Are Management Companies Under Attack?

In what may become a national trend, two states are attacking the issues of whether certain types of activities routinely performed by management companies amount to the unauthorized practice of law. 

Last Thursday, the Florida Bar Association's committee on the unauthorized practice of law, agreed to issue an advisory opinion about whether certain activities were considered the practice of law.  In 1996, the Florida Supreme Court held that "ministerial actions" taken by managers which do not require significant legal expertise and interpretation do not constitute the unauthorized practice of law.  The Florida Supreme Court found, however, that a manager would be practicing law without a license if the actions involved drafting documents requiring a legal description of property (filing of liens), interpreting statutes or governing documents, establishing rights of the community association by making determinations, or by giving advice as to the legal consequences of taking certain courses of action. This new advisory opinion is expected to consider the following 4 items:

1. modification of limited proxy forms promulgated by the State;
2. preparation of documents concerning the right of the association to approve new prospective owners;
3. drafting of pre-arbitration demands;
4. identifying through review of title instruments, the individuals to receive pre-lien letters.

In addition to Florida, the State Bar of Arizona issued an advisory opinion in March of 2012 which held that managers and/or in-house lawyers of management companies are engaged in the unauthorized practice of law when they:

1. prepare or sign legal documents on behalf of an association;
2. express legal opinions or otherwise affect or secure legal rights;
3. represent an association in a judicial, quasi-judicial, administrative, arbitration or mediation matter;
4. negotiate legal matters with an association member.

Presumably, as a result of this advisory opinion, a class action lawsuit was filed last week by two owners against 22 management companies claiming their practices constitute the unauthorized practice of law and as a result the owners who reside with community associations have been injured.