Shopping for a new management company

Started by BethJ2 • 6 replies • 1271 views

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BethJ2 (California)
Posts: 62

Posted:

Our Board is shopping for a new management company. We've got it down to three that we like, but something has come up that I'm not sure is a pro or a con. Two of the companies add a cost of living increase upon renewal based on consumer price index. One company does not. I realize that we can re-negotiate any contract before it renews, but I am wondering if it is a bad idea to not include this.

Including it guarantees that the increase will not be more than the CPI. Not including it could mean the company can increase it any time they feel the need to (and risk losing us as a client). We also don't want to enter into a new relationship trying to squeeze every penny out of them. If they never increase their fee, eventually the service will lapse too.

Just wondering how others have done it and whether or not is was good or bad.

SheliaH (Indiana)
Posts: 6,964

Posted:

A similar question was asked on this website a few years ago, when someone wondered about their assessments being tied to the CPI. I responded at that time that the increase shouldn't be based on that - it should be based on the estimated cost of the service provided. If a service is costing more than expected, the property manager should tell the board so they can work together to see what's causing the increases and how to stop it, or if the service is even necessary (maybe it can be dropped or subcontracted out to someone who charges less).

Our property manager doesn't increase fees based on the CPI, but like you, we're doing more research as to why some things cost more and where we can cut the costs. Ultimately, I think people should decide what services they absolutely want the property manager to do and negotiate fees based on that. The cost will increase sooner or later, but you should be able to make an informed decision as to whether your budget can live with that - and be able to explain the increase to homeowners.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

CarolR11 (Colorado)
Posts: 2,563

Posted:

Our MC contract also has that phrase, but as a Board, we added "based on board approval." In our case, such an increase applies to our PM and Asst. Mgr's salaries, and the hourly wages of our security officers, which Our MC now provides. We felt we were too hemmed in with the automatic CPI-based increase.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Carol brings out a good point.

If you like the company but some points of the contract are giving you concern, you may negotiate to modify the contract before it is signed. This is common practice as contracts are typically written to be more favorable to those who wrote it.

CarolR11 (Colorado)
Posts: 2,563

Posted:

Tim's reply reminds me that we have our HOA attorney review all of our major contracts, so you might consider that, Beth.

In addition, our contract contains a phrase, put in by the MC, that the PM is not obligated to follow any Board directives that violate state law or your governing documents. This protects the MC, but also the board in case you end up with a president or even a board majority that wants to skirt these.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By TimB4 on 03/22/2013 10:33 AM
Carol brings out a good point.

If you like the company but some points of the contract are giving you concern, you may negotiate to modify the contract before it is signed. This is common practice as contracts are typically written to be more favorable to those who wrote it.

This is sound advice.

BethJ2 (California)
Posts: 62

Posted:

Excellent replies! I appreciate your input.

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