Suspect HOA fraud? Here are red flags and how to file a complaint
Do you suspect your homeowners association is misusing your money?
On Tuesday, some current and former board members of the Hammocks Community Association, Florida’s largest homeowner association, were arrested and charged in an alleged $2 million fraud scheme. The association oversees more than 6,500 units in West Kendall.
Here are some of the things to watch out for and what you can do if you think there’s a problem in your HOA:
RED FLAGS
“Well-run associations are readily transparent regarding the association’s finances. A significant red flag is when financial information is not readily available and not timely provided by the association,” posted Fort Myers-based attorney Rob Caves, who works with the Fort Lauderdale-based Becker law firm, to FloridaRealtors.org. “Other potential red flags are unexpected special assessments or increases in the annual assessments the owner must pay.”
Other possible warning signs include “unusual payments for unbudgeted purchases, payments remitted to unknown vendors, and/or unauthorized signatures appearing on checks or other official documents,” wrote L. Chere Trigg, a shareholder with the law firm of Siegfried Rivera, in an August op-ed piece published in the Miami Herald.
SET UP SAFEGUARDS
Some of the safeguards that your HOA should establish to reduce the risk of fraud include “requiring two signatures on all checks, keeping the stockpile of blank checks securely locked away, conducting monthly reviews of all account and financial statements by multiple directors/managers, and maintaining adequate insurance coverage to protect against the loss of funds through embezzlement, fraud or other malfeasance,” Trigg wrote in the Herald op-ed.
Trigg also recommends that HOAs implement routine independent audits of all financial records by certified experts, avoid issuing debit cards in the name of the association, and require multiple signers to withdraw/transfer funds and to make changes to bank accounts, vendor contracts and insurance policies.
Trigg said authorized signers should be limited to the officers and directors of the association boards.
KNOW YOUR RIGHTS
Make sure you get familiar with the rules of your HOA, as well as what Florida law requires from HOAs. And attend meetings when you can. This can help you see if your HOA is doing what it’s meant to.
Some of the HOA rules under Florida law:
Anyone who is an HOA member has the right to attend and speak at all meetings of the board. The statute gives an exception for meetings between the board or committee and the association’s attorney to discuss “proposed or pending litigation or meetings of the board held for the purpose of discussing personnel matters are not required to be open to the members other than directors.”
The association is required to prepare yearly budgets and either provide a copy of the budget to each member or a written notice stating that a copy of the budget is available upon request at no charge.
HOAs are required to create and complete an annual financial report or hire a third party to do so. Just like the budget, a copy of this report must be provided to every member or a written notice notifying them that a copy of the report is available upon request at no charge to the member.
Members do not need to tell the association why they want or need the documents, per Florida law.
HOW TO FILE A COMPLAINT
If you find yourself in a dispute with your HOA, you should first try talking to the board or property manager. If this doesn’t work, you can file a complaint with the Division of Florida Condominiums, Timeshares, and Mobile Homes.
You can download the form from the division’s website or call 1-800-226-9101 to request a form. You can also call 850488-1122. Make sure to list all of your allegations in the complaint and include any documentation or information that you have that will assist in the review.
Once you fill out the form, you can mail it to the Department of Business and Professional Regulation Division of Florida Condominiums, Timeshares and Mobile Homes at 2601 Blair Stone Road, Tallahassee, FL 32399. You can also fax the complaint to 850-488-7149.
The division should contact you within 30 days. However, keep in mind that the division is not allowed to investigate everything.
“In specific HOAs and condo associations, such as those who have experienced ‘developer turnover,’ the Division is only able to investigate complaints related to elections, financial issues and access to association records,” according to a blog post by the firm South Florida Law.
The firm also notes that in the majority of HOA or condoassociation disputes, owners can’t immediately sue their associations. In the majority of situations, the homeowner will need to first attend a mediation session in an attempt to resolve the conflict without going to court, according to the firm.
If you’re not sure whether your complaint requires legal action, speak with a real estate attorney who specializes in HOA disputes.