Article Courtesy of Daytona Beach News-Journal
By Richard Montgomery
Published January 19, 2017
Question: I am trying to negotiate a contract
with a new HOA property manager 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 percent 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.
Monty's Answer: There are several types of condominium homeowner
associations that engage property management 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.
Sizable 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 HOAs 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
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
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.