A homeowner paints the front door a strange shade of green. The rules of the homeowners association state it's supposed to be hunter green, not lime green. That's a violation.
Another homeowner owns too large a dog for the condominium building. A violation.
In a townhouse community, the trash cans can be put out only the morning of collection. The family next door always drags them out the night before. Another violation.
Some people abide by the rules of the community. Some don't. And when they don't, homeowners associations turn to the management company, the people they pay to keep order in the community.
"We're always the third party, the bad guy, but that's a good thing because if a community doesn't enforce their covenants, it can go quickly downhill," said Don Murphy, vice president of marketing for First American Management, a firm in Columbia that specializes in managing communities.
With the number of community associations increasing by almost 6,000 annually, new homeowners and condominium associations will have to make the decision whether to hire outside management to help govern their communities or tackle the whole job themselves.
"Not everyone needs a management company, but many decide to use one," said Donna Reichle of the Community Association Institute, a professional organization that encourages the successful operation of community associations.
A development may be so small that it can handle the management itself.
"If there's very little common area to maintain, the work can be done by volunteers," said Reichle.
A community association is run by a board of directors that often tries to take on all the management duties.
"Good luck to those who think they can do it themselves," Murphy said. Instead of it being a joint effort at self management, he said, the job usually falls to one or two board members who wind up doing all the work. "It's hard to work 10 hours at a regular job, then come home and deal with your neighbors' problems."
"A professional management group," according to Jonas Brodie of Brodie Management Inc., "can collect the assessments from homeowners, do all the recordkeeping, monitor all service contracts like grass cutting and snow removal, keep insurance in force, and pay all the bills."
Often, board members don't have the experience to handle these functions.
Aside from handling the financial aspect of association management, an important role of outside management is dealing with the neighbors.
"People problems," remarked Jim Faust, chief executive officer of Comanco Inc., a management firm he founded 25 years ago. In the case of architectural violations, yard upkeep or problems with dogs, the management group deals with the offending owner instead of having neighbor pitted against neighbor.
"We take the heat instead of the neighbor," Brodie said.
A community association is the typical legal entity formed by the developers to carry out these and other functions. Membership in the association is automatic by virtue of owning a lot in the development and is specified in the deed.
Each association has a set of bylaws that govern the development. The rules can cover everything from architectural controls and landscaping to how many dogs are allowed in a unit. Every homeowner pays a fee to the association, ranging from less than $100 a quarter to several hundred dollars per month.
For many associations, the bulk of fees collected goes to a management company for its services. This is often a sore point in the eyes of the homeowner. Many question whether the fees are justified and whether the management group is worth the money.
"Everyone wants their assessment to be lower," said Greg Fabella, a board member of Montgomery Meadows in Ellicott City.
"People always ask why they pay so much. But what's the alternative? It comes down to volunteers vs. paid workers. You're going to get a better result from someone whose livelihood is based on performance."
"Management is vital; it's like pulling teeth to get volunteers to do the same work," Fabella added.
The fee is based on how much work the management group does. It could involve only the financial side of the association or architectural enforcement and maintenance as well.
Strong selling point
Besides maintaining common areas, the role of the community association is to preserve and enhance the development's property values and architectural integrity and to maintain security, according to Reichle.
A well-thought-out plan for community maintenance and governance is a strong selling point for a new development. Buyers see a well-maintained neighborhood and it can influence their buying decision.
"Many developers recently have been choosing the management group for their community associations," said Faust of Comanco. "But sometimes, it's just dumped into the lap of the association, and it has a hard time choosing a firm."
A homeowners association is the most common form of community association for single-family detached and townhouse developments. The homeowner owns and maintains the lot, the interior and exterior of the house, while the association owns and maintains the common areas. In a multifamily residential project, such as a condominium, the residents own the interior of their units but share ownership of the lobbies, corridors and exterior.
Although community associations have existed as far back as 1844, when one was created for Louisburg Square in Boston, it wasn't until the advent of cluster developments with common open space in the 1970s that the growth of community associations began.
The increase of condominium ownership also accelerated the trend. There were 10,000 community associations in existence in 1970; in 1998 there are 205,000.
Roland Park-Guilford was an early 20th-century version of an association, with bylaws dictating architectural standards and uses.
"Many owners don't understand what they've agreed to when they bought into the development," said Faust. "What the owner perceives to be attractive isn't allowed. The bylaws don't allow changes, the thinking being that the development was put together by an architect who had some design sense."
Said Brodie: "The closer people are to each other, the more problems occur." In a single-family detached development on large lots, there aren't a lot of problems, he said. "In a townhouse development, where people are rubbing shoulders, there are more letters sent out to owners telling them not to do certain things. It's much more management intensive."
In a high-rise condominium, management is responsible for supervising the staff, performing janitorial duties and taking care of the mechanical systems. To Ben Frederick III, whose family firm Frederick Realty has been working with community associations since the 1970s, "there are a lot more headaches with high-rises; there's a lot more involved."
Another important focus is long-term maintenance.
"Management groups take a long-term approach, building up reserves over a long period," Murphy said. When it comes time for new street paving or a new roof for the community clubhouse, the funds are there for the work. A well-run management group also has a preventive maintenance program. "A good management company anticipates contracts that are about to come up," Brodie said.
Making a change
Many community association boards decide to change management at the conclusion of a contract. High management fees are one reason, but slow response time from a management group is another.
"Timeliness in taking a work order from a resident, trash problems that are not taken care of quickly are some of the main complaints," said Reichle of the Community Association Institute.
Some companies have managers who have so many properties to take care of that they can't give enough attention to any of them. Access to a property, especially in an emergency, is important.
"You have to be close," said Murphy, whose company was at Barnside, a condominium development in Columbia, within an hour after a severe rainstorm in June knocked down trees.
Many associations that have shopped for a management group have looked only at the fee. "The most important thing to look for is stability," advised Frederick. Because the management firm will be handling the association's money, it's crucial to assess its financial capabilities. "Many firms have gone out of business or mishandled the association's funds. Some have committed fraud, by writing checks to contractors that don't exist."
Both Frederick and Faust advise looking for a firm that is accredited by the Community Association Institute, which means its employees regularly attend workshops and conferences to improve their management skills.
To Gerrie Bischoff, the secretary of the board of directors for Barnside, references are most important in the selection process. "You should go and look at the properties the company manages."
Making an informed choice of a management group is one step in running a community association. To owners of management firms, the role of the board of directors is critical.
"A board's involvement determines the timeliness of a management group's response," explained Faust. "Some allow flexibility to repair things quickly, some require approval of the smallest repairs at the monthly meetings."
Communication between management and the board is key. "The board should agree on one contact person to avoid conflicting information," Frederick said. "One of the biggest problems is when board members lose sight of long-term goals, they push through their pet projects and then quit."
From board members' point of view, there has to be a clear understanding of each other's responsibility.
"Delineation of duties is very important," said Kent Kester, president of Bowling Brook Farms, a 785-unit townhouse community in Howard County. "There has to be an upfront agreement between the board and management about who's doing what."
Board members and management agree that the board must be committed to enforcing its rules in order to have a well-run community.
According to the Community Association Institute, the overwhelming trend in America is to use associations to govern developments.
"It's hard to find a new development without a homeowners association," said Faust. "The time when houses automatically increased 10 percent in value every year is over; now curb appeal is key." Professional management's expertise, he said, is in maintaining the quality of the development. "It's not about imposing penalties, but the protection of property values."
Hiring a management firm
The following are some important points to consider when a homeowners association hires a management firm:
* Because management groups can offer many different services, the board should decide which functions the association will handle and which ones the management will handle before it solicits proposals.
* The board should prepare a list of specifications that address managerial duties.
* The decision should not rest solely on the basis of the fee the management firm charges.
* Look for companies that have affiliations with professional organizations such as the Community Association Institute or the Institute of Real Estate Management.
* For emergency response, consider firms close to the development.
Interview company officials at their office.
* Interview the company's current and former clients.
* Visit the properties of clients the company currently serves.
The Community Association Institute offers a publication, "Choosing a Management Company." Call 703-548-8600 or write Community Association Institute, 1630 Duke St., Alexandria, Va. 22314.
Pub Date: 8/23/98