The HOA board has many responsibilities to keep the HOA functioning. However, it isn’t easy, requiring time, expertise, and experience. This is why most HOAs hire an HOA management company. But is hiring an HOA management company always a good idea? Let’s find out.
The Responsibilities of an HOA Management Company
Before discussing whether hiring a management company is a good idea, it’s important to break down what a management company does. What are the responsibilities of an HOA management company? Most often, they include the following:
- Facility and amenity management
- Governing document and legal compliance
- Addressing homeowner issues and questions
- Resolving maintenance requests
- Vendor hiring and management
- Common area inspections
- Rule enforcement
- Assessment collections
- Accounting and financial management
- Insurance management
- Reserve fund planning and maintenance
- Capital improvement project management
Is Hiring an HOA Management Company a Good Idea?
Hiring an HOA management service company can be tempting for homeowners associations. After all, they take care of all the HOA’s daily operations, such as rule enforcement, collections, and meeting management. However, they also have some downsides.
Let’s examine the pros and cons of hiring an HOA management company and why it may or may not be a good idea.
Advantages of Hiring an HOA Management Company
One of the biggest advantages of hiring an HOA management company is expertise and experience. Management companies often have in-house professionals who know all the ins and outs of running an HOA. They know how to handle delinquent accounts, which laws apply to HOAs, and how to manage community finances.
HOA management companies have years of experience dealing with various HOAs. They understand the needs of a planned community and what challenges they might face. These companies can offer some much-needed guidance for clueless HOA board members.
In addition, HOA management companies also significantly reduce the board’s workload. With their help, the board can focus on more important community matters, such as organizing community events and capital improvements.
Furthermore, the expertise a management company brings to the table allows the board to avoid liability. Thanks to the management company’s guidance, the board will make fewer financial and legal mistakes. While often unintentional, these mistakes can lead to devastating consequences for the community. A well-intentioned yet inexperienced board can sometimes be just as detrimental to HOAs as malicious ones.
Finally, management companies are often better at maintaining communities. This is because, unlike the board of directors, maintaining the community is the management company’s job. They’re paid to do it. The board may be able to hire vendors and schedule maintenance work, but they have to juggle it with their personal and professional lives, too.
All of these advantages contribute to a higher level of community appeal. A well-managed, clean, and beautiful community will always be more attractive to buyers than a rundown neighborhood.
Disadvantages of Hiring an HOA Management Company
Hiring an HOA management company can be disadvantageous for one main reason: it’s expensive. After all, the management company takes on most of the board’s responsibilities. They hire vendors, manage work orders, conduct inspections, facilitate meetings, and manage the community’s finances. It’s a lot of work, so that it can cost a lot.
Additionally, board members may come into conflict with the management company. They might disagree with the HOA manager and the way they do things. Coming to a compromise isn’t always easy; conflicts can jeopardize the quality of the company’s service.
This leads us to another disadvantage: a lack of control. Sure, the board still has the final say on community decisions. Nonetheless, they must entrust most of the HOA’s operations to the management company. This can be difficult for board members who want more control over community affairs and culture.
Lastly, some communities might find it hard to trust an outsider like an HOA management company. They might think the company has no stake in the community or doesn’t understand its needs, so they’re rigid with rule enforcement and collections. As a result, homeowners might not always comply with the rules and policies made by the management company.
The Alternative: Self-Management
Self-management occurs when the HOA board and residents take on the responsibility of managing the HOA themselves. These communities forego hiring a professional manager and handle operations themselves. This includes everything from accounting and financial management to dispute resolution and vendor management.
The biggest benefit of self-management is that it’s cheap. The community doesn’t need to spend more money hiring a professional to do its work. Instead, it relies on the board, committees, and community volunteers, which can significantly reduce the cost of HOA fees.
Moreover, self-management gives the community complete control over the HOA. The community can increase or decrease the HOA fees as needed, and the board can also run the community as it sees fit.
On the other hand, self-management can be challenging because the board and community members don’t always have the time to manage the community. They often also lack the technical skills required for accounting, financial management, and legal matters. The community might be left in disarray and chaos if things don’t go well.
When Should You Hire an HOA Management Company?
As you can see, hiring an HOA management company comes with benefits and challenges. When should a homeowners association hire one? Here are the most important considerations.
- Lack of Skills. If the board needs to gain the skills and experience needed for accounting, financial management, and legal compliance, they should consider hiring a management company.
- Lack of Time. If the board doesn’t have enough time to dedicate to the community, it can still fulfill its fiduciary duty without being overburdened through outsourcing.
- Unwilling Volunteers. Communities that struggle to recruit committee volunteers can benefit from outsourcing operations to an HOA management company.
- Lack of Trust. Homeowners who do not completely trust the board can hire an HOA management company to keep them accountable.
- Poor Maintenance. Whether it’s negligence, improper maintenance, or bad service from vendors, an HOA management company can help the community with maintenance through better management and connections to reliable contractors.
- Disorganized Management. An HOA management company can streamline a community’s policies and processes to keep communication, meetings, and work orders more organized.
Hire a Trustworthy Professional
Hiring an HOA management company has its pros and cons, but it benefits most homeowners associations. This is especially true for communities that struggle to maintain their common areas and enforce the rules.
88 Doors is an industry-leading HOA management company that can help you keep your community in shape. Call us today at (512) 348-8821 or contact us online to learn more!