Home dues went to diamonds, travel

State considers how to add oversight


Article Courtesy of The Charlotte Observer

Published October 14, 2005

The Colton Ridge homeowners' board first became suspicious when the water was turned off at the pool clubhouse.

The neighborhood's property manager -- who collected homeowners' dues and paid the bills -- said not to worry.

But when the landscaper said he hadn't been paid in months, the board called authorities.

The property manager, Donna Jean Beach of Fort Mill, S.C., was charged earlier this year with embezzling about $100,000 from five Union County neighborhoods, including Colton Ridge, over the past year. A detective said Beach spent $848 on diamond earrings, $264 at Paramount's Carowinds and $419 on a beach hotel, among other items.

Beach has pleaded not guilty. Her attorney, John Nickerson, declined comment.

At least three other property managers in the Charlotte area have been charged in recent years, attorneys say. They say there may be dozens of similar cases that aren't reported or can't be proved.

Professional managers control millions of homeowners' dollars in the Carolinas. They can slap a lien on a property and force a homeowner into foreclosure.

Yet they are governed by no specific code of ethics, as lawyers, accountants and real estate agents are. They can borrow homeowners' dues to pay their own expenses, use one neighborhood's money to pay another's bills or hire family members to do work in the neighborhood -- all without being forced out of business.

Now, a task force created by the N.C. Real Estate Commission is looking into creating standards to hold professional managers more accountable. The goal: to protect consumers.

"When somebody is handling thousands and thousands of dollars, they need to be licensed and they need to be bonded," said Catherine Stout, former president of Colton Ridge.

Push for licensing

Almost 200 management companies are listed in the Charlotte phone book. Some are licensed real estate agents, who are required to hold the money of others in an escrow account and keep separate accounts for each client. Others get special certification from the Community Associations Institute, a trade organization. But many have no license or certification.

"A lot of people are working out of the trunk of their car who have no business being in property management," said Chris Gilleland, a certified manager and president of William Douglas Management Co.. "That makes it harder on the rest of us."

He and others want the state to license the industry as it does for dozens of other occupations, including manicurists, engineers and real estate agents. Licenses could be revoked for unethical or unprofessional behavior.

Several other states, including Florida, Nevada, Georgia and California, have license or certification programs. South Carolina has no program.

"People need to be licensed for accountability because a lot of money comes in," Gilleland said. "Now, no one is checking up on what we do."

Little legal recourse

Tim Sellers, an attorney for homeowners associations, said several approach him every year and ask how they can recover money from dishonest managers.

His answer: Unless you have a clear-cut case in which a lot of money is at stake, it's very difficult.

"So many of these people don't own property and are living on a shoestring," he said. "You may get a judgment against them for $25,000 because that's what they took from you. But you end up not collecting it because they don't have a lot of assets."

The Real Estate Commission gets complaints, said Tom Miller, the commission's legal counsel. But unless the manager is a licensed real estate agent, there's nothing the commission can do, he said.

That's why the commission created a task force to recommend ways to create and enforce standards for managers. Among the possibilities: creating standard accounting procedures, requiring them to be insured or setting up a licensing program to investigate complaints.

The commission hopes to bring a proposal to the legislature next spring.

Hirer, beware

Critics say the state doesn't have the staff or the money to oversee property managers. Rather than create a new bureaucracy, they say, homeowners boards need to take care in hiring managers and properly oversee their finances. "I'm not in favor of licensing because it's just another layer of bureaucracy, and I know there are capable people out there," said Sellers, the attorney. "Boards go with the lowest-cost person, then get upset because they get a substantially lower quality of service. What do they expect?"

The Hunter's Pointe association board in Union County hired Beach because she came recommended by other communities, said president Jon McGuire. She also promised to visit the neighborhood every week looking for violations, and to come to meetings, he said.

But the board didn't check her references thoroughly or independently verify that she was insured, he said. She wasn't.

In the year she worked with them, she is accused of stealing $18,000.

The shortage left the association in such a bind that it had to collect a $120 assessment from every homeowner last year to make ends meet.

"Even when we found discrepancies, we believed her at first," McGuire said. "It's easy for people to take advantage of a small nonprofit like a homeowners association. We're all amateurs."