Management firm must hand over the papers: Now
Question: I’m a board member, and our association uses a management company. From the day the company was hired, owners were encouraged to write and speak freely and directly to management about anything. This made things easier because the board didn’t have to worry about keeping track of association papers or answering calls from owners and vendors.
But no titleholder phone calls or the contents of calls were forwarded to the board and neither were copies of owner correspondence. Eventually, a titleholder sued the management company. Fearing a lawsuit also would be filed against the association, the board sought legal counsel but soon realized we didn’t have necessary information vital to seeking a legal opinion. It was all in the possession of management. We asked management for copies of these items but were told we had to be specific because the company had no idea which items we were referring to. We later learned the management company used the information in its possession against the owner in court.
The board now wants to sue the management firm; we suspect it will use our association’s information against us. Can the company be stopped from using our information? Could the board have prevented this?
Answer: Yes and yes. Essentially, your board handed over all of its responsibilities and documents to a management company and now wonders why it is unable to protect itself.
It was the association’s responsibility, after performing adequate due diligence and obtaining legal advice, to decide at the time the management company was hired whether the company could use association documents during litigation or for any purpose.
It is a breach of the board’s duty to allow a management company to help itself to association documents without consent. It is also a breach because it does not safeguard the homeowners’ private facts or expectations of confidentiality.
Whether the company can legally use the association’s information for any purpose other than to assist in management is doubtful. Management company contracts usually make them “agents” of the association, yet there is nothing forcing a board to accept all contractual terms. Agent actions that damage homeowners and subject the association to potential liability are technically considered acts of the association.
Records and documents are the property of the association, and requests for documents should be honored immediately. Whether the request is specific, the board and any board member has an unequivocal right to ask for documents at any time. It is not up to management to decide which documents to provide. It is to provide all documents or assist in determining which records are needed.
The board has a duty to ensure safekeeping of all records. Documents should not be entrusted to an agent whose interests differ fundamentally from the association’s.
In this situation, the board has a duty to request all of its records be returned immediately. If the board is unable to retrieve its records, it may have to sue the management company to recover the documents. The management company would be liable for the association’s attorney fees in that recovery.
Associations must have hard copies of all documents and records in their possession for immediate availability.
Send questions to P.O. Box 11843, Marina del Rey, CA 90295 or noexit@mindspring.com.
