A deep-rooted consumer protection problem has resulted from questionable Declarant/Developer control, self-serving business practices, and the mismanagement of community associations (A.K.A. HOAs & Condos). Exacerbating the process is weak nonprofit code, the state’s complicit actions, or lack thereof, and the inability to mitigate major existing community association issues. Special interest groups have a longstanding chokehold on legislative change that would require accountability of nonprofit associations without having to resort to civil remedy. However, for the purpose of this paper, this discussion will follow mismanagement, lack of regulation and nonexistent accountability of community associations, specifically by Community Association Management companies/individuals and or Declarant/Developers representing the nonprofit community association while representing their for-profit business, a direct conflict of interest. It is also troubling that information is starting to surface indicating that volunteer resident owner non-profit board members have started paying themselves, family members or business associates as managers of their own communities. Declarant/Developers sometime pay themselves from association funds to manage associations.
A common assumption and misperception exists that Management of Community Associations (nonprofit corporations/businesses) have a contemporaneous relationship to real estate related activities such as management of homeowner rental of single-family and condominium property and are under the jurisdiction of the Alabama Real Estate Commission…quite the contrary. Simply put, Community Association Management Companies manage nonprofit businesses vs. real property, etc. under the jurisdiction or the Commission. Of course, Community Associations perform their fiduciary duties under the direction of an association’s Board of Directors, or at least they should.
Community Association Management Companies and Managers are popping up all over the state and, with no regulation or oversight, are placing the public at risk. Most management companies and their employees have no subject matter experience, training or continuing education requirement. They certainly have no oversight or audit requirement making them ripe for mismanagement of funds and fraud. It is disturbing that the Alabama Real Estate Commission has no jurisdiction over licensees who appear to misrepresent their license as an endorsement of their qualifications to manage community associations, etc. You do not have to search very hard for community management companies to find them listed on a real estate webpage intimating their qualifications as a professional service, even under the same business name. Accordingly, it is easy to assume these services are part of their real estate company’s service, along with listing, sale, and rental management, governed by the Alabama Real Estate Commission, adding a false legitimacy to their services. Including community association management in this venue is a gross misrepresentation, even though the commission and some boards have steered away from involvement. The mission and vision of the Alabama Real Estate Commission is to "protect the public through the licensing & regulating of Real Estate licensees and insure public confidence in real estate transactions". Buyers, sellers and renters rely on their licensed real estate professional... Unfortunately, so do nonprofit community associations at times.
The following points represent concerns, problems and areas for discussion for possible change
* Prospective lender requirement.
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