Length of condo management contract?

Started by ChrisH23 • 12 replies • 917 views

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ChrisH23 (Florida)
Posts: 2

Posted:

Our new board has recently found out that the prior board president signed a renewal contract for five years just a couple of months ago.
He is the only one that signed the contract and it was not discussed during a meeting.
What is a normal/reasonable length of contract for a condo management company?

This person is no longer on our board and the other board members were not aware of this.
We have had issues with the management company and would not have done this.

In reading the contract, it appears it is significantly skewed to the advantage of the management company.
We will have an attorney review this but any ideas in the meantime?
I'll review our bylaws to see if it is addressed whether a contract can be signed outside of a board meeting.

SheliaH (Indiana)
Posts: 6,964

Posted:

Your board has to do what's best for YOUR community. In some cases, a five-year deal may be ok, but others prefer reviewing the contract every two to three years to see if services should be added or dropped. I think every year, the board should do some sort of evaluation of the property manager's performance so you can discuss and resolve problems.

It's bad enough the previous board didn't do this, but for the ones who are still around, not being aware of what the board president was doing is inexcusable. This sounds like a group that just sat there and let the board president make all the decisions, which is totally inappropriate. It should be made clear to everyone this is NOT the way things are done, and it stops right now. In fact, a rebuke of those members in an executive session might be appropriate - and if any of them are officers, they should seriously consider stepping down from those positions. That doesn't mean leave the board - they'd have to resign or be voted out or recalled, which is a whole 'nother conversation.

Does the former president still live in the community? If so, have him/her come to the next board meeting and explain him/herself. I assume you're now holding them via conference call or via something like Zoom to ensure social distancing. Your association attorney should send a letter if he/she blows you off.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

PaulJ6
Posts: 990

Posted:

Well, you can't easily get out of it now unless, perhaps, the management company knew that it wasn't authorized. The management company can generally rely on the signatory's representations that he was approved to sign it.

MarkW18
Posts: 1,290

Posted:

If this were in California, the max contract, unless regulated by the PUC, is one year. Many HOA contracts, be it landscape or management, have auto-new clauses as well as auto-increases.

KerryL1 (California)
Posts: 14,550

Posted:

Say, Paul, if a board's bylaws or other governing documents require a board vote to approve contacts, is this 5-year contract even valid? Is it "voidable?" I have no idea what I'm talking about but maybe you know what I'm trying to say.

On a different note, "signing" a contract is very different than approving it. Our prez may sign contracts, but only after our board approved s them i at a meeting with their votes.

PaulJ6
Posts: 990

Posted:

Quote:

Posted By KerryL1 on 04/16/2020 2:03 PM
Say, Paul, if a board's bylaws or other governing documents require a board vote to approve contacts, is this 5-year contract even valid? Is it "voidable?" I have no idea what I'm talking about but maybe you know what I'm trying to say.

On a different note, "signing" a contract is very different than approving it. Our prez may sign contracts, but only after our board approved s them i at a meeting with their votes.

I don't see how the HOA can get out of the contract unless the management company and the president schemed together to enter into it, knowing that it was unauthorized. When you sign a contract for an entity, the counterparty is permitted to rely on an expectation that the entity has approved it, unless the counterparty knows or should know that it has not been approved.

I would go after the president for this. The HOA could sue the president probably for the funds spent under the contract.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Sue - Sue - Sue!

BillH10 (Texas)
Posts: 1,217

Posted:

Chris

Have you read the contract? Every management contract (and many services contracts, such as for landscaping) I have seen in Texas include a provision which allows either party to terminate with 60 days (or some other period) notice with no penalty and for no reason. I realize this may be unique to this state.

Many service(s) contracts contain provisions for termination for cause. You did not mention the performance of the MC, if this is an issue you may wish to discuss putting the MC on a performance improvement plan with the possibility of contract termination if plan expectations are not met.

Just because the contract is for five years is not necessarily a reason to terminate the contract. What are the provisions which are skewed favorably toward the MC, and by implication unfavorably toward the Association?

Perhaps your first step is to consult with the Association attorney. Are you a member of the Board or a concerned owner?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By BillH10 on 04/17/2020 8:53 AM
Chris

Have you read the contract? Every management contract (and many services contracts, such as for landscaping) I have seen in Texas include a provision which allows either party to terminate with 60 days (or some other period) notice with no penalty and for no reason. I realize this may be unique to this state.

Many service(s) contracts contain provisions for termination for cause. You did not mention the performance of the MC, if this is an issue you may wish to discuss putting the MC on a performance improvement plan with the possibility of contract termination if plan expectations are not met.

Just because the contract is for five years is not necessarily a reason to terminate the contract. What are the provisions which are skewed favorably toward the MC, and by implication unfavorably toward the Association?

Perhaps your first step is to consult with the Association attorney. Are you a member of the Board or a concerned owner?

I agree. Read the contract.

MarkM19 (Texas)
Posts: 1,459

Posted:

Once again Bill has nailed it. Every contract should have a clause for both parties to cancel with the proper notice.

I also came from Ca. where we only had one year contracts. I find it crazy to have long term contracts that cross multiple years when the Board changes nearly every year during elections. Each Board has a right and duty to have vendors they support and believe in working for them. Certainly not a board president that may have died or moved away 4 years ago.

I would get my Board together and discuss that they approach the PMC and say if changes are not made to the length of the contract and the other items that your current board wants the contract will end for cause.

KerryL1 (California)
Posts: 14,550

Posted:

Yes, as others observe, Chris, read the contract and see if there's a way to terminate it.

Our previous prez, who resigned from the Board when her buddies were defeated for reelection last Oct., signed a contact in Feb. '19 for two years for a window washing contract (we're two high rise towers). Many Owners were not happy with the service last fall, but we're stuck with them and there is no "out" clause.

Oh, by the way, the former prez is a retired lawyer, and the previous Board obviously didn't pay attention to the terms when they approved it. They put too much faith in her. This is to say, as a director, never believe what other so-called expert directors advise--they often do NOT know as much as they claim.

MarshallT (New York)
Posts: 414

Posted:

Hi Chris,

Many boards conduct an annual review of the condo management company and make a decision about whether or not they want to stay with that company. Keep in mind that many contracts do renew automatically if no action from the community is taken.

If you need to terminate the contract early, there will be a fee of some sort. Please do review your bylaws, and I'm glad to hear you're planning to consult an attorney as well.

GenoS (Florida)
Posts: 4,276

Posted:

Quote:

Posted By SheliaH on 04/16/2020 9:04 AM
It's bad enough the previous board didn't do this, but for the ones who are still around, not being aware of what the board president was doing is inexcusable.

Absolutely.

ChrisH23, does the contract not have a termination clause? Most contracts between an HOA (or condo) and a service provider contain termination clauses that give either side the right to cancel the contract with 30 days' notice (sometimes 60 days). Were the services obtained put out for competitive bids? If so, FS 720.3055 says,

"A contract with a manager, if made by a competitive bid, may be made for up to 3 years."

I find it hard to believe a professional condo management firm in Florida would enter into a contract without some sort of termination clause.

This is what happens when people are asleep at the switch. The former president and the board of directors did so many things wrong it's hard to list them all. Unfortunately, the company on the other side of the contract is entitled to rely on the president's "apparent authority" to enter into such a contract.

I'd suggest getting a copy of the contract and reading it a few times until you know what it says inside and out. Then get an attorney to advise you on how to get out of it. You'll probably have to pay some sort of early termination fee, as well as the attorney.

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