Wednesday, May 6, 2009

Is Your Management Co. Taking Kickbacks?

An article by David Roeder in today's Chicago Sun-Times examines the practice by some property-management companies of taking money from contractors they hire to work on condo buildings. Highlights:

"If you live in a high-rise condo, the chances are good the management company that runs it is getting paid by more than just your association. The managers also might be taking money from contractors they hire to work on your building.

"Call it a procurement fee, a kickback, or pay-to-play for the private sector. But it's a common practice coming under scrutiny. The Streeterville Organization of Active Residents, a community group whose members are mostly condo owners, has asked a committee to look at the practice and advise condo associations on how to address it. SOAR President Gail Spreen said the group is making no assumptions that anything illegal is going on, especially since some procurement fees are written into management contracts.

"But others are scornful. 'It's theft,' said Tim Sack, vice president of plumbing operations TMS Mechanical Inc. in McHenry, a firm that works at many downtown high-rises. 'To me, it's stealing from the people you are working for.' Sack said he turns down invitations to kick back part of the bill on each job. The money would secure his place on a management company's 'preferred vendor' list.

"Industry insiders said the payments often range from 10 percent to 15 percent.

"Either way, the principle might grate on members of condo boards who have to explain why monthly assessments are so high. If a contractor is dealing in kickbacks, shouldn't they instead just reduce the bill for the job?"

For the entire article, which includes responses from Sudler, Wolin-Levin and Draper & Kramer--and names two companies (Building Group and Habitat Co.) that sources say do not engage in the payments--click here.

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