Between audits, tax preparation, and other financial consulting work, Bach, James, Mansour & Company has probably interacted with more HOAs and community associations this year than ever before. Thank you! Our role provides us some unique insight into the relationship between association boards and professional property management companies. I think the first line in Charles Dickens’ A Tale of Two Cities best describes those relationships:
“It was the best of times, it was the worst of times…”
I’m kidding, of course. Most relationships between boards and property management companies are very positive, and both entities realize that it takes close coordination to ensure a smooth long-term relationship. I was board president when my own 500-home neighborhood changed from self-managed to a professional property management company, so I have some personal experience with this as well.
In a previous article, I provided some tips for transitioning to a property management company. Whether you are starting a new professional property management contract, or looking for ways to improve productivity in 2016, here are some tips for making the most out of this relationship.
- Understand your respective roles. The HOA or community association board manages the neighborhood in accordance with the governing documents (covenants and bylaws). The property management company normally handles the day-to-day financial and business operations, executing the board’s decisions and enforcing rules when needed. Simply put, the relationship works best when boards direct and property management companies execute.
- Set realistic expectations. If your association is paying $2,000 per month for professional property management, don’t expect the property manager to be on-site every day. Property managers are also not available 24/7, although many property management companies do offer emergency after-hours service. If service levels are not documented in your contract, document at least a few core expectations, such as email/phone response time, delivery of monthly reports, and general staff availability.
- Communicate early and often. Just like you expect quick follow-up to your questions and requests, your property management company requires the same level of responsiveness to efficiently manage your community. Set a primary board liaison and quickly respond to your property management team’s questions and approval requests. When in doubt about a business decision, ask for advice. They can probably help based on their experience with other communities.
- Review the financials. Even if your property management company prepares your monthly financial statements, it’s still your responsibility to verify accuracy and ensure that revenue and expenses are classified correctly. Normally, at least one person (the treasurer) reviews the statements each month. Trust me on this – even simple misinterpretations can become exponentially more complicated when left unchecked for more than a month or so.
- Conduct an audit or audit-like procedure. Consider conducting an audit or agreed-upon procedures engagement (a cost-effective audit alternative) every 1-2 years, even if not required by your covenants. It will give all parties, including your residents, peace of mind that the community is financially healthy and well-operated. Don’t worry about upsetting your property management company. In our experience, most management companies appreciate receiving this third party verification of their service quality.
Remember the golden rule…
As a board member, it’s your fiduciary responsibility to ensure that all obligations laid out in your covenants are being met. Fortunately, you hired an expert team (your property management company) to help with the day-to-day execution of community business. The board’s relationship with its property management company is like a marriage – it takes ongoing effort and nurturing to ensure a harmonious and successful relationship. Set realistic mutual expectations with your property management company, and then abide by those guidelines as you work together to effectively and efficiently run your community.
Neal Bach, CPA