A developer in Biloxi, Mississippi is selling units in a new condominium project. She also operates a property management company and wants to enter into a long-term management agreement between the condominium association and her management company before the first units are sold. A buyer's agent reviewing the public offering statement notices this arrangement. Under the Mississippi Condominium Act and general condominium law principles applicable in Mississippi, which statement best describes the legal significance of this arrangement for prospective buyers?
Correct Answer
A) The management agreement must be disclosed in the public offering statement because it creates a material conflict of interest and ongoing financial obligation binding on future unit owners
Under the Mississippi Condominium Act (Miss. Code Ann. §89-9-1 et seq.), the public offering statement must disclose all material facts about the condominium project, including any contracts or agreements that will bind the association and its future members. A long-term management agreement between the developer and a developer-affiliated management company is a classic conflict-of-interest arrangement that creates ongoing financial obligations for unit owners. Its terms, duration, and the developer's related-party interest must be disclosed in the public offering statement so prospective buyers can make fully informed decisions. Failure to disclose such an arrangement could constitute a material omission.
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