By Deborah Goonan, Independent American Communities
How can someone else take away the home that you own, and declare you their tenant? That is the question of former condo owners in Delaware County, Pennsylvania.
Former condo owners have filed a class action lawsuit against Daniel Berger of Boothwyn Partners.
The condo takeover playbook
It all starts with a distressed condo association that just so happens to be located on potentially valuable land. Opportunistic investors see potential for substantial financial gain by converting the property to rental apartments. So they buy all the vacant units, as well as any short sales or foreclosures. When they own enough units, investors gain sufficient voting interests to literally elect themselves to the board.
Once an investor controls the board, the tyranny begins. Exploitative special assessments. Questionable collection tactics. Fining owners for bogus or trumped up violations or nuisances. Leasing condos to tenants from hell. Pressuring remaining owners to sell their units below market value just to escape these unpleasant realities.
Eventually, the investor-controlled board owns 80% of condo units, and then “votes” in favor of termination (also referred to as dissolution) of the condo association corporation. And then the investors declare themselves the new landlord of YOUR property.
It’s all technically legal, or at least not illegal
But what Berger has done may be perfectly legal. If City Hall tried to get away with the tactics of Boothwyn Partners, it would be considered illegal. There would be an uproar.
But not so with a condominium association. Why?
Do not believe industry propaganda about condominium associations as small democracies, where owners elect their neighbors to lead the association for the good of all owners.
A condominium association – like nearly all mandatory homeowners associations – is a corporation. Corporate voting interests are assigned to the number shares one owns, and in the case of Association Governed Residential Housing, that means voting interests are tied directly to the number of units or the total square feet of property one owns.
Contrast this to the voting rights we have as residents of our Cities and Counties. Each registered voter age 18 and up gets but one vote, regardless of homeownership status. (With the exception of convicted felons, whose voting rights can be redeemed after serving their sentence.)
According to U.S. Constitutional law, a landlord does not get to one vote for each apartment or home she owns! A developer does not get “weighted” votes in return for his investment in real estate! That only happens in Association Governed Housing developments.
I repeat: a mandatory condo association is a corporation. Therefore, a condo association is vulnerable to hostile corporate takeover. It’s really no different from any other corporate merger or consolidation – the kind that result in hundreds or thousands of employees losing their jobs as a result of “reorganization” following the takeover.
Except…a condo takeover means you lose your home – and any equity you may have acquired – instead of your job.
Not just a problem in Florida anymore
Condo takeovers occurring in the Sunshine State made national news a few years ago, including reports in the Wall Street Journal and CNBC.
But the trend has spread to Illinois, Arizona, and now Pennsylvania. No doubt the same process has been taking place – unpublicized – in states all across the U.S. Florida was merely the incubator for a process that has been very profitable for real estate investors.
No sympathy, no help for homeowners
And the worst part of this injustice is that, thus far, there has been little help for homeowners. Florida legislators considered and approved statute amendments meant to alleviate financial loss in a hostile condo takeover, but have done nothing at all to prevent what amounts to the theft of your home against your will.
Florida statutes remain full of loopholes that allow investors and developers to avoid a legal requirement to make you whole when they convert your condo to an apartment.
Willowbrook residents can’t halt sale of condos; lawsuit continues
An Upper Chichester apartment complex at the heart of a class-action lawsuit sold last month for $18.5 million and former individual unit owners now say they are being asked to rent what used to be their homes.
“Basically, they wanted the complex and now they have it,” said Christine Scott, lead plaintiff in the lawsuit encompassing claims from a dozen former owners at Willowbrook Apartments. “No matter how nice that may be for them, it cannot make what is happening to people around here right.”
The complaint, filed earlier this year in Delaware County Common Pleas Court by attorney Leslie A. Margolies on behalf of the former owners, alleges 16 counts including fraud, unjust enrichment, deceptive business practices and criminal conspiracy against real estate broker Daniel Berger and others who allegedly orchestrated a hostile takeover of the property in order to auction it to themselves.
Berger’s company, Boothwyn Partners, has denied the allegations.
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