Management Companies.

I have a question.

It seems to me that management companies which often have the power to choose which vendors an hoa uses which companies they use.etc.

must be getting something from the vendors..

I mean, not all . but It makes no sense that management companies would continue to push their preferred vendors to every one of a 100 different communities the manage.

I have found that our condominiums office was using a phone service for years that was charging us by the minute for local calls!. the bill was approx 800 a month for a phone line and a fax line.
It turns out the phone company was an aggregator who basically resold service .. guess who the main account rep for houston was. It was a former employee of the management company!

We just got the renewal for our yearly condominium insurance, the master policy. The management company president(this management company only does our accounting and payment processing) certainly gets defensive every time I ask questions about the insurance coverage.

After Hurricane Harvey,, we had an independent adjuster come out to look at our damages and look at our policy. We didn't have flood insurance. So the coverage we were at was for wind damage to roofs and property. The independent adjuster told us in no uncertain terms that the insurance policy was one of the least favorable he had seen for a community our size. He said basically the deductions are so high and the limitations so extensive, that other than a fire,, nothing is covered. Now, I must also include this independent adjuster was trying to get us to hire him to represent us for possible claims with our insurance. however. he says the limitations were so extensive, he didn't think he could do anything for us.

Obviously, there are minimum insurance requirements. However., based on what this adjuster said, Im wondering if the hoa should consider getting the absolute minimum insureance required by law, with the money we saved , we could have that in a separate account for self insurance.

Has anybody every dealt with this issue. I'm really sick of the management company. Whenever a problem arises at our community, his response is "we only do the books". however,. he certainly makes sure he's at every board meeting . He sure gets defensive when I tried to suggest shopping around for insurance.

One of our previous property managers told us some vendors had contracts with several of their clients and were willing to give us a discount to get more business. Even then, the final decision was (and still is) the board's.

Once upon a time, the property management company would present bids for a project and then our president found their maintenance people would get a look at the other bids when they came in on the fax machine, and so they would underbid to get the work. I think he happened to be in the office when he saw this, and after that, we had the bids mailed in and we'd open them at the meeting.

It's true some property managers are better than others, but your beef is really with the board. There's nothing wrong with the property manager suggesting anything, but you and your colleagues need to do your job. If you don't trust the property manager to make recommendations that really benefit you, either come up with some protocols to obtain bids yourself or get another property manager.

You didn't say how your colleagues feel about this and if they like how things are done and you're in the minority, you'll have to convince them otherwise or learn to live with it. If you have questions about a bid, ask them - everyone will hear the same information and decide for themselves.

You must be careful about making assumptions and then acting on those assumptions. I believe this sort of practice has led you down the wrong road before.

It is very possible that a Management Company is benefiting from steering a HOA to certain vendors. Any of the following are definitely possible:
- It could be that the MC is getting direct monetary kickbacks.
- It could be that the MC is securing lower pricing for the HOA because of numerous contracts with other HOAs.
- It could be that the MC and vendor have built a good working relationship and projects go more smoothly.
- It could be that a relative/friend of the MC owns the vendor company, so MC is trying to give them business.
- It could be a whole host of other things . . .

From prior posts, it seems like you're already skeptical of the actions of your MC. If you incorrectly assume something fishy is going on and then accuse the MC of wrongdoing, there will be consequences. Best to have actual proof of wrongdoing, a plan in place to move forward, and Board agreement on all things before making the accusation.

And as I inferred . . . you could be entirely correct in your assumptions. But as Shelia mentioned, you and your Board are the ones who make the ultimate decision and are ultimately responsible. If I were in your shoes, I would have a conversation with my fellow Board Members and leave the MC out of it for now. Talk about the concerns. Reference facts. Develop a plan when it comes to contracts and vendors. In the end the issue with your prior insurance, phone service, etc. lies with the Board not performing its due diligence. The Board didn't insist on several bids. The Board didn't independently review the decided-upon insurance. The Board didn't ask questions. It's good to trust your MC, but things must be verified.

As others have suggested, it's best to get the Board in agreement on a contract procedure. Solicit bids from several possible vendors (even the MC's preferred vendors). Have bids submitted privately/sealed. Review them all together and weigh pros and cons. The least expensive options is not always the best one. There are things other than cost to consider.

Laska

If your management company is only doing the "accounting and payment processing" and the "books", it is inappropriate of you to ask the MC to take on other tasks which do not fit in the definition of those categories.

Who was involved in securing the present insurance coverages? If I as the MC have a contract to only do the financials, I will not seek bids for the Association insurance coverages. Well, I might, if the contract is modified. I would not be defensive if you asked a question outside the scope of the contract, I would simply tell you I had nothing to do with securing the policies and am not familiar with the coverages. That's not being defensive, that is stating the truth.

As a management company owner, why would I not use preferred vendors? Our preferred vendors are responsive, can be trusted, we know their work. If their pricing is competitive why should they not be used? We constantly seek to find new vendors, but do not need the overhead of managing vendors we cannot rely upon just to satisfy someone's perception of why a vendor is preferred.

As usual both Bill and Barbara always offer the best advice on this site from a MCs perspective. I truly appreciate almost every post they share.

As someone who had been in Business for over 39 years before retiring and moving to Texas 3 years ago. I have seen a lot in my 10 years on Boards as well as my personal business. Yes PMCs do tend to take the path of least resistance and use the same vendors a lot. This can be good but also should be watched carefully. When I first got on my Board 10 years ago and assigned the Treasurer title I asked to see everything. When I saw that we were paying 25k a year for Insurance on 3 building and a Pool and some D & O insurance I asked when the last time this Policy was shopped around? The Manager said oh no we have a Great agent and he does all of our Insurance nearly everyone of their HOAs. I said well that should be easy to verify once we get 2 other bids from other agents for the same coverage. The Board agreed with me and the Manager went to get more bids. A funny/Not really thing happened. The Best Agent ever said that they had a huge Rate reduction and our new Policy would be 10k a year. That was a savings of 15K just in our community. He supposedly does over 100 other HOAs for this very large MC. I doubt that anyone of the poorly paid PMs were on the take. I know that this Agent was taking serious advantage of many HOAs.

Boards must verify every detail because HOAs are the easiest target for bad vendors. First because Managers are not trained in every Trade they hire. They are also not given the time they need to do extensive research and they are spending other peoples money and if the Board does not care why should they?

Boards need to have a diverse group of people that have different strengths and also have the time to give to make sure that they can watch and make sound business decisions. It is our Job.

You should absolutely start with the premise that your management company is taking kickbacks from vendors and work back from there. It’s not hard to figure out. Your property manager will keep recommending the same people over and over. The existing contractors will have an attitude that they’re entitled to your business and complain to the property manager if they’re not chosen for certain jobs. When you ask for lists of alternate contractors, your property manager will struggle to come up with names. The property manager will also get uncomfortable if you bring in bids from contractors he/she doesn’t know.

Also, look at the kind of car your property manager drives. Is it a fairly new Mercedes? Say no more.

Wow.

Sorry, any direct mention of what something like that costs is so ... well ... odd.

Since literally every property manager is a crook taking bribes, I'm super insulted that I've never even been offered one. But then, I was never offered drugs in high school either. I emit a very strong goody-two shoes vibe, apparently.

(And if I were taking bribes I'd buy a Tesla, not a Mercedes, lol)