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Is Your Community Better Off With A Self-Managed HOA?

Homeowners associations vary greatly, with some requiring more attention than others. Although many find the idea of self-management appealing, it is not always the right call. In fact, when you become a self-managed HOA, you open your community up to certain risks.

The Pros and Cons of a Self-Managed HOA

Quite a few homeowners associations, whether large or small, are self-managed. This may seem like a reasonable option, but many associations fail to realize just how much work is involved when handling management — or how much an HOA management company can improve their conditions.

In order to be successful as a self-managed HOA, board members must invest lots of time and have enough experience for each role.

If you’re wondering whether or not your HOA should turn to condo self-management, there are a few important points to consider before making any decisions. Here are the benefits and risks of a self-managed homeowners association:

1. Pro: Cost Savings

Costs reduction | hoa self managementProfessional management services cost money. So, in that respect, self-managed condo associations have the benefit of saving money and cutting down on their budget.

This, in turn, will lead to lower assessments. If your association is having money problems, then it is probably best to forgo professional services.

Keep in mind, though, that not all professional management companies are the same. You may have encountered some that charge sky-high prices, but there are others that offer quality services at a more affordable rate. Plus, with the advent of remote management, self-management has largely become a thing of the past.

2. Con: Problems with the Law

If your association’s board is made up of lawyers, then you probably don’t have to worry about the law. Unfortunately, not all HOAs can be as lucky. Oftentimes, many self-managed HOAs don’t even know they’re breaking the law. And, because not all states have the same laws, it can be confusing to know what’s what.

For instance, in California, reserve studies are mandatory every three years, but that may not be the case in other states. As a board member, you must stay fully aware of the law and keep yourself in the loop at all times.

That takes both time and effort, which not a lot of board members can spare. When it comes to insurance, your HOA must have proper coverage. Otherwise, you’re open to potential lawsuits.

3. Con: Sloppy Management

The leader separates the puzzle with the image of the employee. The concept of personnel management in the company. Dismissing an employee from a team. Demotion. Bad worker. Staff cuts | hoa self-managementBeing a board member is a full-time (and thankless) job — and it doesn’t even come with pay. Most HOA boards consist of volunteers from the community.

These volunteers usually have other priorities, like their careers and families.

Because of this, they might not have all the time in the world to devote to HOA management. Moreover, running a community demands expertise, and not everyone has the skills for it. All of this can lead to inefficient operations. In the end, both the association and its members will suffer.

4. Pro: Autonomy (with Risks)

Another benefit of a self-managed HOA is that you have complete control over the association and the decisions. You can do things your way without worrying about an HOA manager assessing your decision-making process. Unfortunately, this also comes with a disadvantage.

When an HOA board is given full autonomy, there is a greater risk of misuse of power. Difficult board members might force their decisions and even intimidate others into agreeing with them. Without a neutral party involved, things can get messy fast. Additionally, there’s no transparency. And, when that happens, corruption is inevitable.

5. Con: Apathy

A lack of time or knowledge is one thing, but a lack of interest is dangerous. When board members are indifferent, they can open the HOA up to pitfalls.

For instance, not taking budget preparation seriously can lead to a shortage of funds. Barring special assessments, the board may be forced to cut corners. Over time, this can result in diminished curb appeal and lower property values — all because they simply don’t care.

6. Con: Zero Point of Contact

A homeowners association exists to serve its members and protect property values. Naturally, homeowners are going to have a lot of opinions and complaints. And who else are they going to call in the middle of the night? Without an HOA manager, your board members are going to be fielding calls left and right. When you’re a self-managed HOA, constant communication comes with the territory.

What to Consider Before Turning to HOA Self ManagementMan writes things to consider list in note. | hoa self management

Before you even think about becoming a self-managed HOA, there are some things you must take into account.

When you hire a professional to handle your association, you gain access to a plethora of resources. However, if you do it yourself, you must consider the following:

1. HOA Experience

There are many different roles that have to come together when operating a homeowners association. For example, the association treasurer has to fully understand HOA financial reports and the collections process. And the landscape committee must have enough experience to properly supervise a gardener or landscape contractor.

2. Association Size

Although it can vary depending on each association’s circumstances, self-management is generally more reasonable for HOAs with less than 10 units and little to no recreational space and common areas. The more places and offerings there are to manage, the more likely it gets overwhelming for the board

3. Management Costs

The main reason HOAs lean towards self-management is because of the cost associated with hiring an HOA management company. However, it’s important for boards using this reasoning to closely examine their decision.

Although self-management may be able to save a few dollars for each owner every month, lack of professional management could also decrease the value of your property by much, much more.

4. Legal Considerations

A self-managed association’s board has to consider that they are responsible for risk management involving homeowners and the general public, meaning they are liable for all decisions made.

While governing documents do help in legally protecting board members through a hold harmless clause, the board is still not protected from being sued for mismanagement.

Consider Your Options Carefully

Wooden signpost - option 1, 2, 3, 4, 5. | hoa self managementWhen considering self-management, board members must keep all aspects in mind, both positive and negative.

If the circumstances are right and owners are prepared with enough knowledge, experience, and concern for the wellbeing of the community, self-management can be an option.

Otherwise, finding a good property management company can help in keeping the HOA on track to success.

 

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