What Does An HOA Management Company Do?

What Does An hoa management company do?

Running a successful community takes effort and time, and that is why Homeowner Associations (HOAs) have their work cut out for them. The main purpose of an HOA is to increase property values in a community, and this is done by ensuring that common areas are well-maintained and property owners (including tenants) follow rules and regulations.

Usually, when a real estate developer creates a community, they create a self-governing corporation that is run by a board of directors. Every person who buys a home in the community becomes a member of the HOA and once the community grows to a sizable number, the developer passes the reins of the HOA to the residents, who elect the board of directors. The board is responsible for governance and smooth operation of the community.

While the HOA board of directors comprises elected residents, they do not get paid for their services. And, more often than not, most do not have professional support, and therefore have to make collective decisions for the wellbeing of the community on their own. When tasks become challenging and overwhelming for the directors, the HOA can decide to hire the services of an HOA management company. The company’s task is to professionally manage the community on behalf of the board of directors.

However, with the board of directors still retaining significant responsibilities, it can be confusing as to what HOA management companies should or should not do. Understanding the tasks and duties of the homeowners property management company is critical to the board’s ability to efficiently run the community for the benefit of the HOA and its members.

Understanding the Roles of the HOA and HOA Management Company

Both stakeholders are responsible for handling the business operations of the community and building it so that property values appreciate; however, the role of each stakeholder is different.

Role of the HOA:

The homeowner’s association has its own rules and bylaws but it also has to adhere to the local, state, and federal laws. The directors are volunteers, who are elected by the property owners. The board of directors is responsible for governance of the association’s affairs and is the chief decision making body for the organization.

The HOA adopts an annual budget and collects assessments that homeowners have to fund day to day operations and long-term capital expenditures. It is also responsible for enforcing the HOA’s rules. All major and minor decisions pertaining to the community, hiring of vendors, and creating new or amending existing rules are undertaken by the HOA.

Role of HOA Management Company:

An HOA property management company is a third-party company hired by the HOA to handle most of the board members’ responsibilities. The company, however, is not typically a decision maker and instead facilitates enactment of decisions made by the board. The management company carries out the directives of the board and carries out enforcement of the HOA’s rules and policies. The company maintains the HOA’s corporate records and produces regular financial reports.

Based on the roles of the HOA and HOA management company, homeowners should realize that the decisions affecting the community are taken by the board of directors while the HOA management company enforces the decisions of the board, while acting as the primary point of contact for homeowners.

Responsibilities of an HOA Management Company Based on the role of the HOA management company, the responsibilities can be divided into four categories. These are as follows:

Common Area Oversight
Administration
Accounting
Restriction Enforcement

Common Area Oversight:

Common area refers to the areas available for use by homeowners for which the association has maintenance responsibility. These can include parks, pools, clubhouses, ponds, etc.

Managing these areas well is an important task as they are the areas most visible to residents and visitors, and therefore often form opinions on the desirability of the community. if the areas are poorly managed, the community will witness a dip in property values and may not be viewed favorably as an investment opportunity for prospective homebuyers. To ensure that property values are not adversely affected, the HOA management company should work closely with the association’s hired vendors to ensure proper maintenance is being performed.

An HOA management company’s involvement in common area oversight includes:

Regularly visiting the community to check common area conditions and identify maintenance issues
Assist the board in hiring competent vendors to maintain common areas
Work with hired vendors to carry out resolution of maintenance issues
Ensure that contract vendors are abiding by the contract specifications
Ensure that pool cleaning, lawn cleaning, and overall community cleanliness are up to the expected standards of the HOA

Administration: When it comes to administrative tasks and responsibilities, the HOA management company offers the following services:

Scheduling and participating in board meetings

Providing monthly reports to the board of directors

Responding to homeowner communications

Facilitate filing of tax returns

Coordinate mailing of HOA notices

Accounting: HOA accounting and managing of finances can be challenging as there is potential for misappropriation. It’s critical that management companies ensure their accounting practices are based on policies and procedures that mitigate the potential for fraud and mismanagement. A responsible and ethical HOA management company will perform the following accounting-related tasks:

Manage the community’s bank account
Manage vendor work within the association’s designated budget
Bill and collect homeowner dues
Follow through in collection of outstanding dues owed to the association
Compile a monthly financial statement for the board of directors
Work with the board to compile the annual budget
Advise the board on long-term funding needs of the association

Many HOAs often find it challenging to collect dues from homeowners who delay or ignore repeated reminders. An HOA management company should have the knowledge and experience to guide the HOA in collection of outstanding dues. An HOA management company’s responsibilities for managing account receivables include keeping the board apprised of delinquency accounts, carrying out the association’s collection policy, and collaborating with the HOA’s attorney when the board chooses to initiate legal action.

Rules Enforcement:

A critical role performed by an HOA management company is the enforcement of the HOA’s rules. Enforcement of the rules helps to maintain an attractive environment and preserve property values. To ensure that the rules of the HOA are enforced, the HOA manager periodically drives through the community to document it’s condition. During the visit, the manager will usually perform the following tasks:

Document instances of rules that are not being followed
Provide written communication to homeowners in violation and advise on the need to remedy
Facilitate additional enforcement of actions approved by the board of directors, as needed

In order to ensure that property values are not adversely affected by lack of adherence to community rules and standards, the HOA management company should study and become well-versed with the HOA rules and ensure that these rules are enforced across the community in a uniform manner without bias or partiality.

The Bottom Line

At times, homeowners believe that since they are paying their dues, they are not responsible for other aspects of their community and the task of maintaining the community lies with the HOA. However, that is not true. An HOA management company can work to its potential only when homeowners realize that they too are stakeholders. It is critical that homeowners not only pay their dues, but work to abide by the community management services and it’s rules, keep common areas clean, and volunteer their time to participate in community governance and activities in order to ensure property values do not diminish.

For an HOA management company to work effectively and carry out its responsibilities, the HOA, homeowners, and community manager must collaborate and work as a team. Now you know what an HOA management company does and how the company, HOA board of directors, and homeowners are partners who want the same thing – being proud of the community and what it represents.

Effectively running a community can be a real challenge. Usually, a Homeowner Association (HOA) is in charge of managing the business affairs of the corporations while balancing the wants and needs of the neighborhood community. However, these responsibilities are often more than volunteers can or want to do without professional support.

When tasks become overwhelming for the volunteer board of directors, many HOAs hire an HOA management company to effectively carry out the management of their community. Sometimes, however, the lines can be blurred as to which party does what and where homeowners stand. Here is a closer look at the actual responsibilities of an HOA management company and how they can benefit your community association.

HOA Vs. HOA Management

The role of both parties involves Business Operations and community building. While both the HOA and the HOA management company have the same end-game, both have different roles in the big picture.

HOA

The roles and responsibilities of your homeowner’s association and the owners are dependent on the governing documents, federal, state, and local laws. Your HOA is run by a volunteer board of directors that is elected by the homeowners. Your HOA will usually oversee the maintenance of common areas and any amenities. They may also provide for shared services in a community such as trash collection. Your HOA also has the responsibility to collect dues, enforce their governing documents, cover ongoing expenses, and save for large capital expenditures. The board of Directors is responsible for overseeing these functions, making decisions, adopting policies, and hiring vendors.

HOA Management

Since HOAs are governed by boards that consist of community members that perform their duties on a volunteer basis, many HOAs turn to a professional third-party management firm to help cover their large scope of responsibilities. In a broad sense, an HOA management company should be responsible for:

Guide and consult with the board of directors to fulfill their duties
Execute the decisions, directives, and policies approved by the board of directors
Document transactions accounting and otherwise, activities, and records of the association

The board is in charge of decision making and the HOA managers fulfill the actual dues collection, maintenance, vendor payment, and serve as the primary homeowner point of contact. The specific responsibilities of a community management company can be broken down into four sections:

Administrative Services
Accounts Receivable Management
Site Management
Accounting Services

Administrative Services

HOAs involved with an HOA management company will have an experienced manager to act as the community’s primary contact. An HOA manager will be an expert in community management and have an idea of how to navigate through any situation that a community may encounter through proper means of communication. A well-developed HOA management team will be able to provide easily accessible support as well as:

Schedule and attend board meetings
Provide monthly management reports
Uniformly enforce the rules and regulations of the community
Guide the board through preparing an annual budget
Respond to homeowner inquiries in a timely manner

Accounts Receivable Management

A professional HOA management company will be very well-versed in collecting on delinquent accounts. They’ll be up-to-date on state law regarding collections and ensure that the notices sent to delinquent owners are compliant with those requirements. Debt management with an HOA management company involves:

Billing
Reporting delinquent accounts and updates to the board
Sending Delinquent notices at the board’s direction
Initiating legal action for collection of funds according to the board’s directives and policies
Working with the association’s attorney when coordinating legal action

Site Management

Site management is an extremely important piece of the property management puzzle. By neglecting to follow the rules of the association, home values run the chance of decreasing and the community, in general, could be viewed in a negative light. To combat this, the board and management company should be familiar with the rules of the association and enforce them uniformly among members.

To properly enforce your HOA’s rules, the manager should be familiar with the association via regular on-site visits. Tasks during an on-site visit include:

Check on maintenance issues
Inspect for rule violations
Coordination of various Board-approved actions
Ensure that lawn care, pool cleaning, and other vendor tasks are completed based on the contracted specifications.

Accounting Services

Accuracy with community finances and the HOA budget can be a complicated and involved situation. Your HOA management company will have the experience to handle the complications of community finances. A well-versed HOA management firm will be able to:

Manage bank accounts for the community
Accurately estimate maintenance costs
Review monthly billing for community dues and assessments
Provide detailed record-keeping on all accounts payable and accounts receivable
Create monthly financial statements in a timely manner
Provide guidance for long-term funding for the community and board

Where Do the Homeowners Come into Play?

The responsibilities of the homeowner are quite simple. Aside from paying dues on time, homeowners and tenants really need to focus on the basics:

Following association rules
Picking up after your pets
Keeping the shared areas clean
Putting trash and recyclables in the proper bins
Avoiding vandalism and littering

If homeowners, HOA boards, and property managers can get on the same page, recognize their responsibilities and work together, then the community is bound to continue moving on the uptick.

Now that you know what an HOA management company does, here are 5 misconceptions about HOA management associations.

Goodwin & Company Inc. will be the Professional HOA Management Company Your Community Needs

We are a family business that has been a leader in the industry since 1991. Goodwin & Company can provide services to an association of any size and will help you find the right ways to provide the specific needs that your community desires. We offer management services for HOA management, condo property management, developer-managed communities, and capital project coordination. Contact us today to find out about our specific services and how we can make your community the best that it can be.