Successful Transitions: Changing Management Companies

Richard is the general manager of The Kenwood Condominium in Bethesda, Maryland and the President of the River Creek Owners Association in Loudoun County, Virginia. He has been an active writer, speaker and lecturer at various WMCCAI forums and member of both the Education and Quorum Committees.

Almost all associations inevitably come to a point when they change management companies. Whether it be full service or financial, a change is sometimes a good thing. There are many reasons for doing so, some of the main ones are:

• the management company has been there a long time and a board wants to know what other companies can offer.

• service has deteriorated over time; the association is taken for granted.

• costs have been increasing or seem to be out of line with other associations.

• with a fully qualified manager, the need for full service is no longer necessary, financial service may suffice.

Whatever the reason, and however the decision is made, the transition process can be the difference between success or aggravation.

Before letting the current management company know of the change, carefully discuss with the new company how they will manage the transition. Well-established companies will have checklists with key events and items needed. For example, they will cover utility payments, general ledger mapping, reports etc. Use the new company to drive the transition, as they have a vested interest in getting the change done successfully and on time. The current company is another matter. When they lose a contract, interest may wain. But they are being paid so insist on getting every service they are contracted to provide. If you can get the parties together for a transition meeting it will help both sides understand what the other requires. The current management company will have access to bank accounts which have to be changed. This will include signature cards, receipt of correspondence from government agencies, copies of documentation and other things. Everything the current management company has belongs to the association. Insist on getting it.

Because so much of today’s documentation is electronic, getting copies of the general ledger, accounts receivable and accounts payable will be in data format. Insist on knowing what will be delivered, when and how it can be accessed. A data dump which can only be read with a proprietary program or a PDF is not good enough. The association will inevitably have to mine old data for one reason or another, having just unformatted data makes things impossible or costly.

Arrange for a transition audit. Even though the prior management company is reputable, the auditor will certify the records are correct. More importantly the audit will verify that monetary balances are being transferred correctly. Finally, the auditor will have to certify based on the prior management company, that processes were correct to the date of transition. Doing it after the fact may lead to nightmares and a qualified audit.

For owners, a transition is largely invisible. But they will have to complete new ACH (direct deposit) forms, change payment location to send checks or modify their bank recurring assessment payments. The new management company will have to send coupon books. For a manager this will be the most time-consuming part of the transition. Owners will also have to be informed of access web sites or portals. Good and frequent communication with owners is a key factor of success.

Most management companies want to take over the resale function in associations. Transition is a good time to balance whether this should be outsourced to a company or brought in-house. Today’s technology makes the production of resale packages simple, but there is a time component in doing so.

Finally, with all of the work, is it worth it? This truly depends on the relationship with the management company, board, evolution of needs over time and the capability of the manager. Most contracts are signed for extended periods of time. An up-front effort of a few weeks may bring long-term benefits to the association and management. A new company may have better systems, quicker response, cost less and breath new life into the relationship. It is worth considering the benefits for the association.