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Can condo developer also serve as property manager?

Posted on Mon, Nov 19, 2012 @ 07:44 AM

I serve on my homeowners' association's board of directors. The developer and a fellow home owner serve as the other two other board members. The developer also serves as the property manager. So, he serves in three capacities related to our building. The board has voted to not renew the property manager's contract, which expires at the end of the calendar year. The developer/board member/property manager has demanded that his company be paid for retroactive payments that he didn't charge the association prior to the association turnover from the developer to the homeowners. The contract stipulations are vague, as the developer, who owns the property manager, drafted the contract. Can property managers demand retroactive payments that predate the association turnover to homeowners?



There is no "easy" button for this situation. 
Be prepared, this may take an attorney to unravel. 
The scope of the authority for a developer is typically defined within the laws of your state and/or your governing documents. 
Step One: Review your state and local laws (if any) regarding condominiums. 
Step Two: Review governing documents beginning with Articles of Incorporation, covenants, and more. 
Should any of the reviews clearly state the answer for your situation, mention it to the individual. They may see the light before step three. 
Step Three: Engage an attorney. They will be able to determine fairly quickly who is in the right and suggest possible solutions that would be equitable for everyone. Worst case would be litigation. 
A HOA where I used to live had a similar situation. It boiled down to interpretation of the requirements for a developer to turn over the Board to owners only. The HOA engaged an attorney who had a conversation with the developer's attorney and the developer left the Board. Cost for the attorney was minimal.

posted @ Monday, November 19, 2012 8:23 AM by Ron - NC

My best guess is that absent any contractural language specifying dollar cost, no payment would be the operative solution.

posted @ Monday, November 19, 2012 1:33 PM by Frank - MA

This definitely smells fishy to me. When the developer is still in control of the assn, he can pretty much do anything he so chooses. If he owns a prop mgmt co he can certainly employ them to manage his assn; however I see a big conflict of interest. Him being the manager makes the conflict even bigger and should have raised red flags long ago. You may need to hire an attorney to straighten out this mess and make sure the assn comes out on top of this deal.

posted @ Monday, November 19, 2012 2:18 PM by mary

This is not just a matter of the contract, but it is also a financial obligation that was not properly reported (on the books) at the time of transition to owner control. The transition to owner control should go by the terms of your declaration or by state law, and the developer may now be in violation in regard to financial reporting, the balance that should have been available to the association, the working capital fund, fraud, etc.

posted @ Monday, November 19, 2012 7:12 PM by JT

That's a confusing situation. Have you spoken to an attorney about it? It sounds like it could be underhanded, letting the property manager serve on the board. When this happened in my area, we had people leaving their contracts early and making huge messes with remodels. It took a lot of work to get things to the state they are now. 
Jenn | http://getcleaningtoday.com/services.php

posted @ Tuesday, July 15, 2014 5:18 PM by Jennifer Davies

I don't think that there should be anything wrong with that, but I would talk to an attorney about it before hand. There are a lot of laws out there about managing a property, and you have to make sure that you are always in compliance with them. You don't want to give any of your tenants a reason to sue you for something that you do while managing the property. http://www.condominium-management.com

posted @ Thursday, July 31, 2014 3:39 PM by Tony De Azevedo

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