WHEN BANKS NICKEL & DIME YOU, P.2

 

Other property managers have also negotiated their way out of paying bank fees. "When we have a fee, we call the bank and we get it waived," says Steven Hirsch, director of management for Goodstein Management, which manages 47 properties. "If our main bank really tried to push a fee, we would consider changing banks," says Hirsch, who like Fairfield has walked away from banks in the past.

The same approach has also worked for smaller property-management companies like Merlot Management, which handles 25 properties. "They have thousands of dollars of my money, and if they don't treat me well I'll take my money somewhere else," says Beth Markowitz, president of Merlot. "Periodically, when I see a fee crop up I call them and it goes bye-bye." Merlot only pays fees for the occasional overdraft or to stop payment on a check.

Bonus-Baby Banks Budge? Bah!

Someties, however, even threatening to leave has no effect. One management company has vowed to leave its bank for more than a year — but the bank still insists on charging the full amount of banking fees. The property manager recently passed about a third of nearly $20,000 in annual fees on to its clients — to you, and you, and you. The property manager is now changing banks, although the process is long and difficult.

As well, says Osman, some banks are charging boards too much to fill the escrow accounts on their permanent mortgages. These banks, which Osman prefers not to name, already add an amount to cover property tax to the building's monthly mortgage payment. In addition, most banks add an extra amount to the monthly mortgage bill to cover the possibility that property taxes will be more than anticipated.

An extra 10 percent over the estimated annual property tax seems to Osman like a reasonable amount for the bank to hold in its property tax escrow account, says Osman. However, Metropolitan Pacific found that its banks were piling up far more than that in its escrow accounts. One 600-unit complex with about $1 million in annual property tax obligations had more than $300,000 in escrow, even immediately after the property tax for the year had been paid.

Escrow You

"How can they have that much in the escrow after the disbursement?" Osman marvels. "The escrow never seemed to be zero." Banks pay co-ops and condos a nominal interest rate of less than one percent on the money in these accounts.

Metropolitan Pacific had an accountant examine its escrow accounts to determine how much extra money its banks have taken, and is now demanding that the banks return the cash. The banks responded by saying they had the right to take an amount of money from co-op boards into their escrow accounts that they, unilaterally, think is reasonable, according to the original loan agreements.

If your bank refuses to negotiate, you should take your business elsewhere by refinancing permanent loans and moving operating or reserve accounts to other banks.

Metropolitan Pacific is now examining its options. "Just because it's legal," says Osman "doesn't mean it's ethical."

 

Adapted from Habitat July/August 2009. For the complete article and more, join our Archive >>