Associations struggling with bad debt pushing the envelope trying to make up for deficits.
Earlier this week news reports showed homeowners living without water service to their homes. The association shut down the water service because the homeowner didn't pay maintenance fees for several months. The homeowners' attorney claims that the Board acted illegally. The Board, on the other hand, wants to put as much pressure on the owners to pay maintenance fees.
In an earlier post I described actions prohibited by Florida's consumer protection laws. I received quite a few comments indicating that associations regularly publish debtor lists to embarrass or harass the delinquent owners and associations have shut down cable or other television programming, restricted access to recreational facilities, deactivated entry devices for security gates to the property (forcing owners to use the guest gate) and stopped other services. But can an association in Florida shut down services when an owner doesn't pay?
Condominium Associations cannot prohibit owners' access or use of the common elements. Section 718.106, Florida Statutes guarantees every owner's right to use the common elements, which would include the recreational facilities (if part of the condominium), regardless whether they have fulfilled their responsibility to pay maintenance fees. However, in response to cries from community leaders throughout the State, legislation was proposed during the 2009 session to permit condominium boards to suspend certain rights of use as a result of non-payment. We are likely to see proposals in the 2010 session addressing this issue as well. Community leaders and managers can stay up-to-date with respect to legislative activities by participating in the Community Association Leadership Lobby (CALL), which is a Statewide not-for-profit advocacy effort that not only monitors, but participates in drafting legislation designed to improve association operations.
Homeowners' Associations do have support to suspend use of "common areas and facilities" if the governing documents are written in a certain way. Section 720.305, Florida Statutes contains the following provisions:
If the governing documents so provide, an association may suspend, for a reasonable period of time, the rights of a member or a member's tenants, guests, or invitees, or both, to use common areas and facilities and may levy reasonable fines, not to exceed $100 per violation, against any member or any tenant, guest, or invitee. A fine may be levied on the basis of each day of a continuing violation, with a single notice and opportunity for hearing, except that no such fine shall exceed $1,000 in the aggregate unless otherwise provided in the governing documents. A fine shall not become a lien against a parcel. In any action to recover a fine, the prevailing party is entitled to collect its reasonable attorney's fees and costs from the nonprevailing party as determined by the court.
A fine or suspension may not be imposed without notice of at least 14 days to the person sought to be fined or suspended and an opportunity for a hearing before a committee of at least three members appointed by the board who are not officers, directors, or employees of the association, or the spouse, parent, child, brother, or sister of an officer, director, or employee. If the committee, by majority vote, does not approve a proposed fine or suspension, it may not be imposed.
The requirements of this subsection do not apply to the imposition of suspensions or fines upon any member because of the failure of the member to pay assessments or other charges when due if such action is authorized by the governing documents.
The term 'common areas' is defined in the Homeowners' Association Act, but the term 'common facilities' is not described. The governing documents may define the term 'common area' more specifically and may even include (generally by an amendment) a definition of 'common facilities', but is the cable service either? What about water service? Are the pipes carrying the water or the wires carrying the television programming owned and/or maintained by the Association? What if the television programming is through a satellite system and you don't even have any wires in the common areas?
These questions have yet to be answered by an appellate court. An adverse ruling with respect to either of these types of actions exposes community associations (and their leaders under certain circumstances) to liability, so it is very important to consult with counsel before trying to shut off any type of service.
It is also important to note that the statutes specifically prohibits restricting access to the individual home. It says:
Suspension of common-area-use rights shall not impair the right of an owner or tenant of a parcel to have vehicular and pedestrian ingress to and egress from the parcel, including, but not limited to, the right to park.
Community leaders can and should be proactive when it comes to collecting assessments and maintenance fees, but they need to be concerned with liability issues. Therefore, I encourage you to consult with counsel to determine what, if any, changes to the governing documents will improve your position, as no association can operate without its primary (and generally only) source of revenue.
CAN CONDOMINIUM OR HOMEOWNERS ASSOCIATIONS FILE FOR BANKRUPTCY? Yes. Under certain circumstances, condominium associations have successfully reorganized under Chapter 11 of title 11 of the United States Code, 11 U.S.C. sections 101, et seq. (“Chapter 11” and “the Code,” respectively). This phenomenon is not unique to Florida – there have been successful condominium association reorganizations throughout the United States.