Guns, Marijuana, Political Signs and Other Controversial Issues in Washington Community Associations

With grateful thanks to Dan Zimberhoff of Barker Martin -- offices in Bellingham, too -- here are the highlights of the October 2013 session. (Tip: Follow Dan's link -- he's a prolific and knowledgeable, online advisor.)

Guns

Gun laws can be enforced under a hierarchy of laws: Federal, State and local. Gun ownership in the United States is at an all-time high.

This means that chances are high that residents in a common interest community own and keep a gun or multiples in their homes. Dan asks boards to consider the practical implications of implementing and enforcing regulations about guns. His list includes:

• May the association act?
• Should the association act?
• Must the association act?
• What guidelines are in force?
• Generally, the concept of 'reasonableness' can be a problem.

With much interactive discussion, a substantive recommendation is this: assume that there are guns in your community. Boards can recommend that owners store them and keep them in their homes in such a way so that gun accidents don't happen. Any attempt to regulate guns beyond a recommendation may well meet with defeat by owners.

Think about how children can access them, how a visitor might discover one, and how owners and residents can prevent the tragedies that often occur when guns are too easily available.

It's worth a discussion within the community to highlight the issue and to make residents aware that the association is thoughtful in this vein of their responsibility to lead the protection and safety of the community.

Marijuana and Nicotine Use

With the assumption that both drugs have a smoke state, it's important to note that second-hand nicotine smoke  has been proven harmful. No such data is yet available regarding second-hand marijuana smoke. 

Current laws in Washington State prohibit 'smoking' in public, including restrictions to help protect others against second-hand smoke. This is based on it being noxious, offensive, unhealthy and toxic.

Today, only the possession of marijuana is legal in Washington State. No adjustment has been made to Washington State's 'smoking' laws to accommodate marijuana. Note that the new law allows possession of ". . .one ounce of usable marijuana, sixteen ounces of marijuana-infused product in solid form or seventy-two ounces of marijuana-infused product in liquid form."

Again, some common sense is required by boards to address these uses:

• May the association act?
• Should the association act?
• Must the association act?
• What guidelines are in force?
• Generally, the concept of 'reasonableness' can be a problem.

(Do you see a pattern here? Is there any black and white? Is there any right or wrong?)

Blatant violations, such as the interior of a unit being used as a grow operation, or a processing center, may be clear violations of existing guidelines in an association. Look for 'odors', home-based business provisions, and so forth. This may also be a criminal matter so that the association can involve police.

Medical marijuana is another matter. Associations are encouraged to work with association attorneys to work out guidelines for residents qualified to use this drug.

Caveat: If your association is a mixed-used community, you may want to discuss prohibiting commercial space use for marijuana processing operations, retail establishments or grow operations. Especially where state laws do not prohibit these operations based on proximity to schools, libraries and so forth, the community is well-advised to step out ahead of the January 1, 2013 -- or later -- release by the state of its guidelines for these businesses.

Why? The association may want to protect residents from powerful odors that emanate from these operations, and may want to establish a guideline for commercial traffic to these enterprises. 

Involve the association's counsel in order to maximize the association's position while protecting itself from future compromise based on a commercial owner's need to rent space.

Political Sign Displays

In Washington State, political signs are regulated in home owners associations, but not in co-ops or condominiums. Boards are well advised to review the previsions included in RCW §64.38.034, and then develop guidelines that include the time, manner and place allowed for political signage.

Again common sense applies. 

• No signs means no signs, right?
• What if we allow signs, are the democrats going to kill the republicans in my community?
• What if we allow signs, are the republicans going to kill the democrats in my community?

Conduct an open discussion among owners and devise the guideline for your community.

Hot Topic #1 -- Noisy Neighbors

Attendees voted to include this topic in Dan's session. He explained that there is a difference between a sensitive neighbor -- one sensitive to noise -- and a few neighbors whose quiet enjoyment of their home is interrupted by a noisy neighbor. 

In these cases, there are times when the board should be involved and times when this is simply a neighbor-to-neighbor dispute. A conversation or note from a sensitive neighbor that reminds noisemakers of quiet times, of dog barking from loneliness during the day, and so forth may resolve the issue.

If parties -- or dogs, or sound systems -- disturb multiple other residents, the board may want to step in on behalf of the community and enforce quiet times or minimize excess noise.

Again, Dan's common sense guidelines -- above -- apply.

Hot Topic #2 -- Secretive Boards

This topic, too, was voted on by attendees to be included here. Dan advises boards to read -- actually read -- the governing documents. He encourages directors to highlight all occurrences of the word shall and all occurrences of the word may. The difference is this: the word shall implies a legal obligation -- there is no choice, while the word may implies that a board can, but is not required to do so.

(Owners are similarly advised: living in a common interest community requires you to do so responsibly -- in full knowledge of your governing documents. When you have questions, you may pose them to the board or to the association manager. Ask for a reference to your CC&Rs, Bylaws, Rules and Regulations and so forth, so that you can learn more about your living situation.)

Boards that operate according to their governing documents are in possession of authority: process is authority. Lack of process means that the board is operating outside their authority. D&O insurance coverage isn't guaranteed when boards operate outside their authority.

If a board fails to enforce rules, guidelines or other covenants, the unenforced statutes can be deemed as 'abandoned' by the association. When boards enforce rules, wisdom dictates that they do so with full consideration of the practicalities, but do so evenly and consistently.

Boards and owners with a substantial gap between them must find a way to come back together. Establish a protocol and an expectation for communication among community members. Minutes may be a way to communicate, but should not be the community newsletter. Use a newsletter to educate owners; minutes document association business and are legal, historical documents. Agendas and minutes should match.

Fire! Fire! Fire! Now What?

With huge thanks to Will Anderson, Senior Fire Inspector, Whatcom County, we enjoyed an informative and provocative session on September 3, 2013.

Fire and water can be considered the most damaging of natural resources to assets owned by common interest associations and their investors. Water is insidious and not always visible immediately. Fire, however, is unmistakable and requires immediate attention.

As owners of residences in common interest communities — and of commercial spaces — we owe a higher obligation to our community to be vigilant when it comes to fire. Common sense dictates that associations lead smoke detector testing and regular battery replacement efforts. As well, inspections of gas appliances, including gas fireplaces.

Educating residents about fire, and smoke detectors in particular, is also key. One resident who set off smoke detectors in her unit while cooking simply smacked the detector with a broom handle, thus knocking it off the ceiling and disabling it, then continued to live there with her family — and her neighbors — essentially smoke-detector-less.

Boards who lack this sense of leadership can be said to fail their communities, based on the state law that requires boards to protect association assets and the community.

Here then, details from our session.

Thirteen Separate Fire Departments in Whatcom County

Will reported that there are 13 fire departments in Whatcom County, with staffing vagaries differing among those located on the ‘east side’ and the ‘west side’ of the county. What this means is that every association is charged with calling their local fire department and working with their local authority to assure that the association’s assets are known, visible, locate-able and available to the department as required, in order to respond to a fire.

Forty-Three Separate Water Districts in Whatcom County

Contact your local water district to verify that hydrants are flushed regularly and that there is access to water within a reasonable distance from your property. There are some small districts with access to only well water. You can expedite putting out a fire if you know in advance that it is necessary for the fire department to haul the water to the event.

Exteriors

You know the layout of your buildings, roadways and property: Firemen do not. When you see firemen ‘standing around’ in front of a fire, often they are deciding as best as they can how to get in, how to get out, how to address the fire, how to ascertain all the data points necessary in order to fight a fire, save lives and not die themselves. That’s dramatic, but it’s true.

One option for an association is to prepare a pre-fire plan. This plan includes an overhead view of each floor showing all exits, for example. In addition, you can document:

·         Stand-pipe locations, if any — and physically mark them.
·         Sprinkler system schematics — tanks, valves.
·         Fire hydrant locations.
·         Master key boxes, if any.
·         Gate codes, if any.

Then, on the property, label every building with visible numbers that can be read at night. Identify unit numbers, too. There can be blue road reflectors embedded in front of hydrants. Lacking the details above about the property, you may lose a gate, front doors and so forth — which you’d prefer to losing lives.

Be mindful of where you stow your garbage, including recycle-able materials. Arsonists prefer to find easy targets: locations where the only equipment they need to bring to satisfy their need is a match. Cardboard recycle and plastic recycle materials are especially interesting to arsonists. Stow them away from buildings and so that they are not easily accessible.

Smokers who pitch butts into planters in front of the exit/entry door, or into the beauty bark around the building cause fires. Offer exterior ash trays that smother cigarette butts, and service them regularly. Move beauty bark a foot away from buildings, and insert stones in the bare patches.

If your tree branches droop lower than about 10 feet from bushes, or other flammable material, this means that fire can travel up through trees, then jump to other trees. You’ve seen in forest fires, how quickly and with enormous devastation how fires travel through tree tops. Prune your low-hanging branches.

Where possible, give your building a three-foot fire-break distance between combustibles and the building.

If your locale permits fireworks, as much fun as they may be, they are also a major fire hazard. Be prepared to offer water-filled buckets to revelers, and watch for flying, burning matter landing on roofs. In Whatcom County during 2012, millions of dollars’ worth of real estate was burned up by fireworks. Check your local municipality for fireworks periods and publish them to your residents.

If you use surveillance equipment, buy the best that the association can afford. Test it to confirm that the video results are usable.

Interiors

Smoking, cooking and candles are the primary fire starters in residences. Also be aware of using gas appliances and electricity.

Smoking

Smoking may not be allowed in common areas in your community. But unless your community is a non-smoking community, people will smoke within the homes. Most smoking-based fires are started by smokers who smoke in bed. Will explained that our modern furniture materials are significantly more combustible than were those used in homes 50 years ago. Today, you may have up to one full minute to evacuate a burning room: 50 years ago, you had several minutes — simply based on the combustible nature of the furnishings.

Cooking

Will’s Number One guideline is this: Never leave your cooking fires unattended. When, however, one occurs, if it is small enough, wet a towel, wring it out, expand it and smother the fire. This action takes courage, quick thinking and common sense. Never use powder — it may combust. Never use water — that may spread the fuel.

Even electric appliances can start fires. Keep your eyes open for recalls — check out the history of that electric appliance you bought at a garage sale.

No amount of heroic action is worth your life. When the fire is out of control, get out.

Candles

Be vigilant in your use of candles. If you must use them, put a substantial base under any glass container, so that if it breaks because of the heat, the wax and flame won’t spread onto the furniture or floor. A ceramic bowl is suggested, one large enough to contain the liquid in the candle mass.

Gas Appliances

Other elements include gas appliances, including gas fireplaces. Bring in inspectors and service personnel on a regular basis, to inspect and service interior gas equipment. Ask your association to mandate these services and inspections and add the cost to the budget. Look at the vent for the fireplace on the exterior. Is there a hood that deflects the heat away from the building? If not, this heat can dry out the wood and thus lower its ignition point.

Electricity

Don’t use electric extension cords. Don’t use plug multipliers. Throw them away. Their manufacturing standards are not adequate to prevent fires. Use power strips instead, those with true breaker-switch capability. When you feel power cords that are hot or warm, those are signals that there is fire potential there. You can use two power strips in one electrical outlet with two fixtures. No more. You can detect excess heat in electrical outlets if the colour of the outlet is brown or black. This may signal electric overload inside the walls.

Be aware that if Jacob, the handyman, who is not licensed, bonded and insured, inspects or services electric or gas equipment in your unit — or performs gas or electric work for you, your insurance may not cover any fire damage that occurs.

Fire Extinguishers

Finally, if you keep a fire extinguisher, preferably one coded 2-A: 10-B:C. They are inexpensive, not rechargeable and best kept if everyone in the home knows how to use one. Take a class. Mount it on the wall so that moisture does not collect under it and compromise its effectiveness. Keep it up to date.

Summary

In preparation for this session, we asked you to view a video showing a propane barbeque fire that took place in Seattle in June 2012. The video lasts six minutes, from the time the videographer could be heard reporting the fire to the 9-1-1 operator to the time the firemen extinguished the flames.

In our county — one of the largest In Washington — we can expect at best an average of ten minutes travel time for the firemen to travel from where they are to the event. In high-density, multi-family housing, any fire will affect more than one unit.

Action

Take the time to discuss this matter within your community. As a board member, you can use this checklist to elevate the protection you offer to your association, which is your responsibility:

·         What does our local fire department known about us? What would they like to know?
·         How does our local water district service fire hydrants near us?
·         Are our stand pipes marked?
·         Do we have a sprinkler system schematic showing tanks, valves, etc.?
·         Does the local fire department have access to our master key box?
·         Does the local fire department have our gate code? Over-ride or emergency code?
·         How visible are our address numbers and unit numbers at night?
·         How visible are the nearest fire hydrant markers at night?
·         How accessible are our buildings through alleys, side roads or main road for fire trucks?
·         Can we pass an inspection of flammable elements around our buildings?
·         How do we engage revelers during fireworks periods, and otherwise be vigilant during these times?
·         What is the status of our surveillance equipment, who tested it last, who is responsible for its maintenance?
·         How and how often do we educate residents about fire potential in units?
·         What action do we take as a board to address smoke detector maintenance, gas fireplace maintenance and so forth?

Please feel free to share this post with friends and family: the tips are excellent and can save lives.

Reserve Studies and How to Read One in Five Minutes

Reserve Studies and How To Read One in Five Minutes

Introduction

Jim Talaga, President of Association Reserves Washington, presented an extremely informative, useful and insightful series of topics about reserve studies in our state. And he should know. Having grown up in the construction industry, and after having earned commissions selling real estate, his knowledge and leadership contributed to the collaborative efforts that resulted in Washington State's Reserve Study law. See RCW 64.34.380-392 (condominium associations and RCW 64.38.365-390 homeowners associations)

You can follow the links, above, and educate yourself using Association Reserves' free library and the applicable state law.

What is a Reserve Study?

Key to any reserve study is its definition: 

"A Reserve Study is a planning document and budget model for the Association’s expenses whose infrequent and significant nature make them impractical to be included in an annual budget."

A reserve study is useful because its purpose is to prepare the association economically for the significant maintenance, repair and replacement expenses they can expect to face over time, while minimizing or eliminating surprises and special assessments.

At the risk of repeating myself, our buildings will survive us all. Reserve studies give owners a truer sense of the cost of ownership, because it gives boards a way to budget annual contributions to reserve accounts that accommodate the pay-as-you-use theory of building ownership.

Low assessments can be time bombs, because it's possible that they do not reflect effective contributions to  reserve accounts. As of January 2012, condominium state law, above, requires reserve studies and their financial results be included in budgets adopted after that date, and disclosed to owners and prospective buyers of condominium units.

Lenders, insurance companies and educated buyers involved in common interest communities generally and increasingly require copies of current reserve studies in advance of any purchase.

A reserve study specialist can evaluate significant real estate assets and list them in the component list. Ideally, this is accomplished with knowledgeable board members. The condominium law requires six components and Jim has added the seventh. The list includes:

• Asphalt
• Decks
• Painting
• Roofing
• Siding
• Windows
• Plumbing (the seventh)

Excluding any listed component requires an explanation of the exclusion: a downtown high-rise may not own any asphalt, for example.

Both condominiums and homeowners associations are required to list or consider any component for which repair or replacement would exceed 1% of the association's annual budget.

Everything has a useful life, after which the component must be replaced or maintained at a significant level. There is no 'if' -- there is only 'when'. 

Budgets adopted after January 1, 2012 must disclose:

• The percentage of budgeted assessments targeted for the association's reserve account
• Pending special assessments
• Whether the reserve account balances will be sufficient to meet projected expenses over the next thirty years
• If not sufficient, the additional assessment schedule necessary to ensure adequate funding during that period.

If the board refuses to produce a reserve study, in condominiums, 20% of the owners can demand one in writing, and summarily sue the board for its production should the board refuse to produce one. In homeowner associations, the percentage is 35%.

A current reserve study coupled with an adequate level of funding in the reserve account can enhance the attractiveness of a unit to a potential buyer. In Washington State and in Whatcom County, more and more buyers are aware of this requirement, and drill down into the economic health of a community before making an offer.

Unit sellers can point to reserve accounts as equity in their ownership, and enjoy higher returns on their common interest community investments.

As well, unit owners can sleep better knowing that their bank accounts will not be liable to a surprise and potentially draining special assessment.

How to Read a Reserve Study in Five Minutes

Yes, this is math, numbers and all that, but it's also basic economics of owning real estate. Elevate this exercise to the level of an investment, and it can be fun. You'll want to look for three things in your review:

1. A list of components included in the study.
2. A measurement -- the percentage is calculated for you -- of the adequacy of funding.
3. A plan to prepare to pay for expenses at the ends of the useful lives of the components.

Component List Review

For each component, you'll see Useful Life and the Remaining Useful Life, both expressed in years, the Current Average Cost and a projected Future Average Cost. 

     How to read the Component List:

Look for what you know could be missing. In a high-rise, for example, if there are no elevator components on the list and you know there is an elevator, ask why the elevator components are not listed. This is mostly a common-sense test, given everything else you've learned about the property.

Adequacy of Reserves

This measurement is given as a snapshot. Here is an example:

"Results as-of 1/1/2013:
"Projected Starting Reserve Balance: . . . . . . . . . . . . . . . . . . . . . . . .$100,000
"Fully Funded Reserve Balance: . . . . . . . . . . . . . . . . . . . . . . . . . . . . $444,547
"Average Reserve Deficit (Surplus) Per Unit: . . . . . . . . . . . . . . . . . . .$    6,891
"Percent Funded: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22.5%
"100% Full Funding 2013 Monthly Reserve Contribution . . . . . . . . . .$    6,030
"70% Threshold Monthly Reserve Contribution . . . . . . . . . . . . . . . . .$    5,280
"Baseline Contribution (min to maintain reserves above $0) . . . . . . $    3.800
"Recommended 2013 Special Assessment for Reserves: . . . . . . . . . .$          0
"Most Recent Reserve Contribution Rate: . . . . . . . . . . . . . . . . . . . . . $   4,000

[Please forgive uneven column.]

NB: Full Funding means having enough in the reserves account at the end of the component's useful life to pay for its replacement or significant repair.

Notice that the difference between the Most Recent Reserve Contribution Rate and the higher funding levels -- 70% - 100% -- isn't that great.

     How to read the Adequacy of Reserves in the example:

Reserves are currently funded at the 22.5% rate. As a comparison, statistically, associations with funding levels at the 70% to 130% levels enjoy fiscal stability with  low risk of special assessments and/or deferred maintenance.

Risk of Special Assessment in Funding Percentages

Here's a table of percent funded and the risk of special assessment from the data provided by Association Reserves, Inc, gleaned from thousands of reserve studies:

• Zero -- 51%
• 10% -- 40%
• 20% -- 29%
• 30% -- 18%
• 40% -- 10%
• 50% -- 5%
• 60% -- 2%
• 70% -- 1%
• 80% -- LT 1%
• 90% -- LT 1%
• 100% -- LT 1%

KEY: First number is percent funded, second number is risk percentage of a special assessment, LT means less than.

Plan to Pay at the End of Useful Life

Again, this is a common-sense test. Ask the questions and get the answers that make you comfortable -- or uncomfortable.

Final Tip

Work with real estate agents who are knowledgeable about common interest communities, and who can help you assess the financial health of an association. Look beyond the granite countertops and believe that knowing more about your association's financial health means more in the long run that the first blush vanity appeal that you can see at a showing.

Condominium Maintenance and Building Repair Market Trends

Our first quarter 2013 session began with a return of our Forum friends, J2 Building Consultants, specialists in multi-family, high-density real estate buildings.

Jens Johanson, Principal and Travis Brammer, Senior Project Coordinator, began their session with this analogy: How often do you go in for your annual physical? How often do you have your teeth cleaned? How often do you change the oil in  your car? Clearly, the point is, if there is trouble 'inside', finding it early is better than finding it later.

Everything Has a Useful Life

Everything, including our buildings, has a useful life. Yes, your reserve study gives you the useful life of all your real estate assets -- "roofing, painting, paving, decks, siding, plumbing, windows" -- but what about the condition of the structure? What does the association know about the structure, including framing supports, sheathing, water barriers and so forth?

As an example, one client association responded to a ground-floor unit owner who complained of standing water in front of her sliding glass doors. The board brought in a cement specialist, believing that somehow the water under her carpet was related to the underlying cement was in contact with the ground. The cement specialist sealed the cement under the floor, the area re-carpeted, and within weeks, the unit owner complained again of water in front of her door.

The board brought in J2 as building consultants and with an intrusive inspection, revealed the cause of the standing water. The cause was traced to a nail-head size hole on the third floor above the complainant's unit, which had apparently been leaking since initial construction. The rot pattern formed a pyramid that terminated in front of the sliding glass doors.

Every building leaks. Over time, the water intrusion will become visible.

The take-away in this story is this: don't assume that you know what causes the visible damage being caused by water. Calling in contractors or specialists in repair will of course result in a repair of the apparent damage. Best practices dictate calling in building consultants -- and there are others who compete with J2 who are competent -- who can find the source of the water intrusion.

Another possibility is damage caused from inside a unit, such as a plumbing eruption, or a water heater failure. The full extent of the damage to the structure must be understood and addressed.

A visual inspection by a building consultant who specializes in condominiums, and who is familiar with our Northwest weather patterns can produce the information the association needs in order to be fully informed as to the condition of the buildings' structure.

Owners call in cable television vendors who drill holes through siding, weatherproofing layers, sheathing and into the unit's wall board; uninspected areas of the building in low-traffic areas can contain gaps in flashing, animal intrusion sites -- as small as bees or wasps -- that can invite water into the structure. Damage may only appear years later, but at the risk of repeating . . .

"Every building leaks. Over time, the water intrusion will become visible."

Today's Market for Repairs

In today's market, professional fees and the costs of construction materials are remarkably lower than they were during the real estate construction boom times that peaked here in 2007. Some rates and costs are down 15%-40% depending on the specialty.

With a visual inspection, the association's board can become aware and learn more about the condition of their structures. This inspection may lead to an intrusive inspection, which can reveal the total, true condition.

A consultant can work with the board to understand funding issues, whether funding is from owners, insurance proceeds, or tax-incentive rebates. Tax-incentive rebates are useful and can be substantial when an association replaces a roof, windows or other water barrier components.

Association Valuation and Owner Liability

When board members realize the value of the association they lead, often this number underscores the weight of the responsibility they carry as volunteers. For example, 33 units valued roughly at US$150,000 each, means that the association's real estate assets are worth about US$4,950,000.

[You can calculate the approximate value of the real estate assets in your association here.]

As an owner, be aware that the total cost of your ownership in a condominium community includes your financial responsibility to maintain assets you own in common with all other owners. Without great and current Reserve Studies, funding reserves commensurate with owners' financial health, consistent and effective maintenance, the buildings will deteriorate until only a special assessment can pay for the required repairs.

Generally, not only is a special assessment tied to your ownership status, you may also be personally liable for paying a special assessment. Your governing documents will explain your total financial responsibility.

Understanding the structural integrity of your buildings is a key piece of data that you need to know in order to appreciate your total cost of ownership.

The question then becomes: What's it worth to the association to pay for a structural inspection based on the total value of the investment that we own in common?

Recommendations

What holds us back? Generally, it's the fear of discovery. We don't want to know that that lump may be something cancerous; that the toothache might mean a dead tooth requiring extraction and replacement; that the ping under the hood means a failing engine part.

Commissioning a structural inspection now can lead to a reasonable process that matches the association's requirements. For example, once an inspection is complete, a vendor such as J2 prepares a Scope of Repair. Then J2 continues to advise the board through the bid process, whereby the Scope of Repair is let for bid, three qualified bidders identified, and a rough estimate given for the price of repairs.

Once repairs are complete, evidence of structural integrity can highlight the stable and underlying value of units, which can mean dramatically improved unit valuations for resale. By some documented evidence, this increase can be about 18% in today's market.

Here are a few parting tips:

• Don't ignore maintenance
• Don' fall for cheap advice
• Understand the structure of your buildings and its condition
• If there are problems, prepare a Scope of Repairs and send it out for bids
• Get the work done within the funding parameters set by the association

Final, Blatant Commercial

J2 Building Consultants will prepare a proposal for services at no cost. Whether you need a second opinion for an inspection you've already commissioned, a visual inspection, and more, J2 nearby and interested in working with boards by making them their clients.


Our buildings will outlast us all.