Property Management Nightmare - HELP!

Hello all - I will try to keep this brief but include as many details as possible. I just became the president of our HOA board. Our complex is in financial ruins. They have not had an election in 3 and 1/2 years. We have zero reserves, owe 65K in bills, have not completed our required retrofit, have roofs that need desperately repaired that are causing several leaks, and the list goes on. We previously had a management company that only handled accounting (and poorly). Three new board members were elected, by acclamation, as we have 5 seats but only 3 people ran, and we voted to replace them and get a full management company. It has been an absolute nightmare. we have a large complex of 168 units and we have an on-site property manager. She has been working here for 12 years and is amazing, handling way more than her job description responsibilities. She is an employee of the HOA. This management company wants her hours submitted to them which is ridiculous. For years the board has approved them. This new company wants to take complete control and will not even do what the board members ask. I understand they are here to advise etc. but if we’re not talking any legal or civil code issues don’t they need to do with the board says? Example – we have two full-time maintenance personnel and they need some supplies right now like drywall, paint, etc. minor things. The management company will not give us the funds we are asking for at the moment. They want to have a meeting to discuss protocol and want a list of supplies and for what that will be used. They want every little thing inventoried. If we buy a piece of drywall they want to know the sizes used and which unit etc. We always keep the receipts of course to have on file but this is crazy. They also refused to allow our property manager to attend the board meetings which she has in the past with no issue. She even takes the minutes for us. I’ve read online that if the board is OK with this since she is an employee and we’re not discussing anything confidential like her salary for example then there’s no reason she can’t be there. Am I missing something? What exactly are the power does the management company have? Any advice would be greatly appreciated. Thanks.

"...want a list of supplies and for what that will be used. They want every little thing inventoried. If we buy a piece of drywall they want to know the sizes used and which unit etc. We always keep the receipts of course to have on file but this is crazy."

I don't see this as unreasonable and I'm surprised it was not already being done. I don't care what size the job is we always got an itemized invoice for any work. Also, their request to discuss protocols sounds very wise to me.

My guess is you guys were so poorly run and the fact that you owe money screams that some of what they are suggesting needs to be done to get you out of trouble. You did it your way and look where it got you.

I do agree with you that ultimately they work for you and not the other way around. However, it sounds like you need someone to come in and tighten things down until they can figure what the hell happened and how to prevent this going forward.

"You did it your way and look where it got you".

I've only been on the board for 8 weeks so past problems are not my fault. I inherited a huge mess because no one wanted to run. Our ratio of renters is higher than the owners on site so HO engagement is also an issue. What about giving themselves a code to the property without asking, and sending contractors without our knowledge or having our on site manager attend board meetings? How do we get them to give us funds for supplies? We can certainly inventory a list, but we need some items ASAP and they just say no. How much power do they have over the HOA board?

Thanks!

I never said meant to say that it was your fault. My takeaway from your post is that you may not have experience in HOA management or working with a property manager. Some of the things you said did not add up.

If what I am saying is true I think you would be better off taking a big breath and then schedule a meeting with them and hammer out the way things should work. You will never succeed without a good relationship with them and they have a vested interest in not getting tied to a board or community that does not know how to operate and ultimately being blamed for mismanaging their community. Their reputation is on the line and the good ones won't stand for this and will dump you in a heart beat.

I truly am trying to provide constructive feedback. I just got the impression from your post that what you would like to do is dictate how things are done and not use them for the resources that they can provide. Running an HOA is much more complicated than most people think and some of them have no idea that they and the property management company are bound to do what is in the governing docs as well as state and federal regulations.

If I was in your shoes I would schedule a meeting with the management company and invite the other two and if they don't show up then oh well. After the meeting you can report back to them with recommendations that you want to implement. If they don't want to do any work they may just end up doing whatever you say. Others here may weigh in that I am wrong with this approach. If you will be doing all the work alone I truly feel for you and I'd be looking for future leaders that are willing to get on the board and help.

I really hope things work out but if you reach a point where you know in your heart that the ship is going to sink I would bail out and protect yourself.

Thanks John.

Thanks Max - yes please!!

The management company is trying to find ways to cut costs in any way possible. You have 168 units. If you are taking in 80K per month that is $476 per month per owner. But you need $488 per month per owner to cover the costs as they exist today. You also have to build your reserves. Figure you will need to raise at least 15% so you would need to collect $94300 per month from the owners to cover operating cost and start build reserves , that works to $561 per month per owner. I am not sure what is all provided in your community but that seems like a large number. If a reserve study was done in the past, that would give you an idea of what you will actually need to raise. I would go over the books to see where you are spending the most money, figure out your priorities and everything needs to be on the table. You are in a terrible position and there are big cuts that need to be made. If there are not a lot of places to save, I would get out.

Wow, that is not good. Especially when there is so much as stake. Susan pay close attention to what Max tells you.

Hi - not sure how he got my name or the company name (that's odd), but yes, the former management company had no experience with HOAs. They are a rental property company but a former board member is friends with and used to work with the owner. After 10 years that same board member decided to resign along with the 2 other board members. The 3 new members, myself included, opted to hire a new company who is experienced in running and HOA. We have been treading near bankruptcy for over two years now. We are looking at cutting cost, but we need a large chunk of money at once. We have $65K in delinquencies that the former company did nothing about. But liens and legalities take time. We have two owners who have not paid ANY dues in two years. I don't know who I will clean up this mess. This is my first home. I have been a renter for years. I used my 401K for the down payment and had renovations done and love it, but do not have the money or resources to sell and move. It's awful.

Hi - yes, I am familiar with an SA. But in CA, if it is more than 5% of the budget, you need a quorum from the homeowners. We will NEVER get that here. HO engagement is awful. We have 67% renters on the property. We had 3 people run for 5 board seats and we had a total of 19 ballots received. We had 3 people attend the annual meeting, 2 of which had run for the board. Our record meeting attendance was 32. The most we can get without a vote is $327 x 168 units = $55K. We need an assessment of about $1700. We have zero reserves, have $65 in bills, need roofs repaired at $100K, our insurance will drop us if we don't repair the stair railings (the old board had 2 years and never fixed them) at $36K and have zero saved for the CA earthquake retrofit.

Is there anything else we can do that I'm not aware?

Thanks!

I would start to find out if there are liens on file. If not start filing them. Establish a collection policy. 6 months you lein. 1 year consider foreclosure. This will set the tone to know serious

Bankruptcy? Your HOA is a non profit. It should be collecting as much as spends on operational expenses. A reserve account is for capital repairs. Get your operating expenses under control first. Then you can do a reserve study to find out what that needs to be set at

Read your documents. The answers are in there. A MC is not an HOA member. Unless you the HOA tells them what the rules you are following and to enforce them. That should be in a contract if you want it that way. Otherwise the HOA board does the rule enforcement.

Option 1
Have you reviewed what California statutes say about "Emergency Special Assessments"? Per California Civil Code 5610, under circumstances that look an awful lot like yours, the HOA/COA can bypass the membership approval requirement. See https://www.davis-stirling.com/HOME/E/Emergency-Special-Assessments

Be strong. I recall reading about a certain Florida Condo that around 2010, literally had the building falling down. The board special assessed, foreclosed on anyone who would not pay, and made the repairs, all over around five years IIRC.

I think the better option by far is this "Emergency Special Assessment."

Option 2
Arrange for a loan.

I will look into the emergency SA - I know there are certain requirements that need to be met.
I don't think any bank on earth would give us a loan with no reserves and a negative account.
I will ask our management company to get a move on the liens, etc.

Thanks all - wish me luck!

Based on my experience, apartments converted to condo present to own special set of problems. Apartments of yesteryear were not built to the same standards as condos. Two areas that will bite your association in the butt short term, roofs and plumbing.

Can you get a loan? Depending on your financials, what plans you have to shore the financials up, yes, a loan is possible. You have one important asset, collateral. You have 168 dues paying units. One negative is the high rental.

I think the one positive aspect to having so many renters is that their landlords have greater ability to pay for a special assessment (even if it means raising the rent some 30%).

It's the state of California that has limited rent increases. It looks like 10% is the current maximum allowable rent increase. Better than nothing.

I don't have any specific help to offer, I'm sorry. But from the general perspective of "problem solving", I strongly believe that your first order of business should be assembling a prioritized list of the problems your HOA is experiencing.

(I read through the thread and rapidly become confused with all of the stuff that seems to be going on).

I wish you the best with this.

BillD

I disagree. The "unforeseen" aspect is only one category of repairs that might qualify for an emergency special assessment under the statute.

Here's the statute section (from Civil Code 5610) where I think your railings and roofs qualify:

(b) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible where a threat to personal safety on the property is discovered.

Failing roofs = leaks = = water getting where it should not (making wiring unsafe and causing mold) = threat to personal safety. Leaky roofs are a known fire hazard. Leaking water = slippery floors. More.

Failing railings = (need I explain?)

I do hear you about the problems the board is having getting "cooperation" from the manager. I hope you all can sort things out in a sit-down meeting.