Get 2 months of free community web site hosting from Community123.com!
Friday, April 19, 2019
Get 2 months of free community web site hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: Advice on searching for new HOA Management company
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
JohnT38
(South Carolina)

Posts:14


04/07/2019 3:18 PM  
I'm looking for general advice regarding looking for a new HOA management company. I live in a 166 condo community in S.C and we have had our current vendor for 17 years. I've been tasked with comparing price and services offered by other companies. I'm new to this so please let me know if I haven't provided any info that you might need. I'm looking for any general advice that anyone is willing to share and also answers to the following questions:

1.) Is it permissible to provide prospective companies with our current contract? If so, should I black out the company name?
2.) Is there any general rule that HOA management companies use to determine pricing? For example, is the price tied to a formula based on the number of units or a percentage of the annual fees?
3.) If they ask, should I provide them a copy of our budget?

Thanks in advance for your help!
AugustinD


Posts:1498


04/07/2019 4:02 PM  
Great question. This came up recently for the municipality where I live. Also at a former HOA it became controversial. Some contracts contain what is known as "proprietary information." For examples of how several cities deal with this in Texas, see http://austintexas.gov/sites/default/files/files/Resource_Recovery/ConfidentialityInRFPs.pdf
. I believe the same issues are consistently arising nationwide, and laws and procedures similar to these Texas cities are in place. Exacting equity in bidding et cetera is becoming a big deal nationwide.

I think there are too many legal implications to provide any vendor's contract to other vendors during the bidding process. Granted HOA Members typically can obtain copies of vendor's contracts, pursuant to statute and CC&Rs. Then members end up doing pretty much what they want with them. Perhaps nationwide it will be common for HOA Boards to have the vendor redact proprietary information before providing a copy of a current contract to a member, under a records request.

I think condos vary too much to use a per unit formula.

I would not provide a copy of the budget.

I do recommend contracting a management company and not hiring employees to do the labor. If a condo or HOA hires employees, and down the line, the employees work performance starts degrading, under employment law they are hard to fire.

Maybe have each board member prepare a draft Request for Proposal (RFP); then compare to the current contract; then meet and decide which bullet points should go into the final RFP.

I am sorry the exact legal answer is so complicated. I imagine many condos are much more casual about this, with no adverse consequences.




JohnT38
(South Carolina)

Posts:14


04/07/2019 4:07 PM  
Great answer! I do have a copy of the contract and believe it or not it has not been updated since 2007. There is nothing in the contract about confidentiality. I'll check out the link and I appreciate you taking the time to respond.
JohnC46
(South Carolina)

Posts:8195


04/07/2019 5:14 PM  
John

If you go internet searching do not look for Property Management companies. Every real estate whatever advertises themselves as such.

1. Narrow your search down with HOA Management Companies.
2. First thing out of the barrel is ask for references from them for associations similar to your own.
3. Contact some local associations and ask who do they use and are they happy.

I will have more to say as the conversations go on, but dinner time now.
\
JohnT38
(South Carolina)

Posts:14


04/07/2019 5:57 PM  
Thanks for the advice and I will follow it! I've downloaded an example RFP for HOA Management Companies and I'm working on that now. There sure is a lot to think about!
SheliaH
(Indiana)

Posts:2433


04/07/2019 6:01 PM  
I don't think you should show them the contract, even with the company name blacked out. I think the main thing you need to do is consider what they already do for you and what you'd like the ideal property management company to do for you (if there is such a thing). You might also think about what your current company is and isn't doing well and how you'd like to prevent problems in the future. This means you need to read the contract YOURSELF, perhaps comparing it with your documents - that's where the pricing starts. The more you want the company to do, the more it will cost, so you should ask how the price is set, as well as costs for additional services as needed.

As long as you're thinking about changing, you may as well give the current property manager a chance to negotiate if they want to keep your business. You don't have to tell them you're looking or who you're talking to, but if there have been issues, this is a good time to sit down and discuss all that with them and come up with a plan to fix them - with a deadline. If there's no improvement by that time (and be realistic with the time, depending on what needs to be fixed), you can proceed.


I think the most important thing to remember is that the property manager is in charge of the daily operations, but you and your colleagues (the board, that is) are responsible for the overall direction. That means you don't leave it to the property manager to make decisions that the BOARD is tasked to do. Some of those decisions may be difficult, but that's what you signed up for - someone has the be the adult and make the call. A big reason many associations run into trouble is that they get lazy and let the property manager do everything, including making all the decisions. A good property manager will let you know what your options are and then step back and let you debate. He or she shouldn't try to be an attorney, so don't ask him/her for legal advice - even if the answer is correct, you need to do your due diligence and ask the attorney. By the way, have the attorney review the contract before you sign.

You'll also need to ask about a transition plan and how long it will take to implement. Changing management companies doesn't happen overnight and when it's done, you need to be sure everything has been completed and all the books and records with your current company have been closed out and sent over to the new one.

JohnT38
(South Carolina)

Posts:14


04/07/2019 6:17 PM  
You've brought up some excellent points. Some of them I have been thinking about. I agree with you about showing them the current contract. I've downloaded some example RFP's and I think I can transfer information from the existing contract and then modify it with additions, deletions, etc. I also agree that the current company should be included in the bid as long as they are willing to up the level of our service. Our issues have been that they don't keep their word on what is in the contract and it doesn't seem to bother them one bit. I won't bore you with the details but we really have tried to work with them. You mentioned the transition if we go with another company and that honestly gives be heartburn. It will be vital that the existing company transfers everything they have such as open and closed projects, work orders, financial record, etc, etc. I fully intend to tell the other board members that we need to be very thorough and take our time sorting through this before we reach a conclusion. I appreciate your advice.
BarbaraT1
(Texas)

Posts:150


04/08/2019 7:04 AM  
Any prospective management company is going to ask to see your budget. It's a lot of work preparing a bid and if you can't afford even their minimum rate it's just a waste of everyone's time. And, you need to give the company a realistic view of what managing your property will entail.


I've worked for 4 management companies in the last 8 years and my experience is that in terms of what the company offers its clients for price and services, it's all pretty much the same. What matters is who your specific manager is. To that end, ask about their employee turnover (assume they will lie). Check GlassDoor or Indeed and see what former employees say or how often they post jobs. Try to meet the person who would be your manager. Make sure they have condo experience not just single family or apartments. Condos are a unique beast and often subject to an entirely different set of state laws than SFH.

JohnT38
(South Carolina)

Posts:14


04/08/2019 7:44 AM  
Excellent advice. Thank you!
BillH10
(Texas)

Posts:334


04/08/2019 8:41 AM  
We have learned from experience to ask to see information regarding the presence or absence of a reserve study and the percentage funded if there is one.

Our experience has been an association without a reserve study, or one which is wildly out of date, and/or with very low reserves, will be very difficult to manage as there will invariably be issues when funding is needed. A special assessment, or significant increases in assessments, are difficult for both the Board and management company as the need for additional funding, or reserve funding, is often contentious, filled with accusations, underlying lack of understanding, and unwillingness to listen.

In such situations we ask questions to gauge the mindset of the Board and the community to determine if the revenue from the business is worth the time and stress of dealing with a lack of funds for even common repairs.

As a result, we have modified out business plan and will decline to bid in some instances if the reserve funding situation does not meet our subjective or objective criteria.

I suggest you look at the reserve funding situation in your association and be up front regarding presentation of the information, steps being taken if necessary, etc.
JohnT38
(South Carolina)

Posts:14


04/08/2019 11:33 AM  
That makes perfect sense and I respect your companies view. I joined the board a year ago and was disappointed to learn that the last reserve study was 6 years ago. I pushed this issue and got the board to agree to get a new reserve study done. It is suppose to be finished later this month. Overall I would describe our financial situation as fair. We have approximately $450K in our our reserve fund. Last year all roofs were replaced, bad siding was replaced and all condos were painted. Our community pool is in great shape but our two tennis courts are terrible. My major financial concern is that our roads are starting to show their age and no plans have been made to fund the re-pavement. I am starting to look into this and I'm very concerned about what the cost may be. I am anxious to see the completed reserve study and I hope we don't fall into the problem you mentioned above.
BillH10
(Texas)

Posts:334


04/08/2019 2:21 PM  
Well John, it sounds like you are asking the right questions and are looking for good guidance. Good luck to you in your quest.
JohnT38
(South Carolina)

Posts:14


04/08/2019 2:26 PM  
I appreciate it. It's definitely a learning experience and I'm glad I found this site so I can pick the brains of those who have, "been there, done that".
NpS
(Pennsylvania)

Posts:3148


04/08/2019 5:33 PM  
Almost 10 years ago, we made a decision to change management companies. We decided to include the entire community in the selection process.

The attached docs should be self explanatory (except for the stuff about a dual meeting which was due to a unique situation involving a conflict among Board members).

Each owner was given a grading chart (which I can't seem to locate now) where owners could give up to X points on each of the 8 criteria listed.

Those 8 criteria were the most important issues for our community at that time. If we did it again today, the criteria would be a little different because our needs and expectations have changed.

Our criteria might not suit your HOA, but maybe some of this can be useful.

Best of luck.

Attachment: 14833589571.pdf
Attachment: 14833592754.pdf


Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnT38
(South Carolina)

Posts:14


04/08/2019 5:46 PM  
Wow, this will be very helpful. Thank you!
RichardP13
(California)

Posts:3424


04/08/2019 5:52 PM  
Posted By NpS on 04/08/2019 5:33 PM
Almost 10 years ago, we made a decision to change management companies. We decided to include the entire community in the selection process.

The attached docs should be self explanatory (except for the stuff about a dual meeting which was due to a unique situation involving a conflict among Board members).

Each owner was given a grading chart (which I can't seem to locate now) where owners could give up to X points on each of the 8 criteria listed.

Those 8 criteria were the most important issues for our community at that time. If we did it again today, the criteria would be a little different because our needs and expectations have changed.

Our criteria might not suit your HOA, but maybe some of this can be useful.

Best of luck.



Based on what I read, what does the Board do?
NpS
(Pennsylvania)

Posts:3148


04/08/2019 7:46 PM  
Posted By RichardP13 on 04/08/2019 5:52 PM
Posted By NpS on 04/08/2019 5:33 PM
Almost 10 years ago, we made a decision to change management companies. We decided to include the entire community in the selection process.

The attached docs should be self explanatory (except for the stuff about a dual meeting which was due to a unique situation involving a conflict among Board members).

Each owner was given a grading chart (which I can't seem to locate now) where owners could give up to X points on each of the 8 criteria listed.

Those 8 criteria were the most important issues for our community at that time. If we did it again today, the criteria would be a little different because our needs and expectations have changed.

Our criteria might not suit your HOA, but maybe some of this can be useful.

Best of luck.



Based on what I read, what does the Board do?





Back then, we spent our time digging ourselves out of a few holes: Bank-controlled vacant houses that hadn't paid dues in years; properties that weren't being maintained to HOA standards; inadequate contributions to reserves and no reserve study done for over a decade; tree maintenance needs that we couldn't afford; uncontrolled water use/waste; developing our own RFPs and rewriting all vendor contracts; and a few other long-range issues that needed attention. Also, the management company we chose did better at pitching us than they did at delivering on their promises. They lasted around 3 years.

Today, we are self-managed. Our old CPA firm now manages our books. Everything else we do ourselves with homeowner volunteers. No employees. We haven't raised fees in over 5 years. No special assessments, not even when we repaved our streets. We expect to have our reserves fully funded by 2024. We typically get an 80-85% response rate on our annual survey. Better than 95% of the homeowners who take the survey give us positive or neutral grades on around a dozen criteria that we ask them to measure us on. Their feedback helps us evaluate whether our budgeting decisions are on target.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JimC23
(Nevada)

Posts:13


04/08/2019 9:44 PM  
As well as asking members of other HOAs, I suggest asking your HOA attorney for his or her recommendations. I'd bet your attorney knows which managers have good instincts and are most effective yet efficient.
JimC23
(Nevada)

Posts:13


04/08/2019 9:48 PM  
In addition, when we went through an interview process a few years ago to select a new management firm, we asked each candidate who their best competitors were. It was interesting that the names of two or three firms kept getting repeated.
MarkM19
(Texas)

Posts:256


04/09/2019 6:11 AM  
John T,
As usual you are getting a lot of good advice here. The only thing that I will add is over the years I have learned that there are 2 types of Management Companies. The first type is Builder related PMCs They get their business by linking with builders and developers. They are brought in to help form the HOA and also run the HOA the way the builder can sell more properties. They are teammates with the builder. They like having 1 boss and that is the developer. When the development transitions to homeowner board they become hard to deal with and that is when most HOAs should thing about changing.

The other type is the Homeowner MC. They usually replace the first type of MC. They are used to transitioning from an existing MC to theirs. They also know that they have to work with Boards that in many cases have 5 different points of views. It is a much different beast than the first type. I am not saying this type of MC will solve all your problems because they probably won't. Typically all PMs are over worked and under paid IMO.

An important question to ask is how many other properties with your new manager have in their Portfolio? How many units are they responsible for? The number of different HOAs is also important since preparing for Board meetings is time consuming and they have more than 6 or 7 even if they are small and only have quarterly meetings it can eat up the time spent on your issues.

Last thing know and understand their transfer fees and compare with others. Some charge higher fees and every home that sells has to pay these fees and they are not negotiable.

JohnT38
(South Carolina)

Posts:14


04/09/2019 6:18 AM  
Thanks Mark, these are some great questions to ask!
ND
(PA)

Posts:268


04/09/2019 11:35 AM  
My thoughts on each of your 3 questions:

1.) Is it permissible to provide prospective companies with our current contract? If so, should I black out the company name?
I think others have answered this sufficiently, but my 2 cents. Don't provide the contract. Instead, develop a specification of what exactly your HOA wants the MC to do and then supply the same spec to all interested MCs with the hope of receiving proposals that are somewhat comparable to each other.

2.) Is there any general rule that HOA management companies use to determine pricing? For example, is the price tied to a formula based on the number of units or a percentage of the annual fees?
In my experience, there's no formula. Each MC has their own sort of criteria that determines their pricing. Some will only "do it all". Others provide "a la carte" services where you can pick and choose what you want them to do. Some have a per lot price scheme. Others have pricing for certain numbers of lots.

3.) If they ask, should I provide them a copy of our budget?
If one of your goals with switching PMs is to save money, in my opinion it would be foolish to provide a copy of your budget. Providing that will reveal to them exactly what you pay your current MC. Even providing a synopsized budget that shows your expenses (minus MC expense), it would still be somewhat simple for them to figure out what you pay the current MC. Knowing # lots as well as current dues (avail on MLS for recent home sales) will allow them to figure approx. total income. If what you pay the MC isn't a consideration, then you could probably hand over a budget so they know what they are working with. All that said, an experienced MC with knowledge about a reserve study should understand quite well what they will be dealing with for your HOA in regard to expenses and thus income.
GenoS
(Florida)

Posts:2825


04/09/2019 1:48 PM  
I think most companies' contracts "look" pretty much the same and an astute competitor will be able to identify your current MC just by looking at it, even if the name is redacted. And if they can't I would actually hold that against them.
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > Advice on searching for new HOA Management company



Get 2 months of free community web site hosting from Community123.com!



News Articles Provided by: Community Associations Network
News, articles and blogs about condos/HOA's

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
HindmanSanchez Legal Notice:  (For messages posted by HindmanSanchez) This message has been prepared by HindmanSanchez for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Members of HOATalk.com should not act on this information without seeking professional counsel. Please do not send us confidential information unless you speak with one of our attorneys and get authorization to send that information to us. If you wish to initiate possible representation, please contact an attorney in our firm. Our attorneys are licensed to practice law in the state of Colorado only.

Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement