How HOAs Can Make a Clean Break From Their Management Company

Our community association is unhappy with our current management company, and we want to terminate the contract. What are some common reasons to terminate “for cause”? How can we get out of our contract? 

When a board tells me that they wish to terminate their management agreement, I ask: What happened in the past 30 days to make you want to take that direction? I am then told that service has deteriorated over the course of months or years. My follow-up question is: How often did you meet with the management team and leadership to let them know how they were doing? The answer usually is: They know they are not satisfying us.

Unfortunately, lack of communication between the association and management as to service expectations happens often. My advice is that, as part of the management agreement, the parties agree to meet no less than quarterly and ask the hard questions: “How are we doing?” from management, and “Are we satisfied with service levels?” from the association. Quite often, it’s easy to forget that expectations must be tempered by the services and compensation set forth in the agreement.

If the contract did not set forth the reasons for termination “for cause,” it was a failure to negotiate a clear contract. The time to agree on what should be in the prenuptial agreement is before you are looking for a divorce. Some would argue that failing to do what is stated as a service in the contract would be cause, but keep in mind that most agreements provide for the opportunity to cure.

In some instances, the number of times to cure the same default is limited, but often the agreement will not permit a default without written notice and a number of days to be alleviated. I have seen contracts that permit between 10 and 30 days to cure an act of default. Of course, there are some things that would clearly equate to cause, including misappropriation of funds. Other things that may not be as clear are supervision of service providers, administration of contracts, and other similar tasks.

I have seen association boards be unsatisfied because the manager is only visiting the property once per month, and the board believes that twice would be better. The contract should identify the number of monthly site visits so there is no dispute as to what the association has agreed to pay for. If more visits are desired, the association should be willing to pay additional fees.

Remember, it is always best to communicate constantly about what you are happy and unhappy with as to not let issues fester. These “temperature checks” will ensure a clearer understanding between parties as to what is expected from the management company.

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