Article Courtesy of The Miami Herald
By Rene Rodriguez and Nicholas Nehamas
Published September 20, 2019
In a move that could have
implications for thousands of Miami-Dade
County residents and cost the local real
estate industry millions of dollars, a
Brickell condominium association accused of
charging residents inflated fees in
violation of state law has agreed to pay up
to $300,000 to settle a class-action
lawsuit.
The lawsuit, filed by
Joshua and Allison Kobasky, argued that The Plaza 851
Brickell Condominium Association had ripped them off, as
well as hundreds of others, by charging mandatory,
non-refundable “transfer” fees greater than $100 when they
applied to lease a unit and move in.
The Florida Condominium Act prohibits associations from
charging fees greater than $100 per person or married couple
in connection with the sale, lease or transfer of a condo
unit.
But the Plaza association required residents like the
Kobaskys to pay a $150 screening/application fee and a $200
move-in/move-out fee — a charge $250 in excess of what state
law allows. The overcharge may not be eye-popping, but it’s
an added — and illegal — financial stress in one of the
United States’ least affordable housing markets. And for
condo associations that process hundreds of tenants, the
fees quickly add up. |
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Guests party on the 10th floor by the infinity pools
during the grand opening of The Plaza on Brickell in downtown Miami
in 2008.
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“Associations have historically charged these fees to fatten their coffers
even though they don’t disclose them,” said attorney Aaron Resnick, who
represented the plaintiffs in the Plaza lawsuit. “They know people need a
place to live, and in most cases the inflated fees are not thousands of
dollars. Most people will go ahead and pay $250 if it means getting their
apartment quicker.”
Despite the law, buyers and renters are being taken advantage of across
Miami-Dade, the Miami Herald has found. Roughly four in 10 condos listed for
rent or sale charge transfer fees in excess of $100, according to a Herald
analysis of real estate listings. And the Florida Department of Business and
Professional Regulation (DBPR), which oversees the Division of Florida
Condominiums, Timeshares and Mobile Homes, has taken little action to
regulate the practice. Meanwhile, members of the property-management
industry say they are lobbying Florida’s Legislature to raise the limit
above $100.
The Kobasky family signed a one-year lease in January 2014 for a one-bedroom
condo at the Plaza on Brickell East, located at 950 Brickell Bay Drive, for
$2,100 per month. The $350 they were charged in application and move-in fees
was well above the $100 cap.
The settlement benefits any participant who opted in and prevents the
association from charging more than $100 per applicant or $150 per married
couple in the future. That limit includes, but is not limited to, clerical
fees; background, credit and screening checks; elevators fees; and move-in
and move-out charges. However, if the legislature increases the $100 cap in
the future, then the association may raise its fees in accordance, according
to the settlement agreement.
The class period for the Plaza settlement was Jan. 5, 2014-June 3, 2019. A
total of 588 people were eligible to participate in the class action. Each
participant will receive $250, or 100 percent of the alleged damage
suffered. Every potential participant was notified of their eligibility
three times before the deadline, once by postal mail and twice by email.
Circuit Court Judge Michael Hanzman also ordered the association to pay a
total of $95,000 in attorney fees to the two firms that represented the
plaintiffs, Zebersky Payne Shaw Lewenz LLP and the Law Offices of Aaron
Resnick, P.A..
The Kobaskys, who acted as the representatives for the class action, were
also awarded $5,000 as compensation for their time and effort.
Evelyn Greenstone Kammet, department managing attorney at the law firm of
Vernis and Bowling, represented the association. She said her client decided
to settle because of the favorable settlement terms that were presented and
the uncertainty and costs of protracted litigation.
“The transfer fee statute is unclear and almost no Florida appellate case
law exists on this topic,” she said. “Considering the amount paid out to
class members, as opposed to the amount paid to plaintiffs’ attorneys, it
seems the attorneys had the most to gain.”
A new cottage industry?
The $100 state-mandated cap includes all non-refundable fees charged for
interviews, background checks, credit reports, and other costs when people
seek to buy or lease a condo in Florida. Many condo associations across
Miami-Dade are in violation of the law, according to a Miami Herald
investigation published in 2016.
The fees are collected by property-management companies and condo
associations, which say they are only trying to cover the costs of screening
new residents and moving them in. Background and credit checks are run to
make sure prospective residents don’t pose a danger to others and can afford
their units.
But the settlement could set a precedent that threatens companies and
associations charging fees higher than $100 per person, said Jason Kellogg,
a Miami attorney who specializes in condo law.
“This settlement is a pretty good result, and that might encourage more
people who have paid these transfer fees to contact lawyers, and for lawyers
to have a baseline value for these claims,” he said. “Lawyers will have a
better way to measure and bring a coalition. The associations are probably
nervous because if one of these cases goes to the appellate court, you would
have a new cottage industry blowing up.”
Four other class-action lawsuits involving illegal fees by condo association
boards at the Icon Brickell, Quantum on the Bay and Triton Tower in Miami
Beach are currently making their way through court. Just one of the towers
at the Icon Brickell project holds more than a thousand potential class
members.
Resnick said the shortage of affordably priced housing in Miami-Dade has
made condo rentals the only option for many people. He said associations
have gotten away with the practice unchallenged — until now — because
attorney fees don’t make legal action financially viable.
State officials have taken little action, in part because few Floridians
seem aware of the law.
Over the one-year period from Sept. 1, 2018, to Sept. 1, 2019, the DBPR
received eight complaints with allegations of transfer fee violations from
Miami-Dade and Broward residents, according to Patrick R. Fargason, DBPR
deputy communications director. The agency has an online portal that allows
citizens without legal representation to download the proper complaint form.
But those complaints, even when investigated, don’t lead to mandatory
reform. During that same one-year period, the DBPR closed 17 previous
complaints. Twelve of them were resolved with an “Informational Letter”
designed to educate the condo association about the law and mandate the
refund of excess fees. Three were closed as no violation and two were not
investigated as the issue was currently under litigation.
A new rule to the Florida Administrative Code passed on Dec. 5, 2018, allows
the DBPR to be more active. Associations that charged inflated fees after
that date and are investigated by the DBPR face fines up to $5,000 per
violation.
Widespread overcharging
Little has changed since the Miami Herald first reported on condo fees.
Despite the media coverage and class-action lawsuits, 42 percent of
Miami-Dade condos listed for rent or sale still require more than $100 per
person in transfer fees, according to a Herald analysis of the Multiple
Listing Service (MLS) database used by real estate professionals. That
compares to 46 percent in 2016.
Areas with the highest rates of condo associations charging more than $100
tend to be those that are popular with foreign investors and new immigrants;
in other words, the pool of buyers and renters less likely even than locals
to know about an already-obscure provision of Florida law. Those areas
include Doral, North Miami, Hialeah, Bal Harbour and Sunny Isles Beach.
One of the highest violations: Six units listed at the Trump International
Sonesta Beach Resort Condos in Sunny Isles Beach, ranging in price from
$318,000-$350,000, have a $350 application fee. According to a Realtor
handling one of the listings, there is an additional $150 required
application fee payable to the management company AKAM On-Site, for a total
application fee of $500. (The Trump Organization doesn’t run the building.)
Even condos rented by the less-than-super-rich appear to flout the law. The
website for the Blue Lagoon Condominiums in Flagami shows renters must pay a
$100 application fee along with a non-refundable fee of $350 for
“administrative and document storage.” Pet owners must also pay a
non-refundable fee of $300.
Another two-bedroom, one-bath condo in Flagami, listed for sale at $165,000,
has an application fee of $250.
Some members of the condo management industry believe the state’s $100 cap
on fees is overdue for an increase.
“The industry is lobbying the Florida Legislature for a modest increase in
the fee,” said Jose M. Pazos, president of the Miami-based Pazos | Robaina
Association Management firm.
Pazos’ firm charged $150 fees until the Herald’s 2016 story. After it was
published, he said, the fee was lowered — although that could change if the
law does.
“It has not been increased since 1992,” Pazos said, “and it is becoming
difficult to process background checks, especially in Miami, where so many
are international and cost more than the statutory limit.”
Despite the law, fee violations continue to run rampant. Danielle Blake,
chief of public policy for the Miami Association of Realtors, said the group
ran an unofficial check in MLS in March 2019 and found that out of almost
21,000 condo listings, 8,233 had transfer fees that exceed $100, roughly
matching the Herald’s analysis.
“But even when we tell potential tenants that they are being overcharged,”
she said, “they move forward with the transaction anyway, because they love
that particular unit and don’t want to jeopardize their chances. Their only
option after that is to take the association to small claims court, but that
rarely ever happens.” |