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Passing the torch: Why succession planning is essential for community association professionals

Do you know what happens to your company once you’re no longer able to work? Have you determined who will take charge after you’re gone? For any business today, the importance of having a succession plan is critical for a company’s long-term success.

Succession planning involves creating an arrangement for someone to either own or run your business after you retire, become disabled, or die.

The need for a strategic succession plan was the leading topic discussed by more than 200 community association management company CEOs and executives at the 2019 CEO-MC Retreat hosted by the Community Associations Institute (CAI) in La Quinta, Calif.

As the growing industry is witnessing a changing of the guard, its pioneers—those who spent the past 40 years building thriving management companies and businesses that support community associations—are looking for ways to successfully pass the torch to the next generation of leaders.

Today, there are more than 7,000 community association management companies and nearly 55,000 community association managers, according to the Foundation for Community Association Research’s 2018-2019 National and State Statistical Review for Community Association Data. Acquiring the next generation of talent to manage and lead these companies is no easy task.

When asked if their company has a succession plan, more than half (54%) of the CEO-MC Retreat attendees reported that their firm does; 43% do not.

CAI President Cat Carmichael, CMCA, PCAM, challenges executives to avoid the expectation that a family member will be the one to step up and lead the business in the event of an absence, a dangerous assumption many business owners share today. Carmichael added that it’s essential to think of current employees and the value they bring to the company’s future.

“Developing succession plans helps to ensure business continuity if and when an executive or a key employee leaves. Every business should be thinking about its ‘transferable value’—that’s the value of the company when the executive no longer works in it full-time,” says Carmichael. “Elevating current staff value will not only add business value because of the quality and reliability of the workforce, but it will assure that monthly recurring revenue continues.”

Carmichael adds that there’s no better time than the present to deal with the unexpected and protect the businesses that have been built over the decades. A strategic succession plan will ensure the company’s culture is maintained and reduces stress on staff during the transition. It also means the company retains knowledge, history, and business relationships.

Learn more about building a succession plan from the Small Business Administration.

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Now hiring: Employment growth projected for community managers

Community association management is becoming a sought-out career for those entering the job market for the first time or those considering a change late in their professional lives. The role is expected to see growth for new hires in the coming decade, according to recent data from the U.S. Bureau of Labor Statistics.

There were about 363,000 property, real estate, and community association managers working in 2018 with employment forecast to grow 7% through 2028, faster than the average for all occupations. BLS attributes this growth to more people choosing to live in condominiums, cooperatives, planned communities, and senior housing.

“Community associations are a true economic engine, and there’s a need for talent at all levels,” says CAI’s 2019 President Cat Carmichael, CMCA, PCAM, who has made it her mission to open channels that can bring in talented individuals to common-interest communities. “We are striving to find new talent where the talent is and increase awareness of the benefits of community association service.”

Employers typically prefer to hire college graduates with a degree in finance, accounting, real estate, or public administration, but workers with a high school diploma and less than five years of relevant experience also can be considered for entry-level positions, according to BLS.

Employers also may require that community managers participate in training programs or workshops from professional trade associations (like CAI’s Professional Management Development Program) to develop their management skills and expand their knowledge on topics such as insurance and risk management, governance, homeowner relations, personnel management, and reserve funding.

BLS calculated the median pay for a community manager in May 2018 at $58,340 per year. This amount is higher than the median compensation reported by assistant community managers ($43,340) and portfolio managers ($52,500) in the Foundation for Community Association Research’s 2017 Community Association Manager Compensation and Salary Survey. Compensation increases significantly as managers gain more experience and responsibility. According to the Foundation’s research, on-site managers earn an average of $71,560, high-rise managers earn $86,500, and large-scale managers earn $100,000.

Community managers oversee the daily operation of residential properties. In addition, BLS lists some important skills that community managers should have to excel in their role:

  • Communication. Managers must understand contracts and real-estate documents to clearly explain the materials and answer questions raised by residents or board members.
  • Customer service. Managers must provide excellent customer service to keep homeowners happy and expand their business with new clients.
  • Interpersonal. Because community association managers interact with people every day, they must have excellent interpersonal skills.
  • Listening. Managers must listen to and understand residents to meet their needs.
  • Organizational. Managers must be able to plan, coordinate, and direct multiple contractors at the same time, often for multiple properties.
  • Problem-solving. Community association managers must be able to mediate disputes or legal issues between residents, homeowners, and board members.

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Be ready: How to prepare your community for a natural disaster

Hurricane Dorian devastated the northwestern Bahamas and has unleashed heavy rain, strong winds, storm surge, and tornadoes as it has tracked along the East Coast. While the Atlantic hurricane season officially runs from June to November, the peak of the season is now—from mid-August to late October.

With September being National Preparedness Month, Americans can take action to promote emergency planning and disaster relief in the event of hurricanes, wildfires, and floods, which have caused an estimated $414.4 billion in damage across the U.S. from 2013 to 2018, according to data from the National Oceanic and Atmospheric Administration. As natural disasters become more frequent and destructive, it’s important that community associations adopt a comprehensive plan to prepare, respond, and recover from these extreme weather events.

Community association residents and leaders also should be aware that the Federal Emergency Management Agency does NOT reimburse community associations that remove debris from private roads. CAI strongly encourages board members and managers to review the guidelines for removing debris.

In addition, here are some guidelines to prepare your community against a natural disaster.

Hurricanes

  • Gather supplies in an emergency kit to last at least three days, including food, water, flashlights, batteries, cash, first aid supplies, and medications. Also gather supplies for pets, if any, and store important documents.
  • Bring inside loose, lightweight objects that could become projectiles in high winds (e.g., patio furniture, garbage cans) and anchor objects that would be unsafe to bring inside (e.g., propane tanks).
  • Take refuge in a designated storm shelter or in a secure room inside your home that is windowless and not at risk of flooding.
  • Cover windows with wooden panels or storm shutters.
  • Document any property damage with photographs. Contact your insurance company for assistance.

Floods

  • Know the types of flood risks in your area by visiting the Federal Emergency Management Agency’s Flood Map Service Center.
  • Purchase or renew a flood insurance policy through the National Flood Insurance Program. Homeowner’s insurance policies do not cover flooding.
  • Keep important documents in a waterproof container. Create password-protected digital copies.
  • Protect your property. Move valuables to higher levels. Declutter drains and gutters. Install check valves and consider a sump pump with a battery.
  • If trapped in your home, go to its highest level. Do not climb into a closed attic, as you may become trapped by rising floodwater. Go on the roof only if necessary and signal for help.

Wildfires

  • Fireproof your home by covering outdoor vents, removing dry leaf and tree debris, mowing and watering lawns regularly, and using fire-resistant materials to make repairs or replacements.
  • Keep fuel sources at least 100 feet away from your home.
  • Keep important documents in a fireproof safe and make digital copies.
  • Designate a room that can be closed off from outside air. Close all doors and windows. Set up a portable air cleaner to keep indoor pollution levels low when smoky conditions exist.
  • Review insurance coverage to make sure it is enough to replace your property. Document damage with photographs.

For tips on how to make an emergency plan fit for your community association and prepare for other types of disasters, visit CAI’s Community Disaster Preparedness & Relief page and Ready.gov.

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Red, white, and blue: Tips for displaying the Stars and Stripes

The Star-Spangled Banner. Old Glory. The red, white, and blue. No matter how Americans refer to the U.S. flag, everyone has the right to fly it. Flag Day, held annually on June 14 since 1916, should serve as a good reminder for how all should properly and proudly display the Stars and Stripes.

Thanks to the Freedom to Display the American Flag Act, enacted in 2006, residents in community associations have the right to fly the flag even if there are rules and restrictions that prevent it from being displayed. CAI believes, however, that associations should be able to determine the appropriate size, placement, and installation of the flag and flagpoles.

CAI encourages associations to follow the guidelines for flying Old Glory in the U.S. Flag Code, some of which includes:

  • Display the flag in public from sunrise to sunset. It can be displayed at night if it is illuminated during darkness.
  • Do not display the flag in inclement weather, unless it is an all-weather flag.
  • The flag can fly on all days, especially on national holidays, other days that may be proclaimed by the president, and dates of admission of states into the union.
  • Do not position the flag upside down. This represents a signal of distress in moments of extreme danger to life or property.
  • Do not let the flag touch anything beneath it, including the ground, floor, water, or other objects.
  • No part of the flag should have any mark, insignia, letter, word, figure, design, picture, or drawing of any nature.

Need more information about rules and regulations regarding flags, banners, and emblems? Read Everyday Governance: The Community Association’s Guide to Flags, Rentals, Holiday Decorations, Hoops, and Other Headaches, available from CAI Press.

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Homeowner education: Be resourceful with CAI’s HOAResources.com

The best community associations have knowledgeable governing boards, highly-engaged residents, and educated and trained professional managers leading their communities. CAI has believed that since its founding in 1973, and it’s why we offer information, education, and resources to members and the general public. It’s why we recently launched HOAResources.com, a digital news site for the millions of residents living and working in condominium communities and homeowners associations worldwide.

We recognize that the community association model has evolved and grown up over the years, becoming a well-established and increasingly successful form of community governance and an essential component of the U.S. housing market.

There’s an increasing need to educate, train, and provide the latest news and resources to the millions of potential homebuyers, homeowners, and renters living in these communities. After all, 61 percent of all new housing built for sale is in a community association.

The new site lets CAI members and the general public find practical advice on common issues in the community association housing model. The site will address HOA basics, financial planning, rules and governing documents, as well as security and safety. Many time-tested best practices are showcased on the site, often through free, downloadable documents.

Go to www.HOAResources.com, and share the information with homeowners, friends, and colleagues.

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Talent wanted: How to hire and retain skilled community association managers

Recruiting and retaining skilled managers can be challenging for community associations and management companies, especially in a very competitive labor market and with communities limited by tight budgets.

In this reality, it becomes even more important for associations and management companies to highlight their strengths and address organizational shortcomings, says business speaker and author Peter Sheahan.

The founder and CEO of Karrikins Group, a Denver-based business growth strategy consulting firm, Sheahan has been an innovative business thinker for more than 20 years. He has advised leaders at companies such as Apple, Microsoft, Hyundai, IBM, and Wells Fargo. He’s also authored seven books, including the recently released Matter: Move Beyond the Competition, Create More Value, and Become the Obvious Choice and Generation Y, a book about the millennial workforce.

Peter Sheahan

Generation Y came about due to Sheahan’s experience as manager of a hotel in Sydney, Australia. “I noticed there was a very big disconnect between what the young people that I was hiring wanted from their experience of work and what I needed from them at work, as their employer,” he says.

Since that formative experience, Sheahan and his team have strived to help company leaders understand ways to attract talented workers.

“People think that the secret to attracting and retaining talent is little things like, ‘Let’s give them free lunch’ or ‘What perks can we offer?’ or ‘What are our benefits compared to the benefits down the road?’ But at the end of the day, it really comes down to the quality of the organization,” Sheahan says. “Is it successful? Is it high performing? Because good, smart people want to work in those environments.”

Sheahan recommends a few best practices for community associations and management companies for recruiting and retaining talent:

    1. Stop thinking about tactics, and start thinking about the performance of the organization. The focus should be on building an organization that is robust and resilient. “Great organizations have no trouble attracting and retaining talent,” says Sheahan.
    2. Build a culture that people want to work in. The perks and benefits can’t be the only lure for bringing in talented workers. Sheahan warns that if the culture doesn’t reflect what was promised to the manager when hired, “You’ll find yourself in bigger trouble.”
    3. Be courageous. It’s important to brave a tight labor market to find talented people, says Sheahan. It’s also about having the courage to build a high-performing team. “A team is only as strong as its weakest link, so we need to be capable of managing the performance of the underperformers or, at times, even having the courage to move people on,” he says.

Sheahan will be one of the keynote speakers at the 2019 CAI Annual Conference and Exposition: Community NOW, May 15-18, in Orlando.

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A nice approach: Finding success in your community and in business

Disputes and disagreements between board members, residents, community managers, staff members, and business partners are an inevitable part of living in a community association. While generating an atmosphere of kindness and respect might seem easier said than done, it can make for a more collaborative and positive environment for all, says advertising leader and best-selling author Linda Kaplan Thaler.

Thaler, who is CEO and president of Kaplan Thaler Productions, has carried the belief throughout her professional career that being nice pays off. Thaler’s advertising agency became famous for developing the Kodak Moments campaign, catapulting Clairol Herbal Essences into notoriety with a series of ads inspired by the iconic deli scene from “When Harry Met Sally,” and turning “I don’t want to grow up, I’m a Toys R Us kid” into one of the most recognizable jingles in the world.

Linda Kaplan Thaler

She says that her parents, especially her father, instilled the importance of being mindful and respectful of others. While working on a book that demonstrates this philosophy, The Power of Nice: How to Conquer the Business World with Kindness, she interviewed leaders and CEOs who noted their key to higher productivity and profit margins was practicing kindness.

“We don’t have enough people out there, enough leaders out there, who are really espousing this belief that being nice is really a tool for success. You are not filling people’s champagne glass. You are not a doormat,” Thaler emphasizes. “It is a fine strength when you can allow people in to collaborate. At the end of the day, people will work much harder if they feel acknowledged and if they feel like part of the process.”

The same applies to community associations. Thaler believes that codes of civility are a great way to get people toward a path of being nice to one another. “You can’t have a culture, or an association, or a group of homeowners who will feel comfortable with each other if incivility is allowed, if disrespect is allowed,” she explains.

But actions always go beyond words, and community associations can practice what they preach in simple ways. “Listening is such a huge part of creating a culture where people are nice to each other, where people are kind to each other, because they feel like they are being heard,” Thaler says, adding that listening is also critical to creating empathy and connecting with people.

“The other thing is that you can deflect a lot of tension with humor. When we make another person laugh, we are basically creating a bond,” she notes, saying that humor can be a tool before communicating decisions that may not sit well with many people. “I think it’s very important to use humor in a way that says, ‘It’s going to be OK.’ ”

Thaler will be one of the keynote speakers at the 2019 CAI Annual Conference and Exposition: Community NOW, May 15-18, in Orlando.

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A community’s last resort: Foreclosing on a home

Nobody wants to foreclose on a home—not a mortgage banker and certainly not a community association. Countless Americans lose their homes when lending institutions are unable to collect mortgage payments. In a perfect world, no one would ever face foreclosure—for any reason.

That’s why foreclosure should always be used as a last resort, applied only when a community association has exhausted all other collection options and only when a homeowner refuses to remedy a significant debt to the association.

CAI does not support people losing their homes to foreclosure for insignificant sums of money. Even when the debt is significant, foreclosure should be considered only after other approaches have failed. In all cases, homeowners facing foreclosure deserve reasonable opportunity to appeal the issue to the leadership of the association.

There is no universal threshold that should trigger a foreclosure. The decision should be based on many factors, including the amount of the debt, the financial health of the association, the reason for the debt, and the homeowner’s willingness and ability to bring the account up to date. The magnitude of this decision requires an approach that is fair, reasonable, and consistent with practices and procedures established by the association’s governing documents.

While there are isolated instances of inappropriate foreclosure, this action is viewed as a last and unavoidable step by the overwhelming majority of community associations. Knowing that people occasionally face financial hardship—a lost job, for instance—many community associations do work with homeowners to develop deferred or special payment plans.

Elected by their neighbors, volunteer community leaders are responsible for ensuring financial stability and the continued delivery of services to residents in the community. An association’s budgetary obligations do not change when assessments aren’t paid. Common areas must still be maintained. Garbage must be collected. Insurance coverage must continue. The pool remains open in the summer. Snow is plowed in the winter.

Homeowners who simply refuse to pay their assessments—as they contractually agreed to do when they purchased their homes in an association—are cheating their neighbors, their community, and themselves. When homeowners are delinquent on their assessments, either their neighbors must make up the difference or services and amenities must be curtailed. That affects everyone in the community, perhaps even leading to a decline in property values.

Used as a last resort, the lien and foreclosure process gives community associations a mechanism to ensure the resources necessary to provide services, protect property values, and meet the expectations of the community as a whole. Placing a lien on property, with the ability to foreclose, is typically enough impetus to get delinquent residents to meet their financial obligations to the community.

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Condominium assessments and bankruptcy: What can associations collect?

Courts across the nation are split on whether post-petition community association assessments constitute dischargeable debts under Chapter 13 of the U.S. Bankruptcy Code. To make matters worse, in November, the Supreme Court denied a petition to review the issue, leaving the community association industry wondering if the existing dispute among the courts will ever have a concise national remedy.

This past July, the Ninth Circuit Court of Appeals, which comprise several Western states, had held in Goudelock v. Sixty-01 Ass’n of Apartment Owners, No. 16-35385 (9th Cir. July 10, 2018), that an individual’s pre-petition debt or claim for assessments—created when a property owner takes title to property and which contractually obligates the owner/debtor to pay assessments—is dischargeable when the owner/debtor successfully completes a confirmed Chapter 13 plan. In November, CAI attorneys drafted and submitted an amicus brief in tandem with the (now denied) petition to the U.S. Supreme Court appealing the Ninth Circuit case.

CAI’s amicus brief made it clear to the Supreme Court that the rationale employed by the Ninth Circuit in Goudelock has far-reaching implications for community associations throughout the U.S., as it threatens the lifeblood of community associations—the continued ability to levy and collect assessments and dues for the maintenance and preservation of community property. Due to the Supreme Court denying the association’s petition, the Goudelock decision stands. This decision is already negatively impacting community associations in the Ninth Circuit, as courts have cited the Goudelock decision in their reasoning for denying community associations the ability to collect debts in Chapter 13 bankruptcies.

Yet not all courts across the country agree with this decision. In February, the U.S. District Court in New Jersey handed down a decision that positively impacts the amount of money a condominium association with a properly recorded lien is entitled to receive when a unit owner files for Chapter 13 bankruptcy.

In an appeal filed by the Oaks at North Brunswick Condominium Association, the New Jersey court reinforced that a condominium association lien that is recorded in accordance with the New Jersey Condominium Act is given elevated priority over other claims and that said lien is partially secured and no amount of the lien can be stripped because of the Anti-Modification Clause. This means that condominium associations should receive the full amount of their lien claim when a unit owner files a Chapter 13 bankruptcy.

For now, these conflicting rulings leave our community association attorneys confused and frustrated. Outcomes such as the Oaks at North Brunswick case provide hope for dischargeable debts in our industry. However, Goudelock provides that pre-petition condominium assessments are dischargeable in Chapter 13 proceedings but leaves some critical questions unanswered. This being the first circuit court case on the issue, chances are the other circuits may weigh in. At the end of the day, attorneys need to be aware of Goudelock and its possible application to every Chapter 13 case where the debtor owes community association assessments.

This post also is running on CAI’s Advocacy blog, where you can read about the latest court cases, state and federal advocacy efforts, public policies, and more.

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Pothole Patrol: What community associations can do to maintain pavement

It’s that time of year again, when rain, snow, and changing temperatures cause potholes to form, wreaking havoc on roadways, parking lots, and driveways. According to the American Automobile Association (AAA), pothole damages cost U.S. motorists roughly $3 billion per year. On a per-pothole-incident basis that comes out to about $300 per driver. Additionally, AAA reports two-thirds of U.S. drivers are concerned about potholes on local roadways.

No asphalt or concrete surface will last forever, but it is easy to prolong the life of your association’s pavement. Community association managers and boards of directors have several pavement maintenance and repair options from which to choose.

Crack Filling
Cracks in the asphalt should be cleaned of dirt and vegetation and allowed to dry completely before filling. Cracks should be filled with emulsified asphalt slurry or a light grade of liquid asphalt mixed with fine sand.

Asphalt Patching
Patching is done in areas with severe alligator cracks and/or potholes. When the patch is cut out, the sub-base material should be examined and compacted thoroughly before patching. The patch should be tack coated, to ensure firm bonding between the old and new surfaces. Base course material is laid and compacted first, and new surface asphalt is laid and compacted on top of that. The patch should be rolled to a smooth finish, and all edges should be coated to minimize water penetration.

Overlays
Overlays are placed over existing asphalt to create a new surface. In recent years paving fabric, placed on the existing asphalt prior to the overlay, has gained popularity as an effective agent to bond the new asphalt to the existing asphalt surface. Once the existing asphalt has been prepared, the paving fabric is laid down and a new surface quality asphalt is laid over it. It is then rolled to a smooth finish to match existing grades of asphalt.

Sealcoating
Sealcoating is a controversial aspect of asphalt maintenance. Generally, sealcoating provides an additional 2-3 years of protection against the elements and use by providing an additional layer of protection. It is also cosmetic, in that it covers old and new asphalt to create a uniform look in the community and increases curb appeal. Sealcoating is best done approximately one year after a new surface has been laid. It should be applied by the squeegee method if possible to ensure the sealing of cracks too small to fill by the traditional method.

For more information on repair road and paving, check out The Road Repair Handbook, available for purchase at CAI Press.

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