Category: Articles

HOA Management Company: How to Select the Best Partner

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When it comes to HOA management, the primary qualification for any community association is trust. You absolutely must trust the company you hire to manage your homeowner’s association. But first, you need to develop a short list of qualified candidates.

Running an HOA involves managing a lot of projects and tasks. So, experience and expertise should represent the initial qualifications. After you separate the best-qualified HOA management companies from the less capable ones, you can delve deeper into finding the best match for your community association.

Your selection committee should expect to spend ample time during the evaluation process. Given what’s at stake, you don’t want to rush this important decision. Making sure you cover all your bases takes time, discipline, and effort.

Look Within Before You Look Outside

If you don’t already have a search committee in place, put one together before the evaluation process begins. The search committee can have any number of members, depending on your Association.

Before you begin your search for an HOA management company, make sure you understand exactly what your community association needs. Your committee members should each make a list of what they think are critical requirements. Then, you should compile one master requirements list based on everyone’s input.

Search for an Industry Certified Management Company

It is a best practice to consider management companies that promote staff being certified by local and national industry associations such as the Arizona Association of Community Managers (AACM) and the Community Associations Institute (CAI). These organizations were established to improve the professionalism of community management through ongoing education and proactive support.

AACM’s Certified Arizona Association Manager (CAAM®) education program provides the only Arizona-specific professional certification for Community Managers. An AACM-certified management company can instill a greater level of confidence in the management company’s qualifications. In addition, CAI offers various certifications for community management industry professionals, including the Certified Manager of Community Associations (CMCA), the Association Management Specialist (AMS) certification, and the Professional Community Association Manager (PCAM).

Finally, you’ll want to consider the company’s bonding and insurance, including liability and workers’ compensation. State laws will outline the minimum standards. Make sure to ask for a copy of all insurance certificates to confirm proper coverage.

Internal Processes for HOA Management Company

Once you establish a list of management companies meeting the minimum qualifications, you can begin looking inside each candidate to determine the best match. For example, any HOA management company you select must demonstrate stringent internal hiring practices.

Your evaluation should start with checking references. A good track record with other community associations is a good indication of how they will perform for you. You’ll also want to visit the company’s offices and the facilities they manage in person. These visits will give you a good idea of the type of services they provide to other clients and how they perform them.

Read the Fine Print

When you make your selection for a management firm, don’t skip reading all the terms of the contract.  Don’t rely on standardized contract forms. Instead, have your Association attorney review all legal documents and make changes accordingly.

It may also be a good idea to enter into an agreement for a shorter period of time. Rather than commit your community association to a multiple-year agreement, try a one-year arrangement instead. You can then fully evaluate the management company to ensure it’s a good fit for your Association. If it’s not, you won’t be locked into keeping them for a long period of time.

In addition, make sure you understand termination clauses. Your community association attorney can help finalize an agreement that’s in your best interest. A typical termination clause involves a 30-day notice.

Finally, know all the costs associated with your HOA management company’s services. Are all the fees clearly outlined in your proposal and agreement? You don’t want to find you’re paying a bunch of extra fees you didn’t know about. When you’re evaluating competitive management companies, make sure you compare apples to apples with costs.

It’s Never Too Early to Start Planning

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It is never too early in the year to start thinking about HOA budget preparation for your association. AAM begins the yearly budget preparation timeline with budget training sessions for Community Managers in August. The Association Board of Directors also plays an important role in the budget process, so we feel it is important to share a few budget questions for your consideration. August is right around the corner, so let’s get ready for budget season!

Key Questions to Consider During HOA Budget Preparation

Please consider the following during your HOA budget preparation:

  • How well is the association performing versus the current year’s budget?
  • Is operating cash flow for the association trending up or down over recent years?
  • Is the current budget meeting the expectations of homeowners?
  • Have changes in economic factors impacted the assessment level?
  • Are reserve contributions at an appropriate level to ensure long-term financial health?

Reviewing the Current Year’s Budget Performance

Before diving into a fresh budget season, it is important to compare the current year’s budgeted income and expenses versus actual financial activity while focusing on HOA budget preparation. AAM provides a month-to-date and year-to-date variance report in the monthly financial package that explains why certain income or expense activities are over or under budget. If additional details are needed, the community manager and accounting department will be happy to provide information for budget decision-making purposes.

Woman's hand holding a pen while using a calculator, finance sheet sitting under the calculator

Managing Cash Flow and Operating Expenses

Under normal circumstances, the yearly operating income and expenses of the association are fairly predictable. With that being said, there is not a lot of room for error in a zero-based budget. Planning for the worst-case scenario will help ensure adequate cash is available to cover operating expenses. Start the budget process by taking a conservative approach and make adjustments as needed during HOA budget preparation. Balance sheet information is sometimes forgotten during the budget process, so please remember to take a look at cash flow trends for the past few budget seasons. Maintaining a modest operating cushion is acceptable, and it will help the association cover any unexpected expenses that might arise from time to time. If nothing unexpected occurs, then it provides an opportunity to fund community enhancement or make an additional reserve contribution.

Aligning the Budget with Homeowner Expectations

Members of the association buy property with certain expectations in mind, and some of them are not shy about sharing feedback when those expectations are not met. As this feedback is gathered each year, there is an opportunity to make adjustments and improvements through the budget process.

Associations vary in size, design, lifestyle, amenities, and owner demographics. Some of these variables may change over time, so the budget will also evolve. If new expenses or services are being added to the budget, they should be carefully evaluated. The short and long-term impact should be considered, as well as how the association will cover the expense. Enhancements to the community covered by operating funds also impact long-term reserve planning, especially during HOA budget preparation.

Evaluating Economic Factors and Assessment Adjustments

Unfortunately, economic factors such as wages or the general cost of services may increase each year. Increases in minimum wage requirements in some areas of the country have impacted many vendors over the last few years. Each year, the Board should carefully evaluate whether an assessment increase should be approved. In most cases, large assessment increases can be avoided by implementing smaller increases at the appropriate time. This will help avoid unpleasant surprises and special assessments.

Planning for Reserve Funding and Long-Term Stability

Planning for Reserve Funding and Expenditures is essential to the association’s long-term financial health. Associations should have a Reserve Study that identifies major replaceable components. Component details include the remaining useful life of an item at the time of the study, typical life spans, and estimated future replacement costs. The study combines this data into a 30-year schedule of repair and replacement activity. Careful analysis of the yearly reserve contribution recommended in the study is important when considering how much the association should contribute to reserves as part of the annual budget and during overall HOA budget preparation. The Reserve Study should be updated as necessary, with new studies performed every three years or as the governing documents instruct.

The budget is a financial roadmap to ensure the association successfully navigates through each year of financial activity. The budget also serves as a guide for long-range strategic reserve planning, a critical aspect of HOA budget preparation. 

Selecting an Association Management Company

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Top Five Considerations for Selecting an Association Management Company

As Board members of an HOA, you recognize the time and effort typically involved in conducting a search for professional community association management. In order to help with the search and to better evaluate management company candidates, below are the top five considerations for selecting an association management company as your community management partner.

1. Communication 

Effective and prompt communication plays an important role in community management and the overall success of a community. Partnering with a management company that emphasizes and promotes a strong communication plan is crucial for selecting a community association management company. Boards and homeowners need to stay updated and informed on what is happening in their community.

A well-suited management company believes in always being there for their homeowners and Board members, treating them with the utmost courtesy and respect. They accomplish this by making themselves readily available to answer questions, solve problems, and address any issues that should arise, through email, web, telephone, or in person.

2. Innovation in Technology 

In today’s technology-driven world, a well-qualified management company will continue investing in technological solutions and service offerings that enhance both management productivity and the user experience of their Boards and homeowners when selecting a community association management company.

    Ensuring that Board members and homeowners have access to the best technology available should be a top priority of your community management company. Technology services offered should provide the Association with an array of helpful tools, adapt to the community’s specific needs, and be secure, productive, collaborative, and efficient.

    3. Client Longevity 

    A well-established management company will have an extensive portfolio of long-term client partnerships and first-rate references. A significant percentage of its current client base will have been with the company for several years. This continued partnership speaks volumes about the level of services when selecting a community association management company.

      Other factors to consider about a management company’s client base include its size and growth. Is the company’s client base growing or stagnant? When was the last time they added a new community? How many communities have they added in the past year?

      Also, the HOA should evaluate the range of associations the company serves. In other words, is the focus broad or narrow? A full range of association management would include master-planned communities, active adult communities, traditional neighborhoods, condominium properties, and more. The HOA should select a management company with experience in its community type.

      4. Qualified People

      The services of the community association management company will only be as good as the experience and expertise of the people providing them. Therefore, to deliver the highest standards, the company’s people must be highly trained and motivated. In certain positions, professional credentials are required. In particular, HOAs should evaluate the management company’s executive team, community managers, human resource department, accounting personnel, information technology department, and support staff when selecting a community association management company.

        For example, do key personnel hold college degrees and/or professional certifications/designations? Does the company promote a positive culture that drives both success and employee satisfaction?

        5. Ongoing Education 

        Continuing education and training are essential for both the community association management company’s internal staff and the HOA’s Board members. The management company must make it a priority to invest regularly in staff training for everyone involved in managing the community, as well as providing training opportunities for Board members.

          Ongoing education and training ensure that community management professionals have the skills needed to help communities succeed by keeping current on all issues, legislative updates, and best practices concerning association management. Additionally, providing training opportunities to HOA Board members helps develop the skills and knowledge necessary to effectively lead their communities and make informed decisions. Selecting a community association management company that prioritizes education is vital.

          HOA Meeting Basics

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          HOA Meeting Basics provide a foundation for running effective and efficient board meetings that support community management and homeowner engagement. From understanding quorum requirements to following proper notice protocols, these meetings are essential for making decisions, discussing key issues, and ensuring compliance with governing documents. By mastering the basics, HOA Boards can foster transparency, collaboration, and accountability in their communities.

          Table of contents

          Quorum

          A quorum is a very important issue related to board meetings. The term “quorum” refers to the minimum number of members participating to conduct business. If there are not enough members to make up the quorum, the meeting can’t be held, and actions can’t be taken. Quorum requirements are defined in your Bylaws.

          Notice for Regular Board Meetings

          Unless otherwise provided in the documents, the Arizona State Statute requires all HOA Meetings to be noticed at least 48 hours before the meeting via conspicuous posting, newsletter, or any other reasonable means as determined by the Board of Directors. However, the notice provision only applies AFTER the termination of declarant control of the association. Check your Bylaws for other possible notice provisions.

          It is also important to remember:

          • The notice must contain the time and place of the meeting.
          • Notice is not required for Emergency Meetings if action must be taken before notice can be provided.
            • The minutes of the Emergency Meeting shall state the reason necessitating the Emergency Meeting. The minutes of the Emergency Meeting shall be read and approved at the next regularly scheduled meeting of the Board.

          Additionally, it is required by statute that most topics be discussed in Open Board Meetings, such as:

          • Annual Budget
          • Assessment Increases
          • Contract Negotiations
          • Changes in Rules & Regulations
          • Financial Decisions
          • Improvements to Association Property

          Notice for Executive Session

          The membership notice requirements of an Executive Session is a new statutory requirement from 2017. Per Section C. of A.R.S. §33-1248, before entering into any closed portion of a meeting of the Board of Directors, or on notice of a closed meeting, the Board shall identify the paragraph under subsection A. of A.R.S. §33-1248 that authorizes the Board to close the meeting.

          Section A items include:

          1. Legal advice from an attorney for the Board or the Association.
          2. Pending or contemplated litigation.                                        
          3. Personal, health, and financial information about an individual member of the association, an individual employee of the association, or an individual employee of a contractor for the association.
          4. Matters relating to job performance, compensation, health records, or specific complaints against an individual employee of the association or an employee of a contractor of the association who works under the direction of the association.
          5. Discussion of a unit owner’s appeal of any violation cited or penalty imposed by the association except on request of the affected unit owner that the meeting be held in an open session.

          Meeting Minutes

          Meeting Minutes are used to record the Board’s actions, show why the association took a particular action, and preserve the Director’s voting records. It is not necessary to record word-for-word.

          Meeting Minutes Should NOT Include Proceedings of a committee Summary of guest commentsSecretary’s opinion Debate relative to a motion.Meeting Minutes Should NOT Include Proceedings of a Committee Summary of guest commentsSecretary’s opinion Debate relative to a motion.

          Agenda

          An agenda is critical to an efficient and organized meeting. It should have enough information to serve as a helpful guide but not be so overly detailed as to be unwieldy or distracting. Also, it is a statutory requirement to provide copies of the agenda to the members at the meeting. 

          • The president typically sets and reviews the agenda prior to distribution.
          • Time the meeting for the greatest efficiency and ensure the Board’s copy of the agenda refers to numbered pages within the Board packet.
          • Post the agenda on the website or in another format to encourage community involvement.
          • Template for the meeting minutes.

          Parliamentary Procedure

          Parliamentary procedures should be used to run effective meetings. This helps the minute-taker record the actions of the meeting and protects the right of the majority to decide the rights of the minority.

          • One question at a time, one speaker at a time.
          • Personal remarks are always out of order.

          Motions

          • Board members use motions to introduce business.
          • Main motions require a second.
          • The secretary should repeat the motion for accuracy.
          • Modify a motion before the Chair states it.
          • Amend the motion after the Chair states it.
          • Withdraw a motion anytime before the Chair states it
          • Consider a motion once it has both a first and a second.
          • Must give homeowners in attendance the opportunity to speak to an agenda item prior to the Board vote.
          • The motion must be made and seconded before the discussion is conducted by the Board prior to the Board vote.
          • Use a Simplified Roberts Rules of Order.
          • In most cases, the President of the Board only votes in the event of a tie.

          Here’s a simplified example of how this process might work:

          • The President calls for a motion on an agenda item, and a Board Member indicates they make a motion.
            • Example: “I make a motion to accept the bid from XYZ Landscaping to replace granite in tract C of the common areas at a cost of $5,000.00”
            • A second Board member will second the motion
            • The President will restate the motion and then call for a discussion
            • President will call for a vote: “All in favor say aye, opposed nay.”
            • The Board President will announce the results of the motion, for example, “Motion carries unanimously.” Or, “Motion fails with a vote of 2 ayes, 3 nays.”

          Tips for Running an Effective HOA Meeting

          • Be prepared – review your Board packet prior to the meeting and ask questions in advance to the Manager to be better prepared for the meeting. Board packets should be made available 3 to 5 days prior to the meeting.
          • Request the Manager to paginate Board packets.
          • Set the tone of the meeting during “Orders of the Day.”
          • Bring your Board book.
          • Provide an open forum.
          • Establish time limits (1 to 2 minutes per homeowner) for members who wish to speak.
          • Use “Request to Address the Board” forms for the open forum.
          • Limit the number of questions.
          • Use a timed agenda.

          The Role of the Board and Its Members’ Relationship to Each Other

          It is critical that the Board provide a unified front. With regard to discussions, it is essential for the individual Board members to present different views on a given subject.

          You must confront difficult issues, such as:

          • Potential Assessment Increases
          • Contract Changes
          • Homeowner Appeals
          • Enforcement Action
          • Foreclosure Action

          This may, at times, involve having heated or passionate discussions and debates. However, once the vote is taken and the majority rules, you should attempt to put personal differences aside and move forward. Most importantly, always be respectful of fellow Board members and those in attendance at the meeting.

          Dealing with Conflicts during an HOA Meeting

          To eliminate or minimize conflicts during meetings, be proactive. Set the ground rules for the meeting early on, such as that a speaker must be recognized by the chair of the meeting before speaking, the chair may limit the amount of time of those wishing to speak, the number of times they may speak, etc. Put those ground rules in writing and distribute/review them at the beginning of the meeting.

          Call any attempt to provide unsolicited input “Out of Order.” It may take several meetings to educate the members; however, remaining on task and sticking to the agenda is critical to efficient and effective Board Meetings.

          What Professional HOA Management Brings to Your Community

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          There is great assurance and value in having a professional HOA management company manage your association.  These professionals bring a lot to the table, for example:

          • Knowledge of current and changing legislature as it pertains to HOAs
          • Years of expertise and experience with a myriad of HOA situations and issues
          • Education and training for current and new board members
          • Aid in managing Board finances
          • Aid in collecting assessments
          • Creating monthly/quarterly/yearly financial reports
          • Access to necessary forms (architectural submissions, etc…)
          • Aid in communication between Board members and homeowners
          • Access to customer service and emergency numbers to help with questions and issues that may arise
          • Access to vendors
          • An expert who will watch over projects and manage their completion
          • A guiding force who will be there to answer questions and move the Board and Association in the right direction

          With an AAMs professional hoa management expertly managing your community, we aim to give you total peace of mind in knowing that your neighborhood is well cared for and simply a great place to call home.