M-100 Study Guide - Updated

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resources to America’s community association industry. Its members include: volunteer
leaders of condominium and homeowner associations, cooperatives, and planned
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has more than 50 chapters throughout the United States. Each chapter has its own menu of
programs and services and serves geographic areas, entire states, and multiple states. In
2011, CAI estimated that there were approximately 315,000 community associations in the
United States.
The M-100 Study Guide is a summary of key learning concepts from the M-100 course.
Students are encouraged to use this document as they work through the course material,
taking notes in the designated area. While the M-100 Study Guide is not designed to review
all the course content, the key learning concepts highlighted here—along with any notes
transcribed by the student—can be a useful resource when preparing for the final exam.
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the course participant. While the material presented is believed to be accurate, neither CAI
nor its chapters warrant the publication’s suitability other than as information guidelines.
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© Community Associations Institute 2 M-100 Study Guide

Table of Contents
Module 1: Legal Basis
Lesson 1: Legal Basis for Community Associations 4
Lesson 2: Rule Development and Enforcement 9
Module 2: Financial Management
Lesson 1: Budgets and Replacement Reserves 14
Lesson 2: Collecting Assessments 21
Lesson 3: Financial Statements, Audits, Income Taxes, & Investments 25
Module 3: Facilities Management
Lesson 1: Maintenance 30
Lesson 2: Contracting 35
Lesson 3: Risk Management & Insurance 42
Module 4: Community Management and Leadership
Lesson 1: Community Management 49
Lesson 2: Board Meetings and Decision-Making 61
Lesson 3: Ethics 66

Definition of a Community
Association
Community associations have three distinct
characteristics.
 Mandatory Membership
 Mutually Binding Documents
 Lien-Based Assessments
Purposes of a Community
Association
The primary purpose of a community
association is to provide for the community,
business, and governance aspects of the
association.
Types of Community
Associations
The three basic types of residential
community associations—planned
communities, condominiums, and
cooperatives—focus on ownership instead of
architectural style.

Specialized Community Associations
 A master or umbrella association is
made up of more than one residential
community association.
 A mixed-use development is a mixture
of residential and commercial or
industrial use space.
 A “55 and older” community is a legal
designation where there must be at least
one person who is 55 years or older
living in at least 80% of the occupied
units. It must have this designation to
prohibit children and limit occupancy to
a certain age span.
Sources of Legal Obligation

A community association derives its legal
obligations from several sources:
 Federal, state, and local statutes,
regulations, and case law (court
decisions)
 Legal documents unique to the
community association that bind the
association and its owners
 Lender requirements—for example,
requirements set by secondary mortgage
institutions (FHA, Fannie Mae, Freddie
Mac, etc.)
 Standards set by professional bodies—
for example, auditing standards set by
the American Institute of Certified Public
Accountants (AICPA)
Federal Laws
Employment Laws
 Equal Employment Opportunity
Commission (EEOC): prohibits
discrimination in hiring, promotion,
dismissal, etc.
 Fair Labor Standards Act (FLSA):
dictates standards for the basic
minimum wage and overtime pay
 Family and Medical Leave Act (FMLA):
provides for unpaid leave for various
medical issues
 Federal Insurance Contributions Act
(FICA): governs employee and employer

contributions to Social Security
 Occupational Safety and Health Act
(OSHA): outlines safety guidelines for
employees.
Real Estate Laws

 Fair Debt Collection Practices Act
(FDCPA): protects debtors from
unscrupulous debt collectors
 Fair Housing Act: prohibits discrimination
in the sale, rental, financing, insuring
and other housing-related services of
dwellings based on race, color, religion,
national origin, gender, disability or
familial status
 Federal Communications Commission
(FCC)/The Telecommunications Act of
1996: regulates what restrictions
associations can and can’t place on video
antennas, satellite dishes, etc.
 Soldiers and Sailors Civil Relief Act of
1940 (SSCRA): requires the delay of all
civil court actions, such as bankruptcy
and foreclosure, until the service
member returns from active duty
 U.S. Bankruptcy Code: regulates how
individuals and businesses can file for
bankruptcy
State Statutes
 General State Statutes: Apply to all
organizations, including community
associations
 Specific State Statutes: Apply only to
one or more types of community
associations
 Uniform State Statutes: Were created
to standardize laws in various states that
affect community associations
Governing Documents
There are a number of important documents
that provide the legal structure and operation
of the community.
 Recorded Map, Plat, or Plan: shows
the precise location of each lot or unit,
as well as the common areas

 Declarations, CC&Rs or Master
Deeds: establish the chain of title and
rights of ownership for each piece of real
estate.
 They set up the charter of the
community association and typically
detail voting rights for members,
usage rights of common property, and
limits on assessment fees.
 They legally obligate purchasers of
homes or units to follow them and
become binding on all owners once
the developer sells the first home or
unit.
 The terms CC&Rs, master deed, and
declaration are sometimes used
interchangeably.
 Proprietary Lease or Occupancy
Agreement: defines the member or
stockholder’s rights and obligations in
relation to the living unit in a
cooperative
 Articles of Incorporation: documents
that establish the corporation, if the
association is incorporated
 Bylaws: formally adopted regulations
for the administration and management
of a community association, such as
board member election, member voting
rights, calling and conducting meetings,
and duties of the board members
 Resolutions: a motion that follows a
set format and is formally adopted by
the board of directors
Public Offering Statement

This is a disclosure statement that provides
information on the community association to
the first prospective buyers in a new
development. This is not a governing
document, but is often accompanied by them.
Hierarchy of Documents
The documents fall into a hierarchy of
authority. The higher a document’s place in
the hierarchy, the greater its legal weight in a
court of law. Documents lower in the
hierarchy cannot conflict with or change the
terms of those above them. Whenever there
is a conflict, the higher document will prevail.

Benefits of Incorporating:
 Limits the liability of the owners for acts
of the association.
 Entitles the community association to
rights granted all corporations, such as
borrowing money or obtaining insurance.
 May make it easier to deal with
contractors, vendors, or utility
companies.
 Grants the board of directors the same
rights as all board members of
incorporated entities under state
statutes.

What Are Rules?
A rule, also called a regulation or resolution,
is a specific statement of required behavior
or action, a violation of which carries a
penalty (sometimes called a sanction).
An architectural guideline is a rule that
applies to the appearance of an owner’s lot
or the exterior of his or her unit or
improvements.
There are four types of rules or resolutions
for a community association.
1. Policy Resolutions: Policy resolutions
affect owners’ rights and obligations and
usually address ambiguities and
omissions in the declaration.
2. Administrative Resolutions:
Administrative resolutions affect internal
operations of the community association
and usually address ambiguities and
omissions in the bylaws.
3. Special Resolutions: Special resolutions
state board decisions that apply a policy
or rule to an individual situation.
4. General Resolutions: General
resolutions involve routine events such as
approving the meeting minutes.
Sources of Authority
 State Statutes and Court Decisions
 Governing Documents
 Board of Directors
 Owners (limited)
According to the hierarchy of governing

documents, a resolution cannot override
what any other document says, if that
document is higher in the hierarchy. That
higher document must be amended if a
change is needed.
Governing documents may include “shall,”
“shall not,” and “may” language.

Criteria for Valid and
Enforceable Rules
In general, the courts recognize the following
list as characteristics of a valid rule.
 The rule must not violate a fundamental
constitutional right.
 The rule must be consistent with
applicable federal, state, and local
statutes and the community’s governing
documents.
 The rule must reasonably relate to the
operation and purpose of the
community.
 The rule must be reasonable.
 The rule must be fair. It must not
create a separate class or group of
people.
 The rule must be capable of uniform
enforcement.
 The rule must be uniformly enforced.
 The rule must be necessary.
Steps for Developing Rules
1. Determine the need for a rule in the

specific area.
2. Consider both the immediate impact of
such a rule and its long-term
implications.

3. Identify the source(s) of your
community’s authority to make a rule in
the specific area involved.
4. Define the scope of the rule.
5. Justify the validity of the rule.
6. Give notice of any proposed rule.
7. Act promptly on a proposed rule.
8. Give notice of an adopted rule.
9. Revise the Rules and Regulations
document to include the new rule.
10. Record the rules in any land or deed
records, if needed.
Drafting a Resolution
A resolution contains four sections.
Purpose: This section states why a rule is

being adopted.
Authority: This section cites the primary
source(s) of a board’s authority to make a
rule on the topic.
Scope and Intent: This section determines
who and what will be affected by the rule, for
what period of time, the reach or range and
extent of the rule, and penalties for
noncompliance.
Specifications: This section states clearly
and completely what those bound by the rule
will be expected to do.
Development of Architectural
Guidelines
It is in the community’s best interests for a
board to establish written architectural
guidelines for two reasons:
1. Written guidelines indicate to owners
what types of changes will be allowed
under normal circumstances.
2. Written guidelines are a way to avoid
claims of arbitrary or selective treatment
of owners.

Due Process Procedure
Due process procedure is a formal process
designed to protect the rights of all parties
involved. There are several benefits to using
a due process procedure to enforce
community association rules.
 All alleged rule violations are handled in
the same manner.
 Use of a due process procedure is
recognized by the courts as an
indication of legally valid rule
enforcement.
 The vast majority of rule violations can
be resolved with this procedure, thus
avoiding going to court.
 The opportunity to be heard in a non-
threatening fact-finding forum is often
enough to result in a person’s voluntary
decision to obey a rule.
Alternative Dispute Resolution

Alternative dispute resolution (ADR)
includes arbitration and mediation. ADR is a
means of encouraging people to comply with
rules and guidelines by using a trained,
uninvolved third party for assistance. The
decision may be binding or non-binding.
This approach can be a more efficient and
effective way to resolve a serious dispute
versus a drawn-out lawsuit. ADR includes
arbitration and mediation.
Resources for Enforcing Rules

There are a number of internal resources a
community can use to encourage an owner
or tenant to conform to community
association rules.
 Suspension of owner’s voting rights
 Suspension of the use of recreational
facilities and common areas
 Fines
 Eviction
 Self help

Community associations can also draw on
external resources within the broader
community to help them enforce association
rules.
 Local Health Department
 Local Zoning Department
 Local Police Department
 Local Fire Department
 Local Building/Housing/Property
Standards Department
 Local Animal Shelter or Animal Control
Officer
Rule Variances
In order to maintain fairness and avoid
preferential treatment when making
exceptions, these steps should be followed.
1. Determine the direct impact the violation
has on the value or purpose of the
association.
2. Make sound business decisions in keeping
with the best interests of the community
and its members.
3. Document the decision for making the
variance or exception.

What Is a Budget?
 A budget is an annual financial plan for
an organization.
 A budget provides an estimate of a
community’s revenue and expenses for
a specified period of time.
Purpose of a Budget
 To plan community activities
 To determine assessments
 To measure and control the financial
operations
 To give continuity to services
 To maintain quality of life
 To limit surprises
 To look at the needs and desires of the
community
Roles and Responsibilities

Board of Directors: Establishing,
approving, and monitoring the community’s
budget.
Treasurer: Ensuring that the draft budget is
prepared and approved.
Owners: Voting on the budget. It is
important to get the owners involved when
proposing:
 An increase in assessments
 Special assessments
 Major improvements
 Funding replacement reserves
Manager
Budget responsibilities are more likely to
appear in a contract than in the community’s
bylaws. You may be expected to:
 Prepare or be involved in the
development of a draft budget
 Review it with the treasurer, finance
committee, and the board and
membership

 Revise it after any changes are made
 Mail a summary of the budget to the
owners after board approval unless
your governing documents or state
statute requires otherwise
Finance Committee: Helping to draft the
budget.
Budget Components
Revenue: The collective items or amounts
of income which are appropriated for
common expenses.
Expenses: The cost of goods and services
used to operate and maintain the
association’s common elements.
 Operating expenses: for the normal
and usual repairs for the association.
 Major improvement expenses: items
added to improve the quality of life,
appearance of the property, or enhance
property values.
 Reserve account: used to pay for
long-term repair and maintenance
issues.
Sources for Budget

Requirements
 Legal requirements of state statutes
and governing documents
 Owners’ needs and desires (balancing
mandatory and discretionary items)
 Committee and owner feedback
 Reconciliation of revenue and expenses
 Financial forecasting and analysis of
past financial activity
Legal Requirements
 Federal: Income and payroll taxes
(IRS), hazardous waste disposal (EPA),
mortgage requirements (FHA)
 State: replacement reserves and
insurance requirements
 Local: property taxes for common
areas, fees for recycling, or fees for
inspections
 Governing documents: what property
is to be maintained by the association,

what services MUST be offered, and
what kinds of revenue can be generated
Revenue
Revenue consists of the collective items or
amounts of income which are appropriated
for common expenses. Revenue typically
includes owner assessments, interest, and
other revenue.
Types of Revenue
Assessment: the owner’s financial
obligation to the community association
during a given period of time—usually one
year. It covers the owner’s share of the
common expense.
Total Annual Assessment = amount of
income that the board decides to obtain from
owner assessments. Each owner is assigned
a share of the community’s total annual
assessment, which may be paid on a
monthly, quarterly, or annual basis.
Special Assessment = a one-time
assessment often voted on by the owners to
cover a major expense that was not included
in the annual budget or replacement
reserve.
Calculating Assessments
1. Percentage method: uses the assigned
percentage to determine each owner’s
prorata share.
2. Equal method computation: assesses

each owner equally for each lot or unit.
Other Revenue Sources

 Rent from commercial tenants
 Rent from lease of units
 Charges for resale packages

 Collection on insurance claims or legal
settlements
 Antenna rental
 Ad space in the community newsletter
 User fees
Expenses
There are two types of expenditures in a
community budget:
 Mandatory line items—items based
on community and owner needs and
requirements that the community is
obligated to meet.
 Discretionary line items—items
based on owner, board, and committee
desires. They are items people would
like to have. They can also be voted out
of the budget.
Expense Calculation Methods

 Zero-base budgeting: All line items
are set to zero and the amount of funds
allotted to each must be justified. The
zero-base approach keeps you from
accepting this year’s figures at face
value.
 Historical trend budgeting: This
method begins with the assumption
that existing line items are needed. The
amount of funds allotted to each during
the current year is adjusted for
expected changes in the coming year.
Major Improvement Expenses

Major improvements are items that are not
necessarily required, but are added to
improve the quality of life for the residents,
appearance of the property—or to enhance
the value of the community association as
reflected in the resale value of units. They
last more than one year and involve a large
amount of funding.
They are usually voted on by the members
and paid for in one of three ways:
1. Money set aside over time until enough
money has been raised
2. A loan, with the loan payments becoming
part of subsequent year’s operating
expenses

3. Special assessment, which is generally
discouraged as it can be difficult for
owners on fixed income to pay special
assessments, and it doesn’t spread the
cost over current and future owners
The Reserve Account

A reserve account consists of funds put
aside—in reserve—for the replacement of
major components of a community’s
common property.
Reasons for Maintaining a Reserve

Account
 Meets legal, fiduciary, and professional
requirements.
 Provides for the planned replacement of
major items.
 A reserve account equalizes the
contributions of old and new owners.
 Minimizes the need for special
assessments.
 Enhances resale values.
Conducting a Reserve Study

A reserve study is a budget planning tool
with which the association expects to offset
ongoing deterioration and prepare for
inevitable future expenses. Reserve projects
are typically the largest expenses that an
association faces, and proper financial
preparation is essential.
The reserve study is used for developing a
reserve account budget. The study
addresses all major common physical
components of the property that the
association must repair, replace, restore, or
maintain.
Reserve Specialist (RS) is a CAI
designation awarded to qualified reserve
specialists who, through years of specialized
experience, can help ensure that community
associations prepare their reserve budget
and reserve studies as accurately as
possible.

The Value of a Reserve Study
 Fulfills fiduciary responsibility
 Meets individual state requirements (for
regulated states)
 Complies with the American Institute of
Certified Public Accountants (AICPA)
 Reduces personal liability from claims of
financial mismanagement
 Saves valuable time with prioritized
business plan for capital repairs and
replacements
 Effectively communicates the physical
components and priorities to keep
owners informed
 Identifies maintenance issues that
haven’t been budgeted in ongoing
operations
Consequences of Not Having a

Reserve Study
 Underfunding: This may result in
special assessments, bank loans,
deferred maintenance, or a combination
of these.
 Overfunding: This can result in current
owners paying too much (more than
owners “fair share”), for the benefit of
future owners.
 Board member liability: This can
expose them to claims of fiscal
irresponsibility and loss of Directors &
Officers insurance coverage.
The Replacement Reserves Schedule

 The replacement reserves schedule is a
framework for accumulating and
spending the funds for replacing major
components of the property.
 The funds are put aside over a period of
time to ensure that adequate amounts
are available to replace components.
 A reserve cash flow statement
shows the amount to be funded and the
amount to be expended from the
replacement fund over a given period of
time.

Budget Presentation
Two questions to help you prepare for
your budget presentation:
 What information will help my audience
understand and accept my estimates of
revenue and expenses?
 How can I present that information in
an easy-to-understand format?
Two common mistakes to avoid when

presenting a budget:
1. Neglecting to present any information on
how estimates were developed.
2. Presenting so much information that
people are overwhelmed and confused.
When preparing to present your budget:
1. Identify items your audience is interested
in.
2. Identify comparisons or trends to help
understand estimates.
3. Decide what visuals will make it clearer.

Definition of an Assessment
Assessments (sometimes called maintenance
fees) are the owners’ financial obligations to
a community association during a given
period of time. They cover the owners’ share
of the common expenses.
 An annual assessment may be paid
on a monthly, quarterly, or annual
basis.
 A special assessment is a one-time
assessment, often voted on by owners,
to cover a major expense that was not
included in the annual operating
budget.
Authority to Collect
Assessments
The authority to collect assessments can
come from three sources:
 Federal laws and regulations
 State statutes
 Governing documents
Consequences of Delinquent
Payments
 Increased assessments to cover the
deficit
 Essential maintenance deferred due to
lack of funds
 Property beginning to appear run-
down—which in turn reduces property
values
 Shortfalls added to the next year’s
operating budget if any monies are
outstanding at the end of the year
 Borrowing from otherwise restricted
community association funds
 Borrowing from a lender
 Disharmony between paying owners
and delinquent ones
 Inability to obtain mortgages on lots or
units in the community

Characteristics of an Effective
Collection Policy
 Established by a formal resolution of
the board
 Specifies only actions that are within
the power of the association and its
board
 Sets a firm due date for assessments
 Outlines the steps to be taken when a
payment is late
 Allows for discretion in special cases
 Specifies when a delinquent assessment
should be referred to legal counsel
 Provides for the collection of any costs
associated with collecting delinquent
assessments
When a payment is late, your community

association’s collection policy should tell you:
 When late notices are to be sent and
how frequently
 What late notices should say
 What late or collection fee to assess the
delinquent owner
 When collection should be turned over
to legal counsel
 When to accelerate assessment
payment (the collection of all
assessments due through the end of
the fiscal year)
Legal Remedies
Extra-Judicial Remedies
 Late fees
 Security deposits
 Suspending owner’s privileges and
voting rights
 Acceleration
Judicial Remedies
 Perfecting a lien on the unit
A lien is a legal claim by one party
(community association) on the
property of another (delinquent owner)
to obtain the payment of a debt or the
satisfaction of an obligation.
 Foreclosure of the unit
Foreclosure is a legal proceeding filed in
court whereby a party with a claim
against an owner can claim ownership
of the unit involved in order to recover
the money it is owed. If there is little
or no equity in the property, the
association may not get the money it is
owed.
 Sue the owner for a personal money
judgment
A personal money judgment or
summary judgment is a decision by a
judge to allow the community
association to claim the owner’s
personal property to settle a delinquent
account.
Bankruptcy
 Immediately contact legal counsel
when you become aware of a
bankruptcy filing by an owner.
 Immediately forward any bankruptcy
notices to your legal counsel.
 Immediately stop all collection efforts.
Prompt filing of a lien can make a difference

in getting money owed to the community
association.

The association still has the right to collect
any new charges as they are incurred after
the owner files bankruptcy, although only an
attorney can continue the collection efforts.
Types of Bankruptcy
 Chapter 7: Straight bankruptcy or
liquidation for an individual or
corporation.
 Chapter 11: Corporate reorganization
 Chapter 13: Personal reorganization
Uncollectable debts should be written off as

a bad debt.
Solutions for Collection

Shortfalls
 Levying a special assessment
 Raising the regular assessments for the
coming year
 Creating a reserve for bad debts in the
budget
 Cutting this year’s expenses

Accounting Methods Used For
Reports
Financial Statements
Financial statements have two primary
purposes:
1. To provide information for making
appropriate decisions about the
2. To enable the board and the manager to
control the financial operations of the
Components of Financial Statements

 Statement of revenue and expense
 Balance sheet
 Subsidiary reports, such as bank
statements, aged receivables, and open
payables
Statement of Revenue and Expense

There are three major components of a
statement of revenue and expense:
 Revenue represents the earnings of
the community association.
 Expenses are the cost of goods and
services used to operate and maintain
the community’s property.
 Net revenue (also known as excess
revenue over expenses) is the amount
left over after deducting expenses from
income.

Balance Sheet
The balance sheet is a summary, or
snapshot, of the financial condition of the
association at a specific point in time:
 What your association owns
 What your association owes
 The “net worth” of the association
Components of a Balance Sheet

1. Assets: anything owned that has value
2. Liabilities: what is owed to others or
collected in advance
3. Members’ equity or fund balance: the
difference between the community
association’s assets and liabilities
Variations in Approach
Variation between your community
association’s financial statements and others
may be due to:
 Community association’s unique
informational needs
 Software package used
 Expertise and experience of the internal
users—the owners
 Expertise and experience of the
preparers
 Reasons for preparing the report
 Formatting
Warning Signs
 A steady decline in the amount of cash
on hand
 The inability or failure to set aside
budgeted additions to replacement

reserves (or no formal reserve study
has been conducted)
 An increase in the amount of owners’
assessments owed to the community
 An increase in the amount the
community association owes for bills
 The failure to reconcile bank statements
monthly
 Significant and/or unexplained
differences between actual and
budgeted figures for items
 Unpaid amounts showing as due
between funds
Statistical Analysis
Evaluate assessment delinquencies as a
percentage of annual assessments.
Year-End Reports
Accounting standards are called GAAP,
Generally Accepted Accounting Principles.
GAAP requires the following set of year-end
financial reports:
 Balance sheet
 Statement of Revenue and Expense
 Statement of Changes in Members’
Equity (or Fund Balances)
 Statement of Cash Flow
 Notes to Financial Statements
 Unaudited supplementary information
on future major repairs and
replacements

Role of the Certified Public
Accountant (CPA)
There are three types of reports that a CPA
typically provides:
1. Audit: An examination of the accounting
records and procedures of an
organization for the purpose of verifying
the accuracy and completeness of
financial records.
2. Review: A less thorough, and therefore
less costly, review of a community
association’s financial activities.
3. Compilation: A presentation of financial
statements by a CPA without the
assurance that the information conforms
to GAAP.
Federal Income Taxes

Community association managers must be
familiar with federal income tax
requirements and options for two reasons:
1. Determine tax status
2. Reduce tax obligation
Federal Income Tax Filing

Responsibilities
 File tax returns annually.
 Pay tax returns by the 15th day of the
third month.
 Pay for years that were unpaid.
 Make estimated payments, if necessary.
Investments
Investments involve the purchase of
anything with money value for the purpose
of generating additional money over time.
Typically, a community association manager
is expected to:
 Maintain an accurate accounting system
 Document all transfers of funds
 Track investments
 Provide referrals (do not provide
specific advice)

Investment Objectives
 Safety: protecting the principle
(amount of original investment) from
loss.
 Liquidity: the ease with which an
investment can be converted into cash
or a cash equivalent.
 Yield: the amount of return on an
investment.
Asset Protection Measures

 Know the association's federal tax
identification number (FTI).
 Use a lock box system for deposits.
 Require dual signatures for all
withdrawals.
 Segregate and safeguard your
association's replacement reserves.
 Require that statements of operating
and reserve accounts be sent every
month.
 Check invoices against checks paid and
the original receipts for credit card
accounts, if any.
 Shop around for bank services.
 Know the association's insurance
company and consult with the agent.
 Insure the association's money.
 Do not combine funds with other
associations.
 Regularly engage an independent CPA
to conduct an audit.

Facilities Maintenance
Facilities management is the process of operating,
maintaining, repairing, and replacing common
property.
A community association has four major
maintenance goals:
1. To meet the needs of the individual residents as
they relate to the community association’s
responsibilities
2. To preserve and enhance the common property
3. To limit potential exposure to injury to residents,
guests, and employees
4. To protect property values of the homes or units
through successful maintenance of the common
property
Determining Responsibility
Useful Tools
Two useful tools that will help in managing specific
responsibilities are:
1. Responsibility Chart – helps keep track of who
is responsible for the maintenance of various
property elements or areas.
2. Maintenance Contact Sheet –records the
contacts for various maintenance services and
any pertinent information needed during an
emergency.

Identifying Maintenance Needs
 Conduct a detailed, thorough site visit of the
property. Take photos for future comparison
and historical record.
 Examine any available building plans or
specifications.
 Review any reserve studies that have been
prepared.
 Review all maintenance records.
 Interview board members, employees, or
contractors providing maintenance services.
 Review product or equipment information from
manufacturers.
Effective Maintenance Systems

To get the maintenance work done, a manager
must:
 Organize the maintenance work
 Create controls for ensuring that the work is
actually done
Types of Maintenance Programs

 Routine maintenance: regular, recurring
upkeep that must be done
 Preventive maintenance: periodic
maintenance to avoid disruptive breakdowns
and to prolong the useful life of the physical
asset in question
 Emergency maintenance: responding to
unpredictable problems
 Requested maintenance: maintenance
requested by an owner, a tenant, or the board,
or recommended by a contractor, or identified
during a routine site visit of the property
 Reserve replacement: replacing physical
assets as they wear out or break
Maintenance Planning Tools

 Maintenance calendar: a schedule that
identifies what needs to be done during the
year, and how frequently
 Maintenance record: A record of when
maintenance was actually done

Maintenance Management Tools
 Checklists
 Charts of information
 Calendars or schedules
 Records of actions taken
 Inventories
 Computer generated work orders
 Request forms
 Response forms
Site Visits
 Provide documentation of current conditions
and outstanding items
 Provide verification of completed work
 Help to identify potential problems
 Enable onsite meetings with staff or contractors
 Provide a method for follow up on previous
maintenance items
A site visit checklist:

 Documents your current maintenance standards
 Helps you to identify potential problems
A site visit report is a compilation of all the

maintenance needs identified during a site visit. Use
it to:
 Assign maintenance tasks to your staff or
contractors
 Budget for maintenance needs
 Identify any preventive maintenance that needs
to be done
 Determine when on-site staff or independent
contractors are not properly performing work on
time
 Demonstrate to the board that you are visiting
the property and complying with contractual
obligations
Work Order Systems

Work order systems ensure that jobs are
documented and completed efficiently.
A work order/response form:
 Documents owner and tenant requests
 Assigns maintenance tasks to both maintenance
staff and contractors
 Evaluates staff and contractor performance

 Processes feedback from residents
 Is a basis for allocating charges, when
appropriate
Benefits of a work order/response form:

 Identifies whether the need is an emergency
and requires attention
 Allows follow-up to evaluate satisfaction
 Provides a means of monitoring costs
 Provides a history of the repairs made
 Documents any problems with contractors
reported by owners or tenants
 Indicates if the work is a recurring problem
requiring further evaluation
Evaluating Maintenance Systems

and Efforts
Effective Ineffective
Cost-effective and within Budget overruns
budget
Smooth daily operation Crisis-oriented
of the community maintenance
Scheduled preventive Absence of established
maintenance programs routines for performing
maintenance
Efficient and prompt Slow response time
response to requests
Ability to review work Poor record-keeping
sorted by unit, building,
contractor, type of work,
and date
Preventive maintenance Increased frequency of
to reduce potential for maintenance-related
damage to property and insurance claims
person
Efficient use, Frequent equipment
maintenance and break-downs
replacement of
equipment
Buildings and grounds in Buildings and grounds
good condition are “run-down”
Health and aesthetic Local health or building
standards of the department citations
community are being for corrective action
met

Effective Ineffective
Positive outlook and A board that gets
atmosphere among involved in day-to-day
community members maintenance issues
(micromanages)
Positive, supportive, Residents and/or a
respectful attitude board that show lack of
among owners, board, respect toward
staff and manager management,
employees, and all
parties involved with
maintenance
Enthusiastic, loyal Defensive employees
employees
Evaluation Methods
 Implement Report Cards
 Conduct Surveys
 Review Costs
 Review Work Orders
 Inspect the Property
 Compare Associations
Sustainable Lifestyles
Sustainable communities are developed to meet the
“needs of the present without compromising the
ability of future generations to meet their own
needs.” They are regenerative, meaning they have
“processes that restore, renew or revitalize their own
sources of energy and materials, creating
sustainable systems that integrate the needs of
society with the integrity of nature.”
Strategies for Sustainable Lifestyles

 Establish a sustainable lifestyle mission
statement or charter.
 Create a committee or “green team.”
 Relax architectural guidelines.
 Encourage residents to adopt eco-friendly
habits.

Deciding Whether to Contract
for Work
Personnel on Your Team?
 Number of People
 Expertise
 Supervision
 Availability
Time?
 Urgency of the work
 Estimated time for completion
Cost?
 Cash outlay required
 Real labor costs involved
Tools, Equipment, and Supplies?
 Specialized tools, equipment, or
supplies needed
 Storage space for the tools
Insurance Coverage?
 Necessary insurance coverage –
Contractors should have commercial
general liability, use of owned or non-
owned vehicles, and workers’
compensation
Licenses and Permits?
 Special licenses or permits needed
according to proper authorities
Requests for Proposals

A request for proposal (RFP) is an
announcement that a community is
interested in receiving proposals for a
particular project. The RFP should be used
primarily for larger purchases or for ongoing
services.
The RFP packet includes—
 The bid specifications or detailed
instructions about the products or
services requested
 Information about the association that

the contractor will need in order to
prepare a bid
 Information about work conditions
 Requests for information about the
contractor that will help the association
evaluate the contractor’s ability to
perform the work and meet the
specifications
Preparing an RFP Packet

1. Gather preliminary Information.
 Survey the area(s) where the work is to
be done.
 Outline the work to be done in detail.
This may include consulting with a
professional engineer or architect.
 Specify the materials to be used, and
where the materials will be stored.
 Set a realistic deadline for completion of
the work.
2. Compile a complete RFP packet which
includes:
 The full name, address, and telephone
number of the association
 A detailed description of the work to be
done (bid specifications)
 Key dates
 Whom to call for information or
inspection of site
 Where to submit the bid
 Request for three to five references
from previous jobs of similar size and
scope
 Warranties required
3. Review for accuracy and thoroughness.
 Ensure that all your bidders are bidding
on the same job.
 Ensure the specifications are complete
and accurate so the work doesn’t end
up costing far more, taking much longer
than you planned, or creating disputes
with the contractor.
4. Conduct a pre-bid walk-through.

Evaluating Bids
1. Review each bid to verify that it
conforms to your specifications.
2. Check each bidder’s references.
3. Check each bidder with your local Better
Business Bureau and the local Office of
Consumer Affairs to see what type of
complaints they have received—if any.
4. Verify insurance compliance. Obtain
original certificates of insurance.
5. Verify licenses (if required).
6. Eliminate any bids that are unacceptable
based on steps #1-5.
7. Compare the remaining bids in terms of
price.
8. Recommend a contractor to the board
based on the following criteria:
 Demonstrated understanding of what
needs to be done
 Possession of the necessary
qualifications to do the job
 Reasonable price
Contract Provisions
A contract is an agreement between two or
more parties, enforceable by law, by which
each party promises to do, or not to do,
something.
Key Elements of a Contract

Parties to the Contract
A contract should state the complete names,
addresses, and telephone numbers of the
two parties to the contract. The community
association, not the management company,
should clearly be identified as one of the
contracting parties.
Scope of Work
 Requirement that the contractor
conform to applicable codes, industry
standards, or manufacturer’s
specifications
 Requirement that the contractor
provide sufficient employees necessary
to perform the scope of work as
described in the contract
 Requirement that the contractor clean

up after the work is performed and
restore the common elements or areas
to their prior condition
 Exact location where work is to be
performed
 Working hours
 Provisions for tools and equipment—
include security, storage, insurance,
rental, and repair terms
 Materials
o Quality, type, quantity, color
o Who provides them
o Delivery and storage
o Who provides insurance coverage
o Disposal of leftover materials
 Storage
o Where
o Who is responsible for security
and for any missing equipment
 Job site safety requirements

Compensation
 Total agreed-upon amount that will be
paid for the product or service
 When payment(s) will be made
 In what manner payment(s) will be
made
 On what terms payment(s) will be
made
 Amount of retainage, if any
Time Period
 When the work is to begin and when it
must be completed
 Provide for liquidated damage
payments by the contractor, or
reduction in cost if the contractor is
responsible for not meeting the
deadline
Standard of Performance
 An objective standard against which a
contractor’s work can be judged
Warranty
 A promise or guarantee that parts,

materials, or labor will last for a
designated period of time
 A warranty should state:
o What is covered
o For how long
o What is not covered
o What the contractor will do if the
work or product proves defective
Restoration
 A clause stating that if the contractor’s
employees, agents, or subcontractors
damage any common or individual
property in the community while
performing contracted work, the
contractor agrees to fully restore the
property to its condition prior to the
damage
Indemnification
 A clause stating that the contractor will
indemnify and hold harmless or
reimburse the community association
for any amount the association is
required to pay because a claim was
made against the association as a result
of the contractor’s work—as well as for
any legal costs associated with
defending the association against any
claims
Insurance
 A requirement that the contractor have
all necessary insurance for the project—
including liability, workers’
compensation, and vehicle insurance
Licenses and Permits

 A requirement that the contractor
demonstrate to the community
association that it has the necessary
licenses and permits for the work
before work begins
 A requirement that the contractor is
required to comply with all federal,
state, and local laws, regulations, or
codes that are applicable
Notices
 The names and addresses of the
individuals representing both parties for
the purposes of that contract

Termination
 A way for the community association to
extricate itself from a contract if it so
desires
Default
 What constitutes a default or failure of
either party to fulfill the terms of the
contract
 What each party’s rights are if the other
defaults
Financial Protection
 A provision for the community
association’s financial protection if the
contractor should default
 Performance bond: A guarantee by a
surety (a third party) to protect the
community association if the contractor
fails to perform or finish the work
 Payment bond: Usually included with
the performance bond, a guarantee by
a surety that the contractor’s suppliers
and any subcontractors will be paid if
the contractor does not pay them—to
protect the association from having a
mechanic’s lien placed against them
 Waiver of lien: A document giving up
the right to make a claim against the
community association for payments
not received
Negotiating Contracts
 Have the association’s attorney review
the proposed contract before it goes to
the contractor.
 Present your association’s contract to
the contractor that the board selected.
 The contractor’s representative will
either sign it “as is” or propose
changes.
 Negotiate any changes the contractor
proposes, have the attorney review
them, and have those changes initialed
by the contractor.
 Present the initialed version of the
contract signed by the contractor’s
representative to the authorized
community association representative
for his or her initials on any changes

and signature on the contract.
 The president and/or secretary of the
community association should sign
contracts on its behalf. As a manager,
you should not sign a contract as you
are not the party entering into the
agreement—the community association
is.
 Give the contractor and the board
copies of the contract signed by both
parties.
Tips on Successfully Completing a

Contract
 Monitor the job site while work is in
progress.
 Inspect the completed job before final
payment.
 Prepare a payment schedule if you are
going to make progress payments.

Risk Management
Risk management is the process of making
and carrying out decisions that will minimize
the adverse effects of accidental losses upon
the community association.
Exposures to Loss
Property
Tangible losses to association property such

as buildings and their contents
Intangible, such as the loss of information or
someone hacking into the community
website
Liability
Damage to non-association property or to a
person, arising when a person or entity
threatens or actually brings a legal claim
against the community association, its
members, or others whom it must indemnify
by contract
Income
A reduction in income or an increase in
operating expenses, or both
Personnel
Claims by employees regarding
discrimination in hiring or firing, harassment,
or other allegation
How to Identify Exposures

 Conduct surveys
 Review financial statements
 Read records and files
 Construct flowcharts
 Make personal inspections
 Hire experts, including Reserve
Specialists, insurance risk managers
and qualified general contractors

Evaluating Risk
After identifying possible risks, evaluate each
risk in terms of:
 Frequency
 Severity
 Urgency
Controlling Risk
Risk control is a way to treat the primary
exposures to loss.
 Exposure Avoidance
Take measures to avoid the
circumstances that cause exposure.
 Loss Prevention
Take steps to reduce the likelihood of a
potential loss.
 Loss Reduction
Reduce the severity of the loss if
something does happen.
 Segregation of Exposures
Segregate assets or operations so that if
there is an issue in one area, it does not
affect other areas.
Create backup to prevent loss.
 Contractual Transfers
A contract that will, among other things,
transfer the community association’s
legal responsibility for any loss.
Have the association and the
management company listed as
“additionally insured” on the contractor’s
policy.
Insurance for Community

Associations
An association can purchase insurance to
transfer the financial burden of paying for
certain losses to a third party—a commercial
insurance company.
 An agreement between two or more
parties
 Enforceable by law

 A contract in which each party promises
to do, or not to do, something, and in
which terms are not negotiable
Sources of Insurance
Requirements
Association governing documents
The declaration and bylaws for a
condominium
The CC&Rs (Covenants, Conditions, and
Restrictions) for a planned community
The proprietary lease or occupancy
agreement for a cooperative
Resolutions adopted by the board of
directors
 Local, state, and federal law

 Secondary mortgage market,
agency, and lender requirements
Fannie Mae (Federal National Mortgage
Association)
Federal Home Loan Mortgage Corporation
(FHLMC, or Freddie Mac)
Federal Housing Administration (FHA)
Veterans Administration (VA)
 Contractual obligations
 Good business judgment
Reviewing the Policy

Consider the following questions when
reviewing an insurance policy.
 Who is insured?
 What time period is involved?
 What is insured?
 What is a covered cause of loss, or
“peril” insured against
 What is excluded?
 What is limited?
Types of Insurance Coverages

1. Property: Covers losses to tangible or
intangible community association
property

2. Liability: Covers damage to non-
association property or to a person when
a legal claim is brought against the
association
3. Income: Covers losses from a reduction
in revenue and/or an increase in expense
4. Personnel: Covers losses from claims of
an employee against the association
Property Insurance
 Real property: buildings, land, and
information
 Personal property: inventory,
furniture, fine arts, equipment,
supplies, machinery and valuable
papers and records that belongs to the
community association
Property Insurance Coverages and

Endorsements
 Commercial Policy Package (CPP)
 Mechanical/Equipment Breakdown
Insurance
 Ordinance/Law Insurance
 Flood Insurance
 Electronic Data Processing Insurance
(EDP)
Liability Insurance
Liability insurance helps with situations in
which a civil legal claim is brought against
the association because of a legal wrong it is
alleged to have directly committed or for
which it is supposedly responsible.
Liability Insurance Coverages and

Endorsements
 Commercial General Liability Policy
(CGL) covers property damage, bodily
injury, medical payments, personal
injury, advertising injury.
 Hired and non-owned automobile
liability covers claims arising out of the
use of automobiles that are not owned
by the community association, but that
are used while acting on behalf of the
association.
 Commercial umbrella extends the
amount of coverage beyond the limits

of scheduled underlying liability policies.
 Directors & Officers insurance
(D&O) defends the board and may pay
for any damages arising from wrongful
acts that do not lead to property
damage, bodily injury, advertising
injury, or personal injury (as those
items are covered under the CGL).
Income Insurance
Income insurance protects against loss of
income as well as from an increase in
expenses.
Income Insurance Coverages and

Endorsements
 Fidelity Insurance protects against
employee dishonesty which may lead to
the theft of money, securities, or
property.
 Business Income Insurance covers
the loss of certain types of business
income.
 Assessments Receivable Insurance
applies to situations in which a covered
loss happens to the property and the
community association is unable to
collect assessments from the owner.
 Extra Expense Insurance applies
when a covered loss either increases
operating expenses or diminishes the
income produced by normal operations.
Personnel Insurance
Personnel exposures to loss are limited to
loss of services due to injuries received while
working on behalf of the community
association.
Personnel Insurance Coverages and

Endorsements
 Workers’ Compensation Insurance
 Employers’ Liability Insurance

Selecting and Purchasing
Insurance
What is the manager’s role?
 Selecting agents to request to bid
 Distribution of the specifications and bid
form
 Collection of the bid forms
 Preparation of a bid comparison form
How do you evaluate agents/brokers?
 Experience
 Specialty in the field
 Knowledge of community associations
 Claims processing history
 Participation in professional and trade
associations, such as CAI
 Credentials in the insurance field,
including the Community Insurance &
Risk Management Specialist (CIRMS), a
designation conferred by CAI
 Professional standing, types of
insurance licenses, bonding
Insurance Program
Maintenance
 Insurance coverage is on an annual
basis, typically called a policy period.
 Manager should maintain a
chronological schedule of the coverage
inception dates for the association’s
various policies.
 Whenever possible, all policies should
have the same expiration date.
Insurance Program Evaluation

 A community association should assign
a specific person, committee,
employee, manager or consultant the
responsibility of handling the
association’s insurance.
 Some CC&Rs and bylaws require that
an insurance trustee be appointed for
the community association in the event
of a property loss in excess of some
given amount.

Insurance Claims
 Always meet specific requirements for
filing claims.
 Notify the insurer of claims with a
potentially adverse financial impact.
 Present proof of loss.
 Minimize further loss.
 Do not admit negligence for liability
claims.
Community Association and

Owner Insurance Coverages
Homeowner (HO) policies are usually
referred to by the following numbers:
 HO-1, HO-2, HO-3, and HO-5:
Policies for owner-occupied single-
family homes
 HO-4: Tenant’s policy
 HO-6: Policies specifically for a
condominium or cooperative unit owner

Roles in the Operation of the
Community Association
Owners
Owners have the basic authority in a
community association. They have the
voting power to:
 Elect and remove directors
 Amend any of the governing
documents, except board resolutions
 Approve special assessments or capital
improvements
Board of Directors
 The board is charged with the ultimate
responsibility for operating the
community association on behalf of its
owners.
 They are assigned the responsibility to
maintain, protect, preserve, and
enhance the common areas and the
value of owner’s homes and/or units.
Committees
Committees assist the board of directors, in
an advisory capacity, by providing a broader
base of owner involvement and input.
 Mandatory Committees: Usually

include elections, nominations, and
architectural standards
 “Standing” Committees: Established
to meet some on-going need of the
community
 “Ad-hoc” Committees: Task forces
that meet some specific need and are
then dissolved
Fiduciary Duty of the Board

Fiduciary duty requires directors to act in
the best interests of the community as a
whole, and for the benefit of the association.
This fiduciary duty has two components:
1. Avoid conflicts of interest and acting out
of self-interest.
2. Act as reasonable people in managing
the association’s affairs.
Community Association Manager

 Provide information, training, and
leadership
 Foster a sense of community awareness
and spirit
 Develop a body of leadership
 Provide the necessary administrative
tools to the board
 Facilitate board meetings
 Provide practical, technical, and
administrative advice
 Provide information-gathering and fact-
finding support
 Implement the decisions of the board
 Administer the services, programs, and
operations of the community
association
A manager’s authority and responsibility are

defined and limited by:
 Governing documents
 Management contract or employment
agreement
 Actions of the board
 Court cases
 State statutes

Management Structure
Volunteer/ Association- Management

Self Employed Company
Management Manager
Cost No out-of- Cost must be Cost must be
pocket justified justified
management Additional Routine
fees costs may be management
Requires incurred for provided for
investment of temporary what is
time and effort replacements typically a
Unnecessary due to fixed price
costs may be absence,
incurred termination, or
because of resignation
inexperience
Continuity Difficult Depends on Can provide

because of the individual continuity
volunteer hired because of the
turnover and number of
the fact that people at its
activity is disposal
discretionary
for the
volunteer
Profession- Depends on Depends on Can provide

alism the skills and the individual personnel
experience of hired (may systems and
those who possess CMCA, procedures
volunteer AMS, LSM, or (may possess
PCAM CMCA, AMS,
designations) LSM, or PCAM
designations
Types of Community Association

Managers
 Portfolio managers
 Onsite managers
 Large-scale managers
 High-rise managers
 Managers of mixed-use developments
 Managers of developing communities

The Management Contract and
Employment Agreement
Management Contract: used for a
management firm
Employment Agreement: used for an
association-employed manager
Basic Components of a Management

Contract/Employment Agreement:
 Contracting parties
 Legal sources
 Chain of command or lines of authority
 Responsibilities of management
 Insurance
 Term of agreement/Terms of
employment
 Termination
 Notices
 Waivers and modifications
 Indemnification and hold harmless
provision
 Exclusiveness of provisions
 Compensation
 Obligation to provide resources
 Confidentiality
Management Plan
A statement of goals and objectives
approved by the board, including tasks that
address the community association’s
governance, business, and community
operations
Management Evaluation
The board evaluates the performance of the
association manager based on objective
criteria, the management contract, and the
management plan. It is conducted by an
owner/resident survey or a management
audit.
A management audit reviews:
 Governing documents and existing
policies and procedures
 Current condition of the property

 Owner/resident satisfaction
 Fiscal operations
Warning Signs of Weak

Management
 More and more owners are delinquent
with their assessments, and it cannot
be attributed to a poor economy
 The list of action items for the manager
gets bigger after each board meeting,
rather than smaller
 More owners are showing up at the
board meetings
 Board members are getting more
complaints from owners
 It is taking longer and longer for
maintenance requests to be completed
 Contractor or employee performance
goes down, and employees become
defensive when questioned
 Board members start resigning for
“personal reasons”
 Non-board members volunteer to run
for the board because they “have an ax
to grind”
Managing a Developing
Community
Transition is the general process by which
the control and responsibilities of the
governing board of an association are
transferred from the developer to the
persons who bought unit/lots in the
association.
Turnover is the date upon which owners
gain control of their association.
Role of the Manager in Transition

 Working with the developer to create a
viable, operationally-sound association
 Ensuring a clear delineation between
developer and association financial
responsibilities
 Assisting in the education of new board
members
 Coordinating the work of the
professional team retained by the board

Transition Timeline
Initial Services
 Review site, building, and landscape
plans
 Confirm amenities
 Create a team
 Draft realistic multi-year budget
 Determine developer funding
obligations
Pre-Turnover Services
 Train initial board
 Provide leadership programs for
emerging board and committee
members
 Conduct new owner welcome and
orientation sessions
 Update developer funding obligations
 Conduct frequent town hall meetings
Turnover Services
 Prepare for the turnover meeting
 Coach the board
 Prepare owner advisory/board members
 Coordinate the transition team
 Create a turnover checklist
Post-Turnover Services
 Begin community association
management
 Conduct new board orientation
 Coordinate the transition team
 Coach new leaders
 Follow up on turnover meeting issues
 Assist with leadership development
Benefits of Having a Professional

Manager
 The manager can offer
recommendations on the governance
structure of the association.
 The manager can review the draft
governing documents for operational
consistency and reasonableness.
 The manager can relieve the developer
of association-related concerns by
acting as the team leader for the
service providers that should be

involved in the planning for the
community.
The Manager’s Loyalty

 Managers are expected to educate and
guide the developer and owners
through the maze of governmental,
regulatory, and internal laws and rules.
 The manager must educate the
developer to help minimize the
developer's future liabilities and
conflicts with the owners.
 The manager’s ultimate allegiance is to
the association and to the
establishment of a well-run community
with a capable governing body.
Human Resources for

Managers
Onsite managers are typically responsible
for hiring, firing, supervising, and
compensating association employees, with
input and direction from the board of
directors.
When a manager is employed directly by
a management company, association
employees may be the responsibility of the
management company.
Human Resource Management

Human resources management (HRM) is
the process of planning, organizing, leading,
and controlling an association’s human
resources (its employees) in order to achieve
the association’s goals. HRM involves:
 Establishing and administering HRM
systems
 Complying with applicable federal,
state, and local laws and regulations
 Recruiting, screening, and selecting
people
 Training and developing people
 Establishing performance objectives and
evaluating work performance
 Supervising people
 Dismissing people, when necessary

Creating a Human Resources
Management System
HRM systems typically include:
 A personnel manual or employee
handbook
 A set of job descriptions
 A compensation and benefits program
 Employee records and files
Personnel Manual or Employee

Handbook
 Defines the relationship between the
community association and the
employee
 Explains the rights and responsibilities
of both the employer and the employee
 Contains an employment at will
statement – the community
association retains the right to dismiss
an employee without cause at any time
 Contains a disclaimer to the effect that
it is not an implied contract or promise
of employment
Job Descriptions
 Required duties of a position
 Skills and knowledge necessary to
perform required duties
 Reporting relationships of the position
Compliance with Applicable

Laws and Regulations
To effectively manage human resources, you
need to be aware of and comply with
applicable statutes, regulations and case law
at all three governmental levels. This
includes:
 Avoiding discriminatory treatment of
employees based on non-work related
characteristics
 Compensation
 Working conditions
 Hiring
 Promoting
 Dismissal

Anti-Discrimination Laws
The federal government prohibits
discrimination against otherwise qualified
people based on:
 Race and ethnicity
 Color
 National origin
 Family status
 Age
 Gender
 Religion
 Pregnancy
 Disability
The best way to avoid employee claims of

alleged discrimination is to:
 Avoid any kind of preferential treatment
of employees.
 Make all employment decisions based
on bona fide job requirements.
 Document the basis for each
employment decision.
Compensation
Federal Level:
 Fair Labor Standards Act (FLSA):
This act addresses minimum wage
requirements, maximum hours of work,
and overtime pay.
 Federal Insurance Contributions
Act (FICA): This act requires
employers and employees to make
matching contributions to Social
Security. The employer must withhold
the employee’s share of the tax from
his or her wages or salary.
State Level:
 Workers’ compensation laws: This
legislation requires employers to obtain
insurance that will provide most
employees with medical benefits and
compensation for loss of income due to
injury or illness related to employment.
 Unemployment insurance laws:
States administer unemployment
insurance programs and jointly

contribute to them with the federal
government.
 Child labor laws: States also establish
requirements for the employment of
minors.
Occupational Safety and Health

Occupational Safety and Health
Administration under the Occupational
Safety and Health Act (both called OSHA)
regulate:
 Specific working conditions
 Specialized training
 Safety equipment
 Posting of warnings related to products
and work site conditions
 Reporting of accidents and/or deaths
Performance Management
Performance evaluation is the process of
reviewing a person’s work performance to
determine the extent to which his/her
established goals and standards have been
met.
When should performance evaluations
take place?
 Review a new employee’s performance
with him or her after hiring.
 Conduct a formal performance
evaluation on an annual basis.
 Conduct an interim review at least once
during the year and whenever either
party considers a discussion necessary.
How shall performance evaluations be
carried out?
 Always schedule a performance review
or formal evaluation.
 Talk strengths and areas for
improvement.
 Give the person an opportunity to say
what’s on his or her mind.
 Document your conversations with your
employees about their performance.

What are the benefits of performance
evaluations?
 Letting an employee know where
he/she stands
 A salary review
 Consideration for promotion
 Identifying training and development
needs
 Documenting unsatisfactory
performance
 Checking on the effectiveness of your
recruiting, selecting, and training efforts
Characteristics of an Effective
Supervisor
 Honors the employee’s right to rely on
one individual for supervision and
direction—and encourages everyone
else to do so
 Involves employees in the decision-
making process where appropriate
 Encourages a businesslike atmosphere
 Is fair and honest
Discipline
A progressive discipline system is a
procedure whereby performance problems
are brought to the employee’s attention, and
the employee and employer take appropriate
actions to correct them.
An effective—and legally defensible—system
requires that the employee has received:
 A written job description
 Orientation to the job and initial job
training
 A performance evaluation at the end of
an initial probationary period
Progressive Discipline Procedure

1. Give a verbal warning.
2. Give a written warning.
3. Give the employee a specific
probationary period.
4. Dismiss the employee.

Dismissal Procedures
 Plan what you are going to say.
 Keep good records.
 Make arrangements for the employee’s
final paycheck.
 Arrange for the employee to return
association property.
 Discuss the extension or termination of
the employee’s benefits.
 Tell the employee what you will tell
prospective employers who call.
 Notify other parties affected by the
dismissal.

Requirements for Meetings
To help prepare for association meetings,
determine the answers to the following
questions:
 What are the legal requirements for
board meetings?
 What decisions will need to be made
before and at the meeting?
 What information should be prepared
for the meeting?
 How will the information be distributed
so others will prepare for this meeting?
 Where will the meeting be held?
The following meeting issues often have
legal requirements:
 Frequency of meetings
 When meetings should be open or
closed
 Notice of meetings
 Voting
 Executive sessions
 Violation hearings
Preparing for Decision-Making

at Meetings
 Set up an annual calendar.
 Schedule meetings at the right
frequency.
 Involve key players in the meeting
preparations.
 Establish and distribute an agenda.
 Prepare your board members to make
decisions.
Notice of Board Meeting

A notice should be sent in writing and/or
electronically to board members at least a
week before a meeting, unless governing
documents or state statutes require a
different timeframe.

Agendas
 Follow a standard format, based on
parliamentary procedure
 Target a meeting duration of 60-90
minutes if possible
 Have a logical flow
 Can label items “for discussion only” on
the agenda (allows for free flow of
ideas)
 Can be used by the presiding officer to
keep a group moving and focused on
decision-making
 Should be posted in a central common
area before each meeting
 Should be given to any owner who
attends a board meeting
Supporting Materials
The following materials can be distributed
with the agenda:
 Management report
 Minutes from the last meeting
 Financial report
 Committee reports
 Special reports, memos, or
correspondence on issues to be
discussed
Site Selection for Meetings

Look to schedule board meetings in a public
meeting room, as most do not require a
rental fee:
 Local church
 Nearby elementary school
 Community room in the firehouse
 Neighboring library
Site Preparation
Consider the following items when preparing
the site for a meeting:
 Lighting
 Temperature
 Refreshments
 Beverages
 Seating

 Table and chairs facing rows of
attendees
 Chairs in center of table
Conducting the Board Meeting

Use parliamentary procedure.
 Motion
 Second the motion
 Discussion
 Vote
Determine the quorum.

Quorum is the number of members required
to be present for the board to legally
conduct the business of the association.
Use motions to vote on agenda items.

A motion is a proposal that the board takes a
stand or takes action on a specific matter.
Discourage voting abstentions.

An abstention is when someone does not
cast a vote.
Keep debates professional and

appropriate.
A debate is a term used in parliamentary
procedure for discussing a motion or issue.
Go into an executive session when

making decisions about sensitive
material.
An executive session is a closed session for
decisions of sensitive nature.
Give the residents the opportunity to

speak.
Make a list of actions to complete before

the next meeting.
Role of the Presiding Officer

 Sets the tone of organization for the
meetings
 Announces the presence of a quorum
 Establishes the agenda of the meeting
from the beginning
 Sees to it that all major issues are
brought to the floor in the form of a
motion

 Calls people’s attention to the motion
on the floor as a way of refocusing
discussion
 Keeps meetings from becoming
unreasonably long
Recording Minutes for

Meetings
Meeting minutes should include:
 Notation
 Type of meeting
 Name of the group
 Date, place and time of the meeting
 Presence of the president and secretary
or their substitutes
 Presence of a quorum and the names of
the board members present and absent
 Action taken on the minutes of the
previous meeting and corrections
 Details on any motions that pass during
the meeting
 Hour of adjournment
Recording Motions
All motions passed are recorded in the
minutes with the:
 Exact wording of the motion
 Name of the persons making and
seconding the motion
 Result of the vote
 Dissenting minority vote—if those
dissenting ask that it be recorded
Owner Meetings
There are two types of owner meetings:
Annual
 Approval of the budget
 Election of board members
 Community-building activities
Special
 Devoted to a special issue such as
committing to a major improvement or
authorizing a special assessment

The Manager's Role
Support Staff:
Ensure that meetings are well-prepared
and board members have the necessary
information ahead of time.
Professional Advisor:
Provide board with guidance and
perspective on the matters at hand.
Specific Tips for Facilitating a

Meeting
 Help keep discussions on target.
 Offer an alternative when discussions
stall.
 Call attention to past board actions
when they are relevant.
 Let your presiding officer know if you
are over schedule on an item with a
prearranged signal or note.
 Bring a set of governing documents and
look for potential conflicts.
 Urge consistency in actions of the
board.
 Support the principle of fairness.
 Elaborate on your management report.
Tips on Managing Personalities

Think about how to use people’s strengths to
get things done and anticipate how to
compensate for their limitations.

What Is Ethics?
Ethics: The disciplines dealing with what is
good and bad and with moral duty and
obligation
 Learning wrong from right
 Doing the right thing
Values:
 Respect
 Honesty
 Fairness
 Responsibility
Business ethics applies to the delivery of

products or services and to our relationships
with customers, employers, vendors and
colleagues.
Professional ethics is a set of rules or
standards that govern the conduct of
members of a profession.
Duty of Care
Duty of care requires the party acting on
behalf of another to exercise the skill and
care that a reasonable person would exercise
under similar circumstances.
Duty of Loyalty
Duty of Loyalty, also known as fiduciary
duty, requires the fiduciary to act in the
other party’s interests when administering
its assets.
Failure to maintain a duty of loyalty is
unethical and considered a conflict of
interest.
Conflict of Interest
A conflict of interest is a situation in which
an individual’s duty to one leads to the
disregard of a duty to another. A conflict of
interest exists if you can answer “yes” to
both of the following questions:

 Do you have a relationship or
agreement with a third party that could
directly or indirectly influence decision-
making?
 Will you or your management directly
or indirectly receive some compensation
from the community association or a
third party, other than the
compensation described in the
management contract?
Disclosure of Conflicts of Interest

1. Make a full disclosure before acting
2. Obtain specific authorization from the
board in writing
3. Consider how a potential conflict might
be perceived
Code of Ethics
CAI’s Code of Ethics for Management sets
forth the standards for:
 Integrity and objectivity
 Professional courtesy
 Conflict of interest
 Use of client funds
 Limitations of practice
CAI's Code of Ethics for

Management
1. The manager shall comply with current
bylaws, standards and practices as may
be established from time to time by CAI
subject to all federal, state and local
laws, ordinances, and regulations in
effect where the manager practices.
2. The manager shall participate in
continuing professional education
through CAI and other industry related
organizations.
3. The manager shall act in the best
interests of the client; refrain from
making inaccurate or misleading
representations or statements; not
knowingly misrepresent facts to benefit
the manager.
4. The manager shall undertake only those
engagements that they can reasonably

expect to perform with professional
competence.
5. The manager shall exercise due care and
perform planning and supervision as
specified in the written management
agreement, job description or duly
adopted board policies.
6. The manager shall disclose all
relationships in writing to the client
regarding any actual, potential or
perceived conflict of interest between the
manager and other vendors. The
manager shall take all necessary steps to
avoid any perception of favoritism or
impropriety during the vendor selection
process and negotiation of any contracts.
7. The manager shall provide written
disclosure of any compensation, gratuity
or other form of remuneration from
individuals or companies who act or may
act on behalf of the client.
8. The manager shall ensure that
homeowners receive timely notice as
required by state statutes or legal
documents and protect their right of
appeal.
9. The manager shall disclose to the client
the extent of fidelity or other
contractually required insurance carried
on behalf of the manager and/or client
and any subsequent changes in
coverage, which occur during the
manager’s engagement if the amount is
lower than the contract amount requires.
10. The manager shall see that the funds
held for the client by the manager are in
separate accounts, are not
misappropriated, and are returned to the
client at the end of the manager’s
engagement; prepare and furnish to the
client accurate and timely financial
reports in accordance with the terms of
the management agreement, job
description or duly adopted board
policies.
11. The manager shall recognize the original
records, files and books held by the
manager are the property of the client
and shall be returned to the client at the

end of the manager’s engagement;
maintain the duty of confidentiality to all
current and former clients.
12. The manager shall refrain from criticizing
competitors or their business practices;
act in the best interests of their
employers; maintain a professional
relationship with our peers and industry
related professionals.
13. The manager shall conduct themselves in
a professional manner at all times when
acting in the scope of their employment.
14. The manager shall not engage in any
form of price fixing, anti-trust, or anti-
competition.
15. The manager shall not use the work
products of colleagues or competing
management firms that are considered
proprietary without the expressed written
permission of the author or the
management firm.

6402 Arlington Blvd., Suite 500
Falls Church, VA 22042
(888) 224-4321
www.caionline.org
Copyright © Community Associations Institute (CAI). All rights reserved. Reproduction in

whole or in part is not permitted without the expressed, written consent of CAI.

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© Community Associations Institute

Community Associations Institute

This publication is designed to provide accurate and authoritative information in regard to

© Community Associations Institute 2 M-100 Study Guide

Module 1: Legal Basis

Lesson 1: Legal Basis for Community Associations 4

Lesson 2: Rule Development and Enforcement 9

Module 2: Financial Management

Lesson 1: Budgets and Replacement Reserves 14

Lesson 2: Collecting Assessments 21

Lesson 3: Financial Statements, Audits, Income Taxes, & Investments 25

Module 3: Facilities Management

Lesson 3: Risk Management & Insurance 42

Module 4: Community Management and Leadership

Lesson 1: Community Management 49

Lesson 2: Board Meetings and Decision-Making 61

© Community Associations Institute 3 M-100 Study Guide

© Community Associations Institute 4 M-100 Study Guide

Sources of Legal Obligation

© Community Associations Institute 5 M-100 Study Guide

Real Estate Laws

© Community Associations Institute 6 M-100 Study Guide

Public Offering Statement

© Community Associations Institute 7 M-100 Study Guide

© Community Associations Institute 8 M-100 Study Guide

According to the hierarchy of governing

© Community Associations Institute 9 M-100 Study Guide

Steps for Developing Rules

1. Determine the need for a rule in the

© Community Associations Institute 10 M-100 Study Guide

Purpose: This section states why a rule is

© Community Associations Institute 11 M-100 Study Guide

Alternative Dispute Resolution

Resources for Enforcing Rules

© Community Associations Institute 12 M-100 Study Guide

© Community Associations Institute 13 M-100 Study Guide

Roles and Responsibilities

© Community Associations Institute 14 M-100 Study Guide

Sources for Budget

© Community Associations Institute 15 M-100 Study Guide

2. Equal method computation: assesses

Other Revenue Sources

© Community Associations Institute 16 M-100 Study Guide

Expense Calculation Methods

Major Improvement Expenses

© Community Associations Institute 17 M-100 Study Guide

The Reserve Account

Reasons for Maintaining a Reserve

Conducting a Reserve Study

© Community Associations Institute 18 M-100 Study Guide

Consequences of Not Having a

The Replacement Reserves Schedule

© Community Associations Institute 19 M-100 Study Guide

Two common mistakes to avoid when

© Community Associations Institute 20 M-100 Study Guide

© Community Associations Institute 21 M-100 Study Guide

When a payment is late, your community

Prompt filing of a lien can make a difference

© Community Associations Institute 23 M-100 Study Guide

Uncollectable debts should be written off as

Solutions for Collection

© Community Associations Institute 24 M-100 Study Guide

Components of Financial Statements

Statement of Revenue and Expense