A Team Effort Improving the Professional Relationship

A Team Effort

Anyone who has spent time serving on the board of his or her co-op or condo knows that it is a job that no one can do alone. Even if you have the most conscientious group of board members, the job is too time-consuming for a group of volunteers to do in their spare time. That's where your management team comes in; the professionals hired by the board to help in the day-to-day and long-term operations of the building. But even if your board has hired the best management firm, the best attorney, the best accountant and so on, the team is only as good as its coach. And in the case of a co-op or condo, the board has to act as the coach: organizing meetings, making sure the various team members are working together, facilitating communications and working out strategies.

The main three members of your professional team are the managing agent, the accountant and the attorney. In addition to these three, many buildings will retain an architect or engineer on an ongoing basis and a construction manager or designer for particular projects. Your insurance broker, mortgage broker and financial adviser will also play important roles, although their expertise will only be required on a periodic basis. This group of professionals is the team that the board will rely on for advice, expertise and hands-on contributions to the running of the building.

Of course, in some ways, referring to this group of professionals as a team is a misnomer. They are a team insofar as they must be able to work together in order to accomplish the common goals of the board, but they are not a team in that they must act independently of one another and each must serve as a check and balance against the others to ensure that they are providing proper service to the building. Thus, it is imperative that the board know exactly what to expect from each professional so that it can oversee building operations as effectively as possible.



Who Does What?

The managing agent, together with the firm's back office staff, is responsible for collecting maintenance or common charges, keeping the physical plant operating, managing the building staff, enforcing policies, solving problems of residents and hiring contractors. He or she must also see to it that repairs are made, violations are cured, bills are paid, proposals are assembled and board meetings are organized.

The attorney's function is to offer legal advice, as well as spot any problems in building policy that could result in litigation down the road. The accountant is needed to see to it that all financial transactions conducted by the building have been handled properly. Your insurance broker should be called on at least once a year to analyze the building's coverage and check around for lower premium opportunities. Your mortgage broker will be called on when the underlying mortgage comes due or if the co-op needs to refinance to pay for some major capital improvements. The board should have a financial adviser or broker who will offer advice on where to invest the reserve fund for maximum return and safety. And whenever a major contracting job is being considered, the board should consult a licensed architect or engineer to analyze the scope of the job, write the specs, review the bids and oversee the job. The services of a construction manager and/or interior designer may also be requi ffb red in these situations.



Assembling the Team

The first step in assembling an effective team of professionals is to evaluate the needs of the building and the strengths and weaknesses of the existing professionals. Most cooperatives and condominiums have some or all of their professional advisers in place, either left over from the initial conversion or from a prior board. Perhaps the most frequent reason why boards change professionals is a basic distrust by the majority of the board of the impartiality of one or more of the professionals. Belief that the professional is allied with the sponsor or a group or faction on the board or within the building can all be reasons for wanting to switch. Additional grounds for dissatisfaction can include lack of responsiveness to the board's needs, inability to resolve problems, taking an arbitrary position without consulting the board, or, in the case of management, improper handling of finances.

When a decision is made to change professionals, the interview process can become a project in itself. Recommendations from independent sources, reputation and experience are all fundamental places from which a board can start its search. Regardless of the profession, a sound reputation for personal integrity on behalf of the professional and the organization is a basic necessity. And in order to ensure positive, open communications, the board must choose professionals with whom they can work easily and establish a good rapport.



Constant Contact

The key to any successful relationship with building professionals is maintaining a constant line of communication. The board must also be sure that its team is working together and not against each other. If a project gets bogged down or delayed, don't let team members fall into the type of back-stabbing and fingerpointing that can cause a project to fall apart. The board must be able to recognize its own shortcomingsthe delay may be due to the failure of the board to stay actively involved in making sure the project is going forward. Frequently, the services of a professional may be underutilized. For example, the board may decide to carry out a particular transaction based solely on the advice of a managing agent, when the attorney could have provided important advice and guidance as to the validity of the decision. This is particularly true when dealing with mortgage commitments. While the board may want to avoid calling its attorney or accountant in order to save money on professional fees, they are really only shortchanging the building in the end.



Choose with Caution

In light of all the recent indictments in the co-op and condo management industry, boards must be especially vigilant in preventing their professionals from taking advantage of any questionable opportunities. The board cannot allow an architect, engineer or managing agent to select a contractor or manage a substantial construction project without the involvement of the board at all stages. In addition, it can only help to have the attorney review the bidding procedure, the bids received from vendors and the final bid. Many of the chances for improprieties can be eliminated by proper analysis of the proposals and careful drafting of contracts.

The board should also avoid contracts that involve a percentage payment to a professional (except possibly legal contingent fees). Particularly with contracts for engineers or architects that involve a percentage of the project's costs, the incentive for the professional to assist the contractor in building up the price is too great. Fixed rate contracts or hourly rate contracts with a cap, together with an incentive clause regarding coming in at or under budget, are far more beneficial. The same can be said for costs of managing agents. It was early learned that the cooperative or condominium should not hire a managing agent on a percentage of the operating expense basis, but should contract for a flat rate. The fac afd t is that many managing agents charge for extras, in addition to the flat rate. This is not always bad, as long as the board understands what the total cost of the package is going to be and the total cost of the package is reasonable in relation to services rendered.

Overseeing a team is a challenging job. But if the board can institute systems by which all team members can work together, it will find that each board member's job will be that much easier. Good coaching is the best assurance of a winning season.

Mr. Luxemburg, an attorney with Snow Becker Krauss P.C., has been representing cooperatives and condominiums for 20 years. He is also the president of the Council of New York Cooperatives.

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