Boards Struggle with Compliance as Local Laws Multiply

The Compliance Crunch

Squeezed by an ever-expanding number of local laws and regulations, boards and management companies are scrambling to keep up.

By Paula Chin

Compliance with local laws is a crucial part of a board’s duty to maintain building safety and avoid costly fines and penalties. But with the tsunami of city regulations, rules and inspections constantly pouring in, it can be challenging to stay on top of it all. As regulations proliferate at a dizzying rate, many property management companies now have staff dedicated to compliance, notifying them of deadlines and existing violations for the co-ops and condos in their portfolios. The job is so demanding that management companies often rely on sophisticated software and the help of third-party compliance companies that monitor violations, send alerts and help with corrective actions. “Compliance has blown up to such a herculean task that no one manager can handle it for their buildings,” says Dennis DePaola, chief legal officer at Orsid New York. “Boards can sleep better knowing that there’s a team supporting them.”

THE INNER WORKINGS

Think of management and compliance companies as being on opposite ends of a pipeline that moves data from one system to another. Compliance companies extract a trove of public data from city and regulatory agencies — from the Department of Buildings to the FDNY to the Department of Sanitation — including local laws, inspections and filing deadlines, open violations and building histories, that they digitally transfer to management company clients.

Because there is so much information, many management companies have created their own programs that distill the data into a more digestible format. The seven-member compliance team at FirstService Residential, for example, relies on the compliance platform SiteCompli as a first step. “It collects all the data and puts it into a nice, neat web portal for us,” says Stephanie Cardello, the firm’s head of compliance. “Then we adapt it into Excel spreadsheets and Smartsheets, and from that we manipulate the data to create a digital dashboard.” Managing agents and property managers log in to their dashboards, which are broken up visually into categories, allowing them to see at a glance where their buildings stand on everything from parking garage inspections to facade repairs. Each manager can access their properties “and easily toggle through the dashboard for each of their addresses,” Cardello adds.

ALERTS & ACTION

Orsid New York, which works with the compliance firm Jack Jaffa & Associates, has also developed its own user-friendly interface. Orsid’s four-member in-house compliance team boils down Jack Jaffa’s granular weekly and monthly reports, which bore deep down into details like, say, the status of each boiler in a building. “They can be as long as 80 pages, but the information isn’t tailored to what management needs to know, so we compress it to one page,” says Nita Durakovic, Orsid’s compliance manager. There’s a box for each local law, whether it’s Facade Inspection & Safety Program repairs, parapet or elevator inspections, or carbon emissions. “Each box is color coded,” she adds. “If it’s in red, the work or inspections are due within the year. Yellow means it’s due within the next two to three years. If it’s green, you’re in good standing.”

In addition to dashboards, email alerts from compliance firms make it effortless for managers to stay thoroughly up to date. “SiteCompli pings building managers listing any violations recently issued or permits that need to be renewed at their buildings,” explains Keith Werny, president of FirstService’s CityLine Property Management Division. Once that happens, the compliance team kicks into gear and starts arranging the required inspections, working directly with managers, supers and building staff. “If it’s an FDNY permit renewal, we’ll contact the super and we’ll schedule the inspection. If it’s something like the backflow prevention inspection, we will schedule that as well,” Cardello says. “Because we usually work with the same people who we know are valid and legitimate, it’s much easier.”

Alerts are especially important for management companies without a dedicated compliance staff. At MD Squared Property Group, “we use BCompliant to do monitoring in-house in conjunction with our property managers, assistant managers and support staff,” says Adam Reisman, the president of client services. In addition to relying on the weekly spreadsheets BCompliant sends to all MD Squared managers outlining their buildings’ compliance status, “we get alerts if something new is voted into law,” he adds. “Then we’ll arrange a discussion with our managers to review what it is and how to deal with it. It’s super helpful that there’s this additional layer of follow-up.”

HIRING VENDORS

When compliance requires capital projects, it does fall upon individual managing agents to see the work through at their buildings from beginning to end. But they can get help from their compliance colleagues when it comes to finding vendors. At Orsid, the compliance team does the vendor outreach and sometimes hires professionals as well. “We have the authority to do basic compliance work up to a certain dollar amount,” DePaola says. If major work is required for, say, a building’s gas lines, “boards might want us to go out and get multiple bids from different vendors before they make a decision. In the end, it’s their responsibility to do what needs to be done, but they can delegate to management.”

At management companies with large building portfolios, compliance teams can help boards save money by snaring bulk prices for vendor services or equipment. “If there’s something that’s required by a lot of our buildings, we can use our size as leverage,” Werny says. For example, with Local Law 157, which requires the installation of natural gas detectors near all gas appliances in residential buildings, “we can see what products are out there and try to get the best pricing available,” he explains. “Then we give those options to our managers and boards.”

UPDATING RECORDS

As for keeping track of which inspections or repairs have been completed, building managers typically inform their compliance teams, which then manually update their own digital database. “If something’s already complete, I’ll note it and that the deadline has been shifted to, say, next year, and then that new info gets added to the next weekly update,” Werny explains. But at smaller management companies without an in-house compliance staff, managing agents must handle updates themselves. That’s the case at Merlot Management, which has three managers overseeing more than 20 co-ops and condos with the help of a third-party company. “We have something we call the mDRIVE, which is our cloud-based server and where all our files are stored,” says Beth Markowitz, the firm’s president. “It can only be accessed by our managers, who update the information into the appropriate file. It is incredibly burdensome.”

Those updates by management are essential because there are compliance requirements that are not in city databases. For example, “there are holes in Local Law 152, the gas pipe inspections,” Cardello points out. “That’s a requirement from seven years ago, and there’s no tracking mechanism for it because the city does not have a database for it.” 

Dealing with compliance is a beast, and even with a dedicated department it’s daunting. “We’ve got a quiver of a lot of different arrows that we use to try to slay that dragon, but it keeps getting bigger and more fierce,” DePaola says. Argo Real Estate created a compliance department nearly a decade ago for the firm’s 30 managers and developed its own compliance database, augmented by compliance monitoring and violation court cures from Jack Jaffa. “I have a three-person team where each of us handles a certain category,” says Jessica Tusing, director of compliance at Argo Real Estate. “But that sometimes still doesn’t feel like enough.” 

 If a management company uses a third-party compliance-monitoring solution, there is often an additional charge your co-op or condo will have to pay. This charge is typically listed in the management contract as a flat fee. But it beats the alternative of paying off a mushrooming pile of fines. “Having a compliance team has really helped us cut down on violations,” Werny says. “It’s not 100%, but it’s very close.”