Scott Brady is co-owner and principal of Progressive Association Management, a CACM-member HOA management company serving 228 communities and nearly 15,000 homeowners throughout Southern California. Since founding the association management division in 2020, Scott has grown the company into the fastest organically growing association management firm in California by limiting manager workloads, providing full back-office support, and holding every team member accountable to documented daily service standards. |
In many service industries, the price you pay is easy to understand and obtain. Not so with association management. Pricing is considered “proprietary” and is usually not available on a website or easy to understand. Even if you receive a quote for the “base management fee,” that will not be the total monthly fee you end up paying. Here is a breakdown of all the different fees and costs you may encounter and the rationale behind each one.
The Full Breakdown of HOA Management Fees
Base Management Fee
The management contract will be very specific about what is included in this fee. It typically covers providing the monthly financials package, collecting monthly assessments, paying all vendors, conducting monthly or quarterly on-site walks, attending board meetings, and supplying a Community Manager who responds to owner and board calls.
Escrow Documentation Fee
When an owner sells, state law requires that the prospective buyer receives documentation related to both the financial health of the association and all governing documents. The management company is allowed to charge a “reasonable” fee to provide these documents. There are two sets of fees: the cost to transfer responsibility to the new owner, and the time it takes to create a demand letter for escrow that outlines what the seller owes the association at close. If the owner does not provide all governing documents such as the CC&Rs, By-laws, Articles of Incorporation, and meeting minutes, the management company can charge for those as well. The cost varies widely but typically runs from $500 to $1,500 or more. The actual cost to produce these documents is almost negligible, so the profit margin is significant. Management companies often argue that this profit helps keep the base management fee lower for everyone staying in the community.
Meeting Minutes
Every decision made at a board meeting must be documented and recorded in the corporate minutes. The minutes reflect what was voted on and how the board voted. They are never destroyed, and if a lawsuit is ever filed against the board or association, they are critical to the case. If the board has a designated secretary, they can take the minutes themselves. If not, the manager will take the minutes and charge for that service, typically between $50 and $100.
Late Fees, Warning Letters, Pre-Lien and Lien Fees
If an owner falls behind on payments and ignores a warning letter, they may receive an “Intent to Lien” or pre-lien letter. If that is also ignored, the board may vote to place a lien on their property to protect the association’s interest. Each step carries a fee charged by the management company to the owner for that service. Because association accounting uses “modified accrual,” the management company is paid immediately, but the association does not recover those funds until the owner becomes current. For communities with numerous delinquent owners, this can represent a significant source of income. Typical fees are: late fee $10 to $25, warning letter $10 to $25, pre-lien $150 to $400, and lien $250 to $500. There is extra work and risk involved, so these fees are generally justified.
Software Access
Management software is not inexpensive, particularly the most popular and robust platforms. Many management companies share the cost of this software with the association as a line item on the monthly statement.
Travel
If the Community Manager must travel to the association for meetings or on-site visits, the company may charge the mileage back to the association.
Vendor Coordination
If the manager needs to consult with the association attorney about pending litigation or obtain bids for a project, they may bill the association for that additional time. The hourly rate can range from $60 to $300 depending on the level of the person at the company involved.
Project Coordination
If the association undertakes a major project such as termite clearance, street repaving, or re-roofing, the Community Manager is not qualified to serve as a Project Manager, but they will typically charge a percentage of the total project cost to coordinate between the vendor and the owners.
Reimbursables (Paper, Printing, Postage and Envelopes)
Nothing is free with most management companies. Every envelope, sheet of paper, print job, and stamp is tracked and billed back to the association, often at a markup. A company may charge 10 cents per page when the actual cost is closer to 1 cent.
Budget Assistance
Some larger associations have a financial committee that handles reserve investments and budget planning, but most do not. The Community Manager and their financial department may prepare a budget for the board based on current spending and expected future projects and charge for that service. Ultimately the board decides on the final budget and monthly assessments, but many are willing to pay for that assistance.
Set Up and Off-Boarding
Bringing on a new community is labor-intensive. Bank accounts must be opened, all owners must be sent a welcome package and entered into the software, and vendors must be vetted and set up in the system. Many companies charge a one-time fee for this. If the board later decides to terminate the management company, they will also charge a fee to transfer that information to the incoming company.
Storage
Many associations have boxes of historical documentation. Since converting everything to PDFs is often deemed too costly, physical boxes must be kept accessible in case owners request information. Because the company needs ongoing access to these records, they will charge a fee to store them securely.
ACH and eCheck Fees
Increasingly, owners prefer to pay their monthly assessments online rather than by mail. The bank or management software company may charge a fee for that service, and most management companies mark up that fee. This typically runs from $1 to $3 per payment.
Processing Owner Demands
By law, any owner can request association documentation from the management company, which must provide it within a reasonable time at a reasonable fee. As with escrow fees, “reasonable” is not defined in the law and is left to the discretion of the management company.
Annual Owner Disclosure
In California, the board must send a substantial package of documentation to all owners every year. This includes the approved budget, reserve study, insurance declaration page, balcony inspection report if applicable, and rules and regulations. The package can run from 30 to 100 pages, and the management company will charge for reimbursables as well as the time required to prepare, package, and mail it.
What This Means for Your Bottom Line
It is not uncommon for additional fees to exceed the base management fee. A common metric in the industry is that the base fee accounts for only about 50% of the total fees charged by a management company.
Beyond what is charged to the association, management companies also seek additional revenue by charging vendors for compliance and, most significantly, by earning a bank credit on the deposits they hold. These credits offset company expenses, but some companies, typically the largest ones, earn higher credits because their deposit balances are so much greater. The credit amount is not disclosed and is known only between the bank and the management company, but it can range from 1% to 3% of total deposits on hand.
How Progressive Does It Differently
All of these fees can feel like death by a thousand paper cuts. We heard the frustration from boards who felt “nickel and dimed” by their management companies. Because we believe in total transparency, which builds genuine trust with our boards, we simplified our fee structure.
For 11 months out of the year, our boards see only two line items: our base management fee and an “all-included” fee. The only exception is the month we mail the annual disclosure package to all owners, where we do recoup those costs. For everything else, including paper, postage, printing, minutes, travel, storage, eCheck, and software access, there are no additional charges.
We calculated our average additional costs and built them into a single flat fee of $5.25 per owner per month. For a community with 100 owners, that is $525 per month. No surprises. Our boards can budget with confidence because they know not only what their base management fee is, but exactly what their total monthly bill will be. Transparency creates trust and transforms the relationship with our boards from suspicion to complete confidence in how we operate.
If you would like to learn more about our all-included management approach, we would love to connect.
