Category Archives: Horror Stories

FL legislature passes amended version of condo termination bill, still full of loopholes

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guest blog by Deborah Goonan

Florida Legislators have done it again. They have managed to pass a bill that gives the illusion of protecting condo owners, but, in reality, does very little to prevent real estate investors and developers from exploiting consumers, violating 5th Amendment Rights to unlawful taking of property and just compensation.

In the final week of the 2015 legislative session, both the Florida House and Senate voted unanimously to approve passage of HB 643 (identical to SB 1172). Republicans Chris Sprowls and Chris Latvala sponsored these companion bills, with the intention of making it more difficult for bulk buying investors to take advantage of condo owners, particularly those who paid high prices at the time of purchase. Tens of thousands of Florida condo owners have faced forced termination of their distressed condominium associations, with the result that most have been kicked to the curb, forced to sell their units for pennies, most losing all of their equity or left with outstanding mortgages.

Even in its original draft, HB 643 and companion bill SB 1172 had loopholes. (See link to previous blog) But over the course of recent weeks, the two bills were consolidated and amended (watered down) 9 times.

So many loopholes remain in this bill, and news releases are providing inaccurate and incomplete information, touting HB 643 as a “step in the right direction.”

For instance, a recent news release states that condo owners will receive 1% of the value of the unit to help with relocation expenses. But HB 643 specifically states that the relocation allowance will be equal to 1% of termination proceeds. With all the offsets allowed against termination proceeds — the outstanding first mortgage, delinquent assessments, special assessments, fines, etc. — the proceeds could end up being very low or even zero. Do the math – 1% of zero is zero.

Plus there are so many conditions for condo owners to receive the original purchase price of their condo units, that this bill is unlikely to help the vast majority of condo owners. The conditions include:

o   The original purchase has to be made from the developer, not a resale;

o   The property must be the owner’s homestead, as registered in the County of residence;

o   The owner must have absolutely no financial obligation to the lender or the HOA, including an unpaid exorbitant special assessment and/or questionable fine issued by the bulk owners in order to “break” owners and pressure them into selling at a loss.

o   The “full purchase price” concession only applies if bulk owners represent at least 80% of voting interests approving a plan of termination. What if the bulk buyer that controls, say, 75% of voting interests, but then amends the documents to allow for first right of refusal? That would give investors the power to approve sales to straw buyers that will vote in favor of termination, but exempt them from reimbursing owners their full purchase price when that exceeds current fair market value. As written, the bill would not require buyers to be disclosed as affiliates as long as no one buyer acquires at least 20% of the condominium.

And if the bulk buyers control less than 80% of the voting interests, but a percentage sufficient to allow unilateral amendment of the governing documents, this bill does nothing to stop investors or developers from changing the basic rules of the game to their own advantage — even reducing the percentage necessary to approve the termination below 80%, as is permitted by FL Statute.

The loopholes are so obvious, even to non-attorneys and lay people. How can Legislators – many of them educated in law, political science, business, or public policy – justify voting in favor of HB 643?

(South FL Business Journal news release on HB 643)

(unanimous vote of approval)

(full text of HB 643)

(previous blog)

Vile HOAs Finally Attract Lawmakers’ Attention

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Well, well. A North Carolina legislator has introduced a bill that would strip Homeowners Associations of their ability to foreclose on homes. It won’t pass, of course. The lobbying powers that profit from the HOA business will pour millions of dollars into defeating any such bill anywhere in the country.

Still, it’s interesting that HOA abuses and bully boards are entering the collective consciousness of American homeowners.

(link to North Carolina proposal)

 

Got $60,000 to Spare?

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guest blog by Deborah Goonan

Do you have $60,000 to spare?

Imagine you own a one or two bedroom condo in Fort Lauderdale, with a balcony view toward the Intracoastal, and within walking distance to the Atlantic Ocean and beach city night life. Ah, paradise!

Until you get a letter from the Condo Association, demanding that you cough up nearly $60,000 for needed repairs in just a few weeks. You read that right: SIXTY.THOUSAND.DOLLARS.

According to a Channel 10 news report by Bob Norman, owners received notice of the special assessment on February 20, 2015. The first $20,000 was due on April 10, with the full balance due by June 10. Nearly half of owners were unable to come up with the first $20,000 installment. It’s not looking good when the Association cannot collect even one third of what it says is needed to make repairs.

Now many owners are understandably stressed out, knowing they face possible lien and foreclosure if they are unable to come up with all the money within a few weeks. The Association Board is reportedly looking into loan financing to raise the balance of the money needed for repairs, and to allow owners to pay over time. It’s looking like a loan — if they can secure one — will be for millions of dollars plus interest. Either way, assessments will increase dramatically. So much for the argument that condos provide affordable housing.

A quick check of public records for Embassy Tower II Condo reveals recent sales values of perhaps $170,000 – $300,000 per unit, depending on the size and number of upgrades inside. This special assessment amounts to perhaps 20-33% of the value of the unit at the time of sale. Even if owners are able to come up with this sizable chunk of change, will they ever see a good return on their investment?

Also according to public records, Embassy Tower II condo was built in 1973. That makes this condominium complex 42 years old. If owners had been setting aside reserves all along, there would be no need for a $60,000 special assessment. But, as readers of this blog know, it is rare for HOAs to adequately fund reserves.

Let’s do the math, 102 units times $60,000…that’s about $6.1 million shortage of reserves!

So, I’ll make a prediction. Because of its location near both the Atlantic Ocean and the Intracoastal, I’ll bet investor groups are keeping a close eye on Embassy Tower II, just waiting to snatch up units from owners desperate to sell, or facing foreclosure. Why, as soon as they can oust enough current owners, and take control of the Board, they can terminate the Association, and boot out the remaining owners. Then they can raze the 42-year-old building and put up a shiny new condo tower with twice as many units! They’ll make millions!

You see, the dirty little secret about many “affordable” condominiums is that planned obsolescence is part of the equation, virtually guaranteeing redevelopment every 30-50 years.

 

(link to Channel 10 report on huge special assessment)

Child Discrimination in HOAs Illegal!

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guest blog by Dave Russell (community association manager)
Last week Minnetonka residents of a condo complex won a massive settlement agreement in a federal lawsuit contending that a ban on playing in the grass illegally discriminated against families with children.The settlement agreement, announced last Friday, by U.S. Attorney Andrew Luger, means that the Greenbrier Village Homeowners’ Association Inc. and Gassen Company Inc. must establish a new nondiscrimination policy and pay a $10,000 penalty to the federal government and $100,000 to six families.  We all know well who is going to foot the bill for this one. Don’t we?
 
Just days after the Minnetonka settlement another HOA in California was making headlines for smacking homeowners with $50 fines for basically the same thing.  It appears that the Agave and Saguaro HOA in Chula Vista , California prohibits a number of kid-friendly activities in their development. This HOA prohibits their resident children from riding skateboards, bicycles, roller-skates or anything with ‘wheels’ on their driveways, common areas, sidewalks or streets. So what gives with these kooky rules?
 
Well the reporters down at ABC 10 News went to Prescott Management (the management company for Agave and Saguaro HOA) to ask that very question. The HOA manager claimed that some of those rules were for the ‘safety of children.’  Are these ‘safety concerns’ really legitimate?
 
While I completely understand the need for kids to be able to play in their communities, what happens if something goes terribly wrong? Hypothetically, let’s say this HOA changes their rules and a child gets mowed down by a car in the driveway. Whose fault is it? Well that’s the question the parents attorneys will be asking.
 
The argument can easily be made that the HOA should have adopted rules restricting children from playing in dangerous areas, such as driveways. One has to remember, attorneys are always searching for the deepest pockets when it comes to lawsuits and settlements. Unfortunately, those deep pockets always belong to the HOA and their insurance carriers.
 
HOAs and community managers seem to be in a real pickle here. If you restrict child-friendly activities, even if they may be dangerous, the HOA could be sued for a fair housing violation. If you don’t have safety rules in place, and a child gets hurt, the HOA still gets sued if something goes ‘terribly wrong.’ When it’s all said and done, and dust settles from the lawsuits,  it’s the homeowners who will foot the bill once again. Well, don’t they always?
 
So what’s the solution to this seemingly new legal issue of Children vs. HOA’s? A large part of this problem was actually created by the developers themselves, who poorly designed these communities, and without children in mind. Very rarely do you see a developer put in a kid-friendly area where kids can just be kids. And for some reason if the developer does build a kid-friendly area, it’s always across a busy road like the development in the Minnesota case.  It’s all about jamming in as many units into one confined space as possible for profit.
 
There’s no doubt we’ll be seeing a magnitude of new lawsuits from homeowners and federal agencies like Fair Housing. These lawsuits are going to cost homeowners billions of dollars and make HOA insurance premiums skyrocket!  In my opinion, the best solution to this newly found problem is to stop building these damn liabilities!
 
If you ever needed another reason not to buy into an HOA……make sure that you add this one to the top of your list!
 

Seething Over Solar Seems Senseless In Kehrs Mill Estates

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guest blog by Nila Ridings
Most of our readers can relate to being an activist working towards changes in America’s HOAs. We understand being passionate about sharing our knowledge of the abuses and corruption. We can relate to Frances and Jim Babb in many ways. For one, they live in an HOA. And they are strong supporters of solar energy. They believe it is right for America for many reasons. And it’s the most efficient way for them to provide energy to their upscale Victorian mansion in Clarkson Valley; a posh Saint Louis suburb.The Saint Louis Dispatch stated, “The Babbs’ ordeal has turned Frances Babb into a advocate. She’s lobbied state legislators over the past year for the Senate Bill 579, which bars homeowners associations from prohibiting solar energy.” The bill passed. End of the story…or is it? No, it isn’t.

The Babbs requested approval for the installation of the solar panels from their HOA board at Kehrs Mill Estates. There was no response within the time allowed by their CC&Rs. Next they applied for a permit from the City of Clarkson Valley where they ran into a snag that ultimately had to be resolved with litigation and a great deal of nonsense. The Babbs prevailed. The City of Clarkson Valley appealed the court’s decision but were again ordered to issue the permit. The Babbs installed the solar panels and looked forward to living in peace while setting a trend towards using cleaner energy and doing their part to make America less dependent on Arab oil.

Suddenly, guess who has an issue with their solar panels? I know you guessed it right, THE KEHRS MILL ESTATES HOA! Some neighbors claim the solar panels might cause car accidents or bring rabies into the exclusive community. So, now do they want them removed? The Babbs’ house sits a football field length away from the road surrounded by trees so it’s barely visible to passersby.

Will there be another legal battle or will the Kehrs Mill Estates BOD realize how senseless it would be to file suit when the State of Missouri has passed a law that allows solar panels, the City of Clarkson Valley has lost court battles twice, and they didn’t follow their own CC&Rs? We know how this historically goes….after $100,000 or more is spent in legal bills somebody gets tired or goes broke in the fight.

I’ve spoken with Frances Babb and I am 99.9% sure she isn’t going to take her solar panels off of her roof! I’m cheering her on and I hope you will, too. HOAs expect their members to jump at every command and demand but when they don’t follow their own CC&Rs it can sure come back and bite them. Perhaps this will be a lesson learned?

Oh! And a word of caution to our pilot readers. Please do not mistake the Babbs’ solar panels as the runway lights for Lambert Field. Landing your Boeing 757 on one of the HOA private streets is strictly prohibited!

The three attached links are well worth reading!)

(St Louis Post-Dispatch story on the solar fight)

(followup story on solar fight)

(story in Clean Technica)