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Subject: Management Company Eviction
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Author Messages
GenoS
(Florida)

Posts:2525


10/09/2018 2:10 PM  
We hired our previous MC for their bookkeeping services only. A few months ago the company was acquired by a larger management company in the area. The larger company now has 60+ properties that they manage including us (for bookkeeping only). According to the online county court case files their landlord initiated eviction proceedings against them last week.

We knew they were planning to move their office a month ago. They probably knew the eviction was going to happen but naturally they didn't pass on that little tidbit. Can anyone think of any circumstances or scenarios where this shouldn't be a cause for concern? They do have signing authority on our operating account checks. At least the former MC owner did. I'm not sure how that arrangement carries over now to the new company (but I intend to find out).
MelissaP1
(Alabama)

Posts:7767


10/09/2018 2:34 PM  
That sounds like the PM's business. It's their business being evicted by the landlord. There are quite a few scenerios why someone may be evicted. The public notice you read did not say anything? It may be a procedural thing. The landlord may have sold the property. The company didn't pay their rent.

I say as long as the company isn't asking for more money outside their contract, it's none of the HOA's business.

Former HOA President
GenoS
(Florida)

Posts:2525


10/09/2018 3:02 PM  
I agree in a vacuum it's not our business. Between the eviction, however, and a few other troubling incidents already, after only a few months since they acquired our former bookkeeper, I worry that if they're having financial difficulties.... well, let's just say I'm not comfortable with our money being under their control. For instance, they sent out a letter in August to all homeowners introducing themselves and providing a new address where homeowners who pay by check should send their monthly payments. All September checks sent there were returned undeliverable because the PO Box had been discontinued. And they charged us $200 to send out those letters.

If there's a case to be made that the eviction isn't a red flag I'm all ears. The building has not been sold. They occupied a suite on the 3rd floor and all the other commercial tenants arern't going anywhere.
CarolF
(Florida)

Posts:411


10/09/2018 4:42 PM  
Geno - have you tried going into the docket online to examine the paperwork that was filed
for the eviction?
GenoS
(Florida)

Posts:2525


10/09/2018 7:59 PM  
Posted By CarolF on 10/09/2018 4:42 PM
Geno - have you tried going into the docket online to examine the paperwork that was filed
for the eviction?

I have,Carol, but until my application is processed the only thing I can see on the docket is a summary of everything that's filed for the case. Once it's approved I'll be able to see the actual paperwork instead of one-liners like, "5 and 20 Summons Issued".
LetA
(Nevada)

Posts:551


10/10/2018 8:08 AM  
As a precaution, all of you board members should go to the bank and remove them from the signatory from the account. Technically the old company is still the signatory on the account not the new company even though they bough the old company.. Time to get a new MC.
RichardP13
(California)

Posts:3140


10/10/2018 11:22 AM  
As the owner of a property management company, if a client saw that I had an eviction pending, it should raise a red flag.

As a signor on an HOA account, I am smart enough, BUT not stupid enough or dumb enough or ethical challenged enough to do any kind of monetary damage to HOA funds. BUT, as we have seen, there have been enough instances either by management companies or Board members of self-managed HOA's to give someone pause.
AugustinD


Posts:1222


10/11/2018 9:12 AM  
Posted By GenoS on 10/09/2018 2:10 PM
They do have signing authority on our operating account checks. At least the former MC owner did. I'm not sure how that arrangement carries over now to the new company (but I intend to find out).


Why? Aren't there two board members or officers who can do this? I think this practice is a leading cause of embezzlement.
BarbaraT1
(Texas)

Posts:107


10/11/2018 12:59 PM  
Posted By AugustinD on 10/11/2018 9:12 AM
Posted By GenoS on 10/09/2018 2:10 PM
They do have signing authority on our operating account checks. At least the former MC owner did. I'm not sure how that arrangement carries over now to the new company (but I intend to find out).


Why? Aren't there two board members or officers who can do this? I think this practice is a leading cause of embezzlement.





In all the years I've been managing HOAs, I've never had a property in which the Board members signed checks. I can think of a few reasons.

1) Because that's the way it's done. Board members are volunteers, and most of them don't have prior experience. They lean heavily on the manager/management company for guidance. If the management company says "here's how we handle A/P", board members will go along with it. They may not even know they can insist on signing checks.

2) Logistics. I work in Dallas/Fort Worth. I'm onsite now, but when I was in portfolio, my office handled properties up to 60 miles away. The logistics of getting a board member two to drive out to the management office to sign checks in a timely manner would be challenging. And it's not exactly convenient for the manager to drop everything and drive across town to get a check signed either.

3) Apathy. I have managed communities in which half our scheduled board meetings didn't take place for lack of quorum. Sometimes, with a board of just 3 members! In some HOAs, there were perpetually empty board seats because no one would volunteer. The posters at HOATalk are not representative of most board members, IMO.

I agree that the practice of letting the management company sign checks can lead to embezzlement - I'm actually aware this happening with two management companies in D/FW. I don't know the details of the first case, only that the FBI was involved and closed the company down. In the second case, a manager colluded with vendors to inflate invoices or bill for work that wasn't even done. They were caught by the management company's accounting department who noticed that the same manager had similar invoices for similar work done on several different properties, and it all just seemed too coincidental. In this case, I'm not sure having board members sign the checks would have caught that crime in a way that having board members approve invoices, or scrutinize the financials wouldn't.



JohnC46
(South Carolina)

Posts:7872


10/11/2018 2:14 PM  
I look at it as does Barbara. Our bank collects our dues and our MC pays all bills. The best check and balance is for the HOA to closely watch all monthly financial reports (our are over 30 pages long) and have a safety valve meaning have a method to have the HOA Bank stop honoring any checks written on the account by the MC. One phone call can do this.

Cheaters cheat and they will find a way to cheat especially if vendors are in cahoots with them

Our largest single expense is landscaping and we have a yearly contract with the landscaper. They are not associated with the MC and they are paid the monthly agreed on amount. Also if the MC was ever late, the landscaper would be all over the BOD.

Our 2nd largest expense is the MC who is also paid a monthly agreed upon amount.

Could our MC cheat us. Yes. Is it impossible to stop cheaters? Yes.

We are 112 standalone homes with a $90K budget
GenoS
(Florida)

Posts:2525


10/11/2018 2:57 PM  
Posted By AugustinD on 10/11/2018 9:12 AM
Why? Aren't there two board members or officers who can do this? I think this practice is a leading cause of embezzlement.

There should be according to our Bylaws. The Treasurer signs all checks but the board decided that the owner of our bookkeeping firm could be the 2nd signature. The idea that "two signatures" offers added protection, that's a myth since most banks won't enforce a requirement for 2 authorized signatures. Even so, the other board members are/were lazy and took the easy way out: let the Treasurer sign the checks and authorize the bookkeeper to be the other signature.
GenoS
(Florida)

Posts:2525


10/11/2018 3:06 PM  
Posted By JohnC46 on 10/11/2018 2:14 PM
I look at it as does Barbara. Our bank collects our dues and our MC pays all bills. The best check and balance is for the HOA to closely watch all monthly financial reports (our are over 30 pages long) and have a safety valve meaning have a method to have the HOA Bank stop honoring any checks written on the account by the MC. One phone call can do this.

Cheaters cheat and they will find a way to cheat especially if vendors are in cahoots with them

Our largest single expense is landscaping and we have a yearly contract with the landscaper. They are not associated with the MC and they are paid the monthly agreed on amount. Also if the MC was ever late, the landscaper would be all over the BOD.

Our 2nd largest expense is the MC who is also paid a monthly agreed upon amount.

Could our MC cheat us. Yes. Is it impossible to stop cheaters? Yes.

We are 112 standalone homes with a $90K budget

We're searching for a full-service MC right now. We've spoken with repreesntatives of 2 firms so far. Both indicate they're implementing some sort of "electronic invoice" system that works over the internet. Vendors and contractors will submit invoices electronically, the MC bookkeeper will review the invoices and match them to work orders and then the Treasurer will log in to their site and give the final OK to pay the invoice. I'm not completely comfortable with a system like that without getting more details on the safety protocols they plan to use. We won't get the actual invoices any more. Presumably we could get copies at an extra cost to us.

If most MCs are moving to such a system then I guess we'll have to adapt. We have no idea who the software system vendors are and what track record they have, if any, with online security best practices.
RichardP13
(California)

Posts:3140


10/11/2018 4:45 PM  
The system is called Strongroom.
GenoS
(Florida)

Posts:2525


10/11/2018 5:07 PM  
I'm starting to look for Escape Room. Thanks, though, that is actually helpful!
AugustinD


Posts:1222


10/11/2018 5:34 PM  
Posted By BarbaraT1 on 10/11/2018 12:59 PM
In all the years I've been managing HOAs, I've never had a property in which the Board members signed checks.


I have lived in three HOAs at this point. I do not know how the first handled check signing. But for the last two, only directors and treasurers had check-signing authority.

Like you, I too am aware of embezzlement by the management company at one of the HOAs where I have lived. But I think embezzlement by volunteer directors and officers is as common. The hoatalk.com news section seems to report about one instance of embezzlement a month.

If I thought to ask who signs checks before buying into a HOA, I think learning that the management company being the sole signer would be a red flag to me.
GenoS
(Florida)

Posts:2525


10/11/2018 6:17 PM  
Posted By AugustinD on 10/11/2018 5:34 PM
Like you, I too am aware of embezzlement by the management company at one of the HOAs where I have lived. But I think embezzlement by volunteer directors and officers is as common. The hoatalk.com news section seems to report about one instance of embezzlement a month.

Is it just me, or did the HOATalk news section disappear recently? It had a story last month about an elderly Treasurer in Florida who was charged with embezzlement from her association. It's not all that uncommon for directors and officers to be caught stealing. In fact, in Florida you hear about that a lot more than management companies stealing association funds.

The key is having multiple people watching the monthly financial reports.
RoyalpitA


Posts:0


10/12/2018 4:07 PM  
Posted By LetA on 10/10/2018 8:08 AM
As a precaution, all of you board members should go to the bank and remove them from the signatory from the account. Technically the old company is still the signatory on the account not the new company even though they bough the old company.. Time to get a new MC.




FOR SURE
RoyalpitA


Posts:0


10/12/2018 4:09 PM  
Posted By GenoS on 10/11/2018 6:17 PM
Posted By AugustinD on 10/11/2018 5:34 PM
Like you, I too am aware of embezzlement by the management company at one of the HOAs where I have lived. But I think embezzlement by volunteer directors and officers is as common. The hoatalk.com news section seems to report about one instance of embezzlement a month.

Is it just me, or did the HOATalk news section disappear recently? It had a story last month about an elderly Treasurer in Florida who was charged with embezzlement from her association. It's not all that uncommon for directors and officers to be caught stealing. In fact, in Florida you hear about that a lot more than management companies stealing association funds.

The key is having multiple people watching the monthly financial reports.




That issue is the reason for "Fidelity Bond" coverage of signatories.
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