Every community association reaches a point where the relationship with its management company no longer serves the community well. Perhaps communication has broken down, financial reporting has become inconsistent, or maintenance requests are going unanswered for weeks at a time. Whatever the reason, recognizing that a change is necessary is the first and most important step. Switching management companies is a significant undertaking, but it is one that boards across Chicago and the surrounding suburbs navigate successfully every year. The key is to approach the process with a clear plan, a realistic timeline, and a commitment to acting in the best interests of the community.
Before any formal steps can be taken, the board must review the current management agreement. This document governs the relationship between the association and its management company, and it will contain critical information about the notice period required to terminate the contract, any penalties or fees associated with early termination, and the procedures for transitioning records and funds. In Illinois, management contracts for community associations typically require 30 to 90 days of written notice before termination. Understanding these terms is essential to avoid legal disputes and to ensure a clean break. If the language in the contract is ambiguous, it is worth consulting with an association attorney before proceeding.
Switching management companies is a board-level decision, and it is important that the entire board is aligned before moving forward. A divided board can create confusion, delay the process, and undermine the credibility of the decision in the eyes of residents. The board should hold a closed workshop meeting to discuss the reasons for the change, review the terms of the existing contract, and agree on a timeline for the transition. If there is significant disagreement among board members, it may be worth taking additional time to gather data, solicit resident feedback, or consult with a neutral third party before making a final decision.
With the decision to proceed formalized, the board can begin the process of identifying and selecting a new management partner. The most effective way to do this is to develop a Request for Proposals, or RFP. This document outlines the association’s needs, expectations, and specific requirements, and it invites qualified management companies to submit detailed proposals. A well-crafted RFP will include a narrative on the scope of services required, the size and type of the property, the association’s financial profile, and any specific challenges or priorities. Sending the RFP to several qualified companies will generate a range of proposals that the board can compare on an apples-to-apples basis. For those on the board, the resources for board members are available to help guide them through these important decisions.
Once the board has selected a new management partner the next step is to formally notify the current management company of the association’s intent to terminate. This notice should be provided in writing, sent via a method that creates a record of delivery, such as certified mail or email with a read receipt. The notice should reference the specific termination clause in the management agreement and clearly state the effective date of termination. It is important to keep the tone of this communication professional and factual. The goal is to initiate a clean and orderly transition, not to create conflict. A professional management company will acknowledge the notice and begin the process of preparing for the handover.
Once proposals have been received, the board should evaluate them carefully against a consistent set of criteria. This evaluation should go beyond the monthly fee and consider the full scope of services offered, the company’s experience with similar properties, the strength of their financial reporting, and the technology platform in use. After narrowing the field to two or three finalists, the board should schedule in-person or virtual interviews. These conversations are an opportunity to assess the company’s culture, communication style, and responsiveness. The board should come prepared with a list of specific questions, including how the company handles after-hours emergencies, what their manager-to-property ratio is, and how they approach the onboarding process.
Reference checks can be a helpful step in the selection process. Speaking directly with current clients of the finalist companies can provide insights that no proposal or interview can replicate. When checking references, ask about the company’s responsiveness, the accuracy of their financial reporting, how they handle difficult situations, and whether the client would recommend them without hesitation.
Making the Final Selection
After completing the evaluation, interviews, and reference checks, the board should convene to make a final selection. This decision should be made in a public meeting by a formal vote and documented in the board minutes. Key provisions to review in the management agreement include the scope of services, fee structure, the notice period for termination, and procedures for handling reserve funds and financial records. It is advisable to have an association attorney review the new contract before it is signed. A well-negotiated contract will protect the interests of the association and set the foundation for a productive long-term relationship.
The best management companies will provide a well-organized transition timeline to minimize disruption to the community. The plan will provide a detailed schedule for the handover of all records, funds, and operational responsibilities. This timeline should account for the notice period in the existing contract, the time needed to transfer bank accounts and financial records, and the onboarding process of the new company. A typical transition period is 60 to 90 days, though more complex properties may require additional time.
Transferring Records and Financial Accounts
The transfer of records and financial accounts is one of the most important aspects of switching management companies. The outgoing company is obligated to provide all association records, including financial statements, vendor contracts, governing documents, resident information, and maintenance histories. The incoming management company will provide a comprehensive checklist of all items to be transferred and track each one to ensure nothing is overlooked. Bank accounts should be transitioned carefully, with the new company establishing new accounts and the outgoing company providing a final reconciliation of all funds. The board should verify that all reserve funds are accounted for and transferred accurately.
Throughout the transition process, the board should maintain open and proactive communication with residents. While the incoming management company will provide a detailed introduction packet to homeowners, a letter or email from the Board announcing the change in management companies, and introducing the new management team will go a long way toward building confidence and managing expectations. Residents will naturally have questions, and the board should be prepared to address them. A smooth and well-communicated transition can actually strengthen the community’s trust in the board’s leadership.
Once the new management company is in place, the board should discuss the community’s priorities and challenges with the incoming community manager. This meeting sets the tone for the relationship and provides an opportunity to address any outstanding issues from the transition. The board should also establish a regular meeting schedule and agree on communication preferences. A strong start to the new management relationship will pay dividends for years to come, creating a foundation of trust, transparency, and mutual accountability that benefits the entire community. For those interested in learning more about the various facets of property management, our blog offers a wealth of information and insights.
NS Management, LLC
5301 Dempster Street, Suite 301
Skokie, IL 60077
Phone: 847-998-0404