongoing basis. So that’s this concept of budgeted ongoing funding. It’s not a singular event in the future that you’re grimacing and hoping that doesn’t happen while you still own a home in the association, because what’s the cost is driven by the daily deterioration, one day at a time, and every owner is and should be responsible to pay for their fair share for the number of days, months and years that they were at the association, enjoying those assets and effectively using them up. 

Robert Nordlund  21:25

Okay, few things. There’s three parts to every reserve study, and so you’re going to get three results. Part one is the component list you may have seen that the list of projects at the association. Part two is the evaluation of reserve fund strength. How much money do we have, and how do we feel about that? Do we feel good about that? Do we feel oh, no, we’re way behind. And number three is, what do we do about that? What’s our action plan? What’s appropriate? What’s our appropriate response to fund reserve? So there’s three parts of the reserve study. That’s what you’re looking for. Number one, what are we up against? Now there’s a nuance to this. 

Robert Nordlund  22:09

The number two, the reserve fund strength, tells you how well your cash in the bank matches up to the amount of deterioration at the association. If your association that is older, the roof is old, the paint is old, the siding is old, and you don’t have much in reserves, then you can appreciate that the value of that deterioration is large and your amount of cash is small. And we measure that in the percentage called percent funded, and that is a easy, accurate predictor of special assessments at associations. So we can indeed see the future at associations. It’s primarily driven by looking at your percent funded. Now the zero to 30% range, percent funded is where special assessments are fundamentally common. The 30 to 70% mid range is where most associations are in the country. And we talk about special assessments being unusual here, not common, but every once in a while, irregular appearing, and then above 70% when you have more than 70% of the deteriorated value of your reserve components in cash, then it’s smooth sailing. A special assessments are rare when you’re at or above 70% funded. So that helps you see what’s going on. And the nuance is that when you put these three things together, when you look at the components that are facing you in the next five years, if you look at that five year total, that gives you a little bit of color to your percent funded value. 

Robert Nordlund  24:01

For instance, if you’re in the weak range, let’s say you’re 25% funded. That puts you in the high risk of special assessment range. It just plain does. But if you’re a brand new association, and you don’t have any projects in the near future, and the developer only gave you $100 to start with, you’re going to be percent funded is going to be very low. But the significance is almost immaterial. You look at your first five years of expenses and compare that to how much cash you have, and your first five years of expenses at a brand new association are going to be low. So you say, Yeah, not really a problem. We’re not in a cash flow crunch. We may not have much cash, but we also don’t have any pressure. And then the other the third thing is, are we funding per our reserve recommendation or not? Basically, I’m in Los Angeles. And the question is, Where am I, how am I going to drive if I’m going to go to San Francisco, if I’m going to go to San Francisco and I want to make time, I’m going to jump north and get on Interstate, five the freeway, and six hours later, I’ll be in San Francisco. So the question is, am I heading north or not, if I am heading east, I’m heading towards Palm Springs or Phoenix, if I go far enough, and I’m not getting to my destination. 

Robert Nordlund  25:31

So it’s an important question, are you funding per your recommendation or not? And something we’ve learned, and for people who attend our webinars on a regular basis, we have regular, regular webinars at reservestudy.com they’re free, they’re wonderful, they’re informative, they’re we average once a month, some months more, some months less. But you can go to reservestudy.com, scroll to the bottom, sign up for our email list, and you’ll get that once a month notification of what the next webinar is, and if you want to sign up for it or not, it’s totally up to you. But we have these ongoing webinars, and we’ve said so many times there, the average association needs to be setting aside about 25% of its budget towards reserves in order to keep up with deterioration. The actual range is 15 to 45% and again, there’s there’s nuance to that, but it’s primarily driven by the common area assets at your association, and if you are having to really step on the gas because you’re in catch up mode, if you don’t have enough cash, you got a major asphalt or roofing or siding or painting project coming close, and you’ve got to push on the gas to get ready spread it out over as many homeowners as long as possible before you get to a special assessment crisis. That’s one of those very important nuances. 

Robert Nordlund  27:03

Are you setting aside funds as recommended, or are you closing your eyes? And what do we say? See no evil, hear no evil, speak no evil. Yeah, if you’re just doing an ostrich hole in the sand, then you are headed right towards special assessment land, and nothing we can do about that. That’s up to you, and your homeowner is going to get slapped with a special assessment. If you don’t do that, if you don’t gather the money in a timely manner, you’re going to get hit with deferred maintenance, which just gets more expensive, and if you don’t do anything about it, then you get into eventually what we call the death spiral, which is where the homeowners aren’t happy there. They starts to have more renters there, and I’m stereotyping here, but the home values don’t keep up with those in the neighborhood, and yours just plain becomes a lousy association where the the rental owners don’t want to raise the assessments, and it just becomes a dump. And that’s your call, but that’s how you can see the future coming. 

Robert Nordlund  28:24

It’s usually the three parts of your reserve study. Again, the component list, the evaluation of reserve fund strength- That is percent funded. Again, zero to 30% is high risk of special assessment. Fair range is 30 to 70% and the strong range is 70% and above that tells so much, right there, And then your recommended funding. that is, I’m not going to talk about a lot of the nuances of funding plans and calculation methods and all that for today. The bottom line is, want to keep it simple. You got to be thinking somewhere in the range of 25% and that’s free advice here. Doesn’t cost your reserve study. It just is probably what a reserve study is going to tell you, and you can save hundreds or 1000s of dollars just by saying that’s what’s going to cost for our association. And if you want to know what your number is for your association, if you’re at 18% of total budget, or 29% or 34% I did a presentation a few days ago for an association, and their number is 32% it’s just the way their common areas line up compared To the number of homeowners they have at the association.

Robert Nordlund  29:44

But come back to I think one of the very first things I said, it’s all about Mother Nature and Father Time. I don’t cause expenses. I just help you see them and prepare for them, and we help you not be surprised by the thing. Things that are not surprising anyway. I welcome your questions. I welcome your questions on reserves. We talk about so many different other issues here on the podcast. It’s I love doing all these interviews to be surrounded by experts and fascinating people, but I’m the guy on reserves. And if you want to hear more about reserves, let us know we can do more. And you can also pop over to reservestudy.com to catch the webinars that we have there. So I look at the time. Thank you for joining me on today’s program. 

Robert Nordlund  30:32

There are professional reserves day providers all across the country. That’s one thing I should add. How do you know who knows what they’re talking about? Look for a credential on the cover of the report. They should have an RS, which stands for reserve specialist, or PRA professional reserve analyst. You need a reserve study professional helping you with a reserve study. You don’t want an accountant, you don’t want a contractor, you don’t want an architect you don’t want, I guess there’s unlimited number of other things. When you’re looking for a reserve study, get one from an RS or a PRA there’s plenty of professional reserve study providers all across the country working to help you prepare for these major common area projects. They’re not just possible, not just probable, but are inevitable and again, blame Mother Nature and Father Time. Thank you again. I hope you gained some HOA insights from today’s program that helps you bring common sense to your common area. Thank you for joining us. Subscribe to the podcast, and we look forward to having you join us for another great, valuable episode next week

Announcer  31:47

You’ve been listening to HOA Insights: Common Sense for Common Areas. You can listen to the show on our podcast website, Hoa insights.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 Hoa insights.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

151 | HOA Board Heroes: Turning Underfunded HOAs into Healthy Communities

Hal Hovey  00:00

The thing I really like about the CAI members, the business partners, is they understand Hoa, so I’m not hiring a contractor who doesn’t understand why it takes us three months to make a decision, you know, in five months to get to get paid sometimes. And you know why they can’t just come up to the board president and say, Hey, I need to do this. And have me say, Yeah, okay, go for it. I got to go run it through the board.

Announcer  00:28

A regular highlight of the HOA Insights podcast is our board heroes feature, where we dedicate one episode each month to celebrate the remarkable efforts of HOA board members. To us a board hero is one of the 2 million elected volunteers who deserve recognition for excelling in a role that often goes unnoticed. Today, we’re excited to spotlight one of these exceptional board heroes and share their inspiring story. If you match our definition of a board hero, or know someone who does, please reach out to us. Our contact details and those of our sponsors are provided in the show notes.

Robert Nordlund  00:58

Welcome back to Hoa Insights: Common Sense for Common Areas. I’m Robert Nordlund, and I’m here today for episode number 151, with another one of the board heroes. We’re proud to celebrate. I read a column from this board member, Hal Hovey, in the July, August issue of CAI’s Common Ground magazine. I liked it. Was able to get in touch with them, and we’re fortunate to have him on the program today. His column in common ground was titled the power of community leadership. But in chatting with Hal before this episode, I found he has so much more to share about what a caring, curious and courageous board member can do for their association. So today we have with us Hal HOA V who started his community association involvement with the purchase of a home in a self managed waterfront community, and then finding the way the association was not up to his expectations. Fancy that, he started getting involved with the Association, and frankly, they just weren’t keeping the place well maintained. So he’s now served in multiple roles across three different associations. Six years ago, was elected to serve on the board of the CAI Washington State chapter, one of the largest CAI chapters in the country, and is currently on the CAI national homeowner Leaders Council. But before we get to hal’s story, I hope you enjoyed last week’s episode number 150 if you missed that episode or any other prior episode, you can find them on our podcast website, Hoa insights.org, on your favorite podcast platform, you can search HOA insights and find it on YouTube, but better yet, subscribe to the podcast or our YouTube channel in order to get every episode delivered right to your phone or mobile device. Now, about half of our audience stumbles onto this podcast based on a search subscribing not only gives you regular reminders when we drop a new weekly episode and the topic of that episode, more subscribers increases our ranking in podcast search engines, and that helps us encourage and equip more and more board members at associations all across the country, and that’s what we’re trying to accomplish. Well, those of you watching on YouTube can see the mug that I have here, my HOA insights mug with deferred maintenance at a condominium association, and I got that from our merch store, which you can browse through from our Hoa insights.org website, or it’ll be in today’s show notes, and you’ll find we have plenty of free items there, like board member zoom backgrounds, some specialty items for sale, like the mug. And so take a moment after the show see what we have for you in the merch store and at least pick up one of our free items before your next board meeting. Well, we enjoy hearing from you, and most episodes are in response to a topic you’ve recommended. So stay in contact, letting us know what questions you have or topics that you’d like to hear more about. Leave us a voicemail at 805-203-3130, 052033130, leave a comment in the YouTube video or send us an email at podcast at Hoa insights.org, but back to today’s episode. So how did you ever think that some maintenance concerns of that first condominium association would take you down this path?

Hal Hovey  04:20

No, I had absolutely no idea. I don’t think I even knew what I was getting into. You know, I owned properties, and Hoa is for 25 years, never really got involved in them, you know, just kind of sit back and you pay your monthly bill and assume that everything’s running well, that I was in for shock, because all the previous Hoa is I lived in, it were all professionally managed, and they did run really well. But this one was private. It was, you know, self managed, and it was quite a different experience.

Robert Nordlund  04:46

So what was it actually? Was it like a sidewalk that was uneven? Was it some cracks in the asphalt? What was that trigger that got this all going

Hal Hovey  04:55

for you? You know, it was mainly just. Uh, going to some of the initial meetings and seeing that. They didn’t really have a plan for doing things. They didn’t really know how much money they were making or how much money they were needing. The maintenance was obviously deferred already when we bought we knew that, but we didn’t really understand the extent of it. You know, you can kind of get a clue when you’re looking at a property and it’s only painted as high as the ladder goes. But when you got four story buildings, that doesn’t cut it over the long term,

Robert Nordlund  05:30

you got three stories above a ladder height.

Hal Hovey  05:33

So anyway, going to a couple meetings, and, you know, at one point, the question came up about, you know, are we covering our bills? Or do we have enough money to pay for something? And the treasurer, who had been treasurer for quite some time, spoke up and said, Yeah, well, I think so. And then the vice president, who was a little bit smarter on this stuff, said, Well, no, we’ve been taking money out of savings for, you know, two years. And that was kind of my first real clue that their finances were kind of shabby.

Robert Nordlund  06:02

Had you been to board meetings at your prior associations? Was there a need for you to go to board meetings at your prior associations?

Hal Hovey  06:08

I never went to one. I didn’t probably even know when they were, you know, it was like I said. It was just you pay the bill, and everything seems to be running pretty well. The extent of my involvement with previous associations was one I lived in where I got a notice of warning that had to remove my satellite dish. Well, I didn’t have a satellite dish. It was the neighbors across the street. You know, this is a bit back in the days when they were big, eight foot wide ones. So it’s pretty clear who had one who didn’t. Yeah.

Robert Nordlund  06:39

Okay, so significant things like that, but obvious changes. I remember when I was president to my association. We ranked the people I can. I think I can, yeah, I can say it’s, it’s our podcast. We can say what we want. We ranked them on a five point scale. The top was the involved owners, the people who are helping carry the association forward. Number two was the involved, helpful renters who were nice. They reminded us that the laundry machine number two was broken, or something like that. Number three was the not involved owners, but they always paid their bills now that you may have been number three, where you just the silent majority, just helping the association run. Number four was the annoying renters, and number five was the annoying owners, the annoying renters we knew they would leave someday, the annoying owners were just, we didn’t know how long, ago, yeah, just, just annoying, well said. And so there’s different types of people that you have in the association. How much of a factor at that association was that it was self managed? Was that what left them kind of drifting?

Hal Hovey  07:54

Yes, I think that was probably 90% of it is that, you know the treasurer didn’t have the proper training to do good treasure stuff? This is a kind of condo buildings, and they were, at that point, to 20 some years old, and they just hadn’t been raising the dues and, you know? And one of the things that I’ve learned, I’m a real estate agent now, he used to be the military, but one of the things I’ve learned in the real estate business is that a lot out of the newer condominium complexes in particular will have very low monthly dues because they’re not really putting anything into the reserve fund. And then, you know, 10 years down the line, they realize, oh, wow, we’re already behind,

Robert Nordlund  08:35

way behind. 10 years behind, yeah, yeah, okay, well, that’s sounds like a an issue of training. So is that something that you see as a now that you have kind of a national perspective before you had maybe a statewide perspective, but is that common that you see across the country that there’s a lack of training what a board member needs to know to do their job.

Hal Hovey  09:01

Well, I think it’s even more fundamental than that. You know, there’s certainly availability of training for people who know that they need it. The problem is that there’s a lot of homeowners, homeowner board members, who don’t realize that they need some training. You know, you don’t know what. You don’t know type of thing. That’s exactly what I was thinking. Yeah. And so if you have a board member who’s in a critical position, like a president or a treasurer, you know, sometimes you can get just so far behind the power curve that you don’t realize it. You know, we had, I think the first year I was on the board, maybe it was the second year. By then, we had a professional CPA from Boeing who was our treasurer, had taken over his treasurer. We finished up the year with $89 in the bank. And this is on, you know, condominium association with, you know, $250,000 going through our accounts per year. And we finished with $89 and that’s operating account. We didn’t have a survey account at that point. Gee, that’s the.

Robert Nordlund  09:59

And what’s a good rule of thumb, three months of operating expenses?

Hal Hovey  10:04

Yeah, I would say at least. And you know, you’re in the reserve business. You know better than I would wish to have for reserves, but in a 20 something year old Association, you need to have at least something. You know you’re 10 years away from replacing roofs,

Robert Nordlund  10:19

yeah, and you’ve got 10 years of deterioration that you just can’t get back because the deterioration on the roof and the asphalt and the paint and everything has kept on going. It’s like a race car that is spending the first half of the race in pit row. You’re just way far behind. Okay, what can we do to outside of someone stumbling onto this podcast. How would a board member learn that? Oh, gee, I need to find out what I’m supposed to be doing here. How do we trigger that?

Hal Hovey  10:53

Well, it’s interesting because our association, this one I bought into, joined the Washington State Chapter of the community Associations Institute. And the reason we joined was because our Boeing CPA treasurer was in another Association down in Seattle, and he his association was a member of WCAI. So it was through that that I became aware of the trainings that were available because, you know, up here in Washington state, they send out monthly magazines, and they have the trainings in there and all that kind of stuff. And you can get an email list. And there was a training that I wanted to go to, and so I went to it, and, wow, I just, you know, I never looked back. I realized that there’s just so many resources out there that you just need to be made aware of them. And as a member of CAI, both nationally and you know, our local chapter, they’re really good about making people aware of what’s available.

Robert Nordlund  11:52

Yeah, and I could only imagine that to someone who just wasn’t sure about what they’re getting into to finally get exposed to a group of people who had resources, had training, had doesn’t see AI, have their they call them the gap reports guide for Association practitioners, how to be a president, how to be a treasurer, how to be all this kind of stuff. So they have written resources and monthly meetings. Many chapters have monthly meetings where they have guest speakers, and some often trade show around the back, where you’ll find a roofer or a painter or a CPA or things like that, professional services, a management company, or two or three. Maybe we should say it for anyone who’s not familiar with CAI, their website is Cai online.org, Cai online.org, and there you can find out a list of local chapters across the country. You can become a member. You can get, like Hal said, part of their electronic things, they have a national magazine every other month, the common ground magazine. And I kind of want to say you don’t have to reinvent the wheel. People been doing this all across the country for decades, and CAI is there to help. But outside of CAI, what other things? What other resources did you find through CAI?

Hal Hovey  13:11

I realized that there’s a lot of expertise that’s available from the business partners, that’s free. So for example, I know that there’s a number of reserve companies who have online webinars that specialize in reserve studies. There’s some attorneys that we have locally that have a weekly webinar where you can call in with your questions, and they don’t give you specific legal advice, but they give you, you know, generic legal advice. There’s a local structural engineer who has, you know, weekly training. You know, we have all kinds of resources that you don’t have to pay for, and it’s all from the experts. You know, that’s one of the problems that we had as a self managed Hoa is like, Well, we had a guy who worked at Home Depot, and was familiar with a lot of contractors. So when we had contracting or engineering questions, we’d go to him, you know, we had the CPA, who’s who knows accounting, but he doesn’t necessarily know HOA accounting, because it’s such a different animal, you know? And we had, initially, we had a treasurer who worked in school district, and she knew math, so that’s how she got to be the treasurer. But when you, when you reach out and you find out that there’s experts who will give you advice for free, in most cases, you know, it’s just, it’s, I mean, it’s an insight into a whole new world.

Robert Nordlund  14:35

Oh, yeah. And for an association that had less than $100 at year end, you are indeed trying to be very careful about your money. Well, it seems like a light bulb came off or went came off, went on, went turned on. Was it a similar experience for the other board members that you served with?

Hal Hovey  14:51

You know, for some of them, I think so, certainly getting the professional, you know, CPA, as a treasurer, i. Who was already a chapter member, that was a huge, huge step forward, because he kind of was our guide into a lot of this, other aspects of, you know, professionalizing how we operated, right? And then I was, you know, by the time I got on the board of the State chapter, you know, we were able to get our association professional management, but it was a long, hard fight to get the other board members to agree to find that hire a professional manager.

Robert Nordlund  15:31

That’s an important point. It takes momentum and it takes political capital, and those things take time,

Hal Hovey  15:38

and in some cases, it takes having a $200,000 you know, deferred maintenance project that you realize you’re in an over your heads on and you really needed somebody professional to help you through it.

Robert Nordlund  15:52

Yeah, sometimes it’s an emergency that becomes a unifying rallying cry saying, Oh, gee, we have a problem, and that can unify the board, that can unify the homeowners, and say, this is a problem. It’s a big problem. And what do you say? We don’t do this again? And you start saying, okay, maybe we should get management, maybe we should set more funds aside in reserves. Maybe we should get regular monthly financial reports. You’re talking about those kinds of things.

Hal Hovey  16:23

Yeah, and not only that, but also hiring the right contractors. You know, one of the things that I’ve learned is that up here in Washington State, we have two big convention type things each year, and they have the big trade show. So we have like, 150 business partners who are in the trade show, and I can’t tell you the number of professionals that I’ve hired through meeting them face to face. And the thing I really like about the CI members, the business partners, is they understand Hoa, so I’m not hiring a contractor who doesn’t understand why it takes us three months to make a decision, you know, in five months to get to get paid, sometimes. And you know why they can’t just come up to the board president and say, Hey, I need to do this and have me say, Yeah, okay, go for it. I got to go run it through the board. There you go. All this. AI business partners all understand how Hoa is work. That’s why they’re there. So you have overcome one of the stumbling blocks right off the bat,

Robert Nordlund  17:28

yeah, and they’re properly insured, so they can do work on community associations, and they’ve done it a time before, 10 times before, 100 times before, 1000 times before, depending on different cases. But okay, so it was an evolution at your association. Are you talking about a couple years? You’re talking about five years. How long do things take to kind of professionalize the way your board ran that association? We got

Hal Hovey  17:55

more professional pretty quickly because of I came on as the secretary. We had the owing guy came on as the treasurer, the construction guy took over as the president, and we all came on because we were concerned with the direction that the HOA was going to begin with. And we had all bought in there, all in the same year, which, you know, is kind of coincidental, I guess so, we all were trying to get in that professionalizing direction. But the actual getting professional management on board, it took a good 10 years.

Robert Nordlund  18:28

I want you to say that again. How many years? 10 years? Yeah, it takes time, and sometimes I think changing momentum at a community association is like turning a super tanker out in the ocean. It takes a long time, because the association has been doing it one way leadership that is fundamentally a committee, and you want to take the homeowners along with you. And so it takes time to make or build that political capital to say, this is a direction we are now going to go. And I think a bottom line of a lot of what this is, is is it’s going to cost more money to do this the right way, and a lot of that the right way is expensive. But then again, you have to make it clear that what we were doing wasn’t good. Isn’t that kind of the first argument of time to make a change, because you keep doing the same thing, you can’t be expecting different results

Hal Hovey  19:19

something like that, right? Yeah, definition of insanity, right?

Robert Nordlund  19:23

There we go. That’s it. That’s it. Well, Hal, this is fantastic stuff. I look at the time and I see it’s time to take a quick break, hear from one of our generous sponsors, after which we’ll be back to hear more from Hal, and we’ll talk about more about tension and some of the solutions that he was able to come across for his association,

Paige Daniels  19:43

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Robert Nordlund  20:12

And we’re back. Well, I’m enjoying a great time here with Hal Hovey, and we’re talking during our quick break about the tensions that he continues to see in the industry, and one of those is the tension that we see with scarcity. He got involved at his initial Association when money was scarce. So how do you see that as a common problem across the country, where associations are trying so hard to keep expenses low, that they’re actually kind of strangling their association. Yeah, I

Hal Hovey  20:45

think that that’s absolutely it. I think that’s part of the reason why people are elected to have professional management. Some cases, they think it’s too expensive, when in fact, it will save the money over the long term, because they’re actually, you know, hiring experts and trying to stumble through things and making mistakes. But certainly, you know, cost of materials for doing any kind of repairs have gone up. You know, a roof cost twice as much as it did five years ago. And a lot of times we just haven’t been keeping up on our estimates. But yeah, absolutely, I think that that’s a huge problem nationwide.

Robert Nordlund  21:16

Yeah, I see that tension. I hear about that tension. We obviously recommend reserve funding appropriate for those higher expenses. And we get a lot of treasurers, a lot of boards, a lot of managers saying that, gee, that can’t be right. We say, sorry, it is right. Everything’s expensive nowadays. And I think you in our viewing audience need to appreciate that. You think it’s expensive and it’s expensive everywhere.

Hal Hovey  21:42

And they, you know, they see the national headline is that, you know, inflation is 4% Well, that’s great, but our city utilities went up by 200% because we got a new sewer plant. And, you know, it’s not across the board that everything’s, you know, three or 4% inflation. Building Products have gone up 25 to 50%

Robert Nordlund  22:04

Yeah, I wish a lot of things were three or 4% there’s just a big expenses that we learned new words like supply chain problems, just a lot of new things in the last few years. And so it is expensive to run an association. Are there other areas where it’s becoming just plain hard to be a board member?

Hal Hovey  22:25

Well, there’s the perennial problems of having homeowners who make life more difficult than it needs to be. Is that the type fives? Yeah, exactly. You know, the there’s increased regulations in Washington State. We are in the process of going through completely revising how homeowners and community associations are managed. You know, from legislative standpoint, and you know that is causing a lot of stress. A lot of homeowners associations are saying, well, we don’t need to do this. Well, the state government has said, Yes, you do need to do this. You know, transparency is something that homeowners are increasingly wanting because, you know, they can go on the internet and find out almost anything instantaneously, but I can’t find out, you know, what’s the status of my Hoa is, you know, bank account. Why can’t I find that out? Why won’t? Why won’t, you know, you give me a website that I can go to to figure this stuff out,

Robert Nordlund  23:20

yeah, why? What are they doing with all my money, and why did it go up 10% when inflation is only 4%

Hal Hovey  23:26

Yeah, you know, I actually, as a board president, was accused of buying my new car through HOA funds. Of course. Yeah, I’m like, what my $89 in the bank? You know, I bought

Robert Nordlund  23:41

my new Toyota with that. Yeah, there you go. Wasn’t it a Seinfeld episode? Do you remember that from long ago where Jerry, yeah, Jerry gave went down to Florida, and he was doing great as a comedian, and he bought his dad a Cadillac. His dad was the president of his association down in Florida, and so he started driving. The dad started driving around this big Cadillac, and everyone thought he was skimming Association funds. And it was just his son bought him a Cadillac. Yeah, if you want to get wealthy, don’t try to skim a little bit off of community association funds, because those are budgets that have been scrutinized for years and years and years. And there’s new boards that say, Well, I’m going to cut the fat. Well, I think the fat was cut, what, 10 or 20

Hal Hovey  24:29

years ago. I don’t think there was ever any fat in anybody’s budget. I mean, you know, honestly, people are such spectros that they won’t, they won’t. You know, we had $180,000 project. We actually came in under cost, good. And because we came in under cost, a bunch of homeowners insisted that we give them a refund on their special assessment. And being $180 to each of the homeowners, it’s like, why can’t we just leave that in the reserve account?

Robert Nordlund  24:58

Yeah, because we’re gonna have to. Paint. We’re going to have to do this, we have to do that, we have to do something else, and we’re all homeowners here. Yeah, there’s different ways to look at it, but there’s a tent. Well, do you have any well, going back to what you spoke about earlier, the developer often sets up an association with a little bit lean budgets, and so there often never was any fat to start with. If anyone was deficit a budget, not enough funds to run the association. But how do you encourage our board member audience to deal with the stress of working with the homeowners, trying to get on the same page with them? Well, the key to

Hal Hovey  25:39

everything is always communication, isn’t it? You know, as long as you keep communicating with people, give them regular updates, send out the minutes in a timely manner, have them minutes say what actually happened in the meeting. You know, have a budget that’s clear. Instead of just saying, We made this much this month and we spent this much this month, you know, itemize it. Tell them that, oh, we had an unexpected expense of $4,000 for the elevator or whatever the case is. But you know, transparency and communication get you a long, long way with the homeowners.

Robert Nordlund  26:13

I agree, and that builds that trust and political capital. I’m down here in Los Angeles, and when there’s construction on the freeway, it’s always a hassle, and it seems like it’s always happening at just the wrong time when I’m trying to get somewhere. But I like going by the big orange signs that say your tax dollars at work, and I at least know that, okay, I pay a lot of money in taxes. But now the freeway is going to have five lanes instead of four, and traffic is going to flow smoother. So like you say, communicating, being transparent, this is what your money is doing. We’re making improvements. If there’s problems with X or Y or Z, you can say, this is what we’re doing to address that. I really like that, and that is that what you’re doing to build the community of we, rather than us and them, board members and homeowners,

Hal Hovey  27:03

yeah, and, you know, starting people off with the right foot of you know, welcome to our community. This is what it’s like to live in an association. You know, a lot of people are who are coming here are retirees. They’ve never lived in a condominium association before. I’m speaking to my previous Association. Actually, you know, they don’t understand that, yeah, you live on the first floor, but you still have to pay for the elevator for everybody else. And, you know, that’s, you know, we’re a communist organization where everybody’s in it

Robert Nordlund  27:32

together, and you’re on the first floor, you’re paying

Hal Hovey  27:34

for the roof, yeah, and everybody’s in it together. Are you still

Robert Nordlund  27:38

on the board at your association, are you moved to a new, new place?

Hal Hovey  27:43

Yeah, I’m in another community right now. We sold our condominium and we bought a single family house on acreage, and so there’s 35 houses in our current community. And I was on the board. I actually joined the board my first year, I got elected as a vice president, and our president resigned within four months, so I became the president, and did that for a couple years, and then I’m taking a little sabbatical from the board right now, but I’ll probably be back on in January, I would imagine.

Robert Nordlund  28:15

Okay, good for you. Well, you’ve got plenty of responsibilities with the CAI national homeowner, leader council that you took on. What’s your why did you say yes to that? And what do you hope to accomplish with your time on that important committee?

Hal Hovey  28:32

Yeah, well, I was, I was terming off of the state chapter board, and I just wanted to keep my fingers in what was happening, and maybe I had something to offer, and maybe I felt like the National chat and, you know, the national organization had more to offer to the state chapters that wasn’t really trickling down, and so I just wanted to get in there and do my part to speak up. And it’s been a really kind of eye opening. Yeah, what’s that? How? So? How so? Well, national, you know, it’s a big organization, so they move a little bit more slowly than the state board did, but they have their hands in so many different things at once that you don’t see as a lonely guy down. You know, at the state, you know, they’re deeply involved in legislation, legislation, they’re deeply involved in training. And eventually it all trickles out, and we may not even realize where it came from. So a lot of cases, like the corporate Transparency Act that we were talking about previously, you know, ci was fundamentally involved in that and transformed how that all came about. I don’t think down at the individual homeowner level or the individual board member level, we have any appreciation for why that got deferred. The Ci was intimately. Involved in making sure that that happened?

Robert Nordlund  30:01

Yeah, they fought hard to if anyone’s not sure what we’re talking about, it was a couple years ago that board members all across the country were going to have to register because of a was it banking, or was it security, something like that concerns, and it was just, if you’re going to be a part owner in a bank, that’s one thing you you have security issue concerns, but for being the treasurer of ABC Hoa, there was a lot of pushback having to register with the government. And CAI fought a hard fight, and they eventually helped Association boards all across the country to not have to register for that. That was a good thing. So a lot of good things. CAI, does.

Hal Hovey  30:46

They’re doing that right now, and other things that we don’t even know are on the on the horizon. Yeah, they’re

Robert Nordlund  30:50

keeping it’s just the problems away from getting down to the association specific level. Well, how it’s been great talking to you. I’m so glad that there’s people like you on the national committees helping keep the problems at bay, taking the lessons that you learned at your association, the lessons you learned at your state, and applying those desires to make the industry a better place. Now, on a national level, I want to thank you for taking your time and sharing from your experience any final thoughts or words of wisdom that you’d like to share about your board member or leadership experience? Yeah, I

Hal Hovey  31:25

think the biggest thing is to realize as a as a board leader, you know, homeowner leader, you’re not in that by yourself. You know, there’s a lot of resources out there and a lot of free resources. You know, if you want to hire an attorney who specializes in HOA. You can go to the professional decrees list on the CIA website, if you are self managed and you just don’t feel like you can spend the money to join a professional management company. You can go to Hoa resources.org and there’s all kinds of articles on there. There’s free classes that are offered periodically, and there’s a lot of resources from business partners of CAI that, you know, it’s there’s a lot out there to help you. So don’t feel like you got to stumble out around and make it up, you know, as you go, because there’s people who’ve been there before, whether it’s the, you know, CAI exchange online forums where you can get advice from other homeowners, or, you know, some of these webinars that we’ve talked about, you know, there’s, there’s people who will help you.

Robert Nordlund  32:32

Absolutely, I love that spirit of volunteering, that spirit of contributing. We appreciate that homeowner associations are nonprofits. They’re very cost conscious. One of our sponsors, community financials, is a company that helps quite often, self manage associations at least have a financial backbone for their association, getting timely reports. So there’s, there’s ways you can get help without having to go full step to professional management, which is obviously appropriate for many, many associations. Well, we want to publicly acknowledge Hal for performing a thankless job well, and for doing a remarkable job of improving the communities he’s touched and Washington State CAI, and now on a national level, with CAI, homeowner leader committee, he’s been an effective board member. And so we’re just glad that there are board members like Hal scattered all across the country. Want to give board heroes the credit they deserve, and we’re glad to have a platform where they can share their inspiring story. Well, we hope you gain some HOA insights and encouragement from hal’s experience that helps you bring common sense to your common area. And remember, if you match our definition of a board hero, or know someone who does, please reach out to us. We love having board heroes on our program. Our contact details are provided in the show notes. Thank you for joining us. Subscribe to the podcast, and we look forward to having you join us for another great episode next week.

Announcer  34:00

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150 | How Good HOA Board Decisions Raise Home Values & Lower Risk!

Kevin Davis  00:00

It is a financial necessity for community associations to look at how they’re going to communicate, how they’re going to do a job better. We all we want to do is have our association be more valued than any other association in the area, in our zip code or in our community, wherever we live, at our condo or Hoa, whatever it is, we know that ours is the best, most well run association in the area. That means we’re going to do well.

Announcer  00:28

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  00:43

Hi, I’m Robert Nordlund of association reserves, and

Kevin Davis  00:46

I’m Kevin Davis of Kevin Davis Insurance Services. And this is HOA Insights, where you promote common sense

Robert Nordlund  00:52

for common areas. Well, welcome to episode number 150 where we’re again speaking with insurance expert and regular co host, Kevin Davis. Early in 2026 we’ve been presenting some episodes that were full of helpful hints, like last week’s episode 149, with Alden Michaels and Sean coffers from Cai introducing their free board member training course. But like so many other questions in life, the underlying question is, well, why should I care about this? And indeed, that’s a fair question. Kevin and I started this podcast in response to the tragic Champlain tower South collapse. We wanted to create another pathway where board members could be encouraged and equipped for the hard work they do, leading their associations into the future. So why take our advice? Why are we doing this? What’s in it for you and your association? Well, to catch you up a bit, if you did miss last week’s episode number 149, on a free board member training course or any other prior episode, take a moment after today’s program to listen from our podcast website, Hoa insights.org or search. Search for HOA insights on YouTube, and better yet, subscribe to our podcasts on YouTube, on its channel, so you don’t miss any future episodes. More subscribers means a higher search ranking, which means we are able to help more struggling board members find us, and that will improve their association and the lives of all the owners in their association. That’s what we’re trying to accomplish here, one association at a time. Well, those of you watching on YouTube can see the HOA insights mug that I have here, and Kevin’s got one too, that we got from our merch store, which you can browse through from our Hoa insights.org website or the link in our show’s notes, and you’ll find we have some great free stuff there, like board member zoom backgrounds and some specialty items for sale, like the mugs that we just showed. So go with the merch store. See if there’s anything interesting there you’d like to purchase, or just download a free zoom background for your next board 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 always contact us at 805-203-3130, or email us at HOA insights, at pod, excuse me podcast at Hoa insights.org but today’s program is on us helping you appreciate why we’re spending our time on these recordings, why we find these interesting board heroes, and why we find subject matter experts who want to share some key insights with you. So Kevin, it may be easier for you. You see it when it’s not good for you, that’s your world. Yeah.

Kevin Davis  03:39

And you know what? You nailed it on the head when you say, why are we here? We’re here because I see claims. Claims because Board of Directors make it’s not a matter of making bad decisions. Sometimes they make no decisions. It is that to me, boards of directors of Community Association. I was one. I remember about 20 years ago or 30 years ago, I was with board of directors, yes, of a community association, and I was there. I wanted to do good. I wanted to make a difference. But like many board members out there who get into and want to make a difference, it doesn’t take long for you to feel that weight of responsibility, that you you’re alone, that nobody cares what you’re doing. You’ve done some great things in your associations. I remember we we placed, we paired the south facing roofs. And at the annual meeting, we got destroyed because we didn’t change the pool furniture, you know? And so once I realized that, I go, okay, I get board members community associations. Now I understand them. So every time I see a claim because they failure to increase the assessments, or failure to pass a special assessment, or failure to enforce the rules, or failure to force the rules uniformly, all these different things. I say, Robert, we have to let these people understand that if they do a good job, if they do the job that they require to do, and guess. What happens? The likelihood that having the claim is lesser, the likelihood of their premiums going up will be lesser. The people in the association will be more enjoyable. They will have more fun. All it takes for them is to focus on doing a good job.

Robert Nordlund  05:15

My pen’s smoking here again. And as a board member. You got into it for one reason or another. Again, like you said you thought was a good idea for me. Someone said, Well, can you be president? And I said, Okay, you know, how hard could this be? And you You start at it, and then there’s that burden of, okay, what do I do next? Who do I go to for help? And realizing that you’re carrying this weight, but,

Kevin Davis  05:43

but this is the thing. This is the thing, Robert, is that that’s when the choice is there to you. And I made a choice. I said, Okay, we need to learn. In order for us to do a better job, we have to take a step and go, Okay, how can I be effective? How can I look at these, these assessments that have been low for the past 30 years I’ve been in the association, or 20 years on long How do I make that decision? To say, we need to go up 10, 15% you know, the easy thing for me to do as a board member to say, Guess what? I think that maybe one more year, maybe one more year, maybe one more year. And then you think about when three years from now, I’m moved. I don’t care. We have to make tough decisions, and we choose not to at the time we need to.

Robert Nordlund  06:25

That reminds me that, as a board member, there’s neither of us are attorneys, but there’s this concept called the business judgment rule, and it protects board members. And for you, it’s your world. It protects board members when they are well intended. They make a wrong mistake, but they are well intended. And that’s just a wonderful thing, that you don’t have to be

Kevin Davis  06:47

perfect, and that’s the reason why you have insurance. We sell directors officer liability insurance. And what directors and officers do? They have to make decisions. And they make a decision to say, well, guess what? We choose not to have a reserve fund right now, we choose to do that. That’s a choice they made. Now, it’s not illegal, you know? It’s not something that they did for malicious reasons. They’ve made a choice. Well, you have insurance to pick to pay for you. When you make those kind of choices. The problem is, is that if you make the right choice, okay, and the right choice could be different for different people, then all of a sudden, the likelihood of you having to spend next year, two years, five years, going in and out of courtrooms, following emotions and looking for summary judgment and all those legal words, I had no idea what I’m saying, right though, and that’s the point, is making the right decision. You know you’re saying that business judgment? Well, yes, as long as you act in the best interest Association without conflict of interest, you know you should be protected. But it takes a little bit more than that. It takes your some initiatives that desire to say, I want to go beyond, because at the end of the day, when I go beyond, when I make that decision, to be better at it. Guess what? We thrive as a community. People are happier the values of our association, not only the values of our association go up, but our personal values go up too. There for good, positive reasons. Okay, then I feel good, and my message get out to the people who live in that community. Guess what happens now you have a good, positive, thriving community.

Robert Nordlund  08:21

If you’re thinking about I need to move forward. What can I do? I almost have this idea of stumbling forward, where you are making action, but you’re doing the right things. You’ve said it a number of times, maintaining the property, collecting assessments, enforcing the documents and the rules, doing the right things may not be perfect, you know. What do you do when Mrs. Johnson, in unit number 13, is two months behind on her assessments? You love Mrs. Johnson, but she needs to pay her assessments. You know? So you I don’t know what your 60 day process is, but do you need to go through the process and maybe you give her a payment plan? Those are the gray areas where you need to be stumbling forward.

Kevin Davis  09:04

And this is the problem. What happens when you don’t do it? Well, I mean, if you choose to say, You know what, Miss Johnson is a great person, let’s give her a pass. Now, of a sudden you go to Mr. Wilson, who lives on the other side, who’s not a nice person, and you file, you know, notices against him, and you get, you do all the different things. And then, all of a sudden, Mr. Wilson fire, Mr. Johnson, was treated differently. What we think Mr. Wilson is going to do? Mr. Wilson’s upset now. He’s upset with the board because the board is acting in a unfair manner. You know, where they are arbitrary enforcing the rules. And now all you can just imagine the kind of lawsuit you’re going to have because it’s

Robert Nordlund  09:39

arbitrary rule enforcement? Well, there’s a minefield. Everywhere you look, there’s and that is literally your world with the decisions boards do and don’t make. So how do they Is there a moral compass that’s inside of us all, that it’s the reason you got on the board, because you want to do good for the association you’re volunteering. There’s. So many probably good candidates for being on the board that say I can’t because I have young kids, I have overtime at work, or I just just don’t have the time. I get that. So of the people who can serve on the board, how do we cultivate and nurture the right kind of feelings and attitudes so that they are doing great things for the association.

Kevin Davis  10:22

That’s a good question. And I would say this, there are certain types of people on a board that want to do well, and there’s certain types of people on the board who are just people who will be a nuisance. Okay, well, the nuisance and nothing you can do about and Abdul and spend a lot of energy and time on a nuisance, as opposed to saying that people who do well on the board, that spend our energy with them, teach them to be more skilled and help them do a better job, because they will get better. I mean, if you notice the things that we like, the things I enjoy doing, I get better at it, the things I don’t like enjoying, guess what? We I just know I don’t do well at I just want to manage it. I’d only be able to manage it. So if you have a nuisance person in the board or who lives in the community association, stop spending so much energy. Stop giving that person so much oxygen, to the point where you are bringing yourself down and the board down. You know, you got to say, thank you very much. We appreciate your concern. Let’s get back to the roofs well,

Robert Nordlund  11:20

and then that person, let’s talk about that person who got on the board because they think that the board is embezzling, or they,

Kevin Davis  11:29

most of them, think they boards incompetent, yes, yeah.

Robert Nordlund  11:32

Or they think that the assessment should be the same as they were for the last 12 years, whatever it is. And you say, Fine. And Gloria, Fred, whatever the person name is. Can you double check my numbers here? And you know, maybe you can get them going so they clearly, their skill is looking at the numbers. Clearly their skill is looking at the contracts. Can you is there is a landscaper? Here’s a landscape contract. Can you double check and make sure that they’re doing everything that’s in their contract? And contract, and maybe you find out that they’re supposed to plant plants every six months, and you say, fantastic. Thank you so much. And all of a sudden they become a contributor rather than just a critic. And then I’m thinking that a board does not have to be unanimous. You can take advantage of people’s do I say bias to make that constructive for the association is there ways you can do that?

Kevin Davis  12:29

It’s so important what you’re just saying right there, because the consequences of not doing it is greater meaning. As you talk about the flowers every six months you got to plant them. Okay, guess what that nuisance is going to be doing? He’s gonna wait for a six months in one day, right? And all of a sudden he’s gonna sit back and do what follow notice, you know, to the boards in violation of the association documents. They should have done this yesterday at 12:01pm, now what happens there? And you just said it. Now, if the board, when you go back to the board, gets together and you reach consensus, as opposed to say, well, guess what? I knew we should. Because again, the boards now sitting there, and they know the nuisance going to that nuisance guy going to come in and say, it’s been announced 60 plus one day. But if the board’s united, they don’t have to agree on everything but the boys united and say, Thank you very much. We will get on it right away. Don’t know, I’m going to file a lawsuit. I’m going to get it. Guess what? My brother is a lawyer. My uncle’s a lawyer. And you always hear that all the time, someone in their family is a lawyer, and they would get upset. Now here’s the key thing with these things, if you do the job the right way, if you say, Guess what? It’s been 60 plus one day. And the reason why? Because over the last week, we’ve had torrential rains or snow storms, or wherever it is, or what it could be, any long as you have a reason, a reason, you go back, because the judge is going to say, Okay, how were you harmed? Okay, what you mean? How were you harmed that one day that the plants, you know, the two of us, weren’t implanted, how were you harmed? And that’s the end. But the key thing is, is that if you get into a battle with them, if you start fighting with them, if the board gets together and start fighting now, all of a sudden, you giving that lawyer reasons to stay in court a lot longer. Don’t forget, as a lawyer, he doesn’t care if he gets somebody, if he gets Mr. Wilson in unit number 12, who calls up and says the flowers are one day late, he gonna charge you by the hour. And so he goes to court. He gonna charge you by you know, he’s gonna make a lot of money just sitting there, just charging you and charging you. So he has no interest in solving it. He wants to let this thing go on and go. Because you’re mad. You’re upset now, all of a sudden, the board’s upset because, you know, they have to go to court everything. Because instead of them saying, Yes, we should have done it Okay, we will do it tomorrow. You know, we had this legitimate reason why. You know, the President was out of town, that’s something we can fight. You know you want to be in a position where you want to be in a defendable position when something like that happens, end up not being because you go to the nuisance level, and you can’t do that. You can’t beat that nuisance when you lose that battle, when you lower

Robert Nordlund  14:55

yourself to that if we’re going to lower anything, I like the phrase you’ve used so many times. You want to lower the 10. Temperature. Thank you. Acknowledge them. Lower the temperature, but just don’t go down and be fighting that. I remember an episode long, long, long ago. I’ll find it and I’ll put it in the show notes. I, both of us, interviewed George Nowak, oh yes, a Georgia attorney. And just, I love his just the way it sounds when he speaks with wisdom. You think he’s talking about something classic American, but he talked about how it is impossible to do everything absolutely correct. And my head started to spin, because I was thinking, if you do the right things, good things will happen. And he says it’s impossible to do all the right things. And there are these protections that if you are acknowledging, if you’re trying your best and use the word a moment ago, what’s the harm? You know, you don’t want to be short cutting things, but you do want to appreciate that you’re running a community. It’s a living organism. And what did we learn in covid that we’re supposed to wash our hands for 20 seconds, and am I saying it inappropriately? I don’t think I wash my hands for soap and water for 20 seconds all the time. You know, life isn’t about perfect. Life is about doing your best and trying to do the most best, the most can I say the most best the most of the time?

Kevin Davis  16:17

It’s that, but also being aware of what the situation is that you’re in front of you right now. Because what happens? We get overwhelmed, too. If I’m again, when I was a board member and I wanted, I expected praise, because if we did something that was positive, we repaired the porches that was facing the sun, nobody cared.

Robert Nordlund  16:36

You remember that to this day?

Kevin Davis  16:38

Exactly, exactly porches. Decades ago, and it’s still like, you know, you feel it. It’s funny though, because when you sing that meeting, and we expected to be, yes, great, great job of facing those porches, it was about the pool furniture that’s been old and outdated. You know, it’s like, it’s the shock to my system, and it’s like, I’m getting off the board and never serve on the board again and and that’s what the problem is, is that you have good people with well intentions that says, You know what? I this is not for me. I you know, it doesn’t make sense to me. However, since then, we learned, what I learned is that if you stay on the board and you do a good job at end of the day, the values of your association will be higher than the one across the street. You know, there’s a lot of associations in here in certain areas, and all of a sudden your job is to do one thing. I want to make sure the values of our homes or our units is greater than anyone else in our area. That way, when people come in, they want to buy, it’s easy to buy and sell. And if we had that attitude, then it can overcome, you know, the nuisance people that we have. And because, guess what, we all know who that nuisance is. We know who that person, that him or her is, and we know it was more than one. We know we have to be able to minimize their exposure, minimize their influence over us, because the easiest thing to do is spend way too much time and energy on that individual, talking about

Robert Nordlund  18:06

board members. We’re presuming the board members got on the board for good intentions. There are exceptions, and there are situations where a board member with good intentions then misuses that power maybe again, because they they felt they were trying to do good things, running the the association as their own kingdom, rather than working with the board. And so there’s different things that can happen, but still, we’re trying to talk about if you do the right things the right way, running it with a board that is reflecting the best interest of the association. Julia’s talked about mission vision values things like that, where who do we want to be? What do we want to be known for? And that gets you above the fray of the minutia of a nuisance person, a nuisance board member, those little things that you just don’t want to get stuck. To get stuck in. But let’s

Kevin Davis  19:03

go back to what you said about that person. Who is he wants his own king. He comes in with the right reasons. I want to make the association better. I want to increase the values of our unit. And he gets in there, and all of a sudden he becomes the king, and he wants to as his way of doing it. He’s doing it the right way in his mind. Now, if that person really, truly wants to do it that way and be that person, the likelihood of us changing that person is greater. We can give them information to make that person more informed. We can communicate that person better, as opposed to that individual who’s a nuisance and wants to stay a nuisance. So we have separate the person who’s a out. If he’s a board like you just said, he could be a union owner, he could be a board member rent or whatever it is is that you we need to, you know, marginalize that person. If that person happens to be the president associations, then you have a problem. But if that person is not a nuisance, but a mean, well, that person can change anybody who has who’s there for the right reasons, you know, can. Change, but you have to communicate with that person and not isolate them or push them away. The easiest thing to do is to walk away that person and make fun of him and talk about him at the pool, which they all do. You know, guess what the president did this time? I can’t believe it, you know, don’t listen to anything I say. And then all of a sudden he goes down deeper and deeper into a hole, as opposed to walking up to him and says, You know what? Like you said before. You know, here is the landscaping invoices for the past. Can you take a look at them, and let’s talk

Robert Nordlund  20:26

about them. Do they add up? Do they add up? Yeah.

Kevin Davis  20:29

But that’s difference, though, most people will tend to if that strong enough person gets people walk away, you know, as opposed to taking a step forward and saying, let’s work together. Let’s try to solve this problem together. If you try to solve it together again, if that person goes in for the right reasons, because when you flying out, the person with the right reasons, that person says, You know what? Thank you. I can use the help. I appreciate your help.

Robert Nordlund  20:53

I think there’s so much that is all about community that we fail to appreciate. We think that sometimes these associations are just a business, and I want to talk more about community, looking at the time here, I think the time is getting away from us, so let’s Kevin, let’s do this. Let’s take a break and let’s talk about the community side of things, and how it’s not just things that we do, but how we’re building community and how we can create the future. So it’s time to hear, take a break and hear from one of our general sponsors, after which we’ll be back with more common sense for common areas.

Kevin Davis  21:26

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

Robert Nordlund  21:55

we’re back well at most associations. I’m aware that there’s real estate agents who farm different neighborhoods, and the real estate agents know what’s going on at the association. So if your association is a well functioning Association, the real estate agents tend to know that, and they tend to be favorable in the kind of things they say about your association, and the unit values tend to be higher. What do you see from your side of things?

Kevin Davis  22:22

Kevin, yeah, for me, it’s the same way of insurance. You know, as an insurance professional, we look to the better well run community associations, because guess what they get. They get better rates, they get better terms and conditions. You know, we stay on their policy a lot longer. If they have a claim, the likelihood of us canceling them or not renewing them is lessened. It is a financial necessity for community associations to look at how they communicate, how they going to do a job better, because it does make sense. It’s a real estate market there you want to sell your unit, the likelihood of a realtor coming to your association that they know as well managed well run a Community Association. They know. Again, like I said, we all we want to do is have our association be more valued than any other association in the area, in our zip code or in our community, wherever we live, at our condo or Hoa, whatever it is, we know that ours is the best, most well run association in the area. That means we’re going to do well in terms of insurance, when tell in terms of selling our homes, we’re going to the value unit, going to the pool is going to be nicer and more it is just going to be overall. Make more sense.

Robert Nordlund  23:31

I’m aware of two associations close to where I live, neighboring associations. It’s a street that has Association a, association B, association C on it, things like that. They’re slightly different, but one association I know has a big special assessment going on now for insurance because they didn’t take the recommendation to trim their bushes on their perimeter fence. We can use the word recommendation, but that’s one of those silly, simple, wonderful things to do. When someone says, Hey, lower your hazard risk. You want to do that kind of thing, and now they’ve got the difference between one association whose insurance was stable, neighboring Association insurance was increased so much that they have a special assessment. What’s that going to do to home sales?

Kevin Davis  24:16

What happens on that situation is the same thing. If you have problems your hedges. Guess what? You’re gonna have problem the drainage and you got a problem with everything else. That’s what we see. Is that if insurance professional says, Well, we have a problem that seems small, insignificant, that is one of many problems that you are having that association. Because, again, you took your eye off the ball. You took your eye off the maintenance ball. You know, all insurance people can do and say, Listen, we see X, Y and Z. Take care of x, y and z, but we also see 123, A, B, C, 456, that’s the reason why that rates went all the way up. Because what we’re saying is that, guess what, we really don’t want to insure you, we’d rather be go someplace else, because that’s why your rates are up. Where the one across the street, you know, they they trim their hedges, but they also take care of the. Drainage. They also take care of the pools and the common area. They clean it. They make sure it’s well lit. And so you can go in there and see it’s as simple as that. If you have a well maintained Association, I’m an insurance professional, I’m going to love walking to a Association that’s well maintained because I know I can get a better deal that’s not managed correctly, not well maintained correctly. Guess what’s going to happen? I’ll make more money off of it, because going from here to here, I’ve made a lot more money. But guess what? Is a lot more work for me. And guess what? I may not even keep it, you know, I might not even get somebody to insure it. I rather take nice, well managed communities and and be able to handle them, to be a look at them now and say, Guess what? We got another good year for you people across the street, their rates went up by it doubled. Yours maybe went up 10 15% I’d rather do that all day long than write an account that has that went up three or four times. I make three or four times much money on it. But guess what? The responsibility? Yeah, going to the meetings and telling them that, guess what, because you didn’t trim your hedges, and then, guess what, I’m ripping them off. I’m the worst guy in the world. You know, I’m making more money. And can you share? I mean, it’s just a nightmare.

Robert Nordlund  26:11

Well, the only reason you’re charging more is because the risk is higher. You don’t want the place to burn down because there’s a fire. No one wins there. The insurance company doesn’t win. I want to take you back to a word that you said. You took your eye off the ball. And in my world, the world of reserves, it happens because the board members are focusing so much on low monthly assessments, and they are looking at the bills that come in the mail or email or however, and they’re trying to minimize those, and they forget about reserves and the roof that is above your head that every day is getting a little bit older, the asphalt that’s getting a little more worn out, the paints that’s getting a little drier, all these kinds of things when the board members take their eye off the ball and then all of a sudden they’re focusing on this minutia of the, I hate to say the minutia of The operating budget, but they’re missing all these other things that end up being, on average, about 25% of an Association’s total budget. And when you’re missing 25% of the bill that you’re supposed to be paying, that just adds up over a few years, and all of a sudden you have a special assessment. And there’s no surprise. There’s just no surprise,

Kevin Davis  27:18

yeah, and again, after that happens, your rates going to go up and your insurance rates going to go up again. Going to go up again. It’s a compounding effect. It’s easier. We think it’s hard to be good, hard to run a well managed Association. It’s hard. But guess what? If you don’t do it, the consequences of a radar, you know you’re right, the roof starts to leak eventually. Now, of a sudden, you want to be able to have water damage throughout the association. Again, it just keeps getting worse and worse and worse. Now you need, you know, $10,000 here, and 15,000 and insurance doesn’t cover it. Insurance, you’re talking about making things a lot worse by not being good to Association. You know, I mean, a lot of people think that, well, I’m not being bad. They sleep at night. Well, I know what’s happening the association across the street, they are really bad. So your so your bar is not being bad, as opposed to your bar is being good. Your floor is I’m not bad, you know. And so your silly happens to be, you know, okay, yeah, yeah. So you go from not being bad to just being okay, as opposed to your floor being, you know, what? We want to be okay. We want to be a we want to be okay, but our goal is to be up here. We want to make sure we maintain to have a well run manager Association all the time. That’s our goal. You know, not being bad.

Robert Nordlund  28:36

Another way of looking at it is, I think we all watched a lot of Olympics recently, and those were people that, can we say, sacrificed six, eight hours a day training, six, seven days a week for years. We’re not talking about that kind of commitment. We’re talking about just, I feel like so much of our life is made up of the small decisions. Do I have that extra candy bar? Do I get to the gym? The little decisions that over time just adds up and creates the future that we want to live in? And that’s the same thing at an association. Can you smile? Can you say hello as you’re walking to get your mail? Can you lower the temperature? Can you be kind to Mrs. Smith, even though she’s a pain in the ass, just all these little things that add, can you set the tone? And we talked about that good old Mrs. Johnson that’s laid on her assessments, you need to be firm, but you need to be fair. All the little decisions that just add up can is that what we’re talking about here.

Kevin Davis  29:38

But we just said, though, you know you have to make you have to take the choice. It’s a choice there to say, Mrs. Johnson. Listen, we understand. We understand. But you know, if we let you get away with this, we let you not continue to pay assessments. Guess what? Mr. Not miss. You can’t say Mr. Johnson, but people on the other side, guess what’s going to happen to them? They don’t stop paying. So it goes back to. To me a choice. And you said these little things add up, add up, add up and add up to, guess what? Your roof sleeking. I suppose you’re taking care of it 20 years ago. It’s the little things that you choose to say, wait a minute, right now. We have to stop and make a decision, because we know it’s like those nagging it’s like, okay, you’re like us right now. We had a Colson in January. Okay, you had a call since January, but we are making a choice to understand that. Yes, I got it for her. We were not ignoring it. We understand it. We are being we are aware what’s going on. We’re not saying, I’m not going to worry about it. Our bodies, you know, we brush our teeth in the morning. You know, we make sure that we take medication. We need medication. We the things that we do to take care of ourselves. It matters. We made a choice. The same thing in Community Association and board members, you know, we have to make a choice. We make a choice that is going to matter to us at the end of the day that my house, my home, my unit, is worth more today than it was when I first bought it years ago.

Robert Nordlund  31:02

Yeah, you need to add those up, those little choices, what’s good for the association, what’s good for the association, what’s good for the association. And all of a sudden, you look back over a year, or five years, or however long you’re on the board, and you realize, holy moly, this is a good association that we live in. People aren’t parking their cars in the red zones, the garbage cans are in and out at the right times. People are enjoying the pool. The pool has a good season. The roofs are water tight. All of a sudden you realize, Wow, this is a good association. And like we talked about earlier, the real estate agents know too, yeah, this is a good association, and hope values are stronger, and you get paid

Kevin Davis  31:44

for it. And I think you nailed something that was important when you said that. You know, we have a choice. We can look at that roof every single year and ignore it, or we can look at that roof go, You know what? We need to fix that, but not only the roof, but also fix the banister that’s that’s gotten loose and, oh, we also got to fix the drainage system, and we also got those are the choices we make. And most of the times we choose the other way and go, Oh no, maybe next year. Oh no, maybe next year. And that what takes us down that rabbit hole of not having a well managed Community Association.

Robert Nordlund  32:15

Yeah, all the little things add up. Well, Kevin, gee, it’s the treat often. You know, as often as we do this, it’s a high point of my day just to be able to spend some time and chat with you. And we had everyone, we had a list of things that we were going to talk about, and we, I don’t think we got past the second bullet point. There’s a lot going on here, and we do want the best for your association. So Kevin, any closing thoughts to add at this time.

Kevin Davis  32:41

You know what? Again, to me, it’s making a choice in your community to go in one direction or the other. What happens if you don’t make a choice? It’s going to go in the wrong direction, whichever one you choose, it’s going to happen. If you choose to be positive, it’s going to work. If you choose to be negative, it’s going to work. But you got to make that choice.

Robert Nordlund  32:59

Yeah, and association is community. It’s a reflection of who’s in there at the association. It’s a reflection of the leadership. And so you get to make a difference just by being who you are and saying, I choose to be. And then all of a sudden, the ripple effects are throughout the entire Association. Well, we hope you learned some HOA insights from our discussion today that helps you bring common sense to your common areas. Thank you for joining us. We look forward to bringing more episodes to you week after week after week. We’ll be here, and it’ll be great to have you join us on a regular basis. Spread the word.

Announcer  33:38

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149 | Free HOA Board Member Training From CAI

Sean Coffers  00:00

I think we’ve done a great job over the last 20 plus years creating professional development opportunities and professional networking opportunities, and now we’re really looking at, you know, providing opportunity to other parts of our audience, you know, like we are a professional organization that serves, you know, community association, homeowners, their managers and their

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.

Robert Nordlund  00:42

welcome back to HOA Insights: Common Sense for Common Areas. I’m Robert Nordlund, and I’m here today for episode 149 to share news about a new free course from CAI, the National Community Associations Institute. If you’re not familiar with it, they’re a trade organization. It’s called Community Association living and in their words, it’s meant to be an accessible introduction for anyone wanting to know more about living in a community association. This can range from seasoned board members looking for more formal knowledge, which is you our audience, to homeowners thinking about volunteering, and this is your pipeline of new board members, all the way to folks thinking about buying in a community association for the first time. So today, I have with me two staff members from CAI to help describe and promote this course. Alden Michaels is the instructional design manner manager at CAI, a role he’s held since 2019 if you ever attended a CAI webinar, you’ve seen him there as the producer and host and also in their quarterly Community Conversations LIVE program, and he continues working to author new courses and revitalize existing ones. Now, Sean coffers is their director of learning, and is relatively new after joining the CAI team in September of 2025 he’s currently developing a variety of new educational programming for CA ice membership, like this new course, and he informs me to get ready for more in the near future. He’s an engineer by training, so he’s the kind of guy who sees a problem and designs a solution to fix it. Well, last week’s episode 148 was a conversation with Russell Munns of community financials. He’s one of our podcast sponsors. Now, community financials is all about helping board members know and understand their numbers. And in that episode titled how to save money at your HOA, it was jam packed with useful information. Now, 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 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. Those of you watching on YouTube can see the HOA insights bug that I have here, one of my favorites 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 especially items for sale, like mugs. So go to the merch store and see what we have for sale, and at least download a free zoom background. 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. I read about this course, and wanted to share news about it to all our audience members. So Alden and Sean, welcome to the program. Tell me more about this course.

Sean Coffers  03:57

Yeah, thank you for having us today. It’s really a great you know, opportunity to discuss more share with your audience. Kind of this new offering that we have to help prepare HOA and other community association members for perhaps the first volunteer role, or just a refresher, or, you know, anything else they might be looking to gain from this course. So our new course community associations live in was developed largely to provide an introduction to what a community association is, whether it’s a traditional Hoa, a condo, a co op, or any other type of association where people live and volunteer and do all those things of day to day life, which is really important because lot of people don’t really understand what they buy into, or what they volunteer or what they sign up for. They don’t understand the language, the terminology. They don’t understand, you know, a lot of those details, or maybe they are misinformed, or have a misunderstanding, or have a very bad viewpoint, some of these things, and we’re really looking to with this course. Shed some light and share some knowledge in a very accessible manner. So that is the real goal of this course.

Robert Nordlund  05:06

It seems like you should be walking around with every real estate agent and saying, tap, tap, tap, by the way, make sure they know about this course, not that it will make one sale or another sale better or worse. But I agree with you. I don’t think the average first time buyer into a community association understands really what they’re getting into. They are looking at the the price, they’re looking at the kitchen, they’re looking at the school district, and they say, Cool, we’re in.

Sean Coffers  05:36

That is, you know, very accurate. And you mentioned, you know, realtors having this course, one of the initial piece of feedback we’re getting isn’t just from home owners themselves, but it’s from industry business partners, realtors, reserve specialists, insurance professionals and professional managers who are using this course as a way to educate the homeowners that they quit and providing it and sharing it as a way to, you know, raise The level of understanding on all parties, and we’re getting some really great feedback in that result. In that regard,

Robert Nordlund  06:05

I like that we have some of our audience members talk about having a welcome packet for new owners. And this may be one of those new things to give to a new owner. Welcome to you know, Riverview villas. We have a great place here. And don’t know your your background, but if you’re new to Community Association living, click here something like that, 100%

Sean Coffers  06:27

and you’re more than welcome to that is exactly one of the opportunities that we’re trying to have this course provide. So this course is free and accessible to anyone who wants to sign up for it. Basically all you need is an internet connection. I would recommend doing it on the laptop or an iPad, but you could probably do it on your phone and have a totally perfect time. Is it a lot of

Robert Nordlund  06:52

PowerPoint, or is it someone speaking to you? Tell me a window to what it’s really like.

Alden Michaels  06:58

The layout is very it’s very mobile friendly as well. It’s probably best on a laptop, as you said, but it’s very much laid out with pictures, texts and interactions that are in there. So it’s less of a PowerPoint and more of, sort of scroll through. So you’ll have you’ll have a bit of text, you’ll have an interaction to sort of check your understanding of that you may have, like, a really, really small activity, maybe a sort or something like that, just to make sure that you know you’re, you’re picking up what we’re putting down, and then before you move on. So, yeah, the the design, it’s, yeah, it’s fairly simple to go through. And because of that, because it has that sort of scroll down, it’s much more mobile friendly than, say, a lot of PowerPoint style classes would be, though I agree with Sean. It is probably best on a laptop. Most things are, but it is. It’s been made with a program that is very mobile friendly as well.

Robert Nordlund  07:49

Got it. Is it something like a podcast you can just click and listen to? Or are you interacting with it, saying next and

Alden Michaels  07:58

like you say, scrolling so you scroll through you it’s broken up into 10 different sections. So you take each section as as you come the sections themselves. I think it probably works best, rather than just sort of marathoning and going through it, if you sort of take your time with each section, really, really read through, make sure you understand. So yeah, it’s exactly that you get sort of a manageable chunk of something. You hit a continue, you get the next little manageable chunk of something. There are some audio interactions in there, but it is mostly going to be visual. It’s mostly made to be made where you read, interact that way.

Robert Nordlund  08:36

Got it? Okay? So you do need to be looking at it. It’s not the kind of thing to do while

Alden Michaels  08:44

you’re driving, right? That’s what, that’s what a great podcast like this is for.

Robert Nordlund  08:45

Okay, we’ll do the talking here, and you do the looking when you get to this course. Why did CAI develop it? Was there an outcry for it? Or did you just sense that? Gee, this is what our industry needs. Because there’s still too many people coming in and calling up the manager and saying, my toilet is not working. Can you fix it? Like, like at a department?

Sean Coffers  09:08

Yeah, that is a great question, I will say. And Ty tying into some of the other pieces of educational content we are developing, and have developed, one of the areas we’re really looking at is those people taking their first steps. We either into community association living or community association management or being a partner to that industry. I think we’ve done a great job over the last 20 plus years creating professional development opportunities and professional networking opportunities, and now we’re really looking at, you know, providing opportunity to other parts of our audience, you know, like we are a professional organization that serves, you know, community association, homeowners, their managers and their business partners and without, you know, one part of that three. Legged community, you know, it gets a little wobbly. So this is really looking at those homeowners and providing that with a great resource to get more involved and to, you know, learn more about, not just, you know, association living, but just all different parts of home ownership, right?

Robert Nordlund  10:19

Because it’s a community association. Living is such an interesting animal. It’s dependent on the volunteers, and those volunteers making good, wise decisions, caring for the assets of the corporation, selecting, as you said, appropriate business partners, getting good management support. You’re owning it. So is it a government is it more important than the getting on the PTA at the local school? Is all these different volunteer and job type things that come together in a very interesting mix that I don’t think the average person really understands it until they really look at it. And that’s that’s what fascinates me about this course. Another thing that spurred my interest in this was I had a new employee talk to me about the kind of information we present in a reserve study. We have an executive summary. He started using different words and phrases to explain this reserve study that he had just completed. And I thought that is fascinating, that he’s not using our multi decades of words. He’s using fresh words, and it sounds like you’ve got fresh words saying, Welcome to Community Association living. And again, you don’t know whether they’re the manager type, the brand new homeowner type, volunteer owner type even a prospect, but you’re able to say this is what this animal looks like as you kind of peel away the layers of the onion.

Alden Michaels  11:50

Yeah, absolutely, we’ve found that, you know, everybody in the industry, especially when they’re new to the industry, a lot of times, and just the space, the space of community associations of right? You know, up to this point, our main offering would be, you know, we had documents and other things that people could read, but it’s not as interactive as a class, and the only thing they could really interact with was the m1 100, which, you know, is a great, wonderful course, please take it. But that’s not for everybody, and also even people that are in the m1 100, the first bit of it can be a bit overwhelming, because it’s just like here, orient yourself to this brand new space. This is sort of that in between. This is sort of that really, really foundation level upon which you can build even, you know, if you’re a or if you’re a volunteer, if you’re a manager, anything,

Robert Nordlund  12:40

you just got me thinking, I took I’m an RS. I’ve been around for a long time. I’m a credentialed reserve specialist. And I don’t know how many years ago, five years or 10 years, CAI created the ebp educated business partner concept. And that seemed like that was an entry level for US business people dealing with a community association, telling us who to deal with, how to deal with them, understanding their dynamics, life cycles. Seems like this is almost like the ebp, course, but for the homeowners, giving them that necessary introduction,

Sean Coffers  13:19

yeah, that is a very good comparison. It’s definitely that on ramp. So, you know, this is part of you know, this is maybe the first step for a lot of homeowners, but then if they are getting more involved, and they do want, you know, further resources after this, we do have our board leader certificate training program, which is a more in depth course that you can either take online or through your local CI chapter that comes with additional resources, templates and diagrams and documents to help you as a volunteer. But that is definitely positioned to be that next step, and this is really that first step.

Robert Nordlund  13:56

Excellent. So Alden, you mentioned the m1 100. When I think of the m1 100, I think of that as the beginning of the manager training, direction curriculum. So the m1 100 is, I think of it management. Is that where the m1 100 in that series of classes go?

Alden Michaels  14:15

Yeah, absolutely. That’s for that’s our credential for managers. But sometimes we have, I mean, a lot of times when we orient our own staff, we will put them in an m1 100 class to get them used to the space and all of that. So it’s a lot, but, you know, that’s part of what we do, because not everyone comes from the community association space to work for international

Robert Nordlund  14:35

Well, the question is, does anyone Right? Exactly?

Alden Michaels  14:39

So I certainly did, you know, I come from the education world, so, but it was great to know that. And you know, I ran with it fairly quickly, but it would have been helpful at the time to have something like this that would be interactive, to sort of lay that first foundation before I knew that. So, I mean, I think this is useful period, but I think it is. Is especially useful for for homeowners, for board members, for volunteers, because you know that this isn’t a job that you know this isn’t a job. This is where you live. This is something that’s with you the entire time. And knowing the inner workings of that, knowing the structure of that, knowing what it takes to set one up, to to change things even on a very, very foundational and basic level, is going to be very useful.

Robert Nordlund  15:25

Sean, you mentioned the board leadership training. So is that the same thing, a progression from this introductory course? Is that the next step there? Yeah, that is a great explanation.

Sean Coffers  15:39

Basically, it’s for the next level of homeowner who is, you know, looking to volunteer, perhaps be on one of their associations committees or their board, you know, providing a lot more structured understanding of how to do parliamentary procedure and how to work within your bylaws to set Good architectural guidelines. Things of that nature, where you know this community association living course is really, what is an architectural guideline, what is parliamentary procedure, so that if you’re ever sitting in on board meeting, you understand how they’re operating and what that structure looks like. Because one of the things we see is that you know, if you’ve ever sat in on your communities, or maybe your town or your city’s meetings. It can be a little daunting when you know there’s a call to order and motions and people seconding things and like there’s a certain pace to it in a certain way it operates. And, you know, really helping people just understand that this is structured in a certain way to be smooth and efficient.

Robert Nordlund  16:42

I like that. We regularly have what we call board heroes on the program. Board member who has soldiered, fought the good fight, done something at their association. And I remember speaking to one who I asked him, How did you get into this? And he said, Well, I bought a unit, and the person that I bought from was the president. And so he said, so now you can be the president. And in one month, he was in an apartment, he bought a condo, and instantly he was the president, because kind of came with being unit 13 or whatever. And it’s crazy how people get into the board member space. Tell me how long is this? Course, if you were to Alden, I think in your words, you said, Marathon. It through. What are we talking about?

Alden Michaels  17:26

Not very long, not very long. It’s a, as I said, it’s 10 sections. Each section, I mean, it depends, depends on the rate that you read, depends on the speed that you go through there, if you’re reading really, really quickly. And you know, going through there, and you know, most of this already, and it’s just sort of for a checkup. I mean, it could be under an hour, but if you’re really taking it in and everything, I’d say, like, I’d say a little over an hour to do that hour, hour to two hours to go through the whole thing. It tops

Robert Nordlund  17:56

when you said marathon. I was hoping, oh, gee, is it going to be four to 10 hours. When I took the ebp, it was, again, I’ve been in this industry for 39 years. When I took the ebp, it was a lot of Yes, I know, yes, I know, yes, I know, yes, I know. So I was able to go through it pretty quickly. And for someone who is familiar with the Community Association world, sounds like you can go through it in under an hour, but if you’re new to it, you’re like, Oh, I never thought about that. And then you’re pausing, you’re pondering, and maybe you do break it up into a couple or three sections to allow you that time to kind of process is that what you’re talking about

Alden Michaels  18:36

exactly, it’s there’s not a not a massive volume of text, but there’s a high density of information. If that makes any sense, like we do our best to break it out and make it digestible. But if you already know the basic concepts, you read like, yep, yep, I know that I get that, you’ll be moving on to the next section fairly quickly. If it’s new to you, you may have to back up, read that paragraph a few more times, and then maybe Google some words, because there might be some jar you know, we try our best to break out any jargon, but all industries have them, and sometimes you need to learn them. And so that’s, that’s part of what’s that? What’s there. So, yeah, it’s, as I said, not high volume, but high density.

Robert Nordlund  19:14

I remember, shortly after I bought my condo, which was the precursor to getting into this whole industry. I had grown up watching the Beverly Hillbillies, and so I had moved from the Pacific Northwest, moved to Los Angeles, bought a condo. In the back of my mind, I wondered, Is there oil underneath my unit? And I was over the parking lot. And so I thought, you know, I wasn’t gonna but I just had this dream that maybe there was oil in my parking spot right underneath my unit, and I remember one boring evening being an engineer myself. I was reading the governing documents, and I was so disappointed to find out I didn’t own the petroleum or any minerals or whatever. I had no rights to anything i. Underneath the foundation of the property. I was like, I was just so disappointed. And there are those concepts that if you’re new to this industry, you have to someone’s got to tell you, because otherwise, you know, maybe you buy a unit and all of a sudden you start planting the flowers out in front of your entryway, and that’s common area, and that’s not your job, and doesn’t fit in with the landscape theme. Is that kind of what we’re talking about here? Sure.

Alden Michaels  20:32

Yeah, absolutely. That’s one of the many things, like figuring out and also then if there is some sort of a law, is there something in the recorded map, Matt, map, plot or plan that supersedes that and all and where to know to go from there? So, yeah, it’s, is that there’s all sorts of but it’s not just those foundations. We also get into, you know, some softer ideas, like how to build community, the importance of civility also makes an appearance in there, which is, you know, we also think those are also foundational to Community Association living.

Robert Nordlund  21:08

I agree. It is a community, and you want to have it be a place people like to call home, okay, well, I look at the clock, there’s a lot more that. I want to ask about this and find out that the additional resources things like that, but 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 for common areas.

Russell Munz  21:29

Is your HOA or condo self managed and you don’t want to work as hard volunteering? Are you full managed and looking to save money? Are you looking to split the accounting from a manager’s role for better service? Let community financials handle the monthly accounting for you. We collect dues, pay bills, produce financial reports, include portals and help with other support services, all while providing awesome service. We love the opportunity to help you make your community accounting stress free with our industry leading systems and expert team. Visit our website, community financials.com to learn more.

Robert Nordlund  22:02

Now we’re back. Well, one question I wanted to ask before the break, as we’re talking specifically about this new course that is called Community Association living. Is there a certificate of completion, something that you can print out, or a JPEG or a PDF, or something that you can feel that as a grown up, you learn something new.

Sean Coffers  22:21

Yes, there is, or, you know, in our case, share on LinkedIn and say, I completed this thing. Cool. You know, we do recognize that a lot of our community does enjoy sharing their accomplishments and sharing their continuing education in both professional and personal matters. So yes, we do offer

Robert Nordlund  22:40

that nice okay, because I I must have my ebp certificate somewhere. It wasn’t as significant as a diploma or my PE certificate or my Rs, but I like having a certificate of completion. A CAI doesn’t survive on doing things for free, although we like that. Tell me about CAI membership and some of the benefits, some of the additional resources that that begins to unlock for someone who gets a taste of what Cai has to offer.

Sean Coffers  23:15

Yeah, so I will say CI is a membership association primarily we in the summer or late fall, did cross the 50,000 member Mark, which we’re very proud of. Becoming a member of CI gets you a whole host of member benefits, including discounts for paid education opportunities early and discounted access to events, both at the national and chapter level. It gets you access to our exchange communities platform where you can network and ask questions and get feedback from other homeowner leaders, from professional managers, from business partners. So no, there was a question the other day. We have upcoming reserve meetings that we need to have, and you know what resources are available for that? And there’s a whole discussion thread on what people have used to prepare, not just themselves, but the rest of their, you know, committees and volunteer teams

Robert Nordlund  24:10

to prepare for that. That’s the overnight discussion group

Sean Coffers  24:13

that is the exchange community boards. Yes, yeah, I read that every morning. Perfect condition that and get opportunities to access, you know, content in our publication, press access to our common ground magazine. All then feel free to chime in on anything I

Alden Michaels  24:30

was gonna say. We’ve got for for board members. Specifically, we’ve got our program coming up next week. I don’t know when this is going to go out, but it it is going to be on the 11th for about CAI is legislative agenda, because we have a government and public affairs team that may well be on the ground fighting for your particular association against a particular piece of legislation and all of that. And. Knowing that, being aware of that, being able to speak to that. That’s a free two members webinar. So if you’re a member, then you just can just log in and and do that. If you’re a non member, and you’d still would like check it out, only $25 so you can do that as well, but, but that’s, that’s one of the great member benefits, is access to that webinar, do you and it’s a quarterly webinar?

Robert Nordlund  25:23

Yes, okay, I know you do a number of webinars. I went to one CAI webinar just recently. And I’m in the industry, and I register because it’s great content. How many webinars do you guys do a year? Is it only quarterly? Or do you are you almost monthly? Or do you know?

Alden Michaels  25:42

So it’s a we have our monthly series, which is directed mostly for our managers. Board members. Often do come in. Board members of that last one, board members made up about 40% of our audience. So obviously they are we. We welcome them, and a lot of them find great, great use out of that. But that is, that is a paid webinar series, and that’s the reason it’s paid, is that it provides educational credit. And for that we, you know, we keep the any sponsorship or anything to a minimum, and try to maximize that educational content. Make sure that it’s, you know, stem to stern all content for that Community Conversations LIVE is a quarterly still great content for that, but that one’s much more discussion based that one breaks up into into conversations where you and people, usually from your region, can speak about issues that are close to that. So it’s not just us telling you, it gives you a forum to speak to other people as well. And so that’s done quarterly, where we have one February, as I said, coming up in a few days, and the next one after that will be in April. So those are the free, the other ones are the paid.

Robert Nordlund  26:46

And Sean, I think you mentioned education. You and I bumped into each other at a national program in San Diego a few weeks ago. Wonderful to be in San Diego in January. The National Conference will be in Florida in June, correct, I believe. And then CAI has how many chapters, local chapters across the country, so 40 or 50 or something like that.

Sean Coffers  27:09

I have lost count. We get internal emails starting more chapters. You know, continuously my home state of West Virginia, is in the final stages of becoming an official chapter. Very excited about that, but yeah, it is continually growing, continuing to offer more chapter opportunities for people in local areas to meet other people that are dealing with your issues of your state or even cities sometimes. So that’s great opportunity to get involved.

Robert Nordlund  27:38

So being involved, becoming a member in CEI allows you to go to local chapter events. And when I say events nowadays, there’s a number that are, I think of them IRL in real life, and there’s also a number of online type events, products, things like that. So there’s a lot of resources. Tempt me attempt our audience with some of the resources that apply to board members. What downloads publications do you have?

Sean Coffers  28:09

Yeah, that’s a great question. So in addition to the full courses that we’ve discussed, we do have a series of best practices and guides for Association practitioners reports may able to touch on board leadership or parliamentary procedure. You know, if you are a specific position, say the Secretary or the treasurer, we have books on that to prepare you for that role, additional books on the Board Member Handbook so that you know you have a good reference to help you along your way. In addition to that, if your community is facing a specific thing, we probably have a publication on it. You’re facing capital improvements or disaster, or going from developer managed to being a standalone Association for the first time, we had many, many publications to help with, yeah, and many, many cases common to associations.

Robert Nordlund  29:00

And I’m imagining some are free downloads, some are nominal cost.

Alden Michaels  29:03

That’s correct. And I’ll also plug we have some great features on our website, because a lot of issues are regional. You know, for example, can you display a flag depends what state you’re in. We have a state by state on that. Can you have a virtual meeting state by state? We have a breakdown of that as well. And I also would really like to point out the foundation for Community Association research, which is also go through there. They have excellent research, excellent excellent reports, not just for managers, but I believe they have one coming up on aging infrastructure that I think would be really, really important for for everyone. I’m sure, Robert, you care deeply about that.

Robert Nordlund  29:42

I’m one of the authors on that exactly that. Yeah, the whole Chaplain tower South issue still rattles our industry. I’m so pleased we have an organization like CAI that helps educate homeowners, educate all of. Volunteer leaders, the board members, so they understand the responsibility that they have to lead the association successfully into the future. So I look at the time here, and it is time to close. Alden and Sean, it was great talking with you and having you on the program. Any closing thoughts to add at this time? Yeah.

Sean Coffers  30:17

Just want to say thank you for having us. It’s a great opportunity to discuss both Community Association living course and other offerings that the community associations to offers to our homeowners, our business partners and our managers. Thank you for having us.

Alden Michaels  30:36

You’re welcome. Yeah, absolutely. Thank you so much for having us. That’s all. I’ll say, Cool.

Robert Nordlund  30:38

Okay, well, I’ll put a plug in Alden mentioned the CAI website, and if you’d like to see more about what CAI has to offer at CAI, not CIA, I think you’ve got your first 10 years to get that wrong a few times. But if you’re interested in seeing what CAI has to offer, you can visit them. You can find them at CAI online.org. Well, we certainly hope you learned 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  31:14

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