Changing Management Companies

Quick question - is there an SOP for executing this? I am aware of procedures for RFP, selection, award, etc - my concern is the "boots on the ground" actions needed to move from one to another. Also keep in mind that the developer board here allowed the MC to sign checks, so if I have another company coming in, or have two MC's for one month during transition, one will be paying the other.

Did not create the mess, just the poor guy behind the elephants at the circus with a very small broom....

Jadedone4: It sounds as though the MC you have NOW is the one the developer had under contract. Important questions to consider:
- Has transition from developer occurred?
- If so, did the resident-Board sign a new contract with the existing MC?
- You need to review the contracted time period to learn WHEN you can transition to another company

In answer to your last statement about one MC paying another, I strongly disagree. I encourage you to NOT continue the procedure of an MC having authority to sign Association checks, whether its the 'old' MC or a 'new' MC.
Nix, nada, none!!! There is absolutely no reason for an MC to be writing checks against invoices received on the Association's behalf. I would encourage you to review the 'controls' in place for incoming invoices, their approval, and payment of same. It is not the Manager's responsibility. It is the Board's, and as such, it is the Board who should be signing checks and in touch with what invoices/expenses are being incurred at any given time.

You will be able to set up a new signature card with your bank to include 2 Board member signatures as having check signature authority. Either signature will be valid when a check is to be signed. With this, the old signature card with the MCs signature will be null and void.

Regarding transition from one company to a new management company. Hopefully you are dealing with reputable companies who should have no problem in rendering all necessary association documents to the new company. You might want to make a checklist to ensure that your assn. has everything in hand prior to making the last MC payment with cancellation of the contract.

There are many prior posts regarding payment approval process and whether an MC should have check authority. You might want to review them to assist you with the changes in going forward.

GlenL - All in that order? Some things I'd attempt to resolve, or resolve before others. Example: #1 Keep existing bank accounts and change signatory to Board member(s)/Treasurer/Pres., #2 Receive, analyze, and organize HOA files from previous management company. This before providing notice of termination. #3 Collect all outstanding assessments. In other words, I'd get key ducks in a row before notifying everyone under the sun so to speak. : )

Just to have something else to think about, have you considered having one company that is a management of property only company and another that does the financial stuff? There are probably times when the finances are ok but you just can't get the management of the property under control. If you don't have to switch both areas at the same time, your financial continuity still holds. Things like bank sure-pay from homeowners doesn't break, signatory cards aren't an issue and money is well accounted for. This isn't done very often but I am starting to think it is a good idea. After going through 3 management companies in 3 years it appears we have spent a lot of money just to change over the financial part when that wasn't the issue.

Just a thought.

JC3: I will attempt to answer your last question first. A management company is under contract with the Exec. Board (signed between these 2 parties) on behalf of the Community Association. The management company/P.M. are answerable to the Exec. Board in the duties they assume. But, they only assume the duties the Board allows them to assume, and the (mgmt.co.) cost is generally based on the duties and the amount of time the duties entail multiplied by number of units. However, the mgmt. company is never to step over the line of what the Board contracts with them.

Based on the Board's expectations and contract, the Mgmt. Company is there to advise, to encourage, and to support, to share their experiences in managing an association. They can also be contracted to 'do' those things that are somewhat distasteful to the Board: resolving violations, collecting assessments, preparing financial reports, reconciling bank balances, mailing late payment notices, etc. However, even with these duties, they are duties the Board gives the PM authority to handle. For PM responsibilities, check out Roger's list on this site under the search bar.

Now to the finances. You don't need to 'tell' the MC anything regarding changing the bank signature cards. I would suggest 2-Board members go to the bank of choice, complete the bank signature card w/2-signatures with either being valid to sign Association checks. Explain to the bank you are switching your association business. The bank should provide you with checks at n/c.

Once the signature cards are processed, notify the MC that effective (date) they (MC & employees) will no longer have authority to sign checks for the Association. Signed checks will now be handled by the Executive Board.
IF the MC/employees represent a reputable and professional company, the change in their authority of check signing should not interfere with their ability to continue to function as MC for the Association w/other responsibilities as contracted.

Have you actually contracted with another company? It seems that you have been interviewing for quite some time by now. When is the MC transition and have you adhered to the present contract regarding giving them notice?

Well, uuh, yes, that's right. But when one recalcitrant obstructive bm totally supports the mc, and certain other conditions exist, stopping/correcting/removing the mc is impossible, so it waits for a board away from the situation to correct the situation, which is the position we're in now. And we're making progress.



Yes but. ;-) The bank our money is in is not a local co, and we would change to a local co.


Haven't given notice yet, hope to do so after the next meeting. Haven't sontracted with another co yet, either.

Though a bond for association signors is not required, it is a good idea and that should be purchased. How is that done? By a phone call to the insurance company?

Don't overlook or immediately toss electronic banking. A number of banks now offer the ability for board members to log-in and approve electronic payments, negating the need and cost for someone to travel for checks to be signed. This would accomplish moving control to the board, but not add cost.

Next, ask your future, or potentially future company for their transition checklist. I saw a couple a few weeks ago (unfortunately I can't send a copy because of contractual limitations), but they ran 8-10 pages and 200-300 items. But here's an edited version:

Current property owner and resident list
Property files
Articles of Jncorporation, CC&R'a, Bylaws
Rules, Regulations, Resolutions
Corporate seal
Site plans, maps
Architectural Control Rules (ARC), guidelines - if separate from CC&R's
All past and pending ARC submissions
All past and pending violation letters
All association correspondence and replies, including e-mail
All current contracts
A current list of vendors and maintenance contractors, including contact names, addresses & phone numbers
Copies of all minutes and meeting files
Copies of all work orders completed and in process (completed work orders may be in owner's files above)
Originals of all warranties, permits or other documents received from the developer
All legal files and correspondence
All management reports
All audits and tax returns
Current budget
Current financial statement
Association Federal Tax ID
Listing of all utility companies and account numbers, meter numbers
All orignial ACH (auto debit) Authorization Form
Delinquency list and status
A/P history for current year (needed for 1099's)
Bank deposit slips
Bank signature cards
Check registers/stubs/cancelled checks
Paid invoices
Open invoices
Bank statements - operating and reserve
Bank reconciliations - operating and reserve
Investments, CD's, passbooks
Any payroll reports
General Ledger with journal entries
Tax files/coupon book
Reserve study (if done)

There were a lot more, but I at least tried to cover the major headers. Hope this helps.

Joe