New Rules Passed in Va. To Protect Homeowners Groups From Fund Theft

RICHMOND, March 21 -- State legislators concerned about the embezzlement of more than $2 million from hundreds of homeowners associations in Northern Virginia approved regulations this year to try to prevent similar thefts.

The bills, passed by the House and Senate, aim to increase the accountability of companies that manage association finances and include several changes that would create a regulatory board to oversee companies, provide a way for homeowners to lodge complaints and ensure that losses caused by employee theft are covered.

The Northern Virginia case "really revealed a flaw in the system," said Sen. Mary Margaret Whipple (D-Arlington), who introduced one of the bills. "What we discovered is there probably weren't enough safeguards for these people who live in homeowners associations."

Officials who work in the industry say the much-needed, comprehensive changes were considered for years, but the Northern Virginia case spurred the action.

Koger Management Group of Fairfax, which had collected assessments and handled other business for about 400 condominium and homeowners groups, was put under court supervision last year after complaints were made about missing money.

A complaint named Jeffrey S. Koger, 38, son of the company president, Robert A. Koger, as "the likely primary culprit for embezzling the funds." Jeffrey Koger was shot by police and charged with attempted capital murder of a Virginia state trooper after he was involved in an exchange of gunfire last month near Springfield Mall. A preliminary hearing is scheduled for April 2.

The case was "a catalyst for an issue that has been dormant for years,'' said Pia Trigiani, a lawyer with Mercer Trigiani, an Alexandria firm that represents community associations.

In Maryland, lawmakers are considering similar proposals that would require that companies register with the state and be bonded.

Homeowners and condominium associations often serve as mini-governments, assessing fees to provide services such as trash pickup, snow removal and pool maintenance. Many associations employ management companies such as Koger to collect assessments and pay contractors to provide the services.

An estimated 54.6 million Americans live in communities governed by some form of association, according to 2007 figures by the Alexandria-based Community Associations Institute. More than 4,000 such communities are registered in Virginia, with some of the largest in the nation in Northern Virginia, according to the state Department of Professional and Occupational Regulation.

Jay DeBoer, a former legislator and now director of the state agency, said the legislation is needed because property-owner associations, and the management companies they often hire, have had little regulation at the state level.

The bills, approved by the General Assembly before it adjourned its annual legislative session last week, would create a regulatory board to license professional management companies.

They also would create an ombudsman system for handling homeowner complaints, require management companies to be bonded or insured to cover losses caused by embezzlement, establish a certification system for management company employees and require independent audits.

The bills were written after a study by the Virginia Housing Commission, a bipartisan group of legislators and others involved in the industry. The bills will be sent to Gov. Timothy M. Kaine (D), who has 30 days to review the measures.

Staff writer Sandhya Somashekhar contributed to this report.