How to hire a good manager
Question: Our homeowners association is going on our third manager and management company in four years — an experience that has wasted countless hours and money.
The work we need to be done gets hijacked by managers who want to do things their way and are adept enough to manipulate situations ensuring that happens. We learned too late that each manager brought their own agenda. The managers failed to take direction from the board, and knew how to find the lone easygoing board member who would support their style and defend their actions when criticized.
When interviewed, all the managers and management company proprietors talked a good game and were convincing enough for us to hire them. But once hired, each was no different than the company or manager that was replaced, causing constant turnover.
Most of our time was spent arguing with these managers until they were terminated. Each manager threatened to sue us unless we paid for the duration of their contract and we’ve lost a lot of money doing so. There has to be a better way! How do we hire a good manager? Is there a way to terminate management without paying to the end of their contract? Answer: There is no way to guarantee that a management company will live up to its promises or that your board will work well with a manager. But there are ways to increase the odds that a business relationship will turn out favorably and to structure a contract to diminish the negative effects from a breakdown of that relationship.
It sounds like things start off well with board members actively participating in the hiring process and interviewing potential management vendors before they are retained. But from the description of your association’s terrible history with management companies, something obviously goes wrong somewhere.
A good first step toward improving your association’s experience would be explaining to prospective management companies how your board expects its business to be conducted. Discuss guidelines, specific instructions and codes of conduct the association wants to be followed — before the company is even hired. Include those terms into the management agreement so that they can legally be enforced. If a management company is not willing to accept your conditions, then it is not the right vendor for your association.
Once a management vendor is chosen, make clear that there is a distinct line between employer and employee. Because board members and management staff often work closely, management — even directors — may forget that this is a business relationship in a business setting. The management company and its employees should be cordial but are not your friends; they are hired to perform services they get paid for. When that line is blurred by either side, it can become uncomfortable to enforce contractual obligations.
And since it’s not uncommon for a single lenient board director to unravel it all by failing to follow contract terms, stress that no single board director has authority to act on his or her own. Set rules on how management receives its instructions and corresponding deadlines from the board to complete assigned tasks. The board also should vote on procedures that spell out how much independent authority management has to hire and manage outside vendors.
Based on your association’s track record, it should consider a month-to-month contract. If management companies are reluctant to enter into such an arrangement, insist on a probationary period during which the management company or manager can be easily terminated. If your association agrees to a lengthier contract, make sure it receives a discounted rate in return, something associations often fail to demand.
To avoid paying to the end of a management company’s contract, negotiate for more favorable contracttermination terms. There is no reason why there should be a penalty for canceling a management company's services; your association should only pay for the services it actually uses. A 30- or 60-day termination notice may be appropriate.
Stay away from management contracts that have automatic-renewal clauses, which restart the contract upon its expiration without board action. Such provisions don’t encourage outstanding performance and might bind the association to increased management fees without a board vote. Boards are well advised to read and weigh each word carefully, and if still in doubt, have an attorney look it over. Zachary Levine, a partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian, JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com