Kevin Davis: 0:00

It's a job that, if you look at and say, You know what my job is to act in the best interest Association, but what I really want to do is increase the value of my association. If I believed, if they're worth $100,000 I wanted to be worth $110,000 I wanted to be worth more than a community association across the street or down the street or a mile away. And if that board goes in there and say, This is our job, then it's easier to make decisions. And the likelihood of not making a decision or turn your head or putting your head in the sand, or kicking your head, kicking the can down the road, is avoided all the way.

Announcer: 0:35

HOA Insights is brought to you by five companies

that care about board members: 0:37

Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You'll find links to their website and social media in the show notes.

Kevin Davis: 0:51

I'm Kevin Davis of Kevin Davis Insurance Services,

Sherry Branson: 0:54

and I'm Sherry Branson of Kevin Davis Insurance Services, and this is HOA Insights, where we promote common

Kevin Davis: 1:00

sense for common area, and welcome everybody to episode number 153, where we're talking to right now. Sherry Branson, my co host, for how many webinars we've been doing over the past? How many years? Kevin, we have dozens.

Sherry Branson: 1:15

We definitely have dozens of webinars. We have a whole library going back about 14 years. So we've done webinars about every topic imaginable, related to community associations, Rick claims, risk management, the policy, the dino policy, really just everything under the sun. Cyber. So it's fun to do a podcast for a change. Kevin, we haven't

Kevin Davis: 1:34

done in a while. I've been trying to get you to go to these, one of these things for a while, and I'm glad I talked you into and guess what? We're gonna do another one next month. Also we got we're gonna do better. We're gonna do back to back ones.

Sherry Branson: 1:43

Great, fantastic, looking forward to it.

Kevin Davis: 1:45

But this one, we're gonna talk about something really special that's really going to impact the podcast listeners. And that is how no decision is a decision.

Sherry Branson: 1:55

Absolutely. A lot of people don't realize that, Kevin,

Kevin Davis: 1:57

and that's what. And so we're gonna do, go into what, how much it costs, what's it about and why and what stops them from making a decision as always. If you miss any prior episodes, you can find them at WW, W dot Hoa insights.org, on YouTube or your favorite podcast platform, and those you watch on YouTube can see, we have a special HOA insight mug here. I love it. Kevin, that's a

Sherry Branson: 2:24

great mug. Yes, got it from merch store. They can get them in the merch store. Is that where they can get them?

Kevin Davis: 2:30

Yes, yes. You got to get one, because you're going to be one of my regular people. You're not gonna be talking a lot on these podcasts over the next couple of years. So you got to get one. And there's other free stuff in there, yeah, like zoom backgrounds, but go there and you'll find really some great things in there. And we also love hearing from you. If you have a topic like for us to address, you can reach us through our website or on the show notes. But today, program is about leadership under pressure. What happens when issues sit unresolved, how boards can approach difficult decisions more confidently.

Sherry Branson: 3:05

Great topic, Kevin, great topic, and you know, you've been working in the community association industry for decades. Save you lots of experience. What do you think is the number one reason why board members are indecisive, why they don't, they don't make decisions. You know what?

Kevin Davis: 3:23

To me, there's a lot several reasons why, but fear is the number one reason why they don't make decisions. They're afraid because they make a decision, and if they're wrong, guess what's going to happen? They're not liked anymore. And being liked is a really, very, very important item if you're in the community association, board of directors, and that's the problem we when we talk about in decisions, board members of community association understand one thing, that it is your job to make decisions. It is your job to run the association, to manage the association, to make sure that the people who are living there is just feeling a little bit better about the association then the association next door. That's all you want to do. You know, there's a lot of community associations out there, and the bottom line is, is that, you know, we want to make sure that ours association is well respected, that's doing its job, that's managing its best of its

Sherry Branson: 4:16

abilities, absolutely. And it's a fine line. Kevin, where they you know, of course, the board members want the best for their association, and so do the homeowners. They want it to look nice. They want the landscaping to look great and things to be maintained as they should be. But that does cost money. So, you know, sometimes you know the association, the board members might you know, if a poor decision is made or delayed decision, though, you know those two things can happen, and board members are nervous about making any decision. Basically, you just hit the

Kevin Davis: 4:48

nail on the head. We talked about decisions about money. That's probably the number one area when we talk about indecision. Indecision happens when it's about special assessments. Increase. Increasing assessments, you know, have to build, build a fence, or fix a fence, or any kind of repairs whenever that has to be done, the first thing the board does is make no decision,

Sherry Branson: 5:13

unfortunately, and you know, Kevin, from a fiduciary, from a money standpoint, if the board member fails to act, does that carry the same weight as if they made a bad decision or a poor decision or important decision? Are they

Kevin Davis: 5:29

the same? You know what? It's good question, because when we talk about boards, has a fiduciary responsibility, that means they have a job to act in the best interest of the association without conflict of interest. So now, if you're talking about boards who fail to make a decision, that means they're not acting in the best interest of the association, that's the bottom line of we know every association or every these meetings, we talk about breach of fiduciary duty. The number one claim that we see in DNO for community associations is the board breach their fiduciary duty, which means a board failed to act in the best interest of the association. So when you're talking about it's my turn. I'm the board president, and my number one job is to look and see I have a reserve study. And a reserve study tells me that I have to increase the assessments, you know, 10, 15% more so that I could comply with my reserve study. Now if I choose not to do it, if I say, You know what, I'm not going to do it, because if I do that, unit owners will be mad at me, okay, and they don't like my decision, therefore I'm going to not make a decision or just ignore it for now, I'm only going to be on this board for another 12 months. The new board it's gonna be their problems. Now, guess what happens when that new boy gets in and they find out that I, who was on the board for the past 10 years, fail to make that one decision

Sherry Branson: 6:52

right, which could be a huge decision, the garage might be deteriorating, or the foundation or the roof. I mean, these are major decisions that cost a lot of money, but also can basically snowball and get worse as time goes on. Could somebody be sued? They could be sued for this, right, Kevin, if the new board comes in and says, Wait a minute, you guys were supposed to fix that roof or fix that foundation, and now it's going to cost double the amount to fix it than it would have cost five years ago.

Kevin Davis: 7:20

And that's the whole point. That's again, we talked about indecision. You see, I would rather to get the research done and say, Listen, the decision is to have a special assessment of $50,000 okay, that way we honored our fiduciary responsibility. Now we know the people not going to like us. They may vote us out. They may say, Guess what? We don't like the job you've done. Realistically, that could happen and has, and it happens more often than not, because again, if I'm the board president and I look at my reserve study, my reserve study says my roofs are going to be need to be placed the next five years. We're going to need x number of dollars to do it. I have a fiduciary responsibility to make sure that I honor it, because if I don't, what's going to happen to me now, all of a sudden, I refuse to you have a new board of directors involved. I guess that new board is going to want to do, and that's hold me responsible for a decision I didn't make three

Sherry Branson: 8:15

or four years ago. Absolutely, absolutely. Yeah, so it's really just makes the situation basically worse. And, you know, Kevin, with this, we were just talking about like deferred maintenance, because it could be expensive, it could be a large special assessment, that kind of a thing. How often do you think deferred maintenance starts as a financial decision and ends up as a legal or insurance problem?

Kevin Davis: 8:36

Well, you know what I would say, deferred maintenance start off as a observation. Problem first, okay, meaning that I'm walking through the association, and I start noticing things that the association is not being taken care of. Okay, once I noticed that, and I'm a board member, and I ignore it. It's a decision I've made. I made a conscious decision to ignore, you know, certain things in there, I start noticing that there's the balcony railings are not as tight as they should be, okay? First thing you notice that the balcony railings are not as tight. Another thing you notice is this plaster falling off into my garage, okay? Or cracks appearing, you know? But again, as a board member is my I have a fiduciary responsibility to act in the best interest Association, but I walk around with blinders in my association because I see maintenance issues that I am ignoring. Now the bigger problem with that is that if I have a maintenance contract or maintenance agreement, or I have a manual, maintenance manual again, and I choose not to file the manual. So now the manual tells me that once a year, these are the four or five things I need to do if I not only see them, but I ignore them again. Am I acting in the best interest

Sherry Branson: 9:50

of the association? Yeah, you're not. If you're if you're avoiding it or delaying it, or kicking the can down the road. And you know, if they delay raising these assessments. To avoid the backlash. You know that we just talked about, what risks are they building? Kevin, what? What's building up from there?

Kevin Davis: 10:06

This is where it gets. Really gets tough for board members, because, again, I know as a board member that there's, there's deferred maintenance issues, like I just said, there's a railings, okay? And we just, we just see certain things. We see the cracks, but then we ignore it. What we end up doing is defending our position. So in other words, if the union owner, you're a union owner, and you see if something hasn't been done, guess what happens now, all of a sudden, you come to me, as the President of the Association, and say, Wait a minute. I see, look, I'm holding on the railing. Well, guess what? I think you're overreacting. You know, that really has been there for 20 years. Nobody ever fell no I ever hurt themselves to Why don't you? So we become defensive, and when the board becomes defensive, then all of a sudden, it creates a bigger problem. You know, we can't address things if all of a sudden I disagree with what you're doing. Because again, I see, I've walked around and I see we have a manual, we have a maintenance manual that says that we have to do these things, but because if I do them, I know it's gonna cost money, and it costs money, the associate's not gonna like me. They don't like me. They may throw me out, or they may hassle me at the pool, a lot of stress. Yeah, a lot of stress. And the easiest thing to do again is to do what, make no

Sherry Branson: 11:27

decision, right? It's the easy way out. Is basically the easy way out, Kevin, and you know, something I've seen before is inconsistent enforcement. So how does that increase the likelihood of discrimination, her or harassment claims.

Kevin Davis: 11:42

This interesting one was when we talk about something like inconsistent again, indecisions is bad, but then inconsistent decisions, it's just as bad as no decisions. In fact, it probably isn't no decision, if you think about it, you know, in other words, inconsistent decision is for me. Okay, all of a sudden, Sherry, you are the person everybody loves in the association. Everybody gets along with you. You can. You're a great person, and you know, you do the best job you can do. You rarely get into any complaints or anything like that. So all of a sudden, I realized that you're parking your car and visitors parking. Okay, fine, that's not a problem there. But guess what? Now, I'm Sonia, the guy who I don't like, who's on the other side of the association, right? He parks his car in visitors parking, and I don't like him at all. I'm waiting for him to put that car in there. So guess what my decision now is to say, Guess what, you in violation. You've been in visitors parking for the past 48 hours, and therefore I'm going to find I'm going to notify I'm going to penalize you now I haven't touched you at all because, you know, you're my co host. We like each other. We get along well, you know, you come in, you pet my dog, you take good care of me. So that, again, that is a no decision. So I passed on you. So inconsistent. You know, be inconsistent is another way of saying, no decision. I allowed you to get away with parking and visitors parking. Mike, who lives in, you know, unit number x, you know, he, I don't like him. So soon as he parked 48 hours, he has a violation letter. You know, he can't park more than 48 hours. So now it's been 4950 hours. He's been there. He's in violation. He gets that violation letter, and I'm going to really nail it to him, because here's a guy don't like. That's what happens when we have these inconsistent inconsistent is the same as treating some people with the no decision part, that no decision is really, really important, because again, we're mistreating people, and you mentioned the word like discrimination or bullying and harassment. Those are three things that we see more and more in community associations. Okay? Because what happens is, is that as board members, if we're indecisive, the reason why we're indecisive is because we again, if you're not, if you're indecisive, we believe that you don't want to act in your responsibly as a board member, do you? Don't forget, as a board member, you know, you are a business. You're in a business, okay? You have to make decisions. You're in the business. If you have 10 units, you know, and each unit is worth 100,000 Guess what? You have a$10 million corporation. Okay? So you got to treat it like it's Corporation. You can't walk in there and go, You know what? I'm going to treat the people who I like differently than people who I don't like?

Sherry Branson: 14:28

Right, right, favoritism, that kind of a thing and and treat it like a, you know, just like a fun kind of hobby, you know, it's, it really is a job. It's a

Kevin Davis: 14:38

job that, if you look at and say, You know what my job is, to act in the best interest Association, but what I really want to do is increase the value of my association. If I believed, if they're worth$100,000 I wanted to be worth$110,000 I wanted to be worth more than a community association across the street or down the street or a mile away. And if that board goes in there and says. This is our job, then it's easier to make decisions. And the likelihood of not making a decision or turn your head or putting your head in the sand, or kicking your head, kicking the can down the road, is avoided all the way,

Sherry Branson: 15:14

absolutely, absolutely. I think, if you know people are homeowners, understand, I mean, they're not going to be happy. I'm not saying they're not going to be happy and they're not going to complain, but if you explain clearly to them why the assessment has to happen, or why the the fees have to go up, the monthly fees, that kind of a thing, you know, if it's clearly explained to them in, you know, with documentation and stuff like that, I think that's much better than avoiding it all together, or just, you know, delaying it, basically delaying it. And that's

Kevin Davis: 15:42

what it all boils down to. So I guess what? That's a perfect time to take our break, and then we'll come back and give some more give some more answers. Let's give some more advice to people out there who really are afraid to making some decisions. So let's take a quick break, and we'll come back and finish our conversation with Sherry.

Russell Munz: 16:00

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Kevin Davis: 16:32

And we're back. So we know that indecision creates a problem for the association because we make no decision, it is a decision, so we start from there, and we talk about the three areas really talked about in terms of where no decisions are made. Is number one, when it comes to money, when it comes to money, we recognize that the best course of action is to do nothing at all. The second area was maintenance. We see things that need to be done. We have the railings out there, you know that we see that, but looser than they should be, and we ignore it because it's still there. It doesn't fall completely off. Nobody's gotten hurt yet, you know? And the third one is inconsistent rule enforcement. Those are the three areas when we talk about indecision. Those are three areas that really, really, truly impact community associations more so than any other area facing in decisions. Now, let's talk about what happens, though, when you make it just when there's no decision in those three areas. Well, we're saying right now you as a as a person lives in that community association. You're not happy.

Sherry Branson: 17:38

Yeah, I feel that repairs aren't being made. That kind of a thing, you know. Let's say, I see, you know, problems with the foundation or balconies or something like that. And I just say, wait a minute, you know, why isn't this stuff being fixed? Because people do notice. People notice and they and they know, and you know, an inspection was done, a structural inspection of the building, and it's showing, you know that's public information shared with with homeowners, and they know, you know that repairs do need to be made and it's not being done. Well, that could be a problem,

Kevin Davis: 18:10

yeah, and that's the key thing we're talking about, because we all know it's a problem. We all know that that railing is loose, you know, we all know that roofs should be repaired. And what happens is, we say we'll wait till next board comes in, or we don't believe it's our responsibility, or we just put our head in the sand. We're looking down the road, and we are seeing a potential lawsuit against us for breach of fiduciary duty. You know, I spent 40 years I've been selling insurance, DNO, insurance for board members. The number one area that we see when there's a claim against a board members is the board breach their fiduciary duty. And when you breach your fiduciary duty, it's going to be, you know, basically a like I said, it's financial enforcement or maintenance. Those are the three areas that constantly get done. So when we talk about things to help you do a better job. And you mentioned the one right off the bat was communication. Okay, communication is so important because you're giving news that people don't want to hear, right? Okay, it's not good news, yeah, normally it's not good news, you know? And normally it starts with not good news if I want more money if I'm limiting you from doing certain things in a common area, if you can't park where you want to park, you can't go swimming whenever you want to go swimming. You can't certain things you can't do. I'm telling you you can't do it. You don't like that. So the easiest thing for us to do is to ignore those things. And same thing with maintenance, we want to ignore those three things because I want, I want freedom to walk through my community association as the president, and people walk up to me and say, great jobs, because you kept the assessments low, great job. You kept the assessments low, wonderful job. Kev, you kept those assessments low. That here over and over again. But what happens is that we know the insurance rates are going up. Okay? We know maintenance rates are going. Enough we know the content to get a new roof, that hire a contractor, get the equipment cost more than it costs in any time in the past. So if you communicate right off the bat and say, Guess what, you know, our assessments will go up higher. We may need a special assessment to make some of the repairs that we have. It's going to cost money, but our goal is to do one simple thing, decrease the value of our unit over time,

Sherry Branson: 20:27

and Kevin in your you in your 40 years in the industry. You know, when you think about the most serious claims that you've seen, you talked about breach of fiduciary duty being the number one claim you've seen. How often do you know, with your recollection? Do they start with a delay rather than a reckless decision?

Kevin Davis: 20:45

We talk about a reckless decision. We can't determine when a reckless decision is in other words, a decision is a no decision is a reckless and no decision is couldn't be a reckless decision. In other words, the board of directors has a job to make a decision. Yeah, okay. And that decision is well thought out, okay, but to you, it could be reckless. In other words, a reckless decision. Can say, Guess what? We need to increase the assessments more than it's allowed by law, okay? Or we need to have a special assessment, a special assessment to repair the roofs. That special assessment may be for you reckless. You can say you, who live in unit number 52 say, Guess what? This is a reckless decision on your part. There's no way in the world that that roof should cost that much money. I believe that you're getting kickbacks. I believe you having special, special treatment done, and that's the reason why it is a problem. So we should just open up another can of worms. There, Sherry, in the sense that as board members, you have a job to do. And again, if you act in the best interest Association, you don't care if somebody in unit number 32 says, Guess what? I believe your decisions are reckless. He goes, guess what? I did the best job I can do again. Number one, we communicated that's really very, very important. The second one is, get outside advice. Get advice,

Sherry Branson: 22:09

absolutely professional advice. Professional advice.

Kevin Davis: 22:12

Yeah, getting a reserve study done. You know, don't go up on a roof and figure out that. Guess what? This roof should last for another five to 10 years. Get a reserve study.

Sherry Branson: 22:20

If you're not a roof expert, don't try to do it yourself. Don't try to do it, you know, say, oh, I can figure all this out. No, you know, hire the professionals, the reserve specialists. You know, all the

Kevin Davis: 22:31

professionals out there that specialize in community associations, bankers. There are bankers out there that teaches you what to do in your reserve account to make sure that you don't end up putting it in a bank where it can lose because you put in the wrong bank. Get experts. I'm glad you talked about that recklessness, because when somebody says, when you say, that was a reckless decision, I want to say, Guess what? It was decision based on the information that I have and my information I have is from experts in the industry. I got experts in the industry, guess what you can do? You as person lives a unit who's upset with me because I increase the assessments now more than allowable by law, or I want a special assessment that you feel is reckless, then guess what happens? Now, I'm feeling vindicated because I'm being sued now, okay, because of my quote, reckless decision. But the bottom line is, is that I've done my job. I communicated to you. I've used experts. And here's the final thing I love to do. I give piece of advice to is kindness. Okay, if you act in a kind way, people will be more responsive

Sherry Branson: 23:39

to you. That's true. Yeah. I mean, you're, it's a very difficult, it's a challenging job being a board member, you know, and, and I know some people want to be popular and want to be well liked by everybody in the community, but I think if it's if the news is presented in such a way where it's not, you know, antagonistic or not, you know, not hostile, just like a, you know, in an in the right manner and the right tone. I think it can be, you know what? I mean, it's still going to be difficult, but I think people will understand more. They'll definitely understand more. And we

Kevin Davis: 24:12

live it in the world too, that right now, that we are heightened right now, we all feel uncomfortable. We all feel like, you know, we stress, lot of stress, exactly, lot of stress. I always said, like a low level depression going on because, you know, it's these are challenging times we all living in. So if all of a sudden I'm saying, guess what? We need a special assessment. If you pair the roof or repair some the common area, and you are saying, wait a minute. I you know, I believe it's reckless. I think it's a reckless decision on your part. Now I have two choices. I can say, Who are you to tell me is reckless or not? Or I can go, guess what? Lower my voice. Guess what. I'm sorry you feel that way. Sherry, I've done my research. I have professionals out there who told me that this is our best course of action, you know, sorry, you feel that way. So. Now, all of a sudden, I can't control how you feel. You can still believe it's a reckless decision on your part, but I maintain some control on my part. I'm treating you kindly rather than arguing.

Sherry Branson: 25:11

You're just saying. I'm going by what the professionals are telling me is the best way to go, the best route, and to keep the value of your property. Maybe you know, to talk to them about the fact that you're you want to preserve, preserve the value of their property, and the whole Association as a whole,

Kevin Davis: 25:29

that's it. So that's what we're doing there. So we're talking about answers. And guess what? We're coming to the our time now. And I think that's some of the key things we need to talk about, you know, in terms of answers, breach of fiduciary duty is the number one claim that we see as insurance professionals. And breach of fiduciary duty is you did not act in the best interest of dissociation, and we don't act in the best interest associations. Usually because a you're you're afraid of the financial part of it. You don't want to ask people for how much money it cost. It costs, or you don't want to be upfront. On a financial side, you don't want to enforce the documents correctly so you don't enforce them. Guess what happens? You have things like discrimination and bullying and harassment, and a third one is maintenance. If you don't maintain the building, guess what happens to the value of my unit in my quarter million dollar Community Association, unit I live in is now worth only$200,000 so guess what you've just done? You've reached your fiduciary duty, because I've lost $25,000 on my unit, right?

Sherry Branson: 26:34

Yeah, people, if they think of the big picture as as a homeowner, they'll realize, oh, this makes sense, because they're trying to help me keep the value of my property in everybody's property. They're trying. They're doing the best they can as board members, yes.

Kevin Davis: 26:49

And so the answers are like we said, communication. Gotta Communicate. Communicate in a kind way. That's it. Communicate in a kind way. That way you lower the temperature, you make people feel that they matter, that they're important, and what their issues are, are important to you if they're if you do that, it happens to be able to talk to somebody who says, Guess what? You just made a reckless decision. Just by saying reckless, you know, it brings up the you know,

Sherry Branson: 27:18

it brings up the height. Get defensive. People get defensive. Yeah? Defensive. You're accusing somebody of doing something.

Kevin Davis: 27:24

Yeah? And as a board member, what we don't want to do is get into a fight or get into a battle. What we want to do is lower the temperature. Look at the person and say, I'm sorry you feel that way. But guess what I've done? I have experts, professional experts, that guided me in terms of what we need for the next five to 10 years, exactly.

Sherry Branson: 27:44

That's the perfect way to do it, the perfect way to do it. Just explain it in a very calm, low key way, in not try to, you know, bring the temperature up, kind of bringing the temperature down. Yes.

Kevin Davis: 27:56

So guess what? I think this is good. I think that's a good ending. I think that I think we did good on anything you want to add to what you said. What do you think?

Sherry Branson: 28:03

You know, I think it's a great topic. Kevin, and I think a lot of board members will get a lot out of this and realize that if they just don't try to look at it so much as a popularity contest, you know, and treat it like a business, I think that's the key. I think that's really the key. And to be like you said, kind about it, and just presented in such a way that they're working in the best interests of the homeowners and of the association. And I think everybody would, you know, as a homeowner myself, you would, you would understand, you know what? I mean, it's not to hurt somebody. It's not just for for the heck of it, you know, to write to raise the condo fees or the HOA fees, is to help them, basically

Kevin Davis: 28:45

to help them out. You nailed it. So listen, join us again next week for another HOA insight, where we promote common sense for common areas and Sherry, we'll see you again in a few more weeks, but we'll see you definitely for our webinar. So look forward to it. Look forward everybody. Thanks a lot. And take care. Thank you.

Sherry Branson: 29:04

Thanks, Kevin. Take care everybody. See you soon.

Announcer: 29:10

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