There is an increasing pressure on Community Associations to lower dues. So why hire a property management company and not opt, instead, for the supposed lower costs of self-management? Well, you may want to consider the following risks and rewards of such a decision:


SELF-MANAGED


  1. Not enough volunteers willing to do the work. Self-management can be done if you have a group of committed volunteers who are willing to do the work. It’s easy to find people in the neighborhood who are willing to vote in favor of self-management if it means lower dues. It’s much more difficult to find a pool of ready, willing, and able volunteers who are prepared to do what it takes to effectively manage the association. The burden of self-management and the duties and responsibilities that go along with it have to be shared among a strong core of volunteers in order for self-management to be successful. Absent that support, the work will fall on a handful of people, who will quickly burn out and realize they are being taken advantage of by neighbors who are never there when you need them to do something.
  2. Too big an infrastructure for volunteers to oversee. Self-management is fine, in theory, but what about when you have entrance ways, a lake, pavilion, playground, retention ponds, a dam, and landscaping that has to be maintained? Are you prepared to take on the day-to-day challenges of working with vendors to make sure nothing falls through the cracks? Do you have enough knowledge to maintain the resources you have in the community or are you prepared to invest in the education of your Board members to get them up to speed?
  3. Insufficient knowledge and understanding of the Covenants and Bylaws. If you choose to self-manage, the Board members need to get a thorough education on community association management to develop the know how to properly manage. You need to fundamentally understand what the Covenants and Bylaws are and how they impact your community before you can begin to self-manage.
  4. Inability to keep up with the bookkeeping. Do you have the software, filing system, and storage space to manage the receipts and deposits of the association’s funds and the timely payment of all expenses and maintenance of all association books and records? Funds should be deposited daily and checks should be written at least once a week. And a full and complete accounting system should be in place to record all transactions and make monthly financial reports available to the association. If you are self-managed, it’s vitally important to put a system of checks and balances in place and to review all bank statements and financial reports every month to fully account for all income and expenses.
  5. Failure to comply with federal, state, and local laws. Being self-managed doesn’t mean you can forget about properly incorporating, paying annual corporate registration fees, or skipping filing federal and state tax returns. You still must require your vendors to sign a W-9 tax form and you must issue 1099s to vendors at the end of the year. Overlooking the business of managing an association can be very costly if you end up paying penalties for failure to comply.
  6. Unwillingness to confront your neighbors. When your association becomes self-managed, you can no longer push off the dirty work of confronting your neighbors when their grass isn’t being mowed, their flower beds are overgrown, or they erect a backyard gazebo in violation of the Covenants. You must be prepared to send your neighbors collection letters if they fall behind in their dues and file a lien against their property if they become seriously delinquent. You have a fiduciary duty as a Board member to enforce the Covenants and act in the best interests of the association even if it means that doing so may undermine your relationship with your neighbors.
  7. Failure to put controls In place. When you are self-managed, you have a duty to protect the association’s assets in the event of theft, embezzlement, or accident. You not only need Directors' and Officer's Insurance but you should put a bond in place for everyone who has any responsibilities for handling the receipt or payment of association funds. You should also have an insurance rider that covers dishonesty, theft, and embezzlement or some other crime resulting in the loss of association funds. And if you should consider covering Board members for potential liability when they are doing the association’s business, such as attending educational seminars or driving through the neighborhood and doing property inspections. One uninsured claim against your association could wipe out any savings you have very quickly.


If you have that rare combination of committed volunteers and resources to tackle self-management notwithstanding the risks, you may reap the reward of more hands-on management and lower dues. If you don’t have what it takes to be self-managed, you want to choose a property management company that can manage your community association efficiently without breaking the bank. Here are some of the benefits of hiring a professional community association management company:


MANAGED


  1. You don’t have to be the bad guy. If you hire a professional property management company, you no longer have to worry about confronting your neighbors about their late payments, unkempt property, or architectural modifications. Your manager will be the one to field the nasty phone calls from your neighbors and will take the heat when there are complaints about Board policies. You won't have to worry about what the neighbors will think because your property manager will be the “bad guy” responsible for enforcing the Covenants.
  2. A management company Is fully insured. Let’s face it. Who wants to pay a huge insurance premium to protect against management mistakes and errors? When you hire a professional property management company, you don’t have the added expense of insuring for management mistakes or bonding Board members in the event of crime or embezzlement.
  3. A management company will fully account for all financial transactions once a month. Professional property management companies have specialized accounting and bookkeeping systems to handle all receipts and payables and to fully account for all transactions once in a month in clear, concise financial reports. A property management company maintains all the books and records and can be called upon anytime you have a request, need to see a copy of a check or have a question about an invoice. They handle a myriad of accounting transactions, such as the assessment of regular dues and late charges on past dues accounts, so you don’t have to.
  4. A management company is licensed and regulated by the state. Professional property management companies are licensed by the Community Associations Institute (CAI) and subject to state rules and regulations. They are required to maintain all books and records and must be able to furnish backup documentation in the event of any state inquiries or investigations.
  5. A management company will comply with federal, state, and local laws. Property management companies make sure the community association’s federal and state taxes are filed on time, 1099s are sent to all vendors at the end of the year, and the association is in compliance with local laws on retention ponds, lakes, and other safety regulations.
  6. A management company will oversee all vendors and property maintenance. A professional property management company will solicit new vendor bids upon request and will deal with vendors on a daily basis in the event of any concerns.


As much as homeowners complain about paying association dues and question the need for a management company, they are truly taken aback when they sit down and think about everything property management companies do for what they charge each month. Be sure you are prepared to take over these responsibilities before you decide to become self-managed.