Hiring a property manager is a no-brainer for landlords who don’t want to deal with the day-to-day responsibilities of real estate ownership. Some don’t have the capacity; others don’t have the interest. In either case, a property manager allows owners to take a hands-off approach while the property manager uses their expertise, skills, and time management to protect the owner’s investment.
However, Homeowner Association (HOA) property management presents a more complicated picture. HOAs exist when multiple people buy a condominium, townhouse or other type of property in a planned unit development, such as a gated community or subdivision. Each owner is required to pay HOA fees for routine maintenance of the common areas and the building, and the HOA usually maintains a reserve for more expensive repairs. HOAs might also enforce the property’s covenants, conditions and restrictions (e.g. the community’s “rules,” which might include guidelines around yard maintenance, subletting, etc.).
Handling HOA property management duties
Smaller HOAs may be able to carry out property management duties on their own. Consider a four-unit condo association where one owner might volunteer to take on the HOA’s finances; another might offer to schedule lawn mowing and trash collection. The other two property owners might weigh in on decisions and possess voting rights; but by and large, the association runs with little complication.
Larger associations can be more difficult because there’s just more of everything: bills, financial records, maintenance issues, and residents that need immediate responses. These activities are often carried out by an elected Board of Directors. This arrangement is most effective when the members of the Board have unique skills that benefit the association—for instance, accounting or construction management.
However, volunteer Board members often struggle to oversee the obligations of the HOA without some outside assistance. That’s when they turn to a property management company for guidance.
While property management companies provide a range of services, most are equipped to handle the monthly collection of HOA dues, fines and fees; management of HOA financials; creation of an annual budget; development of a long-term capital improvement/replacement plan; ongoing maintenance; finding and managing contractors; and monthly reporting to the HOA board.
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Do you need HOA property management?
As a general rule of thumb, HOAs should consider outside property management in the following situations:
- Homeowners don’t have the time or experience necessary to serve on the HOA’s volunteer Board of Directors. Members of the Board should usually have some background in areas like finance, operations, law, vendor management, or conflict resolution.
- The HOA is responsible for managing complex building systems and amenities, or multiple properties and facilities.
- The HOA has significant membership, making routine billing, correspondence, rule enforcement, and complaint management particularly time-consuming.
- An HOA property management company can leverage its existing relationships to get the association discounts on services (e.g. insurance) or with contractors (e.g. lawn maintenance companies) that they couldn’t otherwise access.
Based on these guidelines, if it seems like the HOA should hire a property management company, there are a few other important considerations.
Factors to consider when hiring HOA property management
First, be sure to check the HOA’s governing documents to see if there is any explicit prohibition on hiring property manager or third-party provider to carry out the duties of the HOA. This is also a good time to check how the governing documents specifically describe the duties of the HOA. You might discover that the HOA has been gradually taking on roles and responsibilities that are actually the obligation of the homeowners.
Next, carefully craft a scope of work for prospective HOA property managers. Hiring a property management company doesn’t have to be an all-or-nothing engagement. For instance, the HOA might decide that it wants to be responsible for specific tasks, like dues collection and bill processing via an HOA management software, while outsourcing building and facility management.
Last but not least, HOAs should interview (and conduct background/reference checks for) a range of property management companies in its search for the right fit. It’s not enough that the selected association management company be equipped to provide the services outlined in the scope of work—they should also really, truly understand the values of the HOA and its long-term goals.