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Florida Condo & HOA Legal Blog

News & Updates on Condo & HOA Laws & Legislation in the State of Florida

CALL Alert: ADA Tester Lawsuits and Sprinkler Opt Out Votes

Posted in CALL Alert, Disability, Discrimination/Fair Housing, Reasonable Accommodations or Modifications


berger_dSince some private communities provide services to the general public, these kinds of ADA testers treat them as a place of public accommodation for the purposes of ADA compliance.

In one recent lawsuit I reviewed, the plaintiff identifies himself as a “tester for the purpose of discovering, encountering, and engaging discrimination against the disabled in public accommodations. When acting as a ‘tester’, Plaintiff employs a routine practice. Plaintiff personally visits the public accommodation; engages all of the barriers to access, or at least of (sic) those that Plaintiff is able to access; tests all of those barriers to access to determine whether and the extent to which they are illegal barriers to access; proceeds with legal action to enjoin such discrimination; and subsequently returns to Premises to verify its compliance or non-compliance with the ADA and to otherwise use the public accommodation as members of the able-bodied community are able to do.” 

These kinds of plaintiffs typically sue for declaratory and injunctive relief, attorney’s fees, expenses and costs pursuant to 42 U.S.C. Section 12182, et. seq. and the 2010 Americans with Disabilities Act (ADA).  In the case I reviewed, the ADA Tester claimed that he needed: 

  • A properly labeled handicap and van-disabled parking space
  • The use of a parking access aisle
  • The use of a lift for pool and Jacuzzi accessibility
  • The use of a gate latch to the pool area that is of the appropriate height 

Insurance expert, Joel Meskin, advises that most D&O policies will defend the ADA matter, but will not pay for the accommodation costs, if any.  Unfortunately, this kind of lawsuit is not new in Florida, Hawaii or Texas.  CALL’s goal is to educate our members that this kind of testing is unfortunately being done in not-for-profit community associations instead of being confined to truly public accommodations like hotels and office buildings. Associations who are contacted by an ADA tester should immediately contact their association attorney. In addition to the costs to modify the amenities and all the other costs associated with litigation, these suits do have an impact on your insurance. 

On a separate note, many of you became active in CALL as a result of our battle to secure opt out votes for older high-rises in Florida back in 2003. Since that battle has been successfully won, many of our impacted members have taken the vote. For those of you who have not, please be aware that the deadline to do so is looming. Pursuant to Section 718.112(2)(l), a majority of your total voting interests must vote to forego sprinklers by December 21, 2016. If you fail to obtain that vote by that deadline, you will have to proceed with the installation of sprinklers by applying for a permit to install same and demonstrating to the local authority having jurisdiction that you will be compliant by December 31, 2019.

If you haven’t yet taken the vote and you are an impacted high-rise, please do take advantage of the opt out rights that CALL fought so hard to secure for you. Contact your association attorney to ensure that the voting on this important issue is handled correctly.

Very truly yours,
berger_sig
Donna DiMaggio Berger
Shareholder
Member, College of Community Association Lawyers
Fort Lauderdale Ext. 15331 (954.364.6031)

Condominium Unit Owners Can Petition The Board To Have Management Changed

Posted in CAM, Managers (CAMS), Reader Q&A

dv2171020Question: Our condominium association has had the same management company for about five years. Our board seems content with their performance, but a number of us, primarily full-time residents, think that we are a low priority. We cannot convince the board to go out for bids and see what else might be available. Is there anything that we, as owners, can do to change managers? S.C. (via e-mail)

Answer: Although there are a few exceptions to the rule, in the vast majority of cases, the decision on whether to hire a manager or management company at all, and if so, what manager or management company, lies exclusively with the board of directors.

Your bylaws probably permit the owners to petition for the call of a special members’ meeting. However, if the bylaws vest the authority to select the manager in the board, any vote taken at a special members’ meeting to change management companies would be advisory only, and not binding on the board. Theoretically, you could petition to amend the bylaws to require the unit owners to approve what management company is hired, although this would be an unusual, complicated, and potentially legally problematic maneuver.

Another option is for twenty percent of your owners to petition that the board formally consider hiring a new management company at a meeting of the board. Pursuant to Section 718.112(2)(c)1 of the Florida Condominium Act, twenty percent of the voting interests may petition the board to consider a substantive item of business. Within sixty days after receipt of the petition, at a regular or specially called meeting of the board, the board must consider the subject. The board is not required to take any particular course of action as a result of such a petition, but they are legally obligated to at least address the matter. This would give unit owners the opportunity to make their views known, as the law requires that each unit owner be given the opportunity to address any properly noticed item of business at board meetings.

Finally, the ultimate ability to influence decisions made by a board is to influence who is on the board. Condominium association members may recall a board member, with or without cause, by vote of a majority of the entire voting interests (there is typically one voting interest per unit). Perhaps more appropriately (or at least less disruptively), you could put together a slate of unit owners to run for the board who are supportive of change.

Obviously, any time the association is considering change in a management relationship, the existing contract provisions need to be reviewed.

Can a Board Member’s Spouse Legally Serve as an Employee of the Condo Association?

Posted in Employment, Operations, Reader Q&A

186468833Question: The wife of our condominium association president works in the association’s office handling property management duties. Can the spouse of a board member be employed as the association’s property manager? B.M. (via e-mail)

Answer:  There is nothing in the Florida Condominium Act that says that the spouse of a director cannot be employed by, or act as an independent contractor to, the association. The statute does provide that the existence of a contract between a director and any one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are directors or officers or are financially interested must be disclosed by following a statutorily-defined procedure.

The issue is addressed differently in the homeowners’ association context. There is likewise nothing in the Florida Homeowners’ Association Act that would preclude the spouse of a director from serving as an employee of, or independent contractor to, the association. However, in 2010, the Florida Legislature added language to the HOA statute which specifically provides that a director, officer, or committee member of the association may not directly receive any salary or compensation from the association for the performance of duties as a director, officer, or committee member and may not “in any other way benefit financially from service to the association.”  Arguably, having one’s spouse be paid as manager results in the director “financially benefitting” from service to the association through his wife’s service as manager.

The HOA statute was amended effective July 1, 2013 to state that the association must disclose the existence of a contract between the association and any of its directors or a corporation, firm, association that is not an affiliated homeowners’ association, or other entity in which an association director is also a director or officer or is financially interested.

In my opinion, the 2010 legislation, while poorly worded, must be read to only preclude compensation of directors for their service as directors. It does not prohibit the association from employing a director as a staff member (which is for service to the association, but as something other than a director) provided that the disclosures are made as required, and would likewise not preclude hiring a director’s spouse.

 

Can Your Association Save Time and Money by Using Email Notice?

Posted in Email, Meetings

carls_aAs we approach the end of the year, condominium and homeowners associations throughout Florida are preparing to send out annual meeting notices to members of their communities. For most of these associations, this will mean printing out and mailing hard copies of each notice, agenda, proxy, proposed amendment, and any other item being sent to the general membership.  On a small scale, this might not seem like a great expense, but what if you multiply the costs of paper, ink, postage, and personnel time for a 10-page packet by 100 members? 1000 condominium Units? 5,000 Lots?  Suddenly, this annual common expense has grown into a significant cost for the association, and it is one that may be unnecessarily high.

Fortunately, your association may be able to reduce these costs by amending its Bylaws to allow for notices to be sent by e-mail.  Both Chapter 718 (governing condominiums) and Chapter 720 (governing HOAs) of the Florida Statutes provide that an association may send certain notices and communications to members via e-mail, so long as the authority to do so is provided in the association’s Bylaws, and the association receives written consent from each member.  By doing so, an association can streamline the process of sending notices to its members, reduce the cost of printing and mailing packets, and provide communications to members in a manner that most people now prefer.

If your association is successful in amending its Bylaws to establish this authority, care must be given to draft a consent form that conclusively establishes an owner’s consent to be given electronic notice at a specific e-mail address, and for all purposes permitted by law, unless and until the association is provided with a written revocation of such consent.  The Board must also be vigilant in maintaining an accurate and up-to-date file of signed consent forms.

Associations should also be aware that the ability to provide e-mail notice is not unlimited.  Not only is written consent required from each member (which can be revoked at any time), there are certain types of notice that still must be sent by mail according to law (e.g., notices of hearing on proposed fines or suspension of use rights, notices of intent to lien, etc.).  Any email that is voluntarily provided by a member must also be included as part of the association’s official records, as well.  For these reasons, before instituting an e-mail notice policy, make sure your association and its Board of Directors are fully aware of any related issues, and the procedures that must be followed to amend the governing documents.

Amendments To HOA Governing Documents Can Be Complete Restatement

Posted in Covenant Enforcement/Violations, Reader Q&A

dv2171019Question: The board of directors of my homeowners’ association recently sent out proposed amendments to our declaration of covenants and restrictions. The amendment we are being asked to vote on includes the new language the board wants to add but does not call out the changes by underlining the new language and crossing out what is being deleted. Is this appropriate? G.W. (via e-mail)
 
Answer: Probably. Chapter 720, Florida Statutes, the Florida Homeowners’ Association Act, does not specify the format in which proposed amendments to the governing documents must be presented. As such, unless the governing documents require that the board present proposed amendments in “strikethrough and underline” format, the board can present amendments that just show how the proposed new provisions will read without outlining the changes.

However, in the condominium context, Section 718.110(1)(b), Florida Statutes, requires that the new language in a proposed amendment be underlined and the proposed deleted language be struck through with hyphens, unless the proposed changes are so extensive that doing so would hinder, rather than assist, the understanding of the proposed amendment.

Limits On Owning Multiple Units in an HOA Becoming More Common

Posted in Covenant Enforcement/Violations, Reader Q&A

Suburbia from the airQuestion: I live in a community governed by a homeowners’ association. The owners recently approved an amendment to the declaration of covenants that provides that no one individual can own more than two units in the community. I am wondering if such an amendment is legal. M.C. (via e-mail) 

Answer: It is likely that the association, in adopting the amendment, is trying to control the number of investment properties in the community. As a result of suppressed prices after the real estate market meltdown, it is common to see investors purchasing multiple units with the sole intention of renting them out. This is of concern to those who believe that a high percentage of rentals drives down property values, which seems to be a widely held view.

Such restrictions may be considered a “restraint on alienation” which is a legal term for covenants and agreements which restrict the free transferability of property. However, courts uphold restraints that are reasonable. While no Florida court has been asked to determine the reasonableness of this particular type of restriction, the Massachusetts Supreme Judicial Court has ruled on this exact issue and found it to be reasonable, at least in the condominium context. Specifically, the Court held that such a restriction is a reasonable means of accomplishing the stated purpose of the restriction – the desire to impart a degree of continuity of residence, inhibit transiency and safeguard the value of investment.

Can an HOA Manager Advocate on Behalf of a Board Candidate in an Election?

Posted in Elections, Managers (CAMS)

berger_dQuestion: Our HOA has an election at its annual meeting (October 18, 2014) for two open board seats.  This year there are 4 candidates, of which 1 is an incumbent.  The Association Manager placed the incumbents name first on the ballot and is actively asking homeowners to vote for that candidate. Is this legal?  Is it proper?  Does it not constitute discrimination against the other 3 homeowners who are running for the two seats?  Our Declarations and Covenants do not address the issue of Association employee advocacy for specific candidates for Board positions.  Do homeowners have recourse to cause the Association Manager to cease this advocacy? — Kathy H., via email

Answer: If you lived in a Florida condominium, the Florida Administrative Code would clearly prohibit listing candidates in any fashion other than alphabetically.

HOA elections are not subject to the same restrictions. However, in some instances, listing a candidate as being an incumbent is not going to be an advantage depending on the popularity of current board practices. –Donna DiMaggio Berger

What Access Should A Board Member Have To Official Records?

Posted in Official Records

lahnamTwo attorneys with our law firm recently had the pleasure of presenting at the September 26th Florida Community Association Journal Expo a class entitled Covering Your Assets: Avoiding Board Member Liability.  One of the questions that came up at that presentation was whether a Manager had to give a Board Member access to Official Records, including Official Records which are not open and accessible to all the members of the association.

The Board Members, usually by a majority vote, are the group of people who are in control of the condominium association or homeowners association.  Since the Board of Directors has numerous powers, which are identified in the association’s governing documents, Chapter 718, Chapter 720 or Chapter 617 of the Florida Statutes, each director is entitled to complete access to the Official Records.

Board Members are not required to submit a written request to review the Official Records and are not required to follow any of the other statutory requirements in order to obtain access to the Official Records.  Board Members often needs access to these records in order to make decisions that are addressed at Board Meetings.  In addition, Board Members are permitted to review Official Records that are not accessible to members of the association, such as e-mail addresses and telephone numbers of a member of the association who has not permitted this information to be given to all members of the association, and records such as personnel records, social security numbers, etc.

A Board Member is entitled to Official Records that are not accessible to all members of the association,  not only because he/she makes decisions as part of the Board, but also because the Board Member has a fiduciary duty to the members of the association.  A fiduciary duty, includes but is not limited to, the duty:

  • to be competent;
  • to be reasonably informed;
  • to disclose conflicts of interest;
  • to avoid intentional misconduct;
  • to avoid negligent misconduct;

As part of this fiduciary duty, Board Members are required to keep Official Records that are not accessible to other members of the association confidential, and are required to keep communications between the Board and the association’s attorney confidential.   Board Members who relay confidential information to members of the association who are not part of the Board can be held liable for a breach of their fiduciary duty.

If you have a Board Member who is relaying confidential information to other people in the community who are not Board Members, please contact your association’s attorney regarding this issue.  Further, if you are a Board Member who is not being permitted access to Official Records, please discuss this issue with the other Board Members and contact the association’s attorney if necessary.

Controlling Your Insurance Claim – Community Associations Beware Something for Nothing

Posted in Insurance, Liability

mammel_cWhenever a casualty to property occurs – a fire, water leak, windstorm damage – community associations are often faced with the need to make emergency repairs.  Water may need to be removed to minimize mold growth, a site may need to be cleared of debris and fenced off following a fire, windows may need to be boarded up, roofs tarped. Many construction companies offer emergency services to assist in stabilizing the premises and preventing further damage to an already damaged structure. Most property insurance policies offer coverage for these services. Problem arise when the services are performed and contracts with the vendors are signed before the insurance company’s adjuster has authorized repairs.  More importantly, agreements for these services are often made before the policyholder has had the benefit of advice from a legal or adjusting professional that works directly for the policyholder.

When emergency services are necessary after a casualty loss, contractors routinely require a contract with the policyholder that obligates the policyholder to pay, and assigns the rights to insurance policy benefits for such services. That assignment of benefits carries with it the rights to deal directly with the insurance company and, if necessary, to sue the insurance company to assert those rights to the extent of the services provided. The policyholder will likely have had little or no say in the emergency services deemed necessary by the contractor. In many cases, the insurance adjuster has not met with the restoration contractor either and has not approved the extent of the services proposed to be performed for payment. If the claim has been assigned in order to assure payment for the services, though, the policyholder may not even be authorized to discuss the services rendered by the contractor with the insurance company – only the contractor will have that right.

Experienced public adjusters can explain some of the problems that arise when emergency contractors take over important rights to benefits under your policy and provide valuable insight.[1]  Other problems affecting the policyholder’s insurance occur during reconstruction, as well.

When a community association is the policyholder, the board undertakes a fiduciary obligation to understand the insurance policy and obtain, for the benefit of the community, the value of the coverage embodied in the policy.  Essentially, the insurance policy is an asset of the association that the board has a duty to maximize.

Once emergency services have been performed, an often complex repair process begins. Restoration requires thorough knowledge of the insurance policy and ongoing construction management. Policyholders should not assume the contractor knows the terms of the policy; in fact, the opposite is probably true.  More importantly, contractors cannot represent an insured with the insurance company; they are not permitted to adjust claims and are neither licensed as public adjusters nor bound to the regulatory requirements of adjusting.  Similarly, contractors are not qualified to interpret and argue policy provisions. In fact, the Florida legislature has explicitly prohibited licensed contractors from acting in the capacity of a public adjuster. At most, contractors can present their building plan to an insurance company to try to get approval, whether that plan maximizes policy benefits or not.

This means that contractors cannot represent a policyholder in disputes with the insurance company since that would constitute either public adjusting or the unauthorized practice of law. Even after an assignment of benefits has been made, contractors are not permitted to advocate on behalf of a policyholder to obtain the full insurance benefits available. In fact, the contractor’s only goal in obtaining the assignment of benefits is to assure it can get paid for the work. While there’s nothing wrong with that goal, in theory, and nothing wrong with the desire of the policyholder to avoid reaching into its own pocket to pay for reconstruction repairs, reaping the benefits of the insurance presents serious challenges. Not only must contractors be managed, the insured must be aware of the work proposed to be done, whether it is all necessary, how much of the scope of work proposed will be covered, and whether the scope of work is going to replace the damaged property to the full extent available under the policy.

Once a policyholder assigns insurance benefits to the contractor, the contractor succeeds to the position of the policyholder under the insurance policy to the extent of the covered work. The policyholder needs assurance that the work being performed will be covered, and that assurance cannot come from the contractor. That assurance either needs to come from the insurance company’s adjuster or the policyholder’s own adjuster or attorney who can advocate to recover policy benefits for the policyholder. For example, after a fire occurs there is frequently extensive water damage from the water applied to extinguish the blaze.  Many times, especially in a high rise property where a fire starts on an upper floor and sprinklers are triggered, the water damage to the building as the water proceeds down through the building may exceed the direct damage from the fire. The restoration contractor will take steps to dry out the building and begin a remediation process to deal with the interior damage to the finishes, including any mold that appears.  If unsupervised by the policyholder or the insurance company’s adjuster, the restoration contractor will determine a scope of work and move forward. The policyholder not only requires assurance from the insurance company that the work will all be covered, but that the work proposed will use the full extent of covered benefits under the policy.

Understanding and using the policy’s benefits usually exceeds the capabilities of a volunteer board of directors of a community association, even with the assistance of an experienced property manager. The board doesn’t have the expertise to understand the operation of the policy and know when the insurance adjuster is honoring the contract’s terms covering the proposed reconstruction activities, and managing the reconstruction will overburden even the most diligent property manager. For example, most property insurance policies severely limit coverage for compliance with building codes that took effect after the property was originally built. But, since reconstruction will generally have to meet the standards of current building codes, understanding the boundaries of the coverage for code compliance is critical. Insurance company adjusters frequently parse the reconstruction activities in an attempt to characterize many as “code upgrades” that are excluded from cover.  Frequently, the distinctions made by insurance company adjusters unfairly favor the insurance company and do not honor the policy’s actual terms. If the contractor moves forward with the repairs, which may well be necessary and required under applicable building codes, the policyholder may not be able to recover all of the reconstruction costs when the insurance company starts to carve up the repairs based on “code compliance” versus covered replacement to code.

The result may be only partial coverage for the work undertaken for reconstruction. And, rest assured, the larger the scope of restoration involved, the more likely the insurance company will scrutinize the work and balk at paying. Depending on the contract with the contractor, any underpayment by the insurance company may revert to be the obligation of the policyholder. If that occurs, it is because there is no insurance to cover. In that event, the community association board is left with incomplete payments from the insurance company, very uncertain rights to further insurance benefits, and substantial gaps between coverage and reconstruction costs. The policyholder clearly needs an advocate at that point.

Predictably, insurance companies are quite willing to deal with contractors rather than lawyers or public adjusters representing policyholders. The reason is simple – contractors frequently leave some of the insured’s money on the table during the reconstruction process. Contractors are interested in getting the job, and are not qualified to maximize the benefits for the policyholder under the insurance policy. For example, when a property is repaired after a fire, the policyholder may not be aware that if the property had interior stucco before the fire, the policy allows restoration to that same quality interior finish. However, without awareness of the policy terms, the contractor likely prepares an estimate with more common gypsum drywall as the interior wallboard, and the insurance company readily approves that material because it is cheaper to construct than stucco would have been.

Unless the policyholder is aware of its rights and is able to advocate to the insurance adjuster to receive the coverage for the better quality repair that should be available, inferior gypsum board will be substituted. Eventually, as the property is rebuilt, the end product is a cheaper, less valuable building than the one the policyholder had insured. An unrepresented board will experience unhappy surprises regarding coverage and, later, second-guessing from their association constituency when the outcome of an insurance claim is poor.

The answer to this complex drama, as usual, is planning for disaster before it actually occurs – the insurance experts that will assist the community association when an insurance claim is necessary should be identified and introduced to the property and its management to guide preparations. Well-qualified public adjusters are experienced in assessing coverage and advocating on behalf of the policyholder for a truly like kind and quality replacement. Lawyers who emphasize property insurance coverage in their practice are able to advise policyholders on preloss preparations – documenting the condition of the insured building before a loss occurs, assembling important maintenance records for reference to prove what is preexisting or new damage; reviewing the association’s insurance policies to be sure appropriate benefit levels and types have been purchased; examining policy applications to confirm claims history and other requested information has been accurately disclosed and replacement values match policy limits to avoid coinsurance penalties.

Florida policyholders have experienced multiple disastrous losses during and after the hurricane seasons of 2004 and 2005, and community association boards are obligated to manage their insurance policy as a valuable asset. To do so, the association should have a relationship with a lawyer and other professionals before the loss occurs, who can be prepared to advocate to assure proper insurance benefits are available after a loss and to argue policy terms to force the insurance company to pay what it owes.  The policy usually holds sufficient benefits to restore the policyholder’s property – but policyholders have be prepared to advocate for them.

Key Security For Condominiums Should Not be Compromised by Using a Lockbox

Posted in Liability, Reader Q&A

486648687Question: The board of directors of the condominium where I live is considering placing a lockbox which contains a key to all of the units somewhere on the property. The idea being that if someone gets locked out of their unit, they can use a combination to open the lockbox to get a key and gain access to their unit. What is the potential liability the condominium association could be exposed to by taking such action? S.P. (via e-mail)

 Answer: This is a very bad idea. It is not uncommon for condominium associations to have individual unit owner keys that allow the association to access a unit for required maintenance or in an emergency situation. Section 718.111(5) of the Florida Condominium Act provides that the association has the irrevocable right of access to all of the units for specific purposes, including the maintenance of the common elements and the prevention of damage to the units or the common elements. The association’s right of access is not to assist owners who lose their keys.

I can envision any number of bad outcomes from placing a key to the units in a publicly accessible location, even if protected by a combination. The association should keep keys in a secure location and keep a log of when a key is used to access a unit and the purpose of entry. Such practices can protect the association from a claim by a unit owner that the keys were used to improperly access their unit.