“It was a summer morning. I was working the HOA Compliance desk of a mid-sized West Coast city when the call came in. The caller was a prospective buyer referred to The Detective by a local Realtor®. She was an educated woman, a CPA by trade, and she was already on edge. As usual, my partner was manning the CIDA REPORT™ Intake Desk when we received the file containing the hard evidence.”
HOA Detective™ | July 11, 2025: I quickly skimmed the haphazard collection of documents the buyer had received from the Association management company (Manco). I knew immediately where this was headed after identifying several of the key players in this latest version of the long con. The suspect list read like a tired rerun. This was no rookie operation – the group we were dealing with were seasoned hands in the confidence game, AKA “professional community management.”
The Mark: The subject property (the mark) was a turn-of-the-century mid-rise condominium, 22 years old. In other words, enough time for any halfway-competent Board of Directors (BOD) to figure out how to govern a condominium association with a $1.5 million annual budget and almost $1.2 million tucked away in reserves.
This BOD? Either they were asleep at the wheel, or they were in on the grift.
Two of the usual suspects had been circling the subject property like vultures since 2013 – their fingerprints were everywhere.
Usual Suspect #1: The prominent Manco had been in place for twelve years. Long enough to dig in deep. The evidence confirmed that the Manco was entrenched. Long enough to insert a full catalog of so-called Contracted Services into the operating budget. Provided by the Manco, these contracted services are where the real money is if you are Manco playing the no-win low low-margin game called “community management.”
These weren’t minor support items. What we found was a budget with almost 20% of the Association’s $1.5M annual revenue stream directed into Manco’s pocket, as if there was an IV hooked up to the Association’s bank account. All of this while charging a very “modest” 4% of annual revenues for Management Services, barely enough to pay the salary of a competent bookkeeper.
Setting up the Long Con: This version of the long confidence game (long con) is a classic example of obfuscation orchestrated over a relatively long period, hence the term “long con.” While keeping the official Manco fee low, it gives the operators of the con a chance to influence the spending and administrative habits of the mark, building a questionable budget filled with vague, bundled charges that funnel cash to affiliated vendors or through “service contracts” provided by the Manco’s internal service department. It’s the same playbook we’ve seen repeatedly – sloppy bookkeeping wrapped in glossy deliverables filled with needless information designed to make it look like the Manco is really on top of things. As all con men know, the key to success is to exude confidence in the presence of the mark. In this instance, the Manco had been perfecting the con for over a decade.
The Reserve Gut Punch: The real gut punch was the reserve funding situation. After years of underfunding, the BOD awoke from its slumber and suddenly started playing catch-up by incorporating a punishing half-million-dollar annual reserve contribution into the current operating budget. That’s over $3,700 per unit per year for those who may be wondering. Whereas, less than 3 years ago, the reserve fund contribution was less than half the current funding level.
For owners already burdened by rising insurance costs and basic living expenses, the reserve funding wasn’t sustainable. The Association was drowning and didn’t even know it.
Some legacy owners had decided to cut their losses and were having a hard time selling their units in the face of the massive reserve fund contribution and a 30-year funding projection, which clearly established that the reserves were underfunded.
Usual Suspect #2: Speaking of drowning, usual suspect #2 was yet another long-time operative who is used by many operators of this confidence game to bolster their credibility. The Detective and his team often find unusual suspect #2 watering at the trough of the largest condominiums in the city. Lapping up the runoff after stirring the reserve spending trough in search of additional revenue streams.
The Association’s current reserve study didn’t just smell fishy – it was a full-blown comedy of errors. The 2025 Reserve study claimed to be a 30-year forecast, but somehow the projected funding model started four years from now for reasons unknown. That’s right – the required 30-year funding model started with a year that was four years in the future. You don’t need a degree in accounting to know how utterly absurd this situation is, but you do need to be shameless to publish it.
No Audit or Review: To top it off, the only audit provided to the buyer was four years old, even though the Association’s Bylaws include an explicit clause requiring that an audit of the annual financial statement must be provided to any owner or lender who requests it, within 90-days of the end of each budget year. No annual transparency check from an independent auditor. Just silence from a Manco team that prefers operating with the light turned OFF!
No Help from Regulators: Where are the regulators, you ask? Isn’t there an agency that ensures:
- Enforcement of the laws that require an annual review by an independent Accountant?
- Or the law that requires the Association to conduct a reserve study update every year?
- Or the statute that requires the reserve study to include a 30-year spending and funding projection, not one that begins four years into the future?
The short, simple answer is NO!
No Recourse, Either! Neither the buyer who hired CIDAnalytics, nor the sellers – who came to us after getting wind of the investigation – have any recourse, short of hiring an attorney to sue the BOD or the Manco at which point one or more of the Association’s bountiful liability insurance policies will pick up the cost of legal services, which results in a situation tantamount to litigating a legal claim against the USGOV. Owners who attempt this avenue of redress quickly find that they are up against a stone wall of silence and the usual delaying tactics used by all insurance companies when settling a claim.
Bottom Line: When a Manco refuses to cooperate. Does not provide the requested documents. Refuses to address the buyer’s or owner’s questions. Or avoids the situation by deferring to the BOD, there is NOTHING a buyer or a vested owner can do.
The BOD, you ask? Whether complicit or clueless, the BOD is, practically speaking, immune from the long arm of the law.
Unfortunately, the situation described here isn’t an isolated case. It’s a systemic flaw in how most condominiums are managed in the U.S. There’s no regulation, no licensing, and no accountability. Mancos aren’t held to any standard of competence or conduct. They operate with impunity. HOA Boards, often made up of well-meaning, but uninformed volunteers, get steamrolled – or recruited into the scheme. What assistance is available to buyers and sellers in the middle of a transaction when they discover such circumstances? Answer, NONE!
- NO regulatory agency steps in to enforce compliance.
- NO one is fired or fined.
- NO licenses are suspended or revoked.
- NO reform occurs.
- NOBODY goes to jail!
Buyers face a choice between walking away or buying into the dysfunction. The sellers? They’re often forced to sell at a loss, trapped by a system that penalizes transparency and rewards obfuscation. At CIDAnalytics, we see this every day.
The faces and buildings change, but the playbook doesn’t. This version of the long con is alive and well in every major city in the country, and has been ongoing for DECADES. The major elements that make this grift so successful include:
- Unlicensed, unregulated, and untrained managers in virtually every state.
- Unquestioned, ethically challenged reserve providers.
- Manco-affiliated vendors.
- Volunteer Boards, often in over their head.
- Unconcerned or compromised state legislatures.
- Powerful industry policy-making organizations like the CAI.
- A USGOV that couldn’t care less!
And homeowners are paying the price while the all-too-familiar cabal of usual suspects maintains a position at the watering trough, turning the HOA’s annual revenue stream into a recurring, annual revenue stream for decades!
Because You’re Buying More Than a Home!
