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The governing documents for many community associations provide that the Association must review plans and then issue written consent for construction of improvements or modifications - especially if those improvements or modifications will be visible to other owners, involve the common elements or association property and/or impact utility services to the property.
We learned long ago from the case of Hidden Harbour Estates, Inc. v. Norman, that condominium residents give up a degree of their individual freedoms for the benefit of all unit owners. Similarly, by virtue of detailed, recorded covenants and restrictions, single-family homeowners give up freedoms they might otherwise enjoy, were they not living in planned communities. These restrictions are an area in which individual autonomy is subrogated to the common good.
All too often, however, property owners ignore the architectural control provisions of the governing documents. When timely and consistent enforcement action is taken by the Association against an owner who has made unapproved changes, the appropriate remedy awarded by the court is a mandatory injunction. The courts have broad discretion to fashion an appropriate remedy, but usually a court's order requires the offending owner to remove unauthorized changes and to restore the original condition of the property. In several cases the courts have required removal of balcony enclosures, storm shutters, decorative features, fences, patios, and newly painted colors. Some homeowners in Pasco County, Florida recently learned this lesson the hard way. Bay News 9 showed demolition of recently constructed expensive docks that were built without HOA consent. One homeowner said she paid Sixty-Five Thousand ($65,000) Dollars to build the dock - only to watch it being dismantled after losing a court battle with the Association.
HOA leaders need to be cognizant of Section 720.3035, Florida Statutes, which became effective on July 1, 2007. This law does not eliminate an association’s ability to regulate alterations to a lot but does require that authority be specifically stated or reasonably inferred from the written covenants or other published guidelines and standards authorized by the declaration of covenants. Home or Unit Owners need to learn and understand what procedures are in place in their community association to avoid costly problems.
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Naples City Council Urged by CALL to Adopt Resolution in Support of HB 561 and SB 1222 to Extend Deadline for Compliance with Costly Fire Sprinkler Retrofit Requirements. Collier County Commissioners Expected to Consider Resolution at Upcoming Meeting.
Representatives from the State Fire Marshal's Office presented information to City Council members and interested citizens regarding the improvements required for high-rise buildings (including condominiums and cooperatives) to comply with the Florida Fire Prevention Code. A recent report of the Florida Department of Business and Professional Regulation pegged estimated compliance costs at up to $8,600 per unit. This, at a the time of an historic decline in property values and unprecedented association assessment delinquencies, all while the efficacy of the requirement has yet to be shown.
While Florida Statutes, Section 718.112(2)(l) provides that an Association may vote to opt out of the requirements to retrofit the units of a high-rise residential condominium, currently there is no way to avoid a partial retrofit of interior common areas in a high rise building (a building greater than 75 feet in height). WZVN (Channel 7) reported about the "angry condo association presidents" and county leaders that hoped to extend the deadline or even change the law completely.
On another note - we are proud to be nominated as a Best Blog in the Sun-Sentinel's Best of Blog Awards. The voting process is already underway - click HERE to vote for Florida Condo & HOA Law Blog in the Business and Technology Category!
A reader recently posed the following inquiry:
I am interested in your thoughts about Fee Simple Communities foreclosing on properties and working with the banks to accept a short sale. As President of a small community (65 units) HOA, we have foreclosed on 3 units and soon to be 5. All but one have a mortgage and all 4 mortgages are above the value of the property. The banks are not accepting short sale offers without involvement from the mortgagor which in cases in close to impossible. Three of the banks are in foreclosure with the longest process exceeding 3 years. Motions to compel are denied and we are looking for creative ways to speed this process and begin to collect from a new homeowner or at least get my 1%/12.
This situation is becoming more and more prevalent throughout the State. Attorney Kevin Miller provides the following comments:
A motion for case management conference can be a useful tool on behalf of any association involved in a mortgage foreclosure action. In this motion, the association's counsel asks the court to establish reasonable deadlines to bring the case to conclusion, ultimately resulting in a foreclosure sale whereby either the mortgagee or another party will take title to the property. In instances where the association has already foreclosed and taken title to the property, and the mortgagee has filed its own foreclosure, the association may be able to simply consent and stipulate to a judgment and either bring about a sale or transfer of title much sooner. Particularly when the foreclosing party plaintiff is the mortgagee and the defendant owner is the association, and there are no other parties to the action.
What about the 'short sale' option?
The U.S. Treasury announced new federal guidelines that give lenders a 10-day limit in which to respond to short sale purchase offers. These rules may provide much needed relief, as the Sun-Sentinel reported approximately 40% of South Florida homeowners owe more than the property is worth. The rules also provide financial incentives for both sellers and lenders.
Is the Association really entitled to any payment from a first mortgagee when the it forecloses its mortgage after the Association has foreclosed its claim of lien?
Remember, the statutes provide for joint and several liability with the previous owner (with the exception of the safe harbor provisions for first mortgagees). Thus, once the Association takes title to a unit or home after completing a lien foreclosure case, it technically becomes liable for the debt of the previous owner and cannot necessarily seek to collect that debt from a subsequent owner, even if the subsequent owner is a mortgagee. Any subsequent owner (mortgagee or otherwise) bears responsibility for payment of all assessments from and after the date title is acquired.
We will address additional options in further posts, including the benefits and detriments to renting the properties acquired as a result of foreclosure. Stay tuned.
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Amendments to the Florida Rules of Civil Procedure Largely Derived From Recommendations of the Task Force on Residential Mortgage Foreclosure Cases.
Some of the changes are as follows:
Verification of Mortgage Foreclosure Complaints: This requires the Plaintiff (lender) to attest to the truthfulness of the allegations in the complaint. It is intended to minimize erroneous filings, conserve judicial resources by reducing the number of cases with "lost note" issues and provide the court with greater authority to sanction lenders that make false allegations.
Changes the Affidavit of Diligent Search: When the defendants cannot be served personally, the law allows the foreclosure case to proceed after publication of a notice. This new form requires the person that conducted the search to sign the Affidavit (instead of the lender) and to provide more information about the search.
New Form - Motion to Cancel and Reschedule Foreclosure Sale: Associations wait and wait for a lender to foreclose and then wait for the sale to bill the new owner (whether lender or third party) for the appropriate amount. More importantly, Associations need the property to be sold to start collecting assessments from the new owner going forward. The number of sales canceled at the last minute seems to be on the rise. This new form requires the lender to explain why they want to cancel the sale. It also directs the Court to set a new sale date, rather than keeping properties in an "extended limbo between final judgment and sale". [Quote from Task Force]
There are some slight changes to the Final Judgment of Foreclosure that weren't published before so interested persons have sixty (60) days to comment before they become final. All of the other changes are final and in effect.
First, a quick note of introduction. As stated above, my name is Travis Moore and for the last number of years I have had the privilege of advocating for the interests of CALL members before Florida's policy makers. This includes the Governor's Office and Executive Branch Agencies such as the Department of Business and Regulation which is charged with condominium oversight and the state Legislature. While decisions are being made in Tallahassee and around the state, it is vitally important the voice of each CALL member is heard by those holding sway over the deliberations. I am pleased to be a part of your team by pointing your megaphone in the most effective direction and being your eyes and ears as the debate affecting our community takes place.
Probably THE hot button issue facing community associations in Florida is mortgage foreclosures and the statutory limit of lender liability for assessments. The association is left maintaining the asset - the burden on the backs of the units not in foreclosure, but many sliding that way. This added burden is just buttering the slope.
Up until recently, the lending lobby has offered no workable solutions. Now, they are circulating draft legislation creating a non-judicial foreclosure process. To date, no bill has been filed but we suspect it will and CALL will quickly analyze it and get it circulated for your input. Already, we are reviewing the draft so be looking for a CALL Alert soon.
As in any proposal to address this true crisis for associations, there are certain criteria which we will insist on. Obviously it must address the associations' ability to have owners and lenders meet their financial obligations to the association. What is rightfully owed to the association for maintaining the real estate must be paid. It must be paid as quickly as possible. One of the main issues currently being faced by associations is the length of time it is taking for the property to be foreclosed, while the hard cap of 6 months (COA) and 12 months (HOA) is keeping the lenders' liability unreasonably low.
It is imperative that any foreclosure process, including a non-judicial one, not put the entire process and timetable under the control of the lender. The lenders have the most to gain by delay...a cap and avoidance of paying full assessments upon taking title...while leaving associations even further at their "mercy."
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The Office of Program Policy Analysis & Government Accountability (OPPAGA) Issues Report Outlining Various Options for Regulation of Homeowners Associations (HOA).
OPPAGA evaluates performance and accountability of various governmental activities. The Draft Report finds that the legislature showed significant interest in regulating Florida's Mandatory Membership Homeowners Associations over the past several years. In 2007 a Senate interim study recommended alternative dispute resolution mechanisms to facilitate resolution of homeowner issues. The 2008 Select Committee on Condominium and Homeowners Association Governance recommended increasing enforcement, mandatory education for board members and allowing local law enforcement to access association records during an investigation. In 2009, the Community Association Living Study Council recommended immediate legislative action to curtail the powers of homeowners associations.
The Draft Report describes several options available to the Legislature, to wit:
| OPTION | ADVANTAGES | DISADVANTAGES |
| Maintain Status Quo | No Cost |
Inability to effectively calculate # of HOAs and homes governed by HOAs Remains difficult to determine extent of problems |
|
Collect Information |
Allows Legislature to estimate needs/costs of additional services Department of State can perform this service without additional cost |
Requires HOAs to report information |
| Expand Service of Office of Ombudsman to HOAs |
Disputes are similar - staff already has expertise Resolutions without expensive pre-suit mediation or litigation Education designed to minimize disputes Provide tracking data
|
Unknown Cost - needs source of funding |
| Regulate Like Condos/Coops |
State mediation/arbitration services may reduce litigation Education could minimize disputes More uniform enforcement of laws |
Unknown cost - 2006 study estimated $10 million in funding required annually |
The Ombudsman's Office reports that most of the complaints about HOAs concern properties in South Florida. The complaints are largely similar to Condo/Coop complaints - the majority of which include lack of access to association records, election disputes, selective enforcement of covenants and the inability to participate at meetings.
Is it time for Florida to provide more oversight to HOAs? Would Florida homeowners benefit from the services of the Ombudsman or the DBPR? Would the costs justify or outweigh the benefits?
There are a number of bills filed for consideration during the 2010 legislative session - some of which include additional regulations for HOAs. Please refer to other posts on this site for information about pending bills or visit CALL to participate in the legislative process.
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As promised in last time, this post continues to address issues regarding an Association’s failure to comply with the statutory mandates of records retention. This post is a bit more intense as there are exceptions to consider.
Spoliation/Presumption Against the Association in a Lawsuit/Arbitration
If the missing documents are important to a case regardless of who the opposing party might be (e.g., member, contractor, manager, etc.), the Court could find that the Association spoliated the evidence. This is a fancy way of saying the Association destroyed evidence. This finding could be issued regardless of the intent of the Association. After a finding of spoliation the Court could instruct a jury that if the evidence were not destroyed it would serve to show that the Association conducted itself inappropriately as it pertains to the issues in the case. In essence the Association is then burdened with having to show it did nothing wrong. This does not always work and a finding could be made against the Association such that it would loose the case. In addition to the presumption against the Association a Court could also sanction the Association with the sanction taking the form of the striking of pleadings (claims or defenses depending on the role of the Association in the case) in addition to a monetary fine (commonly referred to as a sanction).
Evidence Used Against Association in a Lawsuit/Arbitration
If the Association retains records past the time mandated by the statute could this could also work against the Association. The Association should create a succinct procedure for destroying records which exceed the 7 year retention required for most records. The only exception to this is if a case is already pending against the Association or if the Association believes a case could be filed against it on a specific issue which is the subject of the records which are subject to destruction. The Association should speak to its attorney if it is not certain if this “exception” applies at any given time.
Knowing there is a rule and an exception is great but not understanding why they are important does not help the Association at all. The problem with keeping records past the mandated time when the exception is not present is that at time those records could show the Association did something inappropriately. For example, assume the governing documents require a 75% member vote to be amended. In 2000 the Board put an amendment prohibiting the over-night parking of motorcycles at the Association up for a membership vote. The Association voted to pass the amendment by 73% but due to a counting error it was believed the full 75% vote had been obtained. Based on the error, the amendment was recorded and became a part of the Association’s governing documents. In 2009, a new member of the Association begins parking his motorcycle over-night at the Association. The Board makes a demand which the member refuses to comply with and legal action is taken. As part of discovery, the Association is asked to produce all records regarding the amendment of the documents. The Association having not discarded any of its records since its creation in 1980 produces all records to counsel who is required to produce those records to the member. The ballots and voting materials show the vote was 73% and the amendment never passed. The Association looses its case and could have to pay the legal fees and costs incurred by the member in defending against the case. On the other hand if the records had been properly destroyed (1 year for the ballots and 7 years for all other pertinent records) there would have been no way to show that the vote was not the 75% mandated by the governing documents, the amendment would have been upheld and the Association would have prevailed.
You may ask, why the records were produced if the Association was not required to keep them? Simple, once the Association determines records pertinent to a case were not discarded, it cannot then destroy them as this could lead to a claim of spoliation. The Association can also not ask its counsel to destroy the records or otherwise refrain from producing them as that would result in an ethical violation of the rules governing attorney conduct which could result in both a claim of spoliation against the Association and disciplinary action against the attorney.
Do not despair remember I promised that the third post on this issue would give Associations guidance on how to limit their exposure.
A couple of CA bills of interest were heard by the House Civil Justice & Courts Policy Committee on Tuesday (February 4, 2010) morning. HB 329 by Rep. Robaina was debated and it was decided by the Committee to hold off on taking a vote due to some concerns with the provisions pertaining to the ability of associations to go after payment of assessments from renters when unit owner landlords aren’t paying.
HB 561, a omnibus CA bill which CALL is working on very closely with sponsors Bogdanoff and Hudson, was passed by the committee after adopting several amendments pertaining to the contentious sprinkler retrofit issue. It would move the date of compliance to 2019 from 2014 and say that if an association has voted to forego retrofitting that 10 percent of owners could petition to have a special meeting “re-vote” once every 3 years. CALL will continue to monitor this issue to make certain a workable solution is found which doesn’t jeopardize the bill.
There was also a discussion on the Florida Supreme Court’s administrative order re the mandatory mediation process for residential mortgage foreclosure cases. David Muller of CALL was asked by the Committee to testify and was able to provide helpful information on the foreclosure crisis many associations are facing and how this mediation process must not cause further delay and cost. This issue remains a top priority of CALL. We need you to let your Legislators know how your association is being impacted and ask for action.
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2010 looks like it will be another active year in the foreclosure reform area. According to Yeline Goin, Co-Executive Director of Becker & Poliakoff’s Community Association Leadership Lobby (CALL) “there are already several Bills in play which we expect to generate a lot of discussion in Tallahassee this year.” Some of them include the following:
House Bill 115: This proposal states that during the pendency of a foreclosure action, if the unit is occupied by a tenant, the association may demand that the tenants pay rent directly to the association, with a right of eviction for non-compliance. This Bill would also permit the condominium association to suspend certain common element use rights for nonpayment, although utility services could not be suspended. Voting rights could also be suspended for delinquencies. Similar amendments are proposed in this Bill for Chapter 720, the Florida Homeowners Association Act.
Senate Bill 164: This proposal requires any mortgagee which has not completed its foreclosure within six months from filing its foreclosure lawsuit to pay the “statutory cap” (six months of past due assessments or one percent of the original mortgage debt, whichever is less) during the pendency of the lawsuit. This proposal would apply to condominiums only.
House Bill 329: This proposal would also allow the collection of rents directly from tenants, and permit suspension of certain common element use rights and voting rights. Significantly, this Bill also deletes the statutory cap and would require a foreclosing lender to pay all unpaid assessments if the foreclosure action is not completed within a year.
House Bill 337/Senate Bill 968: This Bill states that if an owner is delinquent in the payment of assessments, they can be restricted from running for office, holding office, serving on committees, leasing units, or using the common areas.
House Bill 419/Senate Bill 864: This Bill is similar to a couple of others already discussed regarding the right to demand payment of rents directly from tenants. This proposal also states that an association’s claim of lien can include the cost of collection efforts by management companies or licensed managers.
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