Cost of Changing Property Management Company

Started by MichaelB32 • 14 replies • 1117 views

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MichaelB32 (California)
Posts: 141

Posted:

Our Management Company is becoming terrible to work with. But changing companies has our Board believing it would cost the HOA $10,000 to transfer funds and all our stuff. Is this true? Do Management companies actually charge to transfer accounts and with our Association having 180 members that works out to $56 a unit to use a new Management Company. What were transfer cost for other HOA. We are in California.

Michael Barto
[email protected]

RichardP13 (California)
Posts: 3,868

Posted:

That is the biggest load of BS I have ever heard of. Wouldn't I love to make $56.00 a unit on a transfer.

The most I have ever seen in a contract was 50% of the monthly fee to setup the account one time only. So if the monthly management fee was $3000.00, then that would amount to $1500.00 or just over $8.00 a unit.

The biggest problem is transferring of the association records. I am involved in a transition right now where I have to take a MC to court to release an association records. The MC is one that I used to work for and is owned by an HOA attorney.

MarkM19 (Texas)
Posts: 1,459

Posted:

Michael,
I think they are giving you a line of bull. I am sure this is not the first or the last time this will happen if you let it. Making the move is not that big of a deal for the Board. It can be a little bit of a pain for the HO’s that have Bill Pay Online as they will all have to change the bank to the new MC Bank. The new MC will need to waive late fees for a few months while this gets worked out. I would also ask them about late fees. Who gets the fees and how much do they charge? The Company we use charges $10.00 for every late and they take those fees right of the top of the dues collected. In our case that meant about $500.00 in additional income for the MC. Next time I would try and negotiate how and when they get paid for late fees. The other fee that they need to be asked about is their Transfer Fees. I hear it is typical for MCs to charge $750.00 per home sold in Ca. I personally thing this is a Hugh Junk fee and would try and negotiate if possible. I have had a few MCs say that it takes a lot of work to do the research and send the CC&Rs and By Laws. Not sure how much turnover you have in your HOA but 5 Sales a month and they double their Contracted rate for Management. I know it does not come out of the HOAs pocket, but it can slow sales in HOAs IMO. I would also ask questions about response times for emails from the Board. They all claim to do a good job, but I have found that all PMs are given more properties then they can handle and your service suffers. Make sure you find out how many other properties your Manager will have and get a chance to meet them. IMO a good property manager needs to be very detailed and meticulous. Most boards have one or two members that watch things at best. If the PM is not good the Board won’t look good.

After being on our Board for 8 years I have seen enough to write a book on the subject.

KerryL1 (California)
Posts: 14,550

Posted:

Are you on the Board, Michael? As I recall, you aren't. But you can still read the contract to see what could happen if your Board fires your MC.

I don't remember the previous MC charging us anything when we dumped them, but it was 11 years ago and I was brand new on the Board. I do think I remember we paid the old and new firm both for one month because the Board that fired our old firm wanted to get them off our premises fast.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By MarkM19 on 12/14/2017 8:11 AM
Michael,
I think they are giving you a line of bull. I am sure this is not the first or the last time this will happen if you let it. Making the move is not that big of a deal for the Board. It can be a little bit of a pain for the HO’s that have Bill Pay Online as they will all have to change the bank to the new MC Bank. The new MC will need to waive late fees for a few months while this gets worked out. I would also ask them about late fees. Who gets the fees and how much do they charge? The Company we use charges $10.00 for every late and they take those fees right of the top of the dues collected. In our case that meant about $500.00 in additional income for the MC. Next time I would try and negotiate how and when they get paid for late fees. The other fee that they need to be asked about is their Transfer Fees. I hear it is typical for MCs to charge $750.00 per home sold in Ca. I personally thing this is a Hugh Junk fee and would try and negotiate if possible. I have had a few MCs say that it takes a lot of work to do the research and send the CC&Rs and By Laws. Not sure how much turnover you have in your HOA but 5 Sales a month and they double their Contracted rate for Management. I know it does not come out of the HOAs pocket, but it can slow sales in HOAs IMO. I would also ask questions about response times for emails from the Board. They all claim to do a good job, but I have found that all PMs are given more properties then they can handle and your service suffers. Make sure you find out how many other properties your Manager will have and get a chance to meet them. IMO a good property manager needs to be very detailed and meticulous. Most boards have one or two members that watch things at best. If the PM is not good the Board won’t look good.

After being on our Board for 8 years I have seen enough to write a book on the subject.

To clarify, MC's don't charge $750.00 for transfer fees, that would be the charge for a complete RUSH escrow package. Transfer fees will vary. I have seen them as high as $350.00. There is a consider amount of work that has be done and MAINTAINED. I spend two weeks in December updating all escrow packages. There is a lot more involved than emailing the CCRs and Bylaws, a lot more. Once I get an escrow order, I can have it prepared in just 5 minutes, and it doesn't slow down the sell of homes, actually the process is more efficient. That would be every MC's dream having 5 sell per month. Hell, for that I would managed the community for free.

In regards to late fees, my policy has always been to collect those only after the homeowner pays. That also goes for any collections efforts we may get involved with, such as pre-liens and liens. Why is this important? What if the Board is trying to collect from a delinquent homeowner and they will pay IF the late fees are waived. You want to settle, but the association has already lost that money and MC's aren't going to give back what has already been collected. Under my policy, the HOA can negotiate without worrying about recoup losses.

MichaelB32 (California)
Posts: 141

Posted:

Answer 1: I am not on the Board, but when I was on the Board in 2013 when we changed our management companies and I do not remember any outrages cost to do it.

Question: I do not understand why we are getting into Escrow costs with the Management Company. We are not transferring any deeds. But if this makes sense, our condos are on Lease land and members are sub-leaser to another property management company which is not the HOA management company that we currently use. Do they have to get involved?

Also, this Escrow cost is only for recent sold properties. Currently we have only one in Escrow. Not all the properties?

Michael Barto
[email protected]

BarbaraT1 (Texas)
Posts: 821

Posted:

There can be some costs associated with changing management companies if your current contract has a penalty for early cancellation (paying out the term of the contract, paying an early termination fee). Some companies also charge an "offboarding" fee to transfer your files to the new company, but that's not going to be $10,000. The new management company may have a one time setup fee, but you can always ask for that to be waived during the contract negotiations.

What you mainly experience when changing companies is 60-90 days of diminished productivity during the transfer. But if things are that bad with your current company, it's worth it.

RichardP13 (California)
Posts: 3,868

Posted:

Michael

What I believe is doing is trying to scare the membership with the transition cost to keep the status quo. Another MC may not play ball with the current Board, IF there are issues that a new MC is not comfortable. It's not all dollars and sense.

In regards to escrow costs, those have no bearing on who hold a sub title to the properties, these have to do with membership the HOA itself.

GenoS (Florida)
Posts: 4,276

Posted:

I don't understand how any MC can claim they are entitled to any late fees. The money that's not paid on time is owed to the association, and they're the only ones entitled to any late fees since they're the ones who suffered the harm from not being paid on time.

Is it common for MCs to skim off the top of late fees? That sounds like a scam to me. And if it's somehow a legal scam, that's even worse.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By GenoS on 12/15/2017 1:06 AM
I don't understand how any MC can claim they are entitled to any late fees. The money that's not paid on time is owed to the association, and they're the only ones entitled to any late fees since they're the ones who suffered the harm from not being paid on time.

Is it common for MCs to skim off the top of late fees? That sounds like a scam to me. And if it's somehow a legal scam, that's even worse.

WOW...REALLY...A SCAM

First, the language is in the agreement, and how it is paid, either upfront or when the homeowner pays. Who does the collection. Who sends out the letters?

MarkM19 (Texas)
Posts: 1,459

Posted:

Richard,
Your last comment makes my point. All of this is in the contract and that is why it is extremely important to read the contract and understand the areas that need to be negotiated. This is what the board should do when looking into making a change to a new MC. Once it is signed your home owners will pay the fees and have no recourse.

On my last closing statement I paid the following.

$400.00 Document fee from HOA
$355.00 HOA transfer fee

$755.00 total to my HOA for the Sale of this home.

RichardP13 (California)
Posts: 3,868

Posted:

I am sure that HOA's are capable, on their own, to handle California's escrow process with all the required disclosures.

GenoS (Florida)
Posts: 4,276

Posted:

Quote:

Posted By RichardP13 on 12/15/2017 6:59 AM

WOW...REALLY...A SCAM

First, the language is in the agreement, and how it is paid, either upfront or when the homeowner pays. Who does the collection. Who sends out the letters?

The only party entitled to the late fees is the association. The agreement should spell out who does the collections and who sends out the letters. Keeping some or all of any late fees is probably a negotiable item, fine, but I also see there's no actual industry-wide standard for doing so.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By GenoS on 12/16/2017 6:42 PM

Posted By RichardP13 on 12/15/2017 6:59 AM

WOW...REALLY...A SCAM

First, the language is in the agreement, and how it is paid, either upfront or when the homeowner pays. Who does the collection. Who sends out the letters?

SORRY, you are wrong.

TimB4 (Tennessee)
Posts: 21,061

Posted:

Anyone who has dealt with a collection effort will know that it takes time, money for letters, and energy.

As Treasurer, I send out over 100 letters per year to members who are late or short in their payments.

If I was being paid to do this, I would expect compensation for that extra time and cost.
An MC would expect the same thing.

How much they are compensated would be within the contract.

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