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Subject: Management Company Due Diligence
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Author Messages
JonathanH


Posts:0


02/03/2006 12:06 PM  
Our HOA Board has established a committee to seek out "request for proposals" from management companies to perform the financial management function of the treasurer and possibly to perform full management duties - vendors, legal, etc.

We're trying to make this process somewhat standardized so we can present the findings to the HOA members. We thought a questionnaire submitted to each company was a way to go to as a start for the screening process.

Does anybody have a questionnaire they used in screening for management companies or have other ideas about selection them?
RogerB
(Colorado)

Posts:5067


02/03/2006 3:59 PM  
JonathanH, following is one way to approach your selection:

1) Decide on what specific services you want from a management company. If you cannot decide whether to have only accounting services (IMHO a bad idea) or full services, you can arrange the RFP to have bids for each.
2) Create an RFP with:
a) name, location, number of units, description of common areas/amenities and type of units;
b) provide an itemized list of services desired (this helps when it comes time to compare bids);
c) request examples of their financial reports, basic Agreement, and references;
d) if you want answers to specific questions a questionnaire can be attached.
3) Canvass other HOAs to determine which management companies to contact and which not to contact.
4) Mail RFPs offering them to bid with a deadline for receipt of sealed bids. Advise on who to call to discuss any questions they may have.
5) After the deadline compare bids received and decide on which companies to bring in for an interview. Request the Agent who would be assigned to your association be available for the interview.
6) After the Board votes and selects a company, award the bid and advise and thank the other bidders.
7) Create an Agreement which is acceptable to both parties; don’t just use the Management Company’s Agreement.

If you need a list of potential services we can provide our portfolio of services.

Good Luck,
Roger
AdrianC
(California)

Posts:36


02/04/2006 9:06 AM  

Hi Jonathon,

We recently went through the process of looking for a new management co.

The 4 steps were,

Find Companies - List from HOA assc

Look at websites, size and location of companies.
Telephone interview, Request sample copies of reports, what software used, and data backup availability,(we lost hard copy and computer data in a fire), staff qualifications and support staff, references, distance from our HOA site.

Create short list - 8 Co in our case

Interview Company reps. Tel cal to management co to determine response to service requests, complaints and followup on service requests by management co.

Decision time - the hard one!


If you give me an email address, i will send you our lists and a copy of our interview questionaire.

Good luck
Adrian Callard

[email protected]



MarnaR
(California)

Posts:27


02/04/2006 9:59 AM  
Adrian,

I would be really interested in receiving that questionnaire. We are considering making a change to our management company as well. The builder selected a property management company, and they've remained for 10 years. Last year, the property manager we had for 5 years 'left' the company. When we were elected to the board (2 weeks ago), we discovered that the manager was regularly going WELL above her discretionary spending authority. The President, who was her best friend, was the only board member signing checks, so the rest of the board was unaware of what was going on. We're going to be doing an audit, but through the financial game playing, one of the results is that our reserves are no longer fully funded. We do have a new manager, but the company is basically tainted in our eyes.
MarnaR
(California)

Posts:27


02/04/2006 10:05 AM  
I suppose providing you with my email address would be helpful, wouldn't it? [email protected]
JimR
(Colorado)

Posts:21


02/04/2006 10:34 AM  
JonathanH, Don't go there, read some of these other discussions and see what happens when you get a MC involved. first comes favoritism to certain Board members that the MC feels will be in favor of their activites, and then when it comes time for elections the MC's back those that will keep their intrerests in mind. Minutes and reports are slanted to make the friends on the Board look good and the minority of the Board look bad.

If you just want some one to take care of the books and money, hire an accounting firm and you should be much happier. Keep home control of your Board and Association. Once you get them in your community it is very hard to remove them.

We went through 2 of them and the only difference between them was one was twice as expensive. As far as doing anything advantages for the Assocition, Zip.............Problems caused, unbeivable.
EdR
(Texas)

Posts:170


02/04/2006 11:11 AM  
Jonathan:
I agree with JimR; you do not know problems until you hire a MC. In fact, everything Jim says and more have happened in our assoc. If it weren't for the MC, we would still be a good board and a good community. In fact, things are so bad that if anyone complains about their inefficiency, incompetence or illegal activities, they threaten to sue them for even talking. It is an awful mess--they are in control of the board and association and have set it up where they cannot be terminated without a court order. When the president got in bed with them--they led her (she was willing too) into this, knowingly but she fell for the bait because she wanted them to talk only with her and to donate to her select interest groups. Now our association is divided and fighting like they are at war--the word "community" is a joke. This MC was half the price of the others interviewed, but by the time they threw in a second monthly inspection (which the president approved without board or membership discussion--same with the budget) and by the time they send letters out to over half the subdivision for questionable violations (they have never discussed the rules about the letters nor shown the list to the board before sending them after being asked to do so--but the president doesn't want her friends to receive letters anyway) at $7+ per letter AND that they control who is contracted for every job---they have cost the association about three times what was proposed. Still can't get rid of them. We are looking at our reserves being 1/3 what they should be because of this and we are in an area where there could be a disaster that would require the reserves and insurance.
Sorry guys, but HOAs are a cancer enough without adding fake chemo. An accounting firm and running the rest yourself is the best suggestion, and it will be work for the Board, but a ___ of a lot easier than undoing the damage.
EdR
EdR
(Texas)

Posts:170


02/04/2006 11:58 AM  
PS: The president of our assoc. board also made it where only she (and one other--the treasurer who is also in bed with her and the MC) sign the checks. Before this MC took over, our board had had all four officers signatures at the bank and the duty had to be alternated so that we all knew what was being paid, and believe me we each caught little errors. On several occasions, there would be payment to a contractor that had been already made before. We ended up paying an attorney three times for the same "opinion" and do you think they reimbursed the assoc.? NOW, only the president and her buddy, the treasurer, sign checks, ever. Our bylaws state that checks require two signatures. Bottomline, if you get enough dishonest people working together, they can work quickly to spend monies that you cannot recover. It is no different than Enron--just smaller amounts of money.

I know my posts sound negative, but I've been a resident/member for 10 years and on the board for 5 years with two MCs. One was honest and resigned because of the president; the present one is dishonest, unscrupulous, ineffective, inefficient, incompetent, illegal, much more and GIVES advice for same, and is only there because of the president. I am no longer on the board because I was onto them--you see the problem!
EdR
JimR
(Colorado)

Posts:21


02/04/2006 12:35 PM  
EdR, Do not concern yourself about people thinking that your thoughts are all negative. When you have a bad Board or a bad MC it is a negative experience that you will never forget. You feel like you are living in a communistic country or even outer space, you just can not comprehend how humans can treat each other this way. After a 5 month battle with my Board and MC, I was totally drained of the desire for community service, but I was President and needed to put together a new board, get SB100 under our belt and a new direction for the Board. It got done, but I too am still negative when it comes to the memories of betreal, underhandedness, conspiracy and MC non-professinalism. But I thank my Superior Being for holding me up through it all. Keep the faith EdR, it will get better.
JonathanH


Posts:0


02/04/2006 12:59 PM  
Thanks for the comments. At this point, I'm in charge of heading up the committee with the charge to review what the possible management company candidates do, compare them, etc. I'm not actually a board member which is probably a good thing that the board is staying away from making this decision on its own.

At this point we're really only considering hiring a management company to do the financials, dues processing, etc. The board hasn't explicitly decided to go that route which is also why the committee was established - to figure out if one is necessary and if so what company should do it.
RogerB
(Colorado)

Posts:5067


02/04/2006 3:24 PM  
JimR and EdR, R U related (:
Both of you gave examples of bad Board members which has apparently been allowed by apathetic owners. The management company should be "paid help", like your doctor, dentist, attorney, etc. If enough members care they can elect good Board members. And if the Board members care they can hire good management companies (and terminate bad ones). If the Board members care they will not let a management company control them and if enough members of the association care they can elect Board members that are totally open to the members.

RogerB
MarnaR
(California)

Posts:27


02/04/2006 5:16 PM  
RogerB,

Technically you're right, but there are bad apples out there when it comes to management companies. I'm sure that yours is NOT one of them - but they do exist. Our previous board was aided by a manager who would review proxies received for the annual meeting and election, and let the board members know how many votes they'd need to acquire to be elected. This same manager also regularly lied to members and to the board. She gave (bad)legal advice, when the contract specifically prohibits that. It turns out that she also regularly spent association funds in excess of her contractually allowed discretionary amount. In short, she was a nightmare. When her misdeeds were brought to the attention of her supervisors, they seemed to be ignored. Homeowner apathy wasn't a problem in our neighborhood, and we were eventually able to get this board out of office and we are now considering replacing the management company, though the manager in question is no longer with them. The fact that they were silent and refused to act

We're discussing rule changes on another thread, and while you expressed appreciation for the procedures that HOA boards have to go through in CA to create and change rules, my property manager actively derides this law. In our case, it's unfortunate that the law will cause our efforts to take longer to come to fruition, however I firmly believe that this law has served to keep a number of more ridiculous rules from being enacted, or even proposed.

The board I serve with is in the process of evaluating ALL of our vendors - for the simple reasons that homeowners have never had a say over the vendor selection, and the contracts have never been reviewed. We're paying bottom dollar for our property manager, and the service we get shows. However, in order to get better service, we'll have to raise rates. And we all know how popular that decision will be.

I'm not contesting that a property manager is a valuable tool. Every director I serve with works full time, except me. I have my own business, which allows me to determine how much work I take in, BUT I am also a full time student. None of us has the time required to manage our small (160 home) community. Our CC&Rs and Bylaws do not require that we have a professional manager. We do have the option of self management. To me, this is too big a risk for the general well being of the community to be worth the annual savings. We are, however, discussing this option simply because we've had a terrible property manager in the past. And because those stories, at least here in CA, are all too common. I believe that if we find a good manager, we'll be in great shape. The problem is finding that good manager, and (in our case, at least) then convincing the membership to pay for it through a fee increase.
EdR
(Texas)

Posts:170


02/04/2006 8:16 PM  
Roger, et.al.:
Yes, Jim, Marna and I are related--our last names all start with "R". Just kidding--LOL. Frankly, I'm happy to have a place to vent and to get REAL information, and if you were anywhere near Texas, I think I'd recommend you for the MC for our association, in fact, you could do better from 1,000 miles away than the one we have now within our zip code--not just kidding.
EdR
RogerB
(Colorado)

Posts:5067


02/04/2006 8:30 PM  
EdR, thank you for the compliment. Have you ever thought of offering your services as managing agent for your HOA? One reason I do this somewhat thankless job is because I have experienced many lousy management companys when serving on HOA Boards.

I have walked in your mocasins for many miles!!!

RogerB
AdrianC
(California)

Posts:36


02/05/2006 8:08 AM  

Hi All,

Very interesting discussion.

JONATHON, one of the things we requested when we compiled our short list of companies to interview, was a copy of their standard contract and financial package.

All of them had a very simple termination clause after the intitial period (3 - 12 months)which was a thirty day notification of intent to discontinue service. Even when we gave notice to our old MC, for some of the sorts of things mentionioned in other posts, we could get out in 30 days. It actually takes about sixty days to get it all across to the new MC, so allow for this.

Then we tried a spreadsheet to lay out services and costs on a comparison basis. it got to be very big and unwieldy , but it did give us an idea of what we were getting or missing.

There are a lot of new laws coming into effect this year, June, so make sure they are also offering education seminars for prospective and new board members.

AdrianC



BeckyV
(Michigan)

Posts:43


02/05/2006 10:16 AM  
Just to let you all know there is another way to handle management. In one of the associations where I own, we do not mix our physical management with our financial management. We have two separate entities and it has made for a very good and very safe balance.
The board is able to retain full control of pretty much everything that is going on. Granted, this may not work for those of you who do not have at least a quorum of board members who are on site almost full time.
There is good information about chosing a management company and responsibility lists at the site www.communityassociations.net. You will also find many other topics relavent to this thread.
Good luck
JohnM3
(Florida)

Posts:288


02/06/2006 8:35 AM  
Include also that the management company uses the TOPS Software for all reporting. It is a godsend to your Treas and the bod for financial reports its a great tool. We introduced it into our systems abot 10 years ago of which I have been Treas for the last 8 years and it makes my life as a bod very less stressfull. It only takes me a little over 1 day to do next years budget. Versus the old way it took a comm of 3 people all most a month. Make it manditory that the treas , president have online acess to the Management Companies violations, work order, TOPS data it is very easily done via a web site ours cost 110 dollars a month and it gives people access to the board via e-mail all so all of the different forms such a s architectual review requests, tree cutting requests, no lawn service requests, and a host of others such as picnic area set aside requests party requests plus info on board meetings, the posting of board minutes and allow people to do columns 1 a month on different subjects it allows people to have direct access to the bod without the mc getting in the way. Yes understand they sometimes get very controlling so be carefulland have the sense to not make them your best friend cause they will protect themselves at your expense never ever forget that.
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