Written by Kelly G. Richardson

Q: What are the legal qualifications and requirements to be a property management company or manager for homeowners associations?

If an association changes its management company, does it have an obligation to advise all residents prior to the hiring of a new company, without a vote from its membership? Our old management went belly up, one manager started her own management company and was now contracted by the board to oversee our properties. Should we have been advised prior to the board’s decision to hire this newly created property management company? — J. H., Fullerton

A: Under most HOA bylaws, hiring and firing vendors is usually a board decision, not a membership vote decision. That includes the vendor who provides management services.

Vendor hiring and firing should be done in an open board session. Many boards and some lawyers incorrectly argue that hiring vendors is “formation of contracts,” a closed session topic, and that anything regarding vendors is in closed session.

However, “formation of contracts” is the term from the Open Meeting Act, and NOT “everything to do with vendors.”

“Formation” means the creation of the legal contract, and also negotiating strategy, which of course should be confidential.  Therefore the change of companies should have occurred in an open board meeting after the announcement in the agenda four days prior.

Amazingly, there are no requirements in California in order to manage HOAs. No state law or regulation requires licensing or any particular training of HOA managers. I have several times seen a homeowner in their HOA convince the board to fire the existing management and hire them as the HOA’s new manager (of course, at a lower rate).

Business and Professions Code 11502 does not allow someone to call themselves a “Certified Common Interest Development Manager” unless they meet specific prescribed requirements, but “Certification” is not mandatory. A manager who correctly is called “Certified” is one indication of qualification.

Another indication of qualifications to manage HOAs comes from the three main organizations in California that issue manager credentials — the Community Association Institute, the California Association of Community Managers, and the Community Association Manager International Certification Board.

Each organization has extensive educational offerings for professional managers and issue a number of credentials or designations. Such achievements do not necessarily mean someone is a good manager, but it certainly shows a commitment to advancing oneself in the management profession and also may increase the probability that your manager is more qualified and committed to management excellence than a manager who is not “Certified” or otherwise hold credentials from CAI, CACM, or CAMICB.

HOAs often hire management on the basis of the lowest quoted fee, which is very often a mistake.

When hiring new management, even though the board, not the members, is the decision-maker, the management is such an important vendor that a board may wish to consider having a “meet the new manager” event or set aside a part of a board meeting at which time HOA members can hear the manager talk about their background and experience and ask the manager general questions. It may get the manager off to a strong start relationally with the community members.

Kelly G. Richardson, Esq. is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober LLP, a California law firm known for community association expertise. Submit column questions to Kelly@roattorneys.com .

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