Hiring a new property management company for your building is no small change. Usually, it’s a multi-year commitment that involves a lengthy process, and it has the power to affect a building’s physical condition, finances, and other key aspects. When you’re in the process of evaluating property management companies, the negotiation phase is key.
The search for a property management company usually begins with a Request for Proposals (RFP), and that puts the onus on the property management company to state the terms of the deal. This, in turn, puts the HOA in a favorable position for negotiations.
The level of services offered by the new company should be compared to that of the previous property management company, and clauses should be built in for any services that were absent from the previous contact but proved necessary. After the services are outlined and agreed upon, the HOA should check the property management company’s credentials to confirm that the company has previous experience dealing with a building that size.
Then, it’s time to talk about the fee structure. Typically, the initial offer made by the property management company has some room for negotiation. If the contact includes both a percentage of rents and fixed management fees, there may also be room to move amounts from one category to the other in a way that is mutually beneficial for both parties.
Lastly, HOAs should be careful to look past the numbers and focus on what’s really important, which is the level of service provided by the property management company. In make cases, brand new and unproven property management companies offer lower fees in an attempt to take business away from established ones, but it’s not always in the building’s best interest to go with the absolute lowest rate offered.
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