Breaking up is hard to do: Part I
How to navigate management company transitions
Community Association Law Blog
By Donna DiMaggio Berger
26 February 26 2017
Hopefully, most of us enter into relationships with the expectation
that they will last. However, for those of us past adolescence, we
realize that even long-term relationships can end and, even when they
were good for a long time, the manner in which they do can overshadow
everything that preceded that ending.
In the next few posts in this Breaking Up blog series, I will discuss
the various transitions a board can face including transitions from the
developer, from former counsel and from a long-standing predecessor
board.
In the context of a community's relationship with professional
management, the stakes can often be quite high. More and more
volunteer boards have come to rely upon professional management to
undertake the daily operation and administration of their communities.
For some boards, this reliance is reasonable and a balance is struck
between the directors' responsibilities and that of their licensed
manager. However, for a growing number of communities, the professional
manager has supplanted the board with the staff, contract vendors and
professionals, and, in extreme cases, even with the members. What these
boards may not realize, is that the ultimate responsibility and
accountability will legally and stubbornly cling to them regardless of
their efforts to transfer much of the operational control to
management. As such, it is time for boards to become more proactive
about how a relationship with a professional advisor might end and what
can be done before that happens to insert some clarity into that
process. Otherwise, the transition can be difficult and even
damaging to the community.
One of the first and most obvious steps a board can take is to ensure
that its management agreement is properly reviewed by legal counsel
prior to signing. If your board would like the ability to
terminate, with or without cause, at any time throughout the term of
the contract, then the contract must provide the association with that
right. If your Board would like to have the ability to control the
handling of association funds and records, then that must be spelled
out as well. The time to discuss what you want the relationship to be
and how its ending should be handled, naturally, is before you sign on
the line.
Equally important, the board must retain a copy of the executed
management contract. Many boards are dismayed to learn that they have
not retained possession of a copy of their management agreement, which
can be problematic if problems surface and they must ask the management
company to provide that agreement to them or to their attorney. Most
large management companies these days provide an impressive array of
services which can include all aspects of the financial operations for
the community, in addition to the infrastructure maintenance, insurance
procurement, collection of delinquent accounts and interaction with
vendors and professionals. Most large management companies also offer
technology which can streamline operations and make them more effective
by taking advantage of available technology. However, when it
comes to receiving copies of all those digitized records at the end of
a relationship, some companies are better than others at achieving a
graceful departure and some refuse to deliver the records altogether
and assert that those records belong to the management company, not the
association for whom the records were created.
Florida law requires management companies to turn over the
association's records at the end of the relationship, even if a
monetary dispute exists. It might be tempting to use the leverage
of those records and the crippling effect their absence will create for
the community and the new manager or company coming on board, but it is
in the manager's or management company's best interests to resist that
urge. As with most things in the community association arena, what goes
around comes around and new boards often bring back the management
company which their predecessors ousted; that is unless a less than
gracious departure left a sour impression.
As for the board's responsibilities in this process, it is analogous to
a marriage. A fine-tuned prenuptial agreement can prevent a lot of
unnecessary pain down the road and, if you were the partner who did not
handle any of your personal finances, it helps to learn how to write a
check and fast. Boards need to ensure that a management company
transition does not place the association's operations in
jeopardy. While a perfect management company fit can last for
decades and be mutually beneficial for both parties, it is important
for boards to at least consider the possible end of the relationship at
the time they are entering into each new contract.
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