Tips from our Community Associations Team
For those who are board members and officers of community associations, there is a yearly rhythm to the orderly conduct of the association that needs to be maintained. Minding those yearly issues and doing so in a timely manner will keep your association running smoothly and avoid the vast majority of problems throughout the year.
Below is a list of items common to most community associations, which should serve as a good starting point for boards and managers. Each community is different, so this is by no means exhaustive of what you might have to contend with for your community, but it’s a good place to start.
1. Governing Documents.
A. Does the board have complete and up-to-date copies of all governing documents?
B. Are they all properly filed in local jurisdiction land records? SCC?
C. Have you updated your disclosure packet and resale packet and do you have these readily available for buyers, sellers and their real estate agents? (Note: See also Item 14 below.)
2. Annual accounting.
A. Review all receipts and disbursements.
B. Bank statements and ledgers.
C. Annual Audit
D. Financial Statements
3. Proper Notice of Annual Meeting.
A. Bylaws (or in some cases, Articles of Incorporation) will prescribe the form and content.
B. Bylaws will prescribe amount of advance notice.
C. Check the Bylaws requirements against the Virginia Nonstock Corporation Act for compliance.
4. Announcement of Board Seat Openings Prior to Annual Meeting.
A. Announce election and solicit volunteers in advance.
B. Appoint a nominating committee if called for in your Bylaws.
C. Be extra vigilant to fulfill notice requirements in voting years.
5. Annual Meeting with or without voting.
A. Review Bylaws to ensure you are fulfilling requirements of the annual meeting.
B. If the meeting includes voting on changes to governing documents, check each governing document for special voting/consent requirements, promote attendance.
C. Don’t forget to check the statutes for voting and/or notice requirement:
- Virginia Property Owners’ Association Act
- Virginia Condominium Act
- Virginia Nonstock Corporation Act
6. Identify one time big ticket maintenance items that may affect yearly assessments.
A. Get quotes on these items ahead of time to determine assessments.
B. Adjust annual budget to account for big-ticket maintenance items.
C. Determine whether you may utilize existing reserve money to pay for big-ticket items.
7. Assessment letter updating members as to the amount of assessments for the coming year and manner of payment.
A. Whether annual, quarterly, or monthly, identify the assessment amounts and dates.
B. If assessments are going up, and there is a good reason for it, explain.
C. If a management company or collection firm performs this function, review their letters and practices to ensure compliance with bylaws.
8. Form 1120-H Tax return filed in April.
A. Recently changed from March, this form is now due April 15.
B. One page form with simple instructions.
9. Insurance checkup and payment of annual premium.
A. Review your policy to be certain that it complies with law.
B. Policy should not only cover incidents on all common areas and facilities but also indemnify acts of the board directors/officers from claims of non-compliance with law and community association instruments.
C. Be certain legal expenses are covered and that Association can cover deductibles.
D. Be sure you have the minimum insurance required by your Bylaws/governing documents.
10. State corporation commission registration for corporate form.
A. Identify changes to makeup of board/officers or confirm no changes.
B. Pay yearly fee.
C. Loss of corporate form can open members up to liability.
D. Maintain accurate registered agent address for service of process.
E. If an attorney serves as your registered agent, ensure attorney is aware of the Association’s current point of contact.
11. Common Interest Community Board Registration.
A. If relevant, has your association registered?
B. Has your board filed its annual report required by Va. Code Section 55-516.1.
12. Review financial accounts and designees.
A. Does your association account return interest? Are you getting a decent return?
B. When officers rotate off of board, ensure that they are removed from accounts.
C. Checks and balances: at least two people should receive monthly statements.
D. Ensure reserve accounts qualify for FDIC insurance coverage and move accounts to different financial institution(s) as needed to maintain accounts within FDIC coverage limits.
13. Budget and Reserves.
A. Does your community budget comply with governing documents?
B. Does it account for necessary reserves as recommended by your reserve study?
C. Have you done a reserve study? One is required at least every five years under either Va. Code Section 55-79.83:1 (condominiums) or 55-514.1 (POAs).
D. Do your community instruments require independent audits?
14. Move-outs and Move-ins.
A. As people relocate, membership changes. Do you have a good process for updating throughout the year?
B. Updates should occur routinely, but make a yearly review.
C. Check your disclosure package for buyers/sellers/real estate agents to ensure that it complies with legal requirements.
D. Current copies of Covenants/Articles/Bylaws/Rules
E. Current copies of Disclosure Certificate and required cover sheet
F. Current copies of Community Association financial snapshot
G. Current copies of meeting minutes and other disclosure exhibits.
15. Landscaper or facility cost review and possible issuance of RFP on yearly contract.
A. Often these are the biggest expenses for the association.
B. To fulfill fiduciary duty, periodically price-check by issuing requests for proposals to vendors like landscaper, pool maintenance, etc.
16. Meeting minutes – confirm all properly done and signed.
A. Meeting minutes (of member and board of directors meetings) should be kept in a chronological notebook.
B. They should be signed and dated by the secretary or other recording officer.
C. Review on a yearly basis to ensure all are in order.
17. Review legal updates affecting community associations. In Virginia, new state laws are effective July 1.
A. Each year state legislatures address issues for community associations.
B. Check a government resource or with your legal counsel to inquire.
18. Review new cases within past year addressing community association issues in Virginia.
A. Once a year, check with your legal counsel for case law precedents that may affect your operations.
19. Review the governing documents, in light of property owner covenant and rule violations.
A. Ask yourselves – do we need to try to pass a new restriction to prevent problem not presently addressed by the governing documents/rules in place?
B. If so, determine the process of amending the governing documents/rules and obtaining whatever majority is needed to amend, as well as recording in the land records.
C. Avoid the unauthorized practice of law (a Class I misdemeanor in Virginia) by involving your attorney to draft the amendment instruments.
20. Architectural Review Committee, Covenants Committee and/or Manager should make a concerted effort to examine properties.
A. Disrepair or noncompliance of properties happens gradually and often goes unnoticed.
B. Take a purposeful trip through association property to scrutinize properties at least once a year – if not more often – and note non-compliance violations, issuing notices as necessary.
C. Lot/Unit inspections should be conducted as a matter of routine procedure whenever disclosure/re-sale packets are requested.
21. Revisit your friendly community practices.
A. Oftentimes, association boards limit their activities to governance, collection, and enforcement.
B. Don’t forget that you are a community organization.
C. Have a purposeful yearly meeting to schedule social events.
D. Put a procedure in place to welcome new owners soon after they move in.
Andrew Biondi is a member of Sands Anderson’s Community Associations Team and Litigation Group. He represents individuals and small to mid-size businesses in the areas of creditors’ rights and professional liability defense.