One of the most important factors in the decision to purchase a condominium or co-op is lifestyle. Many who live in residential communities, particularly those in single-family HOAs, choose community living over a single-family home for the convenience of what they don’t have to do: no snow shoveling, no grass mowing, and no cleaning the gutters or falling off the ladder while doing it. Like renters who can “call the super,” co-op and condo owners can do the same or call their managing agent. And like magic, things get done.
But what happens when there’s no managing agent? What happens when the property is self-managed, and the managing agent becomes you?
With outside management a typical characteristic of co-op and condo life, why do some associations and corporations choose to manage themselves? Often, it’s a matter of size. Management agents generally have a minimum monthly charge per building or per unit, and that charge can be more than the individual owners can handle. For the sake of argument, consider a building or association for which the minimum charge for management services is $500 per month. That’s $6,000 per year. In a 50-unit property, that would come to $10 per month and unit. In a 25-unit property, that would come to $20 per month and unit. In a five-unit property, the management fee turns into $100 per month and unit. That’s a big chunk of monthly common charges or maintenance, and it’s not tax deductible. So property size is the single biggest contributing factor to the choice to self-manage.
Another major consideration is what a particular property requires from a manager. A large multi-story, multifamily building with many amenities is more management intensive than, say, a small, six-unit line of duplex units with no interior common areas and no amenities. So what requires the expertise of professional management. And what does the manager actually do?
What Gets Managed
Management services can be divided into several categories. First of all, there are continual management items as well as non-recurring needs. Building employees such as doorpersons, handypersons and porters have to be supervised daily and require payroll services. While payroll services can be easily outsourced with or without a managing agent, actual on-site supervision requires continuing management.
Another recurring management item is purchasing and bookkeeping. Owners send in monthly payments for maintenance and common charges, and bills must get paid out of those collected funds. This recurring item is handled by the management company’s bookkeepers, who work hand in hand with other management company employees to make sure a property has everything it needs to function, from paper towels to light bulbs to cleaning supplies.
There are also non-recurring or occasional items like various building inspections; supervision of occasional work or scheduled projects for improvements; and ownership transfers for units. The managing agent has the responsibility of overseeing these things as well.
All those responsibilities sound like a lot of work – and they are. In a large complex of units where owners share the management fee at affordable levels, it’s pretty clear that it’s well worth it to have professional management. But are there alternatives for smaller properties?
Tina Larsson is the Co-founder of The Folson Group, a New York City-based company that helps co-op and condo properties self-manage effectively. “We set up policies,” she says, “the same way a managing agent does. How do we vet contractors, for instance? Managing agents have requests-for-proposals, or RFPs. We set up something similar, only easier and simpler. We guide the client on how to use this system. It’s specific to the work to be done. We also direct them to resources like [New England Condominium], where they might find what and who they are looking for.”
And what about the idea that managing agents who represent multiple properties have purchasing power that individual properties don’t? Larsson says it’s not true. “Purchasing power – managing agents say they have it, but if you call a specific vendor, you can ask for the same discount the managing agents get, and most of the time you’ll get it too.”
Larsson’s firm also offers its clients a thorough review of their expenses – something a managing agent generally doesn’t do. The firm searches for ways to save money and earns its fee based on those savings. Larsson explains that whereas a managing agent’s job consists of bookkeeping, compliance, closings, complaints and inspections – a self-management consulting firm finds sources for these services for self-managed properties and sets up systems to track and manage them. Records and documents are kept in the cloud to reduce or even eliminate the need for off-site storage of paper documents and files. Consultants will also often set up online applications for the self-managed association or corporation, such as building links, etc., as part of an overall plan.
Keith Emmers lives in a four-unit condominium in Brooklyn, New York. Prior to living in this very small and intimate association, he was both a resident and board member at Park West Village, a large and established co-op on New York City’s Upper West Side. According to him, “This is a totally different experience. A small building is totally ad hoc.”
“We hired the cleaning woman of one of the owners to clean the hallways once a week. That unit owner pays her, and we reimburse the unit owner. Each unit has its own HVAC, so there’s a very small common area utilities which we pay together. We also have a cable bill for fire monitoring for the common areas. Our maintenance payments go into a common account from which the association treasurer pays the bills. We keep a spreadsheet on Google, which can be viewed by anyone in the group.
“Responsibilities are divided up among us,” Emmers further says. “The president of the association works from home, so when we need someone here for an inspection he usually covers. To date, there haven’t been any conflicts. Everyone gets along. We don’t keep an attorney on retainer, but if we need legal services, we have someone we can call.”
Comparing his experiences in both a large co-op and a small condo, Emmers says: “Living in a big building is easier. In a small building there are times when I would like more help, but everyone is so collegial that it makes me feel good about doing things.”
In an interesting twist, Kathy Ryan lives in a 67-unit condominium community in Johnston, Rhode Island, which is self-managed and has been for the 19 years that she has lived there. She has also sat on the board for 16 of those 19 years. The board has seven members and meets once a month. At that meeting they handle the day-to-day business of the association, as well as dealing with any complaints from unit owners. Complaints and comments are left in a “black box” by residents.
All monthly bills are reviewed and paid by the treasurer. The treasurer also completes the annual taxes, so there’s no need for a bookkeeper. There are no interior common areas, so there’s no need for a paid cleaning staff. The common areas consist of the lawns and parking lots, for which the association contracts a landscaper and a guy with a snowplow. In this version of bedrock New England democracy, the board calls a meeting of unit holders when a major decision has to be made, and a vote is taken to determine how to proceed. And, according to Ryan, the unit owners actually show up!
Making the decision to self-manage your co-op corporation or condominium association is a big one, and one not made lightly. Much depends on the complexity of the individual situation. Large, amenity-laden properties might find it difficult to do. There also has to be a willingness on the part of the residents to assume the responsibilities generally associated with a managing agent. There’s no magic wand to be waved. The decision, though, does not appear to rest on the perceived saving in purchasing goods and services that many owners attribute to having good management. Instead, the financial decision should rest on a comparison of what the cost of management is on a per-unit basis, and whether that cost is equal to, greater or lesser than a do-it-yourself approach. In the end, going it alone also requires the commitment to actually do it yourself – the flip side of the same coin.
A J Sidransky is a staff writer/reporter for New England Condominium, and a published novelist.