We are regularly asked how Associations can save money on attorney fees. Some argue: “go with an hourly agreement, that way the Association can control the attorney’s work.” Others might argue: “flat-fee retainer agreements are best; budgeting will be easier.” Still others might say: “a contingent fee arrangement is best, that way the Association won’t have to pay unless the attorney wins.”
While these answers and others may be right in certain circumstances, the real answer, sure to save attorney fees in virtually every Association, is: “Hire strong management, pay fair management fees and use management personnel properly.”
Seems like a simple answer but, counterintuitively, at a time when few manager resumes are circulating, management fee proposals are bent on a race to the bottom. I do not know what is driving this. Board demands? Desire for market share? Ability to sell ancillary services? Increased technology usage? A combination of these factors? Regardless, isn’t it a matter of pay management today or pay way more in legal tomorrow? Worse, isn’t it a matter of pay management today or pay way more in legal, audit, engineering, contractors etc. tomorrow?
Experienced, trained and dedicated managers are effective. Among many other things, they help with risk management and insurance; specifications, bidding and moving projects forward, managing the budget, collecting delinquent fees, managing personnel, maintaining books and records, resolving disputes, etc., etc.
Failure to properly deal with risk management leads to more insurance claims. Failure to properly deal with insurance claims means coverage denial. Failure to properly deal with specifications, bidding and project management leads to flawed projects, cost-overruns and lawsuits. Failure to properly budget and collect Association fees leads to lack of reserves, special assessments, large increases, borrowing and collection lawsuits. Failure to properly manage human resources leads to unnecessary costs, work not getting done and lawsuits. Failure to properly maintain books and records leads to an inability to manage, member suspicion and lawsuits. Failure to promptly address disputes leads to lawsuits.
We do not own a management company, but we work with most of them. Associations should be keenly aware that the management fee supports the manager and much more. When considering a management company proposal, the cost should be one selection factor but not the primary factor. We perform great legal work and appreciate Associations paying our legal fees, but we encourage Associations to hire strong management, pay fair management fees and use management personnel properly.