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Changing Managers or Firms? Don’t Overlook the Details!

Whether change is good or bad often depends on who you talk to, and even a desired change produces a certain level of stress and adjustment. Personal changes are challenging enough, but for condo and co-op residents, a board’s decision to change property managers or firms will quite literally hit home.

If a board has done adequate research, the impact should be positive, but adjustments will still be required. If a board has done less-than-satisfactory due diligence, there will certainly be unnecessary and unwanted chaos, as well as possible financial ramifications.

English author Arnold Bennett, (1867-1931) noted a century ago that even changes for the better would be accompanied by drawbacks and discomforts. Community association boards thinking about changing managers, therefore, would do well to weigh those potential discomforts and drawbacks against their reasons for the change before taking the leap. Finding a resolution to existing issues between the association and management may be a wiser, and less stressful, course of action.

Why Make the Move?

If not completely satisfied with current service, a condominium board may decide not to adapt, but to replace a property manager, or even switch firms completely—a practice that happens more often than one might suspect. Personalities and communication styles will always come into play when a decision to replace a manager or a firm is on the table.

“It’s just the nature of the game,” says David Abel, senior manager in the condominium division at First Realty Management in Boston. “We’ve lost a couple (of associations) here and there; fortunately, we gain more than we lose.

“There are a host of different reasons” why boards will launch a search for a new manager or management company, he says. “It’s very much like a marriage, with its ups and downs. There’s the same amount of trust.”

As in a marriage, a lack of communication can hide a board’s dissatisfaction until the breaking point is reached. “Some boards are more reflective; if they perceive a problem, they’ll call in the senior staff and talk about it.” On the other hand, there are situations in which the board, or residents, are genuinely unhappy with their manager—but never say a word; the manager doesn’t know until the termination notice arrives.

But dissatisfaction isn’t always behind the urge to look for a new manager or firm. “Sometimes, they haven’t changed managers and years, and boards just think it’s time to bid out, to see if maybe they’ll get a better price.” Occasionally, a new board will want to just look around at the market.

“There’s nothing wrong with keeping an eye open, if you’re an association board. But if you’re happy with your manager, and you’re getting a fair price, why would you switch?” asks Frank Rathbun, vice president of marketing and communications at the Community Associations Institute (CAI) in Falls Church, Virginia. Change, he cautions, can put a fair amount of stress on all involved. “There’s a lot or price competition in the industry, and there are companies that will come in and low-bid on a contract. I’ve seen associations that went with a management company that was going to work for less money, and then go back to their old company in a year or two.

“There’s a lot to be said for continuity,” Rathbun continues. “It may be better to try to work with the company or manager you already have than to start over.” If there are problems—real or perceived—between the manager and board, or manager and residents, “sit down and talk them over. Don’t let issues fester.”

Where to Begin?

When those efforts fail, or the wander-lust is simply too strong, board members need to plan the move and not act hastily. “It can be a complicated process,” Rathbun says. “You want to use the best practices to find a manager or management company you can stay with for a long time.”

A long-standing educational resource for association board members and professionals, CAI offers a variety of brochures, pamphlets and books to help boards navigate the hiring process. In his book, Management Companies: How to Find the Right Community Association Professional, Michael E. Packard, PCAM, CPM, notes: “Boards should understand the important distinction between property management and community association management. Property management is an essential component of community association management, but professional association management is designed to support the board with the added governance component that is an integral part of community associations.”

The process begins with a request for proposals that includes a clear list of what services the board expects to receive. A carefully-crafted, detailed request will make an “apples-to-apples” comparison easier. But how many bids should it seek?

“We’ve seen associations send bids out to 13 companies, and others, to just a few,” Abel says. “What I’ve seen successful associations do is create a search committee that will do the research” to be sure that the management firms receiving the proposals are reasonable matches for the association in terms of geographic location and types of associations handled, he adds. It doesn’t make sense for a high-rise urban association with hundreds of units to seek proposals from companies that specialize in small suburban communities located halfway across the state.

Visiting websites or checking company statistics in New England Condominium’s annual Management Directory can help in the search for good matches.

After the bids start rolling in, it’s time to narrow the field to a manageable number for personal interviews. “Five isn’t a bad number,” Abel suggests. “Two is probably not enough, and 10 could tax everyone’s patience.”

In narrowing the field, boards should look for companies and managers that have taken the time and made the effort to earn professional credentials. Organizations like CAI and the Institute of Real Estate Management (IREM) offer a host of educational programs and confer designations on managers and companies that have demonstrated proficiency in the field. Those credentials, Rathbun says, “demonstrate a dedication to the industry.”

Abel notes that every proposal his firm submits includes a listing and biographies of key personnel, including the designations they’ve earned. The credentials are one of the indicators boards can use to determine the professionalism of the managers they’ll be working with.

In some states, boards can check on the managers’ licensing status — but licenses are not required for management professionals in all jurisdictions. Connecticut, for example, passed a law in 2012 requiring manager registration—but as of late last year, only about 327 of an estimated 500 managers in the state had registered. In Massachusetts, some form of licensure “has been debated off and on for about 15 years,” Abel says, but no law has been put into place.

Boards may also want to talk to other associations, and even visit properties managed by companies submitting proposals, to determine whether a company is likely to be a good fit.

How to Decide?

After trimming the application pool to a reasonable number, it’s time to meet the management team face-to-face, to really explore each side’s interests. “It’s good to have a conversation,” Abel says. “You want to talk about issues at the property. Ask, ‘How do you approach problem solving?’ ‘How many hours are you able to spend here in a week?’ The more you converse, the more nuance you may reveal. All associations have different kinds of needs.”

While boards may want to meet the specific manager they’ll be working with, that’s not always possible, or even ideal. “Things change; if the decision-making process goes on for a long time, managers may have moved around or taken on other associations. You don’t have to be fixated on a particular person; trust us to bring you the right person for the job,” Abel says.

And that brings up the next step in the process: Making the decision. The short answer is, don’t let it drag on forever.

A key bit of advice: Boards shouldn’t give notice to current management until they’re really ready to embark on the search. Once that clock—there’s usually a 90-day notice involved—starts ticking, the board will begin to feel pressure. At the other end of the scale, the incoming management team will need some time to get things up and running, and its clock won’t start until the contract is signed. It could take two months for the new manager to get all the information from the old manager, and to get all the pieces in plac. “We want to make the transition as smooth as possible,” he says. “It takes time.”

Property management professionals agree that change for the sake of change is seldom a good idea, but change is inevitable. When faced with changing an agent or firm, be prepared to work through the process. Selecting a manager is a decision that an association—and every resident in it—is likely to be living with for a long time.

Anne Childers is a freelance writer and a frequent contributor to New England Condominium. Associate Editor Pat Gale also contributed to this article.

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Comments

  • I am the chair of our trustee board, the majority of trustees decided and voted to terminate the property managers contract with out cause. Many persisting issues over the years continue to remain and it's pointless to keep talking or objecting to the issues that never change.When the p/m was officially notified the p/m sent a letter to the owners encouraging them to contact the chair to force a meeting with the trustees and allow the p/m to defend any issues that brought us to this drastic decision. The wife of the p/m who owns a unit went door to door ( she had a list of units NOT TO GO TO) asking owners to sign a partition for the trustees to stop the termination and to have an owners meeting and explain what the issues are and allow hubby to defend himself.Since that letter and visit from the wife the chair has been inundated with calls and some e-mails some congratulating the decision some urging a meeting and one dictating steps that should have been taken to reach this point. Since the decision was without cause i will not respond with a Q & A because this turns the whole process in another direction and opens up a termination with cause and by making such a decision stirs up destenison . The trustees will send the owners a letter regarding the termination any ideas what should be included in the letter as in the p/m letter several statements and words give indication that by terminating the contract how do we intend to handle the loss of knowledge that he has accumulated that has a very real impact on condo fees you pay, he is being treated unfairly in light of his long service to us and he respectfully asked that a meeting be called so all owners can hear from the board their reasoning for termination of his service. Our documents do give the trustees the authority to terminate vendors contracts as well as the mangers agreement contract because he a vendor which includes a termination clause which is what was used. The p/m in my opinion has established a divide with the owners they have taken sides and are protesting issues that are trustees responsilities to oversee It has become overwhelming and stressful. I believe the p/m was out of line with his letter Might you have any suggestions on defusing this situation. Thank you