HOW TO DEAL WITH A BAD HOA MANAGEMENT COMPANY IN CALIFORNIA: YOUR LEGAL RIGHTS AND OPTIONS
OVERVIEW
Even though HOA boards are the only legal authority in an HOA, in a lot of associations in California, it doesn’t quite work that way. Too often, much of the day-to-day power is handed over to management companies: paid third-party contractors who aren’t elected by homeowners, don’t answer to them directly, and often operate with little oversight.
This article explains how HOA management companies are supposed to function under California law and their management contracts, the various ways they overstep or mishandle their duties, and the risks associated when boards delegate too much authority. You’ll learn how management companies are hired and fired, what their contracts usually say, the red flags that signal mismanagement, and most importantly, the legal and strategic tools homeowners can use to hold both the board and the management company accountable when things go wrong.
WHO IS RUNNING YOUR HOA?
Many homeowners assume that if something happens in their community, whether it’s a violation notice, a denied request, or a delay in getting repairs done, it’s the management company making the decision. After all, they’re typically the ones sending the letters, answering the emails, and coordinating with vendors. But that assumption is wrong, and it’s one of the most common misconceptions in HOA living.
Under California law, the HOA’s board of directors is the only governing authority in your association. That means that only the HOA board:
- Can make binding decisions on behalf of the association.
- Has a fiduciary duty to all of the individual members of the HOA.
- Is empowered by the Davis-Stirling Act and the governing documents to adopt or enforce rules.
The management company, by contrast, is almost always a paid vendor—a third-party contractor hired by the board to handle certain administrative and operational tasks. They are not elected, they have no independent decision-making power, and they owe no fiduciary duty to you or any other individual homeowner.
In practice, many boards delegate almost everything to the management company—sometimes out of convenience, and sometimes because they assume the manager has more expertise. That’s when problems start. A disengaged board that allows the manager to take de facto control over enforcement, communications, and even the pace at which issues are addressed is not only violating the law but also exposing the HOA to significant liabilities, including embezzlement and breach of fiduciary duty.
And because the management company isn’t directly accountable to, and has no fiduciary or contractual duty to, individual homeowners like you, an HOA board that over-delegates often creates a dynamic where members have no meaningful way to address mismanagement except by pressing the board to act.
WHAT HOA MANAGEMENT COMPANIES ARE SUPPOSED TO DO (AND NOT DO)
The duties of an HOA management company are defined almost entirely by its contract with the HOA—and by the legal limits set in California law. That contract, approved by the board, spells out the scope of services, the length of the relationship, the renewal terms, and any limitations on authority. In California, most HOA management contracts fall into one of two categories:
- Full-service contracts. These cover a wide range of operational and administrative tasks. The manager handles various tasks, such as owner communications, coordinating maintenance and vendor work, facilitating board meetings, managing elections (if delegated), keeping certain records, and preparing and sending required notices.
- Financial-only contracts. These are narrower in scope and usually cover accounting, billing, assessment collection, and certain compliance disclosures.
In either case, there are important legal boundaries. Management companies are never supposed to:
- Make binding decisions on behalf of the HOA.
- Fine a homeowner or reject an architectural application without board authorization.
- Deny a records request unless instructed by the board and supported by the law.
These are non-delegable board powers. Even if the contract language is broad, the management company cannot take on duties that California law and the HOA’s governing documents explicitly reserve to the board.
In practice, however, many management companies go beyond what they’re supposed to do, often acting as if they have independent authority. And if the board is inattentive or complacent—or even worse, if the board intentionally hands over such authority illegally—managers can end up controlling enforcement, communications, and even governance processes in ways that seriously cross legal lines. When that happens, the only way to address the problem is to focus on the board that enabled it.
HOW HOA MANAGEMENT COMPANIES ARE HIRED AND FIRED
Unlike your HOA board, which is elected by the membership, management companies are not chosen by homeowners at large. They are hired as vendors—third-party contractors—through a board-approved contract. In most associations, the decision to hire, renew, or terminate a management company is made entirely by the board, without any requirement for a homeowner vote.
Management contracts in California typically:
- Run for one to three years.
- Include automatic renewal clauses.
- Require 30–90 days’ written notice for termination.
- May include early termination fees, sometimes structured as liquidated damages clauses. [Note, regarding the latter—liquidated damages—under Civil Code § 1671, liquidated damages provisions are not legally enforceable if they are punitive. Rather, they will only be enforced if they reasonably estimate anticipated losses in the event of a breach. That’s why it’s so important for your board of directors to have the HOA’s attorney review the management contract before they sign it.]
Because these contracts can lock the association into specific terms and costs for years at a time, it’s essential for the board (and by extension, you, as an interested homeowner) to understand what’s in them and how they were approved. Homeowners are not powerless in this process. California law gives you the right to review certain records and to hold your board accountable for how it manages the relationship with the management company. If you want to evaluate whether your HOA’s management arrangement is being handled in the best interests of the community, start by:
- Requesting a copy of the management contract (you’re entitled to it under Civil Code § 5200).
- Determining when the contract was last put out for competitive bidding. If it’s been many years, that’s a red flag.
- Identifying who negotiated and approved the contract on behalf of the board.
When boards fail to re-bid contracts for years, the result can be complacency, higher costs, and a lack of accountability. A good board treats management like any other service vendor—subject to periodic review, competitive bidding, and replacement if performance falls short. Boards that rubber-stamp automatic renewals without oversight may not just be neglecting best practices, they could be setting the HOA up for significant financial or governance problems.
RED FLAGS THAT INDICATE A BAD HOA MANAGEMENT COMPANY
Even with a solid contract in place, a management company can still cause serious problems if the board fails to provide proper oversight. The warning signs are rarely subtle. Indeed, most homeowners who have lived in a poorly managed HOA have experienced at least one of these issues firsthand. If you see any of the following, it’s time to ask questions and start holding your board accountable for the way it supervises its managers.
- Routine delays in responding to homeowner inquiries. Occasional delays happen, but a pattern of ignoring emails, phone calls, or written requests—especially for urgent issues—suggests either neglect or understaffing. Either way, such conduct is unacceptable.
- Missing records or refusal to produce documents. Homeowners are entitled to inspect many types of association records under Civil Code section 5200. If the management company stalls, refuses outright, or claims certain documents “don’t exist” when you know that they do, that’s a serious compliance issue, and a major red flag.
- Unexplained late fees or accounting errors. Honest mistakes happen, but a management company should be able to quickly explain and correct any charge on a homeowner’s account. Persistent errors, or evasive responses, are red flags for deeper problems in financial management.
- Arbitrary or inconsistent rule enforcement. Selectively targeting certain homeowners while ignoring the same violations by others can indicate bias, favoritism, or even retaliation. Determining whether the selective enforcement stems from the board, management, or both marks the beginning of your task here.
- Poor communication with the membership. Notices or agendas are posted or sent out late (or not at all), meeting dates that are wrong or never confirmed, and unanswered follow-ups undermine transparency and breed distrust.
- Obstruction during board recalls, elections, or turnover. If a manager is inserting themselves into processes that belong exclusively to the board or membership, that’s a sign they may be overstepping their role. Another sign of this type of overstepping is evidenced if, during open meetings, for example, you see board members looking to the manager for answers to substantive (rather than merely procedural) questions from the homeowners.
- Vendor kickbacks or no-bid renewals. Management companies that routinely steer contracts to the same vendors without competitive bidding, especially if there are personal connections between board members and the manager, put the association at financial and legal risk.
Any one of these problems is reason enough to look more closely at how your HOA’s board is overseeing the manager. When several of them appear together, it’s often a symptom of a board that has ceded too much control or is turning a blind eye to serious misconduct.
HOW TO HOLD YOUR HOA MANAGEMENT COMPANY ACCOUNTABLE
You can’t discipline a management company directly—only the board can terminate or replace them. But you can use California law and organized homeowner action to push your board to address mismanagement. The goal is to document problems, leverage your legal rights, and, if necessary, change the people on the board who are enabling the problem.
Here are the most effective strategies:
- Request a copy of the management contract. As I stated above, under Civil Code section 5200, you’re entitled to see it. Review the scope of duties, renewal terms, and termination provisions.
- Review the board minutes approving the contract. If there was no competitive bidding, no meaningful discussion, or no formal approval, you’ve found leverage to press for change.
- Organize other homeowners. Communicate your concerns to your neighbors. If you have enough support, you can use your recall rights to replace the board members who refuse to oversee the management company properly.
- Demand competitive bidding. A board can re-bid the management contract at any time—it doesn’t have to wait for the renewal date. Competitive bidding puts pressure on the current company to improve performance or pricing.
- Use Internal Dispute Resolution (IDR) strategically. If you think it’s worth your time and might yield a positive result, you can request an IDR meeting to force the board to sit down with you and answer questions about the management company’s actions. If an agreement between you and the board is reached at an IDR, once signed, it becomes enforceable by a court.
Ultimately, if the board won’t act, your only recourse is to change the board itself. Management companies answer to the board, and the board answers to the members, so that’s where the real power lies.
CONCLUDING THOUGHT
An HOA management company is supposed to serve the community, not run it. When managers stay within their contractual and legal boundaries, and when the board actively supervises their work, the relationship can function smoothly and benefit everyone in the association.
But when boards become complacent, over-delegate, or look the other way, management companies can become a source of serious problems, ranging from poor communication to legal violations that put the entire HOA at risk. In those situations, the responsibility lies with the board to step in, correct the course, or replace the manager.
Homeowners can’t fire a management company directly, but they aren’t powerless. By learning what management companies are supposed to do (and not do), recognizing the warning signs of overreach, and using the tools available under California law, you can force accountability, either from the current board or by electing one that will act.
If your management company has crossed the line and your board won’t address it, it’s time to take control of the situation. Call us at MBK CHAPMAN, and we’ll set your HOA straight.