Time for a Change? Making a Smooth Transition

Since management companies foster a competitive environment, co-op and condominium buildings expect a high level of service from their managing agent. However, when agents aren't showing the care and attention buildings deserve, or some sort of mismanagement is suspected, boards might very well decide it's time for a change.

There are multiple reasons why buildings consider switching from one management company to another. The most predominant include fraud, substandard attention to building systems, resident concerns, negligence, or just flat-out personality conflicts. However, it usually comes down to service and price or the combination of the two.

"It's the fault of the agent in almost all cases," says Michael Brower of Michael Brower Realty in Hackensack. "In essence if the agent does what he's paid for and gets the work done according to the contract, there should be no problems. What causes the agent to lose his job are typically either a slow or no-return telephone call, which is probably the biggest kiss of death.

"Then there are bookkeeping concerns," he continues. "Boards see bills that are paid twice or in slow fashion. With finances, that is a trust you cannot win back."

Sometimes buildings decide to change agents or management companies for virtually no reason other than to just change. A board may have turnover and they decide to just completely redo everything - including the management company - or they may change year to year just because they are always looking for the best deal.

The Easy Way Out

Just because an agent is not doing his or her job correctly, however, doesn't necessarily mean that you need to switch management companies.

"I would hope that they had exhausted all possibilities including talking to senior staff of the management company," says Greg Carlson of Carlson Realty, Inc. in Forest Hills, New York. "When you actually change management companies, it's a very big ordeal."

Instead, an easy solution could be just to get a different agent assigned to your building. Although there may be a chemistry problem with one agent, because of the building's relationship with the management company, it may be beneficial to have another agent take over.

"Because a management company provides so much full service to a building and already knows all the ins and outs, it's important to call and explain any problems with the agent and try to find a solution that works best for both parties," says Brower. "It's much easier to have a new agent assigned than to find a new management company."

But that can't always be done. And when the decision is made to switch management companies, a lot of details need to be ironed out.

The Good, the Bad, and the Ugly

First off, it's important for boards to listen to the concerns of the people in their building and do proper research in finding a management company that best suits their needs.

"Some needs are financial, some may be going through capital improvements, some may need more of a resident relationship," Carlson says. "[Boards] need to know themselves what they are looking for. Once they know that, they can gear the interview process on that."

In today's market the need seems to be more for innovative finances. "Since we got hit with the fuel increase, the insurance, the real estate taxes, boards are looking for agents who can be creative with that," Carlson says. "That's the heavy focus these days."

Getting out of a contract is not generally cumbersome since most management companies provide only a 30-day notification period.

"Every company is different but we ask for 30-day notice on cancellations and we provide a client with 60-days notice if we want to let them go," says Josh Prottas of Working Realty, Ltd., a management company in Manhattan.

"There shouldn't be a rush though," says Brower. "The best way to switch is to speak with other people on boards of buildings who are happy with their management company and get recommendations.

"Remember, this wasn't a decision that was made overnight. It's a culmination of many things that have happened over a period of time and the board knows they have to make a change and a search committee is appointed."

When the switch occurs, like any other professional, property management companies should act professional and provide a smooth transition. Records, contracts and finances need to be turned over in an orderly and timely manner and vendors and suppliers need to be contacted.

"If we're taking over a new building, it's our responsibility to notify the vendors and let them know about the change," says Prottas. "Most management companies are relatively easy to work with and help with a smooth transition."

But there's not always that professional courtesy. Sometimes the old company can view the change as a slap in the face and can make the change a difficult one.

"The biggest problem is getting the information. It's like pulling teeth sometimes," says Brower.

"Hopefully the old management company gives the new management company records in a logical sequence and doesn't just throw every piece of paper in a cardboard box and say, "˜Here you go,' which does happen because the old management company doesn't care," Carlson says. "There is nothing legally that obligates a company to turn over all material in a timely and organized manner, although there are organizations like REBNY that try to set guidelines."

The Voice of Reason

The Real Estate Board of New York (REBNY) has adopted guidelines for management companies to follow in order to provide a fair and timely transition between management companies, according to REBNY's Steven Spinola.

These transitional procedures 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.

"There are many firms involved and there is usually cooperation," says Spinola. "The golden rule among management agents is to treat everyone right because you could easily be on the other side of the switch the next time."

There are also specific articles from the New York Association of Realty Managers (NYARM) code of ethics that can be directly applied to the management company's obligations when turning over the records of a building during a management change.

Those tenets are:
  • A manager has a duty of good faith and loyalty to the owner of the building.
  • A manager shall have the duty to disclose information to the owner.
  • A manager shall not act adversely to the interests of the owner.

"While these apply to the full spectrum of the relationship between management and owner, the duties referred to should be followed right up to the end of the relationship," says Margie Russell, NYARM's executive director.

Sometimes though tensions arise and there is a split between an owner and management. "Everyone has feelings and no one likes to be removed from a building," she says. "If the management company's relationship with the building is workable and the answer is to change the individual property manager, then it is most important for the manager to remember to not take it personally. The old adage, "˜You can't please all of the people all of the time' was made for these instances, especially since the relationships are often personality driven."

Money and People Matter

Another area a board should consider before making a switch of management companies concerns a personal relationship among the building's staff.

"Changes can play havoc with the service employees if the handling of the change is not communicated properly," says Russell. "Relationships have been forged and the staff has come to rely not only on the property manager but the back office staff as well. The boards are usually not aware of the relationship between the staff and the payroll department and those who handle the payments to the union health and pension funds. Continuity in this area must be seamless and the concern among the staff is real and should be addressed. In fact, the board should make it a priority to see that this part of any turnover is closely monitored."

And speaking of payroll accounts, since the old management company was privy to all the finances of the building, it's important to change accounting information, just like you would new locks in the building.

"Most management companies are reputable," Carlson says. "They are not going to make duplicates of the keys and start sneaking in. But if it's hostile terms, then maybe you should do everything you can - change locks, change financial info and make sure you have control of the checkbook."

The new management companies usually have their own system for running finances so this is usually not an issue.

"Fortunately most management companies have their own favorite bank," Carlson says.

Whether or not to make a switch is up to the board and the people of the building. Some co-ops stay with management companies for a long, long time and some are always looking around for the best service and price.

"By switching it takes away some of the potential for laziness on the part of management companies," Spinola says. "If a switch does happen, what a board should do is give the new management company at least a year's worth of minutes before they meet with the new agent to bring him or her up to speed. That makes everything smooth."

Keith Loria is a freelance writer based in New York.

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3 Comments

  • Can an owner of numerous apartments be the Managing Agent in the same building?
  • Yes, its nothing illegal about it. As long as the agent is acting in the best interest of the building as a whole they this shouldn't create a problem. PAC Board Director
  • Can a building manager also be president of the board? Is there any legislation or precedent to prevent this?