Hutchinson Island condos sued over alleged insurance pay-out issues

Article Courtesy of The TCPalm

By Alexi Howk

Published July 27, 2008 

— The Florida Department of Business and Professional Regulation is investigating the financial practices of the Colonnades condominiums after several residents filed complaints alleging their homeowner's association refused to give them insurance money to cover damage from the 2004 hurricanes.

The residents, many of whom have filed lawsuits in circuit court against two of the 11 associations within the 250-unit development off Seaway Drive, accuse the associations of withholding their insurance money. Each association has its own insurance policy.

They also say their complaints with the Colonnades bring to light another issue — that there isn't enough regulatory oversight by state government of condominium associations.

"Florida may be paradise, but our paradise is lost," said Paul Fappiano, one of the co-complainants.

He sold his unit last month and moved to San Francisco with his wife, Donna, because he said they no longer could deal with the stress of living in the Colonnades. The unit had been in his family since 1976 and was his retirement home.

He said the association owed him $60,000 but only gave him $10,000. He said he paid $40,000 of his own money to repair the unit.

Specifically, residents, including Fappiano, allege in lawsuits that Association 8:

• Refused to supply financial reports to members for more than two years and provide information showing how almost $2 million in insurance money was being disbursed

• Allowed board members to use insurance money to pay for unintended purposes, including for legal fees and to construct a $27,000 garden that was not damaged from the hurricanes

• "Grossly overpaid" United American Contractors, the Davie contractor hired by the association to make repairs

• Forced unit owners to sign release statements to get their insurance money, but provided no information as to how payouts were computed.

Chuck Clock, the former Association 8 board president — who quit last month and moved to a unit in Association 11 to get away from "the mess" — said if damage to a unit was assessed at $50,000 and the contractor charged $30,000 for the work, the unit owner would receive the remaining balance. However, he said unit owners were required to sign indemnification receipts, agreeing to the amount owed.

"Unit owners wouldn't sign the releases to get the money," Clock said.

Robert Rydzewski Jr., attorney for associations 7 and 8, said several unit owners who had flood damage were paid $10,000 in advance by the association, which later was to be deducted from what was owed. When the insurance money came in, he said there was a surplus of money because the association was able to keep repair costs down.

"It's the association's position that the insurance proceeds were distributed correctly," Rydzewski said. "The unit owners are disputing the amount owed. There was a surplus of funds and people started getting greedy and not trusting each other."

Meanwhile, the state's division of Florida Land Sales, Condominiums and Mobile Homes is looking into the accounting practices of the association and has asked Association 8 to turn over financial reports from 2004 through 2007. The association has until the end of this month to respond.

Officials with that state division and with the state Department of Business and Professional Regulation declined to comment on the pending investigation.

Sam Farkas, a department spokesman, said other condominium associations around the state also are being investigated for their financial practices, but could not be specific about them.

Jon Peet, another spokesman, said the department is careful about what it investigates, because state law only allows it limited oversight of condominium associations. It can enforce financial reporting and board elections. It can't enforce an association's bylaws.

And that limited oversight is what has Colonnades residents such as Rose Patterson upset.

"This is the only (state) agency we're under, yet they have no teeth," she said

Patterson and several other residents asked state Senate President Ken Pruitt, R-Port St. Lucie, to step in and help. A representative from Pruitt's office met with residents and department officials in February.

As for the residents' desire for more government oversight of their association, Pruitt's viewpoint is clear: He thinks there needs to be a balance between maintaining the rights of private property owners to govern themselves while belonging to a homeowners' association, his spokeswoman Kathy Mears said.

"(He) supports the existing regulatory oversight that is framed in Florida statute because there is an opportunity for (the state) to have some oversight while at the same time, providing judicial relief," Mears said.

QUESTIONS?

• The Florida Department of Business and Professional Regulation encourages all condominium owners who suspect any wrongdoing by their association to file a complaint. Department officials said they investigate every complaint received.

• Owners can download the complaint forms online at www.myfloridalicense.com/dbpr/lsc/index.html

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