Managers are usually surprised when they get named in a lawsuit. Managers are service providers who work hard to juggle all of the demands placed upon them by the contract, the management company, the board, the homeowners and residents and the visitors to the community.

Lawsuits naming managers usually involves a lack of communication or an action that results in someone getting hurt, being inconvenienced or losing money. Managers are intimately tied to the decisions made by their boards. The manager may advise the board that making a decision one way or the other might result in litigation. The manager may strongly suggest that the association seek and take the advice of counsel. But, the board that feels strongly that their decision is correct and justified even with the warnings by management, may proceed and ultimately involve the association and management in a lawsuit.

A Case involving a Management Company

A recent case that I testified in, involved the owner of a condominium suing the board and the management company for repairs that were not completed properly. The owner contended that the repairs were not made according to the association expert’s recommendations and that the unit was uninhabitable. The board had taken two years to make the repairs and the management company was included in the lawsuit because the management company did nothing to resolve the issue, in the eyes of the owner. The management company was seen as helping to cause the delays and allowing sub-standard work to be performed.

As an Expert Witness, I was called in by the insurance company representing the association and management company to review the association records and minutes and testify as to their good business judgment and use of reasonable care in making their decisions.

I was able to follow the progress of the initial report of problems, the research and the repair recommendation. The management company had kept excellent records. The board however, had decided to not repair the unit according to the expert’s recommendations. The board had decided to repair the unit by using the association handyman. The repair was not up to code and the repairs were not sufficient to stop the initial complaint, water intrusion.

The board’s decision to hire the handyman to repair the unit was not documented in the minutes. The reasons that the board accepted this repair choice was not explained to the unit owner or recorded in the minutes. The manager was told of the board’s decision outside of a meeting and the decision was never formalized or explained.

The manager was not a part of the decision to give the job to the handyman and when confronted with the information, chose to accept the board’s decision by not pursuing the issue with the board or mentioning it to his management company.

The issue escalated into a lawsuit when the owners recognized that the repairs did not match the repair recommendations. The management company had done nothing to help get the repairs made correctly and the unit was not repaired. The board was told of the owner’s threat to go to an attorney but the board chose to stand by their original decision and possibly try additional remedies as suggested by the handyman.

This matter was eventually settled out of court and the owners had their unit repaired properly. The association’s insurance company settled the lawsuit and paid all attorney’s fees.

This case is probably a simple one by most standards. The manager could have strongly urged the board to reconsider their decision on not following the expert’s guidelines. The manager could have documented this recommendation. The manager should have notified the management company that this issue was being decided and could have consequences to the management company. Hopefully, the manager’s superiors would have stepped in and helped to resolve the issue. If the board still chose to proceed and it was against the best judgment of the management company, the management company could have canceled their contract with the association. Irresponsible acts by a board that does not rely on the professional manager or management company deserves to stand alone in their decision.

Types of Claims made against Managers

Managers can be sued for appearing to side with the board and not rely on good business judgment.

Managers can be sued if they authorize the release of association funds before all contractual terms are met i.e. lien releases are received, progress is made, quality is assured.

Managers can be sued because poor management is seen as a reason that the association buildings or common area is not repaired and is deteriorating.

Managers can be sued if it appears that association funds are missing due to the manager’s negligence.

As we all know, anyone can sue anyone so this list could be much longer. I have listed claims that are common in the industry.

What you can do about reducing your liability as a manager:

• You can insist on being well trained before you are assigned a project to manage.

• You can rely on your association attorney to help you guide the board.

• You can involve your supervisor in issues that you think might become troublesome.

• You can document incidents or issues that you have an indication might result in litigation.

• You can conduct yourself like a professional. Expect to be considered and consulted. Be prepared to make recommendations and pro-actively seek out solutions to issues that might someday become problems.

Community Managers are professionals that are given a great deal of responsibility with few industry guidelines and restrictions. Becoming a manager today involves a big commitment to continuing education. Managers are at risk in being named in lawsuits so they need to be especially personally vigilant in protecting their professional careers. Managers need to be alert and responsive to the continuously changing communities that they manage.

Karen Bennett, PCAM®, CCAM®

Community Association Consulting

www.CIDexpert.com