Question: I have owned a condominium for a long time and have served on the Board of Directors for several years. One big problem involves our condominium management firm.
What criteria should be used for selecting a management firm? What services should the management company perform? Once a contract has been signed, how often should the management be evaluated? What is the appropriate interaction between the board and the management company and its employees?
There is a lot of dissatisfaction with management among the co-owners, but I also suspect our Board of Directors may be partially at fault by trying to handle management on a daily basis, rather than concerning itself primarily with policy. Your advice would be appreciated.
Answer: Management in a condominium association is vital to the success of the association.
While some condominium associations prefer to "self-manage" their association, this often does not work. Even if the self-managed board pays its own manager, it means volunteer members of the Board of Directors have to get involved in the day-to-day operations -- and often these Boards of Directors do not have the time or the inclination to get deeply involved. More important, most Board members do not want to contact their next door neighbor and tell her "hey, you are three months delinquent".
Whether your condominium contains 12 units or 1,200 units, you are running a business. The members of a Board of Directors has a fiduciary responsibility to act reasonably and properly. They should not -- and indeed cannot -- get involved in every detail of the association.
A well-run condominium will hire a management company and delegate major responsibilities to it. However, all too often the Board over-delegates -- and under-supervises -- and the results turn out to be unsatisfactory to the condominium owners as well as to the management company.
How do you select a management company? I recommend you contact six to ten management companies and ask them to send bid proposals. They should include in their proposals the names of several condominium associations they currently manage so you can obtain references.
It is imperative that you call the President or Vice President of those other condominium associations to determine whether they are satisfied with the management company. And of course, we all know that no one will provide a reference who will have negative comments.
Price alone should not be the determining factor on whether to go with a particular management company. If the cost is low, the quality and quantity of services may be equally low; you will only "get what you pay for."
You should determine whether there will be an on-site manager, and how many hours that manager will devote to your project. Will the on-site manager have responsibilities for other condominium associations as well as yours?
Obviously, if you are a small association, you will probably have to accept the fact that the manager will be working with other associations at the same time.
Ask whether the management company is a member of the Community Associations Institute (CAI), a national organization dedicated to the problems of community associations.
Do the managers actively participate in the many educational programs conducted by the CAI?
According to one commentator on condominium activities, association management "typically involves at least nine areas of responsibility."
These include environmental standards, maintenance of common properties, the provision of common services, internal communications, financial management, general administration, procurement of insurance, the preparation of tax returns and other reports, and assistance to the Board of Directors on policy matters.
With respect to evaluation of the management company, the Board should assign one (but not more than two) members of the Board to be the liaison with the management company.
The company should furnish biweekly or monthly reports listing the kinds of services performed, problems raised for Board consideration, delinquency stats, and future planning problems to be considered by the Board.
The Board should meet periodically with the company to review these reports and program future activities for the association.
I recommend that at least once a year the Board should request that the management company prepare a brief "state of the condominium" report, which should be made available not only to Board members, but also to the owners in the association.
After the Board receives this report, it should evaluate the management company based on its past practices. If the Board is dissatisfied with the management company, it should give that company an opportunity to explain its actions and correct its activities, if possible.
You highlighted perhaps the most significant aspect of the relationship between the management company and the directors.
The Board should clearly recognize that once it hires a management company, it should delegate responsibilities to that company and not try to get involved in the day-to-day activities of the association.
If Board members want to get involved, they should manage the condominium themselves. Learning to delegate is difficult but not impossible.
After the management company is in place, ask it for periodic feedback as to whether the Board is getting too involved in the daily operations of the association.