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Unreliable Management Plagues Association

QUESTION: Our homeowners association is faced with changing management companies for the second time in the last year. They all seem to be great during the initial interviews, but after hiring a new company, we soon find that they are unreliable or slow to respond to our requests for service.

The previous management company’s financial statements were inaccurate or not available on time. Now we have a manager who seldom returns phone calls and makes excuses for his tardiness in getting bids and completing other assigned tasks. Can you give us some suggestions to help us in our selection of a new management company?

For the record:

12:00 AM, May. 20, 1990 Correction
Los Angeles Times Sunday May 20, 1990 Home Edition Real Estate Part K Page 27 Column 1 Real Estate Desk 5 inches; 158 words Type of Material: Correction
A question in the May 6 “Condo Q&A;” column asked whether unincorporated community associations are exempt from the California law on reserve funding. The headline, “State Law Requires Establishing Reserve,” was incorrect.
State law does not specifically require that the association set aside reserve funds. However, there have been lawsuits in California as well as other states resulting in judgments against boards of directors that failed to maintain adequate reserve funds.
California law requires that a reserve analysis be prepared by the association. All community associations, large and small, incorporated and unincorporated, must comply. Full disclosure as to the method of funding for repairs and replacement of the major components of the association’s property must be provided to the association’s members and prospective buyers.
Board members must serve in the best interests of the association and make sound business decisions regarding reserve funding. Those who fail to do so may be held accountable if the association is faced with financial hardship resulting from poor financial planning.

ANSWER: First, I suggest that you contact the owner of your current management company and discuss the manager’s shortcomings. Before you cancel the contract, give them a chance to respond to your complaints.

Perhaps another manager can be assigned to your association. Make sure that your expectations are reasonable. Does your contract with the management company include all of the tasks that you are expecting the manager to do? Read the contract thoroughly, especially the termination clause.

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I have provided consulting services to a number of boards that did not fully understand the functions that a management company should perform. There are several different levels of service, ranging from basic financial service to full service management, including supervision of contractors and the association’s staff or on-site employees.

Don’t look for the lowest bidder! These companies often overload and under pay their employees, which leads to manager burn-out or poor job performance.

Management companies are required to disclose their professional affiliations and certifications. Look for companies that have a professional community association manager (PCAM), certified property manager (CPM), or certified public accountant (CPA) among the owners or staff.

Examine the services that are included in the contract fee. Some companies “nickel and dime” their clients with extra charges for postage, photo copying, assessment billing and supplies.

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“Choosing a Management Company,” a booklet written by Michael E. Packard, provides community associations with excellent guidance on the preparation of management specifications, the interview process, the screening and final selection of a management company.

The booklet is available from Community Associations Institute. Send your request and a check for $12 payable to CAI. Send to CAI, P.O. Box 84303, Los Angeles, Calif. 90073. Allow four to six weeks for delivery.

Remember, a good relationship with your management company requires frequent communication and adequate supervision from the board.

Teen-agers Causing Vandalism, Litter

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Q: I live in a planned-unit development that has a large open area that is very appealing to outsiders. Our complex has had a problem with teen-agers gathering late at night to smoke marijuana and drink beer.

The litter and vandalism is getting worse. A gate and chain-link fence have been cut so that they now come and go as they please. A locked bathroom near the tennis courts was severely damaged and a light pole was destroyed.

The board of directors has decided to leave the gate unlocked to prevent further damage to the gate and fences. Obviously, that does not resolve the litter and vandalism issues. The police cannot respond right away and the kids are usually gone by the time that they arrive. A full-time security staff would be too expensive. What can you suggest?

A: As you have found, locked gates do not ensure peace and tranquility. It appears that you and your neighbors are maintaining a nice place for your unwanted guests to “party.” There are several reasons that you should be willing to spend some money to get rid of the trespassers.

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Cleaning up the litter and repairing the damage is costing you money. Vandalism, litter and graffiti will lower the value of your property. The owners who live near this area are probably losing sleep and worrying about what the teen-agers will do next.

If you are ready to reclaim your property, I suggest that you call a few security companies and see what it would cost to have random patrols. A security guard driving by or walking through the complex at random intervals would not be as expensive as a full-time guard. Check with other nearby homeowner associations and shopping centers to get the names of security companies that already provide services in your area.

Call your local police on the non-emergency phone line and find out how you can organize a Neighborhood Watch committee.

Owner Assessed for Lake He Doesn’t Use

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Q: Many members of our homeowners association must pay a $162 annual fee to a lake association. The requirement is part of the property deed. The lake is not contiguous to the property and most of the owners do not even use the lake. Is it legal for a developer to require homeowners in a condominium association to belong to a recreational facility that is not contiguous to the property?

A: If this is a deed restriction that runs with the property, I don’t see that there is any way that you can stop paying the fee to the lake association. You need to refer this matter to an attorney who can review your legal documents and give you a legal opinion.

You bought the property under those terms, and you probably will have to live with it. Even though you do not live on the lake or use it for recreational purposes, it is an amenity that enhances the value of your property. When you sell, you may find that buyers are very interested in the nearby lake and recreational facility.

State Law Requires Establishing Reserve

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Q: I own a condominium in a 36-unit complex. Our association is unincorporated. The board of directors contends that the California statute regarding reserves for the repair and replacement of common property does not apply to our association because we are not incorporated. Are we exempt from establishing and maintaining a reserve fund? How do we comply with this law if we are required to do so?

A: California Civil Code, Section 1351, defines an association as a “nonprofit corporation or unincorporated association created for the purpose of managing a common interest development.” Your association is not exempt from the California statutes governing community associations. Even small associations must comply with this law.

Section 1365 states that the association must provide an operating budget. The annual budget must include related financial information that shows the current cash reserves that are set aside, a list of the major components that the association is responsible for maintaining, the current replacement cost, the estimated remaining useful life of the components and the methods of funding that will defray the future repair or replacement. The association must also disclose the procedures used to calculate the reserve funds.

Many association boards are finding that they do not have the time or the skills to prepare an adequate reserve analysis, so they hire a professional reserve study preparer in order to comply with the law.

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Robert M. Nordlund, licensed professional engineer and owner of Association Reserves Inc., gives the following advice to association boards:

“Although there are companies that specialize only in reserve studies, there are a number of other professionals who can also provide a reliable reserve study. These include accountants teamed with contractors, engineering consulting firms and real estate professionals. You can obtain referrals from management companies, neighboring homeowner associations or from the local chapter of Community Associations Institute.

“A reliable reserve study company should also be willing to provide the names of their competition to assist you in soliciting competitive bids.”

Hickenbottom is past president of the Greater Los Angeles chapter of the Community Associations Institute (CAI), a national nonprofit research and educational organization. She welcomes readers’ questions, but cannot answer them individually. Readers with questions or comments can write to her in care of “Condo Q&A;,” Box 5068, Thousand Oaks, Calif. 91360.

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