Real Estate NewsAsk the HOA Expert
Question: Our budget process takes place in the fall so we will have an approved budget at least 30 days prior to the start of our fiscal year which begins in January. As it turns out, we hold our annual meeting in January and a new board will be elected then. All of our contracts expire next year. Should the current board review, renew and/or secure new bids for our contracted services as part of the budget process or wait for the new board to build its own budget?
Answer: Since the new budget will likely increase fees to owners, the current board should review and approve the next year"s budget so that the new fee structure will go into effect January 1. If the new board decides to amend the budget in some way, that"s its prerogative.
Question: Our board is negotiating a management agreement with a local property management company. Can you give me a idea of what the average cost per door is for HOA management? We"d also like to review a menu of services so we can customize our agreement to our needs.
Answer: There is no "average" cost per door. Cost of HOA management service is directly related to the scope of work. The board needs to develop a scope of work and request proposals from at least three qualified management companies. Choose only those that specialize in HOA management with references to prove it. If you are in a major metropolitan area, look for a chapter of the Community Associations Institute which often has most HOA management companies as members (see caionline.org) For assistance in preparing the scope of work, see the www.Regenesis.net Manager Issues section for Request for Management Proposal.
Question: Can a director of the board give his proxy to someone else to vote at a board meeting?
Answer: No. Proxies can and should be used for the annual owner meeting for elections and other business brought before the group for a vote but directors of the board cannot proxy their authority to someone else.
Question: Fannie Mae and Freddie Mac recently imposed new requirements for reserve studies and insurance deductible reserves on condominiums. Does that same requirement apply to non-condominium common wall homeowner associations? Our townhouse association is responsible for maintaining our building exteriors (roof, siding, paint, decks etc.) but is not a condominium.
Answer: While the new requirements should apply to all common wall HOAs which operate like condominiums (maintain the exteriors and/or insure the structures), they are currently limited to condominiums only. That said, every HOA should have and follow a properly done reserve study whether there is a requirement to do so or not. No business can be run successfully without proper planning and funding. A reserve study provides the board the mechanism to execute both. For a list of Professional Reserve Analysts, go to the website of the Association of Professional Reserve Analysts www.apra-usa.com.
Question: I read your article about the possible conflict of interest that develops with managers who are hired by HOA developers. Our HOA has a more serious problem. The manager is the developer. We now have a number of construction related problems that the developer refuses to fix. The developer/manager attends all board meetings to audit board discussions of these issues. Isn"t there a conflict of interest going on here?
Answer: This developer has an indisputable conflict of interest in serving as manager. The good news is the board has the authority to hire and fire management. Considering the likelihood of continued conflicts of interest, the sooner management is changed, the better. While it"s fairly common for developers to manage the HOA during the marketing phase of the development, once the authority is turned over to a board of homeowners, it is time to get an independent management company to do the work. Even a developer with the best of intentions cannot fairly serve two masters.
For more innovative homeowner association management strategies, see Regenesis.net.