By Meaghan Brown and Nicholas Sekol, Spyder Construction

In the aftermath of property damage, whether due to fire, water, or natural disasters, a structured approach is essential to ensure efficient restoration. Understanding the sequential order of operations can streamline the process and mitigate further loss. This article outlines a detailed roadmap divided into seven phases, offering a comprehensive guide for property owners and managers facing the daunting task of reconstruction.

*** The timelines provided are what to expect and do not necessarily apply to every situation. Unexpected property damage is full of challenges, and some can be unforeseen. Please consult with your disaster recovery team of choice to discuss their specific timelines. Some of these phases can overlap on a timeline as noted below ***

Phase One: Immediate Response (First 0-5 Days Following Loss). The initial phase focuses on stabilizing the property and initiating crucial assessments:

• Board up windows/doors to secure the premises and erect temporary fencing to establish a safety perimeter.
• Arrange temporary power sources and execute utility safe-off procedures to prevent additional hazards.
• Conduct environmental testing, including asbestos and lead assessments. Please note, this should be completed per unit address. If asbestos is found, immediately order a “Spill Delineation Report” from an Industrial Hygienist. 
• Supply necessary liability release waivers to all owners, vendors, insurance carriers, consultants, and contractors requesting access to the property.  Executed copies must be returned before allowing access to the property.
• Engage structural engineers for evaluations if structural damage is apparent.
• Notify insurance carriers and file a claim promptly.
• Collaborate with preferred reconstruction vendors for site inspections immediately. It is the right of the insured to partner with whomever they prefer for their insured restorative construction project.
• Sign a work authorization with your reconstruction contractor to complete the project, with the schedule as “pending” and the value as “open.”
• Ensure your individual unit owners within the HOA place claims with their individual insurance carriers.

Phase Two: Coordinated Assessment (5-30 Days Following Loss). This phase involves coordinating with insurance adjusters and preparing for mitigation:

• Facilitate insurance adjuster inspections, involving contractors in initial site visits. The insurance carrier will need to inspect the loss prior to disturbing the scene. They may also require a cause and origin investigation.
• If the building is None Detect (ND) for asbestos containing materials:
• • Secure releases from tenants and owners to begin mitigation efforts within their spaces. 
  • Coordinate with tenants and owners to remove their contents.
  • Ensure that owner and tenant release forms include a contents release, as anything left behind will be thrown out as debris by the HOA’s contractor.
  • Unit owners can contract with HOA contractor for their individual needs and also have the right to hire their own vendors independent of the HOA for their insured loss.
  • Immediately begin mitigation efforts outside the area of cause and origin, as the mitigation cannot disturb the scene until your carrier releases the scene.
• If the building is positive for asbestos containing materials:
• • Immediately partner with a hazardous materials remediation company and provide the spill delineation report; Request that the company permit the spill response with the Colorado Department of Public Health and Environment (CDPHE).
  • The Spill Response cannot disturb the scene until your insurance carrier releases the scene.

Phase Three: Documentation and Planning (15-45 Days Following Loss). Focus shifts to documentation, cost estimation, and preliminary planning:

• Collect and submit emergency services, site stabilization, mitigation and/or asbestos spill response invoices to insurance adjuster.
• Obtain estimates for demolition and asbestos abatement, if necessary, and send them to the insurance adjuster.
• Depending on the severity of the damage, a design firm may be required for a permit.  Design firms are needed when structural damage occurs or damage to mechanical, plumbing, and electrical systems accompany structural damage. However, if structural damage is minor, an engineer may be all that’s required to design the repairs.
• Submit the design pricing to the insurance adjuster. 
• Request that your contractor work with your insurance carrier to get a preliminary scope of work defined and assess a preliminary value that is in alignment with the CCNRs. 
• Communicate to the individual unit owners the limitations of the HOA insurance and what their individual insurance carriers’ obligations will be.
• The contractor will then issue Change Order #1 to the HOA amending the preliminary estimate value to the contract.
• • At this point, the contractor can attempt to forecast a repair timeline.
  • Repair timelines are always dependent upon the issuance of a building permit. 
  • The contractor can also estimate the owner’s obligations separately upon request as the limitations of the HOA coverage are established.

Phase Four: Permit Procurement and Preparation (30-60 Days Following Loss). Efforts concentrate on securing permits and preparing for demolition or abatement:

• Apply for demolition and asbestos removal permits as required.
• Execute demolition and abatement procedures in compliance with regulations.

Phase Five: Design and Permit Submission (45-120 Days Following Loss). This phase focuses on obtaining design approvals and submitting permit applications:

• Obtain preliminary repair drawings (design team to collaborate with contractors before they submit for permit.)
• Engage design team or contractor to submit repair plans for permit approval from local authorities.
• Address supplementary items identified during plan reviews.
• Initiate change orders for additional work or code upgrades.

Phase Six: Construction Initiation (90-120 Days Following Loss). The construction phase begins with permit acquisition and project commencement:

• Contractor submits a production schedule within one week of receiving the permit and should amend the schedule to the contract by a $0.00 change order if there is a change from the original timeline projection.
• Contractor begins construction. Invoicing should be billed at least monthly, based on a percentage of work performed.
• During the production process, the Building Inspector may request work that exceeds what is specified on the plans. In the event this happens, the contractor will need to issue a supplement to the carrier for the additional expense.
• The contractor should issue a supplement by way of a change order to the HOA to endorse for each corrective change that was required by the building department.  These are referred to as “Code Upgrades” and will typically have insurance coverage limits for these specific corrections.  These should be submitted to the insurance carrier in a timely manner so that they can be added to the claim. Code Upgrades are typically paid when incurred by the insurance carrier.

Phase Seven: Project Completion and Claim Settlement (Production Timeline Following the Loss). The final phase involves completing construction and settling insurance claims:

• Obtain completion notice signed by HOA representative.
• Submit completion notice and supporting documentation (photos of work completed) to insurers.
• Receive Actual Cash Value (ACV) upfront and Replacement Cost Value (RCV) upon project completion. The ACV is the depreciated value of the repair and the RCV is the actual cost of the work the contractor charges.  The difference between these two costs is commonly paid to the insured upon substantial completion of the work.

Navigating property restoration demands a systematic approach and clear communication among stakeholders. By adhering to the outlined order of operations, property owners and managers can effectively navigate through each phase, ensuring a smooth and successful restoration process.

About the Authors: Meaghan Brown is a Business Development Specialist at Spyder Construction, working with HOAs, multifamily, and commercial properties for their community-wide reconstruction, roofing, building envelope, and large loss insurance projects.  In her free time, Meaghan enjoys spending time with her husband and dog enjoying the outdoors near their home in Idaho Springs. 

Nicholas Sekol is a Senior Project Director with Spyder Construction with over 20 years in the business and has completed over $150 million in projects during his tenure.  His focus is Fire Loss Mitigation and Reconstruction throughout the Front Range and beyond.  In his free time, he enjoys spending time with his family and riding his mountain bike all over Colorado. 

By Justin Bayer, Knott Laboratory, LLC

When it comes to the reconstruction and restoration of HOA communities, the civil and structural engineers who make up a part of this niche market are accustomed to working behind the scenes. After all, there’s nothing high-profile and flashy about designing repair plans, pulling permits, or writing up engineering reports about potential issues within a community.  Some recent events and current legislative attention have flipped that script around and shone the spotlight directly on the engineering side of this industry.  There is one lesson that is inevitable, however; deferred maintenance within our communities is increasing at an alarming rate. 

Clearly, there are plenty of examples of extreme circumstances, and not every situation is dire straits when it comes to deferring maintenance and its impact on structures.  That being said, the awareness gathered from situations like the one in Surfside can go a long way toward preventing catastrophes due to deferred maintenance in the future. 

There are many ways that a civil or structural engineer can assist a community, and this article will aim to point community managers, Board members, and contractors toward some situations in which you can or should contact an engineer. (It should be noted that most engineers within our CAI community are more than happy to be a resource and answer questions for the communities we serve, so never hesitate to ask!) 

The most common way to engage an engineer is when your community is in need of a repair/reconstruction project. This would be for things like deteriorating framing of stairs, decks, and balconies, as well as foundation issues, severe cracking, negative drainage, moisture intrusion, and a myriad of other similar issues. It’s always a great idea to start with engineering because this gives the community a chance to have their potential problems assessed by a third-party, independent expert.  This allows for the community to get a report and/or repair plans which can then be sent to general contractors to bid. 

Another way to engage a civil or structural engineer would be for construction defect concerns.  An engineer will often work with an attorney to diagnose issues with new build construction, which is then used in mediation or in court to fight for a settlement that the community will use for repairs.  Once a construction defect case is settled, a community will bring on a civil/structural engineer to work with the Board to prioritize repairs (life safety, building safety, community concerns, and aesthetics). Once repairs have been prioritized, the engineering team will design the repair plans for general contractors to be able to provide pricing to conduct the repairs. 

One way to combat deferred maintenance and regain control of the maintenance in your community is with a facility condition assessment (FCA).  This is essentially having a licensed engineer provide a report about the current state of the building(s) within the community.  Many communities are starting to look around and really grasp the concern for the level of deferred maintenance that their aging infrastructure may have. An engineer will be able to provide a report that details the visible building systems and informs the community on when those systems should be investigated further. For example, let’s say the engineer noted in the report that the stairs are in a deteriorated state, and that this should be addressed as soon as possible.  Now the community can work with the engineer and a contractor of their choice to further investigate the root-cause of the stair issue. 

The investigation into what is causing a particular issue is considered “forensic engineering.”  It’s sort of like CSI: Miami, but even cooler.  Keep in mind, destructive testing is often the only way that engineers can truly see what is happening inside of something like a ceiling, foundation, staircase, or balcony. A facility condition assessment can give a community a reason to investigate further, which can assist with knowing which items suffering from deferred maintenance should be addressed, and in what order. This really helps in the process of securing funding and creating a plan of action to address the issues in a proactive manner.  

So, now you know a bit more about when to call an engineer, why it is a great resource for the community to have an engineering firm representing their best interests, and where the engineering role falls into place as it concerns reconstruction projects. 

Let’s wrap up with some terms which you may see when dealing with engineers on your projects:

• Civil Engineering - Civil engineers design, build, and supervise infrastructure projects and systems. In this instance, civil engineering often refers to engineering involving the land surrounding a building, which includes drainage, grading, pipe networks, etc. This would also include streets/sidewalks, asphalt paring areas, and anything else having to do with “land.” 
• Structural Engineering - Structural Engineering is a specialty within Civil Engineering. Structural Engineers create drawings and specifications, perform calculations, review the work of other engineers, write reports and evaluations, and observe construction sites (civil engineers do all of this as well). A Professional Engineer’s license is required in order to practice both Civil and Structural Engineering. A license can be obtained only after completing a prescribed amount of education and work experience and taking a 2-day exam.

• Building Envelope – This term refers to the “shell” of the building, which aims to provide climate control, water and water vapor resistance, and protection from the elements.  This term encapsulates the roof, foundation, exterior walls (including windows and doors), and insulation. 

• Value Engineering – Value engineering is the consideration of wide-scale, holistic, project-wide conditions to achieve the most cost-effective and functional design. Essentially, this term refers to ways in which creative solutions between the engineer, owner, and the contractor can save the community money and stretch those resources to be able to accomplish more. 

• Destructive Testing – Destructive testing is utilized to understand the cause of the failure of a building’s systems and components. This process involves taking apart a portion of a building to gain an understanding for how/why the material or system is failing, or to understand how it was constructed.  

Knott Laboratory has been in operation for over 40 years and is the premier resource for forensic engineering in the HOA, Apartment, and Commercial industries in Colorado, Arizona, and Texas. Justin Bayer, Director of Business Development, currently serves as President on the Board of Directors for the CAI-Rocky Mountain Chapter. 

By Lindsay Smith, Winzenburg, Leff, Purvis & Payne, LLP

Your reserve account is finally fully-funded and that pool house is looking shabby.  It’s time for a refresh!  Maybe you can remove that ancient, dead tree while you’re at it.  Before you hire a contractor to perform work in your community – be it major or minor – it’s important to make sure that you know what you’re getting, and they know what they’re expected to do.

Some contracts might be for relatively inexpensive work; maybe a slide needs to be replaced at the playground, maybe the pet waste stations are falling over.  Other contracts may run the community millions of dollars and require coordination between a general contractor, an architect, an owner’s representative, homeowners, and others.  Here are some things to keep in mind as you navigate construction contracts for your communities.  Our hypothetical community will have two contracts to consider: the arborist’s contract to remove the dead tree, and the general contractor’s contract to renovate the clubhouse.

Scope

A clear scope of work is the first thing you need to obtain before undertaking capital repairs in the community.  For a large-scale project, consider hiring a third party engineer or other expert to prepare a scope of work for contractors to bid.  This helps to ensure that everyone is working from the same set of documents, and allows the Board to better compare bids.  You can be certain that when two bids are worlds apart, the scope is unclear.  The scope should also include the association’s insurance expectations, warranty requirements, and clearly detail what is and what is not included in the price (e.g., building permits).

To renovate the clubhouse, the association will need a scope that includes demolition and disposal; design and planning; rough work for plumbing, electricity, framing, or other building changes; drywall, fixture, and finishes.  Use the scope to issue a request for proposals and receive bids for the work.  Make sure the request for proposal (“RFP”) includes a due date and anticipated construction schedule.

The tree removal is a much less involved process and the bids you solicit for this project will be much simpler (as will the ultimate contract).

Bids

Speaking of bids, it’s appropriate to seek bids from multiple qualified vendors.  Some communities even have policies that specify the number of bids to request.  You may not receive responses from everyone you solicit a bid from.  A bid should show the vendor understands the scope of the project, provide you with a reasonable construction schedule based on the RFP, and provide you with sufficient financial details to evaluate the response.

When evaluating bids, the lowest bidder is not always the best value.  Talk to your management company and others in the industry, and feel free to check with your lawyer.  While your lawyer might not be able to tell you details about a particular vendor’s dealings with a client, they might have valuable information for the Board to consider with its bid review.

For the clubhouse project, consider having your engineer or architect review the bid to ensure it complies with the technical requirements of the project.  Contracts for large projects should always be reviewed by an attorney.  The tree removal project is likely adequately reviewed by the Board and management, but some communities budget to provide attorney review for all contracts over a specified sum.  Keep in mind that when you sign a bid document, you are creating a contract – it’s just a contract that might not include all the protections that you’ll want or need when things go wrong.  

Project Management

Part of the cost of a large scale project is the cost of project management.  Do not expect your community manager to handle rebuilding the clubhouse unless that is clearly within the scope of the management agreement.  Consider hiring an outside project manager or owner’s representative to keep the project on track.  Factor this cost into the project budget.  If your community manager is going to be the project manager, review the contract to determine what fee is payable.  If appropriate, negotiate with the management company at the outset to adjust the fee and set clear expectations with respect to work required and time documentation.

Coordinating the tree removal is something your manager should be able to handle in the ordinary course of business with no additional fee.

Timing

The project manager will work with the contractor to set up a construction timeline for the clubhouse renovation.  Be honest and realistic with your timeline needs, and recognize that an ambitious timeline can be a red flag for a vendor who might not understand the intricacies of the project.  We all know delays occur that are out of the parties’ control, but unreasonable delays need to be addressed in the contract as delays cause damage to the property, increase costs, and upset the community.

Payment

Based on the scope and the bid, you will have a contract that is a fixed price, or a “time and materials” number.  Fixed price contracts provide predictability and help the community budget, while a time and materials contract can result in unexpected bills.  However, when the scope is unclear (such as when you initially retain the engineering firm to prepare the renovation scope), the vendor may only be able to offer a time and materials contract.  If something unexpected comes up with a fixed price contract, the parties will typically execute a change order to reflect that something.

The contract needs to include payment terms.  Whether it is fixed price or time and materials, both parties to the contract need to know when what payments will be expected and made.  A large scale contract may require regular inspections and certification by the architect that the invoice is supported by the completed work.  Lien waivers are a useful protection for community associations, and conditioning payment on the vendor’s promise that all suppliers and others working for the vendor have been paid protects the Association and its members from mechanic’s liens.

Insurance

Insurance is everyone’s favorite topic, I know.  While your eyes might glaze over at the thought of reading a policy, those policies are crucial when things go badly.  If you have a vendor who doesn’t want to carry worker’s compensation insurance, run!  Your contractors need to carry commercial general liability insurance, including bodily injury and property damage, product liability, and completed operations liability.  If you’re working with a professional such as an engineer or architect, make sure they have professional liability insurance.  Consider whether an umbrella policy would be appropriate in light of the scope of the project.

Your contractors should have no issues naming the association as an additional insured and providing copies of their certificates of insurance.

Consider whether the work to be performed is likely to be excluded from typical insurance policies.  Earth movement exclusions have been held by courts to exclude coverage for natural and man-made earth movement.  When the arborist removes a huge, dead tree and that causes unexpected subsidence that damages the clubhouse structure, the association might be left holding the bag; particularly where you only signed a bid and did not negotiate additional protections in an addendum to the bid.

Default and Termination

So, your arborist made your clubhouse fall off the side of the mountain and now you’re working with a general contractor to rebuild the structure, when you’d originally just wanted to renovate the interior.  After the engineers prepared a revised scope of work and you realized you only have enough money to fix the structure, you executed a new contract with the general contractor to fix things.  And things aren’t going well.  Despite their initial responsive bid and glowing references, they have missed every contractual deadline and suppliers are calling asking for money.  It’s clear that the company that was able to renovate the building interior is completely over its head with the structural project. 

It’s time to cut bait before things get worse.

Your contract must have provisions that allow either party to terminate with appropriate notice.  You will often have the obligation to allow the defaulting party to cure its default, but sometimes you’ll have a clause that allows for termination automatically (such as when the contractor files for bankruptcy).  You don’t want a vendor coming after the community for the balance due on a contract, so talk to your legal counsel to make sure you’re terminating it correctly.  Then, if you’re very very lucky, you might find yourself a new vendor who can do the remaining work correctly and maybe only pay a little more than you’d budgeted.

--

Lindsay Smith is a partner at Winzenburg, Leff, Purvis & Payne, LLP, where she serves as general counsel to communities throughout the state.  She regularly advises clients on governing document interpretation, contracts, enforcement, and Board duties to their communities.

By Jeff Butler, Repipe Specialists

Understanding your Piping systems

When considering your piping systems, there are two main systems in question: Domestic Water Systems and Drain, Waste and Vent (DWV) Systems. Below are some signs of aging to look out for with each system, and how to best maintain them. In the event that systems fail, repiping is the primary option that can prove to be more cost-effective than constant repairs and can be achieved without the need for residents to move out. 

Domestic Water Systems

Domestic water systems provide potable drinking water. Most domestic water systems have a life expectancy of between 30 and 50 years. These systems can include materials such as galvanized, copper, polybutylene or CPVC pipes. 

Some issues that can occur with those systems are:

• Leaks: Galvanized and copper pipes are prone to corrosion, which can lead to pinhole leaks or more significant pipe failures. You may notice recurring leaks in your plumbing system, especially around the joints or areas where the pipes are visibly corroded. 
• Leaks:  CPVC and polybutylene pipes are particularly sensitive to thermal fluctuations, and constant expansion and contraction can stress joints and fittings, leading to leaks.  These type of piping systems can also become brittle over time and can become sufficiently fragile that even touching or putting pressure on the pipe can cause a leak.
• Low water pressure: Accumulated rust and mineral deposits within galvanized pipes can restrict the flow of water, resulting in reduced water pressure. 
• Rusty or discolored water: As the zinc coating wears away on galvanized pipes and the steel begins to corrode, rust particles can enter the water supply, causing discoloration. You may notice brown or yellowish water coming from your faucets.
• Mold or mildew growth: Pinhole leaks can lead to excess moisture, creating a favorable environment for mold and mildew to thrive. If you notice moldy or musty odors, visible mold growth, or persistent dampness, it could be linked to a hidden leak.

To extend the lifespan of domestic water piping systems and minimize the need for premature replacements, you can implement several preventive measures:

• Regular inspections: Perform routine inspections of your plumbing system to check for leaks, corrosion, or other signs of wear and tear. Early detection of problems allows for timely repairs, preventing further damage.
• Maintain a record of leaks:  Keeping track of the type of leaks you are experiencing will be telling over time and also appropriately inform proper decision-making in terms of what type of repair is appropriate long-term.
• Maintain adequate water pressure: Avoid excessive water pressure, as it can stress the pipes and lead to leaks or bursts. Install a pressure regulator if necessary to maintain a safe and consistent pressure throughout your plumbing system.
• Regular maintenance: Schedule regular maintenance for your plumbing system, including flushing water heaters, cleaning aerators, and checking for leaks. Proper maintenance helps keep your pipes in good condition and prevents issues from arising.
• Educate residents: Educate occupants of the property about proper plumbing usage and maintenance practices to minimize the risk of damage to the system. Encourage them to report any leaks or issues promptly for timely repairs.

Drain Waste and Vent Systems

DWV systems carry used water out of the residence. There are several signs that may indicate a DWV system is compromised, including:

• Frequent Clogs: If you're experiencing frequent clogs in your plumbing system despite attempts to clear them, it could be a sign of deteriorating pipes that need replacement.
• Corrosion: Obvious corrosion on the exterior of your pipes. Corrosion weakens pipes and can lead to slow leaks, which can cause water damage and mold growth.
• Leaks: Visible leaks or water damage around pipes are obvious signs that there's a problem. Leaks can occur due to cracks, holes, or loose connections in the pipes.
• Foul Odors: If you notice foul odors coming from your drains, it could indicate sewer gas leaks, which pose health risks. This could be due to damaged or improperly installed DWV pipes.
• Old Age: If your building's plumbing system is aging, it's worth considering a replacement, especially if you're experiencing any of the above issues. Older pipes are more prone to corrosion and damage.

To extend the lifespan of DWV systems, be sure to 

• Avoid Chemical Drain Cleaners: Refrain from using harsh chemical drain cleaners, as they can corrode pipes over time. Instead, use mechanical methods such as plungers or drain snakes to clear clogs whenever possible.
• Proper Ventilation: Ensure that DWV piping systems are properly vented to prevent the buildup of sewer gases, which can be corrosive and pose health hazards. Proper ventilation also helps maintain proper drainage and prevent vacuum or pressure buildup in the pipes.

When considering any type of pipe replacement project in an occupied building, it's essential to plan the project carefully to minimize disruptions to residents and ensure the safety and functionality of the plumbing system. If you're unsure whether your pipes need replacement, it's a good idea to consult with a licensed plumber or contractor who can inspect the system and provide expert advice based on its condition.

About the Author:

Jeff Butler founded Repipe Specialists in 1991, and has been working to constantly improve and refine the Repipe Specialists One Stop Repipe Process™ since. Repipe Specialists specializes in repiping occupied multi-family buildings and communities with minimal impact to residents and working closely with onsite property management to ensure a smooth project. 

By Emily Ramirez, Associa

Analyzing the financial health of a homeowners association is a crucial task to ensure its ability to maintain and enhance the community and common areas.  For a variety of reasons, sometimes the association will be faced with deferred maintenance.  Creating a funding plan to address maintenance helps establish a sustainable financial foundation.  Completing an assessment of deferred maintenance is the first step in determining the current state of the community.

Once a comprehensive list of maintenance needs and associated costs has been created, the next step is to review realistic funding and budgeting options.  We recommend having a reserve study prepared to assist with the details and expectations. Using the data provided, the association can prioritize the items based on their urgency and potential impact on safety, functionality, and the overall value of the property.  Allocating funds strategically ensures that critical repairs are addressed first, mitigating the risk of further deterioration.  Reserve studies will provide a schedule of maintenance and elements to be addressed each year.  Start by reviewing the the projected expenses set forth in the reserve study against the association’s reserve funding.  That will give you a better picture of when each element will need to be replaced.  Budget for all elements that need to be replaced in the upcoming year and include a contribution to catch up on prior years, if necessary.  It is important to get your reserve study updated every 3-5 years to ensure that you are setting aside the proper amount of capital replacement reserves each year and keep up with increasing construction and maintenance costs.  

Deferred maintenance it is often the result of financial constraints in an association.  Deferring maintenance, repairs, and replacements due to lack of funds further compounds the issue.  Once you are no longer able to defer the issue you are now faced with funding on a much larger scale.

Catching up on deferred maintenance often requires a financial investment that may not be readily available.  In such cases, a full review of the current state of the community is in order.  Follow these steps to see if a loan or special assessment may be necessary:

• Review Current Financial Position:

Obtain and review financial statements, including the income statement, balance sheet, and cash flow statement.  Analyze the budget to understand the association's income sources, expenses, and reserves.

• Assess Reserve Fund Adequacy:

Evaluate the reserve fund to ensure it is adequate for long-term maintenance and major repairs. Compare the current reserve balance to the recommended reserve study, considering the age and expected lifespan of community assets.

• Evaluate Operating Fund:

Examine the operating fund to ensure it can cover ongoing expenses like landscaping, security, and utilities.  Analyze the ratio of income to expenses to ensure a sustainable budget.

• Delinquency & Collections:

Assess the collection rate for homeowner dues and fees. A high delinquency rate can strain the HOA's finances and impact the association’s ability to qualify for a loan.  Implement effective collection policies to ensure consistent revenue flow.

Despite best efforts, there are times when the current financial position of the association is just not enough to cover the maintenance needs.  It is then when you will consider a special assessment and/or exploring loan options.

Loan vs Special Assessment.  There are several factors that come into play when considering which option to take.  Does the Board take out a loan, do they special assess, or a combination of both.  First, the association must consider how quickly it needs the funds.  If you special assess, how long will it take for owners to pay the assessment?  If the special assessment is large, you may opt for the loan route.  Loans are more manageable from a homeowner perspective vs a special assessment.  A loan repayment can be spread over 5-10 years thus making the monthly obligation more manageable to each homeowner.  Check your governing documents as some communities will require approval from the membership for one or both options.

Whether you take a loan or opt for a special assessment you may experience an increase in delinquencies because of the higher financial obligations. You will want to take this in consideration when determining how much funding is needed.  When it comes down to it, certain situations do require the association impose a special assessments. You may not like the amount or even what the assessment is for, but your responsibility as a property owner is to pay your portion of the expenses. Loans or special assessments aren’t necessarily bad. If managed the right way by the Board of Directors, they can further the association’s best interest.  The money will go to the betterment of the community by attending to deferred maintenance and raising property values.  After all, no one wants to live in a rundown community with dilapidated amenities.

Even with a clear understanding of the current financial balance in reserves, loans, and special assessments, many associations still turn to the experts for assistance.  Your association’s legal counsel, CPA, management company, and/or bank representative can all play a vital role in the consideration of how to fund for large projects or deferred maintenance.

Written by Emily Ramirez, Director with Associa

By Joshua Flanagan, Blue Frog Roofing

A roofing Preventative Maintenance Agreement (PMA) is a key component in property up-keep. This article will cover the basics of roof preventive maintenance: what it is, why it’s important, and what to look for with different roofing systems. 

To start off, roof preventive maintenance is scheduled maintenance and cleaning designed to help maintain the overall health of a roof and remediate small issues before they can become larger issues. 

Why is it important to perform preventative maintenance for a roofing system? 

Studies from Carnegie Mellon and others, show that 80% of roofs are replaced before reaching their life expectancy. Some of this is due to natural disasters that involve hail or high winds, but most of it is due to deferred maintenance.  Deferred maintenance can also cause loss when a preventable windstorm causes a total loss on an unmaintained roof. This is why preventative maintenance is known to increase the life of a roof by up to 50%. Just like regular maintenance on a vehicle, small repairs and cleaning done every year will keep a roof performing how it should. 

Additionally, having a reactive approach to maintenance (waiting for leaks and problems to appear before performing maintenance) can cost four times more than a proactive approach. This is primarily because when leaks begin to appear, interior damage is already a factor, and a reactive approach will typically involve more trips with trip charges associated. If most issues and potential issues can be remediated with 1-2 trips a year, very few to no other trips should be necessary. 

PMA’s can also be very helpful from an insurance perspective. After maintenance has been completed, the contractor should send out a detailed report indicating what was completed with photos and an explanation. In the case of a potential insurance claim, this detailed report can act as a ‘No Loss Report’, which can be proof of no damage prior to the loss date. If a community does not have a No Loss Report completed prior to an insurable event, then an insurance adjuster will classify the claim as ‘previous damage’ and deny the new claim. A No Loss Report makes sure this doesn’t happen. 

The amount and type of preventative maintenance will differ depending on the roofing system. The first system is called Steep Slope Roofing, which includes many different types of materials, but the most common material is asphalt shingles. With asphalt shingle communities, the most important items to look for during preventative maintenance are:

• Exposed nail heads
• Improper flashing
• Cracked or torn shingles
• Uplifted shingles no longer sealed
• Granular loss
• Leaves and debris in valleys, gutters, and other roof areas

Roof penetrations and roof to wall transitions are typically the most popular leaking points, so it’s important to make sure those are sealed and functioning properly. Depending on the condition and age of the roof, preventative maintenance should be performed 1 to 2 times per year for steep slope roofs. With new, well performing roofs, once a year should be enough. 

The next roofing system is a Low Slope (flat) roofing system. Low Slope roofs are much different and typically require more maintenance. When maintaining low slope roofs, the key items to check are: 

• Exterior/interior walls for signs of leaks, staining, or cracks
• Roof edges/coping for metal leaks, staining, and damage
• The field of roof for damage, loose fasteners, ponding water, etc.
• Roof penetrations, flashings, and parapet walls
• Drains and scuppers for debris and blockages 
• Gutters and downspouts for blockages

Johns Manville, one of the largest low slope roofing manufacturers in the world, describes the importance of maintenance in their “Protect Your JM Roof Guarantee” handout on their website. This handout includes a maintenance checklist and a do’s and don'ts list on the right way to maintain a JM roof. This checklist explains much of what is listed above, but also recommends inspections and maintenance twice a year; at the end of summer and the end of winter, when it has gone through the most thermal stress. The handout also recommends inspections after unusual events such as heavy rains, high wind, hail, and nearby fires. 

With low slope roofs, a manufacturer warranty is usually tied to a preventative maintenance/service plan. If a service plan is not in place and a manufacturer warranty issue comes up, the manufacturer may deem the roof as neglected and deny the warranty claim. 

A PMA will ensure that if a manufacturer warranty issue does come up, it will be noticed in time, and a warranty claim can be made. This is important for both low and steep slope roof types and is a reason why preventative maintenance is critical to brand-new roofs. 

In conclusion, PMA’s will save communities money, increase their roofs’ longevity, and help look out for potential manufacturer and insurance issues. 

Joshua Flanagan joined Blue Frog Roofing in June of 2022 to assist in business development. Blue Frog Roofing is a premium roofing company servicing from Fort Collins to Colorado Springs and the I70 corridor. Blue Frog takes an educational, consultative, and preventative maintenance approach to the industry, specializing in multi-family and commercial roofing including large loss/projects and a dedicated service department for repairs and maintenance. 

By Kiki Dillie

When this article publishes, we will be about 18 months out from when HB22-1137 took effect on August 9, 2022 and made significant changes to portions of the Colorado Common Interest Ownership Act (CCIOA). The law requires associations, management companies, and attorneys to handle delinquencies and covenant enforcement in very specific ways. It required changes to already-mandated policies and resulted in additional expenses be incurred to comply with the new laws. HB22-1137 was meant to make delinquencies and covenant enforcement easier on homeowners, but now that we have a year a half or so to look back, what are some of the continuing issues with it? HB22-1137 mostly impacts delinquencies and covenant enforcement and the continuing issues with each are somewhat different.

In the delinquencies realm, the majority of the continuing issues with HB22-1137 have to do with several portions of the law that are unclear and can be interpreted in different ways. For example, it requires an 18-month payment plan be offered to homeowners before they are sent to collections. The prior laws required a 6-month payment plan, with equal payments. However, the new changes reference two different payment plan options – one for 18 months of equal payments and the other for 17 months of at least $25.00 then presumably a balloon payment of the remaining balance due in month 18. Some legislators involved with HB22-1137 have indicated that these were not meant to be two different options, but it is written as two different options in the law. So, this makes compliance complicated for associations and management companies.

The law also requires notice to the homeowner be posted to the unit (along with sending it to the homeowner two additional ways). Anecdotally, it appears that this requirement has resulted in more homeowners paying their balance due to the association before having to be sent to collections. However, it has also resulted in homeowners’ personal business being broadcast to their neighbors and their tenants, if the unit is rented. It is also unclear if the additional cost for posting should be charged back to the homeowner or paid by the association. On one hand, one of the stated purposes of HB22-1137 was to decrease costs to homeowners, so charging the cost to the delinquent homeowner appears to go against that, but otherwise, the paying homeowners are the ones paying the extra costs, through the Association’s main funds, which is only funded by assessments.

Finally, the 18-month payment plan requirement has the potential to cause associations financial difficulties. Most costs to an association are planned and predictable and so are budgeted for and paid through assessments. However, sometimes unpredictable events happen that require a special assessment or large increases in regular assessments. For example, if an association needs a special assessment to pay for emergency work, they may not be able to pay for the work if too high a percentage of the homeowners choose to pay the money over an 18-month payment plan. Similarly, many associations are currently experiencing huge increases in insurance premiums, resulting in large increases in regular assessments. Again, if too many homeowners don’t pay on time then elect to pay their arrears balance through a payment plan, an association that is statutorily required to have insurance may not be able to pay the insurance premium on time. This could destroy a community if a disaster occurs with no insurance coverage. Alternatively, paying homeowners may have to pay even more to make up for those not paying timely just so that the association is able to cover the cost of their insurance premium.

In the covenant enforcement realm, there are also continuing issues with HB22-1137. For non-health and safety violations, the law requires two 30-day cure periods before proceeding with covenant enforcement action through an attorney. While this change does give homeowners more time to cure any violations without being sent to an attorney for covenant enforcement, it has had the impact of essentially making it impossible for associations to enforce rules that are violated, then cured, then violated again. Some types of violations that are considered repetitious violations, and therefore very difficult if not impossible to enforce, are homeowners not picking up dog waste from common areas, frequent noise violations, and trash can violations. Short term rentals are also difficult to enforce under the new laws, as arguably each new short-term tenant is a new violation, so they never last long enough to take legal action against the homeowner. 

Another issue with enforcing against short term rentals is the $500.00 fine limit imposed by HB22-1137. A total of $500.00 in fines is not high enough to discourage violations of short-term rental prohibitions because it is still financially beneficial to the owner to violate and rent. The $500.00 could be considered simply a cost of doing business when the homeowner can make several thousands of dollars renting out a unit as a short-term rental, even when it is in violation of the Association’s documents.

Finally, HB22-1137 does allow for expedited enforcement against health and safety violations, but it did not provide any definition of what health and safety means. So, associations, management companies and attorneys are left with trying to determine what sorts of issues are legitimate health and safety concerns such that the shorter time periods are justified. A lack of clarity makes compliance difficult.

HB22-1137 required many specific changes be made to how associations, management companies and attorneys handle association delinquencies and covenant enforcement. Although this article focuses on the issues that remain with the new laws, some portions of it were successful in providing some relief to homeowners before they are sent to an attorney for either collections or covenant enforcement. However, the remaining issues have and continue to cause hardships to many associations that are following the rules but are also trying to provide the best possible community to their owners and residents. Hopefully these lingering issues can be clarified through the legislature or the judicial system to the benefit of everyone involved with community associations.

By Devon Schad, Schad Agency

For community associations, managing insurance costs can be a challenging but crucial task. Focusing on maintenance, replacement, and risk mitigation can significantly impact insurance premiums especially when dealing with separate carriers for property and general liability insurance. Below, we explore strategies for community associations to proactively maintain and replace key elements, ultimately reducing the risk of insurance claims and maximizing cost savings.

Property Insurance: A Costly Focus

Property insurance constitutes the most significant portion of an association's insurance expenses. To optimize cost savings, it's essential to concentrate efforts on reducing losses. However, some carriers bundle general liability and property insurance together, making it crucial to tailor strategies accordingly.

Maintenance Tips for Property Insurance:

1. Educating Owners:
   • Educate unit owners on the lifespan of appliances, such as hot water heaters, and recommend replacement before reaching the end of their useful life.
   • Encourage owners to maintain a minimum temperature of 55 degrees during winter to prevent frozen pipes.
   • Advise residents to turn off water when leaving for vacation to minimize potential water damage.
   • Educate owners on useful safety information like how to put out a grease fire.
   • Keep grilling away from buildings to reduce the risk of fire-related losses.

1. Regular Maintenance Tasks:

General Liability: Mitigating Risks

While property insurance focuses on physical structures, general liability insurance addresses potential accidents and injuries within the community. To minimize liabilities and associated insurance costs, community associations should implement proactive measures.

Maintenance Tips for General Liability:

1. Infrastructure Inspection:
   • Conduct regular walkthroughs to identify potential liability risks within the community.
   • Repair uneven sidewalks, cracks, or holes in roadways, driveways, and walkways to prevent accidents and potential claims.
   • Provide ice melt in problem areas or convenient locations during winter months.

1. Informing and Warning Residents:

Risk Mitigation Strategies:

1. Post-Insurance Loss Actions:
   • Analyze previous insurance claims and losses to identify patterns and potential areas for improvement.
   • Implement measures to prevent recurring incidents, such as adding insulation to areas prone to frozen pipes.

1. Shifting Loss Exposure:

In the dynamic landscape of community associations, a strategic focus on maintenance, replacement, and risk mitigation can lead to substantial insurance savings. By educating and engaging residents, addressing potential liabilities, and proactively managing risks, associations can create a safer and more cost-effective living environment for everyone involved. Ultimately, the effort invested in preventative measures will not only result in financial benefits but also contribute to the overall well-being of the community.

Devon Schad, currently serves as the Vice President of the Board of Directors for the CAI Rocky Mountain Chapter and is a CAI Educated Business Partner. Beyond his board position, Devon is the visionary owner of the Schad Agency, a family-owned business that has been at the forefront of the insurance industry since its establishment in 1976. As an expert in his field, Devon is instrumental in crafting insurance language for CC&R's, contributing insightful articles to the industry, and imparting knowledge through teaching certified CMCA classes.

By Stephane Dupont, The Dupont Law Firm

Over the last several years, Colorado common interest communities have seen an increase in the number of hail, flood, wind and other casualty related events. While, historically, proper insurance coverage has absorbed the brunt of the financial impact from these events, increasing insurance deductibles and coverage gaps now beg associations to not only carefully review their existing coverage but to also advise owners as to why they should, or must, obtain insurance to cover association assessed deductible expenses and to advise and plan for the possibility of an uninsured loss.  

Proper Insurance Coverage is the best Funding Mechanism

The best manner to protect against the financial effects of a casualty event is for an association to ensure that it has obtained proper insurance coverage in accordance with the requirements of its governing documents and applicable law. This means that an association should make a concerted attempt and effort to amend its governing documents, if necessary, to clarify and clearly define and delineate the insurable obligations of both the association and homeowners. 

Unfortunately, most association insurance policies come with high dollar deductibles. This is especially the case with regards to wind and hail claims which may carry a 3-5% deductible in the event that a claim is filed. While this may not seem significant at first glance, the deductible expense is commonly assessed on the value of an insured building which may contain multiple units or townhomes. It is, therefore, not unusual to see deductible expenses in the tens or even hundreds of thousands of dollars. Fortunately, loss assessment insurance coverage (commonly called HO-5 or HO-6 coverage) provides reimbursement to homeowners for most special assessments or loss assessments relating to repayment of large association deductible or uninsured expenses. Reminding homeowners to obtain this coverage, even if not specifically required by the association’s governing documents, is often the most significant action that an association can take to protect the homeowners against large assessments relating to deductible expenses. Sending this information to new owners and reminding them regularly through e-mail blasts, newsletters, or a brief letter provided to owners together with their proposed annual budget are just a few methods that an association can communicate this information to owners. 

Transparency Relating to Gaps in Coverage 

There are times when there is a lack of available insurance in the marketplace to cover a particular form of loss.  For example, associations located in certain areas may not be able to purchase flood insurance. If a flood occurs, the cost of repair may fall entirely on the association and, ultimately, its owners. To make matters worse, homeowner obtained loss assessment coverage may not cover payment of loss assessments related to a flood. Associations that are in this unfortunate situation will want to clearly communicate this lack of coverage to owners in the community and work together to help mitigate its financial effects should such an unfortunate loss occur. For example, in the event of a flood, the association and its owners may be entitled to receive limited financial assistance from the Federal Emergency Management Agency (FEMA). Public assistance programs may also be available to assist homeowners with uninsured expenses incurred.

Time to Assess

An association will need to ultimately decide how deductible expenses and/or uninsured expenses will be funded after reviewing their governing documents. Typically, a special assessment or ‘loss assessment’, can be assessed against the homeowners to recover the expense. It is advisable that associations consult with an attorney to confirm that they are following the assessment procedures correctly.  

Once a special or loss assessment has been approved, the association will want, to the extent feasible, to provide homeowners with sufficient time to file and process claims with their insurance carriers before the assessment comes due. Rushing the payment due date will often result in a sizeable amount of delinquencies and possibly delay the collection of the funds from the homeowners further.

If, by chance, the association is unable to pass the requisite assessment it may be forced to explore the adoption of a new or revised annual budget to fund the repairs or consider utilizing a portion of its reserve funds to fund the repairs. If reserve funds are permitted to be utilized, a plan should also be promptly implemented to replace the reserve fund withdrawal(s). Neither option above is advisable and, therefore, it is a good idea for associations, prior to the occurrence of a casualty event, to review their governing documents to confirm that there are no unreasonable obstacles to passing a loss assessment and then attempt to amend and revise the documents to avoid any issues. 

Stephane Dupont is the owner and an attorney with The Dupont Law Firm that provides, at an affordable cost, comprehensive legal services including collections, litigation, covenant enforcement, contract review, covenant interpretation and general counsel work on behalf of common interest communities throughout Colorado. 

By Gabriel Stefu, WesternLaw Group, LLC

In 2022, Colorado adopted legislation that revised the covenant enforcement process of Homeowner Associations. Many questions have been raised since the adoption of HB22-1137 regarding repeat covenant violations and cure periods for repeat violations. 

In general, repeat violations are violations of the same covenant rule that are usually cured soon after the violation occurred (usually within a matter of days), but they are repeated over time by Owners or residents, becoming continuing violations.

Currently, HB22-1137 has procedural provisions for two types of violations:

• Those that are considered to reasonably threaten the public safety or health (one 72-hour notice is required to be sent to the Owner); and 
• Those that do not reasonably threaten the public safety and health (two separate 30-day notices are required to be sent to the Owner). 

The Notice and compliance process for both is different and once an Association determines the type of violation, the processes outlined in HB22-1137 must be followed. Since fines should be applied to any Owner’s account without giving the Owner the opportunity for a hearing in front of the Board of Directors, it is recommended that all covenant violation notices contain language about the opportunity for a hearing.

However, since both types of violations could also be repeat covenant violations, HB22-1137 processes become hard to apply because a specific instance of a repeat covenant violation will probably be “cured” before the mandatory notice requirements expire. Since the new legislation does not define or provide specific guidance regarding the processes required to handle repeat covenant violations, Associations need to define what a repeat covenant violation is as well as provide some examples of what could be considered a repeat covenant violation (e.g. parking violations) and create an enforcement process that fits the general guidelines of HB22-1137. 

The first step an Association must take in order to be able to properly address covenant enforcement, including application of fines or legal actions, is for the Association to adopt and follow a written Policy (“Covenant Enforcement Policy”) governing the imposition of fines and outlining the process for enforcement procedures. This written Policy should be the instrument that defines repeat/continuing covenant violations and the cure periods required for these violations. Please see C.R.C.P. 38.33.3.209.5, 2(c)(II) for specific requirements of the Covenant Enforcement Policy regarding the application of fines that are continuing in nature. 

It is also recommended that the Association’s Covenant Enforcement Policy clearly identify the types of violations that are considered threats to public safety or health and the types of violations that are NOT considered threats to public safety or health, the process that the Owner must follow, the possible fines or remedies that the Association may utilize, and that the policy state the fine schedule as appropriate for each type of violation, etc.

If the repeat covenant violation is considered to reasonably threaten public safety or health, then the cure period for a repeat violation could be as short as 72 hours as mandated by the new legislation. After that, the Association could proceed with fines applied to the Owner’s account every other day, pursuant to HB22-1137, but only if the opportunity for a hearing has been provided to the Owner. It should be noted that HB22-1137 does not limit the total amount of fines that can be applied to an account for covenant violations that are considered to reasonably threaten the public safety or health. After the expiration of the 72 hours grace period, in addition to fines to the account, the Association could take action to remedy the violation as provided by the governing documents of the Association or commence legal proceedings against the Owner (e.g. injunction).

If the repeat covenant violations are not considered to threaten public safety or health, then the cure period should be at least thirty (30) days to be in compliance with the first notice requirement and grace period of HB22-1137. If the repeat violation in question keeps occurring during the thirty (30) day period, the violation will not be considered cured and the Association should send a second thirty (30) day compliance notice  after the first notice has expired.  Although this second notice is mandatory if the violation is not cured during the first thirty (30) day grace period, the Association is allowed to proceed with applying fines to the account as soon as the first thirty (30) day notice expires if the opportunity for a hearing has been provided. Unfortunately, for covenant violations that are not considered to reasonably threaten the public safety or health, the amount of fines limitation imposed by the statute is $500.00. If necessary, after the expiration of the second thirty (30) period, the Association could proceed with other available means provided by the governing documents or commence legal proceedings against the Owner.

Considering the intricacies and complexity of the statute, and the lack of specific guidance for repeat covenant violations, we recommend that Associations consult with legal counsel to determine the compliance process and the needs that are specific to their community. Adopting a clear and concise Covenant Enforcement Policy and ensuring that it is properly implemented with each and every compliance action will ensure the Association’s success in enforcing the covenants of their Homeowner’s Association.

Gabriel Stefu is the managing partner of WesternLaw Group LLC, a law firm dedicated exclusively to Homeowner Associations in Colorado and Wyoming. WesternLaw Group has been in existence for over 16 years and proudly serves many Colorado HOAs.