The article HOA Manager Balancing Act seemed to suggest that if a management company was involved in a homeowner association's management both before and after transition that there was an inevitable conflict of interest. It also begged the question "Can the manager really remain neutral?" The answer is "yes" when the following is included:
The Management Contract should clearly define the relationship of the parties. The management company should always be engaged to perform services for the homeowner association (HOA), not the developer.
Before Transition. The management company is often involved in the developer controlled HOA before the first sale closing takes place. Duties include working with the title company at sale closings, setting up the HOA bank accounts, arranging utility and contract services, coordinating new owner occupancy, hiring and training staff, securing insurance, and a myriad of other services essential to the HOA's welfare.
Warranty Issues. Savvy developers realize that once turnover takes place, the new board of directors will make decisions relative to warranty issues. Those developers know the importance of being pro-active in working with the new board to establish inspection procedures to reinforce warranties and long term good maintenance practices. The HOA manager's job is to assist that process to the client's benefit.
Consultants. Advice from independent consultants is invaluable to HOA management companies when dealing with matters that are outside their expertise like matters of law, engineering and construction defects.
Turnover Accounting. The Covenants, Conditions and Restrictions (CC&Rs) describe when HOA assessments (fees, dues) begin. The escrow company collects HOA assessments from both the buyer and developer at closing. If fees are being collected from new owners, the developer normally must pay fees as well on unsold units. The HOA financial records belong to the HOA and must contain a list of all expenditures. These records are subject to audit and open to inspection by every member.
Code of Ethics. While most state statutes may not address HOA management company ethics, there are a number of trade organizations that do. For example, manager members of Community Associations Institute (CAI), Oregon Washington Community Association Managers (OWCAM) and California Association of Community Managers (CACM) must adhere to a strict Code of Ethics that addresses conflict of interest. Further, state statutes and the HOA governing documents provide guidance to HOA managers.
Board Control. The homeowner association is controlled by the board of directors. It is the board's responsibility to determine if and when legal counsel, an auditor or an independent building inspection firm is needed. It is the board's responsibility to review and approve all contracts. Management companies should encourage the board to seek advice from consultants even when the Board may be reluctant to spend the money.
24/7 Job. HOA management companies are on call 24 hours a day. Managers work full days and attend many night board meetings. They handle the difficult and the unpleasant. They offer advice and listen to criticism. They respond to midnight emergencies and mediate neighbor disputes. They wear many hats and sometimes they are expected to be all things to all people, but throughout the process they are professionals.
In the End. Who is the client? The HOA manager's client is always the homeowner association. Sometimes the HOA is controlled by the developer and sometimes by the homeowners but the manager always serves the interests of the HOA. Successful HOA management companies are made up of service oriented people who take their job seriously because they know their good reputation hangs in the balance. I am proud to know some of the best in the business and I am proud to call them colleagues.
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