Outsourcing Decision Making to Property Management Companies

Outsourcing Decision Making to Property Management Companies

September 22, 2007

Arguably, outsourcing can be a manager’s best friend, or worst enemy. It is fair to say that most people get paychecks prepared not by the employer, but by companies such as ADP. Of course, we also know about the call centers in India.

What about homeowner association board of directors outsourcing decision-making to property management companies?

For example, in a paid advertisement run by the OCR (September 21-23, 2007), the Laguna Woods Village’s Resident’s Voice includes examples of “emergency use only” expenses incurred by PCM General Manager Milt Jones such as a $441.79 Tiffany & Co gift for retiring Laguna Woods Globe editor (owned by the OCR) or a $713.77 tab at Las Brisas Restaurant.

The solution to these complaints? Change the wording to property management company agreement to read something like “residents will pay any and all expenses incurred by the property management company”.

To add insult to injury, the property management company fees for Laguna Woods Village have increased by 69% in five years, according to the paid advertising piece. "When I read the Management Agreements that were signed by the Mutuals, it makes you wonder if they had a give-away contest to see who could give PCM the most for the least return", said Resident's Voice Connie Conrad, when we asked if he know of documented evidence to justify the exponential increase.

We are waiting to hear from PCM Laguna Woods Governmental & Public Affairs Manager to comment on this story.

If you think this is an isolated instance, think again: The CotoBuzz Journal has documented a number of requests sent to various auditors for clarification of fees charged by property management companies. Our own requests to CZ Master Association’s auditor have gone un-answered.

On an apparently un-related story by David Wighton and Ben White, published September 16, 2007, the Financial Times of London, the authors write “Don’t bother ringing up a Wall Street bank with a bit of business at 8am on Tuesday morning. Everyone will be too busy poring over Lehman Brothers’ figures”, then go on to describe the mortgage-backed securities debacle, including pervasive creative accounting echoing the infamous figures don’t lie, but liars figure: “Some executives at rivals question whether the figures will provide an accurate picture, given the discretion allowed by accounting rules. …It is going to be difficult to work out whether Lehman has calculated its numbers on the same basis as the other firms” – So there you have it – our contention is that the more managers outsource decision-making, the more the fox will feed on the hen!

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