Determining which type of management service is best for the HOA is a very important HOA board decision. Even the smallest associations need some form of professional management.
What is a manager? Managers oversee the association’s day-to-day operations, advising and informing the board and following its policies and instructions regarding association property and funds. A manager may be an unpaid volunteer or may be paid. The paid manager may be an association employee, a consultant, or an employee of an outside company. California requires no license to manage HOAs.
Volunteer management: Many associations use volunteers for their management functions. The motivation for volunteer management is primarily to save costs. In volunteer management, volunteers place themselves in the role of an unpaid manager, with all of the risks and no reward. Volunteer-managed associations often find it difficult to find board candidates, since directors work so much harder when they are also managers.
Financial management: This involves collecting assessments, paying bills, and preparing monthly and annual financial reports, disclosures, and budgets. A financial manager typically does not visit the property. Management companies often prefer financial management because it is more predictable and less prone to the extra work of managing the property. Some accountants also offer financial management services. Associations struggling with the cost of full association management may wish to consider at least financial management.
Property management: Property management involves responsibility for keeping up the condition of the buildings and grounds and may include routine inspections for architectural violations, maintenance items, and repair needs. The plumbing leak on a Sunday afternoon and the broken window on Tuesday evening are all part of the routine for a property manager.
Property management, when coupled with financial management, is called “full management.” Some associations choose to hire one company for financial management and another for property management services. Full management services normally cost significantly more than “financial-only” management.
Off-site/on-site: Most associations are managed by persons working at a location at a management firm office. Some companies provide managers working at the association property, at a greater cost. However, on-site managers typically a higher level of service, which can offset the greater cost.
Portfolio vs. general manager: Portfolio managers simultaneously work for multiple associations, while general managers work for just one. Most associations cannot afford general managers. An important question to the portfolio manager is “how many other associations will you handle along with ours?” A lower management fee can result from a company overloading its managers. For some HOAs, cost is the only concern, but level of service, experience, and management credentials should also be considered. Ask questions and make sure your association understands what it is receiving. HOAs normally get what they pay for.
In-house management: Larger associations may choose to hire their manager and staff as direct employees. This gives the association more control of its management at less cost than the rates charged by a management firm for the staff it provides. The drawback is the opposite side of the coin – the association takes on the responsibility of finding, screening, and supervising the manager and dealing with personnel issues.
Choose the management style that best serves the community’s interests and needs, rather than automatically selecting the cheapest.
Next week, Part II: Manager qualifications.
Kelly G. Richardson is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober DeNichilo LLP, a California law firm known for community association advice. Send questions to Kelly@RODllp.com.