Can a tenants association sue a management company for breach of contract due to failure to manage the building’s financial accounts appropriately?

Our management company was hired to manage the building’s finances and to provide guidance to the building’s board of directors. We have a long list of instances where the management company clearly failed to diligently collect late payments/fees, communicate with the building’s attorney, apply funds to the correct unit accounts, provide information to the board (which subsequently caused the board to lose significant amounts of money), etc. Our new management company says we have no case and that it would cost more to sue them that we would ever get back. Is this true?

Asked on August 19, 2011 Maryland

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

A tenant's association can sue a management company for breach of a contract to manage the buidling's financial accounts in an acceptable manner according to acceptable practices in the industry.

The issues are: 1. is there liability against the prior management company for failing to due its duties adequately, and 2. if so, what are the damages?

The key in any litigation assessment is to ascertain the likelihood of establishing liability, estimating the damages resulting from the liability and estimating the costs of legal fees and court costs for bringing a lawsuit.

If the damages assessed are not significant and the costs of attorneys fees and court costs greatly exceed the amount of the estimated return for litigation, then it really does not make economic sense to pursue the litigation.

In your situation have you considered a small claims case against the former managment company? That might be an option for you if the costs of attorneys fees do not justify a legal action in light of the assessed damages. In small claims court, attorneys do not appear.

Good luck.


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