00:00:00:00 - 00:00:01:16 Unknown You're kind of poking and prodding 00:00:01:19 - 00:00:07:23 Unknown what should be and what needs to be different about HOS so that they can actually be seen as as valuable. 00:00:08:02 - 00:00:17:05 Unknown and I think that is what's lost. And it's tangible. It's hard to measure, it's hard to prove, but it's important that it exists 00:00:17:06 - 00:00:26:02 Unknown of course, we get hung up on forms of statutes and governing documents and processes, and the humanity can be layered over with bureaucracy. 00:00:26:05 - 00:00:43:01 Unknown Yeah. You know, this is the most local level of organization other than the family structure itself, that people have in American society. And the things that it would be much more collegial and much more harmonious than 00:00:43:03 - 00:01:04:03 Unknown Welcome to the uncommon area where we're dedicated to reimagining HOS. We provide board members and managers with the resources to create uncommon communities where residents love their home and truly love where they live. 00:01:04:05 - 00:01:14:07 Unknown Welcome to the uncommon area. I am Matthew Holbrook, and in this episode we are addressing the question, are homeowners associations or condo associations? 00:01:14:11 - 00:01:23:04 Unknown Are they primarily quasi government entities or are they quasi businesses, or are they something altogether different? 00:01:23:04 - 00:01:28:20 Unknown And to address this question, I'm joined by attorney David Graf from Denver, Colorado. 00:01:28:23 - 00:01:46:04 Unknown And we have a conversation where we try to unpack what is a homeowner's association and how should we really be thinking about what these associations are in order to be able to see them be of real value to the people who live in them? 00:01:46:06 - 00:02:04:06 Unknown Well, David, thank you so much for joining us in the in common area. Glad that you can be part of this episode. Thank you. Well, you know, we've we've known each other for a little bit. And I think I was mentioning to you before we started recording, I, I follow what you do on LinkedIn. 00:02:04:07 - 00:02:05:16 Unknown You you can be 00:02:05:16 - 00:02:25:10 Unknown prolific and instigating on what you post on, on LinkedIn. And you, you push a lot of interesting topics. And you had said you're trying to tone that back a little bit, but what are your thoughts just on what you're trying to generally do with what you post on LinkedIn? When I started this, I just taught a class. 00:02:25:11 - 00:02:27:15 Unknown It's about two years ago on servant 00:02:27:17 - 00:02:53:02 Unknown and the class was, I thought, really helpful to readjust to expectations of the board members as to why they were doing what they were doing and who they were doing it for. And so I started writing about that topic and it morphed, okay, well, if we call it servant leadership, they're going to be some people in the community believe that we are their servants, and that's not the relationship that I think a board should have to as homeowners. 00:02:53:02 - 00:03:17:04 Unknown And I think that the hierarchy between the board and owners needs to be reduced. So I changed this steward leadership, which is boards, are stewards of this corporation for the benefit of their neighbors, who may very well be on the board next year. And to continue to hand this down to neighbors and everyone, hopefully, or anyone who wants to, has a turn at leading and some. 00:03:17:05 - 00:03:39:09 Unknown And maybe it's not a fun thing, but maybe it's their turn to do the work. And one of the things I think is, at least from my perspective, I'm sure it's not taken by all of the people who read my stuff. It's rounded in kindness and human humanness to people. At least, that's what I think of it being. 00:03:39:11 - 00:04:07:05 Unknown And a lot of times boards are dealing with a lot of conflict, and sometimes board members make that conflict larger rather than smaller. If there's a way that we could reduce the conflict, sometimes it means we have to give up something or fight our time, or not worry about our pride quite so much. But the name of the game to me is reducing conflict, and it doesn't seem to be reducing very much these days. 00:04:07:06 - 00:04:51:12 Unknown Yeah, yeah, I absolutely agree. And I think, you know, when you and I have talked in the past, I think we, we share a lot of the same concerns and same aspirations for the industry. It's interesting we have not talked about this before, but you used just now a word that I use quite a bit in my own advocacy for homes, and that is this idea of humanness that does seem to be lost in a lot of the discussions that if we could all recognize our own inherent desire to treat each other with a certain level of humanity, I think things would be a lot better. 00:04:51:12 - 00:05:24:08 Unknown And somehow what happens in homes oftentimes is that perspective is is lost. So I, I appreciate you saying it in that way. It's I think we are both aligned, but I think we are also aligned with this idea that there is something inherently broken about how HOS function. And there's a reason why most people hate hos. And I think we we would agree that it doesn't have to be that way. 00:05:24:08 - 00:05:48:06 Unknown And we again, we would we would find common ground between the two of us. And I think a lot of other people that there is a there is a way for HOS to function that can provide real value and can be better, but it does require that there is something different from the way that they are today. And I think that's a lot of what you are. 00:05:48:08 - 00:06:25:03 Unknown You're kind of poking and prodding at is, is what should be and what needs to be different about HOS so that they can actually be seen as as valuable. I agree, and I think that is what's lost. And it's tangible. It's hard to measure, it's hard to prove, but it's important that it exists nonetheless. And I think to some extent, you know, we speaking for myself only, of course, we get hung up on forms of statutes and governing documents and processes, and the humanity can be layered over with bureaucracy. 00:06:25:07 - 00:06:44:03 Unknown Yeah. You know, this is the most local level of organization other than the family structure itself, that people have in American society. And the things that it would be much more collegial and much more harmonious than it is. 00:06:44:08 - 00:07:07:02 Unknown Yeah. Well, you've just teed up the topic that we want to dive into for this episode. A while back, you posted a quote that somebody else on social media had had posted, and I just want to read what that quote is in your and what you wrote. 00:07:07:03 - 00:07:34:17 Unknown You responded to this, this quote. And I kind of just want to unpack that response here and use that as kind of a launching point into discussing maybe a little bit larger topic. But the quote that you that you referenced was this, and this is not from you, this is from somebody else. They said, that's why people trying to run an HOA like a business which has a profit motive don't succeed. 00:07:34:18 - 00:07:56:19 Unknown And a is a small government which has to be run for the benefit of all the owners. That means there has to be some expenditures that make little sense on the bottom line. In fact, in a condominium, keeping sufficient reserves to make Fannie Mae and Freddie Mac and insurance companies happy. So units are 00:07:56:21 - 00:08:00:02 Unknown financing is an imperative. 00:08:00:02 - 00:08:03:18 Unknown But nobody would want to run a business that way. 00:08:03:18 - 00:08:29:20 Unknown And you had some some thoughts and response to that quote. But kind of what the quote is getting at is, is this kind of essential identity question. Is an association really a government or quasi government entity, or is it a quasi business or is it something else altogether? And maybe we'll we'll stay in suspense on that for just a minute addressing that. 00:08:29:20 - 00:08:44:16 Unknown Exactly. But maybe just talk about how you would respond to that, that quote that, you know, maybe there's incentives because the associations of government that it it's going to operate in ways that a business never would. Well, I 00:08:44:18 - 00:08:55:11 Unknown it is a business and to some extent has to live with the business because we have shareholders, we have obligations, and we have a need to raise revenue. 00:08:55:15 - 00:09:22:16 Unknown The interesting thing is where we raise revenue is directly from our shareholders, and I think makes them a much more important shareholder than in our regular business. I think that that can be taken to its extreme, to the association's part, though, where when we get into the governance aspect of it. So the business aspect to me is largely financial fund handling, you know, maintaining the infrastructure. 00:09:22:16 - 00:09:52:02 Unknown And I think that can be run like a business much more effectively throughout the community of communities of the United States because of business. If it knew it had to replace its roof, it would start saving for it. If it didn't have a good source of revenue to tap into to replace the roof when it became necessary. So from that perspective, I think the business analogy is helpful, and the fact that it doesn't have a profit motive to me is to me is irrelevant, right? 00:09:52:03 - 00:10:03:23 Unknown We still have fixed and variable expenses, and we know where our money is coming from. We just have to decide, you know, depending on state laws or the shareholders willing to pay to run away for 00:10:04:01 - 00:10:13:10 Unknown but it's a business about people for the benefit of people. And that's where I think the governance aspect shifts from a business to to a government. 00:10:13:12 - 00:10:36:13 Unknown And I don't mean to suggest this hierarchical structure where we have this Wizard of Oz behind the curtain telling the people what they need to do, because I think that is fatal to community. But to recognize that people need to be heard. People need to be respected. Governance needs to be as consistent as it can be. No standing. 00:10:36:13 - 00:11:02:17 Unknown The fact that leadership changes almost every year, at least to some degree. And I think that the governance aspect, being more like a government to me, means that we take a little bit more time to talk to our constituents, our neighbors, and include them in the conversation. You don't have that profit or motive is to increase their property values or their enjoyment within the community, not their property values. 00:11:02:18 - 00:11:24:15 Unknown So to me, it's kind of in between the financial aspects of running the like a business. But the governance aspect, I think it has to be different than a business because people, you know, we can't throw them out of our retail store if we want to. These are people that live there and who may live there for the next 20 or 30 years. 00:11:24:15 - 00:11:37:09 Unknown And this repeat communication that will have with this customer can be terrible. For the next 20 or 30 years. We can try to make it beneficial for both 00:11:37:11 - 00:11:58:08 Unknown Yeah. It's interesting, maybe just a little bit of a tangent, but I have sons in law school right now and they one of them recently had a segment in their property law class on homeowners associations. 00:11:58:08 - 00:12:27:17 Unknown And he was kind of interested in that because he's grown up hearing about homeowners associations and probably knew more about that aspect than anybody else in the class. But it led in the conversation that I was asking him, or maybe just commenting. I wonder why a law is taught as a unit or a portion of property law? Because that's not what it really is. 00:12:27:17 - 00:12:51:13 Unknown If anything, it's it's a nonprofit corporation. And it seems to me that it would be more appropriately folded in under corporations law. And, and it's a, it's a corporate entity. And so we talked about that a little bit. But I don't know if you have any thoughts as an attorney as to where that should fall. It's not exactly what we're talking about, but it relates. 00:12:51:15 - 00:13:14:23 Unknown No it does. And splits the difference between the corporate side and the governance side. And, you know, because the community has its roots in real estate, real property law, restrictions on how real estate is used. I think it's just been folded into property classes because of the origin of how these use of the land arose and how they're used today. 00:13:15:04 - 00:13:35:22 Unknown And it's kind of a split, right, because a lot of the things that we deal with are on the corporate side, voting and changing documents and meeting process notices, but we also deal with a lot of the real estate side. What can you do with your property? To what extent can the association without the rules? How do you force those rules? 00:13:35:23 - 00:13:59:00 Unknown How does the neighbors right to enjoy impact what we think needs to be the outcome here? So it's kind of to be split a bit down the middle between corporate law and real property law, which which makes it fun and diverse. But it doesn't lend itself to one obvious category. Just like I don't think it can be characterized solely as a business, solely as a government. 00:13:59:04 - 00:13:59:12 Unknown Yeah. 00:13:59:17 - 00:14:24:22 Unknown would argue that a homeowner's association or a condo association is a corporation, a nonprofit corporation that happens to have as its most significant asset, real estate. And and so that's that's maybe how I would kind of parse that out. But the business portion of it, I want to I want to pick at that a little bit further. 00:14:24:22 - 00:14:29:07 Unknown I do think that there is an important business element to how 00:14:29:07 - 00:14:53:14 Unknown an association should be run. And most notably, it's that the primary objective, I believe, for an association is to maximize the value of its shareholders, maximize the value of the homes within that community. And so I think that is a business objective, and there are a lot of different elements that go into that. 00:14:53:16 - 00:15:00:19 Unknown I guess my question for you is would you see it in the same way? First of all, and then secondly, what do you see as 00:15:00:19 - 00:15:22:11 Unknown maybe the biggest levers that a board should be looking at in that regard, that maybe sometimes a board overlooks as to how do they drive shareholder value? Yeah, it's not a very business like thing for me to say, but I try to think of it as a corporation, the most valuable asset, the people, shareholders actually. 00:15:22:12 - 00:15:24:09 Unknown Right. There wouldn't be an 00:15:24:11 - 00:15:49:19 Unknown what I find is that I'm not suggesting this is what you were saying, but, you know, we worry about the infrastructure, the fund handling the reserve study, and we forget the people. And I think that that was okay 20 years ago. And you probably saw this as well, you know, 20, 30 years ago, fund handling, sending out the annual notice, sending on board packets, all of that went reasonably predictably, I think. 00:15:49:20 - 00:16:15:02 Unknown And then it started to turn where I think the job description changed and became much more focused on the comment on the one who is a customer but the customer of the people. And I don't know about your company, but a lot of the management companies that I work with and teach to you, don't ask me, they still ask legal questions, but they really ask questions about dealing with difficult situations involving personalities. 00:16:15:04 - 00:16:36:12 Unknown And so I think that the new horizon of community management operations is to maybe slow down a little bit on the bricks and stick side of things, even though that's crucially important. I'm not saying it's not port, but but dealing with people and taking the time to address people so that 00:16:36:17 - 00:16:41:08 Unknown don't create ill will, we don't have to. 00:16:41:10 - 00:17:09:22 Unknown I think board members are time pressed or stressed about money and, you know, getting things done. And I think that the people are an afterthought often. And I'm not saying that I can understand how that would be the case, but it seems to me that many of the problems we see today, especially the ones that are causing a lot of expense and time and brain damage for board members and managers for all based on 00:17:10:00 - 00:17:22:14 Unknown So I want to bring those concepts together here in a second. But first of all, my observation would be that what you're describing as the shift kind of in the industry is really 00:17:22:14 - 00:17:38:14 Unknown it's a post-Covid phenomenon. I don't know that I can attribute everything to Covid, but the Covid era did seem to at least reset the the way that humans interacted, especially within homeowners associations. 00:17:38:14 - 00:18:13:21 Unknown And I think it's I've had this conversation with literally dozens and dozens of people in the industry, and everybody recognizes that the overall tenor and culture and the way that people interact is dramatically different today than it was right before Covid. I think that in to your point, we can lament that as a reality. Or we say that's the that's the state of, you know, where we're at. 00:18:13:21 - 00:18:21:13 Unknown It's the cards were dealt. Now, how do we how do we navigate this most effectively? And I think to your point, I can tell 00:18:21:15 - 00:18:39:07 Unknown for us as a company, a key part of our strategy, and I'm putting this out there to the world, our strategy as a company. But we've we've said for years that we want to attract and retain the best talent and equip that talent with the best resources that can be flexibly applied in any situation. 00:18:39:09 - 00:19:04:15 Unknown There's a lot in that sentence, but my point here is that there's nothing in our strategy explicitly that about what kind of service that we're going to provide for, what kind of financial outcomes we're going to produce, and kind of what I'm what I'm relating it to is our emphasis is get the right people in place and give them the right tools and help them be successful. 00:19:04:15 - 00:19:31:22 Unknown And the rest of it's going to take care of itself. And I think we have found that to be true in that we get the right people, give them the right tools, and give them the flexibility to apply those tools in the right ways. And the service and the financial metrics take care of themselves. And I think an HOA could almost think of things in the same way that if if the priorities, the people, the other things ultimately, ultimately can take care of themselves. 00:19:32:00 - 00:19:47:02 Unknown I think that's right. But I think that that's going to require a shift in how things have been done. You know, one of our corporate core values is that everyone is valued, and we had different variations of that. 00:19:47:04 - 00:20:04:06 Unknown you know, if we can bring peace to a situation sometimes that's far better than finding the most beautiful legal brief and proceeding to take a dispute towards a trial that further polarizes the situation for someone who will live there for the next 20 years. 00:20:04:07 - 00:20:32:23 Unknown And I agree with you that if you hire the best talent and and you treat people the way that talented people can, all of the other things will fall in line. But I think that the industry generally is looking still at what are we paying, what is it going to cost us that's too much. And so there's cost savings that are elevated above having the right people in 00:20:33:01 - 00:21:01:14 Unknown and in an effort to save money. And there's nothing wrong with saving money, but there are consequences to that. And that subpar management does not pay as close attention to what's going on. It will not have the time to have conversations with people that will increase the credibility of the association. I think, as a general rule, that there will be less preparation for public meetings where everything becomes visible and 00:21:01:14 - 00:21:14:07 Unknown consequences continue to spiral downward, all based on the belief, scarcity, belief that X per door, or whatever the metric is, is too much to pay 00:21:14:09 - 00:21:18:15 Unknown we've suffered from that scarcity mentality to our harm. 00:21:18:17 - 00:21:58:16 Unknown So let's let's make the practical and the legal collide here for a minute, and you can maybe give a little even legal perspective. But let's say that an association has a scenario. And I can think of some in mind right now where there may be a financial outcome that could potentially be better for the association, but the path to that outcome might create a lot of interpersonal friction, whether it be amongst the board or between the board and homeowners or and if needed. 00:21:58:16 - 00:22:02:03 Unknown I could give you some general examples of this, but 00:22:02:05 - 00:22:23:21 Unknown could a board still be considered acting in a, in a fiduciary role if if they were actively making decisions? That said, we're going to preserve certain relational capital in the community and on the board and maybe accept a certain amount of. 00:22:23:23 - 00:22:48:21 Unknown I don't even want to put it this way. It sounds too dramatic, but financial excess or less than optimal financial outcomes in exchange, is that an exchange that a board can make, even from a legal standpoint, in functioning in their fiduciary role? So if I heard it right, when I heard you say much nicer terms, do we have to go with a little bit or in part? 00:22:48:22 - 00:23:25:00 Unknown Well, let's say let's say that the low bidder is definitively going to I'm thinking more. The sentence I was going to say is the low bidder definitively going to provide exactly the same level of service as the next bidder, but let's just say they were. That's where I don't know, that's the best example. But sometimes there's an out of the box solution that a particular board member might bring to the table where they've got a different point of view, or they have a different life experience and they're like, hey, we could solve this problem by doing X, and everybody else is wanting to do Y, and Y is the more traditional route. 00:23:25:00 - 00:23:42:17 Unknown And this new board member or this new idea may be the better solution. It may be the right thing, but it may ruffle a whole lot of feathers along the way. And I'm just wondering, is that relational capital always worth it? 00:23:42:19 - 00:24:08:16 Unknown I guess it depends on the outcome, right? Because again, I don't want to keep falling back to this idea of spending a little bit more money or taking a little bit more risk. Payoff, I think, is within the is within the scope of a fiduciary duty. As I understand it, most states the question is what data do we have to support the decision as being a good one? 00:24:08:18 - 00:24:48:10 Unknown But often I think the the river is not straight. It goes around many bends and it gets to the right place eventually and sometimes always going for the cheapest, the most traditional, the most sterile, the most known is not going to take the community to where it needs to be. And and I think that I'm not saying board should be reckless, but to have the courage to say there's a better way to do this, and it is going to create some change and it may incur costs and there may be some friction as owners bristle at a change in the way that we do things. 00:24:48:10 - 00:25:21:11 Unknown But as we continue to do these things, we believe that the community will flourish because of X, Y, and Z, I think yes, I think that's the case. And you could argue going from onsite staff management to portfolio management has sometimes that has cost savings, sometimes it has drawbacks. Or going the opposite way to take a portfolio management company and have an on site dedicated manager wouldn't necessarily be the least expensive, depending on where you're coming from. 00:25:21:14 - 00:25:51:19 Unknown But it might have benefits, right? And and sometimes those things are extraordinarily contentious. It doesn't mean it was a bad decision. But if the storm that has to be weathered is worth it, then I would suggest we look at doing it. Because if we keep doing what we're doing, we'll keep getting what we're getting, and then there will be a state law that says we're going to get rid of either waves, and then we'll have state or local governments doing that. 00:25:51:21 - 00:26:06:14 Unknown And from my personal perspective, I think that the service could decrease. And I think the only reason that people when they're valid is because they think it's futile to fight City Hall, whereas it's not futile to argue with their 00:26:06:14 - 00:26:21:20 Unknown board. So a long winded way of saying yes, I think that's depending on the circumstance entirely within the fiduciary duty, as long as we're acting reasonably in a manner expected to bring a good outcome to the community. 00:26:21:21 - 00:26:29:20 Unknown Based on information that we've gathered, I think it's within the scope of the duty as a general proposition. 00:26:28:01 - 00:26:29:22 Unknown proposition. Yeah, 00:26:29:22 - 00:26:32:04 Unknown I guess I would advocate that. 00:26:32:04 - 00:27:06:02 Unknown Too often boards can be consumed with how do they save every dollar? And sometimes saving those dollars comes at the expense of relationships within the board or from the board to the homeowners. And I wonder sometimes if the strife that is caused through some of these processes is worth the $0.50 per unit per month that the homeowners are going to save on their assessments. 00:27:06:04 - 00:27:31:08 Unknown And I guess circling all the way back to kind of where we started on this conversation, it's the it is it's ultimately the human element that is going to make or break how a community feels. And it's not usually part of the calculus that a board is considering in the decisions that they make. No, I agree with that. 00:27:31:08 - 00:27:43:23 Unknown And I think that some management companies that don't see it the way that you and yours does, you know, they quote the fee based on the minimum functioning of 00:27:44:01 - 00:27:57:02 Unknown and none of the care and handling of the residents is factored into that, and thus it doesn't get provided. And people are upset and they don't have their questions answered and they feel disrespected. 00:27:57:02 - 00:28:23:18 Unknown And there's no credibility that attaches to the board and certainly not to the management company. And they don't recognize the value. And what's ironic is as you hire a better management company to this play out many, many times over the last three years, that new management company becomes so good at handling complaints that the people aren't complaining and the board doesn't know what's going on. 00:28:23:18 - 00:29:03:08 Unknown And if it gets how rough it was, and they attribute that to the people that are happy and they discount the value of the management, they got them from turmoil to piece. And then invariably after a while, they lose marginal awareness of what's going on in other associations. And someone comes in and says, let's sharpen the pencil, we can save money, and they get rid of all of their vendors when things are going well to save, you know, relatively small amounts of money, and then they go through 5 or 10 years of turmoil to happens over and over. 00:29:03:14 - 00:29:24:07 Unknown Yep, yep. It doesn't make anyone bad. They just forget. And as management becomes better, it becomes more invisible. And it's harder to justify the skill of good management. Is it like going to a good hotel? You rarely see people vacuuming, but everything's always come. Yeah, we think that that happens by accident. The 00:29:24:09 - 00:29:27:23 Unknown happens consistently is entropy. 00:29:28:01 - 00:29:29:06 Unknown there's there's something 00:29:29:06 - 00:29:33:05 Unknown to be said about if the community is reasonably at peace. 00:29:33:08 - 00:29:53:02 Unknown One of the best ways to disrupt that piece might be looking for how can we go and save a few more dollars? I agree, and I think that the analysis is not an accurate one, because if you put two contracts, first of all, it'd be hard to tell if you're saving money by switching. That's just the reality of the way 00:29:53:02 - 00:29:53:23 Unknown written. 00:29:54:01 - 00:30:09:03 Unknown But that intangible is never factored in, right? It's taken for granted. The fact that things are going well now is assumed that that's how they will be going. Or maybe save 50 bucks a month on a new management company. That's 00:30:09:09 - 00:30:17:09 Unknown Yeah, well, a couple of examples that might take this in other ways and I can give to you and then let you react to them. 00:30:17:11 - 00:30:42:17 Unknown But I think these illustrate some of what we're talking about. We had a situation a couple of years ago where we had a 1200 unit association that was running consistently with more than 900 open violations at any given time. And I've told the story before on a previous podcast a couple of years ago, but it's worth repeating. 00:30:42:17 - 00:30:45:14 Unknown You know, the inclination to address 900 open. 00:30:45:16 - 00:30:47:17 Unknown And violations at a 1200 00:30:47:19 - 00:31:09:07 Unknown is how do we get more regimented? How do we get faster at identifying the violations, getting people to hearings, closing them, finding, taking those, those actions? How do we make the machine work better? And I was proud of our team in this case where we said, hey, we've been doing this the same way. 00:31:09:09 - 00:31:33:01 Unknown How do we change the narrative? Because we've we've created, at any given time, 900 opportunities for people to hate us. And that's not good for anybody. And so we ended up doing is we did a sprint for a period of time where instead of only sending notices, we actually called every single homeowner before we sent the notice. And it was a massive amount of work. 00:31:33:03 - 00:31:49:00 Unknown But we said, you know what, let's make that investment and see what happens. And we would call homeowners and say, hey, we're going to send you a notice about leaving your trash cans out. We don't like sending you the notice, and you're going to hate getting the notice even more. So none of us are going to be happy about this, but just please know we're not picking on you. 00:31:49:01 - 00:32:10:08 Unknown This helps preserve and enhance the value of the community, and we want what's best for the community. Can you just cooperate with us when you get the notice? We ended up reaching 40% of the people that we called, and another 30% we were able to leave a voicemail or something to communicate. So 70% of the people we reached in one way or another. 00:32:10:08 - 00:32:23:23 Unknown And what was fascinating about this was in a relatively short amount of time, the open violations dropped after having gone for years at 900 at any given time, down to less than 200. 00:32:23:23 - 00:32:25:11 Unknown And now all of a sudden, 00:32:25:11 - 00:32:27:12 Unknown we're in a situation where 00:32:27:16 - 00:32:33:05 Unknown we don't necessarily need to be making the phone calls all the time. But even if we did there at a much lower volume. 00:32:33:06 - 00:32:53:03 Unknown Board members are spending a lot less time doing hearings. We're sending out a lot fewer noncompliance notices, which is a lot less cost to the management company and to the association. Everybody's benefiting. Not to mention that everybody in the community is happier because their community looks better and people aren't getting violations all the time. 00:32:53:05 - 00:33:11:09 Unknown think that's an example of a situation where looking at a scenario and saying, how do we solve this in a way that we're not necessarily first thinking about the dollars and cents, which are what's it going to cost to make all these phone calls, but rather, how do we deserve the problem and get to a better equilibrium? 00:33:11:09 - 00:33:46:15 Unknown And then everybody wins. I think that's illustrating what you're what you're getting at. And and it would be if you put a dollar value that to move forward, they might be wanting to invest that in a solution. But if it goes from 900 to 2 on the 30th everybody wins. Yeah. Everybody. Yep. And the question for me is, after several years of cultivating this communication style with the homeowners and building that trust, how many years does it take for that to be assumed that that's the way it's going to be? 00:33:46:17 - 00:33:51:09 Unknown And that effort and that skill of dealing with humans is 00:33:51:09 - 00:34:14:03 Unknown discounted, because when you're looking at numbers, it's easy to make a comparison because it's intangibles much more difficult. Yeah. Yep. Then that's the concern. Yep. And that I think is where boards could allocate a few more resources to that outreach. Even if it's someone in violation, they know they need to take their trash cans. 00:34:14:05 - 00:34:35:05 Unknown Well, there's a reason that we have 900 open violations, and that's not acceptable. Yeah. And if the community wants to decide that there are certain rules that we should no longer enforce, then let's decide on that before we say that we're going to have a third of our homes. Yeah. At every given time. Yep. And having that conversation. 00:34:35:08 - 00:34:59:11 Unknown Okay. What are the rules that are still applicable to the original vision that you have when you bought here, which would get rid of this one. Should we add this one where you do? Okay. These are the rules. And now we're going to enforce them to consistent but but humane and compassionate way. Neighborly way with the expectation that the sooner we can resolve this matter, it is for you as the holder that that's that's a win. 00:34:59:11 - 00:35:30:16 Unknown It's a huge win. Yeah. But but but it's unfamiliar. Yeah. I think the other example I would give you and maybe you can comment on this from a legal perspective. And I think I've shared this one before as well, but it applies here. I was in a board meeting a year or two ago, and it was an executive session, and a homeowner had come in to appeal the. 00:35:30:18 - 00:35:50:09 Unknown The late charges and praline and lean charges and interest and legal fees that had mounted. And they had had I don't remember, but it was maybe a couple thousand dollars in total costs on an assessment that was in that association was like a little over $100 a month. And the homeowner comes in and 00:35:50:11 - 00:35:53:15 Unknown she says, hey, I've been making my payments 00:35:53:15 - 00:35:55:07 Unknown every month for years. 00:35:55:07 - 00:35:57:06 Unknown but a while back, 00:35:57:06 - 00:36:15:00 Unknown my husband passed away. I've got a teenage son. And and it really impacted him and our family. And I've just been trying to put the pieces back together. And I lost track of things, and I haven't been able to keep up or function like I normally would. And I just got behind on, on, on life. 00:36:15:00 - 00:36:41:04 Unknown And she tells this whole story and, 00:36:18:01 - 00:36:41:05 Unknown you know, the board members were affected. Like, I have sat in lots of executive sessions and I've heard every sob story there is, but you can tell when it's the real thing. And she was telling a very real story in a very real scenario. And, you know, some of the board members are tearing up and the the woman that sharing is emotional about it. 00:36:41:06 - 00:37:03:00 Unknown And I'm sitting there watching and I'm like, you know, my heart goes out to this, this lady and I understand the situation. And, and the board is very kind and gracious with her. And then she's dismissed and then they start talking and they the board was saying wish that we could do something. And then they said the part that that bothers me and I want you to to react to this. 00:37:03:00 - 00:37:28:05 Unknown But they said, but we can't set a precedent. And I think I know what you would say on this, but I wasn't going to give them legal advice in that scenario. And I just stepped in and I said, look, I can protect you from the precedent on this. I believe her story and I want to help. And action is going to cover, you know, her assessments. 00:37:28:05 - 00:37:45:14 Unknown Let's make her whole. And so we did. And and we kind of solved it that way. You know, we can't run a business and do that in every single case that comes up for all of our associations. But there are times when unique scenarios come before a board and they have the 00:37:45:16 - 00:37:56:05 Unknown opportunity to do something human and to do something good and right by a for a fellow homeowner, maybe you could address. 00:37:56:06 - 00:38:18:07 Unknown And I'm not at every board meeting. So I don't for all of our associations, obviously I'm not able to step in and solve the problem every time. How my boards think about those kinds of scenarios, in light of everything that we're talking about, with the caveat that I can't give them, I think that this idea of precedent is is misconstrued. 00:38:18:12 - 00:38:46:11 Unknown And I think what they what they think it means is if we give someone a break, we have to give everyone a right. And I look at it differently, which is you have an obligation to treat people fairly in a similar manner. If a similar situation, that doesn't mean everybody has to have the same outcome. If somebody comes to you, I don't see a lot of people coming in with credible stories about life's disruptions that are very real, just doesn't happen very often. 00:38:46:12 - 00:39:11:07 Unknown Most of the people we collect from don't respond at all, because if they responded, we could get them into a payment plan and they would go on with their lives. So for me, if somebody comes in and says something that is credible, they're in a different category than other people who want to break. And so for me, I'm reluctant to ever waive the actual assessments themselves. 00:39:11:08 - 00:39:41:19 Unknown And I've paid amounts myself and certainly my fees to try to make these, these cases solve them selves when we have the opportunity. But I wouldn't let my fear as a general rule, I wouldn't let my fear of precedent keeping me from doing what I knew was the right thing. Yeah, the failure to have a solution in that case and to say, say you got $1,000 in legal fees and maybe $1,000 in assessments, and I don't know what it costs. 00:39:41:19 - 00:40:02:12 Unknown In California, you could do a non-judicial foreclosure, but you don't want to take a single parents home after a death and the state heavily and be in the news and destroy the association's brand that way. And you concentrate the risk by doubling or tripling down on the investment that you make is delinquency, knowing that this person doesn't have money. 00:40:02:12 - 00:40:26:06 Unknown So again, we want to treat people uniformly. We don't want people to say, well, why did that person have to pay less than I did? Because that's very corrosive. But when these opportunities present themselves and I don't believe they present themselves very often, I would still favor doing what I do is right. And that generally would be how do we get this person off of our delinquent list? 00:40:26:08 - 00:40:51:05 Unknown Yeah, yeah. And I think that there is room in these scenarios, by the way, in this particular scenario, the woman wasn't asking for anything other than she was essentially asking for a payment plan. She was asking for time to to do that. And what was interesting there was the board wanted to give her more than she was even asking, because it seemed like the right thing to do in that scenario. 00:40:51:05 - 00:41:13:03 Unknown And I would agree that you don't want to be in a situation where you're waving assessments themselves, but I think that there are other elements of the costs that in unique situations, the board has latitude because it's unique. It's not setting a precedent. If there is a situation that comes up, that's just not going to come up very often. 00:41:13:03 - 00:41:49:14 Unknown If that exact situation or something very similar comes up again, then you treat it the same way. But it's just by definition, that's not what the scenario is. And so I think my point is that boards have more room to treat people with kindness and understanding and compassion than they probably think that they do. And they can do that in a way without compromising issues of precedent or even their fiduciary obligations to their association. 00:41:49:16 - 00:42:28:16 Unknown I agree. Although this is cyclical, right? Whether it's how to get into the College of Community Association lawyers or mandatory sentencing guidelines, it used to be in both of those arenas that there was a discretion that could be exercised in deciding either on someone's prison sentence or someone's admission to the college. Enough people complained that that put too much discretion in the hands of the Trier of fact or the governing body got rid of discretion, favor of strict guidelines, so that no one was ever treated remotely different than anybody else. 00:42:28:18 - 00:42:32:21 Unknown And at least from my perspective, we realize that taking that human 00:42:33:00 - 00:42:52:09 Unknown element out of that decision making was a horrible thing, and it created more harsh and unexpected consequences. Trying to be fair than allowing people to exercise reasonable discretion. Is it perfect? No, but I think it's better than having to follow a checklist every time. Yeah, yeah, I agree. 00:42:52:14 - 00:43:12:22 Unknown And it really comes back to this idea that I think too often boards, as we come back to this kind of original question, is an association a, a business or is it a government? And I think my your answer was it's a little bit of both. And I would agree. But I think it's almost something altogether different in and of itself. 00:43:12:22 - 00:43:53:17 Unknown it is this idea of community that has this business and governmental element to it. And as such, I think that boards too often make the mistake of discounting that community and, and relationship and human element to the decisions that are made. And I think that there needs to be an awareness of making good business decisions on the elements that our business and making, you know, being aware of the governmental elements and even the political elements of being aware of constituents, but all of it under this umbrella of how are we delivering an environment that fosters the best kind of community? 00:43:53:17 - 00:44:29:07 Unknown Because that's what's going to produce the greatest enjoyment for the people who live there. I agree. I don't know what you would call that category. Yeah, an HOA is what I'd like to I'd like it to be. That's what an HOA becomes known for. We're just a long ways from that at this point, I think so. And I think, again, if we could lose some of our fixation on forms of the way that get in the way of the human side of building community, I think. 00:44:29:09 - 00:45:00:06 Unknown And we talk about, you know, the governance, it becomes heavy. And, you know, we have to treat every person in the same exact way. And and it's telegraphing to potential future board members that they don't want this responsibility over their neighbors. Yeah. Just don't think it has to be that onerous and heavy and have such a divide between constituents and the current leadership term current because it changes constantly. 00:45:00:08 - 00:45:25:06 Unknown Yeah, that's a good thing. You can create irregularities as we go, but as long as people understand what's expected of them and where they are headed, I think it's healthy and it creates appreciation for the people that jump on the board for a term and are happy to never come back, but they can recognize that, you know, it isn't as easy to do something as it is to criticize or tear apart. 00:45:25:11 - 00:45:30:18 Unknown Yeah, well, I think the last comment I would make and then I'll let you react and then we can wrap this up. 00:45:30:18 - 00:45:33:19 Unknown I don't know that most boards 00:45:33:23 - 00:46:06:07 Unknown way or give consideration or even are aware of the reality that lots of associations have reputations, and reputations matter for associations. We are currently, for example, in a situation where we're recruiting to place general managers in certain locations, and even in doing nationwide searches, there are general managers when they hear the name of the association, might say, you know what? 00:46:06:07 - 00:46:28:19 Unknown I'm going to pass because of the reputation. And that applies not just from the talent you're able to bring, but to other vendors that you might be able to attract. But it even comes down to real estate agents are talking about the reputations of of communities and buildings. And so there are a lot of factors that go into. 00:46:28:21 - 00:46:51:12 Unknown The reputation of a community, and there are a lot of consequences or benefits that can be derived from what that reputation is. And I don't know that that boards know that. But on the management side, and I'm sure on the legal side, we hear that we know, like we get approached by certain communities that we don't manage, but we already know the reputation and it affects how we price them. 00:46:51:12 - 00:47:29:03 Unknown It affects whether we'll even entertain them. Reputations matter, and reputations are derived from the human element, the human element. They are. And I see this with boards infighting, and I see it with small groups of dissident owners fighting the board. And I'm not saying who's a writer is wrong, because often it depends. But all of that changes the reputation and the willingness of vendors to show up for pay managers to put good managers on that property because they don't want to lose their. 00:47:29:03 - 00:47:53:00 Unknown And if good management companies to question whether they fire this community and the disruption and the loss of progress, of changing management is significant. And I think that's also forgotten about or not appreciated. Yeah, lose credibility in the eyes of our homeowners. And they're frustrated. And there's a learning curve. And and you know, this idea I would just find another one. 00:47:53:02 - 00:48:18:00 Unknown Find another one, find another one for six management companies in ten years. And everyone knows that you're not the client that is worth bidding on because you're not going to get back all of your startup costs until you're three or whatever it is. So why would you bother? Yeah, to be suffer for mediocrity or worse, for years. It's very avoidable. 00:48:18:02 - 00:48:48:14 Unknown But it's you're right. It is. It is not. A criterion is often just as well on the on this idea of reputations even even worse is individual board members oftentimes have reputations within the world in certain, at least in certain regions. And I am positive that they don't realize that at all. But it is not unusual where I'll be at an association. 00:48:48:14 - 00:49:25:15 Unknown And they'll ask about a board member who is maybe particularly well known for not the right reasons, and they will be asked about, oh, I've heard about so-and-so is is a board member at this particular association. And that sounds like it's really difficult and that whatever. And I don't know that board members know that that they get talked about within other associations in neighboring areas that that do here because it's homeowners talk about them, vendors talk about them, like word gets out. 00:49:25:15 - 00:49:48:16 Unknown And even as individuals, it's not just how you behave in a board meeting with only the people who are there at the board meeting. It's it's amplified. It is. And it comes up sometimes in educational sessions. The other board members want to ask a question about the scenario. You hear it enough times starting to realize who it is. 00:49:48:17 - 00:50:15:05 Unknown Yeah. And all of that. That impacts the ability to retain good people willing to work for that community, both on the board side and on the management and other better side. It's it's you're right. Reputations are small pool which we swim. And I suppose I wish it was a different way. But if if there's a problem community, whatever the problem is, it's not localized in that community. 00:50:15:06 - 00:50:30:18 Unknown And where to send it? Yeah, absolutely. Well, David, I really appreciate your perspective and being part of this episode. I think that this has been an interesting conversation and helpful. And so really glad that you could join us. Thank you. It's 00:50:30:20 - 00:50:46:05 Unknown Well, I know that's a little bit of a different type of a conversation than what we normally have in the uncommon area, but I hope that you found it helpful. And if you did, we would love it. If you would like and subscribe to this podcast and tell other people about the uncommon