Have you ever wondered how a condo building runs? Who keeps the lights on, throws out the garbage and makes sure everyone follows the rules? There are two important yet distinct groups that make it happen - the condo board of directors and the management company.
From setting bylaws to collecting fees, the board and the management company work together to keep everything in the building running smoothly and create a pleasant environment for residents.
Although it often appears as though they are part of the same team, there are several important distinctions between a condo board vs. management company. Here is a closer look at how a condo really operates and the differences between the roles and responsibilities of these two important groups.
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What Is a Condo?
For starters what is a condo and how does it differ from a regular single family home or an apartment? Short for condominium, a condo is a privately owned residential unit in a community of other residences.
The key difference between a condo and an apartment is that residents actually own the unit they live in. If you live in a condo, you also share ownership of common areas with the other owners, including the hallways, elevators, and amenities such as a gym, swimming pool or courtyard.
Condo ownership certainly has plenty of benefits, however, it also comes with responsibilities. You're part of a community of other homeowners who all have the right to peace and privacy. Living in a condo means you have to follow a set of rules that govern how residents are expected to behave - which are known as the condo's bylaws.
As a result, someone needs to oversee the operations of the building to ensure those rules are being followed and the shared areas are properly maintained. That's where the condominium board of directors comes in.
What Is a Condo Board?
The board of directors of a condo is like the building's city council. It's made up of elected homeowners who live in the building and volunteer their time to manage the affairs of the property.
They’re put in charge of managing the big picture decisions that impact the building and make plans for the future of the community. Because the condo board members actually live in the building, they have a special interest in making sure everything functions properly. They not only have an incentive to maintain peace in the building, but they also have an interest in protecting their long-term financial investment.
Condo board responsibilities include:
- Maintain order: One of the most important condo board duties is to enforce the rules and maintain a peaceful environment for everyone in the building. They may delegate certain tasks to the management company, such as responding to tenant complaints. However, it's ultimately up to the condominium board members to ensure residents are respecting the bylaws, resolve any disputes, and dole out fines or punishment to owners who fail to respect the rules.
- Manage the finances: Paying bills and managing the building's budget are also important duties of the condo board members. They're responsible for setting the annual operating budget for the building and keeping track of expenses such as insurance, utilities, and operating costs. They're also responsible for maintaining a reserve fund to prepare for emergencies.
- Keep an eye on maintenance: It's up to the condo board to properly maintain the exterior and common spaces of the building. They will typically delegate any repair work to the management company or a third-party vendor. However, scheduling repairs and allocating funds for regular upkeep is one of the condominium board's responsibilities.
What Is a Management Company?
Although it's up to the condo board to make the big picture decisions about the operations of the building, they can't do it all alone. That's where a management company comes in. Managing a condo building is a lot like running a business. The board is like the corporate executives who have the overall vision for the future of the company. The management company is like the staff they hire to make it happen.
Responsibilities of the management company include:
- Collecting fees
- Paying bills
- Landscaping
- Trash pickup
- Routine repairs
- Responding to tenant requests
- Conflict management
- Regular inspections
- Responding to emergencies
The management company works in collaboration with the condo board and helps them stay on top of their responsibilities. Although they often function as a strategic partner, the management company ultimately answers to the board. The primary difference between the board of directors vs management is that the board is made up of elected volunteers, while the management company is composed of paid employees.
How Do HOA Fees Work?
So now that you understand how a condo operates, who pays for everything? Ultimately, the operations of the building are financed by the homeowners. When you live in a condo, you'll be required to pay monthly HOA fees.
Fees are collected from all the homeowners in the building and used to finance the maintenance costs and other operating expenses of the building. It's the condo board members' duty to oversee the collection of the funds and decide how it's spent, which includes paying the management company and other staff in the building.
HOA fees cover the regular ongoing expenses needed to keep the building running. However, occasionally, the board may need extra cash to finance unexpected expenses, upgrades, and emergencies. When that happens they will approve a special assessment, which is an additional fee on top of your monthly HOA bill that is used to cover unforeseen costs.
Typically assessments are reasonable and just a standard part of owning a condo. However, be aware that in some places, special assessments are getting out of hand. Due to the impacts of climate change and the high number of insurance companies fleeing the state, Florida condo owners in particular are facing astronomical assessment fees. You can read all about the unlucky Florida homeowners who got hit with a $100,000 assessment fee in our recent blog.
Condo Board vs. Management Company: Final Thoughts
At the end of the day, both the condo board and the management company play an important role in maintaining an enjoyable environment for all owners in the building. So next time you get that assessment notice or hear about another tense board meeting, just remember it's all part of the condominium lifestyle.
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