Growing Associations, Growing Controversy

Koger case shows residents need help investigating

associations and management companies.


Article Courtesy of The Connection Newspapers

By Nicholas M. Horrock
Posted on August 25, 2007


As the investigation of Koger Management Group, Inc. continues, there is a growing question among home and condominium owners if there isn’t a better way to get action on problems with homeowners and condominium associations or real estate management companies.
The "association governed communities," are perhaps the fastest growing real estate phenomenon in the United States, according to figures published by Community Association Institute (CAI), an industry trade association. In 1970, there were some 10,000 communities and 701,000 housing units in association. Some 2.1 million people lived in these communities.
In 2006, there were 286,000 communities, 23.1 million housing units and 57 million Americans living under associations.

The Fairfax County Consumer Affairs Branch reports there are some 1,500 homeowners and condominium associations in the county alone.

The association system has grown up in the Northern Virginia as enormous development over the past three decades spawned communities outside of towns and beyond the ability of county governments to service. Developers were required to set up some system to service the community. The average association provides for garbage pickup, snow removal, landscape maintenance, and sometimes security and other community services. Virginia law mandates that once a home or condo owner signs the agreement to live in association to run the community, the board of the association has the power to collect costs to pay for services and special assessments to make major repairs or capital improvements. Failure to pay assessments can result in a lien placed on the home owner’s house and in extreme cases the association can attempt to take over the house for the debt.

The CAI reports that Zogby International conducted a survey of residents nationwide in 2005 that found that 71 percent, 7 in 10, found their association experience as positive.
But Shu Bartholomew, the host of "On the Commons," a one-hour interview show on cable and netcast live on Saturdays at 2 p.m. on WEBR Fairfax Radio and archived on her Web page, believes that discontent with home owner and condo associations is far more widespread than Zogby’s survey might indicate.

In eight years, the show has become a lightning rod for home and condo owner discontent and now there are other radio and television shows around the country that touch on the same subject. According to a search by Google on the Internet, there are hundreds of groups and web sites currently complaining about actions by associations.

Many of them stem from disagreements on displays on the house, parking, swimming pools and service. But Bartholomew said there are also serious issues of abuse of power, to fine and foreclose, to collect the fine; corruption; theft; malfeasance and mismanagement being hidden by rules that protect associations and management companies.

Bartholomew found dozens of recent news stories about theft, corruption and embezzlement all across the country, but she said home owners that suspect wrongdoing have difficulty in Virginia and other places in getting records from the association to investigate, and state agencies often refuse to investigate homeowner complaints.

Bartholomew became interested in home owner’s rights as a member of the board of the Lake Braddock community that has some 1,300 homes.

If you report to state officials, she claims, "state officials will tell you to get a lawyer," she said. If a private owner asked to review the books and records of an association, which is provided for under the law, and the association refused, there is nothing the home owner can do, she said. "The board will say ‘forget it, sue me.’"

"We don’t need new law as much as we need laws enforced," she said.

The Koger Management Group, Inc. only came under scrutiny by the Real Estate Board because Robert Koger was a licensed real estate broker, despite a range of audits that disclosed discrepancies. Robert Koger later reported to the Fairfax City police that an employee of Koger had embezzled $800,000 from the firm. They opened an investigation on January 10, 2007, but a spokesman said on Aug. 16, 2007 the investigation is still underway. The City of Alexandria is also investigating some $364,000 discrepancy at the Watergate community.

On July 26, 2007, Koger Management Group, Inc. filed for bankruptcy under Chapter 11, a federal statute that permits a business to reorganize and try to keep going. It now trades as Tri-State Management PO Box 10133 Fairfax Virginia 22038-8008.

Frank Short, a resident of Lake Braddock and in 2005 secretary of the Lake Braddock Community Association, said in an interview that Koger Management attempted in 2005 to charge home owners who were moving a $50 "transfer fee," to be paid by check when their homes went to settlement. "Other fees: $50.00 Buyer Transfer Fee (separate check made payable to Koger Management Group- to be collected at closing,)" said a Koger "disclosure packet notice."
Failure to pay, the Koger form said, would result in a late fee and "continued delinquency will be turned over to the Association’s attorney for collection. Lien fees and all legal costs will be added to your account. The property can be foreclosed on if fees remain unpaid after turned over for legal collection."

Short said he only found out about the fee when Koger told a resident that refused to pay the fee that he could face legal action.

Short said he and other board members checked and found that no board had ever authorized the management company collect such a fee. The board asked Koger Management to cease collecting it and return any collections it made to the board. Koger refused saying it had the authority to collect the fee.

Short shared documents and correspondence that showed Koger management apparently could not find any justification in the law and later returned $6,000 to the Lake Braddock Board.
"My question is if Koger was collecting this fee here without authorization, how many other associations may have unwittingly let him collect the charge," he said. Lake Braddock now has a different management group. Short said there should be a system for somebody to follow up on the issue. But management groups, he and Bartholomew said, are totally unregulated.
Koger at that time represented some 440 community associations with some 70,000 home owners.