In today’s economy, co-ops and condos are looking for ways to cut costs wherever they can, and many are turning to examining their legal bills. The problem is two-fold. First, you don’t want to compromise your relationship with your attorney or secondly, risk high costs resulting from negligence, misinterpretation of documents, or other oversights.
Every association needs a law firm to help them navigate everyday legal issues such as contracts, sublets, and collection actions, as well as less-common ones like full-blown lawsuits. Some associations make the mistake of forgoing counsel in an attempt to save money. This costly mistake can lead to expensive litigation, ultimately putting an association and its budget in the hole.
“This is where the old warning of not being ‘penny wise and dollar foolish’ comes into play,” Donna DiMaggio Berger, a shareholder attorney at Becker & Poliakoff, a statewide law firm specializing in community association law, says. “There are certain things that a board should know and absolutely require advance attorney involvement to create a safety net for the board if things go wrong. This list includes: signing a contract, terminating a contract, hiring an employee, firing an employee, making material alterations to the common areas, selling property, buying property, denying a tenant or a purchaser and borrowing money.”
Paying By the Hour vs. Retainers
“Billing arrangements vary depending on the nature of the work being performed,” Berger says. “Some types of work lend themselves to a flat fee arrangement while others do not. Most attorneys provide a variety of billing options for their clients depending on the services being performed.”
According to Kenneth Direktor, a shareholder attorney in the Fort Lauderdale-based offices of Becker & Poliakoff, the vast majority of associations pay for legal aid by the hour.
On the other hand, many firms offer a retainer, where for a set price each month, you get a series of defined services by the attorney. Anything above and beyond those services will be covered by the hourly rate.
“A retainer agreement creates the actual contractual attorney-client relationship, and I don't know any reputable attorneys that would operate without one—both for their protection and the client's,” Berger says.
Direktor says he thinks more associations should move toward paying a monthly retainer for legal services, rather than simply by the hour, in order to help them budget more effectively. While he acknowledges Florida’s tough economic climate might hinder budget—conscious associations from paying a monthly fee, he argues doing so is a proactive measure against rising legal fees. Having a retainer allows associations to contact counsel without hesitation (within reason) if trouble arises, therefore preventing the snowballing of issues that could lead to costly litigation.
Making the Most of Counsel
There are ways to maximize the efficiency of the association-counsel relationship, which in turn, keeps unnecessary legal costs at bay. Pernicious habits such as multiple board members contacting counsel and making redundant inquiries eat up attorney time and jack up the bill. Electing one or two board liaisons will kill this issue.
“If you have a board where you have four different people calling counsel with the same question and not communicating with each other, you're going to spend more money on legal,” Direktor says. “There should be more than one point person because you need for the manager to be able to contact counsel, the president should be able to contact counsel, and maybe even the treasurer should be able to contact counsel. But the number of people who should contact counsel is typically reflective of how well the board functions.”
Another way to save is by maximizing its use of the property manager or the managing agent. Before engaging the law firm to prepare and send demand letters to shareholders/unit owners for monetary and other defaults, a written demand letter should be sent out by the manager. In the case of a shareholder/unit owner default, the engagement of counsel should be the last resort.
Now that you are paying for counsel, use it. Legal fees often creep up on a passive association that doesn’t contact its attorney for advice. For instance, if a board neglects to contact counsel before signing a seemingly minor painting or furnishing contract, it could turn into trouble, Direktor warns. What if these projects required membership vote and approval? Only a board that is communicative with its attorney would know for sure.
Plus, staying in close contact with your attorney promotes the creation of a strong rapport, Direktor says, which comes with some added perks.
“There is an advantage to having a lawyer who knows you, who knows the tolerances, the sensitivities of your board members, who knows a little bit about the history of your building, who knows a little something about what's in your documents, having worked with you for a little while. There is a benefit to having someone you can pick up and call and say, ‘Hey, we're thinking about doing this. What do you think? What do we need to consider?’”
Review Your Bills
Russell Robbins, a managing partner with the law firm of Mirza, Basulto & Robbins LLP (with offices located in Coral Springs and Miami Lakes), makes it a point to pay close attention to how he bills clients, making sure he is fair and efficient.
“As an attorney, I am always cognizant of whether I am providing value for my client when I bill for services rendered,” Robbins says. “If your attorney is looking to build a long-term relationship with the association, he or she should be scrutinizing their actions to determine if they are in their client’s best interest, or their own best interest. Each matter is evaluated individually in an attempt to ascertain the proper legal strategy, and the cost effectiveness of that strategy,” he says.
Unfortunately, not all attorneys are so aware, and quite frankly, as honest. Because of this, it is vital to screen all bills and look for any red flags. If a board is being billed by its law firm on an hourly or contingency basis, somebody who is familiar with the services that have been rendered (probably the assigned liaison) should review the bills to make sure the time spent appears to be reasonable.
“It is often difficult for directors, managers and lawyers to remember the specifics of each billable hour,” Berger says. “If you don't recognize the initials next to a billing entry, ask. If the billing entry is written in Morse code, ask for clearer billing entries in the future. The invoicing should tell an accurate story of what was done and by whom. Ideally, the retainer agreement should contain a schedule of fees and the manner in which billing is handled,” she adds.
There are a few undeniable red flags to look for. For example, the board should not have to pay for (a) duplicative services performed by more than one attorney for tasks that reasonably could have been performed by a single attorney; (b) unreasonably excessive time spent by young inexperienced attorneys perhaps attributable to a “learning curve;” and (c) additional time that the law firm may have spent to correct errors that it may have made. The reviewer of the bills also should make sure that the bills contain no mathematical or accounting errors, which sometimes happens.
Know the Limits of Frugality
Being cheap can cost you—especially in the courtroom—experts warn. Yes, hiring a junior attorney with a relatively low hourly rate is tempting, but it can cost associations in the long run—literally. It’s important to hire an attorney with expertise in your field of concern, otherwise, your bill will climb substantially to accommodate the extra time it takes the cheap, albeit less experienced attorney to spot the issue and research the matter, Berger says.
Berger also warns associations to look out for low legal quotes.
“Any lawyer who advises that a court battle is going to cost less than $10,000 minimum is probably not being realistic in his or her assessment,” she says. “Depending on the complexity of the case, experts needed and the ability or inability to settle the matter prior to trial, the costs can skyrocket.”
Supplying clients with needed knowledge and research is one of most effective ways to optimize an attorney-client relationship. After all, dealing with clients that are ignorant of association law can be time consuming, frustrating and can lead to stagnancy.
“Our firm regularly provides seminars to clients and non-clients alike on various topics affecting community associations,” Robbins says. “A better informed client is one who is equipped to make decisions after becoming more knowledgeable on the subject matter.”
Like MBR, several other law firms including Becker & Poliakoff, Katzman & Garfinkel, Glazer & Associates, Association Law Group, and others offer free resources, publications, educational classes and seminars to boards and their membership to keep them educated on association law matters.
“Very often our clients will tell us that they were going to call us with a question but found the answer addressed in one of the many free resources we offer,” Berger says. “I have been asked if that is upsetting and the answer is always a resounding, ‘No.’ The guidebooks and other resources were created with one goal in mind: to help association members.”
Enjolie Esteve is a freelance writer and former editorial assistant at the South Florida Cooperator. Keith Loria, a freelance writer, contributed to this article.
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