In residential, commercial and industrial rental management, there is a revocable agreement that allows the property owner a fair amount of control over the tenant. If the tenant doesn’t live up to the agreement, the owner can terminate the agreement (and vice versa). This is not the case in HOAs which are controlled by the board, governing documents, HOA statutes and property rights.
HOA managers are called on to do everything that a rental property manager is supposed to do plus be an expert at diplomacy, mediation and human psychology. They are often called on to work a full day and then attend night meetings. It is demanding work and those that are good at it are a rare breed indeed.
HOA management companies typically work by contract for a monthly fee. But how is that amount computed? It generally is based on the estimated time it takes to accomplish the tasks outlined in the Management Agreement. There is often an extra hourly charge for tasks not deemed to be routine.
So what goes into the management fee? There are fixed costs like rent, phones, copier, insurance, computers and internet. Labor charges are based on the estimated time it will take to accomplish the prescribed work. Total fixed and labor costs plus profit margin equal the monthly management fee. It is common to divide this number by the total number of units/lots to derive the charge “per door”. Size matters. Smaller HOAs pay more and larger ones pay less per door.
Typically, an HOA management company will assign a manager, a bookkeeper, a maintenance supervisor and possibly an administrative assistant to the account. All will handle multiple HOAs. The average manager may handle 10-15 accounts.
The salary levels of the staff can have a major impact on the management fees. If an HOA wants experienced professionals, there is a price to pay. This is one of the most challenging forms of management there is and a jack-of-all-trades just won’t do. A qualified HOA manager attends seminars, has professional designations and credentials and focuses exclusively on HOA management. The HOA will benefit from this training and experience so expect to pay accordingly.
Managers spend a great deal of their time preparing for and following up on board meetings. For a typical board meeting, the manager gathers information and prepares a management report, reviews the financial statement, attaches relevant correspondence, puts board packets together and emails or mails them to individual directors.
Most board meetings are held on weekday evenings at the HOA so the manager is required to work after hours and travel, both of which costs the HOA money since it’s built into the contract. After the meeting, the manager usually has a laundry list to follow up on that occupies most the following week. A manager can easily spend many hours on board meeting related business.
What can you do to reduce management costs? Keep board meetings to two hours maximum and consider daytime meetings. Move the
board meeting to the management office and hold them during normal business hours. Reduce monthly to quarterly meetings. With an approved budget, proper policies in place and a management planning calendar, the manager should be able to handle most issues with only occasional input from the president. Letting the manager manage without micro-management from the board may be the single biggest cost saver.
Another cost saving involves manager administration of insurance claims and damage reconstruction. Insurance matters can take many hours of a manager’s time. If the management agreement specifically states that insurance claim work is an extra cost to the HOA, the management company can bill the insurance claim for the time it takes to administrate a claim and renovation work. A similar principle involves time spent on collections or legal action against an owner. This management time should be billed to the delinquent owner.
How about the manager providing sale disclosure statements to owners who are selling their homes and buyers’ lenders? The management company should bill owners and buyers separately and not have the homeowner association bear the cost.
These are but a few ways that management costs can be trimmed. Be sensitive to your manager’s time and don’t pile on unnecessary tasks that ultimately will raise the cost. While it’s important to get what you pay for it’s equally important to pay extra for extra services. The best approach is to forge a partnership with the management company and adjust as time and work loaddemands.
HOA managers are a breed apart and waiting to serve. Put them to work for your homeowner association and get back to living that carefree lifestyle advertised in the brochure.
Used with permission from Richard Thompson of www.Regenesis.net. From Regenesis Aug. 2017 newsletter.