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June 2012 – Those duties will be performed by management. One writer says his HOA has written emails to the management company about the lack of performance, and the emails have gone unanswered.

What’s your remedy when your manager fails to perform? Can you withhold management pay until the duties are performed? Can you terminate?

Start with Direct Talk

If you’re frustrated with your HOA manager, the first thing to remember is that your manager must do what’s promised in the contract. “The management company can’t refuse to perform what’s obligated by the contract unless the board is asking the manager to perform something unethical or illegal,” says Gordon Goetz, president and CEO of Goetz Manderley, a community association management company based in Santa Maria, Calif., that manages 210 associations totaling 17,000 homes in California’s San Louis Obispo, Santa Barbara, and Kern counties.

Also remember that in most cases, you’ve hired a management company, not a manager. “Boards need to understand that the contract is between the management company and the association, not the manager,” adds Goetz. “They need to take that refusal to the manager’s supervisor or the company’s principal and discuss what that manager is doing and not doing for the association. The board is fully within its rights to request another representative. Then it’s up to the management company to take action with the individual manager.”

Duane McPherson, Carrollton, Texas–based division president at RealManage, an association management firm that oversees properties in Arizona, California, Colorado, Florida, Louisiana, Nevada, and Texas, also suggests direct talks up the chain of command as necessary. “Typically, the first step is to talk to the manager directly and say, ‘Hey, you’re not doing this. Why not? We need it done,'” he explains. “The manager will either agree or not agree to do it. If the manager doesn’t agree or follow through, the next step is to talk to the manager’s supervisor if there is one, though some smaller companies don’t have that.”

It is, indeed, a dilemma, if the management company you’ve hired is essentially a one–man band. Goetz says that’s food for thought any time you hire a management company. “I always stress the fact that we have multiple employees and levels of management within the company,” he says, “and boards have access to any one of them.”

Whatever the size of a management company, direct contact is much more effective than an email complaint, adds Jeff Vinzani, a partner at the Duggan Vinzani law firm in Charleston, S.C., who represents associations. “To me, writing emails citing a lack of performance means these boards either like what the manager’s doing and are just complaining, or they don’t want to put the manager into default because they like most of what the manager’s doing,” he explains.

“So these boards need to determine if they like the company and just want to have a meeting to tell them they’re falling down on the job, or is it enough dissatisfaction that the board should send the company notice of default,” Vinzani adds. “That doesn’t always mean the contract is over. But it puts the management company on notice, and the company might reallocate its resources to better meet the HOA’s needs.”

You may learn your management company is just as frustrated as you, and it might gladly agree to walk away from your contract. “I’ve seen things go south between a management company and an HOA and seen the management company withdraw and terminate its contract,” says Michael S. Hunter, an attorney and partner at Horack Talley in Charlotte, N.C. “The management company just couldn’t deal with board, or the board was asking them to do something illegal or immoral or something that just didn’t sit quite well with the management company.”

When Talks Won’t Work

When you’ve attempted to talk out the problem and there’s been no resolution, it’s time to review your contract to determine your remedies. “Look at the remedies and default provisions spelled out in the contract,” says Vinzani. “I wouldn’t withhold payment unless the contract allows you do that. You can terminate the contract if it’s risen to that level in the contract, but you have to determine the terms of default and how to provide notice of default.”

“If the management company isn’t fulfilling the terms of their contract, most states have laws saying that you can terminate the contract,” agrees Hunter. “Most management contracts say what’s required for termination, including how much notice you have to give. Some say you can terminate only with cause. Some say you have to give the management company 30 days to cure. It really comes down to what your contract says.”

Be sure to follow the terms of your contract to the letter. “Most contracts require you to notify the management company and give it an opportunity to cure whatever it’s doing wrong,” explains Jed L. Frankel, a partner at Eisinger, Brown, Lewis, Frankel & Chaiet PA in Hollywood, Fla., who advises community associations. “Maybe the manager is supposed to be in the office at a certain time and she’s not, and she’s leaving an hour early. That would be something you need to give notice of and permit the company to cure. But there may be some things—like if the manager assaults a unit owner—that’s so egregious that it can’t be cured. That perhaps would justify immediate termination of the contract.”

“If the contract is clear cut, it’ll say something like 30 days notice of termination is permitted with or without cause, which we have in our contract,” says Goetz. “If termination is with cause only, I’d suggest the board get with its legal counsel. You’d hate to terminate the contract improperly, have your ex–management company sue you for nonperformance, and end up being forced to pay the rest of that year’s fees.”

One last point: Be sure you don’t walk into trouble because you’re itching to get rid of a problem quickly. “Resolving an issue like this can take a bit of time,” says McPherson, “and the agreement is the key.”

HOA Leader

Matt Humphrey is president of the Alameda, California-based HOAleader.com, from which this article was adapted.

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