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EVALUATE THE MANAGEMENT FIRM BEFORE YOU HIRE THE
FIRM!
By
Jan Bergemann
Published
October 12, 2012
My
two fellow bloggers described how to evaluate the manager
already under contract in order to decide whether or not to
renew the contract. That surely is important once you are
dealing with a management firm.
In
my opinion that is often much too late, because many problems
could have been avoided, if the board members had done their
homework and checked out the firm before signing the contract.
Here
is a list of red flags that should serve as a warning when
checking out a new management firm:
v
Make sure that the
association money stays at a local bank. More and more
management companies work with banks outside the state.
v
Make sure that no
money can be moved by the management company without the
signature of minimum one authorized board member – if you even
want to consider giving the management company signature rights.
v
Make sure that the
company you hire is only a licensed community association
management company, not an umbrella company with many other
service providers working under different names.
v
Make sure that the
management firm has employees with serious accounting
experience, not just a simple
CAM
license.
v
Make sure the
contract states all costs including monthly fees, without lots
of “extras” listed in small print on the subsequent pages.
v
Make sure that the
management firm doesn’t have the right to contact the
association attorney without prior approval by the board.
v
Make sure there
isn’t a “hidden” provision in the contract that forces the
association to pay for the legal defense of the
CAM
if somebody files a complaint. It can get really expensive, as
we have seen in many cases.
v
Make sure that the
board approves any past due account before it goes to
collection.
v
Make sure you
check the references and talk with owners – not necessarily
board members – in the communities the manager lists as
references.
There
is a lot more that board members should do before signing on the
dotted line. And since DBPR CAM Regulation is now “hiding”
complaints filed against managers – formerly the DBPR website
was always a good source to check out CAMs – you might want to
GOOGLE the name of the manager/firm. Believe me, you find
interesting articles in most cases. Always remember: Where there
is smoke, there is fire!
Many
CAM
contracts are tricky! Considering the fact that you may find the
monthly fee listed on the first page, you think you have the
facts. With many contracts that’s not the case, because on
subsequent pages you will find “extra charges” – for all
kinds of things. And that can add up quickly. Many firms charge,
for example, for writing “violation” letters, written
without prior approval of the board. I have seen cases where the
extra charges were a lot higher than the basic monthly fee.
Other
CAM
firms lure boards with very low bids, asking for very low basic
monthly fees. These are often firms that will later try to steer
boards to sign contracts with affiliated service
providers/contractors that are part of their corporation, even
if they list different names. Beware of that “trick”!
Most
of all: Watch your association money. Make sure your money is in
a local bank, meaning a bank where board members have access to
it and are able to make changes. It’s not so much about
possible embezzlement – even if we have seen quite a lot of
such cases – it’s about a management company taking its own
pay from the account, often before the board even sees the
monthly bill. And we have seen quite a lot of cases where
management companies helped themselves to money from the account
after their contract was terminated. The “final” bill was
just outrageous – and was deducted from the association
account before even mailing the final bill to the association.
Never
forget: The name MANAGEMENT says it all. A management company
should help with the actual tasks, as directed by the board. A
manager should help to steer boards in the right direction, but
not “run” the show. Managers are just that: Managers who
work under the direction and supervision of the board. Board
members should never forget that!
If
you evaluate a management company before you hire the company,
you may save your association a lot of headaches – or worse.
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