Hiring a PMC

I wish this was easy and all I had to say was check the Internet or a local condo trade magazine and pick any company that is a member of your local condo industry association as they will all do an acceptable job.

It is not that easy.

Property management companies
Management companies are like hotels; their services, marketing  and pricing runs from five-star operations at the high-end all the way down to flop houses.

The full service companies have specialists to handle bookkeeping and accounting (the back room), have years of experience and have relationships with reputable contractors. Many are great, others just okay.

Then there are small shops with a half-dozen or less employees who manage a couple dozen condos. They too can provide great service at reasonable prices.

There are some small one or two person companies that manage a half-dozen or less properties and they outsource the bookkeeping and accounting operations. Again, some are reputable companies that will delight you and others that are nightmares.

At the low end, you have a person or two who are just starting out or who are struggling. They have a cell phone, a virtual office—which can be little more than a mailbox—and a leased car. They may conduct most of their business meetings in the nearest coffee shop.

Condo property management is still largely a cottage industry.

A problem that the companies have is that they rely on the performance of managers and district managers who's performance can be hard to monitor and who can go rogue.

Searching for a new PMC
The board may look for some names on the Internet and ask three or four of them to submit bids. Perhaps the building's contractors, lawyer or auditor will recommend a company or a director visits a couple of nearby condos and asks them who manages their condos.

The prospective companies will ask for a tour of the property, talk to a couple of directors and get a feel for what the condo needs. They will try to determine what the board is looking for and why you are dissatisfied with your present management. Then they will prepare their quotes.

Industry accreditation
A management company that is a member of a provincial or state political lobbying association does not guarantee that that particular company has higher levels of ethics, experience, knowledge or credibility over a company who decides not to join such an organization.

That being said, there are a some awful "independent" management companies out there that should not be business.

The presentations
The three companies will make a sales pitch to the board. They will all promise great service, ideas on how to trim expenses and say they will provide the condo with an experienced manager.

After some consideration, far too often, the board will pick the company that puts in the lowest bid.

Some property manager companies will pay a kickback gratuity to the director, contractor or superintendent that gets them the contract. Watch out for this.

Due diligence
Far too often, the board does very little or no checking to verify the companies' reputation. They do not visit existing clients to see if they are happy with the services the management companies provide.

If your condo is a higher-end tower, you may not be happy with a management company that primarily services townhouses and down-market apartment condos.

Many boards do not even visit the management companies' offices and ask for a tour of the back room facilities, ask about the financial software that they use or check on where and how well the companies store their client's records.

(A few GTA-based management companies use financial software programs that are so old they run on Microsoft DOS.)

Ask for a tour of a couple of condos that are similar to yours in size and age. Also ask to see the latest audited financial records.

Don't go with the cheapest price. Too often, you get what you pay for.

When we hired a new company
At a 114 unit condo in Mississauga, a new board realized that they had performance issues with the cleaning company and the superintendent. Both had to go but the property manager wouldn't put in the needed effort to find replacements.

Then they had serious errors in the arrears report that the manager could not explain and which took a couple of months to fix.

They had other issues with the property management company and although the company had the contract for about ten years, they didn't seem to being putting in much effort in giving the new board the level of service that was expected.

They had to go.

The initial search
The first thing was to ask condo directors, lawyers and consultants for the names of three condo managements companies that they held in high regard.

1st stage
The condo secretary met the owners of the three companies off-site for a two to three hour breakfast meeting. If the secretary felt that they would be a good fit, the candidates were invited to Stage Two.

2nd stage
The owners of the condo companies were invited to the condo for a tour of the building. The president and the treasurer gave the candidates the tour. What the directors were looking for was what did the candidates saw that needed improvement and what their company could do to help them become better board members.

Two candidates were extremely impressive and the directors learnt more from listening to the both of them than they did in the previous two years working with the existing management. The third candidate did not make as good of an impression.

3rd stage
All three companies were asked to make a presentation to the five directors. The board had a list of questions that they prepared that were based on the questions that professional business managers ask during job interviews.

After the presentations, the individual directors waited three days before meeting. During that time, the directors checked the Internet search engines, asked contacts in the condo industry and read over the three proposals. They needed time to think.

After following this process, the five directors took over an hour to decide on the company that they thought was best for the condo.

Some hiring tips
Don't hire a company just because they submitted the lowest price. All the bids should be within 10% of each other.
Have the corporation lawyer review and make any necessary changes to the contract.
Check court records online to check on any lawsuits the company may have been involved in.
Insure that when on site, the manager is working on your condo's business and not on working for the other condos that she manages.
The board should keep its own e-mail account and website so they will remain active if the corporation changes management companies.
When hiring a management company, the directors should ask if there are any extra service fees; what are the printing and postage costs, fees to attend extra board or owner meetings and any other hidden costs.
Finally, mandate that any management company hired by an HOA certify that it has insurance against all misfeasance and negligence by management company's owners, executives or employees.
Ask if the company has a manager, presently on the payroll, that will be assigned to your building.
After picking the company, interview the manager that will be assigned to your corporation to make sure you are comfortable with him or her.

One manager, that was assigned to an upscale condo in downtown Toronto, had his house up for sale by the bank six years before the PMC hired him. A quick look on the Internet brought this up. Two years later, the manager was fired for corruption.
The board hires the corporation lawyer and the auditor and keeps them independent from the management company.
The corporation has its own separate bank accounts. It does not have its money pooled in the management company's accounts.
Ask if the property management company also manages individual rental condo units. If so, this can cause a conflict of interest.
Ask if the company, or its employees, accept finder fees or commissions from suppliers, energy re-sellers, insurance brokers or contractors without disclosing this to the boards.

The contract
The management company will submit a contract for the board's approval. The board needs to have their corporation lawyer review the contract and make any required changes.

A standard contract calls for sixty-days notice of when the board or the company decides to terminate the contract without case. A few companies want ninety-days and in unusual circumstances, a company may want six months.

I suggest that a board do not agree to any term longer than sixty days. A management company staying around for three to six months after being terminated can cause a lot of mischief and more than a few of them do.

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