When an association hires professional services, it should expect to pay HOA management fees. These fees cover the cost of management services, which can encompass maintenance, vendor coordination, and collections, depending on the agreement. It is important to understand what’s included in these fees and what’s not.
What are HOA Management Fees?
Homeowners association management fees are the payments an HOA makes to a professional management company in exchange for managing the day-to-day operations of the community. These fees are usually paid monthly and come out of the HOA’s operating budget.
Management fees usually cover the following:
- Administrative Support. This includes handling resident inquiries, issuing violation notices, and managing correspondence.
- Financial Services. This includes collecting dues, paying bills, preparing budgets, and producing financial reports.
- Maintenance. This includes conducting inspections, facilitating repairs, and planning maintenance schedules.
- Vendor Coordination. This includes hiring and overseeing contractors for landscaping, maintenance, security, and repairs.
- Rule Enforcement. This includes performing property inspections, monitoring violations, and implementing penalties.
- Legal Compliance. This includes ensuring the community complies with its governing documents and applicable laws.
- Board Support. This includes providing advice, managing meetings, and training board members.
How Much Does HOA Management Cost?
HOA management fees can vary significantly from one company to another. It ultimately depends on a few factors, including the scope of services, community size, and community type.
That said, the average HOA management fee falls between $10 and $20 per unit per month. Some companies charge on a percentage basis, typically falling between 5% and 12% of the total monthly dues.
Larger communities may be able to get discounted or lower rates. This is because administrative costs can scale well, which would let the company charge a lower per-unit rate for larger associations.
Still, it is essential to read contracts carefully before signing. Boards should check the pricing structure as well as any hidden fees that may be included. Don’t be afraid to negotiate fees and hire a lawyer for assistance.
What Fees can HOA Management Charge?
Generally, HOA management company fees can include the monthly rate, the initiation fee, the transition or exit fee, the early termination fee, and other add-on fees. Let’s break these down below.
1. Monthly Management Fee
Associations must pay an ongoing fee that covers the management services of the company. The management contract should clearly state this fee and the pricing structure. Some companies charge on a per-unit basis, while others charge a percentage of the total dues.
2. Initiation Fee
The initiation fee is a one-time fee that the company charges when a new homeowner moves into the community or when a new contract begins. This fee usually covers the cost of setting up the new account, reviewing and transferring documents, providing welcome packets, and administering key access (if any). Other names for this fee include setup fee, onboarding fee, or transfer fee.
3. Transition or Exit Fee
The transition or exit fee covers the cost of switching management companies. The company collects this fee to ensure a smoother transition to the new company. It pays for the cost of transferring documents and access, updating HOA records, and similar expenses.
4. Early Termination Fee
The early termination fee is the fee charged by the company for ending a contract before its expiry. If an association decides to cancel its agreement with the company early, it must pay this fee.
5. Add-on Fees
These fees cover extra services not included in the standard contract or scope of services. They are additional fees that an association may pay on an à la carte basis or whenever it needs the extra service.
Can an HOA Management Company Add New Fees Mid-Contract?
Some association boards may be surprised by additional fees that their company adds mid-contract. Board members should understand the legalities of this practice to protect the association better if the situation arises.
The short advice is to check the management contract. The contract should indicate whether the company has the authority to add new fees at its discretion. To avoid getting stuck in this situation, boards should thoroughly review the contract before signing and make sure this clause is removed. Instead, the contract should state that both parties must agree upon any new fees.
Even if state laws change and require additional work for the company, companies can’t unilaterally add fees. Boards must approve these extra charges or fee increases. Again, it boils down to ensuring the management contract is airtight.
Factors That Affect HOA Management Fees
Some factors can influence HOA management fees. These include the level of service, community size, community type, and location. Let’s break them down below.
Level of Service
The level and scope of services can determine HOA management fees. Associations that require more services tend to pay higher fees, whereas those that only need select services usually pay a lower cost. Communities with extensive amenities should also expect higher HOA management fees.
There are four levels of service, each one costing more than the next. These are full-service management, remote management, financial-only services, and consulting services.
- Full-service management. This includes all the services a management company has to offer, including an on-site HOA manager.
- Remote management. This includes all the services in a full-service management contract, except for no on-site support.
- Financial-only services. This focuses only on financial services, such as collection, budget planning, financial reporting, and reserve management.
- Consulting services. This is when an association only requires consultations, recommendations, or advice from trained professionals.
Community Size
The size of the community can also affect HOA management fees. Bigger communities with more complex amenities demand more comprehensive services. In contrast, smaller communities usually don’t require as much focused or extensive support because they have simpler operations.
Community Type
The type of community also significantly affects HOA management prices because each comes with its level of complexity, size, and service demands. Condo associations require more extensive management, leading to higher fees per unit. Single-family communities require less ongoing maintenance due to fewer shared systems. This results in a lower cost per unit.
Townhome communities are moderately priced because they fall between condo communities and single-family HOAs. Commercial or mixed-use associations usually have much higher management fees because they combine residential and business needs. They are more specialized, involving leases, commercial operations, and different maintenance standards.
Finally, luxury communities have higher expectations, with perks such as a 24/7 concierge, security staff, and private maintenance crews. Due to the level of service and additional staffing requirements, these communities pay higher HOA management fees.
Location
Finally, the location of the association can have an impact on management fees. Places with higher costs of living, as well as costs of goods and services, tend to have higher management fees. In comparison, associations that reside in more affordable locations can benefit from lower fees.
The Bottom Line
Hiring a professional management company comes with plenty of benefits. Association boards can expect reduced workloads, more effective operations, and a general peace of mind. That said, it also comes with HOA management fees. Understanding these fees and what they include is essential to securing a favorable deal.
Cedar Management Group offers HOA management services to communities. Call us today at (877) 252-3327 or email us at help@mycmg.com to get started!
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