Q: My condo association has been told that our management company is selling out to a larger organization. Our contract with the current company expires at the end of the year, and we are being pressed to sign an assignment giving permission for the new company to assume our account. We have been asked to sign a one-year contract. The new contract contains page after page of add-on charges that will be impossible to manage.
We realize that our present company can terminate its contract with 30 days’ notice, and we feel it will be difficult to make a proper decision in such a short time. We feel we are being forced into going with the new buyer. In research, it is quite obvious the new company is out to buy as many small management companies as it can, and with its haste, it appears complaints are forthcoming. We want to make the best decision for our community and are being pressured to sign. What is the proper course of action? — J.S., Sarasota
A: I deliberately left out the name of the company to which you refer. I cannot and do not offer an opinion on the company or the terms your association is being asked to assume. What I can offer is some general guidance.
The rights and obligations under a contract are generally assignable to a third party, unless the contract provides otherwise. Contracts can be automatically renewed if not canceled in accordance with the procedures spelled out in the contract. The fees payable to a management company can clearly make up the largest line item in the operating budget of an association. No prudent person should agree to “add-on” charges that are not clearly understood or cannot be properly “managed.”
No association should enter into an agreement that the board feels does not meet the “smell test.” Also for your condo, consult Section 718.3205, Florida Statutes, which contains specific requirements involving agreements for the operation, maintenance and management of condominiums. My recommendations are to take the existing contract, the requests made to your board, and any other relevant documentation to your association legal counsel. You really can’t make an informed decision without being truly informed. Make a short term arrangement, if you have to, in order to avoid going “bare” without professional management while the board decides what is best. And get out there and start interviewing qualified candidates. After all, the new company would not be buying up competitors if your account wasn’t valuable, right?
TELECOM ISSUES
Q: I am a new homeowner in a residential development where the developer entered into a multi-year contract with a telecommunication provider. The contract was entered into 10-15 years ago but has not yet gone the length of the contract. The majority of our residents pay for a secondary (and more updated) service, thus paying double for their cable and internet service. I was wondering if there is any way we as a community can break out of this forced monopoly and have the option to use whatever service provider we choose. — C.B., via email
Q: My community is dealing with a bulk cable provider and has been unable to get the provider to make any allowance for homes that are empty and in some stage of foreclosure. We have been told that the provider would work with a community that has this type of a problem with at least 10 percent of the homes. We also have at least one homeowner who uses a different cable service from the bulk provider. He is aware of the double billing but has never complained. Is there anything we can do to get the bulk provider to change now or do we have to wait for our contract up for renewal? — P.F., via email
A: Telecommunication issues abound in community associations. Technology expands exponentially. So, it is unreasonable to expect that a long-term telecommunication contract will automatically address and satisfy issues that did not exist when the contract was executed.
The Florida law governing both condos and HOAs permits an association to purchase bulk communication services, including television service, and to pay for such service as a common expense. Generally, though, unless the governing documents specifically require that the association provide those services on a bulk basis (which is rare and inadvisable), it is optional on the part of the association. Long term agreements are common, often entered into by a developer that is no longer on the scene, and in many cases have to be adhered to by law and cannot be unilaterally terminated.
In addition to the long term periods of these contracts, they also contain very narrow termination provisions. Failure to provide timely notice of termination under the terms of the contract can result in a renewal of the contract for a whole new term. Any association considering terminating or entering into a bulk contract needs to have those issues reviewed by legal counsel.
If the control of your association is being transferred from the developer, the review of all contracts entered into by the developer in the name of the association is essential. Remedies may exist. If you live in a community with a bulk telecommunications contract, you can often select your own service provider. That does not necessarily mean you or the association can escape responsibility for the costs apportioned to your individual property by virtue of that contract.
The bottom line is that bulk providers do not usually give up or offset income which is generated from those contracts. That being said, many things are negotiable, if approached in the right way.
Tamela Eady is a Florida Bar board-certified real estate attorney in Sarasota with more than 25 years’ experience. She concentrates her practice on community association and real estate law. The subjects discussed in this column are not intended as specific legal advice to anyone and are subject to principles that may change. Questions may be modified for clarity or for brevity. Questions may be directed to Tamela Eady via email to tke@eadylaw.com.
