SUE YOUR
MANAGEMENT COMPANY
Q.
We recently learned that the management company for our homeowners
association owns a construction and maintenance company that they
have utilized to provide services to our association. The management
company did not disclose this relationship. The construction company
completed a large renovation project exceeding $500,000 only few
months ago and we’re certain they made a significant profit. Can
we sue them?
A.
Yes. You can sue them for breaching their fiduciary duty as your
association’s agent and for unfair business practices. In such
a suit, your association would normally ask the court to require
the defendant to reimburse all profits they made plus all legal
fees and costs incurred. You should consult with an attorney immediately
to protect your rights. Top
SELECTION
OF CONTRACTORS
Q.
We live in a common interest development. Based on the recommendation
of our management company, our board of directors obtained three
bids for landscaping maintenance and then selected the company
with the highest bid. The bids were for identical work. Since
all three companies were proposing to do the same work, shouldn’t
our board have selected the lowest bid? Our monthly assessments
are already too high and many of us live on fixed incomes.
A.
The board should use its best judgment in deciding which company
to use, based on all facts available. This is their legal duty.
While the three companies may have submitted bids for the same
work, it does not logically follow that all three companies will
provide the same quality of work. Sometimes experience is helpful
in determining which company will provide the highest quality
work and, likewise, who will be the most reliable contractor.
One of the advantages of hiring an established local management
company, is that they have experience with contractors and can
provide valuable recommendations to the board of directors. Top
MANAGEMENT
COMPANY AS CONSTRUCTION MANAGER
Q.
Our homeowners association recently hired a general contractor
to make major repairs to our townhomes. Our management company
is unwilling to supervise the construction and insists that we
hire a construction manager for this purpose. Do management companies
normally supervise construction work?
A.
Management companies rarely supervise major construction work
because they are rarely qualified to do so. Consequently, most
management companies do not include this service in their management
agreement as a service to be provided.
Those few management companies
that are qualified to supervise construction, normally charge
a separate fee for this work.
I recommend that you carefully
review your management agreement to determine the exact scope
of your management company’s responsibilities. It is unlikely
that they have assumed responsibility for supervision other than
for routine maintenance.
As a general rule, when
interviewing management companies, you should determine the level
of their expertise in construction. Even without a major construction
project, a knowledge of construction is necessary to make good
decisions about maintenance and repairs. Given that maintenance
and repairs is generally a large budget item, a management company
with experience in this area can save an association money. Top
MECHANIC'S
LIEN RIGHTS
Q.
Can a contractor file a mechanic’s lien on an entire condominium
building if the contractor was hired by a single owner to do work
on an individual unit?
A.
No. Only the individual unit
can be liened. Top
MECHANIC'S
LIENS
Q.
What is a mechanic’s lien?
A.
A mechanic’s lien is a form of security, much like a deed of trust,
that creates an interest in real estate to assure payment for
materials furnished or services provided for its improvement.
The holder of the mechanic’s
lien can foreclose on the property if the obligation for payment
is not paid. This
provides a secondary source of repayment if the property owner
does not voluntarily pay. Top
MECHANIC'S
LIEN ON COMMON AREA
Q.
Our condominium management company is involved in a dispute with
a contractor who did work on our common areas. The contractor
is threatening to record a mechanics lien. Our management company
has advised us that a contractor’s lien can never affect the individual
units. Are they correct?
A.
No. Labor performed or services or materials furnished for the
common areas, if duly authorized by the association, is deemed
to be performed or furnished with the express consent of each
condominium owner. Consequently, the contractor may have a basis
for filing a mechanics lien. Note that the owner of a condominium
may remove his or her condominium from a lien by payment to the
holder of the lien the fraction of the total sum secured by the
lien which is attributable to his or her condominium. Finally,
there may be other legal defenses to a mechanics lien which should
be explored. Top
DEFENSE TO
MECHANIC'S LIEN
Q.
As a result of a dispute, a contractor recorded a mechanic’s lien
against our condominium association’s property nearly six months
ago and refuses to release it. What do you suggest?
A.
A mechanic’s lien is invalid and unenforceable under Civil Code
Section 3144, if the lien claimant fails to file a lawsuit to
enforce the lien within ninety days of recordation. You should
refer to this code section when making a demand that it be removed.
If necessary, your association
may bring an action to have the lien released. Your association
will be entitled to recover its costs and reasonable attorney’s
fees. Top
