Managers and Management Companies

This chapter on managers and management companies has been totally revamped as a result of the complaints, suggestions, and concerns sent by readers. These letters are analyzed in Readers Respond where many are also posted in several subsections.

Most managers, administrators, and assistant managers are affiliated with a management company. That is, although working for one or several condos, they are in reality employees of a management company, from which they receive a salary as well as benefits. In turn, the company has a contract with the condo corporation and receives a monthly fee.

This structure of employment has advantages but it also gives rise to several problems. These will be discussed later.

Managing condos is a challenging, interesting, and very worthwhile occupation. Managers’ role is multiple, varied, and requires the development of a wide range of skills. 

But, as we will see later, too many managers and management companies fail in their duties to the condo corporation and to individual owners. Furthermore, owners have no recourse when this occurs because the Condo Act is ineffective in protecting owners.

First, let's ask:

What Are Managers' Duties?

(a) To the condo

Managers are responsible for the maintenance and repairs of their buildings, and have to ensure that all systems are in working order. They supervise staff, do paper work, have the bookkeeping done by their management office, and see to it that owners pay their condo fees in a timely fashion.

Managers need to have good organizational and people skills.   Managers attend to owners' relevant needs. They are in theory also supposed to advise the board, plan for future maintenance, help find appropriate contractors for maintenance and repairs and seek bids. They have reserve fund studies carried out, plan AGMs, and may prepare the agenda for board meetings.

However, in practice, not all managers accomplish these duties. The less experienced managers as well as those who are not much invested in their work or have little knowledge do far less. As a result, board members, usually presidents, have to "pick up the slack," or else problems go unattended: When board members are themselves inexperienced or uninvolved, condos may be in double jeopardy--and this occurs more often than acknowledged.

In contrast, experienced managers as well as those who are truly interested in learning and enjoy the challenge of finding solutions to problems are a blessing for condos. They find ways of saving energy and money, are responsive to ethical boards’ suggestions, help inexperienced boards, and communicate with staff and residents effectively.

Managers’ usual workload may include one large condo or 2 to 5 condos depending on condo size. It is rare that a condo has one full-time manager on site 40 hours a week, especially when there is a superintendent and concierge on staff. Therefore, boards should expect value-added services from managers who have only one condo with less than 350 suites: They have more time than others managers and this one-site system is far more expensive.

With some management companies, an administrator is the equivalent of a manager. But in many other companies, an administrator or assistant manager requires, in theory, fewer qualifications. However, the reality is that many administrators are actually as competent as are many managers.  When on site in a condo, they often do much the same work as a site manager does and their role also varies accordingly.

Administration

Generally, when a building has an administrator rather than a manager, an experienced manager comes on site several hours a week to attend to building maintenance and contractors. This manager also has the role of planning for the future, is in touch with the board of directors, and may attend board meetings.

(b) To individual residents

Managers or administrators are the persons residents go to with requests for repairs to common elements, especially for exclusive-use common elements, such as their suite door, lock, security system, their heating or air conditioning system with noise problems, smoke that gets into their suite, dogs that pee on the corridor’s carpet, lost keys, etc.

Some condos have a high turnover of office staff because too many residents complain about so many things and are so uncooperative that managers or administrators become demoralized. As well, they are left with little time during which to carry out their regular duties. 

What Is It that Managers Should Not Do?

This section has been added because too many letters have been received on the following issues.

Managers and management companies

  • should not prevent owners from contacting the board of directors;
  • should not refuse owners' requests to see board minutes, AGM minutes, financial statements, etc;
  • should not charge fees to just show condo documents to owners;
  • should not impose special fees to punish owners who don't follow rules (unless a by-law has been passed and I am not sure that this is permissible under the Condo Act);
  • should not demand to inspect a suite before issueing a status certificate (suites are private);
  • should not sign cheques to themselves;
  • should not refuse to do repairs for damage caused by common elements, such as water leakages;
  • should not refuse to investigate noise complaints and ignore them;
  • should not talk or gossip against some residents with other residents;
  • should not side with boards who are engaging in unethical practices.

What Are Management Companies' Duties?

In general, employees at the head office of a management company do all the bookkeeping, financial statements, status certificates, emergency coverage after hours and during weekends and holidays.  Head office also provides a replacement when managers go on vacation or are ill.

Certain management companies are structured in such a way that they use few site managers.  Instead, assistants and administrators tend to office hours and an experienced district manager, responsible for 5 to 10 condos, spends several hours weekly at each condo to do the planning as well as supervision of maintenance and repairs.

One company uses a computer system: The site assistant enters all invoices and work orders, addresses, security reports, and resident requests on the computer. District managers have access to this material from other condos in their portfolio and from their head office. In theory, these managers are experienced, knowledgeable, able to analyze situations and make recommendations to the board. This may well be the pattern of the future—especially if the supply of competent and experienced managers does not catch up with demand.

Other managers work independently and do not belong to a management company or have formed their own small company. They then work for one to three condos. They may outsource the bookkeeping to an accounting firm or a management company. They may work from their home or the condo itself and they have little overhead, which is financially advantageous for a condo. This can be a great situation when these independent managers are highly competent because they are more focussed on their one or two condos. But if they are ill or take vacations or additional condos, complications can emerge because they may have recourse to totally inexperienced persons to replace them, even if temporarily.

Which is the Best System?

No system of management is the best currently. What counts are the qualifications and experience of the personnel, their desire to learn, dedication, and ethics. Some condo boards “swear” by a given management company because they have had wonderful managers from this company or, yet, a superb district manager. But another condo in the same area has had only bad experiences with managers from the same company: The president says, “I’ll never deal with them again — they are the worst.” (Click here for What Should Be Done to Improve the Management Situation?)

In a nutshell, the quality of site managers or administrators constitutes about 75% of the degree of satisfaction that a board of directors and owners will have regarding a management company or system of management.

Townhouse developments that are not linked to a high-rise condominium often have difficulties with managerial assistance. One reason is that they rarely have an office or manager on site. As a result, residents and boards may have difficulty contacting them. As well, some of these managers have many more condos to attend to. These issues are discussed in Factors to Consider when Buying a Condo, section on townhouses.

For further information, a section appears at the end of this chapter to highlight problems that occur as a result of incompetent and inexperienced managers: please go to Examples of Specific Management Problems that Arise (below).

Since this website has been posted, countless letters about incompetent managers have been received from owners, directors, and competent managers. To read these letters, please click here on Issues with Management Companies and Managers.

 

Problems of Conflicts of Interest, Accountability, and Qualifications

The problems with the management industry are threefold: the issue of allegiance and conflict of interest;  the issue of accountability to owners/corporation rather than just to boards; the lack of expertise and training of managers and administrators. The first two issues are rarely discussed but are very prominent in the letters received. Therefore, we begin with these.

Problems of Conflicts of Interest

There are two sorts of potential conflict of interest on the part of managers.

The first stems from the structure and ethical culture of management companies. Indeed, most managers and administrators who work in condos owe their allegiance to the management company rather than to the condo corporation they work for. They are in reality accountable to their company first and secondarily to the board of directors...and, far behind, to the corporation and owners at large.

In itself, this represents a conflict of interest. Let's explain this situation: Boards are in charge of condos and, as such, are the employers and the supervisors of the management company. In fact, they generally hire this company. However, as we see in the chapter on Boards of Directors, and particularly in Readers Respond, not all is well in the domain of boards.

A few managers have themselves written that their management company always sides with boards of directors, no matter what. Why? Because companies value their contract or "account" above all and want to keep the condo. This is a question of money. Going against a board's or a president's decision--even when wrong--might jeopardize the contract.

Thus, it frequently happens that the interests of owners/corporation clash with those of an inexperienced or unethical board. In such cases, the manager is more likely to side with the board, usually at the urging of her management company. Hence, owners in such situations have no recourse because both boards and managers are unreliable.

For instance, some letters describe managers who attempted to resolve a situation but were overruled by an unethical president or an ignorant board. Upon consulting with her company, the manager is told to do as the president said.

This being said, far more boards whose managers have severe problems of incompetence, lack of ethics, dishonesty, and even fraud and  kickbacks send letters than manaagers do about boards. Further, while 79% of the letters received since July 2009 point to problems caused by managers, 63% do about boards--although there is a 50% overlap. It does seem that there are more problems of conflict of interest and dishonesty among managers and management companies than among boards.

The second type of conflict of interest resides when contractors hired to service, maintain, and repair the various systems in a condo building are related to the manager or the management company directly or indirectly. This results in maintenance and repairs being carried out that are not necessary; in invoices that are padded; in contracts awarded without a bidding process; fraud and kickbacks--all of which probably costs annually tens of millions of dollars to condo owners in Ontario. For more on this widespread problem, please consult readers' letters in Issues of Fraud, Kickbacks and Conflict of Interest.

Problems of Accountability to Corporation

This problem has already been partly described above. It stems from the conflict that exists between boards' interests and decisions and the good of the entire corporation. 

Overall, the analysis of the letters showed quite clearly that problems with managers in condos tend to be more frequent with  boards who are inexperienced, or unethical, or not hands-on. Such boards are the least likely to make wise decisions and to properly supervise their managers for the good of the corporation. They are also the most likely to tolerate a manager's irresponsibility, lack of accountability, disrespect for owners, and conflicts of interest.

In contrast, an ethical, experienced, and hands-on board or president will not tolerate any nonsense and will see to it that a manager and the company do their job. Even with an inexperienced, and incompetent, and even dishonest manager, such good boards can well keep their condo in good condition.

Problems of Inexperience and Lack of Qualifications

This is the problem which is the most widely discussed. It is the most visible whereas the above problems tend to be hidden.

Many veterans in management as well as other experts agree that there is a crisis in the management industry: In part, it is a question of supply and demand. Too many new condos have been built within a very short time while too few competent and experienced managers are available. As well, it is an issue of lack of licensing and training. (Click here for What Should Be Done to Improve the Management Situation)

Currently, some companies cannot meet the demand for competent managers and are honest about it. They may, instead, offer the services of an assistant manager and this may work out well. But other companies hire managers who have absolutely no experience.  Still other companies even go so far as hiring managers or assistant managers who have been fired from a previous job or received poor references. Such persons may even be sent to condos that are in deep trouble.

These may be older condos that have under-funded reserves, or no reserves at all, or have debts and need countless repairs and replacements. Owners may not be financially secure nor well informed. These condos may be located in a difficult neighbourhood and have multiple problems that would need very experienced managers. Yet, they do not get them. (For info on providing support for management companies that have distressed condos, click here into What Should Be Done to Improve the Management Situation)

What happens when condos in general receive an untrained manager? It may take two years for a new manager to acquire enough experience and knowledge to do a reasonable job. This length of time is detrimental to condos. Inexperienced managers do not even know where to start because they are so far behind.

In the large correspondence received, only two owners did report that a management company had resigned in the face of a board's irresponsible decisions. As well, some directors also wrote to mention that their manager had pointed out potential problems in their decisions; because these managers were trustworty and knowledgeable, the board listened to them.

For further information, a section follows which highlight problems that occur as a result of incompetent and inexperienced managers.

Since this website has been posted, countless letters of complaint about incompetent managers have been received from owners, directors, and competent managers. To read these letters, please click here on Issues with Management Companies and Managers.

Examples of Specific Management Problems That Arise

Managers who lack experience and qualifications cause a great deal of problems for condos, their owners, as well as for the reputation of competent managers.

Problems for Condos

  • Poor record keeping. For instance, invoices cannot be found; new owners and tenants are not properly registered; minutes of board meetings go missing; financial statements are late; contracts are misplaced; no list of contractors exists; deadlines for contract renewals are not kept so that boards of directors barely have the time to study quotes; status certificates are not updated or are simply not given.
  • Condos fees may not be paid on time or collected. Rental fees for lockers, for instance, may not be collected for months, so that condos lose money.
  • Contractors may be called to solve problems that better trained managers would be able to solve with the help of superintendents. This is costly for condos because these contractors have to be paid. (Click here for Misuse of Funds and Fraud)
  • Various technical systems are not maintained because contracts are not renewed on time, contractors not paid, or yet managers may not even know that some systems exist.
  • As well, systems may fail sooner than normal because of lack of maintenance or improper understanding of how they work.
  • Or else, contractors may be constantly called in because neither the manager nor her/his staff can deal with even the tiniest of problems.
  • Other staff, such as janitors, may not be supervised and therefore may not do what they should. In other instances, they are allowed to do whatever they want... and very little of anything. 

  • The problems of conflicts of interest, fraud, and kickbacks are discussed in other chapters.

Problems for Owners

  • Rules may not be enforced. Managers and boards may themselves invent rules as they go or enforce only those that please them.
  • Fees may go up unnecessarily because of unwarranted expenditures.
  • Budgets and annual general meetings are not prepared in a timely fashion.
  • Owners may be refused access to condo documents and boards.
  • Residents do not receive information that could help them save energy, prevent them from causing damage to pipes or drains, prevent injuries. Energy saving initiatives undertaken under a previous management may no longer be carried out, which can have long-term consequences for budgets and owners’ fees.

  • It should be added that problems of lack of proper conduct towards owners and residents also abound: rudeness, refusal to follow up on owners' legitimate problems, and so on, abound.

Problems for Competent Managers

The status and reputation of competent and experienced managers is negatively affected by the lack of qualifications of too many other managers and by the unprofessional way in which some companies deal with condos.

  • These qualified managers would like to be respected as professionals but the structure and standards of the entire industry works against this. As a result, their status is not as high as it should be and they are not taken as seriously as they would otherwise be.
  • Some feel very conflicted when they hear that boards justifiably complain about unqualified co-workers. Some managers surreptitiously try to “make it up” to condos by helping with suggestions, even though they are not paid for this. Some change companies in the hope of being with more competent persons.

Gift Package

  • In turn, the high visibility of incompetent managers with unprofessional behaviours means that educated young persons seeking a worthwhile occupation with a good social status do not choose to go into management, even if this type of work appeals to them.
  • This certainly does not help increase the supply of competent managers. Indeed, a solid mass of competent managers would see to it that the companies that hire them become more ethical, qualified, and accountable.

Problems of Management Company Turnover 

Another serious problem occurs when condo corporations change to another management company. You would think that the old and the new managers would meet so that there is a turnover of knowledge, wouldn’t you? Actually, this may not happen. All that may be turned over are those documents that are generally kept at head offices.

However, this lack of transmission of knowledge may not present much of a problem when the new administrator or manager

  • is experienced or well trained: he or she will then know what to look for;
  • is willing to ask questions to the board in order to understand what has been achieved in the past and what was being planned;
  • is mature enough to realize what he or she still has to learn;
  • and is backed up by a management company with a policy of accountability to their condos’ boards of directors and corporation.

Unfortunately, as seen above, what condos too often get is an inexperienced person who needs a great deal of training and does not even know where to begin. Or yet, they get a manager who has been "kicked out" of another condo for incompetence or unethical practices.

In contrast, competent managers, upon hearing that they will be transferred to another condo, make it their duty to visit the building or townhouses on their own time and seek information from the manager in charge. (This should actually be a management company policy.) At times, it is the outgoing manager who refuses to help the incoming one because of anger at losing the condo contract.

These same mature managers meet the staff and board president before, ask questions, and begin planning.

Another problem arises when a management company takes over a condo that has already achieved a lot and behaves as if this condo was totally new and had never done a thing before.

When this happens, the new management company may bring in all manners of new forms, notices, and standards that end up confusing everyone because the condo was already very experienced. It is actually surprising how often this happens. The new manager may shrug her/his shoulders and say, "This was before my time," as if the past does not count and proceeds to reinvent the proverbial wheels. Very bad for business! Much time is wasted.

Managers and management companies are paid to adapt to a condo’s situation, to repair it if it is failing, but to continue in its standards when it is successful. They are not paid for the building to be turned upside down to adapt to them. Unfortunately, in times of scare supply and high demand, condos do not have much of a choice and have to put up with a great deal of incompetence.

What Should Be Done to Improve the Management Situation?

Management should be dragged into the 21st century era of professionalism and credentials. Management has to become the real profession that it deserves to be (see last section below).

  • Colleges and universities should offer degrees in property management. This would provide a more systematic education. Such degrees or diplomas could take place within faculties of administration or even business schools.

Diploma

  • However, seasoned managers with years of experience and who are extremely knowledgeable should receive credits. After a meeting with an accrediting board, these highly qualified persons should receive an accreditation and an equivalency diploma or degree. Otherwise, the condo industry would lose some of its best persons.
  • This education would include a “stage” or internships during which students would work in various types of condos (and apartment buildings) under the supervision of a professor and experienced managers. The model of faculties of education, nursing, and social work can be considered in these respects.
  • A professional group should exist that would accredit managers, as is the case for nurses or social workers, under an appropriate government ministry’s jurisdiction.
  • After obtaining a diploma or a degree, graduates would begin paid employment as assistant managers and receive proper supervision from an accredited management company. They would become full managers after a few years of experience.

Management companies should be regulated (see below).

  • Mandatory evaluations of managers and management companies should be carried out yearly by boards of directors with the understanding that companies are bound to meet reasonable standards and have to make an effort to improve a deficient situation.
  • A special independent Condo Office (independent from interest groups), or a Condo Ombudsman, should receive and enforce these evaluations. As well, the Office would support competent managers who encounter difficult problems in a condo.

Regulate the Management Industry

Indeed, a large source of problems for owners in Ontario and other provinces resides in the lack of regulation and licensing of the management industry. As things stand, anyone can start a management company and anyone can become a manager—and, often, anyone does...!

While many management companies, both small and large, are very competent, others lack competence and even integrity. Management companies should meet certain government standards and should be regulated by the Ministry of Consumer Affairs. Efforts are made in this direction by groups of management companies themselves but they have no authority in setting and enforcing standards. They are voluntary groups that, in effect, can easily be derailed by conflicts of interest from within the industry.

Professionalize Managers

Currently, there are many avenues that lead to becoming a condo manager or administrator but none involves a commensurate education or professional training resulting in a degree.

At times, management companies turn to office staff who may be qualified in accounting and general record keeping, and promote them to the management of one or more condo buildings. Another avenue taken consists in management companies transforming superintendents into managers or administrators. Yet another avenue sees concierge staff become managers.

There is nothing wrong with promoting persons or with persons changing their line of work. Quite the contrary. However, what is wrong here is that this occurs without the necessary education and training. And condos pay the price.

As well, on-site “training” is usually detrimental to condos because it is not backed up by management companies. In fact, some companies discourage and downplay the efforts of conscientious boards who try to train inexperienced managers.

Let’s think of it this way: Hospitals do not transform janitors or secretaries into nursing staff! If a superintendent wants to become a nurse or an assistant nurse, he returns to college for a proper term of education and training.

Similarly, secretaries do not become instant business managers: They return to college to acquire the necessary education or, yet, go through years of acquiring experience before reaching this goal.

Condos must be the only multi-million-dollar businesses around that are managed by persons without commensurate credentials.

Support for Management Companies Faced with Distressed Condos

Some of these buildings end up under court-ordered administration because their situation is so desperate. But were the Condo Act improved to include more oversight, and with a Condo Office or Ombudsman in charge, owners, directors and managers who can see the handwriting on the wall would have recourse long before the situation becomes extremely detrimental.

Self-Management

Some condos, especially small ones, decide to self-manage. How does this work?

An owner or one of the board members, generally the president, takes on this role for a stipend. This is permitted by the Condo Act but a by-law has to be passed regarding remunerations. In addition, this by-law has to be renewed as the years go by.

One president said that it was less stressful for him and less time consuming to be the manager:

“I am doing in the same number of hours what I used to do as the president plus what the former manager used to do. I waste less nervous energy than when I used to be repeatedly asking that things be done when I knew they weren’t getting done. My time is more efficiently spent doing what needs to be done rather than worrying that it’s not getting done.”  He has about 185 suites and does all the work in 20 hours. Before, the manager used to put in 25 hours while the president put in 15! And the current president spends only one hour each week monitoring the situation.

But it is certainly a risk for an owner to undertake such a job because he or she is constantly on call and at least one other board member has to act as a substitute for vacation and in times of health problems.

Needless to say that self-management is not for everyone. The owner/manager has to set boundaries so that residents do not show up at his suite and do not constantly approach him with complaints while in the pool or in the gym. One also has to be careful to avoid conflicts of interest and treating some residents better than others.

It is advisable, but not mandatory, that a director who becomes the manager resign from the board position to avoid conflicts of interest created by joining the two roles of employer and employee. A president-manager is not generally well supervised by the board. This could be a problem in terms of misuse of funds and lack of accountability.