Six years ago, a scandal rocked the New York State real estate management industry for the second time in a decade. Thirty management company owners, agents and contractors were indicted for taking kickbacks for contract work at many New York City co-ops and condo buildings.

During that sweep of corrupt companies, two of the city’s largest management businesses—Marvin Gold Management and Elm Management Associates—were accused of taking millions of dollars in payoffs from contractors for work at luxury cooperatives, as well as low- and middle-income buildings throughout the city. One manager in the center of the controversy was accused of taking a total of nearly $4 million in kickbacks from contractors for work in some 74 buildings.

These scandals promptly re-ignited the often-discussed and very heated debate over whether property managers should be licensed. Currently, New York property managers are not required to be licensed—although many voluntarily take continuing education courses to stay current in the industry—and this fact still generates a good deal of controversy among residential industry players. Today, however, the interest in passing legislation to license property managers is either firing up or sizzling out, depending on whom you ask.

The Pros

On one side of the debate are the licensing proponents, advocating that managers should earn educational credentials and answer to a governing authority of some sort to ensure ethics and standards in the industry. Proponents firmly believe that such licensing may reduce the chances of a third round of scandal.

In a recent article in Real Estate Weekly on the subject of licensure for managers, David Kuperberg—president of the Manhattan-based management firm Cooper Square Realty, Inc. and a property manager himself—wrote, “New York property management is still in the dinosaur age when compared to most of the country. In key areas of certification, training, technology use, and customer service, we lag behind.”

Kuperberg feels that certification and licensing is one way managers in New York and the surrounding metropolitan areas can bring themselves and their industry up to speed with the rest of the country.

“Mandatory certification would require a property manager to fulfill certain educational and testing requirements, agree to a code of ethics, and have a background check conducted as prerequisites to obtain property management certification,” Kuperberg continues.

“Mandatory certification would also establish a centralized registration center to handle and monitor complaints. Right now, if a property manager has had numerous complaints made or has been accused of wrongdoing, it is difficult for a prospective employer or a building’s board to know this history. The purpose of mandatory certification is not to police the industry, but to raise the standard.”

One of the leading organizations heading up the push for licensing is the New York Association of Realty Managers (NYARM). “We feel that licensing would assure the building owners and co-op boards that they are getting a professional who has been willing to spend time and money to achieve this credential,” says Rochelle Captan, NYARM’s president.

“In the city, we deal with licensed electricians, plumbers and CPAs—everybody is licensed, but we’re putting it all together, and we are not licensed,” says Captan. “Management is more sophisticated than it has ever been before. Now we have Local Law 11, issues with carbon monoxide detectors and lead paint, as well asvarious other indoor air quality situations. We are dealing more and more on so many different levels—why should we not improve ourselves?”

Greg Carlson, executive director of the Federation of New York Housing Cooperatives & Condominiums (FNYHC) agrees with NYARM and Captan. “I don’t understand how buildings hire managers who are in charge of millions in assets do not have to be licensed,” says Carlson. “There also has to be a procedure for those who are just now entering the field to work under someone who is licensed—like an attorney who can’t practice law before they are licensed and have practiced under another, more experienced attorney.”

Another View

On the other side of the debate are opponents like Marolyn Davenport, the senior vice president of the Real Estate Board of New York (REBNY), who stresses that although she hasn’t seen the current licensing proposal in legislation, (a bill requiring licensing of building managers has been proposed each year in the state Assembly since 1981), she still feels that the current system works fine the way it is, that the broker’s licensing requirements cover property management, and creating licensing protocol would entail more difficulty than the end result would be worth.

“I don’t know why it would be passed,” says Davenport. “There is no hue and cry for it. I’ve worked for REBNY for 20 years, and there’s never been a bill that worked for everyone in the industry. In my opinion, the bills favor one organization over the other and there isn’t anything that’s giving it a lot of steam.”

Another issue of concern to the opponents of licensure is that licensing property managers may simply promote one organization’s course offerings over another. For her part, however, Davenport believes that from an educational standpoint, there are many courses that are very good for property managers. According to her, “The broker’s course is sufficient. I’m always skeptical when one organization is pushing to do something that they may benefit from.”

In addition, opponents are concerned—and even some advocates have expressed concern on this issue too—that licensing may lead to a demand for salary increases among licensed property managers—a demand that some buildings may not be able to afford.

More Questions

But are the courses sufficient? Will more education equal higher management fees for buildings? Currently, according to the REBNY website, (www.rebny.com) salespeople who wish to obtain a broker’s license must first complete a 45-hour salesperson’s licensing course and pass the salesperson’s exam, then must complete a 45-hour broker’s licensing course and pass both the course and the New York State Broker’s exam.

Reviewing the REBNY list of courses, there are only two courses offering “property management” information, including a 7-1/2 hour on-campus Leasing and Property Management Basics or the same course offered virtually for 3.5 hours.

Similarly, reviewing the New York Real Estate Institute Broker’s License course, one day of the 45-hour course is devoted to Day 3: Construction/ Property Management.

To put that into context, according to the New York Department of State, “In order to qualify for licensure as a real estate salesperson, an applicant must have satisfactorily completed a 45-hour salesperson qualifying education course in real estate approved by the Secretary of State, and have passed a qualifying examination administered by the department.”

Carlson admits that while offering these courses is good, and individual managers educating themselves is excellent, he insists that the length of most courses simply isn’t enough. “For those who say the broker’s course gives you enough on property management—a few hours is nothing,” says Carlson.

As for more education translating to higher fees for buildings wishing to retain the services of a licensed managing agent, some experts on the issue feel that good old-fashioned capitalism will strike a balance in the end. According to Kuperberg, “The final decision will rest with the marketplace. I am certain most property owners will accept higher fees in return for the elimination of hidden costs and improvements in the quality and professionalism of service.”

Unfortunately for both sides, although the licensing bill was introduced in the current legislative session, it was not acted on this time and the state Senate is currently on break. According to Sen. Carl Kruger, D-27, a sponsor of the bill that was modeled after the original NYARM/Halperin bill of the late 1980s, the bill will be re-filed again in January under a new number. “Most probably,” said Kruger, “The bill will be assigned to the same committee.”

When asked why the bill hasn’t been passed yet, Kruger points out that there is a “ton of legislation that doesn’t get passed or doesn’t see the light of day, whether for political reasons, or perhaps because the bill may have a strong fiscal impact. Bills like this only really take off when there is an expose’, controversy or impropriety—like those 1999 kickbacks that caused the bills to percolate. Unfortunately, supporters of the bill—like NYARM—aren’t as vocal as they should be in Albany and the bill isn’t going to see any great interest.”

Captan is still convinced the bill has a better chance now than it did several years ago and if the bill is approved, she believes that the new licensing criteria could be developed in under a year. “We would be happy to offer the courses,” said Captan. “We feel we’re in an excellent position to do so, especially dealing with the various aspects of management.”

If the legislation is not approved, Carlson offers another alternative to get licensing approved. “Instead of going through the state, I believe the industry should go through the city,” says Carlson. “That may cause a jurisdictional problem, but after two major scandals, we just can’t give up on the issue. It’s important.”

Kuperberg agrees, and says both sides of the issue would do well to strike a compromise, lest the issue be decided for them. “The industry slept through the wake-up call in 1994,” he says. “We must hear the alarm and do something now, otherwise government agencies could step up and take control, instituting a form of licensing that accomplishes little. I would much rather have the industry act before the government does.

“We need to take the initiative and set the standards that will benefit the industry and properties we manage in the long run. How we handle this issue as an industry will tell a lot about our commitment to improvement.”