Turning an HOA completely over to management company

Hello all,

I am new to this web site, but not to HOA's. I've searched the threads but haven't found an answer to my question, so here's some background.

I live in a community of 40 condominiums which were converted from apartments. In 2000, the developer turned the community over to a new volunteer board, consisting of five homeowners as set forth in our community Bylaws. For the first 8 years, we experienced the usual problems that you see in HOA's - dogs off leash, people hogging up parking spaces, people not taking their garbage cans in, and so on. There has also been the ongoing difficulty getting people to step up to volunteer for the board, and keeping five positions filled has been an extreme challenge for our small community.

To alleviate some of the burden for the few people who were actually willing to volunteer, we switched from monthly to quarterly HOA meetings plus an Annual in 2005. In between meetings, the board conducts business via email, and this business is reviewed under "old business" at the next quarterly meeting. Minutes are published and mailed to the other homeowners after every single meeting, and we've recently started publishing them to a web site, too. We rarely get any homeowners attending meetings, except for the Annual and usually only a small handful at that.

In 2008, a homeowner sent out a letter to everyone in the HOA accusing the board of all kinds of things. He had never talked to any of us, but had apparently talked to a disgruntled former board member (we have no idea who this is). We immediately called a "community roundtable" meeting that had pretty good attendance. He aired his "grievances" but none of the homeowners seemed to share them. He has since sent out several more newsletters that have grown increasingly hostile. In his most recent letter, he has named board members and accused us of "lawlessness". He has made threats of lawsuits and reminded us that we can go to "jail" - I'm not sure what for, because we have done nothing wrong.

Our Annual Meeting is tonight. This angry homeowner is running for one of the three expiring positions. He will not get on, however, because most of the homeowners have already assigned their proxies to be voted by the board. Two board members have agreed to re-volunteer to get us through the transition, and we have one new homeowner who is volunteering. When this angry homeowner doesn't get what he wants, we fear what his next actions will be. Even worse, it's going to be more difficult than ever to get anyone to step up, and who can blame them? It's hard enough to be a volunteer Board member as it is, but when you have someone calling you a criminal and generally making your life miserable?

To remedy this, we've considering disbanding our volunteer board of directors and handing over 100% of the community management to a management company. Our Bylaws are somewhat vague on this issue - they assume that we will always have five directors managing the affairs of the association, but I just don't see this happening.

My question is - do any of you know of any cases where due to a lack of volunteers, an HOA will turn itself over 100% to a management company? This may be our only option as this person's actions have added to existing board burnout and discouraged anyone new from stepping up ...

Thanks in advance for any words of advice - I am here to learn.

I agree with JON..........noo question.

It may be a little late in the game but you should avail yourselve to the links provided on this page and get some idea of how to conduct a turnover, it can be complicated, it may be filled with potholes, their is opportunity to do damage and you could find yourself locked into a bad situation. It sounds to me as you need to learn more about what should go on and this step to turn control over to anyone is a sure step to didaster, maybe not now or next year, but it will come, unless you all are completely innocent and fall on a pillow. Turn-over is hard work and long hours learning, teaching and then doing.....slow...slow.

There was a double posting of this question, and I posted this answer on the other one.

Having a management company handle the day to day operations doesn't mean you are turning yourself over 100% to a mgmt.company. You will still have your board. The board is there to establish policy according to your CC&Rs and to provide oversight. The mgmt. company doesn't replace the board. It is directed by the board. There have been some good posts on this site about the roles of a management company.

As others have stated you need a Board to direct the Management Company, because no business can be conducted without a Board. Check your CC&R’s and while it may allow you to hire an MC to assist with the day to day operation there is no provision for the BOD to abrogate its authority to one. Management companies have no independent authority to oversee associations. Managers can try to persuade owners to volunteer, but managers have no authority to appoint directors. A reputable MC wouldn’t undertake such a contract as they could face potential liability.

Also I would be willing to bet your state corporations code requires a Board for the corporation to function. It will be phrased something like this:

Each corporation shall have a board of directors, the activities and affairs of a corporation shall be conducted and all corporate powers shall be exercised by or under the direction of the board. The activities and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.

Without a board, an association cannot conduct business, which means insurance coverage will lapse, maintenance ceases, rules enforcement ends, the association's corporate status lapses and lawsuits cannot be answered. This exposes each owner to potential liability. Resignations by all directors without appointing replacements may also be a breach of the resigning directors' fiduciary duties.

If you truly want to turn your Association over to someone else to run; one or more members can petition the state court to appoint a third party (a receiver or custodian) to manage the association. The receiver would have the power to run the association, including the power to assess the membership for all costs needed to pay for operations; which would include their salary, usually set by the court. The downside is that there are no restrictions on the size or frequency of assessments imposed by the receiver. The membership would have no say in what services were provided, what was repaired when or how much is paid for operations and repairs. All of that would be in the hands of the receiver.