Sunday, April 27, 2014

Does your community association have its own brand?

When you are asked to think of iconic brands, names like Nike, Apple, Starbucks and Coca Cola probably come to mind very easily. These companies all engaged in costly, strategic and sustained brand building over many decades to ensure that their company names would convey a recognizable, memorable and successful image to their customers and potential customers.

Companies certainly use branding to differentiate themselves from their competitors. Apple did a masterful job in portraying its users as young, hip and creative while painting Microsoft fans as stodgy fossils. Undoubtedly, Microsoft would have liked a different image in the marketplace but it was forced to play defense as a result of Apple's more nimble use of branding.

When you think of community associations, do some communities do a better job of branding themselves than others? Should more communities be concerned about building their brand before the market or their detractors pick one for them? 

If you think branding is irrelevant to your community, think again. Chances are you already have a brand in the market and it might not be one your board or previous boards have carefully cultivated. Do you want to know how your community's brand manifests itself? Start by asking what kind of reputation your community has in the market. Is your community seen as a trendy upscale high-rise catering to young professionals in an urban area or is your community more the laid-back, family-friendly suburban  enclave? Often a community's brand is related to the unique community components supporting a specific lifestyle with equestrian, marine and country club communities being a few examples. 

When was the last time you asked neighbors outside your community, local realtors and others in your city how they would describe your association? Is your community seen as stodgy or hip? Flexible  or rigid? Upscale or budget-friendly? The list of possible brand permutations is vast.

What goes into branding?  Successful branding really tells a story about who you are and why folks should want to associate with you. Among other avenues, your story is told by the way your community looks and functions, your signage, the communication portals you use such as newsletters and websites, your approval process, the manner in which you handle a number of member issues including welcoming new residents, helping neighbors in need and dealing with collection issues. the way your employees perform and the types of events you host. Your association members are certainly essential to your community's brand and their contributions can change your brand for the better or the worse over time depending on how happy or unhappy they are.

It is no coincidence that communities with the most positive brands are also those with the greatest level of volunteer involvement, the highest property values and the most membership satisfaction.  Your community's branding (or lack thereof) will go a long way towards attracting or repelling the purchasers, renters, employees and vendors you want. Isn't it time your community started thinking about your brand and took the steps needed to strengthen that brand?

Sunday, April 20, 2014

How well informed are you on Directors & Officers Coverage?

When I thought about running for my HOA Board of Directors more than ten years ago, I wanted to know how many members served on the board, how frequently we would meet and where and what my role would likely be on the board.  I was elected to the board and served for two years.

Oddly enough, I never once asked before that election if we had Directors & Officers Coverage nor did I review the coverage-a rookie mistake for sure and not one I would ever repeat should I consider running for another board. Naturally, I assumed such coverage was in place and would be sufficient which was the case in my community but is not always the case in many other communities.

Of course, I deal with client questions pertaining to D&O coverage all the time. Often these relate to the wrongful acts of current or previous board members. Some of the more common questions I hear include:

  •  If a former association president signs a bad contract without doing any sort of due diligence on the contractor or obtaining competitive bids, can the remaining board members file a claim against the D&O policy? 
  • One of our directors has been sued for slander. Is he protected under our policy?
  • We just discovered that our bookkeeper has a gambling problem and has frittered away common funds at the nearby casino. Will our D&O policy pay us for our losses connected to her activity?
  • Are volunteers covered under our D&O policy if they commit wrongful acts? What about association employees? 
  • What is the difference between a claims-made policy and an occurrence policy and which is better for my association?

Endorsements can cover a wide range of activities and people but you need to know you need them in the first place! Start thinking about the types of activities that occur regularly in your community and the number of directors, officers, employees and volunteers you have and then purchase the coverage needed to protect all those people and address all those activities.

Scott Simmonds is an insurance consultant and a reader of this Blog who has created a handy primer on D&O coverage, breaking down these often complicated issues into easy-to-understand segments. 

Scott has graciously created a link so readers of my CondoandHOALawBlog can download this material for free.

It is difficult enough to get people to volunteer to serve on association boards. You can make that decision a little easier by having the proper coverage in place. The proper coverage can also help your community recover a little quicker when a person in a position of trust in your community does not do the right thing.

Sunday, April 13, 2014

Is anyone performing background checks on directors?

Florida law has been changed over the years to clarify that convicted felons whose civil rights have not been restored are not eligible to serve on a community association board. Other states similarly restrict felons from serving on volunteer boards. In addition, members who are 90 or more days delinquent in the payment of assessments are similarly not eligible to serve on the board.

However, knowing the law and enforcing it are often two entirely different matters.

From a practical standpoint, how do community associations actually determine the eligibility of their board candidates? While the Florida statutes do not specifically address these issues, do you think it is important for your community to also know in advance if a candidate for the board has a personal problem with budgeting, previous litigation, prior rules violations in another community, etc.? How likely is it that any personal judgment issues will bleed over into the judgment a director needs to exercise while serving on a community association board?

When I volunteered to serve as a chaperone on my kids' school field trips, I was rightfully asked to undergo a background check before being approved. I understood the significance of my role as a chaperone and readily submitted to the lengthy questionnaire, fingerprint and background check required by the Broward County school system. When I ran for my HOA Board, I was asked no questions nor did I submit any paperwork to run.

While I am not in favor of unnecessary hurdles that make it less likely that people will volunteer to serve on their association boards, I do think most reasonable board candidates would not object to some level of due diligence to ensure that they are eligible to serve on the board.

So how does your community handle this issue? Do you:

1.      Ask the candidates to fill out a questionnaire confirming if they have been convicted of a felony and if so, whether or not their civil rights have been restored? In Florida, many board candidates submit candidate information sheets touting their credentials to the membership but few delve into any darker issues in those sheets. Does your board ask for additional information needed to determine eligibility?
2.      Do you ask candidates who fall into the category above to provide proof that their civil rights have been fully restored, including the right to bear arms?
3.      Do you check to determine that all candidates are current in the payment of monetary obligations to the association?
4.      Have you amended your governing documents to require more extensive background checks of director candidates including a check for a history of previous bankruptcies, credit issues, litigation, etc.?
5.      Have you done nothing with regard to director background checks?

Far too often, communities learn that there is a director on the board who is not statutorily eligible to be there. Finding someone has a "troubled past" is not always an indication of future trouble. However, wouldn't it be easier if standard election procedures were updated to provide for some level of director background checks to ensure that potential problems are averted?

Friday, April 4, 2014

An owner's right to privacy vs. Association's need to perform preventative services

A recent case out of Florida's Fourth DCA involved a condominium owner's longstanding refusal to allow her association to enter her unit to perform routine pest control services.

The owner claimed that she had a breathing disorder which would be worsened if the association treated her unit for insects and other pests. The owner claimed that she would use a non-chemical form of pesticide but refused to allow the association access to her property to confirm that the unit remained pest-free.

The association argued that Section 718.111(5) of the Condominium Act as well as the provisions of its governing documents granted it the right to enter units for necessary maintenance. The statutory language provides as follows:

Right of access to units--The association has the irrevocable right of access to each unit during reasonable hours, when necessary for the maintenance, repair, or replacement of any common elements or of any portion of a unit to be maintained by the association pursuant to the declaration or as necessary to prevent damage to the common elements or to a unit or units.

The association did offer to allow the owner to provide her own vendor who would use a chemical-free pesticide so long as the owner provided proof that such services were actually being performed.

The trial court ultimately entered an order in favor of the association which laid out a King Solomon-like solution as follows:

-On the third Monday of every month, the owner would permit the association access to her unit for the purpose of performing pest extermination services'
-The pest extermination services would be performed with pesticides purchased and provided by the owner and given to the association to use or if no such chemical-free pesticides were provided, then the association would have to use non-toxic chemical-free pesticides' and
-The owner also had the choice to employ her own exterminator to keep her unit pest-free and provide the association with a copy of her invoice for such services to demonstrate that they were being performed on a monthly basis.

Did this solve the problem? Of course not. Both sides argued that they were the prevailing party and therefore, worthy of having their attorney's fees awarded. The association argued that it had prevailed since it was granted access to the owner's unit. The owner argued that she had prevailed because the association was required to use a chemical-free pesticide. In the interim, the owner continued to refuse the association access to her unit and continued to refuse to provide proof that any services were being performed to keep the property pest-free.

The 4th DCA reversed the summary judgment order and the attorney's fees entered pursuant to that order and affirmed the contempt and enforcement orders.

The overarching question in my opinion is whether or not the owner's chemical sensitivity is a red herring designed to mask the fact that this owner was not happy with giving the association entree to her unit under any circumstances.