CONDOCENTRIC: How To Select A Property Manager

Condominium Corporations are uniquely defined entities in the Province of Ontario, specifically their existence is derived from the Condominium Act, 1998. The management of a condominium corporation’s day-to-day is the joint task of the direction of the Board of Directors comprised primarily of unit owners (i.e. the equivalent of Shareholders) and the execution of that direction by condominium managers.

Given the value of condominium corporations, that is in the millions of dollars, it makes sense to choose a property management company that has the necessary processes to effectively manage and operate the condominium property and assets on a day-to-day basis.

In our years of practice, we have seen a range of skills in the property management industry. Due to the fact that there is no mandatory minimum for performance by property managers either voluntarily or otherwise imposed, some of our clients have been on the losing end of disastrous property management arrangements. One case in recent history was in respect of a breach of fiduciary duty where a property manager misappropriated funds that were the property of the condominium corporation. When things like this happen, it reflects poorly on those property managers who work with integrity and honesty to earn their livelihood

To try and avoid a negative experience, the following is advice on how to seek out appropriate candidates to manage the property and assets of the condominium corporation. But first, the condominium corporation has to do a bit of homework on its’ own to define its needs, goals and service requirements.

To gather this key information, the condominium Board of Directors will need to answer the following questions to build the set of management requirements:

1. Maximizing equity in the units of the property values increasing;
2. Fostering a harmonious and cooperative environment;
3. Keeping accurate records;
4. Employing sound financial management practices with appropriate controls on access to funds;
5. Ensuring independence of the property management company (i.e., no kick‑backs);
6. Adhering to the condominium corporation’s community values as defined within condominium .;
7. Demonstrating professionalism, as well as establish and follow policies, procedures and mechanisms on how to handle day-to-day operations;
8. Developing a a competent and friendly rapport with unit owners; and
9. Assessing areas of risk for the condominium corporation on an on-going basis and advising the Board of Directors in a timely and prudent fashion to ensure that the Board of Directors takes the necessary steps to protect the condominium corporation.

Remember, you get what you pay for, and be wary of characters with no evidence to back up their lofty claims whether they are property managers, trades people or other potential service providers. Expect to pay for service that is a cost commitment in choosing to live in a condominium corporation.

Once you have identified these values, then you are ready to start seeking out your condominium corporation’s property manager. While it is quite easy to obtain numerous proposals, how do you figure out which one is the right one for your condominium corporation? Here are some suggestions, look for the following in respect of your proposed candidates for property management.

1. The corporate structure or organization of the property management company. Does it have a professional management and team in place who are experienced? Often Boards put too much emphasis on the on-site person without asking about the back office processes and operations (e.g., the property manager who stole from the condominium corporation had great personal interactions with the Board). If it is very “mom and pop” in its structure, will it adequately service your community in a professional way? (The author here assumes that professionalism is a requirement for most condominium corporations).
2. Have the proposed candidates explained how they undertake financial management. Ask them about how their lien processes are conducted pursuant to Section 85 of the Condominium Act, 1998.
3. How does property management address budgeting?
4. How does property management address maintenance and repair issues?
5. What is the monthly reporting packaging look like, that is produced by the management firm and property manager for the review of the Board? Ask to see an example. Take a look at the report and see if the information there is valid.

• Does it tell you how money flows in and out of the condominium corporation’s accounts?
• Does it tell you who is in arrears?
• Does it tell you what the complaints are from unit owners?
• Does it tell you the method of rectification of complaints?
• Does it bring up issues of maintenance and repair proactively?
• Does it tie expenditures to the budget?
• Does it reference quotes?
• Does it follow an agenda?
• Does it include information on recommendations for upcoming physical maintenance?

6. Ask the property management companies the following questions when they are interviewed with you:

• How long have they been in business?
• Who are their current customers?
• Are referrals available (follow-up on all referrals, request a minimum of three)?
• How long have they retained their clients? What kind of clients? How old? How many units?
• What is their business strategy toward management?
• How do they choose an on-site property manager? How long is the on-site person guaranteed to stay?
• How is the property manager supervised?
• What processes are in place to minimize errors, delays, and ensure follow-up on outstanding issues?
• One of the fundamental economic challenges in today’s condominium market is that they are not enough qualified property managers to supply all of the condominium corporations. In our experience, the on-site manager is critical to the success or failure of a property management company. If you have a confident, well-versed, articulate and professional property manager who is conscientious, property management will hopefully be reflected in same light. Property managers that are on-site, that make excuses, that do not know where paperwork is, that complain that they do not have enough back office support are probably signs of inadequate support. Ideally a condominium corporation should be able to choose its on-site manager by going through an assessment process with the proposed property management company. Why? Well, if your condominium corporation has unique needs, would it not be better to find a property manager that best fits the character of your condominium corporation. Let’s face it- each community has its own feel and style, and so you would rather get it right than have shuffling back and forth to different on-site property managers – you know how that can detract from the quality of service you are aiming to provide unit owners!
• Ask them how they manage large cost projects? Is it included in the contract, is it not included in the contract?
• Ask them what the price is per door. If the price is extremely low in relation to the rest of the market, remember you get what you pay for. So you should inquire, how can they operate at such a low price? Something has got to give in terms of quality, responsiveness and delivery of services promised.

While price per door is often a huge driver for a lot of condominium corporations, nobody wants to pay, it is unreasonable to expect not to pay market rate.

Condominium corporations must be very cognizant to make sure that they paying for something and getting it. They should also ask themselves whether it is reasonable what they are paying for what they are getting. If somebody promises you the moon, but you are paying them a very low rate, chances are all you may initially receive the anticipated service, but this will likely not last. Thus, be realistic as to the cost of operating your business. Churn, or property management turnover, is costly for many reasons- loss of intellectual property (what the property manager knows, relationships, etc.), loss of momentum on achieving results, re-training staff, etc. As a result, take the time, energy, and possibly money by hiring a condominium consultant to assist with the recruitment of a property management firm to ensure that the best choice is made based on many criteria, rather than only on the price, as you don’t want to repeat the process again for a long time!

A condominium corporation operates much like any business and it requires professionalism to ensure it runs smoothly. For example, the budget must balance every year so that your duties as the Board of Directors is effectively executed. Ask yourself – do you want your investment protected or not? If you want market value to go up, is it not crucial to put in place the right players, structure and processes so that the condominium corporation, a multi-million dollar investment is properly taken care of. Care for your condominium as you would yourself; after all it is a place you choose to call home.

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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