I am interviewing a prospective HOA property manager who wants to change our contract. How can I deal with this company?

January 1, 2017

Just as there are many types of real estate, there are many types of property management companies. Here is an efficient method to find the right one for your HOA.  Read on.

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Reader Question: I am trying to negotiate a contract with a new HOA property management company for our condominium homeowners association. They not only want a monthly fee for their services but they want a fee for anything extra. Also, any maintenance that they do they want to charge 10% over the cost of the job. They don’t like the existing contract we had with our former property manager. Thank you for any information you can share with me. Judy P.

Monty’s Answer: There are several types of condominium homeowner associations (HOA’s) that engage property management (PM) companies. Small projects are sometimes self-managed. Some condo projects prohibit rentals entirely, some allow for conditional rentals, such as minimum rental periods, and other projects have no rental restrictions. These distinctions are important because the income potential for the management company can vary considerably based on the structure of the condo by-laws, rules, and regulations. Many projects allow unit owners to hire individual agents or companies to handle rental duties. Sizeable projects have been known to bid sales and leasing efforts or engage “captive” real estate agents.

These components will influence the type of fees a property management firm must charge to make the responsibility worth investing their time and expertise. Many property management companies specialize in certain types of property, like apartments. Dealing with tenants is very different than dealing with unit owners. This perspective may help you sort out candidates.

The big picture

Property management companies managing HOA’s have more responsibilities than the upkeep of the grounds and improvements and handling rentals. Look for a firm that also advises the HOA about life expectancies of components, such as the roof, to ensure the HOA includes adequate reserves in the unit owner monthly fees. Staggering HOA board terms and other advice can make a property manager a valuable asset. The HOA board is perpetually on a tightrope over expenses, as unit owner opinions will vary widely. Having a knowledgeable PM to advise on by-law structure and cost issues can be very helpful.

Zero in on the job

Assuming the prospective management company has a seen a complete and detailed job description and objects to the contract, it may be helpful for you to determine their objection. If the HOA is without an accurate job description, it should prepare one that describes in detail the work required from the property management firm. The more detail in each task, the easier it is for new candidates to evaluate the job and the cost to comply. Can they demonstrate that changing the contract structure will benefit the HOA and the unit owners by saving money? Does the argument make sense? If the current contract has worked successfully for the HOA for an extended period, it is possible this company is not a good fit.

Interview multiple companies

Start by identifying the companies managing condo projects in your area that look great from the street. Create a list containing six to ten different firms, then, utilizing the process below winnow the number to three. These questions will spur more pertinent discussion.

Compose a cover email that contains your contact information, the number of units, address of the property, and why you are seeking a property manager. State that you have some questions you would like them to answer and email back to you that may lead to a personal interview. Also, attach the job description in a PDF file.

  1. Do you manage any condo HOA’s now?
  2. How long have you been in the HOA property management business?
  3. How many properties do you manage?
  4. Do you self-perform the contract with employees or do you hire subcontractors?
  5. What services do you offer and how do you charge for them?
  6. Does your firm differentiate itself from the competition with any particular services?
  7. Are you a member of any property management associations?
  8. Do you charge for property inspections?
  9. Can you furnish me with three properties and the HOA contact’s phone?
  10. Do you charge for any miscellaneous fees in the management of our property?

Make a decision

At the conclusion of the property tours, give each finalist a copy of your management agreement that the former property manager used and ask them to review it. Tell them you are open to their input on improving the document if they have suggestions. Then ask them for a copy of their standard agreement for you to review. There will be a standout at this point.

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