Hiring New Management When it’s Time for A Change!

Hiring New Management

There is an old adage claiming that “The more things change, the more they stay the same.” This is not a happy thought for a board or association looking to change property managers or firms. To go through the turmoil involved in replacing a management company and still not achieve the desired changes is a costly experience in not just dollars, but time and frustration for the board and indeed, the entire community.

If real change is the desired result, how does a board or association avoid merely swapping out one set of problems for another? Is there a formula to assure a successful change, or guidelines to ensure a positive move in the right direction? What questions should be asked of a prospective new management company before signing on the bottom line? What are the red flags to watch out for, and where and how do you start the search process? Since board members are generally volunteers, just getting started may be a challenge.

Begin at the Beginning

When a management change is imminent, the best place to start the question-and-answer exchange is right at home with the board. Collectively, the board—or hiring committee, in some cases—must fully understand what is not working with their community's current firm, and what changes are expected with a new company. Perhaps the very first question to be asked should be “Is there really a need for a different property management company, or is the problem more a personality conflict with the assigned manager?” If a different agent within the same company might better communicate and work with the board, the 'change' could be as simple as just trading the current manager.

Whether the issue is individual or more systemic, it's a good idea to have your association's attorney review the current contract early in the information gathering process to determine the best way to legally separate from the property management company if necessary, and to identify areas for positive legal change. When a decision is made to bring in a new management firm, the attorney should again be consulted for a review of the new contract and documents before anything is signed; while some board members may argue about the expense of involving the attorney in the process, some due diligence by a legal pro can spot potential problem areas and costly pitfalls, and head them off at the pass.

Finding A Match

“Find a company that fits the level of service you want and expect,” suggests Regan Marock, LCAM, executive director at KW Property Management & Consulting in Miami.” If you go wrong here, it's hard to correct.” He references a recent article written by his colleague Roxanna Dorigo, dealing with the time involved in finding that perfect fit. Dorigo points out not all property management firms—or associations—are created equal. Some management firms specialize in luxury properties with on-site managers; other companies specialize in portfolio properties, or co-ops. Matching your community with a company’s expertise helps narrow the field and shorten the overall process.

Marock also stresses the need to identify expectations—and the cost associated with them—before shopping for a new firm. “The association may want an attendant at the towel cabana, but their budget might not allow that level of service. You have to understand what is wanted, and be prepared to pay for those services.” When the board or the hiring committee has established what is expected from a new firm, the budget will then effectively define what is necessary and affordable for the community.

Marock recommends that the HOA's hiring team visit the management firm's corporate and regional offices, and ask to tour the back offices and meet the support team. Find out how a prospective firm handles maintenance and operations, and remember to check out their customer service/hospitality programs. Ask to see job descriptions, to identify who does what, when. Marock also believes the best property management firms will have an up-to-date policy and procedure manual for handling both the usual expected issues and also the unexpected.

“Don’t settle for just three references,” he adds. “Ask for a list, and the freedom to pick and call your choices.” Speaking to both current and past associations managed by the prospective firm will give community decision-makers a broader appreciation of a company’s management style, and how well that style will mesh with their own community. “And if the sales team tells you the chief or regional operating officer will visit your property regularly,” says Marock, “get that in writing, and define 'regularly'.”

It's also not a bad idea for a hiring committee to request full disclosure of all other subsidiaries a property management company owns, or otherwise has a financial interest in. Insurance companies, cleaning firms, security and even landscape vendors may be part of the package if they are fully or partially owned by a prospective management company. This 'bundling' of services may appear to save both time and money—and they certainly can—but often, services can be purchased independently of the management company and allow for more flexibility. Determining which services your community would like to secure through management versus what you'd like to bid out independently is a task that will differ widely from one association to another.

Jamie Blum, president of JSB Property Management, Inc. in Deerfield Beach provides management services for properties in Broward, Palm Beach, and Dade Counties. She concurs with Marock and encourages hiring committees to review the credentials and education of any prospective firm being considered for hire.

Blum suggests asking, “Are you currently a CAM, as an organization, and is the person who will handle our property CAM as well?” She also recommends taking a critical look at the level of responsibility and involvement with the community a management firm is prepared to take on; do their managers take a more hands-on approach, making decisions on behalf of the communities they manage, or do they favor a more 'on-call' dynamic, where the board runs the show and call upon the manager as needed? Blum says it's important to ask a prospective manager whether “If hired, will you bring in your own vendors? Does your company sign our checks for the vendors? Do the vendors directly invoice the association, or the management company?”

Gloria Donnelli, CPM, LCAM, owner and president of Elite Management Associates in Pembroke Pines, says one of the first things she would encourage a hiring committee to ask of a prospective new company is proof of proper licenses, insurance, and workers compensation coverage for all employees. Donnelli would also ask to examine a firm's monthly financial reports, and make note of when those reports are available. Like Blum and Marock, she would also ask for a list of references—preferably ones of comparable size to your own property.

When checking with those references, she suggests asking probing questions about how the management company has improved the community, and if requests from board and residents are handled in a timely manner. “Customer service is an important issue” she says. “How do you handle owner concerns during business hours and even more importantly, after-hours emergencies?” Additionally, she notes the multicultural mix in many South Florida communities, and says it's important for any property management firm to be able to communicate effectively and courteously across many different language, ethnic, and cultural groups.

Final Checks

Once basic due diligence is done, the pros recommend asking a few additional questions to minimize the chances of buyer’s remorse after the contract ink has dried. For his part, Marock says, “Read your documents before you buy, and make sure there is a 'cancel with or without reason' clause. All the benefits of locking in a contract rest with the company—if they are doing their job, there is nothing to fear.”

Blum suggests actually cold-calling a firm's after-hours and emergency numbers to determine if the firm is truly available 24/7, and warns against signing with a management company that takes a profit percentage of any jobs completed on the property, including insurance claims.

Donnelli warns that “Many companies have marketing personnel who do an excellent job of pitching the company—but other employees will be in charge of daily operations.” So make sure —both verbally and in writing—that you know exactly who will be servicing your particular community, and that you're comfortable with them.

Finally, before anyone signs on the bottom line, have the association attorney review all documents and proposals one last time for any errors, or oversights. If the hiring committee and/or the board have taken sufficient time and effort it may be a long while before another change is necessary.    

Anne Childers is a freelance writer and a frequent contributor to The South Florida Cooperator.

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