New Board to cancel mgmt contract that has 90 without cause clause.Can we do this at the meeting we were just elected?

Started by SmartS • 18 replies • 422 views

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SmartS (Florida)
Posts: 49

Posted:

The old Board signed a management contract effective January 1, 2024 to basically do the Treasurers job. The contact states it can be cancelled with 90 days notice without cause. The former Treasurer told us we are $30K in deficit to our reserves. We were elected at that annual meeting. Our docs then state the newly elected people will have a 1st meeting to choose officers. We started that meeting, elected officers and chose to start the 90 day without cause cancellation period that day.
The President called the mgmt company to cancel. The mgmt company sent an email claiming we need a new meeting with this item specifically noticed to cancel the contract. And it has to be by formal letter not an email.

Our docs do not say that anywhere and neither does the contract. Our thought is the mgmt company just wants the new Board to have to go through hoops and spend money on an attorney to cancel to make our Board look like we are now wasting money.

Anyone ever experience this?

Any thoughts?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You need an attorney to cancel a contract or for advice? You all have a signed contract. Read the terms of the contract on how to cancel. It is all there. Ha to be done in writing.

Plus our HOA had a Treasurer position but used an accounting firm to do the work. The Treasurer may be a figurehead or can get the reports from MC to present. They do not need to act as treasurer if they can not do the job. It is voluntary.

Former HOA President

LoriM15 (Florida)
Posts: 1,009

Posted:

I would say the management company is correct. In Florida, you are required to post the agenda of the meeting 48 hours in advance. Generally, at the annual meeting you have the annual meeting agenda (which is specifically for the members meeting) and then a separate agenda for the new board (organizational meeting). The organizational meeting agenda usually just has the normal items on it (quorum, approval of minutes) and the one new business item which is the election of officers.

In order to vote to give 90 days notice to the management company, you would have to put that on an agenda for the meeting, post 48 hours in advance of the meeting, discuss at the meeting AND allow owner's comments on that agenda item.

If you didn't do that, you are in violation of FS 720 (HOAs) or FS 718 (COAs). You really need to do this at a properly noticed meeting. You could call an emergency meeting, but it still needs to be properly noticed. There are no "executive sessions" in Florida - it has to be done at a real meeting.

By the way, the management company has nothing to do with you being underfunded. That's the board's responsibility to make sure the budget is correct and you are funding everything correctly. They just make recommendations and keep the books, if that's the only function they are doing for you.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Typically BOD's make decisions on contracts. I say the BOD does not need owner approval to implement the 90 day cancellation clause. I also say they need to do such in writing.

KerryL1 (California)
Posts: 14,550

Posted:

Florida is very similar to CA in this regard: Items of business, as Lori writes, must be listed on a posted agenda xx hours ahead of the Board meeting.

So... call another meeting and post this on the agenda 48 hours ahead of the meeting. Re-read Lori's remarks.

Is it the case that all Board members are new, Smart? I'm really curious about why your Board does not know about posting agenda items in advance of board meetings. I thought board members in Fl were required to undergo some kind of training????

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By SmartS on 01/26/2024 8:16 AM
The old Board signed a management contract effective January 1, 2024 to basically do the Treasurers job. The contact states it can be cancelled with 90 days notice without cause. The former Treasurer told us we are $30K in deficit to our reserves. We were elected at that annual meeting. Our docs then state the newly elected people will have a 1st meeting to choose officers. We started that meeting, elected officers and chose to start the 90 day without cause cancellation period that day.
The President called the mgmt company to cancel. The mgmt company sent an email claiming we need a new meeting with this item specifically noticed to cancel the contract. And it has to be by formal letter not an email.

Our docs do not say that anywhere and neither does the contract. Our thought is the mgmt company just wants the new Board to have to go through hoops and spend money on an attorney to cancel to make our Board look like we are now wasting money.

Anyone ever experience this?

Any thoughts?

Yes, you have to send a letter stating the board has decided to end services. If the contractor ends services and does not have a written letter from your HOA, they can be sued by the HOA for breach of contract.

Normally the first meeting to elect officer is only for that purpose. If you are in a state that requires board meetings have an agenda and the owners be notified of the meeting or if your declaration requires the same, the board action was not proper.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By JohnC46 on 01/26/2024 9:53 AM
Typically BOD's make decisions on contracts. I say the BOD does not need owner approval to implement the 90 day cancellation clause. I also say they need to do such in writing.

True, the BOD does not need owner approval. In Florida the BOD does need to hold a properly noticed board meeting to make that decision.

Escaped former treasurer and director of a self managed association.

KerryL1 (California)
Posts: 14,550

Posted:

As a Board meetings, Dean, while it's typical that directors elect officers, there's no reason not to, as our Boards do, also appoint committee members and chairs, set the time/date of monthly board meetings, and do a few other "housekeeping" chores. If there's an item of business that a Board does not want to wait until the next regular meeting, it certainly can be on an organizational meeting's agenda so long as duly noticed per statute.

LoriM15 (Florida)
Posts: 1,009

Posted:

When we terminated our management company last year, our contract required 90 days notice. But the notice had to be in writing to a specific address per the terms of the contract. So it wasn't enough that we voted to terminate the contract, we had to send a termination letter to the local address and the corporate address. Naturally we sent those via certified mail so we had proof of delivery.

I would like to know why the new board at this community decided they didn't need a management company. Was there one before January 1 when the new contract was signed? Or was this association self-managed before that?

If there's this much confusion regarding meetings, agendas and contracts, then they may need to think about getting some help. It sounds like this may be a condo association. With the strict new statutes for condo association reserves and engineering studies, I think this is not the best time to try and be self-managed.

Yes, in Florida all new board members are required to take board member training. If they were just elected they may not understand this.

SheliaH (Indiana)
Posts: 6,964

Posted:

What Lori said. I'm wondering what's prompting the management company dismissal - it's one thing g if there had been performance issues that the previous board discussed with the company, but weren't resolved, but the OP also said the former treasurer said reserves were underfunded - that really concerns me. Is it possible an audit of association finances is in order?

If all of you are new, sign up for those HOA board classes sooner, rather than later. Go ahead and schedule the meeting with the management company as required, and discuss your concerns and a transition plan. Don't know what a transition plan is? There are old conversations on this website that will give you a start, and you can always Google "HOA transition plan", then bring other questions to this conversation (not the old ones).

I don't know what type of relationship you have with the old board, but I think all of you need to sit down and have a few conversations about current HOA issues so you'll have a better idea on what to prioritize and work on right now. Good luck to you.

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

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By KerryL1 on 01/26/2024 1:05 PM
As a Board meetings, Dean, while it's typical that directors elect officers, there's no reason not to, as our Boards do, also appoint committee members and chairs, set the time/date of monthly board meetings, and do a few other "housekeeping" chores. If there's an item of business that a Board does not want to wait until the next regular meeting, it certainly can be on an organizational meeting's agenda so long as duly noticed per statute.

In your state , I believe a board meeting without posting an addenda and giving notice is illegal. That includes house keeping.

TimB4 (Tennessee)
Posts: 21,059

Posted:

As some have said, Jump through the hoops and move on.

SmartS (Florida)
Posts: 49

Posted:

Is there any specific part of 720 that deals with Emergency meeting? Because our docs just allow the board to call Emergency meeting and have all Board members waive the time requirement. This would suggest a Board meeting could be held in an hour if necessary. TYVM

SmartS (Florida)
Posts: 49

Posted:

small 12 home community which started in 1990's and I guess never had anyone complain about how they were running it.
3 of the new Board this is their first time on this Board.
1 was on Board since 1990's, stepped down when they hired a mgmt co. Now back on.
1 was on and off the Board since 2005.

Didn't see anything in the docs about needing a meeting to enter or cancel a contract. Just the Board takes care of all functions of the community.

SmartS (Florida)
Posts: 49

Posted:

Thank you and love your title!

SmartS (Florida)
Posts: 49

Posted:

LoriM15

I would like to know why the new board at this community decided they didn't need a management company. Was there one before January 1 when the new contract was signed? Or was this association self-managed before that?

If there's this much confusion regarding meetings, agendas and contracts, then they may need to think about getting some help. It sounds like this may be a condo association. With the strict new statutes for condo association reserves and engineering studies, I think this is not the best time to try and be self-managed.

Answer

We are a small 12 home community which started in 1990's. I guess they never had anyone complain about how they were running it. (last Board hired the mgmt co even though during that Pres tenure 2020 - 2023 spent all the reserves and then some) Our community is 1 street and ends in a culdesac. For awhile 7 8 owners were full time, now only 3 owners are here full time. So never saw the need for a mgmt co.
3 of the new Board this is their first time on this Board.
1 was on Board since 1990's, stepped down when they hired a mgmt co. Now back on.
1 was on and off the Board since 2005.

Didn't see anything in the docs about needing a meeting to enter or cancel a contract. Just the Board takes care of all functions of the community.

Read the contract and it said only if there is a dispute they could ask for a copy of the Board minutes. Other than that it just said to notify them by mail or drop off. However all of you may want to look at the case below about being able to send an email and as long as they confirm they received it, it should count for the Notice requirement. Notice requirements are not viewed as being strict, just that the person got notice.

However, did send the Mgmt company written Notice of cancellation via email to start the clock if they do not produce anything to say they won't cancel and want to sue. Sent them the Board minutes they requested. Also called them and requested a phone call for 2 way communication for putting together an exit plan. Let's see.

KerryL1 (California)
Posts: 14,550

Posted:

Oh, yes, of course, Dean; the agenda for the Organizational Meeting in my HOA is posted 4 days ahead of the meeting as required in CA.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

our stupid management contract requires any cancellation be 90 days ahead of time and that is be mailed overnight certified mail to an out of state address. I knew this company wouldn't last more than a year and already got thousands of dollars in concessions so didn't want to complaint about one more dumb contract clause.

vis ta vie

LoriM15 (Florida)
Posts: 1,009

Posted:

No. There are no provisions that allow you to waive the 48 hour notice of a meeting. Even if there were, cancellation of a contract is not an emergency.

It doesn’t matter if you are a small association or a large one. The same statutes apply to all. I would suggest you take your board education class ASAP because things have changed a lot since you last served on a board.

Also, if the contract requires written notice, sending an email does not start the process. They are going to count the 90 days from the time the letter was postmarked or received.

While you are still paying your management company, see if they offer any kind of board education. Most of them do.

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