No Competitive Bidding
for Building Contracts
Your managing agent picks the vendor, negotiates the price, collects an undisclosed referral fee, and charges you a supervision markup. No law requires a second quote.
THE PROBLEM
One person controls the spending. No one checks.
In New York City, there is no statutory requirement that condominium or cooperative boards obtain competitive bids for building contracts. No minimum number of quotes. No prohibition on sole-source contracting. No requirement that at least one bid come from a vendor with no prior relationship to the managing agent. No disclosure of referral fees, volume rebates, or revenue-sharing arrangements between the agent and the vendor.
In practice, this means the managing agent selects the vendor for every major building expenditure — cleaning, plumbing, elevator maintenance, facade repair, insurance, legal services, accounting, and more. The agent negotiates the price with a vendor who depends on the agent for business across dozens of buildings. The agent may receive an undisclosed referral fee, volume rebate, or "marketing payment" from the vendor. The agent then recommends the vendor to the board, which approves the contract because the board relies on the agent's expertise.
The conflict of interest is structural and pervasive. The person recommending the vendor is also the person who benefits financially from the vendor being selected. No independent party verifies that the price is market-rate. No audit trail exists. The unit owners who fund the contract have no visibility into the selection process, the pricing, or the agent's financial interest in the outcome.
Government procurement at every level — federal, state, and municipal — requires competitive bidding above threshold amounts. Public corporations must disclose related-party transactions. Only in the condo and co-op world, where the money belongs to homeowners, is the vendor selection process entirely opaque, entirely unregulated, and entirely controlled by an unlicensed intermediary.
WHY IT MATTERS TO YOU
You are overpaying for everything. And you have no way to know by how much.
If you own a condo or co-op in New York City, a portion of your common charges is paying for vendor contracts that were never competitively bid. Your cleaning company, elevator maintenance provider, insurance broker, and plumber were all selected by your managing agent — and the agent may have a financial relationship with each of them that you will never see disclosed.
Industry estimates suggest that buildings paying market-rate under competitive bidding spend 15-30% less than buildings using sole-source agent referrals. For a building with a $2M annual operating budget, that is $300,000-$600,000 per year in potential overspending — money that comes directly from your common charges and assessments.
Before you buy, ask the board: does the building require competitive bidding for contracts above a certain threshold? How many bids were obtained for the most recent major contract? Does the management agreement require disclosure of all agent-vendor financial relationships? If the answers are unsatisfying, factor the cost of vendor capture into your purchase decision. Check the building's profile on our buildings page.
WHAT OTHER STATES DO
Florida requires competitive bidding. New York does not.
Florida Statute §718.3026 requires competitive bidding for all contracts not made with employees of the association. The statute also prohibits any contract with a party in which a board member or manager has a financial interest unless the interest is disclosed and approved by the board after competitive bidding.
California Civil Code §5500 requires boards to review and approve all contracts and disclose any managing agent interest in a vendor. While California does not mandate a minimum number of bids, the disclosure requirement creates accountability.
Virginia's Common Interest Community Board requires managers to disclose all conflicts of interest in vendor selection and imposes fiduciary duty standards on contract procurement.
New York imposes no competitive bidding requirement, no conflict-of-interest disclosure, and no prohibition on agent-vendor financial relationships. The agent is free to steer every contract to a preferred vendor and collect undisclosed compensation for doing so.
PROPOSED FIX
Three bids. Full disclosure. Independent audit.
- Mandatory competitive bidding: At least three independent bids for all contracts exceeding $25,000 (or 5% of annual budget, whichever is less)
- One independent bid: At least one bid must come from a vendor with no prior relationship to the managing agent
- Full disclosure: Managing agents must disclose all financial relationships with recommended vendors — referral fees, volume rebates, common ownership, and revenue-sharing arrangements
- Board approval: Any contract with a vendor in which the agent has a financial interest requires affirmative board vote after full written disclosure
- Annual vendor report: Managing agents must provide an annual summary of all vendor contracts, amounts, and whether competitive bidding was conducted
FAQ
Frequently Asked Questions
Does my board have to get multiple bids for contracts?
No. There is no New York statute requiring competitive bidding for condo or co-op contracts. Some buildings' bylaws or house rules may require it, but this is entirely voluntary and unenforced. Most buildings use whatever vendor the managing agent recommends.
How can I find out if my managing agent has financial relationships with vendors?
You probably cannot. There is no disclosure requirement. Some management contracts include a clause requiring the agent to disclose conflicts, but enforcement depends on a board that may not be inclined to challenge the agent. Your best option is to ask the board directly, review the management contract, and check our agent profiles for pattern data.
What is a vendor kickback and is it legal?
A vendor kickback is any undisclosed payment from a vendor to the managing agent in exchange for the agent's recommendation or business referral. It may take the form of a referral fee, volume rebate, "marketing payment," gift, or revenue-sharing arrangement. Whether it is legal depends on whether it violates the agent's fiduciary duty under the management contract — but without disclosure, no one knows it exists, so no one challenges it.
Can I request that my board implement competitive bidding?
Yes. You can propose a board resolution requiring competitive bidding above a threshold (e.g., $10,000). Many boards resist because the managing agent advises against it. Organizing other unit owners to support the resolution increases your leverage. Document your request in writing and keep a copy.