When a Manager Calls It Quits

Gerard J. Picaso believes in long-term relationships. The president of an eponymous building management firm in New York City, he’s served some of his clients for more than 25 years. But recently, he ended a contract with a co-op after barely eight months, giving the board four months to find a new agent. “Several board members begged me to reconsider, but I told them it just would not work,” he explains.

The incidence of such terminations is fairly low; companies don’t like to drop accounts, or publicize it when they do. And they won’t name the co-ops and condos involved. But Picaso is not the only one to admit walking away from an unsatisfactory situation. “I’ve done that,” says Fred Rudd, president of Rudd Realty. He estimates that he’s left 10 to 15 buildings since 1984, the year his New York-based firm was founded. “The biggest reason is when they’re not cost-effective,” he explains. “Some buildings are so demanding, but unwilling to pay for your time. We do it until we wake up one day and say, ‘This is crazy.’”

Conscientious board members who find themselves bereft of an agent are similarly distressed. “He quit on the phone with me,” says Angela Dona, freshly deputized co-treasurer of the Caton Stratford, a 32-unit Brooklyn cooperative that lost its manager of nearly two years in September. She’s still a little shocked by her conversation with the company’s president. “He said, ‘It just isn’t working out.’” Indeed: it’s probably not coincidental that managers resort to a popular breakup mantra when they’re cutting themselves loose. Like an unhappy spouse, they don’t want to wrangle with a partner over the grounds for the divorce. They just want to get out, fast.

The reasons vary. Inappropriate behavior provoked Picaso’s departure. Originally, he had hoped to establish a “rational, sane relationship” with the client, a large established co-op on the Upper West Side. He wasn’t deterred by its notoriety as a difficult building with an intrusive president who was allowed to dominate the proceedings. Alas, Picaso didn’t get very far.

“We were inundated with e-mails from the president about everything going on in the building, giving us advice on how he wanted things done,” he recalls. “All correspondence, including the minutes, had to go through him. Anything he didn’t care for or approve of was either not disseminated to the board or changed to suit him. The final straw was his call to me to not go ahead with a security system the board had voted for unanimously.” Picaso’s advice to board members who want to avoid this kind of scenario? “When you hire people to do a job, you must let them do the job,” he says. “I had discussions with several board members who said they knew what was going on but didn’t have the strength to change things.”

Equally impossible, says Rudd, are the buildings in which board members want the agent to provide services – at no extra charge – that exceed the scope of the contract. “When a building was refinancing, we said we could provide the mortgage-brokering, charging one-half of one percent,” he says. “The sponsor said he would give them a better rate. The building still expected us to do the work, but not be the mortgage broker. We said, ‘You pay them, you do the work.’”
Another way to alienate an agent, says Rudd, is to reject professional recommendations concerning shareholders’ safety. Full-service managers will address anything from engineering issues to insurance coverage; they can’t afford to associate themselves with buildings that cut corners and put people at risk.

For its part, the board cannot suspend its collective judgment and assume that the building is running properly. Officers need to pay attention. If board vacancies arise, they should be filled promptly; operating without a full slate is a bad idea, as shareholders learned at the Caton Stratford. “Our board did not have a treasurer for at least eight months,” says Dona. In the interim, errors, including multiple invoices to the same vendor as well as an apparent deficit, went unchallenged in the financial reports. Then Dona and her husband, who had agreed to share the treasurer’s job, began going over the books and verifying every disbursement – steps that precipitated the manager’s exit.

Now the Caton Stratford is in limbo, managing itself until the new company it selected can take over. “We hired our own super and we’re going to buy our own supplies,” Dona reports. “We changed our locks ourselves.” What did she learn from her experience? “You have to be attentive and ask a lot of questions,” she says. “The management company is going to do what’s in its own interest.”

The president of the Caton Stratford’s former manager, who would not comment on his company’s role at the co-op, says, “Our business is a complaint business. People become very adversarial; everyone blames someone else. If a board changes, and new members question things, they’re questioning the previous board.”

Of course, agents may leave a property for reasons that are completely unrelated to the conduct on either side. Officers at several buildings report that they lost their manager after the management firm was bought by another company. Co-ops and condos can also find themselves drifting when their manager leaves the residential side of the industry, goes out of business entirely, or, even, gets indicted on racketeering charges.

Ruth Shoenthal, veteran board member of 127-129-131 West 96th Street in Manhattan, where she is now the treasurer, has seen all of the above. A former garment industry executive who became a co-op and condo manager in her own right, Shoenthal has come up with strategies to help her cooperative weather unexpected shifts. “I keep a separate set of files under lock and key,” she says. Therefore, she has been able to present incoming managers with a complete paper trail: mortgage, offering plan, house rules, monthly reports, and audits. The co-op’s lawyer, whose tenure there stretches to nearly two decades, acts as the transfer agent and keeps the stock certificates and proprietary leases, so sales are not delayed by managerial changes. In addition, Shoenthal follows real estate columns, which can alert her to impending developments that could affect her building. “I read the management transitions pages in Habitat and the Cooperator,” she reports.