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

On Wednesday, May 26th, Governor Crist signed two (2) bills of interest to community association leaders and managers into law. 

HB 713 relates to the Department of Business and Professional Regulation.  It authorizes distance learning courses to satisfy continuing education requirements for various professionals, including CAMs.  There are several programs already offered online as part of CAMP (Community Association Managers Program, not to be confused with the manager association of Community Association Management Professionals).

This bill also creates both home inspection and mold related services licensing programs.

HB 1035 relates to elevator safety.  It allows for variances from certain codes as a result of undue hardship, so long as there is a finding that the variance will not adversely affect public safety.  It also includes the phase-in period for compliance with the Phase II Firefighter's Service requirements if the certificate of occupancy was issued on or before July 1, 2008.  The building owner/operator is given a five (5) year grace period to upgrade the elevators solely for this purpose.  If the elevator is replaced or requires major modification before that time, the Phase II Firefighter's Service improvements must be completed at the same time.

HB 1035 describes penalties for unlicensed elevator work.  Citations may be issued to the building owner or operator, in addition to the person performing the work.  Penalties may amount to $1,000 per day of a continuing violation.  

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I talked about the distinction between a carrier's duty to defend and the duty to indemnify early in the year in connection with the U.S. District Court's ruling that a D&O policy did not provide coverage for claims of breach of fiduciary duty, breach of contract and negligence. In Eastpointe Condominium I Asn. Inc. v. Travelers Casualty & Surety Company an owner sued the association claiming the board of directors failed to adequately maintain the roof and other portions of the property.  The carrier took the position that the "property damage" exclusion in the policy controlled.  The Court agreed.

The 11th Circuit Court of Appeal recently affirmed that decision in an unpublished opinion issued on May 20, 2010.

These types of claims are pretty typical.  A unit owner (or several unit owners) feels that the board is not "doing its job" and files suit seeking various remedies often including:

• injunctive relief (demanding that work, repairs, maintenance or improvements, be performed);
• reimbursement for costs sustained as a result of damages to property that would not otherwise exist if the board appropriately attended to the needs of the property;
• damages for the loss in property value, loss of enjoyment of the property, loss of use and the like; and
• reimbursement of attorney's fees and costs for bringing the claim.

Many of these cases involve differences in opinion as to whether maintenance/repairs were or are necessary, what products and methods to use for the repairs or maintenance, which contractor is better, etc.  In many cases the amount of money sought by the unit owner or owners is less than what it costs to defend the claims.   Defense costs can easily eat into the association's cash flow.

Isn't the association's board of directors protected against claims of negligence or breach of fiduciary duty?  If the D&O policy has a similar property damage exclusion, maybe not.

The Traveler's D&O policy excluded coverage for loss in connection with any claim "for or arising out of any damage, destruction, loss of use or deterioration of any tangible property including ... mold, toxic mold, mildew, fungus, or wet or dry rot."

The Eleventh Circuit departs from an earlier ruling that required a carrier to cover claims brought by homeowners against the association.  In Lumbermens Mutual Casualty Co. v. Dadeland Cove Section One Homeowners Asn. Inc., the District Court found that the D&O policy covered property damage losses based upon claims of breach of fiduciary duty, regardless of the tangible property exclusion.

What does your policy cover?  What does it exclude?  If you're not sure, please speak to your agent and/or have your attorney review and compare the policies before you renew because it seems coverage denials (and disputes) are becoming more prevalent.

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What impact will bulk buyers and/or bulk assignees have on your condominium?

SB 1196 creates new Sections 718.701 through 718.708 entitled the "Distressed Condominium Relief Act".   The intent of these provisions is to encourage investors to buy unsold developer inventory, with the goal of stabilizing the condominium market.  It also protects lenders from assuming the responsibilities of the developer when they take title to the units in connection with developer defaults.  If this provision becomes law (the bill has been presented to the Governor) it will only apply to purchases (or other acquisition of title) that take place before the law 'sunsets' on July 1, 2012.  A bulk purchase before the effective date of the statute will not protect any buyer considered an "insider" pursuant to §726.102(7), Florida Statutes or anyone with the intent to "hinder, delay or defraud any purchaser, unit owner, or the association".

What is a bulk assignee?  Basically any person or entity that acquires more than seven (7) units in a condominium where there is an assignment of rights from the original developer.

What is a bulk buyer?  Any person or entity that acquires more than seven (7) units but does not receive an assignment of rights other than:

• the right to conduct sales, leasing and marketing activities on property;
• the right to be exempt from the working capital contribution; and
• the right to be exempt from the association's rights of first refusal (transfer approval procedure).

The bulk buyer, however, must comply with the association's transfer approval procedures with respect to the units acquired in the bulk purchase.  

Bulk assignee's are not saddled with warranties covering work performed under the direction of the original developer and do not need to fund the unfunded portion of the previous developer assessment guarantee.  They are, however, required to supply the post transition association with an audit for the period of their control and warrant their own work.   

Floridians are sadly getting used to dark, empty buildings.  Hopefully these provisions will accomplish the desires objectives.

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A number of bills CALL tracked this session were sent to Governor Crist recently.  He has until June 1, 2010 to act (veto or sign) on the following bills:

• SB 1196, Relating to Community Associations
• HB 663, Relating to Building Safety
• HB 713, Relating to Department of Business and Professional Regulation
• HB 1035, Relating to Elevator Safety
• HB 1411, Relating to Timeshare Foreclosures

We've included bullet point summaries of SB 1196 on this blog, but refer you to the actual text of the bill for more complete information.  Community Update will outline the impact of important bills on community associations - Becker & Poliakoff''s association clients will receive the electronic version shortly.

The Governor's office is in the process of reviewing SB 1964.  We've included concerns about this bill before in Condos/HOAs Have a Lot to Lose if Design Professional Protection Bills Become Law.  In 1999, the Florida Supreme Court codified a long standing principle that design professionals should be held accountable for economic loss damages that they cause just like other professionals in Florida. Board certified construction law attorney Steve Lesser said the following:

[Design professionals] have an obligation to design to meet code and protect the health, life & safety concerns of consumers.  An error in design judgment can be devastating to a unit owner and homeowners that cause damages and in fact- economic damages.  An elevator that fails to operate at the appropriate speeds and breaks down results in loss of use which is an economic loss.  Imagine how this could impact elderly unit owners.  A parking garage that is not properly shored up based on engineering calculations can result in economic loss.  These consumers are largely lay persons that often sign agreements (presented by the professional) that contain limitation of liability clauses. 
 

Please contact the Governor's office to express your support or opposition to 2010 legislation.  Make your voices heard in Tallahassee. 

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With the oil still gushing off our shores and no end in sight, only one thing is for certain, the impact on the environment and economy of Florida’s Gulf Coast will be devastating.

By John Cottle, Esq.

Governor Crist said Floridians must “prepare the worst and hope for the best”. We completely agree with the Governor. It is imperative that anyone with a financial or other vested interest that needs protecting begin doing so as quickly as possible.  Some prompt actions are recommended while it may be wise to consider waiting (as difficult as that may be) regarding others.

Make a Record of Everything
Having been through major disasters and the arduous claims process that follows, I can assure you that there is no such thing as “too much information” when it comes to establishing conditions prior to a casualty loss or in proving “damages”.  Some actions which should be taken immediately include:

• Take photographs – lots of them – and as soon as possible, before any physical damage is caused by the oil spill.  If any damage is sustained, photographs of the damage are indispensable.
• Prepare a  video with narration.
• Rental losses due to canceled reservations should be well-documented. 
• Document all information you receive from anyone who contacts you regarding the oil spill.

Governmental Jurisdictions Can Be Confusing
Beaches, in general, fall under the regulatory authority of several agencies including the Army Corps of Engineers (“ACE”) and on the state level the Florida Department of Environmental Protection (“DEP”).   It is essential to confirm in advance what regulations apply and to obtain any required permits before proceeding with any actions that may violate state or federal laws.

Engaging Professionals
Engaging professionals may be a prudent course of action.  Condominiums and community associations should consider securing the services of a competent coastal engineer.  The advice and recommendations of a professional may provide significant assistance in protecting property and in navigating the confusing web of state and federal regulations applicable to beachfront property. Additionally, it would be wise to seek legal assistance to help protect your assets and income. Some pundits are predicting that this incident will create more lawsuits than any other single event in history. Beware of the contractors, public adjustors and attorneys from all over the country trying to get in on the action.  While many are competent, capable, and professional,  others are not.  It is important to check the history and credentials of any professional before engaging their services.  No substantial claims are likely to be settled quickly, and prudence rather than haste in choosing legal representation will pay off in the long run.

The cleanup from the oil spill will take years.  The litigation and claims processes will take even longer.  Property owners who follow the steps outlined above and keep on top of the news will be in a better position than those who act out of desperation and panic.

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Section 718.111(11), Florida Statutes requires all unit-owner controlled condominium associations to use 'best efforts' to obtain and maintain adequate insurance. 

There have been many debates over the years regarding insurance coverage for condominium associations and the individual unit owners.  Some attorneys and industry representatives take the position that owner insurance (insurance for the contents of the unit and the portions of the unit not insured by the master policy) has been required by law for years, others contend that the law does not require individual coverage at all.  Debates concentrating on the proper scope and amount of coverage for the association pursuant to the master policy are likely to continue, regardless of the pending changes to the Condominium Act. 

The obligation to obtain master coverage (a policy issued to the association) for a multi-family building is not subject to debate.  Even though money is tight, the economy is in trouble and many owners are faced with hard times, there are certain obligations that cannot be ignored.  The tragedy faced by the unfortunate owners of the condominium building that burnt down in Broward County, Florida last week is made exponentially worse by the fact there is no insurance coverage.

Mortgage payments and property taxes do not vanish into thin air when the building burns down.  Will these owners have the funds to re-build?  Do they have any recourse? Probably not, says Gary Poliakoff.  What about the impact on the neighboring condominiums?  Living next to a partially demolished building is not likely to be pleasant or have a positive impact on property values.

Condominium directors, officers and unit owners - take advantage of the educational opportunities offered by various organizations to learn about the realities of condominium living and ownership.  Educational sessions offered by CAI are generally free to community leaders.  While you may not have the ability to prevent a fire, you can prevent this situation from happening to you by understanding the responsibilities of ownership and association operations.

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Governor Crist Issues Executive Order 10-01 Establishing Gulf Oil Spill Economic Recovery Task Force.

The Executive Order issued today is intended to facilitate efforts to recover for losses resulting from the oil spill.  The task force is in addition to the "pro-bono" legal advisory council chaired by former Attorneys General Bob Butterworth and Jim Smith.  The task force will:

• Coordinate State efforts to assist affected business and industries;
• Monitor BP's compensation and claims processes;
• Gather data regarding economic losses and industry indicators;
• Promote business and tourism; and
• Disseminate information and communicate with affected parties.

The Attorney General's office also launched a deepwaterhorizon website to keep Floridians informed about the State's efforts.  Citizens are encouraged to prepare for losses and protect themselves from fraud.

Community associations need to be aware that several governmental agencies have jurisdiction over coastline/beachfront issues.  It may be necessary to secure permits from the Army Corps of Engineers (“ACE”) and/or the Florida Department of Environmental Protection (“DEP”) before taking any action. Violating regulations could result in serious consequences.

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Large Insurance Bill Addresses Fees & Advertising by Public Adjusters, Deadlines for Filing Windstorm/Hurricane Related Claims, Policy Terms and Payouts by Carriers. 

 CS for CS for SB 2044 is a rather large bill addressing many aspects of insurance.  It limits payments to public adjusters for supplemental or reopened claims to 20% of additional insurance proceeds obtained and prohibits public adjusters from charging more than 10% of proceeds paid by a carrier if the claim involves losses from events that are subject to a declaration of a state of emergency by the Governor.  While the bill goes on to regulate advertising or solicitation by public adjusters and the form of contract between the public adjuster and the insured, more attention is being paid to three new provisions that, if they become law, impact property owner obligations, the carrier's ability to change the terms of the contract upon renewal and payment of claims.

These portions of the bill pertain to residential (personal lines) coverage.  Policies issued to multi-family property owners/managers (the Association) are generally (if not always) classified as commercial policies.

One part of the bill purportedly bars homeowners from filing claims.  It says that the insured must provide notice of any claim (including supplemental or reopened claims) based on a windstorm or hurricane loss to the carrier within three (3) years of the date of the storm.  While it doesn't change the applicable statute of limitations for civil actions, in some cases homeowners do not have a full understanding of all the damages caused by the windstorm/hurricane until after demolition and reconstruction begins.  Thus, the three (3) year time frame may result in loss of insurance proceeds, depending upon whether the homeowner has the ability to attend to reconstruction after the storm.

Another section of the bill allows the insurance carrier to change the terms of the policy upon renewal by use of a notice entitled "Notice of Change in Policy Terms".  Payment of the renewal premium constitutes acceptance of the new terms.

Most importantly, the bill removes the prompt payment requirements on the part of carriers.  It only requires the carrier to pay "actual cash value" minus the deductible, regardless of whether the homeowner paid for replacement cost coverage.  The carrier then only pays additional amounts once a contract for reconstruction is in place and the costs are incurred (as the work progresses).  Critics argue that this provision disproportionately impacts lower income families that do not have funds available to pay for reconstruction (along with all the non-insured items) and/or replacement of personal property without insurance proceeds.

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Community Leaders, Management, Staff and Owners Must Act Now to Protect Their Investments, Livelihoods and Homes.

Gulf Coast communities have dealt with a lot of casualties over the years.  Many owners were displaced for years after Hurricane Opal.  Opal's 20 foot storm surges destroyed buildings and businesses.  While special assessments mounted to cover mitigation, repair and other costs, property owners & businesses that cater to community association management/vacation rentals lost their source of revenue - a double whammy.

Oil continues to gush into the Gulf of Mexico.  This disaster is as potentially damaging to the Gulf Coast communities as any hurricane or tornado.  News reports indicate an oil slick the size of Delaware hovers offshore and is likely to make landfall in significant amounts.  Gulf shore residents can expect tar on the beach, an ocean sheen, fish and birds washing up onto shore and more.  Needless to say, tourists are already canceling their plans to visit the Gulf Coast and business are showing signs of distress. While there are still a lot of unknowns, the effect of this spill on the environment and the economy on the northern Gulf Coast is certain to be devastating.  

Community leaders, managers, staff members & owners all have a role in minimizing losses.  Please, protect yourselves and your investments.  Implement your disaster plan and document all losses, including cancellations of vacation plans, beach clean up, damages to personal property and the like.

As with any catastrophic loss, Gulf Coast owners and residents can expect a mass influx of outsiders looking to benefit from this unfortunate event.  Contractors, public adjusters and yes, even attorneys, are likely to swoop down on the region.  BP created a claims process - anyone believe that the oil company is looking out for your best interests?

Becker & Poliakoff Attorneys have represented community associations in the Gulf Coast/Panhandle area for more than twenty (20) years.  Helping clients recover from casualty losses is one of our services.  Attorneys Ray Newman, John Cottle, Angela Chao Clark and John Townsend are already in the process of advising clients how to minimize their losses and prepare for the legal issues they will need to confront in the coming days, weeks, months - perhaps years.

John Cottle explained to Tallahassee Democrat publication that obtaining the remedies available under the federal Pollution Act of 1990, requires evidence of losses. Board Certified Construction Attorney Sanjay Kurian (a contributor to this blog) indicated that insurance claims are not easy or simple matters in an article published by the News Press.  His experience comes from helping community associations recover insurance proceeds from Hurricanes Charley, Jeanne, Francis & Katrina (among other cases).

Becker & Poliakoff has maintained a fully staffed office in Panhandle area since 1998, representing hundreds of community associations with respect to board/association operations, interpreting and enforcing covenants and restrictions, regulatory compliance issues, disaster recovery, insurance claims, construction disputes and more.

For more information on what you can do now to prepare, minimize your losses and ultimately recover for your damages, please visit www.hurricane-recovery.com.   We wish for the best for the Gulf Coast, surrounding areas and all of Florida. 

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