Who Really Runs the Building? Who's in Charge

Most people assume that the board of directors runs the building. Actually the responsibilities for maintaining the building are usually divided between the board of directors and the managing agent. Both parties perform their functions with the advice and help of many support professionals. Typically the board establishes the policy and expenditures; and the managing agent or property manager actually runs and manages the procedures in the building. It’s important that the manager understand the philosophy and culture of the building in order to be able to implement the style the board desires.

For example, the board will make decisions about the rules and expenditures of the building. The managing agent is concerned with not only carrying out these requirements, but performing the administrative work as well, such as collecting maintenance, carrying charges and sending out notices.

Selecting Vendors

The managing agent is responsible for selecting and prescreening vendors including architects, engineers, heating suppliers, insurance and repair personnel. Their credentials are then presented to the board who will select the vendor.

Most management firms work off site, but there are companies who work on-site. The advantage of an on-site representative is that the shareholder can easily go into their office to discuss any topics and concerns. Of course, the building needs to be able to provide the space for the on site representative and not all buildings have available space for them. In some cases a small management firm will operate out of a building they manage and pay the building rent because they are also managing other buildings as well as the on-site one.

Some buildings are self-managed. This requires a good deal of work, expertise and dedication from the shareholders. Frequently this works well in a small building where the shareholders feel a strong sense of ownership and run it as though it were a private home.

Most boards of directors have a regularly schedule monthly meeting to deal with subjects as well as an annual meeting to elect directors and officers. The agenda for these meetings is usually prepared by the managing agent with input from the board. Both parties will have issues, which need to be discussed and examined in order to decide on the procedure. Many buildings also have standing and ad hoc committees who meet at different schedules and report to the board. Committees are assigned specific tasks.

Affairs of the Board

Typically the building’s attorney will attend both the monthly and annual meeting to assist with any legal issues. Also the attorney is very helpful in determining policy on topics which are not necessarily legal, but political in nature.

Architects and engineers are consulted on a per job basis. Their expertise is required to keep the building in good physical condition and as well as approve any structural changes the board or shareholders wish to make. They also insure that any of these changes will meet the required New York City building codes.

One of the most difficult things for a board to do is to assess the managing agent’s performance. One aspect must be that the individual manager understands the character of the board and the clientele they are serving. It requires sensitivity and good listening skills. Another concern is availability.

The managing agent’s work flow widely varies and cannot be controlled or anticipated, such as emergencies or the amount of purchase or rent applications which can change markedly from month to month. The same amount of staff has to deal with these issues making it difficult to juggle the work load well. When evaluating the managing agent some of the factors the board should consider are obviously cost. Is the manager or management firm producing adequately given the fee they’re charging? Savings are another issue to consider in cost.

A knowledgeable managing agent can save the building substantial amounts of money by hiring well priced, but good consultants. An experienced managing agent knows how to find these vendors. Is the managing agent sufficiently available when things need to be discussed? Are they courteous to the shareholders as well as the board? Are they helpful and efficient in processing purchase and rental applications? If they take too long to process a purchase application, the purchaser has to reapply for a mortgage creating additional expense and sometimes a higher rate of interest.

Whatever style the board has when choosing a managing agent or property manager, it’s important to interview a few companies and thoroughly check their references. Remember to ask specific and in depth questions about the company’s style and responsiveness when checking references.

Lenore Barton is a contributor to The Cooperator and an associate broker at Warburg Realty.

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