Chapter FourIIIChapter Six

5. The Management Companies: Managing Mayhem

As contemptible and unpleasant as I have found most HOA board members to be, I have never been able to suppress a slight feeling of pity for these people who appear to suffer the most for their own disagreeable demeanor. Their behavior may be ignoble, but I have never considered any I have ever known to be in any way associated with the criminal class; I have never once speculated as to what might be the extent of their criminal background. But I cannot say the same for the management company personnel I have come in contact with. Immediately upon my initial introduction to one of these individuals, I began to inadvertently weight the probability of an ever so slightly, checkered past.

they would look good in stripes
That is not to say that I believe they might rate a featured spot on “America’s Most Wanted.” I just mean to say that I could never escape the notion that the people from the management company would be just as much at home in a telephone boiler room selling questionable real-estate, free trips to Hawaii, and maybe even engaging in a little borderline mail fraud. They just seemed to exude an aura of low moral and ethical standards, which is to say that they are perfectly suited to the requirements demanded of the “property management professional.”

a piece of the action
The board members are volunteers and, consequently, not paid for their services; their reward is the misperception of elevated social status they believe membership on the board entitles them to. The management company, on the other hand, is one of the three primary players in the CID industry that profit monetarily from the CID housing scheme, and they will stoop to just about anything to protect those profits.

unskilled professional amateurs
Management companies will often tell homeowners that they lack the training, education, experience, and legal expertise to properly operate a homeowners association. While it may be true that homeowner board members lack experience in HOA management, it is just as likely that the management company personnel are equally lacking in these areas of expertise. Under current Texas law, (which is probably similar to most other states) anyone can declare himself or herself to be a "property management professional."

Just like the board of directors, any idiot can open a property management enterprise with absolutely no pervious experience or qualifications. The total lack of requirements plus the illusion of professional respectability is probably what attracts so many individuals of questionable character to these predominately unskilled, low wage jobs.

when they’re good, they’re probably unnecessary
The services that a management company provides generally include the hiring of outside contractors for the maintenance of the common areas, printing of the neighborhood newsletter and copies of the annual budget for the general meeting, printing and mailing of the maintenance assessments, and management of the association bank account. Most of these chores are the same that would be required of any homeowner, and all but those living in the most sprawling and unwieldy of developments would most likely be better off if they handled these matters personally.

do it yourself and save
There is really no reason why a HOA needs a management company. By applying common sense before making decisions, many self-managed associations have found that management is much easier than they had been led to believe. With the aid of a good bookkeeper and/or accountant, and possibly some occasional assistance from a “reputable” attorney, responsible homeowners are quite capable of managing an association.

get your own bids!
Responsible board members can and should get their own maintenance bids. Contractors feel they can get away with more when they deal with a management company representative who is not as interested in the quality of the work or as familiar with the neighborhood as a homeowner. Some management companies have been known to hire disreputable contractors who are willing to pad bids to include kickbacks to the Management Company. Management companies will also recommend attorneys with whom they have an ongoing relationship. These companies and attorneys usually belong to the same trade group: the CAI. The CAI gets its going over in chapter seven.

you’ve got them covered
What homeowners must remember is that management companies have no fiduciary duties to anyone but themselves. The Management Company also presents an added element of risk to the association. These companies act as agents of the association, and as such, their contracts usually stipulate that in the event of a lawsuit, the homeowners association assumes the legal responsibility for the actions of the Management Company, even if they acted fraudulently (and they do that with alarming frequency). Since they are not legally accountable for their actions, hiring the wrong Management Company may place homeowners in a more precarious situation than they might be in should they decide to go it alone.

There are other "red flags" to be aware of. Some management companies have yearly automatic pay increases buried in the fine print of their contracts. Management companies have also been known to arrange to have their contract renewal to take place just before the annual meeting to eliminate the homeowners input. The message is clear that you can’t take your eyes off these people. But the situations I’ve described so far illustrate a management company on its best behavior; just wait till they begin to get really devious.

when they’re bad, they’re pretty good at it
The Management Companies also involve themselves in the enforcement of covenant violations, and many of them have found that this avenue really can lead to a pot of gold. There is only so much profit to be wrung from a quiet, uncontentious community, but when you encourage a board to run roughshod over the homeowners, the potential for added, long term profit can be enormous.

the rogue’s road to riches
Management companies will often nudge an HOA board into conflicts with homeowners over real or perceived violations of regulations that, in many instances, were invented by the board at the urging of the management company simply because these conflicts generate extra business and extra profits. Some associations amass substantial amounts of money from homeowner association dues and many property management companies have found that the best way to transfer some of that money to their own coffers is through the care any feeding of a rogue board.

duping for dollars
Most HOA board members, traditionally prone to authoritarian excess, become willing dupes of the management companies. The Management Company representative fills the board members heads with visions of their own self-importance; the more needy the ego of the board member, the better for the management company. The management Company begins to act as the board’s own enforcers, sending homeowners covenant violation notices (they called them “nastygrams” in my neighborhood) threatening to sue all who would defy them. In order to increase their fees even further, some management companies will try to convince board members that additional rules, regulations, penalties, and fees be imposed on the homeowners.

tyranny is hard work
Life for the homeowner can really become unbearable when a board of directors, concerned only with the prospect of their own self-aggrandizement, advocates all their responsibilities to the Management Company. Management companies can thrive in this kind of environment where they can expand the list of services offered to the board to include micro managing the property of the individual homeowners. This entails a great deal of busywork patrolling the neighborhood searching for covenant violators, sending violation notices, and dealing with irate homeowners on the phone or via email and fax as well as regular conferences and correspondence with the association attorney who is also charging the association by the minute. It all adds up to increased workloads and increased fees.

when the facts don’t add up, make up new facts
As you now know, I do not keep my contempt for this “profession” a secret. I have come in contact with quite a few of these “industry operatives” and I have found all of them totally lacking even a pretense of honesty and integrity. In all my dealings with them, I was never once able to catch one in the act of telling the truth - not even by accident. I’m sure that somewhere, there may be a few exceptions, but they remain outside my own range of experience. Of course, I do not expect you to take my word for it - you must have proof.

a truly tangled web
In my neighborhood, we documented several instances where the Management Company had lied to the association. Most of these extremely clumsy deceptions were in writing and were preserved on my website, which became a constant source of embarrassment for our board of directors. Many of these deceptions involved the altering of legal documents in order to justify some misguided decision the board had made. The most twisted of these whoppers was “the case of the missing grandfather clause.”

cold case files
This situation is actually a good example of how one loses certain common law protections by living in a CID. It’s also a good example of how boards can get very capricious in their interpretation and how management company personnel, with their natural leanings towards the larcenous, can present a serious liability to an association.

I painted my house in accordance with the rules, which in my neighborhood did not cover house painting. This was confirmed, in writing, by both the developer and the board of directors. But seven months later, the board decided they would make up their own rules and that everyone who had done any painting under the previous rules were now in violation of the new rules.

I said that was a violation of grandfather rights. Meaning, of course, you can’t be guilty of violating a rule that was not in effect at the time the alteration took place.

They said, this is a CID and we have the CC&Rs and we can do anything we want. What they didn’t tell me was that they had done some selective grandfathering for some of the homeowners, which, if discovered, set up an embarrassing precedent as well as the possibility of leading some homeowners to question whether the board wasn’t engaging is some selective enforcement.

Since I saved every newsletter and every copy of the board minutes they ever published, (and I strongly recommend that you do the same) it wasn’t long before I found reference to the fact that grandfather status was observed in some cases.

The board meeting minutes for August, 2001 originally read like this:

" A motion was passed stating that the ACC must give prior approval before any fences can be painted or stained. Fences that had already been painted or stained were grandfathered. A letter would be sent to those homeowners stating that the ACC would have to give approval before they could be repainted or stained" Meeting Minutes, August 2001

These minutes were corrected and accepted at the next Board meeting in October.

"Approval of Prior Meeting Minutes: The minutes from the previous board meeting(s) were corrected and accepted." Meeting Minutes, October 2001

But two years later, prior to one of my most interesting encounters with the board, I ask for copies of the August 2001minutes. I had caught them altering documents before so I set an integrity trap for them to see if it would happen again. Would they fess up regarding their grandfathering, or would they resort to deception? Sure enough, at the head of this new copy, the Management Company claimed that the original minutes had not been approved.

"These are the corrected and approved minutes of the Shavano Ridge Homeowners association Board meeting held on August 14, 2001. Please disregard previously received minutes as they were sent in error prior to Board review and approval." Altered Minutes, June 2003

But the minutes had been approved. Obviously, there was something in the original version of the minutes that they didn't want me to see. By June 2003, the August 2001 minutes had been altered and the embarrassing reference to grandfather status was removed.

" A motion was passed stating that the ACC must give prior approval before any fences can be painted or stained. A letter would be sent to those homeowners stating that the ACC would have to give approval before they could be repainted or stained" Altered Minutes, June 2003

Ironically, they went on to add another lie to an already lengthy list of “whoppers in print.” In October of 2004, the Board published this statement in the meeting minutes claiming that they never do what I just showed you they did.

"Any change(s) to the approved minutes are noted in the next BoD's approved minutes. Approved minutes cannot be changed by the BoD." Meeting Minutes for October 2004

Now read that statement again carefully and see if you can't find the colossal contradiction it presents. Amazing isn't it.

This is just one of dozens of incidents where our management company, and our board of directors, showed themselves to be unworthy of the trust of our association. What really surprised me about these people was the swiftness with which they would resort to a lie or alter a document or engage in any other form of chicanery to deceive a homeowner. It seemed like an involuntary reflex. In time, I came to the obvious conclusion that honesty and integrity were not characteristics thought to be desirable in a good property management employee.

The sad part of this story is that my experience with rouge boards and deceitful management companies is the rule, not the exception. After I’ve introduced the last two principal players in the rogue’s gallery of CID industry operatives, I’ll explain my theory as to why I believe that all CIDs will always lean towards corruption. I call it “the petrie dish principal.” Those with a background in science have probably already considered this analogy.


Chapter FourIIIChapter Six