Building Camera Systems

Building Camera Systems

There are many considerations when constructing a camera system for a building. Items to consider are the number of cameras, camera placements, location of the DVR (digital video recording device, takes the place of old-school video tapes), when it will be regularly reviewed and what to look for, and backup system and number of recording days. But first, you need to understand why you’re installing a camera system and/or upgrading it.

PURPOSE

There are three reasons to install a camera system. The first reason is for building security. In the event that something is stolen, a resident is accosted, or property is damaged, the camera system will be used to review its history for people’s faces and the truth about what happened. I had a police officer come to my office to have me review a building’s camera to see if a nearby murderer’s face appeared when he passed by on the sidewalk.

The second reason is for staff supervision. I’ve had many buildings ask me to review their camera systems for late arriving and early leaving staff members, articles in the building missing with staff suspected of stealing, and staff members gone missing during the day. These videos need to be recorded for future citing at Union grievance hearings and arbitrations. They can be recorded easily using a Blackberry recording the screen to get the key moments rather than going through the often complex DVR backup system.

The third reason is for live viewing. If the building has multiple entrances, such as a parking garage entrance, the doorman will need to see who is pulling in before buzzing the garage door open or allowing people into an unmanned service entrance.

HARDWARE

You’ll want a DVR system that allows for as many cameras as you’re looking to place plus additional open ports for possible future installations. I recommend a DVR that has recording capacity of at least 30 days, which is roughly a 500 GB hard drive, which varies with the number of cameras installed and the quality of the recording. You’ll also want an external backup system, such as a $200 USB external drive to auto-backup every 2-3 weeks. This will give you 6-7 weeks of backup.

The cameras you use should be color. For always-lit areas, the type doesn’t matter, but for areas that go dark at night, specify outdoor infrared cameras. This will allow some form of visibility at night.

PLACEMENTS

The reason for having a camera system is important as this will determine camera placements. Most buildings install one in the lobby and at any other entrance. Other locations can include roof door access, roofs, elevators, secondary vestibules, front sidewalks, rear sidewalks, mechanical room entry, and Superintendent offices. I recommend at a bare minimum having a lobby camera to record who enters and exits the building. A second camera should be placed if the building has a second entrance. You’ll want to hold your staff accountable and this is a great way.

Many buildings have elevator cameras. These placements require drops from the elevator room above. Once complete or at the same time, lines can be run to place cameras on the roof. Having a camera in the elevator facing the number of the floor the elevator stops at allows you to view the historical floor access at a certain point in time. This is useful if property on a particular floor is damaged and you need to know who caused it.

Note, roof camera drops cannot be run in an elevator shaft without them being installed in the elevator as well. I went through this with a past building, camera company, and elevator company. The elevator company told me it was against NYC code.

Having a roof camera is useful as parties often occur on roofs, whether approved or not. At times, items are dropped off of the roof or people fall down stairwells. Having a camera view what occurred may keep your building out of insurance liability trouble. This general rule applies for just about any incident where someone claims one thing but the camera backup shows another.

(camera pic from sxriore.com)

Building Work – Know more about it

­­­­Building Work – Know more about it

­­Building work is generally a finite task, often called a job. The job has a clear start and end point. As such, an exact scope of work should be submitted for all work proposed in the building by outside contractors. Jobs can be broken up into multiple cost categories, such as work done by staff, work under $500, work between $500 and $1,000, work between $1,000 and $10,000, and work $10,000ish and above. Jobs can also be broken up by type, such as capital work, chargebacks, or shareholder caused repair work.

Staff Work                                                                                                                                                

Any work that can be handled by building staff on building time generally does not need a scope of work. Staff capable work includes most work “inside of the walls”, such as changes to basic plumbing fixtures, light bulbs, curtains, shelving, locks, window balances, and other carpentry related repairs. I have my staff work on jobs that take no longer than 15 minutes as a courtesy to shareholders. Anything taking longer than 15 minutes takes too much time out of their day and an outside contractor should be called in, unless the remainder of their day is empty.

Having staff complete work that would ordinarily require an outside contractor saves the building money. However, do not have staff do this during their own time, make sure they are paid during regular hours or overtime so building insurance covers them in the event of an injury. Don’t have your staff, regardless of their previous life’s experiences and skills; work on building plumbing or any electrical systems, unless they are separately licensed and insured. Save this work for outside contractors. Never let staff do work off of company time as it’s a liability for the building.

Staff work under the 32BJ contract is a mix between lightly instructed duties from management and the Superintendent’s and remaining staff’s willingness/eagerness to impress Boards. If you’re fortunate enough to have an active and forward thinking Superintendent, he’ll be open to doing just about anything you ask him to do as he’ll know it will help his year-end bonus. However, 32BJ staff cannot be mandated to paint a building, regardless of their available time. They can however be asked to paint a door here and there. It’s a grey area of the contract but if the staff is willing then it will save the building money.

If there’s a leak in the building somewhere, staff should try to pinpoint the leak by opening walls. Having a plumber open walls on the building’s dime is expensive and a waste of their time. Opening a wall is easy; it’s the repair part that takes time. After the in-the-wall repair is complete, bring in a carpenter to close and prime the wall. The final coat of paint or wallpaper is the owner’s responsibility, regardless of the cause.

Work Under $500

I like to ask Boards for their authority to make my own decisions about needed building work under $500. This allows me to act faster and involve them only for more important decisions. A $375 expense in a $1.3 million dollar budget should not involve the Board. Too much Board involvement slows down the machine. Low dollar figure expenses include Superintendent’s office supplies and machines, small staff uniform expenses, minor building touchups, and any other regular course-of-business expense.

Work between $500-$1,000

I don’t like to obtain multiple bids for work between $500 and $1,000 as I’ve bid so many jobs in the past and generally know the cheapest, best contractors. For work of this size, I generally run it by the Board President, briefly describing the scope and need, for their approval. I then sign off on the proposal ‘As Agent For [Corporation Name Here]’ and affix the Board President’s approval email to my records. If it’s uncommon work, I will bid the job out to 2-3 contractors and/or ask other managers around the office if the proposed number is reasonable.

Work between $1,000-$10,000ish

Work in this range generally falls under an entire Board vote if it is elective. This would include more substantial building painting, roof, elevator, or lobby enhancements, or other types of elective work. These jobs are generally requested by the Board. As such, 3 bids would be obtained, analyzed, and proposed to the Board, with Management pointing out which contractor is preferred for the job and why.

If the work is not elective, such as mandatory Category 1 elevator repairs, boiler or entrance door repairs, or any other type of immediate-need work, I’ll obtain the initial quote from the building’s go-to vendor for the type of work, then obtain at least 1 additional quote for verification / to keep the contractors honest. In some cases, such as with elevators or boiler filing requirement work, I can run the figures by third party witnessing firms. Quotes of this nature do not require full Board approval as they are mandatory, immediate, the building has no choice but to do them, and if the management company did their homework, the decision should be clear.

Work over $10,000ish

Based upon the need, this type of work is generally submitted by a sealed bid. If it’s for mandatory work and the figure comes in at $15,000 to repair elevators, it does not need to be a sealed bid as the initial cost is generally unknown until the proposal is created. However, if substantial façade, roof, or boiler replacement work is needed, the managing agent should bring in a building engineer to draw up a scope of work. If the work is sizeable, the agent may need to have 3 engineers bid for their right to draw up the proposal, followed by the approval of that engineer and their expense, concluded by the selected engineer bidding the full scope of work to approximately 5 contractors.

The proposals should be sent to two places, the Board President and the building’s attorney. As a property manager, I would not want to be involved in someone claiming I did something dirty. A property manager’s reputation is all he or she has. Once the proposals are obtained, they should be delivered by the building’s attorney and all opened at once in front of the full Board and managing agent. The bids should be analyzed by the engineer to determine if they satisfy the bid spec. A determination can then be made on who to use.

Capital Work

Capital work is generally categorized as any work done to a building that increases its value. When an item is replaced or repaired, regardless of the cost, it is, by definition, not a ‘capitalized expense’. If work is a true building improvement, taxes may not need to be paid on the bill.

Contrary to the definition of capital work, buildings often elect to have sizeable jobs booked as capital jobs, so as not to throw the operating budget off. Repair jobs booked as capital can include riser and stack repairs, sizeable sidewalk repairs, or any repair invoice in the multiple thousands of dollars range. Buildings often fund this type of repair (non-classically capital) work from their reserve fund. From an accounting standpoint, capitalizing work that is not classically booked as capital only helps to satisfy accuracy of the approved operating budget.

Chargebacks

When bills related to work done in or for a shareholder’s or owner’s apartment consists of repairs from damage they caused or are responsible for, engineering alteration reviews, or legal charges such as collections or other suits, the bills should be paid by the building then charged back to the owner’s account.

Alterations to apartments consisting of substantial plumbing or electrical work, wall demolition or construction, washer or dryer installation, or wet-over-dry circumstance creation (such as when a bathroom is created and the floor below is not a bathroom, new plumbing must be run and has the potential to leak into the ‘dry’ room below), an engineer should review the plans prior to approval/start of any work. Once approved, the engineer should view the work in the middle of the process and also sign-off on it at completion. All of these charges should be billed back to the shareholder. These expenses, once paid by the shareholder, should be noted in the building’s monthly financials as income so the two wash each other out, keeping your budget on track. This applies to any chargeback expense; make sure the payback from the owner is reflected in the financials to balance the financial report.

Any legal work associated with attempts to collect delinquent maintenance or common charges should be billed back to the owner’s account. Unless the owner files bankruptcy, these legal fees should be recouped in the suit to follow.

Shareholder Caused Repair Work

These situations are generally terrible. Shareholders will cry, yell, fight, you name it. In the event of a leak in an apartment or other type of apartment-caused problem, the source must be obtained and if possible photographed as quickly as possible. Determination of the cause of problems is one of the most important tasks of a building Super.

For instance, if water originating from unit 5E leaks down the entire E line, causing $100,000 of damage, who foots the repair bill? The question to the answer lies in who caused the initial problem. Proprietary Lease language generally states that anything ‘in the walls’ is a building expense (excluding electrical lines after the breaker box) and anything ‘from the paint in’ is a shareholder expense. However, if the apartment had a prior alteration where the plumbing was changed within the wall, there’s a good chance the owner is responsible. That is where the pictures come in.

If the cause of the problem is determined to be an owner expense, their insurance carrier must be ‘put on notice’ as soon as possible, as well as the building’s insurance. Since the cost will be theirs, their insurance company (hopefully they have one, else your building’s insurance may need to foot the bill then sue or subrogate for the repair money if the owner doesn’t pay) will bring in an appraiser, followed by the managing agent bidding the job to multiple vendors. Generally, the managing agent will receive a check for the amount of the appraisal, of which the job will be done, the remainder of which either the full amount wasn’t initially granted to the agent or it can either be kept or returned (I recommend returning the difference if the actual work comes in lower than the appraisal, else an audit on the building’s expenses may turn up foul play).

Paying

To pay for work, if the figure is small, the contractor will generally expect payment within a month. For higher figure bills, if your operating account doesn’t have much cash, your managing agent can call the contractor to arrange a three or four time segmented payment of the bill. I’ve never had a problem with a contractor agreeing to this. Often, they’ll ask for a deposit for work up front, which is okay, but the timing for the remainder of the payment can be negotiated.

If work is not done satisfactorily, have your agent withhold payment in full from the contractor until satisfaction is met. I’ve had to do this on a number of occasions. When a contractor is missing money, it’s quite a motivator for them to correct the issue at hand.

(images - handyman from jackoftradez.com, money from infrastructurist.com, crying from gamehounds.net)

Insurance

Insurance

To be discussed in this section are a building’s insurance, homeowners’ insurance, and contractors’ insurance.

Building Insurance

A building’s insurance package is comprehensive and includes multiple facets, including liability, property, environmental, umbrella, director’s and officer’s, crime aka fidelity bond, and other policies for staffing.

Your property policy includes your main provision – your building limit – or how much money the building would be rewarded in the event of complete loss, such as a totaling fire. The amount of your building is valued at is based on its location, value of the units, and many other factors. Your per square foot price on a lower end building will fall around $150 versus $200 - $250 for a higher end building. Provisions to look for are your general deductible; generally between $5,000 and $10,000 and sewer backup deductible if you’re in an area where the sewers backup often.

General liability includes coverage for third-party property damage, bodily injury, and personal injury. Items to look for in this section are lead and mold exclusions. Your general aggregate (overall) limit should be in the $2,000,000 range or higher for your entire building. I heard a story of a building where a contractor was injured, obtained the full amount of the company’s insurance ($1,000,000) then the building’s policy kicked in, with the settlement yet to be determined, but the number could be as high as $2,000,000 additional. That would fall under this policy.

Commercial umbrella is your building’s safety net. The above example, should the claim go over the allowed limit of the liability policy, the umbrella would kick in. A common limit is $100,000,000 with retention of $10,000. (Retention must be paid before the policy would kick in as opposed to a deductible that kicks in automatically and the fee is later sought by the insurance company.) Look for the policy’s lead and mold provisions as well as pollution, directors’ and officers’, and employee benefits coverage.

One month away from the renewal period, have your broker seek multiple carriers. When the carriers respond, have your broker provide a summary of their findings, including applicable side-by-side comparisons of your current plan versus the proposed options. When seeking a new broker, you’ll need to ask your current broker to provide 5 years of hard loss runs. This will alert them that you’ll be seeking a new broker and they may come back to you with more aggressive figures.

Directors’ and Officers’ Insurance – This is the Board member cover your butt policy. I recommend a policy of $1,000,000 minimum (as is standard), upwards of $2,000,000 if your shareholders are threatening an action or are exceedingly vocal. Boards work for free and don’t deserve to come under legal scrutiny thus should be covered to the full extent possible. Speak with your broker about having your umbrella policy kick in if a suit would exceed the D&O limits. Expect a deductible of $5,000.

Crime aka Fidelity Bond aka Employee Dishonesty – With the advent of the real estate bubble bursting, Fannie Mae and Freddie Mac now require a minimum of 3 months of maintenance or common charges be included in your crime policy. If your budget cites annual maintenance income of $1,000,000, your policy should include coverage of a minimum of $250,000. Without this, potential purchasers or refinance candidates may be denied loans.

Homeowner’s Insurance

Always have it, that’s the bottom line. So many times, I’ve seen owners leave the water on in their apartment, install their own electrical line causing a fire, have high end wall finishing damaged from the unit above, or a flood causing damaged to newly installed floors, with all owners devoid of insurance. If you cause damage to apartments surrounding you, no matter how many floors down the leaking water or fire or other type of damage spreads, you’re on the hook for the repairs. At a minimum, you’ll be responsible for covering the cost of replacement walls and flooring of every apartment.

When damage from the building affects your apartment, be it from a flood, fire, or other mishap, the building will generally cover the cost of repairing or replacing your walls with an initial layer of primer as well as replacement flooring if it is still original to the building. Generally, anything installed by the shareholder and/or inside of the walls including the paint, is not covered by the building. This is where your homeowner’s insurance kicks in.

For instance, if your toilet tank runs for days while you’re on vacation, eventually overflowing into the apartments below, and you have insurance, you’ll pay your deductible and you’ll be okay. Your insurance company will send out an adjuster to estimate replacement costs for the damage caused below and that will be it. If you do not have insurance, you’re legally responsible for the repairs below. If you refuse to pay for the damage reimbursements, you run the risk of being sued by each apartment’s owner.

On the other side, if someone causes damage to your apartment, you should file a claim with your homeowner’s insurance carrier, have them cover the cost of repairing your apartment (the money will come much quicker), and they’ll subrogate (go after) the culprit’s insurance. Damages caused by other shareholders to your personal property may not be covered by their insurance policy; their policy may only cover structural damage. A painting damaged by a leak may need to be reimbursed by your own insurance policy. Turnouts from situations like these vary with each instance.

You’ll also want to be insured in the event that a contractor is working in your apartment and they slip and fall as a result of something they were using in your apartment. Your homeowner’s policy could cover you from a potential suit. I do not recommend having contractors work off of your policy. Most contractors have their own insurance policy. Make sure it includes worker’s compensation. If they don’t have their own policy, don’t use them.

Contractor’s Insurance

For every contractor that steps foot into your building, insist that they be insured. This includes movers and painters, two commonly uninsured contractors. Why? I had a contractor damage a service elevator that refused to pay for it. We couldn’t have our insurance company fix it and subrogate against theirs because they had none. Most movers, painters, and other contracting companies are insured; just make sure they include the proper verbiage on their insurance certificates when they submit them to you. This will aid in holding you harmless from potential suits.

It should include:

Additional Insureds

[Owner name], [apartment number], [corporation name], its Directors and Officers, and [management company] as agent for [corporation name]. The additional insureds are included on a primary and non-contributory basis with respect to the work being performed at [building address].

Certificate Holder

[Corporation Name]

C/O [Management Company]

[Management Company Address]

[Management Company Address]

If a contractor refuses to provide insurance and shows up at your building’s door, deny them access until it is provided.

When reviewing a certificate of insurance, make sure it includes your building’s corporation name and management company name, as well as coverage for worker’s compensation. Often, worker’s comp is included on a separate page. Also note the expiration date of the certificate. Will their policy expire while work is being performed, for instance a policy for contractors working over 6 months on an apartment alteration.

Good luck!

(images life preserver from canadiangateway.com, home from webwombat.com.au)

What to do if your Owner is in Arrears

This is a common problem for Boards. Dealing with money issues between anyone living together has no perfect answer. I recommend dealing with owners in arrears on a case-by-case basis; however the following guidelines should help form a general template.

ONE MONTH
1. At 1 month of common charges or maintenance owed, have your managing agent call them. Perhaps they were traveling, lost the bill and were waiting to pay both months in the following month, the agent's banking system may have misapplied the payment (it may have ended up in someone else's account), or they may have bounced their check.

A friendly reminder should bring out the truth with a phone. However, a phone call is often not answered, a voicemail is not returned, or a promise to send in a check is never executed.

A friendly letter may be optionally sent, but requiring your agent to do this may take away their time from more important activities. Phone calls are quicker and friendlier.

TWO MONTHS
2. At 2 months of arrears, send a letter suggesting that if a payment is not received, legal action may ensue in order to protect the wellbeing of the building's finances. Phone calls at 3 weeks and 4 weeks into the month should be placed.

If these actions do not produce a payment, discuss the option of a Board member speaking with the owner. Sometimes, an owner may not tell the managing agent the truth over the phone about why their payment is late. However, this is the touchy situation I was referring to. It often works, but it is not necessary.

THREE MONTHS
3. At 3 months, it is time to consider what type of legal action to pursue. At this point, the Board needs to separate their personal feelings and relationships with the delinquent owner and treat the situation as a business decision. The Board has a fiduciary responsibility to the condominium or corporation in which they reside and as such they must do whatever necessary to maintain the income owed to the corporation.

A good starting point is to have the attorney write a letter to the owner, stating possible future options the owner may face in their delinquency, such as freezing of bank accounts, garnishing of wages, or a lien on their apartment.

This letter will cost $50-$150 from the attorney, the charge of which should be paid for by the building and levied to the owner's account. The owner will be responsible for building reimbursement of the attorney's fee.

FOUR MONTHS
4. At 4 months, it's time to take action. Speak with your attorney about filing a lien and attempting to cover all owed fees in small claims court. In NYC, the maximum allowed reward by a judge is $5,000 per filed case. Attorney's fees may be rewarded in small claims cases if the judge finds the fees of a reasonable amount. If the amount of arrears is greater than $5k, an additional suit may be filed in small claims court.

FIVE MONTHS+
5. At 5 months or more, it is time for more serious action. Speak with your attorney about garnishing wages, freezing bank accounts, and filing for an eviction.

I'm not an expert in evictions, even after going through the process twice. Depending upon the ownership (Condominium versus Cooperative) the options and sequence of events change dramatically. However you slice it, you're looking at a minimum of a one year process, upwards more commonly of two years, and a cost of $20,000-$30,000 in legal fees.

Note: If your delinquent owner has a renter and your lease agreement permits it, you may have the renter pay the building directly. If your lease does not have such a rider, I recommend getting one.

I've heard of buildings posting a list in the lobby of unit owners in arrears. This method can prove counterproductive as the owner may be more willing to work with the Board on a payment plan without having their pride hurt. Also, the unit owner may have lost their job or had another legitimate reason why they were not paying and posting the arrears notice would only cause embarrassment, not an expeditious payment.

If an owner is in arrears and known to the Board as having the ability to pay, they should be in legal. If they can't pay, they should be selling their unit. If the owner forecloses on the apartment, the building is generally last in line to collect and there's a good chance that any legal fees to date would not be included in the settlement. Plan on collecting only outstanding common charges and nothing more.


(images from suitcase guy from clipartof.com, house in chains from mortgagearrears.org.uk, and board room from ct.gov)

Elements of a Board Package

Elements of a Board Package


Sections:
Cover

Agenda

Prior Meeting Minutes

Arrears Report

Sublet/Lease Report

Financial Variance Report

Staff Write-Ups and Reports

Lawsuits

Open Items (Actionable To-Do List)

Sales and Refinances

Vendor Proposals

Shareholder Correspondence (arrears, chargeback, noise, etc. letters)

Optionally:

Sales History

Unpaid Bills

Miscellaneous Topics

Sections:

Cover

Make sure the cover page includes the address, applicable apartment, and start time to avoid logistic errors.

Agenda

The agenda should be distributed to at least the Board President a few days before the meeting to confirm items to be discussed. It can optionally be sent to the whole Board for input. During the meeting, try to stick to the agenda to not get side tracked. Meetings have a tendency to run many hours long and keeping to the agenda helps keep the meetings shorter.

Minutes

Minutes from the prior Board meeting should be included in the package for approval. When reviewed, make the necessary changes, have your managing agent correct them, and have them send them to you when complete to confirm the changes were made.

Arrears Report

Ask your managing agent to run a report for owners at least 1 month in arrears. This will enable you to concentrate on the bigger offenders. At one month, your managing agent should call the owner. At two months, send a letter. At three, it’s probably time to send them to legal. Ask your managing agent what they’ve done for each owner at least 2 months in arrears.

Sublet/Lease Report

Your managing agent should be tracking your sublets because your building probably has a sublet fee. After one year, the fee should be due again.

Financial Variance Report

The variance report should show spending of actual versus budget expense categories above $1,000. This will help you focus on larger items needing discussion during Board meetings.

Staff Write-Ups and Reports

Staff write-ups should be included to Board packages to the entire Board can understand the status of their building’s employees. Your Superintendent should report on your building’s operations and he is in attendance, should report on staffing matters.

Lawsuits

Lawsuit discussions generally run long as complex decisions must be made. Try to have these discussions at the beginning of the meeting.

Open Items (Actionable To-Do List)

A list of open building items should be kept and updated on a weekly basis. I’ve seen these lists as short as 8 items and as long as 40. This should be included to the Board package so everyone is aware of the progress being made on open issues but all of these should not be touched on in the meeting, it will take too much time.

Sales and Refinances

I’ve seen many Boards include updates on potential sales and refinance applications in the building.

Vendor Proposals

Try to have items up to $1,500 decided upon outside of the meeting, but anything involving 3 bids, construction decisions impacting shareholders, big ticket items, or planning of operational items for the future should be included to the package and discussed in the meeting.

Shareholder Correspondence (arrears, chargeback, noise, etc. letters)

Sometimes, Boards like to see what correspondence was generated in the prior month by the agent for owners. Most importantly are chargeback letters. Ask agents to report on the month’s vendor chargebacks for work done in unit owners’ apartments that can be billed back to owners.

Optionally:

Sales History

Sales histories are included in buildings with high turnover as Board members may be thinking of selling. Some buildings may sell only one unit per year but others may sell many. The managing agent’s closing department should keep a record of these as purchasing attorneys often ask for comparable building sales.

Unpaid Bills

Buildings with low operating cash funds tend to keep a keener eye on expenses. A list of unpaid bills will keep the Board in-the-know with how much money is owed, what it’s owed for, what expenses can wait, and what needs to be paid immediately.

Topics:
Other topics may be discussed during meetings, including the building’s guest access policy, building insurance policy (liability, D&O, environmental, etc.), tax certiorari selection and tax status, Annual Meeting documentation preparation and planning, building security with the use of cameras with a DVR recording device, a website for the building, and forms of owner correspondence including memos or email blasts.

Regarding the many facets of a Board package, you will commonly find that your manager will not know the answers to your questions off the top of their head. What's important is not that they instantly know the answer, but that they return your query in a timely fashion with a firm answer. Having a seasoned manager is nice, but having a diligent and fast manager is best. The combination of the two is a keeper.

(images - package from 1adventure.com, report from macksmets.blogspot.com)

What to Look for in your Monthly Financial Report

I’m on the phone with each Board Treasurer each month clarifying particular points of interest in their monthly financial reports. Below are common inquiries they have for me. If you’re a Board member looking for clarity in your monthly financials, the below section is for you! If you have any questions following your reading of this post, leave a comment and I’ll try to help you.

BALANCE SHEET

Bank Accounts

Operating Account – Month over month, make sure your management company covers utilities, payroll, real estate taxes (if there is no escrow account), and other expenses without coming close to over drafting. Remember, this is your book balance, accounting for checks cut and not deposited, which your bank reconciliation will pick up on. Your bank balance is higher than this figure.

Optional Real Estate Escrow Account – Check to see that the transfer was made.

Reserve Account – Keep an eye on interest earned. If your building is fortunate enough to have at least three months of overall shareholder maintenance income in its reserve as liquid, you have the option of laddering your balance in investment products from your bank. Laddering is the ability to have your optionally locked in investments free up at varying times. I recommend looking into terms such as three months, six months, nine months, and one year. This will keep your reserve relatively liquid.

Tenant Security – Do you see purchasers’ security deposits being added to the account? Does your manager have a tenant security account? Make sure they do. The inadvertent spending of a tenant’s security being lost in your operating account is dangerous. Hold your managing agent accountable for all alteration, purchase, or other required tenant security deposits.

Income

Maintenance – What is your year to date variance? How far behind is your building in arrears? What is the managing agent doing about it? Do you have anyone in legal? Are any owners over 3 months in arrears? Perhaps it’s time to take them to small claims court, put a lien on their account, and possibly freeze their bank accounts.

Storage Lockers, Bicycle Rentals, Gym Memberships, Garage Parking – Is your managing agent on top of billing your residents for their monthly or yearly building amenity fees? Ask to see their billing and collection records. Have you thought of raising the cost of these amenities?

Move In, Move Out, Sublet, and Alteration Fees – Is your managing agent collecting these fees? Are subletters moving in and out without being billed? Does your building have a move in/out fee for subletters? When alterations are processed and if your building requires a fee be paid to the building, is it being collected? How is it being tracked? Is there a GL (General Ledger Code) for these fees?

Assessments - Is your building assessing this month? How is the assessment’s collection being tracked? At what point will the assessment’s collection be swept from the operating account to the reserve account? Is there a separate GL to track the assessment’s income?

Payroll

Are all of your Union building’s fees being paid and tracked appropriately? Is overtime out of control?

Gross - If your gross pay to employees shows a high variance, ask to see when overtime was paid and to whom. If need be, ask to see past time sheets. Are relief workers being used to cover for staff that call out to avoid paying over 40 hours a week to regular staff?

Worker’s Compensation – How did your managing agent decide upon a worker’s compensation carrier? Was the policy bid out?

Utilities

There are ways to cut these costs but not by a lot.

Fuel - Keep a close eye on fuel payments. Does your building have a level billing plan? If so, was the account analyzed in April or May for overpayment throughout the year? Were actual invoices as well as level billing invoices being paid inadvertently? Is a credit due for less consumption than paid through level billing? Ask your managing agent for an invoice-by-invoice breakdown versus actual consumption. The fuel provider can issue this.

Water & Sewer – This expense rises by roughly 13% per year. The cost cannot be altered, however the consumption can. Make sure your commercial tenants and laundry company are being appropriately billed or individually metered for their own water use. Have your Superintendent do an apartment-by-apartment inspection for running toilets and faucets.

Repairs & Maintenance (Select Items)

General Rules –

  1. Make sure all expenses that are building improvements (non-repairs) get booked as capital expenses. These expenses are tax-free and fall outside of operating budgets. Occasionally, big ticket items, such as entire sidewalks, big boiler replacement items, or others are booked as capital expenses so the operating budget is not thrown out of proportion.

2.   Chargebacks – How do they appear? Do they show up under R&M? Can your managing agent provide you with a list of chargebacks from a particular period? Some engineering, plumbing, electrical, intercom, carpentry, and exterminator invoices can be billed back to owners if they did not stem from building expenses. Generally, any work that occurs “From the paint in” is a shareholder expense, whether it is billed back to them or to a different shareholder that either caused the leak, cut the intercom cable, or whatever the source of the problem was. Buildings are generally responsible for any work that occurs “From the walls and out”, such as plumbing risers. However, electrical problems are almost always a shareholder responsibility as Proprietary Leases often state that shareholders are responsible for all electrical repairs from the breaker box to the outlet.

Boiler – Were replacement items, such as heat exchangers or burners, accounted for in the operating budget? Was the boiler overhauled prior to heating season?

Elevator Maintenance – Did your building pass City Category 1 testing? Were repairs needed and/or conducted to pass as satisfactory? When is the last time your management company bid the contract to other companies?

Supplies – On occasion, ask your managing agent to audit your Superintendents supply bills. It is very common for building staff to take items home for personal use. Have them ask their Supers to show them purchased tools off of supply bills. If the Supers cannot present the requested tools, discuss further disciplinary action with your managing agent.

Administrative

General - When reviewing your administrative fees, reference your managing agent’s contract. Managing agents make additional revenue through miscellaneous fees, which are subject to yearly increases. This is common, however if your contract has special stipulations, such as a set duplicating or postage fee, make sure this is accounted for.

Postage and Messenger Fees – Have your doormen obtain all resident email addresses and your managing agent obtain all live-out owner and shareholder email addresses for future mailers. Email anything possible to limit the cost of document transmittals. For building memos, have a fax machine setup at the building for the agent to fax memos or have the Superintendent setup with a computer and printer.

Insurance

I recommend having your building try to pay its premiums in one lump sum each year. It will save your building $2-4,000 in finance charges.

Professional

Engineering – Alteration reviews should be charged back to unit owners. Review fees for capital work should be included in your capital budget.

Legal – What are these fees for? Are they from general council? If they are related to unit owner collections, ensure that they are charged back to the delinquent owner.

Mortgage and Taxes

Is your mortgage being paid on time? Are your real estate taxes being paid quarterly? Was your City tax abatement booked correctly? Were your SCRIE, STAR, and other exemptions paid back to applicable shareholders?

Capital

Were any capital costs incurred in the prior month? Were they accounted for somewhere in the monthly financial report? Were taxes paid on these? (If they were building upgrades/improvements and not just building replacements, taxes should probably not have been paid. Consult your auditor for more information).

DISBURSEMENTS

You should see a list of all paid bills each month. Each item paid should have a short description next to it. Look for:

·         Board member or managing agent staff reimbursements.

·         Reserve transfers and mortgage payments.

·         Invoices you approved for payment in the prior month.

·         Payments for miscellaneous managing agent fees.

·         Proper GL coding of payments (some agents use a different set of GLs for capital expenses)

JOURNAL ENTRIES

Look for:

·         Requested reclassifications of operating expenses to capital expenses

·         Miscellaneous payroll expenses

·         Reserve account interest

·         Security account deposits and transfers

OWNER/SHAREHOLDER & COMMERCIAL ARREARS

Look for:

·         Were late fees applied?

·         Is anyone not paying applicable assessments?

·         Are charged back invoices appearing on shareholder billing statements? Are they paying them?

·         Is anyone more than two months in arrears? Is the agent contacting them? Is it time to send them to legal?

·         Are your commercial tenants current?

UNPAID INVOICES

A list of unpaid invoices should be provided on a monthly basis. Look for:

·         Invoices entered into the system more than two months ago and not paid.

·         Invoices recently entered but with service dates over six months ago.

·         Contractors’ invoices appearing higher than discussed.

·         Large individual invoices. Request your managing agent to setup a payment plan with the contractor. Contractors want to be paid, but won’t necessarily have a problem with you paying a single invoice over the course of a few months, they just want money however they can get it.

(This image is a bit more crude than I usually post, but I thought it accurately portrayed Board and Manager senses of humor!)

(images from: balance from philstockworld.com, plumber from belaireng.com, good luck from frederatorblogs.com)

Considerations When Evaluating a Management Company

Considerations When Evaluating a Management Company

Management, Finance, Sales/Leasing, Brokerage, Project Management, Development & Rentals & Subsidized Housing

Management

Your property manager should be your number one consideration. All things being equal, your manager is your go-to person and should be your main determinant in choosing a management company.

·         Can you trust this person?

·         Are they “green” and fresh from assisting someone?

·         How long have they managed buildings?

·         Have they managed a building of your size? (coop versus condo is not a big consideration as the work is almost the same)

·         Are they afraid to write-up your Super or other staff?

·         Who is overseeing them?

·         Who will be attending Board meetings and creating Board packages

·         Give the potential manager a few hypothetical situations that relate to your building and see how well they answer them. This will give you a feel for their style of management, experience, and personality. Not all managers have a dynamic that matches that of their potential Board.

·         Does your manager carry a Blackberry or email-enabled phone? Do they live near your building for accessibility in emergencies?

How will the manager oversee your building’s operations?

·         Will a list be updated weekly/bi-weekly/monthly containing all outstanding items in the building, including staffing, proposals, etc.?

·         How often will staff meetings be held?

·         How often will building visits occur? I recommend one time every two weeks maximum. A building manager’s real strength is on follow-up, not being able to say they went to a building; it is a waste of their time. They should be chasing down proposals, writing up staff members for issues, acting on Board requests, etc. Building visits are only necessary when the building has a weak Super. If the Super is a habitual liar, is often early or late (the manager should always call on the house phone, not the cell phone, so the Super can be tracked), or is doing little to no work, weekly building visits should occur.

·         How quickly do they respond to emails and phone calls? Do they provide you their cell phone number? It’s not fair to ask them to respond to emails and regular calls outside of a Monday through Friday, 9-5 timeframe, but they should always be available for true emergencies.

·         Do they have experience with walk-throughs, building maintenance, and/or capital projects? If not, who on the company’s staff does and will they be accessible?

·         How often and at what point will owners in arrears be contacted? How will it happen?

·         What is expected in a monthly Board package?

·         What experience does the manager have in financial reporting analysis? This is very important as they will have knowledge of building operations that the financial analyst will not. The manager will need to keep an eye on particular items to make sure they are booked correctly, such as chargebacks and capital items.

·         Can the manager write well? This is the person that will be creating all of your building’s memos and letters.

·         What property management computer platform do they use? What email system?

Management Structure

·         Who oversees whom? Who is at the top? Is that person accessible and in the office on a daily basis?

·         Who will attend Annual Meetings?

·         Who fields phone calls?

·         Does each manager have their own assistant? Are the assistants pooled?

·         What is the assistant responsible for?

·         Is there a receptionist or does a recording always pickup? Can you get a live person?

·         How long does it take for a call back? I recommend testing this out instead of just taking a management company’s word for it. The same goes for email.

·         Will the manager be overseen by a senior level person? Will that person attend Board meetings?

Emergencies

·         What is the emergency protocol?

·         Who is the first in line to receive a call in the middle of the night?

·         Is emergency support 24/7?

·         What happens if the manager cannot be reached? Is there a backup person?

Finance Department

Monthly Reporting – What is the process?

·         Bank Reconciliations - Who handles bank reconciliations? Are bank reconciliations current, one month behind, two months behind, not done at all? Will you receive a report of the reconciliations each month?

·         Paid Bills – Will you see each bill that was paid from the month past? Who approved them? Was it only the manager? Did the Superintendent or Board Treasurer have a say in the paid bills? What are the checks and balances for paying bills? What dollar figure can management approve without going to the Board? $500?

·         Chargebacks – How are chargebacks logged? Who enters them? Are they applied directly against the shareholder’s account or against the GL?

·         Mortgage Payments – Is one dedicated person assigned to payments?

·         Utility Payments – Are fuel bills paid quickly to obtain possible early payment reductions? Electrical and Water payments – Are they processed timely so late fees are not incurred? Are actual readings requested instead of estimated readings?

·         Monthly Financial Report Review – Is there a person from the finance department that will have a conference call with you each month to review the financials? Will your manager do this?

·         Will your building have a dedicated analyst? How many other buildings will the analyst be responsible for? How many buildings does the company have versus how many buildings each analyst has?

Fees / Extras

·         What administrative fees can be expected throughout the year? Are they billed by apartment?

·         Who handles the filing of Window Guards, Fire Safety Notices, City Tax Abatements? Are there fees for each of these?

·         Will there be a fee for storing owners’ files? What if there are 30 boxes of files?

·         Is there a fee for processing payroll?

·         What happens if there is a doorman strike and the managing agent needs to be available 24/7? Is there a cost associated with this?

·         Who will handle tax certiorari filing work?

·         Duplicating? Postage?

Budgets (See the blog post on budgets for more information)

·         How are budgets prepared?

·         Is there a fee associated with budget preparation?

·         Ask to see a sample budget.

Bookkeeping

·         How are expenses capitalized?

·         How are overdrafts averted?

·         Who alerts whom when the operating account balance is low and needs a transfer from the reserve account?

·         How is the tax abatement booked? As an assessment? How are credits applied? How are STAR and SCRIE payouts booked?

·         How are tenant security accounts booked? Are separate accounts created for each owner?

·         Does every building have its own operating bank account or are funds comingled from multiple buildings (illegal)?

·         Are there any CPAs on staff?

·         How does year-end auditing work? Does the staff provide all necessary materials to 3^rd party auditors?

Sales and Leasing

·         Does the management company have an internal Closing Department? If not, how are closings processed?

·         What fees are associated with processing a sale? A lease? Refinance?

·         What is the turn-around time for a sale/lease/refi package?

·         Are closings held in the agent’s office?

·         Will your building have a dedicated closing agent? How many other buildings will they have?

·         How responsive is your closing agent? Do they answer emails and phone calls timely? Call a reference the potential agent provides to test their claim.

Brokerage

·         Does the management company have an internal Brokerage Department?

·         Will your building be mandated to use the management company’s brokers? If not, how will the dynamic work? Will the company’s brokers distribute flyers in the building? Will you be notified of this?

·         Do they have experience with commercial leasing?

·         Could the agent’s brokers provide comparable sales to assist in future owners’ sales?

Project Management

·         Does the managing agent offer project management?

·         If your building is considering a building-wide window replacement or major capital façade project or Local Law 11 work, what role will your managing agent play? Do they offer the service of overseeing the project?

Development & Rentals & Subsidized Housing & Commercial Management

·         Does the managing agent own property and involve themselves with property development? What do they specialize in?

·         Does the agent manage rental buildings and/or subsidized housing? Is this a factor in your selection of a firm?

·         Do they manage commercial buildings? If so, is there a separate set of staff for commercial management?


(thinking man from mikiblueyes.com, books from laikaspoetnik.wordpress.com, and istockphoto.com)