Condo Reserve Funds Turned Over to Board President

R.S. from Hawaii writes:

Dear Mister Condo,

The condo president changed management services and requested that the Reserve Funds be turned over to him. The former management service company complied based on his request alone and now the president is in complete possession and control of the monies. Was the former management service wrong to hand over the funds to the president who was acting unilaterally and without consent of board or owners?

Mister Condo replies:

R.S., unbeknownst to many unit owners, the management company works for the association and is responsible to the Board. The Board is, in effect, their boss. Many people think that the management company is the overseer of all things relating to the condo when in fact, they are simply contacted by the Board to handle the day to day business matters of the condominium. The condo Board President is the de facto CEO of the corporation (the condo is a corporation) and can pretty much request the management company to do anything that isn’t illegal. If he requests the funds be turned over to him, the management company should do so. However, this puts the association at risk of have the funds stolen so this is not a best business practice. The bank account where the funds are stored should simply have had the previous management company removed as a custodian and the new management company should have been added. Perhaps the Board President decided to move the funds from one bank to another. Either way, he shouldn’t have cashed out an account and put it in his own care. It put him and the association at risk. Make sure every penny ends up in a new Reserve Fund account. All the best!