Management Chaos at Co-op Leads to Successful Management Switch

Tina Larsson
CEO,
The Folson Group

“Boards often don’t know that they can demand things and negotiate, but of course you can”

Switching management companies can be a daunting task. When there are no other options, boards have to be crystal clear on the services they need. 

A new board had been elected at a 150-unit co-op in Westchester, and the members were ready to roll up their sleeves and hit the ground running — only to find that they were knee-deep in chaos. They couldn’t get their financial records from their management company. There was a stalled boiler replacement that wasn’t being overseen, forcing the building to rent a temporary one installed outside. The property manager was supposed to be on-site one day a week, but often wasn’t. 

Coming Up With a Management Checklist

“The tension was escalating,” says Tina Larsson, the CEO of the Folson Group, a business consultancy for co-ops and condos that was brought in by the board. For these kinds of circumstances, she says her first step is to help boards determine whether they really need to change management, as opposed to improving the situation with the company they have. But things had progressed way beyond the latter. “In this case, the board members had lost all trust and were determined to find new management,” she says. “So we conducted a Zoom session in which we asked the board members what their pain points were and what were their must-haves.”

Because there were so many projects that needed to get done, one nonnegotiable was having a property manager on-site two days a week. “Previously it was just one day, if even that,” Larsson says. “We also suggested that the property manager should have a dedicated assistant because the co-op really needed much more proactive management. A lot of property managers have an assistant but often share them with several managers, so we suggested they insist on a full-time one.”

Based on that conversation, Larsson created a request for proposal and sent it out. Then she did preliminary interviews with all the candidates and checked their references. Once the list was narrowed down to the top three candidates, she set up individual Zoom meetings between each of them and the board. “We want those interviews to be 30 minutes and very consistent,” she explains. “Most important, they need to be done back to back so that board members clearly remember the candidates, which makes it easier to compare and choose the right one.”

Focus On the Right Person and the Right Price 

The board initially had a hard time making a decision. The members were split right down the middle between two candidates, but they eventually came to a consensus. That’s when Larsson began the all-important task of drawing up a management agreement. “We’re not attorneys, but we help boards create an agreement that incorporates all the items they need,” she says. Larsson negotiates the service price using Folson’s database of what the different property management firms charge, and for what services. “Then we ask what the board’s budget is and come up with a price range, typically starting at what they’re paying right now,” she says. “This co-op was paying $110,000 a year, so our range topped out at $120,000.” The price came in at the top end of their budget, and the second day on-site came in at an additional fee. But the board decided this was so important that it was willing to pay it. 

Ensuring a Seamless Transition

Once the baton is passed and the new property manager starts, Folson stays on for a 60-day period to iron out any problems that might arise. “We’re copied in on all emails and correspondence to make sure things are going smoothly and everything is fully up and running,” Larsson says. 

That’s not always the case. “Sometimes we have to step in and say, ‘Listen, we need this now,’” Larsson says. “But this transition went well.” Indeed, as promised, the new management is providing monthly financial reports on time and handling insurance renewals early instead of waiting until the last minute. In addition, the boiler project is proceeding apace. And the property manager is on-site two days a week.  

The Takeaway 

“When boards need new management, they don’t have to do it alone,” Larsson says. “We act as a kind of therapist, helping boards discover what they don’t already know. And boards often don’t know that they can demand things and negotiate. Of course you can.” On the other hand, as boards draw up their checklist, it’s important to have reasonable expectations. “If it’s a long list, we advise them to narrow it down to the most important things,” she says. “You don’t always get everything you want.”