Q: Does the Florida condominium law regulate what has to be in management contracts between the management company and a condominium association? (J.D., via e-mail)
A: Yes. While the law does not generally regulate the “business terms” of management contracts (such as price), there are a number of laws that regulate management contracts.
Section 718.3025 of the Florida Condominium Act states that no written contract for management services (among other contracts covered by the statute) is valid or enforceable unless it contains the following elements: (1) the contract must outline the services to be provided, as well as the obligations and responsibilities of the management company to the unit owners; (2) the contract must detail which costs incurred in performing the services are to be reimbursed by the association to the management company; (3) the contract must indicate how often each service, obligation, or responsibility is to be performed, either individually or by category; (4) the contract must specify the minimum number of personnel the management company will employ to service the association; (5) if the developer is still in control of the association, the contract must disclose any financial or ownership interest the developer holds in the management company; (6) the contract must also disclose any financial or ownership interest that a board member or any party providing maintenance or management services holds in the contracting party.
Management contracts are also regulated by parts of Section 468 of the Florida Statutes, which is the law that regulates community association managers and community association management firms.
Section 468.4335 of the statute states that managers, management firms, their directors, officers, persons with a financial interest in the firm, and their relatives must disclose to the association’s board any activity that could reasonably be construed as a conflict of interest. The statute creates a rebuttable presumption of conflict in two situations: (1) when a manager, management firm, or related party proposes to enter into a contract with the association for services other than community association management, or actually enters into such a contract without prior notice; (2) when a manager, management firm, or related party holds an interest in, or receives compensation from, a person or entity doing business with the association or seeking to contract with the association. The statute also provides that “compensation” includes referral fees, other monetary benefits, ownership interests, and profit-sharing arrangements with vendors or service providers recommended to or used by the association.
Section 468.4334 requires that every contract between a community association and a manager or management firm for management services must include a specific written statement. This statement, which must be in at least 12-point type, affirms that the manager will comply with all professional standards and record-keeping requirements imposed by part VIII of chapter 468, Florida Statutes. The statute further prohibits any contract from waiving or limiting these professional practice standards.
Florida law imposes additional important requirements on management contracts and the conduct of community association managers. For example, Section 718.111(3) of the Florida Condominium Act prohibits an association from hiring an attorney who also represents its management company, or its board members or officers. That statute further states that an association that contracts with a manager or management firm has a statutory duty to ensure the manager or firm is properly licensed before entering into a contract.
Rule 61E14-2.001 of the Florida Administrative Code provides that managers must turn over all official records, books, and property to the association within 10 business days after the management agreement ends, and upon written request, or 20 days if needed to complete financial statements. Managers must also independently comply with laws regarding owner’s rights to inspect official records.
Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com. Past editions may be viewed at floridacondohoalawblog.com.
