Balancing Plates

Boards are concerned about the number of properties for which their manager is responsible. The assumption is the more properties managed, the thinner the level of service. Boards are correct in making this assumption. But the number of properties he or she handles is only a part of the picture. The manager is the tip of the iceberg in available management services. If a property manager has eight properties but has to do his or her own typing and filing, order supplies, prepare meeting reports, review financial statements, coordinate closing documents, act as liaison with the properties' attorneys, and also conduct his or her duties at the property supervising staff and contractors, then those eight properties become the equivalent of sixteen. Therefore, the organization that lies behind the property manager becomes a significant consideration.

Several factors measure the quality of a management organization. One factor is the efficiency in sending out correspondence and responding to owners. Another factor is the professional presentation of monthly management reports (this will ultimately expedite board meetings). The way files are maintained for unit-owners and the accounts payable/accounts receivable departments is critical in helping managers carry out their assignments. A paralegal on staff to monitor insurance compliance, prepare legal status reports, manage closing documents, and act as liaison with the properties' attorneys also frees the property managers to do their jobs.

The administrative staff that backs a property manager is of utmost importance. Boards should consider the ratio of administrative staff to properties managed, just as they would for a property manager. The length of time someone has served on the administrative staff or the property management staff is also a vital statistic. Rapid turnover indicates problems.

Accounting and purchasing are additional back office support areas of which boards should be aware. The way accounts receivable processes payments and accounts payable pays bills backs up the manager's duties. Support also comes from accountants on staff specifically assigned to properties to prepare and review financial reports. This further enhances the managers' ability to serve the community. The qualifications of the accounting and financial staff and the ratio of staff to properties managed are indications of the quality of the management firm. The recent events concerning Enron show the value of due diligence in accounting practices Commonly, there is not a purchasing staff found within management companies. Typically, property managers are required to price and order materials themselves. Purchasing is a job that most property managers would like to execute with as little effort as possible. This approach does not result in cost savings. It is also the area subject to the most abuse.

A purchasing department justifies its existence by saving money for property owners. When properly set up with a system of purchase requisitions, purchase orders, delivery tickets, invoicing, and oversight, central purchasing adds an important level of financial control. A purchasing department is an expense to a management company with no financial return if third-party management is its only business. It is hard to convince boards of the value of a purchasing department when they are cost-conscious about management fees, and often seek the lowest price for management without full consideration of quality and control issues.

All of these points are indicative of the depth and qualifications of the administrative staff. When a board contracts management services, administrative support makes or breaks the property manager. The administrative back office in a property management company takes years to develop, and not every organization has the know how to make it work.

Now that we have reviewed the management organization, what about the manager? The number of properties the agent handles is important but so are the manager's qualifications. Since there are no licensing requirements for managing condominiums and homeowner associations, and cooperatives require only a real estate broker's license, management qualifications are largely up to the hiring practices of the management company.

The firm should establish a minimum number of years experience in real estate management before promoting or hiring someone as a property manager. Management companies are well-advised to perform a background check on prospective candidates and subject them to a management aptitude test to be evaluated by an independent company. Substance abuse testing should also be part of the hiring process. All of this is costly and time-consuming but, in most instances, it results in the employment of qualified managers to manage properties.

Another consideration is the manager's travel time. If a property manager is responsible for accounts in New York City and in Suffolk County, a lot of time is wasted covering the distance. Property managers should be assigned a territory that minimizes travel time. This is more efficient for the property manager and the clients served; it is also cost-effective for the management company. When a manager's assignment is organized in this way, it is of little relevance where the back office of the management company is located. The manager will be on-site when needed, and in the office at other times.

What about when the manager is not in the office? Property managers cannot entirely manage properties from their desks. Communication systems are important to effectively reach managers when they are in the field. The property manager should have a two-way radio for immediate access to the back office, a cellular phone to make calls out to owners, contractors, and property staff, and a pager when all else fails.

The property manager is either a team leader, coordinating the professional services of the management team, or else a jack-of-all-trades-and- master-of-none. In the first instance, the agent can fulfill his or her function as a manager, in the second, he or she is, in effect, balancing plates at the end of long poles. You decide which you would rather hire.

Alvin Wasserman is director of Fairfield Property Services.