Transitioning a commercial property between management companies demands a well-executed plan. As a seasoned professional in commercial property management, I’ll guide you through a step-by-step process, focusing on key considerations, including Common Area Maintenance (CAM) reconciliation, for a successful handover.
1. Review Existing Contracts and Calculate Timelines
- Thoroughly review current property management agreements to determine required notice periods, transition provisions, and wind-down details. This will vary by contract.
- Factor in notice periods and lead times needed for various transition steps as you assemble a full timeline. Ideal notice is 60-90 days.
2. Notify Current Provider and Tenants
- Formally issue written notice to existing provider at earliest date allowed per contract.
- Draft tenant communications to send at 60, 30 and 14 days before transition about the change. Assure them of continuity in service and introduce new contacts.
3. Gather All Documentation from Current Provider
- Create a documentation checklist that covers leases, vendor info, warranties, maintenance records, inspection reports, plans, invoices, certificates, etc.
- Set firm date for all documentation to be submitted by. Conduct spot audits throughout gathering period.
4. Review Budgets, Reconcile Accounts
- Analyze at least 2 years of financial records—budget variances, account reconciliations, CAM billing support for any irregularities.
- Outgoing manager provides final account reconciliations of security deposits, reserves, operating funds, petty cash, etc.
CAM Reconciliation
Common Area Maintenance (CAM) costs can be one of the trickier areas when transitioning between property management companies. Here are some additional considerations to ensure CAM reconciliations go smoothly:
Review existing CAM reconciliation schedules and discuss timing with the new manager. You’ll want to coordinate so tenant billing cycles aren’t disrupted.
The outgoing manager should provide very detailed supporting calculations, expense allocations worksheets, and tenant chargeback schedules for at least the 2 most recent reconciliation periods.
If the reconciliation periods don’t align cleanly, the outgoing manager may need to provide a stub period reconciliation covering the last period of their active management before the switch.
Analyze at least 2 years of CAM reconciliation paperwork from the outgoing manager to look for any irregular reconciliation practices that may need to be addressed under the new manager.
Have the outgoing manager walk the new manager through 1-2 sample tenant chargebacks in detail early on so calculations and allocation methods are clearly understood when the latest is prepared.
Consider having audit rights and retaining review responsibilities over the outgoing manager's final CAM reconciliation covering any period while they were still active.
There may be a need to bring in third-party consultants if there are any disputes regarding allocable expenses and chargeback calculations on the outgoing manager’s final CAM reconciliation.
Following protocols like these around CAM accounting details will help avoid any disruptions to property financials or tenant relationships during and after the management company transition.
5. Plan Staff, Payroll and Benefits Transitions
- If applicable, determine which current staff will stay on site. Plan payroll payment and insurance coverage transitions.
- Communicate changes to affected staff immediately so they can prepare.
6. Migrate Data, Systems to New Platforms
- Document all data and templates to be migrated from current software platforms.
- Map out transition to systems used by incoming provider.
7. Conduct Final Property Walkthrough
- Do walkthrough with managers from both outgoing and incoming firms with extensive photographic documentation.
- Log all maintenance items identified for follow up.
8. Formalize Vendor Transitions
- Get full contact info and pricing for current vendors. Set up new billing with incoming manager.
- Consider requiring outgoing manager to close out open work orders.
9. Exchange Final Reconciliations, Fees for Approval
- Outgoing manager submits final reconciliations of all managed accounts to owner.
- Owner pays final fees to exiting provider once satisfied all obligations completed.
10. New Provider Assumes Full Responsibility
- As of transition date, new property management company steps into full operational, financial and tenant relations responsibility for the asset.
-A complete transition will typically take between 60-90 days.
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