Common Interest Developments

Management Company Performance Measurement

– This process evaluates the performance efficiency and effectiveness of any homeowner association or condominium management firm. Each management function required by the Association is measured to determine the value received for money rendered. Every property management company shall have a standard of performance which can be quantitatively defined and measured. This system should do the following:

1. Define the performance requirements
2. Establish the performance measurement indicator
3. Establish performance standards
4. Measure the management firm’s quality of performance
5. Determine staff requirements
6. Establish baselines to determine costs needed to operate the property

The results will provide baselines to isolate the performance requirements to manage, operate, and maintain the condo or hoa property; to measure the managing firm’s quality of performance; to provide staffing measurement data; and to assist in establishing operating cost in a professional manner.

In evaluating a management company’s performance and that of the homeowner or condominium association itself, the following questions ought to be asked:

1. Is the Association being provided the services for which it is compensating the managing agent?
2. What are the services?
3. Is the managing agent performing to the expectations of the Association?
4. What are the expectations?
5. Can the homeowner or condominium or townhouse association increase its return on investment within the current arrangement it has with the managing agent?
6. What does the firm furnish for its fee?
7. What is the source of the requirements provided for in the current agreement the HOA or condo association has with the agent?
8. What was the Association input to the agreement with the agent?
9. Does the Association have a baseline document that protects the rights of the owners?
10. If the answer is yes, what is it?
11. Does the Association have a baseline document which provides it with adequate guidance by which it can objectively measure the performance of the agent?
12. What would be the bases for measuring the performance of the agent in the performance within the agreement?
13. Is the Association responsible for the personnel and vendors working within the property?
14. If the answer is yes, what is the rationale for accepting this responsibility?
15. What bases does the Association have for determining that the cost of operations is appropriated to the value received?
16. What baseline is used to make this determination?

– In California’s Davis-Stirling Act and the Business and Professions Code, there are required disclosures pertaining to common interest development managers. A Common Interest Development Manager is an individual who, for compensation, or the expectation of compensation, provides or contracts to provide management or financial services, or represents himself or herself to act in the capacity of providing management or financial service to a community association.

Financial Services are acts performed or offered to be performed for compensation for a community association including, but not limited to, the preparation of internal unaudited financial statements, internal accounting and bookkeeping functions, billing of assessments, and related services.

Management Services are acts performed or offered to be performed in an advisory capacity for a community association. These include, but are not limited to, the following:

1. Administering or supervising the financial or common area assets of a community association or common interest development, at the direction of the community association’s governing board.

2. Implementing resolutions and directives of the board of directors

3. Implementing provisions of the governing documents

4. Administering a community association’s contracts, including insurance contracts

An individual who is a member of a business entity who acts as a principal on behalf of a company that provides the services of a common interest development manager is personally considered a common interest development manager.

– California law provides that in order to be called a “certified” common interest development manager, the individual must meet certain educational and testing requirements. A common interest development management firms cannot be a certified common interest development manager. Listing oneself as “certified” or using any other term that implies or suggests certification without having met the legal requirements for certification is an unfair business practice. It is also an unfair business practice to state or advertise that a person is certified, registered, or licensed by a governmental agency to perform the functions of a certified common interest development manager if he or she is not. Additionally, to state or advertise a registration number, unless required by law, is also an unfair business practice.

– In California, a managing agent of a common interest development who receives funds belonging to the association must deposit all such funds that are not placed into an escrow account with a bank, savings association, or credit union, or into an account under the control the association, into a trust fund account maintained by the managing agent in a bank, savings association, or credit union in the state.

Verification of Member’s Reasonable Accommodation Request

From time to time, a condominium association member may ask to do something to accommodate his or her disability – what is known as a “reasonable accommodation.” For instance, an HOA member might claim to need a better parking space due to a physical handicap that makes walking long distances painful. Federal fair housing laws and well as the Americans with Disabilities Act require you to grant reasonable accommodations to the disabled. However, sometimes condo members who are not disabled try to take advantage of the law to get something they are not entitled to – a better parking space or an exception to your homeowners association rules.

The best method to find out whether a request is legitimate is to get verification form the condo member’s healthcare provider or other qualified professions, such a therapist or social worker. The law lets you do this when reasonable, but you must be careful how you go about it.

Notify Members that Manager’s Corporate Affiliate has Won Contract

These days, it is not uncommon for condominium association managers to create ancillary companies in field related to their work as managers. For example, a management company might set up a landscaping company, and though the company names differ, the owner of both companies is the same. It is not unusual for these ancillary companies to bid for proposed projects at the HOA managers’ communities.

Although not necessary, notifying condominium members when the manger’s ancillary company wins a contract is a good idea. Being candid with members has many beneficial long-term effects, just as failing to do so can have negative effects. How you notify your members is up to you. Publishing an article in the community newsletter is one good way; another is to send a letter to the entire homeowners association community.

The letter should tell owners that the HOA has awarded a contract for work to a corporate affiliate of the condominium association manager’s company. The letter should explain the following: who got the contract; the winning bidder is a corporate affiliate of the homeowners association’s management company; and the bidding process. It should also emphasize that no favoritism was shown and that the decision to award the contract to the corporate affiliate of the management company was based solely on the best interest of the condominium property.

Board Review of Overlooked Rules

If a predecessor board allowed HOA members to violate important property rules, those members may still believe that it is okay to continue to ignore those rules. A new board that fines or otherwise punishes condo members for engaging in behavior they has been led to believe was acceptable would be unfair. Also, if the rules were revived too abruptly, homeowners association members might refuse to comply. However, if the new board sent members a notice warning them that the board will be resuming enforcement of previously overlooked rules, the board will stand on firmer ground with its members and with the courts if disputes end up there.

Before trying to revive an overlooked rule, it is advisable to ask an attorney whether state and local laws permit it. Some laws do prohibit the enforcement of overlooked rules in certain situations.

The notice to owners should inform the HOA members that the board will be enforcing previously overlooked rules. The notice should stress the importance of community association rules and tell members that the current board will enforce rules that have been overlooked in the past. It should also tell members that rules will not be enforced retroactively and that the board will give members a grace period in certain circumstances.

Rules for Records Review and Reproduction by Members

HOA members can have all kinds of reasons for wanting to inspect their homeowners association’s books and records. Many of these inspection requests are legitimate and take relatively little office time, but some requests – whether driven by legitimate motives or by a desire to harass the board or manager – can be very cumbersome and time-consuming.

Unless you place reasonable restrictions on the time, place, and manner of inspection, a seemingly straightforward process can turn into a complicated and endless search of your HOA’s books and records, playing havoc with your day-to-day operations. To keep control over the operations of the condominium property, the board should adopt procedures for records and inspection that association members must follow.

Conflict of Interest Waiver

Someone who is both a homeowners association manager and a real estate agent or broker may want to offer real estate services to HOA members who want to sell their units. But there may be times when fulfilling one’s duty to one party violates one’s duty to the other party. In other words, acting in the condominium property’s best interest can run counter to acting in the member-seller’s best interest (and vice versa) – thus creating a conflict of interest. When acting for one party to the detriment of the other, the party that got hurt could sue for violating one’s fiduciary duty to it.

State law might require someone who is both a manger and a real estate agent or broker to disclose the potential conflict of interest to the condominium association and to the member-seller. In addition, the Community Associations Institute’s Professional Manager Code of Ethics requires managers to disclose to their homeowners associations any possible conflicts.

Some states bar potential conflict-of-interest waivers. If your state permits potential conflict-of-interest waivers, get the waiver in writing.

A written potential conflict-of-interest waiver provides proof that the individual properly disclosed the potential conflict to the parties. With written proof, a party will not be able to claim that a manager hid his relationship with the other party. However, the waiver will not stop the condominium property association or member-seller from suing if a conflict of interest occurs and manager does not try to remove himself from the conflict.

J & N Realty, Inc. — real estate, property, planned unit development (PUD), townhouse, townhome, hoa, condo, condominium, homeowner association, common interest development (CID) management services in Los Angeles.