PMC's duties to homeowners

I am having a discussion with another homeowner, who insists if a board were doing something not allowed by statute or by governing documents, such as not holding an election or failing to acquire required insurance, the PMC would almost certainly communicate this fact to the association's membership directly. He feels they would be obligated to do so in order to avoid their own liability.

Nothing specific in mind, but I am curious if that is true? It does not seem consistent with behavior that I have seen.

No, a PMC would not inform membership directly if a Board was failing to conduct a required action. That is on the Board.

However, a (good) PMC also would not carry out a decision that it knew was illegal even if the Board requested it. Our management contract with our PMC states that a neutral attorney must be consulted, at association expense, if the Board insists on the PMC doing a task that the PMC believes not to be legal.

As good PMC would fire a BOD asking them to do improper/illegal things.

Of course not. But I am often surprised. The early thread about Nominating Committees with 100% control over who can run for the board really caught me by surprise.

Of course not. But I am often surprised. The early thread about Nominating Committees with 100% control over who can run for the board really caught me by surprise.

My reasoning is same as mentioned above. The PMC had a fiduciary duty to the Association, not it’s members. If they advise the board that they believe the board is not consistent with the governing documents, or with a specific law, they would have fulfilled their duty. Further, the PMC reports to the Board. Bypassing the board to potentially spur lawsuits would almost certainly be outside of their contract, and potentially be a failure to fulfill their fiduciary duty to the association.

I agree with John. The property manager is a contracted vendor of the HOA association with highly tactical roles and responsibilities as opposed to engaging (too heavily) on trying to persuade its client HOA Board on ethics matters. Yes, a wayward board would be addressed in some fashion but a PM has no options if a board hears the violation and wantonly chooses to ignore it.

A quality Property Management Company would likely not renew a contract in the event of a disrespectful board of directors. A contract breach is too tricky when non-renewal can happen without explanation to the HOA Board (and the PM will never tell board leaders that it's their behavior that spurs the loss of service).

our PMC have illegally directed the board for the last 25+ years to not hold annual elections.
Our bylays state that the initial 3 director terms will be staggered by 1 year and that they have 3 year terms, so basic math means election for one board member every year.

instead they know that's a pain in the butt for them to manage so they just have elections every 3 years, but quorum is never met so their nominating committee just nominates the same insiders club over and over.

so no PMC's dont' always follow by laws unless they are to thier benefit. pretty much how the rest of the world spins, the law of self interest.

But would you go around the board and send notice to all of the homeowners that the board, say, had not procured required insurance?

If owners have not even tried to make sure the annual elections happen, then the blame falls squarely on the owners' shoulders.

Legislators wrote the NC nonprofit corporation statute and HOA/COA statute precisely to help ensure owners have rights. If your HOA/COA's owners do not want to exercise these rights, this is on them.

I agree.

I have no idea what I would do. I have no idea what a quality PMC would do. That’s why I am asking this question.

From the cheap seats:

A PMC is in an unenviable position.

On the one hand, the board calls the shots, and a manager has no authority to undermine that. We've heard plenty of tales of managers not staying in their lanes and taking on the decision-making authority of the board. A competent board would recognize this as a problem since the directors are the ones held accountable for what happens on their watch. If I were on such a board, I would try to have a Come to Jesus meeting with the manager to remind them of the limits of their position, and if the manager wouldn't comply I would view that as grounds for terminating their contact.

But that's with a competent board. A PMC also has a duty to comply with the law and behave ethically and professionally. A board that is misbehaving makes it impossible to both stick to the limits of their authority and to behave professionally. If I were a manager in such a situation, I'd try to have a Come to Jesus meeting with the board to see if I could get them back into their lane. If the meeting was not successful, then if details of the misbehavior are bad enough, I would have to terminate my contract with the association.

Would I send a letter to the homeowners? No. A PMC's duty to the association ends with the terminated contract. And undermining a lawfully elected board of an association is likely a violation of my professional ethics. Also keep in mind that the homeowners are not innocent bystanders here. If they elected the board and are not paying attention to what's going on, then that's on them.

That said, if the board's wrongdoing is serious enough - eg. embezzlement or other criminal behavior - I would try to figure out a way to get the news out. I also think that I have a duty to my colleagues at other management companies so that they don't walk blind into the same mess.

So for me, the situation isn't black and white. Depending on the details, sometimes morality trumps professional norms, and sometimes it's vice versa. When you work for your living, there are going to be times when you'll be expected to do something that doesn't live up to your personal view of how things should go. Sometimes you hold your nose and get over yourself, other times you decide that you can't square it with your conscience and you quit. If you *really* can't square it with your conscience, you may have to lawyer up and blow the whistle.

I was in the same position that Barbara faced. I resigned rather than knowingly do the wrong thing. Owning your own company makes it much easier to handle these situations in the proper manner.

You'd have been welcomed with open arms at our previous PM's company. The owner formed the company as a response to the mediocre companies in my area, and they pride themselves on providing excellent service. They have a waiting list of associations wanting to become clients, so there are some folks out there who value quality and professionalism. The builder I work for also uses this company for the majority of their new communities - sometimes ethical behavior does pay.