Where Do My Dues Go? by Elaine Hudson PCAM, CCAM, CMCA, AMS

Published November 13, 2001

Q:   I called my homeowner association's management company regarding: Someone parked in my designated parking space, A golf ball hit and broke my window, and There are mice in my unit!

The management company told me all these problems were my responsibility and that they would not take care of it.  What does the management company do with all the money I send them every month?  What am I paying all this money for?

A:   Unfortunately, the management company does not get to keep all of the monthly assessments sent in to them.  The fees are to cover the cost of running the association of which the management fee is a small part.  The management company acts as conduit for the association, a facilitator.  They process the homeowner's checks and deposit all the money into the association's bank accounts and then pay their expenses from those funds.

The homeowners association has various duties and responsibilities depending on their specific governing documents.  A Board of Directors is elected by their fellow homeowners to oversee management and make policy decisions on the operation of this business called the association.  The normal, most common financial items that the association is responsible for are:

• Insurance for the common areas and elements; (owners should still have their own individual insurance for personal property)
• Landscape and irrigation system maintenance;
• Water
• Gas and electric bills;
• Phone bills for entry or fire monitoring systems and public phone,
• Plumbing in regards to main water and sewer lines,
• Cleaning and maintaining the pool/spa, play lot, etc;
• Hiring a janitorial company to clean the pool house/club house;
• Contracting with a refuse company for trash pick up;
• Contracting with a maintenance company for common area repairs;
• Cleaning of the dumpster areas;
• Fence/stucco repairs;
• Annual financial audit;
• Reserve Study and setting aside money for major repairs/replacement/improvements:
• Some Boards are also responsible for tennis courts, cable TV, equestrian trails etc.

Along with attending the board meetings and transcribing the minutes which become the legal record of the association, the management company provides accounting services, to pay all of the bills for services provided to the association, billing and record keeping of the owners assessments, and sending out either monthly statements or coupon books, etc.  The management company produces monthly financial reports, ensuring that the Association complies with State of California Civil Code and Corporations Code.  They prepare a proposed budget for Board review and approval and then make sure it gets mailed along with various other required documents annually.  They make sure an annual financial review/audit is performed after the fiscal year end and mail it to all homeowners as required by law. 

Then there are the phone calls to and from homeowners and board members, board meetings mostly in the evenings, landscape walk thrus, all the Board correspondence, CC&R violation letters, Architectural Review processing, maintaining Architectural records, individual homeowner files, and any and all other documents important to running the business of the association.  The management company works to keep costs down for the association, which translates into monthly assessment fees, by negotiating to get the best possible value for services and repairs by obtaining bids for any needed work, and then watches invoices carefully to assure accuracy in the billing of the association. 

The final fine print of a management company's duties and responsibilities seems to be "any and all other jobs necessary to ensure the Association runs smoothly".  The actual expense for the Management Contract which encompasses the above services and functions, is usually around one to two percent of what the homeowner pays in monthly assessments.  Sounds like the homeowners get quite a bang for the buck when it comes to management.

Elaine Hudson is a member of the Community Associations Institute (CAI) and is a Community Manager and the owner of Hudson Management Services, a full service property management company.  Readers can visit the CAI website at www.cai-sd.org and can get their condominium or homeowners association questions answered by calling the Community Associations Institute at (619) 299-1376 or e-mail at q&a@cai-sd.org.

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