Florida bill seeks to strengthen state supervision over condo, HOA fraud

Florida lawmakers will once again consider a bill aimed at strengthening regulation of condo and homeowner associations. 

The proposal is the latest attempt to address allegations of corruption at communities governed by associations. Residents for years have sounded the alarm with claims that their boards of directors, sometimes with the aid of property managers and association attorneys, are running authoritarian-like regimes riddled with misappropriation of funds, election fraud and bullying of those who speak out. 

This spring, in response to the Hammocks case in which five people were arrested and charged with a multimillion-dollar fraud, the legislature took up bills aimed at increasing oversight over associations. But by the time property managers, contractors and other private interests were done lobbying, lawmakers passed a law stripped from most of the beef in the original bills. 

Now, the legislature will vote on a new proposal at its session next year. Senate Bill 426, filed by Sen. Ileana Garcia, would target an issue residents claim stands in their way of taking down corruption: state administration’s lack of power to enforce laws and oversee association dealings. 

Residents “go to the city of Miami, they go to the county, they go to DBPR [Florida Department of Business and Professional Regulation] and nothing happens,” Garcia, whose district is in north Miami-Dade County, said at a Senate Regulated Industries Committee meeting last Tuesday. 

“We have a lot of work to do, and I think the hardest part is trying to recuperate their faith in this system. Once again, where do we start? What do we do? And we need to do it right away.” 

Currently, two laws govern associations: The Condo Act, or Chapter 718, and the HOA statute, or Chapter 720. The Florida Department of Professional and Business Regulation is the state authority that investigates complaints, though residents have told The Real Deal they feel the agency’s powers are limited and they are left with no other options but to pursue lawsuits at their own expense. 

Under the Condo Act, DBPR can investigate issues related to operating budgets and reserves, elections, access to records, budgets and other financial meeting notices, and structural reserve studies. DBPTRs powers are limited and the division often shoots down their complaints citing its lack of jurisdiction, according to residents who spoke with TRD. 

The division has more than 100 employees and a track record of closing nearly all filed complaints, a DBPR spokesperson said, but they also noted the state can only investigate within its legally vested power as outlined by the statutes.  

The new bill would implement a Condominium Fraud Investigation Pilot Program in the Condo Act. The program would have the authority to contract with companies that employ investigators with experience in financial fraud cases, as well as to conduct audits and issue subpoenas. If investigators suspect criminal activity, then the complaints would be forwarded to state attorneys’ offices. 

The proposal also mandates that by 2026, DBPR creates an online database with all condo complexes in the state where residents can access the names and contact information for boards of directors and property managers, as well as records such as association declarations, budgets, reserve studies and structural inspection reports. 

The HOA statute is much weaker than the Condo Act. It opens up with the clause that it is “not in the best interest” for the state to regulate associations, and the law doesn’t provide for an ombudsman. DBPR can only investigate complaints over elections and recalls. 

If passed, Senate Bill 426 would create an ombudsman’s office, where a governor appointee who is an attorney would have the ability to assist in issues between residents and boards. 

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Finally, the legislation also would target a common source of dispute at both HOAs and condo associations: elections. Under the bill, if either 15 percent of the voting interests at a property or six unit owners, whichever is greater, request oversight over electrons, then the ombudsman for condo and homeowners associations would appoint a monitor to oversee the voting process. 

John Perikles, the Economic Crimes Unit chief at the Miami-Dade State Attorney’s Office, said at the senate committee meeting last week that he’s often asked whether association fraud is “that bad”. 

“It is that bad,” he said. “I receive calls and emails almost every day. People sending me packets of information, and they are from what I would characterize from desperate homeowners.”

It took the state attorney’s office five years to unravel the Hammocks case, fighting the board’s pushback on subpoenas and tracking down records, he said. Late last year, police arrested four former board members of the south Miami-Dade HOA and the husband of one of the ex-board members. All five have pleaded not guilty. 

Attorney Spencer Hennings said at the committee meeting that he is proud of his work as a former Florida condo association ombudsman, but it also showed him the shortcomings of the law. During his time as ombudsman, thousands of residents called him alleging their board is violating the Condo Act. 

“So many times I had to tell these people, ‘I am sorry. There is a law … but there’s no one to enforce it.’” Hennings said. “‘So hire a lawyer. Good luck. I hope you have $200,000 to spend because that is what is going to take to enforce this law.’”