The building decided not to pay. Maybe the work was defective, maybe the board disputed a change order, maybe the money simply was not there. Either way the vendor sues, and the caption names the management company right alongside the building — because the management company's name and signature are on the contract.
In most cases you should not be a defendant at all. An agent who contracts for a principal the vendor knew about is generally not personally liable on that contract. The qualifier is that you have to have made the agency clear, and the place that gets tested is the signature.
We defend management companies against vendor and contractor claims. Call 212-233-1233 or email [email protected].
The Disclosed Principal Defense
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The rule
Where an agent contracts on behalf of a principal whose identity the other party knows, the contract is generally the principal's and the agent is not personally bound by it. A vendor who understood it was doing work for 123 Owners Corp., with the management company acting as its agent, contracted with the building.
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How the signature block decides it
“ABC Management LLC, as agent for 123 Owners Corp.” makes the agency explicit on the face of the document. “ABC Management LLC” on its own, with the building named nowhere, invites the argument that the management company was the contracting party. The difference is a few words typed once, and it is worth auditing across your vendor forms before a dispute rather than after.
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What else the vendor will point to
Beyond the signature: who the purchase orders came from, whose bank account paid the earlier invoices, who the vendor negotiated with, and whether anyone ever told the vendor who the owner was. An agent whose own account paid prior invoices has a harder argument than one that always paid from the building's operating account.
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Where the defense does not apply
If the agent personally guaranteed payment, contracted in its own name for its own account, or gave assurances that it would be responsible, the defense is unavailable. It also does not cover claims that are not about the contract — a tort claim arising from the agent's own conduct stands on different ground.
What to Do First
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Tender to the building
You were sued for acting on the building's behalf. That is precisely what the indemnification clause in your management agreement is for. Tender in writing, ask for a defense, and if the building refuses, get the refusal in writing — you may be recovering those defense costs later.
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Pull the contract and the signature page
Before anything else. How you signed shapes the entire defense, and it is better to know immediately than to discover it in a deposition.
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Find out why the building did not pay
If payment was withheld because the work was defective, the building has a real defense and likely a counterclaim, and you are a bystander to a dispute that will be resolved between them. If payment was withheld because the building has no money, the vendor's motivation for keeping you in the case becomes obvious and the dynamic is different.
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Notify your carrier
Even where you expect to be dismissed. Notice is cheap and late notice can be fatal to coverage.
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Check for a mechanic's lien
Vendor suits frequently accompany a mechanic's lien against the building, which has its own deadlines and its own consequences for unit closings and refinancing. The lien often needs attention faster than the lawsuit does.
Getting Out Early
The objective for a properly positioned managing agent is dismissal at the outset, not vindication after discovery.
Where the contract names the building and you signed as its agent, that is frequently resolvable on the documents alone, without a trial on what anyone understood. Vendors often name the agent reflexively and will release it once the point is made, particularly where the building is the solvent defendant they actually want. A letter setting out the agency and enclosing the signature page resolves a meaningful share of these before an answer is due.
Where you are staying in the case — because of how the contract reads, or because the vendor alleges something about your own conduct — the defense runs alongside the building's, and the counterclaim over the quality of the work generally belongs to the building. See claims against vendors.
Fixing It Going Forward
- Standardize the signature block on every vendor contract to name the building and your capacity as its agent
- Have vendor contracts run between the vendor and the building, not between the vendor and you
- Pay vendors from the building's account, never from your own
- Put the building's name on purchase orders and work authorizations
- Never give a personal or corporate assurance of payment on a building's behalf
- Confirm your management agreement obligates the building to defend you on claims like these
Speak With Our Firm
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You should not be paying for the building's decision
A management company sued over a bill the building chose not to pay has two things to establish: that it contracted as an agent, and that its client owes it a defense. Both are usually available, and both are frequently left unclaimed by agents who assume being named means being liable.
Call 212-233-1233 or email [email protected].
