Florida Condo & HOA Legal Blog : Florida Condo Lawyer & Attorney : Becker & Poliakoff Law Firm : Condominium & HOA Law Blog

Just how far can a Board go in placing restrictions upon an owner’s ability to smoke in a condominium association? Many Boards want to prohibit smoking in or upon the common elements. Some Boards want to prevent owners, tenants and guests from smoking within the units.

With several states (including Florida) having recently banned smoking in public places, this issue has been the topic of much conversation among condominium directors. There is no appellate case decision in Florida to guide us here. However, this author believes that an association can, through an amendment to the Declaration of Condominium, prohibit smoking within the condominium common elements and the units. In fact, the Board could probably do it by adopting a rule which, in most cases, wouldn’t even require a membership vote.

The Florida Clean Indoor Air Act (“the Act”), contained within Chapter 386 of the Florida Statutes, provides a uniform state-wide code to keep public places and public areas reasonably free from tobacco smoke. The Act prohibits people from smoking, except in designated smoking areas contained within the common elements. However, association’s can never permit smoking in the common element hallways, corridors, lobbies, aisles, water fountain areas, restrooms, stairwells, entryways, or conference rooms. All other indoor “common areas” are also “no smoking”, unless the Board has specifically designated the area as a smoking area. Smoking may occur outdoors unless the Board has adopted a no smoking policy with respect to outdoor areas.

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A reader recently posted the following inquiry to this site:

I live in a community in which the HOA documents are not being enforced, for instance most every homeowner in the community except for about 40 out of 245, do not maintain the property.  There are piles of junk in the back yard, some still have hurricane shutters up now from last year. The common areas are not kept up by the HOA and the board members are just to afraid to send out violations. I happen to be an officer on the board and I have tried everything I can to correct this situation. Is there anything I can do legally?  My property value is declining more than it should because of this situation.
 

Florida courts have held that any lot owner may enforce the covenants if the authority to do so is contained in the applicable deed restrictions or Declaration of Covenants or if the restrictions and requirements therein "inure to the benefit of each owner".   Kirschner v. Baldwin, 988 So. 2d 1138 (Fla. Dist. Ct. App. 2008).

The case set forth above is a perfect example of how a homeowner has the right to redress what he or she perceives as a violation of the governing documents of the community, even in the event the association fails, or as in this case, declines initiate enforcement action.  In this case, Ms. Kirschner filed suit against the Baldwins, her neighbors, for both injunctive relief and damages as a result of the construction of a new garage in violation of the setback restrictions set forth in the Declaration of Restrictions, Limitations, Conditions and Agreements.  While the trial court initially ruled against her on various grounds, the appellate court reversed indicating that Ms. Kirschner had a right to seek enforcement of the documents.  Thus, the 40 or so responsible property owners in the subdivision have rights, even if the association ignores the violations.

Nonetheless, I understand your concern that communities are created with restrictions for a reason.  Many people buy property within a community association because they appreciate the uniform standards of maintenance and the quality of life those standards engender.  Unfortunately, some of those same people become demonstrably upset when asked to make the effort necessary to comply with those community standards, whether due to budgetary constraints or otherwise.  With appropriate language in the governing documents and an organized, conscientious board, community standards may be created and maintained successfully.   There are enforcement mechanisms in the Florida Statutes available to community associations and typically the governing documents will provide additional remedies.  There is no reason for your board to "be afraid" to engage in enforcement action, they just need thoughtful analysis of the issues at hand and clear direction as to how to proceed.

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As you have probably seen on T.V. or read in the newspapers, this is Earth Week.  That may, or may not, matter to you as an individual, as a community leader or as a property manager.

Regardless of your individual feelings about environmental concerns such as climate change or energy policies, smart decision making mandates consideration of comprehensive planning and utilization of techniques to glean cost savings associated with improving energy efficiency while reducing energy, waste and water consumption costs.  Thus, every community leader, member of a Board of Directors, and property manager should become aware of the laws, programs and opportunities available to reduce expenses of the community, especially in light of budget shortfalls.

While there may be a mind-set that believes it is too expensive to be “green”, that is not necessarily the case and, in fact, the opposite may be true. Community Associations may not be able to afford not to be “green” in light of the long-term cost saving opportunities.

H.B. 7135, creating the 2008 Florida Energy and Economic Development Act, received unanimous approval from the legislature last year. Goals of the legislation include stimulating the economy, reducing pollution and increasing energy efficiency (of course) in an effort to propel use of alternate energy and create “green” industry jobs. The legislation specifically imposes efficiency requirements for state buildings and directs the state to purchase fuel-efficient vehicles. It also continues state programs for solar energy rebates and creates funds for renewable energy grants. The State of Florida allocated $5 million in rebates to property owners that purchased and installed solar energy systems in 2007 & 2008. Changes to the Florida Administrative Code reduce connection costs associated with solar and other renewable energy systems as well as credit (offset) costs for creating power. Condominium Associations, therefore, may not only reduce their energy consumption costs by installing renewable energy devices, but actually may create a new revenue stream from energy credits. Condominium Associations are uniquely positioned to take advantage of these rebates, cost saving techniques and possible new revenue streams as a result of Section 718.113(8), Florida Statues, which provides:

Notwithstanding the provisions of this section or the governing documents of a condominium or a multicondominium association, the board of administration may, without any requirement for approval of the unit owners, install upon or within the common elements or association property solar collectors, clotheslines, or other energy-efficient devices based on renewable resources for the benefit of the unit owners. 

There are plenty of examples of the “business case” for simple retrofits and changes in practices. Building maintenance and repair is an ongoing process and long-term considerations have proven highly beneficial. Some low cost improvements have a remarkably high return and implementation of “sustainable strategies” when tackling major renovation/repair projects are likely to increase the value of the property in addition to lowering operating costs. Some examples include:

FBI Field Office, Chicago, Illinios:

Total improvements and modifications lowered operating costs by more than $400,000.00 annually. Minor changes, including replacing exit signs and sealing connections for a cost of less than $10,000 resulted in annual savings of more than $25,000. The property owner was “paid back” for that investment in 4 months. An energy audit and resulting changes to the HVAC system at a cost of approximately $15,000 results in an annual savings of over $50,000! Simple landscape changes resulted in lowering water bills by $12,000 annually. How many of us would reject a 400% return on an investment?

USAA Realty Company: 
Lighting retrofits, installation of motion sensors instead of timers, installation of LED exit signs and window tinting at a cost of approximately $140,000 resulted in $71,000 annual savings. The property owner was “paid back” for the costs of the improvements in less than two years and now enjoys those savings perpetually.

Adobe Towers / Multiple Hi-Rise Office Buildings:
Major improvements cost initially over $1 million, but rebates reduced those costs by approximately $300,000 and the annual savings of $900,000 increased the value of the building by over $10 million!

Can your community afford not to reduce its future expenses?

I encourage you to share experiences regarding efforts on your part or the part of your association to improve energy efficiency, reduce waste and reduce water consumption, both positive and negative. Please check back for further information, tips and resources or contact us for guidance.

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Amendment to SB 880  approved by Community Affairs Committee intends to encourage purchase of remaining inventory by limiting liability.

Last week the Community Affairs Committee advanced SB 880 with a significant amendment entitled the “Distressed Condominium Relief Act”.

If the bill becomes law, new Section 718.702, Florida Statutes sets forth the legislative intent for the protections afforded to “bulk assignees” and “bulk buyers” of condominium units.

“Bulk assignees” are defined as purchasers of more than 7 units who receive an assignment of some or all of the rights of the developer of the project. “Bulk buyers” are also defined as purchasers of more than 7 units, but have not obtained an assignment (other than rights to conduct sales, leasing and marketing activities within the condominium).

Bulk assignees are not responsible for implied warranties, the obligation to fund converter reserves for units owned by others or honor conversion warranties. Bulk assignees will not have to provide the Association with a full transition audit and will not have to fund developer guarantees or assessment obligations, unless they receive an assignment of the right to guarantee assessment levels and therefore take on the obligation to fund budget deficits.

This section of the proposed bill provides for three distinct methods of assignment of development rights, to wit:

• By the Developer;
• By a previous Bulk Assignee; or
• By a Court.

While bulk assignees are required to deliver any of the documents identified in Section 718.301(4), Florida Statutes in their possession or control to the association upon transition, they are not liable for production or delivery of documents and other materials normally required as part of the transition process, if they cannot obtain them after a “good faith” effort.

Both bulk buyers and bulk assignees need to update the prospectus, the Frequently Asked Questions and Answers Sheet, the required form of escrow agreement (if applicable) and financial information pertaining to the Association.  Disclosure statements, identifying the rights assigned and warranty limitations, are also required.

The legislative history suggests these provisions are necessary to encourage the purchase of remaining inventory in failed projects. 

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In 2007, the Florida Supreme Court issued its opinion in United States Fire Insurance Company v. JSUB, Inc. The case involved allegations that the site work subcontractor used improper computation and testing methods which caused damage to foundations, drywall, and other parts of the project. The question before the Court was whether an insured general contractor had coverage for damages caused by the faulty workmanship of the site work subcontractor under a standard CGL policy.  The question was answered in favor of the insured. Pursuant to the Court's reasoning, the defective work performed by the subcontractor that damaged the general contractor's completed work constituted "property damage". The Court held that the faulty workmanship by the subcontractor which was neither intended nor expected was an "occurrence" and that therefore the cost of repairing the damage caused by the defective workmanship was "property damage" within the meaning of the CGL policy. Although the Court found coverage under the CGL policy for the damage which resulted from the subcontractor's defective work, it left open the question of whether coverage existed for the defective work itself. 

In 2008, the Florida Supreme Court applied the JSUB reasoning in the case of Auto-Owners Insurance Company v. Pozzi Window Company and determined that a CGL policy provided coverage for repairing or replacing the defective work of a negligent subcontractor. The Pozzi case involved allegations of defective installation of windows in a commercial building. In keeping with its opinion in JSUB, the Court held that if the windows were not defective prior to installation but were damaged by the defective installation by the subcontractor, coverage would exist for the cost of repair or replacement of the windows. However, a different result would follow if the windows were defective themselves before being installed and the damage to the completed project was therefore caused by defective windows rather than defective workmanship or installation.

The JSUB and Pozzi decisions have provided a greater level of clarity for construction defect insurance claims. Although these Court opinions have lead to changes in CGL policy forms, they have the potential to expand insurance coverage of construction defects under comprehensive general liability or CGL policies.

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Yesterday Senator Fasano moved to amend SB 1012 to eliminate submerged land lease fees for single-family and multi-family residential docking facilities.  

If approved, not only would the existing exemption for single-family homes continue (and provide additional benefits to owners of larger single-family properties), but multi-family residential properties will not have to pay submerged land lease fees in the future.  Community Associations Institute ("CAI") a national non-profit organization dedicated to enhancing community association operations, primarily through outreach, education and advocacy efforts, led the charge against fee increases for community associations.

The amendment is scheduled to be considered on Thursday, April 16, 2009.

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Proposed SB 1012 would require rules to impose increased fees for submerged land leases.

SB 1012, filed by Senator Constantine along with the Committee on General Government Appropriations and the Committee on Environmental Preservation and Conservation seeks the imposition of new rules governing submerged sovereign land leases.  If passed by the legislature, the Board of Trustees of the Internal Improvement Trust Fund would adopt rules that, among other things:

• Create a "standard" lease term of at least 10 years;
• Create extended lease terms of up to 25 years under certain circumstances;
• Create fees for new leases, expansions of existing leases and modification of uses permitted pursuant to existing leases;
• Change existing rates for leases allowing for designated slip (where boat slips are assigned) use to $.30 per square foot, if the property is not located within an aquatic preserve;
• Change existing rates for leases allowing designated slip use (assigned slips) to $.60 per square foot if the property is located within an aquatic preserve;
• Provide for automatic adjustments of up to ten (10%) percent in fees paid to the State every five (5) years based upon the Consumer Price Index (CPI); and
• Provide for late fees.

Some community associations are justifiably concerned about the possible increased rates, especially considering the current economic climate.  The President of a condominium in Tierra Verde indicated fees payable to the State would increase by more than 400% for her community.

We encourage community leaders to evaluate the impact of passage of this bill upon their communities.  In this day and age of budget shortfalls, every increase in expenses impacts Association operations.  It is also important to determine whether fee increases may be passed on to dock users or must be absorbed as a common expense.

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Developer's Challenge to Notice of Meeting not Proper Defense to Construction Defect Claim

Lake Forest Master Community Association, Inc. v. Orlando Lake Forest Joint Venture, et al., Case No. 5D08-2096

Lake Forest Master Community Association, Inc. ("Lake Forest") filed a lawsuit for construction defects against the Developer, after the membership voted in favor of doing so as required by Section 720.303(1), Florida Statutes. 

The Developer claimed that Lake Forest shouldn't be permitted to continue its lawsuit since it failed to properly notice the meeting.  The trial court agreed and entered Summary Judgment against Lake Forest.

Section 720.303(1), Florida Statutes, provides, in relevant part:

After control of the association is obtained by members other than the developer, the association may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all members concerning matters of common interest to the members, including, but not limited to, the common areas; roof or structural components of a building, or other improvements for which the association is responsible; mechanical, electrical, or plumbing elements serving an improvement or building for which the association is responsible; representations of the developer pertaining to any existing or proposed commonly used facility; and protesting ad valorem taxes on commonly used facilities. The association may defend actions in eminent domain or bring inverse condemnation actions. Before commencing litigation against any party in the name of the association involving amounts in controversy in excess of $100,000, the association must obtain the affirmative approval of a majority of the voting interests at a meeting of the membership at which a quorum has been attained.

Lake Forest appealed the ruling.  While it could have re-filed, re-filing would have impacted its case tremendously due to a change in Section 95.11(c)(3), Florida Statutes, which is the statute of repose.  The statute of respose changed from 15 to 10 years.  Re-filing the lawsuit would have eliminated any claims associated with latent construction defects that existed in excess of ten (10) years.

The appellate court evaluated the procedures utilized by Lake Forest to call the annual meeting, as well as the procedures utilized to recess and reconvene the meeting. The court noted:

• Notice of the annual meeting was furnished by mail to all owners and posted as required by law.  The mailing included a general proxy;
• Minutes of the annual meeting indicated that the members agreed to recess the meeting and reconvene it for specific date. There was testimony indicating that the President likewise announced the time and place for reconvening the meeting;
• At the reconvened meeting, the President announced the annual meeting would be reconvened again at a specific date, place and time.  That information is reflected in the minutes;
• A Motion was made, seconded and the majority of members participating voted in favor of filing legal action against the developer when Lake Forest reconvened the meeting the second time.

The Court relied on both Section 720.306(7), Florida Statutes and the Association's bylaws when concluding it was not necesary for Lake Forest to send written notice of reconvening the meeting to the entire membership, since the date, time and place were announced before it went into recess.  

Moreover, the Court also concluded that dismissal of the case by Summary Judgment was not appropriate even if the Association failed to comply with technical procedural rules.  Rather, it said the case should have been abated for a period of time to enable the Association to correct procedural deficiencies.

This case clarifies several important points of law for community associations.

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Recently I was asked whether it would be a conflict of interest for a director to serve on both an association and master association at the same time.   Assuming the governing documents of both the association and master association do not prohibit this, one must look to Florida Statutes to determine permissibility.

Florida Statute 617.0802 provides a basic set of criteria for a person to be eligible to sit as a director on a board. The most important thing to know though is that it defers to the governing documents of the corporation for limitations on who can hold such a position. In other words if an association’s governing documents require a person be a member of the association to serve on the board then it trumps the premise under Section 617.0802(1) that a director need not be a member of the corporation. 

In a Homeowner's Association setting [720.306(9)] all members of the association shall be eligible to serve on the board of directors while in the Condominium setting [718.112(2)(d)(3)], directors can be unit owners or other eligible persons. Ownership of a property is not required by statute, but the governing documents may impose ownership or membership criteria.

Once a director, the person shall pursuant to Florida law [617.0830; 718.111(1)(d)] discharge his or her duties:

• In good faith;
• With the care an ordinarily prudent in the same position would use; and
• In a manner he reasonably believes to be in the association’s best interest

Director conflicts of interest are also addressed by Florida Statute [617.0832]. Whenever there is a relationship or interest between a director of an association and a person or entity the association is doing business with there exists a conflict of interest.   The conflict in and of itself does not or invalidate the agreement if:

• Disclosure was made to the board or committee which authorized, approved, or ratified the agreement (the vote of the director with the conflict is not counted); 
• Disclosure was made to the members entitled to vote on the agreement and they authorized, approved, ratified it; or 
• The agreement is fair and reasonable as to the association at the time it is authorized by the board, committee or members. 
• In the Condominium the setting the following additional criteria [718.3026(3)] apply to avoid conflicts:
  
• The disclosures to the directors shall be entered into the written minutes of the meeting where they are made; 
• Approval of the agreement shall require an affirmative vote of 2/3 of the directors present; and
• The disclosure to the members shall be made at the next regular or special members meeting after the agreement is made.

Going back to the question at hand, it appears that there is no language in the Florida Statutes which prohibits a director of a master association from sitting on a sub-association’s board or vice versa. 

For information on master associations and their elections, read Master Associations Required to Elect Board by Joe Adams.

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