Commentary by Eric McKinney
Having been privileged to provide general contracting services to HOA and COA boards for the last 27 years, I’ve witnessed the transition of the management industry becoming fixated on providing their own in-house maintenance and construction services to their communities.
The reason for this is simple: follow the money. A typical management contract averages between 7 to 8 percent of a community’s annually collected homeowner dues while the monies paid to vendors for yearly maintenance services and community capital improvement projects is in the 50 to 60 percent range.
Put another way – a community that collects $100,000 in annual homeowner dues spends between $7,000 to $8,000 on management fees yet spends $50,000 to $60,000 on the vendor services.
While management companies offering their communities maintenance and construction services will ensure the boards they have the best interest of the community in mind, nothing could be further from the truth. In fact, HOA/COA boards are becoming targets of their management company because management understands the vulnerabilities of the board and its members and what’s needed to get to the community checkbook.
Here are a few reasons why this is most definitely the case:
1. Your community manager is incentivized (with a monetary “kick-back”) to have his/her management company provide communities with vendor services.
2. Being on an HOA/COA board is a voluntary and temporary position and board members typically trust their management company. This gives management the upper hand.
3. The experience level of board members is typically very limited with regards to vendors, projects cost ranges and the specifics of the maintenance and capital improvement needs of their community.
4. It only takes a majority vote – meaning a manager can schmooze the right board members to get the votes needed to have his/her management company provide vendor contracting services.
So, the question becomes: Is it in the best interest of communities to have its management company provide maintenance and construction services? That’s for individual boards to decide. But the best methods to safeguard against the pitfalls of having this be the case are the ‘checks and balances’ I will share next time.