PM signing as President of company but not President.

Started by BonnieG1 • 28 replies • 1687 views

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BonnieG1 (Nebraska)
Posts: 1,186

Posted:

We have just become aware that November of 2014 our Property management company was sold to another Property management company. In September of 2015 our contract with the Property management company was amended with an increase in fees. Our PM signed as President of the company that was sold. Needless to say we are not happy with the situation as we should have been informed of the transactions between the two property management companies. Our Pm continued to work with us and other condo associations as he was "in charge" of the accounts. I know the company our former PM is working for now and I don't ever plan on using this man again.

In September of 2015 it appears that the company we originally signed the contract with in September of 2013 no longer existed. Is the amendment with the increase of fees a valid contract.

I have emailed the lawyer who is also an owner and a consultant to the Board asking her about this, but I have had such good advise on this site, I want to here as many sides to this as I can before I ask to have the amended contract voided and go back to the original contract as least until the anniversary date of the contract.

TimB4 (Tennessee)
Posts: 21,059

Posted:

The new company should have honored the existing contract or allowed the contract to end as of the date of sale.

However, the new PM signed the contract.

Did the PM have the authority to do so?
If they did, then the amended contract is valid.

You need to check minutes and ask questions of the PM.

RichardP13 (California)
Posts: 3,868

Posted:

Just curious, this is now march of 2016. Did the increase in management fees, which should have showed up on the financials, alert anyone?

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By RichardP13 on 03/06/2016 5:50 PM
Just curious, this is now march of 2016. Did the increase in management fees, which should have showed up on the financials, alert anyone?

It wasn't the new PM who signed the contract. It was the old PM. We didn't know anything about this sale of businesses until last Thursday when checks were returned to me to sign because the old PM had completely left the company.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By BonnieG1 on 03/06/2016 5:58 PM

Posted By RichardP13 on 03/06/2016 5:50 PM
Just curious, this is now march of 2016. Did the increase in management fees, which should have showed up on the financials, alert anyone?

We knew there was going to be an increase when we agreed to the amended contract. The increase did not surprise us. But I am now wondering if the amended contract is valid because the man who had been our PM since October 2013 signed the contract November 2015 but the company on the amended contact is listed as the old company. I think the old company may be working as a secondary to the new company but not certain.

For all practical purposes we had no clue that our PM company had been sold and were still working under the facts we knew at the time the amended contract was signed.

From this point if a PM wants to amend a contract, I will ask are you still working for the same company in the same position as when the original contract was signed.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By BonnieG1 on 03/06/2016 6:04 PM

We knew there was going to be an increase when we agreed to the amended contract. The increase did not surprise us. But I am now wondering if the amended contract is valid because the man who had been our PM since October 2013 signed the contract November 2015 but the company on the amended contact is listed as the old company.

Now I understand.

You (the Association) had a contract with Company A

In November 2015, the Association and Company A agreed to amend the contract.

After November 2015 (or at least after you signed the amended contract) Company A was sold to Company B.

Company B is honoring the amended contract as written.

You don't like company B and are trying to find a way to void the contract.

I would suspect that as long as Company B honors the terms of the amended contract, the Association has to honor their end of the contract and pay them. The terms to terminate your contract would be within that contract.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Correction (after rereading thread):

You had a contract with Company A

In November 2014 Company A was sold to Company B (or at least the sale was started and not finalized)

In November 2015 The Association amended the existing contract with Company A (or they understood that this is what was happening).

Now, March 2016, the Association discovers that Company A was sold (or at least the sale was finalized) and the Association does not like Company B.

Company B is honoring the contract as written.

The Association, not liking company B, is trying to find out if fraud was committed so you can terminate the contract.

Is this understanding correct or is my earlier understanding correct?

I suspect that the Association needs to find out when the sale was actually finalized (as the sale didn't take place until it was finalized). Once that is known, the Association can identify it's options. Hence, your request to the attorney was probably a good call (although it may be an expensive one when compared to simply letting the contract run it's course).

The other option, if you haven't already tried it, is to see if Company B is willing to terminate the contract because the Association was unaware of the sale. Depending on the character of the owner of Company B, they may or may not let you out of the contract (who wants to keep a client that is unhappy with them).

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By TimB4 on 03/07/2016 4:12 AM
Correction (after rereading thread):

You had a contract with Company A

In November 2014 Company A was sold to Company B (or at least the sale was started and not finalized)

In November 2015 The Association amended the existing contract with Company A (or they understood that this is what was happening).

Now, March 2016, the Association discovers that Company A was sold (or at least the sale was finalized) and the Association does not like Company B.

Company B is honoring the contract as written.

The Association, not liking company B, is trying to find out if fraud was committed so you can terminate the contract.

Is this understanding correct or is my earlier understanding correct?

I suspect that the Association needs to find out when the sale was actually finalized (as the sale didn't take place until it was finalized). Once that is known, the Association can identify it's options. Hence, your request to the attorney was probably a good call (although it may be an expensive one when compared to simply letting the contract run it's course).

The other option, if you haven't already tried it, is to see if Company B is willing to terminate the contract because the Association was unaware of the sale. Depending on the character of the owner of Company B, they may or may not let you out of the contract (who wants to keep a client that is unhappy with them).

Most of this is correct. Except we don't like the former President of Company A. So far we have had no problem with company B. Company B did not know we were not told what had happened by our former PM. Also since the lawyer I contacted is also an owner and a consultant to the Board there is no charge for her advise. She gives it as a concerned owner. The Association does have a paid lawyer, but, I try to limit the questions I ask him due to the cost and we have a concerned owner willing an able to help us.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

But yes the part about us getting out of the contract is partially correct. At the very least, I would like to see our management fee lowered since, in my opinion, our former PM misrepresented himself to us.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By BonnieG1 on 03/07/2016 4:23 AM
But yes the part about us getting out of the contract is partially correct. At the very least, I would like to see our management fee lowered since, in my opinion, our former PM misrepresented himself to us.

Bonnie,

I'm going to say that it sounds more like buyers remorse.

You admit that you didn't like Company A.
However, you agreed to higher fees and amended said contract with the company you do not like.
This was done when the Association could have simply refused to agree to the new terms (unless it was a cost increase authorized within the contract).

You now have a contract with Company B (whom you like).
You didn't indicate that you felt cheated when you signed the amendment (in fact you specified you expected the higher fees). You haven't indicated that what you are currently paying is higher then market rate. You simply didn't like the fact that the selling of the company wasn't disclosed.

I understand why you be upset. However, you are not upset with the new company. However, you will have to deal with the new company when you try to void the contract. This will likely not place you on good terms with Company B (who may currently have sympathy for the non-disclosure).

Therefore, my advice is to simply live with the cost increase.

This will maintain good relations with your current MC and likely be less expensive in the long run.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Still not entirely correct. We still liked Company A when we signed the contract. The time the contract was signed we had no indication that the PM had sold his company. We now don't like the PM who signed the contract. We recently discovered that he had sold his company to another company and was working full time somewhere else. During this time he also had our account with the company that he sold his company to. The only difference was the PM (owner of company A) wasn't on site as much. But that didn't alarm me like it should have because I didn't think most owners had as much hands on as our PM did.

The first time we were aware of this was last Friday when I received checks to sign since the new company no longer had a certified PM on staff. He had just told the new company that he would no longer work for them. There was no problem with the maintenance, bookkeeping etc. As far as we knew everything was in place as it had always been. We didn't know the PM was lying through his teeth to us. The old PM still went to the court house for lien filing removal etc.

Friday I took the old PM off our bank account.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

There are 2 parties to any contract of which BOTH are to abide. It sounds like your HOA will NOT have to wait to cancel this contract other than whatever notice written is. Typically 30 days notice has to be given. Which I would serve ASAP and get a new company in. However, make sure to make a list of records you need NOW because they may try to withhold them. I would even recommend someone asking to view the records prior and making as many copies as possible. It may cost some money if you have them run copies.

Your contact was with the original company and signer. Even if it got absorbed and bought out, there should be a reflection in your contract of the change. I would put in the 30 day cancellation notification and see the response. That way whatever their response is, your NOT guessing what to prepare for.

Former HOA President

PitA
Posts: 1,416

Posted:

Friday I took the old PM off our bank account.

Or, you THINK you did.

Tricky w/o opening a new account or minutes showing new directors.

however

The PM should NOT have been a signatory at all.

The PM merely PREPARES the checks for the directors' signature.

however

again

'here we go 'round the mulberry bush, the mulberry bush ........................'

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By PitA on 03/07/2016 7:40 AM

The PM should NOT have been a signatory at all.

John,

Although I agree with you on this.
There are those who advocate having the PM on the account.
There are those who advocate having the PM control the operating funds completely.

Every Association must do what they think is best in this case.

Bonnie certainly took the correct action to have the prior PM removed from the account (if they were on it).

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MelissaP1 on 03/07/2016 6:52 AM

Your contact was with the original company and signer. Even if it got absorbed and bought out, there should be a reflection in your contract of the change. I would put in the 30 day cancellation notification and see the response. That way whatever their response is, your NOT guessing what to prepare for.

Of course, if you cancel the contract with Company B (whom you like) I wouldn't expect them to biting at the bit to give you a quote for a new contract.

Instead, simply talk to them.
Tell them your concerns and see what they may offer to make amends.

PitA
Posts: 1,416

Posted:

TimB,

slightly 'off topic'

'my' bylaws actually specify that all checks MUST be signed by the [Treasurer] plus [the President or the President's designee].

our bank (the big B) requires new from scratch signature cards upon changing signatories as well as certified minutes from the appropriate meeting

or

opening a new account

MelissaP1 (Alabama)
Posts: 13,836

Posted:

In our HOA we did not have a MC but an accounting firm. They wrote the checks but we had to have 2 board members sign them. Which the Treasurer did own the accounting firm but still did not have signatory. Whenever we changed Board positions, we had to go to the bank to sign a new card. We also had special checks designed to reflect the 2 signatory system. Which technically had 3 signatures on it. 1 for the Accounting firm to sign writing the check and the 2 board members. They were quite expensive but kept things in checks and balances.

I still say they need to give the 30 day notice most likely required to cancel the MC's contract. The MC may come up with a few responses. They may say the contract can't be cancelled till the cancellation date. They may change their names on the contract to have signed again. They may agree to end the contract. They may draft a new one and negotiate new terms. The HOA will NOT know until they take some kind of action. There is enough proof they violated the contract first in order for the HOA to pursue cancellation.

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Our PM controls our checking account and writes all checks. I know many of you dislike this but we do have some safeguards. Our main safeguard is we use a bank lock box and the BOD can shut off the PM's access to the funds with a coded phone call. Could he nip us? Yes. Could he nip us bad? Not if the BOD does its job.

Our annual budget is small (about $65K) and dues are paid quarterly so there is rarely more than $15K or so in play at any one time. Our main outgo is for landscaping and we pay a monthly fee (about $2k per month) year round. I know the landscaping company owner would be all over everyone (including the BOD) if a payment was missed thus another safeguard.

The PM has no access to our Reserve Funds other than he gets a monthly statement of such to include in our monthly financial reports.

I know safeguards do not work if the BOD is asleep at the wheel or in cahoots to steal, but that is true of any system.

KerryL1 (California)
Posts: 14,550

Posted:

Trying to wade through all of the off-course remarks and also your own sort of confusing narrative, Bonnie.

Is this the crux of the matter? "Is the amendment with the increase of fees a valid contract?"

To try to summarize: Your Mgmt. Co. "A" was purchased by a different firm, B." Your board was not informed. Months later, your Board approved an increase to firm B?

Was this approved in writing, Bonnie? And this amended contract had the name of the new Firm B on it? Who on your board signed this amendment?

Our mgmt. contract contain a clause saying the firm a has the right to sell out to another firm. Does yours, Bonnie?

It also has a clause where we can give 30 days notice to terminate the contract. So, double check your contract.

What would you like to see happen, Bonnie?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By PitA on 03/07/2016 8:41 AM
TimB,

slightly 'off topic'

'my' bylaws actually specify that all checks MUST be signed by the [Treasurer] plus [the President or the President's designee].

our bank (the big B) requires new from scratch signature cards upon changing signatories as well as certified minutes from the appropriate meeting

or

opening a new account

Same here

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By TimB4 on 03/07/2016 7:54 AM

Tim that is exactly what I hope to do. But first the owner/lawyer will look over the contract.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Our bylaws are not the same as your by laws. We are allowed to have a PM sign checks. But we review all bills and record all fees for a check and balance. We are not even required to have this check and balance but we don't want to turn everything completely over to any property management company.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By KerryL1 on 03/07/2016 11:46 AM
Trying to wade through all of the off-course remarks and also your own sort of confusing narrative, Bonnie.

Is this the crux of the matter? "Is the amendment with the increase of fees a valid contract?"

To try to summarize: Your Mgmt. Co. "A" was purchased by a different firm, B." Your board was not informed. Months later, your Board approved an increase to firm B?

Was this approved in writing, Bonnie? And this amended contract had the name of the new Firm B on it? Who on your board signed this amendment?

Our mgmt. contract contain a clause saying the firm a has the right to sell out to another firm. Does yours, Bonnie?

It also has a clause where we can give 30 days notice to terminate the contract. So, double check your contract.

What would you like to see happen, Bonnie?

The approval was in writing but it did not have the name of the new Firm B on it. I signed the amendment. I don't think our contract contains a clause saying the firm has a right to sell out to another firm. We have to give a 60 day written notice to terminate the contract. I have double checked the contract and our owner/lawyer will also review the contract.

What I would like to see is that we go to the original contract with reimbursement of the difference between the lower and higher PM fee.

KerryL1 (California)
Posts: 14,550

Posted:

Did your Board read this amendment and vote to approve it, Bonnie? Did no one notice there was no company name on it?

I'm not in any legal professions, but I don't think you can be reimbursed for the increase. The reason is, your board voted for it and you signed it.

How much money are we talking about re: reimbursement?

I think tim might be right: You're angry with the old PM for putting one over on you & your board. But that may not get you back the $$ you want.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

Quote:

Posted By KerryL1 on 03/07/2016 3:06 PM
Did your Board read this amendment and vote to approve it, Bonnie? Did no one notice there was no company name on it?

I'm not in any legal professions, but I don't think you can be reimbursed for the increase. The reason is, your board voted for it and you signed it.

How much money are we talking about re: reimbursement?

I think tim might be right: You're angry with the old PM for putting one over on you & your board. But that may not get you back the $$ you want.

There was a company name on the amendment. I never said there was not a company name on the amendment. The former PM signed it as President of company A. We are talkinhg $400.00 a month beginning October 2015. But I would be happy with a partial reimbursement.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Hi Bonnie.
I may be repeating what others have said already - but here goes.
I see 3 weaknesses in your argument:

1. Fee for Services Contract. You agreed to pay a certain amount for specific services. Those services are being provided in accordance with the contract. Your justification for requesting a discount has nothing to do with the caliber of services you are receiving.

2. Delayed Merger. The buyout did not necessarily put Company A out of business immediately. Company B could have let Company A continue to operate as a separate entity for a year or two before merging operations. If that's the case, then old PM could have been the legitimate signer of your contract because he still had that title at Company A.

3. No Injury. You're getting the level of service you wanted for the price you agreed to pay. You don't have a complaint that Company B is worse than Company A in providing those services. You may be unhappy about what first PM did, but it did not result in economic harm.

Sikubali jukumu. Read all posts at your own risk.

MarleneP1 (Texas)
Posts: 16

Posted:

PitA - not necessariy true. The PM is the only signatory on the bank accounts at the Association I work for. Is absolutely allowed here in Texas.

TimB4 (Tennessee)
Posts: 21,059

Posted:

That's allowed elsewhere as well.

However, it's a practice I completely disagree with.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

We now have more information. Our former PM is still part owner in the company, he is just not involved in the day to day operations of the company and is working full time for another company. His cousin who has been our bookkeeper since the beginning is now stepping up as property manager. So we are still dealing with the same company and same maintenance people.

When we got the notice that our PM was no longer with the company members of the Board hit the panic button. Some members hit the panic button harder than I did and insisted we have an emergency meeting with about 15 minutes notice. I was not for that as I needed to find out exactly what was happening before we made any decisions. Some of the Board members were ready to get first a new bookkeeper and possibility a new management company.

I did tell them we would not make any decisions at this meeting that our Vice President called. Our documents do provide for calling meetings, but not the way our Vice President called. We are to have 24 hours notice and if it is not the President calling the meeting two board members are to give a request in writing for a Board meeting. But what has been done is done.

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