management company fiduciary

LaskaS (Texas)
Posts: 1,025

Posted:

hi,, we have a management company that basically only does our accounting.. they handle the accounts payable, and owner assessments(through strongroom) etc.. and keep our books..

In the course of investigating payments that were made that were not approved by the board..

We have discovered,,

there was a large amount of payments that were requested last year $150,000+.... the owners were questioning the validity of the invoices etc.. it was right after hurricane harvey,, the owner of the management company sent an email to the board.. informing them that the president had informed him that there was massive cleanup being done and the payments must be made in order for the cleanup to continue.....
the management company in the next paragraph stated that he would need unanimous consent in email from all of the board members in order for him to pay the payments,, or there would have to be a meeting where a quorum was present and a vote was taken..

ok... so he knew what was required.. he received emails from board members.. and thus, released the payments..

it turns out,, he never had the unanimous written consent of the board.. 2 of the board members refused to consent because there were questions about the amounts of the invoices.
apparently the owner of the management company didn't bother confirming that the email approval contained all of the board members consent,, you know how email correspondence can be hard to read because everyone is responding etc.. well there is even a board member that states in one of the numerous correspondences that there was no unanimous consent..

however,, apparently the owner wasn't very thorough and he didn't catch this..

now that a new board is being elected.. does the management company have any liability?? i know it depends on the agreement of course.. but i'm just wondering if management companies are indemnified from any errors they make..

I will be livid if that is the case.. what's the point of having a third party company that does the books and manages the accounts if they aren't even responsible when they screw up?? If some of you have knowledge in this area, please let me know... we're not talking chump change here.. this is over 150,000.. The board never voted to approve the agreement, and they also never unanimously consented to the payments...

any thoughts?

ND (PA)
Posts: 792

Posted:

Hurricane Harvey occurred about a year ago. I think too much time has gone by to try and now blame Management for things that were or were not done completely according to procedure. While I'm sure it was chaotic during the cleanup time, it sounds to me more that your Board at the time is most to blame for the situation. They had opportunity to intervene, call meetings, ensure appropriate decision-making, and hold Management accountable (for agreements/payments made without their approval). The Board apparently failed to do so or ended up satisfied enough with things that they decided to do nothing.

True, Management should not have proceeded with whatever agreements were made and payment for services provided if the Board was not in agreement (via unanimous email agreement or majority vote at a meeting); however, cleanup needed to occur and decisions had to be made quickly, so Management may have been doing what was absolutely necessary to get things back to normal.

I'd also look closely at the email correspondence where enough Board Members must have agreed to Management's proposal/plans such that Management kept moving forward. While perhaps not unanimous agreement via email (as should have been the case), was there enough agreement that if a meeting were called, would the same decision have been reached? Tough to know at this point if the decision would have been different. Again, I blame that Board more than I do Management for failure to step in at the time these things occurred.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You also need to establish if a "no response" is counted as a "Positive" response. I am also not sure if it was a unaminous decision required. Could it have been Majority? Those 2 votes were not counted once a majority vote happened. Usually an email isn't enough for "proof" for a decision being made. It's usually noted in the meeting notes the decision made.

Do not see why the MC would be responsible. They do what they are told. It even looks like they went a little bit over to make sure the process was followed before they did anything. That was a good thing. Didn't take the decision at face value. So I commend the MC for doing their job. It was your board who would be responsible. The MC does what they tell them to do.

Having questions about things doesn't mean things don't need to keep progressing forward. Stopping till questions are answered in an emergency situation isn't always feasible. It's not like your making a decision that time isn't a factor. A hurricane is an emergency situation of which not unusual for mistakes to be made in the process. Atleast from my experience things get handled at the moment as the need is immediate.

Former HOA President

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

I will be livid if that is the case.. what's the point of having a third party company that does the books and manages the accounts if they aren't even responsible when they screw up?? If some of you have knowledge in this area, please let me know... we're not talking chump change here.. this is over 150,000.. The board never voted to approve the agreement, and they also never unanimously consented to the payments... any thoughts?

If it went to court, a judge would look at it and see that you received cleanup services, paid for them and received the benefit of the services. The fact that procedure was not followed is not relevant.

You could use this as an excuse to switch mgmt companies over this issue. But you have suffered no financial loss.

That said...... I would be going over the invoices with a fine tooth comb looking for fraud. A fake invoice would be a financial loss.

RoyalpitA
Posts: 195

Posted:

Quote:

Posted By MelissaP1 on 10/24/2018 5:15 AM
You also need to establish if a "no response" is counted as a "Positive" response. I am also not sure if it was a unaminous decision required. Could it have been Majority? Those 2 votes were not counted once a majority vote happened. Usually an email isn't enough for "proof" for a decision being made. It's usually noted in the meeting notes the decision made.

Do not see why the MC would be responsible. They do what they are told. It even looks like they went a little bit over to make sure the process was followed before they did anything. That was a good thing. Didn't take the decision at face value. So I commend the MC for doing their job. It was your board who would be responsible. The MC does what they tell them to do.

Having questions about things doesn't mean things don't need to keep progressing forward. Stopping till questions are answered in an emergency situation isn't always feasible. It's not like your making a decision that time isn't a factor. A hurricane is an emergency situation of which not unusual for mistakes to be made in the process. Atleast from my experience things get handled at the moment as the need is immediate.

Action W/O a Meeting requires UNANIMOUS affirmation.

LaskaS (Texas)
Posts: 1,025

Posted:

actually it has gone to court.

the facts are,, trash was removed.. however. there was no valid contract. the board was never consulted before the president hired a "company" to handle the debris removal.

we are in court now determining what a fair price is to pay for the work that was done.

the problem is, the debris removal company kept not records that are verifiable.

this is what we realized a year ago. whem the invoices started coming in, but there was no backup documentation.

the company to this day, still has not provided anything other than their own handwritten log . which of course, does not pass the laugh test.. all debris has to be dumped at a landfill, and landfills provide and keep very specific records.

now this company is claiming they don't have any receipts because they took the debris from 130 homes to their own land... "i'm not making this up,, i can't believe they claimed

the former president was trying to pay the hundreds of thousands of dollars in invoices out within a day or two of them being presented.. the rest of the board did not agree.. but the president tried to force it through, and contacted the management company and instructed them to pay it,, that's when the management company sent an email to all of the board members stating he needed unanimous written consent in order to release the payments

the management company owner was well aware that there were questions concerning the amount and validity of the invoices presented by the debris removal company.

apparently some board members approved the release of payments, but 2 refused to approve them in an email and said there need to be a meeting to review the invoices. the owner of the managment company apparently didn't read all of the board members responses.. and he released the payment..

If it turns out that the hoa paid more than what is legally determined to be a fair price.. I am wondering if we can then go back to the manamgent company and negotiate some kind of settlement. if the mangement company paid out 250,000.. even though they never had the required confirmation that the board approved it. and the courts determine that a fair price was 180,000.. wouldn't the mangement company be liable for that 70,000 overpayment... i'm hoping we can collect from the managment company and then the managment company will have to go after the fly by night debris removal company.

LaskaS (Texas)
Posts: 1,025

Posted:

actually it has gone to court.

the facts are,, trash was removed.. however. there was no valid contract. the board was never consulted before the president hired a "company" to handle the debris removal.

we are in court now determining what a fair price is to pay for the work that was done.

the problem is, the debris removal company kept not records that are verifiable.

this is what we realized a year ago. whem the invoices started coming in, but there was no backup documentation.

the company to this day, still has not provided anything other than their own handwritten log . which of course, does not pass the laugh test.. all debris has to be dumped at a landfill, and landfills provide and keep very specific records.

now this company is claiming they don't have any receipts because they took the debris from 130 homes to their own land... "i'm not making this up,, i can't believe they claimed

the former president was trying to pay the hundreds of thousands of dollars in invoices out within a day or two of them being presented.. the rest of the board did not agree.. but the president tried to force it through, and contacted the management company and instructed them to pay it,, that's when the management company sent an email to all of the board members stating he needed unanimous written consent in order to release the payments

the management company owner was well aware that there were questions concerning the amount and validity of the invoices presented by the debris removal company.

apparently some board members approved the release of payments, but 2 refused to approve them in an email and said there need to be a meeting to review the invoices. the owner of the managment company apparently didn't read all of the board members responses.. and he released the payment..

If it turns out that the hoa paid more than what is legally determined to be a fair price.. I am wondering if we can then go back to the manamgent company and negotiate some kind of settlement. if the mangement company paid out 250,000.. even though they never had the required confirmation that the board approved it. and the courts determine that a fair price was 180,000.. wouldn't the mangement company be liable for that 70,000 overpayment... i'm hoping we can collect from the managment company and then the managment company will have to go after the fly by night debris removal company.

LaskaS (Texas)
Posts: 1,025

Posted:

steve... the entire operation was a fraud..

they kept no receipts, they have no records from any landfills, their invoices went from claiming they removed 9 20 yard dumpters a day to 100 a day,, which is physically impossible, given there were only 5 dumpsters here.. it's just a nightmare,,

the board that was put in place after the previous board was voted out, did nothing to deal with the lawsuit the debris removal company filed against us.. finally,,, we have hired a very good lawyer who is actually responding to the motions, and we've made more progress in the last month, than the previous lawyer had made in a year...

anyway,, the case is going to come down to quantum merit,, there was not valid contract.. and this debris removal company has no records.. so we are having to get expert testimony from debris removal engineers etc.. that will estimate the amount of debris that was produced from 130 downstairs units..( luckily,, the army corp of engineers has done extensive research on debris estimating and forcasting).. and then we will get an expert to testify to a fair price to pay per cubic yard of debris removal post harvey... given the market conditions at the time...