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 As an apartment or condo association, your board has to make some tough decisions. One of the toughest – what property management option to choose. And anyone who’s been put through the paces by an incompetent or untrustworthy manager understands the risk the wrong choice can be.

Take the example of Ohio-based condo association Lakewood Condominium Association, which is suing their property management group on allegations of stealing over $830,000 and allowing overdue association bills to go unpaid. The property management group is charged with, among other things, lying about the association having over $217,000 in CDs in the bank. The CDs, according to court documents, were withdrawn in January 2006, and over $378,000 in reserve funds remain missing.

 It’s hard enough deciding to hire an outside firm to manage the property. The impact on profits is significant enough that many associations opt to handle the management side in-house. But if the task is too much for your association to handle, there are ways to approach hiring an outside firm that can help lessen your risk.

Determine your needs:

1. What do you expect the management company to handle?
2. Decide the parameters of your relationship with the property manager.
3. What percentage of rented or occupied units do you require as a minimum?
4. Will your manager oversee property projects, such as remodels or upgrades?
5. Will the manager set the annual budget, and who will handle annual inspections and reports?
6. How will you verify monthly financial statements?

When looking for a manager, ask the following questions:

• Is the company licensed (if applicable in your state)?
• What are the manager’s insurance coverage amounts? Get copies of all policies, including those covering the company’s employees?
• Does the manager have experience managing similar properties?
• What’s the collection process for rent and association fees? Delinquencies?
• What does the manager charge? Are there any additional fees? If so, for what?
• Will the manager be proactive in preventing issues, or is it a more passive response process?

Get and check references. Also, make sure the company has a physical location and visit it. Expect your property manager to be present at board meetings. Work with the manager to establish a transparent financial relationship so that your association doesn’t become a victim.

What have your experiences been with property management?

Flickr photo credit: Thewmatt