Homeowners' Association Property Managers

Common interest real estate developments, such as condominiums and planned residential developments, often hire a property management firm to handle the day-to-day operation of the development. The governing board of the homeowners' association (HOA) generally selects the property manager. The property manager becomes the HOA's agent. It has defined responsibilities, and it may be held liable for its actions.

Getting Started

People who purchase units in a common interest residential development are known as homeowners. All of the homeowners of a development belong to the HOA for the development. So, if you buy a home in a planned residential development, you become a homeowner and a member of the HOA.

After the HOA has its first meeting and elects its first board of directors, operational control is transferred from the developer to the board. One of the first decisions that the new board must make is whether or not to hire an independent property management service to handle the operation of the development.

Hiring a Property Manager

Employing a professional management company is a good way to of insuring the HOA's continued positive growth and the viability of the development. Whether or not the HOA's board of directors should employ some kind of management company depends on several factors, including:

• Size of the development
• Cost to each housing unit for management services
• Experience of the members of the HOA in managing the day-to-day affairs of the HOA

For larger developments (200 or more units), a business-like operation capable of handling a management situation of considerable scope is required. For medium-sized developments (75-200 units), an on-site, nonresident presence during normal business hours, with the governing body handling other responsibilities, is probably the most cost-efficient arrangement. Smaller developments may run smoothly with the HOA having direct responsibility for project management.

Once the decision to hire a management company has been made, the board should evaluate several firms and decide which one is most suitable. Once the board has agreed on which management firm to hire, the board usually has to obtain the consent of the majority of homeowners in order to enter into a written contract that lasts for more than one year.

Roles of a Property Management Firm

A property management agreement should clearly define the extent of the management firm's area of responsibility and make clear the fact that the firm is the agent of the HOA. As an agent, the firm has the authority to enter into contracts on behalf of the HOA. It has the authority to take other actions on behalf of the HOA. The firm must disclose its agency relationship to third parties in order to avoid liability for the firm.

Property Management Duties

Property management firms may have many duties, including the following:

• Locating tenants to fill vacancies or purchasers to buy units through advertising, real estate brokers, or rental agencies
• Selecting tenants or owners who fit in with existing tenants or owners and checking their financial qualifications
• Preparation, completion and renewal of leases
• Assisting with sales contracts
• Maintenance of the building and grounds
• Making property improvements
• Hiring and supervising personnel to staff and maintain the property
• Negotiating contracts with outside maintenance people
• Dealing with tenant or owner complaints
• Keeping records and developing a record-keeping system
• Paying bills and periodic auditing of accounts
• Collecting rents and fees
• Maintaining adequate insurance on the property
• Preparing financial statements

Liability of Property Manager

The relationship between the HOA and the property manager will usually be created and defined by written contract. This management agreement will typically establish a principal-agent relationship, with all state laws applicable to agency relationships becoming part of the agreement.

As provided in the agreement, the property manager will become the agent of the HOA. As an agent, the property manager will also be considered a fiduciary, which means that the manager must act in the HOA's best interest in matters connected with the management of the property. The manager has fiduciary duties toward the HOA, such as the duty of safeguarding money and property belonging to the HOA. If the manager violates its duties toward the HOA, the manager may be held liable for breach of its fiduciary duties.

If the property manager is acting within its authority when it breaks a contract or causes a personal injury, the HOA may be held liable for the manager's actions.

If you have any questions about property managers for residential real estate developments, contact a residential real estate lawyer in your area.

Questions for Your Attorney

• How can I get the HOA to hire my company as the next property management firm for our subdivision?
• Does the property manager for my condominium have the authority to terminate the HOA's contract with the housekeeping service?
• Will our property manager be held liable for failing to pay the HOA's property taxes?

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