Apparent HOA takeover, fraud scheme

Hello HOAtalk!

Question 1: How common are HOA takeovers?

Question 2: Is there anything that can be be done about it?

I bought a condo about 1-1/2 years ago. It's in a small southern city. There are five (5) owners on the Board of Directors. The board president is a woman. Her husband is the attorney for the BOD. That is a conflict of interest on the attorney's part and a breach of trust on the president's part.

At the board meetings there are usually maybe one or two persons. This development has 115 units. 90% or more of the owners have never been to a board meeting.

There are five condo buildings plus the clubhouse in this development. These condo units sell anywhere from about $60,000 to $80,000. The are 12 acres in this development. It sits atop of a high hill. It has a panoramic view of a lake and the Great Smoky Mountains on one side and a panoramic view of a downtown area on the other side. The land adjoins a private country club which only the wealthy people in this city are able to join.

It's worth noting - at the July, 2014 meeting the board president's husband/board attorney and one of the board members said they had a developer that would buy the south 7 acres and build 200 apartment units. They said the owners would not get one red cent and that the money from the sale would go into the capital reserve fund.

I suspect there has been an HOA takeover with three straw voters. The board president and two others are straw voters. I think the other two board members are complicit at the very least and maybe accomplices.

Description of the problem:

1). The Board of Directors at the October meeting announced that they had decided there would be a special assessment. No mention had earlier been made.

2). They gave three options a). a higher assessment and low dues increase; b). a medium assessment and medium dues increase; or c).a small assessment and a higher dues increase.

3). They had an engineer prepare a "capital reserve study." The engineer a). recommended repairs but got no contractor bid estimates; b). did a cash flow model even though he has no financial credentials; c-1). has had a state engineer license for 14 years, c-2). has got four complaints, c-3). which is more than 98% of all architects, engineers, interior designers, and landscape designers.

4). I told the property manager about the engineer and that the owners needed to know. I was naive. She defended the engineer.

5). I told the property manager that I had an e-mail list and that I was going to e-mail the owners. She became bitterly angry at that. Apparently, the manager/board did not want the owners to know.

6). I sent an e-mail to all of the owners and told them about the engineer. I included documentation from the State Board of Architectural and Engineering Examiners about the complaints against the engineer.

7). The engineer's report gave a price of $185,000 for mold remediation and encapsulation. I contacted a ServPro franchisee. He gave me a bid of $12,641 for the exact same things. $185,000 - $12,641 equals $173,000 overestimate.

8). There was a special assessment in 2007. It was for $1,000,000. The July, 2009 board minutes said that a certain contractor was under contract for $169,000 worth of work for structural repairs to ALL buildings. I went to the building permits department with the city. They told me there was only one building permit. It was for the clubhouse. It was for $21,000. The city told me there were no building permits for any of the condo buildings for structural or crawl space repairs.

9). All five of these buildings have sub-standard floor braces or structural work in the crawl spaces.

10). I sent a second e-mail to the owners. The second e-mail documented the discrepancy in the engineer's bid for mold remediation/encapsulation and the ServPro bid I got. I also pointed out the discrepancy between the July, 2009 board minutes and the building permit.

11). At the November meeting there were abut 12-15 owners present. All of them were bitterly opposed. There was one former board member there. The last speciaL assessment took place on her watch. She is a former city council woman. I think she is in cahoots with the board members.

12). Two of the members were not present. I think those two are straw buyers. The crowd, both the owners and the BOD, was raucous. The BOD had a police officer present for their protection.

13). In spite of the opposition they passed the special assessment!

14). I had earlier spoken to a criminal investigator with the county District Attorney's office. He said they would consider it a private/civil matter.

Thank you for reading my post.

Harvey,

Normally a condo association owns none of the land. Each owner holds an undivided share of the land not deeded to the other owners. If that is your situation your board is not in a position to make a deal with anyone to purchase it. You will need to verify ownership by examining the records at the recorder's office.

I have heard of other condo projects where a developer does take over by buying enough units to give him a majority interest. They then vote to require all remaining units to sell at some below-market price.

Are you on the board?

Keep on emailing those other owners. It sounds like it is waking them up and getting them off their couches.

BobD4;

I am aware of the Leon Benzer case.

I have been really worried about retaliation.

I am going to move as soon as possible. I have applied for an apartment.

They said it would be available on January 1st. If I have to I will let the bank have this unit.

Thank you for your input.

Harvey it doesn't sound as much of a takeover as it does a giveover. If you don't like how things are going, gather support, find people who are willing to serve and vote in a new Board more in tune with what the majority wants.

Just touching bases.

I moved to an apartment. I sold my condo for the mortgage amount. We closed this past January. It serves me right. A lady told me not to buy a unit there.

I just talked to one of the owners via e-mail. He said that no mention had been made of any plans for repairs.

He told me that the manager is almost never at the condo management office. She used to be three days a week all day long each day.

They have collected the first installment of their special assessment. It would be between $50,000 and $100,000.

The BOD never had any intent at all for any structural repairs. Oddly, I don't think most of the owners suspected a thing until I sent out the e-mails (mentioned in my first post). Only one owner told me he was suspicious.

All the owners now know these people are stealing money. I drove through the parking lot a few weeks ago. I saw one of the board members. The look on her face was telling. She didn't see me. She had an expressionless, stunned look on her face. She looked like she was in torment. My guess is she's worried (about criminal prosecution).

I reported them to the FBI last fall. I told them that I had reported them. I e-mailed them a link to the Las Vegas HOA Takeover Scheme articles.

They were not planning on getting caught/exposed. They have got no exit strategy. They have stolen it looks like at least $500,000 in the past five or six years. They are stealing about 1/4 to 1/3 of the monthly HOA dues. That's about $50,000 to $75,000 per year.

For example, similar condo developments have HOA dues of about $80 to $100 per month. I was paying $154 per month. They increased it to $185 per month. I paid $60,000 for the condo.

I ran for the board in July, 2015. They did not disclose the number of votes. All the manager said was that the current board members had been "retained."

That was a couple of months before I figured out they were stealing money.

What these people have been/are doing mirrors almost exactly what the articles say about that Las Vegas HOA Takeover Scheme.

Other than criminal prosecution there is not any way to get them off the board.

The condo documents say that, unless they have a criminal intent, they can use HOA funds to hire an attorney if they are accused. A lawsuit likely would prove there is a criminal intent. However they would go through several hundred thousand dollars of the homeowner's money first.

I am glad I am out of that mess. It took me a few months to recover.