148 | How HOAs Can Save Money Without Cutting Corners

Russell Munz  00:00

Poor collections on your financial reports. If the association hasn’t saved money in their reserve account and they need to do a capital improvement, say they’ve got a leaky roof and they have to replace the roof, well, they don’t have the money to do anything about it, but they got to go out and get a loan. So if the if you go to a bank and you have over 15% delinquency rate, you’re at risk of not being approved for a loan that you would use to do the work.

Announcer  00:27

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Robert Nordlund  00:44

Welcome back to HOA Insights: Common Sense for Common Areas. I’m Robert Nordlund, and I’m here today for episode number 148, with Russell Munz of community financials, one of our podcast sponsors, community financials, provides condo and HOA accounting and other remote services. So he’s our go to guy for financial tips for our HOA Insights program here, today’s episode is called how to save money at your HOA now, to be clear, Russell and I don’t have a magic wand, and we don’t believe you save money by simply not spending owning and maintaining real estate is expensive, so today’s program will be Russell explaining, from his vast experience, how to take good care of your associations, physical and financial well being without making mistakes that end up costing you extra money. Last week’s episode number 147 was another of our popular board hero episodes, this time with Tim long from New Mexico, he shared a moving story about how they built community at their association because of their budget process. Now you heard that right? Their budget process was tense and was a challenge, but it was not divisive. So listen to that episode to find out what they did differently, to actually draw owners together through their budget process and make it a community building opportunity. So if you missed that episode or any other prior episode, take a moment after today’s program to listen from our podcast website, Hoa insights.org, or watch from our YouTube channel, but better yet, subscribe from any of the major podcast platforms so you don’t miss any future episodes. Increasing our subscriber base increases the podcasts position in search results. So becoming a subscriber helps others find this free resource so they can be better equipped to lead their association. Well, those of you watching on YouTube, can see the HOA insights mug that I have here, that I got from our merch store, which you can browse through from our Hoa insights.org website, or the link in our show notes, you’ll find we have some great free stuff there, like board member zoom backgrounds and some specialty items For Sale, like mugs. So go to the merch store, see what we have for sale, and at least download the free zoom background while you’re there. 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, 805-203-3130, or email us at podcast at Hoa insights.org Now this episode was inspired by Jeff from Lake Tahoe, who wrote in, money is always tight at our association. What can we do to limit our assessment increases? Well, that’s a hard one. Jeff, I don’t think we have the power to stop inflation, but indeed, it’s questions like this that made me think that we need Russell back on the program. So Russell, I know you came with a list. What did you want to talk about today to help our audience save money at their association? Sure.

Russell Munz  03:59

Well, Thanks, Robert. I want to first say that in it is hard right now, being an owner of a condo or home in an HOA owners are getting clobbered with increased costs, whether it’s the property taxes have gone up because house values have gone up over the last five, six years, and HOA fees have also gone up. And at the same time, their asset value is going down, in some cases, 20 to 30% in some markets,

Robert Nordlund  04:28

actual home values, home value. So cost

Russell Munz  04:32

of living is going up, home values going down. And you know, the home is the biggest asset for a lot of people. Similarly, if you’re owning, you know, a different kind of asset, like stocks, the market general market can impact the price of the stock, but the value of the stock price can also be affected if the leadership of that company makes poor choices and the stock price goes down. So what I want to emphasize is board members. Members are the leaders of their corporation and the HOA and the condo community. This episode is to help them with part of what is clobbering the homeowners, and they’re the board members are homeowners too. So they’re under extreme budgetary pressure, insurance costs, utilities, maintenance and costs have risen significantly on all fronts. So what boards many don’t realize is that this isn’t just the treasurer’s problem. This is something that the entire board needs to be working on.

Robert Nordlund  05:38

And can we say the entire industry, because it’s not just your association, it’s every

Russell Munz  05:43

Association This is going on in all, all, all the states, all the different neighborhoods and some you know when, when a home buyer looks at where they’re going to buy a house, in a condo unit or a homeowner association, you know, they’re looking at what The what the monthly cost is, and that monthly cost, the common charges, are dictated by the budget of the HOA and the community. So what we really want to dig into is, what type of smart choices can we make to impact part of that home ownership cost, which has a direct impact on the marketability of your home. If I’m looking at two different properties, one across the street from each other, one has they’re both pretty similar, right? Same School District, same one has to double the HOA fee, right? I’m probably going to go to the other place across the street that has half of the cost, and those home prices might be a little bit more expensive, but my monthly carrying cost is going to be less okay? Is that always a good thing? It depends on your budget and where you want to live, right? But if you if you have similar products, and one costs more than the other, and they’re approximately the same kind of amenities, quality, value. You’re going to choose the one that that fits their budget, and they’re going to go to the one that’s that is even if they pay a little bit more on the home price, because the mortgage is locked in, the HOA fee is lower, you know, they’re going to have a lower cost of ownership,

Robert Nordlund  07:18

yeah, just carrying it each month, exactly.

Russell Munz  07:21

Okay, so we got to look at ways that the board, being the leaders of their corporation, can make smart choices that will reduce the need to increase the homeowner association or the condo dues frequently, or the reduce the impact of needing to make special assessments, either on an ongoing basis or something that’s like the norm at that community, because people don’t want special assessments. And for decades, people don’t want increasing, you know, dues or membership fees, although that is likely, you know going to happen because of inflation, but there are other things that are within the control that we’re going to talk about today that can reduce those costs, or ways, techniques and tools to look at as board leaders to help to reduce that pressure of the those increases.

Robert Nordlund  08:17

Got it. Okay, so you’ve got a list. Let’s start touching on the list.

Russell Munz  08:22

If you are not collecting dues, it has the same impact as overspending. So you need to make sure, because you’re you have a fixed income based on the number of units in your community, homes of units and what the common charges are, right? Right? You have a fixed income coming in, and then if you have people that aren’t paying into that system, that impacts, instead of having 100% of your budget now you’ve got 95 or 90% or 80% of your budget that you had to spend. So that’s the same thing as having 20% more cost in that last case, right? So we have to look at how we can improve collections and taking, you know, taking a proactive management approach to collections, yeah,

Robert Nordlund  09:12

because if you’re only collecting 90% then you’re inclined to increase your assessments 10% to be able to pay all your bills,

Russell Munz  09:20

yeah, and because the rest of the people have to carry those that aren’t paying Exactly Okay. You know, there’s many governing documents have late fees. Most, a lot of communities don’t charge them because they’re difficult to administer, or they don’t have a system to administer it. So one, it’s a deterrent. So let’s use it to see if that late fee, if it was in a governing document from the 1980s it might say $15 and that’s not much of a deterrent if someone’s not paying. So make it. Make it. You know, see if you’re if you’re making changes that it’s a real deterrent. Then, you know, give people lots of different ways to pay. Let them pay by check. Let. Them pay by, you know, credit card if they need to, let them pay by, you know, online if they want to. So lots of different ways for people to make payments, or Apple Pay. Yeah, yeah. Well, I don’t know about that, because I don’t, I don’t think that works with a lot of the systems in the industry. But you know, you need to have a systematic collection process in this one of the reports you’re going to review is your age delinquency report. So you can see, okay, we’ve got a collection policy. The collection policy lays out at day when somebody’s 30 days past due. This is what we do if somebody is 60 days past due, this is what we do if somebody is 90 days past due, this is what we do. And the importance here is, in about half of the states there have a statute that’s called a super lien, which allows the HOA to gain priority the HOA money that’s due to the association to gain priority other over other lien holders, but it’s only for six or 12 months or unpaid assessments. So that means, what that means is, if a if you get after the association, you go to a foreclosure to get somebody to pay. If there’s not enough equity in the home, the association gets six to 12 months of its unpaid assessments. And then after that, the mortgage gets paid, and then the HOA goes behind the mortgage, and if there’s no money left, then all of those other payments that are past due from months six or 12 beyond it’s uncollectible, and so the association doesn’t get it. So you need to have a focus that you you don’t risk losing that money. And the other thing I want to say is one last thing I want to say, Okay, you got to states have a shelf life for bad debts. And I’ve seen, I’ve had, you know, communities come to us and they have somebody that hasn’t paid in years. There’s a shelf life in most places, in most states, where debts commonly that are either three to six years old, where the debt becomes legally uncollectible in court. So you know, you can’t carry these deadbeat payers for a long time, because that gets, you know, that gets uncollectible as well. And so those are just two items. I wanted to point out that you got to make sure you handle these things seriously.

Robert Nordlund  12:15

Got it. So make sure that if they miss their first one, if they’re a few days late, try to not let them become 30 days late. Try to stop them from becoming 60 days late. And have your pressure points and enforce those.

Russell Munz  12:31

And you know, you have a notification system that’s nice, that says, hey, you missed paying your your dues. Please pay or whatever, because somebody may have forgotten it. But you just have to have a way of systemized. And then the next thing I want to say is pour collections on your financial reports. If the association hasn’t saved money in their reserve account and they need to do a capital improvement, say they’ve got a leaky roof and they have to replace the roof. Well, they don’t have the money to do anything about it, but they got to go out and get a loan. So if the if you go to a bank and you have over 15% delinquency rate, you’re at risk of not being approved for a loan that you would use to do the work, but over 10% puts you at risk. And this is also especially tough for smaller communities, where just, you know, one or two delinquencies can get you to that threshold.

Robert Nordlund  13:22

Yeah, well, does your what I’m hearing is that you need to have a system and for an association with a management company and an attorney on call, I trust that they have a system with community financials, as long as you’re on the program. I want to ask you, is that one of things that you can systemize for the little self managed associations out there. Absolutely, absolutely, good, good, good. I just wanted to, I don’t think I ever asked you that question before. So it’s good

Russell Munz  13:49

to know nobody likes collecting money from their neighbors. Being the person that says, hey, you you owe the association $300 when you pay it, right? It’s not something you want to bring up at a neighborhood block party, but it’s, you know, so let somebody, let somebody else

Robert Nordlund  14:04

help with that. Be the bad guy. Yeah, okay, good. I like that. What else?

Russell Munz  14:10

Next thing is, you need to get financial reports on a monthly basis so that the board knows what’s going on with its financial picture. I talked it’s so many times where I talk to community boards, and they they’re not getting financial reports on a monthly basis. They maybe they get it quarterly, or maybe they get it sporadically because somebody is wasn’t preparing them on time. But in any event, this is already old data, so you want to make sure, like we talked about before, that you you see what’s happening at the community so you can react to it, and one of those key we already talked about the delinquency report, but another key financial report to look at is the comparative income and expense statement. Now what that is, is it has all of your income and all of your expenses listed out on a report you’re going to. See for the month the prior month, how much income and expenses you had. Then it’s going to have a column next to it that said, Okay, this is what we had for a budget for that period. And then it’s going to show you the difference. Also, on the same report, it’s going to show you where you are year to date. So year to date, how much have we collected an income, year to date, how much have we had expenses, and how are we doing on budget? So when you look at this, you can see, oh, geez, we’re like, double what we budgeted for for this. Why is that? And that’s when, that’s what you use that report for, is to ask that. Why is that question? You may have a good reason, but you may not have a good reason, yeah.

Robert Nordlund  15:37

Well, if you’re on the East Coast and your snow removal is high. Well, number one, it’s winter time, so this is when you expect to get a year’s worth of expenses. And we’ve had some lot of snow lately. And so yeah, if there’s a good reason, there’s a good reason, but if all of a sudden your water bill is high or something else is high, or your collections are low, then that’s, again, one of those things you want to jump on soon, exactly.

Russell Munz  16:04

Oh, okay, just, you know, especially there’s a lot of states that they didn’t expect a lot of snow, or maybe you have more snow than you had the previous year, and you’re using the previous year to make your budget, so you’re going to be over budget in this. So, you know, one of the things, and I used to run a management company for 16 years in Connecticut. So if they had unusual snow, you know, a homeowner doesn’t want to get a special assessment bill for snow removal in August, right? So if you got to do a special assessment to cover the shortfall, do it while people still remember that there was a snowstorm. Do it while they remember the pain. Yeah, exactly right. And you know, that’s a way of covering the gap in what was projected in the budget. But some real examples of early detection to save significant money is water leaks. You wouldn’t believe how many times there was a truck that came to the association. They they did something where they were tree trimming or, you know, some other landscaping. They backed their truck over a pipe. Was the water pipe. No one can see that there’s any leak, but the water bill quadruples after a couple of months. There’s like $3,000 of a water bill that you’re like, Whoa, whoa, whoa, what’s going on here? Yeah, if you’re looking at the financial reports, you’re going to see that something’s going on, and then you can, you can do some investigation. Another thing is maintenance. If your maintenance, you know, is one of the things that is, and we’ll talk about this later, but I got another example. But maintenance is something that can go poorly quickly. You know, you’re spending spending a lot of money on water leaks, for example, yep, but we’ll get into this in like. The next thing is, I’ll give an example of that, but those are things that you want to look at in the financial reports to then ask the questions, why is this over budget? And then do a little investigative research and see if there’s a way that you can get back on budget.

Robert Nordlund  17:53

Fix the problem. Try to try to keep things tight. Don’t let it get out of hand.

Russell Munz  17:57

I will say the next one is fix it this. This kind of comes into the same thing I was talking about, fix it right the first time. And I have seen this over and over again with roof leaks, where we’re going to patch it for two or $3,000 and inevitably the patch doesn’t work, and what you end up having is water infiltration that ruins drywall. Paint has to be remediated for mold. It ruins carpets. It ruins cabinetry. You’ve got multiple parts of the the house that needs to be repaired. Now this is more in town homes and in in condos in this particular example. But if you were to, and I have seen in my years of doing, you know, working in this industry communities, that this was their mode, they would just patch, and then they would have this huge maintenance line item, because they were constantly fixing drywall and repainting homeowners units and working with, like a company, you know, water remediation company, to go through this. And it like they did, they had to do this for like, you know, eight units a year. I mean, it’s like crazy and like to the brain damage of having to manage this over many different seasons, with many different homeowners who are really upset. You know, it’s, it’s, it’s a problem, but it’s, it’s, it’s indicative of a board that’s not, you know, this is, well, we’re always used to this is just normal for us. It’s not looking at the big picture of, okay, we need to fix the roof, and we won’t have to deal with these problems anymore, and our budget’s gonna go down.

Robert Nordlund  19:45

Yeah, it’s that’s not a good normal I’m fidgeting here because I hate the $500 or $1,000 roof leak that is a patch on a patch, and it leaks, and it ends up being a $10,000 or $20,000 interior. Your repair type problem,

Russell Munz  20:02

and then you get, you’ve got, like, you know, you got to pay the, you know, the your deductible for the insurance company, right? And then your insurance cost goes up. It’s just a snowball effect. But this is, like, indicative of poor management and leadership by the by a board. And you don’t want to fall into

Robert Nordlund  20:19

that trap, Russell, let’s take I’m looking at the time here. We need to take a quick break. I want to follow up on that, because there’s pressure when a board feels we don’t have enough money to replace the roof. And that’s another that’s a reserve problem. But we’ll get to that after our break. It’s time to take a break now hear from one of our generous sponsors, after which we’ll be back with more common sense for common areas and today, specifically, how to save money at your association?

Paige Daniels  20:46

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Robert Nordlund  21:17

and we’re back well before the break, I was starting to get all fidgety because I feel the pain. I feel the pressure of poor decisions. And some of those poor decisions come from the pressure that what we don’t have the money to do it right? So Russell, is that what we’re talking about with the reserve pressure, it

Russell Munz  21:36

is, and there’s, there’s a couple of examples, I want to say is just like I talked about before with the value of condo prices. We’ll just use condos right now, but it also happens at HOA in Florida, they’ve been working on a structural integrity reserve study after a collapse of a building. So now there is more pressure to save money for reserves, and a lot of communities were underfunded on reserves, and now have to make up the shortfall, so that is providing upward pressure on the money that they have to put up that they weren’t anticipating or they weren’t paying before. Florida is not alone in this, though, as you know, there’s a lot of other states that are also having more and after that event, are having more and more. You know, regulations on reserves. And so, you know, the reserve is something that needs to, you know, be funded, because you need to have that money set aside to make these replacements happen. And just like we were talking about before, you’re going shopping for a new home, one community across the street has reserves, and they’ve got a million dollars in the bank. Another similar property, same age, has $50,000 in the bank, right, right? You know, it’s it feels safer for me as a buyer to go to the one with a million dollars. So I don’t have to pony up the reserves. And I’ve had, I had a friend who recently bought a condo. It was negotiated at the sale that the seller had to pay for the upcoming structural, you know, reserve fund, right? And that was how they worked it out. But, you know, it’s gonna impact the value one way or the other. So let’s take care of it now. And so I’ll talk with you. What are you seeing behind you know, setting aside money for this so that people are don’t see it as an expense, but they’re, they’re, they’re seeing it as a valuable thing that they can’t escape.

Robert Nordlund  23:33

Yeah, well, first off, it’s a perception issue. Deterioration is like the sand through an hourglass. It’s not like a future roof project that you’re trying to avoid, or a future boiler project every day due to Mother Nature and Father Time. They’re the bad guys. A board doesn’t have any choice about the expenses. The roof is going to fail, the boiler is going to fail, the asphalt is going to fail. The board has no choice in that. All you can do is offset the ongoing deterioration with your reserve funding so that you have the cash when the item fails. All you’re doing with funding reserves is preventing your own special assessment. You’re not creating charity for the future. You’re not paying someone else’s bill. You’re simply offsetting your own deterioration bill, that every month the roof gets a little bit older, the asphalt gets a little bit older, that kind of thing. And when we look across the entire market and across the entire industry, that reserve bill is very often about 25% of an Association’s total budget. So it’s a big number, but there’s, again, no choice about that. If you don’t pay it with your ongoing budgeted reserve transfers, you’ll get hit with a special assessment. It’s just that simple. So don’t feel like you’re the bad guy as the board saying we need to raise our reserve funding, the bad guy is mother nature and Father Time. Point to them to say we’re just trying to offset the. Deterioration that’s happening now, and that will mean that whoever is sitting as a homeowner in the future will have enough money to pay that roof bill, because everyone paid their little fair share over time. So it just we see just a lot of perception issue that

Russell Munz  25:17

they don’t understand. Get ahead of it. Get ahead of it and and budget for it and just be, you know, part of the process, exactly. Okay, good. Another one that comes up as like has been the villain in this budget, ruining kind of scenario that we have. Yeah, yeah, insurance. So insurance has been the Bugaboo. So insurance prices I had, I can’t tell you the number of of communities that need to do a special assessment, because their insurance went from, say, 50,000 to 350,000 crazy or something like that, right? So it may have happened on a smaller scale at your community, if it’s smaller, but it went, you know, it went, it could go two times, three times, four times the amount that it was the previous year. And why is that? It’s not just because there were fires in California and hurricanes in Florida, although that does add a factor, but on an annual basis, the insurance company is going to send out a representative to look at the community, and in their renewal, they’re going to send out a list of requirements or recommendations. They call them recommendations. It could be a substantial list of things that they want done that will reduce the risk of an insurance claim, right? Yep. And if the community just takes them as okay their recommendations and does nothing about it, they are leaving. You know, many of the underwriters are going to cancel them, and when they get canceled, they go to something called the surplus lines. And surplus lines is when your insurance rates get go through that, you know, giant jump that we just talked about. Now, what the community should do is somebody needs to be tuned up where they are looking for those recommendations, and they knock them out in 60 days as best that they can, and communicate with their insurance agent that they have a plan to deal with it so that they will get renewed and they will keep their insurance. Maybe their insurance stays about the same, maybe their insurance goes up by a little bit of inflation. Maybe their insurance goes down. That’s also possible, but they they have to do these recommendations, and they’re not just recommendations. They need to do it so they don’t risk getting canceled, and then if they’re canceled, there’s fewer and fewer options for this, this segment of housing stock, and so that they risk going to the excess lines.

Robert Nordlund  27:52

Yeah, Russell, I got to add in the board members do have agency in this. They have a they can participate. And just like you say, don’t take that recommendation is just, oh, nice to do. There’s two associations I live in Southern California, two associations that we know of just a couple miles from my office where I’m at right now. One has stable insurance premium costs. The other one had to pass a big I think it was a $5,000 per unit special assessment because of fire exposure, and the difference is one spent about 10 grand clearing the hillside at the perimeter of their property, and the other didn’t. So one took the recommendation, one didn’t. One spent 10 grand to clear the hillside. The other didn’t. Boy the second Association spent way more than 10 grand in $5,000 per unit special assessments. Gee, just two units worth would have paid for that tree trimming. It was just crazy. You got to do that.

Russell Munz  28:52

And there’s lots of things like that. There are, you know, if you have hot water heaters and you’re a Multi Floor community, you need to have shut off valves on the hot water heater. So if it, if it leaks or breaks, that doesn’t keep flooding for hours and hours. And there’s a drip plan, drip pan underneath it there. I mean, there’s all these recommendations to do smart things.

Robert Nordlund  29:10

There’s alarms for that. Now, yeah,

Russell Munz  29:12

exactly, exactly. So you have to get ahead of this insurance. The other thing that I see is, if you’re updating, you know, communities have tried this when they’re updating their their governing documents, is that if there’s something that was due to the negligence of an owner, that the deductible is then passed on to that unit owner. So that’s something they can talk about with their you know, the attorney. But then it’s not the associations cost of covering that insurance deductible, it would be the offending owner that caused the issue. So those are things, another thing to take a look at, because those deductibles can be, you know, 10, $20,000 yeah.

Robert Nordlund  29:56

Okay. Last couple things.

Russell Munz  30:00

Get what you pay for from a service provider. So I have you know, this could be vendors give you a flat price. They tell you they’re going to do these things, and then they don’t do them, and so they’re cutting corners. And it’s like my son looked at like we got this big wrapper for a candy bar, and when you opened up, the wrapper inside was this teeny, little candy bar, and he felt gypped. He felt gypped. So the same thing happens. I get, I get talked about, and I’ll use one example. The boards tell me we’re paying this big price for management, and we’re doing all the work ourselves, and we’re getting, we’re getting, you know, some some accounting support, but we’re doing, we’re calling the vendors, because the manager won’t get back to us. So the managers have a tough job, right? And they may have high turnover of staff. The manager might not be trained or experienced. They might not do the things in the contract, and they may be handling too many customers without enough staff. That’s the whole, you know, student, teacher ratio, like, you know, how many, how many are you running? So oftentimes, the board volunteers say, I’m doing the job of the manager. I call the manager. The manager doesn’t call me back. I try and find out what’s going on with the vendor. I call the manager, I don’t hear back, so then I have to call the vendor myself. I asked for a bid on something. They didn’t get back to me. I have to do that. I haven’t seen them around the property, so I’m walking around and I’m telling the vendor what they have to do. This can happen with any vendor. I’m just using that as an example. But this happens with landscapers, right? It can happen with with any vendor. You have to be somebody, has to be supervising what’s going on so that you make sure that you know corners aren’t being cut. So there, you do have options. I just want to say this, there’s the perception that it’s just working with a property management company, what’s, quote, unquote, called Full Service Management. And then there’s also the board does everything 100% themselves, and it’s self managed. But there is a middle option where the board can do 60 just well, the board does like 30 a third. Let’s just call it a third of what the you know, the manager did. They’re calling vendors, they’re getting bids, they’re holding their own meetings. The Secretary is taking minutes, and then they work with a service provider that handles, let’s say accounting and let’s say resale and lender questionnaires and other compliance issues, and provide software to make it easier for the for the board to do. So I would just say, yeah, yeah. So there’s cause comparison, you know, you’re gonna, you could save money because you’re not, you’re you’re not doing the job of the manager and paying the manager full price. Or, you know, similarly, go out to bid. If you find, like, your landscapers not doing what you you told them to do a lot of times. I talk with the communities, landscaper is the most expensive item on their budget. Well, put that one out to bid if you’re not very 100% satisfied with them. If you wouldn’t rate them a nine or a 10, go out to bid next season and get you know free, free competing bids and see how they’re doing and see if somebody you know will will handle it. Yeah, okay, at a better value,

Robert Nordlund  33:22

yeah. One last one to finish off with.

Russell Munz  33:25

There’s fraud prevention through checks and balances. So this is one I don’t want to talk about. It shouldn’t happen that often, but it does happen, and unfortunately so if somebody, like one board member has a checkbook and they pay bills, maybe I’ve seen I’ve done like, I don’t know, 25 fraud case studies. And sometimes somebody comes on hard times and then they write personal checks. There’s other times when it’s a conflict of interest and they pay bills to a family member business, right? And maybe the maybe that wasn’t vetted, maybe they were cutting corners, maybe the quality wasn’t there, maybe was over inflated price, you know, so keeping an eye out for there should be multiple people in the approval process of bills, so you see what’s getting paid. Also, you would, you know, take a look at your bank statements so you can see the transactions that are going through there. And, you know, similarly, if you have, I’ve seen people that had an on site person who was doing their own payroll, cut themselves extra bonus checks, or had a debit card and was using the debit card for personal expenses. You just have to pay attention, because this is another place where you have that leaky you know, you have a leak in your bucket, so to speak, and money’s dropping out of the bottom. You shouldn’t have these issues. So by looking at having. And you know some internal controls where two people are reviewing bills before they’re paid, that you’re looking at bank statements, that you can or you can see transactions and go line by line, and that is somebody is reviewing debit card or credit card charges, besides just one person. And so it’s split up, and then you’re also going to see, like in these financial reports that they’re correct, and the one way to know that they’re correct is also getting a bank reconciliation report that proves what’s on the financial reports matches up with what’s on the bank statements. So just a couple of ways, because that’s a terrible way to be, you know, not be able you have to pass along increased costs because somebody stole money, and now you’ve got to get the money back by increasing costs on the rest of the owners. And I have seen this, you know, even recently, last year. And so it’s something to be

Robert Nordlund  35:50

cognizant about. Yeah, well, I think as we summarize today, it’s expensive to own real estate. We know that you want to be intentional about what you’re doing as a board member and as a board, you don’t want to be allowing leaking money, whether it’s fraud or leaky water or other things that are making mistakes, confirm where the dollars are going. Make sure that it’s not going to the wrong places where you’re not getting value. If the pool service company is supposed to come twice a week, make sure they’re coming twice a week, just little, simple things like that.

Russell Munz  36:23

Yeah, one other thing, if the if the pool company was supposed to include chemicals, make sure they’re not charging you extra for chemicals. We have all these like, extra, like, add on charges. Make sure that you go through them. And I just, you know, I would say, while people are going through their budgets, go through every expense. The last board may have had different expenses than this board wants to have. Just like if you reviewed, like, all of your checkbook and you saw, Oh, yeah, I was paying these subscriptions for these three services that I no longer use, and you go and cancel them, do the same thing at your community.

Robert Nordlund  36:54

I like that. I like that. Well, Russell, your wealth of information. It’s great talking with you and having you on the program, sharing some of your insights, the things that you’ve seen, the experiences that you’ve gained over the years. Any final closing thoughts to add at this time, I’d say

Russell Munz  37:10

that pricing pressure is real for boards on fixed budgets, boards need to take action on the items that we discussed today to reduce that pressure from being transferred to the homeowners through charge increases. So take your notes from this episode and have a discussion at your next board meeting and see which of these steps you can take to make a difference this year at your community.

Robert Nordlund  37:33

I like that. Speaking about that you did have a list, and are you okay with me having that list posted in the show notes as a reminder. Okay, cool. We hope there’s a lot of value. We want you to have value. Want Your association to succeed. If you’d like to get in touch with Russell and see what community financials can do to support your association, you can see more at very simple community financials.com and we hope you learned some great HOA insights from our discussion today that helps you bring common sense to your common areas, and in today’s theme a reduction in costs, or at least containing those costs, we look forward to having you join us for another great episode next week.

Announcer  38:17

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

147 | HOA Board Heroes: Winning Community Support for a 20% Dues Hike

Tim Long  00:00

In retrospect, I think we were lucky that we got the board to agree to do a reserve study. I was not aware of the history, but it turns out that previous boards had been asked to consider a reserve study, and every time that he unanimously said that they were not interested. So there was already in this community, this feeling that we do not need a reserve study, and I didn’t know that at the time,

Announcer  00:31

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  01:03

Welcome back to HOA Insights: Common Sense for Common Areas. I’m Robert Nordlund, and I’m here today for episode number 147 with another one of the board heroes. We’re proud to celebrate. We finished a reserve study for a 66 unit town home Association in Las Cruces, New Mexico earlier this year, it was our first engagement for this property, and we ended up recommending a significant increase in their reserve funding and a special assessment. Not surprising, so far, for a first time client of ours, then we received a long email from the secretary of the board, Tim long in his email, Tim went on to describe how the reserve study, got their attention, how they engaged the homeowners with this news, made some adjustments, customizing the reserve plan, then pitched the increase to their association at their annual meeting. Listen to this. At that annual meeting, the Board passed the plan to increase assessments, and this news was greeted with a round of applause, and that’s what got our attention and why I asked Tim to be on the program today. What the board did to engage the homeowners, to help them understand the needs of the property and how the board was going to lead them forward with the best interests of the association in mind was nothing short of fantastic. Now, Tim is not a magician or a hypnotist. He’s retired from an academic career and is a first time board member, and we’ll hear more from Tim in just a moment, but first, I hope you enjoyed last week’s episode number 146, with regular co host and management and leadership consultant Julie Adamen, I always find myself taking notes whenever she’s on the show from all the lessons she shares from her years in the industry. And if you missed that episode or any other episode, you can find them on our podcast website, Hoa insights.org, on your favorite podcast platform, or on our YouTube channel. But better yet, subscribe to the podcast in order to get every episode delivered right to your phone or mobile device. And those of you watching on YouTube can see the HOA insights mug I have here that I got from our merch store, which you can browse through from our Hoa insights.org website or the show notes, and you’ll find we have plenty of free items there, like the board member zoom backgrounds and some specialty items for sale, like the mug. 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, 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 about. Leave us a voicemail at 805-203-3130, leave a comment on YouTube video or send us an email at podcast at reserve, study.com but back to today’s episode. So Tim, let’s start with what got you onto the board in the first place. Why did you decide to run?

Tim Long  04:07

Think it was a weak moment. Actually, I didn’t give it a lot of thought. There was a big turnover from the 2024 board. We needed a lot of candidates, and my neighbor just said, Hey, I’ll run if you run. I said, Okay, that was

Robert Nordlund  04:24

1. So that was a dare, almost.

Tim Long  04:27

It was, it was not a heavily thought out decision, although I think we’re at a point in our life where we have the time and feel the responsibility to contribute to the operation of the community, so it just seemed like the right thing to do.

Robert Nordlund  04:46

Okay, how long have you lived at the association?

Tim Long  04:50

We’ve been here now

Robert Nordlund  04:53

about two years full time. Okay, so you’re relatively new to the association, and in your second ish year. Or you ran for the board. You thought, I can do this. How hard can it be? I guess maybe, yeah, okay, so he didn’t come on to the board because you had an agenda. There was something wrong that was just fueling your anxiety. You just came on the board because they needed board members and you had some time, yeah,

Tim Long  05:24

kind of that was it. I I also was interested in doing a reserve study, and I thought if I was on the board, I’d be able to make that happen. So that was in the back of my mind. Also, okay,

Robert Nordlund  05:37

so you knew what a reserve study was? Yes, okay, how did you know

Tim Long  05:42

what a reserve study was? Well, I had a friend here, is a long time resident, and he, he told me about reserve studies and pointed me to your podcasts and things like that. Okay, so I kind of knew what it what it might do for us. What happened here is in 2023 when our roads were about 45 years old, they were resurfaced for the first time, and the community chose to go with the chip seal process, and the results were terrible. And I don’t think anybody here is happy with the roads that suggested to me that we were going to need to resurface again much sooner than we thought, and it was probably going to be a lot more expensive than we thought. But I didn’t hear anybody in the community talking about that. I didn’t hear anybody saying, Hey, we better start planning for the future. We’re going to have some major financial problems coming, and we better get ready for it. So I was hoping that a reserve study would act as a catalyst that would cause the community to start thinking about the financial issues that we were going to face soon and and get us started planning on how we’re going to address them. So that’s what I was looking for out of a reserve study, and that’s why I was interested in it, cool, excellent.

Robert Nordlund  07:09

So that was just your general awareness as a homeowner, that roofs get old, the water heater gets old, the asphalt gets old. Just an awareness that things have a life limit, and you’re looking around and you’re thinking, Are we are we not ready? I’m concerned. Is that fair? Yes, exactly. Okay. Well, is your association professionally managed? No, we’re

Tim Long  07:33

all volunteer. And it has. It’s been that way from the beginning. Okay, so the

Robert Nordlund  07:39

board members are carrying the entire burden. Do you even have an accounting service to help with the monthly invoicing and monthly financial reports? We do have that? Yes, excellent. Okay, good for you that that’s a specific skill. Is yours a December 31 fiscal year end property? Yes. Okay, so you got a proposal early in the year, and you commissioned the reserve study. And do you remember what time of year you got the results,

Tim Long  08:07

mid to late summer. Actually, I think we got the final study. I think it was August 4.

Robert Nordlund  08:14

So August for December 31 fiscal year end. So that’s actually a pretty good sweet spot, because that gives you time to react and have time before all of a sudden you have to cram out the budget in November, that kind of thing. And do you have any idea if this was the first ever reserve study for your association? Sure everybody is I’m pretty sure it is okay. And you alluded to the Rose being 45 years old. Is the association 45 years old? I think we’re about

Tim Long  08:45

maybe 49 now, 4849

Robert Nordlund  08:48

years old. Okay, so it’s not like it was originally apartments for 20 or 30 of those years. It was purpose built as condos, correct? Got it? Okay, so, and it’s been the board running the place for ever and ever. Okay, what was your reaction to the news in the reserve study?

Tim Long  09:04

It was startling. There’s no doubt about that. The numbers did that really surprise you. No, I thought it was going to be bad, but I I didn’t know the magnitude of that. The numbers were startling, and I felt that it was going to be difficult for our community to to try to do what we had to do based on that report. Okay, so there was a, there was a startled period there, yes, yeah.

Robert Nordlund  09:38

So you didn’t have a management company counseling you about this. It was something that you as the board decided, were the other board members on board with getting a reserve study, and did they have your sense that it might be bad news?

Tim Long  09:53

In retrospect, I think we were lucky that we got the board to agree to. Do a reserve study. Okay? I was not aware of the history, but it turns out that previous boards had been asked to consider a reserve study, and every time that he unanimously said that they were not interested. Okay, so there was already in this community, this feeling that we do not need a reserve study, and I didn’t know that at the time, if I had, I would have worked a lot harder to prepare the ground for the motion to have a reserve study. But I think what happened is we had seven new board members on it, on a board of nine people, and we just had enough new people who were interested were just able to get it approved, but it came with some resistance already built in, and I don’t think in the beginning all of the board was really behind it. Yeah, well,

Robert Nordlund  10:59

one of the numbers you said kind of struck me. Yours is a 66 unit Association. We have nine board members that seems like a pretty, pretty

Tim Long  11:07

big group. Yeah, it is. The bylaws specified between seven and nine.

Robert Nordlund  11:12

Okay, and so, like you said, a number of board members had phased out, and you were one of the people who just raised your hand in, as you say, a moment of weakness, and got on the board. Okay, right. So he got the results, and it was, I think you said, startling. And your association had for 40 some years said, We don’t need a reserve study. We’re doing just fine without it. And you hit a bump in the road with the chip seal a few years ago, you saw another big project coming up. Yours is a townhome Association, so you’ve also got roofing and painting and other things like that some Okay, so if you’re going to get nervous about the asphalt, then oh, gee, what are we going to do about the roof? What are we going to do about the painting? There’s all these other things there that were probably in the back of your mind. There also. Okay, so after you and the rest of the board got the reserve study, you were startled. How did you start? Well, like even the treasurer, did the board say, Holy mackerel, what are we going to do here?

Tim Long  12:19

It was, I think, sort of agreed ahead of time that the Finance Committee, there’s three of us on the Finance Committee, would take charge of this whole process, and I on the Chair of the Finance Committee. So there was, there was prior agreement that that that committee would lead the process, and we had also outlined in a document what that process was going to be. So the board had already sort of signed off on on a way we were going to proceed with,

Robert Nordlund  12:53

okay, and what was that? And then, in this, an outline of where you’re going to go.

Tim Long  12:59

Well, because of the early resistance, it seemed clear to me that the only way we were going to be successful is by engaging the community and winning them over. Couldn’t go around them that’s that’s inappropriate, in my mind, it is a community so it’s got to be a community decision, so that our only hope, I thought, was to engage and to win over. So after we received the study, and Chip Monday, who did the study for us, presented it to the board in a Zoom meeting, then we had a series of public presentations where we presented the study to the community. So that the community would understand what was in the report, and we were trying to get the community excited about the report and excited about what it could offer us and what might be able to do with it,

Robert Nordlund  13:58

so you presented the reserve say to the community. Obviously, that’s extra work. You’re a board member, not only a board member, you’re on the finance committee, so you have multiple responsibilities there. So you said, Okay, let’s, rather than just figure out what we’re going to do, let’s engage the homeowners. And I love that word community. You know, we’re in this together. Type of thing

Tim Long  14:23

at your association. Does the board have the power to say, this is the budget, these are the assessments, or does it need to be approved by a vote of the homeowners? The board can do that? Okay? So the board could have acted up. The board could could have acted on its own. Personally, I just felt that that’s just not the way to do it. In the end, I wanted the community to decide. Wanted us to do I wanted not to be their decision,

Robert Nordlund  14:55

even though you had the power to do that was to engage them again. I find. Fascinating that that was a choice you had, and do you think that came from you being you, or was it you being a homeowner previously and subject to the whims of the board and saying, if I was a homeowner, I would like the board to involve me, at least give give me the courtesy of telling me what’s going on.

Tim Long  15:23

I don’t really know. It was just to me that was obviously the way to go to to engage the community, to win them over, to get them involved, and ultimately let them they had to make this decisions.

Robert Nordlund  15:43

I like that you you chose, just as a human to be courteous, and I think that is one of those things that board members need to appreciate, that you many times you get back what you give out, and it’s a reflection of the way you’ve treated the homeowners that you said, I’ve got the power to do this, but let’s hear what you want to see. This is our community. Is that fair? Fantastic. Okay, well, Tim, that’s a great point. We’re going to take now a break to hear from one of our generous sponsors. That’s where we’ll hear more details about the process that Tim went and what they learned from those meetings with the homeowners.

Paige Daniels  16:23

Numbers matter, and we need numbers like gain scores and bank balances to let us know where we stand. The same is true for your association. Is yours, thriving or struggling? Let me introduce you to the FiPhO health score, like your own personal FICO credit score. Now in one simple number, owners and boards can learn the combined financial, physical and operational health of their association. The good news, it’s free at ourFiPhO.com that’s our f, i, p, H, o.com, learn how your association measures up.

Robert Nordlund  16:54

And we’re back here to talk with Tim about his process there. And I just want to share that Tim had a moment, just a moment ago, where he got to a point where he couldn’t speak, where he was touched with, well, Tim, maybe you can see it. Say it. You said you were lonely. Being a board member and engaging the homeowners reduced your loneliness, and it helped them see what was going on at the association. Is that, is that fair?

Tim Long  17:21

Yeah, it’s kind of I felt lonely, I felt responsible, and to have the community step up,

Tim Long  17:33

yeah, to join you, join us and lead us to a solution. Listen. Incredibly rewarded.

Robert Nordlund  17:46

That’s fantastic. Well, because it takes, it took extra time to say, let’s involve the homeowners. It took courage to do that. It took commitment. It took curiosity. You know, what are we going to learn here? But I think so much of that is you just saying, I have a choice here, and I can engage the homeowners and get their support. This is our association. The roof’s not going to go away, the resurfacing is not going to go away. How are we going to solve these things? And the key word there is, how are we going to solve these things? And I think strategically, you take away the opposition when you get them onto your own team. Is that kind of what you were thinking? Maybe not strategically what you were thinking. But was that a good result?

Tim Long  18:32

When we started the presentations, they were small group presentations, 10 to 12 people. No, live, okay, in the club, in the clubhouse, good, because we wanted the group to be small so people could interact and say what they wanted to say in and not be intimidated by a large group. So they were small, they were intimate. There was a lot of feedback, and it was extremely positive. And I felt that after the initial series of presentations, there was a good feeling in the community about the reserve

Robert Nordlund  19:10

study, yeah, even though it effectively lived delivered bad news Exactly.

Tim Long  19:15

But when we started those presentations, we told the people there that at this point we were not willing to defend the study. We were not willing to question the study. We were merely going to explain the study. And I explained that the reason why we cannot defend or question is because we have not yet done our homework. And I went to the component list, and I pulled out a couple of items from the reserve study, and I said, this is what the reserve study says about these items, but in our community, we are probably going to handle these differently, and the impact financially will be this. So when I say we haven’t done our homework, I mean. We have not scrutinized every item in the component list yet, so we will get that done. So today, we’re just going to study or explain the report. So I felt that that took away an adversarial possibility in those initial presentations. I didn’t want an adversarial climate. I wanted to just have people see the value of the report. Maybe they didn’t agree with everything in it, but they could see it’s a treasure trove of incredible information. It’s a huge resource for us, okay? And that’s all we wanted people to appreciate. And I think that happened in that first series of meetings, okay?

Robert Nordlund  20:44

And then you took advantage of our online reserve calculator to start to make those adjustments and tweak it a bit to make it your own Exactly.

Tim Long  20:52

We started working through the component list for the big ticket items. We actually met with contractors. I mean, I knew at some point we were going to make recommendations based on the numbers coming out of that study, and I wanted to have as much confidence as possible that those numbers were accurate. They were a good reflection of what we were going to be facing. So we met with contractors and for smaller things, we met with the community. My colleague, Helen Myers, invited community members to her condo, okay, and they would sit around and have snacks and drink wine and have a conversation and talk about the component list and get get their feedback, and they appreciated being included, and many of them were long term residents with institutional memory, and they so much appreciated being part of the process down the road when we had to make the tough decisions, they were On our side. They were advocates for us, because they got included early on in like body

Robert Nordlund  22:07

in, well, I think that says so much about you, the way you treated them with respect, yeah, and you were ushering in you and the new board were ushering in an era of we, not us versus them. It sounds like we

Tim Long  22:21

redid that the component list, and then we used Uplanit, which is wonderful software provided by your company, to well, from that, you generate a 30 year work plan, basically, you know, plan that says, okay, in 2026 we’re going to take care of A, B, C and D, and it’s going to cost 40,020 27 we’re going to take care of x, y, z, and it’s going to cost 30,000 so at that point, after we had gone through the component list, we had the answers to two crucial questions. One, how much money do we need? And two, when do we need it? And earlier, board members told me their attitude was, hey, we know we need more money. Why do we need a reserve study to tell us we need more money? What they did not know is how much money they needed and when they needed it. And those are the questions. If you don’t know those things. How can you do the financial plan? You know,

Robert Nordlund  23:24

I’m thinking, Can I get you on some of my sales calls in the future?

Tim Long  23:29

So the next step was, so we, we, we knew what the spending side had to be. So the next, the next issue is, how do we fund our reserves? How do we make sure we have the money we need when we need it? So using your software, we generated several scenarios for how we might go about funding the reserve study or our reserve accounts, and we held another series of meetings with the community, three more meetings, small group meetings. In those meetings, we went over the budget, we went over scenarios so the people could see the numbers, and We asked them what they thought, because I wanted to

Tim Long  24:24

I wanted them to make the decision, not me, not the board. I wanted them to do it, and that they stepped up big time. That’s fantastic. We went through this. We went through scenarios we had set up, and they said, We don’t like any of those. Let’s try this one. Okay, one we settled on came from the community, and it was for more than I dared ask, but it was, it came from this. Them. That was the crucial thing. Yeah, it came from them, and so they were with us.

Robert Nordlund  25:09

It was their plan. Yeah, when I think about problem, I think, What’s that old adage, a problem shared is a problem halved, but a joy shared is a joy multiplied, and it sounds like you halved the problem. You cut the problem into smaller pieces by sharing it with the homeowners. And then they were on board, and they helped see that, you know, this is going to take some serious business increases. And they were on board supporting the hard work that needed to be done, the hard work, the hard decisions about the assessments need to increase, and that relieved your burden of delivering bad news, because they appreciated that the numbers are the numbers.

Tim Long  25:54

I think so and so at the October meeting, we announced that at the November meeting we would entertain a motion to increase the dues by 20% and right after the October meeting, we sent out an announcement. This is what we’ve done so far. These are the scenarios we considered. Here are the 30 year standard tables generated from your software that show the results of those scenarios. This is the one that people like and want to support, and here’s what it’s going to cost you individually. So we didn’t hide any of this. Everything we knew the community knew they had all the numbers, and they had a month’s advance notice that the board was going to entertain this motion and make and do a vote. Now there was a little bit of pushback during that month, but not, not a lot. But we were just determined to make this open, to make it

Tim Long  27:11

so the community knew everything that we knew so they could help make this decision.

Robert Nordlund  27:19

That’s fantastic, and so you came to the November board meeting. You put the motion out there the board, you told me earlier, unanimously, the board of nine unanimously approved the 20% dues increase. It sounds like a lot of that was going straight to reserves. And the reaction of the people in attendance

Tim Long  27:40

was they applauded. So at that point, we were down to a board of seven. We lost a couple during the year, but the board voted unanimously, and they they all believed in it. And I think after the vote, I just said, thank you not to the board. I said, thank you to the audience, to the community, because they made it happen. And I think they applauded because they believed in this, and they thought it was necessary, and it was important to get the Association on the right course. So I think they were relieved. I think they believed in it. I think they appreciated all the work and effort that went into it. I think all those things went into that applause. I just think that’s

Robert Nordlund  28:34

a template for how to do it. Tim It’s just fantastic from every point of view. We get so much, I don’t want to say so much resistance, but we get so many clients that say, Boy, that’s going to be hard to do, and you and your committee and your board screwed up your courage. Did the communication necessary, invested the time necessary, treated your owners like they were partners in this investment. That is your association. And it’s just remarkable what the owners came back with that, yeah, we appreciate this is what it’s going to cost to continue to stay here and to have this be a nice place to live, to be the kind of place we want to live in, and that, again, that’s, uh, that’s why you’re here today. Now for people listening, yes, we delivered the reserve study. Reserve say stands as published. But we do have this tool. We call you planet, where we encourage our clients to go in and get their fingers in the numbers and push things around and make it their own. Get get their get invested in the plan. And that sounds like exactly what you, with the approval, involvement of your homeowners, were able to do, and the result is you’re going to have the money, enough money at the right time to be able to do what the association needs done.

Tim Long  29:57

That’s our hope, and that’s what we’re trying to. Do and this, none of this. What would have happened without the reserve study, it set a framework within which we could carry out these discussions. Without that, it just would have been my opinion versus your opinion, uninformed subject. To who knows what, but with the reserve study, the framework for discussion and for investigation was set, and then we worked within that framework. It was it was crucial, this. None of this could have happened. None of it without a reserve study. Yeah. So we are deeply indebted to you guys for providing that for us.

Robert Nordlund  30:48

Well, we provided it for your association. There’s a lot of other reserves day firms across the country that do it for their client base. Kim, I want to thank you for hiring us earlier this year, being courageous to do that. Let me ask you, kind of a closing question, are you going to how long? Well, two related questions, how long is your term on the board?

Tim Long  31:08

It’s a two year term, and then we’re supposed to be off for two years. So I have another year to go in after two years off, I’ll just see how I feel, and I’ll be a little bit older then, and maybe I won’t trust myself to be in a position of responsibility. I don’t know. We’ll have to see

Robert Nordlund  31:33

well, in a moment of weakness, you may decide to run again. That’s my thinking. Again, from my point of view, so much of being a board member is the character that you bring to the table, and we’re both going to be a couple years older in a couple years, but I think the character that you brought to the table is absolutely fantastic and is timeless. So I’m looking at the clock here, and it is time to start wrapping this episode from the deep, from the depths of my heart. Tim, I want to thank you for taking the time to join us on today’s program. Any final thoughts or words of wisdom to share on your board member experience with our audience today. I don’t think so. I don’t think I’m that wise. We did what we did here, and it worked.

Tim Long  32:16

Other associations will have their own dynamic thought find their own way, but I do want to emphasize one more time that the reserve study was crucial, and without it, this never would have happened. So we needed that platform. We needed that framework, and I guess I would just encourage other associations, if, if they haven’t had one, and if they’re facing challenges, think about what that what a study might be able to do for them to get them started on the right path. Fantastic.

Robert Nordlund  32:55

Well, we want to publicly acknowledge Tim for performing a thankless job well and for doing an absolutely remarkable job of building community, not causing division through the budget process at his association, we’re glad that there are boards like Tim’s all scattered around the country, and we’re fortunate to have him here to tell his story with us today. We hope you gathered some HOA insights and encouragement from Tim’s observations and experience that helps you bring common sense to your common area. Now, reminder, 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 for another great, valuable episode next week.

Announcer  33:49

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 voice memos 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 and 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. You. One of.

146 | Rebuilding Trust with Organized HOA Board Meetings

Julie Adamen  00:00

Just make sure, as board members, or as management, you get back to those people, I think one of the worst things that happens, because board members know this, managers know it, is that you are so busy all the time, there’s so much stuff coming at you, it’s very easy for something to get lost in the shuffle. At a board meeting is like the one place you don’t want things to get lost in the shuffle. So whether you have to actually physically take a note, ask management to write that down, get it for you for part of an action list, and get back to that person.

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  00:44

Hi, I’m Robert Nordlund of Association Reserves,

Julie Adamen  00:47

and I’m Julie Adamen and with Adamen Inc, and this is HOA Insights, where we promote common sense

Robert Nordlund  00:52

for common areas. Well, welcome to episode 146 where I’m joined by management and leadership expert Julie Adamen of Adamen Inc. Today, we’ll be continuing our early 2026 series on top trends that we expect you’ll be dealing with this year. In this episode, we’ll be addressing rebuilding trust by running meetings that are organized and informative, good meetings, and the message they give of trustworthy leadership. They don’t happen by accident. They’re intentional, and we want to arm you to be your best here in 2026 The result is an aura of confidence and transparency and trust, and that’s good for every Association. Last week’s episode 145 was a great interview with Southern California Attorney Tom ware of kgsw law.com he and I were connected by an association that got embroiled in some litigation a number of years ago, and the origin was a strong board member that went too far, you could say, went south. So our discussion was about bullies, delegation, and how much board members can specialize, how much you can have one board member do yet how much they need to all continue to work together. It’s always good to learn from the mistakes of others. 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 search for HOA insights on YouTube. But better yet, subscribe from any of the major podcast platforms, or subscribe to our podcasts YouTube channel so you don’t miss any future episodes. What we find is more and more subscribers means a higher search ranking, which means we can reach more boards with these free educational and inspirational episodes. So don’t just visit and listen. Subscribe. Join us in our mission to improve the future of the community, association, industry. And those of you watching on YouTube can see the HOA insights mug that Julie and I have, that we got from our merch store, which you can too. You can browse through from our Hoa insights.org website or the link in our show notes, you’ll find we have some great free stuff there, like board member zoom backgrounds and some specialty items for sale, like mugs. So go to the merch store, download a free zoom background, take a moment, look around and see if there’s anything that puts a smile on your face. 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 that you’d like us to address, you can always contact us at 805-203-3130, or email us at podcast at Hoa insights.org, today’s program is a follow up to our episodes 141 42 and 144 on top trends here in 2026 so let’s get right to it. Julie, what do owners learn about the association by attending a board meeting?

Julie Adamen  03:52

Almost everything they need to know that that could be good or that can be bad, but attending HOA magic here? Yeah, yes, absolutely. So let me just ask everybody. It’s obviously, you all live in an HOA. You’re on a board, or you’re a homeowner, or you’ve been on a board, me too. I’m living a big HOA now. I’ve been on two HOA boards at once. I don’t know what I was thinking, but I was so I feel your pain, but if you start thinking about board meetings you’ve attended, let’s just say as as an attendee, not as a board member, as an attendee. And you sat through meetings that were argumentative, low decisions didn’t get made, the board goes wandering off the agenda, off into the field somewhere, and you sit there just thinking, my goodness, this place has run as bad as I thought it was. And I think what really happens most of the time is that board members, because you’re volunteers, and typically this is not your profession. Robert and I are insane enough for this to have been our profession. Lo, these close to 40 years each, decades,

Robert Nordlund  04:54

yeah, wringing my hands exactly,

Julie Adamen  04:58

or poking your eye out. Out, right? But it’s been a heck of a ride, people. It’s been really fun. However, I will say that if this isn’t your business, and you don’t live it and breathe it like we do, you’re like, Okay, well, I’ve heard of HOA. Okay, I’ll get on the board. And typically you How hard can it be? How hard can it be? That’s right, I know the people who served on and they don’t look too bright or whatever it could be, but what often happens. What often happens is that you left the room and they nominated you as the board president, and there you are. So But anyway, I mean, it’s something, it’s not your profession, so you’re like, Okay, I’ll give this a whirl. I’ll step up and do something. And really, folks just don’t think about how all of your laundry, the nice, clean, folded and pressed laundry is, and the really ugly, dirty laundry and all of that, whether it’s good or whether it’s bad, is going to show up in a board meeting unless you plan with forethought. And I think a lot of folks just don’t think about it. So I’ll start at the beginning, Robert, and then I’m gonna hand it back to you. Is that okay? So if almost all homeowners association meetings have attendees. Someone is especially larger associations, they have people that come to the board meetings. It’s noticed some are televised through closed circuit television or cable through their association. And the first thing to do when you have attendees is make sure everybody has a copy of the agenda. Or big associations, they often do their agenda and all that on on a PowerPoint slide, so you have something you can see and actually look at and know where we’re going. So yeah, like a handout.

Robert Nordlund  06:31

If it’s in person, you have a few on a chair at the door. And if it’s online, you have it available so they can download it, print it or view it. Okay, well, I’ll tell you.

Julie Adamen  06:43

What is that, if it’s online, typically that had to be noticed, just like any other meeting. And I would put in an agenda with that notice and with the link. Now understand that it used like, oh, the agenda might change. Yes, it might, but it’s not going to change that much. You might add a item or two, or cross one off, and you just let people know what’s going on. And that’s Oh, fix it. Like, yes, my name is Kevin today. I didn’t

Robert Nordlund  07:06

know, yeah, we were close on that. That was, that was an earlier episode. It was, oh, it was funny. Anyway.

Julie Adamen  07:14

So, so the first thing is, you know what you want to first of all, you want to be welcoming as a board. You want to, you know, welcome people to come in and see how things are going on, and you want to be transparent. That doesn’t mean you don’t run the meetings. You do run the meetings. The homeowners don’t, but you still want them to attend. You want them to see you in action. You shouldn’t have anything that you feel like, oh, I don’t want people to see us operating this way. It happens a lot, though, unfortunately. So first thing is an agenda. Make sure you have your agenda ahead of time. If it’s an online meeting, if it’s zoom or teams, or whatever you’re using, make sure you have that when your email gets sent out to give everyone the link. But if it’s in person, just have, you know, just have a few copies by the door and let people come in and sit down and see what, what’s going to happen.

Robert Nordlund  07:58

Okay, I think you started by saying people get into the board member position kind of unaware of what they’re getting into. And that was certainly my background, my situation. But I think you get past that, like, what am I doing? Oh, gee, now I need to run a meeting, and then you’re trying to figure out, what are we going to accomplish? Yes, it’s a public forum. We need to be transparent. We need to communicate effectively. I’m not sure the average board member appreciates that they are putting on a show. They are putting on a production. Is that right up there with having agenda is making sure your shirts straight, make sure like we were doing before we started recording. Our headsets are straight. The light hair wasn’t sticking out like you’re you’re putting on a show. What shirt are you wearing? Is it a logo shirt? Are you communicating more than you want to, or different than you want to? It is a show. And like you said, you have an agenda. Don’t load it with things that are going to take three hours. You’ve got, what an hour or 90 minutes

Julie Adamen  09:08

90 I was 90 minutes to two hours at the most, but I know associations go longer, though,

Robert Nordlund  09:15

yeah, but so shrink your agenda down so you have you can set yourself up for success. Is that designing, that

Julie Adamen  09:23

is designing. And I want to go back to your word production, because I want everyone to think, Oh, we’re not putting this isn’t TV. We’re not putting on a show. Yeah, you are, in the sense that when Robert’s talking about your clothing. I mean, everybody knows if your kids went to school and they had to wear uniforms, kids in uniforms act a little different than kids with their pants hanging down their rear end. It just is what it is. It’s like when your doctor walks in, you don’t want to see him dressed as a big biker. You’d rather see him with this, you know, a tie and a coat. Or, you know, if it’s a woman has nice little suit, lab coat, something like that. And as board members, that doesn’t mean you have to dress like, ooh, with your tie. I mean, I live in a ginormous golf community, so I. Most of the people around here always got some kind of a golf shirt on or, you know, and a pair of slacks or shorts. Shorts are fine because a lot of you live in very warm areas, like I do, and so that’s fine, but, oh, look neat and tidy. I would say. Don’t be wearing the logo shirts. You always want to look as good as you possibly can, casual, but nice. And you have your agenda and and when you put things on the agenda, here’s a way to think of agendas, folks. Let me go right into this. Your agendas should pretty much stay the same month to month. Now. I don’t mean all the little items are going to be the same, but you’re going to have some very the same categories all the time. Call to order approval of the minutes, review or approval of the financial statements, old business, new business. Maybe committee reports, if you have committees that are going to have report, and then time and date of next meeting and adjournment, and that is it. So if you are a relatively small Association you’re under, if you’re under 500 units, your meeting should not last any more than an hour. I can hear a lot of you going, Oh my God, I wish it would last an hour, but typically I find it’s because the agendas are not well thought out. And within that, and I’m looking at you board presidents out there, because no matter what, you are the head of the meeting, you are the chair. Yes, another person can serve as chair, but typically, 99.9% of the time, it’s the board president. So when the agenda is put forth, whether you did it, whether your management company did it, or your on site manager did it, you want to make sure and take a look at it. And you want to say, Hmm, there’s like 40 items on here. I don’t think we’re going to be able to take action on this many. And then if it’s ones you don’t think you need to take action on yet, just get those off for the next meeting. And there’s nothing worse than listening to a board grapple over 40 different items over four and a half hours. It makes you look unprepared, and definitely makes you look unprepared to make decisions. So you always want to be prepared to make a decision based upon what on what is brought in front of you. So let’s just say you’re gonna you’re looking for a new landscaper. You have a manager. Manager has gotten, is sent out on our RFPs. You’ve gotten three or four bids in from, you know, Bob’s landscaping, ABC landscaping, whatever. Hopefully you’ve looked at your board packets ahead of time, and you’ve read what the contracts say, or what the proposals say, and you are going to be able to make a motion second. It meaning, now that item is up for discussion, and you’re going to discuss either, you know, Bob’s or ABC, or maybe all three at one time, and then decide on your pros and cons. But you should be able to make that decision within five minutes. Most decisions, even less five minutes. If you’re not ready to make a decision in five minutes, you’re not ready to make the decision, and you just table it till the next month and move on. That’s whether it’s that or whether it’s a new cable contract or anything like that. Try to make a decision, decision within five minutes. I’m hearing

Robert Nordlund  12:57

a couple things here. One is, don’t stack the agenda designed for failure. And the other thing is, come prepared. If you are still asking, oh, is Bob’s landscape the one that wouldn’t do trees, or is XYZ the one that was only going to come once every other week, you need to come prepared so you’re ready to go. I’m going to vote with Bob’s, and I go with Bob’s, and three of the five people vote with Bob’s, and you move on, yes, like you’re suggesting that shouldn’t take a long time. It’s one thing if you say yeah, but Bob’s doesn’t do trees well. But last year we went to ABC tree trimming, and they did for half the cost of what was built into Bob’s Yes, and so we don’t need Bob to do tree trimming, the other guy, we were paying the last people to do tree trimming, and that’s why we’re making this change. Exactly We want to come prepared with that, prepared to make decisions, yes, right? And the other thing I’m thinking is delegation. Are, if you have 40 decisions, are those really all board decisions, or should some of those be delegated to management or to a committee or a committee? Yes, yes. Say the committee has recommended Bob’s landscaping. That’s why you have Sheila. Can you tell us why Bob’s and Sheila will tell in two minutes why Bob’s was the best. They weren’t the lowest price, but they do this and this and this, he managed committee recommends Bob’s, yeah, and the committee recommends Bob’s. He’s the one who landscapes the place next door to us, which always looks so good, exactly.

Julie Adamen  14:37

And that’s that delegation that is really key Robert on this. So I think a lot of folks don’t understand how much they actually can delegate to specific committees. I mean, if anything has to do with landscape, your land, your active landscape committee, should be brought into that. That’s why you want, you want to bring them in to help you make those decisions. Because they’re focused on one particular area, you as a board member are focused. On the big picture, all of those areas, and none of them at the same time, but that’s why you have those committee met. Now, if it’s something specific, let’s say you’re going to have the asphalt removed and replaced. Typically, what you should have done ahead of time is appoint an ad hoc committee. That means he’s just they’re just going to be there temporarily to study one issue, and that issue is asphalt replacement. And those people should have been brought in four or five months ago to go and walk the whole place. Get decide what we want to do. You guys go out and you make the RFP, send it here to the board so we can review it before it goes out. Then the RFP goes out, the asphalt committee chair and management, if you have management, management management should always be looped in if you have a manager management company and and then they make their recommendation, and the Board may have questions for the asphalt committee. At you know at the time that these all came in, but you should have all your questions answered ahead of time. If you’re a board member, do not hesitate to pick up the phone and call your asphalt committee chair and say, Why did you recommend this? Because the way I’m reading it, it says something different. Oh, okay, yes, you’ve spoken to him. This is what it says. There’s an addendum, and it will be in the board packet coming

Robert Nordlund  16:10

out tomorrow. Yeah, they’re going to manage the parking and they’re going to clean up at the end of every day. Ah, okay, now I understand makes a big difference, because that’s not a private board meeting that you shouldn’t be doing. That’s just you doing your preparation Right?

Julie Adamen  16:26

Exactly. No private board meeting that’s completely different. You have to have a quorum of the board to do that, and most lot, a lot of states prohibit that now, can’t even talk together.

Robert Nordlund  16:34

Yeah, you get into a mess if you’re you’re doing that kind of thing.

Julie Adamen  16:37

Don’t but, but having going back to having your agenda and keeping the agenda relatively the same each time, same big categories, your drop down menus may be a little bit bigger or, you know, or smaller, depending on what’s going on in the community, and having your agendas available for the people, and then utilizing your committees to help you get enough information to make decisions and listen to their recommendations on those decisions. Now, do you have to take the committee recommendation? No, you do not. You do not. But there’s a reason you have those folks to study those things, so some of the burden is off of you as board members, and they can actually bring you a level of detail that you probably aren’t privy to or didn’t even think to ask about, because you’re not focused on that. So those are two of the big things. Robert, want to talk a little bit about open forum for the homeowners.

Robert Nordlund  17:25

Yes, we’re talking about you mentioned that you want to set an agenda that is set up for success, and one of those things is time for feedback. It is so important in communicating and transparency to make sure that you are hearing from your constituents, not just as you walk around and go the mailbox and sit at the pool or swimming in the pool, walking dogs, but hearing in an official open forum. So how do you manage that successfully? Do you can you budget 15 minutes? But what if you have a special assessment coming up and you got 15 people who want two minutes of microphone time.

Julie Adamen  18:04

Well, I would say you have to give them their two minutes, two minutes or three minutes, whatever it is, even if there’s 15 people there, but hold it to the two or three minutes, whatever you’re you’re doing an association I live in. It’s very large. And there they do have that so, you know, they can feedback for two minutes, and then they then they’re done, and everybody knows it. Now, all the homeowners are pretty trained in that, so it’s not a real big issue, but if you are having something big, like a special assessment, you probably should be holding another separate meeting just to get that kind of feedback, as opposed to it being at a board meeting. So that you might want to think

Robert Nordlund  18:40

about that, because a board meeting is a decision meeting. It’s not an information meeting, and so you do your town hall, we’re going to talk about a special assessment. Now in those open forums, let’s say you’ve got two minutes, two minutes, two minutes. Is this a time for the board to respond, or is it just a time for you to let the people here, do you because are you gonna discuss back and forth?

Julie Adamen  19:04

Try not to. I know sometimes you have to, but really it’s a time for those people to put forth what they think. Okay, so they think about whatever is going on they want to. Typically, it’s a it’s relatively smaller complaints. Well, you know, my trees didn’t get trimmed on my street until, you know, a month later than everybody else is that kind of thing, and you just want to take it in. Thank you so much for your feedback. Now, if people do have something that would be like a common area complaint, or something that really needs to go to management, or if the board is managing, go to them at another time. If you’re having an in person meeting, I would always have literally, a written form, kind of the service order type form, okay, if you are doing this online, and not even that, if your association has this, not all small associations certainly don’t all have it, but you will have a portal for your community where people can go in and type up a complaint, and you could just refer them to that. Please send this. To us so it doesn’t get lost. So and if you tell a homeowner as a board member, say, Yeah, that’s a really good point. I don’t have an answer for you. Let me get back to you. That’s fine, but you have to, but you have to get back to them. You can’t forget I like

Robert Nordlund  20:15

what you were saying. If someone says, I thought we decided this. And you say you’re right. Mrs. Jones, we decided that last month, but thank you for double checking. You can find it in the meeting minutes, maybe just that simple acknowledgement that that’s a good point. Let us look into that, and we’ll get back to you. But just because I feel like so much, it so much of the time, it’s an opportunity for the homeowner to let go of some steam and you want to acknowledge them. You’re a human. You’re a member here. You’re in unit number 16. See, oh yeah, thank you. Thank you for that. That’s a very good point. We will look into that, and we should have an answer for you by next week, something like that. Let them, let them be

Julie Adamen  21:00

heard, yes and acknowledge acknowledge it. I mean, that’s you know to thank you so much for your input. Really appreciate it. And again, if it’s something that the board that is going to be actionable for the board or management, just make sure, as board members or as management, you get back to those people. I think one of the worst things that happens because board members know this, managers know it is that you are so busy all the time, there’s so much stuff coming at you, it’s very easy for something to get lost in the shuffle. At a board meeting is like the one place you don’t want things to get lost in the shuffle. So whether you have to actually physically take a note, ask management to write that down, get it for you for part of an action list, and get back to that person. It’s frankly getting back to people, even if you’ve made a mistake, they don’t care about the mistake. They care about how you fix it, and getting back to them and not leaving them wondering what happened in the dark. Because when homeowners are in the dark, wondering what’s happening, all of a sudden, that darkness vacuum will get filled with all kinds of stuff that didn’t even belong in there, and it can balloon into balloon into a much bigger problem than it was in the first place.

Robert Nordlund  22:05

Yeah, as I’m hearing you, one of my pet peeves is board members who don’t come prepared. But I’m hearing that it’s as important for you to do your homework afterwards follow up on those loose ends, and as much as you do great job by hearing people and letting them say and be part of the community. I think you’re going to just destroy that if you just blow them off and say that was a waste of two minutes of my life. They didn’t do anything about it. Yeah. Maybe that just a simple acknowledgement, an email or, oh, yeah, what’s your email? Mrs. Johnson, let us get back to you on that you’re 16 C, right? Or whatever it is, make sure you have the ability to connect and close that loop communicate, yeah, I we’ve been diving into this, and I haven’t been looking at the time, and we’re way past our midpoint sponsor at so we need to take a quick break here and here for one of our general sponsors. After that, we’ll be back with more common sense for common areas, and discussion about basically how you can build trust at your association with effective board meetings.

Kevin Davis  23:10

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

Robert Nordlund  23:37

experts, and we’re back well during the break, Julie and I were sharing some stories about things that we’ve seen and heard. And we want to make sure, with the time available, that we leave you with at least a couple more ideas of what to do. And the first was the responsibility of the chair, and that’s to move the agenda

Julie Adamen  23:55

forward, to keep the meeting moving forward. For example, if you are if a motion comes before the comes on the floor, second, it’s okay to discuss it. But if it’s obvious you’re not going to make, like I said before, make a decision within two to three minutes, five at the very most, you’re not ready, so you need to table that issue and come back to it at the next meeting. And then, because the last thing we were talking about was homeowner forums, when to have them and Well, typically not during the meeting. In some states, looking at you, Nevada, you have to do that, but most states, you do not. So they’re held before the meeting or after. But one thing that often happens in a meeting is that there’s a controversial issue, or at least it’s controversial to some people in attendance, and they’re going to want to give you their two cents in the middle of the meeting, the chair does not recognize those people. The board meeting is only for typically, only for the board members. And usually when something like that happens, it’s some real ugly thing. It’s people are angry. There’s been a special assessment. There’s been a tree cut down that shouldn’t have been cut down. Whatever it is, people have emotion about it, and they get very angry. And I have sat in those meetings and they’re, if you are the chair, and it looks like it is not going to calm down anytime soon. Call a recess for 10 or 15 minutes. Let everybody go out, stretch their legs, grab some water, you know, and kind of cool down. And oftentimes that will allow you to come right back to the agenda and keep moving. If you come back and it’s more of the same, and it’s abusive, it’s angry. It is hostage holding. I mean, it’s everybody’s being held hostage. The rest of the homeowners there, the whole board members there, your staff, if you have staff there, you know it’s okay to adjourn the meeting. Just call it a day. It’s better for everybody, and then regroup and see what you can do to if they’re even reasonable people, I don’t know, whatever the issue is, you have to decide this on your own if they have a point, but they just didn’t get it across well, or if maybe they’re completely nuts, and how you’re going to deal with them. So this doesn’t happen again. At the next meeting,

Robert Nordlund  26:03

I’m thinking about one of the basic principles you’ve talked about so much, is communicating. And Kevin always talks about lowering the temperature, reducing the pressure, reducing steam. If there’s a wait for maybe you can take a break saying, Hey everyone, I’m sorry this is on me. I’ve got a phone call I need to make right now. So you’re not blaming the disruptive person, whatever it is. Or you could say, you know, with the emotions in the room, let’s take a break. But is it possible to, during that time say, you know, can you put your stuff in writing and we’ll take it as a

Julie Adamen  26:41

regular order. Take it as take it as a board that would be regular order, that letter or email can go into the board packet the next time. So people are seeing that ahead of time, and they can actually look at it, discuss it, and then either take action or not or send it to a committee for review.

Robert Nordlund  26:59

Got it, and that way, what have you done? You’ve lowered the temperature, you’ve allowed the person to be heard, and you’re giving it due time and consideration to look into it.

Julie Adamen  27:10

Yes, in an in a business like fashion, because you are running a business, this is a business meeting well,

Robert Nordlund  27:16

and that I want to make sure we’re clear on that also, because when I get involved, it’s usually because there’s a big roof project or asphalt project, and there’s going to be a special assessment, they want me to come in and explain why the roof is leaking. And it’s usually pretty simple. It’s, it’s 25 years old, folks, and it’s it, if it was a dog, it would be dead. And you guys didn’t set any reserves aside. So it’s next roof is going to cost $250,000 and you got no money. It’s pretty much that simple, but I get involved. And why is this? Why are we just to and you talked about earlier, have an information meeting. It doesn’t have to be a board meeting, but make have it be information meeting, and you’ve told stories about how you were at an association at some point in time where they had a series of weekly update meetings, where people could always come in and there was at least one board member there and sometimes find out information, let off steam. Ask Anything. Boy, yeah, ask anything. It’s total open forum, boy compliment, a business meeting, a board meeting where you are putting on a show with information. Meetings when you have that big you know the hot wire is going to be shut off for 48 hours these two days. You know that’s going to be disruptive. You don’t want to just mention that as an aside. At a board meeting, you’re like, Wait, did he say 48 hours? What? Hang on, I got company

Speaker 1  28:44

coming, grandkids. I got Yeah, right.

Robert Nordlund  28:48

You need to prep that in advance. There’s things you can do, maybe months in advance. Oh, yeah,

Julie Adamen  28:55

how big it is? Sure, yeah, typically, you know it’s coming. It’s not just coming up in a month or two, you usually know eight or nine months out that this is going to have to happen. It’s a train wreck. We got to get ready for it and start addressing that train wreck before it’s in your front yard. Ahead of time.

Robert Nordlund  29:10

Julie, this is just fantastic stuff, and I hope that we’ve been able to pull some of the major points together. It’s always great talking with you and hearing from your volume of experience than the battle wounds that you’ve taken watching and assisting on all this kind of stuff. But any closing thoughts to add at this

Julie Adamen  29:28

time once again, like what we always tell all of you board members out there first, thanks for watching, but you guys are doing yeoman’s work overall. I mean, I think the statistic is about 75% of homeowners are actually satisfied with their homeowners association. That is huge. Of course, we only hear about the bad stuff. We don’t hear about the good stuff, but so you guys are doing great work. And just remember, when you do have a board meeting transparency, be aware of how you’re presenting yourself, how you look, how the board meeting is structured. With the appropriate agenda and keeping that move that agenda moving forward. So everyone’s not there for four horrible and pleasant hours, because, you know what, you don’t want to be a board member forever, and people coming to those meetings don’t want to think, I have to do a four hour meeting every month, and I want to kill myself. So you want them to come in, you want them to feel a part of something positive.

Robert Nordlund  30:21

Yeah, and there’s two things I want to ask. I was trying to close this, but I’ve still got more in my brain going, this is a great opportunity for you to build a pipeline for future board members, because if you can make it appear doable and reasonable and non confrontational, it’s like in my world watching Fred Astaire dance, watching Magic Johnson or Michael Jordan on a basketball court. It just looks so smooth and simple. If you can make it look like organized and you know, Fred has been president for four years, it’s time for him to step down. You say, Well, yeah, I could do that. And I like being part of the common sense and bringing this community forward. Yeah, that kind of stuff, I think it can do. Build a pipeline.

Julie Adamen  31:05

You are spot on, and the number one place people see you in action as a board is at a board meeting. So if your board meetings are long or ugly or or you don’t get along as board and they go on and on forever, nobody wants to volunteer for that experience. They want to be again, a part of something positive, something that’s in touch with the needs of the community.

Robert Nordlund  31:23

Okay, my last question is, do you have a gavel? Does that make it look too official, or is that helpful in having there be order?

Julie Adamen  31:35

Oh, I don’t know. I think it’s I’ve seen people use them. I would say most people don’t need it. It’s but it depends if you like it. Go ahead and use it.

Robert Nordlund  31:43

But at the last trade show I was at, they had little squishy gavels for the attorneys. And I just just thinking about that, you could hit yourself on the head with it all day, and it wouldn’t do anything. Perfect. Yeah. Nerf gavel, it was basically a nerf gavel, okay, well, we hope you learned some HOA insights from our discussion today that helps you bring common sense and today trust to your common areas. Thank you for joining us. We look forward to bringing many more episodes to you, week after week after week, we’ll be here. It’ll be great to have you join us on a regular basis. Spread the word

Announcer  32:21

you’ve been listening to HOA Inisghts: 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 comments 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 and 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.

145 | Dealing with Rogue HOA Board Members!

Tom Ware  00:00

I have seen situations where the bully, the person gains control, because they are a bully, and everybody’s afraid to talk to them. Well, the problem with with that is that the if the bully is going to expose the association to liability, the minority director fully do have an fiduciary duty to stand up to him, to to actually do something, because otherwise, failure to do so is going to result, potentially result in liability to the corporation.

Announcer  00:30

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  00:46

Welcome back to HOA Insights: Common Sense for Common Areas. I’m Robert Nordlund, and I’m here today for episode number 145, with Tom ware, an attorney from the prominent Southern California law firm of Kulik Gottesman Siegel and Ware. You don’t have to memorize that, but that’s part of the program. Tom and I have known each other for years, most commonly seeing each other at national industry conferences and cities across the country. I can’t name them all, rather than when we’re together in the greater Los Angeles area where we live and work. So that’s kind of the fun thing about the both of us. Tom and I worked on different parts of one particular case many years ago, and that Association recently made the news in a bad way. To be clear, sometimes it’s good for your association to make the news when you’ve done some great things, but we’re sharing this episode today because we want to help you avoid your association making the news for all the wrong reasons. Well, last week’s episode 144 was another one of our what you need to know for 2026 episodes with regular co host Kevin Davis and Julie admin, I always enjoy the richness of what they have to share with our board member audience. I got a sneak preview of that episode, and you’re going to like it 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 from our YouTube channel. But better yet, subscribe from any of the major podcast platforms so you don’t miss any future episodes. Increasing our subscriber base increases the podcast position and search results. So subscribing helps others find this free resource so they can be better equipped to lead their association. Well, those of you watching on YouTube can see the HOA insights mug that I have here. It’s a favorite of mine, showing two board members talking about their deteriorated Association and what they’re going to do about it. I got that from our merch store, which you can browse through from our HOA insight star org website, or the link in our show notes, and you’ll find we have some great free stuff there, like board member zoom backgrounds and some specialty items for sale, like mugs. So go to the merch store, 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 you can email us at podcast at Hoa insights.org, but this episode is on me. Here we go. So back in 2019 I was working as an expert witness on an association with a dispute about its reserve funding that had been around for a number of years. And by the time I was working on the association, it was a bit of a mess. Tom was also working on a different aspect of the case, and we commiserated about how many things had gone wrong at the association. And as I stated a few moments ago, the Association recently made the news again. So we’re here today to share some lessons learned from that situation, how you can see those kinds of problems looming and avoid them at your association. So Tom Welcome to the program. Tell me some of the Ritz of this problem.

Tom Ware  04:06

Yeah, and like I said, I don’t want to get into the specifics of that that association, but I do think it’s demonstrative of the fact that when associations seem to understand that their directors are, you know, going to be deemed to be there are going to be seen oftentimes to be their agents. Sometimes they’re acting outside of the scope of their authority, and yet to a third party, it’s going to be seen like they are acting as the agent. And sometimes that wrongful act from this rogue director can actually end up being imputed to the association, and in some cases, even the management company, which is what I think is really important to focus on here, so you could try to avoid having this type of activity happen in your association.

Robert Nordlund  04:51

Hey, let’s talk about words. You talked about agent when I think about board members, the word I think of is fiduciary. Necessary. So were you talking about something different?

Tom Ware  05:03

The fiduciary relationship is the relationship that the director or officer owes to the corporation, and in California, at least, to the members in certain contexts. But the agency issue is that when the director acts with third parties, like a vendor or another party that’s not even, you know, they’re even doing business with, they can be deemed to be acting on behalf of the corporation. So even if they weren’t, you know, expressly authorized to take the actions that they took, sometimes they can impute liability to the corporation. And that’s why, you know, it was when we, you and I, were talking the idea of how to deal with, you know, lack of a better term, or rogue director going off and doing something that they shouldn’t do, or even that the board doesn’t want them to do. You know, how do you deal with that? Because, because I can have extremely negative consequences to everybody involved, okay?

Robert Nordlund  06:01

Because when I think about a healthy Association, again, my point of view as a reserve study provider, I’d like to see the board decide, and I chose that word carefully, how the board decides. And that’s not talking about how one particular individual on the board decides. A healthy situation is where the board decides, and you’re talking about it, you start to get into bad territory when there’s one board member that is deciding on behalf of the Association, and that’s when they become an agent, and they can start to make a lot of trouble. Yeah.

Tom Ware  06:39

I mean, basically what you’re saying is true is that, technically, speaking, in a corporate setting, the corporation, and I would say that most homeowners associations are corporations. You know, there’s some unincorporated associations. And I think these principles pretty much work the same for them, but in the corporation, the corporation acts by through the board of directors and the Board of Directors, you know, in order to act, needs a majority of a quorum of their directors. So, you know, unless the board has delegated that authority to one person, that director by himself, no director, no matter what title they hold, whether the president or the treasurer, they don’t have authority to act on their own. They don’t get to direct vendors, they don’t get to basically enter contracts. They only get to do that if the rest of the majority of the board has authorized them to do so. And a lot of times people miss that. You know, there’s a lot of people think I’m the president. They’ve elected me president, so I’m just going to go out and do whatever I need to do in between meetings, and they’ll go back and report back to the board. And that happens a lot, but that’s not the correct way to do it. And by when you as one of the other board members sitting in that circumstance, don’t stand up and talk up to that director, you’re not only exposing potentially the corporation to potential liability, but you also could be exposing yourself to theoretical liability. Okay?

Robert Nordlund  08:00

Because so it’s a good thing if you have three landscape contracts in front of you, you discuss them, you discuss the pros and cons, the costs, the services, how often they’re going to come, all those kinds of things. And you together as a board, decide we’re going to go with landscape company B, okay. And then you say, Okay, who’s going to call landscape company B and tell a and c that they didn’t make it. That’s that’s a good decision, a good process.

Tom Ware  08:26

Yes, that’s the way it should, should work. Okay, right? And, and also, let’s face it, there’s a lot of things that happen in between meetings that you know sometimes you don’t have, either people aren’t around or you don’t really want to have to go back to the board, let’s say, like in a in a stack community, if a pipe bursts and there’s water leaking active water is leaking down stairs, you know, you don’t have time to necessarily call a board meeting, get everybody there. So I do think there’s, whether it’s the management company or or, you know, particular board member, I think it’s a good idea to delegate certain responsibility to a director or management to take certain action under that type of situation. But there needs to be limits on that, even if you’re going to do that, not an unfettered discretion, but rather, you know, maybe $1 limit to do that. And obviously emergency, we got to stop water.

Robert Nordlund  09:17

You know, you got me just writing a lot of notes here. I like your choices. There is delegation, an emergency situation with limits, and you had another word there. I missed it. Okay, I’ll have to play the podcast back myself to catch that. But Okay, so we’re talking about a healthy board is doing things together, not necessarily unanimously, but they come to consensus. They get, as you said, a majority of quorum. And they say, Okay, we are going to do this. And then you move forward, and you hire in our hypothetical landscape company B. And you know, maybe you thought landscape Company C was the better. Choice, but the board went with B, and you’re a board member, so the party line is we chose B.

Tom Ware  10:06

Yeah, I actually that brings up a good point too, because that’s another thing. This is one, one of the most. In fact, it was just talking when we saw each other at the last summer. We were talking about this very topic, is that there’s a directors, oh, a duty of, among other things, duty of loyalty. And among the part of that duty of loyalty is this duty to maintain the confidences of the corporation in a homeowner’s association. You know, there’s a lot of people that run for the board. They’re not, we’re not always in lockstep, right? We always have like, five board members that all agree. You know, oftentimes there is, you know, three and two. And some people get on because the, you know, the running under this idea that there’s transparency, we want transparency for our community and and if they disagree with the decision of the majority, we want to basically tell the people that elected us that why We disagreed. Now that’s, that’s, you know, that is okay, as long as they’re not disclosing confidential communications. So if you were in a executive meeting, you may be meeting with the attorneys, or maybe it’s like a California week, they can meet an Executive Session for to enter a contract. So if you’re an executive session, that’s a confidential meeting. And so you as a director, even if you don’t agree with what the majority has done, you have an obligation to maintain the confidence of the corporation, and not, you know, throw them under the bus because, because we’re going to go back to what I said at the beginning, when you make statements, you know, even though you haven’t been authorized by the board, but you’re a director, and so when a lay person hears you say something, they there’s this perception that you’re speaking on behalf of the board. And so you, as a, you know, a minority director, you make a statement, and that can be imputed to the association and can create liability. And that’s not that’s not consistent with your fiduciary duty. The one caveat to what I’m saying is that obviously, if you know that the corporation is engaged in criminal activity or going to do something that’s illegal, you have an obligation to say so. That’s the that’s the caveat to what I’m saying there.

Robert Nordlund  12:18

Okay, all right, I like that if you’re in a mid rise condo and there’s a pipe leak, call the plumber, get something fixed. If you’re in a town home Association and the splinkers are all running. They’ve been running for 13 hours, call the landscaper. Get it fixed in emergency situations. That’s your job. If the other boards of directors are out of town, there’s things you need to do. Okay, let’s go back to that hypothetical. I wonder if it’s going to work for everything we’re going to talk about today. Landscape companies. You had a good discussion, and the board was three to two to hire company B. If you thought Company C was the right one, can you say, is it safe to say, if someone asks you, well, you know what happened last night, the board meeting. Well, we picked Company B. It was a good, interesting discussion. There’s a lot of pros and cons. I was in the minority, but we went three for two for Company B, and I support that. Is that okay? Can you say even that much

Tom Ware  13:21

you know, I think that’s probably okay, but at the same time, probably shouldn’t be seeing anything you know as far like, what, what is, what you know when you say, I support that, it’s fine afterwards for that director to tell people I was against hiring, but then that’s as far As they can really go, because they can’t really disclose what was discussed at why the whys they shouldn’t be necessarily disclosing. But that’s where directors often get in trouble, because they’ll make a, you know, they’ll make some statement about the why that can create liability to the corporation. And who said what? You know? Who? Mr. Smith said, blah, blah, blah, blah. And next thing you know that that is being imputed back to the corporation. And sometimes it doesn’t look, you know, it actually does not look good, especially when litigation actually ensues. That’s going to be part of what all comes up,

Robert Nordlund  14:17

yeah, or at least someone’s got to call their DNO insurance provider and say, Uh oh, I think we have a problem here in a claim. All right, let’s get back to the original so you’ve got a board, and you’ve got someone who maybe when they started on the board, they were doing a lot of positive things, but they just realized the other board members weren’t doing much, and so they just started acting on behalf of the Association, taking more agency for the association. When does that turn into bullying, and when does that become dangerous? Well, I

Tom Ware  14:52

think it depends on who the person is, right. I think the bullying stuff is a little bit different, is that there are people that act. Actually gain control by being bullies, and that, I think that is really dangerous. And I think there’s another sometimes this happens for, you know, can be the bully, or it could be just that everybody else is busy and somebody else is willing to do it, and so they just let them. But the direct either situation that the directors have to understand that, you know they do have fiduciary duties, and you know they can’t just let one person go off and and manage the the corporation on their own. You know they don’t, they don’t have the authority to delegate. Hey, you make all these decisions now. Now we’ve gone too far. It’s not it opposed to making an isolated decision. We delegate you to basically supervise the landscaping. That’s one thing. But, you know, just to let one person run the whole business, I think is will end up, you know, leading to liability, oftentimes, for the corporations. And like I said before, the directors too. I mean, directors have a lot more protection, but, you know, in order to the biggest defense that directors have is the business judgment rule. But the business judgment rule, it’s interesting, but that’s this concept that that a director should not be held liable for making honest mistakes and judgment. That’s the basic gist of it, but in California and in a lot of other states, there is a condition that is imposed on the director in order to invoke it, one, they have to be exercising discretion. That means, if the ccnrs say you have to get insurance, you have to shall get insurance. That’s not the decision not to get insurance is not within your discretion. So you don’t get to invoke the business don’t get to invoke the business judgment rule for not complying with that, because that wasn’t part of your your authority. You didn’t have authority to say, No, we’re not going to do that. And the second thing that’s important to know is that the the director has a duty to act on informed consent. That means they they have to investigate, they need to exercise reasonable diligence. Now, that doesn’t mean they can’t rely on other directors or experts, because sometimes certain directors, if you have a director on the board, that’s an accountant, you know, maybe that’s reasonable to rely on them when he’s going over the financial stuff with you, but it doesn’t mean you get to punt it completely. You have to still be part of the discussion and involved in this and and you can rely on their opinion. But you know, you can’t just really put your head in the sand and do nothing.

Robert Nordlund  17:32

Is our reserve balance going up or down? Is our cash balance going up or down? How are we doing? You need at least to get your fingers around those and have a grasp on it, rather than just say, oh, Joe’s got that, Susie’s got that, and just abdicate, oh, is that one of the key elements that you can’t abdicate responsibility to the one person who’s doing the hard work?

Tom Ware  17:54

Well, I would say you shouldn’t. Yeah, I think that, you know, it’s one thing to rely, like I said, on the expertise, you know, if you have a lawyer that’s on the board, I will tell you that, as a lawyer, your malpractice carrier probably doesn’t want you giving legal advice to the Yeah, the board, but it, you know, the lawyer being on the board and you have legal issues, you know, I think it’s reasonable for the other board members to rely on that person’s legal expertise. But once again, you like you, like you said, you can’t really abdicate your responsibilities that the corporations code. And, you know, I know in California, the Civil Code imposes duties on each director. So it’s not it’s, you know, you don’t get to just let them. And in the case that you mentioned before, without getting details, you know, the directors were letting one person go out and take care of things and got them all into trouble.

Robert Nordlund  18:46

Yeah, well, Tom, that was the nature of me wanting to have you on the program. We’ve built a real good foundation here, but we really should get back to that topic. But I think right now it’s a good time to take a break and hear from one of our generous sponsors, after which we’ve act with more common sense for common areas and here specifically, or as much as we can say about this one particular case,

Russell Munz  19:11

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Robert Nordlund  19:42

and we’re back. Well, during the break, Tom and I were continuing to talk about this, and what we want to do is we built a foundation. And Tom, can you talk now about how that the Board of Directors, how you can have one board member that. Starts engaging in conduct that exposes the board and the association to liability. Tell me about that process. Yeah, this is

Tom Ware  20:10

what saying about the fact is, you have to understand that as directors, that when you deal with third parties, they’re going to deem you to be the agent of the corporation oftentimes. And there’s certain defenses to then, and I don’t want to get too in the weeds, but for purposes of teaching standpoint that I think it’s really important that the minority directors, you know, understand that the actions taken by you know, other directors, when they’re dealing with third parties, get, you know, can create not only liability for the corporation, but liability for them as directors. And even if there’s not liability, nobody wants to be sued. You’re, you know, you’re, you’re placing yourself in harm’s way. And you know, there’s, there’s this big legal process and and what I mentioned to you about the business judgment, or what’s interesting about the business judgment rule is another case that I did handle, the Parth case, which actually went up on appeal. I think is a good example for this too, because it works both ways. Because in part Miss Parth was a director of a volunteer homeowners or she’s volunteer director of a homeowner association. She was the president, and she did sign springs. She in Palm Springs, right? Okay, I remember that. So what happened was she the allegation list. Allegations. Allegations were that she signed a contract without Board approval. The allegations was that she hired a roofing contractor that was not licensed and resulted in defective conditions to the property. Also, they argued that she obtained a loan without the loans under the governing documents required membership approval, but she obtained the loan without that, and that was the allegation, and we we were retained through the DNO carrier to defend her. And so she was being sued by her homeowners association for these damages. Initially, we got her out on a business judgment rule saying that she should not be liable because she act in good faith. You know, yes, she made a mistake, but they were like honest mistakes in judgment. Okay? And so the trial court agreed, but the Court of Appeal reversed it, and the Court of Appeal held that, no, this is what I was saying before. No, she, you know, she had to. There was like testimony in her deposition that she hadn’t read the governing documents, ouch, and yeah. So there was this idea that she hadn’t used exercise her reasonable diligence. And so what that means? It didn’t mean she was liable. What it meant was we had to go back down to the trial court and try the case. And what’s significant that as a director is, you don’t, you know that’s this case took five years. So five years Miss Parth was, like, involved in litigation and this allegation, and you know, she was being defended, she do was, the allegation was that she had, you know, more than us. It was a seven figure liability claim against her, okay, and there was insurance reservation of rights, which meant that, if she got, was held liable, or she could be personally liable for that amount,

Robert Nordlund  23:21

she was trying to help and trying to make it easier on the

Tom Ware  23:25

but again, the allegation was that she was acting unilaterally. Now I will tell you that we tried the case. It was 26 day trial, and the facts, I think we proved, were not what was alleged. We actually did prove that her well, she didn’t like follow all the necessary procedures to a T you know, the board, she was acting with consent to the majority of the board, even if they hadn’t gone and formally proved it in a meeting for each act that she did according to finding she acted in good faith in the business judgment rule applied, and then also that they didn’t establish damage claims too. So we completely defended it, but we had to be in trial for 26 days. And this directors was exposed to a, you know, seven figure judgment, and, you know, with potentially the no insurance involved on, you know, coverage on that. And so that’s the thing that I think is really important to know, is that, is that, if you’re a director out there, you know, you personally and you’re actually acting, you know, ostensibly, without not following the precise, like, rules and procedures of your what they call in law school, following the corporate formalities. I mean, making decisions in board meetings, making sure the minutes reflect that those decisions were made, making sure that everybody is consenting with it, as opposed to, like, I think, in Miss Park’s situation, she was acting in the best intent of the board, and yet, you know, because she was kind of just going off and doing things, you know, what she thought was right, she exposed herself to liability, which you don’t want to do. And then the flip. Side I would say is that, you know, in other cases that I’ve seen, you know, there is what I would call a rogue director that has goes out without, you know, in some situations where the board just kind of says, you take care of it, Bob, you know, you take care of this thing and and Bob just goes off, and nobody is paying any attention to what Bob was doing, and now, all of a sudden, the association is being sued for a litany of actions that this director did in that situation. Those other directors have potential exposure because they didn’t really exercise judgment. They did. They just, they just ignored it and let him do it and and so not only is the corporation exposed to liability, but the directors themselves don’t have a lot of the defenses that they should have. Finally on that is that if the if the director, and this where we get your bully. Question here is that I have seen situations where the person gains control because they are a bully. Everybody’s afraid to talk to them, okay, and everything like that. Well, the problem with with that is that if the bully is going to do something that’s going to expose the association to liability, the minority director really do have an fiduciary duty to stand up to them, to to actually do something, because otherwise, failure to do so is going to result, potentially result in liability to the corporation. Of course, how you stand up to the bullies is a more difficult situation.

Robert Nordlund  26:35

Yeah, let’s see. When we wrap this up, being on the board at an association is hard. Takes a lot of time. It takes your care. Well, we talk about the four C’s, you need to care. You need to be curious. You need to be oh, gee, I’m going to miss them now. Care curious. You need to have, I hope our audience is checking me on this, and you need to communicate. I got three of them, but you need to exhibit those behaviors and sitting on the side and letting someone else run with the ball. That’s not how a healthy association is supposed to run. So you need to serve your role and help balance each other out and be politely disagreeing on things. I think this is better. I think this is worse, and continue to come together as a group, is that where we’re going on this?

Tom Ware  27:30

I think the first step of the director would be to confront the director, and should be an executive session, especially if there’s a potential liability for what the director is doing because you don’t want to air that in open session, because now we’re again making admissions that’s going to get imputed to the corporation. If that does not help, I always recommend the board members to ask the legal counsel for an illegal opinion on the validity of whatever action you know that the directors are taking, bringing in the bringing in the big stick, bringing in the expert to say, yeah, you can do that. You can’t do that. Okay, some associations like they have to like civility pledges, or anything that the problem with the bully is the bully just ignores that. That’s a good idea to like, remind people of what their responsibilities are and how they’re supposed to treat people. Unfortunately, with the bully, you know, I did, I think you need to talk to the attorney and try to bring the attorney in and help you in that situation.

Robert Nordlund  28:28

Yeah, well, we want our our audience here, to have success at their association. What I’m hearing is you need to be balanced, and everyone needs to look after each other, look after the association. The board needs to discuss things. At least everyone be aware, even if you do delegate a decision to someone, the other people need to be aware and make sure it’s a democratic process. It’s the board running the association, not Old Joe, someone who’s been doing it for the longest time. Oh, I just got it. Care. Curious, courageous, and communicate effectively. So be those things Google, business judgment rule and Tom, is that safe? They’ll learn more. Start.

Tom Ware  29:14

That’s a start. I mean, it’s not the answer, like I said, there’s always a potential dealing with rogue directors or bullies, I would say is probably the most difficult issue dealing with Hoa is because it’s hard to teach a unreasonable person to be reasonable. So I do think it requires a lot of diligence and patience, and sometimes people just say, I don’t want to deal with it. I’m just gonna leave the board. But I do think it’s incumbent, you know, it’s like eight HOA are the like, the true little microcosm of democracy, you know. And you know, you kind of get what you deserve if you are going to, you know, stick. Your head in the sand and ignore that the bully has taken over your association, then you’re going to basically potentially pay for that. And so I think it’s incumbent, not just on the board member, but on the members, the members themselves, usually the situations where there is a bully, the members know there’s a bully too, and yet the members take no action. And you know, at least in one of the situations, actually, the one we talked about, the members eventually recalled this person from the board. So I think that is what has to happen. I mean, members themselves have to kind of step up and and try to address the bully on the board.

Robert Nordlund  30:39

Yeah, well, that is the democratic process, you can either vote them out or vote someone else new in the next year and look after your association. Do what’s best for your association.

Tom Ware  30:49

Yeah, and if you don’t, unfortunately, you’re going to bear the risk of that.

Robert Nordlund  30:53

Yeah, you as a board member, you as the association in that case that you talked about, multi year case, I’m presuming insurance paid a lot of the bill, but still, to get your association mired in bad news, it’s got to be a bad time. Well, the

Tom Ware  31:09

other thing about insurance is, is interesting because, you know, yeah, there should be insurance Gao there, but always there’s issues with potential coverage. Issues the mere fact that you have DNO insurance, or, you know, general liability insurance doesn’t mean that the association has no exposure or it, you know, it’s becomes a case by case basis, depending on what the plaintiff has alleged. Like, for example, if there’s a contract dispute, there’s typically not going to be any coverage for that, because there’s no coverage that type of thing there. If they if, you know, sometimes associations make mistakes, this is this comes up a lot, actually, if the they get a complaint, somebody makes a claim against them, and yet they don’t really think they don’t want to report to the insurance carrier, because they’re afraid it’s going to impact their insurance, so they don’t, and they wait, and eventually the claim comes, like six months later, but in that six month interim, the associations change policies, and so they didn’t report under the original policy, and so now there’s maybe not coverage. And then even when you have coverage in place, and everything you’ve done everything right? You know, there’s, there’s all sorts of exclusions and policies, you know, I’ll tell you. We have mold exclusions. We have other types of exclusions that say, Yeah, you know, we’re not going to pay for that or and when we’re talking about the rogue director doing something kind of that could be qualified as intentional misconduct. There’s typically not insurance coverage for intentional misconduct. There’s actually a really good case. Well, it’s instructive. It’s not a good case for HOA. It just recently happened up up north, and in that case they they actually found the association. The association failed to repair it. In a nutshell, they failed to repair a under our cap and underground Well, that was leading into into somebody’s upstairs unit. Could spend an hour talking about this case on its own, but they had knowledge of it, allegedly, and they didn’t disclose everything to the homeowner. And so in the end, there ends up being a judgment, you know, a seven figure judgment against the association, and they impose punitive damages, you know, to punish them, and not just against them, but against the President as well. The President ends up getting held and personally liable because they said that the business judgment rule did not apply, because the conduct here was, you know, between not good faith, but rather gross, negligent. Or there was allegations that it could, you know, the suggested it might even be fraud. So that conduct, you know, when you act that way, you’re not going to end up with coverage under your policies. Either you know or you potentially don’t. That’s like another thing that ends up excluding it.

Robert Nordlund  34:04

Okay. Well, I’m gonna finish with two questions. Name of that case. For anyone who’s curious, do you remember?

Speaker 1  34:10

I do. Tell me after the show, and we’ll get in the show. Tell you the show Yes, I get the show notes. Begins with R, but I don’t remember.

Robert Nordlund  34:17

The other one is just boy, yeah, be, be the good little democracy. At your association and work together. And the other point was, yeah, maybe insurance covers it. Maybe it doesn’t. But what’s that going to do to the real estate values? Because all the real estate agents know that you’re embroiled in some kind of trouble, and that’s got to hurt everyone.

Tom Ware  34:39

No, I Yes, you’re right. The key is to try to avoid that. And one of the ways to avoid, man, I would say, for everybody you know, take ownership of your homeowners association. Don’t just punt and let somebody else. Obviously, things are going well, great, but don’t let, don’t let a bully or somebody just simply because you. Don’t want to, you don’t want to deal with them, you’ll end up being in, you know, exposed to liability, and it’ll, let’s face it, if there’s liability to the association, every all the members pay that, you know, they’ll be assessed, and they’ll pay, they’ll pay a portion of it.

Robert Nordlund  35:14

Yeah, so we get back to trust but verify if you’re a board member on that. Okay. Well, thank you. Tom It’s great talking with you. I find myself taking a lot of notes here. It’s going to be hard for me to digest this and get it down to just some short show notes. Thank you so much for taking time to be with us on the program. Any closing thoughts to add at this time?

Tom Ware  35:33

No, that’s That’s it. Like I said, pay pay attention, both as a director and as a homeowner. And you know, I mean, I do also would issue the caveat. My experience is that most people who serve on their directors do so with the best intentions of the corporation. So most the time, we’re okay. But you know, you need to basically in those rare situations where you do have a somebody that is arguably not acting in the good faith, or arguably not acting for the benefit of the corporation? I do think it’s incumbent of everybody to kind of stand up to the bully.

Robert Nordlund  36:11

I like that. Well, if you’d like to get in touch with Tom or learn more about the work his law firm does in California, you can go to their website at k, g, s, w, law.com We hope you learned some great 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  36:36

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 for 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 and 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

144 | How HOAs Are Losing Money to Cyber Scams (And How to Stop It)

Kevin Davis  00:00

LifeLock is for you, okay? Insurance is for the company itself. Okay? So if the company suffers one of those types of losses, you owe $60,000 for roofer. Roofer sends in a invoice with a new bank and routing number. Now, $60,000 is missing. Now, at LifeLock, all it’s going to do is watch you to make sure and protect you to make sure that nobody steals your identity. We’re talking about a loss of

Julie Adamen  00:25

money. Of Money, yes, yeah, actual loss

Kevin Davis  00:27

of money.

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.

Kevin Davis  00:44

I’m Kevin Davis, the president of Kevin Davis Insurance Services.

Julie Adamen  00:48

And I’m Julie Adamen, and President of Adamen Inc. And this is HOA Insights, where we promote common sense for

Kevin Davis  00:53

common areas. Welcome to episode number 144, we’re back in speaking with an HOA management expert and regular co host, Julie Adamen. Over the past several episodes, we’ve talked about the challenges community associations are facing as we move into 2026 everything from inflation to governance pressure. But today we’re focusing on a risk that many board members know exists but don’t always fully understand, and that is cyber risk. They say community associations are increasingly being targeted by cyber criminals, whether through phishing emails, fraudulent fraud transfer requests, ransomware or data breaches. At the same time, we’re seeing boards and managers turn to new tools like AI to get quick answers and make decisions. So today’s conversation is about how we can get a better understanding what cyber risk really comes from, and how AI fits into the picture, and while we align when the right kind of expertise matters, when something goes wrong. Last week, episode number 143, was a great conversation with Candace Scanlon in another one of our popular board hero episodes. If you get CIS Common Ground magazine, you might have heard about her in the November, December 2025, Episode, she’s a long time board member at our Southern California Association, and in our conversations with Candace, she shared a number of great lessons she learned over the years. If you missed that episode or any other prior episode, go to visit us at Hoa insights.org search for HOA insights on YouTube or subscribe to your favorite podcast platform. Subscribing helps us reach more boards with free educational episodes, and that’s how we strengthen the community association industry across the country. Now, those who are watching on YouTube, notice we have our HOA insight mugs here. Here they go. Here’s mine. Julie, you have yours. Got my merch? Okay, go to our marriage store. We have a lot of free tools. There lot board members. Zoom backgrounds, help you look professionals and prepared for your next meeting. And as always, we enjoy hearing from you. If you have a hot topic or any kind of concern or any questions, just drop us a note at 805-203-3130, or email us at podcast at Hoa, insight.org, but today, program is on focusing help and safety in 2026 so ready to get started, Julie,

Julie Adamen  03:35

I am, let’s do it for the folks. That’s a little bit different, because I though I am the moderator of this event, because Kevin is the expert on cyber, on cyber risk, right? So I’m going to ask some basic questions, because this is something I don’t really know a lot about. So hopefully those of you who don’t know anything about cyber risks as it relates to your community association will also get some good information, like I’m hoping to. So Kevin, my question, are you ready?

Kevin Davis  04:01

I am ready. Looking forward to my favorite topic is cyber one thing that’s yeah, because it’s that one area now that I see what’s happening, and nobody really is their heads in the sand. Simple as that, I

Julie Adamen  04:14

think just a lot of people are unaware, or they just don’t think about it, especially in the context of Hoa, is because, honestly, even though your HOA is pretty much can be a ginormous corporation with millions of dollars in budgets, we just think of ourselves as small time. But I guess we’re not. So okay, let’s start here. I really wanted I’ve got these written down and wearing glasses people, so I can actually see what I’ve written here. So Kevin, let’s start where it’s basic when you talk about cyber risk for in terms of HOA community associations, what does that really mean? What does that mean to you when you start talking to people about cyber risk?

Kevin Davis  04:50

Sure, we all understand what cyber criminals, what they do. They are after two pieces of things. For Community Association, they after the money. Reserve account, operating account, all the money, but they also after your data. So when you talk about as community association being so small and so insignificant that we don’t think cyber criminals are looking for you, you’re the perfect target. Okay? So we start there. That’s where we start at, yeah. Well, okay, cyber criminals looking at that you right now, because you said the most magic thing I don’t know really much about cyber, is cyber and we’re small. That’s the problem. Right off the

Julie Adamen  05:27

bat we have do we definitely have that mindset, that’s for sure. So okay, now we know what their target because we definitely have money. I mean operating account, reserve accounts. I mean, some associations have reserve accounts in the multi millions of dollars. So I can see that would be a big target. And of course, those of us who manage or are on boards, that’s just not front of mind. You know, it’s not top of mind, I guess is how I want to say that. So, okay, so how big of an issue has this become? Let’s say from five or six years ago? What percentage of increase would you think we’ve had in cyber crime, or at least attempted

Kevin Davis  06:03

cyber crime? All right, when we talk about cyber crime for Community Association, went from zero, non existent, five, six years ago to the day is quite normal. Let me give you a perfect example. What we see in cyber crime that impacts everybody. All right, you are a professional manager, right? You have clients, right? Yep. All right, what I do as a cyber criminal, I will hack into your system. Okay, I just sent you an email pretending to be Kevin Davis, okay, so I hacked into your system. Allison, I get all a list of all your clients. And guess what I do with that list of clients? Sell. I send, I send them, all your clients, a invoice saying the amount that is due has been you’re 60 days late, 30 days late, but if you pay it now, we’ll give you a 10% discount.

Julie Adamen  06:55

It’s fishing. I mean, what they’re doing is the fishing.

Kevin Davis  06:57

Yeah, here’s the key, though, here’s my new bank and routing number? Yeah, that’s the key. That is the key. How many managers, how many board members? How many landscapers, how many roofers get tricked into doing that? One thing,

Julie Adamen  07:11

it has to be 1000s. Because, I mean, even just owning a business, obviously, I own my own business. I’ve sit in front of a computer most of the day. I get stuff like that all the time. And I think what I would tell anyone in the management side and the board side both is that if it doesn’t look right, don’t click on it. I mean, don’t just assume that it’s safe. Don’t call the company or send them a separate email, going, did you guys send this out? That’s what I do when I get those weird phishing things and I know that they’re they say they’re from someone who’s maybe a client of mine, a management company or something, and I will just take that and forward it to the people I know at the company, and go, This is what’s going on. They’re like, Oh, thanks let me for letting me know. And they send out a blanket email to their clients, saying, This was not us. It’s huge.

Kevin Davis  07:54

That’s the problem, see, but you’re smarter right there than most other it’s not matter being smart or it’s a matter of little sad taking that initiative. You go, Wait a minute. This doesn’t sound right now as a board, as a board member or a management company, guess what? Most times you guys are so busy that you don’t take that extra step as soon as you see this is my new bank and rally number. You go, Hoa. I can’t believe they changed. Now, how many times you ever change your bank and routing number in your life? Never, never, no. And we don’t usually change only

Julie Adamen  08:22

if you change your bank. I mean, right, there’s only if you change your bank.

Kevin Davis  08:25

Yeah, exactly. But we don’t do that that often, but when? But when you see an email that says, here’s my new banking rally number, then all of a sudden, you said it, right? You call that number. You say, Wait, call that number. You call the association, you call the match company called a landscaper, you call the roofers. There’s so many contracts that a board member and a magic company are dealing with that they get faked way too often. That right now is the number one problem that we see in community So, everywhere. Okay, Community Association, it’s everywhere I get them. But in Community Association, record board members rely on their management company, and management company is relying on that board because, again, management companies are so busy that that fake board member, Kevin Davis, the board member of Happy Valley, all of a sudden, says, I’ve been waiting a long time for the new pool furniture you haven’t submitted yet, or the new light bulbs that you should have said long time ago, well, here’s the box, here’s the light bulb, so here’s the money you can pay for it. Then all of a sudden, what happens is, the board never, never gets it, the money that was due the landscaper. Or you’d imagine you don’t get it. And now, a sudden lawsuits happen. You start putting these liens on a property, and it creates a huge, huge problem

Julie Adamen  09:39

for Association, yes, and you’re seeing it. Would you say you see a new case? Weekly, monthly, daily. What do you see?

Kevin Davis  09:46

They are happening more and more, where it went from zero. So now they come and pass my desk a lot more, to the point where it’s like all we can say is, everybody out there, if you have a doubt it. It’s think it’s going to be fraudulent. It is fraudulent because, from an insurance point of view, it’s so new, most insurance carriers do not provide coverage for it’s called social engineering.

Julie Adamen  10:12

Now, that’s what I was going to ask you about. Now, is there coverage for this? Yeah.

Kevin Davis  10:17

Okay, so social engineering. Is that the tight a topic. That’s what we’re talking about. And social engineering is when you voluntarily give money away. Okay, so we talk about insurance when you voluntarily give money away. Guess what you just did? You volunta voluntarily gave money away? Yeah, exactly. So that’s not a claim under insurance policy, because you voluntarily gave it away. So if you were you were tricked into it, as opposed to clicking on something, and you downloaded something and now the money is gone. You don’t have knowledge of that, but you actually got tricked into it. Insurance doesn’t cover being tricked. You know, it doesn’t cover scams. So what has happened with the past year or so? Some insurance provider says We understand you have nonprofit board members that are unaware, so we have to provide that coverage. So the number one lesson right now is to see if you have social engineering and insurance under your policy.

Julie Adamen  11:14

That’s very interesting. So that’s a brand new thing. That’s fascinating. At first, I would have thought, well, of course, there’s going to be coverage for that. But the point is that you’re voluntarily giving it away, but now that they’re willing to well, and how is the cost? Is it relatively nominal, or it is?

Kevin Davis  11:30

This is the part that you shouldn’t be able to get it. But this is the problem. Most insurance providers don’t understand social engineering, so you have to have to have a specialty policy to get it. If you have a specialty policy, it may be cost $100 add it to your insurance coverage.

Julie Adamen  11:48

Oh, that’s quite reasonable. My goodness, if you’re gonna get that, you should get that. But it’s just like so for my business and for personally, we have an organization called LifeLock. So if your if your identity is stolen. They will, you know, they give you X amount of dollars of time to fix it for you. Is it something like that? Do they fix it?

Kevin Davis  12:08

Yes, that’s a perfect example. LifeLock is for you, okay? Insurance is for the company itself, okay? So if the company suffers one of those types of losses where all of a sudden, your reserve account is gone because, you know, somebody said, okay, the roofing contract is done. You owe $60,000 for roofer. Roofer sends in a invoice with a new bank and routing number. Now $60,000 is missing. Yeah, now at LifeLock, all it’s going to do is watch you to make sure and protect you, to make sure that nobody steals your identity, right? We’re talking about a loss of money, okay, actual loss of money. Now to go to the other side for data breaches. So we’re talking about two things here. We’re talking about the loss of funds, which is social engineering, but LifeLock, like really talked about loss of data. So now all of a sudden, you know me as a cyber criminal. Not only I have access to all your money because I tricked you into giving me all your information, looking at every individual board member, but also looking at every unit owner you have there, and I want to hack them too so I get I can create an identity for them. And all

Julie Adamen  13:20

of a sudden, you’ve become a Nigerian prince who wants to give me money, right? Oh, yes,

Kevin Davis  13:25

exactly, yes. But it’s interesting, though, because, again, it’s easy to influence somebody if I pretend to be somebody, you know. So if I’ve said, Listen, this is Kevin Davis. We’ve known each other for a really long time, there’s a Nigerian prince that I am well aware of right now. And so you get to be so busy. Sometimes you guys say, Listen, I give you a perfect example. What happened to me when I first started about two or three years ago? Okay, I started talking about social engineering. So I went to Hawaii to do a presentation for the Hawaii Cai chapter. And so I put it in LinkedIn that I’m going to y talk about cyber by the time I got there, my CFO said, how many gift cards do you want? I said, How many gift cards? I never ordered any gift cards. I said, No, I got an email from you saying that you were now in the y and you need 10 to 15 gift cards. You can get up and you have a new, guess what? They have a new address for you to send it to.

Julie Adamen  14:20

Yes, yes, that’s, that’s, that’s quite the scam. Or they Oh, or now, let me talk about this, because this will dovetail perfectly into this. How are they utilizing AI for fake voices on the phone? Yes, yes. This is something people really need to be aware of. Talk to talk about that a little bit. Kev, alright,

Kevin Davis  14:41

this is the interesting thing right now. Is easy to this, to hack your system and get your and get your data and say, you know, i Julie Adam, and please pay now, okay, to avoid late fees, you send it out without any picture or anything. But now in AI, right now, I have your picture in front. Could you imagine? Pleading words in there and say Hi, happy happy acres. Community Association, Julie here. And guess what? If you pay today, because we’re trying to really evolve and get bigger, you pay today, I’m gonna offer you a 10% discount just by paying right now. Because guess what, this is a hot this is a great time. You got Valentine’s Day coming on, and we’re looking for right now to help help you Community Association. And now is your face and your voice. And your voice is a huge problem,

Julie Adamen  15:28

and let me tell folks out there. So I have a in my business here. I have a series of online classes for managers and board members, actually. So I have two separate sets, but the managers one, I have just redone them all modernize the way they look, and that type of thing. And I used an AI avatar. It’s easy stuff. It’s not even very expensive. And you I, you know, you go onto a website, you pay them, obviously, for the use of their services and including the avatars. And if you didn’t know, in fact, I sent it and showed it to Robert Nordlund, our other illustrious co host, because I use my son as the avatar. I just use his his picture, and it’s, it’s, sounds just like him totally. And he’s like, Oh, is that Spencer? I’m like, No, and you’re Robert’s pretty savvy about this, and it was fast because obviously I know, because I work with it all the time, and I couldn’t use my kids, so I know all the nuances. But if you didn’t necessarily know, you would not know. And it to me, it’s, I say it’s wondrous, but it’s a little frightening too.

Kevin Davis  16:25

And from insurance point of view, we have no idea what’s covered is not covered because, in other words, in order for it to be a loss under an insurance policy, it has to be fortuitous, you know, accident. Okay, can’t be you have to be unaware of it. But these things you are aware when you give money away, there’s awareness factor there. So where did the insurance company says it’s covered and where it’s not? We’re learning every day AI is going to create all kinds of headaches for us in our future, because it goes back to breach of fiduciary duty. As board members, you have to act in the best interest of the association. So now you’re not a a technology specialist, you know you’re not a CIO. You know you’re not you don’t have a contract. You enter all these contracts, but not one of mentions what happens in the event of a cyber loss. So there are things there now that as boards, as magic companies, you got to think about in terms of what happens if there is a cyber loss.

Julie Adamen  17:26

You know what? Kevin, I bet we need to go to commercial break for a minute for our sponsors, because we’re about 18 minutes in. Think we should Okay, sounds good? Okay, all right, everyone. We’ll see you shortly.

Paige Daniels  17:37

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

Kevin Davis  18:09

and we’re back. Joy. Ah, that was, that was fascinating conversation. So what’s next? What do you got next for me?

Julie Adamen  18:16

Well, here’s one question. This is what I was thinking about right before we went to break was that okay? I’m a management company owner. Let’s say I own a management company, and it could be a big one, mid size. Doesn’t really matter, but the breach was through one of my staff members, and then Association money got pilfered. Have you seen that? And how does does? Can management companies get coverage for that? Or what? Oh, sure.

Kevin Davis  18:40

Okay, so this would happen in management company. We’ve seen this several occasion. Somebody goes to a management company office. They pretend to be the UPS, person, the janitor, or somebody from the home office. They go to the server room. Once they get inside server room, either a pick the entire server try to put a thumb drive in it and to get all the information out, or they forgot some way getting that data. Now, once they had that data, it’s like, now, all of a sudden you want to go to the bank, Julie, and you want to walk into a bank and either deposit some money for the association, remove money for the association. Well, guess what happened once I had that data and information? It’s like me walk into the bank and say, Guess what? I’m Julie Adam, and I want, I want the reserve account of happy acres right now. Okay, I have all the documentation you need, and please give it to him, and they will give me a check right there on the spot.

Julie Adamen  19:32

Wow. So now, do you think it would be prudent? I guess it would be for when, if a board is, they’ve got, you know, they’re going out to bid for a new management company. Let’s just say they’re doing that, or they’re getting bids, plus they’re getting one from their current company. Is it prudent for them to ask if the management company has this type of coverage?

Kevin Davis  19:50

Two things, number one, not only ask, but say, what happens in the event of a loss? What happens? What participation are you going to do for us? Because as a board. Remember, we don’t have cyber we don’t understand it, but we need some. We I would assurances from you, because it’s not gonna be in the contract at all. There’s nothing in the contract. But we want assurances. So we want to hear from the magic company. Yes, we have coverage. Okay, if there’s, if there is a cyber event, and we will, we will help you. If there

Julie Adamen  20:21

is a cyber event. Well, it’s me, that’s very interesting. So do you see a reason why it shouldn’t be in the contract? I’m not trying to make work for people. I’m just asking, this is

Kevin Davis  20:31

it definitely should be in the contract? Because this is what. This is what. Let me give you example of a a cyber breach, data breach that’s going to that has happened in the path for Community Association. So Julie, you are not you’re the president. I’m the treasurer of the Community Association. We go to the board meeting, right? And we’re sitting, and I said, Julie, so what’s going on say? Wow. Weird thing happened. I got a letter from the IRS. They said that somebody sent my return in already. I can’t believe it, and it’s 2026 and I’ve got all my information. I can’t even turn it in all turn to that already, and I go, You know what I got to tell you? I got this same letter from the IRS. I can’t believe that happened. And then all of a sudden, another Robert Norlin comes in and said, same thing happened to me. Then we realized, Oh, our association has been hacked. Now. We call it the property management company, and the property managed company will say we we we don’t understand, we don’t know anything about it, or we do know about it, and we have no coverage. So good luck. You know, I mean, a lot of different things can happen at scenario, but we know right now that association has been hacked because three or four of us got leverage from the IRS saying our information has been stolen. So now, so we know Association’s been hacked, so we go to the managed company and say, this has happened. The managed company will look and see that it only impacted your association. So it might be a 12 year old inside an apartment, year number two, right? Or somebody to sign an apartment number two, it’s not us. Or they can say, yes, you’re not the only Association has been hacked. So what you need to do is, we’re working on it to find out how to handle it. In the meantime, by law, there’s certain things you have to do community association. That means you have to have notifications. You have certain things you got to do you have to do by law. So now you have to be prepared for that and that association come back, the management can also say no coverage at all. I mean, we don’t know, we don’t help you. So my point here is this, the association has to have their own cyber policy, and a management company has their own cyber policy, kind of like workers comp. It’s a good idea. And even better, it’s like for the crime insurance. Remember, historically, we talked about crime insurance, where the managed company needs their crime policy, the association need a crime policy that way you don’t have that problem anymore. You if you are hacked and you don’t know whose fault it is, you have your own coverage.

Julie Adamen  22:52

You have your own and so this is two boards. I would completely recommend that you make sure your company has this type of insurance, and you need to have it as well. It’s a relatively nominal cost for both parties, is what it seems to me. And it’s just like way, you know, way, way back in the old days, Kevin, when we were in our 20s and we started in this industry, it was the 80s. It was wild, but, but remember when workers comp, like associations, were like, Well, why do we need to have it? We don’t have employees just in case it’s a belt and suspenders thing. It was just in case somebody’s on your property and all of us their insurance had lapped they get hurt, or if you have board members that are out doing things they shouldn’t be doing, you know, like screwing in light bulbs or doing minor maintenance and somebody gets hurt, you absolutely need this coverage, especially in states that are far more litigious than others, California being one. I mean, you could go to Illinois or New York or that type of thing, but still, it’s just belt and suspenders for everyone. And by the way, for you, management company people out there, you should absolutely have this type of coverage. Wouldn’t you think Kev

Kevin Davis  23:56

exactly because they’re the ones that have the most exposure, yeah, because they overworked. They don’t have it a specialist. They don’t have a chief operating officer of technology, a technology officer, and they are so busy, and there are so many they jumping so many different balls, it’s so easy to influence them. And that’s all what cyber is doing today is saying, guess what? I can help you. I can help you save money. I can help you to get your job done better, save time. Just click right here, right now, and we’ve done it.

Julie Adamen  24:30

No bueno people, no bueno Yeah, wow.

Kevin Davis  24:35

And that’s, that’s the problem? Oh, there’s another area too, in cyber that I got to make sure we mentioned and talk about is something new is going on, is that there are people going into condominium association in their mailboxes and breaking those locks out and stealing checks out of there. And because the technology is easy to whitewash the checks and to issue new add to cashless checks, and because we don’t do monthly reconciliation. Anymore, most of us don’t. We get we forget all about those checks until, once again, somebody calls up and says, I haven’t been paid. So it’s really right now, technology is moving faster than we ever could imagine, and it’s creating a huge problem for all,

Julie Adamen  25:13

and it’s not going to get slower. That is not going to slow down. So I think the maybe some of the best advice you or I could give any of them is that, you know, rely on your expert, your board, call your insurance agent or your broker and find out if you have this coverage and get it if you don’t have it, rely on your experts.

Kevin Davis  25:32

Not only rely on experts. Don’t lie on chat. GPT, because a lot of people will go to chat, G, P, T, says, Listen, do I really need social engineering coverage. If I live in a community association, they may say, No, social engineering is designed multinational corporations and blah, blah, blah, and then you’ll come back to me later on, say, Kevin, you try to sell me social engineering and court, according to chat GBT, not necessarily at this point in time. Yeah, that’s the future problem that we have to worry about also.

Julie Adamen  26:01

This is very true, and this goes for anybody who’s in and around the industry, whether it’s your service provider, you know, a consultant, a management company, manager, anybody and board members, everyone should be aware of this. I mean, I use chat, GPT, I use several of the AIS to assist with what I’m doing, whether it’s something I’m volunteering for, I volunteer with couple of organizations, as well as my own business, and I utilize those tools. They are tools. Tools are not perfection. You. They are not going to take the place of your expert or even your own eyeballs. So if you have something written up, make sure and go over it, because I have found glaring errors, absolute, glaring errors, but it can be quite a time saver, but it is not a guru, it’s not a doctor, nor does it play one on TV.

Kevin Davis  26:47

No, if it did, at least it makes me feel more comfortable, right?

Julie Adamen  26:51

But it did stay at a Holiday Inn Express last night. Okay? It sure does. Oh, my so I had a couple other questions here. Let me drill down on one thing. Okay, what mistakes do you see? Kevin, associations repeating over and over with regard to this,

Kevin Davis  27:08

not making that phone call, as simple as that, just getting that information in, assuming is correct, and paying out the money, or whatever it is they’re doing. Or that’s number one. The second mistake is we make mistakes. We do. You know, technology is there to make us more efficient and make us work quicker, but what happens when we push that button? Is the wrong button. Now suddenly I’m sending out data to everybody, and not data set one person. So, and that’s the kind of things that really we have to be careful of, is that we take it, take a step back and go, Okay, wait a minute. I have data that’s personal, identifiable information that I need to send to the board, not sent to everybody. And if we said to everybody, that’s where your life lock comes into play, yeah, send a LifeLock to everybody you know, whose name appeared in there. So now you have that information.

Julie Adamen  27:58

I mean, and if you’re a, if you’re a big organization, a large association with a couple of 1000 or 567, 1000 units, that can be, I mean, that can be a nightmare to fix and for boards. I mean, Kevin, are you at the point and or you maybe, and the Legal Eagles out there? Are you at the point where you think, if someone does not have this social engineering insurance or to insurance against cyber attacks, that they are breaching their fiduciary duty as board members.

Kevin Davis  28:28

That’s the key, because that’s what happens now, all of a sudden, you get we have we found you, and I found out the IRS has our information. Now we are board members, so we have to do something about it. Let’s say that we go, Well, we went to the manager, and the manager get back to us now. We go back throughout the day. Now, what happened was unit number 10 and 11 and 12 and 18 and 35 and 45 flying out that they’ve been hacked also. We had a meeting. We knew about it, but we chose to do nothing about it. Yeah, you’ve reached your duty, right?

Julie Adamen  28:56

Absolutely, that’s what I would say, too. So you know, it’s, I hate to tell you, board members. I’ve been in your position numerous times, as well as a board member, as well as a HOA consultant and that type of thing. But you have one more thing to think about. But you don’t have to think that hard, because all you got to do is pick up the phone, call your insurance agent and say, Hey, why don’t you come give us a presentation at the next board meeting about cyber you know, cyber risk again, use your experts. They’re happy to help you.

Kevin Davis  29:22

Go to your any insurance professional say I’m concerned about my cyber exposure. If we have a cyber loss tomorrow, I have no idea what to do. No idea. You know, if I’m in a board meeting and my money is gone because I was tricked into it, or I clicked on the wrong thing, or all my data, my personal identifiable information, is out to all the unit owners. What do I do now? And you call your insurance person and says, Guess what? I have a cyber policy that will protect you in those situations.

Julie Adamen  29:53

That’s great. Well, Kevin, I don’t know, should we go out? It’s we’re at 32 minutes. Are we there? You know what?

Kevin Davis  29:59

I think that was a great club. Closing. I just gave a great closing.

Julie Adamen  30:02

That was it. Kevin’s work. Here is done. Microphone drop, right? Yeah, it was total Mic drop. Of course, we’d have to take the headsets off.

Kevin Davis  30:10

That would all right, all right. Listen, Julie, thanks a lot. This was fun. I enjoyed it

Julie Adamen  30:14

and highly informative. So for everybody out there, if anyone has any questions, you could email them into podcast at Hoa insights.com

Kevin Davis  30:21

I look forward to it, and I guess next time we’re going to have another one of our trends coming up for night for 2026. I think we say 19 something. Wow. It’s been 20. They’ve been 26 years. We’ve been in 20 too much for me,

Julie Adamen  30:38

getting old as hell. Yes.

Kevin Davis  30:41

Listen, thanks a lot. Thanks a lot everybody. And we look forward to seeing you guys in the future. Take care.

Announcer  30:50

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