HOA’s management company is not the board’s boss

Q: I am on the board of directors of a small homeowners association (less then a 100 units). We are near the end of our agreement with our property management company. The community managers started out fine, but now seem to just tell us to do what their large HOA do, and want us to select only from their list of vendors. We feel they are just dictating to us. Our prior management was very bad.

I have two questions: 1. Do you have any suggestions to get them to help us? 2. If not, do have suggestions on finding a good management company ?

A: Since we are starting a new year, perhaps it would be a good idea to meet with the management company to discuss the board’s concerns. Let the community manager know your board would like to consider other companies.

Remember, boards make decisions. Management companies are only the administrative arm of your association. They are there to carry out your decisions as long as they are within the law and your governing documents. Give your management company an opportunity to make the appropriate adjustments. If it cannot, then find another management company.

Q: I need advice on how to properly set aside excess cash from HOA assessments for a planned capital improvement project. We wish to enlarge a clubhouse, but do not want to go into debt. Let’s assume the project will cost $400,000, which could take five years of excess dues.

However, today’s owners will be paying for an asset they may not get to enjoy. Also, I’m not sure how the Internal Revenue Service would view the buildup of excess cash that is presumably outside of the reserve account.

A: I consulted with William McCarthy, a certified public accountant. Here is his response:

“The new or expanded clubhouse will be part of the common area property, therefore I believe the costs would be part of the reserve funds.

As to the issue of homeowners paying for an asset they may not get to enjoy, they could still receive some benefit, at least indirectly. Assume they move before or shortly after construction of the clubhouse. It should be a positive selling point that the association is well-funded and either has an expanded or refurbished clubhouse. Would the dues the selling homeowner paid for the construction be offset by an increased sale price? Tough to say.”

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to the Association Q&A, P.O. Box 7440, Las Vegas, Nev., 89125. Fax is 702-385-3759, email is support@hlrealty.com


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