HOA Insights: Common Sense for Common Areas

112 | HOA Board Heroes: What Happens When an HOA Board Is Recalled?

• Hosts: Robert Nordlund, Kevin Davis, Julie Adamen • Season 3 • Episode 112

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What really happens when an HOA board is recalled? Hear Helen’s story and the lessons every board member should know.

 ✅ Is a Reserve Study right for you? 👉 https://www.reservestudy.com/

What happens when an HOA board is recalled? In this HOA Board Heroes episode, we hear Helen’s real story about a recall the price of doing the right thing. Helen, a former board member, shared her experience dealing with the 2020 balcony inspection law. The association faced significant repairs, with initial cost estimates reaching millions. Despite the board's efforts to secure financing and a loan, homeowners resisted, leading to a recall election.

Chapters From Today's Episode:

00:00 The HOA Problem That Grew and Grew…

00:52 Intro to Board Hero Helen

02:11 What law triggered the conflict in this HOA?

04:15 Why did the HOA face pushback over balcony inspections?

06:20 What is a Master Repair Plan and why was it controversial?

08:04 How did the recall campaign begin and gain traction?

10:25 What was Helen’s experience dealing with the opposition group?

12:30 How did communication (or lack of it) fuel the fire?

15:10 Why did board members start resigning?

17:00 How did the association handle financing and reserve planning?

19:15 What was the turning point in the board’s support and leadership?

22:08 What lessons did Helen learn from the recall experience?

24:52 How can other boards prepare for similar challenges?

27:35 What does it really mean to serve your community on an HOA board?

30:45 What advice does Helen offer to future board members?

The views & opinions expressed in this program are those of the Hosts & Guests, intended to provide general education about the community association industry. The content is not intended to provide specific advice or recommendations for any individual or organization. Please seek advice from licensed professionals.

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Helen:

You're just volunteering your time, you're responding to emergency calls, and you're spent, you know, all of this, all of this stuff, it was very hard to and it just and it just grew and grew and grew until the point where they realized that as long as the majority of the board would vote to continue the master repair plan, there was not much they could do without just recalling the board

Announcer:

a regular highlight of the HOA insights podcast is our board heroes feature, where we dedicate one episode each month to celebrate the remarkable efforts of HOA board members. To us a board hero is one of the 2 million elected volunteers who deserve recognition for excelling in a role that often goes unnoticed. Today, we're excited to spotlight one of these exceptional board heroes and share their inspiring story. If you match our definition of a board hero, or know someone who does, please reach out to us. Our contact details and those of our sponsors are provided in the show notes.

Robert Nordlund:

Welcome back to Hoa insights, common sense for common areas. I'm Robert Nordlund, and I'm here today for episode number 112 with another one of the board heroes, we're proud to celebrate. Helen is a regular listener and a former board member who submitted her crazy story, and it was indeed crazy and fantastic, and we followed up with her and wanted to schedule her on the program so we could share her story with you. Well, I hope you enjoyed last week's episode. 112, excuse me. 111, with regular co host and insurance expert Kevin Davis, learning more fascinating insights into his world of insurance, and that's always good information to have at your disposal with insurance being a regular hot topic, with pricing and coverage and just a lot of news about what's going on there. So if you missed that episode or any other prior episodes, you can find them on our podcast website, Hoa insights.org, on your favorite podcast platform or on our YouTube channel. But better yet, subscribe to the podcast in order to get every episode delivered right to your phone or mobile device. Well, those of you watching on YouTube. Can see my HOA insights mug here, one of my favorite cartoons that we have, and it's something that you can get from our merch store, which you can browse through from our Hoa insights.org website, or from the show notes. And you'll find we have plenty of free items there, like board member assume backgrounds and some specialty items, like that mug for sale, but you can get one for free. So just go to our merch store, pick out the mug you'd like and email me at podcast@reservesay.com mentioning episode 112, mug giveaway, and if you're the 10th person, we'll ship it to you free of charge. Well, as you know, we enjoy hearing from you, and most episodes are in response to a topic that you've recommended. So do stay in contact, letting us know what questions you have, topics that you'd like to hear more about, or some of your crazy stories, and so leave us a voicemail at 80520331301, 33130, leave a comment on the YouTube video or send us an email at podcast@reservestudy.com, but back to today's episode. I've built it as a crazy story, but it's really not a crazy story. It's a real story. And Helen, and I'll use just her first name here because of the story you're about to hear she's been a board member for 15 years at her large, over 200 unit Southern California condo association. Just the basics about her association, they have a five member board, and they have on site professional management. They made it through COVID, okay, but their association had an adverse reaction to the balcony inspection requirement here in California, that law for your information went into effect in 2020 it required any condo association with three units or more, with any exterior structural wood elements supporting humans. So think balconies and decks and stairs and things like that more than six feet above the ground. Safety ideal to have an inspection at least every nine years, with the first inspection required prior to December 31 2024, so first inspection was supposed to be done just a few months ago. Now, from my point of view, as a reserve study provider, It all sounded like a pretty reasonable law with a five year implementation time period. And we were aware of that because that legislation passed largely in response to a 2015 balcony collapse in Berkeley, California that killed six people. So the law went to place in 20/21 Inspection required before the end of 2024 and Helen, again, I said, it sounds reasonable to me, but what started to happen at your association because of that balcony inspection requirement?

Helen:

Yeah, we were notified about the new law by our property management company. Be great about letting us know what was coming down. Down the pike. We thought that we should really jump on these inspections. Yeah, we were thinking, Okay, everyone had to do this. It's a state mandate. Every Inspection Company in the state is about to get very busy. So let's, let's get on this very quickly. So we, we scheduled our inspections first. We scheduled some inspections of the load bearing elements, so the inside of the balconies, the inside of the stairwells, and that required drilling some holes. So it required some coordination. It took, it took a lot longer than we realized. The company did a third of our balconies, kind of at random, and then extrapolated those results to say, well, you know, we've seen pretty much everything looks the same that we've opened up. So we can kind of say was with confidence that probably the rest of the of the complex is going to look the same. We had another company come in and look at the waterproofing. They said, yes, your waterproofing is old, which is no surprise, because your building is old and the watch proofing hasn't been replaced for you know, across the complex and individual balconies may have been worked on for various reasons, but big, complex and we just didn't have all of that done. So basically, two companies said, you know, what we recommend at this point is that you come up with a master repair plan. At the time, I did not know what that was, but now I have learned that it's just a coordinated plan where, if you have a large complex, a lot of different balconies and stairs, and they all need pretty much the same types of repair, then it's a way of coordinating those repairs, making sure you have all the plans and the permits in place. So by the time you hire the contractor. Then the contractor can pull all the permits that they need or that they might need. So once they start the work, maybe they open up a balcony. It needs one particular kind of repair. They're ready to go. They've got the permits. Another balcony might have need a bit more significant repair. So they it's kind of a way to coordinate, a way to organize. So they walked us through that process. They said, Yeah, we'll do we'll get the plans, we'll get the permits, we will then you'll go out to bid. We'll get a contractor. You'll choose a contractor, and then the contractor, by that time, will have all the permits ready for them to to do the work.

Robert Nordlund:

That sounds pretty much like a normal process. Now, you said an older building.

Helen:

Tell me how old it was built in 1971

Robert Nordlund:

Okay, and I'm guessing this is probably 2021 or 2022 so we're talking in 50 years and so not surprising, that's a 50 year old building with some wood structural elements. This is Southern California. So was it original siding and a lot of original type things, yeah,

Helen:

mostly original siding. Yeah, we've it was a mixture. But for the balconies and the stairs that were being inspected, most of it was original.

Robert Nordlund:

Okay, so you weren't really all that surprised that they were finding that. Yeah, this looks like a 50 year old building that's got some things to do. Okay? So then you got the inspection done, then they went through the permit process, you got some bids. And tell me what? What was that kind of number?

Helen:

We didn't get to the bidding stage. What we did was we got the the engineer recommended that we also start working on financing early, because he said it can take a long time to get financing in place. At the same time that they're working on the plans and the permits, we could also start working on the financing so that all the pieces would come together kind of in the same time frame, and we one thing wouldn't be held up on another thing. But the what we did was we got rough cost estimates just for the purposes of informing the financing. And so the engineer contacted a contract. Contractor who just had a very, kind of, just took a sort of overview of the project, got some very basic details, and said, you're probably looking at, you know, this. And he gave us a number, and it was, you know, a big, a big number. So we're like, okay, yeah, millions of dollars. So like, okay, that's and so we then we moved on to start it, to work on how we were going to raise that amount of money, because it was a lot more than we had in our visit,

Robert Nordlund:

because your reserves are for classically painting and roofing and asphalt and things like that, and not fixing siding and fixing balconies and 50 year old retrofit type things. Okay, so you started thinking, you know, there's going to be this much money. Were you thinking special assessment? Were you thinking loan? What, what wheels were moving?

Helen:

We thought special assessment was going to be inevitable because we didn't have the money in our reserves, but because our reserves were in fairly good shape. Could have been better, could have been worse. So the plan was to get the loan to pay the work and then we would special assess people to pay back the loan. The benefit to the homeowners would be that, in that case, they could pay a. Over a much more extended period of time than if we just special assessed them. The special assessment would have been just a would have been in a much shorter time frame, have been much more burdensome, but the loan, we could spread out over five to 10 years, and then, even though it's still a lot of money, it would spread it out and kind of make the best of a bad situation kind of thing. We were in good shape to get a loan. We were even pre approved to get a loan because of the strength of our financials and our reserve funding. Yeah. So that's, and that's kind of where we where we got to,

Robert Nordlund:

yeah. And then you're communicating this to the homeowners, that there's this new law, and that's why people are drilling into some places, and they're here legitimately, we're looking at how we're doing. I imagine you're keeping the homeowners posted, and we realize it's going to be expensive, so we're investigating a loan. You're you're communicating, right? Yep. Okay, good. So then what began to happen,

Helen:

there was a just a huge amount of, I think, probably shock initially, and then questioning, and then organized resistance to the plan.

Robert Nordlund:

When I see a building, I can tell a new building versus an old building, and old buildings, like everything in life, older things get tired, and older things need more work than newer things. Are we talking about people who can't see the reality of the situation? Or are they just so tight, money focused that they Well, yeah, talk to me about that.

Helen:

Yeah. I think it just goes to people's expectations of living in a condo, which I know you've you've addressed in other podcasts. Their ideal is they expect to just pay the monthly dues and everything else is taken care of magic and certain magic, yes. And so any special assessment just is a huge shock to people, and comes across as well the board failed, maybe because we have to have the special assessment. The special assessment would have been significant. The loan repayments would have been significant. So I don't want to discount, like say it was trivial. It wasn't trivial, and it would have been a huge stretch for for many homeowners. But Helen,

Robert Nordlund:

without giving away anything, and I got my calculator here. I should have asked you this beforehand, what was the potential size of the special assessment compared to home value?

Helen:

So I would say, home home value. Let's ballpark 500,000 a very, very broad ballpark, and the special assessment would have been around 16,000 if it was, yeah, lump sum.

Robert Nordlund:

Okay, so we're talking 3% okay, so it's not like this is gonna kill their home value, but we're talking 1000s of dollars. Okay? Homeowners were taken aback, even though you had fed them the news. It's one of those things where maybe they were Hear no evil, see no evil, think no evil. They didn't want to hear it until it started to become real, and then they started to push back a

Helen:

bit. We've been talking about this for a long time, probably since 2021 when we started having these inspections, I think most homeowners didn't really pay too much attention until there were dollar amounts talked about. And so, you know, most, most homeowners, don't come to board meetings. So they didn't really, they weren't really part of the conversation, or they didn't listen to the conversation that the board members were having. Maybe many don't read the minutes that get emailed out of the open session. So it so, I think,

Robert Nordlund:

I think you could, I think you could even say most don't read the meeting.

Helen:

Yeah. I mean, we can speak, we can speak the truth here. Yeah, yeah. I'm giving them the benefit of doubt. Yeah. It came as, you know, it's sort of like, Oh my gosh. This is so sudden and and from the board's point of view, of like, we've been thinking about nothing else for two years now, but from the home owners perspective, it was like, this is absolutely shocking, sudden, terrible, just big reaction that led to a just a ton of questioning about, how do you know we need to do this? What does this law actually say you're not interpreting the law correctly? The law doesn't actually say we need to do repairs. It just says we need to do inspections, which is interesting, because we have a fiduciary duty as a board member to do repairs that we're aware of, you know, but, but looking at the letter of the law, they, you know, they were looking for something and said that said you absolutely must do the repairs that the inspector tells you you should do.

Robert Nordlund:

Okay, let me. Let me stop you, right there. You have an on site manager, probably have professional legal counsel, okay? And is this a part time divorce lawyer, or is this someone in the community association law field?

Helen:

No, they're in the community association law field. And they also recommend that we do the, you know, the master repair plan.

Robert Nordlund:

No. I. I get that, yeah, and I'm assuming the homeowners are, and I'm stereotyping now Google attorneys, where they'll Google something and, oh yeah,

Helen:

yes, well, and some of them are even in the engineering field. Some of them are in the, you know, the legal field. So, you know, architectural field, so, you know, everyone can claim to know better than another professional.

Robert Nordlund:

But you used a key word there. You appreciated that you were a fiduciary. Yeah, you have a responsibility to act in the best interest of the association, and that's what you were doing. You were confronted with the facts, you were confronted with the law, and you're moving down that path thinking that, gee, and you said for a couple years that's all we can think of, because we see this big tidal wave coming, and it is going to dominate everything we do. You know, forget patio furniture, forget restriping the asphalt. This we got, we got a big guy here. Okay, so what did that begin to look like, politically or culture wise, at

Helen:

your association? Yeah, so a very large opposition group formed. I'm sure they were they started small, but then they grew very quickly. They were very well organized. They would meet frequently on Zoom. They would put out flyers all over the complex, all over the complex with things that were just patently untrue about the project and the way that it has materialized. And they were disparaging the vendors that we were working with, implying that they were corrupt. I mean, just as time went on, this, this sort of got worse and worse and worse where, you know, implying that the board members were corrupt, implying that the property management company was corrupt, even the HOA lawyer was, you know, everyone was in commutes with everybody, and it must be some mass conspiracy, and everybody must be in the pockets of everybody else. And we're all getting kicked back. We just got totally demonized. And the idea that any of us were acting in good faith was just not, not, not even on in the realm of possibility, in their in their mind. So that was very hard, but it but the message was very strong, and it it was very hard to fight against, because it was, if you join our group, we will save you from a special assessment. That's like magic. That's, you know, so, so compelling to people. If you act in a certain way, we will save you money. And nothing we could say to try and dispel the myths and the lies and everything else that they were saying about the project, and nothing seemed to be able to offset that promise that if you do what we say, we will save you money and you will not have a special assessment.

Robert Nordlund:

That's a compelling story, even if it's untrue. And again, I come at this from someone who looks at buildings for a living, there is a reality to building deterioration that you just can't fight. Now, in the meantime, I imagine you're well right now, the hairs on the back of my neck are sticking up. And for a lot of our listeners, it's thinking, Gee, that can happen during this time period. You're keeping your cool. You are having regular board meetings. Are they making life just horrible there at the association.

Helen:

Yes, as time went on, it just got worse and worse and worse. And just with the very public, the public notices about how, you know, certain board members were not acting in the best interests of the association, which is a board member, is a terrible thing to say. I mean, it actually was, was more more pointed than that. But even if it will, if it wasn't, I think, just as a board member, to be told that you're not doing what you know, acting in the best interests of the associations, just when you do problem, you do so much, you're volunteering. You're not getting any money at all, let alone kickbacks. You know, you're just volunteering your time you're responding to emergency calls, and you're spent, you know, all of this, all of this stuff. So it was, yeah, it was, it was very hard to and it just, and it just grew and grew and grew until the point that, yeah, until the point where they realized that as long as the majority of the board would vote to continue the master repair plan, there was not much they could do without just recalling the board. Okay, that was like the nuclear option. They went option.

Robert Nordlund:

Okay, well, that's a that's a great point to make, and that's a great time to take a quick break to hear from one of our generous sponsors after we'll hear the rest of the story from Helen.

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Robert Nordlund:

and we're back. Okay. Helen, so tell me what happened next.

Helen:

So what happened next is we had a, uh, election coming up, and in that election, the opposition group, part of their campaign was telling people how to vote in this upcoming election, with the goal of removing one of the board members who would vote for the master repair plan, so basically switching the majority of the board to be against the master repair plan. Long story short, they did that. They rallied everyone to vote a certain way, and they did that. And then shortly after that, they initiated a recall election. They told everyone to vote again, how to vote, vote this way, to pull off these two people, the remaining people who would vote for the master repair plan, and we're going to replace them with people who are against the master repair plan. And so basically, they succeeded in that too. And so now we have a new board who are taking us in a different direction, although, yeah, I think they may slowly start to drift back to the original direction, but we can talk about that.

Robert Nordlund:

Yeah, I want to get to that. But the very tempting story that, and I like your words, if you act in this way, we will save you money. We're talking 2122 23 those kind of timeframes that this is going on, and that's either in COVID or post COVID, when people are maybe a little more distrustful of the people in authority. And so that's really bad timing for this board. You've taken good care of the property for a long time. You've had open board meetings. I imagine you have a newsletter. You regular have board meeting Well, yeah, he told me they aren't reading the board meeting minutes, and all through this, you're trying to do the right thing, but now, now they're the board. But you, you put a seed in this conversation where he said there's a may not be able to follow through with their entire plan, and that's because you still got a 50 year old building exactly, and for everyone, everyone not watching, Helen's nodding her head

Helen:

absolutely yes, reality is reality. Let's

Robert Nordlund:

talk about the reality, because we hear about recalls where the opposing faction thinks the board is stealing the opposing faction thinks there's kickbacks or whatever, or they're wasting money on this. And the new board comes in and looks at the bank balance and realizes that, oh no, I guess they weren't stealing so this new board has made a lot of promises, and they still have a 50 some year old building with some licensed professionals that have said, Do you need to do a lot of work to keep it good and safe? So what? What do you start to see here?

Helen:

Well, as expected, and as they, as they told us that they would, this group said, the opposition group said, If we when we recall abortion. These are the things that the new board is going to do for us. And they laid it all out, you know, we're going to, you know, fire certain vendors. We're going to cancel the master repair plan. We're going to in. They just, this is our kind of, you know, this is a policy statement kind of thing. And they're basically working their way through that list. They have canceled the master repair plan. They're working on changing vendors, yeah, but we still have balconies to repair, and they've also made a lot of promises that are going to fix all kinds of things in the building that haven't been fixed. So yeah, they now they know exactly how much money we have, and they they know what needs to be repaired, and they've that now they have to figure it out.

Robert Nordlund:

Okay, did they promise to lower the monthly assessments?

Helen:

No, no, they, they, yeah, they, they would probably suspect that they need to be raised, you know, every year, but, but not in to cover these big projects. Okay,

Robert Nordlund:

so the big deal was avoiding the big special assessment, the big loan, not necessarily we're going to take our assessments down from 425, to 375, back in the good old days. No,

Helen:

thankfully, everyone is at least on board with the fact that, you know, there's inflation and operating costs increase every year. So. Yeah, that part, at least, is understood. But in terms of funding these large repair projects, there isn't really a plan, but, but, yeah, it's it's interesting, because they seem, in a short time they've been in their role, they seem to be accepting now that they do need to do balcony repairs, it's not just an inspection. So that's good. So they did, they do need to do balcony repairs that they've also accepted that they as part of a cheaper plan. I think they were wanting to cherry pick some inspections versus others, because we had a few different contractors inspect the balconies. And they were like, Oh, well, we'll, we'll pick the the lowest, you know, the cheapest repairs, and we'll do those, but we won't do the expensive repairs. And I think now they're starting to talk about, okay, maybe we do need to factor in all the information that we have from all the vendors that inspected the balconies, and that's the information we can't, we can't cherry pick the information. We do need to do, you know, repair what we we've been a form needs to be repaired.

Robert Nordlund:

Well, again, I'm thinking it's a 50 some year old building. And yeah, maybe the west facing ones catch the evening sun, and so maybe they're a little drier than the East ones, but you've got deterioration all around. And so maybe you can stage it a little bit, but the building is 50 years old, so you're starting to see indications that they are addressing the reality of their situation, and they are. Can I use the word stuck between their plan to avoid this big cost, and the reality that they have every inspection report that you left in the file for them says that there's work to do.

Helen:

Yeah, interesting. So, so the, you know, the big the gap is really how to pay for these things, and you can't always, you can always spread out the project to pay, to to lessen the burden of payment. You could do it over five years. Yeah, yeah. But even with the master repair plan that we had in place, it was going to be a multi year project. So without any financing, or without a loan, without special assessment, I yeah, there's no way we we can replenish our reserves fast enough to cover these costs. And in addition to all the other reserve expenses that you normally have, you know, the roof will come up for renewal, for repair, the other waterproofing projects come up other yeah, there's other repairs that needs to be done that will need reserve funding. So even if this was in isolation, we would have a hard time. Yeah, and you still live there. I do, yeah, still live and own and have you gone to a board meeting since the new board's been in position? I have Yes. Just tell me about that. Tell me about that. Yeah. Well, the new board is, you know, trying to change the culture. They're trying to do more things in person. Because we'd kind of shifted to to zoom during COVID, as you know, many people did, and then we were slowly kind of going back to more of a hybrid. But now the new board is wants to kind of create community, I guess, or at least that's what, yeah, have to have people come together and to actually see the board members all about all the board members were, were there at the board meeting in the in the clubhouse, yeah, that, you know, there's food and drink, and it's a bit more of a kind of encouraging people to come to board meetings, which is great, you know, because typically attendance at board meetings is very low. So anything you can do to incentivize it, I think, is, is great. So yep, that's, that's the culture. Now they're trying to change the culture we've we've come through a lot of anger and fighting, and so I think they would like to try and

Robert Nordlund:

do some healing. Okay, good for them. Actually, there was a time during our conversation where, like I said, the hair was sticking up on the back of my neck, but now I'm actually feeling a little bit of sympathy for the new board, because they got themselves in a jam. They've made a lot of promises, and it's going to be really hard to deliver and not be the new bad

Helen:

guys. It's hard to make these decisions, and everyone wants certain things done and certain things repaired, and things that are important to them, different amenities are important to different people, and it's hard as a board sometimes to to have to say no to some things.

Robert Nordlund:

Well, looking at the time, it's about time to wrap this up. I want to remind you or tell them my audience, about this one resource that we mentioned, Helen, you and I earlier. It's a case study by that you can get from the community, associations, Institute. Cai. It's called capital projects, a case study understanding the connection between financing, communication, meetings, bids, project team and more. And it's about a big special assessment renovation project for a high rise in North Dakota, I believe. But a fascinating story. And if you want to read more about this and add double your case study, because we've got one here with Helen, you can get the $20 case study from Cai, and that's another resource if you guys are facing something like this at your association, Helen, I want to thank you for taking the time to join us on today's program and tell your story. Any final thoughts to share on your board member experience to share with our audience today.

Helen:

Well, it sounds like a sad story. It sounds like a failure. I maybe don't sound like a board hero, but I do hope that the story has been helpful. It's it's great to be a board member and to just is very satisfying. So, but it is hard, and it does take courage to make tough decisions. So I'm just sending, sending, sending courage to fellow board members or out there, yeah,

Robert Nordlund:

we talk about attributes, great attributes for boards, being that you care, that you're curious, you have courage and that you communicate, and you were talking about a lot of those things, and I just want to press those buttons hard. We want to thank Helen for performing a thankless job well, a job that doesn't reward you, even in the light of her Association's current change of leadership. Not every story has a happy ending, but I don't think this is the actual end of this story, when the allure of low monthly assessments or absence of large fees turns out to be a mirage. Mother Nature and Father Time, they tend to find a way of always winning. I expect it won't be too long until the new board realizes the challenges that they're facing are exactly the same challenges that Helen and her board were facing. So I look forward to Helen actually being re elected to the board. I think it's associations across the country that benefit from people like Helen being on the board, and get a few other clear thinking homeowners with her, and I hope to be the one to share that next chapter of her story with you. Well, we hope you gain some HOA insights from Helen's story, and that helps you bring common sense to your common areas. And remember, if you match our definition of a bored hero, or know someone who does, please reach out to us. We love having bored heroes on our program. Our contact details are provided in the show notes. Thank you for joining us, and we look forward to another great episode next week. You

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People on this episode

Head Shot

Robert Nordlund, PE, RS

Host
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Julie Adamen

Co-host
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Kevin Davis, CIRMS

Co-host