Association Management Company has lied to Board of Directors

Started by BillB17 • 13 replies • 1760 views

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BillB17 (South Carolina)
Posts: 92

Posted:

I am the President of the Board of an HOA in South Carolina. Recently, I have learned some facts that indicate that our management company has lied to our Board. While the lies have not had any significant impact on our community, they are apparantly blatant in nature.

It causes great concern for me that we hired a management company that would participate in this activity and that they could do this again in a situation which would have an impact on our members. It also says something about the management company or at least the individual who lied to us.

These lies are documented in emails between myself and individuals at the management company. The issue involved was when we were looking at contracting a service for our community. We had bids from several contractors. When reviewing the bids, we were told by our management company that they have had bad experiences with one of the bidders and no longer work with that contractor. They stated that this contractor had been removed from their preffered bidders list and had problems with the performance of this contractor in several communities they managed. As it turns out, that contractor had never done any work with our management company nor had they ever contracted for any work in any community managed by our management company.

I am concerned on what to do. If the offended contractor were to find out that these false claims were made against it by the management company, that contractor may have grounds for litigation against our management company.

Can anyone offer help in this situation?

Conflicted Board President

CarolR11 (Colorado)
Posts: 2,563

Posted:

Bill, how did you learn that the contractor had never worked in any HOAs managed by your MC?

How did you happen to have a bid from this contractor if your MC doesn't like them? Or do you as president solicit bids?

There's no need to be concerned that the contractor may sue the MC. I can't see how that would involve your HOA--or am I missing something?

Meantime, what I'd be concerned about is an MC that lies to your Board. And the possibility that they may have a relationship with other vendors that benefits your MC more than your HOA.

Seems that you may want to start shopping for a new MC.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

if your employee lies to you ~ fire them

the MC works for the BOD

case closed

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The MC does what the board tells them to do. They should not be involved in the bidding process anyways except to pay them.

Now it sounds like a misunderstanding than a "lie". How do you know your talking about the same person or company? Companies can change names and have the same owner attached. I would consult the BBB website for additional reference information.

I do have to say that hearing a bad review of a contractor despite the source, may indicate there is something there. Whether it be a bad personal relationship or business, there is still a bad experience involved on either side. Warning bells would go off just to avoid the whole situation altogether.

Former HOA President

CarolR11 (Colorado)
Posts: 2,563

Posted:

Melissa, please try to remember that not all HOAs are the same as the one where you formerly lived and were president. I seem to recall that you didn't have an MC.

Our complicated HOA with about 20 annual contracts has a full-time onsite PM who solicits bids. No one would serve on our Board without an MC that didn't have that work built into our contract with them. The same goes for all of the many high rises in our urban setting.

We--the Board--set the scope of work, with her advice, and often with the advice of our chief engineer. Most of these are renewed annually without much work on our part. But we decided to get a new HOA attorney and our PM brought us the resumes, law firm materials, and referral letters for three firms, whom we directors interviewed. We'll do the same soon with our landscaping contract.

We also often have special projects and she solicits bids for those. She draws the possibilities from her own numerous contacts in other high-rise HOAs and based on her own past experience with various vendors in our area. If the project is large, like some of our recent ones concerning our construction defect settlement funds, our PM brings in three for us to interview along with reference letters.

So it's incorrect to declare that an MC "should not be involved in the bidding process." As with many things in life: It all depends . . .

And we don't yet know what the MC's job description is in Bill's case. That's why I asked him about it.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Does it really matter? It seems the OP has an issue with the MC or they would not consider them lying. There are two stories here one saying bad contractor and other saying not. Would I risk my HOAs money to take the risk? No. Better just finding another bid...

Former HOA President

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BillB17 on 06/12/2013 11:52 AM
I am the President of the Board of an HOA in South Carolina. Recently, I have learned some facts that indicate that our management company has lied to our Board. While the lies have not had any significant impact on our community, they are apparantly blatant in nature.

It causes great concern for me that we hired a management company that would participate in this activity and that they could do this again in a situation which would have an impact on our members. It also says something about the management company or at least the individual who lied to us.

These lies are documented in emails between myself and individuals at the management company. The issue involved was when we were looking at contracting a service for our community. We had bids from several contractors. When reviewing the bids, we were told by our management company that they have had bad experiences with one of the bidders and no longer work with that contractor. They stated that this contractor had been removed from their preffered bidders list and had problems with the performance of this contractor in several communities they managed. As it turns out, that contractor had never done any work with our management company nor had they ever contracted for any work in any community managed by our management company.

I am concerned on what to do. If the offended contractor were to find out that these false claims were made against it by the management company, that contractor may have grounds for litigation against our management company.

Can anyone offer help in this situation?

Conflicted Board President

Bill,

First, a nit-picking issue. Are you merely president of the board? Or, are you president of the association. I'll bet if you check your bylaws carefully, you will find you are the president of the association, not merely president of the board. So many times I hear, or see, "board president." or "board secretary" or something similar. I wish people would get over that, since I am sure in most cases they will find there is no such thing as a "board" anything. Whatever officer position exists, I'm certain it is an officer position of the association and not merely the board.

Having gotten that off my chest, on to your issue.

1. If an "offended contractor", or potential bidder, were to be name your management company in a lawsuit, that's no concern of yours. Only if your association is named as a co-defendant in the litigation should you be worried.

2. If a particular contractor is not on your management company's "preferred" bidder's list is irrelevant. Your management company should solicit bids from every contractor that is willing to bid. If your MC has had negative experiences with a particular contractor, then certainly you would want them to report that experience to you. But, the bid should still be solicited. Or, if your MC believes that a bid should not be solicited from a particular contractor, that fact and the reasons therefore should be made known to you. The decision whether or not to solicit a bid from a particular contractor should be made by the board, not by your MC. If your board decides that bids should be solicited from all prospective bidders, so be it. Your board is entitled to review and consider all options. Your MC's past experience with a particular contractor is but one factor in the equation. The final decision regarding contractor selection rests with your board.

BillB17 (South Carolina)
Posts: 92

Posted:

Let me try to address some of the questions below.

Our HOA serves a single family home subdivision. The Board of Directors sets the scope of work and any other contractual conditions that we feel appropriate. Our MC then sends these as a RFQ to qualified vendors that they have experience with and feel are competent. The Board will sometimes add a vendor to our MC's standard list. This was the case here. We got a recommendation from another contractor doing some related work on the property. We checked the recommendations references and found them to be excellent and then asked our MC to add their name to the list.

Here is when the MC told us that they had bad experiences with this contractor, removed them from the preferred vendor list and had bad reports from other HOA's that they managed which used this contractors services.

I asked the MC four questions: When was the contractor removed from the preferred vendor list; what were the most common complaints that caused them to be removed; how many associations managed by our MC had problems with the contractors services; and when was the last time our MC used the services of this contractor. Our MC responded, 4 to 5 years ago; failure to properly perform services; two too many; and 4 to 5 years ago.

These were straightforward answers to straightforward questions so I don't think there was misunderstandings or misinterpretations. We asked our MC for names of any communities that had a bad experience with this contractor so that we could hear both sides of the story, i.e., the contractors excellent references and our MC's negative references. Our MC refused to give us that information.

Our Board eventually hired this contractor after receiving and evaluating several proposals based on price, in depth interviews and reference and BBB checks. Our experience with them so far has been stellar in regard to their performance and cooperation.

We learned that this contractor had never done any work for our MC or for any association managed by our MC by asking the contractor that question directly. I tend to believe the contractor based on our contract dealings with them to date and level of confidence they have built with the Board and the Community.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Bill,

You and your board distrust your property management company. Find another company when the contract expires.

Why ask your MC questions seeking answers you don't believe? It's business.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Bill

Is your association owner controlled? If yes, then the MC works for the BOD. If issues continue or you are unhappy then discuss replacing her with the BOD. I suggest discuss it in Executive Session to keep it confidential at this point.

Hope this helps.

RogerB (Colorado)
Posts: 5,067

Posted:

Bill,
Up front let me disclose that I am co-owner of a management company and have perviously served on HOA Boards in three states for many many years. Thus I can view this situation from both sides.

You used the word "indicate" which I think is appropriate at this time in this situation. If I were in your shoes I would talk to the owner of the management company. You stated "contractor had never done any work with our management company nor had they ever contracted for any work in any community managed by our management company". How do you know this? Did you solicit the bids? If you did how do you know the contractor is being honest with you?

Our management company also has an approved contractor list as do many. We solicit bids for all the the HOAs we manange as per our Management Agreement. There are reasons for having this in our Agreements, including being experienced in knowing what contractor do good work for a reasonable price and which contractors we can not trust. When we can no longer trust a contractor they are terminated and removed from our approved contractor list. Does your HOA utilize the experience of your Manager when getting bids? If you do then how do you know the situation with this contractor?

So, I suggest you talk to the owner of the Management Company and try to resolve this problem. Try to determine whether or not the Board can trust them. After that if the Board choses they can solicit bids from other competent management companies, conduct interviews, and select one to hire at such time as the current Management Agreement can be terminated.

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By BillB17 on 06/12/2013 6:21 PM
Let me try to address some of the questions below.

Our HOA serves a single family home subdivision. The Board of Directors sets the scope of work and any other contractual conditions that we feel appropriate. Our MC then sends these as a RFQ to qualified vendors that they have experience with and feel are competent. The Board will sometimes add a vendor to our MC's standard list. This was the case here. We got a recommendation from another contractor doing some related work on the property. We checked the recommendations references and found them to be excellent and then asked our MC to add their name to the list.

Here is when the MC told us that they had bad experiences with this contractor, removed them from the preferred vendor list and had bad reports from other HOA's that they managed which used this contractors services.

I asked the MC four questions: When was the contractor removed from the preferred vendor list; what were the most common complaints that caused them to be removed; how many associations managed by our MC had problems with the contractors services; and when was the last time our MC used the services of this contractor. Our MC responded, 4 to 5 years ago; failure to properly perform services; two too many; and 4 to 5 years ago.

These were straightforward answers to straightforward questions so I don't think there was misunderstandings or misinterpretations. We asked our MC for names of any communities that had a bad experience with this contractor so that we could hear both sides of the story, i.e., the contractors excellent references and our MC's negative references. Our MC refused to give us that information.

Our Board eventually hired this contractor after receiving and evaluating several proposals based on price, in depth interviews and reference and BBB checks. Our experience with them so far has been stellar in regard to their performance and cooperation.

We learned that this contractor had never done any work for our MC or for any association managed by our MC by asking the contractor that question directly. I tend to believe the contractor based on our contract dealings with them to date and level of confidence they have built with the Board and the Community.

Bill, sorry I did not read this post before taking the time to provide guidance to you. I agree with your approach but do question the purpose of your first post.

CarolR11 (Colorado)
Posts: 2,563

Posted:

Bill, thanks for your answers to my questions waaay above. Anyway, I stick with my earlier replies to yourOP.

Bruce, our MC contract states that they need only seek three bids. Sometimes, our PM brings us four. Other times it's difficult even finding vendors experienced with high-rise plumbing, overall mechanical, and closed loop HVAC systems.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By CarolR11 on 06/13/2013 1:01 PM
Bruce, our MC contract states that they need only seek three bids. Sometimes, our PM brings us four.

As a board member, I would not vote in favor of a MC contract that contained such a clause, unless the cost of obtaining more than 3 bids was prohibitive.

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