TMG Tonight is a video web series created by the TMG Family of Companies to provide strategies, tips, and insights that help us all become better investors, better Board Members, and better caretakers of our communities. TMG Tonight premieres every other Friday at 6pm on TMG’s YouTube Channel.
What Makes a Good HOA?
As with any neighborhood, there are pros and cons of living in an HOA. When you buy a house, the first thing everybody looks at is the neighborhood. Well-managed properties look good and HOAs help keep properties that are managed well. Subsequently, HOAs benefit homeowners by increasing home values by 5-6% more than comparable homes that aren't part of an HOA.
On the flip side, every HOA has rules and regulations that must be followed by every homeowner. When you’re buying a home, you have a right to look at the HOA Rules and Restrictions before closing and decide if they fit with your plan for the home. It's important to find an HOA that has rules you can live with.
The quality and effectiveness of an HOA depend on the people in the key roles. If they are doing their jobs well, they are a real asset to the community. There are two key roles that can make or break an HOA:
In the third episode of TMG Tonight, President of the TMG Family of Companies, Carmen Villarma, sat down with HOA Business Manager, Patrick Telfer, of TMG's subsidiary, Association Management Services (AMS) and Board President of Clear Meadows Community Association, Steve Wehrman. Their combined experience and opposite perspectives on HOAs helps to define what makes good HOA Managers and Board Members.
|TYPES OF HOAs||Attached to Another Unit||Who Owns the Land?||Exterior Appearance||Maintenance (Drywall-In)||Maintenance (Drywall-Out)|
|Single Family Planned Urban Development (PUDs)||No||Owner||Owner||Owner||Owner|
|Townhome Planned Urban Development (PUDs)||Yes||Owner||Owner||Owner||HOA|
|Condominium (Condo) Associations||Yes||HOA||HOA||Owner||HOA|
|Commercial Associations (Businesses/Office Buildings)||Yes||HOA||HOA||Owner||HOA|
The HOA Board of Directors
The HOA Board of Directors is made up of homeowners within the community that handle and approve major business decisions on behalf of the association, including signing contracts. The first responsibility of any Board of Directors is fiduciary; meaning they’re responsible for managing the members’ money ethically and well. After that, you can move on to the other issues.
Most HOA Board Members are volunteers. They don’t get paid to be on the Board and usually have full-time jobs too, so they hire a third-party HOA management company (like AMS) to handle the day-to-day operations and decisions, which are previously agreed upon in the management contract.
3 Tips for How to Join Your HOA’s Board of Directors
- "Show up to board meetings," says to Steve Wehrman, President of the Board of Directors for Clear Meadows Community Association. "Board Members must be elected to the Board, so making sure people know who you are is the first step."
- Don’t just show up with a problem, come with an idea for a solution. Say, "I think we have a problem but I’m working on a solution. Let’s work together on it."
- If you don’t get elected the first time, join a committee. This will show the Board that you truly want to be involved and will also give them a chance to get to know you better.
Top Challenge for HOA Board Members
Angry community members are the biggest challenge for any member of a Board, according to Steve. People argue about a lot of issues, so you have to find what people believe in common if you want them to work together. Focus on issues that people agree is a problem.
“Boards can do a lot of things for their community, besides just the appearance and the money,” says Steve. “Like safety. We’re working on traffic mitigation. We want people to drive slower. So, we got a couple Board Members interested and now we’ve got the city ready to work with us.”
How to be a Successful HOA Board Member
- Stop talking and listen. Try to find a way to connect and relate with people rather than ways to differ from them.
- Get more people involved. Don’t sit in a Board position for 10 years. Step down and make room for the next generation of Board members. You can always go back again; but allowing for a rotation of Board members makes room for new ideas and different perspectives, especially as times change and the community changes.
- Be a good neighbor. You are not just a member of the Board of Directors; you are also a member of the community.
KEY HOA TERMINOLOGY
Articles of Incorporation create the association as a legal entity, and are a necessary prelude to all the other steps when forming an incorporated HOA.
Bylaws describe the procedures and mechanics of homeowner association management and decision-making. Bylaws also dictate how the Board is run (what committees they can have, voting procedures, positions available within the community, how many Board seats there are, etc.).
CC&Rs (Covenants, Conditions and Restrictions) describe the rights and obligations of each owner and those of the association itself. They describe the maintenance responsibilities of each owner and those assumed by the HOA and outline what homeowners can and cannot do on their lot. CC&Rs usually lay out the HOA's powers of enforcement, procedures to resolve disputes, and the restrictions on owner usage. This might include regulations governing pets, how an owner alters the property, and the uses of the common area.
Rules and Regulations are procedures for passing internal rules through the processes outlined in the CC&Rs. In short, these fill in the gaps left by the CC&Rs. These rules cover things such as restrictions on how much a unit or lot may be altered, pets, waste disposal, and the use of signage, parking, and recreational facilities. As times change, associations can adopt new rules and restrictions for new concerns. Types of modifications that may need approval:
- Painting your house
- Installing a fence
- Changing the color of your fence
- Installing a new garden (pouring concrete)
- Building additions
- Any exterior modification to your home
Violations are fines issued when a homeowner doesn’t follow the CC&Rs or HOA Rules and Regulations. Types of violations include:
- Parking an RV in your driveway
- Leaving trash cans out beyond a certain amount of time after trash is picked up
- Yard waste being left on the side of the house
- Excessive amount of noise that is causing someone to lose the reasonable enjoyment of their home
Reserves are funds set aside to pay for future problems. The Board looks at an asset and asks important questions: How long will it last? When will it need to be replaced? How much will it cost? How much do we need to set aside each month to make sure we can afford that? Then they factor in extra funds for unexpected problems. If a Board manages money well and budgets carefully, they can keep HOA fees relatively low and won’t have to increase fees to cover unexpected expenses. That’s a product of the Board and management company working well together.
Reserve Studies are required by law every year and look at the long-term maintenance of the whole property (all homes, common areas, roads, etc.). The Reserve Study is done by a specialist, a third-party licensed professional, and they determine if the association has enough reserve funding.
The HOA Manager
The HOA Manager’s job is to be the managing agent for the community. They handle day-to-day operations, phone calls from homeowners (including complaints, maintenance requests, and emergency reports), and manage maintenance and repairs for the community.
The HOA Manager also manages major projects within the community, such as widespread house painting, fence repair and replacement, and street repaving. For these projects, their job is to research vendors and get bids to bring back to the Board for review and approval.
“We are basically like a consultant,” says Patrick Telfer, Association Business Manager for AMS. “We bring the people together that the Board needs to make an intelligent decision for the betterment of the community.”
What Makes a Good HOA Manager?
A good Association Manager is detail-oriented, has excellent customer service skills, and thick skin. “You have to be able to take people’s pain and be able to not take it personally and be able to turn it around to make that person happy,” says Patrick. “You have to have a desire to want to help people.”
How Can an HOA Manager Best Support the Board of Directors?
The best HOA management companies provide regular education and training for board members. Training is not something that the President/Chair can successfully do by themselves. Steve says, “It’s sort of like parents. If you try to teach your kids they maybe push back, but not when the teacher teaches them.” The President is just another community member or neighbor. People are more apt to listen to the manager because they have the knowledge and resources of the industry.
Who Determines the HOA'S Budget?
The HOA Manager generally builds the budget for the Board, but the Board of Directors is responsible for reviewing and approving the final budget. The HOA Manager does due diligence to draft the budget, including:
- Comparing annual expenses to the past 2-5 years.
- Looking at upcoming projects for the year and estimating the cost.
- Determining increases in water or electricity pricing.
- Negotiating contract pricing changes with vendors such as landscapers, preventative maintenance providers, etc.
Who Runs an HOA's Board Meetings?
Board meetings are run by the President/Chair of the Board. The HOA Manager is present to answer questions and provide guidance on state and local laws and restrictions.
HOA Board Meetings in the Age of COVID-19
Since COVID-19, organizing HOA meetings has been a little difficult. Boards had to develop a process where they could still have regular meetings so the association could continue to do business. But with virtual meetings, it has become easy. And homeowners can call in or join the virtual meeting, which has led to an increase in homeowner participation. Most associations have embraced virtual meetings and want to continue with that method even after the pandemic is over.
What Makes AMS Different from Other HOA Management Companies?
“AMS (and the TMG Family of Companies all together) is ahead of the technology,” Patrick says. “Their software works together and allows managers to work remotely and more efficiently. Those sorts of time-saving techniques allow a manager to really focus on what the association really needs, which is managing projects, capital improvements, etc.”
“AMS also has a lot of structure,” says Patrick. "There are a lot of people behind the scenes to support the managers and the homeowners that call in. That support structure is the biggest asset that allows managers to be successful with the Boards. It is difficult to manage communities when you don’t have that, and it requires the manager to work 60-80 hours per week, resulting to burnout and regular manager turnover."
“AMS has long-term relationships with vendors, like maintenance and landscaping,” says Steve. “And they are always immediate to respond, especially in emergency situations.”
“And AMS manager titles are different,” adds Carmen Villarma, President of the TMG Family of Companies, which includes AMS. “They are called Association Business Managers because AMS believes we are managing a business.”
About Patrick Telfer
Patrick Telfer is an Association Business Manager at AMS with 12 years of experience in the industry. He started out in asset management before moving into HOA management about 7 years ago.
“It’s all about problem solving,” Patrick says. “I like to improve on things. I look for ways to improve on somebody’s property in terms of real estate value, getting rid of deferred maintenance, and improving the community overall. HOA management is different than asset management. It’s taking an issue that the community has and finding a permanent solution for it. You get to be more proactive than reactive when it comes to managing the communities.”
About Steve Wehrman
Steve Wehrman is a retired respiratory therapist and current real estate agent, and is the President of the Board for Clear Meadows Community Association. Steve has been on the Clear Meadows Board for about 4 years, starting out as a Board Member before taking on the roles of Vice President and President respectively.
Steve says he was first inspired to get involved with his HOA because he was afraid of the Board. “I had never lived in an HOA before and I heard they were always after you. So I thought, ‘If I get on the Board, that will help protect me from the Board.’ And then I got interested in it and being involved in my community.” This is his third time being a Board Member of an HOA.