Q&A: What Are the Ramifications of a Management Takeover?

Q. I am a unit owner in a condominium association containing 189 units. We manage ourselves and wouldn’t ever want to have a management company manage our property. However, the question has often  been asked as to what happens when a management company takes over. Obviously, the care and upkeep is taken care of by management. What happens to the association articles and bylaws? Does the management company have authority over those? Can it now change the monthly assessment fee without the consent of the association members? In other words, what are the legal ramifications of being professionally managed?

       —Self-Managed in South Florida

A. “The responsibilities of a management company (and the manager, if one is assigned to the association) should be governed by a contract between the management company and the association,” says attorney Alessandra Stivelman of the Hollywood, Florida-based law firm of Eisinger, Brown, Lewis, Frankel & Chaiet.  “In Florida, there is a statute that governs management contracts for condominium associations. Among other matters, the statute requires that the contract is in writing and contain specifications regarding the services, obligations and responsibilities of the parties to the contract.

 “Since the management company will be an agent of the association, the board of directors should determine the manager’s responsibilities in writing.  Furthermore, the contract with the management company should contain a strong indemnification/hold harmless provision and insurance requirements to protect the association. The management company should follow the instructions of the association’s Board of Directors, subject to the limitations in the contract.

 “While a management company should work with the association’s board members to effectively and uniformly enforce the association’s governing documents, the management company does not have the unilateral authority to modify or amend the governing documents. Generally, governing documents, such as the association’s Declaration of Condominium and Bylaws, can only be amended by the approval of a certain percentage of unit owners (as specifically required in the governing documents, and if no procedure is contained in the governing documents, as provided for by applicable state statute).

 “As far as monthly assessment fees, those are generally based on the association’s budget, which should be adopted by the association’s Board of Directors. As such, the management company would not have the authority to modify the Association’s budget. The manager can certainly suggest changes to be considered by the board members and if approved by the board, a revised budget needs to be voted upon and approved as required by applicable state statute.

 “A management company is an important aspect of the daily operation of an association. Since management contracts sometimes provide for more than a one year term (with automatic renewal provisions) and liquidated damages in the event of early termination, we always recommend that an association consult with legal counsel before hiring a management company.      

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