Real Estate Matters: Condo owners in complex confused after two different management companies demand fees, assessments
Q: I live in a condominium complex in suburban Chicago. There’s a problem with the managing company for the property.
Recently, the board of directors of our association hired a new management company while the association was still under contract with our old management company. They’re using an attorney to try to get rid of the old management company for lack of performance. However, the old management company refuses to go away and we have been paying for two management companies.
After the new company was hired, the homeowners were instructed to pay their monthly condominium assessment fees to them. Recently we all received a letter from the old company demanding that assessments be paid to them including back assessments for the past several months and claiming delinquency of accounts.
This is confusing. To whom are we obligated to pay our monthly assessments? Can the old company file liens against the homeowners for not paying the assessments directly to them? Can this management company report us to credit bureaus and damage our credit history? And, can the board of directors be held liable for this mess?
Q: You’re right, it’s a real mess. We hope the attorney the association hired had a sound basis for terminating the old management company’s contract. If we assume that the association has a legal basis for terminating the first management company’s contract, it would be logical for the unit owners to pay their monthly association fees to the new management company.
But perhaps they didn’t have a good reason to fire what we’ll refer to as Management Company A. We also find it interesting that the association is paying both management companies. Why are they doing that? If Management Company A’s contract was terminated, it would seem the building was no longer required to pay them a monthly fee.
It appears that Management Company A does not recognize the termination. They believe (or have been told by their own attorney) that they must continue to provide the services under the management contract they have with your association.
You never want to find yourself in a situation where two parties are claiming the same right. You want to make sure that the first contract is dead — and the parties agree the contract is dead — before entering into a contract with a second party for the same services. Otherwise, you can wind up in a no-win situation.
Here’s what that looks like: If the contract with Management Company A is still valid, but you’ve moved onto Management Company B, you'll be in default under the first contract. On the other hand, if you’ve signed with Management Company B but the first contract is still valid, and you stay with the first Management Company A, you’ll be in default with the Management Company B.
Condo owners, co-op owners, and single-family homeowners that belong to a homeowners association rely on the board of directors to hire the right companies and individuals to provide necessary services. You also rely on the board to hire people to assist you through the transition from Management Company A to Management Company B, which is never easy.