Hiring a new community management company is different from choosing a new cable company, but in our age of endless options, some board members may approach their selection process in a similar way. This falls in line with the current consumer mindset. Where once consumers might have had to pick between a few options, they’re now presented with a multitude of choices for basic things like bread, juice, water, telephone, electric, natural gas or TV. And we now (more than ever) have many choices for other service providers that specialize in everything from accounting to x-rays. You might say that is a benefit of capitalism or a downfall but regardless of the point of view, the choices are at times daunting.
Similarly, the boards of directors of community associations now have overwhelming choices when looking to hire a new management company. Based on the latest information, more than 100 community management companies now provide services in the Chicagoland area. Whether each can actually deliver a good, consistent level of service is a different question. Salespeople can easily say their company provides proactive support, a large pool of resources and a tireless property manager that doesn’t need sleep. And sometimes board members can be swayed by a representative who can speak well, appear credible and dress the part. But there seems to be a disconnect between what salespeople are saying during presentations to board of directors and the facts.
Drawing from my 16 years of experience in the profession, I know that most associations often change management companies –more than they care to admit. The average management-company turnover at a small- to mid-sized association is about two to three years. In many cases, I’ve been aware of terms that lasted only one year.
Could this be a result of boards of directors and homeowners having unrealistic expectations? Or perhaps they followed a slick salesperson who said all the right things. It could also indicate incomplete vetting by the board of directors. I would say it’s probably some combination of it all. My goal for you here is to focus on the vital vetting process. I want communities throughout Chicagoland to be able to find better-suited management companies for more-fruitful business relationships that last much longer.
Here are the top 10 questions to ask in determining the right management company for your community:
1. What are all the services your company offers? Find out if they provide property management for rentals and apartments, high rises, low rises, and both small and large buildings. Inquire if they are insurance or real estate brokers as well. Might they also offer landscaping, general contracting, painting and janitorial services? Decide if you are you looking to hire an expert community management company or a jack of all trades and master of none before making a selection.
2. How does your company earn its revenue? Do they upcharge invoices without the board being aware? If they offer services such as landscaping and insurance, do they simply pad vendor invoices with no extra value for the increase? Do they use property management as a loss leader and profit from general-contracting services on larger-scale projects?
3. How much does your company anticipate making from our association? This includes the base fee plus all anticipated a la carte charges and hidden income. Don’t think the management company will make money only from its base fees; that isn’t realistic in most scenarios. Most companies make more money through tacked-on a la carte fees than they do from their base fees.
4. What is your start-to-finish board-meeting support process? You want to understand exactly how the management company handles board meetings because they are the most crucial component of the association’s operations. The process should include scheduling the board meetings throughout the year, inspecting the property and generating an inspection report, posting notices of the meeting and submitting a comprehensive management report as well as the post–board meeting follow-up. This process alone should take at least 6-10 hours of support from a good management company depending on the size of the association and the issues at hand.
5. What is the average tenure of a property manager at your company? Verify that your association won’t be saddled with frequent property-manager turnover, which is high in the profession. Many associations have to adapt to a new property manager every six months.
6. How many associations do you manage for more than 10 years? Five years? How many have you contracted with during the last 12 months? How many have you lost in the last year? Working with a new association requires a large amount of work. If a company is trying to serve a high volume of new associations, you can presume the property managers won’t have the focus to provide the level of service you need.
7. How many hours do your property managers work per week? How many employees do you have? How many buildings and units do you manage? Here you’ll look to measure how much attention you will receive as a new client as well as a client on an ongoing basis. Note this information and compare it carefully with other companies.
8. For what reasons did you part ways with the last five association relationships that ended? This allows you to determine a company’s honesty, because all management companies have client turnover.
9. What is your capital-project support process? The process should move from capital planning to punchlist resolution. It should also include bid-spec creation and bid-solicitation support through project oversight. Don’t be fooled by companies claiming they provide project support for free. That means either they won’t provide any support (even though the slick salesman says they will) or they make money from the chosen vendor (without the board knowing it). Neither scenario is good for the board or the association. The project-support process is labor and time intensive. For a management company to provide high-quality support, it must have some way to be properly compensated for it in a fair and transparent fashion.
10. How transparent is your community management agreement? Please explain the different ways we may be charged extra a la carte. If the agreement is a mere few pages and says “everything” is included, run away – really fast. It is impossible for a management company to make money just from the base fee unless the fee is very high, especially for a smaller building. The only way a company can take on a smaller building and say everything is included is to generate income in ways the board may not know about. So it really is critical for the board to know EXACTLY how the management company plans to make money.
Having the right management company is essential for your community’s health and well being in addition to the homeowner’s quality of life. To connect with that company, ask these primary questions when vetting your selections. Don’t devote your valuable time asking them how they fix leaks, how they handle a noise complaint or how often they visit the property. Ask what matters most and base your choice on careful evaluation of the answers you receive. As a community board of director, you will be more satisfied and less likely to have to undergo the selection process repeatedly. Commit to making a great decision that leads to a fruitful business relationship you can enjoy for many years. Your friends, family and loved ones will thank you for it.