HOA insurance is a valuable form of financial protection, especially when faced with liability or property damage. Unfortunately, most associations are unaware of the need for insurance and continue without sufficient protection.

What is HOA Insurance?

An HOA master insurance policy is the most common coverage for homeowners associations. This policy protects HOAs against insurance claims, stepping in to cover the cost of expenses related to property damage and general liability.

Insurance for Single-Family HOAs vs Insurance for Condos

Condo associations are physically structured differently from single-family HOA communities. Single-family homes tend to be detached, so they do not share walls, roofs, or plumbing systems. However, condominiums share walls between units, with shared roofs and pipes running in between. As such, the insurance needs of a condo association tend to differ from those of an HOA.

The Importance of Homeowners Association Insurance

Insurance is critical to the financial protection of any homeowners association. It ensures that an HOA or condominium association will not have to tap into its funds or spend as little of its own money as possible when faced with property damage or general liability.

For instance, if a fire burns down the playground, an HOA can file a claim with its insurance provider to cover the replacement cost. If someone slips and hurts themselves on icy pavement in a common area, insurance can cover the cost of legal fees and settlement if they decide to sue.

Without HOA insurance, an HOA board must use its operating budget or reserve funds to pay for the damages. This would severely interfere with the annual budget and deplete its reserves, causing operational hitches and taking away essential funding from other budgetary line items.

As a result, the HOA board would need to compensate for the deficit. This often involves turning to homeowners for additional funding through a special assessment. Depending on the damages, this special assessment could be astronomical, putting more financial burden on the homeowners. Other options include raising regular dues significantly or taking out a loan—both would still result in extra expenses for homeowners.

Is HOA Insurance Required?

Whether or not an HOA is required to carry insurance depends on state laws and the governing documents.

In some states, associations are statutory required to purchase insurance. Homeowners associations in California must carry insurance and include a summary of their policies in the annual budget report, as per Civil Code Section 5300. Similar laws exist in other states.

Apart from state laws, an HOA’s governing documents will also outline the needs and requirements for insurance. If state law does not require insurance, an HOA’s governing documents likely will. In addition to the requirement, the CC&Rs and bylaws usually dictate the type of coverage and amount of insurance an HOA must have.

HOA Insurance vs. Homeowners Insurance

It is important to understand that an HOA insurance master policy differs from homeowners insurance. HOA insurance protects the association itself, while homeowners insurance protects individual homeowners and their properties.

In single-family communities, the HOA’s insurance policy will likely not cover damage to or liability arising from individual homes. For those, homeowners must purchase their policies. In condo communities, though, the condo’s master policy may cover the shared elements, such as walls between units and roofs.

What Does HOA Insurance Cover?

Coverage will ultimately depend on the type of insurance policy an HOA purchases. That said, HOA insurance generally covers physical property damage and general liability.

Property Damage

Property damage coverage will cover the cost of repairs or replacement for physical damage to an HOA’s common areas. These include clubhouses, parks, playgrounds, swimming pools, and more.

In condo associations, property damage coverage extends to the exterior of the condo building and covers the cost of repairs and replacement for shared interiors such as basements and stairwells.

It is essential to note that this policy usually doesn’t cover general wear and tear. Property damage coverage applies more to damages arising from natural disasters, storms, fires, and vandalism. Insurance providers typically offer separate coverage for earthquakes.

General Liability

General liability coverage will cover the cost of legal fees and damages for lawsuits against the HOA after someone gets hurt on common property. For example, if visitors slip and injure themselves on a slippery sidewalk in the parking lot, they may sue the HOA. In this case, general liability can cover legal fees and settlement costs.

Lawsuits can be costly and time-consuming. With general liability coverage, an HOA can save a hefty sum of money and avoid charging special assessments to cover the expenses.

What HOA Insurance Doesn’t Cover

While insurance is beneficial to any community, it does not cover everything. Here are some of the things that a typical HOA insurance policy will not cover:

• Property damage to individual homes or units
• Liability for injuries that occur on individual homes or units
• Flood insurance coverage
• Earthquake insurance coverage
• Damage to personal belongings
• Stolen personal belongings (whether in common areas or individual homes/units)
• Property damage or liability caused by a person
• Claims that go over the limitations of the policy

Bare Walls vs. Walls-In vs. All-In Condo Master Policy

Insurance usually comes in the form of a master policy for single-family HOAs. For condo associations, though, there are three insurance policies to choose from bare walls, walls-in, and all-in.

Bare Walls Coverage

Bare walls coverage only covers the fixed items within the condo units. These include appliances, cabinets, wall coverings, countertops, and wall coverings, among other things. This type of coverage also does not cover any upgrades the owner might make. Instead, the bare walls policy only covers replacement and repairs up to the drywall. 

Due to its limited coverage, this is the cheapest form of insurance for condo associations. The association does not insure the interior of an owner’s unit, except for unfinished walls, floors, and ceilings.

Moreover, if a flood or fire occurs in a unit, bare walls coverage does not pay for improvements. These include appliances, cabinets, wall coverings, fixtures, interior partitions, and floor coverings. The owner’s insurance policy will have to cover the cost of these items.

Some condo associations settle for bare walls coverage due to its low cost. However, some lenders will not approve loans if the association only has limited coverage.

Walls-In Coverage

Also known as single-entity coverage, this type covers all non-personal property items inside condo units. These include appliances, cabinets, wall coverings, countertops, and floor coverings. However, any upgrades the owner makes do not fall under this coverage.

All-In Coverage

Also known as all-inclusive coverage, this type of coverage covers all non-personal property items and any upgrades the owner makes. For example, if the owner changes the countertops from marble to granite, the all-in coverage can pay for it. Due to the extensive coverage, the all-in policy is the most expensive.

How Much Does HOA Insurance Cost?

The type and coverage of an HOA’s insurance policy will determine its annual cost or premium. Additionally, different HOA insurance companies may offer various price points in places where insurance costs are not highly regulated. As such, it is a good idea for an HOA or condo association to shop around before deciding on a provider and policy.

In general, though, HOA insurance can cost between $200 and $500 per month. Some more comprehensive policies can go beyond that, up to $1,000 or more. 

Many HOA boards let the cost of insurance stop them from purchasing the best one that meets their needs. However, it is essential to remember insurance’s role in an HOA’s financial protection, especially in the long run.

Other Types of HOA Insurance

Apart from a master policy, there are other types of insurance an HOA should consider purchasing. These include the following:

• D&O Insurance. This protects board members from personal liability. If they’re sued for decisions made in their capacity as HOA leaders, this policy covers legal defense costs. It’s essential to attract qualified individuals to serve on the board without fear of personal financial risk.
• Workers’ Compensation. HOAs with employees or contractors may require workers’ compensation insurance. This coverage provides medical benefits and wage replacement to injured workers. Depending on local laws, it’s often mandatory and helps the HOA avoid costly legal fees from workplace injury claims.
• Umbrella Liability. Umbrella liability insurance provides additional coverage when claims exceed the limits of standard policies. It’s an extra layer of protection for severe incidents, such as accidents involving large sums of money. This type of insurance ensures the HOA won’t face financial ruin from a major lawsuit.
• Crime and Fidelity. This protects the HOA from theft, fraud, or embezzlement losses. This policy can cover the loss if funds are stolen by board members, employees, or even third parties. It’s especially important for associations that handle large sums of money.
• Flood Insurance. If the HOA is in a flood-prone area, flood insurance is crucial. Standard property insurance policies typically exclude flood damage, making separate flood coverage necessary. It can protect the community from significant financial losses after a natural disaster.
• Earthquake Insurance. In regions prone to earthquakes, this coverage is vital. Like flood insurance, earthquake damage is not covered under most property policies. Earthquake insurance helps repair or rebuild structures affected by seismic activity, ensuring the HOA’s financial stability.

All Things Considered

Every community should have HOA insurance, whether or not state laws or their governing documents require it. Insurance plays a critical role in protecting an HOA’s financial interests. Additionally, it helps ensure that homeowners don’t shoulder additional financial burdens when the unthinkable happens.

Personalized Property Management offers HOA management services around Southern California, including assistance with insurance management. Call us at 760-325-9500 or email us at info@ppminternet.com for more information!

RELATED ARTICLES:

• HOA Board Duties: What To Expect From Your BOD
• How Does A Leased Land In Coachella Valley Work?
• Why Do You Need A Professional HOA Reserve Analyst?

Using social media for HOAs has become quite a common practice nowadays. Given its widespread availability and reach, it has become a popular communication tool for boards and homeowners alike. However, social media has downsides, so boards should enact proper rules to govern its use.

The Pros and Cons of Using Social Media for HOAs

There is no denying that the rise of social media has brought interconnectivity to a whole new level. With the click of a button, people can share information, photos, and videos at a rapid rate.

Many homeowners associations have used this tool to improve communication with residents. However, as with a lot of things, social media brings with it several pros and cons. It is essential to analyze these pros and cons so that boards can make an informed decision on whether or not to incorporate social media into their communication arsenal.

Pros of Social Media for HOAs

The pros of social media in HOA communities include:

• Improved Communication. Social media platforms make it easier for HOA boards to communicate quickly and effectively with homeowners. Announcements, reminders, and updates can be posted instantly, reaching a large audience.
• Increased Engagement. Social media can foster a sense of community by encouraging homeowners to interact with the board and each other. It can be a space for discussions, sharing ideas, and addressing concerns.
• Cost-Effective. Social media is free or low-cost compared to other communication methods, such as printed newsletters or mailed notices. Therefore, it is a budget-friendly tool for HOAs.
• Convenience. Homeowners can access information at any time, from any location. They can also respond or ask questions more easily than traditional communication methods.
• Faster Feedback. Homeowners can provide immediate feedback on issues or suggestions, allowing the board to address concerns promptly.

Cons of Social Media for HOAs

The cons of social media in HOA communities include:

• Risk of Misinformation. With many homeowners participating, there’s a higher chance of spreading rumors, misinformation, or unverified claims. This can create confusion, conflict, and tension among homeowners and board members.
• Lack of Privacy. Social media discussion may not be private or secure, raising concerns about confidentiality. This is particularly concerning when sensitive topics like legal matters or personal grievances are involved.
• Moderation Challenges. Managing the tone and conduct of discussions can be challenging. Improper moderation can lead to potential disagreements or heated exchanges among members. Boards may need to appoint moderators to ensure conversations stay civil and productive.
• Exclusion. Not all homeowners may use social media or be comfortable with technology, especially in communities with technologically challenged residents. Relying heavily on these platforms can leave some people out of the communication loop.
• Liability Issues. Inappropriate comments or posts made by homeowners on an HOA’s social media page could result in legal complications. These include defamation claims and violations of HOA policies, among other things.

How to Use Social Media for HOAs

Social media has several benefits. While there are also disadvantages, many of them can be curbed with the right practices. Boards who wish to use social media for their community should keep the following things in mind.

1. Set Up Objectives

Before starting, the HOA should define its social media goals. These could include sharing updates, promoting community events, or gathering feedback. Clear objectives help guide content creation and ensure the effective use of the platform.

2. Select a Platform

Choosing the right platform depends on the community’s needs. Many have a homeowners association Facebook page. These are popular for HOAs due to their ease of use and privacy settings. Additionally, Facebook remains the leading social media platform in the United States. This means most of the HOA’s members likely already have access to it.

Other platforms like Nextdoor or private forums may also work well, depending on homeowner preferences. Given the nature of HOAs, platforms such as Instagram and TikTok are not best suited for communicating with homeowners. They are better used as promotional tools.

3. Establish and Enforce Rules

It’s essential to set guidelines for participation. Establishing clear rules ensures respectful communication and keeps discussions focused. The HOA should post these rules on the page and enforce them consistently to maintain a positive environment.

Moderators should monitor the content that homeowners post. If a post or comment goes against the rules, moderators should take swift action to delete it. They may even warn the poster or commenter not to do it again or face a temporary ban.

4. Appoint Admins

Managing a social media page requires oversight. The board should appoint a few trusted individuals as administrators or moderators. Admins monitor content, approve posts, and step in if discussions become heated or off-topic.

Of course, board members can do this themselves if they choose. Admin or moderator work tends to be demanding, though, especially if anyone can post or comment at any given time. The workload can also multiply depending on the number of residents in the community.

5. Focus on the Facts

HOAs should always prioritize factual and relevant information in posts. This includes updates on maintenance schedules, community events, or rule changes. Avoiding opinions helps prevent misunderstandings or conflicts among homeowners.

6. Engage Homeowners

Social media works best when there’s active engagement. HOAs can encourage homeowners to participate by asking for suggestions, creating polls, or inviting discussions. This keeps the community involved and fosters a sense of connection.

Sometimes, getting homeowners out of their shells takes a while or some effort. Some homeowners may feel shy or apprehensive about communicating with their neighbors in person at meetings. These people may benefit from the decreased pressure that social media allows. Before long, these homeowners may feel more comfortable talking to others and participating in HOA activities.

7. Prioritize Confidentiality and Privacy

While social media promotes transparency, HOAs must be mindful of privacy. Personal information, disputes, or sensitive topics should not be shared publicly. It’s important to remind homeowners that social media is for general information, not for private matters.

HOA Social Media Rules

Board members must establish a policy to govern the use of social media in their community. At a minimum, an HOA should tackle the following guidelines.

1. Identify Permitted Content

The HOA board should determine what type of content can be posted, commented on, or shared on the platform. A general rule of thumb is that content should be limited to topics related to the association. Examples include meeting dates, new rules or changes, deadline reminders for HOA dues, and community events.

Even if the HOA has a website or owner portal where members can access important documents, it’s still wise to post links to them on the platform. This will give homeowners easy access to the HOA’s governing documents, application forms, meeting minutes, and more.

Of course, the HOA’s social media page tends to stagnate when there’s nothing worth announcing, which may negatively impact involvement. To keep engagement up, the HOA can share helpful content such as maintenance reminders, gardening tips, cleaning advice, etc. The board can also share photos from recent community events.

2. Identify Prohibited Content

The HOA board should establish what type of content is permitted and what is not. All members—homeowners and board members alike—must not post prohibited content.

Prohibited content can vary, but they generally include the following:

• Profane or violent content
• Defamatory or offensive content
• Personal attacks
• Disruptive content with the intent to abuse, intimidate, threaten, or harass (example: trolling)
• Links to websites or files that contain malware
• Spam
• Confidential information (including HOA-related confidential information such as contract negotiations and ongoing litigation)
• Click baits
• Sexual content or content that is not safe for work (NSFW)
• Discriminatory content or content that encourages discrimination
• Illegal content or content that promotes unlawful, harmful, or offensive acts
• Personal information without the consent of the party
• Photos of children without the consent of the parents
• Trademarked or copyrighted content
• Promotional content without the approval of the moderator or HOA board
• Personal opinions are made to look like the association’s opinions
• Rants
• Gossip, hearsay, and speculation
• Political bias
• Criticism

Violating the rule on prohibited content should carry a stern penalty. 

Moderators should remove the post or comment immediately, requiring no prior notice to the poster or commenter. Better yet, the HOA can adjust the settings so that moderators have to approve content before they are posted. However, this may not be possible for comments.

Depending on its severity, the first offense can result in a strict warning. However, if the homeowner violates the rule again, the HOA should consider removing the offender from the social media page or group. Alternatively, the HOA can revoke their ability to post content or comment on posts.

3. Establish Controls

Finally, it is essential to establish internal controls for the social media page. These controls should answer the following questions:

• Who can access or join the HOA’s social media page/group?
• Who can approve or deny posts?
• Are there going to be offline hours?
• Who can post or comment?

A Double-Edged Sword

Using social media for HOAs is inevitable, especially with the prevalence of technology in our day-to-day lives. However, boards need not use social media if they feel it’s not best for the community. That said, if the board does opt to make a social media page for the HOA, it is pertinent to use it wisely and establish a social media policy.

Personalized Property Management offers HOA management services around Southern California, including assistance with owner communications. Call us at 760-325-9500 or email us at info@ppminternet.com for more information!

RELATED ARTICLES:

• How Can The Board Address HOA Noise Complaints
• Selective Enforcement In HOA: What Can Homeowners Do?
• What Is HOA Governance?

The HOA election of officers is an important part of every homeowners association’s governance. It allows homeowners to elect competent leaders who will make decisions in the community’s best interest. Therefore, knowing how board elections work is equally critical to an HOA’s success.

What is the HOA Election of Officers?

Homeowners associations share many similarities with corporations. Like corporations, HOAs are governed by a board of directors elected by the shareholders. In the case of HOAs, board members are elected by the homeowners.

The election of officers is important when one or more board seats open up. This usually happens when a board member’s term expires, but it can also arise from the removal or resignation of a board member. The HOA’s governing documents, specifically the bylaws, dictate the timing, requirements, and election procedures.

For most communities, the elections occur at the annual membership meeting. Here, homeowners cast their ballots for the candidates they wish to elect into office.

HOA Board Elections: Understanding the Process

Elections in an HOA follow the general sequence below.

1. Select Proposed Voting Deadline

First, the HOA must choose a date for the voting deadline. This date should be 105 days after the board intends to mail the nomination procedures and deadline. The voting deadline is often the same date as the annual meeting or when the HOA will count the ballots.

Existing board members must identify which positions will be up for election. Board terms are often staggered, which means that board seats won’t all open up at the same time. Staggered terms ensure that the board is not entirely empty simultaneously and allow a mix of new and experienced directors.

Associations should expect elections to take 105 to 120 days.

2. Nomination Procedures

As per Civil Code Section 5115, an HOA must send a general notice (or individual notice upon request) of nomination deadlines and procedures at least 30 days before the nomination deadline. If an HOA intends to disqualify a candidate, they must provide them with a chance to participate in internal dispute resolution first. 

Associations can only disqualify a person from nomination if the person has been allowed to engage in internal dispute resolution. (Civ. Code § 5105(e).)

During this time, the HOA must also draft the electoral roll. The electoral roll lists all eligible voters in the HOA community. It also includes their identifying numbers (such as lot number or member number), addresses, and contact information. Boards should ensure that their electoral roll is updated. This way, all current homeowners get a vote.

3. Announce and Nominate

The next step is to announce the elections using the appropriate communication channels. Normally, the HOA board should also provide notice ahead of time with a specific timeframe.

At this point, the HOA should also open nominations. Nominations can occur in a few ways: floor nominations, self-nominations, and write-in nominations. Once the HOA establishes its pool of candidates, it can announce the names of those in the running. This is also a good time to create the ballots.

4. Select the Inspector of Elections

The HOA must appoint an election inspector. This inspector must be an independent third party with no conflicts of interest with the association and its election. The HOA must choose an inspector before sending the pre-ballot notice.

5. Send the Pre-Ballot Notice

At least 30 days before distributing the ballots, the HOA must send a general notice consisting of the following information:

• The date, time, and physical address to mail or hand-deliver the votes to the inspector/s
• The date, time, and place of the meeting for counting ballots
• Names of the candidates who will appear on the ballots

6. Review for Accuracy

The HOA must give members and candidates an opportunity to review their information as it appears on the candidate lists and electoral roll at least 30 days before distributing the ballots. The inspector of elections must then correct the inaccuracies or add any omitted information within two (2) business days.

7. Distribute Ballots

The HOA or inspector of elections must mail or hand-deliver the ballots to every association member at least 30 days before the voting deadline and at least 30 days after sending the pre-ballot notice. 

The inspector must also deliver the election rules individually or by posting them online. If the inspector posts the rules online, the website address (URL) must appear on the ballot and inform the member that they may find the rules there.

8. Annual Meeting

The HOA must establish a quorum at the annual meeting and call the meeting to order. At this point, those who have yet to cast their ballots may do so. After that, the board or inspector must close balloting.

At this point, the inspectors can begin opening and counting the votes. They will then announce the results. The HOA must post the results within 15 days.

California HOA Election of Officers

It is essential to note that election procedures and requirements can vary from one community to another. State laws and individual governing documents can also influence how elections proceed. In California, there are certain rules and regulations that HOAs must know.

According to Civil Code Section 5105, all HOAs must adopt election rules consisting of the following:

• Procedures for nominating candidates
• Qualifications of candidates
• How the HOA must select independent third parties as inspectors of election
• Access to the HOA’s media channels during campaigns
• Use of the HOA’s common areas during campaigns
• Procedures for secret balloting
• Uncontested elections procedures
• Procedures for recall elections
• Election materials retention

Key Points

Here are some key points in to know about the HOA election of officers in California:

• HOAs must allow homeowners to nominate themselves as candidates for election.
• An HOA may establish a nominating committee. However, this committee does not have the power to reject qualified candidates.
• An HOA may not exclude candidates based on minor technical violations of the nomination process. However, it may exclude candidates who fail to submit their nomination on or before the deadline or who don’t meet the director qualifications.
• HOAs must prepare a candidate list and have candidates review them for accuracy at least 30 days before distributing the ballots. The inspector of elections then has two (2) business days to correct any inaccuracies.
• An HOA must disqualify a candidate if they are not an association member.
• Certain HOA director qualifications are no longer permissible in California. These include requiring the member to have no violations or unpaid fines, disallowing candidates who are in litigation with the HOA, disallowing candidates who have been convicted of a felony within the last 10 years (provided the HOA’s fidelity bond goes unaffected), disallowing candidates who are second- or third-tier registered sex offenders (with the same fidelity bond caveat), and having minimum age or residency requirements, particularly for 55+ communities.
• An HOA must hire an independent third party to assume the role of inspector of elections.
• HOAs must use secret ballots for elections, as per Civil Code Section 5100. Additionally, they must deliver the ballots to every member at least 30 days before the vote deadline.
• Associations need not use balloting for uncontested elections. Instead, they can use election by acclamation.

HOA Elections Frequently Asked Questions

Here are the answers to the most frequently asked questions about HOA elections.

How often do HOA elections take place?

It depends on the homeowners association. However, HOA elections generally take place every year at the annual meeting. Boards should check their governing documents, specifically their bylaws, to ensure they understand the exact timeline and dates.

Can the HOA election of officers be electronic?

Some associations allow online or electronic voting for their elections, though this varies depending on state laws and an HOA’s governing documents. 

In California, however, HOAs must use secret balloting for board elections. The HOA must mail or hand-deliver the ballots and two pre-addressed envelopes to homeowners. Homeowners must insert the completed ballots in the first envelope before inserting them into the second envelope, which is then sealed.

Can anyone run for the HOA board?

In theory, any homeowner can run for a position on the HOA board. However, some HOAs may have candidate qualifications. It is essential to check the HOA’s governing documents to understand who can run.

In California, an HOA can disqualify a candidate if they are delinquent on their regular dues, have a joint ownership interest with another board member, have been owners for less than a year, or have a past criminal conviction that would prevent the HOA from getting a fidelity bond or terminating its existing policy.

Are there term limits for board members?

Yes, board members usually have term limits in an HOA. It is important to read through the HOA’s bylaws to understand specific term limits.

Can renters vote?

Whether or not renters can vote depends on the association’s bylaws. More often than not, though, only homeowners receive the right to vote in the election. However, a homeowner may assign their renter as their proxy if the association allows proxy votes.

Assistance With HOA Elections

The HOA election of officers can be confusing, with many requirements and conditions. Still, boards must understand how elections work to avoid an invalid election. An HOA management company can assist boards with carrying out legally compliant election procedures.

Personalized Property Management offers HOA management services around Southern California, including assistance with board elections. Call us at 760-325-9500 or email us at info@ppminternet.com for more information!

RELATED ARTICLES:

• HOA Board Duties: What To Expect From Your BOD
• HOA Meeting No Quorum: What Happens Now?
• 7 Best Recruiting HOA Board Members

Managing a planned community can be challenging. It involves not only dues collection but also common area maintenance, administration, financial management, and community governance. Over the years, numerous types of HOA management have emerged to address planned communities’ concerns and daily operations.

What are the Different Types of HOA Management?

There are three main types of HOA management:

1. Self-Management

Self-management involves a board of directors overseeing the entirety of the community’s operations. The community does not use an HOA manager or professional management company. Instead, the board handles everything from member disputes to budget preparation and vendor management. 

2. Association Employed Manager

Homeowners associations often seek outside help handling community affairs. This is especially true for communities with many amenities or homeowner properties. One way to get professional help is by hiring an independent HOA manager to handle the board’s workload.

In this scenario, the HOA manager is tasked with certain duties, such as dues collection, maintenance management, and vendor relationship management. The HOA manager is considered an employee who receives a salary and benefits. 

It’s important to note that HOAs must consult their governing documents before hiring an HOA manager. The documents often outline how the hiring process should proceed, how the payment process should be handled, and what requirements should be met to hire an independent contractor. 

3. HOA Management Company

HOA management companies are firms dedicated to helping community associations with their operations. They fulfill several duties of the board, including accounting, financial management, vendor management, maintenance, and dues collection.

Different management companies will offer different services. Some may offer full-service community management, while others only offer remote or financial management services. Regardless, communities can often hire an HOA management company to fulfill one or more of their needs.

What Services Does Professional Management Offer?

Professional management provides numerous services to homeowners associations. Here is a rundown of the most common services offered.

1. Administration

HOA management companies and community managers often take charge of administrative work. This can include, but is not limited to, the following:

• Vendor and work order management
• Homeowner and board member communication
• Rule enforcement
• Database and document management
• Violation processing, fines, and charges
• Invoicing and dues collection
• Architectural review applications
• Website maintenance
• Common area scheduling and coordination

2. Board Guidance

Professional management can guide the board members on all HOA operations and activities. This can include the following services:

• Board meeting scheduling, preparation, and facilitation
• Recordation and distribution of meeting minutes
• Financial, policy, legal, and insurance advice
• Liaison for the board
• New board member training
• Documentation and reporting
• Annual election oversight

3. Financial Management

HOAs often need help with accounting and financial management. With a professional manager or management company, HOA boards can outsource all financial tasks. They no longer have to worry about managing bank accounts, preparing budgets, filing taxes, auditing reports, preparing financial statements, or collecting dues. Moreover, professional managers can even coordinate reserve studies and handle insurance. 

4. Maintenance

HOAs often have trouble with maintenance — especially if the community is large or has several facilities. The HOA management company or community manager can handle all of the upkeep and related tasks, including the following:

• Vendor bid collection and screening
• Contractor insurance and licensing oversight
• Routine inspections
• Management of maintenance requests
• Maintenance plan preparation and scheduling
• Delegation of maintenance requests to respective vendors
• Oversight of contractor work

5. Legal Advice and Representation

HOA management professionals often provide expertise in legal disputes and compliance issues. They can represent the board whenever there’s a lawsuit within the community and advise the board on what to do if there’s an internal dispute within the neighborhood.

Industry professionals can also serve as legal advisors when there’s a problem within the HOA. They can prevent issues from escalating or reaching court, keeping the HOA’s reputation in check and allowing the community to find resolutions quietly. 

Pros and Cons of the Types of HOA Management

The different forms of HOA management come with various pros and cons. They offer varying degrees of flexibility, responsibility, and financial commitment. Here are the pros and cons of each to help you decide which one is best for your community.

Self-Management

Pros	Cons
Lower fees	Requires time, effort, and expertise
Complete control over operations and projects	Lack of follow-through
Less restrictive rules	More difficult to resolve disputes
Fosters a tighter community	Properties may be harder to sell

Self-managed associations offer two main advantages: complete control and lower HOA fees. The former is self-explanatory, as the board can oversee all of the community’s operations. They govern the community’s capital improvements and often have less complex procedures for voting on community decisions. 

As a result, the community members have more say in the HOA’s projects. This fosters a tight-knit community with less restrictive rules. Moreover, self-managed HOAs have lower fees since no HOA management fees are covered.

On the other hand, self-management can be challenging as the board must devote a lot more time and effort to governance. The board’s lack of experience and expertise may also result in a lack of follow-through regarding maintenance. They may not be as good at resolving community disputes, either. These may deter potential buyers as they must invest more time and effort into the community.

Association Employed Manager

Pros	Cons
Better knowledge and expertise	Additional insurance policies
Simplified vendor management	Employee status
Expert advice on governance
Experience in HOA management

HOAs that employ association managers enjoy many of the benefits of professional expertise. HAO managers often have the knowledge, experience, and expertise to help communities succeed. They can often support the board in areas where they need the most help, like financial management, community governance, and rule enforcement. 

In addition, HOA managers can help you simplify vendor relationship management. HOA managers can act as a liaison between the board and contractor. They can also collect vendor bids, screen potential candidates, and help the board make a good hiring decision.

However, HOA managers often require additional insurance to protect the community from liability. For example, the community may need to purchase workers’ compensation coverage or a liability policy for employees in case of accidents or lawsuits.

Finally, contracted managers may be regarded as employees under state law. In this case, the HOA may need to meet specific obligations like payroll withholdings, employee benefits, and sick leave.

HOA Management Company

Pros	Cons
Saves time and effort	Higher HOA fees
Access to multiple industry professionals	Less involvement from the board
Vendor connections
Management Software

Hiring HOA management companies is a popular choice among planned communities. They offer several benefits that other types of HOA management do not. One of the biggest advantages is that management companies save the board time and effort.

While HOA governance is essential, the board members don’t always have the time to devote to community management. They have their own lives and careers, after all. With an HOA management company on board, the directors can have better peace of mind knowing all their obligations are being fulfilled carefully.

In addition, HOA management companies have an entire team of professionals with experience working with HOAs. These professionals are often required to hold certifications, complete training, and gain experience before they work with HOAs. This means communities can work with industry professionals who can solve most of their complex problems.

Furthermore, HOA management companies have deep connections with skilled vendors. They can connect clients with various contractors, such as construction companies, landscapers, and even HOA attorneys.

Finally, HOA management companies often have access to resources like HOA software, accounting systems, and online portals. With these tools, the HOA can streamline its processes and enhance the community’s experience. 

However, HOA management companies do take away a lot of control. While the board is still in charge of making big decisions, it is less involved in day-to-day operations, which can be challenging for some board members. 

Moreover, management companies have one big drawback: they cost a lot. Nevertheless, the HOA may be able to save money in the long term because management companies can prevent the board from making costly mistakes.

Which is Best for Your Community?

There is no one-size-fits-all answer to HOA management. Different communities will have different needs and financial capabilities. 

For instance, if an HOA consists of a handful of lots, it might make more sense to go the self-managed route. It costs less, and there are fewer common areas to maintain. The HOA may be more manageable even if the board members are the only ones overseeing operations. 

Meanwhile, HOAs with more members and facilities may need professional help. Managing communities like these might not be feasible — even if the board comprises a dozen members. Moreover, they often have more complex processes and procedures that require expertise and experience.

Find a Reliable HOA Management Company Today

Homeowners associations should consider their needs when deciding between the different types of HOA management. If your community has decided to hire an HOA management company, hiring a reliable one with years of experience only makes sense.

Personalized Property Management is just the right choice for communities in Southern California. We have years of experience working with communities in the area. Our team is familiar with the ins and outs of community management — and the state laws that govern HOAs. Call us at 760-325-9500 or email us at info@ppminternet.com to know more!

RELATED ARTICLES:

• What Is HOA Governance?
• Setting Limits For HOA Committees
• 7 Best Recruiting HOA Board Members

Homeowners associations are known for having well-maintained shared spaces and common areas. In fact, it’s the main selling point of living in a planned community. What are the HOA maintenance responsibilities you should be aware of? Here is what board members and community residents need to know. 

What are HOA Maintenance Responsibilities?

Two things dictate HOA maintenance responsibilities: state law and the community’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs). 

States often have dedicated laws governing planned communities. These laws generally outline how a planned community is created, what restrictions can be in place, and how it should be managed. 

As you might expect, they also indicate what the HOA is responsible for maintaining. For example, California law generally states that, unless otherwise provided in the governing documents, HOAs are responsible for maintaining the common areas while homeowners are responsible for separate interests and limited common elements.

Apart from state law, the community’s CC&Rs also outline what the HOA must maintain and what homeowners are responsible for. While these can vary between associations, HOAs are typically required to maintain the following:

1. Common Areas

HOA community maintenance usually includes the common areas. But, what are common areas anyway? Common areas typically refer to HOA amenities, facilities, and properties that all unit owners can use. For example, HOA parks, gyms, clubhouses, and fitness centers all fit this category. Shared pathways like sidewalks and private roads are also included. In condominiums, these also include hallways and elevators.

HOA maintenance responsibilities typically encompass the following:

• Inspection. Homeowners associations are responsible for periodically inspecting the common areas to check for damages. 
• Cleaning. HOAs are responsible for regular cleaning of all common elements and shared spaces.
• Repair and Maintenance. HOAs must conduct regular maintenance activities to ensure each facility is in good condition. The association is also in charge of repairs should any damage occur to the common areas.
• Infrastructure. HOAs are often required to maintain shared infrastructure like walkways, sidewalks, private roads, and parking lots. They are responsible for fixing any cracks, potholes, or water damage they find in these areas.
• Utilities. Homeowners associations cover the cost of repairing and maintaining utilities like sewage, plumbing, and electrical systems.
• Landscaping. HOAs are responsible for the landscaping in each common area like parks and community entrances.

2. Limited Common Areas

HOA maintenance fees may also cover limited common areas, depending on the provisions of the governing documents. Limited common areas, also known as exclusive-use common elements, are shared spaces that are only accessible to specific homeowners. These types of spaces are most common in condominiums.

For example, a condominium may have a shared balcony only accessible to units on one side of the building. In this case, the shared balcony is considered an exclusive-use common area that the HOA may maintain. 

It’s important to remember that the governing documents may have different requirements when it comes to limited common area maintenance. In some communities, these spaces are left in the care of the HOA. Meanwhile, other communities assign maintenance responsibility to the unit owners who have access to these areas. 

3. Exterior Maintenance

Homeowners associations are also in charge of HOA exterior maintenance. This means they are responsible for maintaining the structures and exteriors of common components and buildings. These include sidings, roofs, and exterior walls that are not a part of separate interests. Exterior maintenance is most common in condominium associations. However, it also applies to structures in single-family and townhome communities that have shared buildings.

What Should Homeowners Maintain? 

Homeowners are not free from maintenance obligations. Just like the HOA, they’re required to maintain their separate interests. Separate interests refer to property owned exclusively by unit owners, such as apartments, condominium units, lots, and houses. Moreover, they may include the spaces surrounding a home, like the front and back yards and driveways. 

In some cases, homeowners associations will offer landscaping services to ensure individual yards and lawns look pristine. However, this is not always true. Homeowners should check the governing documents to verify what services the HOA will provide. 

What About Damages Caused by Members?

You might think that all HOA repair responsibilities for the common elements fall on the association’s shoulders. However, if a member causes the damage, the person responsible may vary.

In these cases, the HOA’s insurance may cover the cost of repairs and maintenance. However, state law also has certain regulations that dictate who may be held responsible. In California, community associations may charge a reimbursement assessment to the homeowner responsible for the damage. This means that the homeowner may need to pay for the repairs if they, their guest, or their tenant damages the common elements. 

Who is Responsible for Water Damage?

Water damage is tricky to resolve as the root cause can be hard to pinpoint. Generally, who is responsible for water damage depends on where the damage has occurred. HOAs are usually responsible for water damage in the common areas. Likewise, homeowners must take care of water damage in their own homes.

In some instances, the HOA or homeowner may be responsible for water damage if it resulted from their negligence. If the water damage started from either party’s area of responsibility, it may also be the HOA or homeowner’s responsibility. However, this is not always the case, and it’s usually best to handle these issues on a case-to-case basis. 

Insurance Responsibilities

Damages to the common elements are inevitable. Yes, they can happen due to the HOA’s or homeowners’ negligence. Nonetheless, they can also occur because of natural disasters or regular wear and tear. Regardless of the cause, the HOA has a responsibility to obtain ample insurance to avoid levying special assessments.

In fact, some laws require associations to obtain HOA insurance to cover the cost of property damage and liability claims. The association’s governing documents may also mandate the board to maintain sufficient coverage to prevent the HOA from levying hefty special assessments. 

Who Pays for Maintenance?

The association has responsibility for HOA maintenance. The board is in charge of inspection, regular cleaning, upkeep, repairs, and replacements. However, while the HOA is responsible for conducting all these activities, the association will have to draw funds from homeowner assessments.

This means that, in essence, the homeowners themselves are paying for all the upkeep. Every resident shares the financial responsibility by paying their monthly dues to the HOA. This money is used for common area maintenance and to fund the HOA’s other operations. 

What Should Homeowners Do if the HOA Neglects Maintenance?

Homeowners pay their monthly dues expecting the HOA to meet all their maintenance obligations. However, there are times when the board is negligent or fails to fulfill its maintenance obligations. What can homeowners do in that case? Here are some steps you can take:

1. Review the Governing Documents

Homeowners should first review the governing documents to verify what the HOA is responsible for. They should check whether or not the HOA is indeed being negligent or if they are simply maintaining only the facilities the HOA is responsible for. Moreover, the governing documents may contain procedures for reporting maintenance issues.

2. Report the Maintenance Issue

Homeowners should first report the maintenance issue to the board. The HOA may have simply failed to notice the problem during their regular inspections. Take photos with timestamps and dates and send them to the board as evidence. It may also be helpful to take a video of the issue, if possible.

If the HOA does not have a proper reporting system in place, homeowners may also choose to communicate with the board directly. They may also attend the next board meeting and raise the issue there.

3. Talk to the Board

The HOA board may already know about the issue and are working on a solution to fix the problem. Delays happen all the time due to a lack of funds, challenges with vendor management, a deeper problem that’s causing the maintenance issue, or simply a lack of experience on the board’s part. Whatever the root cause may be, it’s important to speak with the board to understand the root of the problem. Large, complex issues may take time to resolve.

4. Try Dispute Resolution

There are times when the HOA board fails or neglects to fulfill its duty. They may be unresponsive or simply negligent when it comes to minor maintenance issues. In these cases, the best course of action is to enter dispute resolution with the association.

Some communities may have internal dispute resolution systems in place. Homeowners should review their community guidelines and follow the proper procedure to resolve their concerns. If there are no internal dispute resolution procedures, though, the homeowner may turn to third-party mediation or arbitration.

5. Remove the Problematic Board Member

Homeowners may remove the problematic board member as a last resort. Typically, this requires a community vote and a special meeting. According to the community’s procedures, homeowners must petition to recall a director.

The Bottom Line

Board members and homeowners should be aware of many HOA maintenance responsibilities. Staying on top of these responsibilities will ensure the HOA remains compliant with state law and the governing documents. Moreover, it will ensure that the community’s property values always remain high.

Personalized Property Management offers various HOA management services to communities in Southern California. Call us at 760-325-9500 or email us at info@ppminternet.com to learn more!

RELATED ARTICLES:

• HOA Board Duties: What To Expect From Your BOD
• Here’s What To Expect When You Don’t Pay HOA Fees
• Know Your HOA Rental Restrictions Before Renting Out Your Home

Several potential HOA meeting problems can arise, and board members must learn how to deal with them. In doing so, they can hold informative, concise, and trouble-free meetings, which, in turn, helps keep the association in good shape.

How to Handle the Most Common HOA Meeting Problems

HOA meetings are essential for effective community management, but they can sometimes encounter problems that hinder productivity and decision-making. Here are some of the most common issues that arise during HOA meetings.

1. Lack of Attendance and Quorum

Not all residents have the time or interest to attend meetings. This causes a disconnect between homeowners and the HOA board. Worse yet, for annual meetings or meetings that require a membership vote, it can be hard to get a quorum when not enough people attend.

Ensure Proper Notice

One of the best ways to ensure that meetings are packed is to ensure proper and sufficient notice. Notifying residents ahead of time about an upcoming meeting gives them more time to prepare and allows them to make room in their schedule before their calendar fills up.

Notice requirements vary by state. In California, an HOA should give notice of an annual meeting at least 30 days in advance, and for board meetings at least four days’ notice.

An HOA’s governing documents will also contain notice requirements for HOA meetings. Typically, this ranges from seven to 30 days in advance. As the meeting date approaches, remember to give constant reminders to residents. It is also a good idea to promote the meeting using various communication channels such as newsletters, email, phone calls, text messages, flyers, and the community website.

Allow for Virtual Participation

Physical attendance isn’t always a viable option for residents. To address this, an HOA can use technology to make things more accessible for everyone. If state laws and the governing documents allow it, an HOA should consider offering remote or virtual meetings as well as online voting.

2. Poor Preparation and Organization

Poor preparation and organization are among the simplest yet most destructive HOA meeting problems. Without a clear agenda, meetings can become directionless and quickly spiral into chaos. An HOA board that doesn’t prepare for a meeting in advance is also prone to making poor decisions.

Prepare an Agenda

An HOA should develop an agenda ahead of time to avoid poor preparation and organization. This agenda should follow a clear and concise structure and include all pertinent topics of discussion and voting. An agenda serves as a guide for all meeting participants to stay on track.

Distribute and Review Materials Ahead of Time

The HOA board should distribute the agenda and any other materials well in advance of the meeting. This gives both homeowners and board members time to review the materials and make informed decisions.

3. Poor Participation

A high attendance rate doesn’t always equate to high participation. Residents can show up at meetings but remain silent the entire time. While the board mainly makes the decisions at these meetings, it is still important to seek feedback from residents to gauge reactions.

Dedicate Time for an Open Forum

Although residents don’t actively participate in the discussions and decisions at a board meeting, they should still be given the opportunity to voice their concerns. As such, it is important to allocate time for public comment in the agenda. Notices should also reflect that residents have a chance to share their input at these meetings.

Keep in mind that some states require open board meetings to include an open forum. California is one such state. According to Civil Code Section 4925, the board must allow any member to speak at open board meetings within a reasonable time limit.

Keep Discussions Simple

Discussions and decisions can involve technical jargon that residents might not be familiar with, which discourages participation. To address this, the board should make every effort to use simple terms and express their opinions clearly. This promotes inclusivity and encourages residents to engage in community affairs.

4. Going Off-Topic

One of the HOA meeting problems that most associations struggle with is going off-topic. Discussions can quickly veer off course. Sometimes, the board might spend too much time on a single issue, expounding on it in a way that doesn’t relate to the original concern. This unnecessarily lengthens the meeting, causes burnout, and pushes the board to make haphazard decisions just to get it over with.

Stick to the Agenda

Stick to the established agenda to avoid going off-topic. Prioritize urgent issues and avoid branching out to unrelated issues. An agenda not only sets the tone for the meeting but also the pace.

Additionally, distributing the agenda to everyone beforehand gives them time to research, form opinions, and settle on a stance. Board members can do this in advance so that they come prepared with their organized thoughts at the meeting proper, keeping things on track.

Implement Robert’s Rules

Robert’s Rules of Order is a set of parliamentary procedures that facilitate an orderly and efficient meeting. Following Robert’s Rules or another set of procedures allows the HOA to stay on course throughout the meeting. It also prevents members from speaking out of turn and formalizes procedures for efficiency and professionalism.

5. Compliance Issues

The last thing any board wants is to conduct an Illegal HOA board meeting. Unfortunately, this happens way too often, as board members fail to adhere to statutory requirements and their governing documents. Improperly conducted board meetings can call into question the legitimacy of every decision made at these meetings. They also expose the HOA and board to potential liability.

Understand State Laws and the Governing Documents

Board members should thoroughly understand state laws and their governing documents. This means reading up on meeting notice requirements, proper voting procedures, open forum requirements, and proper record-keeping rules.

Hire an HOA Management Company

While self-management is an option, hiring a professional management company can help ensure compliance with legal requirements. An HOA manager can ensure that the board follows all procedures to the letter.

6. Dominant Personalities

Homeowners have different personalities, and some are more dominant than others. While these owners tend to be more vocal about their opinions and issues, there is a danger of them taking over the whole meeting and not allowing others to speak. This creates an imbalance within the community. The loudest voices don’t always represent the majority, but the board might inadvertently mistake it as such because they overshadow the silent owners.

Designate Speaking Time Per Member

To combat this, it is important to allot a time limit for each member to speak during the open forum portion of the meeting. The time limit can vary depending on the needs of the association. In addition to the time limit, consider enforcing a rule prohibiting the same person from speaking twice if other people have yet to get their turn.

Allow Written Input

Some homeowners may feel shy or apprehensive about public speaking. To encourage participation from these owners, an HOA can consider allowing written input. Let members submit their questions or concerns in writing, which can then be read during the open forum portion of the meeting.

7. Escalating Debates

There are plenty of stories of an HOA meeting gone wrong because of heated debates that turn ugly. It is normal for people to have differing opinions on topics and issues. These conflicts are simply part of meetings and discussions. However, it is important not to let these conflicts get out of hand or completely derail the meetings. 

Stay Professional

Board members must remain professional and respectful at all times. They must rein in their emotions and refrain from raising their voice. It is entirely possible to conduct healthy and inclusive discussions without turning heated.

If things do get a little tense, it is essential to exercise empathy. Try looking at things from the opposing party’s point of view. It is also equally important to actively listen to the opinions of others. Keep an open mind, as participants may make good points that could change the perspectives and decisions of others.

Take a Break

Everyone is human, and humans can get caught up in their emotions, which can start affecting their decision-making. When tensions run too high, it is best to take a step back and go on a short break. This will give everyone time to calm down, reorient themselves, and gather their wits. Then, go back into the discussion with a clear head.

8. Technological Hindrances

Nowadays, meetings often need the aid of technology, such as presentations, videos, and even remote meeting applications. Of course, this creates new problems, such as poor Internet connections, audio/visual hitches, and a poor understanding of software functionality.

Check Connectivity Before the Meeting

To ensure a smooth meeting, it is vital to check connectivity before the meeting begins. This way, connectivity issues won’t hinder the flow of the meeting, helping to keep everyone’s attention and maintain momentum.

Familiarize Yourself With the Tools

If the HOA doesn’t have a “tech guy,” it is imperative that board members understand how to operate the various equipment and tools that come with the meeting. This includes laptops, projectors, monitor screens, audio/visual connections, and software. Learning how to use these tools and knowing how to troubleshoot issues can keep things on track.

9. Long Meetings

Finally, HOA meeting problems also include long meetings. Long meetings are detrimental to an HOA not only because they waste time but also because they contribute to poor decision-making. If a meeting takes too long, board members will grow weary and tired, hindering their ability to make good decisions.

Additionally, long meetings can discourage attendance and participation. Nobody wants to attend a meeting if they know it will take hours to finish. Plus, they demonstrate that board members don’t respect homeowners’ time.

Prepare and Study in Advance

Preparing everything in advance helps ensure concise meetings. Board members should research beforehand, gather their thoughts, and list their concerns way ahead of time. This way, they can come to the meeting ready for discussion.

Allocate Timeframes Per Agenda Item

To avoid straying from the topic or dwelling on it for too long, it’s a good idea to designate a timeframe for each agenda item. Set a timer for the discussions so that everyone is conscious of the time.

The Final Word

Board members can face many potential HOA meeting problems. These problems contribute to lengthy, inefficient meetings that can further drive homeowners away. Fortunately, these problems have a fix, and it is fairly easy to implement them.

Personalized Property Management offers HOA management services, including assistance with board meetings, around Southern California. Call us at 760-325-9500 or email us at info@ppminternet.com for more information!

RELATED ARTICLES:

• HOA Meeting Minutes Rules
• HOA Board Duties: What To Expect From Your BOD
• How Can The Board Address HOA Noise Complaints

A professional HOA reserve analyst is an asset to any community. Unfortunately, far too many associations forgo hiring one for various reasons, including budgetary constraints. All things considered, though, the benefits of hiring a professional analyst far outweigh the costs.

What is an HOA Reserve Analyst?

An HOA reserve analyst is a professional who conducts a reserve study or analysis. Professional reserve analysts help ensure the financial stability and long-term viability of an HOA and its assets. With an accurate reserve study on hand, HOAs can carefully plan for future costs while simultaneously protecting the financial interests of homeowners.

Are All HOAs Required to Have a Reserve Study?

Whether or not an HOA must conduct a reserve study depends on state laws and the governing documents.

In some states, associations are required by law to plan for their reserves. California is one of them. According to Civil Code Section 5550, HOA boards must conduct a reserve study at least once every three years if the current replacement value of the HOA’s major components is equal to or greater than half of the association’s gross budget. The board must also review the reserve study every year.

If there is no statutory requirement to conduct a reserve study, an HOA must check its governing documents. The governing documents may require the association to perform a reserve analysis or study, including information on how often it must review this study.

Even if state laws and the governing documents are silent, an HOA would still benefit from conducting a reserve study. Reserve studies allow associations to plan for future costs and accurately incorporate contributions into the budget. This way, when the need arises, an HOA can safely dip into its reserves without needing to levy special assessments or considerably raise regular dues.

The Benefits of Hiring a Professional HOA Reserve Analyst

While California law does not specify who should conduct reserve studies for HOAs, it is best to hire an independent reserve analyst for the job. Most governing documents require an HOA reserve study professional to perform it anyway. Even without such a requirement, though, there are several reasons why hiring a professional reserve analyst is the way to go.

1. Compliance

Different states have different laws regarding reserve requirements and review frequency. An HOA reserve analyst can ensure compliance with these requirements because they are more well-versed in the reserve study laws in their state. 

The same goes for governing documents. Not all associations have similar requirements. A professional reserve analyst can review the provisions of an HOA’s CC&Rs and bylaws and ensure compliance with them. They know to understand the technicalities and jargon involved, often better than the board or community manager.

2. Expertise

Most professional HOA reserve analysts receive training and education to perform reserve studies. As such, they are better suited to conduct them.

Reserve analysts know how to perform various types of studies. These include a full reserve study, a study with a site visit, a study with no site visit, and annual reviews/updates. They also typically offer customized services depending on the community’s needs.

Furthermore, reserve analysts are well-versed in carrying out both parts of a typical reserve study. They can perform the physical analysis, which assesses the physical condition of the community and its assets. This includes estimating the cost of repairing and replacing major components in common areas. They can also perform the financial analysis portion, which reviews the HOA’s current financial health.

From there, reserve analysts can develop a financial plan for the association. This plan includes how much an HOA needs in its reserves at any given time and the dollar amount of contributions it must make every year to maintain the appropriate fund level.

3. Experience

Reserve analysts have the necessary experience to help associations prepare their studies. They have the proper industry accreditations that serve as evidence of their proficiency. They often have backgrounds in accounting, engineering, architecture, and other roles that can supplement their analyses. 

Moreover, reserve analysts usually pursue continuing education to keep up with the latest developments, industry trends, and standards. Associations can also ask for references or samples of past work to understand their work better.

4. Liability

There is a greater risk of potential liability when an HOA board takes the reserve study into its own hands. Hiring an independent specialist minimizes the association’s exposure to liability. Reserve analysts or specialists often have guarantees and warranties written into their contracts. Furthermore, when an HOA board prepares the study, it arguably breaches the Business Judgment Rule.

5. Objectivity

Professional reserve analysts offer an objective, unbiased perspective crucial for making informed decisions about reserve funding. This impartiality helps avoid potential conflicts of interest or biases that more commonly arise when the board conducts the study internally.

In addition, hiring an HOA reserve analyst helps shield the board from potential criticism. Homeowners who dislike the board will usually challenge or contradict any decision the board makes, including matters pertaining to reserve funding. With an independent or third-party analyst at the helm, homeowners can’t claim that the board used biased judgment to conduct the study.

6. Cost

Budgetary constraints are one of the major factors keeping HOAs from hiring a professional. However, reserve analysts offer various options suitable for every budget. Plus, smaller communities usually command a lower price for reserve studies.

7. Assurance

Hiring an independent reserve specialist gives board members and homeowners peace of mind. It is reassuring to know that the HOA’s physical and financial assessment rests in capable hands.

How to Select an HOA Reserve Analyst

Choosing the right HOA reserve analyst is essential for obtaining a reliable and accurate reserve study. Here are key steps and considerations during the search and hiring process.

1. Establish a Budget

The first step in hiring an HOA reserve analyst is establishing a budget. Not all associations have a large budget for reserve studies. Only a few associations dedicate some of their funds to this expense. However, the importance of reserve studies should be accounted for.

Once an HOA has set a budget for its reserve study, it can begin the search process. The established budget will help narrow down choices and remove expensive analysts from the running.

2. Determine Needs

What type of reserve study does the HOA need? This question should be answered at the beginning of the selection process. Determining whether the HOA needs a full study, a study with no site visit, or a simple update will help streamline everything.

3. Check Credentials

Look for reserve analysts with recognized certifications and credentials. The Community Associations Institute (CAI) offers the Reserve Specialist (RS) designation, which indicates that the professional has met specific education, experience, and ethical standards. Other certifications to look for include the Professional Reserve Analyst (PRA) designation from the Association of Professional Reserve Analysts (APRA).

4. Ask for References

It helps to ask for references to check the quality of work. References will allow the HOA to gauge whether or not a particular analyst is a good fit for the community. Expertise and experience should be considered, as well as work ethic and values. Ensuring these align with the HOA is critical to a good working relationship.

5. Verify Insurance

A professional reserve analyst should have the proper insurance coverage in place. Liability insurance is a must, as it protects both the HOA and the analyst in case of omissions or errors.

6. Request a Sample Report

An HOA should ask the reserve analysts for a sample of their previous work. The report should be clear, comprehensive, and easy to understand. It should contain detailed information on the condition of the assets, projected costs, and funding recommendations. Visual aids like graphs and charts also help the board grasp the findings better.

7. Evaluate Methods

The analyst’s methodologies must use industry-standard practices. When asked about their process, reserve analysts should offer transparent explanations. A good methodology also considers factors such as inflation, interest rates, and other economic conditions.

8. Gauge Responsiveness

Effective communication is essential for a successful working relationship. Evaluate the analyst’s communication style, responsiveness, and willingness to answer questions. They should be approachable and able to explain technical concepts in plain language.

9. Review Contracts

The HOA should request detailed quotes from multiple reserve analysts and compare the costs. Be wary of unusually low bids, which may indicate a lack of thoroughness. Boards should review the contract carefully to understand the terms and conditions, including payment schedules, deliverables, and additional services. A good contract should also include guarantees and warranties.

Everything Considered

A reserve study is a fundamental tool in ensuring a homeowners association’s financial health and stability. Not everyone can properly conduct a reserve study, though. Even with no requirements in place, hiring an HOA reserve analyst to perform this study is best, as the benefits are clear and convincing.

Personalized Property Management offers HOA management services, including help with reserve study reviews, around Southern California. Call us at 760-325-9500 or email us at info@ppminternet.com for more information!

RELATED ARTICLES:

• How Does The Board Come Up With An HOA Budget?
• How To Improve Communication In HOA Community
• 9 Reasons You Need An HOA Attorney

HOA management can be hard without professional help. For this reason, many homeowners associations choose to hire an HOA manager. Which type of manager is better: an on-site HOA manager or a remote one? Let’s find out which one is best for your community. 

What is an On-Site HOA Manager?

An HOA onsite manager is a full-time community manager who is physically present in the neighborhood. Unlike remote managers, they can play an active role in community governance. On-site HOA managers can immediately address maintenance issues, answer resident questions, and handle the HOA’s operations.

On-site community management involves at least two people: an executive director (or a general manager) and an administrative assistant. However, larger or more complex communities may require an entire team of HOA managers.

What is a Remote HOA Manager?

A remote HOA manager, an off-site manager, oversees the community from afar. They are not always in the neighborhood, so they usually support the board through back-office services. Remote managers are often in charge of scheduling board meetings, financial management, overseeing projects, invoicing residents, and coordinating with vendors.

In some cases, remote managers may visit the community to attend board meetings and conduct inspections. However, their on-site duties will vary depending on the management company that employs them.

On-Site HOA Management Services

HOA managers who remain on-site provide several services that provide value to communities. 

Board Meeting Management

On-site managers can schedule board meetings, help the secretary prepare the agenda, and send notices to community residents. They may even attend and facilitate those meetings if necessary, allowing board members to free up their time and focus on more important matters. 

Amenity Management

Many HOAs offer exclusive amenities such as clubhouses and parks. However, some require more active involvement than others. This is where an on-site HOA manager comes in handy. For example, a 24-hour pool may require on-site staff to supervise when and how many people can enter. Likewise, an HOA gym may need managers who can regulate foot traffic. 

Recreational Program Management

On-site managers can oversee a community’s high-end services and recreational programs. They can help manage transportation services, security patrols, community sports teams, and event planning.

Neighborhood Inspections

An on-site manager can perform regular inspections to ensure all common areas are operational and well-maintained. They can check the landscaping conditions, buildings, amenities, and shared roads, as well as check for any violations of community rules. 

Financial Management

An on-site HOA manager will often have experience in financial management. They can review the association’s transactions, income, and reserve accounts. Furthermore, they can give the board regular reports so they can make better financial decisions.

Resident Concerns

On-site managers are always available to answer questions and concerns from residents. Whether it’s a complaint about the HOA’s decisions or a maintenance job that needs attention, they can handle all of these for the board.

Community Liaison

The HOA manager can liaise between the board members and the residents. They can handle all announcements and send notices to the members. This informs the community of all board actions, decisions, and events.

Moreover, they can even handle feedback forms. This way, the residents can get their questions answered without bothering the HOA board. The board can simply focus on their duties and let the manager assist the residents with minor issues.

Back-Office Support

Back-office support is not something remote managers can do alone. On-site managers can also support your back-office operations. They can handle payroll, oversee human resources, organize documents, and manage finances. 

Board Advice

On-site HOA managers often have years of experience working with various communities. This allows them to offer advice to HOA boards in specific scenarios. For example, they can inform the board of all the ins and outs of obtaining an HOA loan when necessary. They can also help HOAs handle lawsuits should any arise. 

Professional Network

On-site HOA managers are well-connected and have relationships with professionals who have experience working with HOAs. These include HOA attorneys, financial managers, accountants, vendors, and insurance agents. While they might not be experts in these fields, you can rely on them to ask for advice from their wide network. 

On-Site vs Remote HOA Management

Remote HOA managers offer many of the same services as on-site managers, except for a select few. How are on-site and remote HOA management different? Here are some key factors that distinguish these services.

1. Community Size

While both large and small communities can benefit from on-site HOA management, the former has more to gain. A community with dozens or hundreds of units can only become unmanageable with on-site staff. Even without fancy amenities, conducting regular inspections or handling operations without a readily available manager is impossible. 

Condominium associations with many complicated facilities find it much more cumbersome. Recreational areas aside, managing industrial HVAC units, valets, and in-unit washer-dryers will be too much for the board to handle.

2. Management Focus

Off-site HOA management allows managers to oversee communities from afar. Often, this physical distance grants them the ability to manage multiple neighborhoods at once. While this setup allows them to multitask, it also fragments their focus between several HOAs.

In contrast, onsite HOA management allows the manager to remain dedicated to a single community. They can get to know the residents and understand the HOA’s culture, priorities, and needs. 

3. Scope

Both on-site and off-site managers have similar responsibilities, but the former typically has a broader scope. On-site managers are often more deeply involved in the community’s strategic planning and vision casting. As a result, they can focus on long-term goals and help the board promote the community’s reputation in the market. 

On the other hand, off-site managers will be limited in that they can only offer operational assistance. They can manage work orders, meeting schedules, financial reports, violations, and vendor relationships. However, their perspective is limited, so they may need help to offer fine-tuned insights. 

4. Availability

On-site managers have an edge in terms of availability. They may reside in the community or visit it every day to address issues, making them easily accessible in case there are any urgent problems or emergencies in the neighborhood.

You may be able to reach off-site managers quickly by phone or text. However, they won’t be physically present in a crisis. The HOA board has to take a more hands-on approach, as it cannot rely solely on the community manager. 

5. Communication

You run the risk of miscommunication when dealing with off-site managers. After all, even if you clearly explain a situation or perspective, it can still be misinterpreted if you don’t communicate in person. An on-site HOA manager can significantly reduce the number of misunderstandings that may occur.

6. Community Integration

On-site managers can build more personal relationships with the community residents and board members. This allows them to integrate into the neighborhood more smoothly and gain people’s trust. As a result, the homeowners may be more inclined to trust them to resolve community issues. 

In contrast, off-site managers only visit the community from time to time. They won’t be as familiar with the residents, so they might not understand the nuances of the HOA’s culture. While they can still provide management assistance, they will not have as much rapport as on-site managers.

7. Better Rule Enforcement

Residents can be sneaky regarding certain rules like pet and parking restrictions. They might sneak a small and quiet pet into the home or park in an area they’re not supposed to. If the HOA manager works remotely, they’ll be more likely to get away with these offenses. On the other hand, an on-site manager can more easily spot these violations and even deter them from happening in the first place. 

Which is Right for Your Community?

On-site managers are typically more expensive than remote managers. Nonetheless, they are ideal if you want someone readily available to assist, answer questions, and address emergencies. They can integrate into communities better and provide more service to their HOAs. 

Large communities also have an advantage because they can divide the cost among a larger number of units. Thus, residents can reap all the benefits of on-site management at a fraction of the cost compared to smaller neighborhoods. 

The Bottom Line

Homeowners associations have a choice between a remote and an on-site HOA manager. While the former is more affordable and offers some management support, their services might not be as robust. An on-site HOA manager is your best bet if your community needs someone physically available to handle issues and emergencies.

Does your community need on-site HOA management? Personalized Property Management has a team of experts who can serve communities around Southern California. Call us at 760-325-9500 or email us at info@ppminternet.com for more information!

RELATED ARTICLES:

• HOA Architectural Review Committee: Is It Fair And Effective?
• Know Your HOA Rental Restrictions Before Renting Out Your Home
• HOA Vendor Management: Building Relationships With Vendors

It’s not easy to undergo an HOA transition from developer control. A lot goes into the process, including director elections, handing over HOA documents and accounts, and training the new board for community governance. In this article, we review everything you need to know to make a smooth transition. 

What is a Developer Transition?

Homeowners associations are often established by a developer who is in charge of constructing homes, facilities, and common areas to create a planned community. In the initial stages, the developer fully owns and manages the entire property. They take care of everything from creating the governing documents to preserving the homes and maintaining the common areas.

However, as more and more homes are sold to individual or corporate buyers, the community eventually needs to transition HOA from developer. A developer transition involves the transfer of ownership or control of the HOA to the property owners. The transfer of control usually happens through the following:

• HOA Election. The developer transition requires the election of new HOA board members, who should mostly consist of individual homeowners. 
• Transfer of HOA Bank Accounts. The developer must transfer the HOA’s accounts to the new board and community members.
• Amenities and Common Areas. Any deeds or titles to community facilities are transferred to the homeowners association. Moreover, the newly elected board should now control and maintain the common areas. 

It’s important to note that an HOA transition from developer can happen gradually. This gradual transition usually happens when a development phase is not yet complete. For example, the developer might still need to build several homes in one portion of the community. 

How Long Can a Developer Control an HOA?

The transition from developer to homeowner control depends on state law and the governing documents. Both indicate when and how the developer should begin transitioning the community to property owners. 

In some states, developers must begin transitioning when a certain percentage of the homes have been conveyed to homeowners. Meanwhile, other states require developers to transition control after a certain number of years, regardless of ownership percentage. In California, the Department of Real Estate typically requires developers to slowly give up control in specific areas like voting structure, director elections, and architectural committee management. 

The governing documents may also have similar provisions regarding the transition process. It could hinge on a percentage of units sold or a specific number of years since development. Sometimes, the CC&Rs may even indicate a specific date. For many communities, this means gradually electing more homeowners as board members. 

Regardless of the requirements, it’s best to begin the transition process much earlier than the deadline. Shifting control and ownership can take anywhere between 12 and 18 months. The new board members need time to adjust to their duties and take control of the HOA’s accounts. 

HOA Transition from Developer Control: How to Do It

How do you transition developer control to the homeowners? Here is a guide that might help your community. 

1. Form a Transition Team

Homeowners associations should assemble a transition team at least one year before turnover. A dedicated committee can set milestones, deadlines, and schedules to ensure a smooth transition. The team can also ensure the right people are employed throughout the process. Moreover, it can even serve as a liaison between the residents and the developer.

Sometimes, the developer will appoint board members to help with the transition. This temporary board remains in power until the homeowners can hold an election. However, while involving community members is essential, the HOA should include at least one industry professional with experience in association management and development. 

2. Hire Professionals

Homeowners associations often hire vendors to complete maintenance work and community improvement projects. It’s no different when it comes to developer transitions. The entire process requires expertise from various individuals, including the following:

• HOA Manager. A certified HOA manager can support the board as they train themselves in community management. The manager can also facilitate communications between the developer and the community. 
• Engineer. A licensed civil engineer can inspect the facilities and common areas to spot construction defects and issues. They can ensure these are hammered out before the developer fully transfers ownership.
• Accountant. An accountant can audit the HOA’s existing financial statements to check for fund mismanagement or misappropriation. 
• Lawyer. An HOA attorney can check all the legal documents and requirements, such as the CC&Rs, vendor contracts, and warranties. 

3. Set Periodic Meetings

Homeowners associations should set regular meetings to keep the residents informed. The committee should meet at least once a week to address issues, update the residents, and work on all the transition documents.

4. Audit Each Contract and HOA Document

The developer might execute vendor contracts in the HOA’s name during the development. It’s vital that the community audits these agreements before they complete the transition. Review all the contracts, insurance certificates, claims history, and maintenance records beforehand. The committee should have copies of these and understand their terms.

If the committee uncovers a contract with unreasonable terms, they should work with the vendor and developer to terminate the agreement. However, this usually requires advanced notice and may incur penalties. Therefore, it’s important to consult an HOA attorney before opting out.

The committee must also review all the HOA’s governing documents. They should examine each provision and its implications and decide whether or not to amend them. This process can be quite time-consuming and cumbersome. Working with an HOA manager is best so you don’t miss anything.

5. Consult an Engineer

A licensed civil engineer should inspect the community and examine all common areas. The engineer can conduct a transition study that outlines all the potential issues. This way, the developer can address these problem areas before the community is turned over. 

6. Conduct a Reserve Study

Responsible financial management is foundational to an HOA’s success. Without it, the community can fall into debt and levy hefty assessments to cover the expenses. One of the most responsible things the newly elected board can do is conduct a reserve study immediately.

A reserve study is a tool that assesses the community’s assets, common areas, and finances to help the board anticipate major repairs and replacements. It can help them plan capital improvement projects and determine how much the community needs in the reserves to stay financially healthy. With it, the board can develop accurate HOA budgets in the coming years.

7. Transfer Paperwork

The HOA board members must have all the necessary documentation to operate. Typically, the developer has to pass on the following documents to complete the transition:

• HOA Governing Documents (Articles of Incorporation, CC&Rs, Bylaws, and Rules)
• Membership Lists and Contact Information
• All Recorded Meeting Minutes
• Financial Statements and Reports
• Insurance Policies
• Vendor Contracts
• Warranties
• Tax Returns

8. Train the Board

Electing the board is just half the battle when it comes to transitioning. The board also has to receive the right training to do its job well. Some organizations, like the Community Associations Institute, offer educational events and publications to help new board members learn the ropes.

Of course, nothing beats in-person training. If you want a more hands-on approach, hiring an HOA management company to help you get started is a good idea. HOA management companies often provide workshops and resources to help board members learn about governance, rule enforcement, relevant laws, and effective leadership.

9. Start With Maintenance

The newly elected board should gradually take over the developer’s responsibilities. Community maintenance is a good place to start. The board should start managing the work order requests and coordinate with vendors to schedule all maintenance activities. Over time, the developer can fully transition responsibility to the new board so they’re prepared to handle all the maintenance work.

10. Get Control of HOA Accounts

The new board of directors should completely control the HOA’s bank accounts. They should also check the developer’s accounting records, statements, and reports to ensure nothing is amiss and give them an idea of the HOA’s current financial status.

A Certified Public Accountant (CPA) can help if you’re having trouble understanding the reports. They can inspect the records for potential fraud, audit the financial statements, and ensure all the finances are properly handled. 

11. Update Insurance Policies

HOAs are often insured by the developer during each construction phase. However, that could change once control has been passed on to the community residents. The board should ensure the community has the coverage necessary to remain financially healthy. Some communities may also need additional coverage as required by law or the governing documents.

The Best Way to Transition

An HOA transition from developer can be tricky. It takes a long time to get everything in order. Plus, there are many things to learn — especially for the newly elected board. The best way to transition is to ask the developer for support, take your time, and hire the right professionals to help you. 

Need help with developer turnover? Personalized Property Management can help. We provide HOA management services to communities all across Southern California. Call us at 760-325-9500 or email us at info@ppminternet.com for more information!

RELATED ARTICLES:

• Setting Limits For HOA Committees
• HOA Meeting No Quorum: What Happens Now?
• Selective Enforcement In HOA: What Can Homeowners Do?

Accounting and financial management are some of the hardest parts of running a homeowners association. The board not only needs to keep accurate records but they must also generate financial reports to plan for the future. For this reason, communities avail of HOA accounting services from professional management companies. 

The Benefits of HOA Accounting Services

Homeowners association accounting services have many benefits. Here are some of the reasons why your community might want to hire a professional for the job.

1. Accurate Bookkeeping

HOA bookkeeping can be tedious, time-consuming, and confusing. Often, the HOA treasurer does not have the knowledge or background to maintain accurate records. As a result, the community might end up with messy or inaccurate books that do more harm than good. Board members might think they’re doing well financially when, in reality, they don’t have enough money to spare! This can lead to overspending and potentially put the community in debt.

In contrast, outsourcing HOA accounting services to a professional will ensure you get accurate bookkeeping. The accountant will keep track of all financial transactions, monitor accounts, and record everything properly. They can also generate accurate financial reports for the HOA.

2. Consistent Financial Reports

Financial reports are crucial tools. They help the board understand the association’s current financial health, allowing them to adjust the HOA budget and community plans. Without consistent or regular financial reporting, the board might make costly financial decisions that could lead to special assessments or increased fees.

With a dedicated accountant, homeowners associations can access financial reports quarterly or even monthly. They can identify ways to cut back on spending or increase their income. Moreover, the accountant can even attend board meetings to help them better understand their financial health. 

3. Comprehensive Audit

HOA accounting firms often provide auditing services to their clients. This is an essential part of governance as HOAs are usually required to conduct periodic audits to comply with the governing documents. 

In addition, state law may have certain requirements when it comes to conducting audits. For example, California HOAs that are required to perform audits must work with a Certified Public Accountant (CPA) to do so. Hiring a dedicated accountant or HOA management company to perform the audit fulfills this requirement. 

On the other hand, even if the HOA is not required to perform an audit, it’s usually a good idea to have one anyway. Annual audits help the board compare the budget to income and expenses. Moreover, it can pinpoint any accounting mistakes and uncover fund mismanagement or fraud.

4. Tax Assistance

Accounting for homeowners associations can be complex, but it gets even more convoluted when you throw taxes into the mix. With a dedicated accountant or management company, HOAs can file the correct taxes on time. 

Professional accountants know all the tax laws related to associations. They can help you file your tax returns and even think of ways to lower how much you pay. With their assistance, HOAs can allocate more funds to capital improvements, maintenance projects, and community events.

5. Cost-Effectiveness

Many board members assume hiring an in-house accountant is much cheaper than hiring an HOA management accounting firm. However, while the initial cost might be lower, it can be more expensive in the long run. This is because other costs are involved, such as training, payroll taxes, and benefits. 

6. Efficiency

It’s much more efficient to outsource HOA accounting services. This is because the accountant or HOA management company can handle all the accounting-related tasks for you. The board no longer has to divide its attention between accounting and operations. Instead, they can focus on creating policies and discussing community issues. 

In addition, outsourcing the accounting frees up HOA personnel to do other jobs. The staff can instead focus their time and resources on collecting fees, coordinating with vendors, and overseeing maintenance. 

7. Financial Guidance

The HOA board needs a lot of financial guidance to help them make better decisions. Professional accountants and HOA management companies can offer insights when the HOA is over budget, meets a roadblock in their financial plans, or accidentally misappropriate funds. Plus, professionals like these can help them plan the community’s reserves or choose the right HOA loan when necessary. 

8. Access to Technology

HOA management companies often have the right tools and software needed to achieve the best results in terms of accounting and financial management. With these tools, HOAs no longer need to invest in expensive software subscriptions. They immediately gain access to an efficient system that ensures accurate bookkeeping and reporting.

9. Legal Compliance

State laws govern what homeowners associations can or cannot do — and what they must do. HOA laws may mandate periodic reviews and audits to foster transparency and accountability. Apart from this, HOA laws change every couple of years. In fact, a handful of new laws were introduced in California alone in the last two years.

10. Continuity

HOA accountants can resign or change every few years. In contrast, an HOA management contract only ends when you cancel the agreement or choose not to renew it. Hence, it makes more sense to outsource HOA accounting services if you want better continuity. Even if the management firm has internal changes, its processes and services should remain the same.

Testing the Alternatives: In-House Accounting and Software

HOA accounting is essential to a community’s success. But do you have to outsource your HOA accounting services to a third-party management firm? Let us explore the alternatives below to help you decide what’s best for your community. 

In-House Accounting

Hiring a third-party management company is one of many options. HOAs can also hire an in-house accountant when necessary. An accountant can be beneficial for several reasons, including the following:

• Immediate Availability. An in-house accountant is always ready to answer questions, provide reports, and deal with urgent issues that might require an immediate response.
• Accounting Focus. A dedicated accountant is focused on the HOA’s financial affairs, priorities, and challenges.
• Communication. An accountant is always close by, allowing them to communicate more closely with the board. They can also attend meetings, offer real-time updates, and provide their input during financial discussions.
• Flexibility. In-house bookkeepers and accountants can modify their approach according to the HOA’s preferences. Whether it’s in terms of reporting, financial analysis, or how to handle financial processes, they can adjust to the community’s specific needs.
• Community Immersion. A dedicated accountant is immersed in the community and understands its values, culture, and needs. Hence, they can foster smoother interactions with residents, vendors, and board members.
• Better Control. A dedicated accountant allows communities to get better control over their accounting and financial processes.
• Transparency. Community members might be more inclined to trust an in-house accountant over a third-party management company to handle their accounting and reporting.
• Cost. In-house accountants tend to be cheaper upfront than hiring third-party accounting firms and HOA management companies.

That said, there are drawbacks to hiring a dedicated accountant. For instance, hiring an in-house accountant can be more expensive in the long term if you account for the cost of training, taxes, and benefits.

Moreover, they might have a narrower range of specialties than HOA management companies. They may need to gain experience in budget management, auditing, legal compliance, and reserve planning. In contrast, HOA management companies usually offer all these services in one package.

Accounting Software

Do I need a CPA if I have QuickBooks? Many HOAs assume that accounting software can replace an in-house or third-party accountant. While these tools are helpful, they still need to be used by someone familiar with accounting. Otherwise, you might make accounting entry mistakes. 

In addition, HOA finances can be complex. It’s not just a matter of entering income and expenses. HOAs must also log their reserves, handle budgets, file tax returns, and comply with ever-changing state requirements. Accounting software may be able to log these things, but they won’t always be able to provide strategic advice or detailed analyses.

Finally, accounting software can be misused to hide fund misappropriation, fraud, and theft. An accountant can spot these anomalies by analyzing trends and reviewing the reports generated by the software.

Frequently Asked Questions

Do HOAs Use Cash or Accrual Accounting?

Homeowners associations may use Cash Accounting for interim reporting. However, they must use Accrual Accounting for final financial statements and reports. 

What is the Best Accounting Method for HOA?

The Accrual Basis of Accounting is the best accounting method for homeowners associations. It depicts the HOA’s financial health more accurately as it records revenue and expenses when they are earned or incurred, regardless of cash flow. 

What is the Chart of Accounts for a Homeowners Association?

An HOA chart of accounts is the same as other organizations. It is a structured list of all the accounts the HOA uses to track liabilities, assets, expenses, and income. 

Why is GAAP Relevant to HOAs?

The Generally Accepted Accounting Principles (GAAP) are relevant to HOAs because they ensure their financial statements are comparable, consistent, and precise. It is an organized system that helps HOAs easily understand their financial status, allowing them to make better decisions. 

A Good Investment

Outsourcing your HOA accounting services can be expensive, but it is certainly a worthy investment. In fact, it’s one of the most important things you can invest in as a community as financial management can make or break the HOA. 

Personalized Property Management offers HOA financial management and accounting services to communities across Southern California. Call us at 760-325-9500 or email us at info@ppminternet.com to learn more!

RELATED ARTICLES:

• 9 REASONS YOU NEED AN HOA ATTORNEY
• KNOW YOUR HOA RENTAL RESTRICTIONS BEFORE RENTING OUT YOUR HOME
• REASONABLE ACCOMMODATIONS IN HOAS