There’s a fine line between the community responsibilities of an HOA management company and the HOA board.
However, there are a few parts of a community that the former shouldn’t handle without the help of the board. With the help of HOAleader.com, IKO Community Management takes a closer look at the list:
- Anything in the CC&Rs. "Managers shouldn't be doing anything reserved to the board in the governing documents," said Elizabeth White, a shareholder and head of the community associations practice at LeClairRyan in Williamsburg, Va.
"That means anything legislative in nature like the adoption of rules or setting architectural review board guidelines and policies and procedures."
- Budgets and the annual audit. An HOA management company shouldn’t have free reign to sign checks on behalf of the homeowners associations, especially over a certain limit.
An annual audit, which is recommended for every organization, should be performed by an independent certified public accountant with the help of the board. This helps prevent embezzlement from less-than-savory managers.
- Late fees and other violations. While HOA management companies should collect dues, they shouldn’t be able to waive late fees or parking violations for favored residents.
"A lot of associations have a grievance or violation committee," said Bill Worrall, vice president of The Continental Group in Hollywood, Fla.
"Before an owner is fined or legal action is taken, that should be approved by the board, not the manager."
- Architectural modifications. While an HOA manager can oversee the progress of a new flowerbed or parking lot refurbishment, any major aesthetic change to a community should be approved by the homeowners association.
“It's always a good idea to appoint a committee to oversee architectural modification applications,” said Worrall.
“But approval should always come from the board. It's too easy for a manager to be influenced...by an owner, and that can affect the aesthetics of the community."
- Vendors. Hiring and terminating vendors shouldn’t be the sole decision of an HOA manager. While many organizations hire one to solicit and review the quality of bids, the final decision should be made by the HOA board.
"Managers shouldn't be doing contract approvals unless they have board policy that allows them to execute certain contacts up to a certain amount for recurring services," said White.
- Insurance. The board can delegate a manager to execute the request for proposal process in regards to insurance, but the final decision should be made by the board because they know the community best.
- Liens. A lien is a right to keep possession of property belonging to another person until a debt owed by that person is discharged. Because this is such a serious consequence, the board has a strict policy.
The collective steps avoid putting too much power in the manager’s hands. However, some boards might allow their HOA managers to handle notice letters and the initiation of legal action.
According to Harry Styron, an attorney at Styron & Shilling in Branson, Mo.,“if the manager...tells a delinquent owner that the board has established a schedule for delinquent payments and that he doesn't have the discretion to deviate from that process, that leaves to the owner the responsibility for going to the board.”
You should also keep lien authorization within the board’s duties because letting the manager initiate and pursue the process might be considered the unauthorized practice of law.
“The board has the agreement with the attorney, not the manager,” said Worrell. “As the board would approve any other agreement for service, it should be the ones to sign off and approve any work by the attorney.”
From insurance and monetary matters to vendor management, there are a few parts of a community that should be left to the board with the assistance of an HOA management company. The two are meant to work together to create a harmonious environment for its residents.
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