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Phone: 818-889-4426 Local to Ventura, Oxnard, Westlake Village, consultation services Nationwide
Self-managed Associations are not uncommon, especially with Association of 30 units or less. In order to keep the monthly Association assessments at a reasonable level; it can make sense to go the self-managed route. However, the inherent problem with self-management is that the Association still has the same general requirements as per the Civil Code as any other Association. Since the Board of Directors is a voluntary entity subject to change every year when the election process takes place, continuity and observance of all the mandated requirements are often misunderstood or overlooked.
This creates an obvious potential liability for the Association (as volunteers, the Board of Directors have no individual liability) that can be resolved by hiring a consultant to educate and direct the Board. After the initial interpretation of the Governing Documents and subsequent implementation of rules, regulations, policies, and procedures are in place; the Association is much better equipped to run the show properly. The consultant can also provide the Board of Directors a working format on fulfilling the mandated annual disclosures and such things as Reserve studies and auditing requirements. A few of the many examples of common errors or omissions by self-managed Associations are: Board compensation, inadequately fund reserves, annual audits/reviews, providing proper notice, etc.
A common theme I’ve found is Boards misinterpreting the Associations Governing Documents, which results in the maintenance, repairs, and replacement of components which are the Owner’s responsibility. A consultant will review and then create a policy, which is very cost-effective and reduces costs dramatically. Another typical finding is hiring contractors and maintenance companies without proper research, which can prove catastrophic. If their insurance is inadequate or expired, the Association becomes liable. In today’s insurance market, very few claims need be filed before the carrier provides notice of non-renewal. Replacing the insurance can mean large special assessments to each Owner and dues increases as much as 50% or more. One of my Associations (153 units) was paying $38,000 annually for insurance with a primary (admitted) company. After five claims in five years, the company paid out a total of $32,000; this means a profit of $178,000 over the five years. Because all five claims were in the last two years of the five-year loss history and involved water damages, the Association was non-renewed. Policy replacement through secondary carriers was $140,000 annually, costing each Owner $55.56 mo. in dues.
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