Homeowners associations (HOAs) can be a great way to ensure that a neighborhood or community runs smoothly and remains well-maintained. However, managing an HOA can be complex and time-consuming, requiring much expertise and experience. Because an HOA board of volunteers usually runs homeowner associations (HOA), the board often does not have the expertise or knowledge to handle the managerial functions of the association. This leads many HOAs to seek the assistance of a management company responsible for handling the day-to-day operations.
But how much should an HOA pay a management company? This is a question that many HOA boards struggle with, as there are a lot of factors to consider. Understanding the HOA management fee charged by a company is critical to ensuring the association gets what they pay for and that all funds are appropriately handled.
In this article, we’ll look at the factors that can impact the HOA management fees and provide insight into what you should expect to pay for these services. Whether you’re a HOA board member of an HOA or simply curious about how HOAs operate, this article will provide valuable information you won’t want to miss.
What Are Typical HOA Management Company Services
Services vary greatly between companies, but some standard items are provided in most management company contracts. These include:
- Accounting and financial services
- Board meeting agendas
- Communications, including answering phones, responding to emails, etc.
- Completion of insurance forms and tax returns
- Drafting and amending governing documents
- Dues collection and vendor payments
- Scheduling maintenance and overseeing contractors
- Rule enforcement and violation notices.
Exactly what services the management company will provide should be outlined in detail in the contract.
Factors that Affect the Cost of HOA Management Services
The HOA management fees will vary greatly depending on the company chosen, the services they will be required to provide, and the size of the community they oversee.
1. Company Chosen
Another factor that can impact the cost of HOA management services is the company’s experience and expertise. Companies with more experience and expertise may charge more for their services, but they may also be able to provide more comprehensive and effective services.
2. Size and Location of Community
One of the most significant factors is the size of the community. The size and complexity of the community can significantly influence the cost. Larger communities require more personnel, extensive communication, and greater coordination.
Similarly, communities with complex architectural structures, multiple amenities, or diverse resident needs will demand more from the management company, leading to higher HOA management fees. For example, the HOA management fees may be higher if a pool and clubhouse require additional attention.
A community with hundreds of homes would also generate higher HOA management fee as the management company will be responsible for collecting dues and dealing with complaints.
The community’s geographical location is a critical determinant of the cost of HOA management fees. If your community is located in a city with high living expenses, you can expect the management fees to be proportionately higher. Additionally, transportation costs may increase the overall HOA management fee if the community is in a remote or difficult-to-reach area.
3. Scope of Required Services
Another factor is the level of services required. Some HOAs may require only essential services, while others may require more comprehensive services, such as financial management, legal services, and maintenance management.
The range of services required by the HOA plays a crucial role in determining the cost. Essential services like administrative support and financial management might cost less than specialized services such as legal assistance, maintenance work, or emergency response. The broader the scope of the services, the higher the HOA management fees.
4. Financial Health of the HOA
If the HOA has a history of delayed payments or financial instability, the HOA management company may consider it a risk. This could lead to increased HOA management fees to offset potential financial risks.
5. Special Projects or Initiatives
Suppose the HOA wants to undertake any special projects or initiatives, such as renovations or community events. In that case, these will require additional resources, increasing the management cost.
Fees Associated With HOA Property Management
Generally, the fees associated with HOA property management fees are grouped into three main sections:
1. Initiation management fees
Initiation fees are associated with setting up services with a new property management company. Depending on the community, these fees can range between $1,000 and $30,000. Initiation fees may include setting up accounts, onboarding the community to their systems, initial site visits, and meetings with the board members. This one-time fee is usually charged at the beginning of the contract.
2. Ongoing management fees
Ongoing management fees are the regular, typically monthly management fees for the day-to-day operations and management of the HOA. They cover administrative tasks, financial management, property maintenance, communication with residents, and community rules and regulations enforcement. Depending on the agreement, these can be a flat rate or a per-unit fee.
3. Extra services fees
These fees are charged for any services not outlined in the contract but were required by the HOA.
4. Exit Fees
These fees come into play when the contract with the property management company is terminated. They cover the cost of transitioning responsibilities back to the HOA or a new company. This might include finalizing financial reports, transferring documents and records, and assisting with the transition process.
Most HOA management company contracts are for one year, and the HOA is not recommended to agree to a longer term. It is easier to negotiate a contract with new terms annually, and the shorter term allows the HOA to choose a different company should they not be satisfied with the original management company.
HOA and Property Management Companies
HOA Management focuses on managing communities. The services typically include maintaining common areas, enforcing community rules and regulations, managing the finances of the HOA, liaising with vendors for various services, and communicating with homeowners.
On the other side, property management companies primarily manage rental properties. Services provided by property managers include marketing and renting properties, collecting rent, handling property maintenance and repairs, dealing with tenant issues, and even navigating legal matters related to the property.
An HOA manager works closely with the HOA board to ensure the smooth functioning of the community. They are responsible for executing the decisions made by the board, managing the community’s finances, overseeing the maintenance of common areas, and ensuring compliance with community rules. An HOA manager also facilitates communication between homeowners and the board.
A property managers job, in contrast to HOA, revolves around managing individual rental properties or a portfolio of rental properties for landlords or real estate investors. Their responsibilities include finding and screening tenants, handling lease agreements, collecting rents, coordinating property maintenance and repair, and resolving tenant complaints. In some cases, they might also handle eviction procedures.
The day-to-day tasks of a property manager might include advertising vacancies, arranging property viewings for potential tenants, addressing maintenance requests, collecting rent, conducting regular property inspections, and dealing with any tenant-related issues.
While there is some overlap in the roles of HOA manager and property manager, they each cater to distinct aspects of real estate management. HOA management focuses more on community governance and common areas, whereas property managers deal with individual rental properties and tenant relations.
The Average Cost of HOA Management Services
The average cost of HOA companies can vary widely depending on the above-mentioned factors. On average, typical HOA management fees range between $10 and $20 per month per unit, but it is essential to remember that the more services you need from the company, the higher the HOA management fee will be.
In general, smaller communities with basic management needs may pay smaller fees per unit per month for services. In comparison, larger communities with more complex needs may pay as much higher per unit per month.
Types of HOA Management Service Agreements
Several types of HOA management service agreements can impact the cost of services.
1. Full-service agreement
One of the most common types is the full-service agreement, which provides comprehensive services, including financial management, legal services, maintenance management, and more. Full-service agreements tend to be the most expensive, but they can also provide the most comprehensive services.
2. Partial service agreement
Another HOA management service agreement type is the partial service agreement, which provides only specific management services, such as financial management or maintenance management. Partial service agreements are less expensive than full-service agreements but may not provide comprehensive services.
3. À La Carte Services
Finally, some HOA management service companies offer à la carte services, allowing HOAs to choose specific management services as needed. This can be a cost-effective option for HOAs with specific management needs.
How to Determine the Right HOA Management Company for Your Community
When deciding on an HOA service company, it’s essential to consider several factors to ensure you’re getting the right services at the right price.
One of the first factors to consider is the experience and expertise of the company. Look for a company with a proven track record of success and experience working with communities similar to yours.
Another factor to consider is the level of services required. Determine what services your community needs and look for a HOA management company that can provide those services at a reasonable cost. Also, consider the size of your community and the location, as these factors can impact the cost of services.
It’s also important to consider the reputation of the company. Look for reviews and testimonials from other HOAs that have worked with the company to ensure they have a good reputation and provide quality services.
Finally, consider the level of communication and support provided by the company, as this can impact the overall success of your HOA.
Negotiating with HOA Management Companies
When negotiating with an HOA management company, it’s essential to understand your community’s needs and budget clearly. Be upfront about your budget and what services you require, and ask the company for a detailed breakdown of their fees and services. Don’t hesitate to negotiate prices and services to get the best deal for your community.
It’s also important to get everything in writing. Ensure that the company provides a detailed contract outlining the services, the cost, and any other important details. Don’t sign anything until you’ve read and fully understand the contract.
Questions to Ask When Hiring HOA Companies
When hiring an HOA management company, there are several questions that you should ask to ensure that you’re getting the right services at the right price. Some of these questions include:
- What services are included in your management agreement?
- How much do you charge for your services?
- Are there any additional HOA management fee or charges that you should be aware of?
- What is your experience working with communities similar to ours?
- Can you provide references or testimonials from other HOAs you’ve worked with?
- How do you handle communication with the board and community members?
- What is your process for handling maintenance requests and complaints?
- How do you handle financial management and accounting for the community?
Alternatives to Traditional HOA Companies
While traditional HOA management service companies can provide valuable services to communities, alternative options are also available.
One option is to hire an independent contractor or consultant to provide specific services, such as accounting or legal services. This can be a cost-effective option for HOAs with specific management needs.
Another option is to use technology to streamline management services. There are several software platforms available that can help HOAs manage finances, communicate with members, and handle maintenance requests. While these platforms may not provide the same comprehensive services as traditional companies, they can be a cost-effective and efficient option for smaller communities with basic management needs.
Conclusion
Managing an HOA can be complex and time-consuming, but investing in a quality management services company can help ensure everything runs smoothly and efficiently. When deciding on a company, it’s essential to consider several factors, such as the size of the community, the level of services required, and the experience and expertise of the HOA management company. Also, you need to know your budget and compare it with what HOA management companies charge.
By researching and negotiating prices and services, you can find the right management company to meet your community’s specific needs.
