HOA Insights: Common Sense for Common Areas

035 | Transforming a Divided HOA Board

January 08, 2024 Hosts: Robert Nordlund, Kevin Davis, Julie Adamen Season 1 Episode 35
HOA Insights: Common Sense for Common Areas
035 | Transforming a Divided HOA Board
Show Notes Transcript Chapter Markers

See how one HOA board member overcame division to enhance community and financial management.
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Witness the challenging journey of a dedicated, anonymous HOA board member as he navigates a divided HOA as the "odd one out'. With a budget of $500,000 for 125 units, John Doe's story unfolds the complexities of board dynamics and financial management. From his initial motivation to his analytical approach as treasurer, John has significantly improved transparency and financial handling within his association. Facing underfunded reserves and a top-down culture, he advocates for diversity, inclusivity, and open-mindedness. Learn from this board hero's experiences and advice to new members on persistence, contributing effectively, and making positive change no matter the circumstances.

Chapters from today's episode: Transforming a Divided HOA Board

00:00 Intro to being on the HOA Board
02:51 About This Board Hero
03:40 Why I Joined the Board
06:35 Changing the HOA at Large
09:30 The Best & Worst of Being on the HOA Board
11:10 Challenges of Being a Treasurer
16:06 The Culture of Your HOA Board
17:20 Your Board Needs Different Angles
18:29 How His Board is Improving
20:02 Animosity in the HOA Board
21:58 Ways This Board Can Improve
25:27 Advice for NEW Board Members
26:19 Advice for Odd Ones Out Board Members

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persistence is really important to play the long game and not play the short game. You might have a lot of losses to start with, disappointments. But if you stick with it, you'll find where the gravel road ends, so to speak and the paved road begins. And you'll start getting some wins under your belt.

HOA Insights:

Common Sense for Common Areas exists to help all 2 million volunteer board members nationwide have the right information at the right time to make the right decisions for their future. This podcast is sponsored by four companies that care about Board Members Association insights & Marketplace, Association Reserves, Community Financials, and Kevin Davis Insurance Services. You'll find links to their websites and social media in the show notes. thankless job, what comes to your mind when you hear these two words. Having served on the board of my condominium association for several years followed by decades of experience in the industry. There's one job that without a doubt deserves to be at the top of the list, and elected volunteer community association board member. So regular feature of our weekly podcast is one episode a month devoted to sharing the stories of real life unsung board heroes. In our eyes a board here was one of the 2 million elected volunteers who are worthy of recognition for simply performing a thankless job well. Welcome back to Hoa insights common sense for common areas. I'm Robert Nordlund, and today I'm here to share the story of an unsung board hero who was working with an unusually dysfunctional board. He agreed to speak to us under their condition of anonymity. As such, many of the details in this episode have been changed to protect his identity and the identity of the board. This is episode 35. And if you missed meeting our first six board heroes, you can find them easily on our website, www.hoainsights.org, or by subscribing to HOA Insights on your favorite podcast platform. But before you hear our latest board heroes story, let me introduce you to one of our generous sponsors. Are you part of a homeowner's 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. And we're back. Today we'll be hearing from a volunteer board member we'll be referring to as John Doe, John is in the unfortunate position of being the odd man out on a board with a somewhat divisive culture. After hearing John's story, we decided to change his name and other details, blur his face and disguise his voice in order to protect his identity and the identity of the association he serves. John serves on the board of a townhome style community with over 125 units and an estimated $500,000 budget. The building is almost 30 years old and is about 95% owner occupied. John's lived there at the property for almost 10 years. He served on the board for the past two years. So we asked him what first motivated him to get involved with the governance of his community association. What motivated me to first become involved in the board. And this is actually my second stint on the board was that a friend of mine was on the board and said that it would be a good way to know what was going on. That first didn't didn't last very long. Because as the board secretary which I was selected to then they had a certain way that they wanted minutes done, which was different than any other organization that I had been in. And it was taking me a month just to get minutes that were acceptable to this group. So I said rather than wait for a month and tie up the boards time on stuff like that it's best I step aside and let somebody else do that. So I left the board and in 2021 I was recruited to be on the board again. This was a better opportunity I saw because we had a treasurer who had been on the board. He had been on there for six years as the treasurer and left about three months before my term started. Then another guy took over and month later he sold his property. So he left the association altogether. And then there were three months with nobody my profession prior to My retirement slash sabbatical was a financial analyst for most of the last 43 years, 42 years, something like that. So I saw an opportunity to share my financial expertise. And that's how I came to be the treasurer. financial expertise is clearly an important asset when it comes to serving as a board treasurer. But we were curious what kind of personality and other gifts that he was bringing to the board. Here's what he had to say, my personality would describe as analytical, deep thinking, and forward thinking. And I think that's a unique skill set. Because most of us aren't as financially savvy, there are different areas of expertise in each one of us, John mentioned previously that there was a three month gap between the last treasurer leaving the Association, and the start of his first term, we wondered how many members sit on the board. And if they had any term limits, our board has seven people that could presumably be on the board. We presently have six, one person left in January, there aren't term limits, we each serve two year terms, and they're overlapping. So three people are up for election this year, I believe it is this next year. And for the following year, a treasurer position is among the board seats that are up for reelection at the end of this year. We want to know if John intended to run again and serve another two years on the board. Do I intend to run? Again? That's a good question. And I've gone back and forth on that for quite a while, actually, probably about a year, a year ago, I had my doubts whether I wanted to even continue for a second year, because it took me 10 months just to get on one of the accounts, one of the bank accounts, three different visits, maybe four, to the place where we had that account at. And it was very frustrating. We had all our money tied up in very low interest accounts like 0.2. If that. And I saw, I did some research and found that there were some places where we could get much higher interest like 4%. And I wanted to open one of those types of accounts. And the board president said, Well, you have to stay on the board in order to do that. And that was why I stayed on for another year, because I felt it was better for the owners at large, even though most of them if not all of them don't know about it. But I was able to open not just one, but two different accounts. And now we have all sorts of CDs and so on are making 4 and 5%. And this year, we've made over $16,000 in interest income, John said something really important there, better for the owners at large, regardless of whether they know about it or not. It was clear that making prudent and responsible financial decisions was a key motivator for him to stay involved with the board and continue to act in a way that would benefit the community at large. Even when it's unpopular. We asked him what else was motivating him to stay involved with the board. would motivating me to stay involved personally has been to see improvement in this area from even where it was before. When I was on the board the first time around. For instance, there wasn't a treasurer report is just the President talking about the two or three meetings that I attended as an owner, even before I became on the board the first time. Now there is a monthly Treasurer's Report. I've been putting out articles on virtually every newsletter about how for instance reserves work, how we're doing on interest, how our operating income is, what some of the characteristics are of a board that's financially doing well. What are some of the things that owners should be looking for, and asking questions about If those things aren't happening? John was adamant about leaving the association in a better place than he'd found it and appeared proud of his time and the effort invested into maintaining an informative and transparent relationship with the rest of the community. By serving on the board. We asked what his favorite and least favorite parts of serving on the board were. My favorite aspect of serving on the board is the breakthroughs that I've felt that I've made. Making all that interesting. GM was one thing that I mentioned before, but also learning how reserves work. And it's a tough subject to understand and this summer I was fortunate to be paired up with a reserve specialist that was very patient and explained to me how things worked. And now I feel that I understand it. And I understand it enough that even on some of the forums, I've made some comments to correct people who really don't understand exactly how it works. My least favorite aspect of serving on the board is probably that financial information doesn't get much traction. I put together some pretty elaborate spreadsheets based on the reserve study that shows what items are coming up each year, what the estimated costs are, breaking it down into five and 10 year periods, to try to educate the board on the importance of reserves, when the big ticket items are coming, when we might run out of money, and based on what we're actually contributing to reserves, and not what we're budgeting to reserves. John expressed some difficulty in explaining financial information to the rest of the board. We asked him if this figured into any uniquely challenging characteristics of serving as the board treasurer, the unique characteristics of a tertiary position has, or how to explain something that's very complicated sometimes into digestible ways for others to understand. But first, they have to understand the information themselves. And frankly, when I first came into this job, you know what, like, oh, well, it's just balance sheets and income statements, just like what I've seen for the last 40 years. But there's a lot more to it. There's the importance of operating income, having enough money to pay your bills, but also have a rainy day fund, which is what my predecessor was harping on for a long time was we gotta have money budgeted for a rainy day fund, we have to have money for a rainy day fund and so on. And he was absolutely right. Because last year, we had a vandalism we had somebody run into our front gate, which was not insured. And we had snow and ice event. That wasn't planned, obviously. And the total of that was enough to result in a net loss. So we learned that lesson the hard way. The other thing is, as mentioned, has been the reserves. That's a complicated thing. It's not to set money aside and pull up from later. It's the whole predictability of how much you need to have that yeah, you can predict how much it's going to take to maintain something, how much should it's going to take to repair something, how much it's going to take to replace something you don't necessarily know when just like you don't know when your car goes bad. And you have to replace it. Are you setting aside money to replace your car? Or are you waiting till the car breaks down all the sudden, you have to come up with a bunch of money or take a loan. That's the analogy I've used for that. But the part that reserves studies don't include is improvements if you're making improvements, because you can't, you can't predict that, you can't predict when progress is going to make be made, or what type or how much it's going to cost you can't predict when technology is going to be bad and no longer the parts no longer made. And it has to be upgraded to something else which may cost more but may cost less to maintain. John spoke at length about the challenge of setting aside enough in reserves to protect, maintain and improve the property of the association. We asked him if the association was funded enough to accomplish that, would I consider the association well funded right now, I would say not although better than one of my predecessors love the sport shorter program, our funding level is about 13%. Right now at join higher than that. And the reason that is is because we have been underfunded for about four or five, six years where we had major items roofs, those windows and doors I was talking about, siding, undervalued in our reserve study. And in addition to that there was a law passed in this state in 2018, which required project manager costs to be tacked on to all those big ticket items which can range from 10% or most of them up to 65% of the siding and that makes a huge difference in terms of reserve study. So I brought us up to speed on everything except for the siding due to the big ticket nature of the siding, which was about $3 million. And the siding is due for replacement about 35 years so that those costs have been brought up to speed over a few years but the rest of them are now going to be up to date for 2024. So and so you try and close to 30%. And reserves were showing closer to 21 this year. And but if you put in the full cost, it'd be about 13%. I informed the board that we have some big ticket items coming up in the next six to 10 years, one estimated six years is painting this whole place. And then nine year from now is replacing all the doors and the windows. So that's even a bigger ticket item. Right now we have about a third of that in reserves. So we really need to buckle down and get going towards funding those items. It's encouraging to see that in our budget message coming up for this meeting in about 30 weeks. But there's been mention of those things coming up. So that's a hopeful sign. John's previous answers spoke to a recurring sentiment in his answers, a device of culture among the board members that pervaded their meetings, we wondered what John thought about the board culture and how their meetings were conducted. The current board, if I were to say had a focus is just the here and now, what's going on now what's going on in the next few months. As opposed to us going five years, 10 years from now, the board meetings that we have are top down is what I would describe it. Whereas I would prefer something which is more collaborative. For instance, I was on a planning commission for four years and the local city near here, and I was the chair for a couple two of those years vice chair for one of them. And even though I was the chair, we were all in it together. We were all working to solve a problem. We would ask each other questions, I added a dimension of asking people who made public comments questions so that we would get the right information. It really wasn't I'm trying to make this happen. It was here's the issue. Let's get down here and work it out. Go through all the aspects of it and come to a conclusion. From his answers. I've seen that John valued differing opinions and opposing perspectives. In short, he feels that every board needs a devil's advocate. And we asked what that meant to him. A devil's advocate to me is somebody who thinks about the whole picture, to think about things from different angles. And that leaves to a better conclusion. And we did the same thing. When I was on the planning commission. I rarely I think one time, went to a meeting after having read my packet going to the meeting, which not everybody does, but I did with my mind made up I usually came to a meeting and I hadn't made it up and I was open to listening to what the other board members had to say, what the public had to say on that issue, as well as the staff and whoever the proponent of the issue was, it's really important to go into meetings with open mind, not with your mind made up. keeping an open mind is an important asset when you're part of a team. This dovetails with a quote from General Patton that Julie Ataman brought up in Episode 29, while discussing board member job descriptions, and Patton said, if everyone is thinking alike, then someone isn't thinking. With that in mind, we asked John if the board has done or is doing anything to improve the mental makeup of the board. The two stars that I have for this board is a young fellow young owner in his 20s was recruited to our board fairly recently. And he's brought a new dimension to the board. It new dimension because for one thing he knows today's technology, which most of us old folks don't, or don't as well, or we might know part part of it. But he knows it intricately and and so he brings that new dimension and energy to the board. The second star would be and I don't mean this in a negative way, but dovetails what I just said is that a couple of our long term board members will be leaving in the next year. Hopefully, what that means is that there'll be a couple of new voices to replace those. And with change, I think is good, because you get different perspectives that you didn't get before different backgrounds. Each of us is unique. We just got a new property manager last summer that has made a big difference because she is more engaged with the board. She provides us with information about the bills that she's received. And this is information that we had never gotten before. But I would say the culture has been improving in large particles are. John seemed somewhat hopeful that the conduct and culture of the board would be changing for the better in the coming months. But we wondered if there was any lingering animosity among them board members that might carry over. Is there animosity among the board members? Well, I would say, mainly towards me, I guess because I'm the bearer of bad news. The Treasurer is, as the way I've made the treasurer role to be, is the forward thinker of the group. They say, here's what you're not doing. Here's what you're not funding, I did observe this in that long term predecessor that I had it bring up operating income, you're not making enough bah, bah, bah, you have to raise more money. And it didn't register with me the first time or when I was in those my first stint on the board, but this time around, it did resonate with me, and he probably doesn't realize, but he actually did teach me a lot. I can see where he got frustrated. And frankly, I'm amazed that he lasted six years of being the one to say, we need to do this from you to do that. And the rest of the board saying no, no, we need to spend money on this need to spend we can wait on that until tomorrow. And then tomorrow comes well you got to do this. Now we can wait until tomorrow. It's a top down vote and top down board. And that means the President says I want this and everybody's supposed to vote the way they do. And I saw that, in my previous stint on the board, who was the President doing most of the talking this one is so similar thing. And that's why I said when this old guard has gone and a year from now, there's hope. Because a board should not be where one person who says I want this, I want this, I want that. And everybody's supposed to fall in line or their feelings are hurt. Needless to say that being a marginalized member in a top down board is no easy task, especially when like John, you're trying to work towards the best interests of the association and the community at large. We asked John what his biggest wish was for the board and what the board could do in the next year to improve itself. One wish for the current board that I have is that we would be recruiting new members, we've had this one position open since January. And we have potentially two more coming up. And there really hasn't been any recruiting other than to say, have you run into somebody walking around the community, you might ask them to be on the board. That's a little bit too passive, I think I think it needs to be a little bit more direct next year should be pretty interesting here and really could be quite a change. I think the new president next year, who's suzanne selected, is this young fellow that I've talked about before in his 20s. And I think he'll bring a new dimension in terms of what types of things he wants to do. He has a sharp mind, I think the absence of having other people say this is how it should be done, or this is how it's always been done or whatever might free him from having some more independent thoughts, the other board members might feel a little bit more free to say what they want to say. And then next summer, will be the first non visit site visit from the reserve study. And remember, I talked about how the, the siding the cost of the siding is being phased and that'll be another bump in that. And so our will get closer and closer to where we should be in terms of reserves, the last of our low interest items will be should be converted over to something that's higher interest. So we we should be could be hopefully will be on the upswing on a number of different levels we'll be able to tell on a year from now. We decide to ask John how he would look back on his time on the board, and how he's improved the association once he eventually does decide to leave. Here are his thoughts when I leave the board. And this was one of the things I thought about a year ago and I thought about leaving the board then is had I really accomplished what it is that I came to accomplish. And one of the things I wanted to do was to see that we were doing the best interest wise on what our reserves were earning. It's not going to solve all the problems but it did a pretty heavy contributor 106 or $16,000 divided by 134 is about $100 Well over $100 per person or per unit I should say that that saved that they don't have to pay for assessments, for instance, and to get things in different places. I have three primary places where the investments are to have it balanced like that and have things kind of running like the clock you'd like to think so so that the next This person who takes over as treasurer can keep it going, and to provide them with documentation to show here it is what I was doing. It is what I hope to do, and then leave it to them to decide, is that a good idea? Or do they want to try something else? Finally, as we've done for all our board heroes, we want to ask John, if he had any words of advice to new board members? Yeah, I mean, first I would say is to kind of get the lay of the land, maybe the first one to three meetings that you have the different personalities to not expect, that you're going to get everything that you seek or everything that you want, or how you think something might get done, might not get done the same way that you're thinking about it to be open minded to other ideas and ways of doing things and to contribute in a positive way. Maybe be a devil's advocate, sometimes well, what about well, what about I'm concerned about, how it makes you feel as opposed to necessarily saying, well, that's not a good idea. Given John's self styling as a devil's advocate, we decided to ask him for any parting words of motivation to any board members that also find themselves on the outside the majority opinion of their board. Persistence is really important to play the long game and not played the short game. You might have a lot of losses to start with disappointments. But if you stick with it, you'll find where the gravel road ends, so to speak, and the paved road begins. And you'll start getting some wins under your belt. Thank you for listening. And thank you to John for performing a thankless job well. We hope you gained some HOA insights from historian that helps you bring common sense to your common area. Thanks for joining us, and we look forward to another great episode next week. You've been listening to HOA Insights, Common Sense for Common Areas. You can listen to the show on our podcast website, hoainsights.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 liked 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 to engage in the conversation, email your questions or voice memos to podcast@reserve study.com 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.

Intro to Transforming a Divided HOA Board
About This Board Hero
Why I Joined the Board
Changing the HOA at Large
The Best & Worst of Being on the HOA Board
Challenges of Being a Treasurer
The Culture of Your HOA Board
Your Board Needs Different Angles
How His Board is Improving
Animosity in the HOA Board
Ways Your Board Can Improve
Advice for NEW Board Members
Advice for Odd Board Members Out