How to Run an HOA Without a Management Company
Millions of Americans across the country live in HOA communities, and each one looks different. Associations can vary greatly from the number of homes they encompass to the types of amenities available. Another key differentiator is that some are self-managed HOAs while others employ the help of a property management company. But regardless of the structure, they all have various day-to-day operations that must be fulfilled, rules and regulations that must be enforced, and decisions that must be made. This can be a significant amount of responsibility.
Kuester Management Group partners with homeowners associations throughout the Carolinas, including Charlotte NC, Huntersville NC, Wilmington NC, Myrtle Beach SC, and Fort Mill SC. A professional management company can offer a wealth of knowledge and support, handling a wide range of activities for the association and allowing the board to focus on more pressing issues that cannot be delegated. However, there are many associations that choose to be self-managed and take on these responsibilities themselves. Here are some considerations to keep in mind when running an HOA without a management company.
Tips for Running a Self-Managed HOA
There is no rule that says a homeowners association must hire a professional management company. While there are many benefits to having this type of partnership, the community may also choose to run the association on their own. In doing so, the following are some key steps to take.
Build a Strong Board
The board of directors is at the helm of running the association, so elect a team with diverse knowledge and experience. Seek out homeowners with varied backgrounds such as business, management, finance, accounting, communications, or law. This will give you a solid foundation, and each person will bring valuable insights and expertise. Ultimately the members vote for who sits on the board, so vet everyone's qualifications and let candidates present why they would a good fit.
It is also important for board members to have effective soft skills as well, including communication, organization, time management, and conflict resolution. Generally, board members have full-time jobs on top of this volunteer role, so they need to be able to balance priorities and obligations.
Put the Proper Processes in Place
Organization is paramount for self-managed HOAs. The board is accountable for things such as:
These are just a few of the daily tasks these community leaders face. It is important for the board to establish clear roles and responsibilities so that nothing is overlooked. The governing documents may specify how certain issues are handled, but the board should also put workflows and procedures in place. This can keep things running more smoothly and efficiently while providing consistency. The HOA may want to explore different software systems to help automatic different processes, track projects, and help the board stay organized.
Implement Accurate Financial Management
Financial management is a major component in running an HOA. There are many expenses involved in operating an association, from utilities and insurance to maintenance and landscaping. The board must ensure that it not only has the funds to cover these expenses, but that this money is properly managed and accounted for.
Keeping detailed financial records and tracking all incoming and outgoing funds is a must. This is not only necessary for auditing purposes and transparency, but also for helping the board develop its budget and allocate funds appropriately. There are also taxes that must be filed and paid. While a good accounting software system can help, the board of directors may also want to work with a financial professional to ensure everything is legally compliant and done correctly.
Uphold the Governing Documents
In a self-managed HOA, the board is also responsible for having in-depth knowledge of the governing documents and how they influence decision making. Everything the board does must be in accordance with what these documents state. In addition, any local, state, or federal laws take precedence over the governing documents, so leadership must stay up to date on relevant legal standards as well.
Rule enforcement falls under this umbrella too, as homeowners are all held to the same rules and expectations. The HOA board must enforce policies fairly and consistently and be on the lookout for any violations. If infractions occur, homeowners must be notified following the proper procedures.
Know When to Ask for Help
It is impossible for board members to know absolutely everything about running an HOA. There are certainly times where questions will arise that are outside of leadership's scope of knowledge or experience. While they can do research and try to find the answer or correct way to do something, knowing when to seek professional help is advantageous.
The last thing the HOA wants is to find itself faced with legal issues. Even self-managed HOAs can benefit from working without outside providers including:
Their professional guidance and insight can help the board make more informed decisions. For instance, an accounting firm may manage the books, but the HOA is still responsible for reviewing financial statements, creating the budget, and approving any spending. And working with legal counsel can ensure that any decisions made to not open the association up to liability or potential lawsuits. A lawyer can also assist with navigating legal concerns.
Benefits and Risks of Being Self-Managed
There are both benefits and risks associated with choosing to run an HOA without a management company.
Some benefits include:
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Homeowners choose a structure and processes that work for them. There is not a management company telling them how things should be done. In turn, members may feel a greater sense of ownership and involvement.
The cost savings potential is huge for many HOAs, especially if they have a limited budget. HOA management companies can be a significant upfront investment depending on the level of services provided. Instead, this money goes directly toward the needs of the association and benefits its members.
Since all questions, concerns, and complaints go directly to the board, they may be addressed more quickly. However, this also depends on the availability of the board members and the processes they have in place for handling various problems. A positive is that the board stays abreast of everything going on.
Some risks of being self-managed include:
Since all day-to-day operations and any decisions fall directly to the board, that can make the role very demanding and time consuming. Board members must balance this with other personal and professional obligations while still ensuring that matter are addressed in a timely manner. A professional management company can help alleviate some of that burden by managing administrative tasks, homeowner questions, rule enforcement, dues collection, vendor management, and much more.
Board members do not necessarily have a strong background in all aspects of HOA operations. This can mean that decisions are being made without a full understanding of the situation or potential risks. Ongoing training and professional development is needed to build different skills. Community managers generally have a wealth of training in different areas of HOA management and a team they can call upon for additional support.
Homeowners only have so much access to vendors, suppliers, and service providers. When it comes to projects, they may not be getting the best price or quality. Property management companies, on the other hand, tend to have a vast network of resources at their disposal. They can provide recommendations to the board and help with putting together bid proposals.
Running an HOA is similar to running a business, and there are many situations that can arise that put the HOA at risk. Not fully complying with the governing documents, state or federal regulations, financial reporting requirements, and much more can create major legal headaches. Even if the error was completely unintentional, the board is responsible. Partnering with an experienced management company can help mitigate these risks.
Finding Success as a Self-Managed Community
Deciding to operate as a self-managed HOA is a big decision and one that should not be made lightly. As noted above, there are many factors to take into consideration, and homeowners should do their research to determine if it is the best option for their community. After a few years of being self-managed, some associations find that switching to a professional management company is worth the investment and enables them better meet the needs and expectations of homeowners.
Kuester Management Group is happy to answer any questions that North Carolina or South Carolina HOAs have about professional management services.
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FAQ
Does an HOA have to hire a management company?
No, there are no laws requiring homeowners associations to work with a professional management company. However, many HOAs find it to be a worthwhile investment.
What are some self-managed HOA pros and cons?
The pros and cons can vary from one association to the next depending on factors such as the size of the HOA, its budget, the knowledge and experience of board members, and how much time they have to commit to association responsibilities. Being self-managed gives members a lot of control and autonomy, but it can also come with many risks and responsibilities.
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