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DwightT (Idaho)
Posts: 664
Posted:
Hello all -

I'm the President of a fairly new HOA. We took over from the developer a year ago and hired a management company who started effective March 1. Since then we have been very disappointed with the performance of this MC. Among other things, when we brought them on they promised us that they would take all of our various documents, scan them in, and make them available to Board members over the web. So we gave them our stack of documents (including ACC approvals and infraction letters from while the developer was running the HOA) and waited for web access.

After several months of not getting access, the MC finally told us that because of licensing restrictions from the Microsoft database they are using, they wouldn't be able to give us the promised access. Instead they gave me a CD with the document images. When I looked through it, I found that a lot of documents were missing (including my own ACC approvals). When I questioned the MC about the missing documents, they told me that they no longer had the documents that I had given them. We managed to get duplicate copies from the developer, but during all of this we had had several problems with homeowners when we asked them to submit ACC requests for things that had already been approved (but we no longer had the documentation for). To top it off, the MC has now informed us that they don't want to be bothered with scanning infraction letters. Instead they want our local Neighborhood Manager to hold onto the letters until the issue is resolved, then dispose of them.

We had our HOA meeting last night and we had a lot of homeowners who were angry with the Board because of issues with the MC. The two incumbents who were running managed to hold onto their seats, but the Board has basically decided that we need to replace the MC.

Our contract with the current one states that we can terminate the agreement with a 90-day written notice. My concern about that is that they bill us monthly based on how much revenue they collect that month. With annual dues coming up next month, that means that the bulk of our income will be coming in while this MC is still collecting fees. Because of the documentation issues, would it be possible instead to dismiss them for cause effective immediately? Even if we can't get a new MC in place for a month or two, I think that would be preferable to letting them continue.

/dwight
RogerB (Colorado)
Posts: 5,067
Posted:
Dwight, it may not be easy to terminate for cause. Your Board could consider giving notice immediately and deferring payment of the annual dues until after termination. In future management agreements I suggest you consider agreeing only to a 30 day termination clause with termination by either party without cause. Also, it is a poor idea to establish the management fee based on the amount of revenue collected.
DwightT (Idaho)
Posts: 664
Posted:
Posted By RogerB on 12/13/2006 8:12 PM

Dwight, it may not be easy to terminate for cause. Your Board could consider giving notice immediately and deferring payment of the annual dues until after termination. In future management agreements I suggest you consider agreeing only to a 30 day termination clause with termination by either party without cause. Also, it is a poor idea to establish the management fee based on the amount of revenue collected.


Oh I most definitely agree about the fee structure being a poor idea. We were all new at this last year, and managed to miss that aspect. I've received a couple of bids from potential replacement companies, and they both have flat monthly rates with specified schedules for any increases. Makes much more sense to me.

I've thought about the idea of telling homeowners to defer payments. It will take a little leg-work (313 homes) and will probably raise a few eyebrows since we didn't discuss replacing the MC at the HOA meeting last night (for now the Board is just taking the blame for problems until we get this cleaned up). But it should be mostly possible except for out-of-state owners. But would there be a possibility of problems since the contract states that the MC is supposed to collect dues, and now we would be telling homeowners not to pay them?

Thanks for the response.

/dwight
RogerB (Colorado)
Posts: 5,067
Posted:
Dwight, if your Board has the authority to change from paying annually to paying quarterly, and if there is still sufficient time to have the management company notify the homeowners of this change, it could be considered. But you need to consider any additional costs for the notification and the confusion. Also, a management company bases their monthly cost partially on the time involved and quarterly payments take more time than annual.
DwightT (Idaho)
Posts: 664
Posted:
Our dues are supposed to be payed annually. When the developer was running the HOA, they let people pay on just about any schedule - annual, bi-annual, quarterly, monthly. The MC wasn't too thrilled about this when we took over, both for the reasons that you state plus the confusion of trying to track all the different schedules. To do away with the confusion and the costs, at the HOA meeting this year we announced that there would only be two choices from now on: annual or bi-annual. If we now turned around and announced that we wanted to go to quarterly payments, I think people would have new reasons to get upset with us.

I'll be calling the MC on Monday to let them know what the decision is and to see if we can work something out. Hopefully we can just end this without any animosity.

Thanks for the input.

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