The management company answers to the HOA

Q: We live in an older homeowners association of 385 single-family homes. We’ve lived here 14 years and in the last few years have had several community management companies, each seemingly worse than the last. These big national companies increasingly despise committee and volunteer involvement. They appoint increasingly belligerent, aggressive “managers” with very one-sided contracts, empowering them to fine homeowners at will. They’ve done away with our Compliance Committee in favor of hiring “inspectors” and charging our HOA $10 for every petty violation letter they send out, in addition to their monthly management fees. It’s estimated they send out 50 such violations per month, for which they get $500 extra income! They’ve also been charging homeowners $25 late fees for checks delivered to the homeowner’s office, since it takes a few days to reach their Florida offices. Homeowners are rightfully angry! They’ve also neglected our deferred maintenance and have not kept up with common area maintenance.

Management has recently hired a local lawyer at $340 an hour to threaten homeowners with $100 minimum fines (no maximum) if they fail to appear at “hearings” regarding petty violations. Is this a trend in local HOA’s? I notice in your Dec. 3 column, an HOA homeowner described fines totaling over $18,000 for August with only 500 homeowners! That’s over $36 per month, or $430 per year per homeowner! I agree with your homeowner that this outrageous, punitive, anti-homeowner fining trend is out of control. Our disgusted homeowners (136) have conducted an open meeting, outside the regular board meeting, resulting in an official petition requesting our board to fire our management company and manager by Dec. 31. The process has already taken several months and their management contract calls for a 60-day notice, so even if the board moves immediately, we’ll be stuck with a very bad manager and management company for many painful months ahead.

Is this a trend or did our previous board just sign a terrible contract with an overaggressive, greedy, incompetent management company?

A: The problem begins with your board of directors. Management companies cannot just establish charges for late fees and violation letters unless your board agrees to these charges. By law, all fees for the management company must be listed within the management agreement that your board signs. Management contracts are negotiable.

Management companies do not have the authority to eliminate any association committees. Only your board of directors have the authority and power to eliminate association committees based upon your governing documents. Many management companies provide inspectors that work hand-in-hand with their associations’ compliance committees.

Management companies cannot charge a late fee on assessments that have been received at their local office but are processed in another state. On the homeowner ledgers, the date received at the local office would be entered on your account. If your check was received on Dec. 1 but not processed for deposit in the bank until Dec. 4, your ledger would show Dec. 1 as the date received. If you have members who have been charged a late fee even though the local management company received their checks, those members should contact the Nevada Real Estate Division.

As a point of information, you do not have to estimate how much the management company received for processing violation letters. This information should be listed in your association’s monthly financial reports. If you do not have a financial report, you can request that information in writing to your association. Management companies take their instructions from their boards. Some boards are extremely strict when it comes to the enforcement of their rules and regulations. Management companies can tell their boards if they are going overboard, and that any specific violation that they want the community manager to issue may not be enforceable if a complaint is made to the Nevada Real Estate Division.

Management companies do not provide maintenance services. Again, you need to focus on your board of directors as they are the only ones who can hire and fire vendors. Your association needs to be properly funded in order to pay for the daily maintenance operations and for the reserves for capital improvements. You should address this issue at your next board meeting as to what authority does your management company have over the vendors who provide maintenance services for your association.

As to the hiring of an association attorney and as to the $100 fee, again, you must look at these decisions made by your board of directors. The management company cannot authorize any fees or directly hire any vendors.

Membership should definitely communicate with your board as to any belligerent action taken by their community managers as that would be most inappropriate.

Your management issues will continue until your board of directors make changes as to how the association should be managed.

Barbara Holland, CPM is an author, educator and expert witness on real estate issues pertaining to management and brokerage. Questions may be sent to holland744o@gmail.com.