Faced with a less-than-satisfactory management situation, a condominium or cooperative board may decide not to adapt, but to replace their property manager, or even switch firms completely. According to experts, this practice happens more often than one might suspect. Whether such change is for the better often depends on who you talk to, and even a mostly positive move can produce a certain level of stress and adjustment.
For condo and co-op residents, a board's decision to change property managers or firms will quite literally hit home. If a board has done adequate research before switching management companies, the impact of the change should be positive, even if some adjustments are still required. On the other hand, if a board has done less than satisfactory due diligence, there will almost certainly be unnecessary (and unwelcome) upheaval, as well as possible financial ramifications.
Replacing an individual manager can usually be accomplished without legal implications. Sometimes a newly-elected board may not fit well with their association's current manager, or a manager may retire. Finding a suitable replacement within the same management company should be a routine matter. However, when a board has made the decision to replace a management firm entirely, the process is somewhat more complicated.
Personalities and communication styles will always come into play when a decision to replace a manager or a firm is on the table, and once the decision has been reached to change community association managers or firms, there are several specific steps required for a smooth transition, says Helio De La Torre, a shareholder attorney who practices community association law and construction litigation with the law firm of Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel. P.A. in Coral Gables, which provides services for Dade, Broward and Palm Beach counties. De La Torre is a past president of the CAI Community Associations Institute (CAI)'s Greater Miami Chapter and has been active as chairman of the chapter’s Florida Legislative Action Committee, and says that a board's first step should be a consultation with the building or HOA's legal counsel.
“Consulting your attorney before making management changes is always money well spent,” he says. A board must fully understand what is and is not allowed under their present management contract, and a new contract will have to be reviewed when a replacement management company is selected. De La Torre explains that management contract disputes are a common reason why a board might look to make a change. “Always pay for a review before termination,” he advises. In the past, a “termination without cause” clause was a common item in management contracts, but now many contracts auto-renew annually, and termination is required in writing, and within a specific time frame. “Wrongful termination can result in a lawsuit for all fees and attorney’s fees,” says De La Torre.