Management and Board Relations My Job or Yours?

Building boards and their managing agents function best when they work together as a team. Ideally, the two parties collaborate to implement policy, carry out administrative duties, and make decisions about the efficient operation of the building or association. Management contracts usually spell out the duties of the manager, but confusion sometimes arises among board members regarding the extent of their manager’s duties versus the limits of the board’s duties.

Sometimes, such confusion is the result of misconceptions about the manager’s role, or of preconceived notions on the part of one or more board members about what the manager’s role should be. At best, a board at odds with its manager is ineffective; at worst, it risks doing serious harm to its community. So it is essential that the board and manager work in harmony—but smooth relations can only happen when each party understands their role and obligations.

Whose Job Is It?

In the case of boards staffed with more hands-on board members, the role of that board and the role of the property manager might seem to overlap occasionally. While that redundancy might initially seem helpful, that’s actually the opposite of the way the relationship should work, experts say.

The board should set policy for the community after receiving consultation from the property manager and or other professional consultants. The board makes decisions regarding capital expenditures, which prospective tenants to allow into the building, and other decisions.

The property manager or managing agent must always remember who the employer is, says Paul Gottsegen, executive vice president and director of Manhattan-based Halstead Management Company, LLC. “The board is the client, and the managing agent is the agent,” he says. “There’s a contractual relationship that defines that relationship.”

The managing agent or property manager provides information so the board can make informed decisions, Gottsegen continues. In addition, the property manager is part of a larger team of professionals that help to oversee the operation of the building or community. A professional engineer, an attorney, and the superintendent of the building also provide information and counsel to the board, who may rely on additional advisers to make informed decisions on behalf of the community.

It’s important for board members and property managers not to overstep their prescribed boundaries, but we all know that people are fallible and sometimes are inclined to do what they should not do. Ideally, the board members develop the direction, policy and procedures for the community, and the property manager implements them—but some board members have a tendency to get overly involved and micro-manage operations, which can get in the property manager’s way. It’s important for board members to remember that the purpose of the board is to make decisions, not run operations

It’s also the board’s responsibility is to ensure that the management company performs the day-to-day operations of the property properly, says Brian Rafferty, director of operations for Manhattan-based Century Management Services, Inc. The management firm should carry out the board’s goals and objectives, and advise the board on matters relating to staff, the physical plant, and shareholder affairs, among other things.

Occasionally, a board member will become too closely involved with the oversight of contractors—though that duty is the property manager’s— whereas others may want to give their manager more responsibilities than the agent is contractually obligated to handle. Neither inclination on a board’s part should empower either party to overstep its bounds. Property managers should not make decisions for a client community unilaterally unless it’s an emergency, says Josh Koppel, CPM, vice-president of HSC Management Corp., in Yonkers.

“It’s two o’clock in the morning and a major pipe breaks. [In that instance,] the manager can call the plumber before contacting the board,” Koppel says, noting that management contracts usually allow managers to make such expenditures when they are necessary.

Some management contracts include a clause limiting the amount of building money the property manager can spend without prior approval from the board, unless the expenditure is for life and safety issues. Such emergency actions are exceptions to the rule. In most cases, any significant cash outlay must be green-lighted by the board first.

When Duties Overlap

In emergencies, when property managers have a duty to protect the property and residents, it’s obvious that such a responsibility should be in the hands of the manager. Some tasks that technically are the province of the board members, at times are delegated to managers. With some boards, managing agents will take the meeting minutes, though the task is the duty of a member of the board. Most management companies also perform treasurer’s duties for the board, such as collecting residents’ fees, paying the super, and so forth.

“Taking the minutes of a meeting is the secretary of the board’s responsibility,” Koppel says. “But many agents take the minutes because the board isn’t doing it, or isn’t doing it right.”

Boards may exert pressure on property managers to do work that’s not part of the manager’s job, which can be a serious problem when the job in question isn’t as innocuous as taking meeting minutes. The jobs a board might foist upon a manager could be tasks that the board members would rather not deal with themselves. At times, doing such work could jeopardize a property manager’s job by compromising his contractual relationship with the client building. Simply put, doing more than s/he’s legally responsible to do for the community is in breach of the manager’s contract with the board.

“I’ve had situations in which the board tries to get the agent to address the personal property issues of the residents,” Koppel says. “That’s the property owners’ jobs.”

When board members become too involved, they forget how to protect themselves and the community. Board members should always defer to their professionals, Gottsegen says. “A board is not protected if it doesn’t follow the advice of its professionals. Their insurance protects them if they follow the advice of their professionals,” he says.

As a result, boards that take on the duties of their consultants open themselves up potentially disastrous consequences. Just as the man who represents himself in court has a fool for a client, board members trying to act as managing agents or other professionals for the community can find themselves in over their heads.

“You could be your own accountant or agent, but you’ll make a mistake,” Gottsegen says. “Use professionals. Your managing agent is a professional, and has the experience to do the job.”

Board-Manager Dynamics

In many decisions the board makes regarding the community, property managers are collaborating with the board. The relationship is a partnership, but very clearly defined, Gottsegen says. “Managing agents shouldn’t be involved in making decisions about the building,” he says. A manager should never sign off on any contracts on behalf of the board.

“A managing agent who knows nothing about finances should not be negotiating a re-financing of the building,” Koppel says.

One way to avoid misunderstandings about the responsibilities of the board versus the manager is to ensure that both parties are clear about the terms of the relationship. Gottsegen says his firm tries to communicate clearly with a client so that there are no misunderstandings. “We try to have the expectations of the client all up-front. We don’t want anyone to have the wrong expectation of what the managing agent is doing for them,” he says.

Gottsegen cautions that a managing agent should never inject his personal feelings or politics into board decisions. “The manager should be as clear and as factual as possible. You don’t want to side with a board on political decisions,” he says.

Koppel says that some common-sense rules of thumb could help managers to avoid snafus with the board. Remember who is paying the paycheck, and that the pay could end if a disagreement reaches an impasse, he advises. “The board’s always right, because they are the customers,” he says.

Jonathan Barnes is a freelance writer and frequent contributor to The Cooperator.

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3 Comments

  • Should the files and papers (including bills, budgets, minutes, litigation records, etc.) of a cooperative be kept at the management's office, or on-site at the building? Which is a better location, and why?
  • A representative from our management company has suddenly gotten a seat on our co-op board bring the total directors to 8. Our management company was not our sponsor and our sponsor still controls a small number of rentals. This addition was never discussed or announced. We got a memo from the Directors and suddenly a new name was added. Is this proper? Can a board have an even number of Directors?
  • The manager of my cooperative building has blocked the deposit of my maintenance payments to the corporation. Does this constitute an illegal interference with contractual obligations?