Smart Choice In Hard Times? Maybe, Maybe Not Self-Management

For a building to run in accordance with the law and to deliver its owners and tenants the rights they deserve, good management is crucial. Most co-ops and condos hire a management company to provide the guidance they require; management companies make it their business to know the current rules and regulations for the buildings they handle, and provide services ranging from cleaning the lobby to signing off on multi-million dollar service contracts.

But buildings choose to pay management firms for their skills—they don’t have to. In tough economic times, when boards are looking to cut costs wherever they can, some may consider taking the self-management route. The question is: is it worth it?

It’s Easy If You Know How

Rochelle Captan has served as general manager of the Amalgamated Warbasse Houses in Brooklyn for over 31 years, but she doesn’t work for a management company. She is under the exclusive employment of her (big) building. The Warbasse Houses comprise over 2,000 families and claim their own power plant, shopping center, and professional office spaces. As big as it is, with Captan at the helm, this co-op is a self-managed one. To talk to Captan, you’d think self-management was a piece of cake.

“Sure, there are challenges, but I find them very exciting,” says Captan. “I can’t speak to anything truly terrible about [self-managing], even after 31 years. We have constant leak problems, we have to deal with snow removal issues; we have the various problems you’re going to have in any building over 45 years old. But I have such a good relationship with staff: I know them by name because most of our employees have been here 20 or 30 years. We work together to get things done. That’s what’s great about self-management.”

Captan’s close relationships don’t just extend to the staff. She credits her building’s success with self-management to fostering an open line of communication with the board, too. “They tell me what they need done and I do it,” Captan says. “I’m a direct line to all people—there’s no middle man. The board speaks to me directly so there’s no going through an agent. A close relationship with staff, board, and cooperators eliminates an in-between person.”

Self-managed or not, it’s clear that without a GM as competent as Captan, the Warbasse Houses wouldn’t fare nearly as well as they have. This is at the heart of the argument against taking the self-managed route.

Penny Wise, Pound Foolish?

The trouble self-managed buildings face is the same trouble that often plagues building boards: you’ve got non-professionals playing roles for which they may or may not be well suited or qualified. Though the utopian vision of your building running itself on the elbow grease and good intentions of its residents may be tempting when you look at your monthly management bill, is Stan from 1E really qualified to oversee the finances of a multi-unit building? The likelihood that Stan can figure it out in time for all the necessary bills to be paid, the codes to be adhered to, and all the other minutiae to be seen to is, well, not that good. (Don’t take it personally, Stan.)

Frank Rathbun is vice president of communications for the Community Associations Institute (CAI), a national membership organization that represents homeowner and condominium associations, providing education and resources to the both the volunteers and professionals involved in the governance and management of common-interest communities. Rathbun cautions against rushing into a self-management situation.

“A community may be able to save money by reducing management expenditures, but self-managing could cost money, too,” he says. “Building members are volunteers, not experts—it’s great when homeowners step up to the plate to help, but they aren’t usually experts in management. A professional manager or management company can provide expertise that can save you money and prevent you from making missteps. They’re the professionals. Volunteers may be well-intentioned and well educated after years on a board, but they are volunteers nonetheless. Bottom line: be careful. The money you attempt to save may cost you in other ways.”

Rathbun goes on to cite a recent example. “At an education session at our conference, a sizeable self-managed association shared about their recent debate over whether or not to hire a professional management company. They decided to do it. When the management company came on board, they found out quickly that they could save a lot on garbage pickup. They ended up saving more money on trash pickup than it cost them to hire the agency.” Rathbun quickly adds that he’s not biased. “[The CAI] represents the boards and the individuals—I don’t have an axe to grind. If you can self-manage a small community effectively, without legal issues, that’s great. I’ve just seen from experience that once you get into any size, I’m not sure it’s the most effective approach.”

Where There’s a Will, There’s a Way

If there is enough support within your co-op or condo to eliminate the management company’s services and take on self-management, there are resources available to you—and with all the tasks your board will be taking on, it’s strongly advised that you make use of them. Publications like The Cooperator and organizations like CAI are an excellent place to start, as they have vast online libraries of educational materials on the subject. Both also host trade shows and seminars (which are often free) as well as conferences with educational opportunities for volunteers taking on the responsibility of management. Don’t forget to visit The Cooperator’s22nd Annual Co-op & Condo Expo on Tuesday, April 7th, a full day of networking, educational opportunities and proven solutions. Register online at www.coopexpo.com or call 212-330-0433.

Community message boards such as www.HOALeader.com and www. Community123.com also provide a resource, giving owners a chance to get firsthand advice from those who have made the self-management switch—to both positive and negative ends.

Once the scope of the workload involved is understood (you’ll be handling everything from common area upkeep to insurance purchasing, from monitoring reserve funds to delivering violation notices, etc.), a commitment from volunteers must be in place. Experts advise conscripting a handful of willing shareholder/owners to share the management load. When one person does too much, burnout can occur and many times, there are only a handful of truly dedicated, thorough volunteers willing to do all that it takes to keep a building running smoothly.

Proceed With Caution

“Look, times are tough right now, and buildings are feeling it,” says Rathbun. “Almost 50 percent of the managers CAI recently surveyed described their concern about the market as ‘serious or severe.’ Many co-ops and condos are struggling because of lost assessments. If someone’s lost their job, it’s unlikely that assessments are being paid. A lot of people in this environment are thinking they should try saving money on management costs, but isn’t this the time you should be getting the best expertise and experience you can? I believe that [boards] need guidance and industry help now more than ever.”

The best scenario seems to truly be a blend of professional management guidance and active owner support. If your association has contracted with a reputable company, you’ll benefit from expertise that board members likely don’t have. A management company is much more likely to know how to navigate filing liens, for example, than individual board members. If the company lacks that expertise, it can probably refer you to a qualified attorney who can help with the process.

But don’t pay for services you don’t need—and more importantly, don’t turn over total control to your management company and then sit back while they handle every minute detail. This can greatly increase your management costs, as managers will tend to assume luxury services are desired. More troubling is the prospect of fraud; management companies that operate without watchdogs on the board are more able to manipulate association funds than those whose budgets and expenditures are actively reviewed by board members. It appears that a “co-management” approach is the most attractive solution for co-op and condo buildings that intend to ride out the storm.

Mary Fons is a Chicago-based freelance writer and a frequent contributor to The Cooperator.

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