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Subject: Self managed HOA
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Author Messages
KuS
(California)

Posts:13


08/17/2019 5:59 PM  
Hello ... i have a question on self managing HOA. Can a self managed HOA hire one its members to help with certain task and pays that member? Thank you for your feedback
KerryL1
(California)

Posts:6910


08/17/2019 6:48 PM  
By "member," you mean homeowner and not board member, correct?

If you mean homeowner, self-managed or not, the board can vote to hire an employee UNLESS your governing documents say you may not.

But there's a lot you need to know about this and it can be politically problematic. Other Owners might worry about favoritism. There are liability concerns too and workers comp. It might harder to fire such an employee since she or he is a neighbor, etc. Others here can respond better than I to this topic, but whatever you do n do not "pay" this person with a reduction in their dues.

Can you say what tasks you had in mind? Are you on the Board, KuS. Welcome to our Forum.
KuS
(California)

Posts:13


08/17/2019 11:01 PM  
Hi Kerry,

Thank you for your response. I meant in general but i guess the distinction is important. I am in the board but we don't have a well defined process, we are managed currently by a management company and we are seriously considering self managing in the sense that i will be doing most of the work including full accounting and billing and collections and things like that. I am aware of the liabilities in general but not in specifics. I know liabilities to general public is huge and has to be addressed. So first of all can they pay me if i am on the board? Basically, my question is what form we should have and what role i can or cannot have if i am elected to be the one who manages the HOA, but by managing i mean paying bills and full accounting, etc but i am not managing the liabilities anymore that i bear those now? That's kind of my question or questions.

Thank you
K
KuS
(California)

Posts:13


08/17/2019 11:01 PM  
Hi Kerry,

Thank you for your response. I meant in general but i guess the distinction is important. I am in the board but we don't have a well defined process, we are managed currently by a management company and we are seriously considering self managing in the sense that i will be doing most of the work including full accounting and billing and collections and things like that. I am aware of the liabilities in general but not in specifics. I know liabilities to general public is huge and has to be addressed. So first of all can they pay me if i am on the board? Basically, my question is what form we should have and what role i can or cannot have if i am elected to be the one who manages the HOA, but by managing i mean paying bills and full accounting, etc but i am not managing the liabilities anymore that i bear those now? That's kind of my question or questions.

Thank you
K
TimB4
(Virginia)

Posts:16678


08/17/2019 11:51 PM  
Short answer is yes.
However, it needs to be done the right way.

You also need to determine if they are an employee or independent contractor (per the IRS).
Basically, an independent contractor provides their own supplies and does the job how they want, you are paying for the job to be done. An employee uses Association supplies and the board instructs how the job is to be done.

See:

INDEPENDENT CONTRACTORS IRS 20-FACTOR TEST

Understanding Employee vs. Contractor Designation


You may not reduce assessments in exchange for work. You must pay them and at the end of the year issue the appropriate tax form (W-2 or 1099) showing how much they were paid.
NpS
(Pennsylvania)

Posts:3987


08/18/2019 5:18 AM  
The organizing docs for many HOAs do not allow BOD members to be paid. Some documents allow reimbursement for actual expenses, but nothing more. What exactly do your documents say about BOD members getting paid?

In your shoes, I would talk with your insurance company. If you become the Manager, how does that affect your D&O insurance coverage? Will you need your own separate insurance policy when you provide services for a fee? Which company will insure you if you haven't managed HOAs before?

Will your owners think that your motives have changed? That you are no longer interested in the well being of the community, but want to make money on the HOA? I'm not saying this is realistic. I am just saying that it's a possible impression that can be hard to reverse. Can they trust you as much as they do now when you're taking their money?

Our HOA became self managed a number of years ago. It was gradual, and not by some intentional plan. We simply found that we could manage vendors better than MCs did. So we took the plunge. And the next thing we took on was communications. Homeowners were being misinformed largely because the MCs focused on squeaky wheels who bullied their way into better treatment. We shut it down.

But we never took on bookkeeping. We didn't want to be on the front line when it came to delinquencies. We wanted a buffer between BOD members and delinquent neighbors. Even if we did set up our own bookkeeping system, we would have hired someone from the outside and not someone who lived here. Also, see the insurance discussion above, which was a significant consideration for us.




Sikubali jukumu. Read all posts at your own risk.
SueW6
(Michigan)

Posts:649


08/18/2019 7:32 AM  
Do you also have a treasurer? We paid the treasurer a flat fee, plus by the hour at dues time. The collections and liens were not handled by the Treasurer. That’s a whole ‘nuther job.


Sounds like you are going to be doing basic bookkeeping services.

If so, this “job” needs to be blind- bidded out.
MelissaP1
(Alabama)

Posts:9024


08/18/2019 9:20 AM  
Being self managed isn't as easy as you think. Most members know that board members/officers are UNPAID Volunteer positions. So they will not likely respond well upon hearing one is getting paid. Not that it is necessarily "wrong" to be paid but the nature of the position is such as volunteer.

Let me put that in perspective. Let's say your church runs a volunteer "soup kitchen". The servers and cook's are all volunteer. The tithes/donations of money/food provide the supplies. Now a volunteer wants to be paid to be the cook. It's a hard job and takes some skills. No arguing with that aspect. However, it's looked at as a church's volunteer activity. How does the church now justify paying a cook?

So that is kind of what your looking at here. How do you now pay the cook? Is it wrong for the cook to ask to be paid? Should the cook be paid as they did volunteer to take on that job? If the church decides okay to pay the cook is it hourly or by 1099 form? Do they need to provide insurance, social security, and taxes?

I've had a few HOA members who held the skills we could use on the board/HOA that would not participate without being paid. We tell them that if they don't volunteer then they had to produce a license/insurance and bid on the job. We didn't hire "positions". That's not what the HOA is about. It's about helping your community by applying the skills you may have.

Former HOA President
TimB4
(Virginia)

Posts:16678


08/18/2019 10:11 AM  
Posted By NpS on 08/18/2019 5:18 AM
The organizing docs for many HOAs do not allow BOD members to be paid.




For performing the duties of a director.

They could be paid for performing the duties of Officers.
However, it would draw a lot of questions and perceptions.
Therefore, I wouldn't pay a Director regardless of what duties they are performing in addition to those of a Director.
CathyA3
(Ohio)

Posts:761


08/18/2019 10:34 AM  
Playing devil's advocate here:

* One thing to think about if you're considering becoming self-managed is whether you'll have enough people willing to do the job. Managing a community is a lot of work, as is serving on the board, and many communities have a hard time getting enough volunteers to fill the board positions let alone additional folks to provide managerial services. In my experience many homeowners are all on board if they think it will save them money, but they're nowhere to be found when it's time to actually do the work. Even if you do get enough volunteers now, you should think about how owners have behaved over the community's history and whether your current crop of ambitious folks is unusual.

You don't want to cut loose your current managers and then discover a few years down the road that your homeowner/managers are suddenly not interested in doing the work any more and you have to find a new management company on short notice.

* Another thing to consider with homeowners is a possible lack of professionalism. They may or may not have the necessary skills, and people who do the work full time have a different attitude than those who do the job casually. Also in some states property managers must be licensed, which implies they have a minimum level of knowledge and skills. Of course you'll find exceptions, and some homeowners may be more skilled than the professional manager. But it's something to keep in mind.

* Finally, every community has a few homeowners who delight in giving the manager and vendors a rough time. You should think about whether a homeowner/manager would be an even bigger target for the troublemakers. It's not fun to be on the receiving end of such behavior, but it's easier if you don't live down the street from your tormentors and can't get away from them. So burnout is something to consider.


GenoS
(Florida)

Posts:3570


08/18/2019 3:42 PM  
Posted By CathyA3 on 08/18/2019 10:34 AM
One thing to think about if you're considering becoming self-managed is whether you'll have enough people willing to do the job. Managing a community is a lot of work, as is serving on the board, and many communities have a hard time getting enough volunteers to fill the board positions let alone additional folks to provide managerial services.

From experience I can say this is very true. I would add another caution: You probably don't want to get into a situation where you're the only one who knows how to work a spreadsheet. If you let everyone know you're fluent with spreadsheets then you will come to regret it.
JohnC46
(South Carolina)

Posts:9139


08/18/2019 4:18 PM  
Posted By GenoS on 08/18/2019 3:42 PM
Posted By CathyA3 on 08/18/2019 10:34 AM
One thing to think about if you're considering becoming self-managed is whether you'll have enough people willing to do the job. Managing a community is a lot of work, as is serving on the board, and many communities have a hard time getting enough volunteers to fill the board positions let alone additional folks to provide managerial services.

From experience I can say this is very true. I would add another caution: You probably don't want to get into a situation where you're the only one who knows how to work a spreadsheet. If you let everyone know you're fluent with spreadsheets then you will come to regret it.




I agree.
PaulJ6
(New York)

Posts:632


08/18/2019 4:37 PM  
Posted By KuS on 08/17/2019 5:59 PM
Hello ... i have a question on self managing HOA. Can a self managed HOA hire one its members to help with certain task and pays that member? Thank you for your feedback




Yes. When the HOA board approves the transaction, just be sure to acknowledge that the board is approving the hiring of a member of the HOA and that the transaction is at arm's-length.
KuS
(California)

Posts:13


08/20/2019 9:57 PM  
Thank you, Tim. I think ultimately it is the CC&R that determine all this. I intended of course to do independent contractor because it is much easier both sides. I am or was a cpa myself. Also i am in California so the rules may be a bit different. By the way this role if for myself actually. We are small condo complex of 6 units only but i know that things change once i collect money and expectations and things can develop that i don't foresee at all. Anyway all 5 units said they are ok and it was their suggestion in fact.
Have a good day
K
KuS
(California)

Posts:13


08/20/2019 10:13 PM  
Hello, you are pointing out two of most important issues one being the D&O insurance and similarly the liability to the public. My situation in regards with these liabilities should stay the same or it should be arranged that it stays the same. The second issue is what our CC&R says and i have read it what i can say is the it doesn't preclude from hiring members but it is not very clear and silent on many questions that i have.

Anyway, i need to find out from someone who lives in California... i want it to be that when go to find the lawyer i know most of the issues involved. i have to read the CC&R again... thanks for your feedback
KuS
(California)

Posts:13


08/20/2019 10:18 PM  
Hello, ours is a small 6 unit condominium with no pools or recreation area so the bookkeeping is quite simple for me to do as i have been accountant almost all my life. I just need to find out how to do it that id on't put myself in legal trouble... thanks again
KuS
(California)

Posts:13


08/20/2019 10:25 PM  
Hello, i don't quite understand your logic. This is a small 6 unit condo with no extras. So far almost ten years, i am the one who has been more than anybody else involved with the management, but we don't really maintain the rules, we are like a direct democracy type management. Anyway, they want to get rid of the management team and ask me to do the accounting, the bank accounts, the collection the whole thing, calling vendors billing...i don't think if someone is not paid will do a good job in this situation... Thanks for your feedback
KuS
(California)

Posts:13


08/20/2019 11:04 PM  
On spreadsheets, why? You mean i would get requests to create spreadsheets?
RichardP13


Posts:0


08/20/2019 11:09 PM  
Either you are a volunteer director/officer or you pay professionals to do it. California has specific rules on the documents that must be provided on an annual basis to their members. Forget your CCRs, you need to be familiar with the Davis-Stirling Act and Corporation Code, before you decide you want to save money and go self-managed.
NpS
(Pennsylvania)

Posts:3987


08/21/2019 6:31 AM  
Posted By KuS on 08/20/2019 10:18 PM
Hello, ours is a small 6 unit condominium with no pools or recreation area so the bookkeeping is quite simple for me to do as i have been accountant almost all my life. I just need to find out how to do it that id on't put myself in legal trouble... thanks again


With:
- only 6 units;
- no amenities; and
- all owners willing to pay you for bookkeeping.

That narrows down the issues of potential liability.

2 questions:
- How much are the dues?
- What do the dues pay for?

Thx.



Sikubali jukumu. Read all posts at your own risk.
KuS
(California)

Posts:13


08/21/2019 1:19 PM  
Yes it narrows down the liability issue to some degree but i need to make sure after we have turned self managed that i have the same liability responsibility as anyone else, except maybe for the keeping well kept books, but as far as liability to public i should be in the same position. That's really my biggest concern.

The dues are $335 but we also pay for earthquake insurance i think it is an additional $70 for that

Out biggest expense is after the earthquake insurance which should be really considered for this analysis, and after that the biggest one is communication which is a ridiculous $8000 per year and this is for an intercom. I need to look into that..... so yeah the expenses other than communication just the normal expenses like the management company itself which is about $3500 a year and hazard insurance, garbage collection... etc...
KuS
(California)

Posts:13


08/21/2019 1:20 PM  
Yes it narrows down the liability issue to some degree but i need to make sure after we have turned self managed that i have the same liability responsibility as anyone else, except maybe for the keeping well kept books, but as far as liability to public i should be in the same position. That's really my biggest concern.

The dues are $335 but we also pay for earthquake insurance i think it is an additional $70 for that

Out biggest expense is after the earthquake insurance which should be really considered for this analysis, and after that the biggest one is communication which is a ridiculous $8000 per year and this is for an intercom. I need to look into that..... so yeah the expenses other than communication just the normal expenses like the management company itself which is about $3500 a year and hazard insurance, garbage collection... etc...
JohnC46
(South Carolina)

Posts:9139


08/21/2019 2:19 PM  
K

The catch to being self managed is finding one or two people that will put in the time to do so. Also using only software that the average twit can understand.

Have you looked at using a Bank Lock Box system> Talk to a few local banks.
KuS
(California)

Posts:13


08/21/2019 2:32 PM  
I am well versed as they say in software and accounting. I will just use spreadsheet program and will automate it myself as much as i can. It will be very easy for me to do that and from there i will produce financial statements for the board.
RichardP13


Posts:0


08/21/2019 2:52 PM  
If you are thinking of paying yourself for services rendered, you will need liability insurance. You will need to file a 1099 form with the state and feds. Handling the assessments and collections for 6 units can be done with your eyes closed. Now file income taxes, state disclosures with both the FTB and SOS, file annual disclosure forms, budget and annual policy statements with homeowners each December, send out annual financial reviews to homeowners in April of each year, because, if your don't you could be subject to fines.

Other than that, GOOD LUCK!
NpS
(Pennsylvania)

Posts:3987


08/21/2019 2:57 PM  
Posted By KuS on 08/21/2019 1:20 PM
Yes it narrows down the liability issue to some degree but i need to make sure after we have turned self managed that i have the same liability responsibility as anyone else, except maybe for the keeping well kept books, but as far as liability to public i should be in the same position. That's really my biggest concern.


Who else will have signing authority on HOA bank accounts? Who would your neighbors sue if money disappeared from an HOA bank account? Would you form an LLC so that your personal assets were protected from HOA claims?


Sikubali jukumu. Read all posts at your own risk.
KuS
(California)

Posts:13


08/21/2019 3:22 PM  
Thanks for mentioning these reporting requirements. Where can i get a complete list from an authoritative source. I don't mind the research.
KuS
(California)

Posts:13


08/21/2019 3:25 PM  
First i was thinking that only i should have but now actually i think we should create it such a way that maybe we require two signature mine and and the board president or treasurer.... i have to always have it because how else can i manage it if i don't know who took money out and none board member should have it also because i don't want a sole responsibility for it..
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