What's smarter for a New York apartment building: self-management, or bringing in a third party?
Self-management or a third party managing agent: Which is the better option for my building?
The answer to this question largely depends on the size of your building, among other details, but generally speaking, having an outside party handle management tasks can save the board a lot of headaches, says Steven Wagner, a co-op and condo attorney with Wagner Berkow LLP and a longtime board member of his own 420-unit Manhattan co-op.
"I have represented many co-ops and condos that are very satisfied with their managing agents, and I've represented buildings that have been very satisfied with self-management," says Wagner. "The opposite is also true. It really comes down to who the agent is."
That said, while some buildings either have an exceptionally skilled individual handling management tasks, or are simply so large that they can hire a full management staff all their own, for many buildings, says Wagner, "I think that for the most part, having third party management is a good choice."
This is for a variety of reasons, the first of which is that hiring a third party will save the board—a volunteer organization, after all—from the hassle of administrative tasks such as billing, servicing owners' apartment issues, organizing meetings, compliance with legal requirements, and general maintenance. Also, with an outside managing agent, you're not likely to get left in the lurch because someone isn't available when an urgent issue comes up.
"There is typically a deep bench at a management company, so that if a situation comes up where your site manager isn't available, it's likely the management company will have somebody else available who has experience and can help. This wouldn't be possible if your coop or condo were self-managed," says Wagner.
Unsurprisingly, a third party can also mitigate potential conflicts between neighbors. "If there's a problem, you don’t want to be accused of gunning for one neighbor against another. You want an objective outside party to handle it," says Wagner.
And while the board will have to shell out for the services of a managing agent, ultimately, a good agencty can end up saving the building money, as they often stay on top of cost-saving programs that can improve energy efficiency or streamline insurance costs, for instance.
"It's hard to estimate the cost, because very often agencies can save you money to offset the cost of management fees," says Wagner. "Hopefully they save you more money than they cost, and save the board time and effort in dealing with issues board members might not be experienced in.”
There are some excellent management companies whose services are available at a reasonable cost. The key is finding one that has experience in the types of issues presented by your coop or condo and is able to provide the level of service and commitment to your building that will satisfy the board and the budget.
New York City real estate attorney Steven Wagner is a founding partner of Wagner, Berkow, & Brandt, with more than 30 years of experience representing co-ops, condos, as well as individual owners and shareholders. To submit a question for this column, click here. To arrange a free 15-minute telephone consultation, send Steve an email or call 646-780-7272.
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