Both interest and inflation considerations are important to the calculation of your future reserve requirements. Unless the association has made a conscious decision to transfer all interest earnings to the operating fund (which is the subject of an entirely different article), it is generally assumed that interest earnings will be retained in the reserve fund. Likewise, inflation is a factor that will cause the prices you pay for future repairs to be higher than the cost you’re paying presently for those same repairs and replacements.
Helpful Hints for the Board of Directors
One of the toughest challenges a board of directors can face is the decision and process of bidding out the association’s management contract. Boards often feel they have a fiduciary obligation to bid out the management contract when, in actuality, the board may simply not realize it is already exercising appropriate fiduciary obligation by working to preserve and extend the relationship with the current management company.
The first thing the board should do in considering bidding out the management contract is to ask itself why it should go out to bid. Is there a service issue with the current managing agent? Or is it really about price? Perhaps there is just a clash of personalities with the current staff assigned to the community on behalf of the managing agent? Any of those issues should be promptly discussed with the current managing agent. From day one of establishing a relationship with your management company, the board of directors needs to be prompt and upfront with the company regarding any issues or obstacles. Just as the board expects management to be proactive and candid, the management company has the same expectation of the board. After all, you are in a partnership with your management company – the fewer the surprises the better the relationship between the two entities. So, whether price, service, or personnel are the issues, let your current managing agent know. When possible, all efforts should be made to overcome any concerns of the current managing agent and contract.
The goal of an HOA property manager should be to maintain the current value and improve upon the value of the homes in the HOA area. Not all HOA property management companies provide the same services, so it’s important to choose the best company for the job.
Some homeowners run for the community association board because they’re upset about an assessment hike. Others want to overturn what they consider unfair architectural rules. It is not unusual for personal agendas to be strong motivators for homeowners to seek office.
But more often, it seems, homeowners are too busy to serve on the board or don’t want to take on the responsibility. The same people remain stuck on the board because others aren’t willing to step up.