Sunday, February 26, 2017

Breaking up is hard to do: PART I- How to Navigate Management Company Transitions

Hopefully, most of us enter into relationships with the expectation that they will last. However, for those of us past adolescence, we realize that even long-term relationships can end and, even when they were good for a long time, the manner in which they do can overshadow everything that preceded that ending.

In the next few posts in this Breaking Up blog series, I will discuss the various transitions a board can face including transitions from the developer, from former counsel and from a long-standing predecessor board.

In the context of a community's relationship with professional management, the stakes can often be quite high.  More and more volunteer boards have come to rely upon professional management to undertake the daily operation and administration of their communities. For some boards, this reliance is reasonable and a balance is struck between the directors' responsibilities and that of their licensed manager. However, for a growing number of communities, the professional manager has supplanted the board with the staff, contract vendors and professionals, and, in extreme cases, even with the members. What these boards may not realize, is that the ultimate responsibility and accountability will legally and stubbornly cling to them regardless of their efforts to transfer much of the operational control to management. As such, it is time for boards to become more proactive about how a relationship with a professional advisor might end and what can be done before that happens to insert some clarity into that process.  Otherwise, the transition can be difficult and even damaging to the community.

One of the first and most obvious steps a board can take is to ensure that its management agreement is properly reviewed by legal counsel prior to signing.  If your board would like the ability to terminate, with or without cause, at any time throughout the term of the contract, then the contract must provide the association with that right. If your Board would like to have the ability to control the handling of association funds and records, then that must be spelled out as well. The time to discuss what you want the relationship to be and how its ending should be handled, naturally, is before you sign on the line.

Equally important, the board must retain a copy of the executed management contract. Many boards are dismayed to learn that they have not retained possession of a copy of their management agreement, which can be problematic if problems surface and they must ask the management company to provide that agreement to them or to their attorney. Most large management companies these days provide an impressive array of services which can include all aspects of the financial operations for the community, in addition to the infrastructure maintenance, insurance procurement, collection of delinquent accounts and interaction with vendors and professionals. Most large management companies also offer technology which can streamline operations and make them more effective by taking advantage of available technology.  However, when it comes to receiving copies of all those digitized records at the end of a relationship, some companies are better than others at achieving a graceful departure and some refuse to deliver the records altogether and assert that those records belong to the management company, not the association for whom the records were created.

Florida law requires management companies to turn over the association's records at the end of the relationship, even if a monetary dispute exists.  It might be tempting to use the leverage of those records and the crippling effect their absence will create for the community and the new manager or company coming on board, but it is in the manager's or management company's best interests to resist that urge. As with most things in the community association arena, what goes around comes around and new boards often bring back the management company which their predecessors ousted; that is unless a less than gracious departure left a sour impression.

As for the board's responsibilities in this process, it is analogous to a marriage. A fine-tuned prenuptial agreement can prevent a lot of unnecessary pain down the road and, if you were the partner who did not handle any of your personal finances, it helps to learn how to write a check and fast. Boards need to ensure that a management company transition does not place the association's operations in jeopardy.  While a perfect management company fit can last for decades and be mutually beneficial for both parties, it is important for boards to at least consider the possible end of the relationship at the time they are entering into each new contract.

Monday, February 6, 2017

Attention Boards: your two favorite menaces have combined: Airbnb and Pets!

Whether I am giving a presentation to hundreds of people, teaching a class to dozens of managers or meeting privately with a board of directors, the two issues that have come up without fail over the last few months are: Airbnb and Emotional Support Animals (ESAs) and other pet issues.

The questions I field on these topics usually sound like this:

"Our community is turning into a hotel. We have people coming and going at all hours and we have no idea who they are and, in addition to our security concerns, our recreational amenities are taking a beating."

"We are a no pet community but we have people bringing in more dogs each year and claiming they are emotional support animals. What about the people who bought here specifically because they do not want to or cannot live in close contact with dogs?

As a result of having recently rescued a dog from our local Humane Society, I have been searching for ideas to keep her from tearing down the house during working hours when she is alone. Lo and behold I cam across a site which advertised itself as "Airbnb for Dogs"! Oy. For a fee you can drop off your pet at a sitter's home but just imagine if that home happens to be inside a pet-restricted condominium or HOA? You get the best (or worst depending on one's perspective) of both violations!

With regard to Airbnb, VRBO, HomeAway and other similar sites, the ability to control your owners' engagement in this type of short-term rental activity depends largely on the provisions in your association's governing documents. If you were hoping your local government would help regulate this activity you should know that Airbnb is making that much more difficult by pursuing legislation which would restrict or prohibit a local government's ability to impact their business model which means your association is likely to be on its own when trying to regulate this behavior.  Attempting to pursue each violation as a violation of your minimum leasing requirements can be both costly and laborious given that each renal lasts only mere days. In my opinion, it is more effective to amend your documents to make the listing of properties in your community on these sites the violation rather than focusing on the rental term.

"But how can we tell if we have properties in our community listed on these sites before the guests show up?" you might ask.  Wherever there is a problem, a cottage industry designed to solve it cannot be far behind and the same is true here. There are now companies that exist which search these short-term rental sites each month to confirm whether or not there are units or homes in your community listed there. When those listings are found, your board can spring into action.

With regard to emotional support animal requests, I realize that you may question the truthfulness of many of these requests. You may even feel that the cards are very much stacked against a volunteer board of directors attempting to enforce reasonable pet restrictions.  This does not mean that associations need to rubber stamp all requests the receive. The best policy is to turn over these requests to a community association attorney who is highly experienced with requests for accommodations under the fair housing laws. This way, you can ensure, to the fullest extent the law allows, that any request for an exception to your pet rules is properly investigated and documented. Some people making false claims for fair housing accommodations will back off when asked to produce proper documentation while others are more intransigent and will proceed to acquire documentation off the internet without ever seeing a medical professional. It is also important to remember that there are individuals who are truly in need of an emotional support animal and are legally entitled to a reasonable accommodation.  Your job as a volunteer Board member or community association manager should be to work with your counsel to comply with the law and avoid the often significant penalties and costs associated with violating the fair housing laws while protecting the integrity of your pet restrictions.

The appeal of monetizing one's assets should really come as no surprise as that appeal is strong and there is no asset more easily monetized than a Florida getaway. For volunteer boards attempting to deal with a member's desire to do whatever he or she pleases with regard to occupancy of his or her unit, getting a handle on short-term rental activity and fraudulent ESA requests will certainly require the assistance of experienced counsel, a little ingenuity and a whole lot of patience.

For board members and managers in Florida who have more questions about this blog topic, you may reach me at dberger@bplegal.com or by phone at 954-364-6031.