Page 8 - New Jersey Cooperator January 2019

C ondominium associations come in all sizes and shapes. They can con- tain hundreds of units, or as few as two. While many of the issues faced by asso- ciations are universal regardless of size, small condominium associations do face some unique challenges that set them apart from their larger cousins. Those challenges touch all aspects of life in these communities, from legal to management to social issues. A Cozy Alternative Not all prospective condo owners are seeking the same type of living environment. Some prefer a large, all-inclusive community with tons of amenities and activities to choose from, while others prefer a smaller, cozier and more intimate community. That type of vibe is often found in smaller properties – typi- cally walk-ups and brownstones – and often in urban settings. Small associations are not unusual, and indeed dominate the available housing stock in certain locations. For ex- ample, “if you want to live in Jersey City or Hoboken,” says Joseph Rosenberg, Chief Op- erating Officer at Atlantic Management in Se- caucus, “that’s pretty much what you’ve got!” Small condo associations also make up a sizable portion of the market in parts of New York City; and in Chicago’s Lincoln Park. Ac- cording to Frank Lombardi, a principal with the law firm of Goodman, Shapiro and Lom- bardi, which has offices in Massachusetts and Rhode Island: “Small associations under six units are \\\[also\\\] very common in New Eng- land. In fact, they may constitute as much as a third of all associations in the region.” According to Kevin McIntyre, a real es- tate operator in Chicago: “People who buy in small associations are usually drawn to the low common charges. Carrying costs in larger buildings are much higher, due to those buildings offering more services. They may be looking for a more traditional neigh- borhood as well, something more personal,” like the aforementioned Lincoln Park, where brownstones are the order of the day. “There’s no particular profile of a typi- cal owner in a small association,” says Ariel Fox, a property manager with Cornerstone Management Systems in New York City. “It has more to do with the type of building. We manage old-style tenement buildings where the units are smaller, and the owners tend to be single, perhaps buying their first unit. We also have conversions of old mercantile build- ings where you may have say, eight floor- through lofts on eight floors. Those buildings attract families and investment bankers.” To Hire, or Self-Manage? David Abel, a property manager in Bos- ton with national firm FirstService Residen- tial, says: “Many small condo associations are mostly the result of conversions of our old housing stock. The apartments are worth more as individual units than the property is as a whole.” Put another way, three condo- minium units are worth more individually than a three-family house. “The problem with small associations,” Abel continues, “is that they’re small. They of- ten can’t afford proper management. A four- unit association has the same ‘moving parts’ as a 150-unit association – but in a larger as- sociation, management responsibilities are not usually undertaken by the board.” In a small association, the few members may be responsible for everything from day-to-day maintenance, to tax filing, to conflict resolu- tion between neighbors. Florin Nenciu owns two condo units in Chicago. He lives in one located in a 16-unit building, and leases the other in a three-unit property. In the 16-unit building, the associa- tion itself owns a unit that is leased to a build- ing custodian and handyperson who does maintenance and things like snow shoveling in return for the living space and a stipend. In the three-unit building, the cost of hiring people to do chores and maintenance is just too high to be easily absorbed by three own- ers, so they pitch in themselves to help. Own- ing a unit in a micro-association is like living in a private home; if it snows, you better grab your shovel. Abel lived in a six-unit association at one time. He told his neighbors that while he wasn’t offering to take over the manage- ment of the property, he would be willing to oversee certain aspects of day-to-day upkeep and maintenance. “The catch-22,” explains Abel, “is that small associations can’t afford the cost of management, and managers can’t work for the fee that a small association can afford. That often leads to self-management, or to one or two people assuming the bulk of the responsibility,” which Abel likens to being one’s own attorney. “As the old adage goes, a man who represents himself has a fool for a client.” Management Issues “From a manager’s point of view,” says Abel, “it doesn’t pay to handle small associa- tions. The manager has the same responsi- bilities as in larger associations; they have to produce financial statements, arrange and attend inspections, monitor compliance re- quirements, set up and attend meetings, and handle communications with and between board members. The management model to tackle this problem of scale is to ‘bundle’ sev- eral small associations together.” He further explains: “Let’s say you have four or five client buildings located on the same street, or within a couple of blocks of each other. On the same street, you can cov- er all \\\[of those associations\\\] with the same cleaning service or lawn maintenance. There are a couple of management firms in Boston who do this.” “Typically the problem with small asso- ciations and corporations is that they don’t have full-time staff,” says Fox. “That can be challenging, because what would normally fall under the responsibility of the super, like meeting a contractor, for instance, is then as- sumed to be done by the manager – which isn’t the case.” Fox’s firm doesn’t formally bundle prop- erties for more efficient management, at least not in the sense of going out looking for those types of arrangements. But, he says: “We do have areas where we’ve picked up a number of properties on the same block, and that makes things more worthwhile for us, because one agent can handle a number of buildings at the same time.” À la Carte Services Rosenberg explains that for some small associations, the cost of full-time manage- ment is just too high on a per-unit basis, so they offer an alternative: à la carte services. “Recently, we began offering bookkeeping services,” he says. “We collect the monthly charges and pay the bills. Everything is done online. If it works well, we will expand the program.” The cost of keeping an attorney on retain- er is far too high for most small associations, so in most cases legal services are procured on an as-needed basis. Professional services such as lawyers, accountants, and architects are treated similarly to contract services such as lawn work, snow removal, building clean- ing, and minor maintenance. The association seeks those services only when they’re need- ed. Running Small Associations Unique Communities, Unique Needs BY A J SIDRANSKY MANAGEMENT 8 THE NEW JERSEY COOPERATOR —JANUARY 2019 NJCOOPERATOR.COM ISTOCKPHOTO.COM