By Dean Bowen
As one who has been involved with community association governance for a number of years, including interviewing potential management companies, I understand the difficulties in choosing between a management company and an onsite administrator to handle the affairs of the community association. Management companies can be of great help to condominium and community associations, and I have recommended management companies over the years to associations assuming that it is economically feasible. Of course, some associations have administrators because they are large enough to hire an onsite person. However, in addition to the size of the community association, there is another major consideration when choosing management options.
Checks & Balances
The most important consideration, of course, lies with the ability of the board of directors to instill checks and balances within the management of the community association. Unfortunately, there has been embezzlement, mismanagement and wrongful acts on the part of management companies over the years throughout the country including Michigan. It is important, therefore, to have a checks and balances system in place whereby the board of directors and the attorney for the association are reviewing the activities of the management company.
First Line of Defense
The association attorney is the first line of defense for any condominium and/or community association, and it is imperative that the attorney, if called upon, is prepared to represent the association against the management company if mismanagement should arise. Indeed, I am advised that the Professional Code of Responsibility on the part of an attorney is that he or she represents the association client zealously and competently.
The troubling fact remains; however, that certain management companies tend to recommend certain law firms to their prospective and current clients with the understanding that the law firm will not, under any circumstances, commence litigation against that management company. Any association that does not recognize the potential conflict involved in an attorney not being able to represent the association vigorously against the management company, regardless of whether or not there is litigation, better review its policies and get its act together.
Management companies that partake in this type of activity are in direct violation of the Community Association Institute (CAI) Professional Manager Code of Ethics which states the following:
The manager shall disclose all relationships in writing to the client regarding any actual, potential or perceived conflict of interest between the manager and other vendors. The manager shall take all necessary steps to avoid any perception of favoritism or impropriety during the vendor selection process and negotiation of any contract. (CAI Professional Manager Code of Ethics, p.1)
Questions to ask your attorney and manager
How can an attorney represent an association effectively by looking the other way if there are problems with the operation of the management company as it relates to the association? How can an attorney effectively represent the association competently when he or she is not prepared to litigate on behalf of the association? How can an attorney be trusted to represent the best interest of the association when reviewing the management contract, knowing full well that his or her bread is buttered by the management company?
Too many associations are naïve about this practice and, in some instances, the attorney doesn’t even disclose to the association his or her unwillingness to pursue the management company until he or she is requested to do so.
If an attorney is so beholden financially to a management company for legal business that he or she will not engage in any adversarial matters with it on behalf of his or her client, them something is amiss. Experience dictates that you had better get another attorney and/or another management company, or face being sued by owners who later find out what would arguably be, at best, complacency, and at worst, incompetency on the part of the Board when an issue with the management company arises. I could not be paid enough to be in that pickle, nor should you.
Dean Bowen is a former officer and director of a large Condominium Association and has been involved in the Condominium industry for over twenty (20) years. He is also a principal of a private elementary/middle school and an adjunct English Professor at Baker College.