study of Arizona management contracts

I’ve collected 5 actual management contracts from management firms who are members of the AZ Assn of Community Managers, AACM. All are for HOAs in the Phoenix Metro area. As one management agent told me a long time ago, “What are you doing George? We got a good thing going here!”

 

In general, here’s what they have in common

 

Monthly fees:

$2,000 – $4,000 per month — ($12, 000 – $48,000 plus all those transaction fees summarized below).

Per transaction fees:

numerous and detailed, above the basic monthly fee.

Agency relationship:

4 out of the 5 explicitly acknowledge an agency relationship with the HOA – fiduciary, loyalty, best interests.  One contract specified that it was an independent contractor, but this does not remove the agency relationship.

 “acting under orders”:

All contracts are full of wording that the agent acts under the supervision and direction of the HOA board and its policies.  This serves to negate any “independency” and place the liability on the HOA board. The board can be held responsible for the misdeeds of its agent under respondeat superior. (Never heard of it, did you? That’s because CAI wants it a secret.)

 what does the monthly fee cover?

I couldn’t figure this out after looking at all those transaction fees that are extra. I concluded that it must cover such items as

• waiting for the phone to ring,
• responding sometime to homeowners, touring the grounds on an inspection tour (except nighttime inspections which are extra),
• seeking violators and or physical damage,
• and dealing with the clerical duties pertaining to meetings and attending a few of them.

Transaction fees:

• Paper, envelopes, stamps, check, faxes, etc charges;
• letters including dunning letters, billing reports;
• transfer fees, disclosure fees, computer and bookkeeping fees;
• education, newsletters, website;
• senior staff, computer staff, agent staff.

 

POINTS TO REMEMBER

Your management firm has a legal, binding contract with your HOA, in which it admits that it is an agent of the HOA and to acting under the “orders” of the board. An agency relationship is a fiducciary relaionship with the HOA.  The contract, corporation law, and the CC&Rs require to board to oversee the acts and actions of the management firm, and to take action when there’s wrong-doing by the management firm.  The HOA can be sued under respondeat superior for any wrongful acts by the management firm.

The principal may authorize  the agent to perform a variety of tasks or may restrict the agent to specific functions, but regardless of the amount, or scope, of authority given to the agent, the agent represents the principal and is subject to the principal’s  control. More important, the principal is liable for the consequences of acts that the agent has been directed to perform.