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October 23, 2007
Management Companies - How Much Power Should They Have?
I get a lot of emails from homeowners who are unhappy with management. Of course, it is predictable if the owner is commonly in trouble for breaking the rules or thumbing their noses at management or the board. (Yes, there are those kind of owners.)
But there are situations where management may have too much power. Here are some comments and questions sent to me, and my thoughts on the matter:
"Our current Management Company just simply came in and took over for the previous Management Company without any notice or approval from the homeowners. They took over 2 months before they even had a license to manage a cid. They had said we had no say in the matter since we had no board of directors, they have been friends and business partners of the previous manager who by their own admission was mishandling our funds. Can they do that?"
First of all, a manager or managing agent has to be hired, retained, or contracted to do work. If a managing agent comes in without a contract or written employment agreement, that company or individual does not have the right to perform services, and does not have guidance, protection or authorization to incur costs. And if there is no board, my question would be who is signing the checks? A manager cannot make decisions for an HOA, write their own ticket and sign their own checks, unless of course there is a court order involved, and the person is acting as a receiver, appointed by a judge, which is in fact something that could happen if there are no board members. However, someone would have had to initiate that process. Without it, the owners could call an election and elect a board. Or if there are any board members at all one, two or more could appoint additional board members to serve.
If no one is willing to step up and serve the association as volunteers to end this situation, then I have little helpful advice to offer. I can see why it would be disturbing, and I can imagine that finding volunteers to serve could be difficult, but there are no miracles here that can solve this dilemma. If there is no board to hire, who is going to fire?
Here is another one:
"My question is about Management Companies. Since the Board of Directors is liable and has a fiduciary duty to the association, how much power and authority should they give the management company? How much power and authority should be legally granted a management company? After all, the management company has a vested interest ($$$) to keep the contract. What I have seen over the years is the board relinguishing most control and relying on the manager, and this is what the manager wants. Also, since most board members don't have proper education and knowledge about HOA law, then how do they know whether what they are doing is legal? If all correspondence goes to the manager, then who monitors what the manager does with the correspondence (i.e. letters from attorneys)?"
This is the classic story about how an HOA gets to the point where the manager does more than just manage, by default more than anything else. The answer to the question about whether the board knows management is acting legally is that the board may never know if it operates in a void. So, attending industry group classes, reading up, looking for information, checking references and using good business judgment are things likely to help give a board member some insight as to how things should go. And the answer to the question about who knows what the manager does with correspondence is no one, unless someone is either watching, or has instructed the manager to forward all communications to the entire board. However, there are boards, such as those described herein that want their burden lifted, that may not want to be "bothered" with correspondence.
Here is one more:
"In our condo association our Management Company has full control; the only exception is signing checks with no co-signature. I believe the Board of Directors allowed this to happen without knowing what they were doing. The Manager talked them into refusing any HOA correspondence from any of the homeowners and routing everything thru him, which "could" be filtered. The only thing that the board members do is attend meetings and make decisions based on advice from the Manager. The Manager has told the Board members that they don't really have to know anything about HOA laws and also gives legal advice. Our association has no legal representation."
I received these comments, no questions attached. I have to assume there was a question somewhere in this like: "What can we do?"
I would say, run for the board, campaign, get elected, attend industry functions, read journals, articles, the web, and get involved. However, there probably is a reason the question was not asked. Because the most common answer to that kind of a suggestion is: "I don't have time."
So what else can I say? ... If no one in the HOA steps up to the plate, it is hard to complain to a court or anyone else about wrongdoing... there is little anyone can do. Is it better if an attorney steps in and directs the activities? Or directs the manager? Or gets rid of the manager? What then? ....
All I can say is stop being part of the problem (the complainer) .... and become part of the solution (offering volunteerism and/or leadership services to the association).
Posted by Beth Grimm at October 23, 2007 10:46 PM