In the
past few weeks I have been contacted by community associations regarding issues
they have with their community association managers (“CAM”) making decisions on
behalf of the association without the board of directors being involved. This seems to be an alarming new trend as
certain CAM firms have started their own maintenance companies and terminate
contracts with vendors to give their own companies the contract for services –
all without the board’s knowledge or approval.
In one instance a CAM actually refused to allow a board member to vote
and provided a legal opinion the board member was ineligible, which is clearly
the unlicensed practice of law. In
another instance, which I have seen before, a CAM took it upon himself to take
action against an owner despite the board voting to table the issue until they
had a chance to talk to the association’s lawyer.
A CAM
does not have the authority to make board decisions. The CAM works for the Board of Directors, not
in place of it. CAM contracts have
indemnification clauses, which means the association is liable for the CAMs
actions and must pay for a legal defense should someone try to sue the
CAM. Owners cannot sue the CAM in most
circumstances because the owners are not in “privity of contract” to sue the
CAM, as established in the case of Greenacre Properties. v. Rao, 933 So. 2d 19(Fla. Dist. Ct. App. 2d Dist.2006), meaning
the owners are not a party to the CAM contract.
This shield against liability means there are not many consequences for the
CAM acting outside their scope of authority.
In my opinion, CAM firms being allowed to set
up their own maintenance companies to provide services to the associations is
not a good idea. There is an inherent
conflict of interest. The CAM usually
controls the association’s bank account.
The CAM will then make sure their maintenance company is paid, even if
the work is not satisfactory. I have
come across instances where the work was not satisfactory, but the board was
not aware of the issue because the CAM did not inform the board. Why would they complain about their own work?
When the associations hire a CAM it is now
important to inquire if the CAM firm has its own maintenance company and review
the contract thoroughly to see how much control the board will relinquish to
the CAM in hiring vendors or other actions which create liability for the
association. Many CAM contracts also
provide the CAM with a “bonus” of 10% of the value of the contract for
procuring a contract on behalf of the board.
I think it’s more of kickback then a bonus, but this is a common
practice in Florida.
Selecting a CAM is an important task for
associations. It is up to the board of
directors to perform their due diligence and make sure the contract is clear
regarding decision-making activities.
The actions of an overzealous CAM could be costly and lead to litigation
against the association.
