Are you torn between balancing your condo corporation's budget and retaining invaluable staff? The impact of the Consumer Price Index (CPI) on property management contracts is a pivotal consideration.
In a recent collaboration with Stratastic, Nicholas Chirametli, President of City Sites Property Management Inc., brings his extensive experience in the intricate dynamics of property management agreements, to shed light on this crucial issue and its ramifications on each condo board and corporation considering CPI increases during budget time, as well as throughout the entire condo industry.
Let's dive deeper into this subject and uncover how scrutinizing the numbers influences your condo management team and service agreements, all while safeguarding your corporation's best interests and ensuring that board members understand the impact and importance of CPI increases on property management contracts and staff retention.
The Role of Property Management Contracts:
The Property Management Agreement serves as the cornerstone of the relationship between the Condo Board and third-party contractors. Understanding the nuances of this agreement is essential for condo owners to grasp where their corporation's funds are allocated and how best to compensate property management companies and their managers.
“The Property Management Agreement is the single most important contract relationship between the Condo Board and third-party contractors. The average layperson needs to understand the role of the Manager and the Management Company to better understand where the Corporation’s money goes so they understand how best to compensate their Property Management Companies and by extension, their Property Managers” - Nicholas Chirametli, President (for Stratastic Inc.).
Supporting Property Managers:
It’s important to understand the pivotal role of property management companies in providing the necessary support and infrastructure to equip property managers. By allocating sufficient resources and offering competitive salaries, management companies can attract and retain skilled professionals who play a vital role in overseeing the corporation's operations.
“The greater the budget, the greater the range the Property Management Company has to offer a competitive salary to the Manager and sustain their employment over the course of the Contract. Additionally, the more time and resources the Property Management Company can dedicate to the overall operations of the community” - Nicholas Chirametli, President (for Stratastic Inc.).
Balancing Financial Pressures:
In an era of escalating living costs and regulatory demands, condo management faces unprecedented financial pressures. From mandatory continuing education courses for property managers to rising employment costs, the industry is grappling with mounting expenses. Boards must address these challenges while ensuring the sustainability of property management services.
“The Board must consider the financial pressures on Managers and Management Companies are increasing year over year. The condominium management industry is already suffocated by employment shortages due to the high number of condominiums being built in the province, and what is becoming a higher threshold for Managers to enter the condominium management industry. This effect has increased the salary expectations of Property Managers, while the service cost charged by Management Companies has remained relatively steady” Nicholas Chirametli, President (for Stratastic Inc.).
The Implications of CPI Adjustments:
It’s important for CPI adjustments in property management contracts. Rejecting proposed CPI increases may lead to long-term financial strain for management companies, compromising their ability to offer competitive salaries and retain qualified staff. Boards must carefully weigh the potential consequences and prioritize the long-term stability of their management team.
“The risk is that there will be an increased likelihood that the Corporation may be assigned a more affordable Manager, but they may not be as qualified to meet the Board’s expectations, will come with a learning curve to the community, and may cost more money in the long term. There is also an increased likelihood that the Corporation will continue to experience a high degree of turnover of its Managers if payments to the Management Company do not increase with the cost of living” Nicholas Chirametli, President (for Stratastic Inc.).
These insights are imperative for every condo board to consider when tackling the CPI increase and trying to balance the corporation’s budget. There are many factors that go into making the right decision for each corporation and its community, and we’re hopeful that boards will carefully consider the pros and cons of each one when tasked with approving CPI increases annually - for property management and vendor contracts alike.
- Nicholas Chirametli, City Sites Property Management Inc.
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