Last week I blogged about the possibility of Board members walking off with your association bank accounts. Bank accounts that are about to explode with mandatory reserves and huge construction contracts that are on the way. Today, let’s talk about what you need to know about your management company.
Often times our firm is asked to review new potential management contracts between the association and a management company. Many times these contracts contain clauses that basically state that if the condominium undergoes major construction, the management company is entitled to 2% of the construction project if the association wants the management company to assist in supervising the construction. Now, many of you are about to enter into contracts worth millions of dollars. Some of you may be entering into contracts worth ten million dollars or more. If you overlook that clause and keep that clause in your management contract, you just added a lot of money to all of your construction contracts for something that you may not have wanted in the first place.
So, normally I take that clause out of the contract and make it require the future written permission of the association to assist in supervising the construction. Or, I remove it completely. You can always negotiate it later on.
And twice in the last few weeks I was told by contractors that they were specifically told by managers that if the contractor does not agree to pay the manager two percent of the contract — THEY ARE NOT GETTING THE CONSTRUCTION CONTRACT WITH THE ASSOCIATION. In other words the management company wanted 2% from the association and 2% from the contractor. One manager put this in writing.
Florida Statute 718.111(1)(a) states: An officer, director, or manager may not solicit, offer to accept, or accept anything or service of value or kickback for which consideration has not been provided for his or her own benefit or that of his or her immediate family, from any person providing or proposing to provide goods or services to the association. Any such officer, director, or manager who knowingly so solicits, offers to accept, or accepts any thing or service of value or kickback is subject to a civil penalty pursuant to s. 718.501(1)(d) and, if applicable, a criminal penalty as provided in paragraph (d)
Any manager who asks a contractor for money in order to get the association’s construction contract is breaking the law. At a minimum, they should immediately lose their license. Yet, these things are happening.
There is no doubt that money is going to begin flying in Florida because of the massive number of construction projects that are on the way. No doubt, along with that, many people are going to want a share of these funds, legally or illegally. Clearly however, when a manager demands a kickback for awarding a contract, that manager needs to be punished.