What Big Eyes You Have, Obtain Professional Advice to Help See The Way

What Big Eyes You Have, Obtain Professional Advice to Help See The Way

Mon, 2 Apr, 2012 at 1:00
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By: Anthony W. Dister, Vice President, Wintrust Community Advantage, a Wintrust Company and division of Barrington Bank and Trust Company, N.A.

On a daily basis, we are all flooded with information. When determining what information is good versus bad, one must consider the source or end up being gobbled up by the big bad wolf after realizing he is not your grandmother and what big teeth he has. Little Red Riding Hood was given bad advice by the Wolf, which led her down the wrong path on her way to Grandma’s house. While you as a Board Member may not suffer the same fate as Red, your Association can be put on the wrong path by receiving poor advice when making decisions that can impact the well being of the Association. As board members, you have fiduciary responsibilities which compel you to make decisions that can have profound financial and social impact on you and your neighbors. Receiving professional and accurate advice or guidance on issues such as reserves, maintenance, insurance, budgets, governance, contracts, the law, and rules can make the difference between prosperity and distress.  Association Boards that surround themselves with a qualified professional team put themselves on a path to stability and success.

So who is a qualified professional?
Board Members should make this determination the same way they would pick their doctor; that is by finding an expert in that field who specializes in servicing their specific need. One would not go to the dentist to fix a broken bone instead you select an orthopedic doctor that has experience in treating your specific issue. The same holds true for community associations in that there are many companies that specialize in this market and have extensive experience working with community associations. These experts have earned degrees, passed tests and obtained certifications specific to their fields such as CMCA, PCAM, AMS, CPA, CTP, RS, CIRMS, ect. Choosing a qualified professional will provide the Board with competitive pricing and ensure the Association is guided by someone with experience as it relates to community associations.

Consider the following when selecting a “qualified professional”:

  • Does this professional focus on community associations or are there other lines of business?
  • If this professional leaves the firm, are there other professionals who can take his or her place?
  • Does the firm support the community association market?
  • How many community associations are current customers?
  • How long has this professional been in the community association market?
  • Are they acquainted with other professionals and can they provide referrals as needed?
  • Have they earned any certifications in the community association market?

Property Managers are a great source of information; however, cannot be experts in every field as there are changes every year in the Illinois Condominium Property Act, IRS tax codes, financial reporting requirements, building codes, environmental requirements, insurance, banking, as well as others statutes and laws. Consulting with outside professionals can provide additional insight, knowledge and possible time and money saving options.

These professionals can be your greatest asset and resource when making decisions that impact the Association. Boards typically reach out to these professionals once a problem or issue has taken place; however you may find that a better solution is to work with them regularly and make them part of your professional team to help avoid these problems in the first place. These fields include Accountants, Attorneys, Bankers, Engineers and Insurance Agents just to name a few. Working with outside professionals also adds credibility to Board decisions and shows unit owners that they are taking the proper steps when exercising their fiduciary duty and acting on the Association’s behalf.

The community association industry has experienced significant growth and changes over the past decade both in Illinois and nationwide.  Due to these changes, community associations have appeared on many vendors’ radar screens as potential growth areas and new profit centers. This means that there are an increased number of unqualified professionals in the market who are looking to jump on the community association bandwagon.  Unqualified does not mean that an individual is not good at what they do, however it does mean that community associations are not their area of expertise.  Some board members and/or property managers have forgone those with expertise for a lower fee or a lower interest rate, only to discover that any cost savings were nullified by errors and mismanagement of expectations.  These lower cost providers generally take an enormous amount of time to handle the transaction because they have to research community association law, tax code, procedures or documentation requirements.  Ultimately you may pay less initially, but incur more overall costs related to timing and may need to be concerned about the quality of your final product.

It has been my experience in banking that Associations have a more positive experience when working with professionals that service this industry. As an example, bankers who do not understand the nuances of community associations typically try to take an off the shelf commercial product and apply it to associations. In the case of a community association loan, this usually causes collateral, documentation and approval issues for the bank and association. Thus resulting in higher than expected attorney review fees as the documents will most likely need to be amended by the attorney to comply with the Association’s Declaration and ByLaws. The closing of the loan is then prolonged which could have a negative impact related to the project and contractors. Loan documentation issues may also cause problems with year-end CPA audits and reviews if loan covenants are not appropriate for community associations and insurance providers may not be able to provide acceptable coverage if the Bank does not fully understand the collateral for its loan. This is one example of a problem that can arise.  Lawsuits, tax audits, insurance issues, capital repair projects, loan requirements among other items are best left to the qualified experts.

Board Members are faced with difficult decisions that may affect many individuals so having the right information to make the best possible decision for your Association is critical. By surrounding yourself with a qualified professional team you put yourself on the right path to maintain the health and well being of the Association. Don’t let the Big Bad Wolf steer you in the wrong direction; instead look to qualified professionals to help guide you through the woods.