Friday, August 17, 2018
Business

Will new laws protect condo owners from apartment conversions and rogue associations?

Danny Di Nicolantonio has lived in St. Petersburg's Calais Village Condominums for 33 years. Annoyed at times by the actions, or inaction, of the condo board and property managers, he has complained to the state agency that is supposed to investigate.

That has left him even more annoyed.

The Department of Business and Professional Regulation "is about as useless as a snowball in Florida," Di Nicolantonio says. "I'm sick and tired of filing complaints with them only to continuously be told it is out of their jurisdiction, my file has been closed or to go hire an attorney."

Di Nicolantonio has plenty of company among Florida's 1.5 million condo owners. In a blistering report issued in February, a Miami-Dade grand jury found that the agency is "ill suited" and "ill prepared" to investigate the hundreds of complaints it receives each year about alleged wrongdoing by condominium associations.

PREVIOUS COVERAGE:

Grand jury calls Florida agency inept and ill-suited to probe condo complaints

But hapless condo owners could be getting some relief.

Florida lawmakers this spring unanimously approved a bill that requires condo associations to give owners better access to records and imposes criminal penalties for electoral fraud, theft of funds and conflicts of interest. The measure would become law July 1 if Gov. Rick Scott signs it.

Already signed into law is a bill making it harder to convert condominiums into rental apartments — a trend that has roiled Tampa's Slade at Channelside and several other bay area condo communities.

The legislative crackdown on rogue condo boards was sparked by a Miami-Dade grand jury that spent weeks looking into how DBPR handles complaints and came away "shocked," "amazed" and "exasperated" by what it found.

In their report, the jurors said the agency's Bureau of Compliance has too few investigators — just 33 for all of Florida — and shows a "breathtaking" failure to adequately train them.

While noting that condo owners statewide have complained to and about DBPR, the report spotlighted some especially egregious South Florida cases including what the media dubbed "the condo crime family."

DBPR received more than 30 complaints about the married couple and their daughter rigging elections and stealing funds while serving on association boards. But if not for a lead generated by law enforcement in an unrelated case, "the family might not have been stopped," the report says. The three pleaded guilty to felonies and were ordered to pay $500,000 in restitution.

In general, though, police and prosecutors have been slow to investigate complaints against condo associations, especially allegations of election fraud. That's because there is no mention of criminal punishment in Florida law governing associations.

Under the bill awaiting Scott's signature, forging, stealing or destroying ballots would be crimes punishable by prison. The measure also imposes criminal penalties for theft or embezzlement of funds and destruction of official condo records.

In another area of concern, the Miami-Dade grand jury noted that condo associations "routinely" spend large sums of money for repairs, landscaping and other services yet there is nothing to keep board members from voting to hire companies to which they have a personal connection.

"To our great shock and amazement," the jurors said, "what we thought was a basic ethical principle that would prevent such situations apparently does not.

In addressing conflicts of interest, the bill before Scott would:

• Prohibit condominiums from contracting with a service provider that is owned or operated by a board member, a close relative of a board member or a person who has a financial relationship with a board member.

• Require officers and directors of a condominium board to disclose activities that might "reasonably be construed'' to be a conflict of interest.

• Prohibit attorneys from presenting both the board and the management company of the condo association.

• Prohibit members of the board or management company from buying a unit foreclosed by the condo association.

In suggesting changes to the law, the jurors noted that while condo board members have a fiduciary responsibility to unit owners, "it appears some of them are more involved in self-dealing and looking out for their own financial interests."

Converting condos to apartments

The other major legislation affecting condominiums is part of a continuing effort to undo problems caused by a 2007 law passed after hurricanes left many units damaged and vacant.

The purpose of the law was to make it easier to deal with uninhabitable condos by enabling 80 percent of owners — unlike 100 percent previously — to terminate a condominium if no more than 10 percent of owners opposed. But investors quickly realized the law could also help them covert condos to lucrative rentals as a St. Petersburg company is trying to do with Slade at Channelside.

The company, Slade Owner LLC, already owns enough units to meet the 80 percent threshold for terminating the condominium and converting the entire building to rentals. But Scott approved a change that reduces to 5 percent the percentage of owners who could block conversion, potentially making it harder for the company to carry through with its plans.

That could help the 40-or-so hold-out owners like Eugene McDonald, who bought his unit three years ago.

PREVIOUS COVERAGE: Condo owners in Tampa's the Slade At Channelside battle to keep it from going all rental

"It was going to be my retirement home but when all this started I went out and bought another condo and rented mine out," said McDonald, who lives in nearby Skypoint. "But I didn't want to sell until I was sure that it didn't mess up the rest of the group. The fact they might need only 5 percent cuts the number of units (needed) to block."

McDonald and others worry, though. It is not clear whether the amended law that takes effect July 1 would be retroactive and apply in situations like that at Slade where bulk owners already are well into condo-to-apartment conversions.

The changes approved this year are just the latest attempt to fix what the Legislature did in 2007.

"I feel like we're having to go back fairly regularly because it's obviously an area of heavy litigation when you have bulk buyers trying to buy people's homes," said Rep. Chris Sprowls, a Pinellas County Republican who sponsored the bill. "You have to react to that."

Last year, as condo owners statewide complained they were being offered less than the value of their units, the Legislature amended the 2007 law to provide protections against forced sales. Among them: Homesteaded owners who bought from the developer must be reimbursed for at least the price they paid for their units.

Now, under the new changes, all homesteaded owners must be reimbursed for the full price they originally paid regardless of when they originally bought their condos. Other owners must be compensated for the fair market value. The bill also extends the time between a re-vote for condominium termination to 24 months from the current 18 months, and requires DBPR to approve termination plans.

"We did it that way to protect homeowners in case there is a flaw in the plans," Sprowls said.

Contact Susan Taylor Martin at [email protected] or (727) 893-8642. Follow @susanskate

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Published: 08/17/18