6 Common Failures of HOA Board Members

Far too often associations fail to please their homeowners, making their neighborhoods a place where no one wants to live. That’s why we are listing the biggest mistakes we see board members make time and time again. If your association is experiencing some of these problems please refer to the preventative steps listed below

 

1.Failing to collect overdue fees on a timely manner

Collecting fees can be a daunting task, especially if some homeowners are reluctant to pay them. As a board member, it is your duty to collect fees in a timely, professional manner, without fear nor favor. Failure to do this can impact your entire association’s cash flow and hinder your HOA.

 

2.Failing to review financials

It is very important to closely watch your associations spending. Far too often, association’s experience fraud in some way or another. In order to prevent this, accounting for every dollar spent will help ensure homeowners that their money is going towards their best interest and prevent fraud amongst your association.

 

3.Failing to file tax returns

It is very common for board members in self-managed associations to forget to file important legal documents each year. Every homeowner’s association is required to file a federal tax return (IRS Form 1120-H). Many board members think that the association is not required to file anything because it doesn’t pay taxes. This is not true. You are still required to file this form on behalf of your association. Failure to do so can put your association at risk of losing its non-profit status and will result in penalties and interest that will need to be paid to the IRS.

 

4.Failing to file Secretary of State documents

Another common mistake is board members forget to file their annual reports with the Secretary of State. Failure to file the required documents can result in a dissolution of the association which can cause potential legal and financial issues. If this does happen, it can easily be remedied by contacting the Secretary of State office to file the necessary forms and pay any applicable penalties.

 

5.Failing to maintain insurance coverage

Boards need to take special care to review insurance policies; understand lapse dates and renewals; and review coverage amounts. If a claim occurs during a time when insurance has lapsed, it can cause major problems. Do you want to be the one to break the news to the association members that a Special Assessment is going to be required because your board forgot to renew the association’s insurance?

 

6.Failing to ask for professional help

There is absolutely nothing wrong in seeking help for your association, especially when it comes to accounting and money management. Let the professionals come in and help you with these matters to ensure your association is functioning at its greatest potential.

3 Ways HOA Management Can Benefit Your Association

At some point, every HOA will turn to the question, “should we work with a homeowners association management company?” It’s an important question that should take time and consideration based on the association.

It can be tempting to do it all yourselves in an attempt to save money on management frees each month, but you also have to account for the amount of time and work you’ll save — not to mention the expertise you’ll gain.

To give your board a better picture of the the positive of HOA management, here are three of the top reasons a management company can provide value to your HOA:

#1 HOA Managers are Professionals.

Those working at an HOA management company are professionals who are trained to handle many different types of challenges HOAs run across. They are dedicated to helping you succeed, and they have the experience to help you think long-term and make decisions based on what is best overall for your community.

Plus, they have the time to dedicate to your association. Most board members are volunteers who have other lives outside of the HOA and who aren’t receiving payment for their time. But for HOA managers, managing your HOA is their job. So they can spend that extra time helping to make decisions and bringing their full attention. They also understand best practices for HOA business and requirements.

#2 They Enforce the Rules

Since board members are also living in the HOA, it can become awkward to always enforce rules that you know are affecting those living around you. When you have a management company, it’s an unbiased third party that can help you navigate tricky conversations and situations you might not know how best to handle. Plus, they can make decisions that isn’t as “close to home” for them since the are seeing the big picture without too much of an emotional attachment.

#3 They are Organized

HOA managers bring good communication, organization, and a solid structure when running your association. For example, they often have full accounting teams to provide accounting services and help with payments. They’ll also have staff available to quickly answer emails and phone calls that come in, as well as help you set up or improve your association website. This makes each process more enjoyable for both the board members and those in the community.

You always want to consider all aspects of HOA management before making a decision about whether or not it’s right for your association. You might find a little extra management is just what your HOA needs to meet its goals.

Knowing When to File 1099’s for HOA Contractors

During this busy time of year, HOA Boards and management company employees are scrambling to get next year’s budgets in place, billing statements mailed, and other tasks completed. It can be easy to overlook certain items that are not at the top of the “end of year” list . One task that you will want to ensure you remember this time of year is providing HOA vendors with a 1099 form and filing these forms with the IRS.

If a community association, such as a condominium or homeowners association, hires an independent contractor and pays the contractor over $600.00 during the course of the year, the association is required to file a 1099-MISC form with the Internal Revenue Service. The association must also provide the contractor with the form.  These independent contractors often include HOA attorneys and landscapers, among other vendors. In addition to the $600.00 cutoff amount, three other conditions must be met:

  • The payments must be for services performed (not for goods purchased).
  • The contractor must not be an employee of the association.
  • The payments must be made to an estate, an individual, a partnership, or (in some cases) a corporation. Corporations only fall under this rule if they are providing services to the association, rather than selling products.

As long as these conditions are met, the payments are considered non-employment compensation by the IRS. This means that the association is required to send a 1099-MISC to the contractor and to file a copy with the IRS. If you are unsure on whether or not your association needs to provide a 1099-MICS to a particular vendor, the safest bet is to ask the HOA’s accountant. The deadline for providing the form to contractors is January 31st of the year after services were provided. The deadline for filing the 1099 with the IRS is:

  • March 31 if filing electronically (E-filing is recommended by the IRS)
  • February 28 if filing via paper forms

While this time of year is a demanding one for those in the association management industry, be sure that your condo, HOA, or management company remembers to file 1099’s before the deadline is up. It may not be the first task on your mind, but skipping out on vendor 1099’s could mean serious consequences for your community.

Which Type of Management is Best For Your HOA?

Choosing a property management company is without a doubt one of the most crucial decisions that an HOA Board of Directors can make for their association. Some states now mandate that associations have a property manager, with a few even going as far to require that the property manager meet a certain certification. In most all cases, association managers guide the inform the Board of Directors which they serve. As we will see, the specific roles that come with managing a community can change with each scenario, but the manager always serves to assist the board.

Self-managed community associations utilize volunteers to do all the work. Everything from the management of the association’s daily routine tasks is done by volunteers from within the association. This is obviously much cheaper in the sense that the association does not pay a management company. The volunteers act as a manager working for free. However, board members often work day jobs and have a limited amount of resources to dedicate to the association. The responsibilities that come along with this type association management also tend to cause burn-out among officers.

Some associations with many members may choose to retain a property manager directly, meaning the association hires the manager as an employee. This is known as in-house management and is done because it is cheaper than paying for full-service management from a professional company. An in-house manager can also be a volunteer. However, in-house management can have its disadvantages. If your manager goes on vacation or gets sick, who will step up to fulfill this person’s responsibilities? Also, who is the manager accountable to? With all of the headlines in the news about in-house managers taking money from their associations, one must act with caution.

The next step up from this would be financial-only management, where the association’s Board of Directors makes the big decisions, but leaves the financial functions to a management company. Tasks such as pulling reports for financials, collecting and processing HOA dues, and the cutting of checks to pay bills are all handled by the financial management company. They can also offer guidance on decisions and direction for a Board of Directors.

Full Service Property Management removes as much of the burden off the Board of Directors as possible, making it the most expensive type of management. Will full service management, the management company does all the same things they would under financial management, plus much more. They usually help enforce violations, coordinate with vendors to complete maintenance issues, and help to establish reserve funds. As an added bonus, a professional HOA management company has a check and balances system that strongly inhibits theft from the association. If the community wants, the management company will usually perform drive-by inspections to ensure compliance with the association’s covenants. Each association is assigned a community manager who works directly with the Board of Directors and attends annual and regular board meetings. But just as important is the experience and guidance that a professional community manager can offer.

If you need help with your condo or homeowners association, feel free to use our search directory to connect with a local property management company. We never charge for our service, and we don’t require you to register or otherwise provide your information. A qualified management firm can help you determine which types of service may be the best-suited for your association. Many associations are able to self-mange and don’t have any significant problems. However, practically every association, regardless of their size, will benefit from utilizing professional management. This will also ensure that new volunteers are willing to serve on the Board of Directors each year.

How to Get the Most From Your HOA Management Company

An HOA management company can provide real value to board members and the neighborhood at-large. But, the partnership needs to be managed properly to reap the best results.

The following tips will help protect your HOA and build a positive relationship with your management company:

If the board did the necessary due diligence during the selection process, they should have found a good match between your HOA’s requirements and the management company’s capabilities. The services provided should be no more or no less than what the board needs to create the best neighborhood environment possible.

Make sure you carefully review everything you need your HOA management company to do and then put it in writing. The contract finalization process should not be rushed. Because everyone interprets things differently, it’s important not to assume anything. So, list all services and fees, as well as highlight exclusions and termination conditions.

Identify due dates for all services and reports. The less gray area between the board and management company, the better chance the relationship has of thriving. With schedules defined and agreed upon, you have an objective tool from which to measure performance. Even if the management company provides excellent services, the value of those services becomes greatly diminished if they are delivered late.

To ensure the proper party handles HOA management functions, the board needs to clarify roles. For example, you need to decide who members call with issues and what determines which issues go to the board or the management company. When everyone knows their responsibilities, you have a much better opportunity for promoting efficiency and creating a beneficial partnership.

Continue to read the Associated Asset Management Blog for information about using a HOA Management Company.

Partner With Your Community Association Manager

More and more community associations are asked to spend time and energy juggling a number of projects. This tactic not only makes it more difficult for projects to be completed, but could be perceived as a sign of a disorganized Board. This makes both homeowners and board members frustrated. A good Community Association Manager (CAM) knows just how to overcome the challenges of this juggling act.

Boards of Directors need not only a plan, but they need to work their plan through their CAM every single day. The plan must primarily include major capital expenditures, such as roof replacement, painting, and pavement resurfacing. Without a Capital Improvement Plan most community associations will have no choice but to defer major maintenance issues, which will most certainly cost more in the end. Together, board members and the CAM can develop a long-term Capital Improvement Plan to ensure adequate reserve funding.

Your plan should also include regular property maintenance. These regular maintenance items include lighting improvements, tree trimming, and elevator upgrades. Repair items should be built into your monthly operating budget in order to avoid costly emergency repairs and to preserve the condition of the property for the long term. By performing regular repairs on a monthly basis and avoiding emergency repairs your Association will save money down the line.

The Association’s plan should also have a time frame built into it which sets expectations for the CAM, the Board, and homeowners as to when items should be paid for and completed. This keeps everyone on track and avoids the unnecessary juggling of uncompleted projects.

In closing, a Board should always think long term and work closely with their CAM to develop property maintenance plans that focus on long term repairs that help increase property values in the community.

Marc Rodriguez, CAM

Factors For Developers To Consider When Choosing A Professional Community Management Organization

Finding the best qualified community management company is no easy feat. To help developers narrow the field, we’ve compiled a list of the top five questions you should ask each prospective candidate.

  1. How do you assist developers with community documents and budgetary issues?
    A community management company should alleviate the stress of dealing with budgets.
  2. How do you develop a great neighborhood?
    Every developer wants to create a strong community.  A good candidate will have a unique vision that can help a developer reach its goals.
  3. How do you create a physical environment that promotes a sense of community?
    Neighbors need safe, comfortable spaces to meet each other.  A community manager needs to take into consideration the quality and quantity of physical meeting areas to ensure the neighborhood fosters the highest levels of neighbor participation.
  4. How do you keep neighborhoods safe?
    The most important feature of any community is safety.  If a family doesn’t feel safe living their daily lives, the neighborhood will never maintain a sense of community.  A professional community manager should have experience establishing safety measures like block watches and raising awareness.
  5. How do you encourage homeowner participation in the HOA?
    A strong community management company will know how to encourage member involvement and ensure their participation is productive.  This involvement is critical for HOA success.  A 2012 Community Associations Institute (CAI) survey found 70% who live in HOA communities rated their experience as positive.

How To Get The Most From Your HOA Management Company

An HOA management company can provide real value to board members and the neighborhood at-large.  But, the partnership needs to be managed properly to reap the best results.

The following tips will help protect your HOA and build a positive relationship with your management company:

  • If the board did the necessary due diligence during the selection process, they should have found a good match between your HOA’s requirements and the management company’s capabilities.  The services provided should be no more or no less than what the board needs to create the best neighborhood environment possible.
  • Make sure you carefully review everything you need your HOA management company to do and then put it in writing.  The contract finalization process should not be rushed.  Because everyone interprets things differently, it’s important not to assume anything.  So, list all services and fees, as well as highlight exclusions and termination conditions.
  • Identify due dates for all services and reports.  The less gray area between the board and management company, the better chance the relationship has of thriving.  With schedules defined and agreed upon, you have an objective tool from which to measure performance.  Even if the management company provides excellent services, the value of those services becomes greatly diminished if they are delivered late.
  • To ensure the proper party handles HOA management functions, the board needs to clarify roles. For example, you need to decide who members call with issues and what determines which issues go to the board or the management company.  When everyone knows their responsibilities, you have a much better opportunity for promoting efficiency and creating a beneficial partnership.