When it comes to deciding whether to hire an HOA management company or opt for a self-managed community model, some HOAs base their decision on the cost factor. On a spreadsheet, the self-managed community appears to save money, which means not having to change assessment costs. In reality, this decision could be short-sighted, especially if the comparison does not look at the long-term cost implications related to the challenges and risks of self-managing a community.
Here are other factors to consider before leaping into community self-management:
More than likely, your community does not have a Board of Directors with one or more members who happen to make a living as a lawyer. Without any legal guidance, a self-governed community may not even realize they are breaking a law or infringing on a resident’s rights. The ongoing changes to mandates and laws during the recent pandemic illustrate just how complex this responsibility can become.
This means being aware of such things as covenants and bylaws, reserve studies, insurance coverage, and more. It’s also important to understand and comply with federal, state, and local laws and mandates. Without that legal expertise, you may be subjecting the community to unnecessary risk, including fines and lawsuits.
Beyond the legal expertise, a diverse amount of knowledge and skills are needed to optimize efficiency, fiscal success, accounting and data security, and resident satisfaction. This includes capabilities tied to management, accounting and finance, vendor management, property management, training, communications, and negotiation. These are just some of the areas of community management where it helps to have residents with a certain skill set and knowledge base.
For example, the association treasurer must understand HOA financial reports and how the collections process works. Anyone who wants to help out on the landscape committee needs the background to effectively select and oversee a gardener or landscape contractor for the community. The same goes with all the other roles that are common in an HOA setting.
Today, our calendars are filled with professional and personal commitments, which does not leave much time for the number of volunteers that a community needs to run smoothly. There are decisions and actions that need constant attention with not enough people to cover all the tasks. Even with a management company in place, it can be tough to cover all the committees and events that a community may want or need.
The larger the HOA community in terms of physical size, number of residents, budget total, and types of amenities, the more volunteers are needed to oversee everything. Find out if there is enough willing volunteers to tackle such a formidable task to handle things like entrance gates, brush clearing, private roads, lakes, clubhouses, and parks.
There is a very small group of people willing to take on conflict resolution let alone who know how to leverage it in a way that diffuses the tension and restores harmony in a community. The last few years have seen a rise in the level of frustration people are feeling about their health, mandates, inflation, and other dramatic changes they cannot control.
When it comes to being the person who must talk to their neighbors about the vehicles parked on their lawn, the peeling paint, or the unapproved extension on the house, it’s important to ask yourself or others in the community if anyone would take that on.
With people on edge, trying to handle disputes between neighbors or handle conversations about fines have become even more challenging. It’s important to consider if this is worth taking on and if there are residents willing to handle these heated and often emotional situations.
Community management is not something where you can just “wing it.” It’s got to have a set of controls and formal structure in place to abide by the regulations around the HOA and be effective. However, in a self-managed setting, there may not be the structure necessary to be disciplined about meeting budget preparation. This includes a bookkeeping system with the technology, processes, and team to keep up with receipts, deposits, and financial obligations.
In turn, this could lead to a funds shortage when there is an emergency repair or extra maintenance is required. This may lead to cutting further corners, which then adversely impacts the community’s appeal and home values. Essentially, if the self-managed community leaders don’t care, then this poor attitude will eventually be reflected in the community’s appearance.
Without a paycheck, many who participate in the self-management process may not feel as inclined to put in the time. With unhappy residents and an endless pile of complaints, it may feel like a thankless job for many. The result may be that the mood quickly changes from optimistic and willing to work to apathy and indifference.
There may be less accountability with self-management, which can lead to poor service experiences and an overall lack of quality in how the HOA is managed. Since they are working for a living outside of the community, other things may take precedent over responding to an issue or addressing a question from a community member.
In the self-managed setting, there’s typically no on-site manager or point of contact to reach out with an emergency or issue that needs to be addressed. This can leave the residents frustrated and put the community at risk.
It’s important to consider both the benefits of self-management and the challenges and risks involved. Every situation has to be individually assessed for what works best for fulfilling an HOA’s duties and obligations to its residents.
If the knowledge, skills, and commitment to oversee all aspects of an HOA are not there and/or the risks involved seem too significant, it’s good to start looking for a professional property management company with a proven track record of success overseeing HOA communities.
Innovia is here to help when you are ready for professional assistance in managing your HOA. Contact us to learn more about the advantages of joining forces with a co-op property management company.