Management Company Walked Out of Board Meeting

Started by PaulaM4 • 19 replies • 1754 views

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PaulaM4 (New York)
Posts: 14

Posted:

We had a board meeting today, to cut to the chase, we asked the management co. to let us out of contract as we didn't feel we were a good fit, especially in light of the fact that he never go ahold of old mgmt co. (we signed on w/them the end of May) to get docs and homeowner records, i took the advice of those posted here and wrote to the former mgmt co. she faxed over copies of the check she gave to new mgmnt and there was over a $2,000 discrepancy in the opening balance. New Mgr went ballistic and said we had no right to do that, to spring it on him, etc etc and that he would have the money put back. It boiled down to a heated discussion and he walked out. Question: If the treasurer and I resign, can the board consist of just the Pres & V.P.? He said if we want out we have to buy him out (impossible.....we would need $20,000). Advice anyone???

BradP (Kansas)
Posts: 2,640

Posted:

Paula:

what does your contract say with regards to performance? Read that and get up to speed on it quickly, should be some type of performance clause where you are allowed to terminate a contract if the other party doesn't live up to it.

Here is my take, his reaction would have been expected if I had been in your shoes. He was defensive and when put on the spot about getting out of the contract he was combative. Let him cool his jets and think about it. I would from this point forward be professional but be demanding within your contract. Sooner or later he will either step up his performance or decide the aggravation isn't worth it and will agree to get out of it.

PaulaM4 (New York)
Posts: 14

Posted:

Thanks Brad, it's very good advice. Anyone else, please please feel free to send your thoughts, this is very disturbing

TimB4 (Tennessee)
Posts: 21,047

Posted:

Paula,

You must comply with the contract. Since the individual doesn't agree to ending the contract you will have to review the termination clauses and see, a Brad indicated, if there is another way to terminate for cause.

My concern is that the manager did in fact put $2,000 elsewhere. This means the Board should probably do a lot of verification of the bank account. I would also strongly recommend that you remove the companies signature authority on any of your accounts (I don't think they should have it anyway).

To answer your question, typically if there is less than a quorum on the Board, the remaining members may appoint people to fill the vacancies. If I were in your shoes and discovered an discrepancy with a new management company, I would want to continue serving on the Board in order to be in a position to verify what the Management company does.

JonD1
Posts: 2,350

Posted:

Wow so many issues to address.

You switch MCs and you allow the former to hand over your bank account assets to the new company without verfiying the amount. And no one on the Board knew what you had or was involved? Sounds like very poor behavior by the Board. Our MC does not have access to our accounts and does not control our accounts.

Now the new MC is asked to quit as a "favor" because the "fit" isn't working. Well that is the purpose of contracts to protect both parties.
Most MCs would not simply walk away after such a request. Maybe the process in hiring the new MC was poor? Again another Board failure.

And no one on the Board bothered to read or go over the current contract with the current MC? And decided to open this can of worms without any real preparation. Another bad move by the Board.

Now you are considering quitting the Board and dumping the problems in the lap of others. And your accountability level is what? Zero?

You are willing to make no effrot at all to address this aqs part of the Board?

And protecting and managing your property and its affairs are now someone else's problem and you turn a blind eye.

Where to begin............. Sounds like the Board has many issues of failing to do their jobs. Sounds like the current MC has some explaining to do. Sounds like the members of the Board aren't willing to really do much at all. Maybe the other Board members are planning to jump ship too and you can run your property all the way into the ground and then blame someone else.

All to often today everyone wants to do as little as possible, take no responsibility for anything, and wonder why things didn't work out when the crap hits the fan.

Sad state of affairs all around.....

PaulaM4 (New York)
Posts: 14

Posted:

Thanks Jon. Your remarks were very helpful. I am new to the Board and I know nothing. The former board hired the new MC and didn't think to have a lawyer look over the contact. Very poor choice, I agree. I do not want to stick anyone else but I do feel that I won't be very effective going forward and the owner of the new MC won't take my phone calls or answer any emails so dont you think it's best if another homeowner takes over? No one verified w/the former MC, former MC made a phone call to the current president and told him how much she was sending over. I agree it's been nothing but very poor choices on the part of the board. I guess it does seem kind of naive as in "hey we don't get along can we break up and can you please let us out of our contract". Again, what good can I do at this point?

PaulaM4 (New York)
Posts: 14

Posted:

Tim: the only thing the new MC said before walking out of the room was "if you want out of this contract buy me out". The only clause for termination is breach of contract and even with that you have to give him a letter in writing and give him 30 days to improve the relationship. That's all that I can see in the contract. I was told by a friend of mine that breach of contract is extremely hard to prove. We also did tell him the money has to be put back in our account -- why didn't he give us a copy of the check that the former MC sent to him?

TimB4 (Tennessee)
Posts: 21,047

Posted:

Well, then you might be stuck with the company until the end of the contract.

As for a copy of the check, It might not be standard practice. Do you get copies of all the assessment checks? if you do, then there might be precedence to provide a copy of the check from the previous company. If you don't - why would this check be any different.

Another reason could be - per your post, they took $2K of your money.

Tim

TimB4 (Tennessee)
Posts: 21,047

Posted:

Quote:

Posted By PaulaM4 on 10/20/2011 7:01 PM

I do feel that I won't be very effective going forward and the owner of the new MC won't take my phone calls or answer any emails so dont you think it's best if another homeowner takes over?

I think it's best for you to stay in your position. You have been educated about the management company. Do you want to give the MC time while another person gets up to speed on the topic?

Perhaps you can have the Board appoint you as the main liaison with the company. This will have them return your e-mails or provide reason for breach of contract (lack of communication).

BradP (Kansas)
Posts: 2,640

Posted:

Paula:

I think at this point whoever is the contact for the company just overcommunicates with them, document all calls, emails, etc. They will either step up their game or see the writing on the wall that this isn't worth it and let you out. Yes breach is hard to prove that is why you document everything and go from there.

how much longer is left on their contract?

PaulaM4 (New York)
Posts: 14

Posted:

Thank you Tim, you have been extremely helpful. We are having a Board meeting tonight to decide what to do. We just hired them in May, they have 19 months on their contract. By the way, the check that was handed over from former MC was not an assessment check, it was the closing account check. I'm told that here in New York, it is the law, that in the handover the check is never supposed to be made out to the Management Company themselves, rather it is to be made out in the accounts name (i.e., XXXXX Homeowner Association). Further, standard practice (now i find this out!! -- I told everyone i was brand new!) is that in the handover of one company to another a "break away" audit should be done AND a copy of the closing check should me sent to all Board Members when it is sent to your new management company. Sigh. We will document everything going forward.

PaulaM4 (New York)
Posts: 14

Posted:

Jon: I passed your message along to the entire board. We now feel like bumbling idiots. We are so naive!!! Question for you: Are Property Managers required to be licensed or certified in some way here in the State of New York? If so, how do we check on this (for future reference?) I've also learned the following: never sign a contract w/out having a lawyer look at it; never sign a two year contract (one year renewable is fine); always have a 60 clause to get out of the contract in case you don't like the Company; make sure there is a 30 day notice to cease your account clause; check to see how much postage they are charging (current MC charges $1.00 per mailing which means if it's 44 cents postage he is charging a dollar). Although, it doesn't sound as if anyone would want to sign such a contract, right?

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

I haven't read all the replies, but I think it is best if Board members stay on. We had a President who aided in pulling us away from a management entity and then shortly thereafter resigned. Without going into a long story it would have been better if he would have stayed on.
We did get a new management contract with the same entity, but it was financially not in our favor. The President who resigned told me that is not the contract he would have approved.
I think the next President was just signing anything that was put before him.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BonnieG1 on 10/22/2011 11:47 AM
The President who resigned told me that is not the contract he would have approved.

The president doesn't get to approve contracts; the board does.

If there are five members on the board and three approve the contract and the president is one of the two members who do not approve, the contract is approved regardless of what the president wants. He still has to sign the contract attesting to the fact that the board approved it.

Some days things just don't go as we like.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

I think he might have meant this is not the correct he would have presented to the Board for approval. Since I was not on the Board at the time, I am not certain exactly what he meant.

JonD1
Posts: 2,350

Posted:

Quote:

Posted By PaulaM4 on 10/22/2011 8:52 AM
Jon: I passed your message along to the entire board. We now feel like bumbling idiots. We are so naive!!! Question for you: Are Property Managers required to be licensed or certified in some way here in the State of New York? If so, how do we check on this (for future reference?) I've also learned the following: never sign a contract w/out having a lawyer look at it; never sign a two year contract (one year renewable is fine); always have a 60 clause to get out of the contract in case you don't like the Company; make sure there is a 30 day notice to cease your account clause; check to see how much postage they are charging (current MC charges $1.00 per mailing which means if it's 44 cents postage he is charging a dollar). Although, it doesn't sound as if anyone would want to sign such a contract, right?

Paula:

As Board members it is not you job to turn the operations of your property over to any third party and allow them to run the property. Sorry to say this is quite common. And in most cases it does not work. No one loks out for your investment and home like the owners should. Just common sense.

It is my understanding MC's does not have a state license or certification requirement in NY. For me neither really matters versus what kind of job they do.

I disagree with the assertion you need a lawyer. Most MC contracts arfe in plain English and easy to understand. More important would be what the Board expects, requires, and needs the MC to do. When we hired our current MC I went line by line paragraph by paragraph throught their entire contract and made changes that they either agreed to or they would not have been hired.

More important to have an understanding of who you are dealing with either by interviewing several companies and perhaps visiting other properties they manage and speaking with Board members and residents of these properties.

I would check to make sure any contract does not include an automatic increase in their fees.

I would suggest their be a clause that allows either party to opt out with or wihtout cause.

IF you do a serious review of the new MC which IMO is more important than planning to replace them down the road it might work out better for you.

Sounds to me in the past your Board tried out MCs like some people try on shoes. IF the fit was not good lets get another pair. This can cause problems, uncertainty and alot more work than necessary.

Think about screening an MC like someone you would marry. Arem they honest, decent, share the same goals and common interests, and is this someone you could stand to be around for years to come. If the answers come back NO then you need tom look further.

Serving on a Board is NOT a once a month position if done properly. Many think it can be done that way IMO impossible.

How long has your property existed?
How many units?
What area of NY?
Who is the longest serving Board member and how long have they served?

My suggestion search out the local chapter of CAI an HOA/CONDO organization that among other things provides information and options as to how you handle common issues coming before all Boards.

They have a website you might take the time to visit.

The Board should direct the management of your property. Not the MC, not the lawyer, not anyone else.

I read recently, "you do what needs to be done, when it needs to be done, whether you want to or not." Sadly in our world today most people don't get that or live that even when it comes to their homes and largest investments of their lives.

BradP (Kansas)
Posts: 2,640

Posted:

Paula:

best of luck to you guys, I would chalk this up to a learning experience. I still think there is an opportunity to make the working relationship with the new MC decent. The board just needs to be professional and overcommunicate and demand results according to your contract.

Remember that the person issuing the contract often has it slanted in their favor and there is room for negotiation. Most companies expect that, I deal with 100 plus contracts a year for facility rentals and it amazes me how many people either don't read or ask questions about things in the contract.

PaulaM4 (New York)
Posts: 14

Posted:

Just wanted to come on and see what you guys have to offer on this. President called the MC yesterday and today he called our Pres back to say he would not agree to any meetings with the board unless it's civilized. We need to appoint a new VP as our VP resigned, in part due to this mess and other personal reasons. Anyway, MC told President he'd like to approach the board and get us to agree that he would waive his monthly fee rather than put back the missing $2,300.00!! I am at a loss on what we should be doing here. He asserts he didn't know that his former bookkepper opened our account with the wrong amount and that he never noticed the additional money in his own account as he didn't reconcile his books. He apologizes for his lack of watching over his own employee amd attests that it is as simple as "human error". As you all know, he refuses to let us out of our contract which is now going on 6 months old. Should we insist the money is put back? Otherwise won't it look "shady" to the homeowners? Also, should we call a meeting and let the homeowners know we are only now catching the mistake with the opening balance and that the brand new MC won't let us out of our contract? His words "buy me out". Last should we appoint a VP or wait until the homeowners meeting in May? By-laws say you can run a board with three positions.

TimB4 (Tennessee)
Posts: 21,047

Posted:

Paula,

I would calmly reply that if the money is not returned by x date, that you will turn the issue over to the police.

Additionally, you should state that the Board is verifying that this action of improper accounting and theft of funds doesn't invalidate the contract for cause. Then contact an attorney to review the contract to see if you can get out of it.

Tim

JeffR7 (California)
Posts: 251

Posted:

I would thing that since he agreed that he misused that money he doesn't have an option to let you out of the contract. I would simply sign a contract with another MC, transfer all records and file a small claims case against him for $2,300.

In the termination letter I would make sure that you are letting them know that it's being terminated for cause.

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