There are essentially three options for management of a community association: volunteer or self-management, association-employed manager, and professional management company. Deciding which form of management to pursue is one of the single most important decisions a board of directors will make on behalf of their community. The decision is often determined based upon the size of the community, level of professional services desired by the board and community, and the costs associated with the services. Even in a small association, the responsibilities in serving the members and maintaining basic service levels and administrative and financial records make hiring of professionals almost a necessity. Ultimately, this decision can affect the scope and quality of services provided to residents, the condition of the community’s physical assets and amenities, curb appeal, and the overall financial health of the association.
Deciding to Seek Bids

The first step in determining what company to hire is the solicitation of formal bids or requests for proposals. This process is important for the first company hired by the association board or when a board wants to make certain they are paying a competitive price for the management company already on retainer.
Length of Management Contracts

Bidding professional management services can be a time consuming process and should not be necessary every year. Management transitions, even in the best of circumstances, unavoidably disrupt association operations. Therefore, the size of your community, the scope of services you are soliciting, and the number of special projects planned by the association should be factors in deciding the frequency of bidding. Multi-year contracts can provide an association with cost benefits, continuity in services, and, with an appropriate termination clause, flexibility to make changes when necessary.
Content in the Bid/Request For Proposals (RFP)

The RFP should include a letter requesting bids, a contact person and address to send the bid, a deadline for response, information on a bidder’s conference (if scheduled), a property tour (if appropriate) and the contact person for any questions on the request. Finally, it is helpful to include a time table for bidder interviews and for a final decision by the board in signing the contract.

Additionally, the RFP should include basic information about the community such as the number of homes, type of homes, amenities, age of the community, special features, the number of board members, the number of committees, a brief summary of any special projects in process, the association’s fiscal year, a current budget, etc. The RFP should also specify a uniform proposal format that will make it easy for the board to accurately compare submissions.

The RFP should include minimum qualifications for bidders such as demonstrated experience with the management of communities of similar type and size, fidelity bond insurance requirements, professional designations for the company and staff, technology capabilities and resources, etc.

Finally, the RFP should include a statement of work (SOW). The SOW should outline the services requested by the community and outline the expectations of the management company such as property maintenance demands, administrative services such as the number of meetings to be attended, financial services including collection duties, and other general support. Defining the expectations of the management company will help the board measure performance and accurately evaluate cost proposals.
Creating a List of Bidders

While the telephone book can be a useful resource in developing a list of potential bidders, there are other targeted sources. Community Associations Institute (CAI) is nationally-recognized as an excellent source for developing a bidders’ list. Board members may find a telephone survey of other association board members will yield a useful referral in selecting a management company. Also, the association’s legal counsel or auditor may provide insight in locating reliable, qualified management firms. Finally, a search of the Internet may also help provide background information on potential bidders.
Evaluating Proposals and Companies

Develop a list of questions for those providing bidder references that will address the services and qualities you are looking for from a new management company. Visit the properties managed by the bidders and visit their corporate offices. You can tell a lot about a management company by meeting their staff and asking questions about how their systems work.

For determining the effectiveness of the current management company, a survey of the property residents will provide a useful gauge of the management of the association. Also, a management audit performed by the board and manager or a third-party consultant can provide necessary analysis.
The Management Contract

Most management companies have standard management contracts explaining their services, the fees for those services, and the terms of the contract. Typical provisions clearly define the contracting parties, the lines of authority, the manager’s responsibilities, insurance requirements, length of the contract, a termination clause, an indemnification provision, and a compensation or fee schedule.

Using Legal Counsel to Assist with the Bid Process
Very often, an association’s board of directors will solicit the assistance of legal counsel for all or part of the bid process. While not necessary, legal counsel can be very helpful in reviewing the contract.

The owners who volunteer to serve as members of the board of directors often become overwhelmed with the duties and responsibilities this service requires for the other owners. A professional management company can assist in executing those duties timely, fairly, and legally.

Source: Community Management Corporation

This posting reprinted from Association Times

Related posts:

1. How to Deal with a Rogue Board Member
2. Directors vs. Officers of the Association – Clarifying the Misconceptions

Having a roguish manner in some situations might be quite charming, but such a characteristic is not considered an attribute for a position that involves overseeing or managing the investment owners have in their respective property in a homeowners association.

The board of directors is elected by the homeowners, usually based on leadership qualities that they have observed first hand or from a brief written synopsis of a board member applicant’s past business and community experiences. A successful board works together by listening to owners and one another and making decisions that will be in the best interest of the association. Disrupted meetings and delayed decision-making can result in unnecessary additional cost to the association if the rogue member does not participate at the meeting according to his or her job description as outlined in the association’s bylaws.

A board member with a rogue personality can spell disaster for the board and the association because he or she usually 1) does not recognize or acknowledge the importance and value of the board of directors as an entity, 2) does not understand his or her role as a board member, 3) has a personal agenda and will try to promote his or her own ideas at any cost, and 4) expects the rest of the board members to agree with his or her viewpoint.

When an individual becomes a member of the board of directors and exhibits such rouge qualities the balance of the board must be strong and continue to act in the best interest of the community. Restating the association’s mission at board and annual meetings will reinforce the mission of the association. Using various words (i.e. fiduciary responsibility, business judgment rule, discrimination, related party transactions, liability) when discussing various topics, may help temper a rogue board member.

Reviewing the Directors and Officers or Professional Liability insurance coverage with the board members is an eye opener in some situations. Understanding that professional liability coverage responds to decisions made in good faith versus those that are knowingly detrimental and not in the best interests of the association, can encourage board members to think twice before making a decision.

In the case of the rogue board member not responding to any attempts by the board of directors or manager to defuse potential problems, several other avenues may be discussed. The board of directors may go into executive session to discuss the board’s concerns and the possible liability to the association that may arise from the rogue board member’s actions. The board may also elect to discuss the issue with its legal counsel for recommendations on how to further handle the situation and put the board member on notice that such behavior and/or actions will not be tolerated.

In any event, the board of directors must address a rogue board member at the onset of the inappropriate behavior to avoid damaging the association’s reputation, legal standing, and, ultimately, its values and effectiveness.

Susan Sills, PCAM®
Vice President
Colorado Association Services
Colorado Springs, CO

Reprinted from Association Times

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1. Selecting a Management Company for your California HOA
2. Directors vs. Officers of the Association – Clarifying the Misconceptions
3. Southern California Association Board Members and Property Managers Praise Insurance Agent

It truly amazes me how the very individuals that voluntarily take on those positions and responsibilities misunderstand the Director vs. Officer concepts. Over the years I’ve come to the realization that it is often less effort to simply prepare and present a recap similar to that, which follows. Please keep in mind that this work is prepared within the context of a specific Association and its governing documents, as well as prevailing law, in this case the state of Arizona.

Directors vs. Officers

At the expiration of the Period of Declarant Control the Members elect the Directors to the Board of Directors of the Association. Those Directors elect the Officers of the Association.

The Association acts through its Officers and agents. The Board of Directors makes the policies for the Association, but the Officers and agents carry out these policies and administrative functions for the community. Some of the Officers are clerical while others carry out substantive functions based on policies established by the Board of Directors. All of the officers have an affirmative obligation to act with utmost good faith towards the Association and cannot deal in the funds or the property of the association to their own self-advantage. The Bylaws of the Association require a President, Vice President, Secretary, and Treasurer, and allow for other positions as determined by the Board of Directors.

The following will serve to highlight the powers and duties of the Board, the duties of the Officers, and how those positions are assisted through the delegation of some duties to the management agent.

From the Bylaws – Powers and Duties of the Board

3.10 Powers and Duties. The Board of Directors shall have all of the powers and duties necessary for the administration of the affairs of the Association and may exercise all corporate powers of the Association, subject to any limitation set forth in the Condominium Documents. The duties of the Board of Directors shall include, without limitation:

(a) Open bank accounts on behalf of the Association and designate the signatories thereon;

(b) Make, or contract for the making, of repairs, additions to, improvements to or alterations of the Condominium and repairs to the Common Elements, in accordance with the Condominium Documents, after damage or destruction by fire or other casualty, or as a result of condemnation or eminent domain proceedings;

(c) In the exercise of its discretion, enforce by legal means the provisions of the Condominium Documents;

(d) Designate, hire and dismiss the personnel necessary for the maintenance, operation, repair, replacement of the Common Elements and provide services for the Condominium, and, where appropriate, provide for the compensation of such personnel and for the purchase of equipment, supplies arid material to be used by such personnel in the performance of their duties;

(e) Provide for the operation, care, upkeep and maintenance of all of the Common elements and services of the Condominium and borrow money on behalf of the Association when required in connection with any one instance relating to the operation, upkeep and maintenance for the Common Elements;
(f) Prepare and adopt an annual budget, or amendment thereto, for the Association prior to the commencement of each fiscal year;

(g) Adopt and publish rules and regulations governing the use of the Common Elements and facilities and the personal conduct of the Members and their guests, lessees, invitees and family members thereon and establish penalties for the infraction thereof;

(h) Suspend the voting rights and the right to use of the Common Elements of a Member;

(i) Exercise for the Association all powers, duties and authority vested in or delegated to the Association and not reserved to the membership by other provisions of the Condominium Documents;

(j) Except to members of the Board of Directors appointed by the Declarant; declare the office of a member of the Board to be vacant in the event such member shall be absent from three (3) consecutive regular meetings of the Board of Directors;

(k) Employ, hire and dismiss such employees as they deem necessary and to prescribe theft duties and their compensation;

(l) Cause to be kept a complete record of all its acts and corporate affairs and to present a statement thereof to the Members at the annual meeting of the Members, or at any special meeting when such statement is requested in writing by any Member entitled to vote;

(m) Supervise all officers, agents and employees of the Association and see that their duties are properly performed;

(n) Levy Assessments in accordance with the Declaration and take all necessary action to collect such Assessments;

(o) As required by the Declaration, issue, or cause an appropriate officer to issue upon demand to any person, a certificate setting forth whether or not any Assessment has been paid;

(p) Procure and maintain adequate property liability and other insurance as required by the Declaration;

(q) Cause all officers or employees having fiscal responsibilities to be bonded, as it may deem appropriate;

(r) Cause the Common Elements to be maintained, as more fully set forth in the Declaration; and

(s) Comply with the terms and provisions of, and abide by all limitations of, the Declaration and all other Condominium Documents.

From the Bylaws – What the Board CANNOT delegate

3.11 Managing Agent.
The Board of Directors may employ for the Condominium a “Managing Agent” at a compensation established by the Board of Directors. The Managing Agent shall perform such duties and services as the Board of Directors shall authorize, including, but not limited to, all of the duties listed in the Condominium Act, the Declaration and these Bylaws, except for such duties and services that under the Condominium Act or the Declaration may not be delegated to the Managing Agent. The Board of Directors may delegate to the Managing Agent all of the powers granted to the Board of Directors or the officers of the Association by the Act, the Declaration and these Bylaws, other than the following powers:

(a) To adopt the annual budget, any amendment thereto or to assess any Common Expenses;

(b) To adopt, repeal or amend the Bylaws or any Rules;

(c) To designate signatories on Association bank accounts;

(d) To borrow money on behalf of the Association;

(e) To acquire and mortgage Units;

(f) To allocate Limited Common Elements;

(g) To sue only Unit Owners for the enforcement of the Rules and Regulations adopted by the Board, the Declaration and all other Condominium Documents on behalf of the Association;

(h) To sell, convey, mortgage, pledge, lease, exchange or otherwise dispose of any Association Property

(i) To grant easements, licenses and concessions through or over the Common Elements;

(j) To assign, transfer of pledge any debts due the Association for amounts in excess of Five Thousand Dollars ($5,000.00) or release any debts due in amounts in excess of Five Thousand Dollars ($5,000.00), except on payment in fill;

(k) To compromise any claim due the Association for amounts in excess of Five Thousand Dollars ($5,000.00) or submit to arbitration any dispute

or controversy involving the Association for amounts in excess of Five Thousand Dollars ($5,000.00); or

(l) To confess a judgment for amounts in excess of Five Thousand Dollars ($5,000.00) against the Association or its assets.

From the Bylaws – OFFICERS AND THEIR DUTIES

4.1 Enumeration of Officers.
The principal officers of the Association shall be the President, Vice President, the Secretary, and the Treasurer. The Board of Directors may create such other offices as the affairs of the Association may require. During the Period of Declarant Control, all officers of the Association shall be appointed and removed by the Declarant. After the termination of the Period of Declarant Control, all officers shall be elected by the Board of Directors. After the expiration of the Period of Declarant Control, the President must be a member of the Board of Directors. Any other officers may, but need not, be members of the Board of Directors.

From the Bylaws – WHAT DO THE OFFICERS DO?

4.7 Powers and Duties.
To the extent such powers and duties are not assigned or delegated to the Managing Agent pursuant to Section 3.11, the powers and duties of the officers shall be as follows:

From the Bylaws – JOB OF THE PRESIDENT and VICE PRESIDENT

President. The president shall be the chief executive officer of the Association; shall preside at all meetings of the Board of Directors or the Members; shall see that orders and resolutions of the Board of Directors are carried into effect; and shall generally manage the business of the Association.

Vice-President. The Vice-President shall act in the place and stead of the President in the event of his absence, inability or refusal to act, and shall exercise and discharge such other duties as may be required of him by the Board of Directors.

*Here is how management assists the President and Vice President

From the Management Agreement – MANAGERIAL DUTIES DELEGATED TO MANAGEMENT

1. Act on behalf of, and in conjunction with, the Association Board of Directors to ensure the duties of the Board of Directors are accomplished.

2. Coordinate and attend one (1) monthly meeting (maximum of two hour meeting) of the Board of Directors, provide information packages for the meeting as well as minutes from each meeting, and execute decisions made at such meetings.

3. Coordinate meeting of the Architectural Review Committee, provide minutes, and execute decisions made at such meetings.

4. Work with the Board of Directors, the ARC and all other Board appointed Committees to enforce the CC&R’s and all other governing documents.

5. Coordinate the annual meeting of homeowners and/or members as required by the Board of Directors and/or the Association governing documents.

6. Acquire and maintain insurance of the Association as directed by the Board of Directors and/or the governing documents.

7. Act as Statutory Agent and official address for the Association as directed by the Articles of Incorporation (if desired by Board of Directors).

8. Assist in acquisition, management and replacement of contract services such as landscape maintenance, janitorial, etc., as directed by the Board of Directors.

9. LMR On-site personnel will be provided per Appendix C. Additional personnel per schedule of charges detailed in Appendix B of this Agreement (if applicable).

10. Subject to the availability of Association funds coordinates Association responsibilities per the directive of the Board of Directors. For any one item of repair or replacement, the expenses incurred shall not exceed $ 500.00, unless specifically authorized by the President or Treasurer, or a Director if the President and Treasurer are absent, excepting however, that emergency repairs involving manifest danger to life or property, or immediately necessary for the preservation and safety of the property or occupants, or to avoid the suspension of any necessary service, may be authorized by LMR.

On-Site Personnel

11. Coordinate and manage vendor services.

12. Observation and interaction with contracted service providers.

13. Pool maintenance and cleaning of the pool areas, clubhouses, gym facilities.

14. Trash removal by the mailbox areas.

15. Inspections of the property to identify maintenance issues and coordinate vendor repair services or in-house repair and follow-up.

16. Identify CC&R violations and report to the LMR Senior Association Manager.

17. Process clubhouse reservations and follow-up.

18. Process pool key requests.

19. Available for after hours, on-call response.

20. Other maintenance and administrative tasks as agreed.

From the Bylaws – JOB OF THE TREASURER

Treasurer. The Treasurer, shall receive and deposit in appropriate bank accounts all monies of the Association and shall disburse such funds as directed by resolution of the Board of Directors; shall sign checks of the Association; shall keep proper books of account; shall prepare an annual budget and a statement of income and expenditures to be presented to the membership at its regular annual meeting, and deliver a copy of each to the Members; and, in general, perform all the duties incident to the office of Treasurer.

*Here is how management assists the Treasurer

From the Management Agreement – FINANCIAL DUTIES DELEGATED TO MANAGEMENT

1. Establish and maintain a checking account (General Fund), in the name of the Association to be used for all Association related banking transactions. Such accounts will be at a banking institution providing lock-box service.

2. Establish legal and general reserve accounts, separate from the Association operating account as directed by the Board of Directors.

3. Implement collection procedures for all Annual Assessments, Special Assessments, Maintenance Assessments, interest and all other monies due the Association per Appendix A of this Agreement.

4. Develop and maintain an accounts receivable and accounts payable system to include all revenue and expenses related transactions. Execute the payments and collections of monies as directed by the Board, or Board financial representative.

5. Prepare a monthly financial package for the Board of Directors to include AR, AP, General Ledger, bank reconciliation and other reports as requested by the Board.

6. Create an annual budget for the Association including short, mid and long-range reserve goals as stated by the Board of Directors.

7. An LMR representative will become an authorized signer on the Association’s General Fund account and will be authorized to draft checks, issue receipts for cash or handle funds belonging to the Association.

8. Assist in performance of audits in consonance with auditor appointed by the Association with any related clerical, secretarial, or accounting services requested by said auditor, per Appendix A of this Agreement.

From the Bylaws – JOB OF THE SECRETARY

Secretary. The Secretary shall record the votes and keep the minutes of all meetings and proceedings of the Board of Directors and of the Members; keep the corporate seal of the Association, if any, and affix it on all papers requiring said seal; serve notice of meetings of the Board of Directors and of the Members; keep appropriate current records showing the Members of the Association together with their addresses, and shall perform such other duties as required by the Board of Directors.

*Here is how management assists the Secretary

From the Management Agreement– ADMINISTRATIVE DUTIES DELEGATED TO MANAGEMENT

1. Create and maintain a comprehensive filing system for the Association including lot specific and complete correspondence files. These files will be available for inspection and reproduction to the membership as requested by the Board of Directors and/or required by the Association governing documents. The files of the Association are the property of the Association.

2. Create and maintain a current roster of all members including secondary addresses, rental contacts and other communication related information as provided.

3. Provide the Board of Directors with a monthly correspondence file and recap of significant Association / LMR activities.

4. Coordinate completion and filing of required U.S. Government, State of Arizona, Pima/other County tax reports, etc.

5. Provide information packages for the meeting as well as minutes from each meeting.

6. Coordinate meeting of the Architectural Review Committee and provide minutes.

7. Coordinate the annual meeting of homeowners and/or members as required by the Board of Directors and/or the Association governing documents and provide minutes.

Reprinted from Association Times

Related posts:

1. How to Deal with a Rogue Board Member
2. Selecting a Management Company for your California HOA