The following is a transcription from the Condo Coaches Radio Show, Episode 1
FEATURED TOPICS: Condo Coaches Mission, The Role of the Board, Board Composition, Board Qualifications, Condo Coaches Assessment, Communication, Transparency, Governing Documents, Budgeting, Reserves, Past Due Association Fees
CONDO HEAD COACH: Dean Akers
CONDO COACH: Chad Sweeting
HOST: Jonny Torres
Host: Hello everyone, and welcome to The Condo Coaches. It’s our very first show so we’re going to have a lot to talk about here on our very first episode. To give you a quick introduction on what The Condo Coaches is about, this is a brand-new radio show. We are a team of educational, informational experts when it comes to board members and residents who live under a condominium or homeowner’s association. Our mission here today is to help you and these associations run effectively, efficiently and on budget. I’ll be the host of your show. My name is Johnny Torres, and the stars of our show, here for our inaugural episode we have Dean Akers, who’s our condo head coach. Hey Dean.
Dean: Hey Jonathan, how are you today?
Host: Doing excellent, thanks for being on the show. And one of our condo coaches, Chad Sweeting.
Chad: Good morning, pleasure to be here.
Host: Hey Chad, thanks for coming. Let’s jump right into it. This is our first show. We want to give people an idea of what to expect, what this show is about, how it’s going to help them in creating a better overall environment for the condo or the home they live in. Dean, what is The Condo Coaches about?
Dean: Jonathan, we decided to have a program with your help, and everybody else’s help, where we could reach out to all the condominium owners across the state of Florida at this time. There are about nine million people living in the condos and homeowner’s associations in the state of Florida, which is 45 percent of the population. We felt a real need here.
Host: The Condo Coaches, as we’ve talked before, as we were getting ready to do this show, it’s not limited to your team members, right? There are people out there in the community who want to be condo coaches. Tell us a little bit about that.
Dean: Part of the foundation is we reach out to experts that the condominiums and homeowners associations need information from. We have them come on our show and they’re going to be here to answer questions about specific items, not about their companies, not about what they do, but about helping condominiums and homeowners associations.
Host: Of course there’s so much to running a community, running a condominium. Give us an idea of some of the experts that people can expect on this show in all the episodes going forward.
Dean: Some of the experts we’re going to have, reserve study experts, accounting experts, law experts. Then probably communication experts. People that can really help them build more value out of their associations.
Host: We also talked about possibly having some local elected officials on the show, because of course the things that they legislate affect condominium and homeowner’s associations and even property management companies, which is something that just about all of them deal with as well, is that right?
Dean: That’s correct. I’ve talked to a number of the politicians across the state about this. With a voting block of almost nine million voters they definitely want to be a coach.
Host: They also look for any and every way they can serve their constituency, so it’s only going to benefit them to be on this show with us. We’re going to be fortunate to have them on our show along with all the other experts that we have in our network of condo coaches. Chad, give us a quick idea of your expertise here in being one of our condo coaches. What’s the area that you focus on?
Chad: The past three or four years I’ve focused primarily on condominium and homeowner’s association law. I would say I focus mostly on collection of delinquent assessment.
Host: It’s obviously not a topic that a lot of people enjoy talking about.
Host: But it’s a necessary evil. It’s something that happens frequently for any variety of reasons and of course depending on your governing documents I’m sure that we’re going to get into exactly how to handle those situations, am I right?
Host: Let’s get into, again, the people that we’re trying to reach, the people that we’re trying to help here, the board of directors of a condominium of homeowner’s association. Give us an overview, what is the role of the board?
Dean: The board is, I call it the commissioners of a municipality. They are elected by the constituency, which is the homeowners. They’re the governing entity for the association, just like your county commissioners or city commissioners or legislators would be in any other government. It’s more like the city model.
Host: In terms of the decisions they make, how is a board typically comprised? Of course there are lots of angles, there’s lots of variety in terms of the things that they need to manage. What is the typical composition of a board?
Dean: A board needs to have a minimum of three members, which are the secretary, treasurer and president. You can have unlimited membership above that. We’ve seen boards as much as 20 members, which is… That’s trying to herd cats. I spoke to a board about six, eight months that had 20 members on it and it was a lot of decision making that was hard to do. Most boards have three to seven members and again, they’re like a local government.
Host: When someone gets on one of these boards it can be anybody because it’s made up of the residents of that condominium or community.
Dean: Right. You need to be a resident, you need to be current with all your dues, payments and all your assessments, but it can be anybody. There’s not a qualification requirement, which is a good thing and a bad thing.
Host: I’m sure one of the things that we’re going to see time and time again are people who maybe volunteer for certain roles that they’re not necessarily qualified for and that’s okay, but that’s why we’re here, because we want to make sure that those folks know not only the role that they play but also that they develop the experience that they need to help their associations run effectively.
Dean: Yes Jonathan, like I told you, I’ve been in the business about 10 months. I’ve had previous companies and when I went around and met with boards, and I’ve met with a lot of boards across the state, I found this huge diversity of information. That’s one of the precedents or one of the reasons we started Condo Coaches, was to be able to take out teachings to every level.
Host: When somebody calls and they say, “You know what, my association’s a bit of a mess right now. We’ve got more fires than we can put out,” what is it that The Condo Coaches comes in and does?
Dean: First we’ll come in independent, at no cost, and do a four-page assessment which will ask them questions on communication. It’ll ask questions about their property management company, what they feel. It’ll ask questions on their finances, various things that help gives us a framework, much like a doctor would do before you go in and have surgery or something. Out of that we’ll give them outlines that they can use with whatever vendor they want.
Host: Obviously that gives them a plan of action, right?
Host: That gives them a roadmap of where they need to go to get back on the same page. To open up the conversation, get started on some of the topics we’re going to cover, what is the number one issue you see across the board consistently when dealing with these associations?
Dean: The number one issue I see is communications. That bodes both ways, with board members to their constituency and to the members of the community back to the board members.
Host: You were telling me, because we have so many ways to communicate nowadays. I’m connected. My phone’s always no more than a foot or two away from me. There’s phone, email, social media, texting. I’m sure there’s stuff out there that we don’t even know about, and of course standard mail. How do you feel are some of the best ways to approach starting to tackle that communication hurdle in a community?
Dean: When we come in and do an assessment one of the things we’re going to do is ask, A, how you do it now. We will set up a survey. We do a free survey to all your residents of the best ways they want to be communicated. They’ll send back that data and that’s how we’re going to know the best plans of action for your association.
Host: You’ve done these plenty of times. Is there one that you feel is the one that maybe somebody out there listening can start right away that’s going to be effective for them?
Dean: One is continual communication, not just doing it when there’s a problem. Probably the best method that we’ve seen universally is email blasts, like newsletters that have information in there, and updates of rules and regulations.
Host: This can be fun, right? They can have some fun, they can build in some community events, they can build in yard sale information and maybe things that people in the community, is that right?
Dean: Yes. One of the ones we helped an association up in Orlando do, we got the local merchants— This was really cool, we got the local merchants in the area to give coupons in the newsletter for extra savings for dinners, two for ones and stuff like that. It’s all about asking and representing your community.
Host: We were laying down the groundwork of the role of the board, communication really being the first and foremost problem that we see most often in these association. How important is, obviously you’ve already said communication, but also transparency in the entire process?
Dean: My experience is transparency is job one. Everything that they do is transparent. Everything is public knowledge for them, but not to share it with the members or not to be open about it or tell them it’s none of their business never accomplishes anything.
Host: Like you said, a lot of times that’s at the root of these communications problems because they’re not talking about the things that are happening in these meetings, the decisions that are being made. What are some of the challenges you see in terms of communication out there between the associations and the residents?
Dean: One of the biggest things, it’s true in business too, is you let your buttons get pushed. When you’re in a role of an executive of a company or a head of a board of this nature you can’t let somebody’s name calling get you upset. You can’t believe, Jonathan, the board meetings you’ll go to and somebody will say, “You’re a crook,” and then it goes to pieces. The person’s obviously not a crook and the person doesn’t even imply that they’re a legal crook, but they say some smart remark like that and then the whole communication deal falls apart.
Host: Don’t take it personally. Keep your personal emotions out of it.
Dean: Right. You have a responsibility as an executive or a board member of your association. By the way, some of these are major businesses. Some of them have budgets of $5 and $6 and $7 million. They’re real businesses and they’re non-compensated real businesses, so they really should be appreciative of the people that are on the board.
Host: That’s the one thing that a lot of people forget, is that these people are not only their neighbors but they’re volunteers.
Chad: That’s correct.
Host: Chad, in some of the clients that you’ve worked with, some of these associations, do you see transparency being a problem or as Dean said does it usually come down to a lack of communication?
Chad: Yes, transparency can be an issue. You touched on something really important there in these board members who are volunteers. They were elected by their peers. Sometimes they may feel that they are not being appreciated because they’re not being compensated. Their sole purpose in being a board member is the improvement of the community, to keep the property values up, the curbside appeal. They may be more likely to take something like, “You’re a crook” more personally when they’re not being compensated. To answer your question about transparency, it depends on the temperament of the board member. Most of the time most of my clients are very even keeled, happy to take any questions. Again, it’s something you touched on earlier as well, the property management company. They also take a lot of the burden off the board members, so they’re a valuable resource as well.
Host: We’ve seen varying degrees. We see varying degrees, and I’m speaking as a homeowner, you guys are the experts, that people volunteer and get on these boards for different reasons. Some people want to be the most laid back, reasonable person in the room and the you have other people who want to be very strict. They want the community to be top notch at all times. They want everybody to fall in line. How do you find that balance between the people who want a utopia out of their community and then the people who see it in a more reasonable light and that dynamic? How do you best manage that?
Dean: That’s another reason for this show. If you’re a homeowner and you see your board is that strict, call The Condo Coaches. We can come in and give communication training. We can do some of the things you’re talking about as far as teaching people how to communicate. That’s, again, a big premise for us, is to get in there and make this cohesion go. Chad’s spot on about how the board members, the appreciation. They’re not compensated so they feel like, “Why me? Why are you up in my face when I do this for free for you?” It’s a huge thing.
Host: Like you said, the amount of money that some of these associations manage is equivalent to maybe even a medium sized business, much less a small business. Some of these people have the experience to do that, some of them don’t. Also, the amount of time and effort that it takes in managing this small or medium sized business essentially that is your condominium or your homeowner’s association. For someone out there that may be thinking about getting involved on a board, may be thinking about running for a board position, what would you tell them? What’s the one thing they need to know before jumping in the deep end and running for a board position?
Dean: They need to have temperament and have this transparency. Then they need to call on one of their professionals, whether it’s their property management firm, their local attorney or their association attorney, or in our case The Condo Coaches to come in and give them some framework on what they need to do and what’s expected of them. Any one of those entities can help them if they’ll listen.
Chad: I would agree with that too if I can add on something. You need to surround yourself with competent, intelligent people that can help you out. The board members don’t need to do it alone. You can hire people, property management companies, attorneys, accountants, all kinds of people who can help you through those tough times and give you advice and it’s important to take that advice when it’s given.
Host: On that note, speaking of advice and free advice, we can have The Condo Coaches come out to the community. We can tell you, “This is a pretty big community. There’s a lot to manage here. Why don’t you bring in a company to help you manage some of this, or maybe bring in an expert to help you manage some of this.” If you want them to come out and do an assessment of your community or your board of directors, you can go to TheCondoCoaches.com. You can also call us, that’s also a very easy way to get ahold of us, (813) 331-5415. Or you can email us, that’s easy too, help@TheCondoCoaches.com.
We talked about wanting to get into governing documents. This is that big stack of papers that you fill out when you buy your home or your condo that talks about everything that the board of directors and that association is responsible for. How important is it for a homeowner to be familiar with those documents or read them in depth?
Dean: It’s very important, but I think it’s also very important to read them. One of the things we find out about communications is we’ll have an angry member of the community about something that was clearly in the document and they never read it.
Host: When you often hear, “Who’s responsible for fixing the lampposts? Who’s responsible for making sure that the garbage people are coming when they’re supposed to?” Or, “Maybe we want to get a pool in our community.” A lot of those things are typically addressed up front in these documents, is that right?
Dean: Right. The other thing is really looking at these budgets and looking at their reserves and their cash reserves. Those are big things if you’re purchasing a unit.
Host: Typically, when you’ve purchased a home, if you’re buying brand new you are getting into a situation where there’s this transition period between the builder who’s still in the picture and then you have the homeowner who already lives there and there may be some mix of the builder being on the board and residents being on the board. Give us a little bit of an idea of how that works in terms of the governing documents and what that transition process might be like.
Dean: You want to talk to your association attorney about that. They have turnover periods that the builders are involved in. When they hit certain thresholds, they have to turn it over to the board and then they have warranty periods after that. Those, by the way, are governed by the state of Florida statutes. That’s not a governing document deal, but you want to make sure that if it’s a turnover that you are actively involved in that turnover.
Host: Again, to avoid some of these problems that The Condo Coaches are going to come in to solve, but to maybe head off some of these problems what’s the one section of their HOA or COA documents that they absolutely need to get familiar with? What would you say?
Chad: The bylaws are great as far as what percentage of the voting membership needs to approve a big change. How many board members? That kind of thing. It depends on your governing documents but there’s always a section that has your no hanging clotheslines in the back, whether pets are allowed, what size pets. Those are more focused on the day to day activities of the typical homeowner than what you were talking about, the developer. A typical homeowner wouldn’t be concerned with that.
Host: The Condo Coaches radio show is a brand-new program that we’re going to be bringing you every week that’s going to help you whether you’re a homeowner or whether you’re sitting on a board of directors of your condo or homeowner’s association. We’re here to help you. Really, there’s nothing like this out there because a lot of people jump into their communities or condos, homeowner’s association and you’re thrown in the deep end. Problems come up, there’s a lot to manage as we’ve been talking in past segments. It’s almost like running a small business or even a medium sized business in some cases. We’re here to coach you through the process. We’re here to help you navigate those issues and help you run efficiently, effectively and on budget. Speaking of being on budget, let’s talk about that budget. Of course, there’s lots that goes into maintaining even the smallest community. You’re talking about landscaping, you’re talking about public areas, whether it’s a park or a pool or a community center. How is that budget determined? Where does that number come from?
Dean: I would say, Jonathan, that 90 percent of the budgets are based on historicals. If it’s not it would be a startup community, but they’re still historical. All the big items are put out for bid, like landscaping, pool maintenance and all that, but budgets year on year, you look at the numbers. They’ll be pretty consistent. If there’s something outstanding or something crazy it’ll be adjusted. The big item on budgets that people overlook are reserve parts of the budget. You know what reserves are.
Host: Being a first-time homeowner I barely knew what an HOA or a COA did or what they were responsible for. When we’re talking about a community’s budget what are the reserves?
Dean: The reserves are monies that they set aside, isolated, for big maintenance. Roofs, parking lot repairs, things that have a depreciable life, just like you would in any business.
Host: Things that need maintenance.
Dean: Not maintenance. Something that’s going to fall apart. You know when you buy a brand-new house it has a 20-year warranty on a roof. Ninety-nine point nine nine percent of the time you buy a brand-new house that roof is not going to have any issue for 20 years. If you live in it 10 years and you don’t save any money it doesn’t matter. You move out. The next person moves in, lives eight years, they move out. The person that moves in third moves in, they’re going to buy a roof. That roof’s going to be $20,000, $30,000 to that house. They live in it two years. The people prior had the benefit. A lot of times boards don’t put reserves in because they’re living there now. It’s a tough deal to say, “We really do need to make reserves for this,” because in south Florida there are $10 million reserve assessments happening now that were not reserved and you’re seeing people getting hit with hundreds of thousands of dollars of an assessment they have to pay now and they’re retired.
Host: Would you recommend a new board that’s in a brand-new community, would you recommend that they go ahead and start setting aside reserves?
Dean: The first thing they want to do is see if they have reserves. Then I would say every two to three years they should have a reserves study, which is a professional company. By the way, we’ll have a condo coach come on that is in that industry to share some ideas about it, but the reserve study is critical because that tells you what you have looming and it’s very real.
Host: Again, we’re talking about money. In some instances, a lot of money. You said millions of dollars in the case of some of these condominiums and some of these communities that we’re talking about. Chad, what happens when someone doesn’t pay their association fees? We recently went through a pretty nasty recession. We’re still slowly getting out of that. There have been a lot of instances where people were living in a community and obviously they’re trying to make ends meet. Somebody doesn’t pay their association fees, what happens next?
Chad: I want to touch on something you were talking about earlier with the reserves and a lot of these boards that didn’t put aside reserves in the past. It wasn’t by way of their being irresponsible. A lot of times it was because back when we had the recession hit us the first thing people stopped paying was their assessments. These reserves would get depleted. These associations were living paycheck to paycheck so to speak, monthly assessment to monthly assessment and they could barely pay the water bill. Now that we’re seeing the recovery of the economy somewhat it is a good time to build up those reserves. To answer your question, the association or the board has very, very broad powers and very powerful powers, for lack of a better term, to get these assessments back. I do have a story. We take for granted because we work in this industry, we deal with this day to day, we take for granted that everyone knows what an assessment is, who levies the assessment, that kind of thing. I had a unit owner who was not paying her assessments. She was representing herself. You say pro se, in the legal field. She was representing herself and we went to mediation. Believe it or not the associations do not want to take title. They don’t want to foreclose on these units. They want their assessments being paid monthly. We went to the bargaining table, the mediation, with this unit owner to see if we could come up with some kind of mutually beneficial agreement so she could start paying her assessments. This is the first time I had spoken to her in person. She came to the table saying that she didn’t understand why these assessments were not paid. She goes, “I told the bank. I gave the bank all the money.” She thought the assessments were part of the mortgage. That’s why she wasn’t paying. She wasn’t lying, that was honestly what she thought.
Host: It goes back to communication, which we’ve talked a lot about during this show. Again, maybe it’s a misunderstanding. It’s also something we haven’t really touched on this show, but it is incredibly important for homeowners to attend their board meetings. They’re all different. Some of them are monthly, quarterly, maybe biweekly. Not that you have to go to every single meeting but we would all be in agreement that they should be attending their board meetings when possible.
Chad: Absolutely. That would have educated her on the importance of paying your assessments. To go back to your original question, what would happen is you place a lien on the property much like a bank would place a lien on the property for not paying your mortgage. Again, she has no idea that the association could foreclose on her home, could take title to her home. When they don’t pay assessments, it depends on your governing documents, but state law is 18 percent interest, up to $25 late fee per month when you don’t pay the assessments. As you can imagine, that can build up very, very quickly. One, two years of unpaid assessments can balloon up to something unmanageable for the unit owner. Again, these associations, they want to have a payment plan. They want these unit owners to pay their monthly assessments, so often times we can come up with a payment plan. We can figure out some way to not foreclose on the home.
Host: They’re neighbors, right? At the end of the day these are your neighbors.
Host: Sure, they’re sitting on this board, it’s a volunteer board but at the end of the day nobody wants to kick somebody out of the neighborhood.
Chad: Ultimately that is the ultimate power they have, is to basically kick someone out of their home. They can take title of the home.
Dean: Can I make a point though that this is, again, the communications? The boards have a responsibility, just like the mayor of a city does. If you live next door to the mayor, Jonathan, or the county commissioners and you don’t pay your property taxes you can’t walk over to the county commissioner that’s your buddy and say, “Look, could you stretch me out for a year?” It isn’t going to happen. It’s similar.
Host: Having those lines of communication open, for instance with the example you gave, could’ve maybe avoided this to get as far as it did. They could’ve figured out something before it got down that legal path.
Chad: That’s correct, yes.
Host: When that burden falls on the homeowner, we’ll talk about this again in our last segment. We’re going to talk about what effect that has on the rest of the community, on the rest of the residents, because that’s also important for people out there to now.
We’ve got people all over the state that are ready to help you navigate all the hoops and hurdles and good times and bad times of being a part of a board of director and a condo or homeowner’s association. Dean, tell us a little bit more exactly about what it is The Condo Coaches wants to accomplish.
Dean: We want to put together a network. Not want to, we have put together a network of experts across the state of Florida, some that will come on the show, but if you ask for our assessment to come in and give you advice and help at no charge we have industry experts that’ll come in and look at different facets of your association you need help with and give you advice.
Host: They’re not just going to come and walk around your community. They’ll come to a board meeting, they’ll sit down with your board, they’ll see how you operate your meetings, they’ll see how you handle the different issues that you’re dealing with. Maybe they’re financial, maybe they’re organizational. We’ve talked a lot about communication today. Really, it’s all facets of being on the board of a condo or homeowner’s association.
Dean: We want to make this industry, or the boards and their constituencies, more cohesive to make this a great business to be in, which is condominium associations.
Host: Again, the majority are all volunteers and people come from all walks of life, some with and some without the experience that they need to serve on these boards. We want to make it a great experience. It’s a lot of responsibility. There’s a lot of pressure too, and of course it has its good times and its bad times and we want to help you navigate that. We were talking about what happens when a resident doesn’t pay their homeowners association fees or condo fees. What effect does that have, Chad, on the community at large?
Chad: Obviously, a lot of communities felt this back in the depths of the recession. When people don’t pay their assessments that’s the lifeblood of the association. The grass doesn’t get cut, the pool doesn’t get cleaned. All these numerous things we talked about that are in the budget don’t get done and ultimately it’s bad for the entire association because the property values fall. That would be what would happen if they don’t pay. I want to reiterate that that’s something that The Condo Coaches can do. Going back to what I said before, the ultimate thing that you can do is to take the property away if they don’t pay their assessments, and you can get a court order saying that. However, it doesn’t always benefit the association to do that. Of course, there are legal fees involved, there’s time involved. There are other avenues that can be taken to ultimately recover those delinquent assessments, one of those being mediation payment plans.
Host: It’s certainly something that we’re going to talk about pretty frequently on this program. You’ve also got to tackle the fact that the bank might have an issue there. The bank might be involved in terms of maybe they weren’t paying their mortgage either, and what role that plays in terms of how the association can or cannot collect, is that right?
Chad: Absolutely. That’s something we haven’t touched on yet, but the bank is a huge player in this game because most often the bank will also have a lien. They’ll have a mortgage, obviously, and maybe a lien on the property if they’re not paying their mortgage. That is another thing to take into account with the association. Do you want to take title to a property and then have the bank come two months later, because the bank is going to have priority over the association’s lien, and take title the property? In essence you didn’t really accomplish anything in that time period.
Host: I’m Joe Q. and Bobby S. next door wasn’t paying his association fees. Aside from the pool not getting cleaned, the fence not being painted, that sort of thing, what other side effects does that have on me as a resident in this community?
Dean: I can tell you a big one, is when your neighbor doesn’t pay you’re paying because the budget still has to be met. If the neighbor doesn’t pay or they bad debt 10 percent of the community’s dollars your assessment’s going to be 10 percent more. It’s that simple. It’s math.
Host: Right, because at the end of the day they have to make the numbers add up. They’re not for profit, so they have zero base budgeting, right?
Host: That money has to come from somewhere.
Dean: Absolutely. That’s the struggle that a lot of people don’t really grasp, is that when your neighbor doesn’t pay you’re going to pay for your neighbor. I’ve even told some associations, “Look, if you really want to be good people and love all your neighbors like you say you do create a community chest and have every member put in an extra $50 a month. Then when somebody falls on hard times you use it to pay, but don’t do it out of having assessments not paid.”
Host: On that note, would it be advised to set up reserves for that type of situation? Let’s say right now where the economy’s okay, it’s not great, but there’s nothing necessarily that they need the reserves for. Is that something that could be used or that those reserve dollars can be used for?
Chad: Possibly, but the one thing I would caution on that, and building on what Dean said, if your neighbor is not paying and you have reserves and everyone knows there’s something to fall back on I’m going to say, “My neighbor is not paying. We have reserves. My neighbors aren’t going to care if I don’t pay either then.” It can have a domino effect where no one wants to pay. That’s why a lot of associations, and rightly so, very strict, even if one, two unit owners are not paying their assessments. It’s really important to get everyone on the same page to be really strict with everyone needs to make those monthly assessments.
Host: If you’ve been listening to the program I think you’ve realized there’s so much for us to talk about. There are so many facets to condominium and homeowner’s associations. If you want to learn more directly from one of our condo coaches you can call us, (813) 331-5415. You can find us online, everything you need to know about The Condo Coaches. Go there, look us up for our free assessment, TheCondoCoaches.com, and of course our email address, help@TheCondoCoaches.com.