Terminated Manager Writes Fees Check to Himself

QUESTION: Our association board recently terminated the management company. Upon termination, the manager wrote some association checks to pay himself for services. Among those checks was one for more than $2,000 “for uncollected late fees.”

The management contract states, “All legal fees charged for collection of delinquent accounts shall be charged to the delinquent owner. Late fees are to be retained by the management company as an offset of collection fees.”

We have consulted our association attorney and have succeeded in getting some of the money back from the manager, but he has not returned the “uncollected late fees.” Several of these accounts have been delinquent for years, and the management company was not aggressive in its pursuit of these accounts.

The association will probably have to file an action in Small Claims Court. Based on the contract, is the manager entitled to “uncollected late fees”?

ANSWER: You are relying on your attorney for legal advice, which I cannot provide because I am not an attorney. Perhaps the manager has been writing a check to himself each month for these uncollected late charges that were billed to the delinquent owners. Has anyone checked the financial records?

This problem points out the wisdom of having the entire contract reviewed by an attorney before it is signed. The written agreement should be clearly stated so that both parties understand its meaning. However, problems sometimes arise, especially upon termination, when one or both of the parties is upset.

Association Needs to Protect Its Rights

Q: Our association consists of 95 single-family homes. The escrow companies seem to be unaware that our association exists because they do not communicate with the management company or request legal documents from the association before closings.

Sellers should be notifying their real estate agents, but some homes have been sold without the buyers being told about the homeowner association.

Recently, an owner who owed the association several months of assessments was able to sell his home, and the association did not receive the delinquent assessments after the closing.

How can the association protect itself?

A: You can still file a Small Claims Court action against the seller to recover the unpaid assessments. If the sale was a typical real estate transaction, I am surprised that the title company and the escrow company both failed to communicate with the association.

To protect the association and notify the real estate industry that an association exists, the association can record a Notice of Assessment statement at the recorder’s office of the county in which your association is located.

This will identify your association as having assessment collection authority and inform any escrow agent where to communicate with your management company. A self-managed association can record the name of its treasurer. The statement must be amended when this information changes.

California Civil Code 1363.6 is the state law that provides for this. Contact your association’s attorney if the management company needs legal advice regarding recording this important document.

The county will charge a recordation fee, which is based on the recorder’s per-page fee.

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Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers. She selects questions of general interest for the column and regrets that she cannot respond to all questions received. Send questions to: Condo Q&A;, Box 5068, Thousand Oaks, CA 91360.