Commonly Ignored Best Practices of Commercial Landscape Maintenance

Commonly Ignored Best Practices of Commercial Landscape Maintenance

[ Blog/News ]
How you care for your plants makes all the difference in the lifespan and overall look of them. Here are some best practice tips for landscape maintenance:

Pruning

Pruning ClippersThe difference between hard pruning versus using hedge shears is significant when not shearing the correct plants. The more you improperly prune your plants, the more often you will need to be outside pruning them. Keeping the significant pruning to hard pruning in the winter will make a difference in how time consuming your plants are throughout the rest of the year.

Trees

TreeClearing low-hanging branches and overgrown plant material will open up lines of sight into your property, decrease potential hazards and eliminate safety concerns of individuals hiding in your plants.

Mowing

Lawn MowerWith the weight of a commercial mower and mowing in the same direction each week, your turf is prone to having a matted look, unhealthy and unsightly grass. You can help fix that by alternating your mowing pattern each visit encouraging standing turf.

Fertilizer

FertilizerFertilizer can be a great resource for your turf and plants, but too much of it can harm your landscape. Commonly referred to as fertilizer burn, having too much can cause yellow, brown or dead sections. Additionally, the more you apply fertilizer, the more dependent your turf & plants become on that particular fertilizer to look and stay healthy. Leaving your grass clippings is a great way to naturally fertilize your lawn. Organic fertilizers are also a great way to have a more balanced and sustainable landscape.

Seasonal Planting

Flower - AnnualsAnnuals are a great way to add seasonal color to your landscape, whether they are around entrances, signage, walkways or plant beds giving a fresh and updated look to a potentially older property.

Landscape Debris

Wheelbarrow - Yard DebrisCleaning up the landscape debris after you are done maintaining your property, instead of blowing it into the street or a native area will help you to be more responsible as a community association manager or owner and it will make your property and the surrounding areas more appealing and help to reduce pollution problems.

Mulch

GlovesHaving a mulch bed around your trees helps protect the trees’ trunks from mechanical damage caused by mowers and trimmers and improves the overall appearance of the property. Mulching your beds throughout the property can help nourish your plants, increase curb appeal & reduce weed infestation.

Proper Equipment

Gardening ToolsOne mistake seen frequently is people using the wrong equipment for the task at hand. Whether it is hand pruners, string trimmers or mowers, be sure that you or your service provider is giving you the proper and best resources for maintaining your landscape.

Misunderstanding the pitfalls caused by regular landscape maintenance can lead to long-term failure of your landscape. Focusing on the ‘big picture’ of your property and where you want to take the landscape can have a lasting impact on your budget, overall aesthetic and how much effort is required to keep the property looking good long term.

(Editor’s Note: This blog article first appeared in the May 2018 issue of Community Associations Journal.)

By Tim Hawkins

By Tim Hawkins

Owner, Brookstone Landscape & Design

Having been involved in the landscape industry for over 15 years, Tim Hawkins takes pride in developing solutions and opportunities for people! In his free time, he enjoys running marathons and spending time with his family.

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Washington State Legislative Update

Washington State Legislative Update

[ Blog/News ]

The Washington State’s 65th Legislative Session adjourned on March 8th. For only the third time in the last decade, the Legislature did not go into Special Session. This is no small feat, finishing on time has only occurred during the short (non-budget) legislative sessions of 2008, 2014, and now 2018. The next Legislative Session will begin on January 7th, 2019. CAI’s Legislative Action Committee (LAC) has already started planning for next year.

Join Us!

If you would like to join the LAC, please reach out to Krystelle Purkey, contract lobbyist, at krystellepurkey@icloud.com.

Government Icon Retirements

There is a high probability of another long session looming, leading to several lawmakers announcing they will not seek reelection in 2018, with more announcing every day.

“It’s almost like we need to be a full-time Legislature, or figure out a different schedule,” Representative Lytton said to The Seattle Times.

As of the end of March, 13 lawmakers have announced they will not be seeking reelection, leaving a large vacuum of political power in Olympia. Political jockeying to fill those voids of power has already begun.

The surprise retirement announcement of Senator Sharon Nelson (34th – Vashon Island), who is the current Majority Leader in the Senate, will mean that no matter what happens in November the Washington Legislature will have a completely new leadership structure. Several Democratic Senators have started throwing their names into the mix as the potential new leader.

In the Senate Republican Caucus, Michael Baumgartner (6th – Cheney) has announced he will be running for Spokane County Treasurer, instead of seeking another term as Senator. Rep. Jeff Holy, Sen. Baumgartner’s current seat mate, will be vying for this seat.

IIn the House of Representatives, three House Democratic Chairs have also announced their retirement:

  • Rep. Kristine Lytton (40th – Anacortes), Chair of the Finance Committee
  • Rep. Ruth Kagi (32nd – Shoreline), Chair of the Early Learning & Human Services Committee
  • Rep. Judy Clibborn (41st – Mercer Island), Chair of the Transportation Committee

On the Republican side of the aisle, 9 GOP House members have announced their retirement, including the House Minority Leader Dan Kristiansen (39th – Monroe). J.T. Wilcox (2nd– Yelm), who was the Deputy Minority leader, was elected as the new leader before the Legislature adjourned.

This large exodus of lawmakers means that the Legislature will have a lot of new personalities and new leadership in all four legislative chambers come 2019.

Government Icon 2018 Election Cycle

In 2018, every member of the House Representatives and half of the Senate is up for reelection.

Both parties have announced that they will be targeting key races throughout Washington State. The Democrats, wishing to secure their majority in all chambers, have announced their top targets as follows: Sen. Mark Miloscia (30th – Federal Way), Sen. Joe Fain (47th – Kent), Sen. Jan Angel (26th – Gig Harbor), and Rep. Mark Harmsworth (44th – Snohomish). The Republicans have announced they will be targeting Senator Steve Hobbs (44th – Snohmish), Rep. Christine Kilduff (28th – University Place), and Rep. Brian Blake (19th – Aberdeen).

Candidate filing deadline is on May 18. All candidates running will need to have declared by this date and then the campaign season will truly kick off.

Government Icon CAI Specific Legislation

During the 2017-18 Biennium, the Legislative Action Committee (LAC) advocated for the interests of CAI members. Over 20 pieces of legislation were actively worked on or monitored this year, however only 3 passed.

Substitute Senate Bill 6175 – WUCIOA

Brief Summary: Establishes the Washington Uniform Common Interest Ownership Act (WUCIOA) to govern the formation, management, and termination of common interest communities including condominiums, homeowner associations, and real estate cooperatives.

Only two sections of WUCIOA will automatically apply to existing common interest communities (condominiums, homeowner associations, and cooperatives) in Washington. One addresses the process for an existing community to elect to be governed by WUCIOA and the other addresses budget ratification and assessments. The full Act will only apply to common interest communities created after its effective date.

Prime Sponsor: Senator Jamie Pedersen

Bill Status: Governor Inslee signed the bill into law on March 27, 2018.

Effective Date: July 1, 2018

Second Engrossed Substitute House Bill 2057 – Foreclosure Fairness

Brief Summary: The striking amendment introduced by Senator Mullet is the culmination of a two-year process with over twenty stakeholders. The final bill is the agreed upon language that touches on everything from Department of Commerce’s foreclosure fairness fees to how the financial server can “maintain” the property. The two sections that impacted community associations were: deceased borrower and nuisance abatement.

The deceased borrower provisions created a process for servicer and associations to follow if an individual passes away without a will and is in a foreclosure procedure.

The nuisance abatement section forces servicers to conduct maintenance on the property if it falls into all three of the following categories:

  1. It is in a foreclosure
  2. The property is abandoned
  3. The city or county has deemed it a nuisance under prudery. Associations will be continuing the nuisance discussions over the interim

Prime Sponsor: Representative Tina Orwall

Bill Status: Governor Inslee signed the bill into law on March 29, 2018.

Effective Date: June 7, 2018

Substitute House Bill 2514 – Discriminatory Provisions Found in Written Instruments Related to Real Property

Brief Summary: Authorizes an owner of property subject to a written instrument containing provisions void by reason of Washington’s Law Against Discrimination to record with the county auditor a restrictive covenant modification document. Changes the list of unlawful provisions that homeowners association boards may (and in some cases, must) remove from their governing documents by majority vote to include all provisions that are void by reason of Washington’s Law Against Discrimination.

Prime Sponsor: Representative Christine Kilduff

Bill Status: Governor Inslee signed the bill into law on March 15, 2018.

Effective Date: June 7, 2018 – except for section 1, which goes into effect on January 1, 2019.

Government Icon What to Expect in 2019

Throughout the 2018 Legislative Session there was a constant chorus of “Washington needs a more robust housing supply.” However, with the Democrats gaining control again, they had several key pieces of legislation they wanted to pass, pushing the housing discussion off until next year.

This is where the LAC will come into play and we must prepare for what is to come. The following is a list of potential top housing issues for 2019: construction defect claims, dispute resolution programs, and association voter apathy.

As the LAC begins planning for the 2019 Legislative Session, it is always good to start with what was introduced during this last biennium, but did not pass, as it is likely to be reintroduced again.

House Bill 1172: Low-water landscaping

Brief Summary: Prohibits homeowner association and condominium association restrictions that limit private property owners’ ability to deploy low-water landscaping techniques.

Prime Sponsor: Rep. Tina Orwall

Substitute House Bill 1494: Private Road Maintenance

Brief Summary: Requires the holders of an interest in an easement to maintain the easement and permits agreements that allow maintenance obligations to be allocated to fewer than all holders of an interest in an easement. Requires the cost of maintaining an easement to be shared by each holder of an interest in the easement.

Prime Sponsor: Rep. Jeff Morris

House Bill 2022: Homeowners’ Association Violations

Brief Summary: Entitles an aggrieved party, if a willful violation of a homeowners’ association is found, to exemplary damages up to two times the actual damages sustained.

Prime Sponsor: Rep. Christine Kilduff

Substitute House Bill 2475: Tolling of Construction Defect Claims

Brief Summary: Revises the notice and opportunity to cure process in a construction defect action, adding a mediation process and further detail with respect to the termination of this process. Extends tolling provisions and provides for tolling in the context of claims by one construction professional against another.

Prime Sponsor: Rep. Cindy Ryu

Substitute House Bill 2485: Low-Water Landscaping

Brief Summary: Prohibits homeowner association and condominium association restrictions that limit private property owners’ ability to deploy low-water landscaping techniques.

Prime Sponsor: Rep. Tina Orwall

Substitute House Bill 2790: AGO Dispute Resolution Program

Brief Summary: The Office of the Attorney General (AGO) is directed to establish a dispute resolution pilot program in Clark, King, and Spokane counties, for the resolution of disputes between condominium and homeowners’ association boards and owners. The pilot also instructs the AGO to create educational materials on the rights of homeowners and the authority of the boards.

Prime Sponsor: Rep. Vicki Kraft

Substitute House Bill 2831: Association Notice Requirements w/Condo Defect Litigation

Brief Summary: Requires increased notice, a meeting, and a majority vote of the homeowners before the board of a condominium or homeowners’ association may commence a construction defect action.

Prime Sponsor: Rep. Tana Senn

SB 5082: Fire safety compliance

Summary: Requires an insurer, before issuing or renewing a policy of insurance to the owner of commercial or residential rental property for coverage of the premises, to require the owner to certify that he or she is in compliance with fire safety requirements. Requires an insurer, before issuing or renewing a policy of insurance to an association for a condominium, to require the association to certify that the condominium is in compliance with fire safety requirements.

Prime Sponsor: Sen. Kirk Pearson

SB 5134: HOA Notice and Opportunity Provisions Relating to Certain Enforcement Actions Taken by a Homeowners' or Condominium Association

Summary: Before a homeowner’s association or unit owner’s association may impose and collect charges for late payments of assessments, the owner must be give 45 days notice and an opportunity to be heard by the board of directors or their designee. It is also clarified that the opportunity to be heard must be fair and impartial.

Prime Sponsor: Sen. Bob Hasegawa

SB 5250: Condominium Association Bylaw Amendments

Summary of Bill: Revises the condominium act with regard to voting requirements when amending the bylaws of the association.

Prime Sponsor: Sen. Karen Keiser

Senate Bill 5377: HOA Budget Ratification Voting Requirements

Summary of Bill: Removes provision that a budget is ratified unless a majority of the ballots cast in the association vote to reject – and instead, adds requirement that the majority of ballots cast by those in the association present, by person or by proxy, determines the proposed budget vote.

Prime Sponsor: Sen. Tim Sheldon

Senate Bill 5428: Condo Association Litigation Costs

Summary of Bill: Revises the condominium act regarding costs of litigation for condominium associations by changing the definition of constructional defect and prohibits the board of directors from taking action on behalf of the association to: institute, defend, or intervene in litigation or administrative hearings.

The parties to a construction defect dispute must engage in mandatory binding arbitration.

Prime Sponsor: Sen. Mike Padden

Substitute Senate Bill 6001: Amendments to Bylaws

Brief Summary: The bylaws of a condominium may be amended by applying the minimum percentage of affirmative votes to the number of votes received rather than the total number of votes allocated if: 1) the proposed amendment is not seeking to amend the method of amending the bylaws; and 2) three notices are sent by certified mail, at least ten days apart, to the unit owners in advance of the vote either at a proposed meeting or other voting method authorized by the governing documents.

Prime Sponsor: Sen. Karen Keiser

Substitute Senate Bill 6005: Protecting Lienholders' Interests While Retaining Consumer Protections

Brief Summary: County treasurers, at least 180 days before the issuance of a certificate of delinquency, must provide notice to the record owner of residential property that contains information regarding the potential for the homeowner to access mediation under the Foreclosure Fairness Act.  The fee a person may charge a non-natural person to locate abandoned property is 35 percent of the value returned to the owner.

Prime Sponsor: Sen. Mark Mullet

We Need Your Support!

Government Icon Government Icon Government Icon

The LAC thanks all the members who have stayed involved and diligent this year. We will continue to fight for all community associations throughout the State, but we will still need your support.

In 2019, housing will be one of, if not the most, debated issues at the Washington State Legislature. Please keep a look out for CAI’s “Calls-to-Action” and let your lawmakers know how important it is for them to support our industry. We are essential to a thriving and prosperous Washington.

If you are not receiving emails for CAI’s “Calls to Action” and would like to get on the distribution list, please contact Dawn Bauman at Dbauman@caionline.org.

Written By WSCAI's Legislative Action Committee (LAC)

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Federal Tax Law Changes in 2018 for Community Associations

Federal Tax Law Changes in 2018 for Community Associations

[ Blog/News ]
Qualifying residential homeowners and condominium associations have the unique option in Federal taxation to file one of two tax forms. (This discussion does not include nonresidential, timeshare, cooperatives, commercial or exempt associations).

(Editor’s Note: This blog article first appeared in the April 2018 issue Community Associations Journal. It is a second in a two-part article. Part One appeared in the March issue.)

Federal Tax - Blue Icon Federal Tax - Orange Icon Federal Tax - Blue Icon

Community associations can file form 1120-H, U.S. Income Tax Return for Homeowners Associations or they can file form 1120, U.S. Corporation Income Tax Return. The determination as to which tax return to file is outside the scope of this analysis. However, it should be noted that if the association qualifies to file form 1120-H, this is an annual election and an association can change between the two tax returns each year.

The new Federal tax law makes no changes to form 1120-H. There is a flat tax rate on taxable income of 30%. That remains the same.

However, there is a Federal tax rate change when filing form 1120 effective January 1, 2018. 

From 2005 through 2017 there was a phased tax rate schedule as follows:

Over But not over Tax is Of amount over
$0 $50,000 15% $0
$50,000 $75,000 $7,500 + 25% $50,000
$75,000 $100,000 13,750 + 34% $75,000
$100,000 $335,000 $22,250 + 39% $100,000
$335,000 $10,000,000 $113,900 + 34% $335,000
$10,000,000 $15,000,000 $3,400,000 + 35% $10,000,000
$15,000,000 $18,333,333 $5,150,000 + 38% $15,000,000
$18,333,333 35% $0

It is common to hear that the U.S. corporate tax rate has been 35%. However, as noted above, that is not entirely true – and especially not for most community associations. In our experience, we have found that the majority of associations have taxable income under $50,000; thus, their tax rate has been 15%.

Under the new tax law there is a permanent flat corporate rate of 21%. Thus, many community associations will actually see an increase in their tax rate from 15% to 21% when they file their 2018 1120 tax returns.

Additionally, while we are not discussing the pros and cons of filing 1120 vs. 1120-H, it should be noted that filing 1120 is a much riskier tax option and requires much more diligent accounting and financial reporting. At times, the community association has been swayed into filing form 1120 due to the 15% tax differential. However, now that the tax rate difference is 9%, (21% vs. 30%) some associations may consider the cost versus benefits and conclude that the risk is no longer worthwhile for only a 9% tax savings.

For those associations filing form 1120, there are some additional tax law changes:

  • Expensing of short-lived assets (rather than depreciating them). This is fully in effect through 2022, and then gradually phased out by 2026.
  • Elimination of net operating loss carrybacks and limitations on carryforwards.
  • Elimination of the corporate alternative minimum tax.

Quite frankly, most associations will not be affected by the above items. The large, high taxable income community associations should discuss all the new tax law ramifications with their tax preparer. However, most associations filing form 1120 are limited in their ability to use the above deductions. Nonmembership and investment income is taxable. Tax regulations (IRC Section 277) do not allow for an offset to taxable income from membership losses, including depreciation deductions. Again, this is another reason that filing form 1120 is a more complex matter than form 1120-H.

Summary of Impact on Community Associations

  • Form 1120-H – No Change
  • Form 1120 – If taxable income under $50K, tax rate increase from 15% to 21%
  • Form 1120 – If taxable income over $50K – would need analysis based on specifics

By Gayle Cagianut, CPA

Owner, Cagianut & Company, CPA

Gayle Cagianut is the owner of Cagianut & Company (C&C), and has been a leader in the community associations industry for over 25 years. C&C now works with almost 800 associations in Washington and Idaho performing audits and tax returns. As education is a primary focus of C&C, Gayle provides numerous volunteer hours speaking and writing about accounting, auditing and tax matters specific to condominiums and homeowners association.

Gayle is a member of the Washington State Community Association Institute (WSCAI) and Washington Society of CPAs and American Institute of CPAs. She is a CAI National Faculty Member and was elected to CAI National Business Partners Council. 

A prior CAI National Author of the Year Award winner, Gayle is an original co-author for the “Guide to Homeowners Associations” for Practitioner’s Publishing Company (PPC), a national CPA manual. She is also a current contributing author/editor for a Commerce Clearing House (CCH) national CPA manual.

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Let’s Play 20 Questions: Taxes and Audits

Let’s Play 20 Questions: Taxes and Audits

[ Blog/News ]
One thing is certain for community associations: An annual federal tax return. Another thing MAY be certain: an annual Certified Public Accountant (CPA) audit. If this is surprising to you, read on. If this is not surprising to you, read on anyway; as community associations are so unique in their tax treatment!

(Editor’s Note: This blog article first appeared in the March 2018 issue Community Associations Journal. It is a first in a two-part article. Part two will appear in the upcoming April issue.)

Let’s test your knowledge by playing “20 Questions”!

Question Mark in Talk Bubble Icon Green  Question Mark in Talk Bubble Icon Orange  Question Mark in Talk Bubble Icon Blue

Are associations required to file an annual federal tax return?

Answer Mark in Talk Bubble Icon GreenYES. Associations are required to file annually, even if they do not have taxable income. The return is required from the date of inception, even if assessments are not yet billed.

What type of tax return do associations file?

Answer Mark in Talk Bubble Icon GreenMost associations file a form 1120-H return, which is a special return for this industry. Some associations file a form 1120 return, which is the regular corporate return. This industry is unique in the tax law since most associations may “flip flop” back and forth each year between an 1120-H and an 1120. Some associations (such as commercial associations, and associations that don’t meet certain tests) are required to file an 1120 return. A few associations are considered a Non-Profit for tax purposes and file a form 990 tax return. This is rare and has stringent/narrow requirements.

Do associations pay tax?

Answer Mark in Talk Bubble Icon GreenYES. For the 1120-H return, they pay 30% tax on net “non-exempt function income.” Examples would be interest/investment income on all accounts, income from non-members (such as cell tower income or rental of an association owned unit), and “user fees” from members. For the 1120 return, Associations pay graduated corporate tax rates on net membership income and net non-membership income. These can be very complex issues, so it is always best to have an industry CPA advise on the best tax return choice and prepare the return for the association.

Is there a way to avoid tax?

Answer Mark in Talk Bubble Icon GreenIf the Association has interest/investment income, or income from non-members, other than the standard exemption available, it is difficult to avoid paying any tax. There are strategies to minimize tax. The association should work with their CPA on appropriate deductions that may be taken against the taxable income. If there is other taxable income, keep good accounting records of the potential direct expenses related to the production of income. Additionally, if the association qualifies for 1120 tax return filing, some tax rates are below the 30% “flat tax” for the 1120-H return. As noted above, the 1120 return is recommended in limited circumstances due to the requirements, and higher IRS audit risk.

What are some of the requirements to file an 1120 tax return?

Answer Mark in Talk Bubble Icon GreenIf the Association thinks they are planning on filing an 1120 tax return, they should consult with their CPA as this gets very complex, quickly. Generally, the association needs to follow strict accounting requirements including segregation of operating and reserve cash, and “fund accounting” is preferable. The Association should adopt and adhere to a budget that agrees with the reserve study, have minimal “transfers between funds”, document repayment plans for “due between funds” and be aware of the capital and non-capital items in the reserve study. They also need to have the association membership approve the “70-604” tax election.

What is the “70-604” tax election?

Answer Mark in Talk Bubble Icon GreenThis is a federal tax election only, and does not impact the books. As noted above, if the association files an 1120 tax return, the “net membership income” is taxable. The 70-604 allows the net membership income to be deferred from year one to year two. Since the 70-604 cannot be used two years in a row, this is only a deferral of tax. IF the association still has net membership income remaining at the end of year two, if an 1120 return is again filed, and no offsetting membership losses exist, the net membership income is taxable. Our firm recommends that each association approve the 70-604 each year at the annual meeting, regardless of the type of return filed. This is because it is not known (until the return filing) which form will be appropriate, and if an 1120 is necessary, the 70-604 may be needed. It also provides extra “IRS audit insurance”, regardless of the form filed each year. Again, this election is approved by the membership, not the board.

Is transferring monies to reserves the same as the “70-604?”

Answer Mark in Talk Bubble Icon GreenNo. Should be two separate motions.

When is the tax return due to the IRS?

Answer Mark in Talk Bubble Icon GreenThe return is due 3.5 months after the year end. For calendar year associations, this is April 15. There is an extension available, however any tax due must be paid by the tax return original due date.

What is an audit?

Answer Mark in Talk Bubble Icon OrangeAn independent CPA is engaged by the association to determine if the year end financial statements are materially correct, in accordance with Generally Accepted Accounting Principles (GAAP) and that adequate financial statement disclosures have been presented. The CPA should not be connected to the association in any way. “Materiality” is a matter of CPA judgment, however it means the CPA does not look at every transaction. Examples of “disclosures” would be litigation, special assessments, contingencies, FDIC limitation exceeded, and significant events occurring after year end but before the date of the Auditors’ Report.

Is our association required to have an annual audit?

Answer Mark in Talk Bubble Icon OrangeThis depends on the body of Washington law (RCW) that governs the association, and the size of the association. Please read the noted RCW for more clarification and consult your attorney if unclear.

  • “New Act” Condominiums (Created after 7/1/90 -RCW 64.34.372) Condominiums with 50 or more audits must be audited annually. Condominiums with less than 50 units have an annual audit requirement, however, there are annual waiver provisions.
  • “Old Act” Condominiums: (Created before 7/1/90) Generally, the requirements default to the New Act Condominiums provisions, however, if the governing documents require an annual audit, then an audit is required, regardless of the number of units.
  • Homeowners Associations (RCW 64.38.045) Associations with annual assessments of $50,000 or more must be audited annually, however, there are annual waiver provisions.

Additionally, there is an audit requirement for New Act Condominiums upon the legal transition from developer control. (RCW 64.34.312)

When is an audit recommended, regardless of the requirements?

Answer Mark in Talk Bubble Icon OrangeBecause the board is charged with governance of the association, they need to think through carefully whether the waiver of an audit is advised. Some of the reasons to have an audit include:

  • The CPA may also issue a “Report of Internal Control.” This contains recommendations that protect the board and association.
  • Provides significant disclosures to current and future owners.
  • Construction defect settlements.
  • Insurance proceeds/settlements.
  • Large special assessments.
  • Large construction projects.
  • Change in management companies.

If there is suspected fraud, a separate “forensic audit” may be appropriate.

What is needed in an audit?

Answer Mark in Talk Bubble Icon OrangeThe auditor will ask for the financial records and reports for both the audit year and subsequent year. If it is a new client, the auditor will ask for the financial records of the prior year end. Additionally, the auditor will also ask for governing documents, reserve studies, tax returns, budgets, and board minutes.

How long will the audit take?

Answer Mark in Talk Bubble Icon OrangeIn our firm, IF all information is provided when requested, the process is about six to eight weeks.

Who receives the audited financial statements?

Answer Mark in Talk Bubble Icon OrangeThe Auditors’ Report is addressed to the association board and membership. Other users include future owners (in the re-sale certificate) and current or possible association lenders. (The “Report of Internal Control” is addressed to the association board and management.)

What do we do if an audit discloses an issue?

Answer Mark in Talk Bubble Icon OrangeDiscuss the audit results with your management company and CPA, if you don’t understand the issue. Then, the board should discuss their plans to rectify the issue, and document this in the board minutes.

Are there more questions?

Answer Mark in Talk Bubble Icon BluePossibly, this article has raised more questions for you, than answered. Consult your association CPA, as there are numerous exceptions/details that are beyond the scope of this article.

 

Was this really 20 questions?

Answer Mark in Talk Bubble Icon BlueNo. Apparently the CPA cannot count.

By Catherine Kuhn, CPA

Owner, Cagianut & Company, CPA

Catherine Kuhn, CPA, manages the Bellevue office of Cagianut & Company, CPA, which is devoted exclusively to serving the financial needs of over 800 Community Associations in Washington. C&C has over 25 years of experience in serving Community Associations and currently has 18 employees. Prior to joining Cagianut & Company in 2006, Cathy was a partner in a large Bellevue CPA firm and served clients in various industries there for 20 years. Cathy teaches classes and writes articles for WSCAI. In addition to being “Mom” to 2 active teenagers, she serves as Treasurer of the Newport High School Girls Basketball Booster Club, and a financial volunteer for Bellevue Young Life.

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5 Tips for Running an Association Board Meeting

5 Tips for Running an Association Board Meeting

[ Blog/News ]
Running an effective homeowner’s association (HOA) board meeting is like mastering the zipper merge. When it’s performed properly, everyone knows what they’re supposed to be doing and it looks effortless. It just takes preparation and some practice to get it right.

Whether your association is new or has been around for a while, keeping a meeting running smoothly does not happen by accident. This writer has been in the unique position of having served on the board of her association, and is also an association manager. In both aspects, there are common factors which can affect HOA board meetings. Long, noisy and chaotic meetings cause misery for boards, managers and members alike. There are ways to reduce and even avoid the dilemmas that plague HOA board meetings.

Different types of meetings will have specialized items to be addressed, but no matter what kind of meeting is being held, here are five tips to optimize meeting efficiency.

[1] Agenda

Tip 1 - AgendaJust like real estate is about “location, location, location” effective meetings must have (and stick to) an agenda. Repeat it three times if needed, but remember, “agenda, agenda, agenda.” To that end, take an extra few minutes when planning and be sure to arrange the agenda into simple items and identify which items will require a decision/vote.

Be aware of the items that may invoke passionate and long-winded discussion. This too, can be addressed via the agenda. For those who wish to speak, a time limit of two minutes is advised, and an advance directive at the beginning of the meeting to let attendees know that discussion is limited to new information on the topic.

[2] Time

Tip 2 - TimeWhen planning the meeting, be conscious of time on two levels. The time needed altogether for the meeting, and available time for the attendees. The agenda is a great tool for time management, and time goals should be stated at the outset.

While it’s great to think, “We’ll cover all the topics on the agenda to completion” the reality is, the most productive meetings will produce an action item list with tasks for future follow-up. Again, it’s about time. Some decisions require more time and information than is available at the time of the meeting, and it’s okay to note that; and table the item for further review.

[3] Venue

Tip 3 - VenueThis is an area that can have negative or positive impact on the meeting. If the meeting is scheduled for evening, be aware of travel times and potential traffic considerations for attendees getting to the venue. Give advanced thought room size, temperature and adequate seating. Overcrowded rooms can be detrimental to meeting productivity.

Another venue consideration is acoustics. Community meeting rooms with hard floors have a greater level of echo and sound bounce back. It can be managed with effective direction from the presiding officer, and limiting side conversations. Keep these considerations in mind when seeking and selecting locations for board meetings.

[4] Side Conversation

Tip 4 - Side ConversationDon’t. Just, don’t. Whether in the gallery, or at the directors’ table, side communications are distracting and disruptive to a meeting. Even if it’s topic-related, if it’s not new information to be presented on the floor, it can wait until after the meeting. If you don’t have the floor, take it out the door.

[5] "Pancake"

Tip 5- PancakeNo, not the food. (Although this writer would absolutely attend a meeting that serves pancakes.) Remember the adage, “No matter how flat you make it, a pancake has two sides.” Not everyone at a meeting will agree on how to address an issue, but it’s important to be respectful of others’ positions as members of the association. Homeowners feel passionately about their homes and neighborhood, and in that passion, can lose track of the board’s responsibility to the entire association, not just the individual. So, like a pancake, flip the situation and try to view the other side of a matter.

As the season for annual meetings comes into full swing, these tips will serve to help associations achieve meeting mastery. Now, let’s all take turns…merge out of the parking lot and head to get some pancakes with some side conversation.

By Joy Steele, CMCA

Community Manager, Trestle Community Management

Joy Steele, CMCA is a Community Manager at Trestle Community Management. A devoted community volunteer for over a decade, she has also served her Condo Association for 7+ years, both on the Board and on various committees. A member of the both the SPJ and the NSNC, Joy is a columnist and contributor to the South King Media group, and various online and print periodicals. She currently resides in Des Moines with her husband Dan and their two rescue dogs.

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Boundary Issues: Associations and Owners Often Face Problems Involving Damage and Repairs that Straddle or Cross Property Lines

Boundary Issues: Associations and Owners Often Face Problems Involving Damage and Repairs that Straddle or Cross Property Lines

[ Blog/News ]

A defining moment in many people’s lives is when they purchase their first home. The promise and potential as a new homeowner feels unlimited. What many don’t realize is that the issues you may face as a homeowner—or indeed as a community association— often cross property boundary lines. This article addresses several boundary issues that owners and associations frequently deal with concerning trees, surface water, fences, party walls, retaining walls and boundary lines in general.

Note that the first inquiry to make in a situation in which an improvement appears to be on a boundary line is often whether the improvement is located on one parcel or another, or whether it straddles the two. This may involve examining legal descriptions and maps, and ultimately may require hiring a surveyor. 

Boundary Lines Spot ImageBoundary Lines

Boundary line disputes are often emotionally charged matters that can last for years. The most certain way to determine “on-the-ground” boundary lines is to hire a surveyor, which can be expensive. The surveyor can map boundary lines on the ground based on surveyor stakes and the legal descriptions of the properties.

But two legal doctrines may allow people to move those boundaries based on the conduct of the people who have owned the property on either side of the line:

  1. Adverse possession
  2. Mutual recognition and acquiescence.
Adverse Possession

To establish a claim of adverse possession, the burden is on the person claiming adverse possession to prove by a preponderance of the evidence (i.e., more likely than not) that the claimant’s possession is:

  1. Exclusive
  2. Actual and uninterrupted
  3. Open and notorious
  4. Hostile

[Nickell v. Southview Homeowners Ass’n, 167 Wn. App. 42, 50 (Div. 2, 2012)]

Each of the necessary elements for an adverse possession claim must have existed for ten years. A claimant can satisfy the open and notorious element of adverse possession by showing either:

  1. That the title owner had actual notice of the adverse use throughout the statutory period
  2. That the claimant used the land such that any reasonable person would have thought he owned it

Hostility for an adverse possession claim requires that the claimant treat the land as his own as against the world throughout the statutory period.

Mutual Recognition and Acquiescence

Claims based on mutual recognition and acquiescence arguments involve purported boundary lines demarcated by things like fences and roads. The elements of mutual recognition and acquiescence include:

  1. The line must be certain, well defined, and in some fashion physically designated upon the ground, e.g., by monuments, roadways, fence lines, etc.
  2. In the absence of an express agreement establishing the designated line as the boundary line, the adjoining landowners, or their predecessors in interest, must have in good faith manifested, by their acts, occupancy, and improvements with respect to their respective properties, a mutual recognition and acceptance of the designated line as the true boundary line.
  3. The requisite mutual recognition and acquiescence in the line must have continued for that period of time required to secure property by adverse possession.

[Lamm v. McTighe, 72 Wash.2d 587, 593 (1967)]

The burden of proof is on the party asserting mutual recognition to show, by clear, cogent and convincing evidence, that both parties acquiesced in the line for the same period required to establish adverse possession—10 years. [Muench v. Oxley, 90 Wn.2d 637, 641, 584 P.2d 939 (1978)]

Timber Trespass/Trees Spot ImageTimber Trespass/Trees

A common boundary dispute neighbors contend occurs when a tree located wholly on one party’s property that overhangs onto another. To cut down a tree or other plantings belonging to another without lawful authority is known as “timber trespass.” The trespassing offender is potentially subject to treble damages if it was done willfully. This means the statute allows the aggrieved party to obtain triple the damages amount suffered.

The key phrase with respect to timber trespass is “without authority.” Generally speaking, under Washington law, a landowner has legal authority to engage in self-help at his own expense and trim branches and roots that encroach upon his property. However, that does not give the landowner the right to cut down the tree on the adjacent land.

But what if the tree is located on the boundary line? The Washington State Court of Appeals addressed this issue in 2017. If a tree straddles the boundary line between two properties, the owners of each property own the tree as tenants in common and are each entitled to use, maintain and possess the tree without interfering with the other’s use of it, as set forth in the 2017 Herring v. Pelayo appellate case. The court reiterated that the common owners of the tree may lawfully trim vegetation overhanging their property, but not in a manner that the common owner knows will kill the tree.

So if you are considering cutting the branches of a tree near your property, the best practice would be to speak to the adjacent owner first if there is a chance the tree is not entirely located on your property. If there is an objection, consult a surveyor to determine the tree’s location. Since timber trespass carries such potentially stiff penalties, homeowners should proceed with caution if they are considering cutting down some or part of a neighbor’s tree.

Surface Water Spot ImageSurface Water

In parts of the Pacific Northwest, it is a way of life to deal with rain most of the calendar year. Besides making commuting difficult, rain can cause a variety of problems for homeowners and potentially their neighbors. One common example: When accumulated rain or other surface water runs off one person’s property onto another’s, causing damage.

As explained by the state Supreme Court in Currens v. Sleek, Washington law recognizes the “common enemy doctrine” with respect to surface water. Surface water is “vagrant or diffused [water] produced by rain, melting snow, or springs.” The common enemy doctrine allows landowners to dispose of unwanted surface water in any way they see fit, without liability for resulting damage to a neighbor. The idea is that “surface water … is regarded as an outlaw and a common enemy against which anyone may defend himself, even though by so doing injury may result to others.”

This seemingly counterintuitive doctrine is not absolute and has a few exceptions. First, landowners may not inhibit the flow of a watercourse or natural drain way, such as a stream or gully. Second, landowners may not collect surface water on their property, only to dispose of it on a neighbor’s land. Finally, landowners who alter flow of surface water on their property must exercise their rights with due care by acting in good faith and avoiding unnecessary damage to the property of others.

Fences Spot imageFences

Our state does not appear to have any cases that directly address maintenance of boundary fences. But across the country, it is generally understood that ownership of and responsibility for a boundary fence is determined by who “uses” the fence. A fence built on the boundary and used by only one owner, belongs to the person who built it. It does not become a “shared” fence until the neighbor actually “uses” it as his own fence. What does it mean to “use” the fence as your own fence? There are a number of definitions applied by the states:

  1. Occupancy: To “use” means to use the land right up to the fence line;
  2. Join: To “use” means to hook up your fence to the boundary fence.
  3. Enclosure: To “use” means to hook up to the boundary fence to entirely enclose your property.

By statute in our state, if someone builds a boundary fence that helps enclose a neighbor’s property, that neighbor is responsible for half of the value of the fence. [RCW 16.60.020.] (In other words, our state appears to focus on the “enclosure” aspect of the “use” concept.)

Community association and other property covenants also may provide guidance on who is responsible for fences, though such guidance is often lacking in detail. Look at the language of the covenants to help determine whether an association is in charge of fence repair and replacement—which helps ensure a uniform appearance of fences in the community—or whether it is an owner responsibility. Rarely is it a good idea for one entity to maintain one side, and another entity to maintain another, as a practical matter. More commonly, one entity repairs a shared fence with prior notice, and the two parties may ultimately split the cost.

Shared Walls Spot ImageShared Walls

Responsibility for maintenance and repair of retaining walls located on a shared boundary is somewhat counterintuitive. The general rule is that the landowner who cuts away land from the natural slope is responsible for the retaining wall. But the landowner who builds up fill behind a retaining wall—such as an uphill neighboring community who added fill to level the land to construct a parking lot— is responsible for the retaining wall. Accordingly, to figure out responsibility for a retaining wall that needs repair, a party will likely have to investigate the history of property development concerning the involved lots. If it is not possible to determine responsibility, one reasonable option is to draft an agreement regarding who will undertake the work and to split the costs: This reduces uncertainty about responsibility down the road and sets forth a procedure to follow when future repairs are needed.

Fortunately, party walls (i.e., walls between dwelling units) are often addressed in association or property covenants. Those covenants typically give either neighbor the option to fix the wall, and then the party undertaking the work may charge back. In a condominium situation, the wall may also be a common element that the association fixes as a common expense.

Conclusion

Issues involving or crossing over property lines can be contentious and time-consuming. Cooperation and compromise are often key to keeping costs down and obtaining prompt resolution. Many problems can be circumvented by providing prior notice and doing your homework to pinpoint the ownership of a boundary line improvement, and by entering into agreements ahead of time before and issue arises.

Co-Authored By Bennett Taylor, Esq.

Associate Attorney, Leahy Fjelstead Peryea

Bennett Taylor is an associate attorney at Leahy Fjelstead Peryea.  He lives in the Greenwood neighborhood of Seattle with wife Lindsay, their new daughter Sloane, and his cat, Peanut.

Co-Authored By Allison Peryea, Esq.

Shareholder Attorney, Leahy Fjelstad Peryea

Allison Peryea is a shareholder attorney at Leahy Fjelstad Peryea in Seattle, Washington. Her law firm almost exclusively focuses its practice on serving community association clients. Allison’s practice includes litigation, covenant enforcement, and general counsel assistance to clients. She is a member of the WSCAI Communications Committee and a former editor of the WSCAI Journal. She is also a humor columnist for national website Above the Law.

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November 2018

Sun Mon Tue Wed Thu Fri Sat
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  • Annual Meeting & Awards Gala
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7
  • CEO Luncheon
  • Ronald McDonald House
8
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  • Membership Committee Meeting- Conference Call
21
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  • Business Partners Comm Mtg
28
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