Managing Florida High-Rises and HOA Transparency Revealed

Get ready to uncover the hidden complexities of community association management with our special guest, Karel Costa-Armas. With extensive experience managing luxury high-rise communities in Florida, Karel provides an insider look at navigating recent legislative changes that have ramped up demands for transparency and accountability. Learn how associations can effectively handle deferred maintenance, structural integrity issues, and the surge in mandatory engineering projects. Beyond just managing logistics, Karel offers practical advice for self-managed associations on maintaining proper financial practices and shares eye-opening stories of uncovering potential fraud and embezzlement within long-standing communities.

In the second part of our episode, we confront the serious side of HOA management, tackling criminal and civil lawsuits such as shootings and severe personal injuries. Leveraging my expertise as a retired police officer specialized in operational evaluations and expert witness work, I discuss how legal firms and insurance companies can better assess and manage risks. We explore the evolving challenges faced by association managers, emphasizing the need for continuous education and support. Whether you're an HOA member, manager, or just curious about the world of community associations, this episode is packed with invaluable insights and advice to help maintain vibrant, transparent, and accountable communities.

Transcript

Speaker 1: 0:00

And unless you have a serious smoking gun, you're not gonna overthrow the board. Because of the legislative changes, there have been tens of thousands of new projects. You don't have enough engineers to do all this work.

Speaker 2: 0:14

Some of the calls I get where they say hey, the management company I have is terrible and they never show up.

Speaker 1: 0:19

Very first thing I say is well, show me the management contract and they're promised to show up.

Speaker 2: 0:25

Hello everyone. Today is July 3rd 2024. My guest today is Karel Costa-Armas. Karel is a luxury, high-rise community association manager and expert witness consultant in the HOA industry. Thanks for coming on the podcast, Karel.

Speaker 1: 0:46

Thanks for having me. It's a pleasure.

Speaker 2: 0:49

So you have been in the community association management industry for over 20 years, correct?

Speaker 1: 1:00

Yes, it's been a long time.

Speaker 2: 1:04

How has the experience been for you?

Speaker 1: 1:07

it's quite challenging. It's never. It's always the same and always new right. So same problems, different people, and as technology and changes and improves and the laws uh change drastically, will those challenges have to be handled differently. Yes, and you're in Florida, and the laws there have changed very drastically recently, haven't they? Yes, their main focus has been for the last couple of years on improving transparency, particularly financial transparency, but also holding board members accountable to financial requirements, such as reserves and proper funding, so as to avoid deferred maintenance.

Speaker 2: 1:55

That makes sense and that's not always a simple task. Correct, Because board members are not paid workers, they're volunteers.

Speaker 1: 2:07

Well, they're not paid. The statutes in Florida state that they will not be paid, but the biggest problem has been with deferred maintenance and probably historically across the world, not just nationally or in Florida is that when somebody is in a position, such as a board member, and they're not being paid, there is a lot of peer pressure from their neighbors to kick the can down the road. So that's what happens, and then you have the deferred maintenance that causes major structural issues. You know Champlain Towers towers that's a building that fell down in 2021 in surfside, and that event kind of set the the, the marker, the boundary line there that no more, never again, will reserves be waived and you cannot kick the can down the road any longer.

Speaker 2: 3:04

Okay, and what changes?

Speaker 1: 3:13

have you seen in HOAs around Florida since 2021? Well, I'll tell you what. For managers, there's been a lot more work Because of the legislative changes and the new requirements. There have been thousands, tens of thousands of new projects and engineering inspections that are required. So the contracting industry in Florida, and the roofing industry in particular, is booming, but you don't have enough engineers to do all this work, and so you also have self-managed associations who have been kind of hiding out and doing their own thing. Now under an extreme amount of pressure, and now not only is my regular day-to-day work increased drastically, but my consulting work, where people reach out to me from outside of my area and other states. They are worried as well, and I am kind of guiding them, particularly self-managed HOAs, into how they should be operating how they should be operating.

Speaker 2: 4:25

And when a self-managed HOA reaches out to you, what are some of the first questions or what are some of the first notes you take with them?

Speaker 1: 4:36

Well, I ask a lot of questions and I ask for their documents. Most of the time, I'll ask for their financials and most of the time I'll ask for their financials and most of the time they have none.

Speaker 1: 4:49

They they mean well, but it's usually the example of, let's say, an association has only 50 or 100 homes and there's a group of board members that have been doing it themselves and they consider their set of financials a homemade excel sheet, for example and I say, well, show me a set of financials where you show invoices coded to certain uh general ledger items or reserve items. It doesn't exist. So in florida, I refer to the statute and I say, look, the statute says you're supposed to, by law, be providing these things. But that's Florida. Forget law. You're talking about people spending their monthly monies on the association.

Speaker 1: 5:40

So, law or no law, everybody who's putting money in wants to know where the money's going, and that is the very first and most important uh factor when they want advice. Most of the time what they want is they think that they're going to come to me and I'm going to tell them that it's okay to operate the way they've been operating. Unfortunately, I'm an honest person for them and I say no, it's not right and you should be doing X, y, z. Do it the right way, or you will still be out of the required regulatory mandates and you're going to be in a pickle and there's going to be quite a liability problem.

Speaker 2: 6:23

Wow, and so this has picked up recently, and you're not just seeing these types of issues in Florida, this is all over the country the same problem and many, many times it will.

Speaker 1: 6:54

It will stem from a problem that is decades old. So you have a group of owners, or one, one old guy that's been in charge for 20, 30 years and, based on some of the things they tell me, it's obvious to me that there's some fraud and that there's some type of embezzlement.

Speaker 2: 7:09

But the, the initial documents, the paperwork, the, the, the good guys getting their foot in the door is always the hardest step and so if uh say someone is listening and they're a member of an HOA and they are possibly thinking that their board is going through fraud is committing, fraud is committing, embezzlement is kind of leading in a way that isn't, there's not much transparency. How can members of a nature away deal with that?

Speaker 1: 7:53

Well, I want to give your audience a resource my website's condodetectivecom, so on there I have about 70 videos with tips. So before you go crazy and Googling everything, just go to condo detectivecom, go to the video blog and you'll under. You'll start to understand what the industry standards for an hoa's operations are, and and if you're one of these concerned, frustrated homeowners, you will start to be able to organize your thoughts a little better based on some of this information I'm providing there for free. So you look at that again. If you're a concerned homeowner or you have allegations, you know I have some tips for you as well, because just because you have allegations doesn't mean the world's going to listen to you. So I always tell people look, if you're concerned't mean the world's going to listen to you.

Speaker 1: 8:48

So I always tell people look if you're concerned, if you think somebody's stealing, embezzling funds, you have to organize your thoughts, you have to compare those thoughts to the industry standards and then do you have support?

Speaker 1: 9:09

Do you have other homeowners that think the same way you do, because you'd be surprised, or you know, there's always some people out there that are just way out, and out of 1200 condo units, they're the only one complaining and I tell people like that look, whether you're right or you're super right, nobody believes you and you have no support and unless you, you have a serious smoking gun and you know you, you have major evidence, you're not going to overthrow the board. So there's a lot of factors. You know, I usually have a 30 40 minute conversations with with concerned homeowners that call me or reach out to me and we discuss the main issues. And, you know, many times after they watch the videos and I ask them to send me a follow up email, usually they get enough information to to, I guess, focus a little better and it takes them a few days or a few weeks to get back to me and say, hey, this is the, the, the solid information now, rather than my um, you know, dreams of, of, of, uh, nefarious activity.

Speaker 2: 10:25

That makes a lot more sense because a lot of people they need just a little bit of guidance to even do like you said. Wrap your mind, like you know something's going on, you know something's here, this is where you live, it's your community, but to have no guidance into that, it's tough to put. You put all these different pieces together. But if people can go to thecondodetectivecom, can watch a few five-minute long, six-minute long videos and be able to understand how to create their argument, they have a much better chance of actually getting something accomplished.

Speaker 1: 11:10

Right, and again, I put my stuff out there for free for everyone. You know I have a YouTube channel and again, condodetectivecom is the easiest to remember, but really it's homeownerassociationconsultingcom, but I figured people are going to misspell that, so I've shortened it down to condodetectivecom. And that is exactly right what you said. They're able to piece together their own stray thoughts and say wait a second, I have all these ideas and all these allegations or these things I'm worried about, and all these allegations or these things I'm worried about. Let me organize it in a way that it starts making sense to other homeowners so I can start to get a little bit of support.

Speaker 2: 11:58

That makes sense, and are there any tips that you have for homeowners as far as communication, empathy, you know dealing with the rest of their community because at the end of the day it is a community it's a community.

Speaker 1: 12:16

But you know the most problematic uh, what I call pot stirrers, you know, before they become a negative PIA pain in the association, you know I always tell them look, you need to maintain respect.

Speaker 1: 12:37

If the board is respectful and the board is having meetings and there are minutes and everything seems to be mostly in order, you need to put your requests and your questions in writing first. You know, draw up a letter, non-confrontational, and ask things nicely, copy management, copy all the board members and wait. The second thing is you know if you have a lot of concerns. The second thing is you know if you have a lot of concerns, I would hope that you're a person that's already attending meetings and not somebody who is not participating. You know one of your rights as a homeowner is to attend all the meetings. So if you have complaints and you have questions, one of the very first things you should be doing is attending all the meetings and be respectful. Don't be that crazy person that just starts screaming, insulting others, getting online on some ridiculous forum demanding answers and again being disrespectful and demanding.

Speaker 2: 13:47

You're not going to get very far with that no, and going back to what you said, if the things that are bothering you in the association, especially if there are many things, you have to attend those meetings and communicate them. You'll have to attend those meetings and communicate them and to just kind of go in one meeting disrespectful. Maybe you have many complaints and you throw them all out there very quickly. I've seen this. People don't take it in very well. You're going to have a tough time. The board goes in there every week, every month. They're getting emails. They know all the dirty laundry everywhere and then all of a sudden someone comes in, doesn't seem to really be too involved and then has many complaints.

Speaker 1: 14:47

It's tough to convince people yeah, I mean, the board is there working for free and to have to listen to some other homeowner come in and tell them what to do as if, as if the board worked for them. You know, because they say that sometimes you work for me. Uh, no, no, they work for the association and they work for free for the association and they have their duties, but at no time is management or board member to be accosted and interrogated. There is no obligation for management or board members to answer your questions when you're approaching them in a hostile, demanding manner. You know there are ways and you start with it in writing and, depending on the line of questioning, you may need an attorney.

Speaker 1: 15:33

But there's so many factors, Gaurush, that you know every state has different laws. So your state may have a procedure outlined to get answers or to make records requests. You want to follow those. Your association may have a procedure in place as well. They may have a resolution already in place for requesting records or asking questions, or even a resolution for participating at meetings. So these are all things that could be in place, should be in place. It depends on what's happened.

Speaker 2: 16:19

That makes sense and those should be the drivers of how procedures go on in the association, the drivers of how procedures go on in the association Right.

Speaker 1: 16:29

So long as the interested or frustrated or angry homeowner or the party is respectful and you can always tell if it's a homeowner that really just doesn't understand something they will be respectful and they will have the intention of understanding. When it's somebody that just wants to stir the pot and be very loud, no matter what answer you give them, no matter what document you provide to them, they're not going to be happy and they're not going to even attempt to understand it.

Speaker 2: 17:04

That makes sense. Well, Karel, I know you have to go. So if HOAs, if HOA members do, what consultation do you provide HOAs and HOA members generally?

Speaker 1: 17:32

like I said, I get a lot of calls, so I I spend a lot of time on the phone just trying to guide people in the right direction, right? So I do consulting and I have several different types of clients. Number one is new boards right, new boards that took over and they they need direction because they don't have management. Or they have management but they want a to-do list for that management company. I get the phrase all the time oh, I love Jimmy. He's been our manager for 15 years and it's his management company. We don't want to get rid of him, but you know he needs a little help. So they will contract me to provide an evaluation, a report, and I might, I might go, I might have to fly over to wherever alaska, you know, chicago and say you know, spend a day or two and come up with a very comprehensive list of uh or two and come up with a very comprehensive list of uh, what's right, what's wrong and what needs to be done right. So I took a huge risk assessment of operations, an operational assessment. The other uh type of client I'll have is again a group of frustrated homeowners that is having problems with a rogue board or a tyrannical leader or some of some type, and I provide a similar evaluation. And I say similar because a lot of times they are missing documents and that's because the tyrannical board refuses to provide the documents. So, depending on the level of uh information they provide, I'm able to provide some more. Um, I also provide my my.

Speaker 1: 19:19

My biggest caseload is really criminal and civil lawsuits that involve associations, right. So something happens on the association's property and a lot does right and there's a lawsuit and there's a lot of lawsuits in associations, right. So I tend to have to deal with very serious ones. You know shootings and you know attempted murders and things like that, or even personal injuries that are very serious, and that too involves an operational evaluation and I sometimes help the legal firm in developing a type of strategy for their depositions. I'm a retired police officer, so that's my niche because I have that specific background and I'm able to help with these cases. But you know we're talking about six or seven figure lawsuits and that's where I come in with the expert witness work and the consulting and also insurers, right. So insurance companies are the ones that are paying for these lawsuits and they they need a risk assessment. They want me to go and see the operations, can things be improved, that type of stuff. But I really enjoy doing it and I I enjoy doing the, the videos because there are a lot of misguided or untrained managers. Right, I think a lot of homeowners would be stupefied if they understood how managers come into this business. Right, I don't know a lot of managers, karush, that come in and and say I've always wanted to be a manager. You know, they usually fall into the position okay, something happened, the the market changed, they lost their job. Hey, I'm gonna do this.

Speaker 1: 21:23

In florida, a lot of managers a few years ago, before all these changes and all these extra projects, uh, many managers were retired folks that were doing this. You know, 20, 30 hours a week. There wasn't a lot of uh, mandatory projects. There wasn't a lot of confrontation. I mean, there's all these problems, but they could get by well because of these mandated inspections, engineering inspections, roof replacements, structural integrity, reserve studies all these mandatory items have blown up the industry with so many projects and so much more of a workload. That number one managers. Now their salaries have gone up and they're in drastic need of managers. But the ones that were just getting by, though, they're retired folks that were just trying to make a little extra income. They got out. They said we've had enough of this. This is not the cup of tea that I was expecting. That's not what I signed up for, so I don't know how it is over in. Uh, I think you're in california, in san diego.

Speaker 1: 22:40

Florida has gone through some major changes and the reason I have my videos and my website is because, believe it or not, half the people that call me are manager and they say, hey, you have some advice. And most of the time, I have some advice. And I say, hey, look at some of the videos, because I do have plenty of videos, especially if you, if you connect with me on LinkedIn, you'll see videos that are not on my website and on YouTube as well. So the website's condordetectivecom, but on YouTube I think it's HOA Consultant, or you can just Google my name on YouTube or search my name on YouTube and you'll see it. On linkedin, I provide shorter videos that have a lot of advice for board members, management companies and managers, because I want to support managers and management companies. They get a bad, bad rap and management companies get blamed for so many things. I'm sure you're very familiar with this and um I again some of the calls I get where they say hey the management company I have is terrible and they never show up.

Speaker 1: 23:56

The very first thing I say is, uh, well, show me the management contract and their promise to show up. And it'll say well, manager, goes once a month and goes to your meeting and I say, well, that's what you're paying for. So I have to refocus their attention to the agreement they signed up for. Or, if it's a new board, they're not even familiar with that agreement. I'm sure you as a management company with your firm, you might get a new board that is expecting the world. But you have to refocus their attention to the actual agreement. Say, look, if you want more, we can renegotiate and do more.

Speaker 2: 24:43

Yes or charge a fee for any additional work.

Speaker 1: 24:48

Right. So that's kind of where I'm at. I want to support managers, I want to support management companies. One of the things I would love to do is actually go be a speaker of some type at some of these management events, because I really, really, really want managers to understand a few items, because most of them fell into this industry, they feel a little trapped and they forget number one their health, their physical health. They forget their mental health, they forget their purpose, because every day, all they do is get inundated with complaints and they need to refocus on themselves so that they can be a better manager, a better employee to the management company and provide a better service to the client. Am I right?

Speaker 2: 25:37

Yes, sir.

Speaker 1: 25:40

And that's basically it in a nutshell.

Speaker 2: 25:44

My guest today is Karel Costa-Armas. Thanks for coming on the podcast, Karel.

Speaker 1: 25:50

My pleasure. Take care, my friend.

Speaker 2: 25:52

See you soon. Take care.