How to Determine How Much Your HOA Pays Its Management Company
As a homeowner in a Homeowners Association (HOA), you have the right to know every detail of how your HOA operates, especially when it comes to management fees. This includes understanding how much of these fees go to the management company responsible for handling the day-to-day operations of your community. Ensuring financial transparency is crucial for trust and community satisfaction.
Understanding Your Rights
According to your HOA bylaws, covenants, regulations, or rules, you are entitled to a full accounting of every penny spent by the HOA. This includes all management fees. If the HOA fails to provide this information to you, legal action can be taken. You can sue the HOA for failure to provide the full accounting, and a judge will order the HOA to produce the document you request. Additionally, you can report the HOA to the relevant government agency in your state that enforces HOA laws. In Colorado, for instance, the state's Attorney General's office can provide the best guidance on which agency jurisdiction is appropriate.
Annual Meetings and Budget Presentations
Community-owned properties typically have annual meetings where all homeowners gather. At these meetings, the annual budget for the upcoming year is presented, detailing how HOA dues will be allocated. Dues are often the single largest line item in this budget. If you cannot attend the annual meeting, you can still request copies of the community's budget from the management company. This information is always available to homeowners to ensure transparency and accountability.
State Requirements for HOA Transparency
HOAs are legally required to hold annual meetings where minutes and audited financial statements are presented. These documents are often posted on the HOA's website as well. Management fees are a critical component of these budgets. In our experience, the municipality required our HOA to operate even before the first house was built. This was because the developer wanted to establish amenities like community ponds, fountains, and stone walls, for which the city did not want the financial responsibility. However, these amenities were minimal and no formal design or upkeep regulations were enforced.
Our HOA structure was created to collect fees for management purposes rather than provide significant amenities. Despite our very low HOA fees of $80 per year, many homeowners refuse to pay. The collection process is complex and often contentious. This reality underscores the importance of clear and transparent management fee allocations and budget presentations.
Conclusion
Ensuring financial transparency in HOAs is essential for maintaining trust and satisfaction among homeowners. By understanding your rights and the legal requirements for financial disclosure, you can ensure that the HOA managed by a third-party company is being held accountable for how your fees are being spent. Regularly attending annual meetings, requesting and reviewing financial reports, and staying informed about state and local regulations are key steps in achieving this transparency.