Cleanup to Consistency

From Cleanup to Consistency

What Association Management Looks Like After the Transition

Homeowner Associations don't switch management when they are happy with services. After transitioning many poorly-run communities from Sugar Grove to Naperville to Aurora to Homer Glen, we wanted to share a bit about our experiences and what the Board should expect.

Taking over the management of a HOA or condominium association that has been poorly managed can be an intensive process. During the first several months, there may be years of unresolved issues waiting for attention.

Some of the issues could include:

• Financial records may need to be reconciled.
• Owner ledgers may contain errors.
• Contracts need to be located and reviewed.
• Maintenance projects may have been deferred.
• Violations may have gone unenforced.
• Insurance may need attention.
• Reserve planning could be non-existent.
• Vendor could be calling for payment on unpaid invoices.
• There could be a severe lack of attention or inspections.
• Owners may have completed unauthorized architectural changes in the past.
• Owner records, themselves, could be incorrect or missing.
• Governing documents may be missing or require review.
• Consistency in governance may have "left the building" years ago.
• Budgets may need a complete overhaul.
• Etc.

Some communities need some of this. One larger community we took over in Aurora needed all of this.

For management personnel involved, this can be a very intense time.

For the Board of Directors, this period can feel incredibly productive.

There are frequent emails, discoveries, decisions, proposals, meetings, and problems being resolved.

But there is an important distinction between fixing an association and managing an Association.

The goal of professional management should not be to remain in perpetual cleanup mode. The goal is to establish systems, procedures, and expectations that eventually make that level of cleanup unnecessary.

When the Emergency Becomes the Routine

During a management transition, unusual circumstances often require unusual attention. Management may be reconstructing records, investigating old problems, addressing homeowner concerns that were previously ignored, or identifying maintenance issues that should have been addressed years earlier.

That activity can unintentionally establish an expectation that management should always operate at that same level of urgency.

In reality, one of the clearest signs that an association has successfully transitioned is that things begin to become more predictable.

There should be fewer surprises.

Financial reporting becomes routine. Maintenance becomes scheduled. Contracts have established renewal dates. Collections follow an adopted process. Violations are handled consistently. Records are organized. Owners know how to contact management and where to find community information.

The association begins operating as an organization rather than responding to one problem after another.

From Reactive Maintenance to Planning

Maintenance is one of the best examples of this transition.

When taking over a troubled community, management may discover overdue repairs, neglected landscaping, deteriorating pavement, missing inspections, aging mechanical equipment, or projects that were discussed for years but never completed. For the community in Aurora, there were almost 20 unpaid invoices, a water main leak, several architectural violations leading to litigation, etc.

Initially, management's job is to identify and prioritize those problems.

Eventually, however, those issues should become part of a larger system. Reserve studies, annual inspections, preventative maintenance schedules, vendor contracts, and capital planning should increasingly determine what needs attention and when.

Instead of asking, "What broke this month?" the conversation becomes, "What should we be preparing for next year?"

That is a significant improvement.

Financial Management Should Become Predictable

The same evolution should occur financially.

Early in a transition, substantial effort may be required to understand delinquent accounts, reconcile financial records, review unpaid invoices, examine reserve balances, and determine whether prior financial practices were appropriate.

Once those issues have been addressed, financial management should become much more predictable.

• The Board should receive understandable financial reports.
• Delinquencies should follow an established collection process.
• Vendor invoices should be processed consistently.
• Reserve contributions should be made as budgeted.
• Upcoming expenses should be anticipated.
• Proactive maintenance should be implemented.
• Homeowners and the Board should experience transparency.
• The annual budget process should become part of the association's regular operating calendar.

Good financial management is not measured by how many financial emergencies are solved. It is increasingly measured by how few financial emergencies occur.

The Board and Management Relationship Also Evolves

The relationship between the Board and management should mature during this process as well.

During a difficult transition, management may temporarily become deeply involved in identifying problems and presenting solutions because so much institutional knowledge has been lost.

Once the association stabilizes, the respective roles become clearer.

Management administers the association, maintains records, communicates with owners, monitors contracts and maintenance, provides financial information, obtains proposals, identifies developing issues, and implements the decisions of the Board.

The Board governs.

Directors establish priorities, approve budgets and contracts, adopt policies, make significant financial decisions, and exercise the authority provided to them by the association's governing documents.

A strong management relationship does not replace the Board's decision making. It gives the Board better information and better systems with which to make those decisions.

What Should a Board Expect After the Cleanup?

Once an association has moved beyond the transition period, expectations should shift from extraordinary corrective work toward consistent execution.

The Board should expect accurate financial reporting, organized records, responsive owner communication, contract oversight, maintenance planning, consistent enforcement procedures, meeting preparation, collection follow up, and early identification of developing concerns.

Most importantly, management should help the Board look forward rather than constantly looking backward.

This also means that a quieter month is not necessarily a sign that less management is occurring.

Sometimes it means exactly the opposite.

A community where assessments are being collected, vendors are performing as expected, maintenance is scheduled, records are current, owners are receiving appropriate communication, and major projects are being planned in advance simply does not generate the same level of crisis activity as a community that is struggling.

Success Should Eventually Look Like Consistency

A successful management transition should have an expiration date.

There should eventually come a point when the association is no longer being "fixed."

The records are organized. Financials are understandable. Policies are being followed. Maintenance is being scheduled. Vendors understand their responsibilities. Homeowners know where to obtain information. The Board understands upcoming decisions, and management is looking ahead for potential problems.

At that point, professional management has entered a different and equally important phase: protecting the progress that was made.

The measure of management should therefore evolve as the association improves.

The question is no longer simply, "How many problems did management fix this month?"

A better question becomes:

"How many problems are we no longer experiencing because the association is now being managed properly?"

That transition from cleanup to consistency is not a reduction in management.

It is the result of successful management.

About PMI Service Group

Property Management

PMI Service Group manages rental homes for real-estate investors, HOA and condo Associations, commercial properties and even commercial Associations. We also offer brokerage services for homeowners looking to sell their home. We also conduct property acquisitions off-market, helping people who face foreclosure or private sales between real-estate investment clients looking to trim or add to their real estate portfolio(s). With many years of experience in construction, engineering, design, rehabs, investment property, property management and portfolio management, let's have a conversation about managing your Association.

Real-Estate Investors

We also conduct property acquisitions off-market, helping people who face foreclosure or private sales between real-estate investment clients looking to trim or add to their real estate portfolio(s).

Local Team

With many years of experience in construction, engineering, design, rehabs, investment property, property management and portfolio management, let's have a conversation about what good management really means. We're local and experienced and would love to hear from you.

PMI Service Group

630-912-8742