The Key to a Smooth Management Transition

Habitat spoke recently with Fred Rudd, president Rudd Realty, about the key ingredients of a smooth management transition. 

When buildings change management companies, there's a certain transition protocol. But you recently took over a property where it wasn’t followed. What happened?

There are two things involved in a smooth transition. One is the financial side, where our chief financial officer contacts the previous management company and starts to collect the money and financial records. The second part is to request the records kept by the company as a fiduciary for the building. For example, when the roof was replaced or apartments were altered – basically everything that has been essential to the building’s operations going back at least five to seven years. In the property we recently took over, we received only about four boxes of paper files. These were the actual tenant records, proprietary leases, and applications for ownership, but no building records whatsoever.

How many boxes typically come over during a transition? 

It depends on how long the company has been managing the building. In this case it was more than 10 years, so we would have expected somewhere between 10 and 15 boxes. Getting only four was a real red flag that there was a problem. We called the company to request the missing files, and it sent over some information on the building systems – but no documents of plans, contracts, guarantees, or warranties. So we were still really short of the records that we needed.

What did you do next?

We communicated with the board and explained what was happening, and we contacted the management company again to discuss the issue. It was not very responsive. Ultimately, the board president contacted an attorney and sent a legal letter.

Did that produce anything?

It did not produce the records we were looking for. But speaking to a longtime board member, I found out there were archives in a room in the basement, about 10 or 12 boxes full of old files. This board member got two volunteers to help him sort through the boxes with my oversight. There was some stuff that was helpful, but most of it was from earlier management companies. It wasn’t the comprehensive information regarding the building's systems that I was looking for.

So what should boards be doing today to make sure their records are in good order?

I think clearly it's on people’s minds when they’re considering new management, because we're always asked about our transition team and how we transition a building. It's a very important question that should be addressed in the interview. As for the actual files themselves, a board can go to the management office and request that they be stored in their archives so they will be easy to access if there’s a transition in the future.