Column: Side effects of rock bottom management fees

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Commentary by Eric McKinney

Homeowner boards love to feel like they’re getting a good deal – who doesn’t? But negotiating the lowest possible management fee with your management company could end up costing your community more for yearly maintenance and capital improvement projects than what’s saved on the management fee.

McKinney

When a property management company agrees to manage communities for ‘rock-bottom’ fees, it requires that they manage additional properties (to offset decreased management fee revenue on a per property basis) to remain profitable, which translates to their community managers having less time to devote to each of their communities.

Community managers understand the need to keep board members happy and therefore focus on tangible objectives that, if not properly performed, carry immediate repercussions from their boards. This means items that are not easy for board members to gauge performance and value suffer and do not get the attention they deserve.  Unfortunately for association boards, these intangible items have everything to do with their community’s yearly maintenance and capital improvement projects.

Community managers having too many properties to oversee don’t have adequate time to properly assemble comprehensive requests for proposals, nor negotiate best pricing with qualified vendors.

This is rather substantial and can be quite costly to a community given that an association board will invest 50 to 60 percent of annually collected homeowner dues on yearly maintenance and capital improvement needs for their community.

When negotiating, consider that a rock-bottom management fee could affect the ‘intangible’ services your community receives, impacting expenditures and making the sting of overpaying for services something that may not be realized for months or even years to come.

Eric McKinney is a Carmel resident and 28-year veteran of the HOA/COA industry, managing partner of Cambri Management and co-founder of CommunityLynk.com.  Contact Eric at ericm@cambri.com.

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