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The fight club: Why your building should be more like a rental (Part 2 of 3)

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Last week we hypothesized that co-ops and condos would be better off if their managing agents--like the ones in charge of rental buildings--were more keenly motivated to suggest and carry out quality of life improvements.

This week, we look at whether co-ops and condos should behave more like rentals when it comes to resolving disputes among residents.

Once again, we’re tapping into the brain of Jerry Kestenbaum: As a co-op board member for two decades and the founder of BuildingLink--an online communications tool for apartment buildings used by several hundred NYC co-op, condo, and luxury rental buildings--Kestenbaum has evolved into something of a Kremlinologist when it comes to vertical living.

In his view, three big inefficiencies mar the handling of disputes in co-ops and condos:

1.  The desire to set an example:   Boards often act too aggressively and confrontationally out of fear that other residents might be tempted to get away with something.

“In reality, other residents are rarely aware of or looking at the situation to learn any lesson at all from it, and in many cases, scenarios for possible pragmatic compromises early on are ignored by the board,” he says.

When principle matters more than resolving disputes as quickly and cheaply as possible, “the result is more protracted lawsuits and much more money spent on legal fees than might be necessary,” says Kestenbaum. “I have seen a good number of $3,000 disputes get handled in a way that cost the building $15,000 or more in legal fees.”

2. The buck stops nowhere: In a co-op or condo, the cost of a bungled dispute isn’t necessarily borne by the bunglers.

“There’s no ‘tenant’ who doesn’t renew his lease and moves out, there are usually no damaged reputation costs to the building, and most importantly, the legal fees get distributed among the very broad group of all owners, not shouldered by the managing agent or specifically by the board,” observes Kestenbaum.

3. Form letter abuse:  Too often, a board’s kneejerk response to a complaint is to instruct its managing agent to “send a letter” to whomever appears to be causing the problem, such as a neighbor making too much noise.

These boilerplate communications rarely invite discussion of another possible side to the story, so they exacerbate tensions, especially if there is already an ongoing dispute between the resident and the managing agent or between two residents.

Yet form letters are sent because they are faster and easier than taking the time to investigate and craft a customized response.

“The managing agent has no real incentive to put in extra effort to avoid conflict down the road,” says Kestenbaum, who last week proposed a performance bonus as a way to motivate managing agents to work harder in areas like this. “He is not one of the two parties involved in the complaint, nor is it his money if it turns into a legal dispute.”

In a rental building, by contrast, all three inefficiencies outlined above are virtually absent.   In part this is because the landlord--not a diffused group of shareholders or unit owners--shoulders the full cost of a badly handled dispute. It's also because the property manager’s top priority is to keep the landlord’s pockets full—both by defusing conflict before it hits the courts and by keeping the customer happy enough to renew the lease.

“If Renter A is complaining about noise from Renter B, the property managers say, ‘How can I make them both happy?’” says Kestenbaum.  “They work hard to get to the point where they're not dealing with angry, alienated people."

What do you think, board members, property managers, and owners? Would this approach work in your buildings?

Related links:

Why your building should be more like a rental (Part 1 of 3)

Coming soon to your co-op or condo: Mandatory time-outs

Soothe your savage neighbor with (free!) mediation

Co-op board wars getting you down? Detente is a phone call away

Curing a dysfunctional co-op

 

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