New Timeline Added

In anticipation of the November 5, 2012 annual Meeting of the Members, I've put together a concise timeline of egregious acts by the board and management company dating back to 2006. Each of these acts can be confirmed by reviewing the Meeting Minutes and Financials available on this blog. If we are to make positive change in this community, it is critically important that we have 134 members present at the meeting. Though an absentee ballot can also count towards your attendance, these absentee ballots are counted by our Management Company. Review the timeline and you'll agree that our board cannot be trusted, and that your attendance is vital.

We are the Management Company's Cash Cow

After a review of Westwind HOA's financial disclosure for 2007 - 2012, a peculiar event occurred in October of 2009. The fee our association paid to the management company jumped from $2800 to $6000 - in a single month!

There is no explanation as to why the board agreed to this extraordinary jump in management fees to a company who had simply changed it's name - from Leisure Life (who maintained a D minus rating from the Better Business Bureau at the time) to our Management Company. To this day, our Management Company, still offers no added benefits or services that weren't previously offered by our previous Management Company (same owner). It was simply a name change that cost our association an additional $3200 monthly. In May of 2011, the board agreed to an additional 5% increase to the Management company. Only a few months later, the board agreed to another 5% increase for a monthly management fee of $6600 today.

Now, are these fees extraordinary? Well, take it from the top 10 management firms for 2012 according to the Phoenix Business Journal. Below are some of their comments. After reading this you might ask, "How the heck does this happen?". Step 1: Eliminate elections. Step2: Pad the Pockets of the Board.

#1 Rossmar & Graham Community Association:

Dear Mr. Jones,

Thank you for contacting our office regarding your inquiry on management fees. As discussed, you had noted that as a homeowner you had concerns regarding the management fees paid by your association. In our conversation, you relayed that your association is made up of 534 single family homes, with two large open parks and one tot lot. As discussed, there are a variety of variables that go into the pricing of a management contract, including complexity of the community, any on-site staffing or extensive amenities.

Per our discussion, the base management fee that we have for similar sized communities is at about $2300-$2700 per month (please note that this is not intended to be a proposal of management services, but simply a comparison for information purposes).

We welcome the opportunity to be considered for management services for your association. We would be happy to meet with the board or it’s representative committee, in order to provide a proposal for consideration. Feel free to have a representative contact me or our business development manager, Arianne Alhvin (Office (480) 551-4301, or via e-mail at aahlvin@rossmar.com) in order to schedule a property visit or meeting.

Thank you once again for contacting our firm. Let me know if there are any further questions (my direct line is (480) 551-4521).

Sincerely,
Any Ferrell CAAM, CMCA, AMS, PCAM
Senior Vice President – Portfolio Division
Rossmar & Graham | 9362 E. Raintree Drive Scottsdale, Arizona 85260
Office (480) 551-4521 | Fax (480) 551-6037 | www.rossmar.com

#3 City Property Management Co.:

Good Morning Michael,

Your question is a good one, but unfortunately cannot be answered clearly, which is not what you are looking for. Monthly management fees depend on many factors. For instance, # of doors, type of community (single family, condo, townhome), amenities, and services required. Typically you can gauge your management fee on $5 a door for "traditional" management. Without knowing specifics on your community and just based on 534 homes, I would say you are paying far too much. You should be at about $2670 per month. But again without know the needs of your community and what is included in the fee, it's hard to say. We would love to offer your Board a bid for management services. If that is something your Board is interested in, please let me know.

Thanks so much and have a great day!

Sara Saiz, CAAM®
City Property Management Company
4645 E. Cotton Gin Loop
Phoenix, Arizona 85040
(602) 437-4777 Extension 103
sara@cityproperty.com

#5 Vision Community Management:

Mike,

It was a pleasure speaking with you today.

We have managed Garden Lakes since 2007. We do not charge fees for rental registration programs or rental tracking in our communities. These are standard administrative functions at Vision. Please let me know if any other questions come to mind. I'll be happy to answer them.

As per your request, here is the management fee breakdown we discussed:

Garden Lakes consists of 2,216 homes and has a management fee of $6,900 per month.

Rancho Santa Fe consists of 1,999 homes and has a management fee of $6,750 per month.

Sage Creek consists of 500 homes and has a management fee of $2,000 per month.

The Vision team would appreciate the opportunity to create a custom proposal for professional management and financial services for your community. We are familiar with your community as we have managed many nearby communities, such as Garden Lakes for several years. During our time there we have been able to successfully complete their painting project, re-do landscaping and irrigation, along with addressing lake and associated wildlife issues.

Feel free to contact me with any questions you may have. I can be reached at my office number listed below or on my cell phone at 480-440-7208. I look forward to hearing from you. Have a great weekend.

Sincerely,
Pamela Rottner, PCAM, AMS, CMCA, CAAM
Senior Vice-President
Vision Community Management
9633 S. 48th Street, Suite 150
Phoenix, AZ 85044
Phone: (480) 759-4945
Fax: (480) 759-8683
www.wearevision.com

#7 Premier Community Management Inc.:

Mr. Jones,

Thank you for contacting Premier Community Management in regards to Westwind HOA. For a community the size of Westwind HOA, Premier would charge approximately $2200 for a monthly management fee. Please let me know if you would like me to submit a proposal to you for management services or if there is anything else I could help you with.

Warm Regards,
Lynne Kerley, CMCA, CAAM
Director of Client Services

#10 Associated Property Management Inc.:

Michael,

I hope they are washing your car every week for those fees! Those are by far the highest rates I have ever heard of for an association and I manage some of the higher end communities in Scottsdale. If you get tired of paying those fees and still want good service give us a call. 480-941-1077 my extension is 36, Tom and Trent are the owners of the company and can be reached at ext: 14 & 16. I have included them in this response so you will have their email address as well. I realize there are always politics involved with a change in the management company, but at least they could do interviews to become educated on current market rates.

Good Luck, let me know if we can assist in anyway!

James Stiely
james.stiely@apm-management.com

Dear Michael,

I am one of the owners here at Associated Property Management and I was forwarded your email from James about your management fees. I am happy to provide you or your Board a proposal for property management and I can assure you that our management fee for a deed restricted community of your size would be considerably less than what you are paying now. If your Association with 537 homes has no on site employees or out of the ordinary services than our average management fee for an Association such as your association would be $2,685.

We presently manage 75 communities throughout the valley and have been in business for over 28 years. The reason I stress that is because I want you to know that we are not a fly by night company that would make a statement that we could not back up. We presently manage a couple of communities that were once under management of our Management Company and would be happy to provide references upon request.

Sincerely,

Tom Emele - CAAM, AMS, CMCA
President of Associated Property Management
PO Box 188, Scottsdale, AZ 85252
480-941-1077 ext 14
602-553-4628 fax

It Pays to be a Director at Westwind!

After a review of Westwind HOA's financial disclosure for all of 2011 and 2012, a peculiar recurring transaction of $150 per month stands out. In violation of Bylaws Article 3.4 Compensation, our Management Company has been paying $150 monthly to Director Chris Gillies for "Porter Services".

Article 3.4 Compensation of the Westwind HOA Bylaws states: "No Director will receive compensation for any service rendered to the Association; however, any Director may be reimbursed for actual expenses incurred in the performance of his/her duties."

Authors of this article made it clear that no one will maintain a directorship and be compensated as a nodding head to a "look the other way" management firm. Yet Chris Gillies has been paid $150 per month by our Management Company since November of 2009. By the time the next annual member meeting arrives in November, Chris will have been paid $5400 for Porter Services.

Chris Gillies isn't the only director enjoying a compensatory relationship with our Management Company. Since 2011, our Management Company has paid Chris Wadding's son $6055 for various porter services. $3420 of this amount was for "Tree Trimming and Removal" despite that in 2011, the HOA maintained contracts in the amount of $8,100 monthly to Proqual Landscaping. Our Management Company paid Chris Wadding $555 for "Tree Trimming and Removal" as recently as April 2012 despite a 2012 contract with Mariposa Landscaping who had charged the HOA $560 as of April for the exact same service.

Why is it a big deal whether or not Directors and there families are compensated by our Management Company?

Our Management Company fees are 3 to 4 times more then other management firms for neighboring communities. Since securing a monthly compensation to Chris Gillies in November of 2009, the fees have increased by 10% (this value may be updated higher if it is found that fees were lower in 2009 and 2010 - awaiting information). Pam Rottner of Vision Community Managment provides the details in an email dated July 28, 2012:

"We are familiar with your community as we have managed many nearby communities, such as Garden Lakes for several years... here is the management fee breakdown we discussed:

Garden Lakes consists of 2,216 homes and has a management fee of $6,900 per month. ($3.11 per home per month)

Rancho Santa Fe consists of 1,999 homes and has a management fee of $6,750 per month. ($3.76 per home per month)

Sage Creek consists of 500 homes and has a management fee of $2,000 per month. ($4.00 per home per month)

Westwind consists of 534 homes and has a management fee of $6,600 per month. ($12.35 per home per month)"

In addition to the management fee, Our Management Company charges thousands of dollars yearly for office supplies, and rental registration/tracking programs. Pam Rottner explains that for the surrounding communities, "We do not charge fees for rental registration programs, rental tracking, or office supplies in our communities. These are standard administrative functions at Vision."

So you can conclude quite easily that the reason our Management Company can get away with thousands of dollars in exorbitant fees is because they pad the pockets of the majority of our Directors and their family members. This also explains why our Management Company actively suppresses and discourages absentee balloting.

Positive Change... A New Advisory Committee

CORRECTION:I was wrong in thinking that Officer's / Director's terms can expire without an election or successor. ARS 10-3805.E says, "Despite the expiration of a director's term, a director shall continue to hold office until the director's successor is elected, designated or appointed and qualifies, until the director's resignation or removal or until there is a decrease in the number of directors."

Any previous insistence by me that the board could not establish a quorum of directors having expired terms was wrong per ARS 10 which applies to corporations and associations.

And so, how do we bring about positive change, without being able to make a quorum of the members? Keep in mind that it pains me to say that we are "unable to make a quorum of the board", because I believe we can if the Association proactively distributed absentee ballots - until that happens, then the assumption is that we cannot without positive change.

Well, positive change has already come about with the establishment of the Advisory Committee. Legally established on May 18, 2012 and led by Director Chris Guiles, the group has already saved the Association tens of thousands of dollars on a new landscaping contract. With that they have proposed new ideas and changes that will beautify the community and hopefully invigorate participation in the community.

Members of the Advisory Committee include: Allen Dodson, Delores Ortega, Steve Feniello, and Chris Gillies (Director). Much thanks and hope to these three individuals for helping to bring about positive change.

My visit with other homeowners...

Today I had the privilege of meeting Delores Ortega and Steve Feniello. Along with Allen Dodson, these members recently approached the board with an alternative landscaping contract that has saved the community $40K annually.

After my meet, I drafted a letter to Chandler Travis the legal representation for the HOA. I will post his response as soon as it arrives.

Hi Chandler,

Today I visited with Delores Ortega (L332), and Steve Feniello (L330). They mentioned that elections did not take place in November 2011 because they were told by our Management Company that a quorum of the members was not met per Article 2.4 of the Bylaws. Additionally, these members of the association were led to believe by our Management Company that the annual meeting to elect officers of the board requires "in person" attendance of 25% or more of the total number of eligible votes in the Association. This is a clear misrepresentation of Arizona Revised Statute 33-1812 which requires the association to "provide for votes to be cast in person and by absentee ballot". This is in accordance with Article 3.1 of the ByLaws which states that: "Elections for the Board of Directors may be conducted in any one of the following manners (i) by voice vote, roll call vote, hand vote, or written ballot at an annual meeting of the Members; or (ii) by written ballot indicated by mail."

I would like for you to advise your client that continuing to mislead our community on the difficulties of changing the status quo is arbitrary and capricious to her fiduciary responsibilities to this association.

And so now I'd like to flip the coin and focus on Arizona Revised Statute 33-1249.B which governs how a "Quorum of Directors" is defined. It states: "Unless the bylaws specify a larger percentage, a quorum is deemed present throughout any meeting of the board of directors if persons entitled to cast at least fifty per cent of the votes on that board are present at the beginning of the meeting." This is in accordance with Article 3.9 of the Bylaws which state, "A majority of the Directors present at the beginning of the meeting will constitute a quorum for the transaction of business. Unless otherwise specified by these Bylaws, the Articles, or the Declaration, every act or decision done or made by a majority directors present at a duly-held meeting at which a quorum is present will be regarded conclusively as the act of the Board."

Now, per our Management Company, Steve Wadding's term expired on Nov 2011, likewise Pedro Lopez term expired in Nov 2010. I see nothing in Arizona Statute 33 Chapter 9&16, or within the ByLaws which allow a board member whose term has expired to act in any official capacity as an officer of the board, or to continue acting in any official capacity until succession.

In this scenario, how will the board attain a "Quorum of Directors"at the next meeting in May with only a single director? Without being able to make a "Quorum of Directors", it is nearly impossible for the HOA to transact any business. This scenario is designed to be avoided by the staggered terms outlined in Article 3.2 of the Bylaws, however the board has found itself in this position by failing to elect a successor to Pedro Lopez in 2010 despite plenty of interested nominees within the community.

And so, I'd like to know how you will advise your client to proceed through this predicament. I am awaiting a response, and so are the members that I met today. Will you either:

• advise our Management Company and the remaining director that the one or two directors whose terms have expired continue to operate in there full capacity in order to establish a Quorum of Directors in May? If so, what ARS statute or Article in the ByLaws gives them the authority to do this?
• advise our Management Company and the remaining director that as fiduciaries to the association, that the most reasonable and fair course of action is to allow the Advisory Committee established on Novemeber 2011 consisting of Allen Dodson, Delores Ortega, and Steve Feniello to prepare/mail-out absentee and in-person ballots for the Meeting in May?
  

Sincerely,
Michael J. Jones

Meeting Minutes and the Good Ol' Boys

Westwind HOA meeting minutes are provided in the pane to the right providing a historical reference since 2004 of all board decisions and "elections". A review of those minutes shows how the board determines it's members - no surprise, it's a Good Ol' Boys Club. During 'elections', the board nominates an officer who's term has just expired, and the officer becomes re-elected by a motion. This process guarantees that anyone voting by in-person ballot or absentee ballot per ARS 33.1812 and Article 3.1 is disenfranchised. It also usurps an election by hand or voice roll-call per ARS 33.1812 and Article 3.1.

See the following board minutes for a review of how the Good Ol' Boys club works:

• Feb 2, 2006
• Nov 20, 2006
• Jan 21, 2008
• Nov 17, 2008
• Nov 6, 2009
• May 6, 2011
  

New AZ Laws to Limit HOA Powers

In 2011, the Arizona Legislature passed the following bills:

HB2245: Allows members to videotape or audiotape open meetings.

HB22717: prevents an HOA from charging a fee for the use or placement of indoor or outdoor display of a for sale or lease sign by a unit owner on their property.

SB1148: Re-asserts that homeowners have right to due process facilitated by an Administrative Law Judge from the Department of Fire, Building and Life Safety. If you have a legitimate complaint against the HOA that falls under ARS 33 Chapter 9 and 16, then this could be your best route.

SB1326: prevents an HOA from prohibiting the Gadsden Flag, and prohibits the HOA from front or backyard display of flags. The HOA may limit the height of a flagpole to no more than the height of the rooftop, and may limit the display of flags to no more than 2.

Additional pro-homeowner bills passed during the 2011 legislature include HB2609, SB1149, and SB1540.