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Poorly Run CAM Firms Lead To HOA Inefficiencies

In my last post I identified and discussed how inefficiencies in Budgeting and Expense Control adversely affect the amount of your dues and, as a result, the value of your home.

This post will be about how to identify a poorly run CAM (Community Asset Management) firm and what you can do to help rectify things.

It is standard practice that board memberships in a HOA are volunteer positions; and as such, many associations out-source the day-to-day management operations to a CAM firm.

However, it is important to note:

Your association is most likely a non-profit organization whose primary income is dues collected from homeowners; and the CAM firm most likely is a for-profit corporation whose primary income is a monthly management contract fee collected from the HOA’s under contract. 

Therein lies the rub.

While HOA board members are bound by governing documents to have a fiduciary obligation to the association / association members, CAM firms are not bound by this obligation. This fact makes it imperative that HOA’s identify poorly run CAM firms; especially if your board is hands-off and relies 100% on the CAM firm.

IDENTIFYING POORLY RUN CAM FIRMS

  • Does your CAM firm allow you to view Association financial and other records per A.R.S 33-1805 (or similar), or do they deny the request, or try to charge you for these documents
  • Do you rarely hear from your HOA attorney’s
    • Legislative changes are very important and occur frequently
    • Assessment Collections / Liens / Demands are key expense and legal items
    • CAM firms are not law firms
  • Can your CAM firm property manager (PM) explain, in detail, how assessment collections and violation fees are handled (process and accounting)
    • Does it match your Collection Policy and Violation Policy
    • Does the accounting / invoicing / cash flowing match these policies
  • Does your CAM firm PM do all the talking at meetings
    • Are questions to the board always answered by CAM firm personnel
    • Is the Meeting Minute documenter at your meetings an employee of your CAM firm

I feel that the main issue with poorly run CAM firms is that they try to provide for every service they can in an effort to gain additional revenue streams and maintain full control of the HOA. All at the expense of the HOA and its members.

What if your HOA has partnered with a poorly run CAM firm?

RECTIFYING A POORLY RUN CAM FIRM

  • Separate out financial management function
    • Hire a quality CPA not connected to CAM firms
  • Separate out Assessment Collections function
    • Move away from law firms and / or your CAM firm to collection agencies not connected to CAM firms
  • Hire an attorney not connected to a CAM firm
    • Flat monthly fee for HOA statute enforcement/By-Laws/general counsel/etc…
    • Meeting Minutes $xxx/meeting (hourly / flat rate?)
  • Leave project management, member communications, daily upkeep, CC&R Violations, etc… with existing CAM firm
    • Alternatively hire another CAM firm with limited functions
    • Alternatively hire another CAM firm with a proven history maintaining fiduciary obligations to a HOA (most likely very rare)
    • Alternatively hire a project manager / community maintainer

With technology today, there is absolutely no reason why key HOA functions all have to be provided by one vendor; especially when conflict of interests are so prevalent and core competencies can be utilized elsewhere (many times for less costs overall).

I am currently in the information gathering process of the rectifying stage. Hopefully my next post will be a blueprint for better managed HOA’s.