Just like breaking up with someone you dated you can procrastinate and not do it because you don’t want to deal with it, sometimes it is comfortable staying with someone you know rather than finding someone new or you talk yourself into staying saying it’s not that bad – until you are disappointed again. But when you make the move you are usually rewarded and say for heaven’s sakes what took me so long?
We get it change brings up fear. What if changing takes a lot of time and I’m already stretched thin? What if we choose a company only to get let down again? What if unit owners aren’t happy with the change or the process and judge us negatively? In the end you and the rest of the board knows changing is the right thing to do and you have to make it happen.
And yes change makes more short term work for the board.
The Prep Work
Take a vote at a board meeting. You’ve had enough and we are going to investigate a change all in favor? No vote involving the unit owners is required. Then at the meeting do some brainstorming. Come up with a list of “grievances” that are causing you to make a change (you’ll want those eliminated going forward). See if you can get agreement on what the top 1-3 goals are for the change. Ex: financial transparency, become self-managed and save some money or better communication and service, etc.
Then come up with a list of what the board can do themselves (maybe with additional volunteers on a committee helping). Get clear on what things you don’t want to do or don’t have special expertise to do and what you want done by your new service.
The most time consuming part of the transition will be researching alternatives, doing phone and conference calls, web demos and in some cases meetings.
Sometimes one board member volunteers to do the investigation work and then shares the results. Other times this work is shared with another board member. Sometimes a committee member – not a board member does the legwork. Sometimes the board comes up with a list of questions that all the prospects fill out.
When the initial information is collected have another meeting At this meeting the board can do an initial round of vetting and narrow the search down to their top few candidates that they want to investigate further. Then more information is gathered on the finalists.
Lastly, at another board meeting you can discuss which service people like best and vote on it. You can record the vote results in your minutes. Again no vote involving the unit owners is usually required for you to make the change but it is good to double check with your community’s attorney.
After you get thru the selection process the rest of the transition is not difficult. To help you the service you chose will generally have a transition manager that will guide you and do many of the next steps.
Most transitions take 30 days. I’ve done one transition for an 80 unit complex in a week – between Christmas and New Years with a January 1 start date. So it can be done very quickly.
Your current management agreement will generally dictate how much notice you have to give and how much time you have for a transition. However, if your management agreement expired you typically can move as quickly as you want. Again a quick review by your association’s attorney is helpful.
A final consideration is if you want to hold off until a major task or project that is currently being worked on gets finished up.
6 Step Transition:
Here are the 6 main steps for the transition process:
Step 1 – Vote
Vote on making the change and record it in your minutes (See a sample minutes format in our website’s resource section).
Step 2 – Give Notice
The management agreement usually has a termination notice of 30-90 days. Draft up a simple letter that states you are terminating service and states the last day of service. We suggest your community attorney look it over. Then mail out the letter – double check your management agreement if you need to send it by certified mail. When you mail your notice also send an email notice which will start the ball rolling sooner.
Step 3 – Get 3 Reports
Your next company will just need 3 main reports to get started:
1 – List of charges for each unit owner including delinquent fees
2 – Income & Expense with budget for the last closed month
3 – Unit Owner Roster
These provide enough information for the new company to set up a chart of accounts and get out the assessments – the most time sensitive task for most transitions – especially for communities using mailed monthly statements. This info is easily provided by email by your outgoing manager.
Step 4 – Set Up Banking
Your next company will probably use a different bank than you are currently using as part of their systems. To set up a new bank account you’ll need to provide the legal name of the association, the tax ID and get a check to deposit (can be $100 or larger to fund a month’s worth of bills) and create new signature cards. The new company will facilitate this process.
Step 5 – Notify Owners
Draft up and review a letter to unit owners that communicates the change. Typically this is sent out 10-14 days prior to the new company’s start date. Ideally mail the notice with the upcoming month’s assessment bill if you are using mailed monthly statements to save money. If using coupons, new coupon books will be generated and mailed out typically in a separate mailing from your notice letter to the unit owners.
Step 6 – Notify Vendors
Notify your vendors of the change and where they now need to send their bills. Typically there is a report you get from the outgoing manager that has vendors, their tax Id’s and mailing addresses or generates mailing labels. The vendors will also provide a current insurance certificate and the expiration stored in your new system so you get prompted when to get an update.
The rest of the community’s reports and information will come in over the coming days and weeks. Usually someone will go to the management office and pick up boxes of documents. (See the Document Retention Schedule in the Resource section of our website). Also ask for a download of as much of the community financial data and documents onto a thumb drive. For the paper files, throw out items not needed per the retention schedule and store the rest in a closet. Some particularly useful items like rules and regulations and the community insurance certificate can be scanned and added to your new web portal for owners to access.
Management companies are used to transition – it occurs routinely in the industry. Plus in many states there are statutes that dictate the time frame an outgoing manager has to provide all the info and money, typically a short period of time. In the rare circumstance that you are not getting information in a reasonable time frame have your community’s attorney reach out to the manager’s office.
It’s annoying but some checks will go to your former management company’s office. You’ll get a stack of these unit owner checks or just 1 check for the remaining balance in your old bank account along with a list of who those payments are from at the end of the month. This will close out your prior bank account and the funds will be deposited into your new bank account.
If your reserve account was at the same bank as your operating account we recommend moving the reserve account to new bank for ease of viewing. Your new company’s service should allow boards to view the association’s bank accounts online and it’s easier to see them all in one place.
During this transition it is a good idea to make any desired change to your income and expense report layout. If there are some old expense items you are not using you can remove them. This makes the report shorter, easier to read and improves financial accuracy since there will be fewer GL codes to think about.
Lastly, a best practice to ensure your success is to do a check-in call or web conference 30 days after the transition date to go over items that are still open or need changing. Examples are adding documents for unit owners on a web portal or reports that need further refinement.
Whatever frustrations you were suffering with before should be alleviated. Enjoy your newfound peace of mind. As the last step I encourage you to add back some fun and reward your effort. Cater your next board meeting or bring a cake or cold beverages and celebrate – you deserve it!