Changing Management How to Know When it's Time

Changing Management

When a community association enters into a contract with a professional management company, board members may feel a sense of relief. After all, much of the burden of running the community's daily operations has now been transferred to (hopefully) capable hands, leaving the board more time to focus on members' own affairs. And in many cases, this is exactly how things play out: management does its job capably and efficiently, and board members feel the stress leave their bodies. 

But it's also true that not every manager or firm is the correct fit for every association, and some managers are outright bad! A board that entrusts too much responsibility to a manager, and falls asleep at the wheel, may not notice things are awry until the association has veered wildly off course. In light of that, it's imperative that a board keep in close contact with its management, conduct regular performance evaluations, and be unafraid to speak up when things aren't done to specification. The more time spent in a deteriorating relationship with an unfit management company, the more difficult it will be to undo any damage to the community – even under a trustworthy new manager. So boards should know when it's time to cut their losses and seek something better.

Management Bona Fides

It helps a great deal if a board identifies and declares its expectations for a management company before entering into a contractual relationship with anyone. This gives both parties a clear idea of where their responsibilities lie, and what the expectations for the association are going forward. If benchmarks are consistently failing to be met, it becomes somewhat more clear where the problem lies.

“In my experience, a board will seek to part ways with their current management company because the board is doing all of the actual managing of the community itself,” says Ian Novak, Vice President and Director of Condominium Management Services with Draper and Kramer in Chicago. “Boards can and should expect management to have proper proactive communication with the community, accurate financial reporting that is delivered on time, and cutting-edge technology platforms that serve the community.”

Poor communication is often the reason boards cite when asked why their last management situation did not work out, notes Jason Keller, Operations Manager with Scalzo Property Management in Bethel, Connecticut. “I ask each potential client what led them to seek me out and entertain a switch in management, and nine times out of 10, the answer is a lack of communication and lack of follow-up on the part of their current manager or management company,” he says. “Oftentimes, this leads to the board taking a proactive role in the day-to-day operations of the association, and essentially doing the manager's job – which in turn leads to frustration and burnout for the board members, since their role should be to set policy and make decisions, not manage the association.”

“There are many different reasons or circumstances that may cause a board to seek a new management company,” adds Michael M. Kayam, Esq., Senior Counsel at Lasser Law Group in New York City. “Sometimes the reason is as simple as new people coming onto the board, one of whom has a relative, friend or former colleague who works in property management, and the board agrees to give that person an opportunity. But typically, we see boards seek new management when they feel that their current management company is not properly handling issues at the building, not communicating with the board or providing meaningful updates on matters, not completing tasks, and recommending or entering into contracts with unsatisfactory vendors or contractors. In addition, poor communication between the management company and the building's shareholders or unit owners can lead to community backlash or resentment toward the board, which in turn causes the relationship between board and management to sour.”

Dropping a Hint

Just because things seem grim at the moment does not necessarily mean that a board must sever ties with its management company entirely. An honest and thorough performance evaluation may lead to the manager stepping up their game and really turning things around – or the association may be assigned a different manager within the company who is simply a better fit. But none of this can happen unless the board lays its issues with the current manager bare, with as much professional courtesy as the board would expect in return. 

“Oftentimes a manager develops what I refer to as 'tunnel vision,'” says Keller. “They become so consumed with the pressures of the day-to-day operations that they lose sight of the longer-term goals and objectives. They simply fall into an endless cycle of 'putting out fires' by responding to complaints from irate owners, and [then] fail to properly prioritize projects and tasks that require more planning and self-motivation on their part. This leads to a board growing frustrated with the manager's performance, as the priorities set by the board are not being met and plans are not moving forward. The manager is working hard, but not on the right things, and as such does not understand the board's frustration. Oftentimes upper-level management at the company is too far detached from day-to-day operations to step in and clarify the perception gap. Therefore, the best thing that a board can do is to communicate its frustrations to upper-level management, and give them a chance to remedy the issues.”

A management company can avoid being caught off-guard by a client community if it implements procedures that address these communication issues before they grow problematic. “Our company has instituted several policies to avoid a perceived lack of follow-through with our clients,” says Dennis M. Ravelli II, Vice President and Partner with Salisbury Management, Inc. in Boylston, Massachusetts. “All phone calls and emails must be returned promptly, and quality solutions must be implemented in a timely manner. We work closely with both boards and unit owners to be sure that their concerns are being addressed, and keep close tabs on vendors throughout any maintenance or repair process. We also provide timely financial reports and other pertinent information so that the board is equipped to make necessary decisions.”

When a board must approach its management company in a critical manner, Kayam recommends that it engage in a “non-confrontational conversation with the current property manager regarding its dissatisfaction with the service it is receiving, and the type of service it would like to receive,” and then allow the manager to respond accordingly. “If the issues remain unresolved, a board can call the president or head of the management company to discuss the expectations of the board, and the level of attention and service they need from a manager. If that still doesn't work, the board can request that the management company assign a different property manager to the building who may be better suited to fit its needs. Ultimately, the board should give its management company a few chances to straighten things out before seeking new management, since the company will usually try its best to accommodate the board rather than lose an account.”

Handling Transition

When a board sees no recourse other than to change management teams, it should strive to make the transition as seamless as possible.

“Ideally, a board should do all it can to end the relationship on good terms,” says Keller. “A manager treated with respect will have much more incentive to ensure a smooth transition than one that is not. What the outgoing manager typically has – and that the board and new manager need – is history. The board should consider paying both managers or management companies to overlap services during a transition period, as it will make the switch much more tolerable. Perhaps the board can even negotiate the new manager/company managing for free for the first month or two.”

“The outgoing management company should organize, label, and turn over all hard files and keys it has in its office, as well as any electronic files it has for the building, and deliver these items to the board or new management company along with an itemized list of exactly what is being turned over,” adds Kayam. “Certain items may be more time sensitive and require immediate turnover, such as financials, bank account information, and any mortgage information or payment schedules. Other items such as open invoices, building documents, information related to legal actions in the building, and purchase or lease applications should be delivered contemporaneously with or shortly after the time-sensitive items are turned over.”

When looking for new management, the board should consider speaking with its attorneys and accountants, and also consult with other boards to see if they have worked with any companies with which they've had positive experiences, Kayam continues. “In addition, boards can join trade organizations or attend trade shows where they will have an opportunity to meet and discuss their needs with many different management companies.”

Change is by its nature difficult, but if it's time to change managers or management firms, your board can take comfort knowing that it's taken all the appropriate steps, and is making the decision from a confident, prudent position. 

Mike Odenthal is a staff writer/reporter for The Cooperator. 

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  • I'll refer to this article once my coop is in a position to change management. Coops with an outside management company have a clear advantage to those who self-manage - they have oversight. The board of my coop pays themselves for services to self-manage our HDFC, which has 55 residential units and five commercial. The lack of transparency in my building is just one of our issues. For now, the majority of shareholders eligible to vote are fine with trusting their friends on the board to also act as management for the coop.