Blog
By Jeff Kerrane, Esq., Kerrane Storz P.C.
Following the tragic collapse of the Champlain Towers South in Surfside, Florida, Fannie Mae took a significant step to modernize lending requirements. These new requirements place a greater emphasis on the property condition and the strength of the community’s reserves. In response to growing concerns about aging infrastructure and extensive deferred maintenance in certain buildings, Fannie Mae introduced a series of measures that will have a profound impact on the condominium market.
In 2021, Fannie Mae unveiled the Temporary Requirements for Condo and Co-Op Projects, a set of guidelines that reshaped the landscape of mortgages in condominium associations. Earlier this year, Fannie Mae amended the temporary requirements, and made them a permanent part of their underwriting standards. The new permanent rules are effective as of September 18, 2023.
Seventy percent of home mortgages are supported by Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are private corporations created by Congress to provide liquidity in the mortgage market. Fannie Mae and Freddie Mac buy mortgages from lenders and package them into mortgage-backed securities that may be sold. Fannie Mae and Freddie Mac have thousands of pages of regulations that provide the standards by which mortgages can be approved. Mortgages that qualify under these regulations are often referred to as “conforming” or “conventional” loans.
The first step in determining which Fannie Mae underwriting rules apply to your community association is to know which level of review will apply under the Fannie Mae guidelines:
Full Review
Limited Review
Review Waived
New Condo Project
Established Condo Project (with a high loan to value ratio)
2-4 Unit Condo Project
Co-op Project
Detached Condo Project
Manufactured Home Project
PUD
Under the Fannie Mae rules, a condo project includes associations where the owners each own an undivided interest in the common area. A PUD is an association in which the HOA owns the common property. PUDs would include most single-family home and townhome communities.
FULL OR LIMITED REVIEW
For projects subject to a full review, the new Fannie Mae requirements will exclude from financing eligibility any of the following:
These disqualifications allow for a few exceptions where projects may still be eligible for financing, such as projects where the damage or deferred maintenance is isolated to just one or a few units, and does not affect the overall safety, soundness, structural integrity or habitability of the project. The new rules also will not exclude projects in need of only routine repairs that are preventative in nature and are accomplished through the HOA’s normal operating budget or through special assessments that are within guidelines.
In addition, Fannie Mae will now look at an HOA’s reserve funds to ensure that the HOA is budgeting at least 10% of its assessment income to reserves. Alternatively, the reserve funds will be deemed acceptable if the HOA has adequate funded reserves that meet or exceed the recommendations included in the HOA’s reserve study.
The new requirements will now strongly advise lenders to review, at a minimum, the following documents:
Fannie Mae’s guidelines also extend to special assessments. Lenders must review current or planned special assessments, seeking documentation to ensure they don't negatively impact the project's financial stability, viability, condition, or marketability. In the case of assessments related to safety, soundness, structural integrity, or habitability, Fannie Mae requires that all repairs be fully completed.
REVIEW WAIVED
Fortunately for owners in PUD projects, these new Fannie Mae requirements will not apply. PUDs need only meet the normal Fannie Mae underwriting requirements.
The collective impact of these new modern lending standards is expected to render many condominiums ineligible for loans, potentially affecting the ability to buy and sell condominiums and, ultimately, property values. HOA boards and community association managers will need to become familiar with the new rules and adapt their reserve and maintenance practices to ensure their future viability and safeguard their property values.
Jeff Kerrane is a shareholder with Kerrane Storz, PC, which exclusively represents property owners and community associations in construction defect litigation. Jeff can be reached at jkerrane@kerranestorz.com or at 720-277-2076.
By Adam Thompson
Have you heard of the recent “Xeriscape Bill” [SB 23-178] that was signed into law at the end of May? This new bill overrides pre-existing HOA guidelines that restricted residents from installing xeriscape, artificial turf, and vegetable gardens in their yards. The intent of the bill is to promote water-wise landscapes. Some fear this bill will bring a reduced home values and aesthetic appeal to their neighborhoods. Others see the bill as an opportunity for communities to develop their own unique look, rather than the ‘cookie cutter’ manicured turf landscapes and shrub beds that are common in most residential developments.
Across the front range, steady population growth is bringing in new developments that are putting increased demands on our water supply. Water costs make up a significant portion of an HOA’s budget and we are seeing spikes in water prices as demand makes this resource scarcer.
So what is Xeriscape and what do each of the new changes mean?
Xeriscape (not “zero-scape”) is an approach to landscaping that is mindful of water usage to grow and maintain a landscape. It is not the elimination of water needed to maintain the landscape. Xeriscapes can, and do, include plants and even turf - although many experts would limit turf to areas where it will serve a purpose.
Three pre-approved designs are required for every community which will enable residents and boards to start xeriscape implementation without overburdening the ARCs. Many free designs are available at https://plantselect.org/design/downloadable-designs/ or residents can submit their own water-wise designs for approval. It may be preferable for a community to work with a landscape designer to create a proprietary set of designs and work to establish a common theme.
While there might be a strong push for people to convert their yards to drought tolerant design, several considerations should be made before committing to a yard renovation:
How ever you choose to implement these new rules, I hope you see it as an opportunity to improve the beauty of your yard and your neighborhood.
Adam Thompson holds a B.S. Degree in Landscape Design & Management and has worked in the landscape industry since 2007 working in construction and maintenance between single family homes to resort properties.
By Kevin McAlister and Rachel Schmidt, Higgins & Associates
For any homeowner, the prospect of a flood is a daunting one. With Colorado seeing over five inches of rain in both May and June of this year, breaking a hundred-year record, the likelihood of experiencing a flood has been significantly higher than in a ‘normal’ year. While a flood can be equally as devastating as a housefire, flood mitigation precautions are often overlooked due to the arid environment in which we live. While installing smoke alarms and removing potential fuel sources such as pine needles and leaves are fire mitigation measures routinely undertaken by HOAs, there are some equally simple mitigation measures than can be taken to significantly reduce the likelihood of a water intrusion event.
The principal goal of any flood mitigation activity is to direct water away from structures. This is often easier to achieve in single family communities where buildings are further apart than in multi-family communities where the proximity of buildings creates greater challenges to managing water flow. The second objective of flood mitigation is to prevent water from entering a structure if it does get to the property façade. However, as the adage goes, “an ounce of prevention is worth a pound of cure” so keeping water away from structures in the beginning is far more effective than trying to keep it out once it gets there.
Gutters
Gutters are used to capture the discharge from roof surfaces. During heavy rainfall, this can result in a significant demand being placed on these drainage systems. If the gutters are insufficiently sized for the roof area or not periodically cleared of debris, the water can spill over the sides and may no longer be directed as intended. It is especially important not just to clear the gutter paths, but to also ensure the flow continues unobstructed through the downspout.
Downspouts
Downspouts are critical in flood prevention as their job is to collect concentrated water flow and move it away from the building and protects the building’s foundation. As the flow from downspouts is concentrated, it can cause soil erosion at the point of discharge which will ultimately cause more issues. Downspouts need to be extended to discharge at least 5-feet from any foundation. Every foot beyond that provides a bonus level of flood prevention. At the point of discharge, downspout extensions need a splash block, cobbles, or some other means to dissipate the water without causing erosion. Finally, it is good practice to require that landscapers reposition downspout extensions that are often lifted-up during mowing or other landscaping activities.
Window Wells
Window wells are a common feature of Colorado properties with basements and should include a curb or other enclosure to prevent water from flowing into the well openings. Window well enclosures that have sunk below grade or do not form a continuous barrier with the foundation wall should be modified to ensure that water cannot enter the well from the surrounding grade.
Overwatering and Sprinkler Maintenance
With our dry climate, many communities benefit from irrigation systems to sustain plants and lawns. However, overwatering, especially during wet weather, can result in oversaturation of surrounding soils. This can create excessive run-off, erosion issues, elevated water tables, and significant underground hydrostatic pressure on foundation walls, thus increasing the likelihood of basement water intrusion. Be sure to turn off sprinklers during wet weather and conduct regular maintenance on water lines to prevent leaks damaging nearby foundations. Being knowledgeable about landscaping and areas where communities can opt for more water conscious planting and landscaping also helps prevent overwatering.
Maintaining Grading Slope
Maintaining adequate grading slope away from a building is one of the more important counter-flood measures. The International Building Code requires that a minimum 5-percent slope is maintained away from structures for the first 10-feet to ensure that water is discharged away from foundations. Flat ground or ground that slopes towards a building is one of the most common issues we encounter at buildings with persistent water intrusion issues. Site regrading and ensuring there is an uninterrupted route to discharge water off a site or to a suitable outlet point is often the only way to address this issue.
Through regular inspection and maintenance, homeowners’ associations can reduce the incidence of flooding issues and avoid the resultant property damage and distress of a water intrusion event. If in doubt, we advise that a professional architect, engineer, or licensed contractor be consulted prior to undertaking any work to ensure compliance with code and that any future repairs fully resolve any identified deficiencies.
About the Authors:
Kevin McAlister leads the Construction Consulting group at Higgins & Associates. He has over 30 years of experience as both a contractor and a construction consultant addressing issues in the built environment, especially within the tight confines of multi-family communities. Kevin advises HOAs on suitable property rehabilitation and maintenance approaches including drainage, roofing and grading issues and consults on the cost requirements of these activities.
Rachel leads the Civil Engineering department at Higgins & Associates. She has devoted her career to working with homeowners to assist them in assessing and resolving their civil and structural engineering problems. Rachel has helped many HOAs and property managers to manage the process from determining the cause of an issue, to designing, implementing, and validating the repair. She has experience with all property types from single-family homes to extensive multi-family home developments.
By Joshua Flanagan, Blue Frog Roofing
With the continued growth and modernization of urban areas comes the human response to energy efficiency and health. Surprisingly, roofing systems can play a large factor in this response. Energy efficiency in regard to roofing is not a new idea; however, it only truly began to gain traction in the United States in the early 2000s when California changed their energy code to use cool roofing for commercial buildings. A cool roofing system is typically when a lighter color roof is installed in areas of high heat to reflect sunlight thus reducing energy costs. Energy efficient roofing has since taken further steps with solar panels and green roofing systems.
The City of Denver passed an initiative in January of 2018 that originally required all new commercial buildings over 25,000 square feet to install a green roof. Green roofs, also known as vegetative roofs or living roofs, by definition are “ballasted roofs consisting of a waterproofing membrane, growing medium (soil) and vegetation (plants) overlying a traditional roof” (U.S GSA). Denver and its voters cheered as this initiative passed, but when it came time to discuss implementation, “it wasn’t looking feasible,” wrote Alicita Rodriguez in the CU Denver News. Rodriquez received some insight from Austin Troy, PhD, chair of urban and regional planning department at CU Denver’s College of Architecture and Planning on why it wasn’t looking feasible. Troy explained how green roofs are extremely expensive because of the structural support needed for the soil as well as the very high irrigation and drainage costs. Troy adds that if you force everyone to build a green roof, then investors are forced to pay a lot of money for something that may not get much use and potentially forgo low-cost green landscaping to save money. It’s important to consider that adding vegetation around buildings and using energy-saving materials can be more cost effective than green roofs while still being environmentally effective.
After half a year, and nine meetings, the Green Roofs Review Task Force changed the initiative to the Green Building Ordinance, effective on Nov. 2, 2018. So, instead of this one size fits all approach, the ordinance changed, permitting “new buildings over 25,000 feet to choose from a series of nine green-energy options in these areas: green roofs/green space, solar/renewable energy, energy efficiency, green building certifications (third-party programs), payment to the Green Building Fund, and the Energy Program (for roof replacement)”(Rodriquez). This gives developers, investors, and contractors a wider range of options while still participating in the modernization of energy efficiency. The following year construction results were a wide range of all nine options, with the most popular being cool roofs only, enrolling in the energy program, and on-site green spaces. Green roofs are still being proposed in Denver, but now a more selective plan can be addressed for those who choose that system.
There are quite a few benefits to these energy efficient roofing systems. Cool roofs and green spaces are known to reduce the Urban heat island with cool roofing systems also saving around 10 to 15 percent in energy costs. Green spaces/roofs are also known to help with stormwater run-off management. Solar panels can reduce operating costs and attract tenants. Cool roofs are probably the most popular of these options listed since it is a simple and less expensive option than the others with choosing the right roof material and color. “Cool roofs achieve the greatest cooling savings in hot climates but can increase energy costs in colder climates if the annual heating penalty exceeds the annual cooling savings” (Energy.gov). In Denver, we typically have more warming days than cooling days, so installing a cool roof can reflect 60 to 90 percent of sunlight. Common materials for low slope (flat) roofs are TPO (thermoplastic polyolefin) which is white in color, PVC (polyvinyl chloride) which can be made with most colors, and light-colored metal roofing (standing seam or exposed fastener metal). However, in parts of the mountains at higher elevations with more cooling days, a cool roof system could be black EPDM roofing materials or dark colored metal roofing systems to retain more heat inside the building. For steep sloped buildings, any lighter colored materials including asphalt shingles can make a big difference in energy efficiency. Metal roofing types including Stone Coated Steel are also known to further energy efficiency. Synthetic materials like Brava or Di Vinci can achieve this as well. There are many other roofing materials, but these are some of the most popular.
Blue Frog Roofing is a premium Roofing company servicing all of Colorado and Southern Wyoming taking an educational, consultative, and preventative maintenance approach. We specialize in Multifamily and commercial roofing and large loss while having a strong service/repair team.
By Connie Van Dorn, CAI-RMC Homeowner Leader
As one of the five stakeholders who brought HB22-1137 to the General Assembly for consideration, I read with relief David’s conclusion that I am, we are, well-intentioned, decent, reasonable people.
Since last fall, I am also now a newly minted CAI RMC member, RMC Homeowner Leader Committee member, and RMC BOD Member at Large in a Homeowner Leader seat. I am here to work from the inside to move that pendulum David mentioned to a reasonable place.
The passage of HB22-1137 had a number of intended and achieved consequences including eliminating industry “insider” purchase of HOA foreclosures, opening up small claims court for some disputes, and others. Most importantly, it did prevent hundreds of what could only be called predatory foreclosures.
David pointed out some of the unintended consequences of that legislation. He didn’t mention, however, that there are some things that were in the bill’s language, that the original stakeholders didn’t bring to the table either. Some of the things that “didn’t work,” will no doubt be addressed in the 2024 legislative session.
If we want community associations in Colorado to thrive, there are other things we can do together, to address some of the challenges we all know exist. Meaningful reform can happen without legislation or with shared stakeholder legislation. For example, I’ve been inspired by CAI's 2020 and Beyond Governance Panel Report and changes its authors contemplated. Transformational Homeowner Leader Education and Training is another opportunity.
While the “costs” of 1137’s implementation are challenging to quantify, perhaps there’s also an opportunity here to work together in innovative ways to strengthen communities, community associations, and the homeowner experience. In recognition of CAI’s 50th anniversary, I like to think that’s what the founders had in mind.
Connie is a retired Human Capital Consultant who enjoyed a career in human resource solutions for distinguished companies and organizations. In addition to being a proud Mom of two amazing adult children and a lifelong volunteer, Connie is a Student of Common Interest Communities and on a mission to strength Colorado HOAs via Homeowner Advocacy.
By David Graf, Moeller Graf, P.C.
HB 22-1137 (“1137”) was the most impactful community association legislation since CCIOA was adopted in 1992. CCIOA’s legislative declaration, at C.R.S § 38-33.3-102(b), states that the “continuation of the economic prosperity of Colorado is dependent upon the strengthening of homeowner associations in common interest communities financially to the setting of budget guidelines, the creation of statutory assessment liens, the granting of six months’ lien priority, the facilitation of borrowing, and more certain powers in the Association to sue on behalf of the owners enter enhancing the financial stability of associations by increasing the Association’s powers to collect delinquent assessments, late charges, fines, and enforcement costs…”
Little more than a dozen years later, SB 100, effective in 2006, was adopted as a “homeowners’ protection act” to protect owners from their associations in certain respects. Fast-forward to 2022, 1137 passes through the legislature to provide additional owner protections with respect to assessment collections and covenant enforcement, largely as a result of negative homeowner experiences in two communities within the state.
I’ve gotten to know some of the stakeholders who were behind 1137, and without exception, I have found them to be well-intentioned, decent, and reasonable people. I’ve also had conversations with some of the legislators who brought forth 1137 and I have found them to be sincere in their efforts to address what they see as the primary issues affecting community association collections and covenant enforcement here in Colorado. I don’t personally believe that any of these individuals are actively trying to destroy communities, nor are they anarchists, or opposed to holding owners to their responsibilities to their neighbors by virtue of living in a common interest community.
We don’t always agree on where the pendulum should fall between vigorous enforcement of community standards and obligations, on the one hand, and a lack of enforcement of community standards and obligations for the benefit of a few to the detriment of the many, on the other hand. For everyone who doesn’t have to pay their assessments, their neighbors have to absorb that debt. For those who take good care of their property, it is of little comfort when they walk out the front door and have to look at the blighted property next to them. The goal of everyone, 1137 stakeholders included, should be to find a balance where people can come back into compliance while the needs of the neighbors are honored for the most part, for most of the time.
On the topic of collections, associations had to adopt a new collection policy and essentially “retool” their collection process, time frames, and form documents based on the requirements of 1137. This created a gap in collection activity, in my experience, of about six months. I have heard reports of accounts receivable balances increasing during this window of time, and while I believe some of it is due to a lack of collection effort, some of it could also be attributed to the softening economy.
The posting of the delinquency notice on the door is an issue that caused a lot of stress to boards and management teams. The concerns were that the cost of the posting, the safety of who was doing the posting, and the potential for a negative owner experience in having a delinquency notice posted on the door early in the collections process. All of those concerns, in my experience, were valid. However, I have heard that the posting on the door has been effective in getting the attention of owners to pay their assessments.
I don’t believe that anyone would dispute that the number of foreclosures filed by associations after the effective date of 1137 has fallen dramatically. There are a number of limitations on association foreclosures imposed by 1137. I’ve discussed this issue with a few stakeholders and other interested parties and they seem to believe that due to the falling number of foreclosures, the bill has worked as intended. I don’t think that the analysis is quite as straightforward. Yes, I think that non-urgent foreclosures being prohibited is a good thing. With that said, there are times when foreclosures may be the only remedy available to a community association.
For example, I’ve experienced board members who were scared to foreclose on an owner notwithstanding the fact that a judgment had already been entered against them, numerous collection remedies had been pursued, and the owner still has not made a payment in several years. If all other remedies have proven ineffective and the owner appears to be intent on not paying and not communicating with their association, foreclosure should be a reasonable remedy.
Additionally, the prohibition on foreclosing on covenant violation fines has left some of our clients without recourse for owners who are unwilling to maintain their properties to a minimum community standard after having been ordered by a court to maintain their properties and failing to do so after many months or even years. In those cases, the association is without recourse to deliver a solution to the community for a covenant problem that a judge has already determined needs to be remedied. This is not so much an economic impact to the association per se, but it is a potential impact on neighboring properties that might be up for sale and it begs the question of who has more rights-- the neighbor contemplating a loss in market value of his or her home or the owner who has steadfastly refused to maintain their property for months or even years?
On the subject of covenant violations, while there are a number of procedural issues with 1137, the financial impact of the $500 maximum fine on a covenant violation not affecting the health and safety of the public stands out. It has been my experience that violation fines can be one of several effective tools to gain compliance. However, for many communities, a $500 maximum fine takes that nonjudicial tool off the table. Said another way, there are some owners who would gladly pay the fine to remain out of compliance. This has the unintended consequence of increasing the possibility that an association would have to pursue a covenant violation lawsuit because the association was prohibited by law from getting the owner’s attention to remedy the violation through violation fines.
From my perspective, much of the hysteria surrounding the adoption of 1137 has not come to pass-at least so far. The burden of complying with 1137 has scared a number of self-managed boards out of being self-managed and has caused management companies, for the most part, to pass on those costs to their clients. I have heard of very few and isolated reports of people abusing the language option contained within 1137. The designated contact for communication has been a positive development. New conversations about how to address community issues amicably and inexpensively have taken place.
The true financial impact of 1137 that I worry about has not yet been felt on a grand scale. Specifically, I’m referring to the eighteen-month payment plan. We’ve had a number of hailstorms throughout Colorado this summer, and there will be deductible apportionments/special assessments as a result. For those owners who have not protected themselves adequately with HO6 loss assessment coverage or otherwise, if they choose to pay the assessment over eighteen months in any appreciable number, associations are going to be strained in funding necessary infrastructure repairs. When that happens, I think that we will understand that the pendulum has swung a little too far out of balance for the health of associations that maintain critical infrastructure.
David Graf has practiced community association law exclusively since 2001. Regarded as one of the most sought-after community association industry speakers in the United States, David has been recognized for several awards, notable CAI’s National Educator of the Year (2015). David has been admitted to the College of Community Association Lawyers (“CCAL” or the “College”). In 2018 and 2020, David was elected by his CCAL peers to the College’s Board of Governors and is the current President of the College.
By Danielle Holley, Hearn & Fleener
Thoughts About the Visible Vegetable Garden Rule
Being an avid flower and vegetable gardener – and not shy to talk about it – I’ve heard from a few friends at the law firms wondering what regulations around “visible” vegetable gardens could look like. I’ll tell you, I do not mind the change. Also, I see why it causes concern for aesthetically-minded community architectural or landscape committees and the management infrastructure that has to enforce their decisions. This essay is more “thoughts for consideration” than actionable solutions, but I’d love to hear from anyone who has an opinion!
The new law, effective August 2023, includes a provision stating an association “may not prohibit vegetable gardens in the front, back, or side yard of a unit owner's property” within single family home communities. I’m calling them “visible gardens” because “front, back and side yard gardens” feels clunky. And honestly, most of us are only worried about the visible areas of another person’s home.
My first thought is that August is great! The best time to install a new garden is in autumn so you can wake up one spring morning and do the fun part: planting. That said, it doesn’t leave much turnaround time for an association with opinions about this practice.
While a covenant community may not prohibit the choice to install a garden, implied language is that an association may regulate visible gardens without prohibiting them. How might that look? Start with the vegetable garden definition. SB 178 defines a garden as “a plot of ground or an elevated soil bed in which pollinator plants, flowers, or vegetables or herbs, fruits, leafy greens, or other edible plants are cultivated.”
What is that not? The definition does not expressly permit greenhouses, an orchard, bee-keeping, re-wilding/meadows/use of the whole lot, compost piles, scarecrows, neglected lawns, or marijuana plants (a whole different law). It also does not grant owners permission to do whatever they please. They are simply allowed to have a visible garden plot.
Senate Bill 178 was written and passed with intent that the law “removes barriers to water-wise landscaping practices in community associations”. Through that lens and as citizens of the American West – a desert! – I hope most of us engage this process in the spirit of saving water. As professionals working with community associations, we can work to meet association homeowners where they are on their water-saving journeys and how they wish to participate in visible gardening. A lot of them will not care or listen. And a few are about to have a crisis of passion.
An example being my own community built in 1962. My neighbors and I have wildly different views on how our front yards should appear, but we all seem to care:
The woman across the street spends hours in her front yard where she harvests a multitude of flowers and vegetables each season, but it is not pretty. Components of it are stunning, but the overall effect is somewhat unfortunate looking with old pantyhose used to train vines along her front walkway.
A man next door to her has planted fruit trees and built hügelkultur berms lined with rocks where he plants pumpkins and gourds each summer. His children are often out there with him planting and picking things while his wife enjoys the shade. I haven’t seen them out yet this year which makes me think they might skip this season.
The family just south have a “pollinator garden” (they say) where their children have painted boards and rocks and sculptures… and left them subject to the elements. The area is not my favorite to walk by with its thistle and grasses leaning over the sidewalk, but there are a few sunflowers that emerge each year and the “wild” nepeta is some of the first pollinator food in the neighborhood come spring. And for the record, the whole family sits out front and enjoys it many times each week. They just mowed the weeds so maybe they were observing “No-Mow May”?
The teacher who lives between my house and the pollinator garden has a formal “Midwest” lawn with irrigated Kentucky bluegrass bordered by pink roses, white iris and purple salvia. I have never seen her enjoying it, but contractors are often tinkering with the irrigation and spraying the shrubs. I think it’s pretty. I also think she overwaters and allows dubious chemicals.
My front lawn is xeric with a few tomatoes hidden close to the house in a small irrigated patch. We don’t sit out there often, but when we do, neighbors often stop to comment happily on the changes we have made. It is south-facing and used to be a large rectangle of bluegrass. We could not water enough after May/June to keep it from going dormant.
All this to say, what fits the greater neighborhood and the ethos of our neighbors? Do we want to encourage encounters with people as they walk by us doing the gardening? Do we want to proudly suggest that our people are water savers? Pollinator supporters? Do we hope that our neighborhood – like an un-bumper-stickered mid-price car – will not announce anything except its relative sensibility and safety?
I like to think about these things. It feels impossible to ask an association board or landscape committee to craft guidelines that speak for an entire community, but that is literally what our government has asked associations to do. They’re tiny villages of people doing their best to live good lives and they hope their neighbors won’t take exception to their choices.
As suggestions to get started “allowing visible gardens” a committee might consider the following:
Water
Since the intent of the law is to “encourage water-wise behavior”, an association might ask owners who want to install visible gardens to pay for/install/administer the appropriate watering devices and/or hand water their garden. It would be ineffectual to allow the same watering routine for bluegrass to continue once all or a portion of it has been removed in exchange for a garden. It is worth noting that Denver Water does not regulate how often a vegetable garden is watered although they do put restrictions on turf irrigation.
Design and Installation
Keeping with the spirit of the law, an association should not set aesthetic guidelines that make installation of a new garden cost prohibitive. Remember that vegetable gardeners are often thrifty types and may upcycle materials that are more charming than attractive. Associations have the right to regulate these options.
A committee should consider what might be acceptable or unacceptable. They should also consider the longevity of the materials being used. At what point does a raised bed need to be repaired or replaced?
Maintenance
Anyone who has googled “front yard garden” knows the number one rule is to keep things tidy (so as to not ruin it for the rest of us). The term “tidy” leans subjective, but I think reminding neighbors of the concept is fair enough.
Vegetable gardens are not always lovely and aesthetics do matter. An organized and tidy plot, even if you subscribe to chaos theory, can go a long way toward making the space unobjectionable.
For me, this also means cleaning and repairing my vegetable plots in the fall. I leave plant skeletons up all winter in my flower gardens as critter habitat. This might not be a choice I would make if my only gardens were visible to the neighbors.
Community
If nothing else, spending more time in your front garden means you’ll meet the people who walk their dogs.
Should the community choose to welcome visible gardens, consider hosting a vegetable exchange at the end of the summer. It could be as simple as a table in the shade near the clubhouse or mailboxes with a sign: “Leave Your Surplus, Take Our Surplus”. It could be as involved as a potluck!
Maybe in the spring, the community encourages a plant exchange?
If the neighborhood is jumping in with both feet, perhaps a garden tour in August? Or a garden construction event in October? Maybe you invite/hire a landscaper to teach your homeowners how to install water-wise irrigation for their new gardens in April.
How neat would it be to see how much water the community is allowing to stay in the watershed? What that means in real dollars?
At the end of the day, we are working to improve the home values and experiences of community association homeowners. Most of the work is on them. They are their own neighbors. Love thy neighbor and now their garden plot.
Danielle Holley is a gardening enthusiast. She works at Hearn & Fleener in Littleton, CO as their Director of Client Services where she provides support to managers and association boards during their construction defect claims. She has been an active member of Community Associations Institute since 2009 and she especially enjoys the landscaping classes. She welcomes your feedback on this essay and your garden surplus.
By Devon Schad, The Schad Agency
When it comes to safeguarding your condominium or townhome investment, having the appropriate insurance coverage is vital. The HO6 insurance policy is specifically designed to fill the gaps left by the master insurance policy held by the association. In this article, we will delve into what HO6 insurance entails, its significance, key inquiries to make to your insurance agent or company, and the utilization of loss assessment in case you are assigned a portion of a deductible.
What is HO6 Insurance?
Although the condominium & townhome associations typically carry a master insurance policy, it usually only covers the common areas and the structure of the building. HO6 insurance steps in to provide coverage for personal property, interior unit items not covered by the master policy, personal liability, loss of use, and other areas of coverage.
Different Approaches to Master Policy Building Coverage
Specific requirements for your association can be found by reading the Covenants, Conditions & Restrictions (CC&R’s) or sometimes referred to as your Declarations:
Bare-walls
The “bare-walls” only insures the basic structure of the individual building, up to the bare-walls of the unit. Unit owners are responsible for insuring their own exclusive building property, such as sinks, cabinets, appliances, flooring, and wallpaper, along with any improvements and betterments.
Single Entity or Original Construction
The “original construction” covers most real property in a residential building, including fixtures in individual units. However, it doesn't include any structural improvements, betterments, or additions made by owners.
All-Inclusive
The "all-in" coverage includes all real property in a residential building, including fixtures in individual units and any improvements made by owners. It replaces a unit to its original condition after a loss. In this approach, the unit owner is only responsible for their personal property under the HO6 or unit owners form or losses below the associations all other perils deductible (AOP).
It is important to note associations may have different requirements of those above and may also follow what is outlined in the Colorado Common Interest Ownership Act.
Critical Coverages You Should Have
Building/Improvements/Betterments
The master policy may not extend to the interior of individual units, making it important to have HO6 insurance to cover gaps in coverage. This includes walls, floors, ceilings, fixtures, improvements or alterations.
Personal Liability Coverage
Provides personal liability coverage, protecting you in case someone is accidentally injured in your unit or away from it, or if you accidentally cause damage to someone else's property. This coverage excludes claims involving automobiles and business, which require separate coverage.
Additional Living Expenses (ALE) Coverage
In the event that your unit becomes uninhabitable due to a covered loss, HO6 insurance can cover additional living expenses such as temporary accommodation and meals until your unit is repaired or until you find a new permanent residence. If you rent your unit, this coverage can help cover the loss of rental income. Many policies only come with twelve months of coverage or a set limit which may not be enough to cover you for the time it will likely take to rebuild.
LOSS ASSESSMENT
Many association policies have a 5%-10% wind/hail deductible where unit owners are likely to be assessed a share of that deductible following a covered loss that affects common areas or multiple units. Loss assessment coverage, typically included in HO6 insurance policies, can help mitigate this financial burden. This percentage is based on the total building value and not the loss.
As an example, an association with 10 units and a $1,000,000 building coverage and a 10% wind/hail deductible will have a $100,000 deductible at the time of loss. To help cover this loss, most association will assess owners a share of this loss in equal portions, assessing $10,000 to each unit owner. Having the right loss Assessment may cover the entire $10,000 amount assessed.
Be careful when purchasing loss assessment coverage as some carriers have added this language below:
Special Limit
We will not pay more than $1,000 of your assessment
per unit that results from a deductible in the
policy of insurance purchased by a corporation or
association of property owners.
Having the language above will limit your payout, REGARDLESS OF HOW MUCH LOSS ASSESSMENT YOU PURCHASE.
It is important to note that some loss assessment endorsements must be in force at the time of the loss to the association as well as at the time you are assessed.
Review your HO6 policy to determine the maximum coverage amount for loss assessments and make sure you are covered for at least the greater of the master policy all other perils deductible or the wind/hail percent deductible.
Conclusion
As an owner, it is crucial to protect your investment and personal belongings. HO6 insurance offers the necessary coverage to safeguard your unit and personal property, providing peace of mind against unexpected events. Remember to ask the right questions when selecting a policy and understand the benefits of loss assessment coverage to ensure you have tailored insurance protection as a condominium & townhome owner.
Devon Schad currently sits on the Board of Director for CAI Rocky Mountain Chapter, is an Educated Business Partner, and owner of the Schad Agency. The Schad Agency is a family-owned business specializing in insuring association and has since its founding in 1976.
By Nicole Bailey, RBC Wealth Management
The funds collected and managed by community associations are designated to be used for the benefit of the association. Association governing documents require some part of the annual assessments to be set aside for the future repair and replacement of community assets. As these reserve funds accumulate, it’s important to ensure the funds are available when they are needed to pay for major repairs and asset replacements. The association’s reserve study provides a schedule of the reserve spending so that the association can build a plan to fund the reserve account sufficiently. The association can also work with a qualified financial advisor to structure an investment strategy that helps protect the funds and generates interest income to supplement the contributions to the account from the homeowners’ assessments.
The homeowners in the community have entrusted elected members, management, and other professionals to properly manage and maintain the association. Everyone who serves the association (homeowners, board members, managers, community experts, etc) is expected to act in the best interest of the association. When selecting a financial advisor for an association, the board and community manager should seek out an advisor who acts in the best interests of the association.
Once a qualified investment professional has been engaged, the board and the advisor can develop an investment strategy that helps protect the funds, verifies they are available as needed, and generates a reasonable return given the first two objectives are met. The association’s investment policy provides the general parameters that inform the strategy to be implemented by the advisor.
As part of the investment objective, the investment policy outlines the types of risk the association should avoid or attempt to mitigate. These risks often include credit risk, liquidity risk, and inflation risk. It is important to have an awareness and understanding of the other types of risk the funds could be exposed to even if they are invested in what are commonly considered “safe” investments.
All investments come with different types of risk, so it is important for the board to consider which types of risk are acceptable and which types are not. Below is a summary of the different types of risks involved with investing:
In addition to the restrictions on risk, the association’s investment policy includes information about the investment strategy and the relationship between the board and the financial advisor. The policy should outline the goal of the investment strategy – why are the funds being invested? Is it to ensure the full amount of the funds are FDIC insured (beyond $250,000)? Is the association seeking to increase the amount of interest being earned? When identifying the investment timeline, the policy should reference the reserve study. If the reserve study calls for limited spending for the next 5 years, the investment policy should not limit the investment timeline to 2 years. In alignment with the discussion of risk, objective, and timeline, the policy can identify the types of investment vehicles to be used or avoided in the account. Many policies restrict investments to certificates of deposits or investments guaranteed by the federal government, which is in alignment with the mitigation of credit risk. Some policies allow for a percentage of the funds to be placed into diversified stock positions which is in alignment with the mitigation of inflation risk. These restrictions and allowances should be carefully considered and approved by the board of directors. The board’s expectations for the management and communication around the account should also be specifically outlined in the policy.
Under the fiduciary umbrella, the board of directors should partner with a qualified financial professional and adopt a comprehensive investment policy. By leaning on professionals and policies, the community may reap the benefits of long-term growth in the account in order to meet the future needs of the association.
Nicole Bailey, CFP ®, Vice President - Financial Advisor
RBC Wealth Management, a division of RBC Capital Markets, LLC, registered investment adviser and Member NYSE/FINRA/SIPC.
Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.
RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in consultation with your independent tax or legal advisor. No information, including but not limited to written materials, provided by RBC WM should be construed as legal, accounting or tax advice.
By Peter B. Miller, RS, and Rick McKittrick, MillerDodson Associates, Inc.
Now that we have marked the second anniversary of the Champlain Towers South partial collapse, it is time to examine where we have come regarding the Reserve Study field. This tragedy opened our eyes and made clear several issues, not the least of which was a reform of the way we do Reserve Studies. As we all know, the Community Associations Institute (CAI), was very active in its response to this disaster, starting with a physical presence on the ground in the days immediately following the collapse, followed by its Condominium Safety Public Policy Report within months of the event. CAI also appointed several task forces to study specific topics such as Reserves and Reserve Funding, Building Maintenance and Structural Integrity, and Insurance. The input from these task forces culminated with extensive changes to CAI’s Reserve Study Standards. These changes to the Reserve Study Standards are important to understand, not just for Reserve Specialists, but for Community Managers and Community Association Volunteer Leaders as well.
Input from the hundreds of CAI task force participants showed that the Reserve Study Standards of the late-1990’s needed to be updated to reflect the current practices and the rapidly changing technologies in the 21st Century. The updated Standards challenge the older practices such as requiring only a 20-year minimum period for the Reserve Study. This has now been updated to require the Reserve Study to cover a 30-year minimum. Previous Reserve Study practices excluded many components that had a Normal Useful Life (RUL) greater than 30 years. The new Standards require that proportional funding be provided so that a component with a 40-year Normal Useful Life would have 75% funding at the end of 30 years, for example. Previously ignored or overlooked “in the wall” common elements such as plumbing pipes, and electrical and mechanical equipment must now be included as Reserve inventory items. Additionally, Reserve Studies previously required that replacement be “in-like-kind”, meaning that you replaced each component with an identical component. The updated Standards recognize that components can be replaced with newer, more energy-efficient technology, or with components that have a lower life-cycle cost.
The updated Reserve Study Standards also acknowledge that maintenance practices are integral in planning for the future physical and financial needs of a building, and therefore need to be considered in preparing the Reserve Study. The new practices recognize that a good maintenance plan can extend the Useful Life of components. Conversely, the lack of a maintenance plan can and should result in a reduction in the Normal Useful Life of the various components. Such a reduction in Remaining Useful Life, of course, increases the amount of Reserve Funding necessary for these components.
Most importantly, the new Standards recognize that the structural integrity of buildings can no longer be ignored. While the actual structural components of a building are still not included in the Reserve Study inventory, funding for periodic professional structural evaluations of certain building types should be provided in the Reserve Study. The Taskforce on Reserves and Building Safety recommends that buildings be evaluated structurally every 10 years up to year 20. Buildings older than 20 years should be evaluated every 5 years. The exact “scope” of these evaluations is not defined within the new Standards. However, it has been suggested that the scope of these evaluations be defined by the appropriate ASTM Standard.
It is hoped that the Reserve Study Standards will continue to be a model for State and local governments that are considering legislating Reserve Studies. And it is not just State and local jurisdictions that are tightening these requirements. CAI has seen outside forces such as Fannie and Freddie, other lending institutions, as well as the Insurance industry pushing for tighter Standards.
The new Reserve Study Standards can be found on the CAI website at www.caionline.org under Reserve Study Standards. It should be noted that the updated Reserve Study Standards do not change the requirements and qualifications for applying for the Reserve Specialist Designation.
Peter B. Miller, RS, is the President of MillerDodson Associates, Inc. He is a past member of CAI’s Board of Trustees and served as a Co-Chair of the Taskforce on Reserve and Building Safety.
Rick McKittrick has worked as an Analyst with MillerDodson for more than 15 years.
