Property Management Companies Getting Kickbacks from "Preferred Vendors"?

By Staff in News on May 8, 2009 4:40PM

Is your management company taking kickbacks from contractors they hire to work on your building? If you live in a high-rise condo, odds are that they do. According to the Sun-Times, it’s a common practice now coming under scrutiny. Contractors who agree to kick back part of a bill to a management company on each job secure a place on a “preferred vendor” list. Tim Sack of TMS Mechanical Inc., in McHenry, a firm that works at many downtown high-rises told the Sun-Times, “To me, it’s stealing from the people you are working for.” He said he has turned down invitations to pay kickbacks.

Payments, or “procurement fees” as they’re sometimes called, can range from 10 to 15 percent according to industry insiders but Joe Armenio, president of Sudler Management Services, a condo manager that keeps a preferred vendor list, claims the fees are not that high. When asked why a contractor dealing in kickbacks shouldn’t instead just reduce the bill for the job, Armenio said it isn’t that simple. He told the Sun-Times that Sudler has “strategic relationships” with vendors who, in exchange for a guarantee of business, provide discounts that a condo board couldn’t get on its own. He added that Sudler produces bids and compares prices, and clients are under no obligation to go with a preferred vendor.

The Streeterville Organization of Active Residents, a community group of mostly condo owners, has asked a committee to look at the practice and advise condo associations on how to address it. Meanwhile some condo associations may have to explain why monthly assessments are so high.

Post by: Camela Furry