Management costs increases

Started by JackB8 • 8 replies • 1821 views

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JackB8 (Virginia)
Posts: 141

Posted:

For the past 3 years, our HOA has seen management company costs increase on average 4% a year. Cost of living increases for those three past years average 1.3%. Even though the management company increases are limited to 5% a year by our covenants, It seems to me that, barring some major increase in service, which might necessitate a raise, -an increase of 2.7% above the COLA is a bit extreme. Any other associations seeing these types of increases? Thanks in advance.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By JackB8 on 08/28/2014 4:51 PM

Even though the management company increases are limited to 5% a year by our covenants,

Jack,

Did you intend to say that Assessments are limited to a 5% increase?

OR

Do your CC&Rs really specify how much of an increase a contractor (in this case, the MC) may raise their fee?

KerryL1 (California)
Posts: 14,550

Posted:

Tim asks a good question, jack. Are you sure your covenants specifically limit PM raises?

We just gave our PM a 3% raise mainly because she's done a fine job reducing our contracts' annual fees by getting bids and new vendors who are doing a good job. We've typically given between 2-1/2 - 3%

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By JackB8 on 08/28/2014 4:51 PM
For the past 3 years, our HOA has seen management company costs increase on average 4% a year. Cost of living increases for those three past years average 1.3%. Even though the management company increases are limited to 5% a year by our covenants, It seems to me that, barring some major increase in service, which might necessitate a raise, -an increase of 2.7% above the COLA is a bit extreme. Any other associations seeing these types of increases? Thanks in advance.

Do not forget that property management contracts are negotiated and other property management firms might like your business. My experience as HOA president has taught me that companies will seek 5% increases (or that neighborhood) if you assume you must pay them more, annually, for the base contract. During the Great Recession, when we were struggling, some our PM took 5% increases and a landscaper took 2%, in a negative economic growth environment. That was the trigger that may be start thinking like you, Jack.

I would say an increase above the rate of inflation (maybe not even then on certain years) should be discussed. In fact, any increase should come with a basic explanation from the company. It might be a reasonable request.

DavidW5 (North Carolina)
Posts: 565

Posted:

You should always have a statement of work and a draft RFP ready to go out to solicit bids for your contracts, including the management contract. It is always a hoot when the incumbent submits a bid well below what they are asking you to pay under the current contract.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Your letting your mgmt company run you.

You should always be looking for a better mgmt company for a better price and let them bid on the contract just like everyone else.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By DavidW5 on 08/29/2014 6:00 AM
You should always have a statement of work and a draft RFP ready to go out to solicit bids for your contracts, including the management contract.

Actually, this should be done for every contract. When our trash contract came up for renewal this year, I suggested getting bids. Our President said that since the contract has an auto renewal and there have been no problems, he motioned to simply let the contract renew. Fortunately, I had already prepared an RFP (request for proposal) as the swing vote stated that they were fine letting the contract renew, however, since the RFP was already prepared it couldn't hurt to send it out for bids.

Well, we kept our current contractor . . . at $10,000 per year less then they were charging us (as they were willing to meet a competitors bid).

So David is absolutely correct that RFPs should be written (once written they can simply be updated with dates and contact info) and ready to go for every recurring contract you have so you can bid them out at a moments notice. Learn from our example: you may think you are getting a good deal and are happy with the service but you won't really know if the price is a fair price unless you seek bids from other companies.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

This thread can close with that advice above. It's rock solid. Nice work in saving $10,000!

There is no entitlement for vendors to receive automatic fee increases.

JackB8 (Virginia)
Posts: 141

Posted:

Thank you all for your thoughts. Big help. Jack

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