Disadvantages of Self-Management
Small Management Companies
Board members and homeowners living in community associations should be aware of the many disadvantages of self-management or hiring small family run management companies:
- No checks and balances exist when one person is accounting for the association’s income and expenses. Checks and balances exist only when accounting functions are divided between two or more unrelated bookkeepers utilizing a double entry accounting system.
- Many management companies can pass on savings through volume purchasing power that does not exist for a single association. Often, the savings will cover all or most of the management fee.
- Management companies generally have access to a large group of reliable contractors and vendors. This can save your association money while avoiding unnecessary problems.
- Paid board members are not volunteers and consequently do not receive the statutory indemnification that non-paid board members receive in accordance with the California Civil Code.
- Many management companies have attorneys on retainer. Thus, association clients can obtain, at no cost, legal advice from time to time. Most importantly, most larger management companies are kept up to date on laws relating to associations. This information can be made available to the board at no cost.
- Some management companies are highly effective at collecting assessments. This can increase your income while reducing your legal and collection costs.
- Self-management can result in a lack of continuity of management with each election of a new board. A management company assures continuity of management. Continuity is a key factor in minimizing costs and avoiding problems.
- Professional managers can generally be more objective than most board members because they don’t establish personal relationships with the members of the association. Objectivity is necessary to eliminate certain conflicts of interest.
- Most management companies provide a 24-hour, 365 days a year emergency response service.
- Nearly all mortgage lenders and most buyers frown on self-managed associations.