Developer forms separate condo association and renters corporation

I would like to get feedback from those that follow this blog about a situation I have with a condo in Florida that I rent and occasionally use. There are a total of 418 condo units in the complex with 225 units in the rental program.

When the project was built in the eighties, the developer formed two companies; one company for the condo owners association and one to be a rental company to rent the units for the owners. This was done to help the new owners pay for their units through rental income from the units until they were at an age that they would retire to the resort. They have a check in desk at the front of the resort and a staff that takes care of reservations and the renters during their stay. They receive operating revenue from rental commissions, cleaning fees, and deep cleans, community services, also known as security fees, maintenance and sale of inventory which is replacing articles in the units that are missing or broken such as coffee pots etc.

This total is around $1MM. The 2010 budget shows $1,102,298.00 The expenses for 2010 are projected to be $1,038,671 with a ‘MAKE BUDGET” PROFIT OF $63,627. This is where it gets interesting. The Corporation is a for profit corporation however they pay little or no taxes. The way they are getting around it is that they are paying all but a small portion of their profits to the Ocean Gallery Properties Owners Association as a management fee. In 2006 they paid $238,658 and 2007 they paid $268,900.00. In 2008 it was $327,055.00 . The profits made are taken off the operating budget thereby it cost the owners less for annual dues than would ordinarily be the case with no in house rental department.

The question arises that If the people that purchased units and put them in the rental program and there was a profit after the operating expenses of the rental department, why would the profits not be shared with the owners who only rent since theirs is the units that are receiving above normal wear and tear and when not rented there is no one using the amenities of the resort whereas owners who live there full time use the facilities all the time. The problem is that originally you could make enough from the rental income to pay taxes and the mortgage payments and a little left over for up grades. Years ago the property owners association realized that the more they could earn from the rentals the less would come out of their pockets. Since this is a seasonal property for the most part, those that lived there full time became the board members and passed rules that helped them more than those that had rental units. If you live there you do not rent so you want your fees as low as possible so they turned to the rental program to generate more money. The original basic agreement with the rental company was that they would take care of renting the units for a 30% commission based on the rent price. The board figured out that if they charged fees directly to the renters for use of the facilities (which the owner is already paying for) they could earn more money faster because it was not a percentage of rents but fees. Years ago people began to place their units with local real estate companies to rent them stopping the rental department 's fees. To counteract this the board passed a resolution that if you rented your unit, you had to go through the rental department and no outside real estate companies were allowed. What has happened is that it now cost as much to rent the unit as you receive from it. There is no money left for renovation and upgrades and no profit from the rental however the management fees paid to the property owners association continue to rise. It is clear to see by looking at the books that the property owner association charges what ever is left from the operation of the rental department as a management fee to suck the money out of the rental department and give it to all the owners rather than the rental unit owners. The property owners association in essence does no management of the rental department. Again this is a separate company that has its own management and employees that operate the rental department. The rental company is owned by the property owners association but it is a separate company. What do the followers of this blog feel could be done to help the rental owners and is the property owners association legal right in taking three hundred plus thousand dollars away from the rental owners and giving it to the non rental owners as well?