The Ultimate Do It Yourself Project Self Managing Your Community

The Ultimate Do It Yourself Project

 Convenience and saving money are just a couple reasons why an association would  choose to self-manage a property. Though, outside managing firms and property  managers are hired and employed for good reason. The job requires collecting  monthly condo fees, hiring and managing staff, responding to residents’ issues, among other expected and unexpected tasks. Before a board chooses to  self manage, there are many factors to consider.  

 The Pros and Cons

 The primary advantages of self-management are a significant expense savings for  the association. “The biggest benefit I've found after working with self-managed associations is  cost,” says attorney Charles T. VanderVennet, whose practice is in Arlington Heights. “However, the associations that decide to [self-manage] must really be willing to  put in the time and labor that management would do for an association in order  to save that money.”  

 Another benefit of self-management is the ability to take control over the  direction and operations of the building. Often, management companies have  their own set protocols for dealing with delinquencies or hiring contractors  that may conflict with the needs and preferences of a particular board. “The advantage is that you are in total control,” says Angela Falzone, a property consultant at Association Advocates, Inc., a  Chicago-based firm that provides residential property consultation and project  facilitation services. “You don't have a person to pass the buck to so you get to know everything that's  supposed to be done. However, a self-managed association will have to follow  the same laws as professional managers, they can't make it up. So while you can  be in total control and you can make decisions, it's still going to be based on  the law and the declaration around your documents.”  

 The direct involvement required of self-managing boards can create very  committed, aware and engaged board members presuming it is run properly and efficiently, says James  Erwin, a Chicago attorney and the founding partner of Erwin & Associates, LLC. “This can create a better sense of community because board members are  communicating well and often with their ownership. If a self-managed community  is running well, it means they have developed a system for communicating and  responding effectively with their ownership without overwhelming themselves.”  

 A self-managed board may be more involved with its residents, since they are  neighbors who are in charge, but having an emotional involvement can be tricky.  Falzone says that often it is very difficult for board members to face other  owners when they are delinquent or violating the rules. As a consultant, she  receives many phone calls from board members who are hesitant to fine or  reprimand their neighbors. “That's very, very hard for owners to do on owners. And what we try to explain to  them when I teach self-managed seminars is, use the law as the third person.  This not a we and you. This is you doing your job. And the job says that I have  to keep the property safe, I have to retain the value, and I have to keep it  maintained. This isn't me against you, this is me doing my job. To take that  personal stuff out of it is very difficult for some self-managed boards, very  difficult.”  

 VanderVennet, who has served on a board in the past, said “it was difficult turning to your neighbor, who watched your kids or took care of  your home while you were away on vacation, and tell them they are late on  association fees, for example. Management is often the buffer that can provide  that policy discussion or ultimatum or communication. It serves a very valuable  function in those situations, which then has to be taken on by board members  when it comes to the business side or operations side of administering the  condominium,” he says.  

 That being said, it's not advisable to be cold and unforgiving when serving on a  self-managing board. VanderVennet explains that a personal relationship is  still very much necessary in order to foster a sense of community but when it  comes to finances and compliance with rules and laws, the board needs to uphold  those.  

 On the flip side, self-managing a building can be very challenging, especially  to a board, which does not have extensive experience. “It is a disadvantage in that it is very time consuming. The board member  responsibilities are heavier without a professional managing agent,” says Falzone. Catching up to speed with the skills and knowledge of a managing  agent can take time and money if you have to take classes or obtain certifications, she says.  

 In terms of expertise, VanderVennet has observed that self-managing boards have  sufficient skills in accounting and bookkeeping but fall short in expertise in  structural components of the property such as masonry and roofing and knowing what building codes are applicable to  the maintenance and repair of those elements. “Those are things that owners just don't know. So when they are budgeting for a  project, their ability to budget appropriately may be hampered by this lack of  knowledge.”  

 Another challenge for self-managed boards is effective leadership transition,  Erwin says. “A self-managed board can run well for a couple of years and then it can fall off  a cliff if it is not handed off to another board that has learned and properly  understands the operations.” Here, sufficient training and education come into play once again.  

 Industry insiders suggest that as associations determine the viability of  self-managing that they seek education through mediums such as the CAI  (Community Associations Institute) or the Institute of Real Estate Management  (IREM). Falzone advises current and prospective self-managing boards to keep  current on information and regulations by attending expos, events and seminars  targeted to property managers as a way to update their knowledge bank.  

 Self-Managing Factors to Consider

 Often a confusing topic for an association considering self-management is  considering whether or not the size of the community should be the determining  issue. In some cases, for very large building or high-rises, hiring a  management company or even a part-time manager doesn't cost much more and  results in a smaller headache for the board. “A larger association could fit management fees easily into their budget if they  needed to,” Falzone says.  

 But self-management, with the right tools, attitude and board members can be  done successfully in almost any sized property. “Size doesn't matter as long as the protocols and the training are in place. If  [board members] know how to do it, they can do it whether it's two units or 200  units,” says Falzone.  

 After considering the size of the property or association, the next set of  variables to be studied is special circumstances unique to a respective  association. If the building has commercial components, Erwin advises boards to  really think twice about self-management as commercial tenants bring a whole  new host of liability issues, rules and laws that the average board member may  not be familiar with.  

 It is also important to take into account the makeup of the potential board.  Professionals who work full-time and have families may not have the time  necessary to devote to such intimate operations and as industry experts will  stress, self-management is very time-consuming and requires large time  devotion, he says.  

 Erwin says many self-managed associations that do not hire a full time property  management company, pick and choose services “a la carte.” This can be a good option for boards that have a tight budget but would still  like professional assistance with upkeep and finances. “Some provide the accounting component, some provide just the contractor network.”  

 Falzone also advises boards that have an interest in self-management to  outsource at least some of the operations to a manager, especially accounting  and finances. “I live in a nine-unit townhome complex and there's no way we could afford a  management company or be able to find one that would take us full-service. We  have outsourced our accounting. That we can do and that's what I highly  recommend all self-managed associations to do. Get that off your plate,” she says. A guide to self-management can be found on their website:  www.association self_management.html.  

 VanderVennet adds that associations can also seek guidance with a management  consultant that can assist them with budgeting and project management. “Just like they would ask an attorney or accountant or a plumber certain kinds of  questions, perhaps they can work with a consultant who they can bounce ideas  off of or seek information on a project by project basis.”  

 Self-Managing Applications

 Aside from burnout and the possibilities of self-managed entitlement that leads  to laziness or oversights, poor recordkeeping is often a problem as each  successive board has specific approach to management and bookkeeping. Many  self-managed buildings will hire an outside bookkeeper to take care of the  records and finances.  

 This approach to association management is not a new practice and occurs all  over the nation—so much so that there are companies that cater to this niche segment of the  industry. Buildium, for example, has developed software that is used to manage  more than 500,000 residential units in 31 countries worldwide. The Boston-based  company has software for both property managers and associations. The latter  software program, which can be tested on a 15-day free trial basis, handles  properties from a few units to 1,000-plus units.  

 Whether a board elects to use a vendor for a contained software solution, as a  self-managed association they will have to deal directly with contractors which  can be cumbersome. Boards are advised to get multiple bids with vendors as well  as extensive research online, through references and by asking other properties  what vendors they use. If you do happen to be content with a particular vendor,  it is important to maintain a good relationship with them. “I know sometimes not only just self-managed, but sometimes boards think that  when you're supposed to get three bids as a vendor. That means that every  single time you have electrical work, you go out and get three bids. That is  not the way this works. You get three bids for the first project, you find an  electrician who gets familiar with your building, knows your wiring, knows your  system. You hang with that guy. I mean, that's what a good manager does. A good  manager develops relationships,” Falzone explains.  

 Self-managing a condominium or HOA certainly has its challenges but could be a  viable option for well-organized and knowledgeable boards looking to save  money. It is important to consider the skills and circumstances of your  building to determine if self-management is right for you.   

 W.B. King is a freelance writer and a frequent contributor to The Chicagoland  Cooperator. Editorial Assistant Maggie Puniewska contributed to this article.  

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