Why Should You Hire a Management Company and How to Find One
I think you will find this discussion helpful, whether you feel like you need to search for a new property manager, or you’re currently self-managed and want to look for a property manager for the first time.
If you are a self-managed Association, you might be asking yourself: Why should we move to a professional management company?
Here are some of the reasons why you might want to move to professional management:
- Making sure assessments are properly and consistently collected and making sure legal procedures are properly followed. You don’t want to get caught in a fair debt collection action.
- Without management, you have to have a board member with an accounting background because you have to collect the assessments, pay bills, compile budgets, etc. Someone at the board has to understand construction matters and meet vendors.
- The Board members are constantly bothered with after-hours emergency matters.
- Ensuring your insurance is adequate and appropriately re-bid every couple of years.
- Ensuring all the documentation is in place, for instance, meeting minutes, resolutions, policies, etc.
- Making sure there is no deferred maintenance.
- Maintaining proper reserves.
A. Determining Management Specifications.
So, you’ve decided to replace your management company or hire one for the first time. What’s next?
The Board can determine what services it wants from a management company by first deciding which services can be separately handled by its members. Some Boards use a matrix to link various Association duties with a responsible party. I’ve prepared such a matrix in the past, but it’s pretty long. So I won’t post it here. But if you want to look at this matrix, let me know and I’ll separately post it. Responsibilities assigned to the management company will be translated later from the matrix to the management contract.
Specifications dealing with fiscal responsibilities would typically entail collecting assessments, following up on delinquencies, approving and paying bills and accounting for payroll for on-site employees (if any).
Specifications should also list tasks and services the management company is expected to provide. For example:
- Attend meetings – list them and specify how long the manager should stay.
- Take meeting minutes – unless a volunteer will take meeting minutes.
- Maintain up-to-date resident and tenant rosters.
- Prepare any required Association certificates for the sale of a house or condominium unit. For instance, an Association must provide a pending buyer with the state of payment of assessments.
- Prepare and coordinate specifications and proposals. Remember, the power to award contracts should always rest with the Board.
- Insurance. Describe in detail the responsibility of being the liaison to the insurance company. And describe thoroughly any special assistance the Association might need from a manager to process insurance matters.
Once the Board has finalized this list of management specifications, it should gather a number of supporting documents into a package that provides sufficient information for each potential management company to make a realistic bid. This would include:
A cover letter that invites companies to bid. Also referred to a “Request for Proposal”. List the Association documents that are included for the management company’s information; specify the timeline for submitting bids, reviewing proposals and making a selection; and state exactly what information the Association wants from the management company.
Next, include all documents necessary for the management company to make an accurate bid. This would include the matrix I referred to above, and the Association’s management contract form. Preferably, the Association would have its own form rather than the management company’s form so that the management responsibilities are written to the Association’s specifications. I recognize this falls into the category of a wish list. Most management companies will require their own form.
B. Identifying Management Companies.
After the Board prepares the specifications, it should begin compiling a list of management companies that might want to respond to the Association’s request for bids. Don’t rely on a Google search as a source of management firms. Also, don’t attempt to find a management firm by sending a mass mailing to all local companies. You’ll waste time with unqualified or mismatched companies.
Look for companies that are active in the community association industry and have an indicator of professional certification or designation earned by the company or its employees. Look for firms that are “Accredited Association Management Companies (AAMC)” or whose managers are “Certified Managers of Community Associations (CMCA)”, “Association Management Specialists (AMS)” or “Professional Managers of Community Associations (PCAM)”.
Try to find companies that manage associations similar to yours and in close proximity to your development. You should come up with an initial list of about 5 or 6 management companies.
Most importantly, ask for references from other Association directors. Hey, that’s one of the things that this Facebook group is for.
The Association should phone the potential candidates to determine their interest in submitting a bid. Some firms may not be in a position to take on new clients or they may recognize they’re not a good fit. The Association should strive for a final list of at least 3 management companies to bid on the contract. Send each of these companies the Request for Proposal package compiled by your Association (and attach the matrix to the Request for Proposal).
C. Making the Final Selection; Management Contract.
An Association should never hire a management company based on price alone. It’s important to hire a firm that’s capable of doing the job and has strong knowledge of community associations. Look for a management company that can provide the community with solid managerial leadership.
The management contract should be a relatively short document, but it should specify the following terms:
- The parties involved in the agreement.
- Association services and amenities to be managed by the management company.
- The Association’s separate management duties.
- Management’s communications responsibilities.
- Fees to be paid to the management company.
- Terms of the agreement, especially including length of term.
- Specify the Association’s termination rights and the return of books and records on termination.
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