Should Managing Agents Take a Fee When Residents Renovate Apartments?
Oct. 22, 2013 — At a 26-unit co-op in Tribeca that he manages, Timothy C. Grogan, president of Grogan & Associates, reviews the construction contract when a buyer does a board-approved apartment alteration, makes sure the security deposit is paid, and checks that all insurance and Department of Buildings filings are in order and that periodic inspections by the building's engineer or architect are performed on time. For this, he's paid a $450 fee by the shareholder whose apartment was under renovation. Should he be?
Some contend that since he is representing both the corporation and one of its shareholders that this fee paid by the resident opens the property manager to a charge of conflict of interest. Grogan disagrees, noting, "I'm just providing a service to the co-op that's paid for by the shareholder. I want to make sure that the building is protected and there's no liability."
Paul Brensilber, president of Jordan Cooper & Associates, requires fees ranging from $500 to $1,000 to oversee renovation jobs. "Whatever the fee is, it's too low, it should go up," Brensilber says. "We meet with the contractor and go over the rules of engagement – how to get construction materials into and out of the building. Deliveries are a problem. These are becoming monumental issues because of the extent of some of the work that's being done today."
Serving Two Masters?
Where some see this fee as a conflict of interest — how can the manager serve two masters? Others see the possibility of a more subtle — but potentially harmful — misunderstanding.
"When the managing agent is paid this fee, he doesn't become the project manager or the construction manager," observes C. Jaye Berger, a Manhattan lawyer who specializes in co-op, condo and construction law. "Some people who are renovating their apartments mistakenly think that, because the managing agent is observing the job, he works for them. The agent is there to make sure there isn't damage to the building and that the shareholder does what he said he was going to do — and not more."
By most accounts, managing agents perform a vital function in a process that can get downright byzantine. "The managing agent needs to play a role," says attorney Greenspun. "The fee [he gets] is not to perform services for the shareholder. The agent is working to protect the interest of the co-op, and the cost of the work the managing agent does to make sure that everything's done according to the rules and regulations is passed on to the shareholder. There's no free lunch."
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