I think Im done “THE FLORIDA HOA = ATM CAPER” THE ISSUES: a b c (abc) HOABOD, CDD, Builder, Attorneys, CPAs, and Management Companies are colluding to bilk HOA members by millions of dollars that should have been returned to it’s members. HOA members are uneducated, lazy and apathetic. Because the binding documents are the declaration and these documents are prepared by the creator during construction, signors don’t heed the disclosures removing all personal civil freedoms and its ability to cause financial hardship. The developer/builder seeks to increase income above the purchase price, The Attorneys promote litigious action to generate income, The property management cooks the books to hide inappropriate actions, filing false tax reports, over-paying for services, and accommodates false budgets, The CDD’s add another layer of profit by siphoning off member assets through gifts of HOA-DUES and LAND ASSETS (double dipping), and lastly, The CPA’S charge a fee to put their name on the HOABOD financial compilation and call it “A CERTIFIED AUDIT”, duping member homeowners into believing all the money paid for dues are properly spent. BACKGROUND: HOME OWNER ASSOCIATIONS (HOA) Even though HOA’s are granted by IRC section 528 preferential Federal Income Tax treatment, the State of Florida approves the organization’s incorporations as non-profits, under chapter 720 and 617. The sole purpose of a HOA is to accommodate the members collecting the necessary amounts to pay for mutually beneficial expenses, known as maintenance, beautifying the community, activities, amenities, co-mingling, and maintaining property values. HOA’s are pretty much thought of as a hands-off entity and these matters are thought of as civil. Although HOA’s have been around for many years, it has been about 20 years since the idea of a HOA has exploded throughout the country. Sometime within the last 10 years the above scheme was hatched and bad actors began to run HOABOD. During this time, bullies emboldened with HOABOD power and access to an unlimited war chest in order to persecute members with financial difficulties one at a time. A simple example is the $25.00 late fee and extraordinary ROI that it provides. Depending on the dues amount can be a 200% assessment. (25/150 =16.6% x12 = 200%). Many associations have lost control of their governance, dues, homes and have filed unresolved complaints. BACKGROUND: ABC abcHOA , a Florida non-profit Corporation, was established through it’s Declaration on October 27, 2003, incorporated on June 24, 2002, and turned over to it’s homeowners in 2007. “THE DECLARATION”, contains the only iron clad rules governing our community. In fact, our founding fathers felt so strongly on this point, that in order to override any provisions contained within THE DECLARATION there needs to be an affirming vote of 80% of all homeowners and 51% for reserves collection. abcHOA, a Florida non-profit corporation, is subject to and ruled by Florida Statutes and Chapters. Florida considers our DECLARATION, to be a contract and resolvable in civil court. Moreover, abcHOA, has the ability to defend itself against any legal claim brought upon it with an unlimited budget. However, any action that violates the abcHOA DECLARATION, is an action not taken on behalf of abcHOA, since only acts contained within the DECLARATION have the right to be defended by it’s legal council. Further emphasizing the weight our forefathers placed on how abcHOA was to be governed. The developer, abcbuilder in 2003, controlled the for-profit company selling homes, was chairman of the abcCDD authorized to issue $7,200,000 bond @6.25% on 600 homes and had secured a revenue stream through a municipal bond in total of approx ($ 1,000 x 600 x 30) 18,000,000, and president of abcHOA. The abcHOA declaration stated the infra-structure and common areas necessary to complete the project would be funded by the abcCDD, “THE DISTRICT” and cost $7.2 million. To date there is no evidence of more than $4 million being spent. In 2006, abcCDD shows on its audited financial report $ 4, 401,597 in assets and long term liabilities $7,075,000, or a reduction of $125,000 and a shortage in assets of $3,539,316 over the three year period from 2003. In 2006 the interest paid, was $642,544. At 90% completion the builder is to turnover the HOA to the homeowners. One day in 2007, the President of the builder signs over the presidency to an appointed homeowner member. On that day, the builder sells a track of land to the HOABOD, and the new president donates that land to the CDD. And and year end the report in 2007 shows the interest paid at $450,292. FACTS: abcHOA is a large corporation which generates on average $ 1,800,000 per year through due collections. In addition each owner individually is responsible for repaying $ 7,200,000 in bonds at an interest rate of 6.25% to Abc CDD. The members/shareholders/homeowners of abcHOA) have documented numerous bad acts, private inurement and private benefit between the HOABOD, CDD, DEVELOPER AND OUR NUMEROUS MANAGEMENT COMPANIES, ATTORNEYS, AND C.P.A.’S. We have documented many failures to maintain our community, two sets of books, filing false tax returns and official documents with county clerk, gifting valuable land and equipment from our treasury, preparing budgets with the intent to mislead its members, mismanagement of funds, overstating expenses, collecting reserves without authority, diverting assets in direct violation of our declaration, abuse of power, and misuse of office. Moreover, we are double paying assessments for the bond, both separately through the taxing authority, and though our dues diverted and used to buy assets for the CDD. Failure to inform and return excess dues (60%) to the members, funds were divert into a unauthorized “reserve fund”, and not disclosed as taxable. Furthermore these excess dues were squandered away and spent on unnecessary services, and purchases. Some actions taken by HOABOD are reprehensible when they by strip a member of their physical well-being and dignity. A HOABOD has the authority to file legal action against any member for any reason, for any amount. Tragically, the ignorant members suffer financially because when the HOABOD lose the unfounded or unjust battle against our neighbor, the HOABOD has the authority to pay the bill by a special assessment on every home, just to pay our neighbors legal fees. The most repugnant bad acts committed by HOABOD are actions taken against our members fallen upon hard financial times. These member is unable to defend against a false claim made by HOABOD-Bullies which leads to the HOA filing a claim of lien and then a foreclose falsely stating the HOA lien holds the superior lien omitting the First Mortgage claim. In 2013 due to flooding, abcHOA showed as a current expense $250,000 for pumping equipment and is not shown on the HOA balance sheet. Coincidently, on the balance sheet of abcCDD there is an addition of “Capital grants and contributions” in the amount of $178,000. abcCDD in 2012, paid $ 411,188 in interest, and in 2013, the interest expense was $391,590. In each of those years program revenue averaged $650,000. In each of these years other expenses were higher. Also, over the same period General government expenses doubled, and the shortage of assets was reduced to $ 2,448,675. In 2014 the bond payable outstanding is 5,940,000 upon the date the bond is re-financed. The fees collected and applied to the principal of bonds outstanding for the 11 year period are $ 1,260,000 CONCLUSIONS: This BOD has performed bad acts when making these distributions of HOA land and equipment. There are many unusual transactions that are of some concern. Some examples are large areas of prime real estate gifted by the builder to the HOA and then to the CDD on the same day. Also significant amounts of funds gifted for equipments shown onto the books of the CDD. Moreover, the builder does not appear to be making any payments of the bond for the lots it owns, but rather moves funds around to collect municipal bond interest for the holder of these bonds. In order to timely pay off the $7.2 million bond every homeowner is assessed 400 per year or $240,000 of 30 equal payments pays the bond in full and on time. Over an eleven year period the CDD was obligated to set aside these amounts for the bond reduction or $2,640,000 should have been in a restricted account. Furthermore, had proper oversight been provided the refinanced amount borne by the members of the CDD should have been $4,560,000. These numbers reported clearly show there was $1,380,000 not used for the intended purpose of the agreed upon assessment and being unduly burdened by this CDD. Without question, abcHOA-BOD acted outside its authority, is personally financially liable and misappropriated funds that should have been retuned the to Homeowner members. Rather than return these funds, abcHOA-BOD hires attorneys to take action beyond the written provisions of the DECLARATION. The attorneys that the BOD hired for legal actions in violation of our Declaration are unauthorized, and a complete misuse of funds. Once the BOD makes a decision to violate the Declaration, it is no longer acting for the HOA, but rather under the guise of the HOA to conduct unapproved activities. The attorneys’ have worked hand in hand with the management companies. There are no disclosure of any 1245 or 1250 capitalized property. The current methods of record keeping creates excessive expenses, inflated deductions directly causing false Federal Tax Returns on non-member income and fails to file State sales tax on non-member rental home income. Failure to keep books and records in a manner that allows for a proper review, and the BOD cites different numbers verbally during HOABOD meetings. Every Management company has been keeping all records on a cash basis without review from a third party. These records therefor fail to report transactions in a manner to inform members to actual activities. Furthermore, these omission perpetuate ongoing false budgets that reports the activities of the HOA BOD to its members at the annual meetings. THIS FRAUD WILL CONTINUE TO GROW EXPONENTIALLY and the HOA = ATM will continue on its present path in Florida, unless it is stopped. RECOMMENDATION: Every asset acquired that does not meet the definition of common area property is prohibited by Article 2.7 of the Declaration. These assets must be offered to the original owner at the purchased price, less accrued expenses. Moreover, all expenses paid from HOA funds on these assets must be fully restored. These amounts must be singularly and jointly recoverable from all individuals, entity or corporation that participated in, received or directed the expenditure on prohibited assets. Furthermore since abcHOABOD lacked any authority to execute any transactions which violated its Declaration, each and every member of the Board of Directors shall be denied any legal representation by abcHOA or any other related entity. If every provider of services are required to return fees earned from unauthorized activities plus a 200% penalty if not returned within 30 days of notification, these practices will stop. Furthermore, the same standards as stolen property should be used, requiring a provider of services view and have on-hand any provision in the document regarding the services it is providing. Thereby the current I didn’t know excuse is moot and accountability is put in place for each professional a HOA hires to assist in conducting its business of managing funds for a collective group of homeowners. All regulatory bodies should take swift and strong action in this case and put an end to this cancer within our day to day living in HOA’s in Florida. The State Statutes must be forceful and provide oversight with huge punitive damages when exposed.
Posted on: Mon, 11 Aug 2014 04:47:30 +0000
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