I have closely observed condo and HOA communities around the country through reserve fund and transition studies and have noted Maine has a larger share of self-managed communities than other areas of the country. Why is this the case I am not sure, but it has to do with either Yankee thriftiness and independence or the average state’s demographics with Maine leading the country with a high ratio of well-educated retired senior citizens. Whatever the reason ‘is self-managed a good idea?’
Sometimes self-management is imposed due to lack of choice such a 3-unit condo on Munjoy Hill in Portland where no property management company wants to take the condominium on. When a choice is available a ‘pro / con’ list could be prepared but this method would create a short ‘pro’ list limited to potential cost savings by avoiding the cost of a full-service property management firm and/or creating a tighter community-based condominium or HOA. Instead let us consider the ‘con’ list as it will reveal the true elements of the issue.
A self-managed condo community is directly contrary to the most obvious benefit of condo living, namely potential condo buyers seeking to shed the responsibilities of home ownership such as landscape maintenance and exterior façade repairs while gaining low-cost amenities like swimming pools and clubhouse facilities.
At the top of the ‘con’ list would be lack of expertise and time to manage a condo community. This is not a skill set taught in school but can only be gained from experience and Community Association Institute (CAI) workshops. The best management model has a strong leader versed in condo law and regulations while knowledgeable in community budgetary controls and multi-family property software as well as construction/ facility management. Even with the availability of well-skilled committee members in the beginning, it should be acknowledged volunteers come and go. The loss of a key leader can create a serious challenge to consistent management practices. To mitigate this risk the condo type with the best chance of having a leadership pool of members with both business skills and the time to devote to managing a condo complex are the ‘50+’ senior-only condominium with a larger number of experienced retired members.
Other areas where self-managed condos run into problems are related to financial and legal matters. Condo management without a good understanding of budgetary and financial matters can quickly enter troubled water. Without accurate operating budgets and well-planned reserve capital spending, a condo community can quickly place unit owners’ net worth in jeopardy. Strict collection practices and a closely monitored accounting system are necessary to avoid cash flow and fraud problems. Similarly, compliance with current federal, state, and local condominium laws is important, requiring legal counsel by an attorney knowledgeable of the state’s condominium statutes; the association’s governing documents; and needs of the condo board.
One of the most important skills of the board is consistent communication with unit owners. This element of management should be supported by the association’s attorney who will remind the board of the required board and membership meetings. The board should also understand the need for timely handling of legal problems; unit owner complaints; and risk management. Good communication also includes keeping the association’s professional team of an accounting firm; an insurance agent; and an attorney informed of any potential problems. A well run self-managed community does not mean the board and volunteers do most of the association work. Volunteers’ time should be respected to avoid burn-out and technical mistakes. For some larger condominiums, the use of a professional in-house property manager would be money well spent.
As the association’s buildings and site infrastructure are the most important element of the community’s assets, consideration should be given to having an engineer or architect on call to consult on matters associated with operational maintenance and prioritizing capital repairs. This is critical if the board lacks the technical knowledge to make informed decisions. Deferred or forgotten maintenance can be the most expensive mistake a board can make. Facility problems rarely fix themselves but only get worse. The most important fiduciary responsibility of the board is to protect the unit owners’ net worth. Neglected maintenance not only negatively affects the unit owners’ perception of quality of community life but also degrades the community’s curb appeal with the resultant loss of property value.
Therefore, the answer to the question ‘is self-managed a mistake?’ boils down to the people available to do things right. With the right mix of people and the available volunteer time any condo community can be successfully managed. It is a matter of discipline, determination, and consistency. When done right a self-managed condo will have a greater sense of community at a lower cost but it takes a village. That is worth the effort.
Written by Jack Carr, P.E., R.S., LEED-AP, Senior Consultant Criterium Engineers
Published in Condo Media