Self-management could mean a slippery slide into trouble by Julie Peterson, PMDP

Q: We live in a small association and our CC&R's require us to use a professional management company. We think it would be less expensive if we used self-management. Can we do this? If not, why not?

A: Most governing documents allow you to become self-managed provided that you do it in the proper way. Your existing documents should state the procedure to follow to do this such, as obtaining all of the necessary signatures from both the homeowners and the mortgage holders.

Of course your governing documents could also require that you change or amend your documents. You would then be obligated to obtain the proper approval from all involved in order to amend or change them.

Board members are generally unaware of the great deal of administrative tasks that go on behind the scenes and that are needed in order to maintain a well-run association. Most board members or homeowners do not realize the amount of time spent on things such as refinancing of homes, homeowner certificates for mortgage companies, escrow demands, delinquency follow-up, lien processing, investing of reserve funds, audits and required mailings and deadlines.

Homeowner association management is becoming more and more complex as the years go by and does require a great deal of expertise. It used to be that successfully managing a homeowner association meant that the trash was picked up on schedule, the pool was the correct temperature and that everyone parked in the proper parking space.

Homeowner association management has evolved into a complex animal fraught with legal pitfalls. Small associations that chose to forgo professional management may find out too late that they were penny-wise and pound-foolish.

They may find that they will end up using an attorney more often, at a much higher price, to help them handle minor day-to-day issues that a management company could have handled at less expense if it had been available. It is very difficult for volunteers to put in the necessary time to keep up to date on the latest trends and new legislation.

There is also a benefit to having a professional manager share with you ideas on how other associations successfully managed the same problems as your association faces.

Professional management companies have more clout with vendors and have access to discounts and bulk purchasing, which are then passed on to the customer. Insurance companies will many times give discounts if the property is professionally managed.

Homeowner associations do not realize that the reason they are getting such good prices is due to the management company. They also have the experience of working with various vendors and can recommend who would best meet your needs.

If a small association cannot afford professional management, then it should find a management company that it can hire on a consulting basis or pay by the hour for services rendered. It would also be smart to subcontract the accounting portion out to a CPA or company that specializes in billing rather than trying to do it themselves and thus leave themselves open to criticism from their neighbors for possible mishandling of funds.

Please bear in mind that if you do elect to go self-management and find out later that it doesn't work as desired, you may find that many of the professional management companies are unwilling to take over the management of projects that have been self-managed.

Julie Peterson is a member of the Community Associations Institute (CAI) and is Vice President, Management Division of N.N. Jaeschke, Inc. Readers can visit the CAI website at http://www.cai-sd.org and can get their condominium or homeowners association questions answered by calling the Community Associations Institute at (619) 299-1376; e-mail at q&a@cai-sd.org or sending questions to: Condominiums, Homes, San Diego Union-Tribune, P.O. Box 120191, San Diego 92112-0191.

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