QUESTION: Our new board directors recently terminated the old management company. As treasurer, I cautioned other directors that this time we need to be more careful in hiring a replacement. We received 13 proposals and took our time, over a month, thoroughly interviewing each company and their on-site managers.
The board, which includes a number of successful business owners, voted for a local company and then signed its contract. We did not seek legal counsel because it’s a straightforward, east-to-read contract, so why waste money? But we soon experienced discrepancies between the promises made during interviews and the service and pricing provided.
I reminded the manager about what she and her boss said during the interview and that I intended to hold them to their promises. Her response was that “this is a fully integrated contract and you signed it.”
What did she mean by that? Do we have legal recourse here? Can we enforce those promises, or at least get out of the contract without being sued?
ANSWER: Apparently your directors checked their business acumen at the door along with their common sense. Contractual agreements, including management contracts, are a complicated area of law.
Listening to 13, or even 300, companies’ sales pitches is not due diligence, nor is deluding yourselves that you are competent to review a “simple to read” contract. An association’s management contract is by far its most critical contractual arrangement because it reaches into every aspect of HOA operations, short and long term. And never forget it was written by the management company’s attorney in a light most favorable to management.
It’s hard to understand why the board didn’t do any independent research, at least on the company it intended to choose. Directors could have visited properties the company manages, and talked to owners and board directors. It also is often revealing to check court records to see…