If you're finding it difficult to understand HOA management, you're not alone. Learn the answers to the most commonly asked questions about the subject below.
If you’re finding it difficult to understand HOA management, you’re not alone. Learn the answers to the most commonly asked questions about the subject below.
To understand HOA management, you must first know the meaning of HOA. HOA stands for homeowners association. These are organizations formed within a planned community, subdivision, or condominium. HOAs manage the day-to-day operations of a community, ratify and enforce rules for residents and properties, and have the general goal of maintaining property values.
An HOA consists of members of the community. From this community, volunteer members for positions on the HOA board of directors. This HOA board is responsible for all the operations, including financial management, collection, vendor coordination and payment, insurance, maintenance, and more.
HOA management, on the other hand, refers to the governance and handling of a homeowners association. It’s something the HOA board does on a daily basis. However, many HOA boards have difficulty keeping up with the demands of managing a community. Since most boards consist of volunteers, they often lack the time to accomplish all the tasks involved in managing an HOA.
This is where an HOA management company comes in.
An HOA management company provides various services to homeowners associations. These companies oversee the operations of an HOA and supervise the maintenance of amenities and common areas. Basically, a homeowners association management company exists to make the lives of HOA board members easier by helping fulfill their duties and responsibilities.
More specifically, these companies execute the following duties:
These companies have years of experience and a diverse set of experts at their disposal. Therefore, they’re fully equipped to handle the various tasks associated with an HOA, whether that means collecting dues or planning the annual budget.
It’s important to know that HOA managers or management companies are not board members. They don’t make final decisions on community matters. That responsibility still lies with the HOA board. The company is merely there to provide aid and advice.
For example, if a homeowner commits a violation, the company may send a notice per the board’s direction. The same goes for maintenance or architectural requests. If a homeowner sends a request form, the company acts as a middleman of sorts — sending and receiving correspondence — but doesn’t get to decide whether to approve or deny the request.
Some of the benefits an HOA management company provides include:
Homeowners associations hire vendors to perform various tasks, so you might wonder if management companies simply fall under the same category. But, management companies are not the same as other vendors in your HOA.
Whereas standard vendors carry out specific, time-bound services for the association, management companies work around the clock and perform more varied tasks. In a way, management companies are like an extension of the HOA itself. They are bound by the same fiduciary duties as board members and must fulfill their services within the community’s best interest.
Just like any other professional service, HOA management companies come with a price. But, not all companies charge the same amount or fees. On average, though, companies charge around $10 to $20 per unit per month.
Apart from the standard management fee, many companies also impose other fees such as an initiation fee and an exit fee. Initiation fees cover the start-up costs, including file transitions, bookkeeping, and other changes. This can range anywhere from a few thousand dollars to over $30,000. On the other hand, exit fees cover the cost of the transition.
Some management companies also charge fees for special services. For instance, a company may limit board meeting attendance to two a month. Anything beyond that will cost the association extra. It’s important to review your management contract prior to signing to find out a company’s exact fee structure.
Every management contract will contain a termination clause that will provide you with details on how to end your contract early. Although the process can vary dramatically, it generally involves notifying the company of your intent to terminate. The contract will state how long the notice period should be, though it usually ranges anywhere from 30 to 90 days’ written notice.
There may also be a termination fee you need to pay. Again, the exact amount can vary. Some companies charge a fixed amount for terminating the contract early, while other companies charge management fees equivalent to the contract’s remaining months. For instance, if there are 9 months left on your contract and the monthly fee is $1,000, the termination fee would total $9,000.
If your management contract is due to expire soon anyway, perhaps it’s better to wait it out instead of going through a long and arduous termination process.
It is possible to sue your HOA management company, though it will not be easy. Most management contracts have a hold harmless clause that requires the HOA to indemnify the company from negligence claims when carrying out tasks on the association’s behalf. However, if you manage to prove that the company or manager acted in gross negligence or willful misconduct, then a court may find them personally liable.
Typically, whether or not it’s in your best interest to hire an HOA management company depends on the size of your community.
Smaller communities tend to turn to self-management since there’s less work involved. On the other hand, larger communities will have a more difficult time conducting business without professional assistance.
While size is one of the deciding factors, there are others that can dictate whether you should hire a management company. Consider the following questions as you make your decision:
If your answer to most of these questions is “yes,” then it’s time to partner with an HOA management company. Some associations don’t require full-service management. That is to say that they only need help with specific areas of community management. For example, a professional can take over financial management and accounting while the board can focus on the rest.
When deciding how to split the work between the HOA board and the management company, make sure to keep the community in mind. Prioritize maintaining property values and instilling a sense of community above all. These are the things that draw buyers into a neighborhood as well as keep current residents satisfied.
Managing a community is often a difficult undertaking, especially for an HOA board with little to no time or experience. But, arming yourself with knowledge of the subject is the first step to successful community management. Hopefully, these FAQs have provided you with more familiarity.
Whether or not your HOA decides to hire an HOA management company, though, is up to you. However, there are clearly plenty of benefits of getting professional help. If you decide to go through with it, find the best company in your area using our comprehensive online directory.
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