Category Archives: Handicap

Conflicts of Interest Abound in the World of HOAs

      3 Comments on Conflicts of Interest Abound in the World of HOAs
guest blog by Deborah Goonan

What if your condominium leaks like a sieve? What if the streets flood every time it rains? What if your condo building develops foundation cracks and unexplained build up of mold?

Owners may assume that reporting serious problems to the Board will result in sincere concern and earnest investigation of possible construction defects. They might expect the Board to insist that responsible parties pay for damages and repairs. But what if one of the association Board members is affiliated with the Developer?

Residents of Boathouse Condominiums, Bay City, Michigan, have complained of numerous defects but have run into resistance. Their Board has denied their request to seek defect claims against the developer of their 37-unit high-end boathouse conversion, Marina Place LLC. The Agent of the Developer’s corporation just so happens to be a member of the Board at Boathouse Condominiums.

So nineteen residents have filed their own lawsuit against the Developer and construction company, alleging numerous defects that allow water intrusion into the units, and a faulty foundation. But the lawsuit also lists the HOA as a defendant, for failure to address their concerns.

The Developer denies knowledge of defects, and seeks proof of damages.

Attorneys for both sides are already engaged. This battle could get expensive.

(link to news story on Boathouse Condominiums)

 

Where Does CAI Stand On Florida Condo Terminations?

      6 Comments on Where Does CAI Stand On Florida Condo Terminations?
guest blog by Deborah Goonan

Unless you’ve been hiding under a rock for the past decade, you have probably heard about Florida’s boom and bust real estate market for condominiums. The big news right now is the fact that hundreds of condo owners are being forced to sell their homes at a loss to developers and investors, in a series of so-called voluntary condo terminations.

In a recently published article in the Wall Street Journal,  Jack McCabe, CEO of McCabe Research & Consulting LLC, was quoted as saying close to 400 uncompleted complexes remain as part condo and part rental in the state of Florida.

A Bloomberg Businessweek report published last month estimates that 235 condominiums have been terminated statewide since 2007.

West Palm Beach attorney and CAI member, Michael Gelfand, was also quoted in the WSJ article,“It is a classic case of unintended consequences” of the 2007 amendment, which, according to the article, he helped to draft.

Hundreds, perhaps thousands of condo owners have been caught in the middle of a battle to keep their homes or at least receive just compensation. Owners from 13 condo complexes have joined together to fight against developers, and have created their own Facebook page: Floridians ACT.

Attorney Michael Mayer, of Peyton Bolin PL, which operates five offices in Florida, has taken up the fight for owners of Via Lugano condominium in Boynton Beach. According to Mayer, the legal suit contends that the 2007 statute amendment allowing for optional termination by less than unanimous consent does not apply to condominiums created prior to its enactment. The suit also challenges the takeover on Constitutional grounds, at both state and federal levels, as a violation of owners’ rights to “acquire, possess, and protect property.” The Peyton Bolin law firm is listed among CAI’s member service providers.

Ironically, in the midst of terminations of unsuccessful condo projects, a south Florida real estate blog reports that lenders have eased financing for development of 260 new condo towers (over 35,000 units) in South Florida alone, most of them close to the water and on the high end of the market.

So what is CAI’s official Public Policy on the matter?

Look no further than page 58 of CAI Government & Public Affairs Public Policies:

“Community Associations Institute (CAI) supports protections that enable property owners to challenge governmental taking of common or private property. CAI opposes legislative or judicial actions that would limit or restrict the ability and rights of community associations to maintain control over association common property.”

Read between the lines: Developers and private investors who take control of the Association must not have their property rights restricted. Furthermore, it would be inappropriate to protect owners’ rights where the party seeking to take property rights is not the government.  CAI maintains, generally supported by the courts, that Community Associations are corporate entities, and are not government entities.

Whose interests does CAI actually represent? The introduction to Public Policies provides some contradictory language:

“CAI is dedicated to fostering vibrant, responsive, competent community associations that promote harmony, community and responsible leadership. CAI advances excellence though a variety of education programs, professional designations, research, networking and referral opportunities, publications, and advocacy before legislative bodies, regulatory bodies, and the courts.

In addition to individual homeowners, CAI’s multidisciplinary membership encompasses community association managers and management firms, attorneys, accountants, engineers, builders/developers, and other providers of professional products and services for homeowners and their associations. CAI represents this extensive constituency on a range of issues including taxation, insurance, private property rights, telecommunications, fair housing, and community association manager credentialing. CAI’s over 32,000 members participate actively in the public policy process through more than 60 local, regional and state chapters and 35 state Legislative Action Committees and one federal Legislative Action Committee.”

Are Community Association Boards that are controlled by developers and investors exercising “responsible leadership” in these hostile corporate takeovers that deprive Americans of their property rights? Does Florida Statute 718 represent the “individual homeowners” constituency of CAI, through optional termination provisions drafted by one of their own member attorneys? It seems the statute as written supports the collective interests of the Association rather than the individual interests of owners.

Is it realistically possible to provide “advocacy” that will encompass a “multidisciplinary membership” where the interests of one subset of a constituency are often in direct conflict with the interests of another?  You be the judge.

References:

http://investing.businessweek.com/research/markets/news/article.asp?docKey=600-201408291903KRTRIB__BUSNEWS_31950_37969-1

http://www.caionline.org/info/provider/Pages/CAINationalServiceDirectory.aspx

http://www.caionline.org/govt/news/Political%20HeadsUp%20Public%20Document%20Library/CAIPublicPoliciesJan2013.pdf

https://www.facebook.com/Floridiansact

http://www.peytonbolin.com/recent-press/

http://online.wsj.com/articles/in-florida-condo-battles-play-out-1407260650

http://therealdeal.com/miami/blog/2014/08/29/condo-construction-financing-spigot-begins-to-open-in-south-florida/

 

HOA Residents Try To Bail Out

      7 Comments on HOA Residents Try To Bail Out
guest blog by Deborah Goonan

The HOA, Association of Poinciana Villages (FL), wants to become a city. In fact, a group of residents have been attempting to become a municipal corporation for several years. The group has recently completed a feasibility study that it will submit to Florida Legislature.

It seems as though the large subdivision of Poinciana is tired of being underfunded and getting no services from Osceola and Polk Counties, despite the fact that 47,000 residents pay taxes to both Counties and the state of Florida. Their mature HOA cannot provide needed services provided to residents of nearby cities of similar size. Apparently the residents pay assessments, while the developer does not. The residents are tired of Developer Avatar retaining majority control since 1971 and want each resident to have voting rights, instead of a 9 member Board of Directors voting on behalf of each of Poinciana’s Villages. What a concept!

Who can blame these residents? After all, compare PUBLIC local government (municipal or county level) to PRIVATE governance in HOAs.

*A municipality has access to property and sales tax revenues, low interest loans, issuance of municipal bonds, state and federal grants. * The HOA is limited to collection of assessments that are NOT based on assessed property values. (often the $50K home pays the same assessment as the $500K home and even commercial property owners) The HOA has very limited access to financing through loans.

*A municipality can take advantage of economies of scale, and can cooperate with nearby towns and cities, or enter into local agreements to provide needed services. * HOAs have no option to collaborate with neighboring communities or public entities to provide needed services. In fact, its governing documents (the so-called CC&Rs contract) often state that the local governing entity will NOT provide such services, because the Developer has given away owner rights to these services as part of the development agreement at the time permits were issued.

*Local government elected officials are compensated, are publicly vetted, and they generally possess experience relevant to their respective roles. They often have term limits. Should these officials fail in their work, they are usually voted out of office in the next election. If they engage in unethical or illegal conduct, they will eventually be investigated, and held personally liable, without constituents having to bring a legal suit. *The HOA Board is comprised of volunteers who are practically immune from personal liability and oversight. The burden is placed upon owners and residents to investigate wrong-doing or spend personal funds in filing a civil suit.

*Voting and elections in a city – one vote per registered adult voter vs. one vote per unit (dwelling) owned. That means tenants vote, and each adult in the household gets to vote. No one in the community gets more than one vote. * The HOA Developer is granted weighted voting rights and appoints the Board as long as he controls most of the votes. After turnover, Boards are often elected by representative voting members, proxies, and other dubious means. Of course, allocation of voting rights is inequitable: the more property one owns, the more votes one has. They and the managers they hire often lack necessary personal and professional skills to do the job.

*The city has sovereign immunity, limiting its legal liability. * The HOA is a corporation that must insure itself against potentially high legal liability.

This is one evolving story to monitor closely.

(article on Poinciana seeking municipality status)
(PINCHOS residents group statement on reasons to incorporate)
(Letter from PINCHOS to Florida Legislators)

 

Love Thy Neighbors – It’s Good For The Heart

      7 Comments on Love Thy Neighbors – It’s Good For The Heart

I’m going to slip into the religion zone for just a minute. But for you non-believers, just wait. It’s for you too.

When Jesus was asked about the most important commandments, the first was “Love your God with all your heart.”

When asked about the second he said, “Love thy neighbor as thyself. There are no greater commandments than those.” He actually said that!

Sooo, let’s go full circle and jump forward a couple thousand years to a scientific study of more than 5000 people and their health and general well-being. It seems like there’s a pretty solid connection between heart health and the amount of strife with neighbors.

I’ll leave the finer points of the study up to you in the link below. In the meantime, I’m using both hands and both sets of toes to count up the number of cancer and heart disease patients in my own HOA neighborhood!

(good neighbor study)

 

Norristown PA Condominium Failure Costs Taxpayers Millions‏

      3 Comments on Norristown PA Condominium Failure Costs Taxpayers Millions‏
guest blog by Deborah Goonan

Why should you care about continued construction of HOAs, even if you do not live in one?

City and County planning boards love HOAs because they increase the property tax base, while requiring very few, if any, additional services to be provided within the boundaries of these communities. In theory, HOA residents pay assessments for their own services – which can include road maintenance, storm water system maintenance, security, and the like, as well as maintenance of common areas and multifamily (attached) housing structures. In other words, HOA owners pay more of their property tax dollars for a lower level of city or county service. That means higher net tax revenues for cities and counties. Or does it?

I have blogged before about the fact that non-HOA taxpayers are increasingly footing the bill for HOA failures in their cities and counties. Over the past few months, several media reports have surfaced about troubled and failed private HOA communities. Today I present one example from Norristown, Pennsylvania, as originally reported in The Inquirer last month. (see link to article below)

According to the report, a 26-unit condominium at 770 Sandy Street was constructed in the mid-2000s. After construction, when problems became apparent, city “Inspectors pinpointed hazards years after the building was occupied, including load-bearing walls that were hollow, exposed wiring, and fire escape stairs made of wood.” How did the developer, R. Bruce Fazio, get away with selling homes with so many apparent construction defects?

Upon further investigation, it was discovered that the municipality had issued a flawed permit, and apparently failed to identify building code violations prior to occupancy.

In 2010, the building was condemned, and a judge ordered the city of Norristown to make repairs totaling $3 million.

But despite the fact that taxpayers have already forked over $3 million for the apparent negligence and incompetence of the developer and city officials, problems still continue, with many units remaining vacant and unlivable due to water damage from frozen pipes. Another condemnation may be in the works. How much more money will it cost the city of Norristown?

The unfortunate owners of these ill-fated condos have faced major financial loss and stress, but the residents of Norristown at large are also paying the price to clean up the mess left behind. Meanwhile, the developer and city officials are not being held accountable. Read the article below for details.

Your tax dollars at work?

(link to news story about Norristown failures)