Self-managed community associations typically avoid professional management companies because of the cost. However, these associations have to ask themselves, “is the liability worth the risk?” As financial and legal responsibilities increase, so too do the risks associated with self-managed community associations.
The Risky Business of Being a Self-Managed Community Association
The majority of self-managed community associations are run by volunteer board members who typically work full-time jobs, don’t have the time to properly run a community effectively, and lack the industry experience needed to mitigate common risks. With this in mind, the five most common risks associated with self-managed community associations include:
- Meeting Minutes Compliance: Meeting minutes must be recorded, stored, and distributed in accordance with legal regulations. Board meeting minutes are considered a legal record of the decisions and actions agreed to by the board in the meeting, which makes them a legal document that can be used in a court of law if needed. For that reason, the record-keeping, storage, and distribution should not be taken lightly. Legal matters aside, it’s important to note that many board members may not know how to properly manage homeowners, which can lead to negative, unruly, and non-productive meetings if not done by the book.
- Effective Communication: Managing complaints, questions, and suggestions is virtually impossible without the right resources and technology systems. Self-managed associations are often focused on reducing costs, which means that they often neglect to invest in community association management software. A failure to make this investment will restrict their ability to respond to issues in a timely fashion, make a positive impression within the community, and ensure that the quality of living is maintained. Professional community managers are not only trained in these tasks, but they understand the value that purpose-built association management software brings to the community.
- Local and National Legal Knowledge: The board is liable for the entire community, so in a self-managed association, board members must understand the national and local laws if they want to ensure that the community remains compliant. A failure to properly understand these laws can result in heightened legal risks. As with any increased legal risk, the potential costs of a lawsuit of compliance complaint can be incredibly high and negatively impact the community for an extended period of time.
- Annual Disclosure Statements & Resale Disclosures: One of the biggest risks to self-managed community associations revolves around the annual disclosure statement. Many board members either a) don’t know how to file the annual disclosure statement, b) don’t know that the statement must be filed yearly, or c) incorrectly file the statement. Filing requirements vary state-by-state, so it’s critical that the board members of self-managed associations do their due diligence to remain compliant. Resale disclosures are also a huge task as far as the day-to-day management of a community association. Self-managed community associations will need to ensure they have a board member handling them who is extremely knowledgeable of the ever-changing state and local laws to ensure these disclosures are handled properly – something professional managers are trained and often certified to do.
- Vendor Relations: One of the often overlooked, but critical tasks a self-managed association must manage is the vendor relationships. Not only do they need to keep track of vendors who are properly insured and licensed, but manage their invoicing and payments can also take up a great amount of time. Depending on the common area maintenance or age of the association, vendor relations can easily be a full-time job for a board member who is not supported by a professional community association management company.
The Bottom Line: Professional Community Managers Reduce Risks
While self-management can eliminate certain costs, it does bring about a heightened level of risk. The good news is that a professional community manager will work on behalf of the board and association to ensure that legal and financial tasks are completed correctly. The community management team will also have the tools, technologies, and experience needed to reduce these risks while delivering substantial benefits. Self-managed associations should look for a community manager who has years of experience, industry certifications, an impeccable reputation, and uses modern, mobile community association management software.
Beth Gilbert is the Sr. Director of the Community Association Market at AppFolio. Beth brings over 15 years of Product experience to AppFolio and is currently responsible for developing the vision and strategy for the Community Association market. She is passionate about building relationships with customers to learn about new ways to partner in the success of their businesses.