Berding | Weil Community Association ALERT Newsletter
Legal News and Comments for Community Association Boards and Managers Issue #39 • March 2010
Making Ends Meet
Fiduciary Duty on a Limited Budget
By Steven S. Weil, Esq.
Delinquencies are up, assessment payments are down, but the beat goes on. Insurance bills are due, lawns must be mowed, roofs need fixing, reserves should be funded, and owners demand enforcement of the CC&Rs. With its high rate of delinquencies and large receivables is this year a sign of things to come, or an anomaly, like a one-hundred year storm? Time will tell. Meanwhile, for most boards, the process of prioritizing what services will be cut and what will continue to be provided to Association members began with adoption of the 2009 budget. This article discusses the "what next" and offers some basic operational principles to get you through the year.
Protect the Money
Members expect and the Association needs it--protecting reserves from financial losses must be the top priority of the board, the manager and the treasurer. Investment goals are, in order of importance: (1) protecting principal from risk by investment in FDIC-insured or Certificate of Deposit Account Registry Service ("CDARS") accounts, (2) layer investments to permit withdrawals with little or no penalty, and (3) higher yields are not as important as preserving principal.
Adopt an Investment Policy
One way to protect Association funds and to assure members the board has done so is by adoption of an investment policy. The policy should identify the Association's goals and objectives, require periodic (at least quarterly) review of investments, require consultation with professionals, limit investments to insured accounts (such as T-Bills, CDs and Money Markets) maintained in the Association's name, be based on safety, liquidity, reasonable investment costs and diversification, limit withdrawals to those authorized by the board with signatures by the President and Treasurer, and permit policy exceptions for good cause and emergencies following board approval.
Monitor the Money
The Treasurer is not just another association director or officer. Under most bylaws, the Treasurer (also known as the "Chief Financial Officer") has specific duties which can include being responsible for the receipt and deposit of funds, signing checks and promissory notes, keeping or causing to be kept proper books of account and assisting in presenting the budget and financial statement to the members. As a practical matter this means the Treasurer should regularly communicate with the manager and the Association's CPA and be prepared to make oral presentations at board and membership meetings.
Berding|Weil Q&A of the Day
By Lucas J. Olona, Esq.
I am an owner of a unit in a condominium project that is currently involved in litigation. I would like to know the status of our litigation. May I contact the attorneys retained by my Board directly to inquire about it?
The Association's attorneys have an obligation to act in the best interests of the Association at all times. This obligation includes protecting all information discussed with the client under the attorney-client privilege. Because the Association's attorneys are retained by the association, and not directly by any individual owner, the attorney-client privilege may not extend to communications that the attorneys have with individual owners. Should privileged information be discussed in a conversation with an individual owner, that information may be "discovered" (i.e., learned) by any other party to the action, including the builder and subcontractors. Thus the association's counsel will be reluctant to share information with owners directly.
The attorneys for the association also have an obligation to their client to be efficient. There are often dozens, even hundreds of owners in the typical community association and the attorneys would spend countless hours and the client's money talking to each of them individually.The most efficient way for the individual owners to obtain information on the status of association litigation is to refer to the disclosure information provided to the management company, read the status letters from counsel, and attend meetings when the attorneys will be present to answer questions.

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