Violation Tracking

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The board was stunned. Not only had the managing agent failed to pay payroll taxes, but he had missed payments on the city’s water bill and the real estate taxes. There were fines to pay, and a lot of red faces – mainly on the directors of the small co-op’s board, who had not stayed on top of the situation and had blindly trusted the agent to keep ahead of bills. The agent blamed others for the mishaps and was soon dismissed.

The manager – a veteran of many years in the field – had not suddenly become incompetent. Instead, he was probably suffering from “paperwork fatigue” – a phenomenon encountered by many agents these days as city regulations, inspections, and fines have increased dramatically.

“In today’s real estate market, the city of New York is issuing thousands of violations a day to building owners,” claims Jack Jaffa, president of Jack Jaffa & Associates, which owns Alert Service Plus. “It costs them thousands upon thousands of dollars, because many don’t take care of them.”

“It’s getting so convoluted with so many different things that I don’t think it’s possible for one person to actually be on top of it all,” says Carl Borenstein, president of Veritas Property Management. “If you don’t catch a judgment in time, you might lose the ability to fight it. And the city’s looking to make more money, so they’re writing more violations.”

Indeed, the city is actively enforcing a collection of ever-growing regulations – for lead paint abatement; Local Law 11 repairs; and elevator, water tank, and boiler inspections, among others – and those actions have opened up new business opportunities for a handful of firms. Such companies as EMPOWER NY, SiteCompli, Alert Service Plus, and DOB Alerts have devised software systems that not only track violations but keep the client informed of the confusing collection of deadlines that buildings must meet for inspections, certifications, and regulations.

Some say it has all become too much for the management industry, already understaffed and underpaid. As a result, says Jack Wurtzel, CEO of EMPOWER NY, “many managers have been more reactive, not proactive, in keeping their properties in compliance. We decided to take the initiative and help them build a system that would make them catch the bull by the horns.”

A No-Brainer?

“The city lets you look up information online,” says Ross Goldenberg, a partner at SiteCompli, “but its websites – if the agency in question even has one – are difficult to use, take forever to find what you’re looking for, don’t inform you of important due dates, and are only as good as the last time you looked at them. As soon as you are done retrieving information, it’s already out of date.”

The various systems out there all do essentially the same thing: they will generally keep track of a portfolio of properties, eliminating the need to wade through pages of government websites each time someone needs data. Most of them continuously compile the latest compliance information about the portfolio in one place, including violations, inspections, and complaints. Users can be alerted by e-mail or text message when critical issues occur at any of the properties (stop-work orders and work-without-a-permit notices, for instance). Such systems seem to be ideal for overworked managers. As Jason Griffith, another partner at SiteCompli, puts it: “With our help, the managing agents can focus on fixing problems, not finding them.”

Indeed, most of the programs can track data for the agent, spotting larger trends that give the manager, if he wants to use it, information that he could use for preventive maintenance purposes.

So, it’s a no-brainer. All the managers are jumping on this software, right?

Not exactly. Some did get right on the bandwagon. Peter Lehr, director of management at Kaled, for instance, says he was convinced five minutes after SiteCompli’s presentation began that this was the system for his firm. “I was very impressed by the whole thing,” he says. Maryann Caro-Caputo, president of Tribor Management, was quick to sign up with EMPOWER NY, saying, “It is a tremendous alert system. We get immediate notification of complaints being filed, so we’re able to react before the city even sends out a notice.”

Adds Ben Kirshenbaum, general counsel at Cooper Square Realty, who was involved in signing the firm up with SiteCompli: “It seemed to give us what we wanted, at a price we negotiated that was reasonable. Technologically, they seemed to be very up to date and provided us with information that we could integrate into our [old, manually administered] system. The initial appeal is that you don’t have to rely on the mail – notifications from the city often go to the wrong addresses. We don’t have to rely on the vagaries of the post office.”

Opt Out

While most of the management executives sing the praises of these systems, observing how efficient the software has made them, some have either opted out (for now) or have limited their involvement. The reason? It’s a question of cash. As in, who’s going to pay for this new toy?

Many of the firms simply pass on the cost to their clients. “I find it’s a reasonable cost,” Lehr says. “It’s a minimal cost – I think we’re paying 85 cents a unit – and allows us to better manage their facilities. I would have to assign somebody full-time to track all these things. A violation hits the system, and we see it in real time.”

But others are not as sanguine, saying that they cannot, in good conscience, add thousands of dollars to their management fees to pay for the service. “We started using SiteCompli on a limited basis,” reports Peter Von Simson, president of New Bedford Management. “The problem is there’s a charge of a dollar per unit to use it, so for a large building, is it really worthwhile to spend an additional $5,000 a year to track a violation?” To absorb the cost is also difficult: “To take a 10 percent hit on your management fee is hard to do,” Von Simson notes. “[Profit] margins are pretty slim in general.”

Some executives argue that, at a time when competition is fierce and the economy is soft, raising your fees is not the ideal action you want to take. Besides, aren’t managers supposed to be monitoring these things anyway? Isn’t that part of their basic service and fee structure?

“I don’t use these systems,” says Louis Sandberg, president of Sandberg Management. “I have the managers and the back office tracking [the violations and regulations]. We do it internally. We’re pretty much covered that way. It’s not that having [the outside] services wouldn’t be useful. It’s just that I don’t want to pay for it and pass that on to the client. I feel that tracking deadlines and violations is part of our job description.”

Sandberg continues: “It’s expensive. If you look at my business – we manage mostly small to mid-sized properties – our management fees are relatively low. For us to absorb those costs would cost maybe 10 grand a year for all my buildings. Also, a lot of my clients wouldn’t let me pass the costs on; most co-ops and condos would think that’s something management should keep on top of – compliance issues.”

There is also a marketing issue: a management firm’s competition can try and make the use of such a system a negative. “The more services you can offer a building and not pass the charges along to them, that’s a plus,” says Sandberg. “I would use that in the [job] interview. I can pitch them. We don’t rely on outside services.”

Still, those who have the systems are unfazed by those who do not, arguing that the positives outweigh the negatives. “How many times do you get a private elevator violation and the superintendent doesn’t give it to the manager?” says Lehr. “Well, we know this is in the system. We know it’s out there. We know we have to get the elevator company and the company has to respond quickly and get the paperwork in. And all of this stuff is being tracked in real time. It makes a lot of sense. It’s a great tool and makes you manage better.”

“For a small, self-managed building, this would be very helpful,” adds Von Simson. “The fear is that you put some sort of liability on the building by missing important dates – you fail to register your oil tank, or you don’t do an elevator inspection. For some, this clearly makes a lot of sense.”
Online resources

SiteCompli

www.sitecompli.com

EMPOWER NY

www.empowerny.com

Alert Service Plus

www.jackjaffa.com/alert-services