PROPERTY MANAGERS HIDDEN FEES CO-OP CONDO

"When you get a quote from a management company, what does that quote include?" asks Fred Rudd, president and founder of Rudd Realty. "We're taking over the management of a building," he says by way of example, "where we quoted a $42,000 [annual] fee that was all-inclusive, with some exceptions that I mentioned" to the board, which wanted to pay the same as it was paying its current management company, $36,000. "I did some calculations and said OK. And when I got all the building documents from the old company and saw the financial statements, I saw, yes, the building was paying $36,000 — but with add-ons, they were paying $60,000 total. There was $24,000 a year in additional charges."

That's something Paul Miller, board president of the co-op at 308 East 79th Street, sought to avoid when the building switched companies 18 months ago to Douglas Elliman Property Management. An à la carte structure "wasn't what we were looking for," said Miller, director of the marketing and branding company The Pinwheel Group. "We were looking only for a full package. Otherwise you could drive yourself crazy with, ‘Well, that's not in the contract, it costs extra, so who on the board is going to do this to save a couple bucks?'" 

Matter of Degree

The first thing to realize is that "flat rate/all-inclusive" and "à la carte" actually fall along a spectrum. Virtually no property management firm is all one or the other. The annual "Business of Management Survey" in Habitat print magazine shows a couple of firms that include virtually all filings (lead paint notices, window guard notices, etc.) in their fee, don't charge extra for working on capital improvement projects and don't charge to maintain the building's bank account. At the other extreme, some firms have a per-unit charge for all filings, charge a percentage of the capital improvement cost if you want them to oversee it and charge you bank fees.

Most fall in-between. Note that a high annual minimum doesn't guarantee fees won't be charged: One firm with a $36,000 minimum, on the high end of the scale, has hosts of add-on fees, while one with a $12,000 minimum does not.

Of course, numbers alone don't tell the whole story: A board also chooses a firm based on such intangibles as reputation. But the choice between all-inclusive and à la carte remains one of the single most important points to keep in mind.

"There are companies that charge for individual Xeroxes," says Rudd. "Some charge for every fax." Some, he claims, "charge you back as cost-plus — so if it's cost-plus-20-percent for every copy or fax, that can add up to quite a bit of money."

"We don't charge anything for normal management correspondence," says Don Wilson, president of Blue Woods Management Group, "like sending a letter to a shareholder or to an attorney on behalf of shareholder. If I have to send it FedEx, I would charge it."

"We don't keep a list by the postage meter of every letter that goes out," says Jeffrey Weber, a principal in Weber-Farhat Realty Management. "I'm just not the type to nickel-and-dime someone where each time they call I keep a record of when they call and how much time I'm spending. … Charging for bank reconciliation?" he marvels, referring to the standard bookkeeping practice of reconciling bank statements with check amounts. "You have to do that," he says with a laugh. "It's part of the job."

Wilson sees photocopies the same way. "At the end of the month we print financial reports that are fairly lengthy and which we hand deliver to every board member and mail to the accountant. You could easily be sending out 500 sheets of paper, so that's a big duplicating job. But that's a service we provide as part of our fee."

Capital Projects

Where management expenses can really pile up is on capital-improvement projects, such as building-wide window replacement, a installing new roof or new boiler. New York City property managers are about evenly divided on whether or not — and in which manner — they charge to oversee capital improvements.

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