Property Management Issues
So, You're Thinking of Switching Management Companies?
From the Summer 2020 issue of the CCI Toronto Condovoice Magazine.
Is a Change the Right Choice for Your Community?
The right management company is a very important choice for a condominium community. Your managing agent is the face of your community – with owners, residents, contractors and professional service providers. They are also responsible for ensuring that your operations run effectively. Making the wrong choice in service providers can have a real negative impact on your community and can prevent your condo from running smoothly.
Ultimately, the board and owners in the corporation need to have confidence in the ability of their management company and assigned property manager. There needs to be mutual trust and respect in the relationship.
In my career, I've seen this respect and trust break down for a number of reasons. Sometimes, it is best for both the condo and management company to part ways in favour of a better relationship fit. Let's explore some of the challenges that can be worked through, as well as some necessary considerations in making such a big change.
Working It Out With Your Current Provider
The current condominium management market is a challenging one. Statistics released by the Condominium Management Regulatory Authority of Ontario (as of January 6, 2020) tell us that there are only 1,641 general licensees in the condominium market a number of whom are working in "supervisory" roles. It is estimated that in early 2019 there were 11,300 condominium corporations in Ontario (and growing every day). The math is simple – there is a shortage of managers and all management service providers are drawing from the same pool of talent. Armed with this knowledge, ask yourself as a Board if whatever is driving you to dissatisfaction (and a desire to change service providers) is worth the risk of jumping into an uncertain market. Will your next assigned manager be better or worse than what you have? What's the old saying: the grass isn't always greener on the other side?
First, consider instead if there are ways that the relationship can be improved to mutual satisfaction. Consider the following:
1. Have you had a direct discussion with your manager about areas for improvement? I don't mean to say "your manager's supervisor". I mean speaking to your manager directly, as a real person, to respectfully detail the areas where improvement is needed.
2. If you have spoken to your manager directly, escalating to the supervisor is the next logical step. Is there a change at a company level that will assist the manager in ensuring your needs are met?
3. Should you consider mandatory mediation under section 132 (1) of the Condominium Act, 1998? It's often overlooked that management agreements are subject to mediation/arbitration under this section of the Act.
4. Are your expectations reasonable (see below)?
Are Your Expectations Reasonable?
Property managers are tasked with managing sometimes complex business operations, large operating and capital budgets, major projects, compliance, and communication needs. It is necessary to have broad expertise and skills and to manage the needs of the client often with very little resources available.
Because of this it is not reasonable to expect your property manager to be an expert at all things. Rather, you should look at their skill sets and ask yourselves if they are fulfilling the needs of the corporation using best efforts and achieving results. Management companies help to fill the gaps but understand that senior representatives (such as regional managers) often oversee a large number of properties and can't be everywhere at the same time – escalated support should come with reasonable time frames attached. Be aware that those working in supervisory roles are spread thin because of the low cost of condominium management services in the market. Also be mindful that when disaster strikes, you can't expect business as usual. Politics and major damages will take up a large amount of time. Help your manager prioritize what's important to you.
Maybe your property manager excels at communication and people management but may not be the most effective at coordinating major construction projects. As a board, you should think about what resources might be needed to make sure the manager has the tools available to them to operate successfully. Discuss those thoughts in board meetings so that action plans can be established increasing your likelihood of success.
Further, if you have a specific expectation as a board it's important to simply say so. If you as an individual director have specific needs relating to organization of information to make the right decisions say so in advance. Don't expect your manager to simply know what your needs are. Crystal balls are not standard issue to managers.
Finally, property managers are human beings. No one person is perfect. Be reasonable when minor errors occur. Expect that when there are missteps the accountable person should acknowledge the error and takes steps to correct it (and prevent recurrence). If your Board is routinely changing management companies or staff members, look within to see where the issue lies. You might make the wrong choice in provider once, but if it is a routine occurrence your expectations probably fall short of reasonable and respectful.
The Hiring Market
As reviewed earlier in this article, all condominium management providers are facing a shortage of qualified managers and are drawing from the same pool of talent.
There are a number of limited license holders working on their education and experience to achieve their general license. As this happens, the number of general licensees will increase – helping to alleviate the ongoing shortage. The market is ripe for new condo managers and I hope that this will increase interest in the occupation for excellent candidates.
But beware, not all general licensees will be experts in the field. Consider that if you manage one property for two years (achieving the experience requirements for the general license) you will have seen probably only two owners meetings, two budgets, and one capital project. Expertise comes with many years of experience and missteps.
You also can't expect a management firm to bring you multiple potential managers to interview as a board. There are a few reasons for this:
- There are limited qualified persons providing condo management services. Not all of them are on the job market currently. There may only be one suitable candidate at the time your corporation is looking.
- The employee/employer relationship is between the company and the manager. Management companies have to be careful in the interview process to ask the right questions and treat the candidate appropriately. I have seen Boards ask inappropriate questions to potential candidates. I have also seen Boards reject good candidates for bad reasons.
- Entering into a relationship with a management company needs to be based on mutual trust. Do you trust your selected firm to bring you the right candidate? If you don't, you may need to rethink your choice of provider.
How to Select a New Firm
With all of the above considered, if your community still needs to look for new management I have the following suggestions. These are based on my exposure to many condos in transition. I've seen it done really well, and really poorly.
- 1. Review the terms of your existing agreement. Specif ically, you should be clear on your termination obligations but as well consider what worked well in your existing contract and what didn't.
- Identify a quality standard. Are you looking for the best price or the best service?
- Pre-qualify a minimum of three management companies. Make sure their service level is in line with what you've identif ied as acceptable. Be honest about your expectations and challenges when vetting potential managers. That way they can truly understand your needs and you can get real information about how they'll help you moving forward.
- Collect proposals via sealed bid. Your RFP does not need to be overly complex but should have a requirement for the information you need to make the right decision.
- Interview at least two firms.
- Verify the licensing and insurance of the chosen firm.
- Enter into a written agrement to start in line withthe notice to be provided to your existing manager.
I would caution boards against terminating first and then selecting a new firm. A short timeline limits a successful transition. 60 days is ideal. Exceptions should be made only with a very good reason.
Change Management – Communication
You've decided to change and now you need to tell your community members. Each situation is a bit unique and depends on the perception in the community about existing management. I would suggest discussing a communication plan with your newly selected provider – they will have to work long term with the result of the communication!
At all times, try to remain respectful of your existing manager. Business relationships can end and we all need a reminder sometimes to think of the unintended impacts it can have. Throwing stones and playing blame games is very rarely constructive. Focus your efforts on positive improvements and your whole community will benefit.
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