Management fees are generally in the top five of the highest expenses within a Condominium Corporation’s annual budget. As volunteers on the Board, you each have your own personal expertise, but require the assistance of a professional manager to guide your decisions, advise of your regulatory obligations and handle the daily tasks of administering the business of your property.
Who sets management fees? Like every industry, condominium management is a competitive field. Management companies will set the fees (often this is done on a “per door” basis), but its very important to understand what is included in the price quoted and more importantly, what is not included.
What do fees include? Be VERY cautious in researching this aspect – unfortunately you may not, or even worse, sometimes may, get exactly what you pay for.
– The first consideration should be not only the company’s experience, but that of their staff member assigned to your property as Manager – often, you will find companies with lower fees because they hire administrative professionals and “train” them to be managers – you will want more than you’re paying for in this situation if you care about your investment.
– A second scenario regarding lower fees involves “buying” your business – the first year contract will be at the low-end of the market, but significant increases will be implemented each year thereafter (while it may seem like a cost-cutting measure to do this the first year and then change to another company, you will cause no end of grief and substantial expense by constantly changing managers).
– The third situation involves a low monthly fee quoted up front, but remarkable extra charges incurred after the contract is signed – often, these are not even itemized – you will simply see hundreds of dollars in additional administrative costs on your financial statement each month. If and when you get an explanation of these costs, it is often a vague reply, citing photocopying, land titles costs, courier expenses, etc. While these are legitimate charges – make sure they are itemized, with copies of invoices or details attached. This practice will cost you many thousands of dollars more over the long-term than a slightly higher fee from another company with realistic monthly fees and transparent invoicing.
Where will we see the benefits of our management fees? You will see the benefits of hiring a reputable, ethical professional in your property values. Thorough, accurate financial and legislated record-keeping; attention to regular maintenance and replacement issues; enforcement of bylaws and an appropriate reserve fund will be worth far more to today’s savvy purchasers who often hire professionals to review the Corporation’s affairs in detail, prior to purchasing a unit in your property.
When should we be concerned about fees? Obviously, lower fees should set off some alarms; conversely, higher fees should be completely justified. The rule of thumb in any tendering process is often to throw out the lowest and the highest – where all factors are equal, this is the simplest method. Just be sure that you look very closely in comparing services, terms and critical practices as well as qualifications such as experience, consistency and prompt, regular communication.
Why should we research a variety of fees? Often higher-end or, the “good” companies, will offer flexible service contracts – if you have a 12 unit property – you may only need assistance on a consulting basis or perhaps partial management services. At the other end of the scale, a 400 unit high-rise with older bylaws, special assessments and multiple insurance claims, may opt for an all-inclusive, comprehensive full-service contract. Carefully review the services proposed for the price quoted and consider your needs – don’t pay for what you don’t need and make sure what you need is included and not priced as an extra – surprises in this regard are never pleasant.
How do we make sense of the fees? ASK the questions and be sure you get a satisfactory answer before you move forward. It’s always prudent to get answers in writing and if you’re uncertain about what to ask; speak to friends, family, colleagues or consult with the local professional organization or an industry advocate to get some ideas. Make sure you’re comfortable with a) the services offered, b) the apparent knowledge, experience and skill of the person appointed to your property and of course, c) with the fees proposed in relation to value for your money.
Remember that condominium management is not a creative process – there are some very set, critical tasks that must be accomplished by every manager. What you must consider, is the depth of knowledge, variety of experience, availability, commitment and professionalism that will allow you to be comfortable in trusting the guidance and assistance you’ll be paying for.