At today’s OVA Board meeting the Aid for Sub-Associations Committee (ASAC) delivered a major report to the Board and the community. The committee is comprised of four representatives of different sub-associations plus OVA Board liaison Steve Spanier and OVA Management liaison Kevin Hubred, and is chaired by Jeff Young.

The ASAC was tasked by the OVA Board with researching the needs and concerns of Oakmont’s sub-associations, determining how best to address their needs and concerns, and reporting back to the Board with recommendations. Today’s report represents a tremendous amount of work performed by the committee since its formation in February. You may find the full 34-page report here.

Assessment of sub-association needs and challenges

The ASAC sent a survey to the board chairman of each of Oakmont’s 37 sub-associations. The results of the survey, including numerous comments, are included in Appendix 1 of the report. In addition to the survey, members of the committee had conversations with several HOA chairs. The report lists quite a few points, a very condensed version of which follows:

  • It is difficult to find willing sub-association board members, much less ones with the appropriate talents and knowledge. This is caused by both the demographics of Oakmont and the rising percentage of renters who cannot serve on HOA boards.
  • The legal environment in which HOA’s exist is complex, and it is difficult to know, much less follow, all relevant laws and regulations.
  • Financial weakness, due to dues being kept too low and reserves not adequately funded, is a challenge for perhaps 20% of the sub-HOAs. For some associations, immediate remedial action is needed.
  • Property management companies (e.g. Professional Association Services, Grapevine Property Management Services) have their own challenges, including difficulty retaining competent property managers, and the result is a trend toward less personal and satisfactory service provided to sub-associations. Some services that may have been provided in the past (e.g. board member education) are less available today.

Needs Identified

Because the members of sub-association boards generally lack the training and motivation to attend to all the details needed to manage their HOA’s, the ASAC identified a long list of areas where more assistance is needed, including Bylaws and CC&R’s, pertinent laws, record storage requirements, architectural restrictions and processes, reserve studies and requirements, relationships with other organizations including OVA, ECHO, LOMAA, COPE and OEPC, and others. The ASAC’s assertion is that, by providing more support in all of these areas, it should be possible to reduce the amount of learning required, lessen the burden on sub-association board members, and thus make it more likely that members of a sub-association will be willing to become board members.

Key quote from the report: “There is currently a significant gap between what most board members want to do to serve on an HOA board and what is required of them by law.” The report also states that “no matter what property management company they choose to work with, the gap still exists.” The ASAC proposes to close that gap by providing additional services, not currently provided by property management companies, including high-level recommendations and advice, board member training, and a number of other services.

The report includes a 2-page chart listing a large number of “roles” which are filled by some combination of the sub-association board, OVA “Board Advocate Services” (see Recommended solutions, below), and the sub-association’s property management company. Understanding and defining this division of labor will be key to having smooth and efficient sub-association management, and the more of these roles that are filled by OVA “Board Advocate Services” and the sub-association’s property management company, the easier will be the job of the sub-association board.

Recommended solutions

The ASAC recommends that OVA should create a new paid staff position, entitled “Sub-Association Board Advocate”, and the report includes a list of tasks to be performed by this Advocate to support sub-associations. The report also details staffing requirements and estimated costs, initially to include one “Senior Property Manager” and one “Office Assistant”. The estimated annual budget for the additional staff and needed services, including rental of office space, is $220,362/year (or about $3.80/OVA member/month).

The committee recommends that the position be funded by OVA, stating:

  • We came to the conclusion that to have the sub-associations pay for the service would cause adoption of the services to be too small to effectively address Oakmont’s systemic problem of having unhealthy sub-associations.

The ASAC also recommends establishment of a legal roadmap for smaller sub-associations to merge, the reasoning being that not only do smaller associations have more difficulty finding board members, but they don’t have adequate resources to properly manage their communities. A clear roadmap for how a merger could be accomplished would facilitate such mergers.

In addition to the main report and Appendix 1: Survey Results, the report includes a Business Plan, with important details about how the ASAC sees the evolution of OVA Board Advocate Services, including the expected growth of the services and such things as strengths, weaknesses, opportunities and risks, additional information on what services might be provided, and financial, marketing and management plans. The Business Plan provides a much more complete picture of how ASAC’s vision might be implemented than does the main report.

Today’s report to the OVA Board

The ASAC report was a major topic at today’s OVA Board meeting.  ASAC member Mary England described the travails of Oak Forest HOA which, when she became a board member, had virtually no reserves and a need to clear the HOA’s common property of a large quantity of dead plant material that, in a fire, would present a severe hazard.  That need, and the necessity to begin to restore healthy reserves, forced her HOA to make a multi-thousand dollar special assessment.  Bob Spaulding then described the situation in his HOA (Twin Lakes), which is fiscally healthy and which has an experienced and competent board . . . BUT the board members have served for years, and have not been able to recruit anyone new to serve on the board, in spite of the fact that their HOA, with 92 homes, is the largest in Oakmont.  Finally, Jeff Young of Quail Run HOA presented the ASAC report in a series of slides.  In the Open Forum that followed, a number of community members expressed their views, with most sympathetic to the plight of the sub-associations, but a few questioning why those not in sub-associations should be subsidizing services of those who are.  Included in the discussion was the possibility of dissolution of HOA’s, which prompted a response from Kevin and others, concerning the practicality of dissolution (it is possible, but difficult and expensive, and may be made more so by HOA infrastructure that is commonly held and not easily divisible).  But the smallest HOA in Oakmont is only three homes, and dissolution might be the right thing for very small HOA’s.

Commentary

First, the committee has done a fantastic job, and I wholeheartedly agree with their findings concerning the needs and challenges of Oakmont sub-associations. Their conclusions are consistent with my experiences serving on the board of my sub-association for three years and as president for one of those years, and from talking with board members from other sub-associations at LOMAA meetings and elsewhere. I also completely agree that healthy sub-associations are important to the overall health of Oakmont as a community. The report of the committee is thorough, including details of costs and risks, as well as benefits.

One observation documented in the committee report that surprised me was:

  • The continuing lack of trust of the OVA and OVA-centric solutions by perhaps as much as 50% of our sub-associations is creating an unhealthy environment within our larger community. This lack of trust serves to further isolate our sub-associations, making it harder for them to get the help they really need.

A well functioning OVA Board Advocate Services program could go a long way toward remedying this situation.

However, there are challenges to successful implementation of the committee’s proposal:

Most important is how this new service of OVA is to be funded. According to my calculations, based on the budget detailed in the ASAC report, the dues burden of the services will be about $4/member/month if funded by the full OVA membership, or about $12/HOA home/month if funded by all the sub-associations in Oakmont. The latter would amount to approximately a 5% rise in sub-association dues, depending on how much their dues are at present.

I believe that to fund the new sub-association services from OVA dues would be a terrible and unpopular mistake – simply put, sub-association services should be paid for by sub-associations. Owners of “owner-maintained” homes already must pay for painting and landscaping and insurance, and so forth, and have the responsibility for making decisions on all of these. To expect them to subsidize the sub-associations is simply unfair, and won’t go over well. Unlike OVA facilities, sub-association services are NOT available to all Oakmont residents and are NOT serving all residents.

I do recognize the difficulty of starting up the OVA Board Advocate Services program, expecting it to be association-funded from day 1, especially to the degree that sub-association boards do not trust OVA to provide effective support. But if it is to succeed, the program must evolve toward being fully funded by sub-associations, even if it doesn’t start that way. To address this issue, I have suggested to the OVA Board a phased approach to funding OVA Board Advocate Services:

  1. Fund the initial year of the Sub-Association Board Advocate program from OVA funds. Hire the staff, and ramp up the program.
  2. Notify the sub-associations that the first year of the service (2020?) will require no contribution from them, but after that a subscription to the service will be required. The cost of the subscription should be based on the number of homes included in the sub-association but must be cost-effective from the perspective of the sub-association boards.
  3. If the budget remains at approximately $220k/year, and assuming that 1,500 housing units are within sub-associations, then the required subscription to fully fund the program will be about $12/home/month, or about a 5% increase for a sub-association with $240/home/month dues, assuming a 100% subscription rate. This should be manageable and, if the suggested services are provided effectively, should be well worth the costs.
  4. If only half the homes in sub-associations are represented by subscriptions, then either the subscription costs will be double or OVA would have to make up the difference. Perhaps OVA should make up the difference during the second year, but a review of the program at least once a year is desirable regardless, and the funding should be part of such a review. As a new program, its evolution should be monitored and managed carefully. Full funding from sub-association subscriptions should be a critical goal of the program.
  5. The program staff should know that their jobs potentially depend on how well they provide the promised services, as well as on having a good relationship with their clients. If they don’t do a good enough job that the sub-associations are willing to pay for the service, then the program should be abolished. This should be in the charter of the program from the very start, in order to motivate its employees and build trust and support for the program by sub-association boards.

Another challenge related to funding is that we cannot, prior to implementation, know how much demand will be put onto the Board Advocate Services program. The report-suggested staffing may be inadequate, and if it is, then the costs of the program could balloon as more staffing is needed. This is worrisome whether the funding comes from OVA or from sub-associations, but is even more problematic if the program is “free” to associations, because they will have less motivation to limit their demands on the program to the essentials.

“Back in my day”, when our board had a full-service contract with OAS, before they were bought out by PAS, OAS provided most of the services suggested by this report to be provided by the Board Advocate Services program, including board member training, making boards aware of legal requirements, minding the calendar, etc. It should be explored whether or not OVA could work with the current property management companies to entice them to provide more complete services to sub-associations. This could be a more cost-effective way to provide sub-association support, or it might at least close part of the gap identified by the ASAC report, allowing the Board Advocate Services program to focus on services that cannot easily be provided by property management companies.

Finally, a suggestion that might address several issues: Start small, by identifying just a few sub-association services that could be provided by existing or part-time OVA staff, under the expert supervision of Kevin, who is more qualified in this area than any new hire we are likely to find. Not only would this provide a less expensive start-up for the program, but it could provide useful services and build trust with the sub-associations, so that the program might evolve and grow naturally, as demand from the sub-associations increases. If the program is not able to provide useful services that the sub-associations want, then it should not continue.

As a former sub-association board member and president, I have to say that I would recognize the value in the ASAC-proposed program. But I would also expect it to need to win my continued support by providing a good value for the money!

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7 Comments

  1. Lyn Cramer on July 16, 2019 at 8:40 pm

    Excellent summary of the report, Bruce. Thanks.

    Given the poor response to the survey of HOAs (only 18 out of 37) and high degree of distrust many HOA members have about the OVA’s intentions, what evidence is there that hiring someone will accomplish the ends sought? And what are those ends? Consolidation of smaller units is an obvious goal, but larger problems–finding willing board members and proper funding of association property–cannot, nor should be, solved by the OVA.

    But, the problems are real enough. Your recommendation, to start small and proceed only when specific goals have been achieved, makes sense.

    • BRUCE BON on July 16, 2019 at 9:11 pm

      One reason to start small is that this is an experiment for Oakmont. Starting small makes experimental failure less expensive.

      The theory behind the main ASAC proposal is that much of the burden of governing an HOA can be eliminated with expert help, and if all a board member has to do is to make reasonable decisions, then the lighter burden will encourage more to be willing to serve. But how much will the OVA staff be able to lighten board members’ load? Will it make enough difference for people to spend less time with their grandchildren, or whatever else they want to do in retirement, in order to perform service for their HOA’s? That remains to be seen. Also, if property management companies have difficulty finding and retaining competent property managers, will OVA have better luck?

      These questions probably can’t be answered except by trying the plan. The sub-association problems are serious enough that something needs to change. I’m not sure this is the right answer. Perhaps a combination of patience and OVA pressure on the property management companies to get them to step up to the plate would work. As it stands now, whenever someone new moves into an HOA, it is almost inevitable that the HOA’s board looks at them as a potential new board member! I have experienced that from both sides, as a new recruit and as a board member hoping to hand the baton to someone else!!

  2. Yvonne Frauenfelder on July 17, 2019 at 10:06 am

    Thank you, Bruce, for excellent work compiling, analyzing and reporting on the complex issues of Oakmont’s sub-associations in all their management challenges, difficulties and concerns.

  3. Kathy Cirksena on July 17, 2019 at 10:44 am

    Some thoughts from the cheap seats. Many owners are very disengaged and don’t even live nearby. Other units are owned by trusts and banks. Of resident owners very few are able to participate due to health and mobility. Of those able to participate on a board very few have a grasp of the issues the association needs to be dealing with. It takes enormous time and effort to get up to speed on the associations issues and finances. For many infrastructure is 50 years old and has not been maintained as boards try to avoid dues increases. Associations don’t follow basic procedures like a reserve study. The rules in place for HOA boards hamstring needed action. Of the associations that did not respond to the survey, most of those will be the ones in the worst shape, with a barely functioning board, severely underfunded reserves and a lack of potential board members.

    • Bruce Bon on July 17, 2019 at 11:10 am

      Very good observations, Kathy, and consistent with my experience and the findings of the ASA Committee. I think your suggestion, that the half of our sub-associations who failed to respond to the survey may be the ones in the worst trouble, is probably accurate — this would mean that the situation is even worse than portrayed in the survey!

      At a fundamental level, the laws probably should be changed to make HOA governance simpler for HOA’s with fewer than 100 units, or some such reform. Perhaps have the law require all small HOA’s to have a property management company do all the duties now handled by the board, and the board’s sole responsibility is choosing a management company — a doubtless expensive route, but maybe one that would work? And what happens if there is no competent property management company available?

      I don’t know the right answer, but I know the problems in Oakmont are real and very serious. If anyone has any brilliant ideas for dealing with these problems, please don’t keep them a secret!!

  4. Gil Gilbert on July 18, 2019 at 5:12 pm

    A great topic! I have been on a board for 4 years & am constantly learning more information. It is absolutely essential that you have a good management company. We have experienced bad & good. The responsibilities increase annually, & the Davis-Sterling Act adds more rules & complexity each year. Reserve studies, grounds maintenance, tree trimming, irrigation all are routine but sometimes emergencies require monitoring–not to mention adequate insurance in an evolving risk situation. Without a good HOA management support service, we’d be “dead in the water”. LOMAA is a great asset & source for burdened HOA Boards. It provides discussions & answers to many questions we may have. I look forward to their monthly meetings. This discussion is past implementation. I’m glad it has been started. In most cases dues were not adequate to maintain a level of care for the grounds. So there is a huge backlog of necessary trimming, etc. We are trying hard to catch up.

    • Bruce Bon on July 18, 2019 at 5:59 pm

      Agree completely, GIlbert. Our biggest challenges when I was on our Board were amending our CC&R’s for “exclusive use of common area easements” including getting surveys for homes affected, as required by a fairly recent Davis-Stirling addition, and upgrading our fire insurance after the 2017 fires, along with the continuing challenge of managing irrigation water usage — our water bill is a major part of our dues. Within the past year, we added a rental restriction to our CC&R’s, and we just voted to incorporate last month. We are very fortunate to have a competent and pro-active board, but the challenges keep coming. As with most other boards, pretty much all members would rather be doing something else with their time, but somebody has to do the job!

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