Have You Started Your 2021 HOA Budget? Here Are Three Steps to Start Your Planning
The end of the year is approaching fast, which means it is time to start your 2021 HOA budget. You should start your HOA budget process now to give your HOA enough time to create an effective budget for next years. There are some essential items, documents, and steps to take to prepare for next year’s budget. While each HOA is different and will need certain unique provisions, there are starting points to help any HOA initiate the budget process. Below are a few steps to set up your homeowner’s association for success when creating next year’s budget. Step 1: Create a Timeline The budget planning process is a complex activity that must start early so the budget can be finalized and approved prior to the beginning of the new year. Creating a timeline will help your HOA stay organized and on track. The first task on your timeline should be collecting necessary documents and materials, if you haven’t already done so. This can include your HOA’s reserve study, contracts and vendor agreements, operating expenses, and any other financial documents you have. The next item on the timeline will be the actual construction of the budget. This will require the planning of meetings, creation of a physical budget document, and finding where you can cut costs, or where you may need to have increases. Constructing the budget can be challenging. It may be worth considering finding an HOA management company to assist you with the details and structure of your HOA budget. The last part of your timeline will be reviewing your draft budget, making any necessary last-minute changes or provisions, and then finalizing and distributing the budget. Step 2: Define Community Goals Your HOA goals will largely define what must go into your budget. What do you want to accomplish in the upcoming years? For instance, if your community is planning to install a new playground, factor that into your budget. If it is an expensive undertaking, you cannot just drastically increase HOA fees. A good idea would be to dedicate a certain amount from HOA fees to the project, and allow enough time to save up for it over a period of a few years. Remember, community goals come from the community. These are not objectives your homeowner’s board alone can decide on. A good practice is to survey residents before your budget planning session to gather information. Then, assess these goals and identify which ones are worth pursuing. Step 3: Anticipate Expense Increases and Contact Vendors There will be unavoidable expense increases every year. This is something you need to anticipate and expect when planning your budget. A good way of determining what some expense increases will be is by contacting your vendors. Contact existing vendors to find out what their anticipated increases may be for the coming year. Examples of these operating items include contracts for landscaping, pest control, pool maintenance, etc. Another area to look for possible increases is within your maintenance and utility expense. You can contact local utility companies and they will tell you what their increases will be for the next year. You can also use historical information to compute the estimated annual expense. Once you have completed these three steps you should be able to begin your HOA budget. If this is your first time constructing an HOA budget, or if you would like some assistance in taking some of the stress off you and your HOA board, consider hiring an HOA management company. Atlantic and Pacific Management offers a full spectrum of HOA management and customer support services in San Diego County. A&P can review all your HOA needs including assistance with your budget. Reach out and see for yourself how A&P can help your HOA become more successful.
Reviewing Vendor Contracts for Your HOA in Current Times
Have you recently reviewed your vendor contracts? Revisiting vendor contracts can be very important, especially in ever changing times. There are key items you want to look for such as liabilities, how to reduce the risk of litigations, and most importantly, making sure the needs of your community are being met. With the rules and regulations of the country changing as quickly as they are, many of your vendor contracts could be out of date and need refreshing. Let’s review some important information you should look for in your vendors contracts. Start Internally Before diving in and pulling out all your vendor contracts, start by evaluating your HOA and community. Review your goals and conduct a SWOT (strengths, weaknesses, opportunities, and threats) analysis. The world is changing fast, and your goals and visions may be changing as well. Consider any threats you might not have thought of in the beginning of the year, as well as strengths that your HOA can thrive from. Once you’ve determined your goals for the rest of the year and conducted a SWOT analysis, you should have a clearer idea of what you’re looking for in a vendor. Reviewing Contracts There are several essential items to look for when reviewing your vendor’s contract. First and foremost, make sure their goals align with the goals of your HOA and your community. The work the vendor is guaranteeing should meet the expectations of the HOA, and in a timely manner. Timing A good contract will detail relevant time frames and answer the following questions: (a) When does the contract become effective? (b) What is the deadline for completion of work? (c) How long will the contract remain in force? (d) Are party notification requirements time sensitive? (e) Is the contract auto-renewing, and if so, when, and for how long? (f) Do material terms (i.e. price) change throughout the effective date of the contract? Review current contracts to ensure jobs are being completed on time and that you are not overpaying for services. Also, check to see if any contracts are expired or about to expire. This can be an opportunity to restructure the contract to meet any new needs of the community. Liability Between pandemics, changing government regulations, uncontrollable acts of nature, protests and riots, or any other unanticipated event, there are a lot of things that could prevent a vendor from being able to complete their work. In the case of this you do not want to be responsible for paying the vendor for work that they were unable to complete. A force majeure clause will cover any of these incidents. Merriam-Webster’s Dictionary defines “force majeure” as “superior or irresistible force” or “an event or effect that cannot be reasonably anticipated or controlled.” Force majeure clauses are designed to relieve a party from penalties for breach of contract when circumstances beyond the party’s control render performance untenable or impossible. This will protect both the HOA and the vendor. Litigation and Attorney Fees In the event there is a contract dispute, you want to make sure you are covered. Contract disputes can become very expensive to litigate. Often, litigation expenses can prohibit a HOA from seeking court assistance to enforce contract terms. To prevent this, a good contract should include attorney’s fee provisions. This will allow a prevailing association to recover court costs, expenses, and attorney’s fees. Having this in the contract will also help avoid the situation all together, since the vendor will not want to have to cover fees if this event were to arise. We can help! Atlantic and Pacific Management can offer expert advice and assistance to help you review vendor contracts and make the best decisions for your HOA. For more information, or anything else HOA related, reach out to Atlantic and Pacific Management.
Best Practices to Managing Your Vendor Agreements
We have passed the halfway point of the year, and your midyear budget review is complete. While reviewing your budget you may have noticed some expenses paid to vendors, or realized you need to hire vendors for community projects like maintenance, road and sidewalk repairs, landscaping, and more. Now is a great time to review, assess, and manage your vendor agreements. If you have any vendor contracts about to expire or a job you need to obtain vendor bids for, how do you choose the right vendor to get the best work done within your HOA’s budget? Let’s look at ways to hire the best vendors for the jobs. Scope of Work The first step in finding the right vendor is to clearly define the scope of work needed. For example, if your HOA wants to add speed bumps to the community, when creating a proposal for vendors to bid on you want to provide as much detail of the project as possible. Include how many speed bumps, what size you expect them to be, where they should be placed, and a date you expect the work done by. This will help your HOA and the bidding vendors to meet expectations on both sides. By providing a detailed scope of work to bidding vendors, your HOA should be able to avoid unexpected costs or having to have jobs redone later on. Choosing a Vendor Now that you have bids and vendors to choose from, it’s time to pick the right one. A good first impression is always important. Pay attention to how the vendor presents themselves and their company, how they maintain their equipment, and how much professionalism they show. Also make sure they have all the necessary paperwork needed. The vendor should have all certifications, licenses, bonds, and insurance that is required by your specific CC&Rs. It’s also important to ask for the contractor’s tax ID number; this information is necessary in order for them to get paid. Don’t just look for the lowest bid or best offer. Research each vendor you are considering. See if they have good reviews or references you can contact. Make sure they can meet the expectations and that there won’t be any hidden costs or expenses. Lastly, make sure the vendor has adequate insurance to cover any incidents that may occur. Review the insurance policy of each contractor to make sure it covers potential damages incurred during their job. Also verify that the contract contains a guarantee by the contractor and that their insurance will protect the association’s assets should circumstances arise. This will protect your HOA and relieve them of liability. Need assistance? For more assistance in finding the right vendor for your community and your budget, Atlantic and Pacific Management can help you assess vendors and work out all the precise details. For more information, or anything else HOA related, reach out to Atlantic and Pacific Management.
How to Start Preparing Your Reserve Study
What is a reserve study? A reserve study outlines a stable, equitable, and proactive Annual Funding Plan to offset your community’s long- term and often costly expenditures. A study made of all the major capital systems in the association, it evaluates how much life they have left and how much they’re likely to cost when they wear out. From that, you can calculate how much money the association has to set aside each year to have enough to replace those items when they do wear out. How to Start Prepping Most states, including California, require associations to conduct reserve studies. These studies can be time consuming and costly, so making sure you properly prepare everything needed is a key to conducting a successful and accurate reserve study. Three areas to start your planning are: 1. Creating a Component List: The reserve study should contain every single component the association has, and it should be as detailed as it can possibly get. This can include roofs that will soon need replaced, surfaces that need to be painted, roads that need to be resurfaced, communities’ updates, etc. Be sure to come up with the most accurate estimates possible for each component. 2. Calculating a Reserve Fund Strength: Reserve fund strength is a calculation comparing an association’s Actual Reserve Balance to its Fully Funded Balance. To get this, take the estimated replacement cost and divide it by the number of years the item is estimated to last. That number is the amount you should reserve each year. Then compare the amount needed to be reserved with what is actually being reserved and see if what is being reserved is accurate or if adjustments need to be made. 3. Creating a Funding Plan: Create a custom funding plan detailing annual reserve contribution, avoiding special assessments when possible. Creating this plan will help stay on track and reduce the potential of running into unforeseen costs. Be sure to check your G/L to make sure you have coded your payments to correct accounts so you won’t have to redo it when it comes time to do your budget. Need assistance? Creating a reserve study can become more complex the deeper you dive into it. Having an expert assist you is a great option to relieve some of the stress and time that comes with putting a reserve study together. Atlantic and Pacific Management can help you asses your assets and components and create your reserve study. For more information, or anything else HOA related, reach out to Atlantic and Pacific Management.
TIPS FOR RECRUTING HOA BOARD MEMBERS
One of the best ways to enhance your community and make it the best that it can be is to volunteer as a member of the HOA board. Becoming a board member can take up a lot of valuable time, but it is worth the investment. Finding people willing to volunteer is challenging, especially when it comes to the HOA board. For community associations, member involvement is crucial to providing responsible and successful management of the HOA. Here are a few tips for recruiting potential HOA board members. Appeal to the Specific Talents of Your Homeowners Sometimes homeowners may not be getting involved in their community because they believe they do not have the right qualifications for the job. However, an HOA board needs people with a variety of skills. Find people in your community who are skilled in construction, design, information technology, or gardening and appeal to their specific skill-set to help get them involved. Direct Complaints into Participatory Roles Sometimes your community may have members that “lightly suggest” a lot of items to your board. While some may see this as complaining, your board should see this as a future recruitment opportunity. These suggestions are all being directed to the board as a means to improve the community. Invite your passionate residents to come aboard and get involved with the development of your neighborhood. An active, caring hand is always important on a board or even a committee. The fact is that if a particular community member knows enough to complain, then they are paying attention to the board and its actions. Provide Low-Commitment Positions Some homeowners are hesitant to jump into the board because it is too much responsibility all at once. What if they did not like being a member? One of the easiest ways to gain lasting support from this type of person is to get them involved in low-commitment activities or positions that can encourage a small spark to become a flame of enthusiasm. Committees are a great start for the hesitant resident. Provide Education for Homeowners In today’s busy world, a majority of community members are working hard to make ends meet and to juggle family obligations. Out-of-site, out-of-mind complacency is not unusual when it comes to HOA boards. To recruit new members, the board should consider “tooting its own horn” in terms of sharing success stories and highlighting accomplishments. The board could then advocate the need for community involvement. Newsletters, social media, and community events are great ways to call attention to the importance of HOA boards and the need for strong, contributing board members. The Importance of Recruiting HOA boards conduct important community business that requires knowledgeable and involved community members. Being a board member comes with serious responsibilities, including fiduciary oversight. Existing board members have enough on their plate and adding recruitment of new members may seem like a daunting task. Recruiting takes time and effort but as members become complacent, board members must not. Investing time in learning more about the expertise of your members, identifying those you want to encourage, and deciding your method of approach are all vital steps to assembling a great board. Boards do not have to go it alone; HOA management services, tools and guidance are available. Start improving your recruiting methods today by implementing the ideas listed above today!
Helpful Steps Creating Your HOA Budget
Prepare a Business Plan What do the board and residents want to accomplish, as a whole? Adding Amenities (e.g. playground or security gate) can be costly, or a luxury. Residents may instead want a budget that enhances the current property at this time Develop processes & Assign Tasks The goal and objective of the association have to be reviewed, numbers must crunched, resident input should be sought and budget reviews meetings need to be scheduled. All of this takes time and effort. Put an organized process in place. Review Financial History Examine budgets and financial statements, from at least the past several years to help determine a starting point. Compare this year’s actual expenditure to date against the original budget, so adjustments can be made as well as in next year’s budget. Project Utility Costs Do you provide water and/or heater to your residents and the common areas? Utility rates are soaring in many cities nationwide. Find out what the trends are in your community. Some increases, should always be built in for utility costs regardless. Review Vendor Contracts Do Landscaper or maintenance company contracts call for a price increase in the coming year? Are any contracts expiring? Review all contracts and seeks bids. Do a Maintenance Review Inspect the entire property. Are the playground or the pool repairs pressing? Any driveways or lots need repairing? Hallways due to be repainted? Preventive maintenance can prevent costlier problems. Evaluate Insurance Policies Like your personal policies, your community’s policies should be reviewed yearly. Are limits and types of coverage sufficient? Do your reserves cover any deductibles that might be needed? Would a lower-premium, higher-deductible plan make sense? Include Legal and Collection Costs Few associations can translate 100 percent of their fees due into actual revenue. Referring to previous legal or collection actions might provide valuable insights into expectations for your future costs. Create a worksheet When you determine known expenses, start inserting the numbers into a spreadsheet and compare them with expected revenue. At least you’ll know how much above or below your projected operating costs you are. Prioritize Projects Something will need upkeep or change every year. Make sure needs – especially those that expose the association to liability (e.g. stairwell, repairs) – are budgeted for before wants (e.g. beautification projects). Expect the Unexpected Set aside funding for some “emergencies” that cannot be identified in advance. One year, mosquito abatement might be necessary; another year, vandalism might present a problem, or a storm might destroy landscaping. Being prepared is a good plan. Plan out Reserves Over a long enough period, projects such as replacing a building’s roofs are as inevitable as they are expensive. Experts suggest a good reserve study should tell you how to fund your expenses. Be Transparent It’s not possible to keep every resident happy, but keeping the budgeting process open and transparent at least gives residents a chance to have their opinions heard. Distribute the Budget Distribute the processed budget to the homeowners for their review and comment. Then, once the association board has approved the new budget, get it into the hands of all homeowners. Follow the Budget Except for emergencies that have not been budgeted for, follow your plan. The budgeting tool keeps the community operations on track. Ask Us How We Can Help Plan Your Next HOA Budget Insert link to the Proposal page http://aphoamgmt.com/index.php/request-for-proposal Based on below layout. We do not want to copy the colors, etc. but if you can match with the website, it would look good.
A&P HOA Fall Promotion
End of Year Special: Get One Month Free When You Book a New 2020 Annual HOA Management Contract by December 31, 2019! Now is the time to review your HOA management strategies for 2020. Are your expectations being exceeded, and your properties being managed in a knowledgeable and responsive way? We invite you to explore all that Atlantic & Pacific Management can offer you! We have been serving San Diego’s single and multi-family communities, including condos and townhomes, for over three decades – and we’d love to have the opportunity to support your community. Please contact us today for a FREE ANALYSIS to learn more about how we can help support your HOA. Plus, GET ONE MONTH FREE when you book your new 2020 annual HOA management contract with us by December 31, 2019. Our HOA services include annual budgeting, online payment assessments, monthly financial reporting, implementation of policies and bylaws, strategic planning and community preservation, site inspection reports, coordination of meetings, and guidance on capital improvements and assessments. Our service orientation, responsiveness, and thorough property manager training create a symbiotic relationship between your HOA Board, the manager, and our organization – which leads to incredible outcomes for properties and homeowners! Reach out to us now, or call (858) 672-3100 weekdays from 8:00am – 5:00pm.
The Power Of Prevention
Taking time to regularly upkeep can help you avoid shelling out cash for repairs and prevent claims that could cause a spike in your homeowners insurance premium. Clean Inspect Check Monthly · Vents · Dryer Filters · Septic Tank · Furnace · Fire Extinguishers · Smoke Detector Batteries · Leaky Faucets · Running Toilets Quarterly · Gutters · Downspouts · Chimney · Fireplace · Heating & Air Systems · Tree Branches, Cracks & Gaps · Interior Caulking Yearly · Washer Hose Connections · HVAC System Calls · Roof for Leaks, Mold & Water Damage · Foundation for Cracks · Exterior Drainage Plus review your homeowners policy annually so you know what’s covered and what isn’t! If you can make it as below layout, it would look great!