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Ways to Determine If Property Management is Needed for HOAs


Question:

Common interest real estate developments, such as condo associations and planned residential developments, often hire property management to handle the day-to-day operation of the development. The governing board of the homeowners' association (HOA) generally selects the property manager. The property manager becomes the HOA's agent. It has defined responsibilities, and it may be held liable for its actions.

People who purchase units in a common interest residential development are known as homeowners. All of the homeowners of a development belong to the HOA for the development. So, if you buy a home in a planned residential development, you become a homeowner and a member of the HOA.

After the HOA has its first meeting and elects its first HOA board, operational control is transferred from the developer to the board. One of the first decisions that the new HOA board must make is whether or not to hire an independent property management service to handle the operation of the development.

Employing a professional property management company is a good way to of insuring the HOA's continued positive growth and the viability of the development. Whether or not the HOA's board of directors should employ some kind of property management company depends on several factors, including:

  • Size of the development
  • Cost to each housing unit for management services
  • Experience of the members of the HOA in managing the day-to-day affairs of the HOA

For larger developments (200 or more units), a business-like operation capable of handling a management situation of considerable scope is required. For medium-sized developments (75-200 units), an on-site, nonresident presence during normal business hours, with the governing body handling other responsibilities, is probably the most cost-efficient arrangement. Smaller developments may run smoothly with the HOA having direct responsibility for property management.

Once the decision to hire a property management company has been made, the condo board should evaluate several firms and decide which one is most suitable. Once the condo board has agreed on which property management firm to hire, the board usually has to obtain the consent of the majority of homeowners in order to enter into a written contract that lasts for more than one year.

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