Who Regulates HOA Management Companies?

Homeowner association (HOA) management companies are not strictly regulated. If you’re wondering who regulates HOA management companies, the answer varies by region. Also, most HOA laws affect the association itself, rather than management companies hired by the association.

As an association manager, it’s important to understand all types of HOA regulations — whether these regulatory laws target your clients or your own management business. Understanding who regulates HOA management companies will help you keep your business in good standing with your clients and their community. By enhancing your knowledge of HOA law, you can also provide better service to HOA board members.

The legal aspects of HOA management are often complicated and confusing. But they don’t have to be. With a little research, you can learn all about the HOA regulations in your area. Resources such as HOA Leader are a great place to start. Then, if you need clarity on a particular regulation, you can consult your county registrar’s office.

Whether you’re starting a new HOA management company or just brushing up on your industry knowledge, it’s important to understand who regulates HOA management companies. This will help your business avoid incurring fines, sanctions, and other legal repercussions. It will also keep you from losing clients.

The Association’s Board

Although it’s not a government entity, the primary regulator for an HOA management business is the client’s board. As an association manager, you’re often given tremendous power within the HOA — and with great power comes great responsibility, as the saying goes. HOA managers have access to the association’s financial accounts, private data about residents, and more sensitive information. You’re also expected to enforce rules for residents on the HOA’s behalf.

Unfortunately, there have been cases where unscrupulous HOA managers took advantage of their position. Due to the nature of an HOA, they’re often targeted for fraud and embezzlement. An HOA manager can help protect the association from these problems, but many boards will also keep a close eye on your activity.

To reduce fraud and other abuses of power, many HOAs will impose certain regulations for the management companies they hire. For example, you may be required to have multiple board members authorize a new vendor, bill payments over a certain amount, and more. Usually, you’ll establish these rules with each new HOA client as you negotiate your contract.

It’s important to remember that you’re hired to operate the HOA and help with administration. You enforce the rules, but you don’t make them. If your client’s board comes to you with new guidelines for your job, always listen and accept them.

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States, Counties, and Cities

If you violate a client’s rule, you’ll probably just get fired. However, violating government regulations for HOA management companies can carry more severe consequences. You may be heavily fined or even have your business license revoked.

Business regulations vary by region. It’s a good idea to spend some time familiarizing yourself with your local laws about HOA management companies and small business ownership in general. Some states are heavily regulated, while others barely impose any statutes at all.

Then, within each state, there are individual counties and cities that can have their own regulations. You might operate your HOA management business in a state and a county that are very relaxed about HOA laws, but exist in a city with tighter local regulations

We recommend checking with your local government to be sure you know all the rules that apply to your business. You can also seek assistance from your local Chamber of Commerce. If you’re still not sure about which local regulations apply to your HOA management business, it might be worth it to have a consultation with an attorney who specializes in this topic.

Federal Law

With regard to federal law, there is currently no nationwide regulation that specifically applies to HOA management companies. When dealing with the federal government, use common sense and follow the rules that apply to all businesses. Avoid illegal activity, respect the rights of your employees (if you have any), and file your business taxes on time.

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How to Avoid Regulation Violations

Understanding who regulates HOA management companies is only one part of the equation. Once you understand the laws that govern your company, the next step is making sure you never violate them.

To ensure that your association management company complies with the business regulations in your region, there are several best practices you should employ. We recommend the following:

Use HOA Accounting Software

Accounting for HOAs can be very complicated and it’s easy to make mistakes if you’re managing your clients’ finances the old-fashioned way. Using calculators, files, and spreadsheets are also very inefficient. By switching to accounting software that’s designed for HOA management, you can manage your clients’ money with efficiency and transparency.

With CINC Systems, our cloud-based accounting software offers many features to help your business. Try CINC Systems for collecting your clients’ resident fees, tracking deposits and expenditures in real-time, and generating customized financial reports. Cloud-based HOA accounting software like CINC Systems also keeps your clients’ private data much more secure than other accounting methods.

Conduct Your Business with Integrity

When it comes to running a successful HOA management business, integrity is everything. Clients need an HOA manager they can trust and rely on. If you follow the rules you and your client established in your contract, you’ll have nothing to worry about. Always stick to your project deadlines, listen to your clients’ feedback, and follow through with your promises.

Communicate Openly with Clients

Similarly, make sure that you communicate openly with your HOA clients. By being transparent in your business dealings, you’ll earn the HOA’s trust and the board can loosen its regulations toward you. Always return phone calls and emails in a timely manner, ask questions when needed, and speak up when you need your client to give you direction.

Although some HOAs want to be very “hands off” and let their association managers handle most of the community’s needs, others want to be more involved. Make sure you and your client agree to a balanced communication structure.

By following these best practices, you’ll dramatically reduce the need for your clients’ HOA board to regulate your operations.

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