Who Do You Call? Fraud, Mismanagement and Rule-Breaking

In most instances, the board or management team of a condo or HOA is equipped to handle the wide variety of issues that arise day-to-day, from a leaky roof to dealing with municipal bureaucracy. There are other, bigger issues—things like embezzlement and fraud, for example—that require experienced outside professionals to resolve.

“Directors in Florida are held to a standard of care that requires them to seek and rely upon the opinions of trained professionals where appropriate,” says Attorney Jonathan S. Goldstein, a senior associate at the law firm of Haber Slade in Miami. “In many instances this includes legal counsel, because there is an element of legal compliance and there are potential risks and liabilities in taking various types of actions.”

The State of Florida provides a number of rights for condominium owners through Chapter 718, Florida Statutes, also known as the Condominium Act, notes Chelsea Eagle, deputy director of communications for the Florida Department of Business and Professional Regulation (DBPR). Board members, under this provision, are held to account.

Eagle points to the Act, which states: “A director is expected to carry out his or her powers and duties, as any other ordinarily prudent person would do under reasonably similar circumstances. Directors have a fiduciary relationship with the unit owners, and have the responsibility to act with the highest degree of good faith and to place the interests of the unit owners above the personal interests of the directors.”

She continues that DBPR is a regulatory agency that enforces administrative law, as opposed to criminal law, for more than one million of Florida’s businesses and professionals. “These include community association managers, condominiums and cooperatives,” she says.

Co-ops, on the other hand, operate under Chapter 719 of the Florida Statutes whereas homeowners’ associations operate under Chapter 720 of the Florida Statutes. All three entities have similarities regarding the statutory obligations and fiduciary duties that govern both associations and directors. Further, all three are bound by Florida’s “Sunshine Law,” which requires open meetings and governance, including statutory access rights to the association’s official records.

“In general, the requirements for co-op directors are governed by specific co-op statutory requirements as well as the duties for directors in the Florida Corporate and Not-for-Profit Corporation Acts (as applicable),” explains Goldstein. “Similarly, condominiums and HOAs have their own requirements and director duties contained within their respective statutory schemes that incorporate by reference those same Corporation and Not-For-Profit Corporation Act standards.”

Goldstein adds the most notable differences is that HOAs have more robust protections against self-dealing and conflicts of interest, including the automatic removal of a director in violation of HOA anti-solicitation requirements. This type of removal, he says, is absent from both condominium and co-op statutory requirements.

“While co-op governing documents may permit such removal as well, in the condominium context, case law limits the ability of governing documents to authorize the removal of directors for reasons not permitted by statute, and there is no similar condominium statutory provision that contemplates removal for solicitation,” says Goldstein. “Another significant difference is that in co-ops and HOAs, a director charged by information or indictment with a felony theft or embezzlement offense relating to association funds is automatically removed from office and is ineligible to run for the board.”

Fraud: A Common Occurrence?

Mauri Peyton, an attorney and founding member of the Fort Lauderdale-based law firm of PeytonBolin, PL, says fraud based issues and/or claims are not common in his experience. “Typical they come in from unit owner concerns or when a board turns over they will want to investigate the old board. Thankfully it doesn’t come up that often,” he says.

While not a common occurrence, fraudulent activity does transpire. Peyton relayed an example regarding a treasurer of an association who took out a debit card from the association’s operating account. “He had a serious gambling problem. He would go to the casino and withdraw the five hundred dollar limit on a daily basis until the association was out of money.”

In this case, the gentlemen was successfully prosecuted criminally. “The biggest challenge for associations is getting the authorities to take criminal charges seriously. A lot of the police agencies at the lower levels will tell you to deal with these issues civilly. Your remedies are then to go to an attorney and seek action in court or seek the arbitration process.”

If a board member or managing agent suspects wrongful behavior, Goldstein says they should notify the association’s counsel and consider obtaining their own counsel in their capacity as both a single director or member of the association (if they are a member).

“Notice of wrongdoing by a single dissenting director to the association’s counsel will trigger ethical and fiduciary considerations for the association’s counsel that will require them to carefully consider how to best represent the association’s interests,” says Goldstein.

In some cases, the fraudulent act might be on a smaller scale. Take, for example, an officer who was having the deli that delivered sandwiches to board meetings also send food to the president’s apartment. A suspicious board member might raise this to other board members and insist on an investigation.

“Every board member has a fiduciary duty to the association,” says Peyton. “You really don’t violate it unless you reach into the realm of criminal level conduct. Most other board decisions and actions will be covered by the Business Judgment Rule—if you are stealing from the association that is when the director is personally liable.”

Board Member Protocol

By accepting a position on a board, that member is volunteering their time and efforts for the betterment of the community. As such, if they suspect foul play they have a duty to investigate the suspected illegal behavior. If they ignore the issue or wait too long to act, serious consequences could be in store.

“Once suspected malfeasance is discovered, and supporting documentation obtained, it is suggested that the proper recourse should be to alert the appropriate administrative agency investigation department, law enforcement and the association’s legal counsel,” says Goldstein. “Retaining legal counsel on behalf of the member’s own interest can also be beneficial, and such counsel can work with the association’s legal counsel if they are cooperative or guide an effort to correct the malfeasance and dispute the association’s official actions if they are supportive of or enable the malfeasance.”

Aside from being responsible for fraud-related losses, a negligent board member could further hobble operations when it comes to insurance. “Insurance policies always have exclusions and they are usually specific, which varies on a fact to fact basis,” says Peyton. “The insurance company will try and deny you on every step of the way. While there are handful of good insurance companies that will make you whole without much of a fight, in general, their job is not to pay claims.”

Goldstein says managing agents can also adversely impact insurance rates or coverage if they are deemed negligent. This is especially important when looking at directors and officers liability insurance, a notice of occurrence policy.

“A management company arguably has both a contractual and fiduciary duty to notify the association’s legal counsel of wrongdoing or potential liabilities, to advise the board to seek legal counsel based upon the risks as stated by the manager, to use discretion in not alerting wrongdoers of ongoing investigations into their conduct if this will prejudice the investigation, and to promptly put carriers on notice of potential claims,” says Goldstein. “Failing to comply would put the management company at risk of legal claims for breach of contract, negligence, breach of fiduciary duty and/or indemnification.”

Actionable Intel

For many board members, discovering questionable information—on purpose or by accident—is a slippery slope. If actionable intelligence is attained, the way in which the information is reported is critical. Often, board members are cautious about blowing the whistle on a fellow board member or managing agent for fear of personal repercussions.

“Reporting information is really tricky. They need to bring it up at board meetings,” says Peyton. “My experience in these situations is that if there is one board member who has these concerns and the other board members are all in on it, the one board members reaction is to resign from the board and that is probably the worst course of action. The best thing is to bring up the issue at a board meeting and bring in professionals to investigate.”

Goldstein adds that there are protections for “whistleblowers,” such as a provision for condominiums and HOAs that prohibits Strategic Lawsuit Against Public Participation (SLAPP) suits. These are lawsuits against a member brought in retaliation for that member’s having reported to a governmental authority or administrative agency, or otherwise having taken legal action against such public (or quasi-public) entity.

“One thing a whistleblower, dissenting director or manager should not do is attempt to informally resolve the issue one on one with the suspected wrongdoer, as alerting them could result in their attempting to cover their tracks or flee,” says Goldstein. “It is also unproductive to deal with these types of issues verbally, without written notice or documentation.”

If you suspect wrongdoing, first, contact your association attorney, and you also may need to contact state officials, the Florida DBPR or the local police authorities if a crime has been committed.

Simple, basic practices-like good record keeping, regular maintenance and good communication between the condo/HOA board and the building administrators are keys to keeping the community fiscally sound and on track and head off fraud and mismanagement before they take a foothold.

Brad King is a freelance writer and a frequent contributor to The South Florida Cooperator.

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  • How do you go about filing a complaint against Board and Prop Management for financial mid management? We suspect the board has exhausted its op ex budget on items that are deemed Capital Expense. The Board is now asking for a vote on Special Assessment to cover items.
  • My friend was appointed as sec/treasurer to her board in December 2018. She is not permitted to sign on checks although our docs say 2association only signers property management sent her thumb drive with financials and if she wants to see more she has to go to attorney office. She discovered a solid case of fraud/theft by president and told manager and told president. Her and another board member that supported her are being recalled by president. She has solid evidence and recordings of how she has been bullied and and belittled. She is a senior from Brazil who has lived here 40 years and is only one who stands up to them she is filing with DBPR. Our attorney for over 25 years supports manager. Don’t have money for attorney. What can she do. 3member board in 14 unit condo that is part of 19 condo run by same co
  • We are being reassessed for outdoor electrical boxes which is part of the association's obligations and the reassessing us so that the homeowners on the condos have to pay for it also things are being relabeled balances are going 2-0 on certain entities on our budget and other entities are being doubled or tripled who do I call please help me
  • We recently bought an investment condo in Tampa. We are absentee owners who live near Atlanta. The HOA management company refuses to give us the names or contact info of the board of directors. Is this lawful? I’ve never heard of such a thing. I am President of our HOA up here in Ga. we have approximately 350 homes in our community. Every resident has my name, my email address and my phone number as well as that of the rest of our board members. Our residents know they can reach one of us at any time. We also have a management company with which we work in tandem. I am completely miffed that I have no idea who the board is at our condo and I just don’t believe that withholding this information from an owner is appropriate. Please let me know what recourse we have that will help us get this information to which we are entitled. Thank you!
  • Yanser_falcon@yahoo.com on Sunday, December 30, 2018 1:17 PM
    Can an association manager make a housekeeper or maintenance employee access a unit and walk some resident's dog just because the dog is making a lot of noise inside the unit, apparently because they owner forgot to walk the dog before leaving the unit? I need an answer ASAP please... thanks
  • We purchased property in FL and was not advised of HOA..we are only here three months out of year. We signed on for HOA but about twenty in location only pay dues. My husband recently underwent major heart surgery..I received letter from HOA, which I thought was for dues, put check in mail, due to my circumstances, didn’t real letter. The president called me twice threatened to put 500 dollar lien on property for dock repairs..is this legal since all homeowners haven’t participated since we have been here for 17 years ? What’s my recourse?
  • our docs say no trucks,trailers,vans boats or other commercial vehicle may be parked overnight on property. i have a pick up that is registered as a passenger vehicle. i am not being allowed to have it at my condo. my contention is that its not a commercial vehicle so it should be allowed. also, parking stickers are being issued to mini vans. why is that ok? seems the rule is being read two different ways. what can i do?
  • There is been a board in the condominium building I’m living in the past 15 years . We will be voting for getting a new board in the next month or two . It is most unfortunate that the president of the board association, has control of all the elderly people ballots Because they trust him . They also have control the ballot box in which they are the only ones I can count the votes . They have refused to show any of the financials to the people who are condominiums in our building . And they want to wait until the new board is put in place before they move forward with any actions . My question to you is is there an independent person that can come in and look into of all the illegal matters have been handled . This is not just me speaking off-the-cuff , many people are very well aware of what this man is been doing . I would like to know if there is an association and just come independently and look at all the records , without my name being involved .. I can promise you it will not be a waste of time , and there are many people in the building after the new board comes on like an investigation . I myself , Would like to have this get underway as soon as possible . And this will not be a waste of time I could guarantee that I remain respect fully yours , Suzanne Kent cooke
  • Being here since the 1980s we have seen our condo board go from bad to worst. At the beginning we had an office secretary who was married to the president of board. She was the only person allowed in office and had access to all. They would abuse verbally anyone who questioned them. They treated us like animals from third world country. Since then board figured if they can do it so can we. Our president has ten minute meetings our vice president does not live on premises and has no clue on what is going on and to boot has other units in building were her son and wife( wife in question) rent all under one year of purchase which is illegal. We have building directors that purchase to turn around condos and rent in less than a year. Totally abusing their powers. We have asked for financial records as money goes missing and no one has answers to questions. Avoiding us because most of us our in our 70s and some just do not speak English. Where can we go to get action. The DBPR is a total joke and waste of time, we feel board members are taking advantage of us because of our age and its uncalled for. Its a crime to beat an elderly person , we feel eden isles condominium is doing just that without the physical aspect.
  • On 2-1-2017, I was double billed first quarter. I paid in full 1st quarter by check using the coupon book provided, the check cleared my bank but they said I did not pay. They billed me for Feb, Mar and Apr. and fees were to be sent to Phoenix Arizona, under new management name. I called, they said I cannot call, I must write, so I wrote, twice, and no reply. During this same time period, my in-house water bill went well over the usual amount. I called and wrote to the Water Co. and the HOA on the same letter, so that both parties would receive the same information. The Water Co. responded, found out that someone had tampered with the water meter governing the irrigation. The HOA said they do not do the irrigation, but the yearly budget shows that they do. I never once said I would not pay, I just wanted a corrected coupon book. To this day, I have been sued, and forced to pay attorney's fees or have my home sold at auction. I NEED HELP FOR THIS FRAUD.
  • As of this date, I have not received any help and I was forced to pay a debt collector the fees which were already paid, plus the continuing fees. I never said that I would not pay, just amend the payment coupon book to rectify their mistake. According to the Florida State Law, arbitration or mediation is the way to settle disputes, and filing a law suit is not legal. As a homeowner, I have no rights and they threatened to auction my home if I did not pay. Why have Florida laws governing homeowners Assoc. if they are not enforced.? Please help me as I am 86 years old and have become a victim, pay up or else. Thank you for any help you can give me. Rita
  • Jennifer C Butts on Monday, May 18, 2020 3:36 PM
    I've sent Best Beach Getaways multiple emails and called at least 20 times with no response. I rented 2 condos from them for June. The condo is Ocean Villas in Panama City Beach Florida. Can someone lead me in the right direction to reach this agency? Any help is appreciated. Thanks, Jennifer
  • Approved assessments for projects not completed in 65 day is consider Exploitation iaw FL Statue 825.103. Is this eight or is it longer ?
  • I live in a 55+ mobile home co-op community in FL. Our Board of Directors President has been accusing residents of breaking rules and regulations when none have been broken. The Board selectively enforces the rules and regulations. They are accusing people who have not broken any rule and charging them a $2,000.00 fine. They have accused my husband via mail on letterhead from our Management Company (who only does our financials) of false violations. The letter states to advise of our intentions which we tried to do but the phone number on the Management letterhead was an incorrect number. After getting the right phone number we were told by the Management Company that "they only do our financials" and that the letter did not come from them and therefore could not help us. I read the letter to them and also told them that the letter came with there address on the envelope as well as the letter. They said they could not help us, they did not write the letter. Our Board President told us if we ever have a question just ask any Board Member. My husband asked two other Board Members and after them arguing with him he got a letter for harassing the Board member. This is just the beginning. Can someone pls HELP us?
  • Can the CAM management company & the board of directors break into our unit with a locksmith, while NEVER having tried to contact us through mail, phone call, or text? They had all that information. We were out of town. They pretended they needed to check our unit because the new owner in the unit below us had leak problems. There were problems in that unit for the past 30 years, but now it was an emergency.
  • Can a CAM management company and the condo association board of directors break into a condo without giving any warning to the condo unit owners? We were out of town. They never tried to call us, or send a certified letter, regular letter, or text, so that we could have overnighted the keys to them. There was a new condo owner who moved in below us who complained about the 30-year plus leaking lanai he had just moved into. It obviously was not disclosed by the previous owner about his multi-decade leak. They broke into our unit, damaged the door, destroyed our matching lock, and one of them stole some signs we had on the kitchen counter. What recourse do we have now?
  • I have a condo in Fort Myers in an over 55 community. About a week and a half ago my snowbird tenant called me and said there was water on the bathroom floor. I immediatedly notified the management company as well as a plumber. When the plumber came to inspect it he said that every time the unit above me used their sinks or toilet the water comes down to my unit due to a broken pipe . The president of the association took it upon herself to call a friend of hers that is a “handywoman” to come in and fix the pipe even after I told her that my homeowners insurance told me it HAS to be a licensed, certified plumber with liability insurance and certificates etc. They said they would not be responsible for anyliabilities or issues if I hired anyone but that because the Florida law mandates that. Also I noted in the documents for the assosiation if anyone needs any plumbing, electrical or contracting work done it has got to be by a licensed professions with liability and certifications. It is now 1-1/2 weeks later and I want to hire the plumber that was there today and the association keeps telling me that they have already repaired it and I am not to hire any plumber. Meanwhile, my tenant had to leave due to coughing and not feeling well , as well as the people upstairs because they could not use their toilets or sinks . And in addition to that I had a mold restoration company come in today and it going to run thousands of dollars to remediate the place, remove and replace all the molded sheetrock, replace the carpet, etc. Apparently this has been going on for some time but no one knew it until last week. More impodrtantly and more frustrating is that this same exact incident happened about 8 years ago and all of my carpets, and walls, flooring etc. had to be either replaced or repaired. I believe it was never fixed properly the first time by a licensed plumber and has been leaking this entire time behind the walls. The president is insistent that the problem is repaired because her friend went in yesterday for a few hours and as they claim repaired all the damaged broken pipes behind the wall. The association calls that "repairing the problem". I call it “putting a band- aid on the problem” until it resurfaces again, just as it has. I did much research on plumbing requirements in florida , and spoke to numerous plumbers, insurance agents and Pam and not one person or article permits an unlicensed handywoman to repair broken pipes behind walls, yet my associaion & management company is telling me they fixed the problem and are basically not responding to me . What worries me more is that the plumber that went in today told me he believes even after this woman claims she fixed the problem he believe it still exists because after l-1/2 weeks of shutting down the water and numerous days of fans - the walls registered today as still very wet. He told me the problem is probably only getting worse. My hands are tied because the association is supposed to be absorbing the cost for the plumbing but refuse to hire a licensed plumber which is breaking the law. In addition to that, either I or my insurance will be forced to cover all of the remediation, which was all caused by the damaged pipes behind the wall,and this just does not seem fair to me. I could see paying for remediation IF i caused the problems in my unit in the front of the walls, but all the mold and damage to floors, walls, rugs etc. was due to the issue that started in the pipes behind the walls. It is going to be thousands of dollars just as it was 8 years ago. I hesitate to go through my insurance because it will probably skyrocket, but will probably have to do that cause I cannot affort the cost of a remediation. Can you help
  • I am having an extremely hard time with my HOA board with his new as a bike a year ago January president has a felony in his background also embezzled funds bid fixing in Palm Beach. I have pointed out this president's impropriety in hiring his own new Landscaping Company inspiring a legitimate well run outfit. He has done many things on the property as an electrician and plumber irrigation specialist sump pump specialist the list goes on is not hired unlicensed contractors to do work nor pull permits I have been calling the HOA out on these improprieties and have become a huge Target remodeled one of my homes and they held me up for so long that I cannot afford to have the work finished because of the price of wood has almost tripled and I have lost my contractors because they have moved on to other projects. They will not give me the information on our insurance company they actually don't respond to any emails or letters. I have not been able to rent my second property because I couldn't finish my first property and I lost the revenue over season for income which I need. I have hired an attorney and he does not seem to take me seriously nice letters do not work with this board they just ignore you and prolong the time it takes to send letters back and forth out of spite. I have several other people who are also complaining we tried to have him ejected from the board we were three votes short. Very small HOA mobile home Co-op and there's absolutely no need for this ridiculous board to allow selective enforcement of HOA rules and regulations initially of which they did no idea because I never read the rules. I am beside myself because I can't seem to get anyone to take me seriously without charging an arm and a leg.
  • I had an issue with the HOA. Who can I discuss ths with
  • The board is voting off our president because he does what he wants and does not tell the board members. My question is can he vote when we are voting off the board?
  • I am a member of the board. I requested many financial documents from the management company. The president of the board knows all about it. But they all refused to give me the documentation requested. Who is able to help me if the president of the board and the management company refused to give me the documents requested. They all have ignored my request.
  • Hi, What to do if a board member does not pay association fees, more than 90 days delinquent and refuses to leave the board. Also rest of board members does not take action against the delinquent member and management company is protecting this person. Thanks.
  • I have lived in my Fl.condo for many years and served on the Board. We govern by the Fl. Statutes, the Condominium Act and the Condo Bylaws. You can get most answers by first going on line to get the state laws governing Your state. In Fl. A Board must allow a homeowner to inspect most documents when A certified letter with return address is sent within 5 days of delivery. If not a complaint to Dept. of Business and Professional Regulations Will notify the Board and request the documents and will be charged fines If Board does not comply.
  • I moved to my condominium two years ago. Since then, I have learned about corruption and dishonest boards. I also learned that is no adequate protection and platform for condominium owners unless they hire a lawyer. It's a huge disadvantage we have against rogue boards. The DBPR has limited power. The solution to this problem is to create a Condominium Owners Association with fee-paying members. The association would have a contract with a law firm where members could get legal advice, representation and the association would pay for it. Corrupt boards can get away with almost everything because they know few owners can afford legal action against them. Having the Condominium Owners Association would change that. If you are interested please contact me.
  • I am a victim of a corrupt association spending $$MILLIONS on crumbling construction fraud. The current president has sued his last residence where he was also a president for a slip and fall. The same security company is contracted here. Isn’t this a major conflict.? If the security co is being sued for negligence how can he employ them here in this building.? He now drives a Mazzeroti