Community Associations select management companies for a number of reasons.
Boards should understand the important distinction between property management and community association management. Property management is an essential component of community association management, but professional association management is designed to support the board with the added governance component that is an integral part of community associations. Choosing a professional association management company will greatly aid the board, and in fact assume many responsibilities that will help the board to govern instead of administrate.
Rinaldo Acri explains, “When a community association contracts with a professional management company, in addition to receiving the services of an assigned manager, it is also availing itself of the collective knowledge and experience of the CEO and other managers in the firm; and it is receiving the services of support personnel like bookkeepers and administrative assistants.”
Here are some reasons why a Homeowners Association Board will seek professional guidance:
- Boards of self-managed communities may decide they’d be better served by a management company than volunteers.
- The Association is coming out of developer control, some developers may not believe a professional community manager is needed. When the board assumes full control of the association from the developer, board members may find they need to take this step themselves.
- A board may believe a change is needed from an existing management company to another.
Whatever the reason, boards should understand the importance of selecting a management company and apply a well thought out selection process.
Many Association boards may hire a management company based on the wrong criteria:
- They are the cheapest – Board members should select a management company that is a right fit for the community and not be reluctant to pay for quality services. The success of the community depends on their selection.
- They pick the first company they find under the mistaken assumption that all companies are more or less the same.
- Take time to actually visit the management company and meet with staff.
This guide will help association boards understand how to identify their needs, outline those needs in a request for proposal, and identify and select the management company that best fits the association’s needs.
Pro Tip – Community association management companies are retained to:
- Preserve assets
- Maintain value
- Establish continuity
- Provide professional assistance in management, governance, and financial matters
Management companies can provide a number of services. Therefore, the association should specify exactly what it needs to ensure that companies bid on the same services. Make sure to perform an apples to apples comparisons. Make a spreadsheet of services your require.
The board should determine which services can be handled by members, outside contractors, and on-site personnel before assigning tasks to a management company.
Verify the quality of services provided by a management company by contacting current clients, former clients, the Better Business Bureau, and state real estate agencies. Do an on site interview of the management company. Do not rely on websites, powerpoint presentation, or fake reviews.
Management Company Shopping Tips:
- Before replacing a management company, the board should make every effort to resolve its concerns with its current company and allow it to correct performance or other issues. Boards should communicate their concerns and attempt to solve the problems.
- Some boards will shop for a new management company based solely or largely on cost. Board members may not understand how a firm’s fees are established, and they may believe them to be too high. While cost is one factor, the level of knowledge, skill, and specialization required to maintain a community association properly is very valuable, and associations should expect to pay, and budget for, commensurate fees.
- Sometimes an entirely new board is elected because change is needed in the association. However, the need for a “clean sweep” may not necessarily extend to the management company. A careful evaluation of association services and needs should be the basis of any decision to make a change-not change for its own sake.
- Management companies provide continuity to community operations during board and committee turnover, associations should think twice before replacing a management company. The financial and psychological costs of turnover, as well as broken continuity, should make selecting a new management company a last resort.
- Once the decision is made to select a new management company, the board needs to commit to undertaking a pragmatic and well-organized search and be prepared
to invest time in the process.
HOA Management Selection Process Guidelines:
- Create an ad hoc committee to assist the board with the selection process.
- Prepare written specifications of management services desired-a request for proposal (RFP)-and gather association documents necessary to support the RFP.
- Compile a list of management companies that would be suitable candidates, and ascertain their interest and ability to bid on the RFP.
- Mail the RFP to the management companies that expressed interest.
- Schedule times for each management company to visit the association property and times for the board to interview company representatives in their offices.
The manager who will be the lead association contact should be present during this interview.
- Interview each company’s present and former clients.
- Analyze all data and make a final selection.
- Send a letter to the firms that are not chosen, thanking them for their proposal and informing them that someone else was chosen.