 Good afternoon, everyone. Welcome to another episode of condo insider. My name is Jane Sugimura and I'm your host for the show today. And today, you know, our topic today is hostility and discord at board meetings and how board members, you know, can deal with it. Hopefully I can give you some pointers. But, you know, I don't know whether it's the full moon or, you know, what it is, but, you know, people are. I think civility is as has is being lost in these public meetings. You look at the board of education. I mean, they, you know, they have disruptive meetings because you have angry parents who show up and. And I, you know, my, my board meeting, I mean, we had one a couple of months ago in a lot of people show I haven't know I, you know, right now I. Our building is a no pets building. And I had all these people show up owner show up to say, Why do we have all these dogs and a no pets building and so we, you know, the board had to deal with that issue. And now, all the boards in Hawaii are dealing with the budget. And I'm sure that, you know, there are, I'm hearing that, you know, approving the budget, you know, is probably, you know, when the times are good. It's probably not a big deal. But now we're in, you know, we're in not so good economic times. And we've got inflation. I heard from one of my property manager executives that, you know, he's consulting with boards and they're raising their maintenance fees 14 to 20%. So I can imagine that some of you are dealing with angry homeowners. And if you are like, like my, my association and maybe some other associations, you have maybe a budget committee. And, and, you know, we were all neighbors and I, I've been doing it for years. This year has been very contentious. Very, very contentious. And I don't know whether it's like I said, whether it's a blue moon or something that's in the food. But, you know, people are people are not being nice anymore. They're yelling and screaming and stamping their feet. And saying, I'm an owner and you know, you got to do it. You got to do this because I'm an owner and you owe it to me. And it's like, you know, being a board, I have, you know, I've heard from board members that say, you know, I don't have to take this. I'm an unpaid volunteer. And, you know, I'm out of here. But, you know, you can't do that because then you're abandoning, you know, your association. You know, to the people. You know, who are the, you know, the, the screamers and the yellows and the disruptors. And, and I don't think that's better. And yes, it's not easy for board members to deal with this type of disruption. But you know, I think what, you know, there, and there are some simple rules that board members, you know, can follow. And board members, you know, not, not only during budget season, but every time a board meets, it's making decisions. And when it makes a decision, it, you know, it has the board members have something called a fiduciary duty. This is a legal obligation. That is in 514 B. And in fact, it's an HRS 514 B dash 106. That provides that a board member shall owe a fiduciary duty to the association. And I'm, I'm, I'm repeating this emphasizes you owe it to the association. You don't owe it to your neighbor. You don't owe it to individual homeowners who are who live in your project now. And you don't, you know, you owe it to the entity, the association as a board member you're making decisions that will prevent harm to the association that includes the association and future owners. And, and it, it's not only the, the, the owners that you're protecting the association, you're, you're, you're acting, you're making decisions, so that people don't sue the board, or sue the association. You want, so, so, so you've got a really, really big job. But as a director of the fiduciary duty, you know, is kind of a hard concept to kind of to understand. And this is one, this, I have to admit that this is one of the toughest concepts of condominium association to both understand and implement. And if you're a board member, what this means is your fiduciary duty is to the association, not to an individual owner. Well, that means that, you know, you're protecting the owners as a whole. And that's what it means. You're protecting them as a whole. You're not protecting your neighbor next door, or the person who lives, you know, down the hall. What you're doing is you're protecting all of the owners. That means that from time to time, you're going to have to say no to a specific owner's request. A great example is when an owner asks for reimbursement or special treatment, that's not covered by the bylaws. And for example, if you have a loud or noisy project that's going on in your, you know, in your condominium, and an owner asks you for hotel room because it's too loud, and he can't sleep. Okay, you're not obligated under Hawaii law to provide that owner with a hotel room. And if you do provide that owner with hotel room, then everybody else who's bothered by the noise and the ruckus is going to ask for hotel room. And all of a sudden this project that the association is paying for the budget is going up because you're paying for all these hotel rooms for owners who are bothered by the noise and whatever. And so in order to carry out your fiduciary duty, what you're going to have to do is tell that owner who wants a hotel room because he can't stand the noise for the construction project that's going on in the property. You have to tell him no. Okay, so that's an easy one. Okay. But what if somebody comes to you and says, you know, you know, I'm an owner, and I have a medical condition, and this dust that is, you know, created by your project is affecting my asthma, and I can't breathe. And so I can't stay here. And since I can't stay here, you guys have got to pay for a hotel to put me up. So what do you do then this is and if you're if you're and this is the standard answer, when you don't know, you have to call the associations general counsel the attorney. And the attorney will look at the facts and the law and your governing documents and provide you with an answer that way you can blame the attorney for the answer. And in a situation where you've got a medic, an owner with a medical problem. Maybe you have to do a reasonable accommodation because they have a disability that way. You know, if the attorney says, well, you have to do a reasonable accommodation because this owner has a disability. And so, so, so you do it for that person, but it's only because they have a disability. And it's a health and safety issue. Because if you don't get him out of there, he's going to become very ill. And so that's the difference between the guy who just can't sleep because of the noise. Okay, but you know, these things, I mean, you can't make the decision yourself. So when when you're caught, when one of these situations come up, the first thing you want to do is to call the association's attorney. So that the association's attorney can guide you in making a decision that's going to fulfill your fiduciary duty. And you know, the one thing you don't want to do is to do something, you know, treat owners differently. And that that no, no is called selective enforcement. In other words, the association has rules, and you are on the board of directors. And so even though you're not the person who's enforcing it usually delegate that to your management company, or to the security people who work for your condominium, but you know, you're the one who makes a decision to say yes, you can do it for this person, but you can't do it for that one. That's a big no no get you into a lot of trouble. It's called selective enforcement. And that means that you're not treating everybody the same. That's why the example that I gave you about the person who who didn't like the project construction project because he couldn't sleep. And the person who had asthma and was affected by the dust, so that he couldn't breathe. Those are two different, you know, scenarios. And so for one, you didn't give them the hotel room for the second one, maybe you did. Or maybe you put him in a hotel and you split the cost and say, Hey, you know, we'd like to help out and, and because we're doing this and because you have a health problem and we want to make a reasonable accommodation. Maybe what we'll do is we'll get your hotel but you know, you got to pay hat, or you know, something like that. At least, you know, we're getting you out of the unhealthy situation. But these are decisions that, you know, you need to make and you have to make them with the interests of the association at, you know, at the heart of your decision because if you screw up, and you allow selective enforcement which you treat people differently. And that's what the owners after a while, if you do that enough, they will come after you and say, Hey, you know, board member, you know, you're not treating as fairly, you know, you let so and so do this and that and when we asked, you said no. And so that's why, you know, you have to act consistently to avoid the selective enforcement issue, and, and to make sure that everybody is treated fairly. And, you know, with respect to, let's get back to the, the budget approval at the board meeting, which may be contentious for some of you. Okay. And, you know, and board members really have a hard job, because you have to live with your neighbors. And, you know, one of the decisions you make at the approval of the budget is what is the maintenance fees going to be for the coming year. And like I said, at the earlier part of the program, I had a property management company tell me that, you know, they're raising associate mean maintenance fees in a range of 14 to 20%. And you're saying, Well, why is that? Well, number one, inflation is between eight and 9%. Okay, let me go back. Your budget, you're talking about your budgets. Your budget is really two pieces. One is the operating budget. That's what you have to pay, but owners have to pay so that the association can turn on the lights every day. The electricity, the water, the sewer, the employees paying for the insurance, and the supplies for the pool, the supplies for the cleaning people, you know, paying your plumbers and electricians and security equipment, and paying for the inspections because you have to have annual fire inspections. And maybe you have to have a structural inspection because somebody found a crack. But anyway, your operating expenses pay the bill for what you have to use every day for one year. And that usually covered by inflation. So if inflation is going up eight or 9%, then you take your actual costs from last year and you raise them. But you know what your association is your management company does is it takes your expenses from the previous year, and it talks to the vendors, and many, many, many of you who live in high rise building with no fire cars know that the insurance went up. And it didn't go up by the inflation rate. I know ours went up 30%. And so we got hit with an increase of $45,000 last year. And I'm hearing that in some buildings, it went up over 50%. So that's over the inflation. Okay, so you know, so the inflation rate is basically the bottom line. Because your other expenses are going to go up. And if you have projects in the pipeline. Oh, and so that's your operating budget, the things that you do on a daily basis. And then, so that would be covered by your inflation costs or whatever it is. So now it's eight or 9%. So you have to put in stock, set money aside for reserves. Okay, those are the two points one is operating expenses the other one is reserves, and your reserves. And to give an example. The reserve law went came into effect in the early 1990s. And it came into effect because Maisie he wrote all who is now now our senator in Congress. What used to be head of the consumer protection committee in the Hawaii State House of Representatives. And she was a grousing to me that she had condominium people who bought into units, and they got hit with a $10,000 assessment this is in the early 90s. Okay. And you know that's because back then, there was no reserve law, there was no law that said, you have to put aside money every month, all owners in a condominium had to set aside money every month, so that you could pay for the big repairs like you know, fixing the swimming pool, painting the building every 10 years, which is about a million dollar job if you're a 30 story building. And now we have small repairs. And for those buildings that are over 30 years, we have pipe replacement, which costs millions of dollars. And how do you pay for that. You're not going to wait until all your pipes are failing. Now, we need $19 million. And how do you get it you do a special assessment. And you know, and the whole purpose of the reserve is so that you don't do a special assessment. You put money away every year, every month, and it's collected with the maintenance fees to take care of all of the components in your reserve. And how you do that is you get a reserve study person who is certified and qualified to do a reserve study, who comes to your building and looks at all your components, and it looks at your roof. Do you have spalling, do you have painting, what kind of equipment do you have you have heat pumps, you have air conditioning equipment, and how long is it useful life, and how much is it going to cost, and how much do you have to do, you know, this year, so that when it becomes when you have to have, you know, do the roof, you know, you have the money ready, so you don't have to do a special assessment. And so Maisie, back then, I mean, back in the 90s, I mean, she she was grousing to me. She that if we didn't, you know, do it voluntarily, she was going to make a law, and she did. It's one of the toughest laws in the country. And after the Florida collapse, there were states all over the country that were looking at the Hawaii law budget and research because it's so strong. And they're starting to adopt that Florida didn't have one now they do. But anyway, what it does is it says that you got to set aside you got to collect you the association, you the board are responsible for collecting money from all of your owners. And you, and you add it to the maintenance fee so you have the money set aside for operating expenses that pays for the day to day that pays for everything to turn the lights on and off on your building, and to make sure that it runs on a daily basis and then you collect extra to sock away for those big projects, like replacing roof, doing spalling, replacing your alarm system, are renovating your elevators, putting in fire sprinklers. And these are awesome and replacing your pipes now that older buildings have to do. And these are some of these are million dollar jobs in fact replacing and putting in fire sprinklers is probably multi million. I mean, Marco Polo in 2021 spent $5.4 million retrofitting their building with fire sprinklers. And so, you know, so this isn't cheap. And you're not going to be able to do it in one year. That's why you have to, you know, sock away a little bit, every, every month, so that you have that money, when you have to do those big expensive repairs that you know are going to happen. You know they're going to happen. And maybe, you know, if they happen sooner rather than later, at least you have money in the bank that you don't have to do a special assessment, because a special assessment is hard on your owners. If you think raising maintenance fees is hard, try doing a special assessment, they will come after you and scream bloody murder, and they'll watch your head on a plate. You know, so, so you don't want to go there. It's better to incrementally re increase the maintenance fees on a steady basis. You know, if you're going to go there, rather than keep your maintenance fees low, and when something bad happens, say, oh, sorry. Now I'm going to have to special assess you $10,000. And we're, and people are going to say where am I going to get the money. And they're going to, you know, scream bloody murder. And, and those of you who are, you know, have been on boards, maybe have heard of owners rising up and getting rid of, you know, removing boards. They get mad. They get angry. And, you know, and, and so board members, you know, have to know that, you know, and, and, you know, and you can't, you know, kowtow and give in to the squeaky wheel owners who say, No, no, no, my maintenance fees have to stay low. Because you as a board member, like I said, have a duty fiduciary duty to the association. That means the entire entity. That means current owners and future owners. And like what happened in Florida, you, one of the primary duties of a board member, and it's in your governing documents, you're responsible for the repair and maintenance of your building, which means you make decisions. You got to make sure that money is there. And yeah, it's going to be hard. It's hard to economic times like now. And so you got to be ready to make those hard decisions. And you have to know that, you know, under the Hawaii revised statutes, as a board member, you have a fiduciary duty to make sure that there are sufficient funds in your reserves so that future owners do not have to be specially assessed to come up with extra money because you fail to take steps in previous years to increase maintenance fees so that there would be enough money. And that's the whole, and the reserve study is a planning tool. It's not, you know, something, it's not clairvoyant, it's not a magic document that says, ah, this is what you have to put away. Yes, it gives you a number as to what you should, it gives you an estimate, but that reserve study changes. And in economic, in times like now where they, you know, where the economy is, so what do you call it, it changes so quickly. You need to get the reserve study updated. In fact, all any of you, if you're using reserve studies that were done in 2020 and 2021, they're obsolete, their numbers are no good. Okay, so you need to do a new one for 2023. And, and, and, and, you know, that's a given if you're working off of those old numbers. It's garbage in garbage out. And it can't, you know, it's not useful as a planning tool, unless you use current numbers, because what a reserve study does is it makes a list of all your components, figures out what the useful life is, and how much it costs to replace it. And then they figure out how much you have to sock away every year, so that when it comes time to replace it, you will have the money. And so if the costs of goods go up, like it did between 21 and 22. That means that if you did the reserve study in 2021, those numbers are no good anymore. And that's why you have to, you know, constantly, you know, update your reports in times of, you know, economic, you know, disruption where the where changes, like in one year. Right. The interest rates, you know, went up. What was it inflation was maybe three or 4% in January of 2022 and now we're up to eight or 9% I mean, and it's so volatile. And now in today's paper I think there was a news where the, where the Wall Street, the markets are up over 1000 points. Because there's a report that the inflation is cooling. So now everything's coming down. So, you know, and, and, and, you know, so it is volatile. And, you know, for board members, this is you have to understand that this is a hard choice, but you need to think of the association, not your neighbor next door, not, you know, your best friend who lives down the hall. And your decisions have to be for the entire association for current owners for future owners, and to make sure that you got that pot of money set aside for your reserves, so that your building does not suffer. What happened in Florida when that building collapsed, and that building collapsed, because the owners and the board members didn't do what was necessary to maintain that building they knew that there were problems. They were told that there were they had a report, they had a report for eight years, that there were spalling problems structural problems, and nobody didn't love the board, you know, just before the collapse, try to raise money, and the owners would not approve the increase. And, and in fact, I think they did manage to pass something, because when the building collapsed, they were in the process of collecting this extra money, but it was too late. And, you know, you don't want to be in a situation like that. And so, you know, so, so you board members, I applaud you for hanging in there and doing your job. And yes, it is a thankless job you are an unpaid volunteer we all know that, but you know you're doing something that's good for your building, and good for your owners, even though they might not think you're such a good guy right now. But you are doing it for their benefit. You have the information they don't have. And, you know, so you need to use that information to make the best decision for your association. And for those of you who continue to have a disruptive meetings for your owners, where it's not just for the budget, or maybe for something else. Please tune in next week, because I'm going to have as my guest, Rachel Glanstein, who's a professional parliamentarian, and she's the one that you would hire to come to your meetings. And she would, she would run the meetings and she she would make sure that those people who yell and scream to not disrupt your meeting that you the board will be able to finish your meeting and get your business done. But anyway, that's, that's another episode. And, and so I hope you will tune in next week to hear what she has to say. And I thank you so much for joining us today. For this episode of condo insider and condo insider is the show for people who live and work in condos. And so I hope we've been able to bring you some good information that you can use in your relationship with your condominium. And so thank you for tuning in. And please join us with other episodes, especially next week, when we have Rachel Glanstein. So a hollow, mahalo and aloha. Thank you. Mahalo.