While the majority of co-op and condo buildings and HOA communities choose to partner with professional management firms to provide guidance and counseling and oversee day-to-day operations, other boards take the reins themselves and choose self-management.
While there are advantages to going the self-managed route, there are also challenges. But with the right preparation and commitment, this large and sometimes intimidating undertaking can be done successfully.
Why Go Solo?
Sometimes it comes down to the size of the community. For smaller buildings, self-management can make economic sense, ensuring that the building’s residents are getting the most bang for their buck. What most often leads small buildings to manage themselves? “They may not have the money” for a full time management firm, says Gary Mindlin, owner of Top Hat Home Services, a boutique management firm in Manhattan. Or the board members may feel, “We have the expertise, and we only collect four checks a month—so why are we paying a company to do the job?”
According to attorney Steve Troup, a partner at the Manhattan-based law firm of Tarter Krinsky & Drogin LLP, “Larger buildings are typically not self-managed, although some are. They have a professional manager, who is a building employee and who has been well-trained before going in-house.”
Size can be prohibitive when it comes to self-management. “When you get to a certain size, self-management makes no sense,” says Mindlin. “At the other end of the market [where buildings are smaller], cost becomes more important, and it’s harder to provide added value at a lower cost.”
Melissa Rothe, CMCA, AMS, director of residential services at W New York-Downtown and a board member for the new Big Apple chapter of the Community Associations Institute (CAI), agrees. “In smaller communities, you can save money, but above 25 units, the community ends up paying more” in terms of hiring outside consultants—perhaps someone to handle the books or provide legal advice.
And in some cases, even if a smaller building wanted to hire a management company, Mindlin says, “a lot of firms will turn away smaller buildings of 40 units or less. It’s just not profitable for them.”
On the other hand, self-management may just be another example of self-expression. “Self-management can be a wonderful thing,” says Mindlin, especially if it’s well planned out and everyone involved in the operation of the building or community is equally invested and committed to its success. In that context, it becomes an opportunity to strengthen relationships among neighbors, friends and volunteers. “It can build a huge sense of community,” says Rothe.
Self-management can be a good fit, too, when members of the community have certain skill sets and experiences to share, for the good of the cause. Board members may have financial, legal or other applicable experiences, such as qualified engineering skills, that may prove valuable in the management of a co-op or condo building. Those skill sets can cultivate an added sense of well being when considering the jump to self-management.
As much as self-management may appeal to a community and its residents, there are some inherent challenges that may arise by going without professional guidance. One of those challenges is ensuring that the individuals volunteering their time to manage the property are realistic about the amount of work and commitment involved in the proposed effort. “It takes a lot of time and knowledge," says Mindin, "and almost always in the building someone says, ‘I have the time and knowledge,’ but almost always, they don’t."
Rothe agrees. “People may think, ‘I’m a lawyer or an accountant, and I have skills,’ which is true—but they may not understand the amount of hours involved. Who is going to respond when a water pipe bursts in the middle of the night? Normally, it’s the managers. Which volunteer is going to handle it?”
It can be especially difficult in buildings where the majority of residents are still working full-time. “Most people have day jobs and this is their volunteer role after their working hours,” Rothe adds. And there is a lot to think about. “You can go from very trivial problems to the catastrophic, but it’s the smaller issues that can be most troublesome,” she says. “Who’s going after the late fees? When someone complains that ‘so-and-so’s dog is pooping in my yard,’ who is going to take care of that? You don’t have the manager as a buffer anymore.”
In small communities, trying to manage those seemingly small conflicts can lead to much larger headaches. Laying out expectations and guidelines early on and with clarity can help ease these issues. “You have to set guidelines with your lawyer and the building (residents) have to be in agreement because then (self-management) will go much easier,” says Mindlin. “A lot of the issues that come up are issues that could have been mitigated with clear rules and guidelines. We get pulled into a lot of these inter-owner relationship problems, especially when it involves money. The more guidelines, the more communication, the better. The politics in small buildings can be just as big as the politics in larger buildings.”
The More You Know...
When it comes to self-management, boards also should remember that the job has a learning curve. “You’re not just collecting rent and paying bills,” says Troup. “There are an awful lot of administrative and regulatory issues involved.”
For example, various permits must be renewed throughout the year, from boiler to elevator inspections. If those inspections do not happen and if those permits are not secured, “there are fees and then fines if those fees are late,” he says. And those fines and fees can turn into liens on property.
Self-managed buildings also may suffer from a lack of buying power. Professional management firms are usually able to secure better prices than self-managed buildings because professional management firms have much deeper ‘pools’ of professionals to secure bids from.
Another common pitfall of self-management is a potential lack of experience from the individuals in charge. “They need to find out what the scope of their job is,” says Troup.
The risk of little to no experience can factor into a wide range of areas in the management of a building, including the upkeep of the physical space. “I’ve seen a lot of shoddy workmanship in buildings because of a lack of supervision,” says Mindlin. “The board does its due diligence and signs the contract but then who’s overseeing the project? For a self-managed building, I have to ask myself, ‘who am I getting to do this work and am I qualified to oversee this work?’ When a building is self-managed, they have to know when to get help.”
Help Along the Way
That idea of outsourcing is an important one for the board members and volunteers working in the trenches. Without years of experience, the challenges of managing can be justifiably daunting, a burden made all the heavier by the fact that this is the place where they, their families, friends and neighbors live and call home.
A wealth of help is available though. Just because a community is self-managed does not mean they cannot turn to outside guidance and advice on a regular basis. A number of services are available “a la carte” for communities looking for guidance, as are educational opportunities.
A number of firms provide monthly accounting help while placing a trusted and valued attorney on retainer—and speed dial—can pay off in avoiding rookie mistakes. Firms are also out there to help with reserve funds and even board elections. Companies such as Mindlin’s can provide a la carte assistance with maintenance, engineering advice, on-site handyman work, project management and upkeep. Trade shows—such as The Cooperator's own annual Co-op & Condo Expo—(the next one is Tuesday, April 21, 2015)—are another excellent way for self-managed buildings to make connections with vendors and service providers their building may need in the future, as well as a source of information and education via seminars, demos, and literature.
Professional organizations such as CAI also provide valuable guidance and education. The newly established CAI-Big Apple serves the New York City area and offers a number of different courses, including Introduction to Community Association Livingand courses in the fundamentals and essentials of leadership. Networking and attendance at various seminars also help put volunteers in touch with other individuals in similar circumstances and opens the door to vendors who may be able to provide the kind of services they need for successful management. For more information go to www.associationhelp now.com/index.php/hoa-news-new-york-city. Other New York City-based organizations include the New York chapters of the Institute of Real Estate Management (www.iremnyc.org) and the New York Association of Realty Managers (www.nyarm.com).
Somewhere between the realms of complete self-management and a completely-managed experience lies a middle ground, and sometimes that can be the best place for mid-sized and small buildings with limited volunteer resources. “Look at your operation as a whole,” Rothe says. “See what your management firm is doing on a daily basis and have an open, candid conversation with your current manager.” And then ask if services can be modified—if the board can handle some responsibilities while the management firm retains others. It may be a way to bring down costs while keeping volunteer duties reasonable—a win-win for everyone involved.
For buildings and associations that choose to fly solo, it can be done and done well, especially in smaller communities. With proper communication and support among residents and volunteer leaders as well as a willingness to learn, the challenges of self-management can be met. Remember to never be afraid to ask questions or seek help when needed.
Certainly, the idea of friends and neighbors building a community just for them and living with the well-being of their neighbors in mind is an appealing one. And it is a good feeling to know that if anything does go wrong or if the volunteer corps gets overwhelmed, there is always a safety net available in the form of professional property management.
Liz Lent is a freelance writer and frequent contributor to The Cooperator.