Condo owners in complex confused after two different management companies demand fees, assessments

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.

You should ask the board of directors for more information to help you understand what’s going on. You might also request that the board call a meeting of all unit owners to work together with the board. Information and guidance from the attorney representing the board could provide some helpful clarity and direction on how to proceed.

You should find out the following: What action the attorney has taken to terminate the contract; what was the basis for the termination; and did the attorney filed suit against the management company to enforce the termination?

As far as payments go, we agree that it’s a terrible situation. The board of directors has the right to hire a company to manage the financial dealings of the association. That contract gives the management company certain rights to collect association dues and spend association money to pay expenses. We don’t know what the contract says and what rights the association had handed over to Management Company A.

But here’s the bottom line: You don’t want two management companies fighting with owners, the board and, ultimately, each other over who is going to collect fees and assessments.

If, at the end of the day, you’ve paid your assessments following guidance from the board of directors, we don’t think Management Company A can, or should, report your purported non-payments to the credit reporting agencies or a collection company.

We think that if Management Company A reported the non-payment of assessments knowing that their contract with the association had been terminated or purportedly terminated, their reporting might violate some of the reporting requirements under federal laws. We have to assume that a creditor that sends information of a delinquency to the credit reporting bureaus does so in good faith with knowledge that the amounts have not been paid.

Clearly, Management Company A doesn’t know if assessments that were not paid to them were paid to Management Company B.

In general, if a condo owner fails to pay their assessments, the property management company can file a lien against the unit for the non-payment of assessments. But liens also have to be filed in good faith. We aren’t so sure Management Company A could claim good faith if the association has fired them and they don’t know whether you paid the assessments to the other management company.

The only way to unravel this mess is to talk with the board of directors, and the attorney they hired, to find out where things are. Work together to follow the instructions given to the owners by the board and the advice of the attorney representing the association. Don’t be afraid to question the attorney as to next steps and a possible timeline of actions. If you or the board need a second opinion, or if your attorney’s advice doesn’t seem to be working, you might want to reach out to a different law firm or attorney.

(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)