Condo associations shift from self-management to professional outside help | Opinion

Article Courtesy of  The Miami Herald

By Regan Marock

Published November 10, 2021

The trend of condominium communities transitioning from self-management to third-party professional management has increased over the last two decades and even more so recently. By definition, a self-managed community is one that does not hire a third-party Managing Agent on behalf of the Association but rather handles the day-to-day operations internally with added operational involvement from a volunteer Board of Directors. Contributing to this trend is the increasing amount of time required by volunteer boards, changing resident demographics skewing younger and still working full time, and the level of education and experience needed to effectively operate the property. After the tragedy in Surfside, more boards of self-managed communities are making the change, handing over association responsibilities to a professional management company.

Boards considering this major decision are evaluating the resources that a professional manager provides with the realization that no one person can be an expert at everything (human resources, accounting, budgeting, negotiating contracts, hospitality, etc.). At the same time, boards do not wish to lose control over personnel decisions, contract commitments and overall major decision making. There are some common misconceptions about retaining professional management.

In many cases, the employees of self-managed communities have been with the association for many years and have become family to the residents of the community. Board approval is needed for hiring and firing decisions of employees, and this doesn’t change when working with a professional management company. Employees who are in turn hired by the professional management company during a transition do not lose their benefit levels. Additionally, management companies do not execute contracts nor sign checks on behalf of the association. All contract terms, limits and cancellation provisions, including the third-party manager, are negotiated with the board and the association’s legal counsel, and ultimately, approved by residents as required by association bylaws.
Above: The Four Seasons Hotel Miami’s seventh-floor terrace and pool can be seen in this aerial shot of Brickell.

Management companies charge a negotiated fee to the association based on several factors, including the number of units, number of employees, activities to be managed, accounting services, the need for bank loans, existing code compliance and violations, etc. The addition of a third-party manager frees up the board members’ time allowing them to concentrate on strategic decisions and long-term planning. The services of a professional management company come at a cost which may be offset by savings realized through economies of scale and independent, competitive bidding on services, supplies, insurance, etc. In addition, because of their scale, management companies are able to monitor new legislation, insurance changes and compliance requirements of all local and state ordinances, all of which are aimed at building safety. Condo boards today are also turning to their third-party managers for guidance on adequate Directors & Officers liability insurance. Understanding that our society has become more litigious, some associations are looking to increase the limits on these policies. While the decision to transition to professional management should not be kicked down the road, board members, the condominium association and trusted professionals are encouraged to spend sufficient time reviewing the benefits and risks of self-managing their individual community operations versus third-party management.