Preparing for Success

What Associations and Management Companies Should Consider When Contemplating Doing Business With Each Other

By Joseph Arena / Published May 2022

Hiring a property management company is one of the most important decisions a community association can make. In turn, taking on a new community association client has significant implications for a property management company. A bad fit can be problematic for all involved. Understanding what each party expects and offers at the outset will give the parties the best chance to have a lasting and mutually beneficial relationship. 

     As background, community associations should be aware that community association managers (CAMs) are professionals who are regulated by Part VIII of Chapter 468, Fla. Stat., and that management contracts applicable to condominium associations must contain certain requirements set forth within Fla. Stat. §718.3025. Although contracts for the services of community association managers are exempt from statutory bidding requirements, associations are nevertheless recommended to interview several property management companies before selecting one, and management companies should be prepared to speak to their experience and qualifications when they are being interviewed as well as provide references.         

     Critical to these initial discussions is what personnel and services are necessary to meet an association’s needs, whether a portfolio or a dedicated property manager would be suitable, what staffing and services are desired, and how the property manager will be expected to make himself or herself available to an association’s board members and residents. Associations looking to engage a property management company should be clear about whether their focus is mainly on ministerial services such as recordkeeping, bookkeeping, community mailings, and annual corporate filings, or is instead on obtaining advice and guidance from the management company as well as being connected by management to other professionals such as contractors, vendors, attorneys, accountants, insurance agents, etc. Additionally, the parties should be mutually mindful that recently enacted statutes require notice and homeowner consent before changing the method of delivery of assessment invoices—making such changes something that may no longer be done at the discretion of the association’s board of directors and bookkeeping agent.     

     As a best practice coinciding with taking on an association client, property managers should take the time to read and familiarize themselves with the association’s governing documents as well as the forms and policies used by the association in its administration. Strategic planning discussions between individual association officers and the association’s property manager should be scheduled to occur regularly, and the parties’ management agreement should contain terms addressing when the association’s board members will be supplied with financial reports, progress reports, updates, and summaries of activities/services. Frequently, an association’s property management company will oversee the maintenance of official records, the taking of meeting notes, the preparation of meeting minutes, the preparation of the initial draft of the annual budget, the preparation of estoppel certificates, the initial processing of submitted tenant and purchaser application forms, the initial processing of submitted architectural application forms, the preparation of vendor invoices for payment, and the depositing of assessment revenues into the association’s bank accounts. 

     Early on in a relationship between a community association and its property management company, it is important for the parties to discuss and reach a practical understanding as to how, how often, and by what methods the association’s board of directors and the property manager are to communicate with each other. Additionally, the association’s board should be prepared to articulate its expectations concerning how management should communicate with and respond to community residents. This subject can be a source of dissatisfaction for either party if its expectations of the other are not being met. It is also important that the fees charged by an association’s property management comp-any, as well as periodic fee increases, are predictable and easy to understand. Lastly, protocol should be established so that members of an association’s board are made aware of how they may monitor checks and banking transactions affecting the association’s accounts.       

     However, notwithstanding the observance of all the foregoing, there are occasions when problems arise and relationships between associations and property management companies do not work out. It is recommended that board members be informed as to who they should contact at the management company if they experience problems with their assigned property manager. Somewhat similarly, it is often appropriate for an association’s board of directors to assign one or two association officers to act as liaisons with the property manager to prevent him or her (or other management personnel) from being bombarded with communications from the association’s full board. 

     Additionally, it is critical that the applicable management contract provide that either party may terminate the agreement with 30- to 60-days’ written notice at any time, with or without cause. Naturally, associations will want to ensure that the contract provides further that upon such termination, the association’s property, records, documents, and website data will be made available to enable a transition to a successor property management company or to self-management. Similarly, community association managers, whose licenses can be at risk based upon the acts of the community associations that they manage, will want to ensure that they can quickly separate themselves from associations whose boards are dysfunctional or whose board members are willfully violating the law.    

     In conclusion, the market for community association management is vast, and potential association clients are as varied as the kinds of communities that exist in our state. However, not every company and association are good matches for each other, and associations and property management companies are cautioned to do their due diligence to avoid mismatched expectations. Both community associations and property management companies are, after all, principally businesses, and both should be operated with forethought given to how to identify and form lasting and beneficial business relationships.

Joseph Arena

Attorney, Becker

     Joseph Arena is Florida Bar board certified in condominium and planned development law and focuses his practice exclusively on the representation of condominium associations and homeowners associations in transactional, operational, corporate, and litigation matters. Mr. Arena is responsible for interpreting and amending governing documents, providing legal opinions on operational and corporate matters, assisting with board member elections, recalls, and related arbitrations, and drafting contracts and contract addenda. His experience also includes pursuing appropriate legal action to address violations of restrictive covenants and association rules, supervising the collection of assessments, prosecuting assessment lien foreclosure actions, defending mortgage foreclosure actions, prosecuting and defending quiet title actions, and representing associations as creditors’ counsel in bankruptcies. For more information, visit beckerlawyers.com.