Self-management vs. professional management

Happy New Year, Roger!

Wow, six deep questions.

1. Which do you prefer and why?
Self-management. Because, having lived and worked with a mangagement company as a Board member, I found it difficult to be able to feel free to handle our affairs better w/o any interfence from the management company. As long as we were following our legal docs., and the laws of our state, we really didn't need them. The one good part of the management company was giving us ideas within the laws as to how or what to do this or that issue. That's it.

2. What do you see as the pros a
and cons of each?

Pro about self-management Leadership is in tact.

Con: When the leadership makes things up as they go along.

Pro about professional management: They back up the BOD's when the BOD's find themselves not being able to get a homeowner to cooperate and whever else the BOD's may have difficulties with they seem to be able to help. As well as keep the BOD's from making things up as they go along.

Con: Some management companies can be difficult to deal with or may not do their job and we are stuck with them until their contract is up.

3. What is your major complaint on management of your association?

The President does mean what she says and says what she means, and does not follow through on anything. She is does not tell the homeowner's the truth. Therefore, she's not trust worthy. She's the worst we've ever had. However, no one else is interested in replacing her, just complains.

4. How do you evaluate management of your association?

By how they make sure all deed restrictions are followed, and how they treat the homeowner's when they have a suggestion or complaints. In other words, manners and professionalism.

5. Where do you think self management is more effective?

When everyone on the BOD's understands what is required of them, and then follow through with their job, in a professional manner.

6. Where do you think professional management is more
effective?

I really don't believe they are effective. I believe they can be helpful through some hard issues for an HOA and the BOD's. Sometimes that never happens to a HOA or BOD's. So, it is a waste of a lot of money for their time they do not need.

May I suggest, looking into a CPA who is knowledgable with HOA for your needs vs. professional management. This way your Leadership remains in tact, and the BOD's keep on working as they always have been w/o the hassels of the management company, and the cost is way less for your needs vs. a management company.

This is my opinion, such as it is. :-)

Take care,
Audrey

The following comments are based on my experience serving on self-managed boards in three states and serving many associations in Colorado as their professional manager. I would really like to hear from those of you who have other opinions.

Thanks,
RogerB

1. Which do you prefer and why?
When possible I prefer a good professional managing Agent who will protect the investment in my home and the quality of life in my community. Of course, for voluntary HOAs the owners can not be forced to pay an assessment so the association has no guaranteed funds to commit to a managing agent.

2. What do you see as the pros and cons of each?
Self-management
Pro - A greater sense of control by some board members and the belief that the assessment will be lower when not paying for professional management.

Con - When the board of directors is not knowledgeable and conscientious there can be many problems, including doing a poor job and having the potential for significantly greater expenses. Do you realize the potential financial liability to such board members?

Professional management
Pro - a good managing agent can provide guidance which can result in better board decisions and handling of problems; reduce potential for major legal expenses; save the association money through reduced costs for contractors and other services; provide more effective enforcement of restrictions; better accounting; and more.

Con - Management companies that are too expensive, have inexperienced Agents, and/or function independently rather than as part of the HOA team under guidelines established by the board.

3. What is your major complaint on management of your association?
From my experience the most common complaints are, respectively:
a) poor board of directors, especially the President.
b) poor managing Agent.
c) failure to have realistic architectural modification guidelines.

4. How do you evaluate management of your association?
a) the quality of life maintained in the community.
b) the maintenance of homes and associated increase of property values with time.
c) any law suits.
d) communications provided.

5. Where do you think self management is more effective?
Knowing what I now know, I would not live in a self managed HOA again.

6. Where do you think professional management is more effective?
Always more effective assuming a good managing Agent is used. Preferably one who’s cost is more than offset by reducing total expenses

We are a brand new board in an old development (40 units). We'd like to hire a proffessional and affordable management agent. What are the things we should be looking at when hiring an agent? This process is a bit intimidating.
Your input is appreciated
Y.L

1.Personally, I would prefer self-management as long as there is a pool of talent, skill, commitment and integrity within the community of members to draw upon. Professional management would be a step I would investigate when a series of Boards have a tendency to adopt hidden agendas; stop following the dictates of the governing documents; the members become compliant and apathetic; the members don't involve themselves in watchdogging what is going on within the association or get involved in their association; or the structure or size of the organization becomes too restrictive for a Board to handle, either too large or too small.

2. What do you see as the pros and cons of each? I think I address this in #1 but the cons of professional management would be losing the members losing contact with the actual running of their organization and shaping its direction and growth. I would be wary of the 'voice' of the members being lost when a professional management company takes over.

3. What is your major complaint on management of your association? More than one answer here; Overall our members seem to want our Board to run the association and over the past few years have been sliding on dealing with the actual work of passing/approving the necessary bylaw amendments to do this at the Annual General Meetings. The membership pass these amendments to the Bylaw committee (three nonBoard member committee) but then scream if we try to tighten up the process and say we are trying to take their rights away from them. This could become a cyclical debate going nowhere fast.

Secondly, a sense as a Board member that there is a growing number of members who are losing their sense of personal responsibility as soon as they buy into a Home Owner's Association and look to the Board and the association to deal with any and all of their problems.

4.How do you evaluate management of your association?
-communication
-commitment to community
-ease of systems
-integrity
-consistency

5.Where do you think self-management is more effective?
We are each other's neighbors and our concerns are each others. When I am working within our Block Watch program or at our pool with my children or attending the Saturday morning pilates class I am also available for a quick chat as a Board representative. This isn't always ideal from a personal perspective but it sure works from all of our members' perspective. It is relatively easy to draw the lines between the personal and the professional and have them be recognized. And I do consider my volunteer Board position as a professional aspect of my life.

6. Where do you think professional management is more effective? If there wasn't a pool of contractors, accountants, business owners, community organizers, environmentalists, city planners, etc. who were interested in filling three year terms on the Board.

I am so sorry for the double post.

I'm in California. Are there are any differences in state law regarding self-management? We have 24 condos. Our management company does nothing for us. They write maybe 6 checks each month. When anyone calls to have something done, it takes weeks for them to call us back. We pay them $650 each month. I'm thinking on bringing a motion to the board in a month or two to try self management, but before I do, I need all the pros & cons, and any other information I can learn. Can someone direct me to the information I need? Any help or comments will be greatly appreciated.

thank you
M

MarileneS,

First, I would recommend that you start a new thread rather than continuing a thread started in 2005 and hasn't had a comment since 2006. A lot has changed since then and more people are likely to respond to a thread that doesn't appear to have a lot of replies already.

In light of the new mortgage underwriting guidelines, I personally think you would be much better off with professional management. Fair or not, lenders trust third-party professional management more than self-managed communities. This wasn't a problem in the boom years of 2005 and 2006, but is a major con in this real estate environment.

In addition, before you ask about state law, what do your governing documents state about self-management? Are you allowed to be self-managed without approval of the owners and the mortgage companies?

Ellen,

I'm curious to know in what way does the bank "post the assessments". I'm not familiar with lock boxes but I would like to think the bank will give the HOA a detailed accounting of the monies received but I don't know that would, or could, take the place of the HOAs accounting. The HOA has a set of member accounts that the assessments would have to be posted to. Then the income received (deposits) needs to be posted to the HOAs set of books. I don't know how the bank enters into this. And I doubt very seriously that the bank is going to prepare financial statements; for one thing they wouldn't have all the info required to do so.

Mary,

Contact one of your larger banks and ask them for information on a lock box for an association. Or Google lock boxes.

I don't think I would want a bank to do it either. I have a couple phone calls into a few companies to see what they charge. I think we will have to be redoing our cc&r's and rules and regs. They are ancient.

all the information you have written is very helpful. As far as starting a new topic discussion, I think this one is going good, but I can still do it you all think I should.

thank you
M

And if you decide to SM here is a kind of mini-checklist of some of the things you need to change (which others can add to) and don't forget a place to store Association records. This is not meant to scare you away from SM but to remind you that there is more involved than writing a few checks each month.

Notify all owners of change and the date the change is effective and any change in where they mail their assessments to and whether they will need to file a new ACH (auto debit) Authorization Form if they use that option.

Notify Secretary of State of change and new address and any change of Registered Agent.

File Form 8822 - Change of Address with the Internal Revenue Service and notify your local County Tax Office.

Notify all vendors including Utility Companies of change and new billing address.

Notify the Associations attorney.

Review all homeowner's in the collection process (Past due, lien, foreclosure) to make sure none fall through the cracks.

Setup new banking accounts and transfer funds if necessary; order checks and deposit slip's. Or
remove former Management Company's employees from the bank signature cards and make sure you have the original ACH (auto debit) Authorization Form for homeowners that utilize that service.

Arrange to transfer all files from the former MC including but not limited to:
1. Articles of Incorporation, CC&R's, By-laws and any Rules, Regulations, Resolutions.
2. Any Board Policies and Procedures.
3. Site plans and maps.
4. Architectural Control Rules (ARC), guidelines - if separate from CC&R's.
5. Originals of all warranties, permits or other documents received from the developer.
6. Reserve study (if done).
7. Association Federal Tax ID.
8. Copies of all minutes and meeting files
9. All association correspondence and replies, including e-mail.
10. All current contracts.
11. All legal files and correspondence.
12. All management reports.
13. A current list of vendors and maintenance contractors, including contact names, addresses & phone numbers including a listing of all utility companies and account numbers, meter numbers.

Accounting/Bookkeeping including but not limited to:
1. Current budget.
2. Current financial statement.
3. Delinquency list and status
4. A/P history for current year (needed for 1099's)
5. Check registers/stubs/cancelled checks
6. Paid invoices
7. Open invoices
8. Bank statements - operating and reserve
9. Bank reconciliations - operating and reserve
10. Investments, CD's, passbooks , Money Market Accounts
11. Any payroll reports
12. General Ledger with journal entries
13. Tax files/coupon book
14. All audits and tax returns.

Homeowner files including but not limited to:
1. Current property owner and resident list.
2. Property files.
3. Copies of all work orders completed and in process.
4. All past and pending ARC submissions.
5. All past and pending violation letters.
6. Pending and completed work orders