The Matter of Fees in an Association Management Agreement

Posted by Cody Kellogg on August 24th, 2016

Of course, association management fees are important in the general scheme of things but these must be viewed in light of other more important factors. You have to consider the fees charged by the competition, the scope of services provided by the association managers, and the quality of the services rendered, among others.

You have to keep in mind that these professionals will become stewards of your property portfolio – or managers of the homeowners’ association on your behalf, for that matter. For this reason, you shouldn’t make your decisions based primarily, much less solely, on what property management company charges the lowest fees. Otherwise, you may just as well say hello to financial, legal and mental inconveniences.

Trouble with Low Fees

Understandably, you may want to choose from among the companies offering the more affordable fees – the lower the fees, the higher your net profits, other things being equal. But this is a trap for the following reasons:

Lower fees can be an acknowledgement, albeit an implied one, that the company doesn’t offer top-tier services

Lower charges may be the company’s method of gaining business from prospective clients by undercutting its competition

In the second case, the issue will also likely lead to poorer quality of services rendered. This is because lower fees means lower profit margins for the company that, in turn, will lower its quantity and quality of property management services. In this way, it can still remain relatively profitable even while luring in more clients with its lower fees.

Plus, you will be getting the short end of the stick in terms of the managers assigned to your homeowners association.  You may be getting an overloaded association manager with so many property to handle – or more appropriately, that he cannot handle considering the number.

The bottom line: You are well-advised to consider the management fees as the last criterion in choosing the best association managers and their company. You want great value for your money, which means reasonable prices for reasonable quantity and quality of services. You want to avoid the low fees and poor management combo.

Going Into Detail About the Fees

You have to avoid plunging into an agreement even when the fees appear reasonable since there are several crucial details about this matter, too. You should ask every prospective management company about these matters so as to make an informed choice:

What’s the basic management fee? Depending on the types of property, the number of units, and their condition and location, the management fees can range from 4 to 12 percent of the monthly rate.

What’s vacancy fee? This is a tricky part since there are several types of agreement about it, such as no vacancy fee, or prorated when tenants come in, or full monthly fee collected even there are no tenants.

What’s the set-up fee? This refers to the fee given for the time invested in setting up new accounts. Be sure to ask about its details, such as whether it’s per property or per unit.

The more vigilant you are about the costs of the management contract, the more likely you will end up with a fair one. After all, both parties need to make a profit!

Contact:

Broadway Association Management, LLC
12811 Kenwood Lane, Suite 103
33907
United States
239-728-6100
info@bamfla.com