As a leader in Homeowners Association Management, one of the questions we get from potential clients and current clients is when are homeowners association management company administrative fees justified?
How Does Key Community Management Manage Cost, Price & Fees for your Homeowners Association?
When we started our property management company over 14 years ago, as with any business, we had to create a fee structure. We realized early on there were two main aspects of billing for services. First, we establish a per-door cost or a contracted monthly price for services outlined in our contract and second is the administrative fees. The administrative fee structure is used to cover any services for the community outside the parameters of the assigned tasks and is charged to protect against the excessive use of material or time such as printing, postage, etc.
Our general rule for homeowners association administrative charges early on was, if we could not provide an accurate monthly accounting of each item billed, then those items should be included in the monthly per door cost. What we deemed as a prudent and responsible business decision, we soon found out was not how most local management companies view fees.
Prices/Costs & Fees Your Homeowners Association Should Watch Out For
I am currently working with a very large local homeowners association with over 800 homes that is a potential client. My contact person in the community was able to provide me with financial information from year end including the reserve balance from 2015 and a February 2016 reimbursable expense report. The monthly management fee base price based on the per-door formula is approximately $5,000. I hope you are sitting down, because the February reimbursable expenses were over $3,000 for a total of over $8,000 for the month. The reimbursable expense report listed 11 line items with six of them I believe to be excessive.
They include HOA fee items like:
- Bank account maintenance 1 ea. $95
- Violation notices 4 ea. $32
- Architectural review processing 11ea. $275
- Color copies 79 ea. $59
- Monthly storage fee of records 7 boxes $385
- Delinquent legal processing 16 ea. $1,424
Total excessive charges for one month $2,270
Our bank does not charge a maintenance fee, HOAs do not typically need color copies and the storage fee is excessive. The sad ending to this travesty is the community, which is over 10 years old, has maintenance issues looming and they only have $21,000 in their reserve account.
My advice to board members is to dig deeper into budgeted items, talk to vendors and have them explain the details of the contract, negotiate terms and make sure all fees are visible on the contract. Be vigilant and don’t put your community at risk. Call us today to review your governing documents and how they provide a path to a financial and legal community experience.
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