Managing Ultra-Small Co-ops and Condos Too Small To Count?

Managing Ultra-Small Co-ops and Condos

Despite the significant number of small condo and association communities that exist in Illinois, and in the Chicago area in particular, residents of these buildings would not be blamed if they felt a bit neglected with all of the attention that larger high-rises and mega-dwellings receive. 

According to Donald Kekstadt, AMS, PCAM, CEO of Associa Chicagoland, there are roughly 11,500 associations in Illinois, and the vast majority of those associations are small enterprises with 10, six or even three flats. When it comes to operating, managing and maintaining these buildings or communities, though, size can be a misleading factor. “These buildings have real needs,” says Kekstadt. “And they’re the same needs as the 150-unit buildings.”

Tairre Dever Sutton, president of TAIRRE Management Services, Inc., based in Des Plaines, agrees that the issues faced by residents are the same, regardless of the number of units involved. “If one pipe breaks, it’s still a pipe break,” she says. The difference is that in a small building, when that happens, everyone becomes involved in the problem, often whether they want to or not.

For managers and management firms, the goal is to provide a consistent, high level of service regardless of the size of the community served. “We approach this from a larger perspective, that our portfolio needs to be balanced,” says Darren Seefeldt of Good Steward Building Management. “So we don’t differentiate the amount of service or agents who serve the smaller associations. These properties have and deserve a level of service that shouldn’t be overlooked.” 

Same Needs...Fewer Resources

The fact that smaller condos and associations do face the same issues and requirements as their counterparts means they do face one particular difficulty that their peers do not and that is a severe limitation of resources, including matters of time, personnel and finance. 

“From our experience,” says Seefeldt, “we’ve come across numerous small associations—six units or less—seeking professional management, and to boil it down, their main frustrations deal with the scales of economy that they face. Smaller buildings still have common elements and the related repairs and maintenance similar to larger associations, and most times, the income doesn’t match up with the expenses to stay on top of repairs and incorporate a preventative maintenance plan.”

It can be challenging, too, for small communities to negotiate more beneficial agreements with vendors and contractors. “They have no leverage which can be difficult, says Kekstadt.”

Beyond repairs and maintenance, there is the day-to-day management of a small business operation, one that involves the homes and investments of friends and neighbors. “The business is fairly cyclical,” says Kekstadt. “There are elections, budgets, maintenance, mechanical systems. They have to comply with state statutes. To do an annual election for a six-unit building is the same amount of work as for a larger building.”

Small boards of directors receive no special treatment or considerations under the law either. “A three-person board still falls under state statutes,” Kekstadt adds. “They have to do reviews, audits, four meetings a year, the whole nine yards. It’s just a smaller economy of scale and they often can’t afford all professional services to help them.” 

There is not much chance of different small communities banding together to improve those economies of scale and all sign up with a snow removal service, for example, to reduce costs. “It’s really hard because (the communities) are still individual businesses,” Kestadt says. “They couldn’t do one massive contract.” 

Getting Personal

Living in a small condo or association often means closer relationships with neighbors. Personalities can clash and relationship conflicts can make the same types of things that usually fly under the emotional radar in larger buildings. 

“In small buildings, everyone is friends so when someone wants to spend $1,000 on a project and the other two board members say ‘hold on, we need to think about this,’ management often has to step in and smooth that road over,” says Sutton. She will work to help them see the difference between what the building or community needs versus what they or other individuals may want. “I’ll tell them we need to do X, Y and Z first and then we’ll see what the ‘wants’ are down the road,” Sutton says. “Sometimes you have to be the voice of reason.” 

Sometimes the issues arise because in a small building everyone inevitably knows everyone else’s business. “You don’t have anyone at arms’ length,” says Kekstadt. “What if someone doesn’t pay their assessments? You have to turn them over for collection. Foreclosures and things like that happen and it can get difficult. When you manage on your own, you have to deal with this.” 

Knowing how to handle difficult situations can be key to a healthy community. “Conflict resolution is imperative to the well-being of an association,” says Seefeldt. “In an urban setting, there can be inherent tension simply due to the proximity of the other unit. While a resident in the unit above may think they are enjoying a movie, the resident below may take personal offense to the amount of noise as they are trying to get rest for their second shift job. In this scenario, no one is technically ‘wrong,’ but it’s a reality. Successful associations not only follow the declarations and set up reasonable rules, but they create an environment where unit owners can be listened to.” 

And that is where managers can help. “Many times, we feel our job is to diffuse the tension between neighbors when conflict arises and to help them come to a solution that they can both agree to.” 

Help on the Way

While many challenges face small communities, there are also great positives, stemming mostly from that sense of camaraderie that can arise when life is going smoothly. “The benefits definitely trend to being a more tight knit community,” says Seefeldt. 

“Sometimes,” notes Sutton, “in these small buildings, they care enough that it becomes a team effort and that’s a good thing. They’re more invested and more of a team.”

Even in communities that get along flawlessly where everyone is committed to the success of their home and that of their neighbor, there is still a matter of who can and will do the work involved in running it. “Really, it’s how much do you want to dedicate to your building,” says Sutton. In small buildings, it becomes a matter of either investing the money in outside help or dividing the tasks among the residents. 

“They will do things themselves or not do things, but eventually the roof will leak and someone’s got to step up,” says Kekstadt. Depending on the demographics of the building—say, one populated by older residents—there can be difficulty in getting that work done, in finding the money and working with vendors. 

Even when residents volunteer to take on responsibilities and duties, it can be a difficult position to stay with in the long run. “The detriment is that after a while, there’s a lot of burnout and the people who have stepped up in the past have either moved, or are just wearing of dealing with what can sometimes be a full-time, unpaid position,” says Seefeldt. 

Fortunately, help is available with many management firms looking to find ways to accommodate smaller communities and more modest budgets. And that is a good thing, especially when it comes to financial management. For small buildings looking after their own books, there can be issues of trust. “Who’s watching for the foxes in the hen house?” says Sutton. “Who’s watching the money? There’s no one doing that with self-management.” 

That is why, she says, “I would never advocate that a building not have some sort of professional management services, even if it’s someone just doing the books.” 

Certainly it may not make financial sense to hire a full-time management firm to look after the day-to-day needs of a small building, as prices can be beyond what individual unit owners can afford. “This is definitely a challenge,” says Seefeldt. “In most scenarios, property managers set up their fee structure based on the number of units in a given association. And the amount of time a property manager might spend on a six-unit building could be comparable to a 40-plus unit building per month, based on need.”

Fortunately, says Seefeldt, some smaller firms such as his own can add small buildings to their roster of clients.. 

Another option involves a la carte services, which can play a great role in helping the overwhelming become much more manageable. Kekstadt’s firm offers a “financial plus” program to help with payments of bills, assessments and other back office needs.

Sutton’s firm offers full customization to accommodate smaller buildings. “If someone says, we just need two hours of your time a month plus help with accounting, we can do that,” Sutton says. If actual time spent goes above and beyond that agreement, then an hourly fee is assessed. 

For the residents of small condos and associations, there may be upsides and downsides to the close-knit life but no doubt the goals remain the same for all involved: to create the best possible homes in which every neighbor can live in harmony.

Fortunately, with so many management firms aware of the unique needs of these boutique communities, more options than ever are available to help with governance, finances, maintenance and even those broken water pipes that crop up from time to time. 

As residents of small buildings know better than almost anyone else, just about anything can be accomplished by working together—especially if that includes a bit of outside help to lend a hand.  

Liz Lent is a freelance writer and a frequent contributor to The Chicagoland Cooperator.

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