Management Company Eviction

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).

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.

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".

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.

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.

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.

The system is called Strongroom.

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.

FOR SURE