The Age of Consultants How Do You Know When You Need One?

It appears we’re living in the age of the consultant. There are financial consultants, construction consultants, security and management consultants, and those that get you rebates on your building’s taxes and utilities. There are experts to confer with on elevator and roof repair, technology, and insurance, and still others who will evaluate your maintenance service. The question is, do you need all these people and the services they’re selling?

Consultants can be viewed as a large resource available to co-ops and condos. They can be called in to solve a single problem or manage a single project, or be retained to provide services year-round. They can supplement what a managing agent does, or they can be used by a self-managing building to handle certain duties and give advice on others. They can help your board find its way through a jungle of service providers, changing technologies, and reams of tax laws. They can take on tasks too large for busy board members and managing agents, and they can find your building money you may not know you had. By knowing what’s available, a co-op or condo board need not feel alone with any decision.

What Do They Do?

Depending on the situation, construction consulting firms fill a number of other capacities. If, for instance, a building has retail space they want to turn into condominiums, a consultant could develop a pro forma of the benefits. If it’s a landmark building, the consultant should know which architects to consider for the job, those that offer competitive fees, and those that do spectacular design work. Good consultants look for input from the board as well; according to Leith ter Meulen, president and chief executive officer of Manhattan construction consulting firm Landair Project Resources, construction consultants try to cast as wide a net as possible to capture the most appropriate architect for each building.

Very early on, a consultant develops a budget, making sure that not only are the construction costs accurately predicted and accounted for, but all of the other related costs as well–like insurance, possible legal fees, design fees, permits, and probes that they might recommend to get more information on any unforeseen conditions or problems within the building.

"In a nutshell, what we do is help clients get through the whole process of planning, designing, and building either a new facility or an expanded facility, or just renovating a building that’s already up," ter Meulen explains.

Ideally, clients hire Landair even before they hire an architect; that way, ter Meulen’s people can help put together the entire project team. Landair solicits proposals from architects and aids the board in choosing the most appropriate one. They then negotiate a contract with the architect since the building board may not have the experience to know what they should be negotiating for and what they’re entitled to. Monitoring the design process comes next, to ensure that the plans meet the needs of the client, no key features are overlooked, and that disruption of day-to-day living in and around the building is minimized during the project’s completion.

Lerch Bates, a nationwide elevator consulting company, offers similar service as it applies to their particular specialty. According to John Saling, the company’s regional manager in Metuchen, New Jersey, Lerch Bates will do schematic design work for architects working on new buildings, helping them figure out how many elevators the building needs, how fast they need to go, what the weight capacity needs to be, and where the elevator machinery needs to go. For building owners or management companies renovating their elevators, most elevator consultants do a field survey to determine the condition of the equipment, what the scope of the modernization needs to be, what can be retained and what can be replaced. They draw up specifications and then oversee the bidding process.

On the maintenance end, elevator consultants can do an audit in which the condition of the equipment is reviewed to determine if the building is getting what’s promised in its maintenance contract; and whether the existing maintenance contract is in fact appropriate to the building. A consultant can often reword a contract not written to the client’s benefit, or write up a maintenance specification form and do a bid process on that as well.

When it comes to the complicated issue of preparing your building to accommodate new data and telecommunications technology, the services of a knowledgeable tech-consulting firm can be invaluable. Maia Aron, chief operating officer for Manhattan technology consultants Barnes Wentworth, says that, "Very often a service provider will come and they’ll wire your building just to sell their particular service. We wire it so it will accommodate everybody." Aron adds that technology is changing so rapidly that a board can’t be expected to fully evaluate what scores of product and service salespeople are telling them–and that’s where a consultant can be a great help.

According to Aron, a board should think about seeking the help of a tech consultant "If they’re confused, if their residents are complaining that they’re not getting services that they want, or if they’re complaining about the quality of services. If they’re doing a building renovation and they’re going to be doing work in the building anyway, in the hallways, for example, or in the apartments, that’s a good time to do extra work all together."

Different Fields, Similar Benefits

While Landair, Lerch Bates, Barnes Wentworth, and other consulting firms like them operate in vastly different fields, many of the benefits of retaining their services are the same across the board. For starters, these firms shun any kind of financial tie with the providers they recommend to their clients. "That would be a total conflict, complete conflict," says ter Meulen. In other words, such a consultant can be an objective set of eyes–they have no stake in which providers you hire or what decisions you make. Their only goal is to ensure that a building’s needs are met. It’s sort of like having a board member with lots of construction experience and lots of time working on a project or problem.

A consultant’s expertise can make a big difference in bidding out jobs by narrowing potential contenders, determining specs, and evaluating proposals accordingly. Saling points out, "It’s very difficult to get proposals from different companies and level them out yourself–it’s such an apples and oranges deal. Companies will come up with different scopes of work: different things will be included, different things will be done different ways." He explains that for a comprehensive elevator upgrade, you’re probably going to spend anywhere from about $75,000 to $125,000 per elevator, and for that you’re going to want to see more than one price for the sake of comparison. The low bid is not always the best bid, and going through a consultant who is equipped for the bidding process is certainly the best way to evaluate your choices.

Ultimately, all decisions still rest with the building owners. "What we try to do, based on having a lot of experience in buildings," says ter Meulen, "is to anticipate what the decisions will be, when they’ll have to be made, and what kind of information the owner needs to make those decisions with confidence."

Let The Board Be A Board

One firm rather unique in its purpose is Fairfax Virginia’s ROA Hutton, specializing in co-op-to-condo conversions. Vice president David Muelken says he knows of no other firm that does what ROA does–which is virtually every part of the conversion process. "We not only consult," he says, "but we actually do the work." According to company president Jack Boyajian at ROA Hutton’s headquarters in Iselin, New Jersey, "One of the things that we do is try to take the burden off the board. This is a large-scale effort, and you can’t really ask a board member who’s already volunteering a lot of time to go around and actually educate their shareholders. The board is actually able to work as a board of directors; they’re setting policy but they’re not having to go out and do the hard work. We’re doing that for them." The firm establishes an individual website for every conversion-in-progress to provides shareholders with information and allow them to communicate directly with ROA Hutton. Each shareholder has their own password for the site, and–among other things–can apply for a mortgage online, or run different scenarios to determine what their monthly maintenance would be at different interest rates and loan payment dates.

To take some of the sting out of the conversion process, Boyajian’s company works on a contingency basis. This relieves much of the enormous amount of work that would face a board attempting to convert on its own, and ROA’s consultants make themselves available even before the building has made the final decision to convert. According to Muelkin, "For a typical 200-unit building we’ve got to reach out and educate, meaning meet with or speak with, every family in the community, not just once, but many many times, answer their questions, give them materials so that they can make a good decision, and go through all the upfront work on the appraisals. A lot of times we’ll do marketing studies, engineering reports, or environmental studies–literally several months worth of hard work just to get them in a position to vote. The vote takes place, then we have all the hard work to do the actual conversion. We estimate between three and 4,000 man-hours to do a typical conversion–all on a contingency basis."

The job culminates in a closing where, Boyajian says, "Each shareholder brings his shares to the table, pays his portion or share of the underlying obligation, and it converts. Everything, including their existing share loan and all transactional costs, is wrapped together into a new condominium mortgage. It’s cash-free and in many cases it’s either the same or a lower cost per month than they were paying as a co-op." Not to mention that the value of each unit is now significantly higher than it was–30 to 40 percent on average, but sometimes as much as 200 percent.

Free Money?

Another consultant that promises what is essentially free money is Herb Rose, owner of Manhattan’s Herb Rose Consulting. He has made a business of researching and recovering unused tax credits and water overpayments. "The largest category is for unused J51 tax credits [tax exemption and abatement for residential rehabilitation or conversion to multiple dwellings] that the buildings may have had even before they were converted and the credits were never taken. I had one situation in a building in Queens, a development with 13 or 14 buildings, and we got them back $814,000." What is surprising–especially since Rose works on a contingency basis–is that many boards are reluctant give him the go-ahead, even when his research indicates their chances of recovering large sums are quite good. Rose mainly attributes this to inertia. "I’ll bet you that conservatively speaking, one out of 20 co-ops has money coming back to them," Rose says. The work involved for the co-op or condo is minimal; initially, Rose–and other consultants like him–simply need the identification of the building to begin their research. To recover any wayward funds, he will need copies of bills going back a few years.

Smorgasbord of Services

Some consultants will provide services on a retainer basis, as well as offer piecemeal options on an as-needed basis. Mindy Eisenberg Stark, CPA, CFE, has a firm of the same name in Scarsdale, New York, that is retained by co-ops or condos to cover a wide range of necessary positions and provide a number of different services. On a consulting basis, Stark explains, "We do audits and we give tax advice on tax issues specific to the co-op and condo industry. We help with budgeting, mortage refinancing, and financing of capital improvements. I act as the inspector of elections at the annual shareholder meetings, I also act as a certified fraud examiner if there’s a situation where a co-op may suspect fraud, as well as basically consulting on what to expect from the management company, and what to expect in their monthly management report, how to get bids for capital improvements, how to shop for a management company, basic business advice for the day to day running of the co-op."

Choosing a Consultant

In choosing a consultant, the main advice offered by consultants themselves is, "References, references, references." Stark advises getting recommendations from buildings in your area, or names from directories or ads, then interviewing the firms and checking references. Aron recommends asking for references from organizations they have worked with that are similar to your own. "You want to know who they’ve worked with recently who was like you," she says. "Also, you want to make sure that whatever consultant you pick doesn’t have a vested interest."

"Often a building has a managing agent that perhaps has someone they’ve worked with in the past, that’s how it works more often than not," says Saling. He recommends getting the names of a couple of different consultants and requesting a proposal from them. "This is truly a request for a proposal rather than a bid specification, the idea being that the consultant knows a little bit better what scope of services would be appropriate to offer. Look at the quality of the proposal, the comprehensiveness of the services provided." He recommends looking at what level of professional oversight you have had for past projects–the frequency of meetings, number of site visits and follow-ups and kinds of reports you received–and how satisfied you were. Often the scope of these is comparable to other types of work.

As co-ops and condos explore alternatives to the traditional form of management, they will find that a broad range of possibilities exists–consultants can be knowledgeable intermediaries with the ability to look at a problem from several angles. Because of the multitude of fields with which they are familiar, consultants can serve as a single voice of reason to boards who feel the need to go above-and-beyond the services of their managing agents.

Ms. Goodman is a freelance writer living in Yonkers.

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Comments

  • I agree that there are a ton of consultancy firms out there. However, when it comes to something like constructing a building or retail space, I don't know how you could build something without a construction consultant! There are just so many different facets to building that it can be overwhelming. In fact, I wouldn't be surprised if a general construction consultant had employees that specialized in certain aspects of building. Not only would they need to know different architects, like you said, they would also need to know people who could discuss noise pollution, structural integrity, and many other things.