When ideas about saving money in an HOA sprout up at the next board or annual meeting due to small budgets, restricted cash flow, or delinquent owners - do not make the one fatal mistake many HOA's make. Every board begins their budget investigation by looking closely at the contracts they have with the vendors...meaning how much are we paying "so and so" to cut the grass, maintain the pool, do our books, etc. Truth be told, many of the day to day activities performed by professional vendors for HOA's are extremely simple tasks that can be done by anyone...and that is the problem.
The fact that there is no unique set of skills that separates you from the people who help you is exactly what entices and traps unwary board members into making a costly mistake - hiring from within. Will you save money on hiring little Johnny down the street to mow the common areas - yes...initially...until he cuts his finger off or kills the grass because he cut it too short. But what about something much, much more important - like hiring an owner to be the "new property manager". Do property managers have special education and training...yes and no. The skill set performed by property managers technically can be done by most anyone. And the initial savings to the board may be tens of thousands of dollars. But look at it from the worst possible scenario for a minute with me. Consider what property managers do....they keep accounting records, make deposits, write checks, pay bills, keep records on home owner's balances, keep important HOA paperwork and contracts. They are the beating heart for most HOA's - and if that heart decides to stop - then your HOA also stops.
What if that owner / property manager gets angry and suddenly stopped returning your calls, stopped paying the bills, deleted the home owners account records, and deposited association money in some account in his name? This has all happened with an owner-hired property manager. Here is why...with an owner-hired property manager, you lose independence and control. Unlike professional corporate managers, this owner probably only works for your HOA...and has accountability to no one. Corporate property managers care about their reputation in the community and have other clients. If they get terminated by an HOA, they just turn over all records and move on. And what if this owner / property manager stops paying his dues? Is he going to fine himself? File a lien on himself? And what if you want to terminate his services at some point in the future? Is he going to give you back all of your important accounting records, receipts, and other documents? What if he just holds your HOA hostage until he gets paid? The board has effectively let this one owner take complete control of the HOA, and if he does not want to give it back, he won't.
Then you are talking law suits. And when you talk lawsuits, you are talking thousands, and tens of thousands of dollars on attorneys fees. So the savings you thought you were getting with this one owner / property manager has now been completely overshadowed. Now this is not to say that some HOA's are so small, and their budgets so limited, that they cannot help but hire some neighborhood kids to cut the grass or clean the pool (either that or raise the quarterly or monthly assessments on every owner in the HOA making you the most popular board member in the neighborhood). But HOA boards should strive, based on what could happen as depicted above, to avoid hiring from within.
Please contact The Evans HOA Law Firm if you have any questions.