Self-Management Is It Right For Your Community?

Self-Management

Self-managed condominiums are a puzzle to many, especially considering that one major driving force for purchasing a condominium is to offload countless common home ownership responsibilities to someone else. A community that assumes the supervision and administration of their condominium without an outside property management firm is viewed as counter to the purpose of buying a condominium.

Additionally, more often than not the self-management cons can outweigh the pros, especially considering an increasingly time-drained society and chance of heightened conflicts among owners-turned-managers.

It’s a wonder that any community is willing to take on self-management. However, some condominiums are finding this alternative a viable and beneficial option to the more traditional management arrangement. In the process, they are saving money andbuilding a stronger community base.

Deciding if self-management is rightfor a community is no easy task and entails a fair amount of exploration to determine if the community would make a good candidate for such an endeavor. To create and sustain a successful self-managed condo it takes a certain owner, property and community “profile.”

Time vs. Expertise

When it comes to self-management, time and expertise are not mutually exclusive. However, when evaluating if your condo would make a good candidate for self-management, common sense dictates first and foremost to examine the knowledgeable business-oriented individuals in a community that would be available to oversee the self-managing responsibilities. “More than anything else, self-management is more about who makes up the boardand oversees the process,” explains Thomas D. Rich, CPA, who has an accounting and management services firm in Stratford, Connecticut, and whose clients include several self-managed condominiums. “It is important that there is the expertise.”

In a perfect self-management set-up, individuals would be in place who have an aptitude in one or all of the areas of finance, general business knowledge and the building industry. By buildinga base of knowledgeable individuals, communities will prevent time sinks as attempts are made to conquer the learning curve.

Joseph Carleton, a principal at the Law Offices of Joseph Carleton in Wells, Maine, views the importance of a knowledgeable business background as paramount to any self-management venture. He approaches it from a legal standpoint. “Self-managed condos tend to not go by the book,” Carleton believes. “They can lack knowledge of following the rules and this can run into problems.” Carleton specifically points to handling delinquent accounts, adherence to state statutes pertaining to condos, and answering mortgage queries. “Given that mortgage information will fall on the shoulders of the board, they might be hard-pressed to fill out some of the increasingly complex paperwork required,” Carleton warns. Condominiums are advised to seek out legal counsel prior to becoming self-managed to familiarize themselves as to what might be required of them and then form a strong relationship with their legal counsel so as questions arise they can be accurately answered.

It Takes Time and Commitment

Any way you slice it, there is too little time in a day. Add a whole host of additional duties that self-management brings to the table and the situation can look insurmountable. However, as withany venture, it is the upfront organization and multiple helping hands that will create a successful outcome.

It takes a village to make self-management work – and any community contemplating self-management should assess its team of available volunteers. “The question is, do you have a pool of volunteers that have the time to put into this commitment?” states Rich.

If your building’s owners primarily don’t live on the premises year round they typically would not be people willing to  put the time and effort into self management. “Time is a big factor in all this,” Carleton states. “It is understandableto want to self-manage, but you must have the consistency of volunteers that have the time to put into it.”

In theory, retirement communities are perfect candidates for self-management. Theoretically it makes perfect sense: a pool of individuals chock full of life experience and an over-abundance of potential free time. But some retirees who self-manage their communities tend to micro-manage, reviewing every detail with a fine-tooth comb and delaying decisions.

Rich points out that not all retirees are created equal. “It all comes down to the individuals. Whether retiree or not, condominiums are a business. Some businesses have people that run them well, others not.”

Nancy Tewksbury knows this all too well. Tewksbury is the business and property manager at Edgewood Heights Condominiums and also a unit owner. Edgewood Heights has the unique distinction of having been self-managed since its inception in 1985. Only condominium owners within the community have been hired to manage the 100+ unit community in Concord, New Hampshire. Tewksbury stresses that Edgewood Heights’ success with self-management has little to do with the employment status of the part-time managers it has hired. “It depends on the individual,” Tewksbury explains. “Employed or retired, either would work out as long as the person is organized, has business experience and has the available time.”

Counter to common belief, when it comes to self-management, size isn’t everything. Obviously, smaller communities (20 units or fewer) will prove to be easier to manage than larger ones. And in fact, most property management companies will not tackle smaller condo properties because it's not cost-effective for them. However, any size condominium is a feasible candidate for self-management as long as it has qualified, available individuals in place to oversee the self-management execution.

"It is not about the size of the community, but more about who is self-managing the condo,” states Tewksbury. “Are the people in place knowledgeable with running a business? That is what counts, not how many units there are.” Typically, as the size of a condominium community increases, so to do the number of committees and volunteer undertakingsneeded to carry out a smooth self-managed operation.

Playing the “Bad Cop”

It is all a balancing act, and a tricky one. Managing and running a condo is like any business; it requires a certain amount of professionalism and a clear division of responsibility. Once a community commits to self-managing, those lines can get blurred.

One concern is that a situation will arise with neighbors telling neighbors what they can and can’t do, possibly stirring up conflicts. “Self-management can potentially no longer have a business feel to it,” states Idena Ortiz, CMCA, AMS with CP Management in Exeter, New Hampshire. “Trying to run a condo when it gets ‘friendly’ canbe hard.” Tewksbury understands the concern. “Playing the ‘Bad Guy’ does come into play when self-managing,” she says.

Condos must not undervalue the importance of having an individual in place that has the skill set to do the job no matter what. In Tewksbury’s experience, she has never had a problem with conflicts with neighbors, and furthermore believes that self-managementcan foster a more community-based feeling to the condominium. “People know who I am, I am part of the community and I think that means something to people. We all have a vested interest in a positive outcome,” states Tewksbury.

You Get What You Put In

When self-managing, cost savings are dependent on how much management the owners and board are willing to take on. On average, a full service management firm in the Northeast will bill outtheir services at $15 to $25 per condo unit per month. If the community is willing to undertake virtually all of the management responsibilities, then the cost savings will be substantial.

However, most larger self-managed condos (50+ units) employ a part-time manager or multiple staff members. Even with payrolled staff, savings can still be had. Edgewood Heights Condominium in Concord, New Hampshire employs two part-time managers and saves close to 50% from what they would incur by using a full service management firm, according to figures supplied by Tewksbury.

Still, Carleton cautions that condos may not see the huge cost savings they had envisioned. “Over the long run, condo communities don’t save as much money as they think they can,” states Carleton, “because in the end they can end up with costly legal conflicts if the correct people are not put in place.”

Several factors can offset or even increase cost savings for self-managed condos. Simply put, the newer the building, the potentially fewer repairs and issues come up, making newer buildings better candidates for self-management. A bigger bang for the buck also comes into play when self-managed condos hire local contractors, which is a practice most do. “It is a better hands-on approach and typically condos get a better financial deal dealing locally,” states Tewksbury.

Because no two communities are the same, self-management may certainly not be the perfect fit for every condominium. But self-management is certainly worthy of exploring for the potential benefits and compatibility to your condominium. No doubt a full-service property management firm may prove a less challenging path. But if backed by a consistent pool of volunteers and a knowledgeable business-oriented board, self-management might prove a community-building and cost-saving endeavor for your condominium.

Hillary Pember is a freelance writer and frequent contributor to New England Condominium.

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