Give HOA Self Management a Try in 4 Steps

Key Takeaways

• Property management companies (PMCs) are a good fit for some HOAs, but other communities decide to self manage for a variety of reasons.
• Transition to self management requires transfer from the PMC to the HOA of all related information, accounts, and tangible property.
• Purpose-specific software automates many HOA management tasks, making it feasible for volunteer boards to self manage their community associations.

There can be many reasons to transition your HOA from a contracted property management company to a self managed HOA. It may simply be that third-party management in general is not meeting your association’s expectations. A particular property management company may be a bad fit for your community or fail to carry out the work it was hired to do. Or perhaps the benefits of having a professional manager are outweighed by the tens of thousands of dollars in unit fees and other expenses your HOA and its members pay for the PMC’s services.

The HOA Software Advantage

There was a time when HOA boards did (and some still do) do their communities’ bookkeeping, communications, and accounts payable and receivable—mostly with ledger books, paper invoices, physical checks, and manually stuffed-and-stamped envelopes. With everything involveding digitizing these manual accounts (or worse, maintaining them), it’s no wonder that many communities opted for a third-party PMC.

But thanks to advancements in DIY technology, there is now HOA management software that anticipates and automates many tasks while adding accountability and transparency, making transitioning to self management far less laborious than in the past for board volunteers.

HOA software helps tackle management needs with a holistic approach, streamlining and automating many important tasks—from budgeting and accounting, to per-unit billing and collecting dues, to tracking violations, to communicating with homeowners and storing and accessing all your community’s data from one central hub.

To make a successful shift to self management, first, you must end the relationship with your current HOA management company. Third-party managers typically come with a service contract for one to several years, which means you must honor the terms of the contract, find just cause to terminate it early, or pay an early-termination fee.

Take these steps to simplify the process of ending your management contract and build a self managed HOA with confidence.

Step 1: Avoid Multi-Year Contracts

A third-party property management company will rarely sign a contract for less than one year. However, some may offer you the option to sign an agreement that extends for multiple years.

Generally speaking, HOAs should avoid property management contracts beyond a one-year duration. This will give your members enough time to assess the work your third-party manager is doing without getting stuck with them for an unnecessarily long term.

A one-year agreement gives you short-term options either to hire a different PMC or to transition to a self managed HOA if that proves advantageous. Having the option not to renew each year means you can avoid the complications of terminating your agreement early.

Give your HOA’s board enough time to meet with its third-party property manager prior to seeking not to renew your contract, especially if your contract has an automatic renewal clause. Factor in any advanced notice your contract requires, if necessary.

Step 2: Do You Have a Case for Early Termination?

In some specific cases, a third-party property management firm may not live up to their end of the agreement, giving you “just cause” to terminate the contract early. Each individual contract may differ on what constitutes just cause, so it’s important to be familiar with your property management agreement, especially its termination clauses.

Here are some examples of violations that may allow you to terminate an agreement early:

• Not properly storing residents’ security deposits according to state law
• Violating state or federal Fair Housing Laws
• Not addressing resident needs or property upkeep in a timely manner
• Failing to fulfil certain obligations per the agreement, such as placing tenants or performing inspections

Note: Termination may sometimes require 30 to 90 days’ notice. Specific terms of cancelling a contract, with or without just cause, vary based on your individual agreement. It’s important to have a clear understanding of all that terminating your property management agreement entails to know if it’s a viable option or if there’s room to negotiate.

Step 3: Providing Notice

Your contract may stipulate that you must provide official notice to terminate the agreement. You may be required to send a letter via certified mail. Your board may choose to send an email notice first, letting the management company know that a certified letter is forthcoming.

It’s always best to keep your letter professional and free of accusations or attacks, even when listing reasons for termination. The letter should clearly state your intention to terminate and the effective time frame.

Remember also to send written notice to residents to let them know your self managed HOA will take over and what details of that transition pertain to them. Or consider putting the decision to a community-wide vote.

Either you or the management company must do this, depending on your contract. Handling these responsibilities yourself is easier than you may think when you take the steps to get started with self-management.

Step 4: Final Steps of a Self Managed HOA Transition

After ending your property management agreement, the final steps of becoming a self managed HOA are to transition all the finances and other data your third-party manager handled previously.

Some of the information that must be transferred includes:

• Any outstanding funds, such as rent or reserve funds
• Banking information
• Annual budget information
• Income and expense statements
• Other accounting data and financial reports
• Vendor contract data
• Security deposit records
• Copies of lease agreements
• All other community data

There are many software solutions, but HOA management software lets you store, retrieve, and manage all financial and community data in one central digital hub.

Self managed HOAs may be relying on a board treasurer who doesn’t necessarily have an accounting background or even be particularly tech-savvy. After parting ways with a third-party property manager, they may be left sorting through a large amount of files and physical documents without a clear idea of how to proceed.

HOA software tools help smooth the transition by letting you transfer spreadsheets, QuickBooks files, and other data directly into a secure, easy-to-navigate repository. HOA software can sync your financial data automatically to your bank accounts and streamline processes like billing and dues collection.

PayHOA’s holistic software tools help you seamlessly switch from a third-party property manager to a self managed HOA. Over 7,000 HOAs across the country trust PayHOA to help make their neighborhoods a better place to live, and 98% of our users recommend PayHOA.

PayHOA offers an HOA management software solution for HOAs of any size or managerial priorities. To find out how PayHOA fits your HOA management tasks and to see how intuitively its user interface works, try our software free for 30 days.