RETALIATION AGAINST MANAGERS

TIPS AND STRATEGIES FOR MANAGERS TO ADDRESS PUSH BACK FROM BOARDS AND HOMEOWNERS.

By Garrett Wait

Everyone in the common interest development industry recognizes the difficult nature of being a property manager. On a daily basis, managers are put under enormous amounts of pressure to address their communities’ needs. In recent years, that pressure has included a rise in board and owner push-back against their advice, online campaigns deriding their ability and ethics, and even lawsuits. While it may be impossible to avoid upsetting some people, managers should at the very least understand the tools at their disposal to combat these retaliatory acts.

The first line of defense in every contractual relationship is the contract itself. Management contracts should define the relationship as specifically as possible. The provisions of the contract ideally define the roles and actions of the parties, including: (i) termination – both the timeframe for each party to terminate the contract, and the method of notice to each party; (ii) non-renewal – whether the association or the manager needs to advise the other party of an intent not to renew the contract on an annual basis, and the timeframe and method of notice to each party; (iii) what occurs upon an alleged breach – whether the parties must engage in dispute resolution (i.e. mediation or arbitration), the method of notice to each party, and a provision regarding potential attorney’s fees; (iv) limits to the parties’ liability to one another; (v) insurance provisions; and (vi) an indemnity provision.

Hold harmless and indemnity provisions must be in every management contract and owners who wish to sue the manager should be advised that the association will likely be responsible for costs. This means, indirectly, through the payment of assessments, the owner will be essentially paying the legal costs of the association’s defense. This can be a significant deterrent to litigious owners.

Strengthening your management contract language will not solve every problem related to board and owner pushback. When an association’s board fails to follow its manager’s advice, the manager would be wise to document everything. Managers should ensure that his or her recommendation and the board’s subsequent refusal to abide by the recommendation is documented in writing. For example, confirm via email that you advised X and board decided to do Y. It may also help to remind the board on a frequent basis that it has a fiduciary obligation to members that does not necessarily extend to management. Indeed, certain breaches could lead to personal liability of directors. Boards who often ignore management advice are often the boards that find themselves in trouble.

Remember, the written word is powerful in many ways. Communications should be in writing and written notes should be made of conversations that have a reasonable chance of being the source of a dispute.

Avoiding litigation is always preferable, of course, so prior to litigation it is critical that the manager effectively communicate to the board and the membership that he or she is working in a team-based and collaborative environment. Boards and managers can usually avoid significant conflict so long as everyone understands that while there may be disagreements, managers are working for the betterment of the community as a whole.

When homeowners decide to make harmful statements about management on Yelp, Google reviews, or through other social media campaigns, managers should be prepared to professionally set the records straight or ask those companies to remove harmful reviews. In some cases, the reviews or statements on social media can be potentially defamatory, depending on how they are written, but watch out for potential SLAPP liability. Under those circumstances, managers should contact legal representation to analyze the need for a cease and desist letter or even a lawsuit.

Managers should protect themselves against false and misleading claims through proactive measures designed to create a clear and accurate record of events. Generally, emails should be preferred over telephone calls because a written record is far more helpful than relying on your own recollection. Another way to be proactive is to keep detailed and accurate minutes of board meeting discussions, advice from the manager or other expert, if any, and the board’s ultimate decision.

Managers should never allow a claim or threat of litigation go without a written response. In one recent example, a highly combative director called a manager and said he would need to escalate an otherwise benign matter to litigation as a bluff. The manager rightly responded via email advising the board member of the need to discuss with rest of the board if his threat was serious. The contentious director quickly backed down.

Managers should carry adequate insurance and should tender a claim when he or she “reasonably suspects” a dispute will be escalated to litigation. Not every threat is legitimate, and not every owner or board actually wants to sue, so use good judgment about the prospects of a lawsuit before tendering a claim. Even prior to litigation, it is always wise to keep detailed contemporaneous notes, but it is especially critical when disputes begin to escalate beyond a simple disagreement.

Remember, the written word is powerful in many ways. Management contracts will control and protect you from liability if properly drafted. Communications should – when possible – be in writing and written notes should be made of conversations that have a reasonable chance of being the source of a dispute. Finally, under most circumstances, the manager’s agency relationship will not create pass-through liability if the board refuses to follow his or her advice.

Garrett Wait is a Senior Associate with Kriger Law Firm specializing on community association law. He’s worked in the industry eight years.