Operate Your HOA as a Business

Most homeowner associations lack adequate resources to operate like a business and a volunteer Board member ends up wasting an enormous amount of time on concerns that divert their attention away from key concerns.  All too often, associations are run like a family community co-op, foregoing business acumen, in order to gather over a pot-luck. While casual gatherings are great for fostering relationships, the failure to operate like a business can damage the association and result in creative reporting, lackluster enforcement or homeowner disengagement.  

“When inadequate business functions are applied, Board members can become too quick to shout for legal action or use their power to push a personal agenda, while others can drag their heels to avoid confrontation.  Without formal processes, the results undermine the HOA by negatively influencing the community’s culture.  Members will quickly take advantage of it,” states Michael Madson, President-Elect of Idaho Community Association Institute’s Chapter and president of MGM Association Management.

“Poor management diverts the Board’s attention away from issues that affect the underline fabric of a community.  Board members need to advocate the importance of following the rules and model behaviors that will help to define their culture,” he reports.

A formal collections procedure, for example, provides a step-by-step process for the Board and its membership to follow and leaves no question as to the expectations. 

5 Simple Steps to Improve Your Collections

1. Determine a delinquency timeframe. The first step for the Board is to determine a timeline when an owner will be declared past due on his or her assessments — after 30 days, 60 or 90? Madson suggests a two month or 60-day threshold.
2. Create a courtesy letter process. The policy should designate when the association manager will send the first “courtesy letter” (for example, seven days after the due date or expiration of the grace period for the missed payment) along with an explanation of the subsequent timeline of events, a statement about the collections policy, who to call for help, and offer a platform for arbitration.
3. Become the solution provider.  Madson says Board members have an excellent opportunity to position themselves as the solution provider; rather than being the “heavy.”  “Association manager’s job is to provide this service and offset the Board from potential uncomfortable confrontations.” Board members should attempt to remain impartial and act only as a mediator between the homeowner and the HOA by offering solutions,” he reports.
4. Institute penalties.  A formal collection procedure should be clearly stated in the governing documents and define the interest and late fees if applicable.  Madson states that Boards should take a hard line against waiving these fees.  “A free pass opens you up to claims of unequal enforcement,” he says.  “Instead, the Board might consider suspending voting rights or the rights to use amenities.”  
5. Consider payment options.  The Board might consider payment plans.  The policy should spell out the requisite conditions an owner must meet and how long plans can run (generally, plans should go no longer than 12 months), and any payment plan must be formally documented.

For more information on how to save your Board time, improve your collections or how to better manage your HOA as a business, contact MGM Association Management at (208) 846-9189 or visit  www.gomgm.com.