Is a third-party project manager for HOA projects necessary? It is not uncommon for homeowners associations to have large-scale projects that fall outside of the board’s expertise. While an HOA management company may be able to provide some assistance, there is an argument for hiring a separate professional for the job.
What is a Project Manager for HOA?
Homeowners associations often juggle maintenance and improvement projects. A project manager is the person in charge of overseeing and coordinating these projects, which can range from small repairs to major renovations or upgrades.
The project manager essentially acts as a liaison between the HOA board, contractors, and residents. If the manager is a third party, they can also serve as the point of contact for the management company. With a project manager, the association can ensure the project stays on schedule, on budget, and meets the required standards.
Should the Board Hire a Project Manager for HOA Projects?
Association boards are responsible for managing community affairs, but some projects may require skills and time that fall outside the board’s expertise. This raises the question of whether the board should hire a project manager. To answer this question, several key considerations are essential.
1. Check the HOA Management Contract
Many associations already have an HOA management company on payroll, and they can tap that company to oversee projects. That said, many management contracts stipulate that large projects incur additional costs. This means the HOA would have to pay additional fees, on top of the ongoing management fees.
Boards should check their management contract to understand their options. Moreover, boards should make sure that the contract doesn’t include any language that would require the HOA to use the company’s project management services exclusively. This will give the association the freedom to shop outside for large-scale projects.
2. Consider Expertise
Associations typically have a management team, and most teams have members who possess the required expertise for managing capital projects. To save money, boards should tap these members for project management.
3. Identify the Project Size and Cost
The size of the project can also indicate whether an independent project manager is necessary. Small projects, such as fence repairs, signage updates, and pressure washing, typically involve shorter timelines and lower costs. For these projects, the board or community manager can likely handle the oversight.
On the other hand, larger projects involve significant coordination, larger budgets, and more disruption. They may also require certain permits. Examples include roof replacements for shared facilities or buildings, asphalt resurfacing, structural repairs, and amenity renovations.
Aside from size, the project’s cost can also influence the board’s decision. For example, if the project costs more than $150,000, it may be a good idea to hire a project manager in addition to the board or community manager. Projects of that scale demand more attention, which could potentially split the community manager’s time.
The Benefits of Hiring a Third-Party Project Manager for HOA
For many associations, managing a large construction or renovation project can be overwhelming. While relying on the community manager is an option, bringing in an independent project manager offers several benefits. Let’s discuss them below.
1. A Third Party Advocates Solely for the HOA
Unlike boards and managers who may be juggling multiple responsibilities, a third-party project manager works only for the association. Their sole job is to ensure the project is completed correctly, on time, and within budget. This advocacy can make a significant difference, especially when complex repairs or large budgets are involved.
2. Savings Through Better Oversight
Experienced project managers can identify when contractors recommend unnecessarily expensive solutions or try to expand the scope of work. This keen eye for detail can potentially help associations save thousands of dollars in additional expenses.
3. Detecting and Preventing Contractor Overreach
Board members may not always have the expertise to challenge recommendations made by contractors. A third-party manager can evaluate these recommendations, attend inspections, and push back when full replacements are not warranted.
4. Clarity and Transparency for Residents
Large projects often require special assessments or loans. Homeowners may resist these additional financial obligations if they are not aware of the reasons behind them.
A third-party project manager can bridge the gap between the board and the community. They can attend meetings, explain the scope of the work, and provide a breakdown of expenses to help residents better understand the project.
5. Long-Term Value and Risk Mitigation
Independent project managers bring technical knowledge and experience from working on similar projects. This equips them with the ability to identify potential issues before they arise, coordinate effectively with contractors, and prevent costly mistakes. With a project manager, associations can also reduce legal and financial risks.
Why Companies Charge Extra for the Management of HOA Projects
While HOA management companies may undertake small projects at no extra cost, large projects often incur additional fees. This is because project oversight typically falls outside the scope of routine HOA management. Managing large projects demands more time, coordination, and expertise.
Most management contracts include an hourly rate or a separate fee structure for project management. This rate or fee covers contractor oversight, site logistics, material coordination, and communication. These responsibilities are more focused and go beyond what standard management services include.
There is a higher level of involvement for project management. Managers have to plan, solve problems as they arise, and ensure compliance with project schedules.
How Much Does an HOA Project Coordinator Cost?
The cost of a project manager can vary widely depending on who handles the oversight and the scope of the project. In many cases, the HOA’s existing management company offers project coordination services for an additional fee, especially when the project involves tasks beyond routine operations and management.
Management contracts often include terms for capital projects that require extra time and attention. If the board wants the manager involved in coordinating a major renovation or repair, the management company may charge an additional fee of 2% to 5% of the total project cost.
While that percentage can add up quickly on high-value projects, it is still generally less than the cost of hiring an independent project manager. A project manager typically charges a higher fee, typically around 15% of the project contract value. This is because their role involves deeper oversight, technical expertise, and dedicated focus.
How to Hire the Right Project Manager for HOA
Whether the board decides to secure its management company’s help or hire an independent project manager, there are specific steps to follow.
1. Understand the Project Scope
Association boards should start by clearly defining the project. For large-scale renovations that involve multiple contractors or architectural components, the board must determine whether the manager has the capacity and expertise to handle the job in addition to their regular duties.
2. Ask the Right Questions
Board members should ask questions to gauge the manager’s readiness and expertise. Relevant questions include:
- What is your experience managing projects of this size and type?
- What specific project management skills do you bring to the table?
- What potential issues would you anticipate that a board member or homeowner might overlook?
3. Compare Costs
Cost is a key consideration, too. The board should compare the community manager’s hourly rate with the cost of hiring an outside project management firm. Of course, while cost is important, especially if an HOA is on a tight budget, it should not be the only deciding factor.
4. Review the Contract
If the board decides to hire a third-party project manager, it must ensure there is a written contract with authorized signatures. Contracts should clearly define roles, responsibilities, deliverables, timelines, termination clauses, and indemnification provisions. Without a contract, disputes are bound to arise.
5. Protect the Association’s Interests
For any contract worth $1,000 or more, the board should review the terms carefully before signing. The agreement should include an explicit termination clause, indemnification language that protects the association, and clear responsibilities and deliverables. Having a lawyer review the contract is recommended.
The Bottom Line
Hiring an independent project manager for HOA projects certainly has its benefits, but it also tends to be more expensive. There is no single answer that works for all communities, as several considerations must be taken into account. Ultimately, the decision rests with the HOA board.
Graham Management offers exceptional HOA management services to Houston communities. Call us today at (713) 334-8000, request a proposal, or contact us online to learn more.
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