HOA super majority

Started by MattF4 • 10 replies • 245 views

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MattF4 (Florida)
Posts: 1

Posted:

We have an HOA that governs 100 condominium units. This is a resort complex that is comprised of a hotel, restaurant, bar and entertainment facilities. The hotel was sold 3 years ago and the new owner controls 60 of the units. He has taken over the entire board and the other 40 owners are basically held hostage. Ours dues have nearly tripled in The last three years and we have o idea on what these funds are spent on. Additionally if maintenance is $1,000 a month, how can we verify that he is depositing his $60,000 in the general fund, since his sister is treasurer. Any help would be appreciated

ElleN (Idaho)
Posts: 4,420

Posted:

Are you aware that what you described are the symptoms of an investor who is going to convert a condo association to an apartment complex? And that if this is the path the investor is taking, it's best to sell now? Because the more units the investor owns, the lower the offering price will be for the remaining units.

Many condo governing documents are set up to legally allow such takeovers.

If you would be kind enough to read your Declaration and confirm the condo is under Florida statute FS 718, then I can direct you to the sections of FS 718 that explain how to get records. But I fear you are fighting a losing battle, and the losses may be devastating to your net worth.

You should google on chatter about condo conversions in the last couple of years.

DeanJ
Posts: 1,786

Posted:

I think you are screwed. The majority owner can pay himself what ever he likes.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

sell now. Florida Condos insurance has gone up a lot, is probably the main reason, but unless you enjoy having your biggest financial investmen controlled by somone else this is not place to be.

vis ta vie

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By MattF4 on 01/06/2024 9:16 PM

Additionally if maintenance is $1,000 a month, how can we verify that he is depositing his $60,000 in the general fund, . . .

The answer here is simple. Ask to see the records of the Association.

The more specific, the better. I would suggest the following:

1) Bank statements for the Association
2) check register for the Association

This will answer your question and show you how the money is being spent.

Applicable statutes, and likely your governing documents, give member the right to review these records. NOTE: I said review. They can charge for copies.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I had the same reaction as ElleN: the new owner is aiming to convert the community to rentals, and is just waiting until he owns enough units (a super-majority) to force the conversion.

At this point the remaining owners will have the choice of selling their units to the new owner or paying him rent. Don't make the mistake of thinking that this isn't legal. There always seems to be one or two remaining owners who lawyer up and sue, because they can't believe that the new owner can do this. He can, and they end up in worse financial shape (after paying the lawyer on top of losing their home) than they would have if they'd seen the writing on the wall and gotten out early.

The good news is that you should be able to sell your condo easily, there is a buyer waiting to grab it. But I wouldn't try to get greedy, because he can wait you out and pay even less for your home in the future.

CathyA3 (Ohio)
Posts: 6,299

Posted:

What property rights? Last holdout condo owners in Boca fight investor’s termination bid

An update:

Boca Raton holdout tests condo law regarding forced-sales to investor groups

The holdout is pursuing an interesting legal angle. Quote from second article:

"In 2007, Florida lawmakers changed condominium law to say that only 80 percent approval, not 100 percent, from unit owners was enough to trigger a dissolution of a condo association.
...
But instead of giving up by evicting his tenant, and agreeing to a sales price, Fellman hired a lawyer and took the association to court, claiming that the original 100 percent requirement in the condo documents couldn’t be altered."

So Mr. Fellman is arguing that current Florida law isn't lawful.

The second article noted that he keeps losing and is "hemorrhaging money". It'll be interesting to see how this one plays out, because Florida is pretty friendly to investors. I'll also note the irony that Mr. Fellman is actually renting out his condo, he's not living in it. He's far from the typical elderly owner on a fixed income who is forced out of their home and faces economic hardship as a result.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By CathyA3 on 01/08/2024 6:50 AM

So Mr. Fellman is arguing that current Florida law isn't lawful.

I think it's more of an argument that the terms of the contract can't be change unless there is a conflict with the law.
Being more restrictive is typically not a conflict.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Florida Statute (FS) 718.111 details the ability for members to inspect and copy records, here is an excerpt:
(b) The official records of the association must be maintained within the state for at least 7 years. The records of the association shall be made available to a unit owner within 45 miles of the condominium property or within the county in which the condominium property is located within 5 working days after receipt of a written request by the board or its designee. However, such distance requirement does not apply to an association governing a timeshare condominium. This paragraph may be complied with by having a copy of the official records of the association available for inspection or copying on the condominium property or association property, or the association may offer the option of making the records available to a unit owner electronically via the Internet or by allowing the records to be viewed in electronic format on a computer screen and printed upon request. The association is not responsible for the use or misuse of the information provided to an association member or his or her authorized representative pursuant to the compliance requirements of this chapter unless the association has an affirmative duty not to disclose such information pursuant to this chapter.
(c) The official records of the association are open to inspection by any association member or the authorized representative of such member at all reasonable times. The right to inspect the records includes the right to make or obtain copies, at the reasonable expense, if any, of the member. The association may adopt reasonable rules regarding the frequency, time, location, notice, and manner of record inspections and copying. The failure of an association to provide the records within 10 working days after receipt of a written request creates a rebuttable presumption that the association willfully failed to comply with this paragraph. A unit owner who is denied access to official records is entitled to the actual damages or minimum damages for the association’s willful failure to comply. Minimum damages are $50 per calendar day for up to 10 days, beginning on the 11th working day after receipt of the written request. The failure to permit inspection entitles any person prevailing in an enforcement action to recover reasonable attorney’s fees from the person in control of the records who, directly or indirectly, knowingly denied access to the records. Any person who knowingly or intentionally defaces or destroys accounting records that are required by this chapter to be maintained during the period for which such records are required to be maintained, or who knowingly or intentionally fails to create or maintain accounting records that are required to be created or maintained, with the intent of causing harm to the association or one or more of its members, is personally subject to a civil penalty pursuant to s. 718.501(1)(d). The association shall maintain an adequate number of copies of the declaration, articles of incorporation, bylaws, and rules, and all amendments to each of the foregoing, as well as the question and answer sheet as described in s. 718.504 and year-end financial information required under this section, on the condominium property to ensure their availability to unit owners and prospective purchasers, and may charge its actual costs for preparing and furnishing these documents to those requesting the documents. Notwithstanding this paragraph, the following records are not accessible to unit owners:

A few exceptions are mentioned, you should review the entire law. Unfortunately, if they don't comply willingly, your main option would be to sue to force compliance. You need to decide how much you are willing to sink into this vs. bailing. The state department of business and professional regulation (DBPR) supposedly can also provide assistance but I haven't seen any threads on this site that suggests they have ever been much use to a homeowner in Florida.

Escaped former treasurer and director of a self managed association.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TimB4 on 01/08/2024 7:48 AM

Posted By CathyA3 on 01/08/2024 6:50 AM
So Mr. Fellman is arguing that current Florida law isn't lawful.

I think it's more of an argument that the terms of the contract can't be change unless there is a conflict with the law.
Being more restrictive is typically not a conflict.

I read the reports on the Howard Fellman v. Mission Viejo litigation. I agree with TimB4. The statute changed around 2007 to require only 80% of the owners to approve a de-conversion (with several caveats). The Declaration originally said 100% must approve. The Declaration controlled as long as it said 100% was required.

Unfortunately for Mr. Fellman, sometime in the last several years the investor amended the declaration, and a court upheld the amendment. The investor complied with the procedures for amending the Declaration (the court said), and Fellman knew of this possibility because Fellman has notice of what the Declaration says. A deal's a deal. (And no, a tyranny of the majority argument either does not work in Florida or was not raised or did not legally "fit" here, meaning the court did not see anything unreasonable with the amendment.)

Fellman appealed. In April 2023 the appeals court upheld the lower court decision. See https://law.justia.com/cases/florida/fourth-district-court-of-appeal/2023/22-1260.html

I am not sure where things are now. I do not see any other court action or media reports since April of last year.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By ElleN on 01/06/2024 10:42 PM
Are you aware that what you described are the symptoms of an investor who is going to convert a condo association to an apartment complex? And that if this is the path the investor is taking, it's best to sell now? Because the more units the investor owns, the lower the offering price will be for the remaining units.

I saw some reports this morning that Florida statutes changed around 2015 to require that an investor buying out condo owners has to offer fair market value. If the OP wants details, either google or ask the forum for more info.

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