What Does An HOA Management Company Do?

What Does An hoa management company do?

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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.

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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.  

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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.