Are you a board member or homeowner of a HOA that is having management company challenges? Self-managed homeowners associations and condo associations are those that decide to forgo professional management, instead choosing to be primarily managed by the HOA board. Regardless of the size of your association, switching to self-management comes with many pros and cons. The following take a more in-depth look at the advantages and disadvantages that come with a self-managed HOA.
There are several benefits associated with transitioning to a self-managed HOA, including everything from reduced costs to increased visibility.
This is the number one reason communities move to self-management and for good reason, management companies can be expensive! Fees can vary substantially depending on your level of service and needs: whether you have a part-time portfolio manager or full-time onsite manager, your location and a host of other factors play into the rate. However an often quoted range for management services is around $10-$20 per home every month. For a 100-home community this can mean a base fee of $12,000 - $24,000 dollars a year.
In addition, depending on your agreement, management costs can often balloon by 10-20% as many tasks are not included in the contracted monthly rate. These could include special tasks like drafting newsletters, billing and accounting for special assessments, producing vendor 1099s or, in general, hourly billing for any time spent on non-routine projects, additional meetings or other tasks outside the scope of the contract.
Finally, when your contract is up for renewal, the management company can increase their rates, even beyond what your community feels reasonable. If you do decide to switch management you’ll face a switching/initiation fee with your new company of at least a few thousand dollars.
Overall, self-management means much lower operational costs and will be a substantial savings to the community and thus to the homeowner dues every month.
Among the most common issues faced by HOA boards that use a third-party management company is a lack of visibility about projects, association initiatives and homeowner interactions. For example a board may feel that a reserve project is either dragging or was completed not to specifications and it’s hard to tease out where fault lies - the vendor or the manager. Similarly a homeowner complaint can go unaddressed or receive an unsatisfactory response but the board might not have been aware of the issue until a much later date.
When self-managed, the HOA board will be in charge of all association projects and homeowner communication, giving the board perfect insight into the day-to-day happenings of the community.
When you self-manage you get greater autonomy to select all the tools and strategies that best fit your community. When it comes to vendors many management companies have their own preferred vendors. Your manager should be soliciting multiple bids on projects over a certain dollar threshold (depending on your CC&Rs and management agreement) but you may have little control over how those bidding vendors were selected. As a self-managed board with perfectly aligned interests of the community, finding your own vendor could mean cost savings or a preferred level of quality.
Nearly every management company uses software to manage the financial and day-to-day operations of the associations they manage and, unfortunately, most of this software is challenging for board members to use (if they have access at all). Additionally homeowners are left with clunky portals in which to make their payments and, possibly, to submit requests. As a self-managed board you have the opportunity to choose easy-to-use, modern HOA management software to ease the burden on your board and community members.
Finally, many management companies require a community to use their preferred bank as the bank integrates with their management software and, in many cases, covers the cost of the software for the management company. Being self-managed provides you greater flexibility to choose the financial tools and institutions that make the most sense for your community.
While there are a number of benefits to self-managing an HOA, it’s important to understand the downsides before your community fully commits to ending a management contract.
In the event that a homeowner issue or complaint arises, there isn't an intermediary party to handle the situation. Take for example a homeowner who has, against regulations, been parking their camper van on the road. Instead of direct communication with the board, the manager can issue a courtesy notice of the violation, talk to the member, and escalate as needed with the intention of trying to diffuse the issue before it gets to the board.
In a self-managed community the board will be directly responsible for resolving homeowner issues from day one. Management companies automatically provide a first line of defense in such situations.
While you’ll have more control and visibility over the happenings of your community as a self-managed HOA board, you will also likely have a greater time commitment. How much extra work totally depends on your community; if you have an active board in a community with few shared spaces then you’ll undoubtedly have a lower commitment than an association with a number of services and owner amenities.
Regardless of your community, you'll be tasked with handling vendor solicitation, coordination and payment. Additionally the board will take on the responsibility of enforcing the CC&Rs and sending homeowners violation notices as needed. And importantly the board will be responsible for collecting homeowner dues and financial management of the association.
By moving away from a property management company, you'll be without a trusted party that can advise you on the best course of action. Most HOA community managers received professional certification and have held their position for a number of years across multiple communities so they have general expertise on the state rules and regulations as well as management best practices.
As a board member you’ll likely encounter new situations where you won’t know the best course of action. That being said, you don’t need to go at it alone. One option for self-managed communities is to hire an ad hoc professionally-certified HOA consultant when uncertain situations arise.
There are both benefits and drawbacks to being a self-managed HOA. On one hand your community will save significant costs, whereas on the other, the board and other volunteers will be taking on a greater burden of responsibility. It’s important to make the best decision for your community but know that self-management is a well-trodden path and that there are professionals you can rely on in times of need. If becoming a self-managed HOA sounds appealing for your community, make sure to follow best practices when exploring your options.