One of the certainties of living in a co-op, condo, or HOA is that despite all having an equal stake in the financial and administrative success of the building or association, only a small percentage of residents choose to take an active role in the governance and management of their communities. In addition, many buildings and associations contract with a management company to help execute their boards’ decisions and handle the day-to-day supervision of the property. 

But what about those who go it alone, the self-managed associations and corporations? What happens when a new hire is required, or a large project like a roof replacement is needed? How is it handled, and how does that process differ from communities with outside management?

What is ‘Self-Managed?’

While the term may seem self-explanatory, there’s more than one kind of ‘self-managed’ community. At its simplest, a self-managed community is a shared-interest community where the members or shareholders—via a board of directors—make all decisions about the maintenance and management of the property. The board arranges for everything the building or HOA needs to operate, whether that’s locating a roofer or plumber, taking out the garbage, or handling snow and ice removal. For smaller communities (say those with fewer than 10 units) and often those with fewer than 25 units, this type of self-management is typically standard.

Conversely, there are much larger communities numbering in the hundreds and sometimes more than a thousand units that also call themselves self-managed. Many of these are over-55 active adult communities found in places like Florida and New Jersey, and while they are technically self-managed, they do have a designated management professional who’s hired by the community to be on-site and serve them exclusively. That’s why they’re also considered self-managed; there is no larger off-site managerial firm involved. In some places, having a designated manager on-site to oversee maintenance, finances, and other operations isn’t a matter of choice. In Florida for example, state regulations governing shared-interest communities require a certified professional property manager on-site. 

What’s the Deal?

How, then, do self-managed communities handle their business? Like communities served by large management companies, self-managed communities are governed through their elected boards. While the typical board has around seven members, small communities may have boards with as few as three members. In the case of very small associations, say a three-unit condo, everyone in the building may be a board member, or the association may be run very informally, with neighbors speaking about issues as they come up.

Kevin McIntosh is the president of a 12-unit condominium located in New Canaan, Connecticut. He explains the process his association uses to manage and maintain the property: “When we undertake a project, the board appoints a point person to head the project—or a committee might be formed, depending on the size and scope of the project. The project leader sources at least three bids and looks over and analyzes them. The point person or the committee will then interview the bidders on-site. Sometimes, depending on the type of job, they’ll visit the vendors in their place of business to get a better feeling for them. In other words, does the potential vendor have new equipment? How does his labor situation look?  We like to know how long a vendor’s employees have been with him and what their qualifications are. You have to do your homework. The board in a small community has to be very focused and dedicated to that work.”  

Jan Northrop lives in a 392-unit self-managed co-op community in Patterson, New Jersey. They employ a dedicated on-site manager to assist the nine-member board with the daily maintenance and management of the property. “We form committees based on our needs,” she explains. “For instance, one of those committees is for the negotiation and renegotiations of contracts. I chair that committee. My committee consists of three people, all board members. When we are in need of a new vendor, like an insurance carrier or roofer, our on-site manager is in charge of collecting at least three bids. We then receive the closed and sealed bids and read and review them. We narrow it down and review proposals, discuss them, and then decide which we would like to interview. The committee does the interviews, then makes a decision based on the interviews and the price, etc. The job will go to the most qualified bidder—not necessarily the lowest bidder.”

Barbara McDonald is the president of the board of an eight-unit condominium association in the Uptown section of Chicago. “We have a four-person board, sometimes five. Four is required by the bylaws. Overall, we are too small for committees, so when we need to hire someone, we typically ask everyone in the association if they know anyone who they had a good experience with and who did a good job. From time to time, we enquire with a professional like an architect or lawyer to make a referral. Usually, jobs are done on a ‘one-off’ basis; we don’t enter long-term contracts. We also use Nextdoor and Facebook as resources. There are lots of local Chicago residents’ groups on Facebook. We do like to have first-hand experience referrals. Typically, the final decision is managed and vetted by the board.  The decision is approved by the whole association when necessary.”

“The key to being a successful self-managed community is volunteerism,” says Joe Milak, the president of a 112-unit self-managed over-55 community in Wykoff, New Jersey.  “You have only a small cadre to choose from. You need people to step up and be responsible, otherwise you need a management company. That will increase costs and may require higher monthly fees.”

Some Shoulds & Shouldn’ts

While self-managed communities may trust their board to locate, vet, and hire everything from roofers and plumbers to landscapers and janitorial staff, unless a board member is an attorney themselves, contract review and negotiation may not be the board’s strong point. Be that as it may, many boards don’t want to pay an attorney to review contracts, or enter into retainer arrangements that could lead to higher costs for community members.  

While it’s almost always best to bite the bullet and pay to get a professional set of eyes on any kind of binding agreement involving community funds or property, here are a few tips from legal pros about what should and shouldn’t be included in most vendor and service provider contracts:

“Board members should be vigilant of red flags,” says Scott Piekarsky, a principal with Offit Kurman, a law firm located in Hackensack, New Jersey. “If the pricing seems unreasonably high, if the scope of service is very limited, or the vendor is charging extra for items that should be included, watch out. The vendor’s contract may give them standard terms and conditions that are unreasonable, unfair, or heavyhanded. That’s why you need legal counsel involved, especially with the terms and conditions.”

“There are some items that every contract should include,” says Kris Kasten, a principal with Bartzen Rosenlund Kasten, a law firm located in Chicago.  “For example, the identity of parties to the contract, the scope of work or service to be performed, the term of the contract or time in which the contract will be performed, and the price. Other items that most contracts should include include provisions covering the types and amounts of insurance to be obtained and maintained by each party, whether one party should be named as additional insured under the other party’s insurance, indemnification provisions, provisions about how the contract can be terminated, provisions about how and to whom notices should be sent, remedy provisions (i.e., provisions about what happens if one party breaches the contract), and provisions stating that the laws of the state in which the association is located govern the contract, for example. Boards should be careful of contracts that are very one-sided in favor of the vendor, and should also try to negotiate fair contracts. Self-managed associations should consult with an attorney before signing a contract.”

Hal Coopersmith, a principal with Coopersmith & Coopersmith, a law firm based in New York adds that “a board should always seek references from vendors. If a vendor does not provide references, or those references are not willing or unable to speak to a board member then it should be an immediate red flag. Another example is willingness to provide requested information, for instance, a laundry contractor who may not share revenue that is generated. For long term contracts, understanding the renewal and termination obligations are very important. For a long-term contract, there shouldn’t necessarily be an automatic renewal unless the building terminates the agreement. Similarly, an agreement should have a clear exit strategy if a vendor is not performing, and objective standards for a building to terminate the contract. For construction contracts, adequate retainage and benchmarks are also critical.”  

While the goal of most self-managed communities is to control costs by taking up the responsibility of managing and maintaining their properties without the expense of hiring outside management, it’s still important to have channels for professional advice open where needed, even on a ‘one-off’ or a-la-carte basis. If there is a community member who is an attorney or an accountant or an engineer, their skill and talent base should be tapped when negotiating certain types of contracts. While self-management has many benefits, when additional input and scrutiny is necessary, don’t hesitate to get it. 

A J Sidransky is a staff writer/reporter for CooperatorNews, and a published novelist. He may be reached at alan@yrinc.com.