How Are Management Fees Determined?
Board members sometimes ask how management companies determine the amount to be charged for homeowner association management services.
The short answer that fees are based upon the precise services set forth in the management agreement which includes many factors, including the number of meetings a manager will attend and the number of inspections or site visits performed. The fee charged must cover a number of expenses incurred in providing management services. These expenses include the following:
- Cost of accounting services which includes monthly billings, collecting and depositing funds, and generating both monthly and year-end financial statements.
- Salary of the community manager, including payroll burden and health insurance.
- Salaries of support staff, including the operations manager, inhouse collection manager, inhouse construction consultant, and receptionist/administrative assistant, plus applicable payroll burden and health insurance.
- Rent, utilities, telephone, internet service, office supplies, kitchen supplies, non-billable copy costs, and mileage expenses.
- Liability insurance, workers’ compensation insurance, and fidelity bond.
- Computer and other office equipment repairs, maintenance, and updates. This often includes the use of an IT consultant.
- Cost of continuing education for community manager and staff.
The following factors influence the number of hours a manger will be required to spend managing a particular homeowner association:
- Stacked condominiums require more time than townhomes because of plumbing problems, noise complaints and roof leaks that often affect multiple units. Detached homes require less time than townhomes.
- Older buildings generally require more time than newer buildings because they usually require more maintenance.
- Buildings suffering deferred maintenance and cash flow problems generally require more time because they usually require more maintenance.
- Delinquent homeowners require more time of both the property manager and the assessment collection manager.
- Buildings with water intrusion problems require the most maintenance and repairs, requiring substantial management time.
- Associations that have “problem creating owners” require more management time than other associations.
Community managers and board members should prioritize all projects since the amount of time a manager can spend on a particular association is limited based on the amount of fee paid. Developing priorities results in our clients receiving the most for each dollar spent on management.
American HOA Management