Q&A: What Happens to Docs When Transitioning to Outside Management?

Q. I am a unit owner in a condominium association containing 189 units. We manage ourselves and wouldn’t ever want to have a management company manage our property. However, the question has often been asked as to what happens when a management company takes over. Obviously, the care and upkeep is taken care of by the management. But, what happens to the association articles and bylaws? Does the management company have authority over those? Can it now change the monthly assessment fee without the consent of the association members? In other words, what are the legal ramifications of using a management company?

                 —Self-Sufficient Shareholder

A. “While the unit owners of this 189-unit condominium perhaps should be commended for their ability to self-manage such a large condominium community,” says attorney Stanley M. Kaufman of the Manhattan-based law firm of Kaufman Friedman Plotnicki & Grun, LLP, “the questions posed suggest that their expressed position—that they “wouldn’t ever want to have a management company manage our property”—may be based upon entirely unfounded concerns.  The primary governing documents of a condominium are its Declaration and Bylaws and, although a management company usually serves as the physical custodian of those documents, the management company has no control over their contents, and the management company certainly cannot change them.  The declaration is a recorded document which can only be amended in the manner which must be set forth therein, which is almost always by a vote 66 and 2/3 percent in number and common interest of the unit owners.  By statute, the bylaws must be annexed to the declaration, and any amendment to the bylaws must be (a) set forth in an amendment to the declaration which also must be recorded, and (b) approved by a “percentage of unit owners, but not less than sixty-six and two-thirds percent in number and common interest” (except if all of the units in the condominium are non-residential).  

“As long as there is a functioning Board of Managers,” Kaufman continues, “the unit owners of this condominium also need not be concerned about a management company taking it upon itself to increase common charges. The condominium’s bylaws must provide for the operation of the property, the payment of common expenses and the determination and collection of common charges.  Typically the Board of Managers will be vested with the responsibility of approving an annual budget which will provide for the funds that the association will need to collect in order to pay its expenses, operate the common elements, cover any shortfalls from prior years, and perhaps replenish reserves.  The budget will also provide for the generation income to cover those funds, from the unit owners’ payment of common charges, in accordance with their respective percentage interest in the condominium.  The managing agent often performs an invaluable role in this process, such as to provide information, give advice, and perhaps even draft the initial proposed budget for the board members’ review.  But the managing agent has no vote.”

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