Suggestions for setting up a Homeowners Association

March 26, 2017 2:21 PM

I live in a new neighborhood that is getting ready to take over the HOA from the developer. Currently we have around 250 homes. In future years that will increase to +/-400. We are looking for a low cost solution that can provide a website with announcements, accept payment for annual dues (around $200/house/year) and also issue letters stating current dues status for homeowners that need a letter from the hoa for a real estate closing.

I realize there are a ton of options for free/cheap websites so that's not the main focus. Collecting payments, tracking who is current/late, and the financial side is probably more important. We could always run a separate website if needed.

posted by Wallzatcha to Home & Garden (4 answers total)

The last place I lived with an HOA used a management company to handle all of the financial things. That way even if the board of volunteers was new people every year, the money collection part was handled securely and consistently. It probably would have been cheaper to do it themselves, but I for one was glad the money collection part was not exposed to the usual problems you have with a group of volunteers (procrastination, life getting in the way, loss of expertise when a member leaves, etc). There's a lot of administration involved with keeping up with 400 accounts. It's worth paying a company, in my opinion.

Here's the management company they used, for reference.
posted by rakaidan at 3:45 PM on March 26, 2017 [2 favorites]

http://activebuilding.com

This is pretty similar to what you're seeking, heard only positives, but might not send physical letters.
posted by semaphore at 4:57 PM on March 26, 2017

http://hoa-express.com
posted by metaseeker at 5:17 PM on March 26, 2017

Here's a preview of the road ahead:

The reason developers set up HOAs is usually to pay for infrastructure that the city didn't want to pay for. This means that the HOA is fully responsible for maintenance on things we take for granted like roads, streetlights, and sidewalks.

The first 20 years there's usually not much maintenance. After that, things start falling apart and the bills will start to hit, some expected, some unexpected. In the meantime, the HOA will need to save up by funding the reserves. Look at your reserves study - it lays out the expected maintenance costs for the next 30 years. If the reserves aren't adequately funded, you could end up with a "special assessment", which is about as fun as a root canal.

Depending on the HOA, there may also be common areas, such as landscaping, swimming pools, and clubhouses. These will need weekly or monthly maintenance and occasional repair.

Now, the breakdown of expenses might look like this:

• about 30% should go towards reserves
• about 60% goes towards ongoing maintenance - landscapers etc.
• about $20 per member per month goes to the HOA manager fee
• the rest goes towards insurance, taxes, utilities, etc.

The typical HOA membership looks like this:

• 60% of the members just want to pay their dues and get on with their own lives
• 30% of the members will provide opinions if you ask
• a handful of people will be very vocal about keeping dues to an absolute minimum
• a handful people will be very vocal about keeping up neighborhood standards
• a few people will care enough to serve on the board of directors
• one person will be more opinionated than the rest, and become the board president

Now, your biggest decision is who you hire as your professional HOA community manager.

First, think about what you need the community manager to be good at:

1. Manage contractors - landscapers, pool maintenance, asphalt sealers. This includes putting out bids, placing a work order, and - most importantly - inspecting the work. You want a manager who will actually make sure the work is done correctly. I can't emphasize this enough. This is a big portion of the HOA expenditures, and arguably the most important role of the manager.

2. Ensure that the HOA is following regulations like annual elections, reserves studies, tax filings. Also, handle exceptions like late dues, warning letters, etc. This is pretty straightforward and not a big differentiating factor among management companies.

3. Maintain banking and accounting records - a good manager is not necessarily a good bookkeeper. I would strongly urge you to outsource this to a different provider. This makes it much easier to switch managers if they are not living up to promises.

4. Maintain membership records - again, outsource this to an online platform so that you can switch managers more nimbly. Most HOA management contracts have an "Appendix A" that says they can tack on arbitrary charges for photocopies and envelopes. No kidding! It's an incredibly cheap shot, and it's the prevailing industry practice. In this day and age, there is no need to pay somebody $0.20 per page for photocopies, good grief. Go electronic and take this out of their hands as much as possible. Note that state regulations on HOAs often have specific requirements for delivery of notifications to homeowners, so try to build electronic document delivery into the CC&Rs from the outset, or at least make it an opt-out rather than an opt-in. Again 60% of the members will not respond to an opt-in even if you use ALL CAPS.

5. Plan for the future. Again, the first 20 years are usually smooth sailing - new roads, new homeowners. It's good that you are taking the lead right now. This is the best time to set a strong foundation to handle the challenges ahead. Plan to have well-funded reserves, good CC&Rs, open channels of communications. A good HOA manager has seen many communities go through the same issues and can provide guidance.

My advice is to find a small to medium sized local HOA management company. The big HOA conglomerates have a tendency to make their profits by hiring as few people as possible, and doing as little as possible, for as long as possible. Interview your candidates on their experience, knowledge, and responsiveness. Expect to pay good money for good professional service. It will pay for itself several times over.
posted by metaseeker at 1:45 PM on March 30, 2017 [1 favorite]