It's not uncommon for condo associations in the New England area to have outside management companies handling the day-to-day business of running their buildings. Managers do everything from collecting maintenance checks to responding to homeowner issues to hiring maintenance contractors—and all manner of tasks in between.
Some buildings, however, opt to go it alone and manage their own communities. Their reasons are as varied as the communities themselves. This article will discuss why some associations choose to self-manage and to illustrate the pros and cons—as well as the actual methods—of their decision.
Reasons To Go It Alone
Picture this: a board of directors and several disgruntled shareholders convene to discuss the poor service they feel they're receiving from their management company. Someone angrily brings up the fact that maintenance expenses have gone up, though no actual maintenance seems to be getting done. The steps in front of one building are constantly icy throughout the winter months, while someone else points out that his building's landscaping looks sickly and ill-tended throughout the spring and summer.
In this case, residents and board members feel their community is not being well managed. They feel they could do a better job on their own. And, in doing so, they'd save the moneythey pay for their management—or lack thereof.
So they decide to fire the property manager, and henceforth manage their own affairs.
"Communities that self-manage say, 'We've seen what the property manager has done. We can do that better, faster, and more economically,'" says attorney Carl Lisman of Lisman, Webster & Leckerling, PC, in Burlington, Vermont. "Sometimes it's financially driven, but sometimes it isn't. Or maybe they're just more community-oriented and they think that this is a way to build community."
Michael Weintraub, vice president of Millennium Partners in Boston and former general manager of a large self-managed condo, agrees.
"A board may have hired several managing agents and believed they were simply not providing the services it believed it was entitled to," says Weintraub, whose firm manages severalluxury buildings in Boston and New York. "A board may believe it can perform those services better because it has a vested interest. Or they may simply want to save the money."
Advantages and Disadvantages
A board might decide to enlist the support of residents and self-manage. Or they may feel confident that the management company they hired is doing a fine job of managing their building. The route a particular condo or co-op community chooses to travel largely depends on the unique characteristics of that community. The challenges they face will depend upon the people who live there, how effective the board is and perhaps how large the community is.
"The hardest thing about managing your own building is finding the right volunteers to be available and to be knowledgeable," says Lisman, who says that about half of the boards he works with are self-managed.
Enlisting the support of busy residents is difficult. Signing up capable, dedicated and skilled people to be trustees and special committee members is even harder.
"This is a full-time, 24/7 commitment that requires the confluence and knowledge of many skills and professions," advises Weintraub, whose self-managed condo, back in the late 1990s, was the recipient of the Community Associations Institute's (CAI's) national award for "best managed" large condominium. "All condominiums have their own personalities and can be managed in many different ways, depending on the community's own particular dynamics."
It's often difficult for volunteer residents "to stay abreast of the current methods and develop the proper systemsand operations for efficient management," according to Andrew Witter, president of Priority Management Inc. in Osterville. "Self management may seem less expensive, but it is difficult to maintain continuity."
Witter, who is an accredited residentialmanager (ARM) and a founding member of the National Association of Realtors' Property Management Section, believes that self-management isn't necessarily the most efficient way to run a community.
"Professional [managers] should be able to operate a property in a safe, legal and cost-effective manner," he says. "The old adage applies… would you have your mason apply a cast to your broken leg?"
The advantages might be different for a larger building or community that can afford a professional site manager solely devoted to their property, who would work directly for the trustees, instead of for a third-party management company. In the case of a large building or development with an array of amenities to manage and maintain, the expertise and resources of a bona fide employee could prove golden.
Smaller buildings, on the other hand, might benefit from self management, especially if they have that unique mix of volunteer residents and trustees whoare truly dedicated and up for the task of building administration.
"To my thinking, the primary advantage[of self-management] is not only having the control but also exercising it in a way that is consistent with what the owners want," says Lisman, who finds that most often it is his smaller Vermont associations that opt to self manage. "My sense is that many times being self-managed works out just fine for a particular association."
But the experts seem to agree that embarking on self-management could be a rough road and that communities should be cautious.
According to Weintraub, common problems could include a lack of professional oversight and a poor system of checks and balances, a lack of continuity and guidance during trustee or staff turnover, the drudgery of day-to-day involvement with staff and residentissues, and dealing with contractors, public officials, and so forth.
"You're relying on volunteers to do or volunteers to supervise. That's not easy," Lisman agrees. "One of the problems with an unguided, self-managed board is many times they don't understand what their legal obligations are. They don't understand how to maintain the property. They don't understand how to create a budget. And on and on and on."
How Residents Can Educate Themselves
So how can a self-managed board and volunteer residents educate themselves on all the details a professional property manager already knows?
"With great difficulty," laughs Lisman. "I don't think it's easy for a board of laypeople, some of whom may have owned homes before they moved into a common interest community, to begin to appreciate the complexity of property management."
The average condo resident probably doesn't have experience with property management. As such, they may not be skilled in accounting, physical plant and grounds maintenance, or issues regarding the law or things like insurance coverage.
That's not to say it's a hopeless uphill slog, however. CAI and the Institute of Real Estate Management (IREM) are two organizations that offer professional educational courses and publications on property management-related issues.
"In larger condominiums, the site manager can oftentimes provide assistance and education," advises Weintraub. "Additionally, accountants, lawyers, engineers and other professionals can be hired to assist with certain tasks."
When Lisman's firm initially gets involved in representing an association, they'll perform what he calls a 'legal audit.' They'll peruse the legal documents that created the community, governance documents, association rules and regulations and insurance policies.
"We'll sit down with the board and officers and discuss their role from a legal standpoint and how to fulfill their legal responsibilities," he says. "The first thing self-managing trustees need to do is bring in a lawyer who can do [this]."
He further suggests bringing in an accountant to educate a board in the same way, as well as someone who has a background in property maintenance, all in an effort "to learn from broad categories of people the scope of what it is [the trustees] are responsible for."
Weintraub adds that once a board has learned all they can about self-management from professionals, they can come up with their own "hybrid, or creative alternatives" for managing their association.
"For example, 'self-managed' buildings may contract out a professional financial manager to handle all accounting functions, or hire a 'manager' directly to handle the day-to-day operations—or a combination," he points out. "Some associations that are professionally managed by a third party may still have in-house staff that work directly for the association and not the managing agent."
Even the best-educated group of trustees run the risk of making mistakes when just starting out in self management. Until a board is experienced in matters of law, accounting, engineering, personnel, insurance and maintenance, they're bound to hit snags.
Weintraub says mistakes are common. For instance, not understanding maintenance issues might cause a board to delay certain preventive maintenance measures. Additionally, an inexperiencedboard may fail to file certain necessary returns, permits or forms, he says. "But mistakes can be avoided through accountability, education, training and ownership," he advises.
Insurance is another area where newlyself-managed boards can sometimes make a mess of things.
"We live in a litigious society where people can and frequently do sue everyone and anyone," warns Witter. "Proper insurance coverage is key. Insurance companies and banks are justly concerned that a property is professionally managed."
Hiring the wrong contractors can also get self-managers in hot water. Management companies are well-informed about local contractors, including the quality of their work and how to get the best price. Trustees or volunteers unseasoned in hiring workers to carry out maintenance and repairs may find that it's not as easy as they think.
Experts agree that the best way to find a good contractor is to ask around.
"Don't do competitive bidding and then just hire the lowest bidder," counsels Lisman. "The best way [to find a contractor] is to see who has developed a reputation for working with community associations, and then to look in that direction."
Witter suggests reading ads in trade journals and then checking references from managers and other professionals in the industry who might be knowledgeable about this particular contractor or company.
"Contact other associations to see who they have hired and get references," Weintraub adds.
Domini Hedderman is a freelance writer for New England Condominium magazine.