Help: New HOA and thinking of Self-Managing

We recently took over our HOA and after looking at the budget decided that we could not afford a management company. Had we kept them we would have been in the red very quickly.

Now we are left with running this and have little if any experience between the three of us.

So...HELP. We are meeting tonight to discuss the budget and collecting dues for this year. Any suggestions on running this ourselves or have we made a mistake in firing the management company?

I think you made a huge mistake in firing your MC before you became capable of running the organization yourselves.

Before firing the manager you should have studied the financials to see where the money was going, and why you are having a shortfall. Maybe it would have meant having to raise the dues assessments to cover all the costs.

Now you still have to study the financials and look back through a couple of years of invoices to see how the money has been spent. Usually there is a lot of money wasted because board members don't inspect to see that work was performed properly. There are many ways for money to be wasted if no one is watching the store, and treating the money as if it were their own.

Now you're faced with learning while you're doing, unless you can convince the MC to step back in.

When our HOA was turned over to the homeowners, the first thing the 3 board members did was remove the management company. Then they decided they couldn't manage with just the three of them and added two more board members. The board concentrated on ACC violations and that type of stuff rather than the financial future of the association. The first thought is to save money by removing the management company.

Our president apparently worked for a management company that managed condo's and after three years of trying to self-manage, they hired her management company to manage our HOA. This is a management company who said we did not need a reserve study or reserve fund (among other bad advice and practices). I became a board member as I didn't like the way the neighborhood was headed. I dealt with this management company for a short time until we hired another in which we have been using for about five years.

HOA's can be self-managed but you need the volunteers and know-how to do it. Given that your board has little or no experience, I would have kept them on until the board learned more and had a better comfort level with operating an HOA. Another issue will be keeping and recruiting volunteers. This is tough. A few do so much that they get burned out, some political crap will take place and deter current board members or future volunteers.

On another note, developers are notorious for implementing annual assessments that barely cover operating costs. They want low dues in order to attract buyers. The developer could care less what happens once they are out of there. The developer hasn't gotten a reserve study and you can bet that they didn't include reserve funds in their annual assessment. I highly recommend that you have a reserve study prepared so that you can start a reserve fund and not have to 'catch up' down the road.

There are two types of management you can go with, full management or accounting & legal management. With the lack of volunteers, we find full management the best route not only for accounting and legal, but also in the ACC violation process. When you are a board member and send letters and apply liens to homes, people take it personally. With a third party doing all of this, their seems to be less tension and accusations. Our law firm offers a quarterly newsleter to their clients as well as an annual HOA law seminar. I can contact them directly for advice on issues. The management company collects data so that the board can make informed decisions. They also offer advice and ideas due to the experience they have in the industry. The board is still responsible for making decisions, the management company is a tool in assisting the board in the operations of the association.

Good luck in self-managing!

While researching management companies and sending out RFP's, we were asked if we wanted full management or accounting/legal only. Our management company does all of our accounting and we also have a law firm on retainer who works directly with our management company on collections and other legal matters. While we have full management, many companies offered the accounting & legal service only.

Roger, regarding the newsletter published by the law firm, you had asked me this before. I write the newsletter for the association, the law firm we use publishes a quarterly newsletter which goes out to retainer clients (which are management companies and board members of the HOA's they represent). It deals with various laws & issues related to operating the HOA/POA and Condo associations and is very imformative to board members...it does not go to homeowners.