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

On March 2, 2010, Congress passed and the President signed H.R. 4691, which extended the National Flood Insurance Program (NFIP) through March 28, 2010.  Homeowners (including community associations) who have current flood insurance policies still have coverage; but NFIP cannot issue new policies, increase coverage on existing policies or issue renewal policies.  Since the extension expired, please refer to the NFIP guide titled “Recommendations/Guidance for Possible NFIP Authority Lapse and Hiatus”.  FEMA has advised that "any hiatus period should be brief and most of the nearly 5.6 million flood insurance policyholders nationwide will not be affected".

Congress is scheduled to reconsider H.R. 4851 entitled the "Continuing Extension Act of 2010", which extends several governmental programs, on April 12, 2010. Once Congress authorizes the NFIP program again, it’s expected to make it retroactive.  However, the hiatus may slow down or delay closings that were scheduled to take place in early April.

Since flooding can often lead to mold if not addressed immediately, the U.S. Environmental Protection Agency publishes helpful information including mold clean-up guidelines. 

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Appellate Court sides with Homeowner in Parking Enforcement Litigation.  Owner Permitted to Park Large Pick-Up Truck in Driveway.

Eagles Master Association, Inc. v. Vizzi - link to Summary Judgment Ruling.

Interpreting governing documents of condos & HOA is tricky sometimes.  While there is an emphasis on the 'plain meaning' of the words - sometimes the exact meaning of the words doesn't make sense in the context or is otherwise unreasonable for one reason or another.  The Second District Court of Appeal found that the plain meaning of one of the sentences of the Eagles Master Association's Declaration didn't make sense on its own.  After considering several factors, it found that the Association's interpretation of the Declaration was simply unreasonable, inconsistent with other provisions and therefore incorrect.  The result?  Victory for the homeowner after reportedly spending two hundred thousand ($200,000) dollars in legal fees - some or all of which to be reimbursed by the Association.

Like any case, this case involved several legal issues.  The homeowner challenged the legitimacy of the Master Association's board.  There was the issue of whether the Master Association declaration of covenants had priority over the Sub-Association documents in the event of a conflict.  There were amendments to analyze as well.

The Master Declaration said (in part) the following:

Vehicles and Parking.  No vehicles shall be regularly parked in The Eagles except on a paved driveway or inside a garage.  No trucks or vehicles which are used for commercial purposes, other than those present on business may be parked in The Eagles unless inside a garage and concealed from public view. Pick-up trucks, boats, trailers, campers, vans, motorcycles and other recreational vehicles ... shall not be permitted in The Eagles except while loading or unloading the contents thereof or while parked inside a garage and concealed from public view.

 The Sub-Association Declaration said (in part):

Vehicles.  No motor vehicles shall be parked on the Properties except on paved or concrete driveway or in a garage.  No motor vehicles which are primarily used for commercial purposes, other than those present on business, nor any trailers, may be parked on the Properties unless inside a garage and concealed from public view. Boats, trailers, commercial trucks, commercial vans, motorcycles and other recreational vehicles shall be parked inside of garages and concealed from public view.

Seem pretty similar, right?

The Master Association took the position that its declaration required all pick-up trucks, vans, etc. to park in an enclosed garage (concealed from view), except for short periods of loading and unloading.  This truck was too large to fit inside the garage.  The Court disagreed.  It said:

1. Interpreting the declaration was a matter of law;
2. If at all possible, any inconsistent provisions should be reconciled;
3. All of the terms & provisions should be read together with the goal of making each term meaningful; and
4. Any doubts must be resolved in favor of the free use of the property (against the party seeking to enforce the restriction).

In the end, the Court found that the better interpretation of both documents lead to the conclusion that while commercial trucks and commercial vans were banned from parking on the driveways unless garaged or there for business purposes, other trucks (including pick-up trucks and SUV's registered as trucks) used for personal transportation were allowed.

Community leaders should analyze the current documents and consult with counsel to ensure that the restrictions and covenants are written in a way that supports the common interpretation.  Remember, any ambiguity is resolved against the person/entity trying to enforce the document.  Thus, review your existing practices and consider amending the documents to create enforceable rules and regulations that fit your community's goals and residents' needs.

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Court Rules in Favor of Condominium Association After Lender Fails to Move Foreclosure Proceedings Along or Comply With Court Orders.   

On Feb. 8, 2007, the Bank of New York filed a mortgage foreclosure lawsuit against a unit owner, naming the Moorings at Edgewater Condominium Association, Inc. as an additional defendant in the case.  The defaulting unit owner filed for bankruptcy on May 1, 2007, which resulted in an automatic stay of the foreclosure lawsuit.  The unit owner surrendered the property and was discharged from bankruptcy several months later.  The lender waited almost a year from the bankruptcy discharge to file its Motion for Summary Judgment, but never set that Motion for hearing, leaving the association in limbo.

Becoming quite frustrated as a result of the delay, the association hired Attorney Scott Petersen of Becker & Poliakoff's Sarasota office, who filed a Motion to Compel as a result of the delay.  The Court granted the association's Motion and Ordered the bank to move its mortgage foreclosure case along on or before June 29, 2009.  Remember, the unit owner surrendered the property, did not reside in the unit and did not contest the mortgage foreclosure action. 

After Bank failed to obey the Court’s Order, Attorney Peterson scheduled a hearing on an Order to Show Cause for September 24, 2009.  The lender attempted to file a Notice of Voluntary Dismissal to avoid the Show Cause hearing.  The Court ultimately granted the Order to Show Cause, ruling that the bank must pay regular and special assessments as a result of the inordinate delay.

After two months of non-payment, Attorney Petersen filed a Motion for Contempt when the Bank's attorney did not respond to correspondence.  The Bank argued the following as justification for its delay:

1. Owner’s bankruptcy;
2. Difficulties in service of process;
3. Countrywide’s Consent Judgment - implying the parties (owner and lender) were engaged in the loss mitigation process;  and
4. the Court’s Order of May 29, 2009 was illegal pursuant to F.S. 718.116 and the U.S. Bank v. Tadmore case.

The association countered with the following arguments:

1. The Owner’s bankruptcy case was discharged in 2007 and did not cause a 3-year delay;
2. The Affidavits of Service showed that service was attempted during an 8-day stretch from March 1-8, 2007 and then again on April 23, 2007, all of which were unsuccessful. The next attempt at service was June 12, 2008, which was successful, but there was no explanation for the intervening delay;
3. Countrywide’s Consent Judgment was filed Nov. 10, 2008, more than a year after the property was surrendered in bankruptcy and didn't even apply since the borrower (unit owner) abandoned the property; and (among other things)
4. The facts of this case were so egregious that sanctions were appropriate.

This victory for the association shows community leaders cannot sit back and wait for the bank to foreclose.  Moreover, there are many steps that proactive leaders can take now to guard against future delinquencies and to improve the association's position.

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Representative Bogdanoff Explains Amendments in CS/CS/HB 561 at Becker & Poliakoff's Leadership Seminar.  Representative Sachs announces she will "continue to fight for fairness in foreclosures". 

Over 450 volunteer board members, professional community association managers and industry representatives listened intently to Representative Bogdanoff on Saturday at the Kravis Center during the Becker & Poliakoff Leadership Seminar.  They were pleased to hear that CS/CS/HB 561 includes provisions that would:

• delay enforcement of code mandated elevator improvements (specifically ASME 17.1 and 17.3) in condominiums or cooperatives where the Certificate of Occupancy was issued on or prior to July 1, 2008, for five (5) years or until the elevator is replaced or requires major modification (whichever happens first);
• eliminate any requirement for condominiums or cooperatives that are less than four (4) stories and has exterior corridors to install a manual fire alarm as required by §9.6 of the Life Safety Code (as adopted by the Florida Fire Prevention Code);
• clarify that in a condominium association with more than 10 units, co-owners of a unit cannot serve on the board together unless they own more than one unit and are not co-occupants of a unit;
• require board members to certify (in writing) that they have read the laws and governing documents, will work to uphold the documents and policies and faithfully discharge their fiduciary responsibilities (or submit a certificate of satisfactory completion of approved educational curriculum), failing which they are automatically disqualified from service;
• allow high-rise condominium and cooperative associations to vote to completely avoid any obligation to retrofit the buildings with a fire sprinkler system or engineered life safety system and extend the deadline for others to 2019; and
• authorize bulk contracts for communication services, information services or internet services.

Stay tuned for more legislative updates direct from Tallahassee as these (and other) changes are likely to substantially impact community association operations.

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This week marks the second week of the legislative session and things are getting downright hot inside the capitol as it relates to community association bills. While only mid-week, I have been involved with numerous meetings regarding SB 1196 and HB 561, the ca package getting the most attention by the Legislature. I have met with the sponsors…Sen. Fasano, Sen. Ring, Rep. Bogdanoff, Rep. Hudson…with interest groups ranging from bankers, managers, CPA’s, insurance agents, with committee staff, etc. Progress is being made on several fronts and as language is negotiated which provide workable solutions to real challenges, we will get that out via the CALL website (www.CALLbp.com) for your review and input.

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OPPAGA Report Finds that Insureds Received Larger Insurance Settlements when Public Adjuster Involved in Claim.  Florida Legislature Considers Additional Regulations Governing Solicitation by Public Adjusters. 

 The number of public adjusters in Florida increased by more than 300% over the last six (6) years - no doubt as a direct result of the catastrophic damages caused by hurricanes in 2004 and 2005.  As the deadline to file Hurricane Wilma claims becomes closer and closer, more homeowners, association leaders and building managers are being solicited to re-open old claims.  In the aftermath of Hurricane Wilma many distraught association leaders readily 'signed on the dotted line' after being told 'not to worry' about the association's insurance claim or repairs to the property. 

Did the use of a public adjuster make a difference?  The report issued by the Office of Program Policy Analysis & Government Accountability (OPPAGA) finds that claims took longer but payouts were higher when a public adjuster represented the insured.  In fact, Citizens Property Insurance Corporation paid insureds represented by public adjusters at least five time (5x) more than it paid insureds handling claims by themselves.

While Section 626.8795, Florida Statutes specifically prohibits the public adjuster from having anything to do with the repair or reconstruction of the damaged property, contractors and public adjusters often seemed interchangeable to association leaders.  The Department of Financial Services recently stepped-up enforcement efforts against contractors - including United Roofing Systems.    Moreover, solicitations became so intrusive that the Florida laws were amended in both 2008 and 2009 to impose restrictions:

• limiting hours of solicitation (in person or by telephone) from Monday through Saturday between 8:00 a.m. and 8:00 p.m.;
• prohibiting contact with policyholders until at least 48 hours after an event; and
• limiting fees to 10% of the claims related to declared emergencies and 20% for all other new claims.

 SB 2264, filed by Senator Bennett seeks to control solicitation by public adjusters even more and according to the Sun-Sentinel, industry groups are all for it, claiming that public adjusters lead to higher premiums.  Among other things the bill seeks to:

• prohibit solicitation in person or by phone (unless the insured is someone they know or a family member);
• require written communications to include the word 'ADVERTISEMENT' in red ink and be sent via regular mail (not certified or registered);
• prohibit mailers until 30 days after the insurable event takes place; and importantly
• cap fees at the 10%/20% limits for re-opened claims.

Contracts between insureds and public adjusters often result in disputes leading to expensive and protracted litigation.  It is therefore extremely important to consult with counsel before entering into any contract with a public adjuster or contractor after a casualty occurs.  For more information on disaster planning and recovery, please go to www.hurricane-recovery.com.

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In my last 2 posts I discussed the dangers of failing to comply with the records retention provisions of Florida law. This post will touch on things the Association can do to limit its exposure.

First, the Association needs to ensure it understands exactly which records must be maintained by statute [§718.111(12) and §720.303(4)]. For example, I get many questions about whether the audio recording of Board meeting must be maintained. The truth is it depends. The recording must be maintained until such time as the minutes are approved and then it can be destroyed [Fla. Admin. Code 61B-23.002]. However, if there is a delay in approving the minutes, the recording must be kept as an official record and must be provided for inspection should such a request be made.

Second, in determining which records are to be retained, it is important for the Association to understand the “gray” area [§718.111(12)(15) and §720.303(4)(l)] set forth in each statute. In dealing with the gray area, the Association should consult with its attorney to determine what items fall within the gray area “catch all” as determined by the Legislature, Division and/or Courts.

Third, the Association needs to create a strict policy addressing where the documents are to be housed. The statutes provide for location limitations (Condominiums - 45 miles from the condominium or within the county in which the condominium is located; homeowners associations - within the state in which the HOA is located]) which are for the most part followed. The problem is that some Associations allow some of their records to be retained by their property managers, some by the Board members and others in a storage area on Association property. In these instances, it is usually difficult for the Board or even its manager to truly know where all the documents are such that full compliance with a records inspection request or discovery in a case is difficult to accomplish. A singular location needs to be chosen which allows the Association easy access to comply with a records inspection request or a discovery request in case. If this cannot occur as to the current year’s records, then a singular location as to the records of prior years should be created and a detailed list of where the current year’s records are maintained should be maintained by the Board and its manager for easy reference.

Fourth, the Association needs to create a policy through which it ensure that each time the members leave the Board that a full inventory of documents and the actual documents in the possession the former Board member is provided to the Association. In the spirit of being neighborly, the new Board should request the documents from the old Board members before contacting the Association’s attorney for assistance. If the records are not turned over however the new Board must seek legal assistance.

Fifth, whenever the records or a part of them are to be maintained by the management company, the Association with the assistance of counsel, should ensure the contract provides specific information as to what documents the company will be charged with maintaining and the manner in which the records will need to be turned over to the Association upon termination. The contract should also provide specific language regarding the repercussions to the management company for failure to turn over or otherwise improperly destroy or damage the documents of the Association. The Association’s attorney can help prepare the language for the contract to ensure these protections.

Sixth, the Association should ensure that if it suspects a set of documents will be or otherwise address the subject of a suit (threatened or filed) it should seek the advice of its attorney as to whether the documents must be retained or otherwise destroyed as part of the Association’s standard practice.

Seventh, the Association should create a policy which addresses destruction of records. This policy should address when a record is subject to destruction, who is responsible for the destruction and how it will be destroyed.

Please note that while no system is foolproof the key to its success is its ease. The easier the policy is to understand and follow the greater the likelihood it will be properly followed.
 

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What policies does your community have in place regarding the use, storage and operation of golf carts?  Can owners ride the golf carts to the local convenience store, coffee shop or hair dresser?  Adoption of a new proposal will allow local governments to create their own regulations governing the use of golf carts, which pleases many Condo & HOA owners.  In Bradenton, Florida seniors listed golf cart usage as a priority, as the cost is insignificant and many of them have given up driving automobiles.  The Bradenton Herald recently included a story describing what changes would result from SB 2448. 

Ambiguities regarding the use of golf carts are not new.  In 2002, the Florida Attorney General released an Advisory Legal Opinion in reply to an inquiry regarding whether a municipality may impose a minimum age requirement for the operation of a golf cart which was more restrictive than those found in the Florida Statutes or whether a City may require the operator of a golf cart to have a valid Florida Driver’s License, the answer to both being 'no'.  In 2004, Charlie Crist, as Florida's Attorney General, issued an Advisory Legal Opinion (AGO 2004-60) implying that a community association could not adopt rules prohibiting persons under the age of 16 from using golf carts on public streets in the country club community.   He also indicated that the Association could not force golf cart users to use child safety devices, which resulted in changes to the Florida Statutes.

Under proposed SB 2448, the local government would be obligated to:

1. issue a finding that golf carts, bicycles and pedestrians can share the sidewalk safely;
2. consult with the Department of Transportation;
3. restrict speed to no more than 15 mph and only permit use on sidewalks at least 8 feet wide;
4. retain (or supplement) golf cart equipment requirements; and
5. post appropriate signage.

Community associations need to address golf cart, scooter and other transportation device use and storage issues carefully - even with respect to private property.  Consult with counsel to determine what types of regulations are appropriate and enforceable.  It is also a good idea to check whether the insurance policies contain exclusions or specific requirements for claims involving golf carts.

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Has your carrier been 'red-flagged'?  The Florida Association of Insurance Agents and other industry professionals warned the legislature about carrier financial instability, underwriting losses and reductions in surplus funds.  Sarasota's Herald-Tribune reports that "Weak Insurers put Floridians at Risk" and notes that carriers in Florida are highly more leveraged than in other states.

The Herald-Tribune's investigation found:

• One third of homeowners rely on private insurance carriers that exhibit at least one sign of financial risk;
   
• More than 100,000 homeowners rely on companies that can barely pay claims for fires, let alone hurricanes or other casualties; and
   
• Almost one-third of the private carriers have decreased cash set aside for claims.

A presentation by Insurance Commissioner Kevin McCarty stated:

• A license to operate as an insurer should never be confused as a complete guarantee if financial health and profitability.  These are private companies and sometimes economic conditions can create financial distress to one degree or another.

• Solvency regulation is designed to reduce financial risks for the policyholder by proactive early detection of potential insurer distresses; and

• Current market conditions have impacted insurers to varying degrees and will likely continue.

Herald-Tribune identifies six (6) carriers with red flags:  Homewise Preferred; Magnolia Insurance; Northern Capital Insurance; People's Trust; Sunshine State; and Southern Oak Insurance.  Coral Insurance and American Keystone insurance failed last year and Magnolia is reportedly under state supervision, but has not been liquidated.

Citizens' Insurance Corp., has become the primary insurer.  However there is an understanding in the industry that premiums charged by Citizens are 40-60% below sustainable rates, leaving Floridians subject to assessments for casualty losses.

Community leaders are well advised to educate themselves about the financial stability of the carriers providing coverage to their communities and to understand whether FIGA provides any relief in the event of insolvency.

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