While the majority of Garden State condo communities and HOAs choose to partner with professional management firms to provide guidance and counseling and oversee day-to-day operations, other boards take the reins themselves and choose self-management. Choosing to go the self-managed route can be a tough decision, and it’s one that is best made by taking the characteristics—and character—of the co-op, condo or HOA itself into consideration.
Why Go Solo?
Sometimes the decision to self-manage simply comes down to the size of the community. For smaller buildings, self-management can make economic sense, ensuring that the building’s residents are getting the most bang for their buck. Smaller associations may not have the funds for a full time management firm, says Gary Mindlin, owner of Top Hat Home Services, a boutique management firm in New York City. Or the board members may feel “We have the expertise, and we only collect four checks a month—so why are we paying a company to do the job? “At that end of the market, cost becomes more important, and it’s harder to provide added value at a lower cost.”
Self-management can be a good fit, too, when members of the community have certain skill sets and experiences to share, and/or solid relationships with vendors and service providers. Board members may have financial, legal or other applicable experiences, such as qualified engineering skills, that may prove valuable in the management of a co-op or condo building. Those skill sets can cultivate an added sense of well being when considering the jump to self-management. "About three years ago, we made the decision to go that route," says the in-house manager of an active adult community in Monroe Township. “Our golf course was always managed by a management company, but since we have a talented pro and a talented superintendent and a talented comptroller, we have taken it in-house and we have saved a great deal of money by doing that and we have been successful. We have all the financials, our superintendent takes care of all of the chemicals and our pro takes care of the pro-shop and so on. It's all being done in house.”
In addition to all that, another part of the appeal of managing oneself has less to do with money and more to do with community, regardless of size. “Most management companies would not be here on a full-time basis,” says Domenick Lorelli, former president of the Senata Bayclub, an adult community in Bayville which has been managing itself since 1993. “There are two big benefits to self-managing: the first is that it's cheaper, and the second is the accessibility and you know the people personally. A property manager is here only on a part-time basis. So you don't have access to any answers or solutions to your questions or problems until they are on-site. Whereas with self-management, the people live here, and they are on site everyday of the week. They can be available to talk to, or if you have any problems you can come up here [to the office] and have them handled the right way.”
As much as self-management may appeal to a community and its residents, there are some inherent challenges that may arise by going without professional guidance. One of those challenges is ensuring that the individuals volunteering their time to manage the property are realistic about the amount of work and commitment involved in the proposed effort. “It takes a lot of time and knowledge," says Mindlin, "and almost always in the building someone says, ‘I have the time and knowledge,’ but almost always, they don’t."
Other pros second this.“People may think, ‘I’m a lawyer or an accountant, and I have skills,’ which is true—but they may not understand the amount of hours involved," says another manager. "Who is going to respond when a water pipe bursts in the middle of the night? Normally, it’s the managers. Which volunteer is going to handle it?”
An over-55 community might have residents who are retired, and prepared to devote more time to administrative work on behalf of the association, but it can be much more difficult in buildings where the majority of residents are still working full-time. A volunteer role after working hours is a lot to think about. “You can go from very trivial problems to the catastrophic, but it’s the smaller issues that can be most troublesome,” says the manager. “Who’s going after the late fees? When someone complains that ‘so-and-so’s dog is pooping in my yard,’ who is going to take care of that? You don’t have the manager as a buffer anymore.”
In the case of larger buildings, size can be prohibitive when it comes to self-management, says attorney Steven Troup, a partner at the Manhattan-based law firm of Tarter Krinsky & Drogin LLP. “Larger buildings are typically not self-managed, although some are. They have a professional manager who is a building employee and who has been well trained before going in-house.”
When larger buildings are considered—say, those with several hundred or thousands of residents—a professional management firm absolutely makes sense, says Lorelli. “I would think self-management works best in a smaller community. We're about 312 homes, but my own personal feeling is that up to 400 homes you can manage yourself. Once you get beyond that, it becomes a real full time job, and you can't handle it—whereas if you are small you can handle it.”
In small communities, trying to manage those seemingly small conflicts can lead to much larger headaches. Laying out expectations and guidelines early on and with clarity can help ease these issues. “You have to set guidelines with your lawyer and the building (residents) have to be in agreement because then self-management will go much easier,” says Mindlin. “A lot of the issues that come up are issues that could have been mitigated with clear rules and guidelines. We get pulled into a lot of these inter-owner relationship problems, especially when it involves money. The more guidelines, the more communication, the better. The politics in small buildings can be just as big as the politics in larger buildings.”
The More You Know...
When it comes to self-management, boards also should remember that the job has a learning curve. “You’re not just collecting rent and paying bills,” says Troup. “There are an awful lot of administrative and regulatory issues involved.” For example, various permits must be renewed throughout the year, from boiler to elevator inspections. If those inspections do not happen and if those permits are not secured, “there are fees and then fines if those fees are late,” he says. And those fines and fees can turn into liens on property.
Self-managed buildings also may suffer from a lack of buying power. Professional management firms are usually able to secure better prices than self-managed because professional management firms have much deeper ‘pools’ of professionals to secure bids from.
Another common pitfall of self-management is a potential lack of experience from the individuals in charge. “They need to find out what the scope of their job is,” says Troup. The risk of little to no experience can factor into a wide range of areas in the management of a building, including the upkeep of the physical space. “I’ve seen a lot of shoddy workmanship in buildings because of a lack of supervision,” says Mindlin. “The board does its due diligence and signs the contract but then who’s overseeing the project? For a self-managed building, I have to ask myself, ‘who am I getting to do this work and am I qualified to oversee this work?’ When a building is self-managed, they have to know when to get help.”
Help Along the Way
That idea of outsourcing is an important one for the board members and volunteers working in the trenches. Without years of experience, the challenges of managing can be justifiably daunting, a burden made all the heavier by the fact that this is the place where they, their families, friends and neighbors live and call home.
A wealth of help is available though. Just because a community is self-managed does not mean they cannot turn to outside guidance and advice on a regular basis. A number of services are available “a la carte” for communities looking for guidance, as are educational opportunities.
A number of firms provide monthly accounting help, while placing a trusted and valued attorney on retainer—and speed dial—can pay off in avoiding rookie mistakes. Firms are also out there to help with reserve funds and even board elections. Some management companies can provide a la carte assistance with maintenance, engineering advice, on-site handyman work, project management and upkeep.
Trade shows—such as The New Jersey Cooperator's own annual Expo—are another excellent way for self-managed buildings to make connections with vendors and service providers their building may need in the future, as well as a source of information and education via seminars, demos, and literature. More info and registration can be found at www.nj-expo.com.
Professional organizations such as the New Jersey chapter of the Community Association Institute (CAI-NJ) and the Pennsylvania and Delaware Valley chapter of CAI (CAI-PADELVAL) also provide valuable guidance and education. CAI-NJ and CAI-PADELVAL both offer a number of different courses on association living, management, and courses in the fundamentals and essentials of leadership. Networking and attendance at various seminars also help put volunteers in touch with other individuals in similar circumstances and opens the door to vendors who may be able to provide the kind of services they need for successful management. You can learn more at www.cainj.org or www.cai-padelval.org.
The Best of Both?
Somewhere between the realms of complete self-management and a completely managed experience lies a middle ground, and sometimes that can be the best place for mid-size and small buildings with limited volunteer resources. According to the pros, the key to determining if your community falls within that zone is to look at your operation as a whole—if you're currently being professionally managed, catalog what your management firm is doing on a daily basis, and ask if services can be modified—if perhaps the board can handle some responsibilities while the management firm retains others. It may be a way to bring down costs while keeping volunteer duties reasonable—a win-win for everyone involved.
For buildings and associations that choose to fly solo, it can be done and done well, especially in smaller communities. With proper communication and support among residents and volunteer leaders as well as a willingness to learn and never be afraid to ask questions or seek help when needed, the challenges of self-management can be met. Certainly, the idea of friends and neighbors building a community just for them and living with the wellbeing of their neighbors in mind is an appealing one. And it is a good feeling to know that if anything does go wrong or if the volunteer corps gets overwhelmed, there is always a safety net available in the form of professional property management.
Liz Lent is a freelance writer and a frequent contributor to The New Jersey Cooperator.