Attention board members of community associations! Do you live in a condo, townhome, or HOA association? Do you have a community property management company? If you have a property manager, you are probably relieved that you don’t have to work as hard as before because the property manager will take care of the issues.
Unfortunately, just because you have a property manager does not mean that you get to check out as a board member or stop having board meetings. In fact, it’s the opposite. You should have a system in place that has checks and balances between the association, board, and management company.
As a former board of director, I get it. As an unpaid volunteer board member, you probably don’t have a lot of time to carefully scrutinize what your property manager/company is doing at all times. Because of this, often times, boards don’t see warning signs and red flags before it’s too late.
Since the property manager/company is working on your behalf and is your agent, they should always be working on your behalf and working in your best interest. And they certainly should not do anything that is not in your association’s best interest. Unfortunately, that is not the case all too often. What makes matters worse is that board members often times ignore the warning signs or are not even aware of the warning signs.
So what happens when a property manager does not act in your best interest? At what point should the board take action and question the actions of the property manager? At what point should the board ask for a new property manager or in extreme circumstances actually fire the property management company?
To fully discuss these scenarios, it would take a very lengthy article to fully address them. As a result, I will only discuss what are the most serious red flags and warning signs of impending consequences for the association if no action is taken.
10. Board does not receive (accurate) monthly financial statements. Sounds too hard to believe? I have heard of many cases where boards were either not receiving financial statements or were getting them inconsistently. In the most extreme circumstances, the management company was creating fake financial statements and sending those to the board. Don’t become the next victim of FRAUD!
9. There is no spending limit for the property manager (and you have been surprised with expenditures in the past). There should be a spending limit detailed in the management operating agreement. This is called the NTE or Not to Exceed limit. If there is no limit, then the manager can go out and spend whatever they feel is appropriate and this is the type of surprise that no board member or association should ever want to receive. Don’t let your current manager drain your account. Take action TODAY!
8. No competing bids for projects or service contracts. For project scenarios, the property manager gets one bid from a vendor that is willing to provide a kickback and then tells the board that this is vendor we are going with or he/she might get 2 fictitious bids and ensure that the 2 bids are much higher than the property manager’s preferred vendor. Remember, the property manager is working for you! They should be looking out for your best interest not their own best interest. Don’t overpay again for another project and don’t get duped by your property manager. Make a change TODAY!
For service contract scenarios, the property manager is unwilling to rebid service contracts like snow removal, janitorial, or landscaping. Ideally, the management company should be asking the boards on an annual basis if the board would like to rebid the service agreements or at least when a renewal is coming up. I agree that the cheapest is not the best option always but it’s important to keep all vendors honest. Stop OVERSPENDING for contract services!
7. Bully behavior. In this scenario, the property manager is bullying the board into getting their way each and every time. The board is literally afraid to fire the management company. Hard to believe? This happens more often than you realize. The property manager is working for you and not the other way around. The property manager should advise the board on business matters but ultimately the board makes the final decisions. Period. End of story. Fight back and don’t let bully property managers scare you. Fire them TODAY!
6. High Property Manager Turnover. You are on your 5th property manager in 2 years. Or you keep asking for a new property manager because you are dissatisfied with the prior property manager’s performance. If you are getting a new property manager every 6 months, you should question what is going on with the management company. Stop dealing with these types of headaches. Demand excellence and find a better quality management firm TODAY.
5. Lack of compliance with the management agreement. This one is the most grey and may not be as black and white. For example, the property manager is supposed to manage all projects and never shows up or oversees any of the projects. Or the property manager is supposed to get three bids for all projects over $2,500 but only gets 2 bids. Or says they didn’t have time to get bids. What is worse is when boards STOP asking the property manager to perform tasks as the board feels there is no point of even asking. The board then starts taking on the work of the property manager. Don’t accept anything less than EXCELLENCE from your property management company.
4. Rude and unprofessional behavior. There is absolutely no reason why an association should tolerate rude and unprofessional behavior. If you are not treated with utmost respect and treated professionally by your management company, you deserve better. Don’t delay in seeking a better management/association relationship.
3. Lack of Response from Property Manager. In this scenario, the property manager either “forgets” to return phone calls or emails, or responds weeks later. In some cases, the board just stops asking for assistance and just handles it themselves. Or the board justifies that the pricing they are paying is “cheap”. In my opinion, any amount of money that the association is paying for poor service is OVERPAYING. Stop accepting mediocrity and poor service. Make a change today and DON’T delay.
2. Property manager is receiving kickbacks or money from vendors. This drives up your assessments without you even realizing it. There is absolutely no reason why a management company should ever receive money from vendors. The management company is the agent for the association and should be working exclusively for the association. For example, If the management company is getting a fee from the vendors that are awarded contracts, then the management company is acting like a general contractor. This makes absolutely no sense. Your management company should act as the association’s representative at ALL TIMES and should be looking out for YOUR best interests. If you are a board member, ask and/or clarify if your management company is receiving money from vendors that are awarded projects or for any reason. If you suspect any of this behavior, take action TODAY.
1. Suspicion of theft of funds (or theft of funds). Theft of funds can happen many different ways. Some of the most common ways are as follows:
If you have any suspicion of theft of funds, you need to cancel your agreement with the management company immediately. There are no ifs ands or buts. Take immediate and aggressive action before it’s too late.
In summary, if you suspect any of the above is happening between your property management/management company and your community association, you need to take aggressive action and make a positive change. Your hard earned money could be at risk if you DON’T take action TODAY.
About the Author
Salvatore J. Sciacca aka “Condoboss” is one of the nation’s leading experts in the community property management industry. He is also the President and Founder of Chicago Property Services, Chicago’s #1 community property management company specializing in management and operations of condos/townhomes/HOA’s of 100 units and under.
Salvatore is also the founder of managemycommunity.com (MMC), which is a state-of-the-art online support portal for community associations. With over 20 years of industry experience, Salvatore is recognized for his extensive knowledge of capital planning, preventative maintenance, cost-saving measures and community building techniques.
He holds industry stature as a Certified Manager of Community Associations (CMCA), the designation of Association Management Specialist (AMS) and is fully licensed as a manager (License #: 261.001386) through the State of IL.
Salvatore can be reached at: 312.455.0107 x102 or firstname.lastname@example.org