PRIMER: MANAGING AGENTS, P.2

Extra fees. One concern of new boards is extra fees. Every management company has schedules of additional fees, some paid by the individual owners (transfer department/sales, refinance sublet), others by the co-op or condo (issuing annual window guard forms, and 1098s, for example). A lot of the fees cover costs that are not encountered by every property, so they are not included in the base fee.

Bidding. It is the function of the managing agent to determine, through competitive bids, if the board is getting the best quality for the prices it is paying. When a board is dissatisfied with some of its vendors and contractors, it's the agent's job to secure competitive bids to replace them. It is not necessary to competitively bid every service; aside from exceptions for emergencies, a board may also have "price cutoffs," in which bidding only stars on jobs costing more than a predetermined amount.

All management companies have contractors with whom they have had experience. If contractors provide quality work at a fair price, they will earn a place on an approved list to call for proposals. There is never a requirement to use a contractor recommended by the managing agent.

The agent should be available to provide professional help any time the board decides to check prices or make changes.

Back office. A visit to the management office is the best way to learn about the organization supporting the manager. Boards sometimes hire managing agents without proper qualifications at discount prices with the notion that they are saving money, but when mistakes happens because of inexperienced agents who have had limited experience with finances or property management, money is not saved and resources are wasted.
Maintaining accurate financial and maintenance records is crucial to the life of a property. Quality record-keeping includes

• accounts payable files segregated by properties and vendors
• accounts receivable updated daily
• precise cash balances available at all times
• owners' unit files, containing every transaction with residents.

A professional management company has a purchasing department to competitively bid goods and services. Orders are placed with approved and signed purchase requisitions. Invoices are matched to signed delivery receipts and copies of purchase requisitions. Invoices are reviewed to confirm that quoted prices on purchase requisitions and quantities on signed delivery receipts match.

An insurance-compliance department should verify that contractors' insurance coverages is in effect.

Checks should be issues for payments only when all internal controls have been confirmed.

Professional management services include a paralegal/closing coordinator to monitor legal activity. The closing coordinator also manages sales and sublets.

Monthly report. All property-management activities culminate in the preparation of a monthly management report. The managing agent can guide a board through the report by presenting the financial report, legal-status report, review of correspondence and contractors' proposals. Well-informed boards can fulfill their true function as a decision-making body.

In the end, the board that takes the time to learn about the role of the managing agent and their property will have made a worthwhile investment. All too often, the "board of directors" becomes the "board of workers" because the management company it hired is not able to meet its needs.
 
Alvin Wasserman is director of Fairfield Property Services.

Illustration by Liza Donnelly 

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