Knowledge is Power

knowledge-is-power

We have all heard the phrase “knowledge is power” but a recent Florida case involving a condominium association suggests that a lack of proper knowledge may prove to be even more powerful!

In the process of collecting delinquent assessments, a representative of the association’s management company is often required to attest to the process and procedures concerning their company’s handling of owner payments and account ledgers.  There are, however, instances where the current  management company may have had a predecessor at the property, or maybe even multiple predecessors, who handled the particular delinquent account at issue during their tenure.  So this naturally raises a question as to how the current management company can properly attest to the veracity of the records that predate their involvement with the association.

The answer is that the account history maintained by a prior management company has routinely been admitted as evidence under what is referred to as the “business record exception” in order to allow the association to fully substantiate the total amount due and owing.  However, in the recent case of Yang v. Sebastian Lakes the court held that it was not sufficient for the association’s current property management representative to authenticate the records of the prior company under the business records exception because the individual lacked personal knowledge of the predecessor’s practices and procedures and could not attest to the veracity of their records.  Really?

This is surprising since the court’s opinion is in direct conflict with the holding of the WAMCO case which is routinely relied upon and conversely holds that a testifying witness may indeed authenticate the records of a predecessor through the business records exception even though the witness is not aware of the predecessor company’s specific practices and procedures.

In comparing the two differing opinions, the WAMCO decision seems to makes more sense, at least from a real-world perspective.  Take for example the account history associated with a loan.  As we are all aware, ownership and servicing of a loan may change hands several times before there is either a payoff or a default.  In the case of a default, the logic under Sebastian Lakes would require the current holder of the loan to march a parade of witnesses into court so they could each testify as to how their specific company maintained the account history and recordkeeping for the loan during their period of ownership/servicing.  Then again, adding a parade to what many people already believe to be a circus may seem like a natural pairing so why not?

Even more concerning is that the Sebastian Lakes holding fails to account for the scenario where the predecessor, whether it be a bank, loan servicer or management company no longer exists.  It is, of course, impossible to obtain testimony from a representative of a non-existent entity, so under Sebastian Lakes there would seem to be no way to properly authenticate the prior records.  Great outcome!

Even though Sebastian Lakes seems to arrive at a somewhat strange conclusion it is beneficial in that it identifies a defense that has gained a degree of traction and reinforces the value of engaging your current management company to audit the records received from a prior management company for accuracy and consistency with generally accepted accounting principles, which, in turn, will allow them to more accurately testify on your behalf when necessary.

Daniel Wasserstein

E-mail: danw@wassersteinpa.com

561-288-3999

One comment on “Knowledge is Power

  1. Nice blog. I agree with you that one should have a proper set knowledge and information regarding the home rent services . Without knowledge one is not able to have a better living. Thanks for the post.

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