Hit the Ground Running

Ensure a Smooth Management Transition

Not entirely satisfied with the performance of your management company? Chances are your board hasn’t sought a new agent because they were frightened of the transition. Such is the case with many of the buildings that have interviewed Ronni Lynn Arougheti, president of Heron, Ltd., a property management company in Manhattan. Arougheti says she has been told surprisingly often that a building will stay with the same firm for fear of the worst-case scenario. However, "it isn’t that bad!" she exclaims. "Some people said they were so worried and stayed so unhappy for so long–and then the transition was seamless."

Arougheti’s optimism does not mean there aren’t serious issues to contend with, but rather that there are ways of dealing with them, ways that board members and managers can prepare so as to avert major difficulties.

One issue is getting the proper paperwork turned over from the old management company. There are many reasons this step of the process may go awry. Some companies simply haven’t kept good records. Arougheti reports, "In some transitions, I have literally received paperwork that consisted of loose papers in shopping bags, or boxes that were obviously never opened during the period that the management company was running the building."

Bernd Allen, a partner with the law firm Allen, Morris, Troisi & Simon in Manhattan, points out that managing agents have a contract with co-ops that includes turning over documents to anyone designated by the co-op. "These documents don’t belong to the managing agent; they belong to the co-op." He says that problems with turning over the documentation generally have to do with fees. "When a managing agent is fired, they may decide they’re owed $12,000, and they won’t turn over the paperwork until it’s been paid. This amount could reflect their monthly fee, back fees that haven’t been paid, and items that the agent now realizes were never billed for. A co-op may give a month’s notice; then the agent points out that the contract states they will be given 90 days’ notice and demands three months’ payment."

The Real Estate Board of New York (REBNY) has developed a set of guidelines for the transfer of documents from one managing agent to another that about 50 companies have now agreed to use. (See sidebar on page 18.) It includes timetables and a very thorough list of documents to be turned over. REBNY senior vice president Marolyn Davenport comments, "People have been pleased that a standard has been set to clear up the confusion." This standard is proving helpful on both ends of the transaction, according to Anita Sapirman, president of Saparn Realty, a residential property management firm in Manhattan, vice president of the Association of Co-op and Condominium Managers, and co-chair of the committee that developed the guidelines. "When you’re taking over a building," she says, "that list lets you know when you’re missing something right away." Arougheti notes, "If the old company is adhering to the guidelines, all I have to do is pick up the phone and I know everything’s set."

And in the worst case scenarios? Arougheti says, "There were times we got nothing, but were able to hit the ground running because we knew what we needed, and were able to go to alternate sources to get it." Board members can be of help here, too. Ruth Schoenthal, board president of a 145-unit Upper West Side building, has been through four management transitions. As a managing agent herself for Equity Management Group, she was aware of what paperwork was important and proceeded to file away a copy of her building’s offering plan and its amendments. When she became a board member in 1990, she continued to save things such as the financials and budgets, tax certiorari information, the monthly runs for billing, and a "red book" put together by the board to describe how the building runs. When Heron took over as her co-op’s agent, Schoenthal was able to provide all of that to them, and reports that their back office got everything right on the first billing. "They’re real pros," Shoenthal says.

How do you determine if a company is "a real pro"? "When you’re interviewing them," Schoenthal advises, "they will respond to your questions with straight answers, not a pitch." Arougheti suggests choosing a firm that adheres to the REBNY guidelines, "because you never know what’s going to happen in the future." She adds that it behooves the board to go see the new agent and see what their filing system is like.

The way the board handles firing an agent can have an impact on how cooperative that agent is through the transition. "Sit down with everyone and tell them what you want; that it’s not their fault and their reputation will not be harmed," recommends Allen. "You could say ‘We’ve been together ten years and we like the service, but the relationship has grown stale and we want a change.’ Don’t call up and say, ‘You’re fired, I’ll be by in the morning for the books.’ That never works."

Good communication with shareholders is also important. Schoenthal says that often a decision to seek a new managing agent comes after the board has heard a stream of complaints about the old one that go something like, "They don’t return my calls...they were rude to me...I can’t get an answer. So when we write a letter informing the shareholders about the change," she says, "we acknowledge that it is due to them: ‘We’ve been listening to your complaints; we are having the same problems. Therefore we have decided to change management.’ That makes it easier" for shareholders to deal with the change.

The last month under the lame duck management may be difficult. Steven Greenbaum, director of management for Mark Greenberg Real Estate (MGRE) in Port Washington, New York, offers this month free to new clients. "Here you’re dealing with a company that has been fired. There’s no reason for them to do their job properly, so we call and say, ‘Don’t do anything, we’ll do everything. We’ll pay you to send us the paperwork.’ It works."

Greenbaum points out that the transition is the most crucial time. "Everyone in the building gets their opinion of the new managing company at that time, so you’ve got to be diligent to make a good impression. The board is perhaps seven or nine people who made the decision. The other tenants don’t know about it until they get a letter, and may not know why a change was made, so you need to show your attributes to everyone."

Greenbaum details a good way to begin a new relationship with a building. "The perfect picture is that the account executive, another executive of the company, a couple of board members and a member of the staff, preferably the superintendent, do a walk-through, which is really a brainstorming session. You talk about aesthetics, wishes, wants, goals, and you set immediate priorities as well as those one, three, and five years away. You write them down. You go back into the meeting room and discuss what you want to do to make this the best building possible–it could be better financing, better staff relations, better tenant relations. If the goal is to improve staff, the management company gives professional input on ways of doing that and you develop a program. Say the goal is better tenant relations, you may decide to do a newsletter. You decide the topics–assign a person to do that. As long as you walk away with a list of goals, you can look back and say, ‘How are we doing?’" Greenbaum’s firm keeps lists of projects, including name, cost, status, comments, and dates, which they continuously revise, update and review at every board meeting.

Schoenthal feels that an important way a new manager can glean information is to listen to the superintendent and discover what his issues are. "That way you find out immediately what’s going on with the building, as well as what his strengths and weaknesses are. How does he control the staff? Do they respond to him, have respect for him? How are repairmen handled, in terms of logging them in and out and controlling them? A good agent looks for these things."

How long does it take to really know a building? Sapirman says, "It depends on the building’s size, and the personalities involved and how well they communicate with each other. Things also depend on how fast the board moves, because we need board approval before acting. Generally within six months you know everything backward and forward, and within a year, you have things runnings smoothly, the way you’d like."

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