Should we hire a condo management company?

For larger Condominium Corporations its a pretty simple and a pretty obvious choice.  You practically need to have a professional management company to run things.  But, for smaller condos its a tough choice.  This post is about that question.

It’s important to keep in mind what a management company does and doesn’t do.  While this varies by company, there are some common points.  The key point is that your management fees pay for just that, management, and not much else.   So, they don’t pay to cut the grass.  They pay for a manager who hires the grass cutter and writes a cheque on the Condo Corporation’s bank account.

The key thing to note about a manager is they are an agent.  That means they act on your behalf, and you (the Condo Corporation) are liable for what they do, even for good faith mistakes.  Let’s take an example:  suppose you have a pipe burst and flooding.  It’s great to have a manager that will respond to emergency calls at night to deal with it, instead of waking up board members.   However, there’s a catch.  Whatever that manager does, such as hiring a firm to cleanup the aftermath, is the responsibility of the Condo Corporation to pay for.  The Condo Board can’t renege on lawfully made commitments that could be enormously expensive, even if they were poor judgments.

Also, keep in mind when a management firm advertises 24/7 service, what they likely mean is that if you call after hours the call goes to an answering service who in turns call the on-call property manager out of the office, who then deals with the matter by phone.  That could be what you want.  But, for small Condo Corporations an on-site board member may work just as well.  Often, they’re probably up and awake if an emergency (like flooding) is happening anyway.

A potential mistake is often thinking the management firm is a huge time saver for the board.  In a way that’s true, but it’s a potentially dangerous view.  A good management firm’s real benefit is its expertise, not the time saving to the board.  A good board will be actively involved in major decisions regardless of whether they have a management firm.  Neglecting those decisions, just because they have a management firm is dangerous.  A good property management firm will do its best to keep the board involved in key decisions.

One should consider how many other properties a property manager of a management firm has.  Your property is far from alone especially if its small.  A property manager can actually slow decisions down for a small condo corporation, as often the board can easily meet on their own and agree on action, but may be frustrated in getting time and attention from the property manager.  So, say you hire a property manager who works 40 hours a week and they have ten properties.  That’s only four for your property.  So, it’s not a huge stretch to match that quantitatively.  It’s not about the quantity of hours, but the quality.  What they do in those four hours might be more than the board can do in any amount of time.

Simple common sense says, if you are going to hire a management company, look around.  Get at a few quotes from different management companies that have experience with your type of condo (e.g. similar size).  Asked detailed questions of what they do and don’t do.  Ask about fees, obviously, and the rules of cancelling a contract.  There can be nasty surprises when cancelling a contract, if the board didn’t read the contract’s small print carefully enough.

Of course the best source is trusted references.  So, ask people from other condos who they’re using.  Be careful though.  There’s a tendency for there to be a love-hate cycle with property managers.  A condo corporation grows unhappy with one manager, hires a new one that seems great initially, but the new property manager becomes swamped like the old one, and the cycle repeats itself.  So, a good reference is only really good if the condo corporation has had the management firm for some time.

Whatever you do, what every Condo Corporation need is a good board of directors.  Nothing can replace that.