HOA Management Companies and Their Contracts

When it comes to the operations of an HOA, there’s much that has to be done on a daily basis. Oftentimes, an HOA board may opt to hire a property management company to assist with these day-to-day tasks, such as collecting dues and paying invoices. In addition, management companies can also take on financials, maintenance and contractors, creation of an annual budget, and more, which takes a lot of weight off the shoulders of the board members.

After determining whether your HOA could benefit from a property management company, it’s important to understand what the contract should look like to prevent future problems, and to ensure that the relationship between your HOA and your management company remains intact and successful. 

Do you need a management company?

The decision to hire a property management company is typically based on an HOA’s capacity to handle daily tasks efficiently. In smaller-sized HOAs, like a four-unit condo, operations may run smoothly without outside help. In larger HOAs, however, the board of directors may not have the time or resources to carry out every last duty such as bills, maintenance issues, and general homeowner responses.

There will be times when the volunteers who run for the board of directors do not have extensive experience in finance, law, and vendor management. Similarly, the volume of community management responsibilities, like billing and complaint management, may be too time-consuming for many members. In these instances especially, it would be wise to look into hiring an HOA management company.

What are the benefits?

The many benefits of a management company for an HOA in need are apparent. For one, when management companies understand the big picture and structure of an HOA, they can help devise long-term financial plans and utilize its resources to meet needs that are specific to the HOA. Doing so  takes away a heavy burden from the members of the board.

In addition to handling daily financial and administrative tasks, all while ensuring that the HOA is operating under the clearly defined rules of the governing documents, management companies can make recommendations and provide options for vendors, insurance, and more.

Delegation of responsibilities: 

With a management company in place, it’s not uncommon for homeowners to confuse the responsibilities of the board members with the responsibilities of the management company, and vice versa. In order to keep everyone in the know and impose peaceful order, it’s important for the board members to clearly define for its homeowners the split of responsibilities, particularly in terms of rule enforcement.

Although the management company may enforce community policies on behalf of the board members, the management company is not in charge of setting policies or rules, or determining penalties. They also cannot negotiate disputes between residents and advise on legal matters. Typically, the management company may cover major repairs, regularly scheduled maintenance, landscaping, financials and dues collection, and common area maintenance. This certainly takes a major burden off of the members of the board, who have other important duties to uphold. 

Essentially, the relationship between an HOA and its management company is a partnership where each side acts as members of a team working toward a common goal. The board of directors draws up rules, enacts policies, and approves a budget. On the other side, the management company executes this plan (at the board’s discretion), and makes sure that the HOA’s operations work in compliance with the HOA’s governing documents.

Spell out services and fees in the contract: 

Because it’s only natural for HOA board members and management companies to have differing opinions on certain matters, a management contract clearly outlines all agreements regarding fees, services, and actions taken in anticipation of a future problem.

The core elements of a management contract should typically outline management fees as well as estimates of man-hours, specifics on the services provided, and a chance to make amendments and cancellations. What’s also important is the contract’s expiration date and termination period — these ensure that if “one party needs to leave the agreement, notification will be given and allow each to part ways in the correct way.

The best way to make the most out of your contract is to understand it completely. Do not hesitate to work with your management company on going over the ins and outs of each portion before you sign. Having a strong grasp of the contract will bring about confidence in the work that will be done together and allow you to feel peace of mind moving forward.

In any HOA, a select group of daily tasks must be taken on efficiently to ensure a high quality of living. For some, hiring a property management company allows board members to focus on specific tasks while knowing that a select portion of the HOA’s operations are in good hands. Before singing any contract, however, make sure that a property management company is right for you and that you understand and agree with everything in the contract.