An HOA functions like a mini-city, collecting funds, managing finances, maintaining facilities and adopting and enforcing rules. An elected board of directors oversees these activities. Board members have fiduciary responsibilities, defined in law and HOA documents. All these activities and responsibilities apply to an HOA whether it has 1,000 units or only 25.
HOAs are complex, requiring professional expertise to manage properly. The question is, does your Board need an HOA manager to do this? Before assuming that members of the board can manage all of the HOA’s affairs, let’s look at what’s involved in more detail.
1. Financial Matters
HOA finances include budgeting, accounting, bookkeeping, and reserve funding. Someone must collect the dues/assessments, current and past due, and pay the bills.
Someone must develop an annual budget for the HOA board to adopt, and prepare monthly, annual financial reports for their review and, in some cases, submission to government agencies in accordance with legal requirements.
Finally, someone must maintain and retain the HOA’s financial records as required by law.
HOA governance begins with the CC&Rs and bylaws. However, these documents must be updated/amended occasionally as laws or circumstances change. Someone must draft these changes for the board to review and adopt.
Governance also includes having someone enforce the bylaws, property maintenance standards, assessments/dues collection, use of facilities, rules, etc. Enforcement involves notifying the property owner they are in violation, assessing fines, even attaching liens (in serious cases) on the property.
3. Administrative Duties
An HOA must have someone attend to the administrative needs of the organization. These include having its non-financial records – board meeting agendas and minutes, business correspondence, contracts, membership lists, etc. - maintained and preserved in accordance with legal requirements.
Even the smallest HOA has to purchase things like office supplies and contract for services like landscaping and facilities maintenance. If the HOA has just one part time employee, it needs someone to manage payroll, benefits (if any), hiring and termination, and employment policies.
Perhaps most important, an HOA needs points of contact, at least a telephone number and a mailing address, and a designated person to respond when members call/write with requests or businesses seek to talk to someone who can speak for the organization.
4. Legal Affairs
The need for legal consultation permeates all of these topics. The property purchaser signs documents that legally bind both the HOA and the purchaser to abide by the CC&Rs and the bylaws. In addition, state laws and local ordinances can influence the HOA-property owner relationship. Legislatures and councils change these laws on occasion and someone has to ensure the HOA stays in compliance with those changes.
In California, the Davis-Sterling Act governs many of these and other aspects of running an HOA.
5. Facilities Maintenance
Depending on the size of the HOA and how much in the way of common facilities it maintains, the largest single expense in the budget can be facilities maintenance. Landscaping is a year-round responsibility. Swimming pools are expensive to operate and maintain as they age. Buildings need painting and roofs must be replaced.
To keep an HOA’s facilities in good condition, someone has to inspect the property regularly, solicit bids from contractors, select and award a winning bid, and supervise the work to insure it is done properly. Needed maintenance can cover the gamut: roofing, painting, electrical, plumbing, irrigation, lawn and tree care, etc.
By now, you should see that managing an HOA’s affairs requires a high level of expertise – legal, financial, facilities maintenance, etc. Attempting to do it with a volunteer board, perhaps a paid employee or two, and additional volunteers, puts the HOA at risk of incurring serious financial and legal harm.