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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 www.onthecommons.us, 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.
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Enforcement
Model?
South Florida has become the super
bowl of community associations and according to state Rep. Julio Robaina,
(R-South Miami) "gated communities, high rise condos and
association run communities are the way of the 21st century in
Florida."
With thousands of homes and apartments occupied and thousands more under
construction or for sale, Robaina saw a need to deal with homeowner
complaints about homeowner and condominium associations and management
companies that serve the communities. There was, he said, a "rising
concern about alleged misuse of funds."
Robaina first helped create a Florida "Office of the
Ombudsman" to hear complaints of homeowners and be a "neutral
party" in disputes. The ombudsman is based in the state capital at
Tallahassee, he said, and has too small a staff to do field
investigations. Local police and state attorneys offices had little
knowledge of how to handle these cases and few resources. When a
complaint of fraud got to public officials, "they told people to
get a lawyer and sue," he said.
Robaina said the state boards told people their complaints were a civil
matter and the local state’s attorneys had nothing in their budget to
handle the investigations and little training. Yet often, he said, the
complaints actually described crimes of corruption, self dealing, fraud
and embezzlement.
Two years ago, working with the Florida Department of Law Enforcement
and the Department of Business and Professional Regulation, the
45-year-old legislator devised a pilot project to get police and
state’s attorneys in Dade County (the county around Miami) to become
involved. He contacted the dozens of police agencies in Dade County and
persuaded each to send investigators to a one-day seminar on how to
handle cases arising from community associations.
Robaina then worked with state officials and his legislative staff to
devise a curriculum.
But the key problem, he said, was how to separate contentious personal
disagreements between boards and home owners from allegations of real
wrong doing.
What came forth was the "Condominium Crimes and Screening Checklist
and Unit Owner Resource Guide." One exists for homeowners as well.
This two-page guide, written to be "short, sweet and to the
point" and published in both Spanish and English (a Creole version
for Haitian immigrants is coming), helps the complainant assess what
information he has. The form asks the owner if he has reported his
problem to state agencies, perhaps to the ombudsman before, whether he
has sought to review association records under Florida laws and whether
the owner has evidence — checks, bills, contracts, invoices — of
alleged wrongdoing.
"Please do not submit this form until you have sufficient
documentation to support your allegations," the form warns and
"do not expect immediate results."
The form is then forwarded to the ombudsman’s office where it is
reviewed and a determination is made whether there is probable cause to
believe a crime has taken place. A certified public accountant with
forensic experience is on duty to review financial records. If the
ombudsman determines that there is, it forwards the complaint to the
appropriate police department, which is committed to investigate.
State’s attorneys have been trained as well and have prosecutors
familiar with these cases.
The pilot project began in February 2007. If successful at the end of
one year, Robaina said, it will be tried in other Florida counties.
The first case came in May when two officials of a Hallandale, Fla.
condominium were charged with a kickback scheme that may have cost
apartment owners up to $4 million in unnecessary assessments. The case
goes to court shortly.
Those with information on an alleged wrongdoing in a condominium or
home owner association in Northern Virginia are asked to call Nicholas
Horrock at 703-403-2035.
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