You are a Board Member at a Community Association.
You are not happy with the level of service you are receiving from the Property Management Company, but you are a volunteer. Normally, your Property Manager handles soliciting bids and getting proposals, so you don't know where to look, or where to start to find a Property Management Company.
This article will guide you with resources as to where to look, important dates to remember, and some key points to negotiate into your Property Management Contract.
Did You Know…
78% of Condominiums, Homeowners Associations, and Planned Communities are on a calendar year budget.
Out of these 78%, most of the Management contracts expire at the end of the calendar year (December 31st).
Most Management contracts require a 90-day cancellation in writing, often by certified mail, prior to the expiration of the contract (September 30th deadline for a December 31 contract expiration).
If the Management Company does NOT receive cancellation on or before September 30th, your Association may automatically renew into another contract term (1 year, 2 years, 3 years, or MORE!!!)
But My Management Company Has Managed Our Community Forever.
It is great to have tenured clients. They become the bread and butter of any Management Company. Loyalty to a Management Company is awesome, especially if you are receiving the service you desire.
But, is your Management Company as competitive as they should be in pricing, or has your community been subject to increasing Management fees year after year…at 3-5%?
Look at this example: Community 1, year 1: $20,000 contract
Year 2 at 3%: $20, 600
Year 3 at 3%: $21,836
Year 4 at 3%: $22,491
Year 5 at 3%: $23,165
Year 6 at 3%: $23,860
Year 7 at 3%: $24,576
Year 8 at 3%: $25,313
Year 9 at 3%: $26,073
Year 10 at 3%: $26,855
Year 11 at 3%: $27,661
Year 12 at 3%: $28,491
Year 13 at 3%: $29,345
Year 14 at 3%: $30,226
Year 15 at 3%: $31,132
Yes, cost of living increases. Managers also deserve a raise. But is 3-5% annually fair, year after year?
If after 15 years of property Management, you can say that your Management Company is:
X Raising the Bar year after year
X Continues to provide excellent customer service (great response time)
X Finds ways to save money
X Suggests improvements for the community to increase property values
X Protects property values
X Ensures proper maintenance is completed in common elements
X Ensures the community is well maintained (homeowner responsibilities …little to no
X Finds a way to reduce paper and help the environment
X Continues to increase and adapt to current day technology, while being attentive to
those who are not able to communicate electronically…
Then, you are absolutely correct in continuing to renew your contract. That is the level of service that you want, that you should receive, and that you deserve.
Are You Receiving Totally Awesome Property Management Services?
I was at a potential client interview the other day. I asked the Board of Directors what they were unhappy about and why they were looking for a new Management Company.
“Well, I gotta tell you. It’s like we are married.”
I looked at them, and replied, “Ok….”
“You know the difference between when you are dating, and when you are married? We want a property Management Company who continues to court us and doesn’t fall too comfortable or complacent just because they have had our contract for a few years.”
And sadly, that’s how the story goes all too often.
Management Companies will provide the best sales, place their best Manager to be your Property Manager, and then poof. The Management of your Association is dependent on the ability of the Property Manager to sink or swim…
If they swim, you may keep the manager for 1-2 years.
If they sink, you may have another manager every year (or, even 7 managers over two years).
You may know who the supervisor on the account is if you complain enough, and otherwise, you may not even know their name. More importantly, they probably don’t know your name.
And Senior Management? Do they know your name? Do they know your community? Have they ever visited your community, or come to a meeting?
It shouldn’t matter how big or small your community is. Every client matters. You deserve the level of attention that makes you feel wanted and special --- beyond the honeymoon period, and outside of contract renewal time. You shouldn't matter just in the beginning and when they might lose the contract; you should matter, all the time.
Stop the Auto-Renewal.
Almost every Management contract I have read, indicates that there is an auto-renewal if the Board does not provide notice of cancellation 90 days prior to the renewal of the contract.
This auto-renewal can be good for the Management Company and the Community, in that continued services are provided if either party drops the ball about extending the contract. It is not necessary for a Board to receive multiple quotes if they don't have an interest in changing Management Companies, either. Why fix what is not broken?
But to me, Auto-Renewals from any provider – Management, landscaper, snow removal, etc. are a way to “trap” the client (that’s you), into continuing the relationship.
“Well, you didn’t provide cancellation in terms with the contract, so you are stuck with us for another year [or three…or five]”.
And yes, I have heard that line from senior Management at Management Companies and Contractors on more than one occasion.
Ask yourself this: Do you want to be stuck in a relationship that you don’t want? Whether you are the Board of Directors, the Management Company, the Landscaper, the Snow Removal Vendor, etc…. who wants to be in a relationship where they are “stuck”?
With all the providers available for Management of Communities and other services, companies need to realize that providing service is an opportunity, not a chore. Your Management Company should want to manage and make you feel special. No one should make you feel trapped, or stuck, in a “bad” relationship.
How Do You Stop the Auto-Renewal from Occurring?
1. Find out when your contract expires. Just because 78% of Communities renew their Management Contract on January 1, and require cancellation by September 30th, there are 22% of communities who do not fall into this pattern. Are you one of them?? Request a copy of your Management Contract. Read it. Know your renewal date and cancellation terms, as well as all of the things the Management Company should be doing day in and day out.
2. Mark your calendar. Your Management Company should have an annual calendar of events that coincides with your budget calendar. While Management will not tell you when you should go out to bid for management – they will add their contract’s renewal date at your request to this annual calendar. Likewise, Property Managers should be providing a list of contract expirations and the notice required to be provided for cancelation for all contracts in their monthly management reports. They will add their cancellation to the contract as well, if you request it.
No Management Company is going to remind you that it's time to send them cancellation, however. So keep a close eye on these dates. Set reminders on your iphone or smart phone, add them to your outlook or gmail calendars...even ask Alexa or Siri to set a reminder for you...
Here is a way to know what important dates tom mark on your calendar:
Take the renewal date.
4-6 months prior to renewal: Solicit bids, review, and interview Management Companies.
4 months prior to renewal: Finalize any bids, negotiate, and sign your new management contract.
3 months prior to renewal: provide cancellation to current the current Management Company.
0-3 months prior to new contract: This is the time frame that transition occurs from one Management Company to the other, including notice to the homeowners, setting up homeowner accounts, website/homeowner portal and mobile access.
Here is an example:
Let’s assume your contract renews on January 1, like 78% of other Community Associations.
4-6 months prior to renewal: June, July, and August – receive bids, interview Management Companies.
4 months prior to renewal: August to the first week of September: finalize any bids, negotiate, sign new Management contract!
3 months prior to renewal: September 15 (to allow time for mailing), provide cancellation to the current Management Company.
0-3 months prior to new contract: Your new company will transition out with your prior Management Company.
3. Provide notice to the Management Company that you are not cancelling the Management contract, but you are not-auto renewing. Ask them to present a proposal and tell them that you are going out to bid for services. This is a good exercise to go through every few years to ensure that you are receiving proper pricing and service from the current Management Company and are not falling into increased fees with decreasing attention and unsatisfactory service.
You may find that just through this tactic, your level of service immediately increases from your current Management Company. But, is that really a good thing? If they are providing more attention because they are on notice, where was this attention before now? And, will it fade once you sign a renewal with them?
4. Negotiate the auto-renewal to be removed from your contract. This is a two-edged sword. If the auto-renewal is not a part of your contract, then you (the client) cannot be trapped in the Management Company’s contract. But, what if the Management Company decides you are not the right fit for them? This gives them an out, too.
5. Negotiate a cancellation with or without cause, at any time, with 90-days notice. Wow, that sounds scary right? Most Management companies are not interested in being “stuck” in a relationship. Negative feedback and negative word of mouth from a client isn’t worth the few extra dollars that is collected. But be careful, this also means that the Management Company can also decide to cancel the contract, too. While that may sound ironic or funny, there are times that a Management Company will decide a client is no longer the right fit (especially if the company is growing and the profit margins are tight or non-existent on your contract).
A 90-day with or without cause cancellation in the contract, encourages that every day, both parties (the client and the Management Company) put their best foot forward.
So What’s Next?
It’s time to shop and solicit bids from Property Management Companies. And you can start, with requesting a Proposal from Bricck Property Management here: Request Proposal | Bricck Property Management!
Bricck Property Management is a boutique property Management firm that specializes in the Management of Condominiums, Homeowners Associations, and Planned Communities in Pennsylvania, New Jersey, and Delaware. We are disrupting the Property Management space by managing differently. We enjoy property Management and want to manage. We know that Residents and Boards of Directors are often ignored too often by over-worked Property Managers and thin-stretched Property Management companies. Let us make a difference in your life, where we place our focus on where it matters most: On You and Your Community.