Grand Jury’s slanted report on condo boards, managers needs balance
Daily Business Review
Commentary by John A. Moore
22 March 2017
Enough is enough. That was the takeaway from the Miami-Dade County
grand jury's final report on Feb. 6 addressing condominium association
complaints.
State Attorney Katherine Fernandez Rundle initiated the investigation
because each year her office receives what is considered an astounding
number of complaints — 500 to 1,500 — of alleged misconduct by
condominium association boards and their property management companies.
The report recommends changes to the Florida Condominium Act and the
Department of Business and Professional Regulation, the agency charged
with regulating condominiums.
The grand jury's report focuses on complaints regarding a unit owner's
inability to access association records, self-dealing among board
members and property managers, a lack of DBPR enforcement and
fraudulent board elections.
For instance, the grand jury found that, despite a state law requiring
an association to provide unit owners with access to the association's
records within 10 working days, many owners were denied access or the
access was greatly delayed. The report concludes that association
boards do not fear reprisal because they are generally immune from any
personal liability and the maximum statutory damage that can be
assessed against the association is only $500.
The grand jury succinctly stated that a "right without a remedy is
effectively no right at all." Accordingly, the grand jury recommends
revising the law to make board members and property managers subject to
personal financial liability as well as criminal charges under certain
circumstances.
Enacting the grand jury's recommendations, however, may create new
issues and an even further backlog of complaints. Specifically,
subjecting board members to the threat of personal liability and
criminal charges may deter individuals from serving on the board. The
grand jury dismisses this concern without any apparent analysis simply
stating that this would only concern those potential board members who
intend to engage in wrong conduct. Such reasoning is self-serving and
anyone considering becoming a board member would rightfully be
concerned about being falsely accused and facing this increased risk.
The grand jury also did not seem to consider that the threat of
personal liability and criminal charges might lead to increased and
protracted litigation as board members may feel compelled to fight to
the bitter end to avoid an adverse ruling. This could lead to an even
longer delay in providing the owners with access to the records. And if
the board member prevails after a lengthy litigation, it will be the
association that has to pick up the tab. The report, although noting
that owners can abuse the process that has been established to request
records, makes no recommendations to curb nuisance requests, which
waste the association's time and money.
Slanted Perspective
Additionally, the grand jury fails to adequately explain why the
current provisions in Florida Statutes 617.0830 and 617.0834, which
provide for personal liability against board members when they have
acted in bad faith, are insufficient.
It is apparent from the report that the grand jury views unit owners as
generally being innocent and their complaints valid, whereas board
members are considered to act with ulterior and improper motives. Such
a slanted perspective is pervasive throughout the report. Although
noting that under Florida law, board members of any corporation,
including condo associations, may enter into business arrangements with
the corporation on which they serve on the board, the grand jury
nonetheless concludes that this is improper "self-dealing" when done by
a condo board member.
Accordingly, the report recommends changing the law only with respect
to condo associations. Inherent in their reasoning is that board
members always have devious motives. What about the situation where the
board member's company is able to offer a "friends and family rate?"
Moreover, why do condo associations need this additional protection
that is not afforded to any other corporation?
DBPR Recommendations
With respect to the DBPR, the grand jury found it to be understaffed
and its investigators lacked the necessary training and authority to be
effective. Based upon these findings, the grand jury recommends that
the DBPR investigators be trained in basic investigative techniques and
their powers be expanded to include the authority to initiate
investigations, take sworn statements and collect evidence.
Although the DBPR could use additional staffing, the report glosses
over the increased cost involved in any such staffing and where the
funds would come from to pay for that increased cost.
When or if the Florida Legislature or the DBPR will implement any or
all of the recommendations is unknown, but it is hoped that any such
changes would be better balanced than what the grand jury has
recommended.
A corrupt board is obviously a problem, but so too are incorrigible
unit owners who are willing to manipulate the system. Reform may be
long overdue, but anytime new laws and regulations are implemented, due
consideration should be given to how they will play out in the real
world.
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