reality check on Property manager's scope of work?

I am a trustee of a 37-unit condo in Massachusetts. There are a couple things that our property manager refuses to do. Looking for feedback: Is PM being lazy, or, are these tasks not typically within the PM's scope?

Context: the property manager is professional PM firm with about 5-7 office employees and 8-10 field maintenance employees. They manage about 30-40 associations.

The management fees we pay are approx $17,000 per year (~ $460/unit/year). Would also be interested in feedback from others about whether these fees are low, medium, or high.

The management agreement lists the manager's duties, in a brief and generic bulleted list. But it is not specific enough to answer my questions on the following specific matters:

1) For our "annual report", the manager just delivers the year-end financial statements (balance sheet and income statement). In my mind this is not a full annual report. I would be hoping to see things like a narrative about the financial condition of the association. Reports on maintenance from last year, plans for next year's maintenance. Etc. Manager says "board can write a report like that if they want".

2) For monthly dues collection and late fees, manager will send only 1 message per month to each homeowner with a copy of their monthly statement. (the messages are using either email, or paper mail, as per each homeowner's preference). We have asked the manager to beef this up with some additional reminders, warnings, etc to the homeowners who are behind. Manager refuses, says the 1 message per month is their max. He has given conflicting reasons. "our software can't do it" (I call BS - all management software now has email templates!). Also, "we are not a collection agency", and "it isn't worth trying because if someone is a deadbeat, they won't pay no matter how many reminders you send".

3) Our bylaws require that any unit owners who rent out their unit must have the tenant sign an agreement between the tenant and the association, on a standard form, which says basically: "tenant acknowledges they are living in a condo association, they have received a copy of the rules and regs, and agree to follow them". Manager refuses to do any outreach or follow up to track which units are rented, and get them to fill out the form. He says that if anyone submit the form, he'll sign it and file it, but otherwise "not my job". Also manager says he has no way of knowing which units are rented and which are owner occupied.

So, to the more experienced trustees and managers out there... Lazy or Normal?

Thanks!

Hi DeanJ - while in general I agree that the association should not be middle man in tenant-landlord matters, that is not what my docs say. Our bylaws have "leasing regulations" that are recorded at the country deeds office. They state:

"Lessee must execute a written agreement (Lessee/Lessor Declaration) directly with the Trustees of the [name] Condominium Trust under which he/she specifically agrees to observe and be bound by the same."

As an exhibit it even includes a blank copy of the "Lessee/Lessor Declaration" for each tenant to sign.

Are you saying this is wrong? Would you suggest it be repealed/re-written?

One person’s responses

First, take a look at the association’s contract with the property manager (something you and your colleagues should have already done) so you’ll know exactly what the manager is supposed to do. You may think they’re responsible for certain tasks, but if it’s not part of the contract, you’ll either have to talk to them about adding some services or modifying others, and all of that will affect the management fee (and your assessments), so be careful what you wish for.

This also helps answer your second question. Our collection policy states that when accounts have to be sent to the attorney, the homeowner will be assessed a fee the property manager charges the association for sending late notices and keeping track of the account (when the money came in, did checks turn to rubber, how much in late fees have been assessed, etc.)

Once again, your contract should state what the property manager will do – if it only calls for one reminder, you may need to amend the contract to include two or three. Then you can adjust your collection policy to state homeowners will be responsible for those fees (can’t remember what we call ours), the late fees, the unpaid assessments and the collection costs the attorney will charge the association to pursue the debt.

You can list out an example of how much this can cost the homeowner if they don’t deal with it quickly – that might motivate the late payers to straighten up. PS: if you’re not already doing so, post your collection policy on your community website, if you have one and send homeowners the current policy every year with the annual income/expense report.

If your manager is too busy or lazy (or both) to come up with a form letter/email for second or third notices, perhaps the board treasurer can come up with something – you’re correct in there are many examples one can look up Google and adapt to your community’s needs. Get those examples to him and tell him to start incorporating them within the next 30 days.

This would also be a good time to remind homeowners of the due date, late fee assessments and when the account will be turned over to the attorney and that THEY’RE responsible for keeping the association updated on their current addresses, phone numbers, email addresses, etc.

Jumping back to your first question, the association treasurer should be presenting the story behind the annual report. In fact, all board members should review the numbers themselves so they understand what they mean because that’s part of their fiduciary duty as board members. It’s ok to ask the property manager about certain line items – perhaps an expense was placed in the wrong category. If you see lots of things that don’t make sense and don’t get an answer that is more nonsensical, it may be time for an audit (another thing associations should do periodically)

Assuming the numbers are accurate, the annual report (which the treasurer could draft with input from the rest of you) should discuss things like: how well did you stay within the overall budget? What line items increased faster than expected and why (e.g. more snow may have busted the snow removal budget)? Is it time for your five year reserve study (remind homeowners what they are, how the board uses it to prepare future budgets, etc.)

Finally, the rental issue – one that really irked me for the 10 years I was on my board because we also had trouble keeping track of who rented. There are dozens of conversations on this website about the matter and a variety of approaches, such as rental caps, which usually require amending the documents, and that requires a certain percentage of homeowners to approve. You can look at a few for more information, but if you have questions, bring them back to this conversation – lots of things may have changed between the time the subject came up even three months ago.

All of that said, since your documents require a copy of the leasing agreement to be filed with the association so you can check for that language, you may need do some sort of annual census of sorts to see who lives where. You might start with reviewing the owner records to see if the mailing address matches the condo address and send those homeowners a letter asking for clarification. Remind them of that section of the documents and give them a deadline (30 days) in which to file the paperwork. If they don't, you may need more evidence to show that the owner isn't living in that unit if you're going to take legal action. You'll also need to decide how far that will go because you will hear the "I didn't know that was a requirement" or "you haven't enforced that in X years, so it's no longer valid", etc.

In fact, start with a conversation with your association attorney to determine the best way to proceed, because if this hasn't been enforced in several years, you will run into trouble if you try to enforce it now. Your attorney might suggest that you start with some sort of owner survey to get a line on who lives in the community. You can always give a grace period to give people time to comply and let them know effective next year, there will be more enforcement, so here's what owners are expected to do and what happens if they don't.

As a practical matter, explain that the association needs this information so you know who to contact if there are complaints about noise, parking, etc. Owner-landlords should understand that they are ultimately responsible for the conduct of the people who live in their unit, so it would behoove them to give them a copy of the rules and write into the leasing agreement that they're responsible for full compliance with them.

Back to the property manager - after talking to the attorney and reviewing the property management contract (again), determine what you want the manager to do, if it's already part of the contract, and if not, what you're willing to pay for. Remember, the property manager may be responsible for the daily tasks, but the BOARD is responsible for the overall management of the association and the property manager works at their direction. Therefore, it’s the board’s responsibility to figure out the best way to address the rental issue in your community and you may have to try different things to see what works or not. To wit, there may need to be a rewrite of that requirement of your documents to incorporate Dean's suggestion about requiring notification whenever an occupant isn't the owner of record.

In short, the primary answer to your question may be somewhere in the middle, but you’ll need to start with what you’re paying your property manager to do – and if you’re willing to pay more to get him/her to do what you want. If they don’t have the resources to do those things, you’ll have to decide what’s most important and how this will impact assessments.

Finally, it doesn't matter what community A pays in management fees vs. you or community B, because you don't live in those communities. Determining what's too high, low or just right might work in Goldilocks and the Three Bears, but in HOA land, what you pay depends on the going rates in your area and the makeup of your community. Just because community A pays $10K vs. $35K for community B doesn’t mean community A is in good shape. It may be one community has more amenities than the other and all of them cost more to maintain (which is overseen by the property manager). Simple math also says that the larger the community, the easier it is to spread the expenses out.

If management company states maintenance project 1-8 will be completed in 2026 and the budget will be as sound as Fort Knox does it make it so.

The annual financial statement is an historic representation of facts. It is the board’s responsibility to establish the budget which will fund what is going to occur in the future. It is also the board’s responsibility to communicate and promote those plans to management and the owners.

I agree with your manager.

The Treasurer, who should also be spot checking the financial work of the manager, would be the one to provide a write up of the financial health of the Association.

The Treasurer could do a maintenance report or, as in my last Association, we had a maintenance officer who would provide the report. We also had a calendar of expected maintenance (mainly based on our reserve study). This allowed the Treasurer to be more informed when providing a draft budget for the Board to approve.

Our attorney advised us that all things financial should be sent via us mail vs. email. Sending additional notices via the mail costs additional money. We would only send out late notices once a month. Mainly because of the time required in mail being sent and payments being received. That said, if you want additional reminders, write it into the contract the following year.

I disagree with the inability of the manager to identify which units are rented and which units are owner occupied. The membership list tells you that (where is the mailing address for the owner? On property means owner occupied. Off property most likely means rented).
With that said, I think having such agreements signed are a waste of time. Most governing documents specify that the member is responsible for their family, guests and tenants to comply with the governing documents. If the renter is a pain, the Association goes after the owner. If the renter is a big pain the Association calls the police on the renter and goes after the owner for the actions of the tenant. This makes such a statement from a renter feel good paper work. You feel good that they signed something but it doesn't change anything. If you think it should be the job of the manager, add it to the contract for next year.

Regarding your question: "So, to the more experienced trustees and managers out there... Lazy or Normal?"

I don't think you will like my answer. Based on what you provided, I think the managers action is normal. I think it's the Board/Officers who are being lazy and expecting the manager to do everything. Officers can delegate tasks to the manager but the Officer is still responsible for those tasks to be done and for providing information to the Board so the Board can make informed decisions.

Tim

Some managers are very good at making suggested observations the board can consider to make the community better. Others only do what the contract says and nothing more because going beyond that got them into trouble. Some took advantage of the association - board members don't always know the ins and outs of running a HOA and let the property manager do all their thinking for them. Others are new to the job and haven't been trained- or tried to object when the board wanted to do something completely against the law and/documents and got hammered.

I don't know where your property manager falls, but maybe it's time you found out. But first, it may be time for you and your colleagues to check yourselves. Are you being clear in your instructions? Are people running back to the property manager with "THIS is what you do - never mind the others or what we voted on - they don't know what they're talking about." How many of you actually read your documents so you understand YOUR duties and what the association is supposed to do?

If you have new trustees, a little training could help - and the oldsters could benefit from a refresher. I always recommend going to the CAI website and buying a few of their educational materials on a variety of subjects like collection policies, care and feeding of property managers, reserves, rules enforcement, etc. There may be local chapters with training seminars and you get to network with other HOA board members to exchange ideas and horror stories.

Then a heart to heart with the manager is in order. Everyone gets to speak and the rest should shut up and listen. It may be the rest are happy with the manager and the misunderstanding is yours - or they'd rather let the property manager figure things out so they don't have to.

As I said earlier, the board's job is to figure out the best way to manage the association's resources. If board members can't or refuse to apply careful thought to the issues and take the position seriously, they should go home and let someone with a better work ethic and willingness to learn and ask questions take over.

When the air is clear, you can come up with a better understanding of what the manager is to do and you can be more specific in what you need. It takes time to develop good working relationships so all of you should give each others and yourself especially some grace.

I think your thinking is on the right track, so it may be you will be the catalyst to start the changes. Keep reading current and older conversations on this website to pick up ideas and warnings(!) on best practices you can adapt to your community. Good luck!

PS - it's one thing to ask other HOAs about their property managers and what their experience has been if you're thinking about making a change. But get off this "I wonder what communities A, B, C and D pay." All of you are different and since you don't live there anyway and what they pay won't affect you, spend your time and energy focusing on making sure your association gets the biggest bang for their buck.

There is a real difference in the scope of work for a part-time "portfolio" manager of a condo association and a full-time property manager. It appears you have a portfolio manager who also manages other associations.

I agree with others that it is not the job of the property manager to give a state of the finances each year UNLESS that task is specifically outlined in your statement of work on the management contract.

The easiest way to fix the issues you are having is to revise that statement of work. Outline exactly what you would like to see (how many letters sent, when, other tasks not being done) and get a new price from the management company. If they aren't willing to do what you want, then you may have to bid out the contract - but be very specific.

We have a full-time property manager that does all the things you spoke about (and more) except give a financial health report. However, we pay his salary with a 29% upcharge and a monthly fee that pays for the financial system. Our condo sub-associations all use portfolio managers. Their managers don't even answer the phone - you have to leave a message and they get to it on the one or two days a week they devote to that association. Their managers deal with 10 or more associations, so while it may not seem like much to you for the manager to send an extra collection letter, to a busy property manager it is a big deal.

I also agree with others that you need to use your attorney or a collections agent if you have overdue assessments. Have the board make a policy and set a threshold for when the account gets sent to collections. It may be only two or three months - but if someone has not paid in two or three months you have a problem that can quickly escalate. Better to get it early and a collections attorney can send letters, place liens and set up payment plans. They are worth every penny because fair debt laws are very complex.

In my last Association we had monthly payments. As Treasurer, and with permission from the board, our first missed payment would waive late charges if the account was brought current by mm/dd/yyyy. However, if the individual was habitually late, we would not waive the fees.

We would also always include the following paragraph:

There are many reasons why your account balance could be incorrect, including an error on our part. We ask that you please check your records to determine if you have made payment. If your records indicate that you have paid these assessments, please contact abc at xxx-xxxx or email

When you get paid from an employer do they state there could be many reasons your pay check may be incorrect, which could include an on our part and contact us if we goofed it up?.

This is an important HOA function. Whoever is in charge of the HOA books is responsible the owner accounts are 100% correct all the time. Even if the person sent a payment, that doesn’t mean the HOA received it.

I think contracting for condo association management services is so different from contracting for a slice of chocolate cake that there is no comparison.

I think the best thing your board can do is go through the bid process with a few management companies. Also you can contact condominiums in your area and ask the manager if he/she would care to share the management fee per unit et cetera.