There comes a point in the lives of some homeowners associations when volunteers can no longer do it all. Finding a firm you can trust to take on all or some of the tasks involved in running an HOA is like conducting a job interview. If you do your homework, you’ll know what to ask and what to look for in the candidates. Here are 10 tips for picking the right HOA management firm.
1. Know what you need. Start your search by making a list of what you’d like the management company to do. You can put anything on the list, as long as the HOA board keeps the responsibility to oversee the management company’s actions. Knowing what your HOA needs will help you focus your search.
2. Choose a person or committee to do the preliminary search. Expect to devote about 20 hours to choosing a company, says Elizabeth White, an attorney at LeClairRyan in Williamsburg, Va., who represents community associations.
3. Ask if your state requires some level of manager licensing. If so, seek out companies and candidates with the proper credentials. “We’re finding a lot of management companies in states that require licensing (that) haven’t gotten the license,” White says. States that require licenses or registration include Alaska, Connecticut, the District of Columbia, Florida, Georgia, Nevada, and Virginia. Starting in 2011, Illinois will require licenses.
4. Consider a company certified by the Community Associations Institute. This Alexandria, Va.-based organization has a range of certifications for companies and individual managers.
5. Be sure the company performs criminal background checks on its employees, especially its managers. Do your own background checks, too. Check references and do an onsite visit. “Speak to board members of associations managed by that company,” suggests David Regenbaum, CEO of Association Management Inc. in Houston. “Visit the company’s office and get a sense of its business philosophy. Some are merely bookkeeping and secretarial services. Others are fully committed and involved in the community. Make sure you select the company that’s appropriate to your needs.”
6. Investigate the firm’s bonding and insurance. Your state law and governing documents may spell out minimum standards for both, Taylor says. But a management company should also have liability insurance and workers’ compensation insurance covering its employees. Ask for a copy of the company’s insurance certificate, recommends Robert White, managing director of KW Property Management & Consulting in Miami. His firm carries a $2 million liability policy, plus a $10 million umbrella policy.
7. Read the fine print. It’s the rare management company that works without a signed contract. “It goes without saying,” Elizabeth White says, “that you should never sign the management company’s form contract.” Have your association lawyer suggest changes.
8. Try to negotiate for a one-year contract rather than the three-year contracts many companies seek. Why commit to a three-year contract if you can negotiate a one-year contract with the option to renew at one-year intervals for two years at the same price?
9. Scrutinize termination provisions. “As a manager, I don’t mind receiving 30 days’ notice of termination,” Regenbaum says. “But you shouldn’t allow the management company to give you 30 days’ notice because it’s difficult to scramble to find another manager in that time.” You need 60 to 90 days to repeat the search process if things don’t work out with your current management company.
10. Ask for a complete fee schedule, so you can compare competing contracts. Big costs may be buried in extra fees. For example, a company may provide for a manager to attend one meeting every six months and charge $100 per hour after that. It may also charge separately for postage and to manage a vote on and payment collection for special assessments. The lesson, according to Elizabeth White: Bids that come in significantly lower than others should be red flags.