Reader Questions: Who Watches the Managers?

By Kelly G. Richardson, Esq., CCAL 

Hello Mr Richardson: What entity oversees/regulates HOA management companies in California?
Thank You, C.W., Santa Barbara

Kelly: What state agency oversees management companies? The management company manager refuses to speak to any of the other board members except the president. D.S., Escondido.

Dear C.W., and D.S.: There is no state agency in California overseeing HOA management companies or managers. Basically, the only requirement to begin managing HOAs is to obtain a local business license and then start soliciting clients. California has so many HOAs and many managers that it would probably take a major piece of legislation (and budget allocations) to initiate some sort of licensing, and, at least at present, the idea is not on the immediate horizon.

California has a voluntary designation, the “Certified Common Interest Development Manager,” under Business and Professions Code Section 11500-11506. The state does not oversee or issue this designation. A manager may call themselves “Certified” after completing 30 hours of instruction on specified topics from an education provider meeting certain criteria. Presently, the Community Associations Institute (CAI) and the California Association of Community Managers (CACM) are the main organizations providing education sufficient so a manager may call themselves “Certified” under this statute. The certification applies only to the individual and not to the entire company or other managers within the company.

This underscores why HOAs boards should not only look at the price quoted by a management company, but should ask about the credentials and background of the proposed manager for the HOA. Are they “Certified,” and do they hold any CAI or CACM designations?

Who watches the manager? The HOA board does.
Sincerely, Kelly

Dear Kelly: An insurance agent HOA member, out of the blue, advised me this is not a good time to change management companies, because recent government regulations have caused many insurers to go out of business. He said some HOAs now cannot find insurance or a company to manage them. My limited research does not appear to bear this out. Kelly, what is your opinion on this? Is this member misinforming me for some unknown reason? D.A., Poway.

Dear D.A.: HOAs in 2023 are in a tough market regarding property damage insurance. Three of the largest carriers have withdrawn from writing California HOA property insurance polices, and rates have skyrocketed for those still offering such insurance. I am not an insurance broker, but I mainly see my clients hurt by three factors:

1. The overall tightening of the property insurance market
2. Expanded designated wildfire risk areas
3. Past history of claims 

I have never heard that switching management to a different manager or company has an effect on the ability to obtain damage insurance. 

Currently, the greatest management industry challenge is high demand and a shortage of qualified managers. Unfortunately, even though the HOA housing model in California continues to grow, the management profession ranks have not kept pace – making good managers hard to find.

Your HOA should not hold on to poor management service just because of the fear that it might impact your HOA’s insurability, but make sure that you have a solid alternative before abandoning current management. Insist that the board meet the manager who would be assigned to the account before signing on a new management contract.

Best, Kelly