“We expect an onslaught of similar litigation in light of tighter statewide restrictions governing associations, their finances, and the need for repairs. This added layer of scrutiny is likely to reveal other instances of fraud,” said Kluger Kaplan's Steve Silverman.

The Eleventh Judicial Circuit Court of Florida has appointed a receiver to oversee the Mirador Master Association in Miami Beach amid years of alleged financial irregularities, statutory violations, and mismanagement.

It’s the latest example of alleged fraud at homeowners’ associations and condo associations in South Florida, which according to Kluger Kaplan’s Steve Silverman is a statewide issue that “underscores the lack of oversight over these boards.”

“We expect an onslaught of similar litigation in light of tighter statewide restrictions governing associations, their finances, and the need for repairs. This added layer of scrutiny is likely to reveal other instances of fraud,” he said.

Kluger Kaplan attorneys Steve Silverman and Lauren Fallick represent Mirador 1000 Condominium Association Inc. and Mirador 1200 Condominium Association Inc., which are two of the five associations that comprise the master association. The HOA serves more than 1,200 unit owners.

“This receivership is in the best interest of the entire master association and it’s in the best interest of each of the five members and their unit owners,” said Fallick.

Miami-Dade Circuit Judge Vivianne Del Rio appointed attorney Melanie Damian of Damian & Valori LLP in Miami to serve as the receiver over the master association.

Francisco Touron of Touron Law in Miami represented the plaintiff, National Concrete Preservation, a concrete contractor in Miami that sued the master association for failure to pay the company for work they were contracted to do in 2018.

“We are anxious to be paid for work performed as the Master Association has not presented a viable defense to avoid paying for work performed,” Touron said in a written statement.

Mirador Condo Association 1000 and 1200 also brought forward allegations against the master association, the former board president, the current treasurer, and a former unlicensed property manager.

According to Silverman and Fallick, allegations included substantial, unsubstantiated monies paid from the master association to its former board president, current treasurer, and former unlicensed manager for unsubstantiated claimed reimbursements, years of HOA statutory violations including the master association’s failures to perform statutorily required annual audits, failures to pass updated annual budgets and maintain official books, records, and financial records.

“That was the tip of the iceberg that made us realize the board was misappropriating funds because we got sued by a contractor and the board really had no explanation for where the money went,” Silverman said. “The ultimate takeaway was that after four days of evidentiary hearings … when we were examining the president of the master board who was vehemently opposed to the appointment of a receiver in the prior months, [the president] essentially caved under the weight of cross-examination and agreed in open court to the judge that a receiver should be appointed.”

Silverman said it was at that point that the court granted Kluger Kaplan’s final motion for receivership, finding that a receiver is necessary to protect and preserve the assets of the association and to protect the rights of the members of the association.

For lawyers who may take on a similar case, Silverman said the key is to gain transparency through aggressive discovery.

“Once you have the same understanding of events that the board members have, which is often hidden from the public, you’re able to figure out the path you need to take and discover what wrongs need to be addressed and remedied,” said Silverman. “It’s really getting the evidence and ammunition you need to go into court, present a strong and convincing case and get the relief you need for the unit owners and residents.”

With many associations facing little to no recordkeeping, Fallick advises lawyers to go through every document.

“You’ll likely going to be facing objections and stonewalling of discovery because if there wasn’t transparency before to perpetuate or cover up some of these acts, they’re not just going to hand it over,” she said. “Roll up your sleeves and get the proper experts and consultants that you may need, whether it’s a forensic CPA, or consulting attorney depending on the circumstances.”

Fallick says that, until similar cases are brought to light, more financial irregularities and mismanagement will continue without any notice.

“This may not ultimately affect what happens at another building, but hopefully it brings more awareness to these issues so that the legislature or the DBPR does say ‘we have a problem here and we need to do something about it because what we are doing so far is not working,’” she said.

Evelyn Kemmet of Vernis & Bowling of Miami and Samuel Persuad of Persaud Law Group. Inc. in Key Largo represented some of the other associations that are comprised of the master association. Invited to comment, the didn’t respond by the deadline.

SECOND AMENDED ORDER APPOINTING MELANIE E. DAMIAN, ESQ. AS RECEIVER OVER MIRADOR MASTER ASSOCIATION, INC.