The Condo Republic 

Residents were restless at the January 2009 Towne Park Homeowners Association board meeting. Like guerrilla insurgents, the condo owners hoped to stage a coup against the HOA board “dictatorship.”

According to homeowners, the group’s mistrust grew out of the board’s botched attempt to repair the roof of Building 1, located at 300 East and 600 South in downtown Salt Lake City. When contractors declared bankruptcy in the middle of the job, condo owners found they had shelled out hundreds of thousands of dollars for an unfinished roof, which led to major water damage across multiple floors of the building.

At the January 2009 meeting, the board proposed another assessment for other repairs to skeptical owners who were already incensed after discovering that one of their board members had spent nearly a month in 2008 at a downtown hotel while condo renovations were underway, with condo owners footing the $4,867 hotel bill, according to homeowners who spoke to City Weekly.

When the vote failed to muster a majority of owners willing to foot the bill for building repairs, the board took the proposal back, amended it, and presented the proposal to the condo owners again in February 2009—this time, the assessment was approved. Or, at least that’s what owners were told, until one owner requested to see the vote tally and found the numbers didn’t add up. According to owners including Dylan Zwick, who now sits on the board for Towne Park, owners continued to demand to see the ballots until May 2010, when the board president told the owners they could not see the ballots and that she had stored them with her own personal lawyer.

Embattled by angry owners, the president eventually relented and produced the ballots, revealing a tally that fell far short of the numbers necessary to enact the assessment, Zwick says. Amid the furor over the recount, the president resigned and a number of the outspoken critics like Zwick took on board positions.

Regime change may have been needed at the Towne Park, but new board members say it wasn’t easy, considering that HOA boards operate in a shadowy area of state property laws where little accountability is required of them while being accorded nearly no legal liability and a lot of power over fellow homeowners.

“This combination is a perfect recipe for—if not outright corruption—then abuse,” says Zwick, a 30-year-old University of Utah mathematics student and new board member of the Towne Park Homeowners Association. “They’re kind of like these private little governments.”

Zwick and others faced intimidation from board members who had the power to behave either like benevolent monarchs or dictators.

While Zwick (pictured at left) and others have seen these problems and believe it takes active involvement to monitor board politics, they also are seeking help from the Utah Legislature to help regulate undemocratic condo politics. Simple reforms, like requiring transparency for meetings and elections, is the rhetoric for some like Zwick, while legislators like Rep. David Litvack, D-Salt Lake City, are exploring the idea of a state-funded ombudsman who could operate independently to help resolve condo conflicts.

However, an ombudsman’s office would mean spending more on more government—a concept few legislators on the Hill are fans of—and there’s also the challenge that many Utah lawmakers are landlords themselves or are involved with property-management companies. In fact, Utah Senate President Michael Waddoups, a more-than-well-known face in local HOA communities, operates Cooperative Property Management, a company that, according to its Website, works with many “notable properties,” including “Foxboro, Country Springs Centerville, Stansbury Condos, Vine Street Mod, and Homestead Farms,” offering a slate of accounting and maintenance services. Waddoups’ company was even contracted to Towne Park’s HOA during its recent upheaval.

Because of Waddoups’ property-management background and his elevated position of trust in the community, it is easy for condo owners to believe their HOA is in good hands when he’s involved. Often that’s the case—but not always, as Arlington Place HOA board members (which, in 2006-07, included City Weekly editor Jerre Wroble) learned the hard way. There, the HOA board—which contracted with Waddoups’ company to provide accounting assistance in 2004—discovered only too late it had long been employing an unlicensed and uninsured maintenance man whose criminal past included allegations of stalking and two separate charges of lewdness—nearly all of which was unknown until he left the employ of the HOA.

God of the Gaps
Before Zwick became the vice president of the Towne Park HOA, he, like many newcomers to the Condo Republic, had no idea what the CC&Rs, or the Covenants, Conditions and Restrictions agreement was, when he signed it. Zwick realizes now how important the agreement is, especially for what it leaves out.

“They’re essentially the governing documents of the condominium. They’re fairly long, but there are still a lot of possible situations left out,” Zwick says, adding that boards end up with a lot of power in interpreting all the things the documents don’t spell out explicitly. “The HOA board becomes a god of the gaps—anything not specifically addressed within the CC&Rs is almost completely up to the discretion of the board.”

Hand that leeway to a volunteer board, tasked with a lot of responsibility, a big bank account, and little or no compensation, and Zwick says you have a situation where boards can abuse their power, often out of sheer vindictiveness.

Zwick says he was once blissfully ignorant of condo politics until his dad, then retired and also a Towne Home condo owner, started telling him about bruising and nasty exchanges at meetings he had attended between frustrated condo owners and an intractable board. Zwick’s father started a Website challenging the board’s actions—including the board member’s hotel bill and the voting tallies on the assessments.

“My dad was retired, bored and I think he was just looking for a battle,” Zwick says with a laugh. Besides the Website, his dad posted flyers around the condo to advertise board actions. Ultimately, this insurrection succeeded, the board president resigned and several new members took positions on the board, including the younger Zwick.

“I have been on both sides of this,” Zwick says. “Some homeowners like to complain about everything and that can be annoying, but it’s what you sign on to.” In Zwick’s experience, a major challenge to fair HOA-board governance is the issue of power. Not only does being a “god of the gap” mean boards have a lot of discretion in interpreting condo rules, but they also have the added ability to punish condo owners with arbitrary fines, or, as he experienced firsthand, face legal intimidation from HOA-board lawyers.

If condo owners attempt to legally challenge their boards, the board’s legal fees are usually provided by the condo-owner fees, which means condo owners challenging their boards pay both for their own lawyers as well as their opposition’s legal fees. This situation gives boards more power to make legal threats, as Zwick’s father experienced when he was issued a cease-and-desist order from their board’s attorney. Zwick says the notice was “all bark and no bite,” since it demanded they stop the Website, threatening serious legal consequences if the Website reported anything libelous or untrue.

Ultimately, Zwick is supportive of a recently formed group, the Condo Owners Coalition of Utah, which is pushing for legislative backing to reforms for condo associations statewide. Zwick advocates for clear protections for condo owners’ access to voting and financial records, as well as articulating when boards can close meetings off from condo owners.

“If all you want to do is live in your condo, pay your dues and be left alone, you should be able to do that—but the problem is what happens if you start running into an issue,” Zwick says. “Then you start realizing how small your power is relative to the board’s.”

Viva Reforma!
Brought into the uprising like a U.N. peacekeeping official, Rep. David Litvack, D-Salt Lake City (pictured at left), says he became interested in condo property rights after several constituents approached him, saying they were powerless to affect the actions of their HOA board. “They felt like they had nowhere to turn,” Litvack says of the distraught condo owners who reached out to him nearly a year ago with their complaints.

“We’re not talking about frivolous disputes,” Litvack says, referencing concerns he recently heard. “There were things that involved vote fraud, financial mismanagement, board meetings that are not made accessible to the condo owners, the use of fines as kind of a punishment or a way of keeping people quiet—these are some of the accusations.

“They really didn’t have much of a way to address grievances with unresponsive boards—boards that were even violating their own bylaws,” he said. With some boards even gaming the nominating process, Litvack was told some condo owners felt litigation was their only option to force out dictatorial boards.

“Then you’re in a situation where you end up paying attorney fees twice over, even if you prevail,” Litvack says. In a battle between condo owners and an intractable board, Litvack says one solution may be an independent third party, possibly operated by the government, that could arbitrate such disputes.

“This [ombudsman] would act as a moderator to try to bring resolution to disputes between owners and HOA boards,” Litvack says, adding that these types of “ombudsmen” are in place in other states.

It’s a position he says is not unprecedented, even in Utah, since there is already a private-property ombudsman in state government who intercedes in disputes between property owners and government officials seeking to take property through eminent domain.

Florida has had a condo-owners ombudsman office established since 2004 to mediate disputes, and the Connecticut state assembly is currently looking at following Florida’s model by establishing a self-funded commission that would draw revenue from a small annual assessment from condo owners: $4 per year, per condo unit, with a $35 filing fee for a condo owner looking to invoke the mediation of the ombudsman’s office.

The issue is front and center for the Condo Owners Coalition of Utah. Executive director Lisa Hamilton (pictured at left) says the Legislature needs to help safeguard the rights of condo owners, arguing that government already has a stake in helping resolve private-property disputes.

“Say you own a single-family home and you have a dispute over the property line, who do you go to?” Hamilton asks, answering that residents turn to municipal government. With condos, Hamilton says there is a similar need for government to mediate private-property matters.

“I think being a condo owner has only recently become so popular, so legislation hasn’t been made and hasn’t been needed,” Hamilton says. “But there’re more condos now than there ever have been; people are moving in for the condo lifestyle, and they’re finding all of these problems.”

Sam Bell, a Salt Lake City attorney who represents more than 500 homeowners’ associations, has seen his fair share of corrupt boards, irate condo owners and everything in between. Having been party to bad blood between owners and their boards, Bell isn’t convinced the Legislature can do much to prevent it.

“My honest opinion is that if boards are rational, you don’t need somebody to get in between owners and the board to solve a problem,” Bell says. “You do get boards on occasion that are a little power hungry and all of a sudden they become Nazi generals and just want to run everything and forget that the real purpose is just to get a community that is appealing to live in and enhances property values. But the biggest issue there is education.”

Bell points out that with condo boards staffed with laypeople, they generally don’t understand all the legal requirements of them for transparency and accountability. He says that if board members paid close attention, they would see there are already legal requirements that open up certain financials and voting records to their owners.

“I think education would go a long ways,” Bell says “Probably a lot farther than an ombudsman would.”

Bell also says that even in many condo CC&R agreements, there are provisions in place to allow condo owners to recover attorney fees if they have to sue their boards. By his estimation, Bell says that while many disputes arise, very few ever go down the path of serious litigation, saying that less than a handful of cases in the past three years, citing only his recollection, required significant legal attention.

“I think helping a board understand their responsibility is a bigger issue than having a law that requires them to do something,” Bell says.

That being said, Bell says even more than boards, management professionals need more training. “I think the most important group of people in need of education are the managers. Boards typically rely on the managers for information and guidance. This could be manifested through licensure (or enforcement of licensure laws) and continuing education.”

Lawmaking Landlords
The argument for more government and less reliance on existing market forces to regulate disputes between condo owners and condo boards is going to be a tough battle for Hamilton’s coalition, and not just because of the Legislature’s conservative temperament. As it stands now, one of the major players in the insular world of condo politics is property-management companies, which are hired by associations to manage the day-to-day operations of HOAs, and only answer to the board.

Senate President Waddoups—along with four other lawmakers—make their living as property managers. Critics say companies like Waddoups’ are too beholden to the HOA boards that sign their paychecks.

In the case of Arlington Place, located at 100 South and 1100 East in Salt Lake City, previous board members are quick to point out that Waddoups’ Cooperative Property Management was not involved in the day-to-day operations. He did, however, attend board meetings and, according to some, rubberstamp the accounting done by Arlington’s former president.

Like most HOAs, much of the board’s work had to do with overseeing building maintenance, which at the Arlington, was mostly performed by Joseph E. Morris, a handyman who operated a company called Have Hammer Will Travel. That Morris had, since the early 2000s, lived with the HOA board president was not much of a secret among residents. Homeowners believed they were getting a great bang for the buck with a live-in handyman and a president who volunteered much of her time to handling paperwork and paying the bills. With Waddoups reviewing the books, residents felt reassured their HOA dollars were being well-managed.

However, according to some residents requesting anonymity, tensions began to build, with board members cycling on and off the board, many stating concerns over payments to Morris’ company. In December 2007, the beleaguered president, hounded by complaints of a conflict of interest between her and Morris, stepped down. Shortly after, the board, under a new president, terminated the contract with Morris’ maintenance company. Waddoups reportedly told the board that he would continue the accounting contract for Arlington only if Morris were kept on to handle maintenance. When Morris was sent packing, Waddoups walked away as well. Such loyalty to Morris would prove to be misplaced.

Admiral Joe
Arlington turned out to the perfect environment in which a “bullshitter” like Morris—as former board member and resident Terry Mitchell Nani described him—could operate. Morris often told wild stories about his past, Nani said, including that he was a retired Navy Seal as well as a retired rear admiral, a fictional title even stamped on his personal checks.

If Morris’ military charade was troubling to residents, it wasn’t as disturbing as the attire Morris was wearing when he was arrested for gross lewdness in July 1995 when a Salt Lake County Sheriff’s deputy responded to a complaint that Morris was stalking two young women throughout the city. The officer’s report said that when Morris was approached in his car, he was wearing a woman’s black wig, blouse, black nylons and black high-heeled shoes. The following year, Morris pleaded guilty to misdemeanor lewdness.

It would be his second lewdness charge. In 1992, Morris had been arrested after a woman reported Morris pulling up to her car in the West Valley City’s Valley Fair Mall parking lot next to her. When the woman looked over she saw that “the driver was naked, masturbating and smiling at her,” according to the police report.

News of Morris’ bizarre criminal citations would come as a shock to board members, especially since Morris had keys to many condo units and was seen by residents as the trusted building “super.” But Morris’ background check came to light only after Morris had left the employ of the HOA, leaving the board to wonder how he ever had gotten licensed, bonded and insured in the first place. “The paperwork is in the office,” homeowners were repeatedly told.

In fact, according to Nani, Morris was neither bonded nor licensed as a general contractor with the Utah Division of Occupational and Professional Licensing, which was required of all building tradesmen per the condo bylaws. Nor was his business—which Morris had claimed was a tax-exempt corporation—even registered as a business entity with the state of Utah. His 2007 insurance certificate turned out to be a doctored photocopy of a form that had expired in 2005, according to Nani.

These misrepresentations aside, the bigger upset at Arlington Place was the cost of Morris’ work. According to board minutes, for 2007 alone, Horizon Management, the company that was hired after Morris left identified $44,420 worth of questionable expenses and outlined them in a letter sent to members of the new board. Among those expenses included $2,043 in fire and safety supplies that Morris bought, although the supplies could never be located on the property. Morris also charged $2,887 charge for pool supplies, none of which could be located, and $656 for a pool pump, though the original could have been repaired for $100 or replaced entirely for $300.

For altering his insurance certificates, Morris would be charged in 2008 with second-degree felony communications fraud and three counts of third-degree felony charges of forgery; two of the forgery charges were dismissed along with the communications fraud, and Morris took a plea in abeyance for one forgery charge.

Waddoups would not agree to speak to City Weekly in regard to this story. Morris could not be reached for comment.

Condo Refugees
Despite many such condo horror stories, it will be tough for reformers to convince legislators to intercede in a private-property matter. But Zwick of the Towne Park condos says lawmakers need to rethink the property-rights paradigm when it comes to condos.

Zwick says the point was offered by a property-management attorney that, if you were to buy a property with your brother and there were a dispute over ownership, the state would not get involved. But Zwick says that’s the wrong way to look at the issue.

“If you buy a property with your brother and the two of you are in charge, you don’t have to worry,” Zwick says. “But with a homeowners association, you’re signing up to basically be under the control of a group of people that is constantly changing.” For some, the idea of condo ownership is meant to be a sign of progress, liberation from the renter’s life and a transition into true ownership. But as many like Zwick are discovering, this freedom is anything but, and the move to a condo can mean less control over their lives and property than they had ever imagined.

Beyond that, an economic urgency underlies the issue for Rep. Litvack, who points to the fact that condos are a booming housing option across the state, from downtown Salt Lake City to suburban Washington County to Park City.

“This is an issue that spans the state,” Litvack says. “If we’re going to keep it as an attractive lifestyle, then we have to address this issue. We have people moving out of their condos because the situation got so unbearable they gave up. Talk about property rights—giving up your property and feeling that you have to move because you’ve been so poorly treated, abused and mismanaged—obviously, that’s way out of line.” 

For more information about the Condo Owners Coalition of Utah, visit CondoOwnersCoalition.org.