To start, I assume:
- This is the first time you deal with hiring a Managing agent
- This agent will be an employee of a Mgt Co.
- The accounting and collection will be done under the supervision of the Mgt Co
- Your assn has at least 50 units
Finding a model contract is not the answer to your problem.
All mgt co have their own contract, with their own terms, adapted to the services they provide. Except if you are a huge association with thousand of units, the mgt co will not let you write your own contract that their lawyers would have to check and most likely to rewrite to their corporate rules.
If you really want to get some model contracts, call three Mgt Co ask them for bids and copies of their contract. When they present their bids, ask each of them what sets them apart from other Mgt Co? Why should we hire you? What you don’t do? This will give you ideas of different topics that could be important, or not, to your assn.
WHAT ARE THE KEY CONTRACT ISSUES?
This should have been your question. Here are a few that are coming to my mind. I hope that other bloggers will had to this first list”
- Do not let the agent to sign the checks alone. Require double signature: Agent+Assn.
- Ask for monthly financial reporting on an accrual basis (Many prefer cash basis. It’s less work for them but it won’t give you the info you need)
- Get a monthly report detailing the actions taken for all accounts in collection (Demand letter, lien, foreclosure…)
- Meet the managing agent to be assigned to your assn. You need to like him/her.
- How many “doors” are currently handled by that agent? What’s the max? (usually the starting agent has 4/500 doors and plenty of time for you but, before you know it, he/she has 1,000 up to 1,500 doors to handle and very little time for you)
- Start up costs. Usually there is a setup fee.
- How will you be accessing your assn admin (invoices, receivables, reports…)
- Is it on computer with a 24/7 coded access for you or your treasurer?
- If you’re unsatisfied and want to switch to a different mgt co, how, in what format, the data will be forwarded to the successor?
- Test their emergency response line. Leave an urgent message Saturday at 11:00 PM. See when the person will get back to you.
- How much do they charge per door, per month? What is included? What is not?
- If you want to hire your own maintenance, cleaning, guard, can they take care of the person’s payroll, work comp etc…What’s their mark up?
- Office expenses: what is included in the “per door” contract? How much do they charge per photocopy? For annual or budget meeting mailings? For Estoppels? Tenants’ background checks? Etc…
- How many agent’s meeting presence are include in the “per door” annually? How much they will charge for any add’l meeting?
- Do they work with “affiliated” contractors? (landscaping, cleaning, maintenance etc? Get full disclosure of any relations or relatives (The agent may have a brother in law in landscaping)
- What are their collection policies for the initial steps? Do they insist on using their own lawyer for the following steps (lien, foreclosure etc…?
- How can they meet, within five mandatory days, any owners’ requests for inspection? Where are stored the originals? Do they charge for inspections?
INCOMPLETE LIST- I HOPE THAT OTHER BLOGGERS WILL ADD TO IT
NOTE: All Mgt Co try to be competitive on their “per door” fee. So they try to make money on the “additional” charges. Ask for the list. Compare with others.
RS-FL has posted an excellent screening checklist for your consideration. One critical component I would add is that of control of your bank accounts. IMHO, the board, not the management company, should retain complete control of your HOA's reserve account. Only board members should be authorized check signers over these funds. With regard to your operating funds, their signing limit should be held at no more than $1,000 unless the disbursement is for normal, recurring expenses such as water, insurance, etc. We permit our PM to sign checks in excess of $1,000 after receiving written approval from two board members.
Maintain electronic access to your bank's on line banking module so that you can review bank account activity as much as you want. Most management company contracts I have seen are for one year in duration with month-to-month thereafter. Ensure that you have the right to terminate the contract early without penalty if your PM violates your check writing policies.
If you seek the assistance of an attorney, remember that lawyers give legal advice, not business advice. Attorneys are best qualified to advise you as to whether the language in a contract with a PM violates your state's laws. S/he will not give you "best practices" advice.
I have an article on hiring a management agent and some thoughts if you'd like to e-mail me. Some of the advice given is very good, other parts are not good or bad - there are benefits and drawbacks to any of the suggestions. I see them as recommendations, but they don't have the benefits and drawbacks. There are a few things I feel should be addressed from my over ten years experience:
- Most board members don't want to sign checks. However, all expenses should be known. Items that are contracted should be checked against the contract. Nothing should be paid that the board has not already approved.
- There are now 'niche' or specialty banks that management companies have relationships with. We have to provide our contract and we put the accounts in the association's name. The benefits the associations get are greater than often local banks can handle, and they can provide lockbox, online payment and other systems at no additional cost. Most local banks can't handle that.
- Some management companies offer low fees and try to make up the difference on the back end, but not all try to "make money" on additional charges. However, all management companies are trying to make money. No one is in business to lose money.
- Accrual and cash basis are accounting methods. Accrual is business oriented, but most people do not understand accrual and I have found that Associations and boards often think they have more money than they do when on the accrual basis than the cash basis. Cash is easy to understand for most unpaid, volunteer board members and how most people run their own checkbook. Most actually run a modified accrual basis and most smaller management companies pay the bills timely, which is almost as good as accrual. The organization (board members) have to determine what will work best for them.
CAI is for managers and association board members, but the organization began mostly for and with managers. That does not mean they are not supportive of associations, because they very much are. Without associations, there is no need for managers. It is worthwhile for board members to be members of the organization.