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Dealing with D&O
Enforcing House Rules
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What is a Management Company?
What Your Manager Should Know
Self-Management: Risky Scheme?
Why Bother to Budget?
Review Your Record Keeping
What Are You Getting for Your Management Dollars?
Article: What is a Management Company?
By: Alvin Wasserman
From Habitat Magazine
Alvin Wasserman is director of Fairfield Property Services in Commack, N.Y.
Since there are no licensing requirements in New York State to manage Condominiums and Homeowner Associations, and cooperatives only require a Real Estate Broker's License, how can boards and owners know they are getting professional management?
Anyone can create an advertisement and announce that, "Today I am a property manager." So-called property managers are jacks-of-all-trades and masters of none. Without proper qualifications, they are hired at discount prices with the notion to "save money." It is remarkable that millions of dollars of assets are entrusted into the hands of an amateur, or worse, someone who has limited or no experience with financial management or property management. Mistakes are made at the expense of the owners they represent. In many situations, it is a disaster waiting to happen.
The differences between management firms are startling. One reason for the differences between management companies is the cost of professional management. You cannot do the job right at a discount price. A legitimate property management company has accounting and financial staff with established systems of checks and balances that protect owners from misuse of funds. The professional management company has property managers with years of experience in construction, renovation, repairs, and maintenance. Financial and management personnel participate in continuing education at staff meetings and seminars. Experienced financial and management personnel are applying tried-and-true solutions to the challenges they face daily.
Maintaining accurate records is of the utmost importance. Records document financial and maintenance activities at a property. They are important to the life of a property as medical records are to an individual. We trust doctors to maintain our medical records according to regulations. In private industry, there are no regulations to require property management firms to maintain records in good order.
Quality record keeping includes the following components. Accounts payable files are segregated by vendor to include a purchase requisition, invoice, signed delivery receipt, and back-up copy of the check for every order. Accounts receivable is updated daily via a wide area network directly connected to the bank. Accurate cash balances are available at all times. Individual unit files are established to contain every correspondence and transaction with residents.
A professional management company has a purchasing department to competitively bid goods and services on an ongoing basis. Orders are placed with a signed purchase requisition. Invoices are approved with a signed delivery receipt and copy of the purchase requisition. The invoice must match the quoted price on the purchase requisition, and the amount of goods signed for on the delivery receipt. Only when all of the internal controls are correct, is a check issued.
Professional management includes a paralegal on staff to act as liaison between boards and their attorneys. The paralegal coordinates closings for cooperatives and monitors all legal activity at condominiums, homeowner associations, and cooperatives.
The professional property manager has expertise in property maintenance and is a team leader to coordinate other professionals on the management team. The professional manager is coordinating the services of certified accounting and finance, purchasing, and paralegal staffs to meet the goals of boards and owners.
All property management activities culminate in the presentation of a monthly management report. The report is presented in a binder divided into major headings. The manager leads the Board through a financial report, legal report, correspondence, and miscellaneous items including contractors' proposals for work to be performed at the property. Boards can easily review events in the life of the property over the past month and fulfill their true function as a decision making body.
The gap between professional management and pseudo management is huge. Fairfield Property Services is in favor of licensing requirements that would help to eliminate unreliable management companies that give the industry a bad name, and to educate the public about professional management.
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