Many associations may want to assign a homeowner as HOA manager, especially small associations on a budget. Tempting as this move might be, it also poses legal and ethical risks that the board may not be ready to face. Before leaping, it is best to examine the decision from all viewpoints.
Homeowner as HOA Manager: Is This Allowed?
An HOA manager keeps the community running day to day. They handle maintenance issues, work with vendors, collect dues, and maintain the association’s financial records. They also help enforce the rules, schedule board meetings, and maintain steady communication between the board and the homeowners.
In many ways, the manager is there to support the board and make sure the association stays on track. That means the job calls for someone who is organized, neutral, and familiar with state laws and the community’s governing documents. It is not just about handling daily tasks. It is also about reducing risk and protecting the association.
That is where the concern comes in. Having a homeowner as an HOA manager can create liability problems of its own. Whether it is allowed depends on state laws and the governing documents. Many documents don’t clearly address it, but that doesn’t mean the board should approve the idea without thinking through the risks.
Why a Homeowner Might Serve as HOA Manager
Homeowners association management is both time-consuming and costly. Smaller communities, in particular, might have a harder time finding room in the budget for professional management. For this reason, many boards allow homeowners to serve as managers in exchange for compensation.
In addition to budgetary concerns, having a homeowner as HOA manager may also stem from scarcity. If there aren’t any management companies in the area, a board may be forced to turn to a homeowner. This might be more common in rural regions.
Residents know the community better, which can also influence the board’s decision. If the board wants someone already familiar with the association’s needs and problems, a resident can seem like a good choice.
Finally, if a resident has skills in certain areas, such as accounting or law, the board might deem them qualified to manage the association. Of course, these reasons might make sense on paper, but they can quickly blur the lines.
Advantages of Having a Homeowner as HOA Manager
There are certainly benefits to appointing a homeowner as the manager. These include cost savings, familiarity with the community, faster communication, and a personal investment in the association’s success. Let’s break these down below.
1. Cost Savings
Professional managers do good work, but the fees can hit the budget pretty hard. Boards often end up setting aside a bigger chunk than they expected to cover management costs.
When a homeowner takes the role instead, the association can skip those bills and get extra money for other expenses. This can take the form of repairs, reserves, or something that has been sitting on the back burner for a while.
2. Community Familiarity
A resident manager already knows the usual trouble spots and the odd little quirks of the neighborhood. They know which areas require more attention and which topics are always the subject of complaints. They also feel the community’s vibe, so they get why people are frustrated or worried without needing a long explanation.
3. Faster Communication
If the manager lives on-site, things can move much more quickly. They can immediately become aware of issues, sometimes just from walking around the community or hearing someone mention something in passing. The board doesn’t have to chase down emails or wait for a reply. And if something urgent happens, everyone already knows where to knock.
4. Personal Investment
Resident managers have a personal stake in the community’s success. Because they are also homeowners, they care more about whether or not property values remain high. This usually pushes them to put in more effort because they are affected much the same as everyone else.
Disadvantages of Having a Homeowner as HOA Manager
Despite its appeal, the homeowner-manager setup can also come with challenges. This includes the lack of neutrality, limited expertise, time and burnout, accountability concerns, and community tension. Let’s break these down below.
1. Lack of Neutrality
A homeowner acting as manager may struggle to enforce rules fairly and consistently, especially when they’re friends or neighbors with other residents. Their personal bias can affect their judgment, causing disputes or a lack of trust.
2. Limited Expertise
Most homeowners lack formal training in HOA law, accounting, or maintenance management. This can lead to costly mistakes with legal consequences.
3. Time and Burnout
Managing an association can be very demanding. If the homeowner has a full-time job and a busy personal life, they might find it challenging to balance these with their role as manager. This can lead to fatigue or burnout, which can, in turn, translate into poor performance.
4. Accountability Concerns
Without a third-party manager, it is easy to let things fall by the wayside. This can put the association at risk of mismanagement or misuse of funds. Accountability is essential, and a resident manager can undermine it.
5. Community Tension
Homeowners might think that the resident manager has too much authority, especially if they also serve on the board. This can result in tension between residents, leading to potential conflict and a lack of trust.
Legal and Ethical Risks of Having a Homeowner as HOA Manager
Board members should always approach decisions with care and thought. The same applies to the decision to appoint a homeowner as HOA manager. If the board isn’t careful, it can run into legal issues.
For one thing, some states require community association managers ot hold professional licenses. A good example is Florida. According to Florida Statutes Section 468.432, anyone who manages more than 10 units or handles over $100,000 a year must have a license for community association management.
Given this requirement, a homeowner without a license can’t serve as an HOA manager. If the board insists on this decision, the association could face specific legal penalties.
Another roadblock is insurance. The association’s directors and officers (D&O) policy may not cover a homeowner serving as an HOA manager. Should they misuse funds or violate fair housing laws, the HOA will have to cover the damages.
Other than that, there’s the subject of compensation. Professional managers typically receive a salary or fee, but resident managers may receive a salary or fee. Paying a homeowner for management duties could lead to problems with tax or employment law.
How to Minimize Risks
If the board decides to appoint a homeowner as HOA manager, it must establish rules to safeguard the association. The board must:
- Create a written management agreement defining the duties, limits, and compensation (if any) of the resident manager.
- Review all financial reports, contracts, and major decisions with the manager.
- Require the manager to keep detailed records to ensure transparency.
- Insist on open communication with the manager at all times.
- Obtain insurance policies that cover the homeowner as the HOA manager.
- Consult legal counsel before deciding to pursue this option.
- Review state licensing laws to ensure compliance.
Why Professional HOA Management Services are Better
Self-management may be more affordable, but it is not always practical. There may come a time when hiring a professional is the right choice. Larger communities or those with complex amenities, in particular, can benefit from an HOA management company.
If the board finds that its workload is already too much to handle, a professional manager can be of great help. The board can delegate much of the work to the manager, who can complete it accurately.
Boards should also turn to an HOA management company if it lacks expertise. Managing an association requires knowledge of local laws, financial management, and risk management — all of which a manager can help with.
Lastly, hiring a professional can reduce conflicts of interest. Because they aren’t residents and don’t hold a personal stake, they can approach decisions with a level head and a neutral perspective. All in all, it is better to hire professional management, even for smaller associations with limited budgets.
A Decision With Risks
Having a homeowner as an HOA manager can help save money in the short term. That said, this arrangement comes with significant legal, ethical, and operational risks. While it may be allowed under state laws and the governing documents, hiring professional management remains the best course of action.
HOA Explore allows associations to search for HOA management companies easily. Use our online directory today!
