For George Yee, assistant treasurer of the 107-unit Estates at Hallet Cove Homeowners' Association in Astoria, life on the board has been particularly challenging. In the past seven years, the building has changed managing agents four times, twice in the past year alone. Trying to track down the co-op's records to turn them over to the newest agent has turned into an odyssey. One company still has the co-op's blueprints, another has some of the payment records, a third has some of the correspondence with shareholders, and the fourth is still waiting for the current set of files to be delivered to its offices.
While Yee acknowledges that the co-op may never be able to find every item in its files, the board has finally learned to anticipate problems with its transitions and, this time around, took the precautionary step of putting the prior agent's final payment in escrow until the transition was complete.
Finding a good managing agent can be a time-consuming job, but boards that think their work is done when they've hired the new company are opening the door to a wealth of headaches.
"The transition process is a very important management change and the board should be on top of it every step of the way," observes Arthur Davis, a co-op consultant. "The reason why you are switching is because someone can provide better and less expensive service and one of the things you ask at an interview process is to describe their transition process."
Boards should be asking detailed questions of prospective managing agents about what they can expect during the transition process - how the company handles it, and perhaps most importantly, what the company expects from the board members during the changeover.
"The transition is not over exactly at the time all the documents are presented. It's a process, and you need to be vigilant about getting in touch with the prior managing agent to put in inquiries to make sure you have all the current information," explains Jack Lerner, vice president of Plymouth Management Group.
Plymouth is one of 35 management companies that have agreed to abide by the transition guidelines drawn up by the Real Estate Board of New York (REBNY) five years ago in order to help buildings make a smoother switch. The guidelines (available at www.rebny.com) include a timeline of when information should be handed over. For example, it details what needs to be given immediately to the new agent, such as the rent roll, the multiple dwelling residence card, the building's federal ID number, and an alternate address listing for shareholders, and what needs to be turned over within two weeks to three months of the transition.
The guidelines also include a list of transition documents that the new agent should have within 60 days, including, but hardly limited to, insurance policies, licenses and permits, the payroll, shareholder files, tax forms, bills, and vendor maintenance contracts.
David Kuperberg, president of Cooper Square Realty, another firm that has adopted the REBNY guidelines, says his company learned the hard way of the need to set up a transition team. About 15 years ago, while the company was assuming control of a building, the previous agent left the country with all the records. Cooper Square had to go to the city's Department of Buildings, and, as Kuperberg puts it, "recreate everything from scratch." Today, the firm has a two-person transition team: the agent in charge of the building and an account executive or vice president serving as a coordinator.
One of the ways in which boards can protect themselves is to either put the balance of the outgoing agent's payment into escrow while the transition is taking place, or keep the outgoing agent on the payroll while transferring the files. Although the latter may be the more expensive route, clients often find that, as long as the outgoing manager is still on the payroll, "you will get a quicker response or a more complete response," says Lerner.
Timing is everything. Before the transition starts, the incoming agent should meet with the outgoing one, and hand over a list of documents that will be needed. The transition should also begin in the middle of the month. You need to give the outgoing agent time to get the information together, says Lerner, and to get the new firm's "real-time" billing up and running. "You don't want to start out at the beginning of the month, because you are swamped with all the transactional stuff," such as collecting rent and paying bills.
Lerner says that if his company is taking over from a managing agent located within the five boroughs, Plymouth will send the new agent down to the offices of the outgoing agent to pick up the files in person. "We choose to do it that way, because it's important to establish a relationship. Face to face is more personable and there is a sense of connection and not purely competition." For a 50- to 100-unit building, there are usually about six or seven boxes of files to be carted away.
"The first things you need to get obviously are the accounting issues: the rent rolls, the arrears report, the payment information, the tax ID number, copies of the most recent bank statements, because you need to know where the money is," points out Mary Hack, a managing agent with Blue Woods Management, which has also adopted the REBNY transition guidelines.
Many times, when agents are leaving a building, they lose interest in helping, and getting a complete set of files can be time-consuming. Sometimes it's a small matter, says Hack, such as a money market account that gets overlooked or doesn't get transferred. Other times, it becomes more problematic: "I've been in managing agents' offices when they didn't know where their files were. Some files were in one drawer with another property. It was just ridiculous."
Her advice to boards is to get a copy of the management checklist and go over it with the new agent. That way, the board members will be up to speed on the transition and may be able to help locate files faster.
Don Levy, director of management for Lawrence Properties, which has also adopted the REBNY guidelines, believes boards should be involved earlier. Even before co-ops or condos decide to make a transition, they should be sitting down with their current managing agent and making sure that the agent has all of the critical and basic co-op or condo information
Says Levy: "One of the real problems is no matter how carefully you set up your management transition team - making sure all the important documents are there - there are frequently situations where properties may have multiple transitions and the former managing agent doesn't have most of the basic documents."
Boards shouldn't wait until the last minute to start making inquiries about the status of their files, because once an agent is fired, he or she is going to be disinclined to spend time going through the documents to make sure they are all turned over to the new agent. And even when people are being diligent, problems arise.
"We had a large 200-plus unit cooperative that was in the process of being transferred to us and a group of management staff members carefully culled out all the original proprietary leases and set them aside for filing," says Levy, "and a particularly industrious employee came by and decided that was the shredding pile and shredded all of the proprietary leases for each apartment." After that, there was "a good deal of scrambling" to get copies to reestablish the files.
Gregory Carlson, excutive director of the Federation of New York Housing Cooperatives & Condominiums, says that board members should give the list provided by REBNY to the new agent before they assume control of the building. Then, says Carlson, the board members should take all the documents that are part of the co-op's history - the proprietary lease, bylaws, house rules, certificate of incorporation, and minutes - and either keep them in the building or in an easily accessible storage facility. That way, the board of directors will be able to access the files whenever they need to and won't have to worry when the building switches agents. Other management company executives agree it is a good idea. "Agents love to get rid of their paper," points out one executive. "It frees the cabinet up for the next account."