HOA Justice is elusive without enforcement of laws and high ethical standards

By Deborah Goonan, Independent American Communities

 

Things are really heating up in Florida, and it’s not just because of the weather.

A recent Miami-Dade Grand Jury report blasts the Department of Professional and Business Judgment (DBPR) for its failure to address an epidemic of corruption and dysfunction in condominium associations in the Sunshine State.

While the Grand Jury convened in South Florida, the epicenter of condo life, serious problems exist throughout the state, not only in condominium and cooperative associations, but also in planned communities with homeowners associations.

The Tampa Bay Times highlights some examples of unhappy homeowners in the Gulf Coast region of Florida. They express deep frustration over poor or nonexistent DBPR oversight of mandatory associations.

Grand Jury calls Florida agency inept and ill suited to probe condo complaints

By Susan Taylor Martin, Times Senior Correspondent Published: February 24, 2017 Updated: February 24, 2017 at 11:36 AM
In Pasco County, residents of one community were shocked when their homeowners association approved a special assessment for new roofs even though a study showed most of the existing roofs still had years of “useful life.”

In a Tampa high-rise, condo owners are fighting a $600,000 assessment they say will mostly benefit an investment group that is trying to convert the entire building to rentals.

And in Miami, unit owners watched in vain as what officials called a “condo crime family” spent years rigging association elections and stealing association funds.

Those are the types of complaints that regularly flow into Florida’s Department of Business and Professional Regulation, the state agency charged with investigating allegations of wrongdoing by condominium associations and, in some cases, homeowner associations. Yet the DBPR is “ill-suited” and ill-prepared for the job.

That’s the conclusion of a Miami-Dade grand jury that spent weeks looking into how DBPR handles complaints and came away “shocked,” “amazed” and “exasperated” by what it found.

Read more:

http://www.tbo.com/news/grand-jury-calls-florida-agency-inept-and-ill-suited-to-probe-condo-complaints-20170224/

 

Now, allow me to delve a bit deeper.

DBPR and Homeowners Associations, Disputes over maintenance, and CC&Rs

Could DBPR have been helpful to homeowners at Weymouth HOA? The short answer is NO. Here’s why.

Weymouth at Land ‘o Lakes is a townhouse homeowners association (HOA), not a condominium association. In Florida, single family planned communities are governed by a separate HOA statute, which does not mirror condominium and cooperative statutes.

DBPR has no jurisdiction over Florida HOAs, except to arbitrate election and recall disputes.

But even if Weymouth were a condominium association, Florida statutes do not specifically require ethical standards of conduct for board members, nor does the law require accountability of HOAs to uphold their responsibilities as outlined in the CC&Rs “contract.”

For example, Florida statues do not outlaw self-dealing, nor do they prohibit unfair or one-sided provisions in contracts.

The following screen shots, taken from Weymouth HOA’s CC&Rs, illustrate a few common issues, and explain why there is a bitter dispute over replacement of roofs.

Weymouth is a maintenance-provided HOA. Buyers often see this as an advantage, a promise of a low-maintenance lifestyle.

But what homeowners often fail to realize – until it’s too late – is that granting exclusive control for exterior and landscape maintenance to an HOA shifts control of their private property to a board of directors that might not share their values for fiscal responsibility, quality of workmanship, or frequency of upkeep.

Note that the CC&Rs for Weymouth specify that the Association has exclusive control over “repair, replacement and maintenance of roofs…” among other things. Also note that the CC&Rs do not hold the HOA accountable for making repairs only when necessary, for seeking competitive bids on re-roofing, or for choosing a competent, licensed contractor.  As is typical of most mandatory associations, Weymouth’s CC&Rs do not prohibit self-dealing in awarding of maintenance and repair contracts. (While I am not saying that Weymouth board is engaging in self-dealing, the opportunity certainly presents itself.)

 

 

And note that the homeowner is responsible for repair and replacement of windows and doors, subject to approval by the Architectural Control Committee. Surprise! Not all exterior maintenance is covered by HOA assessments. Furthermore, Weymouth HOA can dictate when it is time to replace doors and windows, and can then require that owners install only HOA-approved windows and doors.

Red flag! What if the HOA approves doors and windows that cost 20% more than average? Or what if the HOA approves cheap windows and doors installed by a second-rate contractor?

By the way, this is common language in maintenance-provided HOAs across the U.S. It often takes homeowners by surprise.

Although it may seem unfair or misleading, state law does not forbid these types of arrangements. Therefore, no state agency can get involved in HOA disputes over exterior maintenance, because no laws have been broken.

 

DBPR and Condo Takeovers

DBPR has no jurisdiction to investigate investor takeover of condominium associations, nor can it prevent a hostile board from engaging in all sorts of aggressive, manipulative, and abusive tactics designed to force owner-occupants to sell their units to condo board investors, simply to escape the tyranny. If condo owners do not willingly sell and move, there is nothing to stop the condo association from forcing eviction either through foreclosure or termination of the association.

How can this be?

The stark truth is that Florida laws actually enable hostile takeover of condominium corporations.

First, voting interests attach to the property, not the person who owns property. That means investors who own multiple units own sufficient shares in the corporation to acquire majority and eventually supermajority voting interests. By default, a wealthy opportunistic investment group reaps the benefit of this arrangement and the spoils of its conquest.

In 2007, when the Florida Legislature enacted a statute allowing for termination of a condo association with only 80% consent of owners (formerly, unanimous consent had been required), and subsequently reduced liability of “bulk buyers” to avoid liability for construction defects inherited from the original developer, it opened the floodgates for the kind of abuse that now affects the Slade At Channelside and hundreds of other condo associations in the Sunshine State.

See also:

Condo owners in Tampa’s the Slade At Channelside battle to keep it from going all rental

http://www.tampabay.com/news/business/realestate/condo-owners-in-tampas-the-slade-at-channelside-battle-to-keep-it-from/2307784

 

Finally, the Grand Jury report has one glaring omission.

Missing from grand jury report is any reference to the responsibility of legal professionals that represent association governed communities.

That’s right. The authors of the report point out the prevalence of misconduct by board members and managers, but fail to recognize the important role of attorneys hired by condo (and homeowners) associations.

An association’s board and/or management company often relies on advice and services of an attorney. And, unfortunately, not all attorneys are competent and ethical. Sometimes an attorney provides bad advice to the board, resulting in costly litigation against the association and months, if not years, of internal conflict within the community.

Whether such bad advice is willful and intentional or well-meaning but unintentional is debatable. Either way, attorneys must be held accountable for the roles they play in governance of thousands of mandatory associations in Florida, and, for that matter, across the U.S.

A few weeks ago, I wrote and article about Palm Aire Country Club Association II (PACC2) in Pompano Beach. The article highlighted the struggle of condo owners to conduct a fair election, one of the chief complaints of condo owners highlighted in the recent Grand Jury report.

It was the law firm of Shendell & Associates that advised incumbent condo board members with regard to elections in 2015 and 2016.

In 2015, Shendells removed condo board candidates from the ballot on the day of the election, for purported assessment fee delinquencies. Those delinquencies were later revealed to be bogus – a result of untimely posting of payments, or a refusal of the manager to accept payments from owners. Condo owners complain that they were instructed to send payments directly to Shendells, who continued to accrue excessive attorney’s fees on top of disputed delinquent assessments.

In other words, the very same, increasingly common complaint cited in the Grand Jury report. Can hundreds of condo owners, making similar complaints, all be wrong? Or does this situation call for serious investigation by skilled professionals? Is the process used by some HOA attorney firms legal? Is it ethical?

In 2016, Shendells also advised the board to postpone the annual election meeting with just two days’ notice. But according to PACC2’s own ByLaws, postponing an annual meeting is subject to a vote of the entire condominium membership. This has been confirmed by the courts in December 2016 and January 2017.

Shendell’s advice resulted in disenfranchisement of all condo owners who voted for the 2016 board, a board who was not finally granted access to association records and funds until January of 2017, less than two months prior to the next annual election.

Clearly, DBPR was of no use to PACC2 condo owners.

Norman B. Arnoff, Esq., whose wife owns a condo in PACC2, has read the Grand Jury report, and offers his thoughts:

Even if the Florida Legislature appropriates more government and better equipped resources and trained personnel to oversee the regulatory and enforcement framework for Florida Condo Associations ; there will not, nor can there be all the resources necessary to maintain the highest standards, and that is why professional responsibility of especially the lawyers has to be maintained at the highest level. The lawyers and the other professionals coupled with a duly elected and qualified board with a real sense of fiduciary responsibility i.e. they are to serve and not merely be served; is the keystone of the arch of safe and sound condo associations.

 

The bottom line

While a competent state agency could theoretically prove helpful to owners of association governed housing, and meaningful enforcement could serve as a deterrent to bad actors, what is sorely needed are higher ethical standards that serve the public interest. We need to substantially raise the bar for acceptable leadership standards in common interest communities, and hold each other accountable, based upon open and transparent democratic principles. Furthermore, homeownership must not be based upon one-side, undemocratic contracts, that compromise individual rights and put property owners at a disadvantage with respect to their associations.