The Fee Fighters
I had a telephone conversation with Chris, one of three founders
of the start-up consultant group The Fee Fighters
who will assist
boards of directors review their expenses, line-by-line, to find ways
of trimming costs.
Chris cleared up a few concerns I had after reading a recent Toronto Star
article about their cost-cutting process. This is what Chris had to
say.
Reserve Funds
The first priority is to have a healthy Reserve Fund and to continue
making regular contributions to it. Only when that has been done, can a
board look at trimming costs.
Monthly expenses
will rise
The first success was at The Toy Factory which they believe now has the
lowest monthly common expenses per square foot of any condo with
similar amenities in the GTA. They cut the expenses by 30% for three
years and raised the
monthly expenses by 10% last year due to inflationary factors. The
property values have rose by $10,000 to $25,000 a unit
Condo boards
Many condo directors have no experience in directing a corporation that
is worth tens of millions of dollars and has a million dollars or more
annual cash flow. There are condos that are bleeding money everywhere,
monthly expenses are 90¢ a square foot and there is zero understanding
of where the money is going.
How do
you find savings?
The management company has their affiliates or associated companies
working for the condo corporation and the board does not know if they
are getting good value for their money. In many of Toronto’s condos,
the residents who have solid business experience are too busy making
money to sit on their condo’s boards. Many volunteer directors don’t
have these skills and there is no manual to show them how to
efficiently manage a condo.
Cutting services
The Fee Fighters do not lower fees by cutting essential services but by
finding alternative suppliers and suggesting cost improvements. They
work well with their property manager.
Owners are
frustrated
Some condos do not hold AGMs, don’t follow the rules and cannot tell
the frustrated owners where their $500 a month is going.
Who is calling
The Fee Fighters?
There are condo boards that are looking for help in reducing the
monthly expenses and they get calls from frustrated owners who feel
that their boards are not acting in their best interests.
Who is their
market?
They are just starting up but they see their market being condos that
are less than 20-years old, are paying 60-90¢ a square foot and have
large numbers of rented units.
What are their
services?
The Fee Fighters work with the directors going through all the
expenses, line-by-line and seeing where there are potential savings.
They look for contracts that appear to have inflated pricing. Those are
the areas are carefully reviewed.
A once they have conducted a review, they work with the board with the
implementation of those ideas. They then give the board a template to
follow.
How does Fee
Fighters get paid?
They charge 25% of the first year’s savings. At the end of the year,
their services should no longer be needed, as the board should be able
to follow the template and work on their own.
What is unique
about Fee Fighters?
Efficiency consultants have a long history working in business and the
public sector. We are the only efficiency consultants, that we are
aware of, that brings this specialty service to condominium
corporations.
Why are you
unnamed on your website?
We are all employed full time and we see The Fee Fighters, at least in
the short term, as a sideline. It will take time before we will know if
it will be a viable enterprise.
A letter
from The Toy Factory
Here is a letter that was sent to a Toy Factory owner:
February 24, 2015
As you may be aware, on Valentines Day (Sat Feb 14 2015) an article was
published in the Toronto Star, on the front page of the Business
section featuring the Toy Factory.
The article references data demonstrating that the Toy Factory
maintenance fees, are not only the lowest in the entire GTA for a
building with comparable amenities, we are actually #2 in the entire
GTA on an absolute scale...measured against over 4,400 condos. We have
been tracking as number 1 or 2..for 3 years in a row.
I hope you agree, this is no small accomplishment. And the
corresponding impact on property values (as measured against the rest
of Liberty Village) has been considerable. So it is seen as a DOUBLE
BENEFIT, by virtue of (1) paying less fees and (2) the increase in
asset value.
I believe this information is valuable for all of us, but specifically
if your intentions include either refinancing, or selling your Toy
Factory property. This information may be vital in your discussions
with agents or mortgage brokers etc.
For context, although our fees have recently increased, and may
increase again on Dec 1st by 10%...we are still tracking at almost HALF
the current GTA average, which is $0.59 per square foot.
Obviously, this article has created a huge discussion province-wide,
regarding inflated maintenance fees. The feedback has been
overwhelming. When you consider the number of residents and buildings
involved, the waste could well exceed an astronomical amount of $2
Billion.
I hope you are keeping warm through this frosty winter (although not so
warm in our hallways), and that this information was of value.
Sincerely,
Craig Gagliano
President, Toy Factory
The Fee Fighters
Website: http://www.thefeefighters.com/
e-mail: http://www.thefeefighters.com/contact/
Telephone: Chris 416.725.0458
Comments
from readers
Sorry but I am a bit disappointed with this current—Condo News
e-mail—great publicity for them (The Fee Fighters) but these
individuals
won’t even revel their names. In your article it states they are the
only “efficiency consultants” etc ... . Without their names how do you
even know they are efficiency consultants and what are their
qualifications?
Here is an e-mail I sent to Susan Pigg, the Toronto Star reporter:
February 20, 2015
| From: |
Tom Lepage |
| To: |
spigg@thestar.ca |
| Subject: |
Condos and
low fees |
Good Afternoon Susan
I was disappointed in the article ‘Maintenance fees take a toll
on Toronto condo owners’ only because once condo owners read anything
in a news paper they believe it must be true. I am a manager of a
LinkedIn Group called Condo-Ology Network and I have copied my comments
regarding the article below if you are interested.
What we really need is our provincial Realtors to break down monthly
condo fee into two distinct usages/requirements 1) Monthly amount
necessary ongoing operations; and 2) Monthly contributions to the
Corporations reserves. Then and only then can the public understand how
their monthly condo fees are being used.
Craig Gagliano states “What’s needed, he stresses, are more condo
boards with the collective courage required to make difficult
decisions”.
There is no courage required for a Board to unilaterally reduce ongoing
monthly condo fees cost by cutting comfort, services and to jeopardize
long-term financial stability. Cutting cost is only meaningful, if and
only if, all other various operational aspects of the Condominium
Corporation remain the same.
A Great Board not a courageous Board (with or without fee management)
continuously seeks value for all expenditures. In addition of
continuously seeking value, a great Board analyzes various proactive
options which may include reducing or increasing ongoing services BUT
only to the point of a well prepared and logical presentation to the
Owners. Eliminating comfort and services must be approved by a majority
of the Owners and not by the Board.
A Board that reduces comfort and service in order to reduce monthly
fees without Owners approval is not a courageous Board it is a
Directorship.
Reserve Fund Contributions
1) From the Article - It’s not a question of bleeding reserve
funds, but “bringing the engineer onside with a new view of austerity,
as to how to meet the new limits prescribed by law (in the reserve
fund) and protect the interests of the owners.
2) From the Article - Some condo residents, like Gagliano, have
come to believe it’s better for buildings to impose the odd special
assessment—a one-time fee for unexpected expenses—than continue to
boost monthly fees.
Hard to believe the above two comments can be used in the same article.
In all of my years in the condominium management business, I would
guesstimate that well over 90% of owners that I had the pleasure of
working with would rather pay an extra monthly amount to avoid an
unknown special assessment. This has been my experience but every
condominium corporation is unique and at the end of the day it should
be the majority of Owners that should decide if they want the chance of
a special assessment and not the Board.
Many, if not all, Condominium Corporations that require Court Appointed
Administration is because of cost cutting saviors’ of high fees many,
many years prior – appears that the Toy Factory Lofts has begun their
first steps to Court Appointed Administration.
If Realtors similar to those that own Condos.ca truly believe that the
odd special assessment is better than a realistic condominium monthly
fee are just as misleading as those developers who set their first year
condo fees low.
Tom Lepage—Collingwood
—†—
I am not sure I would flog these fee fighters, it says that they charge
25% of the first year's savings.
We're cut a lot of things in the past, only to see that we have made
things worse by the second or third year, and had to rehire staff or
re-do projects all over again at a higher cost.
Condo director—Toronto
—†—
I own a unit in a large condo building and our board collects over
$3 million a year and our fees goes up every year. I emailed my board
to suggest they look into this.
Alex—City Place
—†—
Morning! Not very impressed—not impressed at all—with the
"Fee Fighters". I don't think boards will hire them and besides,
the Toy Factory is not all that great of a success story. The road was
totally open and clear for them to cut common expenses, they had no
real problems to surmount at the time. And they constantly dial
expenses up or down whenever they want (down 30% up 10%). Now
THAT shit is expensive. Raising or reducing the common expenses
is EXPENSIVE.
Mary—North York
—†—
You look up these guys in one year and they'll be gone. They just
think the Toy Factory was an amazing challenge that only they could
achieve, but that's not true. Let them try a 40 year-old building or
something actually normal and difficult and less straightforward.
Elizabeth—Toronto
—†—
It still doesn't answer who Fee Fighters are. Who are the "we" behind
Fee Fighters? Why don't they disclose their identity? Why is it masked?
Why is there no bio on their website? Who are condo boards dealing with?
"A long history working in business and the public sector." What does
that mean? What do they have to support this statement?
What do they do in terms of the performance of the new contractors?
What about performance issues with the suppliers they recommend?
Who gets to evaluate when the savings occur?
Did you ask any of these questions? Or did you take everything at face
value?
More importantly, why are you giving anonymous people credibility? It
diminishes your credibility for promoting anonymous persons with
unproven results.
Thanks,
Condo owner—Toronto
The Fee Fighters face three major
criticisms; the difficulties
of comparing common expenses between different condos, their staying anonymous and doubts about
the Fee Fighters qualifications.
Condos.ca has opened up a can of
worms about condo fees. On their website, they now compare a condo's
monthly expenses with the average for all condos in the area. Monthly
common expenses have always been important to potential buyers but
Condos.ca is bringing it out front and centre.
If high monthly common expenses is a serious
problem (debatable), then The Fee Fighters are claiming that they may
be the
solution.
The first question is whether
The Fee Fighters can find savings in most condos, especially the older
ones.
I expect that the Fee Fighters
may
find a niche in Toronto's newer large towers that still have the
developer's contracts in place and are managed by the original property
management company; condos where an inexperienced board needs to get an
independent opinion to determine fair prices for services.
A second possible market will be with
older condos where the owners voted in a new board who needs help in
understanding the condo's finances and whether the old board was
getting fair value for the money they are paying.
The second concern is why the principals of a start-up condo consultant
company don't openly identify themselves.
Yet, this is not uncommon in the
condo industry. When I look up property management websites, many of
the smaller companies do not give the names of the company officers or
state who are the owners.
Some of them also suggest that they
can improve services and cut fees. Here are just a few examples:
http://www.affablepm.com/5.html
http://www.brilliantproperty.ca/
http://datsunpropertymanagement.com/
http://designs.sohomwebmedia.com/mock_ups/sue/dpc/xhtml/index.html
http://www.networkspm.com/
Finally, my readers are concerned
about The Fee Fighters qualifications.
It will be up to the condo
corporations to determine The Fee Fighters qualifications before
agreeing to hire them.
Finally, condo owners should know
that The Fee Fighters is not the only condo consultant service in the
GTA that offers similar services.
—editor
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