Insight and Education for Community Associations
Community Associations Institute / Central Arizona Chapter / www.caicommunityresource.com Issue 3 / 2009
Protecting Your Organization from
Itself – financial Issues
reSerVeS: If You fail to Plan,
You are Planning to fail
One Size does Not fit all
How to Borrow and
What Impact does a
reserve Study Have
on the Process
2009 CaI Casino Night
Myths and Misconceptions
2009 CaI CaC event Calendar
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Issue 3 / 2009 1
on the cover
If You fail to Plan,
Issue 3 / 2009
You are Planning
Community Associations Institute / Central Arizona Chapter / www.caicommunityresource.com
12 10 “Priceless Legal advice”
April Luncheon Recap
From the Editor
12 “going green” New Members
Welcome to the
May Luncheon Recap
Central Arizona Chapter!
14 How to Borrow and What
14 CaI events .................................................8
2009 Winter CAI Breakfast Club
Impact does a reserve Study
Have on the Process arizona Legislative
action Committee ............................22
By Terry Burks
2009 Arizona Legislative Session
16 Myths and Misconceptions
16 Myths that associations follow that could increase
the association’s financial liability in the future.
CaI News ................................................24
CAI News & Information
By Lynn Krupnik, CCAL and
Elaine Anghel, CMCA, AMS, PCAM, CAAM
Congratulations Corner ................26
17 reSerVeS: If You fail to Plan,
CAI – Central Arizona Chapter
You are Planning to fail
2009 Committee Chairs
By Kerry-Lynn Goto, CMCA, LSM, PCAM, RS
18 assessment Increases:
One Size does Not fit all 17 2009 CaI CaC
CAI – Central Arizona Chapter
By Jessica J. Maceyko
2009 Annual Sponsors
20 “Preserve and Protect”
While efforts to insure accuracy are exercised, the publisher
By Deena Kanoff assumes no liability for the information contained in either
editorial or advertising content.
21 MadOff’S PONZI SCHeMe - Valhalla Holdings
a Lesson in Segregation of duties www.Valhalla360.com
By Michael R. Gallacher, CPA and For advertising and editorial information,
Marcos C. Goodman, CPA please call Valhalla Holdings at (480) 634-1708.
Issue 3 / 2009 3
From the presiDent Community Associations Institute
Central Arizona Chapter
2009 BoarD oF Directors
President’s Message chapter president
Law Offices of John Chaix
602-561-1094 • email@example.com
Charles Maxwell, Esq., CCAL
Maxwell & Morgan, PC
480-833-1001 • firstname.lastname@example.org
I learned a lot during our May luncheon this year members with the best possible lunch experience, vice president
about Going Green. Some of you may remember we needed to encourage our membership to Gary McCunn
I jokingly mentioned after the presentation that I meet the registration deadline for our luncheons. Four Peaks Landscape Management, Inc.
480-967-0376 • GMcCunn@fourpeakslandscape.com
needed to get my dryer vent checked and cleaned. Early registration gives us a better estimate of
However, the more I thought about it, the more the attendees and allows us to better serve our chapter secretary
I wondered if my house was in good shape. As it membership. We can often accommodate a few Kerry-Lynn Goto, CMCA, LSM, PCAM, RS
turns out, the vent had detached itself in my attic last minute registrants or walk in attendees, but Great Boards, LLC
602-569-0288 • email@example.com
and was blowing lint everywhere. The detachment sometimes we have to ask people to wait to see if
was a result of the vent being extremely clogged. we have any no shows or turn them away due to a chapter treasurer
So now my ability to dry my laundry is back on shortage of space. We would like to limit both of Anne Dill
track with a reduction in my energy impact on the these scenarios by implementing a ten dollar late Community Association Banc
environment! Sometimes we all sit in a luncheon registration convenience charge. By registering on 602-369-2388 • firstname.lastname@example.org
and wonder if the topic is truly relevant to us. I time, you help us keep our costs contained and our chapter Directors
believe there is always something to learn either meal quality of a higher caliber. Elaine Anghel, CMCA, AMS, PCAM
for our own benefit or possibly in order to help Tri-City Property Management Services, Inc.
another. I hope each of you come away from our One of the best ways for an organization to prevent 480-844-2224 • email@example.com
luncheons with a nugget of valuable information. stagnation, is to bring in new people or get people Charles Greco
who have been in the organization involved in Florence Gardens Mobile Home Association
The Board has a number of initiatives that we are new ways. Their involvement can lead to new 520-705-2069 • firstname.lastname@example.org
continuing to investigate and pursue: ideas and a checks and balances on the existing Shelly Holland, CMCA, LSM, PCAM
• West Valley events: We hear our west valley system. This does not mean that the “old” reliable Val Vista Lakes Community Association
members and we will continue to provide more participants should be pushed aside, but rather that 480-926-9694 • email@example.com
networking opportunities on that side of town. the blending of experience and knowledge with Lynn Krupnik, Esq., CCAL
• Open, clear communication and accessible new enthusiasm can lead to a better and stronger Ekmark & Ekmark, LLC.
operation of the chapter: We want your organization. This year as I look around at the 480-922-9292 • firstname.lastname@example.org
feedback; we also want you to maximize your volunteers, committee participants, luncheon and
cai central arizona staff
membership through participation and easy event attendees, I see quite a few new faces mixed Kayte Comes
access of information. with those I have known for almost eight years. I Executive Director
• Expressing gratitude and appreciation for you, believe this trend heralds the birth of a stronger 602-347-8726 • email@example.com
our members. and hopefully better CAC-CAI. I want to extend
• Relevant and timely education. a warm welcome to all of our new members and Assistant Executive Director
• Serving the legislative needs of our thank you to all of our existing members for helping 602-347-8726 • firstname.lastname@example.org
membership. CAI grow. As with any family, there is always room
• Charitable outreach at the table for more. Please invite someone to join chapter office
2221 W. Baseline Road, Suite 101
• Quality networking programs us for a luncheon that you believe can give and
Tempe, AZ 85283-1039
receive value from participating in CAI. Tel: 602-347-8726 • Fax: 602-414-5553
If you have an idea of how to improve our email@example.com
chapter or meet any of these initiatives, please Thank you again for your time, energy and financial www.cai-az.org
communicate with Kayte Comes or myself. resources. We know you have options, and we
community resource committee
value your support and participation. Have a great
Recently, our board was faced with a tough summer and I hope to see you at our October Golf committee co-chairs
choice. We realized that in order to provide our Classic! Elaine Anghel, CMCA, AMS, PCAM
Tri-City Property Management
Jerry Parsons, CMCA, AMS
From the Editor... Total Property Management
In past publications of this magazine, we have as the inappropriate allocation of an association’s Board of Directors Liaison
focused on the security considerations involved reserves, the failure to follow proper accounting Lynn Krupnik, Esq., CCAL
in safeguarding communities from outside procedures, or an improper assessment increase Ekmark & Ekmark, LLC
dangers. However, external forces are not the only implemented by the board may all place an committee members
potential threats to the well-being of community association in hot water. Fortunately, each Anne Dill
associations. Many of the problems we see in association can implement internal controls to Community Association Banc
community associations arise from individuals, avoid such situations. Jessica Maceyko, Esq.
actions or decisions made within the organization Ekmark & Ekmark
itself. In this magazine edition and the following We hope that this issue provides you with
edition, we will address numerous steps that guidance on how to protect your association from Scottsdale Ranch Community Association
each association can take to mitigate potential itself by safeguarding the association’s financial
problems stemming from inside the association. security. Regis Salazar
Rossmar & Graham
Financial matters are often ripe for dispute, Yours truly, Brooke Songer
especially in the current economy. Issues such CAI Magazine Committee ALPHA Community Management
An Association Law Firm
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We have excellent lawyers, paralegals, assistants and staff,
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Issue 3 / 2009 5
CAI MEMBERSHIP APPLICATION
new memBers P.O. Box 34793 • Alexandria, VA 22334-0793
Ph: 1-888-224-4321 • Fx: 1-240-524-2424 • Online: www.caionline.org/join
MEMBERSHIP CONTACT: (where materials will be sent)
Welcome to the Name:
Central Arizona Chapter! Assoc./Company:
The Central Arizona Chapter proudly presents and welcomes our Fax:
new members for April, May & June of 2009.
Select your Chapter: Central Arizona
homeowner/BoarD memBers: Recruiter Name/Co. Name:
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Community Association Leaders & Homeowners
Ms. Anita Gerulis Stony Mountain Villas HOA q Individual Homeowner or Board Member $114
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Ms. Irene Hobbs Stony Mountain Villas HOA q 3 Member Board $264
q 4 Member Board $324
Ms. Crystal Marino Stony Mountain Villas HOA
q 5 Member Board $374
Mr. Walt Patterson Sun City Homeowners Association q 6 Member Board $424
q 7 Member Board $474
management companies: For 2-3 Board Member applications, please list the additional individuals who will receive materials.
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Community Solutions, LLC Mr. Chris Boettcher
inDiviDuaL community Address:
Mr. Peter Budd Jomar Association Services, Inc.
Mr. Stephen Burton Jomar Association Services, Inc.
Ms. Barbara Leabo Amcor Property Professionals, Inc. Name:
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Ms. Regis Salazar Rossmar & Graham City/State/Zip:
Ms. Phyllis Snyder Royal Ranch HOA Phone:
Ms. Bernadeen Wright, Fax:
CMCA, AMS Jomar Association Services, Inc. Email:
Individual Managers $120
Business partners: Management Companies $375
Black Eagle Nurseries and Maintenance Mr. Luis R. Serna Business Partners $535
ByteWize, Inc. Ms. Lori Hardtke q Accountant q Attorney
q Builder/Developer q Insurance
Coit Cleaning and Restoration Services Mr. Frank Fuentes
q Lender/Banker q Reserve Study
Creative Consumer Research Ms. Y-Vette Cave q Supplier (landscaper, etc.)
Criterium Engineers Mr. Charles S. Jones Please Specify:
Faith Restoration, Inc. Mr. Everett Higginbotham q Technology Provider
*Membership Dues above include $15 Advocacy Support Fee
Farmers Insurance Mr. Lee Jones
Gallacher, Bosen, & Goodman, PLLC Mr. Michael R. Gallacher PAYMENT METHOD
Grace Plumbing Services, Inc. Mr. Everett Higginbotham q Check Enclosed q VISA q MasterCard q AMEX
Marbecc Custom Designs LLC- Mr. Mike Haley Account #:
Michael Ginsburg, CPA Mr. Michael Ginsburg
Mercury Lock and Safe, LLC Mr. Brian Calabro
Pacifica Real Estate Services, Inc. Mr. Mirko Marrone IMPORTANT TAX INFORMATION: Under the provisions of section 1070(a) of the Revenue Act passed by Congress
in 12/87, please note the following. Contributions or gifts to CAI are not tax-deductible as charitable contributions
Real Estate Data Solutions Mr. Salvatore Schamante for federal income tax purposes. However, they may be deductible as ordinary and necessary business expenses
subject to restrictions imposed as a result of association lobbying activities.
Titan Restoration, LLC Mr. Andy O’Crowley
CAI estimates that the non-deductible portion of your dues is 17%. For specific guidelines concerning your particular
Universal Protection Service Ms. Angela Carey tax situation, consult a tax professional. CAI’s Federal ID number is 23-7392984. $39 of annual membership dues is
for your non-refundable subscription to Common Ground.
Your D&O Coverage
Shouldn’t Be Trial and Error
Issues over architectural control, landscaping, signage, pets and parking areas often
lead to Directors and Ofﬁcers Liability claims for non-money damages.
While these suits do not include a ﬁnancial demand they can still cost a bundle to
defend in court. And with today’s Community Associations facing more challenges
to the actions and authority of their Boards, non-money damage claims
now represent the majority of D&O claims.
An experienced CAU professional can help you compare your present insurance
coverage to that provided by CAU. For a prompt response, please contact
Rob Chandley, CIRMS, Regional Marketing Director at 1-800-228-1930 x 7162
7418 East Helm Drive, Scottsdale, AZ 85260
Phone: 800-228-1930 x 7162 • Fax: 480-443-0836
E-Mail: firstname.lastname@example.org • www.cauinsure.com
Issue 3 / 2009 7
2009 CAI Bircher Exterminating Services
Casino Night High Roller Suite Sponsor:
Universal Protection Services
Alliance Association Financial Services
A slew of CAI members, Bennett & Porter Insurance
including almost 200 Black Eagle Nurseries and Landscaping
managers, homeowners Carpenter Hazlewood Delgado & Wood
and vendors, dressed in Community Association Banc
western attire and met at Ekmark & Ekmark
the Venue in downtown Ironstone Bank
Scottsdale on June 24, Maxwell & Morgan
2009 for an evening of fun Pinnacle Restoration
and games. The games Valley View Landscaping
turned out to be blackjack,
roulette, craps and Texas Bank Sponsors:
hold’em It was a night of BNC National Bank
good food, good drinks Sunwest Financial
and good friendship!
After three hours of eating, drinking, socializing and gambling, Faith Restoration Services
the participants cashed in their chips for raffle tickets and Jomar Association Services
the stage. Some of Bar Sponsors:
those who didn’t end ACE Restoration Services
up with any chips BDL Financial
after the gambling
purchased raffle Dessert Sponsor:
tickets. Everyone sat Titan Restoration
on the edge of their
seats and studied Pre-Event Marketing Sponsor:
the numbers on Sunwest Financial
their raffle tickets as
Board President, Casino Night Committee
Brandi Reynolds announced the many winning numbers. Kim Kaseta, Sunwest Financial (co-chair)
Winners left with gift certificates, golf accessories, computer Jennifer Kennedy, Brown Community Management (co-chair)
luggage. We thank the sponsors and Committee for the hard Judi Celano, Valley View Landscaping
work and support that made this event a financial and social Heidi Hallquist, Carpenter Hazlewood Delgado & Wood
success. Denise Ochoa, Kasdan Simonds Riley & Vaughan
Lisa Stultz, Sunwest Financial
Mitch Pinckard, Golden Valley Property Management
(Programs Committee chair)
Issue 3 / 2009 9
APRIL LUNCHEON RECAP
“Priceless Legal Advice”
The Chapter’s April 14, 2009 luncheon topic was the popular,
“Priceless Legal Advice,” where a panel of attorneys who specialize in
the industry offered answers to questions posed from the audience.
Question: Do homeowners associations need worker compensation dropping leaves in his backyard. What are the Association’s duties, if any?
insurance? What are the consequences of failing to carry worker comp
insurance? Answer (Hazlewood): Generally, associations do not have any duty
written into CC&Rs with respect to trees growing over homeowners’ lot
Answer (Blommel): Yes, if they have employees. A homeowners lines. That would be the only way the association would have a duty to
association which employs even one part-time employee needs to have that enforce – if there were mandatory language about that. The law regarding
employee covered by worker compensation insurance. If the Association encroachment of trees and other plants is found in the “common law”.
has a management company employ its workers, then it must ensure that The premise is that one’s property line extends upward into the sky and
the management company has worker compensation insurance for those down into the ground. A property owner has the right to protect his or
workers. her property. A landowner may cut off offending branches or roots at his
property line, without notice. Cannon v. Dunn, 145 Ariz. 115 (Ct. App. 1985).
The uninsured Arizona worker has a choice. She can sue her employer in However, the adjoining owner cannot go onto the other owner’s property
tort for the injury or she can file a No Insurance claim with the Industrial without permission to cut off branches. That would be a trespass.
Commission of Arizona (ICA). If accepted by the ICA, the association must
reimburse the Special Fund of the ICA for every dollar the ICA spends plus Question: In order for someone to be able to attend a meeting on behalf of
10% as a penalty. Failure to carry worker comp insurance is a felony and an owner, what key items does the letter of representation have to include?
the ICA can assess a $1,000 penalty against the association. Does it have to be notarized by the member?
Question: The Americans with Disabilities Act and the Family Medical Answer (Hazlewood): The planned community and condominium statutes
Leave Act were both amended in 2008. What’s next? (A.R.S. 33-1248 and 33-1804) say only that a member or “a person
designated by a member in writing as the member’s representative” may
Answer (Blommel): The ADA Amendments Act of 2008 overruled two U.S. attend and speak at open meetings of the association and board. It could
Supreme Court decisions and expanded the interpretation of “disability” to be any type of writing, even an email, if you can identify the owner. A
give more protection to employees and job applicants. Congress amended letter is not required. Signatures are not mentioned in the statute, but
the FMLA to include military exigencies and care for wounded service you obviously need something that indicates the owner really designated
members as qualifying events to take job protected unpaid leave. The US the person to attend. Therefore, a signature, or at least a “signed” email
Department of Labor issued new regulations interpreting the FMLA. If you makes sense, but technically is not required. Therefore, notarizing is not
have 15 or more employees, you need to learn about the ADA Amendments mentioned or required.
Act and if you have 50 or more employees, you need to post your new
notice, amend your employee handbook and train your HR staff and Question: What can be done by an association to avoid having mechanics’
supervisors on the new rules. liens recorded against the common area?
There is a new I-9 form, too, for your new hires. Answer (Krupnik): To help avoid mechanics liens, an association needs to
make sure that it properly structures its contracts. The association should
Retaliation cases are “hot” as are overtime cases. not pay any money to a contractor before work has been performed. If the
association pays the contractor and the contractor does not, in turn, pay
President Obama and the Democrat majority in Congress are considering the suppliers and the subcontractors, those suppliers or subcontractors
the following: could record materialmen’s liens or mechanics liens against the common
area. Any contract with a contractor should be structured such that the
Employment Non Discrimination Act – adds sexual orientation to Title VII association does not pay the contractor until the association has received
protected classes. releases and/or waivers.
Employee Free Choice Act – provides that unions can submit a petition The association should also consider requiring the developer of the project
with 50% of the workers to the National Labor Relations Board for to provide the association with a title report before transferring common
certification. areas to the association. Unfortunately, some associations have ended up
with common areas that were still subject to the first mortgage that covered
Mandatory paid sick leave – 7 days required for all employees of employers the entire project from initial development or subject to mechanics liens or
with 15 or more employees. materialmen’s liens. By obtaining the title report, the association and the
developer can determine whether any steps need to be taken before transfer
Employee Misclassification Prevention Act– would tighten definition of occurs.
independent contractor. The IRS has developed a new and heavier burden
for businesses and organizations to prove that a worker is an independent Question: Is the association obligated to pursue collection of past due
contractor. accounts? What if it has no money to do it?
Question: A homeowner has a tree over 30 feet tall that over-hangs the Answer (Krupnik): Usually an association is not obligated to take specific
neighbor’s property line by less than a foot. That neighbor has sought collection actions. Sometimes, however, an association’s governing
enforcement from the Association asking that the tree be trimmed back for documents require the association to take certain actions at specific times.
If the requirements are not in violation of the law, the association needs to By doing so, the judgments are likely to be picked up by appropriate credit
follow them or amend its governing documents. reporting agencies.
If no requirements exist, the association can choose what collection With respect to bankruptcy, while some attorneys over the years have
actions to take, so long as it is acting in the best interest of the foolishly advised their clients to merely “write off” all amounts due
association. The association has up to three (3) years to file legal action and owing if a bankruptcy is filed, amounts should only be written off
for foreclosing on an assessment lien and up to six (6) years to obtain a in a bankruptcy where the property has been lost by a foreclosure and
personal judgment. Therefore, the association does not need to pursue the debtors have received a discharge in bankruptcy. If the debtors
all delinquencies immediately. In these trying economic times, the want to keep their property in bankruptcy, the association’s lien is not
association may need to prioritize what collections actions to take, and extinguished for any amounts.
choose to not pursue an owner when a trustee’s sale is pending. These
are just some of the issues that the association should consider when Question: “When there is a vacant unit with an enforcement issue that
deciding when and how to pursue delinquent owners for nonpayment of needs to be addressed asap, i.e. some significant issue that is affecting
assessments. property values of the surrounding homes (broken window creating
security issues or hazardous waste accumulation, etc.), what is the best
Question: Should we post a list of delinquent owners at the clubhouse? way for an association to handle such an issue, especially given the current
Answer (Lines): Arizona laws governing open board meetings and climate whereby the association will lose any monies used for self-help
association financial records suggest that delinquency lists should not remedies?”
be publicized. Members have a right to attend board meetings, but not
without limitations. An association may exclude members from any Answer (Maxwell): First, it is a misconception that an association will
portion of a meeting in which the board discusses “personal, health or automatically lose all monies associated with self-help remedies. This is
financial information about an individual member of the association.” especially inaccurate if a bank owns the property. If a bank already owns
Delinquency reports are regularly considered in board meetings. the property, the association is likely in a first lien position with respect to
These reports are financial records. However, the sensitive nature of a all amounts incurred. If the property is in foreclosure, it is recommended
member’s personal, health or financial information should be reserved that the association take no action to correct the violations until after the
for discussion without other members attending. Similarly, associations bank forecloses and after notice is provided to the bank of the intention to
may legally withhold such records from other members requesting copies correct the violations.
or to inspect the association’s financial records. Although these laws are
permissive, and not mandatory, association boards should ensure that With respect to correcting violations, associations should generally only
their discussions and records concerning such personal information is focus their attention on those portions of the property that are visible to
kept private. the public. Associations should generally stay out of enclosed backyards.
Question: Can an association/management company charge a fee for If an association is unconcerned with recovery of amounts associated with
properties that have been foreclosed upon, i.e. a “transfer fee” of some self-help remedies due to the significance of a violation, such as missing
sort? doors and/or windows, the association may impose safety measures, such
as sealing off missing doors and windows with plywood and locking gates
Answer (Lines): Arizona laws require associations to disclose information to backyards with pools. Sometimes the extent of the violation is so great
upon receiving written notice of a pending sale of a lot or condominium that remedial costs are irrelevant.
unit. The disclosure differs depending on the size of the community. The
disclosure statement is usually handled by the association’s manager Many times, I am asked if associations should organize clean up
and provides information concerning assessments and the association’s committees within a development. While such an approach is admirable
CC&R’s, rules, etc. Associations may establish and charge a reasonable fee in theory, associations need to be aware of potential liability. If persons
for the costs related to preparing and providing the statement. are injured during organized cleanup efforts, such as injuries caused by a
flying rock dislodged by a person irresponsibly using a weed whacker, the
Typically, the statement is handled through a title company prior to association could be subject to significant liability.
closing escrow. However, disclosure and applicable fees apply to any
written notice of a transfer or sale, whether handled through escrow The foregoing is a recap of the April 2009 luncheon topic, “Priceless Legal
or not. Receiving notice of a pending trustee’s sale probably falls Advice,” presented by:
within the disclosure laws. If an association receives notice, it may
Denise Blommel, Esq. who is a member of CAI-CAC and a labor and
provide disclosure and charge the applicable fee. Additional statutes
employment attorney in downtown Scottsdale.
allow nonprofit corporations to “impose dues, assessments, admission
and transfer fees on its members.” If your community is a nonprofit James Hazelwood, Esq. who has represented condominium and planned
corporation, it may charge a reasonable transfer or admission fee to the community associations in Arizona since 1989. He is a partner in the Tempe
new owner, including either the purchaser or foreclosing bank that took law firm of Carpenter, Hazlewood, Delgado & Wood, PLC, a firm devoted
title through the trustee’s sale. exclusively to community association representation. James is a member of
CAI’s College of Community Association Lawyers (CCAL), the Arizona Trustee
Question: “How can an association collect money from a former owner Association, and the Maricopa County and American Bar Associations.
who lost the property at a Trustee’s Sale? Is it best to simply write off
Lynn Krupnik, Esq, who is an attorney with the law firm of Ekmark & Ekmark,
the debt once they lose the house? How does a bankruptcy affect this
L.L.C., where she has been practicing in the area of community association
scenario?” law for over twelve years. Ms. Krupnik was admitted to the CAI College of
Community Association Lawyers, and speaks and writes often on topics that
Answer (Maxwell): Having been through the economic downturn in the affect community associations.
real estate market three times during my twenty-five year legal career, I
have learned that the downturns are merely part of the economic cycle and Mark E. Lines, a founding attorney of Shaw & Lines, LLC. Mr. Lines has
matters will turn around. In most instances, it is unwise for associations represented planned communities, condominiums, office condos and timeshare
to merely “write off” amounts as a result of a trustee’s sale. If an clients throughout Arizona. Mr. Lines, an accomplished lecturer, recently
received the Leadership Centre’s 2009 Instructor of the Year Award.
association can afford to pursue a simple money judgment, the association
should do so as judgments can be renewed on an ongoing basis every five Charles Maxwell, Esq., CCAL is a principal/shareholder with Maxwell &
years. When the economy picks up, people start to reestablish their credit. Morgan, P.C. and President-Elect of CAI-CAC. Mr. Maxwell’s practice is limited
When the credit shows a prior judgment, the judgment must generally be to community association law and litigation and he has practiced in said area
resolved before a lender will extend new credit. Most debtors then resolve of the law since 1984. Mr. Maxwell frequently lectures on association matters.
their judgments. Judgments secured in Justice Court should not only be Maxwell & Morgan, P.C. is Arizona’s only AV rated law firm devoted exclusively
transferred to the Superior Court, but the judgments should be recorded. to community association law and litigation.
Issue 3 / 2009 11
MAY LUNCHEON RECAP
The theme of our Chapter’s May 12, 2009 luncheon was
“Going Green,” and the speakers, who have many
years experience in their respective fields, provided some
useful tips for reducing energy consumption and waste.
they are turned off, they continue to draw power. Be sure to not only turn off
Xeriscape equipment in the evenings, but also flip the switch on the power strip to stop
“phantom” electrical use.
What is xeriscape? First, it is called “xeriscape,” not “zeroscape” and, it
is simply water conservation through creative landscaping. The use of There are several new technologies for heating water, cooling buildings,
xeriscape is beneficial both to the environment and to your wallet. The lighting occupied spaces and turning lights off in unoccupied spaces. There
seven principles that apply to xeriscape are: are also utility rebates and tax credits available for installing energy-saving
1. Make a plan that includes water and energy efficiency.
2. Create practical turf areas that limit the use of grass.
3. Select and group plants appropriately, using only native or desert- Dryer Vents
adapted plants and trees.
4. Utilize rock mulch and recycled wood mulch to protect the plants from While trying to keep up with mounds of laundry, homeowners often find
the sun and water evaporation. that when they are ready to remove clothes from the dryer, the clothes aren’t
5. Utilize soil amendments for flowers, vegetables and turf areas. dry yet, so they restart the drying cycle, using more gas or electricity and put
6. Utilize efficient irrigation like drip and micro-spray systems. their dryer another cycle closer to the landfill. This also has a poor effect on
7. Develop and implement an appropriate and efficient maintenance the environment.
In all likelihood, these dryers are suffocating in lint that is so clogged in
the dryer vent and lint tray cavity that it can’t expel the dampness from
Energy Efficiency in Community Buildings the laundry to the outside. As a result, the dryer has to run much longer
thus wasting more energy. In doing so, this also adds over 3,000 pounds
By using energy wisely, everyone can tap the cheapest, most abundant and of harmful carbon dioxide to the atmosphere. It is easy to see how annual
most reliable source of renewable energy. dryer vent cleanings can help save both the dryer and the environment.
Common sources of energy waste in community buildings include: Cleaning the dryer vent is a small way to go green and put money back in
your pocket. Did you know that the clothes dryer is often the second or third
Loss of conditioned air through leaks in the building envelope, such as: the highest consumer of electricity in a household?
areas around recessed can lights, doors with gaps between the door and the
threshold, windows with sun-damaged caulking, electrical outlets and light Another problem is that many homeowners are putting their home and
switch plates. Leaks should be sealed using the right kind of caulks, spray family at risk by starting the dryer and then leaving the house or going to
foams, door sweeps and other sealants. Some doors just need to be adjusted bed. According to the U.S. Fire Administration, clogged dryer vents cause
after long-time use. 15,000 fires, 15 deaths, 310 injuries, and over $84 million in property
damage each year. Have you looked at the back of your dryer lately?
Incandescent lights or using more lighting than needed can waste energy Chances are you will find a large label that says something to the effect of,
twice. Most of the energy used to produce light with an incandescent light “Warning, Fire Hazard: Use only a heavy metal vent. Do not use plastic or
bulb generates heat, not light. The community ends up paying for the lights foil. Failure to follow these instructions can result in death or fire.”
twice: first to power the lights, and then again to cool the space that has
been heated by the lights. Some easy options to reduce lighting costs are to For peace of mind, have your dryer vent inspected, thoroughly cleaned, and
replace incandescent lights with LED lights. repaired if necessary. Not only will you make your home safer and your
clothes dryer faster, you will also be helping the environment by using less
Also, consider turning on only half of the lights during the day. This can cut electricity and keeping your dryer out of the landfill.
your lighting bill in half without any noticeable difference in lighting levels.
Additionally, if any outdoor safety lighting is set to turn on and off with a The foregoing is a recap of the May 2009 luncheon topic, “Going Green,”
timer, ensure that the time the lights come on and go off corresponds to the presented by:
actual daylight hours. Another consideration is to replace the timers with
light sensors that operate the lights based on the level of daylight. Gary McCunn, Certified Irrigation Auditor, Certified Arborist, and Licensed
There are many electronic sources in buildings that emit heat, such as Melissa Debnar, Certified Home Energy Rate and Certified Indoor Environmentalist
computers, printers or fax machines. This equipment, while critical for of Advanced Energy Efficiency & Environmental Quality (AE3Q) of Arizona.
managing the community, can also generate a lot of heat that needs to be
cooled. All of these electronics will not only continue to generate heat when Chris Willey of Dryer Vent Wizard franchise, serving Arizona.
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of commercial maintenance and construction and residential construction as well.
Since 1992 we have been striving to ensure that our clients receive the highest
quality maintenance and prompt emergency services. Each of our commercial
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to detail. Small to large businesses, HOA’s and business parks rely on Valley
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Issue 3 / 2009 13
and Lisa Stacy, Administrative Assistant
How to Borrow and What Impact does
a reserve Study Have on the Process
By Terry Burks
In a perfect world, each association has a reserve study outlining fixed rate permanent loan at the time construction has been
the useful life of each of the association’s assets with a correspond- completed.
ing reserve funding schedule. If the reserve study is kept up to date,
as assets age and their time of replacement arrives, reserve monies 3. Are there penalties for prepaying the loan?
are spent to replace the aged asset and all is well. But as we all know a. Generally there is a pre-payment penalty based on the term
conditions change and board views on funding reserves vary. Conse- of the loan: (As an example) 5% if paid off in the first year,
quently, you may find your association in a position requiring a loan 4% if paid off in the second year etc.
to complete a major renovation project. This may be your association’s b. If the association makes a large principal reduction most
first loan request, and you find yourself in need of help initiating the banks will re-amortize the loan, reducing the monthly pay-
information gathering and review process, which can get confusing. ment. No penalty would be assessed however there may be a
Hopefully the information below will give you some guidance through fee assessed for the re-amortization.
the various loan stages as well as the bankers thought process. 4. What are the requirements for the association to qualify for a
The first thing you should consider is that not all banks have the a. Delinquency review – Does the association follow up on
lending expertise to underwrite or manage a loan request from a delinquencies and does it have a collection policy in place?
community association. This skill set is only found in a few banks so b. Non-Owner Occupied units – Each bank may have a speci-
the first question you should ask is just that, “Do you make loans to fied percentage they will not exceed.
community associations?” If yes, what documentation will be needed c. Current reserve study – What is the need for future funding
to begin the application process? I have outlined a list of informa- and what percent is currently funded. This is as important as
tion you may need. Please keep in mind that the list will vary at each the effect on the new loan payment to the cash flow analysis.
individual bank. d. What will be the effect on the monthly assessment as the loan
1. Complete a simple loan request application as to the amount you repayment and any reserve adjustments are made? Percent-
will need and the purpose for the loan. age of increase? What effect will this have on the marketabil-
2. An outline of the work to be done. Attach all bids if available. ity of the homes going forward?
3. Payback term – How many years / months will the loan be active? 5. Does the board have the authority to enter into a loan agreement
4. Is your community a townhome, condominium or single family or is there a vote needed from the entire association? Regard-
community? less of whether the board has the borrowing authority or not, if
5. How many homes are in the association? the loan amount substantially effects the regular assessment to
6. What are the current dues and the frequency? all homeowners, it would be prudent to secure an affirming vote
7. Delinquencies / broken out 30-60-90 and > 90 days. Number and before taking on that responsibility.
amounts. A high delinquency rate will seriously affect your ability
to secure a loan. What most associations fail to realize is the effect the loan repay-
8. When the homes were built, approximately? ment will have on their regular assessments as well as any shortfalls
9. Sales and turnover in the community. How many homes have in the funding of reserves. The bank will take into account not only
been purchased in the past two years? what the loan repayment will have on the regular assessment amount
10. Master and sub-association structure. but also if the reserve study and its corresponding reserve dollars
11. Reserve Study/ What precent is funded? Each bank has bench- (Percent Funded) are seeing a dramatic shortfall, that too must be
marks that it requires to see which may vary. increased to insure the property does not become delinquent in the
12. Audited financial reports for the past 2-3 years as well as the cur- maintenance of the buildings or neighborhood, compromising the
rent years income and expense summary. association’s ability to keep a well maintained community that will
attract new homeowners and insures the repayment of the loan.
I have outlined a number of question and answers that may serve as a
guide to your board: Your relationship manager from your bank of choice can be an excel-
lent guide in this process, addressing the Board of Directors ques-
1. What is the possible number of years the bank will provide a loan, tions. Please call upon the experts to lead you through this process to
both the construction portion and permanent loan after construc- insure the outcome you desire prevails. Each bank is different and
tion? so are their terms and conditions for borrowing. Pick a bank with
a. Construction: 12 to 24 months – Determined by the type of the terms that work for your association. A strong bank with liquid-
project and the bank guidelines. ity that has the expertise on hand to manage a loan to an association
b. Permanent loan: 5,7,10 years or possibly longer based on the as well as a relationship manager that can assist with answering
amount and purpose of the loan. questions from the board will go a long way in simplifying the loan
process and cut out a number of headaches as you move through this
2. Will the interest rate be fixed throughout the term of the loan? process.
a. The commitment or letter of interest that will be provided to
all loan clients details the rates and terms. The interest rate Terry Burks has 35 years of banking experience and for the past five years has
banked for hundreds of community management companies and thousands of
may vary during the construction phase of the project with a
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Issue 3 / 2009 15
Myths By Lynn Krupnik, CCAL &
Elaine Anghel, CMCA, AMS, PCAM, CAAM
Myths that associations follow that could increase
the association’s financial liability in the future.
Myth: If I am getting property tax statements and/or property Fact: There is a difference between being a non-profit corpo-
valuation notices for the association, the association must own ration and a tax-exempt organization. Just because an orga-
its common area. nization is a non-profit corporation does not mean that it is
tax-exempt. Rather, most associations are not tax-exempt, and
Fact: Just because you are receiving property tax statements or are required to pay some taxes (at least on the outside income
valuation notices does not mean the association owns the com- it receives, such as interest). An association needs to work with
mon area. The assessor’s office and treasurer’s office will send its accountant to determine the best tax form to be filed by the
their notices to any address you give to them. Therefore, the association on an annual basis.
fact that you are getting the notices only means that the assessor
and/or treasurer has your address for delivering these notices. Myth: Because we haven’t heard anything from the Arizona
It has no connection to ownership. Corporation Commission, our corporation must be in good
If the association wants to make sure that it owns the com-
mon area, it should check the valuation notice or the assessor’s Fact: Every association should go on-line to the Arizona Cor-
website to see who is shown as the owner of the parcel. The poration Commission’s (“ACC”) website to make sure that its
assessor’s site will list the deed recording number that is the corporation is in good standing. There are many associations
basis for the assessor’s determination of ownership. Although that have been administratively dissolved and not been aware
the information is not always entirely accurate, it will give the of this fact for a number of years. One reason that this often
association a good place to start to determine if it owns its com- happens is that if an annual report was not filed, the names and
mon area. Also, keep in mind that just because the property is addresses of the principal place of business or statutory agent for
valued at $500 does not mean the association owns the common the organization may be a former board member or management
area. For those communities that have been around for awhile, company. Although the ACC may send out a Notice of Adminis-
the assessor’s office originally valued many of those common trative Dissolution, that Notice may go to a prior board member
areas at $500 per acre, whether they were owned by the associa- or management company and never make it to the association.
tion or not. However, if the association has not filed paperwork Therefore, an association should check on-line to make sure that
to qualify for common area valuation (i.e. a value of $500), the it is good standing with the ACC. The ACC’s website is http://
assessor may revalue those common areas in the future. If the www.cc.state.az.us. Once there, go to “Corporate Records”.
association is not paying attention, it may receive a large tax From there, you can click on “Information on Active Corpora-
bill that it was not anticipating (due to this increased property tions.”
value). That is not the time for the association to find out that it
does not own its common area. If there is a problem, it is better Lynn Krupnik is an attorney with the law firm of Ekmark & Ekmark, L.L.C.,
for the association to fix the problem before the assessor reval- where she has been practicing in the area of community association law for over
twelve years. Ms. Krupnik was admitted to the CAI College of Community As-
ues it common area. sociation Lawyers, and speaks and writes often on topics that affect community
Myth: Because our association is a non-profit corporation, we
Elaine Anghel is the Vice President of Management Services of Tri-City Property
don’t have to pay taxes. Management Services, Inc. and has been in the homeowner association industry
for sixteen years.
If You Fail to Plan,
You are Planning to Fail
By Kerry-Lynn Goto, CMCA, LSM, PCAM, RS
Eventually, a community’s major assets, such as streets, building roofs,
and recreational amenities will “retire,” requiring major repairs or replacement.
However, unlike individuals who don’t properly plan for retirement,
associations can’t rely on Social Security.
Community associations function as businesses. Although the The most prudent course of action for an association’s board is
business is generally non-profit in nature, a board of directors to avoid the foregoing scenarios by preparing for component re-
has a fiduciary obligation to the association, and is elected by tirement through a long-range reserve funding plan. A well-exe-
the membership to protect, preserve, maintain and enhance its cuted reserve funding plan distributes major repair and replace-
community’s common elements. This fiduciary obligation re- ment costs over a period of several years, helping to ensure that
quires community association boards to adequately prepare for funds will be on-hand when needed, thereby avoiding the need
anticipated future expenses. So, what happens when association for loans, special assessments or deferred maintenance.
boards don’t plan ahead? Essentially, an association that has
not properly funded for replacement reserves faces three sce- Association boards can employ various strategies to meet their
narios: borrowing from a bank; special assessment; or, deferred reserve funding goals. These include baseline funding, thresh-
maintenance. old funding, and full funding:
While obtaining a bank loan to pay for necessary replacement or • Baseline funding establishes a reserve funding goal of keep-
repairs may be an option, the financing charges associated with ing an association’s reserve cash balance above zero. Vari-
borrowing add to the cost of the primary expenditure. Even if ous plans are tested against the anticipated reserves expense
a bank loan is available, some association governing documents schedule until a desired funding plan is achieved;
prohibit borrowing, while others require approval of a large
percentage of homeowners in order to proceed. In many cases, • Threshold funding maintains an association’s reserve fund
regular assessments must be increased to meet the loan pay- balance above a specified dollar amount, or percentage
ment obligation; and the bank will require a lien against future funded. This method could be more or less conservative than
association assessments to secure repayment. full funding, depending upon the threshold amount; and,
The second option is the dreaded special assessment. Spe- • Full funding is designed to attain and maintain reserves at or
cial assessments are frequently unfair, as they place financial near 100% of funding. This method is sometimes referred to
responsibility for worn-out components on the current hom- as “component” funding, as reserve funds are separately allo-
eowner, regardless of how long they have owned property within cated for each component to achieve 100% funding for future
the community. They can also create an economic hardship expenditure.
on homeowners who may already be struggling to meet their
regular assessment payments, as special assessments usually Planning for an association’s asset retirement makes good busi-
have a very short time-frame for payment. Additionally, as with ness sense, as it helps to ensure that sufficient funds will be
the borrowing scenario discussed above, obtaining membership available to meet future replacement costs. If you are unsure,
approval for a special assessment can be difficult. or know that your association’s reserve funds are inadequate, a
professional reserve study provider can assist with long-range
The third alternative is to defer the necessary maintenance or reserve planning and funding strategies.
replacement until the association has sufficient funds to meet
its obligations. However, deferred maintenance can have a Kerry-Lynn Goto, CMCA, LSM, PCAM, RS, is 30+ year veteran of the community
snowball effect, leading to a deterioration of common area ap- association industry. She is a community association consultant and the owner
pearance and functionality, a decline in property values, and a of Great Boards, LLC; a consulting firm that provides professional reserve stud-
ies for common interest developments.
potential breach of fiduciary duty claim against the association’s
board of directors causing increased insurance premiums.
Issue 3 / 2009 17
One Size Does Not Fit All
By Jessica J. Maceyko
Lately, it seems that there is a general sense of heightened assessment. Most declarations provide that the maximum
awareness in this country when it comes to money. Many annual assessment is the highest amount the board can levy in a
community associations are also feeling the pinch. The result? given year without the approval of a specified percentage of the
Numerous associations are finding it necessary to raise annual members. Confusion often arises with respect to the limit of the
assessments to meet increasing expenses in light of decreasing maximum annual assessment versus the actual amount the as-
revenue. Not surprisingly, a problem can arise when a cash- sociation levies, since these are often two different numbers. In
strapped association increases the assessments levied against other words, even though a board may be authorized under the
its cash-strapped members. With so many members concerned declaration to assess a certain amount (the maximum annual
about their personal finances and unable to pay higher assess- assessment), the board may actually be levying a lesser amount
ment amounts, the odds of a challenge being brought against an (the actual annual assessment).
association for an improper assessment are elevated.
This discrepancy most often arises when there is an automatic
Fortunately, there are steps an association can take to protect increase in the maximum annual assessment. While some dec-
itself from such a challenge. Below are some tips to use when larations require the board to take active steps to raise the maxi-
navigating the potentially muddy waters of assessment mum annual assessment each year, other declarations provide
increases. that the maximum annual assessment is automatically increased
each year by a certain amount or percentage, without the board
having to take any steps to effectuate this increase. Therefore, if
One Size Does Not Fit All the maximum annual assessment has been increasing automati-
cally for several years, but the actual annual assessment charged
The most important thing to remember when it comes to in- to the members has remained relatively stable, a situation could
creasing assessments is that each set of governing documents arise where the association can raise the annual assessment
is different. With the exception of the few statutory provisions substantially in a given year. This concept may be difficult for
discussed below, assessment increases are governed entirely by members to understand, and it may appear to them to be unfair,
each association’s governing documents. It is easy to fall into the thus increasing the likelihood of a challenge.
trap of assuming that all governing documents are basically the
same when it comes to the requirements for raising assessments. To prevent such issues, the board and manager should care-
However, this is not the case. There are substantial differ- fully review the governing documents and make sure they have
ences in assessment provisions. Furthermore, the assessment an understanding of the maximum annual assessment versus
provisions, which are typically in the declaration, are often very the actual annual assessment and are aware of whether the
complicated. A few of the more common issues with assessment documents provide for an automatic increase in the maximum
provisions are discussed below. annual assessment.
Maximum Annual Assessments The Consumer Price Index
Typically, a declaration will set forth a maximum annual assess- Many governing documents have provisions linking the allow-
ment amount, or a method for calculating the maximum annual able increase in the maximum or actual annual assessment to
the Consumer Price Index (CPI). These documents will typically provision. The Act provides that an association cannot raise its
set forth a formula to be used in calculating the CPI increase. actual annual assessment by more than twenty percent (20%)
However, these formulas are not all the same. Some formu- over the prior year’s actual annual assessment without the ap-
las will only allow the association to raise assessments by the proval of a majority of all of the association members. There-
amount of the CPI increase over the prior fiscal year. Other for- fore, even if the declaration provides for an automatic maximum
mulas will allow the association to increase assessments by the annual assessment increase or a CPI calculation that would yield
amount of the CPI increase for the entire time the association a higher assessment increase, a planned community association
has been in existence. If a declaration sets forth such a formula is limited by this cap.
and if the association was formed many years ago, the allowable
increase may be substantial. Again, such a large increase in a Condominium associations are not restricted by the twenty
given year may raise a red flag with the members. percent (20%) cap that is present in the Planned Community
Act. However, the Condominium Act provides that unless the
In addition, there are numerous versions of the CPI published condominium declaration specifically gives the board the power
by the U.S. Bureau of Labor Statistics. A declaration drafted to adopt and amend budgets, the board must send the budget
many years ago may reference a different version of the CPI out for ratification by the members as set forth in the Act. Since
than a declaration drafted recently. Accordingly, the board and assessment amounts are tied into budgets, condominium asso-
manager should carefully review the declaration to ensure that ciations need to be aware of whether the board has the power to
they are using the proper CPI and the proper formula. They establish the budget, or whether ratification is required.
should also be prepared to explain to the members how the CPI
formula works and show evidence that the calculations were In summary, increasing assessments is a hot-button issue in
done properly. light of the current economy. Therefore, it is more important
than ever for each board, manager and association to be aware
of the governing document and statutory provisions addressing
The Planned Community and assessments.
Condominium Acts Jessica J. Maceyko is an attorney with the law firm of Ekmark & Ekmark, LLC,
where she practices community association law exclusively.
The Planned Community Act sets forth a cap on assessment
increases that trumps any association governing document
less expensive SM
Charles e. Maxwell* Brian w. Morgan
Jeffrey B. CorBen elise V. saadi daron J. garey
w. williaM nikolaus Chad M. gallaCher
Melissa s. laVonier nanCy MCdade (of counsel)
Advising developers Representing Hundreds of Homeowner Associations
interpreting governing documents Throughout Arizona Since 1984 SM
interpreting FederAl/stAte lAws telephone emAil
resolving AssociAtion disputes (480) 833-1001 firstname.lastname@example.org
enForcing covenAnts FAx weBsite
(480) 969-8267 www.HOALAW.biz
drAFting governing documents
drAFting Amendments *
Admitted into CAI’s Prestigious College of Community Association Lawyers.
simple to complex litigAtion Arizona’s only AV rated law firm devoted exclusively to community association law and litigation.
Issue 3 / 2009 19
“Preserve and Protect”
By Deena Kanoff
In these economically challenged times, how does a board of directors
maximize its community’s hard-earned reserve dollars?
They target obvious problems relating to maintenance issues and fix them. you can do is implement all common area repairs that enhance property
When it comes to increasing and maximizing property values, that’s a values. At the same time, work should be prioritized to insure the most
lesson any community can apply. important issues are addressed, starting with life/safety and health.
Here are a few places to start: A well maintained property is key!
There should be short-term and long-term goals set up during the
VISIBILITY planning phase of the project that identify the remaining useful life of
common area components and components that are beyond repair and
A question to ask yourself – How desirable is your community to live in? should be replaced. This is the most cost effective way to maintain the
community, reduce resident complaints, and maintain property values.
When it comes to new or potential owners, often they’re influenced by Your property is your most valuable investment.
something as tangible as good old fashioned curb appeal, or what they see
when they first look around. This well-forecasted, disciplined planning program offers greater
economic return, and in turn, money in the bank.
So, the first key to strong property values is also the most obvious: Keep
your focal points well maintained! Global planning can provide a framework of strategies and endpoints
joining one board to the next, even when board members leave, and new
ones are seated.
It provides the stability that helps a community thrive.
“You get what you pay for.”
Board members need to see the big picture and how properly maintained
The most direct correlation for a community may be between its property properties are clearly the most economical choices in preserving their
values and its assessment level. It’s not that people have to be convinced maintenance dollars!
that a higher assessment rate always equals higher values. But rather, they
usually have to be convinced that a lesser rate doesn’t equal higher values.
There’s a mindset among owners that if an assessment fee is too high, it’s
going to (adversely) affect the value of the units, and turn away potential “Hear Ye, Hear Ye!”
Assuming your board sees the big picture and your association is doing
In fact, whatever superficial appeal your community tries to gain from well, the important question is, “Do your residents all know what is going
keeping its assessments too low is quickly squandered away by the damage on in the association?” Do they know the improvement and maintenance
of an underfunded budget and a reactive maintenance program that dollars are being spent wisely now in order to secure the future
simply cannot address the repair maintenance needs throughout the maintenance integrity of the property?
How about prospective buyers? By nature, people don’t usually seek out
Simply stated: If you do not have enough money in your reserves to good news; you have to deliver it to them!
take care of maintenance issues within the community, all you do is
begin to attract similar buyers in the marketplace that are interested in A newsletter that features the maintenance planning and upcoming
perpetuating the same low, depleted reserve budget. Maintenance issues projects helps in sending a positive message.
become worse, and available funding becomes non-existent which equals
a very bad combination in maintaining the property value. A friendly and inviting newsletter would increase the chances of a
potential new buyer wanting to purchase into that particular community.
The association needs an annual “cost of living raise,” in order to maintain
the integrity of the components within the community. When you have an A newsletter is a great tool to review the accomplishments of the previous
assessment rate that‘s realistic, the other financial objectives will fall into year, and it also helps to forecast what’s to come. This type of “community
place, including funding both the operating budget and the reserve budget tracking” aids the association in keeping the maintenance schedules up to
necessary to maintain the building structures and repair issues within the date and is a way to address future needs within the community.
community and common areas. It is easier to move forward with repairs
when you have readily available funding. This is very important in today’s marketplace. With so many properties
on the market, you have to create a way to stand out from the rest and
provide information of what’s going on in your community. Whether it’s
PLANNING capital improvement programs or full maintenance renovations that are
taking place, “keeping the community involved” adds to the “emotional
Tomorrow is a new day, but so is the “day after.” value” of the community and promotes a positive community experience.
In today’s economy, can you plan for property values to go up…or down? Deena Kanoff is Director of Business Development of Jon Wayne Construction.
She was affiliated with an architectural firm after graduating from the University
of Southern California prior to joining JWC in 1995. Deena is a member of the
Even with a crystal ball, you cannot determine what will be. But what following associations: AACM, CAI, and CACM.
MADOFF’S A Lesson
PONzI of Duties
SCHEME - By Michael R. Gallacher, CPA and
Marcos C. Goodman, CPA
Bernie Madoff apparently “made off” (pun intended)
with billions of dollars. That is until he was finally caught.
His criminal activity was revealed to the world last December after he associations need to consider. In best case scenarios, duties must be seg-
had confided in his two sons that the asset management arm of his firm regated among responsible and trustworthy individuals. Of course, there
was an elaborate Ponzi scheme, which he had actually begun back in the is always the possibility of collusion, but that is a topic for another article.
early 1990’s. The most shocking revelations following his arrest may be
that he never invested any of his clients’ money at all, and that he insisted Each process of the association should be evaluated to determine if
that he was solely responsible for the scheme. adequate control procedures are in place to prevent misuse or theft of
association assets. Internal controls are processes to prevent errors,
If these assertions turn out to be correct, the concept of “segregation of theft and/or fraud. Some associations may be subject to unnecessary risk
duties” under the subject of internal controls takes on added meaning because they fail to institute processes or control procedures in a way that
and importance. For Bernie Madoff, all “investment duties” were con- might protect them and their association’s assets.
centrated in him alone. For community associations, and in particular
for those who serve on their boards, segregating duties is not only good For community associations, basic control procedures can be developed
business, but also a compelling safeguard to protect assets and reputa- around the following areas:
Segregating the responsibilities for dealing with the “cash” asset of an as- 2. Disbursements
sociation is one function that deserves our attention. Cash represents all 3. Payroll
the assets, from petty cash to balances in checking accounts and savings 4. Budgeting
accounts, as well as investment accounts. Pertinent questions regarding
these practices include: Depending on the size of the community, there can also be a number of
subcontrols that relate to these areas. With sub-controls in place, the
1. Are the responsibilities for collection and deposit preparation ad- board will need to increase its oversight roll. This increased roll may
equately separated from those of recording cash receipts? require additional training. The fiduciary position of each board member
2. Are the responsibilities for cash receipt functions adequately sepa- can be safeguarded by tight internal controls, which lightens the load for
rated from those of cash disbursements? association members.
3. Are responsibilities for check preparation and check signing ad-
equately segregated from those entering cash disbursement Michael R. Gallacher and Marcos C. Goodman are with the accounting firm Gal-
information? lacher, Bosen, & Goodman, PLLC in Mesa, Arizona.
These are only a sample of internal control guideline questions that
Issue 3 / 2009 21
a r i z o n a L e g i s L at i v e
2009 Arizona Legislative Session
By Ryan Anderson
The First Regular Session of the 49th Legislature opened for under this legislation, an association could not regulate its
business on Monday, January 12th, 2009, with several new own swimming pool, and could not exercise authority over its
legislative faces and a renewed optimism. playgrounds.
The results of November’s general election welcomed 22 new This bill also fails to consider a number of safety concerns
members, which created an opportunity for significant changes associated with narrow streets which are routinely constructed in
in both House and Senate Leadership. Arizona Governor Janet planned communities. Often, a developer will design communities
Napolitano prepared to vacate the Office of the Governor for her with narrow roads in exchange for agreements to enforce CC&R
new role as head of the Department of Homeland Security in the parking restrictions on community streets. If this legislation were
Obama Administration. Napolitano’s exit in late January cleared to pass, boats, RVs, large SUVs, etc., would now be able to park
the way for Secretary of State Jan Brewer to assume her new role as on these neighborhood streets. When precious seconds count,
Governor, which marked Republican control of the Legislative and imagine the jeopardy this would create for emergency vehicles such
Executive Branches for the first time since 2002. as fire trucks and ambulances.
Unfortunately, any optimism that accompanied the new legislative Another bill the LAC is actively working to defeat is HB2514
body quickly dissipated as members learned of the reality of the (amateur radio; accommodation), a Republican sponsored bill
state’s multi-billion dollar budget deficit. This was going to be a that recently passed out of the House of Representatives. The
long and tedious session. legislation will require all planned communities in this state
to allow the installation and use of HAM radio towers and will
To date, 1111 bills have been introduced in the current session, but prevent homeowner associations from enforcing size or placement
the reality is that one issue has dominated all legislative dialogue: restrictions on large towers within planned communities.
the budget. After a 2009 fiscal year fix of $1.68 billion early in the
session, Governor Brewer made it abundantly clear she wanted Yes, you very well could have a 50 ft + HAM radio tower next to
to bridge the 2010 deficit gap primarily with temporary sales your home by this time next year.
and property tax increases. Brewer’s budget proposal includes a
package for the November ballot that would raise the state’s sales Advocates claim the legislation should be enacted in the name of
tax rate from 5.6% to 6.6%, possibly generating an estimated $1 public safety and homeland security in case of a state of emergency.
billion in additional annual revenue. The reality is that a small group of hobbyists would like to impose
their will upon the majority of their neighbors, compliments of the
Meanwhile, lawmakers struggled to put together their own budget Arizona State Legislature.
package in the hopes of pulling the state out of debt by not raising
taxes, and instead cut state spending by an additional $350+ HB2514 and HB2034 are symptomatic of a common problem
million more than the Governor’s plan. surrounding most HOA legislation introduced at the Capitol: the
Legislature’s continued attempt to interfere with the rights of
Amidst the huge budget crater consuming discussions, committee willing parties to contract. New laws continue to be enacted and
agendas trickled along. And while we will likely witness the lowest imposed upon the majority of homeowners because of the desires
percentage of bills signed into law in Arizona history, the CAI of a small and vocal minority.
Legislative Action Committee (LAC) is currently monitoring or
actively lobbying on behalf of or against 13 homeowner association A real political debate should take place in the forum where it
related bills. matters most – between the owners of a particular community
debating what they want to do about parking, HAM radio towers
When compared to more recent sessions, 13 bills is a reduction in or any other issue affecting their community. Planned community
the amount of harmful or anti-HOA bills being considered before associations inherit use restrictions from developers who draft
the Legislature. However, the CAI LAC continues to fight as hard the CC&Rs. Unfortunately, the CC&Rs often contain unworkable
as ever to defeat a number of bills currently moving through the thresholds for amending community documents. Often, the
process. owners would like to change the provisions to reflect the changing
expectations of communities. Each community’s needs are
One such bill, HB2034 (planned communities; authority over different and unique. If CC&Rs were easier to amend, homeowners
roadways), would cripple the ability of homeowner associations who desire to change onerous provisions (whether it be parking,
to enforce parking and street restrictions in communities with HAM radio towers, or acceptable house colors), could attempt to do
roadways dedicated to cities and counties. While the bill purports so at the local level, and the Legislature should not feel obligated to
to address parking of vehicles on publicly dedicated streets only, interfere with private contracts between willing parties.
the words “vehicle”, “car”, “RV” and “park” never appear in the bill.
Until this larger concept or true “Power to the People” legislation
As currently drafted, HB2034 would render planned community is actualized, it is likely that we will continue to fight anecdotal,
restrictions on any “area” – such as the lots or common area in short-sighted, one-size fits all homeowner association legislation at
an association – null and void if the “area” is under the “legal the State Capitol.
authority of a governmental entity.” Ironically, every lot and every
parcel of common area in Arizona is under the legal authority Ryan Anderson is a Senior Associate with DeMenna & Associates, a Phoenix-
of the federal government or the State of Arizona. For example, based political consulting firm. He routinely lobbies on behalf of homeowner
and community association rights before the Arizona State Capitol.
AAFS_CommunityResource_0109.pdf 1/10/2009 4:34:00 PM
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Issue 3 / 2009 23
CAI News &
CAI - CENTRAL ARIZONA CHAPTER
2009 Board Election
This year’s CAI Nominating Committee is composed of the
immediate past President Kathe Barnes, serving as committee
chair, President-Elect Charlie Maxwell, Alan Lezak (homeowner),
Cat Coltrell (US Bank) and Larry Aldrich (Burns Pest Elimination).
The purpose of the Nominating Committee is to identify
candidates and conduct interviews for the three open Board seats.
These candidates will fill the seats of outgoing Board members
Chuck Greco, Anne Dill and Kerry-Lynn Goto. Each position is for
a 3-year term.
In late June and early July, an e-mail blast was sent to the
membership soliciting board candidates for the three open
positions. The Nominating Committee will select a slate of
candidates that is deemed to help promote the value of the CAI
by providing knowledge and skills related to the duties of group
leadership, consensus building, and decision making. The
Nominating Committee must submit a slate of nominees not less
than the number of open positions. • Substantial discounts to CAI members
Any applicant who is not selected by the Nominating Committee
• “A” rated insurance company partners
has the right to petition the Chapter and be placed on a written • Unique insurance program groups for property
ballot along with the nominees. The ballot is sent to the managers. One policy, one renewal date for
membership not less than 30 days prior to the election date. The multiple properties.
deadline to file a petition is September 28, 2009. If there are
no petitions filed, the slate of candidates, as presented by the • Comprehensive coverage specific to your needs
Nominating Committee, and the notice of the Annual Meeting will • FREE professional loss prevention assessment
then be sent to each member.
• Licensed agent & service representation team
The Annual Meeting and Board Election will be held at the designated to your account.
November 10, 2009 luncheon. If there is no contest for any of the
positions to be filled, the Secretary casts a unanimous ballot for the • Involved member of
slate of nominees nominated by the Nominating Committee, and
such nominees are declared elected Directors of the Chapter. M a n a gement Comp a n ie s • P rop er t y M a n a ger s
Condo s • Ap a r t ment s • HOA’s
Should you have any questions about the Board Election, please
call the CAI office at (602) 347-8726.
Ca l l 480 -212 -1150 or v isit ou r
website at w w w.bapi ns.com
Issue 3 / 2009 25
c o n g r at u L at i o n s c o r n e r
Special congratulations to our CAI – Central Arizona members of the month:
April: Nicole McConville with Scottsdale Ranch Community Association &
Jerry Parsons, CMCA, AMS with Total Property Management
May: Mike Amico with Western Risk Insurance & Jennifer Kennedy with
Brown Community Management
June: Ken Miceli with Advanced Painting & Contracting & Mitch Pinckard,
CMCA with Golden Valley Property Management
Congratulations to those who have recently received a new CAI Designation:
Mr. Mitchell Pinckard, CMCA, Golden Valley Property Management
Mrs. Pat Kanicsar, CMCA, PMG Services
Ms. Maggie Story, CMCA, PMG Services
Ms. Rita Hoy, CMCA, PMG Services
Ms. Cindy Cassin, CMCA, AMS, PCAM, Capital Consultants Management
Mr. Jeff Reynolds, CMCA, AMS, Rossmar & Graham Management Company
Mrs. Josephine “Jo” Seashols, CMCA, AMS, Tillett Property Management
Mr. Todd Davidson, CMCA, AMS, PCAM, Capital Consultants Management
Ms. Delores Ferguson, CMCA, AMS, PCAM, Capital Consultants
Mr. Mark L. Wade, CMCA, AMS, PCAM, Sun Lakes HOA I
Ms. Cindy Cassin, CMCA, AMS, PCAM, Capital Consultants Management
CAI – Central Arizona Chapter
2009 Committee Chairs
Kerry-Lynn Goto CMCA, LSM, Ken Miceli Scottsdale Fine Landscaping is seeking to
PCAM, RS (Chair) (Chair)
Great Boards, LLC Advanced Painting & Contracting make acquisitions in Arizona.
eDucation programs We are currently looking to purchase
Gayle E. Laureta, CMCA, PCAM Mitch Pinckard, CAAM (Chair)
(Co-chair) Golden Valley Property Management commercial/HOA landscape maintenance
Planned Development Services
companies ranging in gross sales from
puBLic reLations $250,000 - $2 million. We are cash buyers
Angela Potts, Esq. (Co-chair) Brandi Reynolds
Ekmark & Ekmark, LLC (Co-chair) for your book of business and sound team.
480-922-9292 Law Offices of John Chaix
email@example.com Please e-mail all
Scott Carpenter, Esq., CCAL Augustus Shaw, Esq.
Carpenter, Hazlewood, PLC (Co-chair) inquiries to
Shaw & Lines, LLC
Elaine Anghel PCAM, AMS, CMCA
Lynda Erickson, PCAM DON’T LET A
Tri-City Property Management (Chair)
Services Jomar Association Services DOWN ECONOMY
480-844-2224 x 125 480-892-5222
firstname.lastname@example.org email@example.com GET YOU DOWN!!
Jerry Parsons, AMS, CMCA
Total Property Management
CE N TR AL AR IZO N A CHAP TE R
SFL is a Division of MIG
602-952-5581 (Martoccia Investment Group)
Augustus H. Shaw IV
Mark E. Lines
Quinten T. Cupps
Michael C. Lamb
4523 E. Broadway Rd.
Phoenix, Arizona 85040
New Name, Same Comprehensive Anne Dill
Banking Solutions for Regional Account Executive
Homeowner Associations 602.369.2388
Toll Free 866.800.4656
Community Association Banc is now a division of firstname.lastname@example.org
Mutual of Omaha Bank and stronger than ever.
• Online cash management systems
• Lockbox and digital imaging services
Manny San Miguel
• Online ACH and credit card payment systems Regional Account Executive
• HOA loans for property maintenance and development
Toll Free 866.800.4656
CondoCerts simplifies the process of obtaining ext. 7405
and distributing homeowner association data and email@example.com
documentation with our online document delivery system. mutualofomahabank.com
• Real-time account access 24/7
• Automated resale disclosure packages
• Dedicated customer service teams
Community Association Banc
National Corporate Member of Community
Associations Institute. Community Association
Banc is a division of Mutual of Omaha Bank.
Issue 3 / 2009 27
caLenDar oF events
2009 CAI CAC Event Calendar
8th CAI – Central Arizona Educational Lunch
9th CAI- Annual Golf Classic –
AZ Grand Resort
27th New Member Breakfast Club Meeting
10th CAI – Central Arizona Educational Lunch
No scheduled events
CAI – Central Arizona Chapter
2009 Annual Sponsors
BNC National Bank
Carpenter Hazlewood Delgado & Wood
Community Association Banc
Maxwell & Morgan, PC
Advanced Painting & Contracting
Community Association Underwriters of America
Law Offices of John Chaix
Shaw & Lines, LLC
Bennett & Porter Insurance
Clean Cut Lawns
Dicks Coglianese Lipson & Shuquem
Ekmark & Ekmark, LLC
Rossmar & Graham Management Company
The Mahoney Group
Bircher Exterminating Services, Inc.
Integrity First Property Management
Jon Wayne Construction & Consulting
Kasdan Simonds Riley & Vaughan
Kommercial Painting Services
Planned Development Services
Securitas Security Services
Titan Restoration Our readers are
Tot Lot Services
Trident Security your
Tri-City Property Management
AMCOR Property Professionals, Inc. We deliver to over 30,000 homes
Associated Property Management
Association Reserves in premier communities around
Caretaker, Inc. the East Valley.
Gallacher Bosen & Goodman To advertise visit
Golden Valley Property Management • Scottsdale Ranch • The Islands
HomeTeam Pest Defense www.valhalla360.com
• The Ahwatukee Foothills • Augusta Ranch
Jomar Association Services or call
Rider Levett Bucknall • Ocotillo • Sun Lakes
A complete list of 2009 Sponsors can be found • Val Vista Lakes
by visiting www.cai-az.org. Valhalla Holdings
Sunwest Financial Community Association Services
Sunwest Financial is a leader in working with Community Associations. For nearly three decades, our experienced
Relationship Managers and dedicated Customer Service Department have created custom packages of products and
services to meet your industry’s needs. We can offer you:
Rapid Remit Lockbox Processing HOA Wealth Management Service
Streamline dues payment processing. Removes the worry and hassle related to managing your
associations’ funds because we do the work for you.
Customized Community Association Loans Elite Money Market
Use the funds for renovation and rehabilitation Earn great rates on your funds.
projects, or to replenish reserves.
Remote Deposit Capture CD Placement
Save time by processing checks at your location. Obtain the security of FDIC coverage for amounts over
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Contact our Community Association Services Division toll free at (866) 479-2265 to speak to any of our experienced
Relationship Managers for more information.
Kimberly Kaseta Lisa Stultz
VP & Relationship Manager VP VP & Relationship Manager
480.290.5210 | firstname.lastname@example.org 480 480.287.4406 | email@example.com
Issue 3 / 2009
Scottsdale Fine Landscaping
Full Service Landscape Management
Specializing In HOA’s, Condos, Commercial Plazas
and Office Complexes
Our mission is to provide exemplary service to our customers,
to sustain lasting business relationships with our customers,
and to work with qualified employees who share our passion
and commitment in what we do for our customers.
Scottsdale Fine Landscaping is a full service Landscape
Management Company established in 1988.
Caring for Communities for 22 Years Our central location in the Scottsdale Airpark provides easy
access to our customers.
We have developed and structured our landscape management
programs in such a way as to provide our customers with the
best possible proactive and reactive service. Through dedicated
service and attention to detail, we have sustained many
customers since our inception.
MEMBER O F
SouthweSt DiviSion eaSt coaSt DiviSion
(Servicing Phoenix & Scottsdale Arizona) (Servicing Central New Jersey)
Scottsdale Fine Landscaping Martoccia Landscape Services, Inc.
PMB 452 - 11445 E. via Linda, #2 P.O. Box 4173
Scottsdale, Az 85259 Warren, NJ 07059
Tel: 480-614-3238 Tel: 908-756-1967
FAX: 480-614-1190 FAX: 908-755-6585
Licensed (ROC 217999-K21) - Bonded - Insured
Licensed (ROC 13VH01475500) - Bonded - Insured