“It was a sunny morning in early 2025, the HOA Detective™ was working the HOA Fraud Unit in a mid-sized West Coast city. My partner was busy managing the steady stream of inquiries from concerned condo buyers who had read the recent reports about a phenomenon we call “The HOA Budget Takeover…”
“For the purposes of this report, the names of the guilty are not mentioned to avoid lawsuits and prevent embarrassing the innocent. Otherwise, this story is being told exactly as it is set forth in the subject property’s 2025 Management Plan Budget.
HOA Detective™ | June 3, 2025: There is the occasional instance in which the operating budget for a prominent condominium simply doesn’t add up. In this context the “prominent condominium” is one with more than $1.5M in annual revenues, 99% of which is generated exclusively by the annual assessments paid by the condominium unit owners.
The subject property for the latest HOA Detective™ case study is a modern mid-rise condominium located in a mid-sized West Coast city with numerous similar condominium developments that are the result of the same developer-management company alignment.
HOA Budget Takeover: The case study provides a textbook example of what we call the HOA Operating Budget Takeover – a process in which a deeply entrenched management company and affiliated vendors can quietly siphon hundreds of thousands of dollars a year from a community’s budget, right from under the noses of the innocent Association members.
The condominium building in question had been under the control of the same management company (ManCo) since it opened 17 years ago at the time we got the call to investigate. Over time, the ManCo’s role had become less like a service provider and more like a ruling comptroller. Ancillary investigations conducted in the months and years leading up to this latest instance had identified other Associations developed by the same Developer-ManCo consortium that had experienced the same pattern:
Developer installs preferred ManCo; ManCo installs “friends of the family” vendors; operating budget begins to swell until the lack of transparency results in a bloated budget which directs 40%-50% (or more) of the total revenues of the Association directly into the pockets of the ManCo or affiliated vendors. In this out-of-control instance, the budget in question was nothing short of astonishing, even to a seasoned HOA Detective™ and his team of investigators.
How Much is Enough: If an annual management fee that averages $1,309 per Unit for a relatively small 62 Unit condominium isn’t enough, how about an annual Concierge Services fee that averages $5,759 per Unit?
For those of you who are not familiar with the budget practices of urban condominiums on the West Coast, suffice it to say the fees for these two budget categories alone under the Association’s “2025 Management Plan Budget” are more than 10 times the amounts the HOA Detective™ and his staff had ever encountered in almost 15 years of investigating condominium budgets. When it comes to the Concierge Services fee, it’s the highest concierge cost we’ve ever seen in ANY West Coast market.
Wait – it Gets Better (or worse): After conducting further investigation, another ~$200K was found to be allocated to various building maintenance and janitorial expenses for services provided by affiliated vendors or are being used to pay for ManCo staff provided services. In short, this budget is not only a near full employment funding source for several ManCo employees, the friends and family of preferred vendors are also helping themselves!
Unfortunate State of Affairs: The HOA Detective’s late grandfather would have called this situation an “unfortunate state of affairs.” The HOA Detective™ calls this phenomenon a “HOA Budget Takeover.” We are not talking about the occasional padded contracts. This “Management Plan” is a systemic redirection of the Association’s annual spending into the pockets of the people overseeing the budget itself, or closely affiliated business entities.
Somethings Seem Reasonable: In this case, the ManCo’s base fee may seem reasonable on first glance – especially when compared to the budget for Concierge Services – but when compared to the per unit management costs for similar buildings in the same city and others in the region – the management fee alone is more than 10X that of the closest comparable properties. Add the astronomical cost for ManCo-provided concierge services, the combined ANNUAL haul from affiliated services exceeds $550,000 a year. Funds which are paid directly to the ManCo or closely affiliated vendors.
Bottom Line There is No Sgt. Friday for HOAs: Let That Sink In – Over half a million dollars. One building. Sixty-two units. ~$8,870 per Unit EVERY year in what amounts to a modern version of Highway/Urban Robbery. A fraud being orchestrated right in front of the Association members and endorsed by the community management sector is business as usual.
If your Association’s budget includes line items that make you raise an eyebrow – or vendors that seem a little too cozy with management – it’s time to take a close look. Because if you don’t know where your hard-earned money is going, chances are it’s already gone.
Because You’re Buying More Than a Home!
