DEVELOPER-CONTROLLED HOA LEVIES SPECIAL ASSESSMENT FOR LEGAL FEES

An Opinion By Jan Bergemann
President, Cyber Citizens For Justice, Inc.

Published June 8, 2010

It's always amazing to see when especially people that deal professionally with homeowners’ associations try to ignore the Florida Statutes regulating these HOAs. They know full well that nobody is enforcing the statutes anyway and most homeowners don't have the money to enforce the statutes in court or defend themselves against unjust demands. Especially developers seem to have the tendency to plainly ignore the provisions of FS 720.

FS 720.303(8) ASSOCIATION FUNDS; COMMINGLING.--

(c) Association funds may not be used by a developer to defend a civil or criminal action, administrative proceeding, or arbitration proceeding that has been filed against the developer or directors appointed to the association board by the developer, even when the subject of the action or proceeding concerns the operation of the developer-controlled association.

Florida Statutes 720 contains many provisions that are specifically valid for so-called developer-controlled associations, meaning associations that are not fully built out and the association board consists of members appointed by the developer. FS 720.303(8) clearly states that legal fees are the responsibility of the developer, as long as he/she controls the association. Admittedly, not everybody knows it, but a developer who hired a law firm to sue a homeowner for libel and/or slander and is otherwise involved in all kinds of lawsuits should take the time to confer with his law firm about specific provisions in FS 720.

LETTER TO OWNERS: SUPPLEMENTARY ASSESSMENT

The purpose of this assessment is to cover shortfalls in the 2009 Budget.

This assessment was necessary to cover unanticipated factors such as the unexpected closing of the previous management company; unreturned Association funds and records; non-payment of shared West Gate expenses by the neighboring Grove Community; and non-budgeted legal fees for clarification of Association operations from demands of Harbor Hills Association Members.

If you missed these few important words in the letter "unanticipated factors such as the unexpected closing of the previous management company," or didn't understand the meaning, here is a little explanation for these few innocent-sounding words:

According to developer Michael Rich, a former management company, Kravetz Realty Group, LLC, embezzled $126,000. This management company had been hired by developer Michael Rich, much to the dismay of some of the homeowners. Here are two paragraphs of a letter, written before the embezzlement finally occurred. Did the author of the letter already see the writing on the wall?

The Developer has recently hired Kravetz Realty Group, a New York property management firm, as a full service manager for an annual fee of $72,070.00. The Florida agent for this firm, our new Community Association Manager, is located in Jupiter, 200 miles away from Harbor Hills. Our assessments must now be sent out of state to New York, 1,300 miles away from Harbor Hills. I believe it is logical to conclude that our funds will now be deposited in New York State bank accounts rather than Florida State bank accounts. What protection do the members have when their assets have migrated to another state? Access to our records has been difficult prior to this change. I can’t see it getting any better with the change.

Kravetz advertises a charge of 3.5% of gross revenue which should produce a fee of $41.00 per homeowner. The fee actually charged by Kravetz amounts to $152.00 per resident owner (475 into $72,070.00). Our sister homeowners association, The Grove, is paying its manager $60.00 per owner. It appears that Harbor Hills residents are being grossly overcharged.

According to some other correspondence, not only money "disappeared." Records disappeared with the money as well.

And despite the opposition of the owners against hiring this out-of-state management company, developer Michael Rich now expects these same owners to pay for the losses caused by his hiring this management company.

The economy is bad, the real estate market even worse and many developers are in financial trouble. Does that mean that developers should be allowed to ignore the current Florida Statutes and assess homeowners to pay for financial deficits caused by the developers’ foolish decisions?