Disgruntle Management Company

Started by MarkT8 • 13 replies • 1358 views

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MarkT8 (Maryland)
Posts: 16

Posted:

My last post was how we lost over $48k. We held the Management company partially responsible because they were after all supposed to be managing our accounts. We terminated our relationship and hired a new company. By law , supposedly, the old management is supposed to cooperate. Well that isn't happening. So far they haven't turned over our books, taxes, and have been approving architectural request that we wouldn't have approved. I have talked to the attorney general and they are backed logged and the new company what's us to hire a lawyer. This really sucks because we all ready lost more then half of our operating expense and now we have to hire a lawyer to go after our own books. I am surprised that these management companies are not required to have a license if so we could of gone after their license. Companies like these shouldn't be allowed to operate. Located in Baltimore MD. Any advise?

PitA
Posts: 1,416

Posted:

Y'all hired them.

Y'all pay the price for your decision.

Y'all now need to go the bank and FREEZE the HOA's accounts.

If the bank will not co-operate y'all need a corporate attorney NOW.

The Management Co. should NEVER have been a signatory to the HOA's bank account.

They merely PREPARE the checks for the BOD Treasure's signature.

? Y'all thought that there was no work to do simply because y'all hired clerks ?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Well I would change banks and start over from scratch. The MC should NEVER been involved in ACC approvals in the first place unless it's in the contract to do so. Which most HOA's have it written the BOARD makes the final ACC approvals/denials. So sounds like your HOA was already giving too much power/responsibility to that MC in the first place. Make sure to read the current contract to see what is crossing lines now. The MC is a HIRED contractor to the HOA. It's NOT the other way around. They are to do what the board wants. In some cases it may be to approve or to enforce rules. It just has to be IN the contract to do so. It's service your paying for.

I would also institute from now on avoiding long term contracts with anyone even your MC. We never go over a year typically. Doesn't mean we don't keep the SAME contractor each year. It means each year we have the option of accepting bids and/or negotiating new terms to the existing contract. Getting "comfortable" with a contractor or agree long term to save costs is not a good business practice.

I agree with Pita advice. Go to your bank and get them off the signatory card and sign up the new bank. One of your board members should be a signer. They need to go to the bank with the new MC to transfer the official signing rights. Plus remove the others not approved. The HOA has to send a signatory of the account to do this. Hopefully, the President should be. If not, you have BIGGER problems.

The HOA is a non-profit so even if you start over for the mean time. Your dues collecting in is to be enough to cover that month's bills. If not, again your HOA has issues. Also start contributing to savings for capital replacement costs of the future if you do have extra. I would forgo the lawyer until your HOA gets it's footing again and can afford it.

Former HOA President

MarkT8 (Maryland)
Posts: 16

Posted:

The management company that we had problems with was terminated and bank accountants moved. The problem is that they have all of our records and won't pass them onto the New management company which by law they have to. The new company doesn't know who has paid or what homeowners balances are. The law is no good because its basically unenforceable unless we fork out the money for a lawyer. The old management company doesn't have the authority to approve arch request but they did anyway. I was surprised that these companies don't have to be licensed then we would be able to have their license revoked for what they are doing.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Some states do require MC's be licensed. Not all. The board should still have the power to deny this ACC request. It is up to them ultimately. So they could still step in and deny stating that the MC had no authority.

As for previous records/history... That can be trickier but not impossible. There is no reason for them to hold onto certain records. Don't know why they would other than being spiteful. After looking through all our records (in a box in our closet), I found many not really necessary. Plus some you think exist don't. So it's best to make a list of actual documents your HOA needs to do business. Don't assume there are records out there that exist when they may not.

Don't go with a Real Estate lawyer. Your not dealing with Real Estate. Your dealing with a corporation. A general lawyer may be able to take your case. A lawyer specializing in HOA can raise the price. So put your ducks in a row before contacting the attorney to save time and money. Look at your options for collecting these records and NOT depend on just the lawyer telling you what they are. They will do what you tell them to do. They won't tell you everything that is an option to do...

Former HOA President

MarkT8 (Maryland)
Posts: 16

Posted:

AS far as the arch request goes, the problem is that they already started building the fence. In the back yards the fence must be a 6'board on board fence. This fence is a 42" picket fence. Looks ridicules among all the other fences. I am not going to have them tear it down unless its at the expense of the former management company who approved it out of spite. Just makes me mad that this company is allowed to operate. It's going to be a long and ugly fight. Attorney is one way but we are also going through the attorney general but they are backed logged and will be a while.

TimB4 (Tennessee)
Posts: 21,059

Posted:

well, with access to the bank accounts, you should be able to rebuild most of the financials.
If you don't have access to the bank accounts, skip the AG and get your own attorney as time is more of the essence then justice.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Another route? Why not contact the IRS for your tax situation? While your waiting, maybe it's time to take some tax action. They do have a form you call a number for. Fill out that form and submit it to the IRS. They will investigate.

However, I will warn... Make sure your HOA is of "Clean hands" before doing so. Maybe ask some general questions to a tax aware person for options. There are 2 things assured in life... Death and Taxes...

Former HOA President

GenoS (Florida)
Posts: 4,276

Posted:

I agree with Tim. Skip the Atty General and hire a lawyer ASAP to demand that they turn over the records.

MarkT8 (Maryland)
Posts: 16

Posted:

We are interviewing a lawyer Tuesday. The police will be serving a subpoena hopefully this week. We don't know yet if the police will give us a copy of our records when they receive them. I hate spending money that should be going to improve the community and giving it to lawyers only because we hired a poor management company that should be put out of business.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By GenoS on 06/18/2017 2:00 PM
I agree with Tim. Skip the Atty General and hire a lawyer ASAP to demand that they turn over the records.

I would not only hire a good lawyer I would also file complaints (if you did not already file formal complaint) with my local attorney general, state attorney general, Better Business Bureau, etc. If other HOA's also start having issues maybe time will be found to nail them. I would probably also write my State Legislators, so they can understand why potentially this industry in your state needs to be regulated.

GwenG (Florida)
Posts: 669

Posted:

Florida requires CAM's and FIRM (CAB) licenses (business that hire CAM's to work for association contracts). There is no qualification to get a CAB license. Just pay a fee and hire a CAM and you're in business!

Licensing (or lack thereof) is not the problem. The problem is the board delegated its powers to a hired hand. They violated their fiduciary duty to the Members and now have costly consequences.

The lack of licensure is beside the point. If there is no state regulatory agency obliged to receive and investigate, mediate or arbitrate disputes with an MC, then the "protections" of licensing, education and statutes are useless. MC's do what they want if they are allowed to do so by becoming a proxy for the Board. It's off to court you go!

The victim that needs rescuing is the association. The association was sleeping on the job. The costly resources of lawyers and attorney generals thumping laws is just part of cleaning up the initial mistake. Legislators (lawyers) may or may not sponsor coherent laws to help associations in the future. Don't count on it happening anytime fast...or at all.

Did your board check BBB before hiring the Management Company? In Florida, complaints against CAM's and CAB's are hidden from consumers--ALL complaints whether confirmed or not. You can always make a request under Freedom of Information or hire a Private Investigator.

Advice: Take the lesson to heart which you are now teaching yourself and owners. Manage the business front end in the future. It might seem inviting to hire a One Stop Company but this is a situation that "is a nightmare dressed like a daydream". Get yourself a good accountant and a good secretary. Don't co-mingle business functions; keep finance independent from legal and independent from administrative. Do NOT allow anyone to sequester your records behind proprietary software or website passwords. Elect a board member with executive experience.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

My HOA's operating procedure, which I helped set up, is based on the MC doing all the work and basically having financial control with some safe guards.

First things first. Cheaters cheat. It is near impossible to stop somebody with larceny in their heart.

Our quarterly dues are sent to a major bank's lock box system. Each owner receives a payment book. We pay quarterly and can use credit cards, checks, auto withdrawal, even go to the bank and pay cash. The money is transferred to the MC. The BOD has a coded password which can stop this transfer upon activation of the password.

Our MC has no access to our Reserve Account other then receiving a statement of it to use in his financial reports to us.

Each BOD Member receives a monthly financial report some 10 pages long. If the BOD fails to catch anything, shame on them. Each owner can request a monthly financial report. It will be less info then the BOD gets as the BOD gets delinquency reports with name, amount owed, and any action being taken. We have had only two owner requests in 2 years and not one for the past year.

We are not a very large HOA and we have no amenities. We are 40 side by side duplex homes and 32 single family standalone homes for 112 owners. Our budget is $67,200.00 per year with 1/2 going to landscaping as we do all the landscaping including the home owners lot. Our landscaper is not associated with our MC. The landscaper gets paid in equal monthly payments from the MC and the landscaper would be the first to scream at us that he did not get paid that month.

Is our system full proof? No system is. Cheaters cheat. It is near impossible to stop somebody with larceny in their heart.

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