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February 23, 2009
Managers Recommending Contractors Who Are Affiliated with Management - Is it Right?
As a followup to a very recent blog, another possible issue has been raised by some boards and owners that I should discuss. Some management companies own maintenance companies and some have their own affiliations with maintenance and construction contractors, landscapers and the like. In other words, some management companies benefit by the Association or owners hiring the contractors recommended by them.
Is that legal?
I know of nothing making it illegal.
Must the management company or contractor make that clear to the HOA and/or owners? In other words, are there disclosure requirements?
That is an interesting question because there are disclosure requirements if a corporate (which in California includes most HOA and Condo Associations) board member gains financial benefit in any contract being considered by the Board. If such benefit is not disclosed, the board member has breached their fiduciary duty. However, if it is disclosed, the transaction is legal, and the benefit does not subject the board member to a conflict of interest claim.
With a manager it is different. To the best of my knowledge, there is no legal duty to disclose such an affiliation.
So the question is - is it "right" to use affiliated contractors that benefit the management company and is it right to not disclose the relationship?
My take: the working relationship and any financial advantage should definitely be disclosed, and HOAs contracting with the management company should be allowed to choose a "degree of separation" and/or bids from contractors not affiliated with the management company.
If there is no "give" in this relationship, there are other companies to consider.
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Posted by Beth Grimm at February 23, 2009 9:19 AM