Even the best working relationships between co-op and condo boards and their management com-
panies can eventually come to an end, forcing a switch from one company to another. The transition can be lengthy and complex in the best of circumstances, while worst case scenarios can involve lost documents, unpaid bills and even the disappearance of funds. But with help from the Real Estate Board of New York (REBNY), the period preceding, during and following a management change can be less confusing to all involved. REBNY's Residential Management Council has developed Transition Procedures that are being adopted by many of the city's management firms to address the problems that often arise when a client leaves one firm and hires another.
Anita Sapirman, president of Saparn Realty, a residential property management firm in Manhattan and co-chair of REBNY's Residential Management Council, notes that her experience has been that the average length of time a management company maintains a working relationship with a board is eight years. We like to say in the real estate industry, Sapirman explains, that you win some and you lose some.
Sometimes the split between a management firm and its client building is not on such friendly terms, as was the case with an Upper East Side building (not a Saparn client) whose newly-elected board chose to end a long-time relationship with its management company. The management company had not been acting in our best interest, explains the board president. Indeed, the firm's mismanagement had resulted in several costly and unnecessary expenditures; and, when it was finally given its walking papers, the firm shipped its replacement a single shoe box that presumably contained nine years' worth of files and paperwork.
That some management firms have, over the years, demonstrated at best an indifference, and at worst a carelessness, when turning over an account can be corroborated by board members who have gone through the process. Bernd Allen, a partner in the Manhattan-based law firm Allen, Morris, Troisi & Simon, LLP that represents more than two dozen boards, notes that these firms have no incentive to be accommodating because they've already lost the account, and because they're no longer being paid. Meanwhile, the new firm, according to Allen, is operating by the seat of its pants because of lack of documentation.
But hopefully, these attitudes can be changed. Already 35 of the city's largest management companies have adopted the new transition guidelines since the document was completed at the end of last summer. The guidelines spell out the procedures to be adhered to when a co-op or condo account is transferred to a new management company and also provide timeframes for transferring various documents to the new managing agent. While some documents can be transferred in a matter of days, other documents cannot be transferred until certain accounts are reconciled, a process that could take as long as two or three months. Calling the guidelines a good program and a step in the right direction, Allen remains cautious. The problem, he says, is getting management companies to adhere to the guidelines.
Standards Are Needed
The need for the transition procedures stems from the fact that, despite an unwritten agreement am ffb ong management companies to transfer accounts in a professional manner, some firms have experienced difficulty receiving the proper records when they pick up a new account. Perhaps, as one managing agent points out, the firm giving up the account feels that it has nothing to gain by ensuring a smooth transition, and nothing to lose by dragging its feet.
Whatever the case, according to Marolyn Davenport, REBNY's vice president for regulatory affairs and executive director of the REBNY Foundation, There was a general feeling that things were not getting done. Regardless of the number of accounts changing hands, in Davenport's view, There was a high enough turnover among management companies that some form of standardization was necessary. The intent of the guidelines is to make the process work well, and to ensure that records are maintained in good order and that they are transferred in a timely fashion. The fact that the guidelines appear under REBNY's letterhead should be an added inducement for management firms to follow them.
Ronni Arougheti, president of Heron Ltd., a residential property management firm in Manhattan, pushed hard for the implementation of standards to cover the transition process. According to Arougheti, When there were no standards, some management firms had a tendency to be sloppy. Reportedly some firms were so lax in their filing methods that they turned over to their successors shopping bags containing miscellaneous paperwork. Too often, notes Arougheti, A management company taking over an account was forced to accept whatever it received.
Timothy Fine, executive vice president and managing director of Charles H. Greenthal Management, adds that traditionally some management companies have done a better job of transferring accounts than others. Larger firms relinquishing accounts have generally acted in a professional manner, says Fine. His feeling is that these firms act responsibly because they are fully aware of what it would feel like to be on the receiving end of a transition in which the former management company did not act with sensitivity. Fine echoes the need for some degree of standardization, stating, Some of the smaller players have been short-sighted in their thinking, and this short-sightedness has a tendency to clog the transition pipeline.
Transferring Key Documents
Accompanying the transition procedures is a transition document list that, according to Sapirman, clearly indicates what the management companies should be maintaining, and what they should be turning over. The list is broken down into the following ten categories: mortgage information, insurance, legal, accounting, payroll, general, shareholders/unit owners, operations, licenses/permits and transfer department. Included in these ten categories are no fewer than 78 items ranging from the corporate stock book and seal to a complete set of keys. Davenport is careful to point out, however, that the transition document list is noteworthy not because of the significance of any of the individual items it contains, but because it is so complete. A management firm taking over an account would be hard-pressed to think of an item not included on the list.
Those management companies that take it upon themselves to act responsibly and adhere to REBNY'S new transition guidelines will benefit greatly, as will the residential properties they have been entrusted to manage. The intent of the guidelines is to increase professionalism in the industry, says Davenport, as well as the public perception of professionalism. We want to give clients confidence in the industry.
Mr. Johnson is a freelance writer based in Manhattan.