168 | HOA Loans vs Special Assessments: Which Hurts Less?

HOA loans or special assessments? Discover which option may cost your community less in the long run.
✅ Is a Reserve Study right for you? 👉 https://www.reservestudy.com/

In Episode 168, Julie is joined by HOA industry veteran Rolf Crocker to discuss one of the toughest financial decisions community associations face: should an HOA fund major expenses with a special assessment, a loan, or a combination of both? Drawing on Rolf's experience in both community management and HOA lending, he and Julie explore the key factors that help HOA boards make informed financial decisions for the future.

Chapters:

00:00 Why do HOAs end up needing loans or special assessments?
01:04 What causes HOA reserve funding shortfalls?
05:06 Should your HOA choose a loan or a special assessment?
07:48 Can an HOA combine loans and special assessments?
09:44 How should boards communicate financial problems?
11:05 What questions will homeowners ask first?
16:37 Ad Break - Community Financials
17:08 How do you prove you've chosen the best financial option?
23:14 How do you prevent another financial crisis?
27:53 Why should boards address funding problems even if they're unpopular?
31:25 What's the biggest lesson for HOA 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.

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Transcript

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Rolf Crocker: 0:00

You know, no one wants to bring bad news to your to your neighbors. I understand that, but as prices continue to ramp up, as insurance costs skyrocket, as in the wake of Champlain Towers, Fanny and Freddie become more demanding in the paperwork that they're requiring for making sure you're maintaining the property correctly. If there is a shortfall, people might say,"Look, we would never get this passed in this life or the next. So why even try?

Announcer: 0:28

HOA Insights is brought to you by five companies

that care about board members: 0:30

Association Insights and Marketplace, Association Reserves, Community Financials, Kevin Davis Insurance Services, and the Inspectors of Election. You'll find links to their website and social media in the show notes.

Julie Adamen: 0:43

Hi, I'm Julie Adamen with Adamen Inc.

Rolf Crocker: 0:46

And I am Rolf Crocker with Omni Community Management.

Julie Adamen: 0:48

And this is HOA Insights, where we promote common sense

Rolf Crocker: 0:52

for common areas.

Julie Adamen: 0:53

Hey, everybody! Welcome to episode 160-eight and I'm joined here by my best buddy in the world, Rolf Crocker, industry guru full of insights.

Rolf Crocker: 1:03

Stop management

Julie Adamen: 1:04

company executive speaker, soft shoe dancer. I think he's a spy as well, but we don't talk about that too much. So, yeah. Anyway, everybody, we're going to talk to you today about a couple of things that we have gotten as emails asking us to to speak about, meaning the the whole HOA insights thing, and they were handed off to me, so I thought that I would get Rolf to talk about them. A couple of things is that a lot of associations, because especially in this day and age right now, associations are getting older. Most of them are underfunded in their reserves, so we are going to talk about what you do about that. Do you get a loan? How do you decide whether you're going to get a loan, or how do you decide whether you're going to special assess, or do both? Now, the reason I wanted Ralph to be here to talk with us today is because not only has he been in the management world for a million years, you also

Rolf Crocker: 1:56

spent four years on the HOA banking side, specializing in loans for homeowners associations, we

Julie Adamen: 2:02

thought this would be a really great thing to start talking about. So, Rolf, let's talk about why associations need a loan or special assessments. Why don't you riff a bit,

Rolf Crocker: 2:12

man? So many ways to try to cover this, to try to distill it down. But if you're having a conversation where you have a shortfall in your bank accounts, whether it's operating a reserve to cover necessary repairs or replacements in your reserve accounts, it's invariably because well, it could be for several reasons. But the primary reason that I've found is that boards have struggled, shall we say, setting assessments commensurate with their obligation under the governing documents, which is a really fancy way of saying that you know we're just trying to keep the dues low and we don't want to increase it because we don't want people being mad at us or we don't want to pay more. And if that happens over a period of of years of even decades in many cases, then associations down the road will find themselves when they have to finally do the major repairs that the reserve study calls for that they don't have the funds that the reserve study says they're supposed to have in order to do the repairs, and now they have to figure out a funding source to be able to make up that shortfall. Because when the mantra in the industry for the last 60 years is supposed to be to protect, maintain, and enhance the value of the asset, which are the individual homes, for whatever reason, the money isn't there to be able to do the work.

Julie Adamen: 3:25

Well, that's often a political issue. I mean, it's the hardest thing to you know raise dues on your neighbors, and it's true. I mean, so many board members. I mean, I mean, this is the thing about being governed by your neighbors, or you're the neighbor who's doing the governing, right? Is that you're on your way to the mailbox, and the person who got the notice of assessment increase of $10 a month or something, and they're unglued, and it's very personal. They come right up to you and they tell you this is wrong, and I'm going to vote you out, or all the different things that they say. So there's that. The other thing I wanted to point out with just what you were saying, it's even associations that yes, the reserve study says okay, time to replace the roof, and we don't have that on the clubhouse. We don't have that $300,000 What are we going to do? But there's also the emergency. I mean, the

thing that happens: 4:10

the pool, you know, the the plaster has completely failed, and in the pool, and you've got leaking going on everywhere. Or there has been something that happened to the roof where you didn't realize it was leaking underneath, and all of a sudden everything is kind of collapsed on one end. So that happens even before maybe the reserve study says it's supposed to be replaced. So regardless, you're looking at a shortfall.

Rolf Crocker: 4:33

Could be out in California. We had legislation passed six years ago that required condominiums specifically to repair balconies and elevated walkways and catwalks, which wasn't anticipated. You may have construction defect that that wasn't accounted for in the reserve study, and in other parts of the country, wildfires or floods or other unexpected expenses, or sewer mains that collapse, or water systems. Any number of things can bring you to the point of need of the money,

Julie Adamen: 5:03

and it may be insurance covered, but doesn't cover all of it necessarily.

Rolf Crocker: 5:06

Correct. Usually, it covers the sudden happening, the result, but not the actual thing that caused it. Right. We're here today. We need money. What do we do about it? So, as Julia talked about, really in an HOA world, I always say there's two. There's, you know every decision has two components. There's a political component and an economic component. The economic component is actually fairly straightforward. It's a math exercise. You go out, you get the bids for the work that needs to be done, then you divide it by the number of units that there are, and then you have the outcome of what each person's individual responsibility is, but then you have the political aspect, and that is always the most challenging aspect. Because as you talked about, you're dealing with people's homes. It's the single biggest purchase most of us will make in our lifetime. Most Americans can't even afford a major car repair because their economic situation is so tight. You know, I had my transmission and my car blow up. It's a four-year-old car. It's going to be $8,000 to replace it. I don't know people that have that kind of coin to be able to flip it. So the angst is very, very real. But yet, the buildings aren't sitting there saying, "I recognize you can't afford it, so you can just let me go. That's not how it works. The buildings, the health, safety aspects, keeping up the equity, keeping up a habitable condition. None of that is contingent upon people's individual economic situation. Is contingent upon what the buildings require and how soon and quickly it needs to be done. So the question is, how do you raise the capital? So the primary way the capital is raised, if it's not in your budget or in your bank account, is through some kind of special assessment, and that is an assessment outside of the normal assessments you have for operating, which is what happens within the 12-month period, or what is put aside for reserves, which is for anything that, at least in California, has a useful life of greater than 12 months or less than 30 years. So, if you don't have the money, you've got to be able to go out and get it. So, the ways you can obtain that is either through special assessing each individual owner, whatever their pro rata share is, or there are times you can go out and get a bank loan to be able to fund that. The challenge with the bank loan side, they're absolutely obtainable. They are done every day across the country for on behalf of associations. But it's one thing to get a loan, but then the bank's going to look at your budget and say, "Well, how are you going to pay for the loan payment? How are you going to service the loan? Invariably, if that's not already built into your operating budget on some level, then you've got to raise the funds again back to special assessments. So special assessment becomes sort of the the key piece. The question is, do people pay for it individually, or are they going to go to a bank, get a loan, and then pay it back over time? Those are really the primary options of of solving the issue.

Julie Adamen: 7:48

Yeah, and don't sometimes people? Well, I do. I'm asking you on everyone's behalf. There are many times that associations get a loan and special assess because the because the amount of is so onerous, or they have to raise assessments to do that debt service, right?

Rolf Crocker: 8:03

That's correct. What I found in my banking experience is that usually it's a hybrid situation. There are people within every association that will have the economic means to be able to pay for most special assessments outright, but yet there's always going to be a group of folks in every homeowners association that don't have the means to be able to go out and qualify for a 5000 15,000 you know, the biggest one I remember doing was a $10 million loan, 50-$7,000 per unit special assessment. They just can't go out and get that, or they don't have the credit avail, the credit built to be able to get that kind of money. What a loan does is it allows the association, the corporation, to borrow money on behalf of the membership, where the individual owners do not have to qualify with their own credit. Now, sort of, I hate to equate this to a payday loan because it's not like that. But the money is going to be more expensive because now there's the interest and there's the soft cost equated with all of that. But they are able to obtain it, and if you have a special assessment, and in most states, you have to vote based on what the dollar amount is. There are, you know, in California, you can do up to 5% without a vote of the membership of the budget, and every state is different. But if it requires a vote, the goal is to get people to vote yes because the work needs to get done. In my experience, usually it's a hybrid. You have $1 amount, you go for the vote, and I'm sure we're going to talk about the details of what this means in just a moment. But once everyone, once it gets approved, and those who can prepay will prepay, and those who can't will take advantage of the association loan that they've pre-qualified for, and then those that haven't been able to prepay will be the ones responsible to service the loan based on their monthly payments, so the association can make the loan payments until the loan is paid off.

Julie Adamen: 9:44

That is the quick and dirty, and it's it's very common. And as associ as Ralph talked about earlier, and you all are board members out there, you know this is what happens. It may not be happening in your board right today, but it happened years back when association is new in the seven. Or 80s or 90s, whenever it was new, no one needed to raise assessments. You know, of just oh, we don't want to have to do that. Everything's brand new, and then all of a sudden you're coming, starting to come. Do now the place is 20 years old, 25 years old, and howdy, we just do not have enough money to do this. I think one of the big things that, as current board members, to remember to to do number one is you have to communicate all this to your owners. We're going to talk about that in a second. But in the number one part of this communication is don't throw the previous boards under the bus as much as you want to and as much as they may deserve it, because number one they prob they may still live there, they may have friends that live there, and you know what? It just doesn't do anybody any good. And I know it is extremely tempting to go. Well, if those guys had done that 30 years ago, we wouldn't be in this mess. Or if the developer had given us more money, well, yeah, but you weren't on the board then. You don't really know what happened. But regardless, you have to move forward. Where are we today? From here is where we move forward. It's like the old adage: the best time to plant a tree is 30 years ago. The second best time is today. Today,

Russell Munz: 11:05

exactly.

Rolf Crocker: 11:07

You got it. It's like golf. You got to play it where it lies, and you pick it up from here. The goal is to move it forward because the goal is is to have a successful outcome, to be able to get the money's needed, to make the necessary repairs, to preserve everybody's equity, and to make the place a place that you that you want to come home to, that you're proud to live at. So that's the outcome, and focusing on that is important. So, to that end, what I've found in my experience, I've distilled the basic thing to get a special assessment of any kind, which would include a bank loan passed. Essentially, the board needs to be able to answer three questions. First question that people are going to ask is

number one: 11:42

How did we get here? People have been paying their assessments for years, for decades. Even though in most associations I know in California, you have to review the financial statements; they're made available. There's a lot of information, but most associations, people aren't reading that. You know, they're putting the packet of the annual disclosure, and as long as the assessments aren't going up any more than $10 a month,

Julie Adamen: 12:06

it goes by. It goes bright by the wayside.

Rolf Crocker: 12:09

But now all of a sudden, when you're coming to them and asking, "Hey, we need like you know 15 grand each, now they come out of the woodwork and say, "Okay, how do we get here? So that's what Julie talked about. Don't throw past members under the bus, especially if they're in the room, but you've got to be able to go back and have some sense of how you got there. So transparency here is really the key. You got to be able to be transparent with how we've raised assessments, any other mitigating circumstances that may have caused it, and to be able to let them know in a transparent way that look, there are a lot of reasons why we got here. Here's what they are, so that you have to be able to answer that.

Julie Adamen: 12:43

Yeah, and and let's talk about that transparency because we're going to go to a break in about five minutes. But let's let's start talking about that transparency because as I do these podcasts with Robert a lot, I spend a ton of time talking about communication, which I think is one of the most difficult things in our industry for boards to wrap their minds and their hands around how much they need to communicate to the owners, what may feel like too much communication to you as a board member is probably not enough to the people out there in the audience. Because first rule of marketing is seven times in front of someone and they see it doesn't mean they read it. It means they see it. So the first thing in transparency is open communication, and that's the minutes of your board meetings are posted. They're available to everybody. You should be sending out newsletters. You should have your website updated. I will say people like, well, we're the board. We write our own newsletter because the management company charges us, or we're self managed, and nobody's a good writer. Well, I would say that that has gone by the wayside. You can use Chat GPT, Claude, Grok. They can write stuff for you that is absolutely amazing. All you have to do is give it bullet points. Make sure and proofread it though, because it's not proofread. But and you can send this information out, and I would say send it out in in in bytes. And I meaning it doesn't need to be you know 20 paragraphs, just three or four paragraphs, letting people know what's happening, and do it again and again and again. Even if it's some of the same information going out, it really is a communication strategy. So if you know this is coming up, okay. So then here's the other part. I'll let Rolf address this, then we'll go to break here. But the other part is that the board has been dealing with this. Okay, the board knows what's going on. Let's say because you have all the no, you know. I mean, a lot of places the homeowners have no idea what's going on because two or three people attend the meetings. That's about it. So the board has been living with this financial situation, whatever it is. You're going to need more money to do X. You've been looking at this financial statement, and you've been living with this for six months, a year, two years, three years. You already know this is coming up, but to your homeowners, it's like a whiplash. They have no idea what this is all about. Want to address that just for a minute, Rolf? Yeah,

Rolf Crocker: 14:57

sure. But you could argue that they should have known because it's not like the information. Hasn't been readily available to anyone who's to who wants to see it and wants to know it, but for the most part, folks are just kind of like day in day out living their lives and in many respects oblivious to what the actual condition is. So the need to be able to communicate this early and often is so key. And I understand there are times where people don't want to yell"movie" in a crowded firehouse, you know you don't want to, you know, freak people out to where they're just, you know, running around with chickens with their head cut off. But you're doing a disservice by not getting, even if you don't have complete information, information out there early enough that it's at least available where you can go back and look through it. And how I equate this is kind of like a Kubler Ross grieving cycle, where you know the board themselves right when the board people get on the board they read a financial for the first time they think oh my goodness well this can't be right denial and well who's responsible anger and well maybe we don't have to do all that work negotiation it's like oh crap where we're going to come up with the money depression and eventually we need to do something acceptance, so that's kind of how it rolls. To Julie's point, you've been wrestling with it, but then to just to spring it on people, you've had months, maybe years, to wrestle with it. Most homeowners, because you can argue whether they should have known, but most of them don't. So just know that you've got to come into this being fully prepared to educate them in terms of the the background of of how we got here, and also being transparent, where where where are we actually at today?

Julie Adamen: 16:27

Yes, exactly. All right, everybody, we're going to take a break for our one of our sponsors, and we're going to come back, and we're actually going to talk about that communication strategy. So stand by.

Russell Munz: 16:37

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Julie Adamen: 17:08

Hey everybody, and we're back with Ralph Crocker of Omni Community Management in Fair Oaks, California, and we're talking about special assessments and loans for associations. And we're on to the part about how do we communicate that to our owners? So, Ralph, I'm going to hand this to you.

Rolf Crocker: 17:23

Sure. So, the first question is, how did we get here? That's a communication strategy as well. The next question you have to answer of the three questions is, has the board done their homework? Is this the best option of all available options? Here's the place where the board really needs to engage the professionals who are out there in the industry? Your contractors, your design professionals, certainly your attorney to know what the legalities are in terms of special assessments and how they look, and what are the potential insurance agent among them. Sure, even perhaps if you're a larger association that has some means CPAs or financial advisors, and your banker. If you need to get a loan, then you need to have your banker involved in these conversations. To because what the people are going to look for, they're sitting in. Say you have a town hall and you're talking about all this in detail for the first time. You know the how we how we got here. Questions have been answered. Now, have you done your homework? Is this really the right option? Are you like platinum plating this? Right? Are you like over-engineering this, or is this really what's necessary? You've got to be able to defend that, and that's where your professionals can help you do that. So communicating that is important. So Julie, in terms of communication, what would you think on that?

Julie Adamen: 18:34

I would think the first thing, again, keep in mind, board members, that you've been living with this for months or years, right? And now all of a sudden we are springing it on the homeowners. Granted, had they been paying attention, maybe they would know some about this. But seriously, they don't know the details you do. So I would say, as you know, this is coming up. The first thing, and I know a lot of you hate to do this because you're often on the firing line, but a town hall, like Rolf said, that and a Q and A that can go miles towards promoting the transparency of the board. So don't forget, you want to be as transparent as possible. Yes, is you are you going to get questioned? Yes, are people going to be angry? Yes, but you have to hit this head on in the sense that okay, you know, on Tuesday or on Saturday morning, on you know august 7, we are gonna. I don't even know if August 7 is a Saturday, but let's pretend it is. But it

Rolf Crocker: 19:23

isn't

Julie Adamen: 19:24

sunnier. Eventually, it will be. So you should have a town hall, promote it to everybody. Come on in, ask your questions. We're going to have our presentation by our attorney, by our contractor that that we are looking at, by our consultant that we've hired. I mean, let's just say it's a roof job. You hire a roofing consultant first. You bring that person in, and you will have a presentation given to them. I'd suggest using a PowerPoint or something like that, whether it's done by a board member, board president, or whoever is going to be better at at communicating this, and then having your experts chime in with this, and at the same time either let. People ask questions during or towards the end. You kind of have to gage that with how it's going to go. Sometimes having them ask during the presentation makes things go way longer. But maybe better for them to hold it till the end or hold it till the end of the different sections. Here, let's ask our attorney questions here. And I know you got to pay the attorney. The rest of the people, maybe, maybe not. You have to pay them, but the attorney you have to. It is well worth it. I know everyone hates paying attorneys. Sorry, attorneys that are out there, but you know it's true. And they just, but it's well, well worth it. And this is for your protection as board members. Don't forget, you not only do you have a fiduciary duty to be transparent and to move the association forward where it should be financially, you have the fiduciary duty to hire experts to help you do this. The attorney is what is giving the board not only cover but legitimacy. Not that you're not legitimate; it gives you legitimacy in the eyes of the homeowners as well as the other experts. So I'd start with the town hall, and I would depending on the size of the project and the temperature of the you know the populace out there. You may have to hold three or four of them. You and in between those town halls, we have to have mailers that go out, email, snail mail, whatever. I'm talking mailers in general that have to go out. Information, information, information. I would highly recommend that you actually put forth a strategy, a written communication strategy. This week we're doing this. In two weeks we're doing this. In two weeks we're going to have that town hall. Oh, in the middle there we've got something new coming up, so we're going to send out a blast email. I suggest you get that together because then it's not so much work on your part of having to figure out. Oh my gosh, everything blew up all of a sudden. We have to have a an emergency email go out. No, you want to have everything as as consistent and calm as possible. So when the homeowners read these kind of missives or have those kind of town halls, they're professional, they're calm, they are not emotional on the part of the board. The homeowners are going to get emotional because we're talking about money. That's what is one of the big things in our industry that people are like. Why is everyone so nuts in HOA management? Because we deal with very personal things to people. Their living arrangements and their money, and that's just the way it is. And there's no getting around it. So you have to recognize that, embrace it, embrace the suck people, because that's the part that sucks. But you got to embrace it and go forward with it. So if you need help with your communication strategy, perhaps you have a management company and there's an executive there that you can get to help you with. Maybe your maybe your on-site general manager can help you do that. If you don't have someone, maybe your attorney can refer you to a consultant. I do that kind of work. I'm not saying you have to hire me, but I'm just saying I'm one of the few consultants that's independent nationally left. Everybody's retired out, but me. What's wrong with me? I'm too dumb to retire. I know. I'm too dumb to retire. No. actually, I'm just having too much fun at the time. So, anyway, that's what I would suggest. You get some help with that. It'll be well worth it if you don't have someone on the board who can do it. But let's move on to the next part, Rolf. I think we're on number three. The

Rolf Crocker: 23:14

goal here is to get people to to to build trust because if you have to go for a vote, you want the vote to swing in the favor of getting the project done, whatever needs to be done. So we talked about how do we get here? Is this the best

option? And number three is: 23:27

is all of these have equal importance? Number three is people are going to want to know in the audience what are you doing to make sure that you're not back here three to five years from now with your hat in hand, saying you know, please, sir, may I have more? And the tendency in these situations is for boards to look myopically because they want to minimize the number to lessen the financial impact on the membership.

Julie Adamen: 23:50

Well, and the political pain-that's political pain, yeah.

Rolf Crocker: 23:53

But it's it's noble in terms of trying to take some of the fear and animus out. But the goal of the association, ultimately, its long-term goal is for the preservation of the property values over the long haul, not just for the next three to five years. So, when boards are looking at a special assessment strategy for cash shortfalls, my recommendation is they get with their reserve study preparer and they look anything that's coming up in the next five years that would need to be done because they get just enough money to do the project in front of them, but then three years down the road they realize, oh, the pool needs to be resurfaced, the siding. There's other major projects that could be on there. The goal is if you're going to take a bite of the special assessment apple, you only you want to take the biggest bite that you can just to get in front of it. So part of the goal that I always recommend it's not just getting the money to do the repair, but it's getting the the association financially healthy, so that moving forward, they don't have to do major special assessments or even major assessment increases. And if you include work that needs to be done in the next three to five years, that actually allows. The board and the associations members breathing room to be able to get healthy financially. You know the goal is to set the assessments commensurate with the obligation, which means if it's in the documents, you have to maintain it. There's no choice in that. That's the duty. So being able to look at this and say, "Look, we're taking a little bit bigger bite now because we want to get healthy. If you do periodic, like annual assessment increases. The problem is you can't do that in perpetuity because at some point you've priced yourself out of the resale market when the assessments get too high. So at some point they've got to reset to what would be an average, you know, 3% ish, three to 5% setting aside arguments about insurance, hard insurance markets, or other major things, but in an altruistic world, the goal is to minimize it. So you're putting away the correct amount. So when the work comes due, you have the money in the bank to pay for it. So look at this from a more holistic standpoint, not just the myopic view of getting through the immediate project with minimum financial impact.

Julie Adamen: 25:58

Even though that's totally understandable, I get that. I get that because it. This is painful process for everyone. It's painful for the homeowners, but it's really painful for the board because you know most people you know didn't say, "Oh, I'm going to be on the board of my HOA. Yay! Most of them are there because no one else would do the job, right? So they're there, or you know they got nominated while they were out of the room or something, or they agreed to at at a cocktail party. They agreed to do it. Not think. What was I thinking the next day?

Rolf Crocker: 26:24

That's happened a lot.

Julie Adamen: 26:25

Oh yes, it has happened a lot. But the thing is, I want the board members to remember this, and we don't talk about this as an industry very much. So your duty as a board member is to preserve, protect, maintain, and enhance the community. But it's not just for your term, and for this three years or two years, it's into the future. So if you are thinking, well, right now we have all these people who are on fixed incomes, and I find a lot of those fixed incomes are rather high in some places. We just don't want to pay another$10 a month. Well, that's great. You're in your 80s. If you're somewhere in your 60s, you're thinking I'm happy to pay another 1020-$5, a month, whatever it is, because I'm going to be living here another 20-five years, as opposed to just the folks who are thinking,"Well, I'm only going to be living here another, you know, 510, or whatever it is until Jesus calls me home. I'm going to live there that long. But for those of us who were in that age cohort, if you're in your 50s, 60s, that kind of thing, they you got to be looking out for them as well. It's not, you know, what you don't want is that musical chairs thing where the music's playing and everybody's going around, and all of a sudden, you know, in 10 years, that board is like the people standing there with no chair. Oh, oh, how do I do that? That's part of your responsibility. And again, well, back to those are the people you want to throw under the bus 10 years later, but you don't do it still when you have to. You got to let that part go, though. For you, current board members, remember it's not just now; it's into the future. You're responsible for

Rolf Crocker: 27:53

that's the hardest piece to get your head around. I mean, when most people, most of us can't even spell HOA when we move into one, right? And then we get on the board, and we don't necessarily think we're not clear on what the obligation is because, as board members, we're lay people for the most part. We may have served on boards, we may have had leadership background or financial acumen from other roles, but for the most part, they're just folks who are civic-minded, willing to serve, trying to do the right thing on behalf of their their neighbors, but also themselves, so it's a very challenging position to be in. So we've talked about, you know, how do we get here? We've talked about is this the best? Have you done your homework? Is this the best option? We've talked about we're just gonna we're kind of try to get this fixed so we're not back here having this conversation again. I guess in terms of trying to land the plane, I think we're about pretty close to that. There, I would leave this thought with you. I'm not an attorney. I don't play one on TV. What I can tell you is that, based on 30, almost 30-eight years of management experience, having managed on-site high-rise portfolio, run a few management companies, that you know no one wants to bring bad news to your to your neighbors. I understand that, but as prices continue to ramp up, as insurance costs skyrocket, as in the wake of Champlain Towers, Fanny and Freddie become more demanding in the paperwork that they're requiring for making sure you're maintaining the property correctly. If there is a shortfall, people might say,"Look, we would never get this passed in this life or the next, so why even try? Still, the obligation is to let the people know what's going on and what you can do as as best you can with your experts to try to fix it. At least going through the exercise does two things. Number one, if somebody decides to sue the association down the road for failure to maintain, it's a lot easier to go before the judge and say, "Well, Your Honor, in 2026 we heard a podcast with Julie and Rolf, and they said we should be in front of this, so we did what would they suggested, and we put it out to the membership, and it got shot down and was voted down. What else would you have expected us to do? And the judge. Look at them. Say, well, you've done what was required under the law, the business judgment rule in California, and in most places. What would a reasonably prudent person do in similar circumstances? Not that you had to be an expert and be successful. That's not the standard. You made the effort, so that protects you personally as well as protects the association. But the second thing it does is it puts an actual number out there into the world, which means when you go through the effort to get the vote, you now put a number with actual real world experts telling you what that repair is going to cost. So now the people who voted it down, who didn't want to pay for it, well now of a sudden they've got a $35,000 special assessment that's listed in their minutes. Well, now all of a sudden they're going to take a 30-$5,000 haircut on their equity when they go to sell it because at some point somebody has to pay that, and I can't tell you the number of times that people have moved in and like a year later a special assessment hits and they've done everything but want to sue the association or certainly the seller because it wasn't disclosed. So at least it gets the information out there. People can do with it what they want, but it's not falling back on the board that they neglected to do their duty because they were afraid of what the people would say, or they would they were afraid that for any number of reasons that that we shouldn't do this because there's not a chance. You're not doing it based on that you're based doing it based on your responsibilities as a trustee on behalf of the organization.

Julie Adamen: 31:25

Well, I couldn't have put it any better. And Rolf, you landed the plane perfectly.

Rolf Crocker: 31:30

Hey, even a broken clock shred twice a day.

Julie Adamen: 31:32

Speaking of that, I'm going to end this with a funny little thing that you board members can use at your meetings as well. So we used to say this as as an on-site general manager, I did that for a few years. Ralph's done it as well. Is that he said being an on-site manager, like being a board member, you're like the pilot of a 740-seven with all the passengers in the cockpit with you. Am I right or am I right? True

Rolf Crocker: 31:58

that, man. Absolutely. Oh my goodness. Yes.

Julie Adamen: 32:01

Oh well, thank you all for joining us today. Hope you had got some good information out of this. If you have any questions, honestly, I don't have the Association Reserves email that I'm supposed to have here, but you can email any questions or comments to me, Julie at adamant-inc.com. J-U-L-I-E at adamant. That's a m e n hyphen i n c.com If you didn't get that, just Google me and you will find me. I'm everywhere. Just send an email to my website and I get it. So anyway, hope you all have a great day. And thanks for listening. Thanks for all for joining me. I appreciate it.

Announcer: 32:39

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