Hotels say management company withheld files, jeopardizing COVID-19 relief funds

As the aggressive delta variant of the COVID-19 pandemic wreaks havoc, lawsuits filed by hotel properties in three states should serve as a wake-up call for all hotel owners who hire a management company.

Lawsuits in Florida, Georgia and Alabama allege that a management company failed to fulfill its legal obligations to hotel properties, including refusing to hand over all documents related to its management of the properties, compromising their eligibility for federal COVID-19 relief programs designed to keep workers on the job.

“The owners of the hotel are committed to being good corporate citizens, doing their part in keeping the staff at work despite the obvious downturn in the economy. Federal aid programs are a critical part of keeping these workers employed, but the management company’s refusal to turn over the records as required is unwarranted and undermines efforts to serve the public and employees, ”said David Weiss, a Tallahassee-based lawyer with Ausley McMullen, who represents one of the hotel’s owners. “The owners made a deal with the management company in good faith and were utterly disappointed with the business practices they faced. “

All four lawsuits were filed in Tallahassee by Capital Circle Properties; in DeKalb County, Georgia, by SM Investors; and in Mobile, Alabama, by Montilimar Hospitality and Service Hospitality. MMI Hotel Group of Flowood, Mississippi, is the defendant in all four lawsuits.

Hotel owners accuse the management company of improperly withholding documents they need to get tax credits and loan forgiveness. Hotels have relied on Paycheck Protection Program (PPP) loans and employee retention credit to keep workers on their payrolls during the pandemic.

Federal COVID-19 relief programs require companies to provide detailed documentation proving the funding was justified and used for its intended purpose. Without proper documentation, hotels would be at the mercy of loans and not benefit from tax credits.

The four hotels suing MMI Hotel Group are the TownePlace Suite by Marriott properties in Tallahassee and Mobile, Alabama; a Hampton Inn in Stone Mountain, Georgia; and a Fairfield Inn & Suites by Marriott in Mobile.

Hotel operators claim that MMI Hotel Group “has failed in its fiduciary obligations… of hotels.

Because the management company has not transferred all hotel books to owners as required by their contracts, owners likely cannot meet federal requirements for COVID-19 relief legislation. This jeopardizes the funds they planned when they kept employees on staff.

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