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Article Courtesy of The Miami Herald
By Nicholas Nehamas
Published June 6, 2016
Condo associations across South Florida are ripping off
consumers with high application fees in violation of state law, a Miami
Herald investigation has found.
Associations are allowed to charge people applying to buy or rent a unit a
maximum of $100 per person. The nonrefundable fees cover the costs of
interviews, background and credit checks. But many buildings gouge tenants
and buyers with fees anywhere between $125 and $625, according to lease and
purchase applications reviewed by the Herald.
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Some associations also
tack on moving-in and other charges that run into the
hundreds of dollars. At a few condos that allow pets, even
residents’ furry friends have to cough up fees of $100 or
more.
In Miami-Dade County, nearly half of condo listings show
application fees exceeding $100, from fancy high-rises in
Miami Beach to run-of-the-mill units in Kendall, according
to a Herald analysis of a database used by Realtors. The
problem exists in Broward County too but is less widespread.
All in all, the high fees could lead to class-action
lawsuits against associations, attorneys say.
“State law seems to pretty clearly prohibit fees in excess
of $100,” said Jason Kellogg, a Miami attorney who
specializes in condo association law. “This sounds like a
major racket. ... The cost of owning or renting a condo in
South Florida is expensive enough without associations
fleecing residents with illegal fees.”
The revelation follows a series of reports in El Nuevo
Herald documenting corruption at South Florida condo
associations, including rigged elections and contracts
awarded without fair bidding.
Illegal fees are another reminder that South Florida’s poor
and middle class can’t keep up in a real-estate market
distorted by out-of-town cash, said Ali Bustamante, a
professor at Florida International University.
“High application fees are potentially discriminatory by
crowding out low-income and low-middle-income renters who
can’t afford to put down $300 fees,” he said. “It’s a huge
foot on the scale.” |
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The 2 Midtown condo association charges tenants and
buyers $550 dollars in transfer fees. It’s one of many South Florida
condo associations ripping off consumers. State law limits such fees
to $100 per applicant.
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As developers build luxury high-rises at the expense of
middle-market housing, rents across South Florida have skyrocketed. The
region is now one of the nation’s least affordable places to buy or rent,
although a new push for downtown rental buildings could help out.
Still, Bustamante said, “the property owners have all the leverage.”
Jason Wood, a sales manager at a furniture company, said he was charged $125
to apply to the Mirador 1200 condo in Miami Beach in 2012. He paid with a
cashier’s check.
A person at the Mirador’s front desk said the fee is now $150.
“I am currently looking for a new place and see all over they advertise fees
of $200 to $300,” Wood said. “Miami is already a rip-off when it comes to
cost of housing and this is more salt in the wound with no real system of
... tenants’ rights.”
Jacking up the price
The Florida Condominium Act prohibits condo associations from charging
so-called transfer fees of more than $100 per applicant “in connection with
the sale, mortgage, lease, sublease, or other transfer of a unit.” Those
fees — including charges associated with applications, background checks,
screening and move-in fees — must be clearly stated in a condo’s governing
documents.
The law also states that married couples should be treated as one person and
pay a total of $100, and prevents associations from charging dependent
children or people renewing their leases.
But the rules are widely flouted.
To apply for a lease at 2 Midtown in the popular neighborhood near Wynwood,
a renter must pay a $200 application fee, plus a $350 “processing” fee. Only
money orders are accepted.
$625 Total transfer fee at Quantum on the Bay
At the Pavillion in mid-Beach, the association charges $260 for new
applicants.
An extra $160 might seem like small change, but it adds up. The Pavillion
has 408 units. About 200 of them are rented out at any given time, according
to a tenant information package.
At larger buildings, the benefits for management and associations are even
greater. Quantum on the Bay in Edgewater has nearly 700 units. The
association charges tenants a $100 application fee plus $125 for
“registration and orientation,” $175 for “administrative review” and $225 to
move in and out.
Property management companies usually handle the applications and profit
from high fees. The associations also make extra cash.
“These buildings are processing applications all day every day,” said
Stavros Mitchelides, a Miami Beach-based Realtor. “And you don’t get your
money back if you’re not approved.”
Isola on Brickell Key charges $200 per applicant. The Henderson and Helen
Marr in Miami Beach each charge $150. So does 401 Blu, although it gives
spouses what seems like a discount: $200 per couple. (By law, they should
only have to pay $100.)
“I have a lot of clients where $100, $150 is a lot of money,” said
Mitchelides, who only recently learned the up-charges were illegal. “A lot
of these people are renters. It’s not fair. I had a girl who couldn’t afford
more than $1,400 per month [in rent] and her application fee was $250.”
Mitchelides was thumbing through a real-estate industry trade magazine last
month when he happened upon a mention of the $100 cap. He called the Florida
Realtors’ legal hotline and was advised his clients could file civil
lawsuits against the condo associations or complain to the state attorney
general and the Tallahassee agency that regulates condos.
“Obviously, no one is going to sue over that amount,” Mitchelides said. “And
Realtors don’t want to spend all day filing complaints.”
Instead, he called the Herald.
The newspaper analyzed home listings on a database for Realtors called the
Multiple Listing Service. It found that in Miami-Dade, 46 percent of condos
listed for rent or sale say they require a fee of more than $100 per
applicant.
The entries on the database are made by Realtors, not condo associations,
and may not always be accurate.
“I think it’s higher,” Mitchelides said.
In Broward, only 22 percent of condos asked application fees higher than
$100.
The cities with the most condos on the market were all in Miami-Dade and had
high rates of illegal fees: Miami (48 percent), Miami Beach (40 percent),
Sunny Isles Beach (50 percent) and Aventura (44 percent). The biggest
markets in Broward had much lower rates of illegal fees: Fort Lauderdale (12
percent), Hallandale Beach (29 percent), Hollywood (24 percent) and Pompano
Beach (23 percent).
Almost none of the condo associations mentioned in this story returned
requests for comment. Neither did several management companies at buildings
that charge more than $100 per applicant, including KW Property Management,
First Service Residential, Quest Management and Aqua Management. One company
that did respond complained that the $100 fee doesn’t cover the costs of
background checks.
And Fredrick Rotstein, property manager for the Isola condo tower, wrote in
an email that the association “will be immediately reviewing our ‘transfer
fees’ and will make sure that they are in compliance with the applicable
statute.”
It’s up to board members to audit their rules and have counsel make sure
they’re compliant with the law, said Jonathan Goldstein, a Miami attorney.
“They shouldn’t take for granted that management companies or previous
boards had in place leasing policies that were compliant with the governing
declaration, municipal ordinances or Fair Housing Act regulations,” he said.
Unlike condo associations, homeowners’ associations — which govern planned
communities of single-family homes — can charge whatever they wish. Condo
associations can also legally assess fees for estoppel letters and mortgage
questionnaires.
The condo statue doesn’t apply to landlords at rental apartments, who have
been known to gouge tenants with high fees, according to a WSVN
investigation last year.
Sticking it to foreigners
Some condo associations single out foreign buyers for higher fees,
reflecting the added costs of a background check on someone who’s lived
overseas.
At Sunset Palms West in Kendall, international buyers must pay a fee of
$150. At 801 Meridian on the Beach, the fee soars even higher: $350 for a
foreign buyer.
Pets get squeezed, too.
900 Biscayne in downtown Miami charges tenants $100 to apply, $300 to move
in and $250 to register a pet, all nonrefundable.
State law prohibits condo associations from charging transfer fees of more
than $100 per person or married couple
Consumers generally don’t know they’re being overcharged.
Only 13 people filed complaints about the high fees in Miami-Dade and
Broward counties over the last year, according to the Florida Division of
Condominiums, Timeshares and Mobile Homes. In five cases, the division sent
“letters providing education” to the associations.
Asked if application, move-in and pet fees of more than $100 violated
Florida law, a spokesman for the division declined an interview but emailed
the relevant section of the Florida Condominium Act.
The state Legislature raised the limit from $50 to $100 in 1990.
Saul Gross, president of Miami Beach-based Streamline Properties, said $100
was hardly enough to cover the costs of doing background checks.
He said state legislators set the limit “before Airbnb and the short term
rental epidemic [and] before Associations realized if they weren’t careful
about approving tenants, it would interfere with the quality of life of the
long-term unit owner residents.”
Streamline charges $150 application fees at at least two buildings it
manages in Miami Beach.
Gross said he believes the statute caps transfer fees at $100 but allows
higher charges for credit checks.
(A post on the condo division’s website states “the maximum charge allowable
is $100 per applicant.”)
In a video posted on his Facebook page after this story was published, Jose
Pazos disputed that the $150 application fees charged by his Pazos-Robaina
Association Management Firm were illegal.
“Now I’m going to aggressively lobby the Florida legislature for the
upcoming session to increase ... to make sure that what we’re doing is
beyond reproach,” Pazos said. “That’s what we’re going to do now.”
If anyone were hoping that management companies and associations would drop
their fees to $100, Pazos continued, “that’s not happening. That is not
fiscally responsible for the rest of the owners of that condominium or for
the business owners who own the management companies.”
And Lynda Horvat, an attorney for Neighborhood Property Management, said if
the fees are paid directly to the management company, and not to the
association, the law doesn’t apply.
“Property management companies lawfully charge associations to perform
services, which include but are not limited to processing tenant
applications, conducting background checks and interviewing tenants,” Horvat
wrote in an email. “The service charges paid to the property management
pursuant to its contract with the association are not transfer fees.”
That reading seems to contradict a 2008 warning letter the division wrote to
a Broward condo.
Transfer fees “include such items as clerical fees, fees paid as a part of
an applicant’s credit or background check or screening process and move-in
fees,” the letter states.
“The Division takes the position that a mandatory fee, which an association
requires an owner, purchaser or leasee to pay in connection with the sale or
lease of a condominium unit is a transfer fee,” it continues.
“Charging more than $100 per person is a violation of Florida statute,” said
Miami attorney Josh Rubens. “The money should be refunded.”
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