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Find Blog Articles for Florida’s Condo, HOA and the Management Industry.
Tags: Board of Directors, Tax Planning
Accounting and tax services are about more than just numbers on a page. Unlike other accounting firms, when you call us you will get a live human being not voicemail and unlike other accounting firms we will work with you on your business helping you to grow profits and cut taxes. Unlike other accounting firms we will tell you before we begin work exactly what it will cost for our help.
Our tax accounting professionals will be happy to assist you with; tax planning, tax preparation and tax representation.
Our tax accountants are EA’s (Enrolled to practice before the IRS). They know the tax laws and will make sure you don’t pay one penny more than you have to. Visit us for a free consultation with a tax accountant, who will review your tax situation, with you to determine the best course of action. The tax accountant will provide you with a free fee quotation.
Unlike a balance sheet which shows a quick snapshot of HOA finances at a certain point, the income statement shows financial information over a period of time. Usually, the period of time is the rate at which you prepare your financial documents whether it be monthly, quarterly, or annually.
The income statement is considered the most important document within the financial statement because it shows the financial direction, whether that be positive or negative, of the community association.
There are four items that should be included in an income statement:
Gross profit is all the money that was made over the time period. If you submit financial documents monthly, it should be all the funds raised within that month. That should include any dues, fees, charges, or donations collected.
Operational expenses would be regular fees such as property maintenance, pool cleaning, landscaping, etc. Anything that is a recurring charge necessary to keep the community up and running.
All other one-time expenses would fall under the Gains and Losses category. Because the income statement shows finances over a certain period of time, any extra expenses need to be reported. If the community playground needed new mulch in March, that expense should appear in that month’s income statement, even if it means the association did not make as much money in March on paper.
Net income is the result of taking gross profit and subtracting all expenses for the period. This is the magic number that the entire report is based on. If your report comes out showing a positive net income, then your association did well and you can put some money in the reserves. If your net profit came out negative, then you should take a deeper look into your finances and see where improvements can be made.
All categories should be broken down to be as detailed as possible. For example, gross profit should be broken down between dues, fees, and any other source of income for that time period. Operational expenses should be broken down into landscaping, pool cleaning, etc. The more detail included in any financial document, the more insight it will give to the association board of directors leading to better decision making and financial planning.
If you are still unsure about how to create a proper income statement, contact the professionals at CSM. We have years of experience working with HOAs from around the United States. With a wide variety of services, our goal is to give community associations all the tools and technology they need to be financially successful, while at the same time still allowing them to remain independent.
Tags: Condo and HOA, Condo and HOA Accounting, Condo and HOA Budgets, Management News
End of Year Taxes:
While tax returns aren’t due until April, to minimize your tax burden the strategy of accelerating rental property expenses should be considered now, property owners, should start deducting these expenses this year could be more important than ever, especially if you’re affected by the new Affordable Healthcare Act tax. Under the Act, if your modified adjusted income exceeds $250,000 (filing jointly) then you’ll pay an additional 3.8% tax on any rental income or other passive income above that amount. Rental property expenses are deductible only in the year they are paid, so December is your last chance to pay for any rental property-related expenses that you want to deduct this year. Additionally, you can pay your expenses in advance, so consider paying in December some expenses due next year (such as a mortgage payment, property taxes, or utility bills) to offset this year’s income.
As far as rental income is concerned, don’t be tempted to defer rental income for December rents to next year. The Internal Revenue Service matches 1099s for commercial leases, and they want to see rental income match up with 1099s. While residential rental owners don’t receive 1099s from their tenants, many audits that CAP’s have been involved in where the IRS examined residential lease agreements and had issues with the rental owner declaring less than a full twelve months of income if the unit was occupied for the entire year. But what if you were on vacation for all of December and didn’t check your mailbox until mid-January? That’s still income for December.
It’s important to not make assumptions about rental income losses–several clients get burned because they thought they could deduct these losses. The problem is that rental income losses fall under the “passive income rule” which can be a complicated beast. Rental income is considered passive income, and under the rule, passive income losses can only be offset against passive income, which means you need to have another rental property that makes money or some other passive income source. The rule is different if your adjusted gross income is less than $150,000. The passive income rules are very complex and everyone has a different situation, so it’s critical that you consult with your tax advisor before you act on any assumptions.
Checklist: End of Year Taxes
Meet with your accountant to discuss end of year tax strategies.
Consider paying now expenses due next year to offset this year’s income.
Let your accountant know if you anticipate any rental losses next year, or if you’re planning on refinancing, buying, or selling rental property as these activities may have tax consequences that might be partially mitigated with informed planning.
If you formed an LLC or S-Corporation to hold your rental property, order 1099s now to send to your unincorporated vendors (to whom you paid more than $600) by January 31st–it can sneak up quickly.
We provide you with complete, timely reports that will manage your cash flow:
You will be surprised at how much you can save. You can reduce many variable costs, office space, payroll taxes, employee benefits, equipment costs, software costs and the effort! Contact us for a free estimate of the cost savings for your business.
Year-end reviews:
Revisiting and evaluating insurance policies and rental regulations and laws is key to protecting your rental property investment. We recommend that rental property owners set an annual calendar reminder to review their insurance policies for proper and adequate coverage and check on new local ordinances affecting landlords.
Insurance policies and their respective coverage amounts change frequently. We have seen many owners move out of their property and convert it to a rental but forget to call their insurance provider to make sure their policy is updated from a primary occupant policy to a landlord policy. If an owner does not make this policy change then it is very likely a future claim will be denied for the wrong policy classification. The classification change to a landlord policy will likely result in a premium increase but without the proper classification the property owner is not adequately insured which, in the end, will be a much bigger price to pay.
City ordinances can change quickly and are difficult for distant and even local landlords to be aware of. While a local professional property manager should be able to help you with local ordinances, It is ultimately the property owner’s responsibility to make sure rental property is compliant with local city and county ordinances.
In addition to local ordinances, make sure you understand federal and state laws that impact rental property, such as fair housing requirements and your state’s landlord-tenants laws. Your property manager, if you have one, will be an important resource here. If you self-manage your rental property, consider joining a state or local landlord association, as these groups often have attorneys provide updates on changing laws as well as provide other benefits. Property Managers in South Florida can join forces with www.sfpma.com
While it might be a slower time for year for landlords and property management companies, the winter, especially December, can nonetheless get busy because of the holidays. However, it’s important to have a game plan for the coming year. Schedule a planning meeting to meet with key people, including any co-owners of your rental property or your property manager, if you have one, to address these issues:
Checklist: Planning for Next Year
Confirm annual or six-month rental property inspections are scheduled.
Review lease agreement template.
Review policies or “house rules.” Consider adding a policy addressing space heater safety. Adding a Pet Policy, we see many more tenants and owners with pets, along with service animals.
Review rents and consider an increase.
Discuss whether any significant repairs, such as re-roofing, need to be undertaken in the coming year.
Tags: Budgets & Finance, Business Articles, Condo & HOA Accounting, Management News
This free webinar will cover the following topics: Understanding rental income & Expenses, Passive loss restrictions, and material participation, Depreciation choices, Section 199A and QBID, along with much more that we help you understand and get every benefit the tax code allows.
2021 LEGAL UPDATE December 16th 12:00 pm – 2:00 pm Join Campbell Property Management and Attorney Jeffrey Rembaum from Kaye Bender Rembaum for this Legal Update Webinar, live via Zoom. This 2 hour course will run from 12:00 PM to 2:00 PM. Property Managers who attend will receive 2 CEUs in the Legal Update category. Board Members who attend will learn about law changes from 2020 that may impact their community associations in Florida. Register Today
FREE EDUCATION Virtual Event “MAINTAINING ORDER: A DISCUSSION ON RULES & REGULATIONS, GOVERNING DOCUMENTS AND FINING IN COMMUNITY ASSOCIATIONS” by Katzman Chandler MAINTAINING ORDER: A DISCUSSION ON RULES & REGULATIONS, GOVERNING DOCUMENTS AND FINING IN COMMUNITY ASSOCIATIONS Date: Wednesday, December 16, 2020 Time: 1:00 pm Location: Online Event via, Zoom What are some typical Community Association Rules and Regulations? How are the Association’s Rules and Regulations adopted and enforced? Who enforces them, and by what means? Is an attorney needed to create them? This Course provides answers to these questions, as well as a primer on Association Governing Documents, their order of priority and enforceability, and includes a review of fines and fining procedures. REGISTER NOW Register Online or Call Now 800-987-6518
SEASON 2; EPISODE 6 OF ASSOCIATION LEADERSHIP Castle Group & Kaye Bender Rembaum December 17th 12:00 pm – 1:00 pm Castle Group & Kaye Bender Rembaum invite you to join us for Season 2, Episode 6 of Association Leadership. The live webinar will be hosted by Craig Vaughan- Castle Group, President and Attorneys Jeffrey A. Rembaum & Michael S. Bender- Kaye Bender Rembaum, P.L.- Board Certified Specialists in Condominium and Planned Development Law. This is hosted by Castle. Please direct all questions to m.rodriguez@castlegroup.com Reserve your seat HERE!
WEBINAR: GUEST RESTRICTIONS & SCREENING TENANTS AND NEW OWNERS December 17th 1:00 pm – 2:00 pm Guest Restrictions & Screening Tenants and New Owners: Is It Worthwhile? Course #: 9630142 | 1 CE credit in HR (or Elective) Instructor: Karina Skeie, Esq. This webinar addresses the authority to review and approve tenants and owners, including issues related to transfer fees/security deposits, potential “good cause” to deny an applicant, restricting guest occupancy, and common pitfalls in the “screening” process. RESERVE YOUR SEAT HERE
FREE EDUCATION Virtual Event “Q & A SESSION FOR MAINTAINING ORDER: A DISCUSSION ON RULES & REGULATIONS, GOVERNING DOCUMENTS AND FINING IN COMMUNITY ASSOCIATIONS” by Katzman Chandler Q & A SESSION FOR MAINTAINING ORDER: A DISCUSSION ON RULES & REGULATIONS, GOVERNING DOCUMENTS AND FINING IN COMMUNITY ASSOCIATIONS Date: Thursday, December 17, 2020 Time: 1:00 pm – 2:00 pm Location: Online Event via, Zoom You have questions, we have answers! Come join our Q & A Session to answer all your questions about Maintaining Order: a Discussion on Rules & Regulations, Governing Documents and Fining in Community Associations. REGISTER NOW Register Online or Call Now 800-987-6518
DISASTER PREPAREDNESS & RECOVERY: ARE YOU READY TO WEATHER THE STORM? by Becker Provider #0000811 | Course #9630113 | 1 OPP or 1 ELE Credit Online Webinar Is your community prepared in the event that a hurricane strikes through your city? In this special course we will go over practical tips for developing and implementing a disaster recovery plan for your community. Managers and board members will learn: Steps to take to protect life and property Recover and post event steps The ins and outs of contracting before and after the hurricane How to document a claim
Outgoing board members to return all official records … to the incoming board.
Now as benign as this may seem it speaks to a greater problem and that issue is: Where are all the association’s records? Why did the legislature have to go out of its way to create a specific law to obligate a proper transition from one board to the other? There must be a problem here.
The problem is that community associations have a lot of records and it goes beyond what a board of directors has control of because managers and management companies also have control of essential documents that very often go missing. Let’s take a few examples to demonstrate the problem.
A big wind comes and knocks off a couple of roofs in your association, it happens all the time. Well, the first thing that the insurance company wants are the maintenance records roofs going back seven years before they pay for the claim. No records…claim denied and its lawyer time. Another good one relating to community association collections, is that the board has decided to foreclose on Mister Delequaint for non-payment of assessments for the past five years. Mr. Delequaint arrives in court and his lawyer asks the association’s attorney to provide the proof of mailing for the budgets for said five years and they are nowhere to be found. As a matter of fact even the budgets are stone cold lost.
The judge can very well possibly rule in favor of Mr. Delequaint (no association foreclosure) and even award him prevailing attorney fees. All these maladies could have been avoided if the association had a document retention policy and followed the protocol.
Let’s face the facts and understand that community associations are volatile environments and calling them dynamic is kind. Boards of Directors change, emotions run high, management companies are dismissed frequently, as are attorneys, vendors and whoever else gets an opportunity to work for an association. In the middle of all of this mess records, contracts, ledgers, insurance policies, minutes, proof of mailings, warranties, governing documents, proof of meeting notices, notes and everything else that can be put on paper fall into a deep dark abyss never to be found again. Sometimes by accident and often by design by disgruntled board members, dismissed employees (managers), or untrained office staff who may feel that the round file is for everything that is over a year old.
So now that the problem has been identified what is the solution? First as mentioned above, the board of directors must establish a record keeping policy and protocol (vote on it and put it in the minutes). Don’t lose those minutes and approve them at the next meeting. Said policy should identify all the records that an association must keep and for how long. This is easy because it’s all in the statutes (for Florida condos 718.111 and Florida HOAs 720.305) and I doubt that any state does not address this issue.
The next thing is:
HOW can an association keep these records from disappearing never to be found again? There are many ways to go about this and technology may have the answer. Although it might seem to be expensive it is possible that all documents be kept electronically and not just on paper.
Have them scanned and put them away on a remote server. This technology also gives an association a backup just in case that big wind comes and blows away your office or the management office.
Once again referring to Florida condo statutes 718.111(12)(b) it is crystal clear that documents can be maintained in digital format. In Florida HOA statutes 720.303(5) the legality of keeping records in digital form is not so clear but it is still a prudent idea. No matter what your board comes up with you should be able to easily get your hands on the minutes of a meeting from five years ago or all the maintenance records for the roofs. Try it and if you cannot put your eyes on them it proves that your community association has a problem that needs to be fixed right away.
Find the right companies to help you with Digital Record Keeping, Websites and Accounting.
Tags: Board of Directors, Condo & HOA Accounting, Condo & HOA Elections
HOA bank statements are just as they sound: a statement from the bank showing all deposits and withdraws from each association account over a certain period of time. The most effective way to prevent fraud within your community association is to keep a close eye on bank statements. Most associations have at least two accounts: an operating account for regular costs of running a community association and a reserve account for setting aside funds for future projects.
Reviewing bank statements on a regular basis is important because it is one of the few financial documents that is not prepared by the association board of directors or HOA management company. Comparing bank statements with association financial statements is a good way for other HOA members to check the accuracy of financial statements prepared by the manager and/or treasurer.
What is Included in an Condo &HOA Bank Statement
A proper bank statement should include a timeline of all deposits and withdraws into and out of association accounts. Each account should have its own statement. It is important to carefully review every transaction to prevent potential fraud. One of the most common ways fraud is committed is by “borrowing” money from a long-term reserve fund and returning the money after a time; essentially taking out a loan using association funds. This is common because of how hard it is to track. If all funds are accounted for in the long run, nobody would know unless they inspect each individual transaction.
Who Should Review Bank Statements
Only a few people have access to association funds. Usually, it is just the president, treasurer, and/or your property management company if you choose to use one. This leaves a lot of power in the hands of a few. If left unchecked, it could be an opportunity for fraud. It is important that all bank statements be sent to someone other than the member(s) who have the ability to write checks. That way, they can act as an impartial inspector to make sure that nothing is missing within the HOA accounts.
How Often Should Bank Statements Be Checked
Bank statements should be included with all other financial statements prepared at the interval as determined by your HOA whether it be monthly, quarterly, or annually. Ideally, bank statements should be checked as frequently as possible. Some banks offer online banking services that allow for 24/7 access to association account statements.
Need More Information
Financial management can be one of the toughest aspects of operating a successful HOA. If you are having trouble with reviewing financial documents such as HOA Bank Statements, contact the professionals at CSM. We have years of experience working with homeowner’s associations from all over the United States. Using state-of-the-art technology, we can provide financial management assistance while still allowing association directors to remain independent.
Tags: Accounting Articles, Condo and HOA, Condo and HOA Budgets, Management News
By Eric Glazer, Esq.
Published August 3, 2020
As promised a few weeks back, we need to discuss some very interesting pitfalls associations sometimes fall into in the area of collections. In light of the fact that mortgage delinquencies are at an all-time high, rest assured that owners will in a short while begin falling behind on condo and HOA assessments as well.
The association must accept even partial payments.
Suppose the assessments are $300.00 per month. An owner has not paid in 3 months and owes $900.00 plus late fees and interest. The owner sends in a payment for $300.00. Must the association accept the $300.00 payment? YES.
In Ocean Two Condominium Ass’n, Inc. v. Kliger, 983 So.2d 739 (Fla.App. 3 Dist.,2008) the court held that the refusal of a condominium association and its management company of tendered payments of undisputed maintenance fees by condominium unit owners was improper and rendered premature the association’s lien foreclosure action involving owners’ units.. The condominium statute provided that such payments were to be applied on account, without prejudice to association’s and unit owners’ respective positions. In this case, the dispute would have been reduced to an inconsequential amount, and association’s attorneys could not in good faith have filed to foreclose the miniscule claim remaining. West’s F.S.A. § 718.116(3).
The association should not worry about restrictive endorsements.
Same scenario as above, but this time, the owner writes “paid in full” on the $300.00 check. Should the association deposit the check? If they do, are they now prevented from suing for the $600.00 balance?
The condo and HOA statutes each provide the methods by which to apply assessments that are paid. Each statute makes it clear that they are to be applied in accordance with the statute, and any purported accord and satisfaction, or any restrictive endorsement, designation, or instruction placed on or accompanying a payment. In simple terms, after applying the payment, the balance is still owed despite the words “paid in full” or similar words being placed on the check.
The association must apply the monies in accordance with the statute.
Same scenario as above, but the owner has also incurred $200.00 in attorney’s fees, $10.00 in interest and $75.00 in late fees. How much does the owner owe to the association after making the $300.00 payment?
The statute says……….Assessments and installments on assessments which are not paid when due bear interest at the rate provided in the declaration, from the due date until paid. The rate may not exceed the rate allowed by law, and, if no rate is provided in the declaration, interest accrues at the rate of 18 percent per year. If provided by the declaration or bylaws, the association may, in addition to such interest, charge an administrative late fee of up to the greater of $25 or 5 percent of each delinquent installment for which the payment is late. Any payment received by an association must be applied first to any interest accrued by the association, then to any administrative late fee, then to any costs and reasonable attorney fees incurred in collection, and then to the delinquent assessment.
Since 2009, Eric has been the host of Condo Craze and HOAs, a weekly one hour radio show that airs at noon each Sunday on 850 WFTL.Eric Glazer graduated from the University of Miami School of Law in 1992 after receiving a B.A. from NYU. He has practiced community association law for more than 2 decades and is the owner of Glazer and Sachs, P.A. a seven attorney law firm with offices in Fort Lauderdale and Orlando and satellite offices in Naples, Fort Myers and Tampa.
See: www.condocrazeandhoas.com.
He is the first attorney in the State of Florida that designed a course that certifies condominium residents as eligible to serve on a condominium Board of Directors and has now certified more than 10,000 Floridians all across the state. He is certified as a Circuit Court Mediator by The Florida Supreme Court and has mediated dozens of disputes between associations and unit owners. Eric also devotes significant time to advancing legislation in the best interest of Florida community association members.
Tags: Condo and HOA Accounting, Condo and HOA Collections, Condo and HOA Laws, Management News
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