Article on property managers behaving badly

I was going to post this in MarkR21's conversation on his property management company charging $400 in transfer/document fees to new homeowners, but I think it deserves its own conversation.

This is a story about a property management company in Colorado and how it's apparently bilked one HOA out of $29K and counting. Hope you find it useful and consider what your HOA may need to do to protect itself, even if you don't live in Colorado:

https://www.propublica.org/article/colorado-hoa-management-companies-investigation?utm_source=sailthru&utm_medium=email&utm_campaign=majorinvestigations&utm_criver

The link is listed in the post. Highlight it then right click for opening options. Or highlight it and copy it into your browser's search bar.

I just read the article. I feel so bad for all those owners and the board of trustees. However, this opened my eyes to things my community should focus on in the area of finances. I hope every board that connects with this site reads this enlightening article.
Board members work hard for their communities, and although rarely appreciated, it is a big undertaking to be willing to volunteer.
Hats off to all of you, and learn as much as possible.

Indeed. When you join a HOA board, you have to realize thisnt a block club that organizes a neighborhood clean up or block and that's the end if it. You will be managing hundreds of thousands (and sometimes millions) of dollars in association money and property and some folks don't have the temperament or skill set - or both - to do it effectively.

It's not necessarily the fault of the homeowners. All you wanted was to live in a vegan, safe, attractive community with people who wanted the same thing. You want a place where you're happy to return to at the end of the day and not deal with more drama in fighting over next years budget.

We end up depending on the property manager to do all the thinking for us "because that's their job" but don't review the contract to see exactly what their job is. And some are entirely too trusting - there has to be some oversight, which isn't the same as micromanaging, which annoys everyone.

This same scenario will also happen within a self-managed HOA, maybe more so than with a community that is managed. Why, because you have/should a board overseeing the activities. Why do associations generally hire management, because 1) the board doesn't get paid, 2) they don't want to handle the day-to-day operations, and 3) they aren't qualified.

I am currently in the process of switching HOA software providers. The new vendor has, IMHO, the platform I have ever encountered. The purpose was to provide more access to association data to both board members and homeowners alike. While you can lead one to the water, you can't make them drink. I can see what board members or homeowners access the portal and it is sad how few really do, especially board members. While I require the board to approve invoices prior to payment, it is pulling teeth to get this done on a timely basis.

Sheila says it is not necessarily the fault of the homeowners, she is wrong. It is entirely their fault. Sorry, you just can't just live in a community and not be involved. Governments have mandated this path for them, except they never put in any regulatory or oversight process. California has 60,000 HOA's and not one agency to oversee this monster. The group leading this monster, their name start with an "L". Then you have the lobbying groups. Then you have legislatures create laws, written by that "L" word, which then, only they can interpret, and we all know, no two, that "L" word can agree upon.

In the article, there was a couple of things that stood out. How does a manager not question a $29,000 invoice, and how in the hell do they have access to draw funds from reserve accounts. Then there was the funds deposited into the management company's bank account because of either bank error or software error? I find that hard to believe. Then again, why was the Board doing their die diligence? If managers have to be licensed, why not board members of self-managed communities also?

As it stands, it will only get worse before it gets better.

You should probably re-read your Bylaws, as there is no such language.

Amen and Amen!

When I said some of this wasn't necessarily the homeowners' fault, I didn't mean NONE of this was their fault. I'm always saying the property managers work at the board's direction and part of THEIR job is to review what the manager is doing. If the manager is paying the bills, the board should be reviewing monthly bank statements and checks should be matched with the appropriate bill or invoice. In our association, we require two signatures if checks exceed a certain amount, and as treasurer, I reviewed the income/expense statements, balance sheets, and bank statements and ask questions about anything I didn't understand. If the answer didn't make sense, I'd ask more questions and keep asking until I did understand it. I didn't care (and still don't) if it got on people's nerves - if I'm paying you to do something, I expect you to do it, do it correctly, and let me know if you have any questions or concerns. As some of you noted, these homeowners didn't do any of that.

So why isn't some of this necessarily their fault? Consider your board may consist of a teacher, grocery store manager, auto mechanic, retired professor and a truck driver. Everyone comes with different skills sets, which is good, but few, if any, know how to run a homeowner's association. It's not a block club, it's a non-profit organization, which means complete and accurate records have to be kept of the what, when, how, who and most importantly, the WHY of the things you do. You don't necessarily know all that when you join a HOA board, which is why I constantly talk a bout education.

I believe developers should do more with the initial homeowner board - give them some bloody education on what it'll take to run their community - I know people's opinions about CAI are mixed, but you can start there and add your own information or come up with something that's more effective. You don't learn everything you need to know in one shot and that's why continuing education of some sort is critical. One of the reasons I continue to come and post on this board is because HOA issues continue to evolve and if I ever decide to return to my board, I want to hit the ground running and be effective. If I never go back to the board, I need to understand what's behind the decisions and it's a little easier to have those discussions when you have some idea as to what the issues are.

Of course, you can't make board members (or homeowners for that matter) pay attention to what's being said or what they're given to read, let alone try some best practices and consider what works best for their community. I've seen several conversations on this board where people complain they do all the work, but their board colleagues won't do anything outside the monthly meeting. It's as if they think will have everything they need to make decisions within an hour to 90 minutes (but not much more than that, otherwise, they'll miss the second half of Monday Night Football or the final episode of Game of Thrones). We all know that's not necessarily true - if I go to a board meeting and ask a question and everyone looks dumbfounded or cops an attitude, that's a problem. Homwowners are supposed to know what's happening with the money they pay to keep the community running and if you can't or won't take it seriously, get the hell off the board and go mess up your own money.

It's true oversight by an independent agency can be helpful, but at the end of the day, this comes back to the homeowners themselves, and this is where I put some blame on the property managers. Yes, homeowners do need to pay more attention, but even if they're dumb as a bag of hammers, wont read the documents or anything else, that doesn't give the property manager, developer, association attorney or anyone else the right to rip them off. You may think you can get away with it, and maybe you can, for a while, but it's still wrong and one day, karma will stop by to say hi - and it won't end well.
In the meantime, if your clients are that addled, at least try to give them sensible options. If dealing with foolishness day after day becomes too much (because stupid and unethical people ARE a drag), it may be best to say "I can't and won't do this anymore. You want me to do all your thinking for you - nope. You want me to do this, that, and the third at the same price for the next 10 years, regardless of what the economy does and your refusal or failure to raise assessments so I can do what you ask? Double nope. You want me to help you circumvent your documents and run a sham election so YOU can stay in power? Hell no - do what you like, but I'm out. Have a nice day."

I think the press does like its clickbait that just reflects the belief of the masses. "Clickbait" being the key word.

Before googling, and I bet like all the long-time posters here, I was ready to bet that this legislation's emphasis was on limiting foreclosures spoke to prohibiting foreclosures based solely on the accumulation of fines. This prediction turns out to be correct. See https://www.denverpost.com/2022/06/07/green-valley-ranch-hoa-homeowner-protections-colorado-law-legislature/

That legislatures nationwide have frequently passed such laws (prohibiting foreclosure for only fines) is interesting to me. Are rogue boards abusing their fining authority that big a problem? Maybe. Or is it more that it's unconscionable to try to foreclose on an owner who is paying their regular assessment on time but objects to a fine and so will not pay it?

Colorado Governor Polis also vetoed a bill requiring reserve studies, among other things. From the Denver Post:

The bill would have required HOAs to conduct a reserve study every 30 years and update it every five years, finding out what their community’s liabilities are and how they’re going to pay for that maintenance and repairs before any problems become worse.

Governor Polis's reasoning for the veto?
In his veto letter, Polis said that while he agrees with parts of the bill, other parts will end up increasing HOA costs for homeowners — a point Titone refutes — so he vetoed the bill.

“Reducing housing costs for all Coloradans is one of my top priorities, and I take saving Coloradans money very seriously,” Polis wrote. “I am concerned about additional fees that homeowners, particularly those in smaller HOA communities, may face during these times of pandemic induced inflation as a result of this bill.”

More at https://www.denverpost.com/2022/06/07/green-valley-ranch-hoa-homeowner-protections-colorado-law-legislature/

I lay most of the blame on owners by far.

To me, your sympathy for those who can "pony up the funds" is curious. I always thought greater wealth usually correlates to more education. At least, that's what studies still tend to say. If one lets the wealthy off the hook when it comes to understanding the covenants and serving on boards, then doesn't this leave zero hope for holding the lower income accountable?

I am mindful as well that it is the wealthy who make their money most directly off developers, abetted by city councils, county commissions and legislatures who subscribe to the pyramid and resource-depleting scheme of "more is better." My sympathy does not overrunneth. Nothing makes my day more than a HOA owner who is an attorney or other professional suing his/her HOA/COA and losing big, be it through a pyrrhic "victory" or otherwise.

No one wealthy is talking about bailing out, say, Jackson, Mississippi with lotsa water -- except that it's all polluted water, due to the sewage treatment plant being aged and decrepit.

Savage, I know. With the water valve for agriculture in the Southwest now at a trickle, and my beloved Southwest now under siege from forest fires and flooding as well, overwhelmingly due to the more educated classes screwing things up in the name of "Greed is good," schadenfreude suits me.