What is the purpose of an HOA

Who does what? Understanding the purpose of, and the different roles in, your Community Association.

By Elaine Anghel, Senior Vice President of On-Site Communities, Associated Asset Management, LLC (AAM)

You’re not alone if you’re asking what the purpose of an annual meeting is and what the differences are between an HOA, the Board of Directors and the Management Company. Understanding the differences will help you have an even better experience for yourself and your family while living in an HOA.

 Training group Woman Raising Hand

What is the purpose of an Annual Membership Meeting?

During your homeowner association’s annual meeting, a variety of issues are addressed. The annual budget is presented, it’s an opportunity to discuss accomplishments from the prior year as well as upcoming major goals and projects, committee reports are presented, and it brings the membership together in a forum to receive information and address the board and management with questions. This is also when an election is held for any expiring board seats providing all homeowners the opportunity to participate in the process to elect volunteers to serve a term on the Board of Directors. How long that term is and what the eligibility requirements are, can be referenced in the governing documents - typically in the by-laws.

 

What is the role of an HOA?

As described in Community Association Living (a CAI publication), homeowners associations are designed to manage common or shared property, protect owners’ property values, provide services to residents, and develop a sense of community through social activities and amenities. All residents have an important role to play in a community’s success, but board members have a particularly vital job.

 

HOA refers to homeowners association and essentially, the HOA is responsible for the maintenance of items that are not the individual homeowner’s responsibility. Someone has to represent those interests to ensure the assets of the community are maintained and replaced at the appropriate time, that the community’s budget is well funded, and that home values are kept at an optimal pace. This is where the role of a board member comes in…

 

Now that I have been elected to serve; what is my role as a board member? 

Your role is a very important one. You’ve been elected to make decisions that will affect your community, both operationally and financially. In your volunteer role, you are a fiduciary of your community – that is you have the duty to put the interest of others above yours while making your decisions as a board member. As a fiduciary, you have an obligation to protect the community association by preparing and adhering to the budget, adequately funding the reserves, collecting assessments and having appropriate insurance coverage. In sum, you are charged with protecting and increasing property values. This is no easy task and that is where the selection of your professional management company is a critical one.

 

What is the role of the management company?

The management company works for the HOA and is hired by the Board of Directors. As a management company, we help the board preserve their community assets, maintain property values, and assist with the operational and financial matters of the HOA. 

 

The Board sets policy and the management company carries out the decisions the Board makes and ensures those policies are implemented. 

 

What are some examples of how a management company assists the Board? 

  • Coordinates maintenance activities 
  • Seeks out proposals and screens vendors (licensing and insurance requirements) 
  • Manages human resource needs 
  • Informs the Board when legal advice is necessary 
  • Manages the association’s finances (delinquencies, budgeting, examining reserves, assessment collection, payables and receivables, financial reporting) 
  • Works with professional partners: CPA, legal counsel, reserve specialist and insurance agent 
  • Guides the Board through day-to-day operations by having a strong understanding of governing documents, governmental laws, and state statutes
  • Brings the element of “community” through lifestyle programming

 

Purposeofhoagraphic

Board of Directors:

Volunteer 

Governs 

Makes Decisions

 

Management Company:

Under contract 

Manages

Carries Out Decisions

 

Identifying “who does what” provides a great foundation in understanding your community association. It provides a clear delineation of how a community is taken care of and who the residents should go to with their concerns. It also provides board leaders with a clear vision of their role, who the management company is and what they do, allowing for optimal focus on how to best succeed in their respective roles. It’s a true partnership between board members, management company team members, vendors and residents. A strong partnership in all capacities equals a successfully run community association!