Part 1:  What you may not realize

With changing laws, liability, and lending standards, owners in communities that self-manage may not be aware of the position they’re putting themselves---and their volunteer board members---in.

You already know how much work your volunteer board does.  They keep the place looking great, they keep the bills paid, they maintain community standards, and much more.  In addition to the work that the self-managed HOA board always does, pressure is increasing because of changes in the HOA space, and overall expectations of responsiveness in our world. 

As a homeowner in a self-managed HOA, you may think, “We’ve managed by ourselves this long…why hire management now?”   But when you say, ‘we’ve managed’…who exactly has managed?  Yes, you’ve paid your HOA dues, and perhaps attended meetings…but someone has actually been doing the heavy lifting of running the HOA.  Spending time and resources.  Collecting dues, paying vendors, arranging maintenance, budgeting, mediating bylaws questions. And putting themselves in a position of liability on top of that.

Your HOA may be fine, but your volunteer board members are probably pressured and strained.  All the owners are relying on a few volunteers.  And expecting them to do a good job with their management. In most states, a board member can’t be compensated in any way.  This is a purely volunteer effort, with a lot of people’s property values at stake.  Is it really equitable---or even wise---for a few people to take on so much, for the benefit of the whole HOA?  As an owner, are you sharing the responsibility for your ownership stake in the HOA?

Laws, liability, and lending standards

When you’re part of an HOA, your property value is tied to the governance and health of the association you belong to.  Most days it doesn’t concern you---but when you go to sell, refinance, or even reinsure your home, it will matter a lot.  And when you want help, you’re going to want it fast.

Laws governing HOAs are changing to protect owners and mortgage lenders, and boards must keep up.  Liability on board members is increasing, driven by lawsuits and other factors. Lending standards are tightening, with more scrutiny on the financial and maintenance health of the HOA. Your board is doing a lot of work, but they don’t have access to answers on many questions that they need help with.  And owners increasingly expect answers to be available instantly---like reaching for an app on your phone.

Liability. The board’s choices affect all property owners, and sometimes there will be conflict, or even mistakes.  Without professional support, volunteer board members don’t usually have access to current legislation that affects HOAs, awareness of insurance liabilities for the HOA, and more. 

Access. What if you need something from your HOA board? New lending laws require financial and community disclosures for federally backed mortgages.  Some lenders require more.  Reports and questionnaires need to be accurately completed and returned fast---or your sale or refi is at risk.  What if your board is busy that day?

What if something unexpected happens?  Continuity for the HOA is something owners don’t consider until it’s too late.  If something happens to your board, where are all the HOA records kept?   In self-managed HOAs, it’s not uncommon for things to go sideways when the president or treasurer---the only people with access to HOA accounts—moves, quits, is ill, or unavailable.  It takes a tremendous effort to get banking and accounts straightened out if something happens to the board that controls them.  

Dues billing, collecting, vendor payments, and bookkeeping. It’s a lot of work to keep up with the responsibility of the financials of a homeowners association.  And that’s just the start.  What kind of financial controls are in place to protect the HOA’s funds? 

Self-management is tough on the HOA’s volunteer board, while benefitting all of the owners.  And it can put all the owners at risk.  By kicking in to bring on professional management, all owners share the load.  The community runs responsibly and legally for all members, when the whole community contributes a little.  A third party professional HOA manager makes running the HOA easier, more convenient, more protected, and really…more fair. 

But the benefit is not all for the volunteer board.  For more of “Doing fine on our own”, see another Small Talk post, “For owners only: What’s in it for me?”