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Subject: Illegally aquired units in a condo association
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LyndaB6
(Florida)

Posts:1


11/13/2018 2:47 AM  
Five years ago our 55 and over, 385 units condo association hire a cam manager. The first year seem to work out well. Then the Board hired
an electrician/ outside manager over the three association's maintenance men. We later found it that he was her
boyfriend and/or husband. The two of them along with some other unsavory people connnected with them acquired around 24 units.
All of these units were put in a several LLC names with the boyfried being the manager of all of them. Some were foreclosures.
When this information was found out, one member on the Board called the police and fired the manager along with her boyriend/husband.
Needless to say, they took all the files of the units they acquired but that was not noticed until a year or so later.
When a new Board was elected they hired a forensic auditor. His reports came back that there was wrong doings but since
a member of the Board, who claimed ignorance of the sitution, notarized all of the transactions and another Board member
signed them, that there is nothing the association can do. We would still like to have them prosecuted. Any suggestions? on
how we should move forward? Our by-laws do say that if a unit is for sale it has to be posted giving owners 1st choice to buy
but the the maximun units an owner is allowed to own is two.
CathyA3
(Ohio)

Posts:243


11/13/2018 3:59 AM  
To untangle this, you'll need competent legal advice from an attorney who is well versed in association law (not real estate law). You have two issues that I can see: the actions of the manager that violated the CC&Rs, and an incompetent board that apparently signed off on them. I'd suggest getting together with like minded neighbors because legal services don't come cheap and this doesn't sound like it will be easily or quickly resolved. You and your neighbors should also plan to remove the clueless board members and replace them with homeowners who know what they're doing. Your governing documents should spell out how to go about this.
CarolF
(Florida)

Posts:416


11/13/2018 4:15 AM  
Lynda - are you saying these units were being foreclosed on by the association for non-payment of assessments, not a bank foreclosure? In Florida, all foreclosures are judicial, and handled through the court.
Or, were these units that just came up for sale?
MelissaP1
(Alabama)

Posts:8079


11/13/2018 5:08 AM  
Why not just move on and stop wasting more of the HOA's money? Ya learned a hard lesson. That is you need to PARTICIPATE in your HOA than let someone else manage it. This wouldn't have happened if it wasn't for the apathy of the owners. You all played a part in this.

Plus what will you get out of all of this? The court system can ONLY make one "Whole". What did you all actually lose that hasn't already been recovered from? Seems it's time to move on and NOT make the same mistakes. Like PAY ATTENTION!!!!

Former HOA President
SteveM9
(Massachusetts)

Posts:3231


11/13/2018 5:29 AM  
All of these units were put in a several LLC names with the boyfried being the manager of all of them.

but the the maximun units an owner is allowed to own is two.


Legally a LLC is an individual. So if he setup 24 LLC's with 1 unit each, he would still be legally be ok with your rules. Really nothing you can do.
AugustinD


Posts:1571


11/13/2018 5:44 AM  
Posted By LyndaB6 on 11/13/2018 2:47 AM
Our by-laws do say that if a unit is for sale it has to be posted giving owners 1st choice to buy but the the maximun units an owner is allowed to own is two.


I wonder if these by-laws are enforceable. Where exactly do units that are for sale have to be posted? Must a seller wait until the condo is advertised to the condo members before listing it with a real estate agent and say, advertising it on realtor.com?

Do the condo's governing documents say that all sales must be approved by the board?

What crime do you think these folks committed? Some type of criminal fraud? I am not seeing it.
KerryL1
(California)

Posts:6350


11/13/2018 8:11 AM  
My thinking is along the lines of Augustine's. In addition, I'd like to see the wording that limits condo ownership to just two units. And where this restriction is. It seems odd it'd be in the bylaws.

I also tend to agree you need legal advice.
JeffT2
(Iowa)

Posts:464


11/13/2018 9:08 AM  
It is not uncommon for condominiums to limit the number of units that can be owned by one entity. In part, this is to qualify for FHA approved mortgages, since FHA limits the percentage of units owned by one entity. It also helps to limit the number of rentals.

You may be able to break up their ownership and force them to sell. If your condo Declaration is well written, it will prohibit ownership of more than two units when the owners are related or the individuals have a financial interest in more than two of the LLCs. It will depend on the exact wording of the Declaration or it may depend on a judge's decision in interpreting the situation. In other words, explore this with a lawyer as a civil (not criminal) action.

Ask the lawyer if you might be entitled to recover your legal fees from them.

You may be able to report their scheme to FHA or their mortgage lender(s), to see if they committed some sort of fraud in obtaining mortgages.

You can report the CAM to the state at www.myfloridalicense.com/dbpr

Be careful. Your association may spend a huge amount of money only to have a judge decide they are just entrepreneurs who operated within the law.

You may be able to go thru arbitration, or negotiate a settlement with them instead of court action.
GenoS
(Florida)

Posts:2892


11/13/2018 12:03 PM  
Posted By SteveM9 on 11/13/2018 5:29 AM
Legally a LLC is an individual. So if he setup 24 LLC's with 1 unit each, he would still be legally be ok with your rules. Really nothing you can do.

This is my thinking. I bet when "the board called the police" I bet the police laughed. OP for sure needs some legal help but I think it's better than even odds that the property manager and her friends did nothing illegal. Shady behavior... certainly. Illegal? OP will have to pay to find out.
JohnC46
(South Carolina)

Posts:8267


11/13/2018 12:14 PM  
Posted By GenoS on 11/13/2018 12:03 PM
Posted By SteveM9 on 11/13/2018 5:29 AM
Legally a LLC is an individual. So if he setup 24 LLC's with 1 unit each, he would still be legally be ok with your rules. Really nothing you can do.

This is my thinking. I bet when "the board called the police" I bet the police laughed. OP for sure needs some legal help but I think it's better than even odds that the property manager and her friends did nothing illegal. Shady behavior... certainly. Illegal? OP will have to pay to find out.





I agree. Shady, but not illegal.
AugustinD


Posts:1571


11/13/2018 4:17 PM  
Posted By JeffT2 on 11/13/2018 9:08 AM
It is not uncommon for condominiums to limit the number of units that can be owned by one entity. In part, this is to qualify for FHA approved mortgages, since FHA limits the percentage of units owned by one entity. It also helps to limit the number of rentals.


Good point. The 2018 FHA rules (guidelines) require that less than 50% of a condo's units be rentals. Also a single investor can own up to 50% of the condo's units. Why the limits? Try living in a condominium where around 50% of the residents are renters, and one may see what is described here, from 2015:
https://www.marketwatch.com/story/too-many-renters-are-a-bad-sign-in-a-condo-complex-2015-04-27

Excerpt:
~~~
In the condo ownership arrangement, all unit owners strive to ensure that the condo complex is run properly, with common element areas kept clean and in good repair. Such common care is conducive for better living conditions in comparison to ordinary apartment living.

In contrast, a renter doesn't have a personal stake in the ownership of the condo building and may not be committed to looking after the complex as the unit owner. Renters are far more likely to break condo rules regarding noise and upkeep of the common amenities, resulting in the degradation of the complex. A complex that is heavily rented out becomes unappealing to potential buyers.

In fact, many financial institutions judge a condo complex to be risky if more than 25% of the units are rented out and refuse financing to new buyers. As a result, such condo complexes may become desperate. To attract buyers, they may start selling the vacant units at lower prices, adversely affecting the value of the other units within the same complex. As the complex makes the transition from mostly owner-occupied to mostly rented out, it enters a very dangerous stage: It may degrade itself to the point of depleting its budget and reserve fund. If the unit owners cannot replenish those funds, as a last resort, a common loan is arranged for the complex to maintain its very existence – passing the costs and repayment of such loan to the condo unit owners.
~~~
Kinkeai63N
(New York)

Posts:2


11/14/2018 9:06 PM  
http://www.hoatalk.com/Forum/tabid/55/view/post/postid/255557/forumid/1/Default.aspx
http://www.hoatalk.com/Forum/tabid/55/view/post/postid/255557/forumid/1/Default.aspx
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