New Board trying to Correct Issues from Previous Board

Started by JeremyG1 • 7 replies • 1571 views

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JeremyG1 (Pennsylvania)
Posts: 1

Posted:

I was recently elected to our 5 member HOA Board for a 300 home community with a Full Time Property Manager in Pennsylvania. I'm a newbie to this site but have found alot of great information.

After the election in December, I did alot to get myself acquinted with the behind the scenes activities of the HOA in preparation for our 3/20/14 Developer Transition Meeting.

Below are a couple of questions that I was hoping the experienced members here could help me our with:

1. Insurance: We have a community clubhouse with a pool and 2 ponds in our development. I feel that we are grossly under-insured with coverage of 1 million for Directors/Officers and a 1 million umbrella for general liability. Am I correct in this assumption. Should the Umbrella be 5, 10 or 15 million instead of 1.

2. Pool Use: We currently hire a pool "monitor" to check members into the pool and test the chemicals. The old board said that PA law states that chemicals need to be recorded 3 times a day. The "monitor" is not a lifeguard so it is "swim at your own risk". The problem that we have is that these "monitors" are high school kids that don't always show up, which means the pool is closed and residents can't get in. My question is, couldn't we provide keys to residents or install a keypad lock to the pool gate so residents aren't locked out of "their" pool?

3. Incorporating: When I uncovered the under-insured issue, I read that incorporating the HOA as a non-profit is the standard for established HOA's but we are no incorporated. What is the typical cost of incorporating the HOA?

Thanks in advance for the help.

SheliaH (Indiana)
Posts: 6,964

Posted:

Insurance - I can't say whether you're over or underinsured, so your best option might be to do some comparison shopping among insurance companies. Be sure to get an agent who knows how HOAs are run and what type of insurance is required. You can use the search engine on this site to get some ideas on what type of insurance you will need.

You should also check your CCRs to see if there's anything else besides the pools and clubhouse that are the Association's responsibility, as that will also influence your liability coverage.

Pool - when we had our pool, we also had a pool monitor to check in homeowners and their guests (delinquent homeowners didn't have access, nor did their guests or tenants renting out their units). We had a pool company that took care of the chemicals and I believe the health department came out once a week to check the balance, so you may want to check with your local department to see what the requirements are.

Ours was also a swim at your risk pool and we also had trouble with high school students who wouldn't show up, so we quit hiring them and got the pool company to provide a monitor. He was also a former cop and that helped keep some of the crazy behavior under control.

You might have a problem keeping track of 300 keys and people may swap keypad codes. If your CCRs state delinquent homeowners can't use the pool, it may be better to hire an adult monitor and provide a list of delinquent homeowners so he or she will know who can and can't use the pool.

Non-profit corporation - for the costs, start with the state agency where these papers are filed (in Indiana, it's the secretary of state) - there may be a fee schedule on its website. Of course, you'll have to ensure the language on the paperwork is in order, so to do it correctly, get an attorney, preferably one who works with HOAs or is well versed in corporate law. Good luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

KellyM3 (North Carolina)
Posts: 2,239

Posted:

1. You might bump your liability insurance up a bit, but not to several million dollars. That's your call but your insurance company knows a sensible answer.

2. Yes, you can provide access to your pool with clear markings that there are no lifeguards. Check your state and local rules, though. Regarding keys....assign copy-proof keys if nothing else. Install keyless entry w/ keycards in optimal situation. Off-season, no resident gets access to the pool unless they're a board member on business.

3. Hire a lawyer and get straight on the incorporation. You need to do it if the law requires but it shouldn't be hard.

DavidW5 (North Carolina)
Posts: 565

Posted:

Jeremy,

If you are referring to incorporating as on IRS 501c. non-profit organization, you are probably wasting your time and effort. The IRS regulations are quite restrictive in this regard. However, most HOAs are incorporated as "not for profit" corporations under the state laws in their state.

As to insurance. We are an 800 home HOA with a large clubhouse, 2 pools and other amenities. We carry liability coverage with a $2M limit. An issue we are investigating is what the coverage limit should be on our property coverage and what crime coverage we should have (to cover theft of financial assets like our replacement reserves - over $3M). We are in the process of meeting with several insurance brokers to determine what coverages we should specify in an RFP.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Be aware that many HOA insurance companies offer only "Package deals". Which means you may have some coverages you don't really need. We had insurance for a HOA vehicle. We didn't own a HOA vehicle and most HOA's don't. However, what that insurance did do is if as a BOARD member I was to have an accident in my car while doing HOA business, it would kick in and pay the difference between what my insurance paid out. It was more in the along the lines of "gap insurance". It's NOT a complete rip-off that you do have these package deals. Just don't get lost in the details and try to "cherry pick" your needs in insurance.

Our CC&R's spelled out the insurance limits we needed to keep. It also required what any contractor liability insurance needed to be. One should ONLY hire contractors insured and licensed for major work or over a certain money limit. That also may be in your documents and a consideration.

Former HOA President

RichardP13 (California)
Posts: 1,767

Posted:

Jeremy

An insurance agent who specializes in HOAs will ask for a copy of the association's CCRs. In that document will have an outline of the insurance requirements for the association, including umbrella coverage, D & O, and Fidelity insurance. Your state might also have specific association requirements, but again an agent whose business is HOAs will know all the requirements.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

You will purchase an umbrella of insurance coverage...even if cherry picked, it wouldn't save much if any money. It looks a lot like a business liability insurance policy

JohnB26 (South Carolina)
Posts: 1,569

Posted:

The purpose of incorporating (usually as a not-for-profit) is that it removes personal liability (re: common elements) from the individual member and transfers same to the corporation.

eg. a common parking area is not properly maintained (for whatever reason) - someone's father trips and is permanently disabled - lawsuit awards $10,000,000.00

if incorporated - y'all lose the common elements but keep your homes

if unincorporated - y'all split the uninsured portion EQUALLY including your homes and vehicles if necessary

PERIOD - END OF CASE

since you will be incorporated, you will need to follow the state corporate law which means corporate bylaws and a board of directors

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