This introductory article, first of a comprehensive three part series, is designed to assist Strata Corporations with the process of selecting a Strata Agent.

The future articles are Your Tender Specifications followed by Responsibilities and Duties of Council and Property Manager. Hopefully this article will provide the reader with another perspective and provide insight into the selection process.

When a Strata Corporation enters into an agreement with a management company the Corporation is the Principal and the management company the Agent. The express appointment and authority of the Agent is defined in the agency agreement and is subject to the Law of Agency.

The agreement gives the Agent the authority to enter in to contracts with third parties which are binding on the Strata Corporation. The Corporation will be bound to the third party to the extent that the action was within the Agents authority. The Agent employs individuals who act as property managers for your Strata Corporation.

The defined role of the property manager should be significantly more than taking minutes, identifying illegally parked cars and barking dogs.

A professional property manager for a Strata Corporation should be pro-active, have a national property management designations, many years of experience and the ability to provide leadership and direction to the Corporation.

The selection process to identify, evaluate and select Agents with competent and professional managers on staff is difficult. This is primarily because there are no compulsory educational, licensing, financial, bonding, continuing educational or re-certification requirements for strata management.

When Strata Corporations, or individuals, select service providers such as accountants, engineers, lawyers and trades there are professional standards, legislation and benchmarks to rely upon. In British Columbia, to manage Strata Corporations the only requirement is a business license.

A small Strata Corporation of 25 units with individual unit values of $175,000 each represents a real property with an overall value of $4,375,000.

Would you not want to be able to identify the best possible management solution for your Strata Corporation rather than the cheapest cost per door?

Strata Corporations may take comfort in the fact that the management of a strata property is no different than management of an investment property. Experienced, professional and licensed property managers are readily available.

In the investment community an investor will identify individuals and companies who are licensed, bonded, insured and have professionals on staff that are certified by one or more institutes in a discipline related to their particular requirement. Strata Corporations could also benefit from this proven selection strategy.

Commercial or residential rental properties may be owned by many unique investors with varying ownership objectives subjected to a multitude of legislative directives.

Similarly Strata Corporations consist of owners with varying ownership objectives, subjected to a multitude of legislative directives. In all cases the property remains the same, it is the type of occupants and applicable legislation that differs from commercial to residential rental to strata properties.

Property Management is most commonly defined briefly but concisely as

return from a property over its fullest economic life".

There are two implications here. First, the property manager will strive to increase income. Secondly, increased income will not occur at the expense of compromising the physical integrity of the property. This definition underscores the fiduciary relationship that exist between a client and fee-manager in the investment sector. The challenge to the property manager is to maximize the economic life of the property for his client while meeting his client's requirements for a return on the investment.

This contradictory relationship exists in most strata management as well. It seems to be a basic requirement of Strata Corporations to maintain low maintenance fees. But this should not occur to the extent that it compromises the physical integrity of the property, thereby eroding the overall value and equity of the owners.

To appreciate the significant impact of the management activity please refer to data (Figure 1 & 2 ) published by Mel A. Shear in his book Handbook of Building Maintenance Management, Reston Publishing Company, Inc. 1983.

Figure 1 depicts a typical life cycle of a major investment property as 50 years. Note the time allocated to the conception phase, the design phase and the construction phase.

Figure 2 depicts the percentage of life cycle costs dedicated to these activities. Note the cost of construction at 20% compared to the cost of operation at 75%. Since 75% of the life cycle cost is under the direction of the property manager selecting a suitable Strata Agent to manage a property is extremely important.

The following 18-point checklist is designed to narrow the selection process to focus on two or three suitable management firms for your property.

1. The nature of your property determines your needs. The requirements for the management of a strata project are not much different from the requirements for the management of a rental project. As an owner it is important to focus on management firms that have qualified personnel, a proven track record in the particular type of property that you own and an understanding of the applicable legislation.

2. Solicit referrals from friends, neighbours, associations and other Strata Corporations. This process will provide some insight into the capabilities or reputation of various firms and will yield a list of potential firms to consult when you prepare your invitational tender list.

3. Prepare tender guidelines. The specific guidelines will be a list of requirements and questions or items for the individual management proposals to include. This process will cause the Strata Corporation to think about their own operational and financial requirements resulting in a standard criteria from which to evaluate proposals received.

4. Visit the management office. Determine if there is a serious commitment to the strata management industry. Does the company subscribe to the " "Strata McManagement" philosophy, focusing solely on volume of units instead of personalized service or do they provide responsive, tailored and personalized service that would address your unique needs and requirements.

5. Is the company a national or local company? Accessibility to the decision makers is important for two reasons.

First, if you have a problem affecting your Strata Corporation is it solved where your property is located or is it referred to an office in another province.

Secondly, although we are in a global economy, real estate dynamics are localized and depth of understanding by your selected Strata Agent of local conditions is important to the success of your Strata Corporation

6. Meet the property manager who will manage your account. Hiring an employee without an interview is certainly risky therefore retaining a Strata Agent before meeting the actual property manager assigned to your account could result in unexpected disappointment. The key person is the property manager as he/she will have the hour-to-hour, day-to-day, week-to-week responsibility for the operational and financial well being of the Strata Corporation.

Driven by a consumer desire for competent, personal and professional service, the shift in the industry is towards boutique management firms and executive property managers . These are smaller companies with senior and qualified property managers, with one or more property management designations, who would personally handle a portfolio, dealing directly with the Strata Councils, much the same as a lawyer, dentist or accountant would deal with their clients.

7. Ask about the compensation package for the property manager If there is no "performance or incentive" package for the property manager it could be that the property manager's day begins at 9:00 A.M. and ends at 5:00 P.M. while the Strata Corporation is speeding along as a 24-hour a day operation. Look for a situation where you are dealing with the principal or senior associate or where the property manager receives compensation based on the management fees within his/her portfolio. You should obtain the best talent available.

8. Have the property manager attend your property. Quiz the property manager on certain aspects of management including legislation, elevator contracts, building envelope problems, policies and procedures for your property. This will demonstrate how knowledgeable the property manager is. Ask how certain hypothetical situations are handled. If there is a parking problem ask about solutions; if there is excessive damage in amenity areas ask about rules.

Develop an understanding of how the property manager interprets and responds to problem situations. Watch out for evasive answers or non- answers. Should the property manager continually defer questions to the head office or accounting department, this is a clue that the property manager is not on top of the situation.

9. Ask about financial reporting. Under no circumstances should you appoint a Strata Agent without first receiving a full set of their sample financial statements. Depending on your requirements you might wish to find out if the accounting system has the capacity to produce various reports that you might require. The system should be real time to provide immediate updates as information is entered. This is important as it enables the management firm to identify and project trends and to spot problem areas.

10. Ask about computer based management information systems. Is a standard off-the-shelf spreadsheet package used or has the management firm invested in a comprehensive property management system that enables them to provide a variety of reports and analysis.

11. Ask for corporate brochures or information packages. Review their corporate profile, operating philosophy, foundation of their management program.

12. Ask for a comprehensive management outline of services provided. Depending on the property, the management proposal should address specific key areas such as finance, administration and maintenance.

13. Request that the proposal be appended to the contract. If the management firm agrees, it is a good indication that they stand behind their proposal when it comes time to deliver the goods.

14. Ask to view the contract. Review the formal management contract before making your final selection, this way problem areas or concerns are addressed while options are still available.

It is also a good way to view the compatibility between the Strata Corporation needs and the ability and willingness of the management company to meet those needs.

15. Education and Experience. Over the last decade strata management has been forced to evolve from a traditional administrative function where someone took minutes and collect common area maintenance fees, to a comprehensive management program where an experienced and certified property management professional ensures all needs are met.

The earlier administrative approach was not sufficient to protect the physical and financial integrity of the Strata Corporation or to ensure the successful overall management of a Strata Corporation.

The building envelope failure crisis in British Columbia arose from the fact that we live in a rain forest where, in many cases, buildings were poorly constructed containing fundamental design flaws, using inappropriate materials and construction methods, for a rain-forest type of environment.

Given the above facts the building envelope failure would have occurred, regardless of the actions of the property manager.

However, the question remains, could earlier detection by a professional property manager have mitigated the losses? Very likely YES. Had the Strata Corporation retained the services of a certified professional with a contractual mandate to provide property management services similar to that offered in the investment sector, early recognition of deterioration would likely have been conveyed to the owners.

Individual strata units owned collectively represent a complex and significant financial investment and warrant investment in a sophisticated management approach including personnel similar to those offered in the investment sector.

Given that property management is a profession, identify companies and individuals who are licensed and have staff with one or more of the following designations; Certified Property Manager (CPM), Certified Manager of Condominiums (CMOC), offered by the Institute of Real Estate Management, or Real Property Administrator (RPA), offered by the Building Owners Managers Institute.

These educational achievements and designations provide assurance that an individual has experience and knowledge gained through the completion of a Graduate Level Program in the property management field.

16, 17, 18. Points 16, 17 & 18 have been deliberately omitted to convey the fact that each Strata Corporation’s requirements and property are unique. Serious consideration should be given to matching a Strata Corporation’s needs to the services provided by the Strata Agent

It is important to expand on this check list by developing additional questions to ensure compatibility between the Strata Corporation and the management firm.