9 Tips for Nailing the Process of Hiring Your Next Condo/HOA Manager

This article first appeared in HOAleader.com. Kelly Richardson, Esq., CCAL, is a regular contributor to help inform community associations. 

When you're ready to begin the search for a new manager—or even your first manager—it can feel overwhelming. Often, bids aren't apples to apples. Price matters, but how much weight should it carry? Your personal connection with the manager is important, but how permanent will it be?

Take a deep breath. Our experts say these 9 actions should help you clarify the process—and your ultimate decision. 

1. Start with a request for proposal—but be sure it's carefully crafted. "A lot of my clients use RFPs because they have specific things they're concerned about," says Marshal Granor, CCAL, managing partner at Granor & Granor PC in Horsham, Pa., who is not only a community association lawyer but is also the former owner of a community association management company. "That's especially true with transition boards interviewing their first manager."

It's OK to search online for examples, but be sure to read through every line and tweak the template so your RFP is closely tailored to your community. "One of my clients decided to go online to find an RFP, then put one together based on that and sent it out," explains Granor. "I saw it and asked, 'Why are you talking about islands and waters?' They got it from someplace in Florida and didn't whittle it down enough."

2. Ask a logical source for referrals. Know who can probably give you a head start in finding a competent manager? Your lawyer.

"I'd ask your legal counsel for recommendations," advises Todd J. Skowronski, an associate at Makower Abbate Guerra Wegner Vollmer PLLC, whose firm advises nearly 2,000 association clients throughout Michigan. "If they like a management company, it's because the lawyer knows that management company does good work and doesn't get its clients into legal trouble."

3. Pose a real-life challenge to walk through their thinking. "During the interviewing process, I'd outline a current issue the association has and ask how the manager and company would approach the issue," suggests Jasmine F. Hale, CCAL, a partner at Berding & Weil based in Walnut Creek, Calif., who advises condos and HOAs throughout California. "Maybe you have a governing document violation issue that's become contentious. I'd explain it and ask the manager how they'd address it. That can give good insight on how the manager and company would approach operational issues."

4. Consider your personal connection, but recognize it's not guaranteed to continue. "I owned a property management business for a few years," notes Granor. "People who are doing the interviewing often want to know who their manager is going to be. But if it's six months from now, the company truly has no idea who your manager will be because no employer can guarantee an employee will be at their company in the future."

5. Get granular when it comes to every fee you could be charged. "You want to know your ancillary fees, or those other than monthly or per-door charge," advises Granor. "Some include a lot for their fee, while others are more à la carte, perhaps charging $.50 a page to fax or email a document.

"I've asked management companies about that kind of fee, and the response I've gotten is, 'We have to take the time to scan the documents and send them,'" he explains. "My response is, 'Raise your overall fee if you're worried about those costs becoming too high.'

"Also know that every management company charges for resale packets or estoppel certificates, whatever you call them in your state, or to respond to questionnaires for mortgage companies," says Granor. "Buyers might apply to three different lenders, and the manager might have to respond to three lenders. Charging a fee for that is reasonable. But charging nearly $1,000 for that isn't.

"I've also seen management companies charge for taking minutes of meetings," he adds. "If you as a condo or HOA are hiring a secretary because nobody in the community wants to do it, OK. Maybe that's fair. But when you get multiple pages of fees, it means maybe the company has been burned and taken advantage of. Or it means they lowball their bid and add on these fees."

6. Don't focus on price without a full understanding of what you're getting for that price. "I think the first mistake and the most common mistake many boards make when hiring new management is to evaluate proposals based purely on price," reports Kelly G. Richardson, CCAL, a partner at Richardson, Ober in Pasadena, Calif., whose firm represents hundreds of HOAs throughout California and who has been a syndicated columnist on HOA issues for 17 years.

"What they should be looking at is what they're getting and who they're getting for the price," he states. "Are you hiring a PCAM, the highest available professional designation of a manager in the United States? Or are you getting a manager with no credentials or designations from any organization, local or national?"

Hale agrees but notes that may not be a dealbreaker. "First, I'd ask for the credentials and certifications of the manager who's going to be assigned to the community," she states. "It doesn't mean a manager who doesn't have those isn't able to do a great job. There are a lot who are great. But certainly having a certified or credentialed manager can suggest an increase in their professionalism, commitment to the industry, and experience. And those factors tend to bode well for a longer-term, more successful management experience." Check out licensing and fit for your community, too. "If you're in a state where licensing is required, are they licensed?" asks Granor. "You don't want to be a training ground. New managers should be starting on the less-intensive properties."

Richardson also suggests you evaluate how many HOAs the manager will be working with. "By that I mean, is that one manager spread over 15 HOAs?" he asks. "And what's the scope of the services to be provided? Is the manager handling only the financials or managing the property? How often will that manager physically be at your property? All these issues must be addressed before you can make an apples-to-apples comparison."

California readers: There's one more pricing issue that can arise for you. "We have very California-specific financial disclosures and review requirements on HOA boards," explains Richardson. "Most management companies don't include the cost of those in their scope of services. We're always asking that those be inserted, and the companies always agree."

7. Check the tech the management company offers. "I believe there needs to be an online portal," insists Granor. "These are pretty much automatic today, but there are some companies around here that don't have one. With those companies, if you want a copy of your governing documents, you have to email the manager, who makes a copy and mails it or emails it to you. Some even make a copy and ask you to pick it up.

"Your management company should have the latest and greatest documents online and a system that allows your owners to see if their payment has arrived," he says. "The portals that are there for the companies that do this are wonderful. If a company doesn't offer that or charges extra for it, that's a red flag."

8. Don't miss this important step. "I'd also check references," advises Hale. "Too many associations don't think to ask for references of current clients they can talk to—and then actually call those references!"

Be sure to search for online references, too. "I'd check Yelp and Google reviews," suggests Skowronski. "I wouldn't give them too much weight. But if you see a lot of the same comments, such as nonresponsiveness, it's something to consider."

9. Be sure the contract won't ruin a great business relationship. One thing that can sour a client-management company relationship is a later dispute over a contract provision that makes the client condo/HOA feel duped. "Always have your legal counsel review the management contract," suggests Skowronski. "They'll know what sort of pitfalls can appear in management contracts and what to watch out for."

Hale couldn't agree more. "Good lord, I can tell you that not all management contracts are created equally and that a lot of times boards don't understand what they're getting into," she explains. "This may sound minor, but it can be important. At least in California, an association is legally entitled to impose late fees, interest charges—the whole nine yards—on delinquent accounts.

"I've seen contracts that say the management company is entitled to keep all the late fees associated with delinquent collection issues," says Hale. "What happens is that a conflict can arise between the management company—which considers that provision a revenue generator—and a board—which wants to waive those fees to get the owner to pay the principal. Now you have a conflict in which the management company doesn't want the board to agree to give up this revenue while the association says it's worth waiving it to get the principal.

"That sounds small, but I've definitely seen it come into conflict between managers and associations," she states.

Other contract provisions to weigh carefully are autorenew and autoescalation clauses. "The most common thing I see is that many management companies would prefer to have an annually renewing contract that autorenews and has an autoescalation in their fee," says Richardson. "I believe it's in the association's best interest to have a month-to-month contract with perhaps 60 days' notice to terminate for any reason.

"However I do recognize that it takes management companies several months to sort of break into a new HOA in terms of settling into a cruising altitude," he adds. "So I feel guaranteeing you'll be in the contract six months is fair. I've found all the reputable management companies will acknowledge this and change to a month-to-month contract as long as there's some minimum period so they know they'll have a chance to at least recover their startup costs."