The Real Deal Miami

When the manager is the maintenance company

By Rachel Gomez | August 19, 2009 11:23AM

South Florida property management companies that offer a one-stop shop for repairs and maintenance face unique problems and opportunities in a troubled economy.
 
Many property management companies in the region own the businesses that provide painting, landscaping, roofing or other maintenance services to the properties they run. In the midst of an economic crisis, having those operations in-house can be a liability because competition has gotten so fierce or an asset because it brings in money. 
 
South Florida property management companies, like every other industry connected to the real estate sector, must scramble to generate cash and make up for widespread decreases in fees. Owning the sub-contracting company lets some property management firms bring in more revenue.
 
But it can also cost homeowners more because it takes away the competitive bid process, said Paul Kaplan, managing director and co-founder of KW Property Management and Consulting, based in Miami.
 
“You make more money, but it’s at a detriment to the client,” Kaplan said. “It’s important to be fair when bidding out.”
 
Although some say it can be more efficient and reliable when the property management company owns the firm that mows the lawns or repairs leaking faucets, this was not the case for Kaplan and partner Robert White. The two started a landscape company but sold it off 14 months later.
 
KW Property Management and Consulting has 420 employees and 120 properties throughout Florida, from Tampa and Naples down to South Florida. Kaplan said for the size of the company, the sale was a good move. 
 
“How can you expect a property manager to fairly watch over that vendor?” Kaplan said. “In these times, you need to run your property leaner.”
 
Kaplan said when a vendor is a sister company, managers will often go easy on their expenses and their bottom line. He also said that when the property management company has a financial interest in a vendor company, there is often pressure for the board to choose that company for services regardless of whether they are the most competitively priced. This drives up maintenance fees.
 
“When dealing with the homeowners’ association, you need to get competitive pricing,” Kaplan said. 
 
At the same time, some property managers will point out that the HOA likes the umbrella because they have to deal with fewer vendors.
 
“When something goes wrong, it’s easier to turn around and blame us so there’s more pressure to perform,” said Kent Sonneborn, president at Landmark Management Services.  Landmark owns three service companies: Landmark Landscaping and Maintenance, Landmark Pest Control Services and Hampton Insurance Company. 
 
Sonneborn said his company only does landscaping for about 15 to 20 percent of their properties, and they don’t require their properties to go with Landmark for services. “Sometimes they’re happy with the vendor they’re using.”
 
At the same time, he said, there’s certain things Landmark has chosen not to be involved in. “We’re not trying to be all things to all people,” he said.