If you’ve served on an HOA board, you know that it’s harder than it looks. Everyone has an opinion – and often, those opinions do not align. Disagreements about seemingly simple decisions can become very polarizing. If you are the decision-maker, you may find yourself with fewer friends after removing a tree or choosing a new exterior paint color.
Without the assistance of an HOA management company, volunteering on an HOA board can be a miserable and sometimes isolating experience. Still, you may be wondering if hiring a management company to help is really worth the extra money.
Exactly what does an HOA management company do?
Homeowner associations (HOAs) protect the investments and the chosen way of life of those they serve. Investing in a home can be a huge liability if its surrounding community deteriorates. Most people want to buy a home that will maintain its value or appreciate over time. Those who choose to live in planned communities want to feel comfortable and safe while enjoying common areas.
HOA management companies are a force multiplier. Imagine being a volunteer HOA president responsible for maintaining safe and secure common areas and making sure residents comply with community rules. While the buck stops with you, an HOA management company can bolster your authority and help you confidently manage the daily duties and tedious tasks such as:
- Overseeing clubhouses, parks, pools, ponds and other recreational facilities
- Complying with government ordinances and laws
- Addressing all sorts of homeowner complaints
- Identifying common area maintenance problems
- Resolving common area maintenance requests
- Hiring and holding contractors accountable for repairs
- Hiring security companies to serve the community
- Enforcing rules and restrictions preventing undesirable home exterior conditions, on-street parking and other community annoyances
- Collecting dues, assessments and punitive fines
Now imagine serving as a volunteer HOA treasurer. As the treasurer you have a fiduciary duty to protect the monetary interests of the members of the HOA. Among your primary duties and responsibilities could be:
- Financial record-keeping, budgeting, and auditing
- Investing community funds
- Purchasing insurance, especially errors and omissions coverage for directors and officers of the HOA
- Paying local, state and federal taxes
- Tracking reserve funds, dues, and assessments
- Preparing a variety of useful financial reports, such as balance sheet, comparative income & expense, aged delinquency, and bank reconciliation reports
While the buck may stop with the HOA president, all fingers will point at the treasurer if the HOA suffers a monetary loss. An HOA management company can help treasurers manage the tedious, technical, and uncomfortable tasks above. Treasurers can oversee their work and identify potential errors and omissions.
HOA management companies can help the board avoid Directors & Officers Liability. They can also assist your board with routine administrative tasks. Anyone who has served on a board can attest that holding regular and productive meetings can be a major source of stress. Outsourcing board meetings to an HOA management company is better than whipping out “Robert’s Rules of Order” when a dispute arises. Failing to conduct board meetings in accordance with by-laws can spell trouble.
What are the pros and cons of hiring an HOA management company?
Depending on the size of your community, if you hire the right HOA management company, the pros may outweigh the cons. An effectively managed community can increase property values by showcasing pride in homeownership and community. If you hire the wrong HOA management company, the reputation of your HOA can suffer.
The right HOA management company can attract the right community volunteers to serve on your HOA board. Boards need volunteers with the right skillsets in public relations, operations, management, accounting and law. At the same time, the decisions volunteer board members make can financially impact others, and members can hold them responsible for their mistakes. Therefore, they may appreciate having paraprofessionals that help them minimize their errors and omissions.
On the other side, HOA management companies can be cost-prohibitive. Most homeowners dislike paying HOA dues on top of their mortgage payments. Hiring an HOA management company may require you to increase your membership dues. Homeowners will expect more out of their HOA when their dues go up. When budgets are tight, self-management aided by the use of a good community management software program may seem like a more cost-effective alternative, but it’s important to understand the liability exposures involved in this choice.
Hiring the wrong HOA management company can damage your HOA’s reputation. Toxic HOAs with overzealous enforcement, impersonal or bureaucratic customer service and frequent fines can drive your members away. Savvy real estate agents and homeowners will do their research before buying a home under an HOA because HOAs can restrict freedom and expect conformity.
What questions should you ask when vetting an HOA management company?
Before hiring and vetting an HOA management company, you need to know what services you need, how much your members are willing to pay per unit per month and what your members will expect for the cost. Many companies charge on a monthly, per unit basis and offer pricing options based on the number of services provided. Others tailor their packages to the size of the community and the number of amenities managed.
You can use a list of questions to vet an HOA management company. Ask members of the board to formulate the questions based on their respective needs and professional knowledge. Questions to ask HOA management companies may include:
- What is your company’s vision statement and how do you live up to it?
- What community software do you use to help manage your communities?
- How experienced are your key employees? What are their credentials?
- Are your key employees pursuing continuing education on a regular basis?
- Do you have in-house accounting and legal teams? What services do you outsource?
- How do you select vendors to perform maintenance on the properties you manage?
- Has your organization ever been involved in litigation?
- What do you expect from your HOA clients?
- How to you measure your overall performance?
- Do you carry general and professional liability insurance?
- Can you provide us with a copy of your contract so we can review it for legal sufficiency?
- What are your initiation fees, ongoing fees, and exit fees?
- Do you have any other fees?
- Can you provide me with the names of similar HOAs you manage?
Vetting an HOA management company can be challenging because they are likely to tell you what you want to hear. Their online marketing material may list all the services under the sun and boast about their unique ability to satisfy all your needs with satisfaction guaranteed. The best way to find the right HOA management company is to ask similar HOAs in your area who they use and who they have let go in the past.
What are the insurance implications?
It’s important that your board and HOA management company carry adequate HOA insurance. Your general liability coverage excludes professional liability. Professional liability coverage protects you against damages caused by your errors and omissions. If you hire an HOA management company, have an attorney review the contract to make sure your HOA adequately transfers or shares risk with the HOA management company.
Managing an HOA management company
HOA presidents, treasurers and board members must actively oversee HOA management companies. They have fiduciary responsibilities. They must never be out of sight and out of mind. Boards should establish SMART goals that are specific, measurable, achievable, relevant, and time-bound to evaluate their performance.
Never forget to request feedback from your board members and the homeowners you serve. Listen and act on their feedback in a timely manner.