Condo Media - April 2010 - 24

RISK MANAGEMENT
exercise that degree of reasonable care and competence that is commensurate with the ordinary knowledge and skill common to members of the profession. A professional will not be held to a standard of extraordinary skills and attention, but will be accountable for reasonable ability and care. A community manager need not and should not guarantee results or outcome. Rather, the community manager merely undertakes to use his or her best skill and judgment. A result that the association finds unsatisfactory hardly justifies a lawsuit charging the manager with negligence, nor should it result in a verdict against the community manager. Breach of Duty. Once a plaintiff has established that it is owed a duty by the defendant in its malpractice claim, the plaintiff must further show breach of duty. The plaintiff in this case must show that the manager failed to exercise the reasonable care, skill and diligence that was owed to the association due to the relationship of the parties. Courts have generally required that such a proof be supported by testimony or other evidence from experts. As stated in a legal malpractice case, expert testimony should be generally required to establish the standard of care applicable to an attorney whose conduct is alleged to have been negligent and further to establish that his or her conduct deviated from that standard. That general rule should be subject to the exception that such expert testimony is not necessary in cases where the conduct complained of can be evaluated adequately by a jury in the absence of expert testimony. Fraud and misrepresentations are occasionally encountered in claims of management malpractice. A manager’s advice, if offered when it is known to be false or incorrect, may constitute fraud. This is true whether the advice is offered verbally or by conduct, and intentional failure to make a reasonable inquiry into the soundness of the advice will not offer any protection to

5 Ways to Avoid Liability
Experience has proven that a manager who takes the effort to avoid the ﬁve practices listed below beneﬁts both from reduced liability and the increased professionalism that they exhibit in dealing with boards, vendors and developers.
Do not exceed documented authority to act. The contract between the manager and the association and the minutes/resolution of the board create the primary sources of authority to act as the association’s agent. When taking action that could bind or impute liability to the association, make sure the action is duly authorized in writing. Failure to ensure that a board’s directive to the manager is documented in writing could, at best, lead to confusion between the board and the manager as to the action to be taken and, at worst, expose the manager to liability for taking unauthorized action. Do not become the expert because the board fails to consult a “true” expert in a particular field. When a board is trying to control costs during a major expenditure, such as a roof replacement, it may try to rely upon the manager to prepare project speciﬁcations, inspect for quality control and monitor completion for progress payments. Depending on the project, these duties may be beyond the manager’s level of expertise and should be more properly performed by a project manager with expertise in that ﬁeld. Managers do not do themselves or the association a favor by undertaking duties outside their area of expertise and could open themselves to additional liability if the project goes sour. Do not sign on the association’s behalf without reflecting the agency status. Vendors frequently direct proposals to the management company and prepare contracts in the name of the management company, or even the individual manager, as opposed to the proper party — the association. If the manager signs a contract that is not in the association’s name, and does not clearly indicate the manager’s representative capacity, the manager could be held liable as the contracting party. Do not give preferential treatment to the developer. Since the developer generally controls newly created associations, the developer usually hires the manager. Although the developer may be able to ensure that the manager is hired to manage other associations, it is vital to remember the manager’s duty is to the association with which it has a contract. Therefore, the developer should be treated in the same manner as other owners with respect to the lots or units it owns. Even if preferential treatment does not ultimately result in liability, it does result in suspicion as to the managers’ loyalty after the developer turns over control of the association to the owners. Do not base the annual budget on someone else’s faulty proposal. The manager usually prepares a draft budget for board review and approval. This draft should be based upon the ﬁgures that the manager truly believes will be necessary for the association to fulﬁll its ﬁnancial obligations in the next ﬁscal year. This is true even if the board, formally or informally, suggests assessments should not be increased. If the board chooses to modify the proposed budget, there will be a clear record of the manager’s recommendation. Without that record, the manager could face blame for inadequate operating and reserve funds.

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CONDO MEDIA • APRIL 2010

Condo Media - April 2010

Table of Contents for the Digital Edition of Condo Media - April 2010