Criminal Activity in HOAs Dealing With Bad Apples

Criminal Activity in HOAs

Living in a building or association means living in a community where residents get to know each other, attend events together and, sometimes even become close friends. In most cases, the people you meet are regular, down-to-earth folks, but as much as you think you know all of your neighbors, you can’t possibly know what’s going on behind every closed door. 

Some owners use their units for using, making or selling drugs, while others use them for more lascivious purposes. From drugs to prostitution and everything in between, residents can be engaged in illegal activity inside their own home at any time. But what are the signs of criminal goings-on, and how can boards and residents recognize them without overstepping the bounds of community and invading others' privacy? 

Out of Sight, Out of Mind...

“The problem with illegal or criminal activity is that people keep it hidden,” says Mark R. Rosenbaum, a principal at the law firm of Fischel & Kahn, Ltd. in Chicago. “If someone is running a hacking operation on the computer in their dining room, you wouldn’t know that in the ordinary course [of interaction]. If someone is robbing people, they're probably not doing it on-site, so you wouldn’t know about that either. Really, there aren’t many indicators that residents are doing something unless a lot of people are showing up at one apartment to buy drugs, or someone in the building stumbles into evidence.”  

It happens everywhere, from New York to California. In November, 2013, professional poker player Vadim Trincher pleaded guilty to running an illegal sports-betting operation out of his New York Trump Tower condo. This wasn’t a penny-ante operation either. The New York Post reported that Trincher’s business catered to gamblers in Russia, the Ukraine and America and he was part of a $100 million gambling ring. Also in 2013, the Washington Post reported on the Mexican drug cartel who has been known to work out of various locations, including condominiums. 

Once the board, manager or even the residents get wind that there is some fishy business going on in their building, it obviously needs to be taken care of but by who? 

“Avoid taking the law into your own hands and not try to combat the illegal activity directly,” says Steven J. Thayer, MBA, JD, founding partner at the law firm of Handler Thayer, LLP in Chicago. He strongly recommends reporting any criminal activity to local law enforcement who are ultimately charged with enforcing applicable laws. “Keep in mind, however, that once you get involved, you are involved,” he says. “Anything you say or do will likely be a discoverable event and could lead to you being a witness—either voluntary or compulsory—in a subsequent criminal or civil proceeding.” 

Not all residents are involved in such dramatic, news-worthy misdeeds, however; some might not even realize what they are doing is illicit. Consider 'Mrs. Jones,' a licensed hairdresser, who cuts hair out of her unit to make some extra money. It might sound innocent enough—she’s a nice, hard-working lady who's using a marketable skill to make ends meet—but her unit isn’t zoned for a business, and she has customers coming and going at all hours, which is disturbing other tenants. Or consider Mr. Smith, who works as a personal trainer, and has customers coming in and out of his unit for workout sessions. 

In addition to violating zoning restrictions (and possibly licensure laws, depending on the nature of the business) the situations above are likely also a violation of the bylaws or declaration of the association, which give a board authority to act, and uphold the rights of neighboring apartments. “Most condo declarations impose a set of Covenants, Conditions, and Restrictions on the property that include a prohibition on using the residence to conduct illegal activity,” explains Thayer. In the case of something that's not legal, but yet not outright criminal, “The appropriate channel for a complaint would typically start with the management company (if there is one), the board of the association, or the president of the association.”

If the resident isn’t violating a covenant or restriction, says Jim Slowikowski, principal of the law firm of Dickler, Kahn, Slowikowski & Zavell, Ltd. in Arlington Heights, there is really no private action that the board can take against them. “You should have good rules in place where the resident is required to comply with laws, ordinances and statutes. The board can point to that in a situation where you want someone out,” he says. “Almost all the declarations have something that says that you shall not do anything that’s a nuisance or annoyance to another and violating criminal statutes is a nuisance.”  

As an example, smoking pot where the other residents can smell it or selling drugs where other residents are uncomfortable with the increase in extra, unwanted, guests coming and going at all hours of the night, can be considered nuisances. 

I See What You Did There...

If the board wants to move forward with eviction because a resident has violated the bylaws or declaration, it’s important to have proof that the resident is actually engaged in the wrongdoing that's being alleged. But when it comes to getting that proof, a board should depend on the professionals.

In the case of a suspected drug dealing operation, “We need more proof than just random people coming to the unit,” says Slowikowski. “If we want to pursue something, we have to prove beyond a reasonable doubt and a preponderance of the evidence. An increase in traffic isn’t going to be enough. A witness is good—someone who would want to go to court and testify to get rid of the tenant. But don’t be surprised that they don’t want to get involved that much.” 

Also, just because a board knows that something unlawful is taking place behind closed doors in their building or association doesn’t necessarily mean they are under any legal obligation to do anything about it, says Rosenbaum. “Nobody has a duty to report illegal activity,” he says. “The fact that you may know or suspect criminal activity taking place may give you a moral obligation though. Stepping in and stopping the criminal activity isn’t something that has to be done on a first-person basis.” 

However, if a board member, resident or staff member steps in and try to intervene, the Good Samaritan statute might apply. “If you happen to see a crime, but don’t interfere, you cannot be held liable for failing to stop it” says Rosenbaum. “However, if do interfere and cause harm, there are Good Samaritan and self-defense statues that may protect you - but check with a criminal lawyer.”

“Remember, condo and association owners generally own their pro-rata share of the common elements and the association as a whole has 'premises liability' for everything that happens on their property,” explains Thayer. “You could end up paying your share of any losses that result from lawsuits or other matters that affect your common interest property.  A drug deal that goes bust and results in dead people lying in the common areas is not good for any association or owner.”

Cover Yourself

But what if the board makes a mistake and the resident isn’t involved in any wrongdoing? “If someone was to sue the board because the board thought they were selling drugs, for example, their D&O insurance would protect the board, but I’ve never seen anyone sued for something like that,” says Rosenbaum. 

D&O coverage covers any wrongful act, errors & omissions or potentially misleading statement that a board member could make while conducting association business in good faith. In this, D&O differs from general liability insurance, which mainly covers liability against third party bodily injury and property damage.

“The insurance isn’t going to come into play unless there’s a claim against them,” says Slowikowski. “It could also be from another resident who says that ‘you didn’t inform me, this burglar lives here and you knew about it and the person broke into my unit.’ 

It’s important that the board be proactive in keeping the community safe. Make sure that the bylaws and proprietary lease outline what should be done in case of illegal activity, the police are notified and proof is documented. If necessary, it is much easier to evict residents who are up to no good if you’ve followed these steps and have everything you need in place.

Lisa Iannucci is a freelance writer and a frequent contributor to The Chicagoland Cooperator.

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