Does Your Management Company Work For The Board...Or The Owners?
By Christopher Carter - Real Estate Broker Associate
July 20, 2023
This is one of those questions that initially appears to have a fairly straightforward answer, though becomes much more involved when you start considering how Florida residential Owners Associations really function. In this article, we are discussing the relationship between Owners, Boards, and Managers/Management Companies in both Condominium Owners Associations (COA’s) and Homeowners Associations (HOA’s).
There are over 25,000 COA’s in Florida, and about the same number of HOA’s. I refer to them separately because they are organized and regulated quite differently, and each has its own Chapter in Florida Statutes. Though both are residential Owners Associations with elected Boards of Directors, property owner members, and the ability to hire licensed management.
Property owners in Condo Buildings and HOA Communities always have ongoing questions about their Association's function, politics, and finances. This is especially true with newer owners who may not yet be familiar with the basics of Florida Association governance and operation.
Before starting this discussion, you may want to take a quick look at an article from last week that gives an introduction to the basic relationship between Association Boards and Managers: Association Board or Management Company - Who's The Boss?: www.southfloridasuntimes.com/news - Today's article builds on the points presented in that earlier one.
To over-simplify 2 fundamental concepts of Association governance:
Board members (owners who have been elected to the Association's Board of Directors) have a Fiduciary Duty to always act in the best interest of the entire Association, using their best judgment to promote and protect the operational, administrative, and financial well-being of the Association. The Board functions as the Executive Branch of the Association's "government."
Management Companies and individual Property Managers may be considered as administrative assistants to the Board, hired to help oversee and organize maintenance, record-keeping, communication, and financial accounting for the property and Association.
Boards have decision-making authority when it comes to Association business, while Management Companies / Managers do not.
Management can only act within the limitations of:
• Florida Statutes
• Association Governing Documents
• Instructions from the Board
• in that order!
Board instructions to management cannot conflict with (or violate) Florida Statutes and the Association's Governing Documents.
Florida's Condominium Act (FS Chapter 718) and Homeowner's Association Act (FS Chapter 720) allow both COA’s and HOA’s to contract with Management Companies and/or individual Property Managers to help with the administration, maintenance, communication, and financial accounting for the Association. Management Companies and Managers are paid out of the Association's operating accounts, perform their duties according to the management agreement/contract they signed, and receive their direct guidance and instruction from the Association's Board of Directors.
However - hiring a Management Company or Manager does not relieve the Board of its Fiduciary Duty and responsibility to the Association.
In Florida, any company or individual performing management duties and services to an Owners Association must hold a current Community Association Manager or Community Association Management Firm license from the Department of Business and Professional Regulation.
A Property Manager for a condo building or Association-governed community can work under a couple of different arrangements:
• A licensed Manager and a support/maintenance staff are hired and paid directly by the Association. The COA or HOA is responsible for payroll taxes, benefits, and other costs. In this case, the manager is only responsible for that specific property, usually has an onsite office, is on the property weekdays, "on call" weekends. Some condo buildings (often larger properties) even have a resident manager, with an Association-owned unit made available to the Property Manager as part of her/his compensation package. This arrangement often results in a closer working relationship with, and increased Manager accountability to the Board.
• The Association contracts with a licensed Management Company to provide management services and a designated Property Manager who is employed by the company (not the Association). The Management Company is responsible for the individual manager's payroll taxes, benefits, and other employment costs. Under this arrangement, the company's Property Manager and staff can have offices on larger properties, though only rarely would a company manager be a resident manager. The Management Company is a contracted vendor to the Association.
Under the second arrangement, the assigned Property Manager could be managing just that property, or be a portfolio manager who provides management services to multiple different Associations and properties. Portfolio managers do not usually spend time at any one property every day. They may only be onsite when reviewing maintenance issues or attending Board meetings.
The earlier article on Board / Manager relationships mentioned above explains this further. Here is another link: www.southfloridasuntimes.com/news
Management fees are variable and negotiable depending on the services required by the Association. COA’s and HOA’s with well-informed, efficient Boards who communicate well with owners often require only administrative and accounting services from a Management Company / Property Manager. On the other hand, Associations with unfocused, less-communicative Boards tend to need much more in the way of management services.
In considering this week's headline question, it is important to keep 2 points in mind:
• Management Companies or employee Property Managers are paid with Association operating funds which come from owners' scheduled (usually quarterly) assessments. The management contract is between the company or manager and the COA or HOA's corporation.
• The Board has the authority to enter into a management contract if it feels it is in the best interest of the entire Association. An owner vote is NOT required to engage a Management Company/Manager, negotiate the terms of a management agreement, or change management service providers if the Board sees fit to do so. The Board hires, fires, and instructs Management Companies and Managers based solely on a Board decision, not an Association vote.
Are you beginning to see how this article's headline question may not have an easy answer?
Since Boards have direct input to the Management Company / Property Manager's duties, responsibilities, and even their job security, some companies and managers tend to think of the Board itself as their employer and do whatever is necessary to keep them happy. In my opinion, this can be short-sighted and seriously compromise the company or manager's obligations to the entire Association.
When the line between a Board's function, and the duties of a Management Company / Manager becomes blurred, owners frequently feel confused and frustrated. Most of the frustration is caused by owners not knowing which one has the authority and responsibility to address a particular concern. For clarification, read your Governing Documents and Rules for Residents, then consult a Florida-Licensed attorney for application to specific circumstances.
Spoiler alert - the Board has final authority over the Property Manager, whether she/he is an Association employee or works for a contracted Management Company.
It is important to note here that Managers and Management Companies are not allowed to interpret legal documents or offer an opinion on legal matters affecting the Association. This is why it is crucial for all Associations to have a competent attorney who works well with both the Board and management.
Management Companies and Property Managers find it necessary at times to play "referee" between a Board and owners, especially in Associations where there is already a contentious relationship between some owners and the Board.
In these situations, it is very important for management to maintain a neutral approach and strive to provide the most accurate information available to both the Board and owners in the Association.
So where does all this leave us in addressing whether Management Companies and Managers work for the Board or the Owners? The practical answer is both, though not in the same capacity.
Management has a dual obligation to the Board in efficiently carrying out their lawful instructions AND to the entire Association (all owner members) to always discharge their duties diligently, honestly, in good faith, accurately accounting for all funds, with care and full disclosure.
Management Companies and Managers assist Association Boards in protecting the collective interests of all owners, and therefore the Association as a whole.
As I have said in many previous articles - the keys to living in an Association-governed building or community are education and participation. Learn all you can about how yours operates, then participate in the business of running it.
Editor's Note: Christopher Carter is NOT an attorney. He does not give legal advice. For interpretation and application to specific circumstances of anything you read in this article, you must speak with a Florida-Licensed attorney.
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