Article Courtesy of The
Miami Herald
By Michelle Marchante
Published November 25, 2022
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The former president of one of the largest homeowners associations in Florida,
along with her husband and three others, were accused of plundering millions of
dollars of monthly maintenance fees and diverting it for personal use.
Do you suspect your homeowners association is misusing your money?
People who live in an HOA community elect a governing body tasked with
overseeing day-to-day responsibilities, such as maintenance of shared amenities,
collecting fees and enforcing rules.
But sometimes, someone with access to the association’s wallet starts stealing
money. On Tuesday, current and former board members of the Hammocks Community
Association, Florida’s largest homeowner association, were arrested and charged
in an alleged $2 million fraud scheme. The association oversees more than 6,500
units in West Kendall.
Here are some of the things to watch out for and what you can do if you think
there’s a problem in your HOA:
Red flags to watch for “Well-run associations are readily transparent
regarding the association’s finances.
A significant red flag is when financial information is not readily available
and not timely provided by the association,” posted Fort Myers-based attorney
Rob Caves, who works with the Fort Lauderdale-based Becker law firm, to
FloridaRealtors.org.
“Other potential red flags are unexpected special assessments or increases in
the annual assessments the owner must pay.”
Other possible warning signs include “unusual payments for unbudgeted purchases,
payments remitted to unknown vendors, and/or unauthorized signatures appearing
on checks or other official documents,” wrote L. Chere Trigg, a shareholder with
the law firm of Siegfried Rivera, in an August op-ed piece published in the
Miami Herald.
Set up safeguards
Some of the safeguards your HOA should establish to reduce the risk of fraud
include “requiring two signatures on all checks, keeping the stockpile of blank
checks securely locked away, conducting monthly reviews of all account and
financial statements by multiple directors/managers, and maintaining adequate
insurance coverage to protect against the loss of funds through embezzlement,
fraud or other malfeasance,” Trigg wrote in the Herald op-ed.
Trigg also recommends that HOAs implement routine independent audits of all
financial records by certified experts, avoid issuing debit cards in the name of
the association, and require multiple signors to withdraw/transfer funds and to
make changes to bank accounts, vendor contracts and insurance policies.
Trigg said authorized signors should be limited to the officers and directors of
the association boards. Know your Florida HOA rights Make sure you get familiar
with the rules of your HOA, as well as what Florida law requires from HOAs. And
attend meetings when you can. This can help you see if your HOA is doing what
it’s meant to.
Some of the HOA rules under Florida law:
Anyone who is an HOA member has the right to attend and speak at all meetings of
the board. The statute gives an exception for meetings between the board or
committee and the association’s attorney to discuss “proposed or pending
litigation or meetings of the board held for the purpose of discussing personnel
matters are not required to be open to the members other than directors.”
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The association is required to prepare yearly budgets and
either provide a copy of the budget to each member or a written notice
stating that a copy of the budget is available upon request at no charge.
The budget must include estimates for anticipated expenses and revenue, as
well as estimates of surplus/deficit as of the end of the current year. The
budget must also “set out separately all fees or charges paid by the
association for recreational amenities, whether owned by the association,
the developer or another person.”
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HOAs are required to create and complete an annual
financial report or hire a third party to do so. Just like the budget, a
copy of this report must be provided to every member or a written notice
notifying them that a copy of the report is available upon request at no
charge to the member.
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Associations are required to “make official records with
limited exceptions that do not include permits, available for inspection or
copying by any member of the association or an authorized representative
within 10 business days after receipt by the board or its designee (e.g.,
its manager) of a written request,” according to a blog post by the Becker
law firm. Becker notes that the association is allowed to adopt “reasonable
rules” regarding the manner in which official records are requested,
inspected and copied. However, members do not need to tell the association
why they want or need the documents, per Florida law.
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Members of a HOA’s board of directors can be removed by a
vote of the majority of the association’s homeowners. And homeowners do not
have to provide a reason for recalling a director. How to file a complaint
against your HOA
If
you find yourself in a dispute with your HOA, you should first try talking to
the board or property manager. If this doesn’t work, you can file a complaint
with the Division of Florida Condominiums, Timeshares, and Mobile Homes.
You can download the form from the division’s website or call 1-800-226-9101 (if
using a phone in Florida) to request a form. You can also call 850-488-1122.
Make sure to list all of your allegations in the complaint and include any
documentation or info you have that will assist in the review. Once you fill out
the form, you can mail it to the Department of Business and Professional
Regulation Division of Florida Condominiums, Timeshares and Mobile Homes at 2601
Blair Stone Road, Tallahassee, FL 32399.
You can also fax the complaint to 850-488-7149. The division should contact you
within 30 days to provide an update on its review of the complaint and whether
it has the legal authority to investigate your allegations, as well as if any
additional information is needed. However, keep in mind that the division is not
allowed to investigate everything. “In specific HOAs and condo associations,
such as those who have experienced “developer turnover,” the Division is only
able to investigate complaints related to elections, financial issues and access
to association records,” according to a blog post by South Florida Law firm.
The law firm also notes that in the majority of HOA or condo association
disputes, owners can’t immediately sue their associations. In the majority of
situations, the homeowner will need to first attend a mediation session with the
HOA in an attempt to resolve the conflict without going to court, according to
the law firm.
“Other complaints, including those that were not successfully resolved in
mediation may be resolved via an arbitration process, or, in the minority of
cases, through courtroom litigation,” the law firm states. If you’re not sure
whether your complaint requires legal action, speak with a real estate attorney
who specializes in HOA disputes.
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