HOA MANAGING AGENT

Boards May Delegate Operations to a Manager

Agent of the Association. A managing agent is one who represents another, called the principal, in dealings with third persons. (Civ. Code § 2295.) A manager is "a person or entity who, for compensation or in expectation of compensation, exercises control over the assets of a common interest development." (Civ. Code § 4158(a); Berryman v. Merit Management.) Boards may delegate the day-to-day operations of their associations. Some duties, however, cannot be delegated and must remain with the board. 

Common Interest Development Manager. A CID manager does not include a common interest development management firm. (Bus & Prof. § 11503.) It means an individual who, for compensation or in expectation of compensation, provides or contracts to provide management or financial services or represents himself or herself to act in the capacity of providing management or financial services to a community association. It includes:

• A person in a partnership, a corporation, or any other business entity who advises, supervises, and directs the activity of an association.
• A person operating under a fictitious business name who provides the services of a manager. (Bus. & Prof. § 11501.)

Management Services. While there are different types of management structures, management services means an act performed or offered in an advisory capacity that includes the following:

• Administering or supervising the financial or common area assets of a community association at the direction of the board. (Civ. Code § 5380.)
• Implementing resolutions and directives of the board.
• Implementing provisions of governing documents, which govern the operation of the association.
• Administering contracts, including insurance contracts, vendors, contractors, and other third-party providers of goods and services. (Bus. & Prof. § 11500(d).)

Recording Management Information. As provided for in Civil Code § 4210, to facilitate the collection of assessments boards of directors may record a statement with the County Recorder with the following information:

•  The name of the association.
•  The name and address of a managing agent or treasurer or other person authorized to receive assessments.
•  A daytime telephone number of the authorized party.
•  A list of separate interests subject to assessment by the association, showing the assessor's parcel number or legal description, or both, of the separate interests.
•  The recording information identifying the CC&Rs.

Communications With HOA Attorney. See "Attorney-Client Privelege."

Forms of HOA Management

The primary duty of a board of directors is to manage their association. While some responsibilities are nondelegable, boards can delegate duties to a managing agent. Following are the forms of management commonly found in homeowner associations:

Self-Management. Small associations frequently use self-management, i.e., the board directly manages the association without the assistance of professional management.

Management Company. Small and medium-sized associations often employ a management company to handle day-to-day operations. It includes receiving assessments, paying bills, preparing monthly financial reports (Civ. Code § 5500), preparing and mailing the annual budget report and policy statement (Civ. Code § 5300 and § 5310), performing property inspections, soliciting bids for projects, handling correspondence, preparing board meeting packets, etc. See managing agent.

Onsite Management. Large and high-end mid-sized associations often employ a full-time onsite manager to handle operations. Sending monthly invoices, mailing bills, and receiving assessments is done in-house or contracted with a management company. The onsite manager can be a direct employee of the association or an employee of a management company. The arrangement provides the full service described above but with a higher level of service since management and staff are on site.

Community Managers

Individual managers can be classified into the following two categories:

Portfolio Managers. A portfolio manager is an individual who works for a management company and manages multiple associations. The manager works from the management company's office, handling board and homeowner requests by telephone and email.

Onsite Managers. An onsite manager handles a single association account, working from an office at the association. The manager can either be employed directly by the association or be on the payroll of a management company.

Management Companies

Management companies generally fall into four categories based on size. All will offer financial management services or full management.

• Small. A small company has a handful of employees who manage a small number of associations within a small region.
• Medium. A medium company has a larger staff and a region that covers multiple counties.
• Large. A large company may offer services throughout the state, including in-house maintenance services.
• Mega. Mega companies cover multiple states and may offer management services in adjacent countries. They might also provide in-house insurance, banking, and maintenance services.

Manager Disclosures

As required by Business & Professions § 11504, managers of common interest developments must annually disclose to the board of directors of the association the following information:

• Whether or not the CID manager has met the requirements of Section 11502 so he or she may be called a certified common interest development manager.
• The name, address, and telephone number of the professional association that certified the common interest development manager, the date the manager was certified, and the status of the certification.
• The location of his or her primary office.
• Prior to entering into or renewing a contract with an association, the common interest development manager shall disclose to the board of directors of the association or common interest development whether the fidelity insurance of the common interest development manager or his or her employer covers the current year’s operating and reserve funds of the association. This requirement shall not be construed to compel an association to require a common interest development manager to obtain or maintain fidelity insurance.
• Whether the common interest development manager possesses an active real estate license.

Management Agent Disclosures. Civil Code § 5375 further requires that before entering into a management agreement, a prospective managing agent other than a full-time employee of the association (Civ. Code § 5385) or any regulated financial institution operating within the normal course of its regulated business practice (Civ. Code § 4158) must provide a board of directors with a written statement which contains all of the following information:

1.  The names and business addresses of the owners or general partners of the managing agent. If the managing agent is a corporation, the written statement shall include the names and business addresses of the directors and officers and shareholders holding greater than 10 percent of the shares of the corporation.

2.  Whether or not any relevant licenses such as architectural design, construction, engineering, real estate, or accounting have been issued by this state and are currently held by the persons specified above. If a license is currently held by any of those persons, the statement must disclose (i) what license is held, (ii) the dates the license is valid, and (iii) the name of the licensee appearing on that license.

3.  Whether or not any relevant professional certifications or designations such as architectural design, construction, engineering, real property management, or accounting are currently held by any of the persons specified in paragraph (1), including, but not limited to, a professional common interest development manager. If any certification or designation is held, the statement shall include the following information: (i) the certification and the issuing entity, (ii) the dates the certification or designation is valid, and (iii) the names in which the certification or designation is held.

Documents and Manager Conflicts of Interest. Managers and management companies must facilitate the delivery of documents into escrow and also disclose conflicts of interest, including:

• receiving any referral fee or other financial benefit that could be derived from a business or company providing products or services to the association;
• ownership interests or profit-sharing arrangements with service providers recommended to, or used by, the association;
• receiving a referral fee or other financial benefit from a third-party provider distributing documents pursuant to Civil Code § 4528;
• disclosing any business or company in which the common interest development manager or common interest development management firm has any ownership interests, profit-sharing arrangements, or other financial incentives provided to the management firm or managing agent.

Finding Good Management

When contracting for management services, you want to ask the following questions:

• Are their managers all certified (or working on certification) through CAI or CACM?  You will be in better hands with a management company that places a premium on training their managers. (See Designations and Certifications.)
• Ask how long they've been in business, since nothing can match the wisdom that comes with years of experience.
• Ask about insurance — what do they have, and at what limits?
• Look at the financial statements they generate for their associations. It's essential that you can read and understand them. Otherwise, they have no value to you.
• Ask if they maintain separate bank accounts for each association. Under no circumstances should the management company co-mingle client monies into a single account.

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