038 | Overcoming Dysfunction in Your HOA

Julie Adamen: 0:00

Speak with one voice. That doesn't mean you have to think that way. But when you walk out of that meeting for you, who are the dissenters, you're like, I did not agree with it. I did not vote for it. But we did it and we're moving forward. And then Zipit, that's not the only thing that's going to happen in your timeline on the board. And you don't know what's going to happen a week or two weeks, or month from now that you're going to need to come together as a board. And if you undermine individuals, individuals you live near. That's a big problem. For everybody.

Announcer: HOA Insights: 0:32

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. They care about board members, association insights and marketplace, association reserves, community financials, and Kevin Davis Insurance Services. You'll find links to their websites and social media in the show notes.

Robert Nordlund: 1:02

Hi, I'm Robert Nordlund of association

Julie Adamen: 1:05

Julie Adamen and of Adamen Inc. and this is HOA reserves. And I'm Insights where we promote common sense for

Robert Nordlund: 1:11

common areas. Well, welcome to episode 38, where we'll be talking about board dysfunction. Some of you are in the middle of it as board members, some of you are in the middle of it as homeowners with a board that is secretive, who's lying, misappropriating money, self dealing, ignoring problems, or power hungry? So the question is, what do you do? Well, this is a follow up to episode number 37, a conversation that we had with Russell Munz about what a board should do to minimize fraud opportunities. And if you didn't catch that episode, or any of our other prior episodes, take a moment after today's program to listen from our podcast website, www.HOAinsights.org, or watching our YouTube channel. And remember to subscribe to this podcast on any of the most popular podcast platforms. So you don't miss any future episodes. And we enjoy hearing from you. So if you have a hot topic, a crazy story, or a question you'd like us to address, contact us at 805-203-3130 or email us at podcast@reservestudy.com. So Julie to start today's program. Let's start with one of those questions. And we have a special treat in the answer. We

Julie Adamen: 2:31

sure do. So we had a listener who asked us not to use her name. But But here's what she's told us. We're dealing with a member disputes with regard to maintenance. At our association, we had a toilet leaking into a unit from the unit above. The governing documents clearly call this a member issue but the leakers kept telling us the leakee. I love the terminology. I do too badly. The leakers kept telling the leakee that the management company is responsible. Of course not. At times they've told the leakee the association was handling it just to deflect the problem. Meanwhile, the leakee has brown ceiling stains. He even offered up the plumber that they used for similar issue in their own unit. But the leaker just keeps stonewalling. We had a management we have managed to call the leaker to assert some muscle reminding them it's their problem and not the association's yet the issue persists. While I know as a board member, it is not an association manager, excuse me Association matter. And the management call was a courtesy. We even offered to send out the association plumber and charge them for the repair. But it's hard to keep apologizing to the leakee and suggest they seek legal action against the leaker. But it's starting to feel like this is what must happen.

Robert Nordlund: 3:50

Yeah, heck of a problem. Leakee Leaker . Owner versus owner, the board member is clear that it's not the association's problem. Maybe they're referring to governing documents good for them to have read the governing documents, good for them to be involved, trying to solve the problem trying to solve the problem. Yeah, inaction is just a problem. So we thought we do what we recommend boards should do in this type of situation. Get clear legal advice. So we reached out to noted California Attorney Adrian Adams of the Adams Sterling law firm. You can find them at www Adamssterling.com at A D A M S T E R L I N G for some help on the issue. And here's what he said when we posed the question.

Adrian Adams: 4:40

Hi, Robert and Julie. This kind of issue is fairly common in the industry. Now water is always a problem. Water is the enemy and water between units it used to be that we could say it's a owner to owner problem and as association would have nothing to do with it. That's for really not the case anymore. And where this really came up was when the big mold issues were hitting all over California. And I remember being in court once. And the judge said, Wait a minute, does not water have to go through common area to get to the next unit? And the answer is yes. So therefore, it is an association problem. So it's not strictly an owner to owner problem, the association's involved because the water passes through common area. And you also have issues involving nuisance issue under the CCNRs. So the owner above is treating a nuisance for the owner down below association needs to get involved. So violation of CCNRs owners, also there is a health element and there are within typically within CCNRs and giving authority to boards of directors to deal with health and safety kinds of issues. And where that comes in is water over long term, especially creates mold. And mold is a health issue. So if you got no black mold growing, it could impact the health of the owner down below. And suddenly, you've got a big lawsuit against the association as well as the owner up above. So the Association does need to get involved, they do need to do something to to deal with it even when the CCNR say it's an owner problem. So the owner is true, the owner above with the leaky toilet has to fix the toilet II also is now responsible for the damage to the common areas, which the association is responsible to repair. And then the association can bill back to that owner of the cost of those repairs that were caused by the negligence of the owner up above. So the association can't just bury its head this and say, it's not our problem, it is their problem. And the sooner they deal with it, the less expensive it is, the longer it goes, the more expensive it can be caught. So it really is in the association's best interest to get involved with it with the problem early on, and require the owner up above to fix his toilet, his or her. If the owner refuses, then it's a matter of going through the process calling them to a hearing imposing fines, they still refuse, then the ultimately you make a demand you to sue them. And you're making pre litigation ADR demand to take them into mediation. And at that point, the will it's cheaper for the owner to fix the problem than to descend against a lawsuit. So normally, you don't have to take these all the way to court. But you do have to be very clear and very firm, about what needs to be done. And this is where typically a lawyer letter to the owner is sufficient to get things done. But if not, then you've got recourse and you just follow the steps create

Robert Nordlund: 8:13

you wouldn't be responsible Adrian to shortcut that a little bit and give a lawyer letter that says if it is not fixed by two weeks or whatever, something reasonable, then the association will fix it themselves.

Adrian Adams: 8:29

Well, that means going into the unit. And even though CCN RS will often have that language and then allows the association to do it, I don't recommend that they do. Because then you got all kinds of problems, potential problems, they stand at the door, you push your way in assault, battery trespass claims, all you damage this you damage that is just not not worth it. So what in fact, if you want to shortcut things a little bit, instead of going through a hearing process, and fines to start with a lawyer letter at the beginning. And so demand is being made, and we're going to sue you, if you don't fix it, and we're going to give you a deadline, then you don't have to do the you know, we're gonna call you in front of the board. And you know, if you don't fix it, we're gonna sue you. So you just kind of have to gauge the individual you're dealing with. If they're generally you know, that they work with the Association, they're just slow on getting things done, then a you know, calling them before the Board may be sufficient to get them moving. But if for somebody that's a bit resistant, then you want to start with a lawyer letter right at the outset. And the threat in that will usually get the results that you need.

Julie Adamen: 9:46

Sure. You know, Robert, that's really interesting, but that's exactly what I thought Adrian was going to say. To me, it's the only solution that makes sense. And back in the day when I was a manager, I would have said probably First thing I would have done was get a lawyer to send a letter. And people usually have a tendency to hop to what they're supposed to be doing once they get that

Robert Nordlund: 10:07

Yeah, it's almost like, I feel back when I was a kid. And some people will say, well just let those to

Julie Adamen: 10:14

And it's good to get more expensive no matter fight it out. And that's rarely a good solution. And for the the what they do. I mean, just like Adrian said, be more expensive board member, well intended board member to say, yeah, leave for the association to continue to fix the incur liability by it up to these two people to work it out. And I was thinking the same thing, but you don't get from one unit to another not fixing it, with the mold issue and others various things. unit without going through common area. And so the So yeah, the lawyer nasty gram, I think that's a good, good way association can assert itself. And I think the whole point is to go. Yeah, but you know, the board member, though, I have to swiftly the leaker. Um, they can unit 201 versus us unit 101. give her credit, because they were certainly trying to Yeah, right. A leaker will realize, oh, yeah, I'm gonna alleviate the problem with what they thought were their have to do this sooner or later. I might as well do it without parameters, by go by following those governing documents. But legal fees. And I that's like Adrian was saying, at least in the state of California, that and whoever, wherever this woman is located, this board is located. You know, if you talk with a lawyer, they may bring you more up to date on what the most recent case law is. And and now that the association's can't just say, you know, no, it's not our problem. You have to because of this type of situation, maybe it's a high rise, maybe it's, you know, I don't know, just stack units, who knows two stories? I don't know. But still, that's common area, and you're responsible to take care of the inside of that, even though your governing documents, which may have been written 25 or 30 years ago, don't actually reflect that. So remember, everybody lawyers are tools. I mean, I mean, that a good way. Lawyers. Yeah, it's just like any other service provider, though. I mean, if you already know, another person to have talked to, a resource they could have had was been would have been their insurance agent, who might very well have recommended the same course of action get a lawyer? Yeah.

Robert Nordlund: 12:31

Well, I guess what we're focusing on here is a board that's taking action trying while they call the free podcast, trying to find a solution trying to find wisdom. And that's why we're here to encourage to inspire, to, in informed to educate so many reasons. We're here on the path to health and health help and help you we help one person today.

Julie Adamen: 12:55

We may have helped 30. We don't know I've had some very good policy now.

Robert Nordlund: 13:00

But that's a board that is moving forward and trying to take action. What about the topic of today, which is dysfunction, a board that would have said, Hey, not my problem, let them fight it out. A board that is insulating themselves against what's going on in the community, a board that hasn't raised assessments in X years, even though everything else are getting more expensive. How common is dysfunction?

Julie Adamen: 13:28

Oh, it's very common. And I think every board member and every homeowner listening to this right now. And even if you are a manager or a business partner, I think we would all say, it's probably more dysfunction than function. And I don't mean that in an it's a Oh, you guys are terrible. It's not so much that though, you all know there are horrible boards and board members out there. But I find a lot of board dysfunction has to do with simple ignorance of what they should be doing, and just not having enough information or even knowing where to go for the resource of information, everybody. This is why Robert started this podcast. So we could give people some information like this. But I think it's endemic to the industry because boards, you know, they're volunteers. They're mostly on the board, because, you know, they stepped out of the room and somewhat voted them in. Or they said, Okay, I'll take that position because no one else will. And it's not.

Robert Nordlund: 14:23

They had one simple problem they wanted to solve. And they were not prepared for everything at the association. Yeah.

Julie Adamen: 14:29

Oh, yes, the agenda driven like I'm getting on the board to lower dues 20%. And that's all they focus on. So it's the nature of the business. So I think it's really good that we are going to talk about this. For all of you out there. We have some discussion between Robert myself and the other hosts via email about Shall we do dysfunction, shall we talk about it? Is it negative? And my view just to let you know is that it's so common, that I think if we don't talk about it, we're ignoring the elephant in the room. We're, we're doing this ourselves. So I think that it's a good thing for us to talk about. And for all of you out there who are suffering from a dysfunctional board, or you're on one, please let us know. And let us know how we can help you. Robert gave you the information earlier, generally, you can call, you can look me up online or on LinkedIn or whatever. I'm happy to talk with you about any of these type of topics, and we'll bring it right into the podcast. Right?

Robert Nordlund: 15:22

We'll do what we can. What are the elements of it, I think there's a part of it is boards doing the wrong thing, where they're squashing a nominee for the Board's application boards. Taking inaction not doing something. So it can go both ways where they're literally doing the wrong thing. Maybe they're getting a little eager about some funds that are in miscellaneous cash, or hiring their brother's landscaper that can inflate the price just a little bit, and they get a piece of the action. There's so many things do you see it more as things that they are doing, wrongly or things that they are not doing? I

Julie Adamen: 16:11

would say that's just a crapshoot. That's 50/50. It just depends on it. So let you want to take those what let's let's talk about the inertia, the let's not do anything, the most recent board, I sat on, I was sitting pre before I moved down here to Arizona, I was sitting on two boards at one time, and one of the associations was was larger as I had a rental in there. And it was really a great Association. That was a board, not just because I was on it, they've been that way for a long time. That was a board that was proactive, they took care of things that needed to be taken care of. There wasn't a lot of bickering about spending $5. I mean, they had enough money dues were definitely affordable for what people were getting. And when a board is proactive, they don't suffer from that inertia of gosh, we shouldn't do that. Let's table that. And we'll table that for six months or five months or 12 months. And that inaction what happens is that the homeowners start realize if your homeowner to place like this, you know, they start noticing that maybe the the playground equipment looks shabby, or part of it is broken. That's a liability issue. But not talking about that part right now. But it's looks broken, or, you know, the units need painting, but the board's gonna put it off for another four or five years, because they're just afraid to spend the money or this particular board is afraid to spend the money. And what can happen and this is very common, is believe it or not, your home values can actually go down based on how it looks and the and honestly the happiness of the people around there. And who live in there. The association that I was on that on the board of I was speaking about, overall, the homeowners were very happy, the place look terrific. We all I mean, and it was very complicated landscape wise, lots and lots of little things that had to happen. And overall, it just worked well. But that was because that board was not inert. They were willing to step out and spend the money that they had they had it in reserves, because they put the money in reserves as they should. And it just and everyone was generally happy. Now I know that that may seem like an oxymoron to some people, but generally happy homeowners association. But it's true, though. So I so I think if you talk about inner ones, I think that's common, and mostly because the board is probably confused on what their role is. They were afraid to make decisions. They don't know, or they don't know how to make the decision among themselves. Oftentimes they're leaderless, you know, it's just a rudderless leader list or someone who's the president or some not, no one is acting as chair. And, and just leading them down this way. And I think fear is a lot of a problem there. But oh my god, if we spend this money, Robert, you know, this had associations there. You know, they're just they look at those 40 or 50, or$60,000 expenditures. And for a lot of people are on boards, they may have never had that experience of having to other than maybe buying a house or buying a car. That's the most expensive things they've ever purchased. And in a lot of places, you know, 60 $70,000 people aren't paying that for a car. I mean, most people don't. So that's to them. It's visceral. What's like, this is hard to do. I mean, I think Robert would the first time you bought a new car, how old were you? How many years ago was that?

Robert Nordlund: 19:33

I was newly married, and my wife and I brought used cars into the marriage. But we were expecting a child that we needed a four door car. He gave us had two door cars. And that was Yeah, that's a lot of money. We had a budget number and yeah, we found out it was going to be more expensive than we anticipated. And that's, you just realize, okay, life is expensive. And I think that's maybe one thing that we have to make clear, let's remind people that owning real estate is expensive. And you're not going to have success by slashing the budget. If you buy a house. And you just say, I'm not going to fix the roof, I'm not going to paint the fence, not going to paint the house, I'm not going to fix the landscape, I'm not going to fit, your your home value is going to go down and down and down. And you may have saved hundreds or a few $1,000. But the real money is made by maintaining the home and letting it increase. That's that's the big money with homeownership. And so they're missing. They're missing the objective here. And we're talking about not just one home, but the homes of 50 or 100 or 500 people were how the

Julie Adamen: 20:49

5000 people or 5000. Yeah, those kinds

Robert Nordlund: 20:53

of things. So yes, the board has a and you've mentioned it before the board has a personality, they like to do this, they are stronger in this and weaker in that. And it may be a leadership issue. It may be different types of things. But those are the characteristics. And so the board has a personality now. There's different types of it. There's people who don't care, the people who don't invest the time, I think about the board members who got on the board, because they thought How bad can it be? It's one meeting a month.

Julie Adamen: 21:25

And they I'm so sorry if that's how you got on the board. But if you're not the Lone Ranger, that's pretty common. Yeah. I was there. Be aware of the cocktail party before that happens.

Robert Nordlund: 21:36

Yeah, just crazy. I really thought if those nice people were running the association before me and asked me to be president, then I could do it. And that was when I was a young professional working hard at my my first real job. But dysfunction is a real thing. We don't want to make this into a complaint session. We don't want to make us into a top this on who has the worst, dysfunctional board. But we'd be here for hours, we'd be here for hours. And that's what this whole podcast would turn into. Yeah. But we want to find ways to help people have solutions. So let's take a quick break, and hear from our sponsors. And we'll be right back.

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Robert Nordlund: 22:50

And we're back. And I'm here with Julie Of course. And we're talking about dysfunction. We talked about inaction. Let's talk about some other things. What about the proactive things that are going on that are really wrong? Julie, can you take that ball and run with it? Yeah,

Julie Adamen: 23:08

you know, usually those type of things our the board will or the stronger board members or member will push through probably something having to do with their own agenda. Maybe the reason they got on the board was to make sure that all of the flowers are white, I actually had a board member many years ago. That's why she got on the board because she thought all of the petunias should be white. This was a ginormous project. But that was her agenda. And it's it's either that or it's Oh, I play pickleball. And I want those courts perfect. And though they really are okay, and other things need to be done, but they're doing it for their own agenda. It's also that's also pretty common as things happen. So we're doing things like Robert had talked about earlier, oh, I'm gonna hire my brother in law to do the landscaping. And I might be taking a little schnitzel off the side there. So those are pretty common things that happen. Yeah,

Robert Nordlund: 24:03

I'm, well, I think there's also maybe some healthy tension that somewhere in the middle, I'm thinking now of a client of ours that has horse property. And they also have tennis courts. And so that community is pretty evenly divided between the people who get dirty and smelly working with horses and like trails, and the other people who dress up nice and go to the tennis courts and sip their iced tea in between sets. And that's that's two different kinds of people. So sometimes there's healthy tension, but the dysfunction is when things just aren't going I think of misuse of power. I think of the board members who are maybe undermining the board's authority by saying, Well, I didn't vote for that, or maybe making improper suggestions. And we may hear from Kevin Davis in the future about when those kinds of things happen, what what happens, but misuse of power, trying to well not having an open election, or if someone does run for the board, they happen to lose the application, or they deny the application for some crazy reason. There's just those things. There's,

Julie Adamen: 25:21

there's just It runs the gamut. I mean, it really does have of how things can go off the rails. I think you touched on one that I just want to dress really quickly that I talk about it in my classes, my board member classes about speaking with one voice. And you know, when you're on a board, just and and homeowners and other board members be aware of this, that when when a board makes a decision, let's say it's a five member board? Three, say yes to say no, the two that say no, absolutely disagree with what the board has done. And let's say it's not illegal or immoral, it's just something they don't want. And if those two board members go around, doing this to the other homeowners, they you undermine the entire board, and you undermine the board's integrity. So speak with one voice, that doesn't mean you have to think that way. But when you walk out of that meeting, for you, who were the dissenters, you're like, I did not agree with it. I did not vote for it. But we did it and we're moving forward. And then Zipit, because that's not the only thing that's going to happen in your timeline on the board. And you don't know what's going to happen a week now or two weeks, or a month from now that you're going to need to come together as a board. And if you undermine individuals, individuals you live near, that's a big problem for every panel.

Robert Nordlund: 26:40

Yeah, well, you're not always going to get your way because it is a collaborative, and it's arguably a democratic process. And hopefully they have a vision and mission that is a higher authority. And the majority says, Yeah, we are a peaceful community, therefore, I know everyone likes pickleball. But it's just noisy. And so therefore it doesn't fit. And you could have a three to two against converting one of the tennis courts short, pickleball. Court. And that's that's the way it goes, you have to appreciate what are we trying to accomplish here? Well, what does? What does a board member do if they are on the board? They're the one in five. That is always the minority vote on the board. Sometimes that happens, just because they have a different vision for the association. But what if they see a majority of four that has been on the board for last 10 years, is always late with Financials sometimes skips a few months of financial reports. That starts to smell fishy. And the board only ever lets one new person onto the board. What does a person do? Is it dangerous for them to? I'd want ask us without asking a legal question. Is it dangerous for them to continue being on that board? Or what can they do to make progress at their association?

Julie Adamen: 28:04

Well, I that's without specifics, it'd be hard to say. But you know, there is a process about getting other people on a board. And if you are if that person is the minority, and they and their opinion is shared by many others within the community, then start lobbying people to run for the board. Yeah. And it usually people end up on the board a long time because no one else will volunteer. And I think I would impress upon if I was that person, I would be knocking on doors, people I knew who thought like I did, and they wanted to make some changes on that and just said, Look, if we don't do it, who will? If we don't take care of it, who will? And it's it's kind of a civic duty to act, it is a civic duty. Thank you. It's not, it's not easy. I'm not saying that. So I would say there's that you can always try if there's a liability issue in there. You will I mean, you're certainly covered by insurance. But I think as a board member, maybe I wouldn't want to be on that board, that would have to be something very specific that I would resign over. I also wouldn't be afraid of pseudo putting in writing my concerns about what's going on to the board itself. Now, I know a lot of board members or people who would say, Well, I'm going to send it to the membership. I'd be cautious on that. But I think putting your concerns down in writing would be great. Maybe asking them to be putting the minutes that would be a fee if they would put them in or not. You know, you asked that that written thing is a part of the minutes not to writing down the whole thing in the minutes. But definitely having something to file and and that you sent it to everyone may be helpful. It's better to try and collaborate than to be a rogue person coming in and you know, it's slinging arrows. That just doesn't make you any friends in general. So it's a difficult position to be in. But I think the first thing I would do is try to get other people on the board, those long term board members can often be a problem. But But again, like I said, usually they're there because no one else will do it. Yeah.

Robert Nordlund: 30:17

So if you can get other people now and think back in my experience, when I became president, I started thinking, Who would I like on my team? And I literally lobbied other people. And because there's often not a lot of other volunteers, there's a fair chance that those people can get elected by the association overall. And yes, it's going to cost some time. But I'm telling you, I sold my unit for a healthy profit one ended up selling my unit. And that was the reward. And I got effectively well paid for my time as a board member because of the increase in home values that I got.

Julie Adamen: 30:56

That's a great way to think of that. Right. And to put that, and that's a fine point on it, too. And to your point, that board I was on that I had a rental where we made a very healthy profit on that house. That was that that neighborhood is so desirable, people were waiting for houses to come up to buy just like that.

Robert Nordlund: 31:15

Yeah. Well, as we lead out this episode with your association attorney should be on your team running for the board. In some states, there's a state ombudsman, Julie watts, do you have an opinion on the state ombudsman?

Julie Adamen: 31:29

My understanding is I mean, in the States I have lived in, we didn't have that. But my understanding is that sometimes they could be quite overwhelmed. It's like there's really not there's like an arms, but one person dealing with a lot of problems. So there's that. I? I don't.

Robert Nordlund: 31:49

Okay, I'm with you on. Yeah. So from a state's point of view, associations are small businesses, small nonprofits, and they are inclined to you guys work it out. That's your internal problem. Don't you have governing documents? Don't you have an attorney? Don't you have wise counsel from your professional manager might not be as don't make state ombudsman, your first choice and only choice.

Julie Adamen: 32:15

It's not your crutch. They're not a crutch. Not your crutch,

Robert Nordlund: 32:19

good management, where you have professional management, where you have credentialed management, where they know what they're doing, it's worth the money that you pay for it, you're gonna get wise counsel, they're going to come in and be the voice of reason, to help the board move forward to take projects out of the board's hands. Again, it's going to cost a little bit of money. But that's money well spent. What is it? Is it 10 bucks a door per month, something like that, it's it gets a couple, couple nice cup of coffees, it's less than a cost of lunch per month to have professional management per door. So that's money well spent. I have a feeling that we could go very deep in this. And I believe we will spend more episodes on this. We look forward to your feedback as the audience on this subject where you'd like us to go. It may be just a I don't want to say a flaw in the community association housing model. But it is definitely an opening for problems. We have volunteers trying their best. But they are, as you all know, underpaid, they're people. They're people, they're under under paid under trained. overworked again, we're trying to encourage and equip here as much as we can't. So if you have some feedback, please give it to us. We're here to help. Well, Julie, I look at the time. And as always, I thank you. It's great talking with you. Any closing thoughts as we've opened up this whole idea about dysfunction? Yeah, you

Julie Adamen: 33:52

know, I think maybe in the coming episodes that you and I speak, Robert, I think what we should do, and we've talked about this before, is come at this from the macro first. And I think a lot of boards are dysfunctional, because they really don't know where they're going or, or why their existence. So I think we could go into mission and vision statements and core values. And a lot of people may go oh, that's different as HOA Yes. And let me tell you, it works. It works when everyone is at least in the same church, they may not be in the same pew but they're in the same church they at least know where they're going and that can help alleviate dysfunction. So we should talk about that. Yeah,

Robert Nordlund: 34:35

I think we touched on that in earlier episode again you can we have www.HOAinsights.org. Look at the episode titles and we talked a little bit about that. That's that overarching umbrella of what are we here for? What are we trying to accomplish and that can bring a board together and help

Julie Adamen: 34:52

put some bring the community to yeah community and to

Robert Nordlund: 34:56

and put some ointment on wounds when there are divided boards And they could say that, you know, we may not all exactly agree. But we are moving this association forward towards this higher objective. We hope you learned some HOA insights from our discussion today that helps you bring common sense to your common area. We look forward to having you join us for another great episode. Next week.

Announcer: 35:19

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