Florida lawmakers tap condo fund as owners' complaints rise

Article Courtesy of The Miami Herald


Published May 27, 2009 


In the midst of more and more complaints from condo owners, the Florida Legislature took $6 million from the trust that funds the state's office that deals with those complaints.

Since Florida lawmakers ended the legislative session without taking up condo foreclosure reform, consumer complaints battering the state's condominium ombudsman's office have gained momentum.

''We're getting a lot of calls and complaints from angry condo owners that legislators didn't do enough to help ease the foreclosure crisis. People are really angry,'' said Bill Raphan, the assistant condo ombudsman based in Fort Lauderdale.

Adding a little salt to the wound: Because of the tight state budget, lawmakers are taking $6 million from the condominium, timeshares and mobile home trust fund -- fed, in part, by a $4 fee charged to each Florida condo owner annually.

The money from the trust supports the activities of the ombudsman's office, which is housed in the state's Division of Condominium, Timeshares and Mobile Homes. The ombudsman is a resource about state condo laws for condo associations and is also their liaison with the division. The office fields complaints -- tens of thousands each year, mediates squabbles and supervises elections, among other things.

The legislators tapped more than two dozen state piggy banks in the recently ended session to cover a $6 billion budget shortfall.

While the shift will not affect the budget of the ombudsman's office for the coming year, it represents the second hit to the fund this year, following a separate $26 million raid in January.

It also comes at a particularly sensitive time for the state's roughly 1.5 million condo owners, thousands of whom are enduring extraordinary hardship stemming from Florida's housing troubles. Over the past year, activists have been calling for reform and more staff and services from the ombudsman to deal with a wave of condo woes, from association fraud to foreclosures.

''Condo owners need the money more than ever and all the help they can get. Shorting them of their own funds is really an insult,'' said Jan Bergemann, president of Cyber Citizens for Justice, a grass-roots community association organization. ''It's coming to the point where condo owners should ask themselves why should they pay it,'' Bergemann said.

The provision is included in the $66.5 billion budget Gov. Charlie Crist is expected to sign Wednesday morning. On Tuesday, however, the governor indicated he would veto one such sweep -- $6 million from a fund that pays for concealed weapons applications. A spokesman for his office said Tuesday he didn't know whether Crist was contemplating a veto of the condo fund raid.

Condo owners will see no disruptions in services over the coming year as a result of the sweeps, said Mike Cochran, director of the Division of Florida Condominiums, Timeshares and Mobile Homes.

''[Condo owners] don't have reason to be concerned. We're going to be operating like we always operate,'' Cochran said.

But many say the division and ombudsman office need to step it up, especially in light of the housing blowout. Condo associations across Florida have been socked by foreclosures and association fee delinquencies, which are forcing many into insolvency. Some buildings are falling into disrepair and losing essential utilities because they can't pay the bills.

''These associations are having serious problems. Owners aren't losing their homes because they don't pay their bills, but because their neighbors don't pay their bills and the banks don't pay their bills,'' Bergemann said.

Condo associations allege that banks often delay foreclosing on units to avoid taking title and assuming ownership because it would require them to pay association fees like other owners.

Several remedies were proposed this year but died in the session as lawmakers dealt with seemingly more urgent emergencies. The proposed laws would have required banks to foreclose more expeditiously on condos while increasing the amount of past due fees they would have to pay upon taking ownership. Currently, lenders are responsible for paying the lesser of six months of past due payments or 1 percent of the original mortgage amount.

Cochran said he was aware of the problems but was limited in what he could do to help, saying foreclosures were contractual matters between borrowers and lenders.

A separate measure would have created a condo police force, funded by trust fund money and tasked with rooting out condo association fraud and mismanagement that can cost communities millions.

Last year, the office logged 16,000 phone calls, 90 percent of them came from Miami-Dade, Broward and Palm Beach counties. The trust fund, Cochran pointed out, is not entirely funded by condo owners. Timeshare owners, who contribute $2 per seven-day period, are actually the largest contributors to the fund. Mobile home owners pay $5 per lot annually as well.

The fund generates an average of $15 million in revenue from the fees. Cochran said that was enough to cover the division's annual budget of over $7 million and continue funding the ombudsman's office, whose budget is roughly $400,000.

At the end of 2008, the fund had a cash balance of more than $29 million, before the Legislature swept out $26 million. Its cash balance as of May 9 was $9 million.

Cochran said lawmakers had left the fund relatively untouched until the economic crisis started punching larger and larger holes in the budget.

Rep. Richard Steinberg, a Miami Beach Democrat whose constituency is largely comprised of condo owners, said the ombudsman's office was short-staffed and needed to hire more people to respond to growing demands. He, along with Rep. Julio Robaina, urged the governor to veto the measure.

"People in my district are frequently calling with issues in their condos, and we are often sending them to the ombudsman, and they're not getting their issues resolved as quickly as they should be.''

Robaina, the Miami Republican who sponsored a major condo foreclosure reform bill that went nowhere, said lawmakers were raiding the trust fund as soon as the money was going in. He also feared that the ombudsman, whose role is primarily to deal with the public, is in danger of being eliminated.

''The ombudsman's office is hanging by a thread without the trust fund money. It's basically down to nothing,'' Robaina said.

Humberto Sanchez, who owns a condo in Doral at Summit Chase, said he wondered whether condo owners should sue to state.

''It's despicable to see that not only are they not doing anything for us, for the condo owners, but on top of that they are taking our money that is earmarked specifically for the condo section,'' Sanchez said.