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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