Rent Real EstateAsk the HOA Expert
Question: We have recurring problems with insurance claims. Our management company advises that if a unit owner has damage inside their condo (toilet overflow, fire, etc.), the claim should be submitted to the association’s insurance carrier which will determine whether the claim should be paid by the association or the homeowner insurance. This doesn’t sound right to me.
Answer: You are correct to be concerned. Homeowner association insurance is designed to be very broad and cover many kinds of claims including damage to unit interiors. It is up to HOA policy to restrict the kinds of claims that can be submitted. This is necessary to safeguard the HOA’s insurability. Excessive claims cause premiums to rise or the policy to be cancelled.
To solve this, the Board should adopt an "Insurance & Maintenance Areas of Responsibilities Policy" (sample available at www.Regenesis.net) which separate responsibilities either by "association" or "owner". Another policy should be adopted to require all owners to carry condominium insurance insuring their unit and personal property. Once these policies are in place, each owner will know what kind of claims may be made to the association"s insurance and should advise their agents accordingly.
All insurance claims made against the association’s insurance should be approved by the Board before submission and the HOA"s insurance agent should be put on notice not to accept one unless it has that authorization. This will help control the number and types of claims. There are cases when the damage is so small that the association should just pay for it rather than submit a claim. Insurance companies track the number of claims closely, even if no money is paid out. Claims cost money to process and above average number of claims indicate higher risk. Getting put in a higher risk category is never to the HOA’s benefit.
Question: We have HOA members who want copies of Board Meeting minutes prior to approval at the next meeting. It makes me nervous to have info released that isn"t official or is possibly not accurate.
Answer: The problem with waiting until after the next meeting to circulate approved minutes is that some or all of the action items in the previous meeting"s minutes may have already taken place. It is a good practice to post the minutes (clearly marked "DRAFT subject to revision and approval by the Board") so that the members have an inkling of what happened. Same goes for the annual meeting minutes.
Question: Our current by-laws state a board member can be removed for “just cause”. What is considered as just cause? Also, what constitutes a “member in good standing”?
Answer: If not clarified in the governing documents, I recommend the Board adopt a policy. Here are a few situations that could lead there:
Guilt of any criminal action involving the HOA.
Guilty of a crime that impacts the HOA business, like a Treasurer who is convicted of tax fraud.
Guilty of conflict of interest (depending on blatancy).
Undermining board actions with the membership.
Failing to attend meetings.
Carrying out a hidden agenda.
Disruptive demeanor at meetings.
A member in good standing is one whose balance with the HOA is current or, at least, not delinquent for a long time or in a significant amount. You could also include "not in violation of rules, regulations or architectural restrictions" although the severity of the violation needs to be factored in.
Question: The committees in our HOA are appointed by the Board. Could you provide some information on how they interact with our Property Manager?
Answer: Interaction varies according to committee. Committees are authorized to do what the Board decides they should do. A Newsletter Committee, for example, should normally work directly with the Property Manager to produce the newsletter. A draft should be presented to the Board for approval and the Property Manager sees that it"s printed and distributed. The Budget Committee presents a draft budget to the Board for approval. The Landscape Committee typically oversees the landscape contractor and the Pool Committee oversees the pool contractor. As long as everything is going according to plan, the committee can function on its own. If there is a problem, the committee should pass the information on to the Property Manager, the Board or both, depending on the severity.
Committees don"t make policy. They carry out administrative functions approved by the Board and assist the Property Manager is refining their area of focus. In other words, since the HOA can"t afford to have the manager do daily inspection, a vigilant committee of volunteers can assist in more regular oversight and advise the manager when action is needed as in the case of the landscape contractor.
The Board should be sure each committee has a clear job description with limits of authority defined. The Property Manager should understand that committees are advisory only. If there is an issue that needs approval, the Manager should take it to the Board or Board President.
For more on this topic, see www.Regenesis.net