What Do HOA Management Fees Cover?

So you may be thinking about hiring an association property manager to take over operations, implementation of policies, and day-to-day management of your homeowners association and community assets. Or perhaps you are unhappy with your current property manager, so you are shopping around to see what services other companies offer.

When interviewing an association property manager, the first question board members usually ask is, “So what is this going to cost?” While your association's budget is important, looking at costs first will likely set you up with a manager that won't be the right fit. When you put costs first, you are basing the decision on a price tag, and not the true value you may get overall—you need to consider the investment you may be making for your development over the expense. First, you need to determine what you need from an association property manager.

What Does the Property Manager Bring to the Table When Hired?

• Accounting and financial advising services: This may be simple bookkeeping or extend to suggesting how much to budget for future costs, when repairs and maintenance to common properties are likely to be necessary and how to find a good contractor. As part of advising the board, managers may report on the HOA's financial status, maintenance needs and progress regularly at meetings.
• Oversee collections actions: This can be helpful partly because they are professionals and partly because they do not live in the community.
• Enforce Rules: Property managers can be responsible for rule enforcement, such as towing an inappropriately parked vehicle or confiscating an item improperly left on common property.
• Dealing with insurance: Dealing with such insurance claims, because it is not a regularly needed activity, is commonly among the extra fees assessed separately from the flat monthly charge for routine services to an HOA.
• Newsletter creation: If the board wants a newsletter or similar document for community residents on behalf of the HOA, property managers can handle this, including printing and related costs.
• Oversee contractors: If any work is to be done on the property, management companies may oversee it as a general contractor, likely charging for that service separately as well.

HOA Property Manager Fees Broken Down

Gauging the cost of hiring a manager can be a bit tricky. How much rental managers charge the HOA will vary depending on the size of the community and the extent of their responsibilities in it. When interviewing multiple association managers, an easy way to compare fees may be on a cost per unit measurement. Generally, there are no set fees, which charges and fees can vary widely from company to company. However, for some activities, the fees that property managers can charge may be regulated to some extent by state laws, so your association may be able to look up the limits.

Some firms offer different combinations of services or may allow HOAs to select from the list of their offerings to determine what functions the rental managers will perform. The choices made may depend on how active the HOA and community are, the size of the community and the degree of knowledge and experience the HOA members have.

Costs are divided into the routine and the less predictable, and HOA boards should assess what the community is likely to need as they choose a property management company.

HOA property management fees typically fall into three categories: initiation, ongoing, and exit.

• Initiation fees: The fee a manager will charge to take over the day to day management of the HOA. The fee will be negotiated based on the work load required, including bookkeeping, transition of files, physical or digital records transition, banking and software changes, etc. This fee can range from a couple of thousand dollars for a small HOA or upwards of $30,000 or more for a large HOA with several hundred homes.
• Ongoing management fees: This is the most common type of fee typically paid monthly by the HOA to the management company. This will almost invariably be a set fee, pre-negotiated as part of the contract. Contracts can range from 1-3 years, but are usually on a year to year basis. You can expect to pay roughly $10 to $20 per unit, per month, for management services. Larger communities may be charged lower per door rates because of the way administrative efforts scale. Expect higher fees in areas with a higher than average cost of living.
• Exit fees: These are fees incurred to transition the HOA from one firm to the next. While no company wants to lose business, it happens. If you are thinking of switching from one firm to another, don’t expect the manager to work for free transitioning the HOA’s books to another company. Ethically they should be there to make it a smooth transition, but at the same time, you should expect to pay them for the service of assisting that changeover.

As previously mentioned, there may be extra fees depending on the work you want your association manager to do. Handling insurance claims may incur an additional fee, as would serving as a general contractor.

Evaluating the Costs

When comparing companies’ prices, be sure to compare the services they offer and not just the price. Remember that not all that is cheap is a good bargain, and not all that is expensive has implicit value. If you value your time, hiring the right HOA property manager can be the best time management/investment any HOA board can make on behalf of the owners. It gives peace of mind knowing you have pros watching over and guiding you along the way.