There are many reasons to transition to a self managed HOA.
Your third-party management company may not be meeting your association’s needs. They may be a bad fit for your community. Or maybe you’ve weighed the cost versus benefit of paying tens of thousands of dollars in unit fees and other expenses your property manager charges each year.
Whether it’s one of these reasons or all of the above, many HOAs choose to part ways with third-party management companies and take on the day-to-day operations of their communities.
The HOA Software Advantage
HOA management software makes transitioning to self management easier than ever 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.
How to do this, however, can seem complicated. Third-party managers typically come with a service contract for one or several years, which means you must honor the terms of the contract or find just cause to terminate it early.
Take these steps to simplify the process of ending your management contract and build a self managed HOA with confidence.
Table of Contents:
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 long term.
A one-year agreement gives you the ability to transition to a self managed HOA more quickly. Having the option to not renew each year means you can avoid the complications of terminating your agreement early.
Note: Give your board enough time to meet with your 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 the termination section of your property management agreement.
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.
You may give reasons or results, but it’s always best to keep your letter professional and free of accusations or attacks. The letter should clearly state your intention to terminate and the effective time frame.
Remember to also 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. 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:
· 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
· Any outstanding funds, such as rent or reserve funds
HOA management software lets you store, retrieve, and manage all financial and community data from one central digital hub.
Self managed HOAs may be relying on a board treasurer who doesn’t necessarily have an accounting background. 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 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.