Tag Archives: drawbacks

Condominium Self-Management: The Pros and Cons

One of the primary goals of this blog is to provide Florida condominium association Boards with the information necessary to properly self-manage their condominium. However, before a Board can make the decision to become self-managed, it is necessary to consider the pros and cons of self-management. As such, I feel it is important to briefly address this topic before providing any additional advice. If you are considering becoming a self-managed condominium association, I also recommend you read my blog post “What does condominium association self-management require?”.

 

Condominium Self-Management Pros:

1.    Financial Savings

Probably the most appealing reason for Boards to self-manage their association is the potential savings created by not having to pay a management company. Depending on the size of your community and the breadth of services offered, a professional management company may cost anywhere from $30,000 – $70,000 per year. This reduction in operating expenses can be put towards needed property repairs, community improvements, reserves, or reduction in maintenance fees, just to name a few.

 2.    Alignment of Interests

With community owners managing the association, the interests of residents and management are completely aligned. When managers have a vested interest (through homeownership) in the property they manage, they are likely to be more committed to the success of the community, be more prudent when spending funds, and take resident comments/ concerns more seriously.

 3.    Elimination of Middleman

With the elimination of a professional management company serving as a middleman between the community’s residents and the association’s Board, there is often more rapid response to, and resolution of, resident concerns. And, as I have mentioned in other posts, timely and detailed communication with residents is the key to a successful association!

4.    Complete Control

This factor needs very little qualification. Professional management companies tend to have control over all aspects of association management including Board meeting agendas, timing of property projects, operating and reserve expenditures, annual budget drafting, etc. Being self-managed allows the Board to have complete control over every aspect of management and, if the Board has specific goals they aim to achieve, the likelihood of doing so increases when self-managed.

 

Condominium Self-Management Cons:

1.    Board Time Commitment

Self-management of a condominium is a very timely venture. The President of the Board should expect this to be a full-time job. On top of handling routine resident issues and meeting with vendors during the day, at least one member of the Board will need to be on call at all times to handle emergencies. The novelty of handling 2am water leaks can wear off fast and many Board members burn out rapidly.

2.    Board Turnover

Condominium association Boards typically see some member turnover annually. This lack of consistent leadership can be very detrimental to the health and functioning of the Association, particularly when a veteran Board member leaves or when new Board members do not work together well. Professional management eliminates this issue as experienced managers can provide advice and guidance to new Board members while keeping the association running smoothly. To help mitigate these issues, the Board members of self-managed associations should be willing to commit to at least one year of service, and a training process for new Board members should be established.

 3.    Lack of Experience

Lack of experience in property management can get many self-managed associations into trouble. Managing a condominium requires not only an understanding of accounting and legal issues, but knowledge of landscaping, building maintenance, annual corporate filings, permits for amenities such as pools or elevators, and much more. Failure to comply with local, state and federal laws, as well as the communities governing documents, can land Board members in hot water and be costly for the association. Board members must dedicate themselves to learning about all of these different topics and should enlist the help of a professional accountant and experienced condominium attorney to provide routine guidance.

 

Lack of Industry Contacts: a Pro and a Con

One factor that you will frequently see on self-management “con” lists is that Board members lack professional contacts. The argument typically goes like this. Unlike professional management companies, which have lists of plumbers, contractors, pool repairmen, etc. that they can use to obtain bids for maintenance projects, Board members usually have to start from scratch in developing a list of vendors that they can rely on. Further, as management companies tend to be involved with numerous properties, they have leverage with their vendors (helping to ensure reasonable pricing and quality work) as the vendors would not want to risk falling out of favor with management companies and losing significant business. While I think there is some merit to this argument, I have a different perspective and, as such, did not want to include this in my list of “cons”.

In my experience, management companies tend to work very closely with a small subset of vendors and though they could use their relationship with these vendors to push for more competitive pricing and guarantees for the condominiums they manage, they tend not to in practice. I believe this is due to a combination of complacency and being overworked. Given this, many vendors learn that they can charge higher prices and their bids will still land in front of condominium Boards for approval. Further, without proper management oversight of each project (which is again a product of managers being stretched too thin), vendors learn that they can get away with mediocre work. I’m certainly not suggesting that all vendors do this, or that those that do have bad intentions. It is very common for vendors who initially did stellar work to slowly (and perhaps unintentionally) let their work product deteriorate somewhat overtime as they become more confident that the Board will continue to use them.

All of this leads to my feeling that Board members’ lack of industry contacts can actually also be a self-management “pro”. With Angie’s List and similar websites flourishing, Board members can easily identify vendors for all types of maintenance projects. With no historical biases, they can objectively assess vendors and begin to create their own preferred vendor list. Further, as most Board members live on the property, they can routinely monitor project progress to determine if they continue to be satisfied with a vendor or if they need to once again obtain competitive bids from other companies.

I hope this overview of self-management pros and cons was helpful. Please feel free to contact me if you have any questions or if you would like to discuss the pros and cons of self-managing your particular property.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations.