Transitions are where management companies acquire liabilities they never agreed to take on. A building changes agents because something went wrong — unpaid vendors, uncollected arrears, violations nobody certified, a capital project that stalled, books that do not reconcile. The new agent arrives, starts fixing things, and eighteen months later finds itself answering for conditions that existed before it had a contract.
The protection is not complicated, but it has to happen at the start: establish in writing what you received, what you did not receive, and what condition the building was in on the day you took over.
We advise managing agents on takeovers and transitions. Call 212-233-1233 or email [email protected].
Getting a Complete Turnover
Departing agents range from cooperative to obstructive, and the ones leaving under a cloud are the least helpful. Ask for everything in writing, and record what does not arrive.
- General ledger, financial statements, budgets and bank reconciliations for the preceding several years
- Bank account details, signatory cards, reserve accounts and any loan documents
- Arrears ledgers by unit, with backup for every charge, late fee and assessment
- All vendor and service contracts, including ones auto-renewing or with early termination penalties
- Open litigation files, judgments, liens and any matters with counsel
- The full violation history — open, cured but uncertified, and in hearing
- Insurance policies, certificates and the loss history
- Governing documents: declaration, bylaws, proprietary lease, house rules, offering plan and amendments
- Resident and shareholder files, alteration agreements, sublet approvals and board minutes
- Employee records, payroll, union agreements and benefit obligations
- Keys, access credentials, alarm codes and building systems documentation
- Pending closings, payoff letters issued and questionnaires outstanding
Protecting Yourself From the Prior Period
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Say so in the management agreement
The cleanest protection is a provision stating that the agent's obligations and liability run from the commencement date and that it assumes no responsibility for acts, omissions or conditions predating the engagement. Boards rarely object, because it is plainly reasonable — but it has to be asked for, and most form agreements do not include it.
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Document the opening condition
Write to the board early identifying what you found: the violations that were open, the arrears as of the takeover date, the contracts you inherited, the records you never received. Put it in writing and keep the acknowledgment. This one letter resolves most later arguments about what predated you, and it is far more persuasive than a reconstruction offered after a claim.
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Do not warrant what you cannot verify
Arrears ledgers you inherited may be wrong. Violations may be recorded against the building that nobody has looked at. Vendor balances may be disputed. Report these as inherited and unverified, and do not certify or re-issue figures you have not independently confirmed — a payoff letter is the most dangerous example, because it is relied on at a closing and the error is discovered only afterward.
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Reconcile the accounts before you sign on them
Taking signatory authority over accounts you have not reconciled means taking responsibility for whatever is in them. An opening reconciliation, and where the situation warrants it an independent review, is worth the cost in a building whose prior management ended badly.
When the Prior Agent Will Not Hand Things Over
Records get withheld, most often over unpaid fees. It is the building's fight more than yours, but you are the one who cannot work without the files.
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The records belong to the building
Under most management agreements the books and records are the building's property, held by the agent. A departing agent generally has an obligation to deliver them, and a fee dispute does not usually justify holding them hostage. The demand should come from the building, in writing, citing the agreement.
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Keep your own record of the gaps
Whatever the outcome between the board and the prior agent, you need a contemporaneous list of what you asked for and never got. That list is what protects you when something surfaces later that you had no way of knowing about.
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Reconstruct what matters most
Some things cannot wait for the dispute to resolve. Governing documents, insurance, open violations and pending litigation deadlines can usually be reconstructed from public records, counsel and carriers, and should be, rather than left open while the board and its former agent argue.
Speak With Our Firm
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Start the engagement protected
We review the management agreement before you sign it, prepare the turnover demand, and help you document the opening condition of a building in a way that holds up if the board's view of history later changes. For an agent taking on a portfolio, doing this once as a repeatable process is worth considerably more than doing it building by building.
Call 212-233-1233 or email [email protected]. See also the management agreement and leaving a building.
