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

Community leaders should understand the financial wherewithal of the associations they lead.  Unit and Home Owners also have rights to review financial records.  It seems like we hear about theft of association funds more and more these days.  Simply leaving finances in the hands of a manager, bookkeeper or treasurer is not enough.  For some practical ideas how to stay "in the know", please see the following article published by HOAleader:

Five Questions to Ask Your Manager about Your Homeowner Association's Finances

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Many of the participants in the Gulf Oil Spill Webinar held on Friday, June 25, 2010 asked questions regarding the types of claims to submit, the mechanics of the claims process, whether insurance policies will provide coverage for losses and whether there is other financial assistance available. 

BP bears responsibility for various categories of damages, explained in:

BP Claims Process for Damages from Deepwater Horizon Oil Spill

You can file claims by visiting the website www.bp.com/claims or visiting one of the BP claim centers.  Lost rental income as a result of cancellations are included, but you have to substantiate the loss of revenue by tracking cancellations and showing historical earnings.

Reductions in Staff / Loss of Employment

One participant indicated the association needed to let go of staff as a result of decreased demand and asked whether fired employees could file claims for lost income.  The answer is yes and they should file those claims.  They will need some form of documentation from the former employer.  Associations in this predicament should have counsel prepare or at least review this documentation to ensure it doesn't jeopardize their claims.

Calculation of Damages or Losses

Another participant asked whether they needed to file multiple claims or wait until the season was over to calculate and file claims.  You only need to file your claim once - you can update your claim file as damages accrue.  However, please read the fine print carefully!  Sometimes even cashing a check operates as satisfaction of the claim.  If you're not sure, please consult with counsel.

Insurance Issues

Many participants asked about insurance coverage.  Officials from the NFIP (National Flood Insurance Program) announced that it will pay claims for property damage to homes (and contents) from oil driven ashore in storm surges, but there are limitations.  Flood insurance does not cover any special clean up costs associated with oil contamination.  Flood insurance provides coverage for damages from rising water (storm surge), not contamination or damages from wind containing water saturated with oil.  Many casualty/property insurance policies exclude damage from pollutants so please check with your agent (or the carrier) to learn what your coverage includes.

Other Financial Assistance

Florida offers Small Business Emergency Bridge Loans.  These are short term loans to established businesses.

SBA announced that it has made Economic Injury Disaster Loans (EIDL) available and has deferred payments on many disaster loans in the impacted areas.   Funds may be used to meet payroll, accounts payable and other financial obligations.

What if BP denies my claim?

If claims are denied or not addressed after ninety (90) days, you may appeal to the U.S. Coast Guard.  You may also submit a claim to the National Pollution Funds Center.

Link to Webinar

If you could not attend the webinar or would like an opportunity to absorb the information again, here is a link: BP Claims Process Webinar

We thank all the webinar participants for their valuable input and will continue to provide information to assist you through this process.

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Board members and property managers need to be aware of new training, certification, notification, record keeping and clearance requirements. 

Contractors performing renovation, repair and painting projects that disturb lead-based paint in homes, child care facilities, and schools built before 1978 must be certified and must follow specific work practices to prevent lead contamination.  The EPA rules became effective on April 22, 2010.  Eight hours of training, two of which must be hands-on training, is required to become certified.  EPA has approved 251 training providers a number of which are accredited to provide training in multiple states.

The EPA's outreach materials say new research shows that contractors like plumbers, electricians, painters and window replacement experts can inadvertently expose children to harmful levels of lead from invisible dust disturbed during jobs they perform every day.  Maintenance staff and property managers that perform repairs must be certified as well.  Minor repairs, defined as a work area of less than 6 square feet inside a building or less than 20 square feet outside a building, are excluded.  Owners of single-family homes do not need certification if they reside in the property and perform the work themselves.

EPA requires disclosure of lead-based paint.  It published a guidebook entitled "Renovate Right".  Compliance with these federal rules is important - as fines and penalties for violations are significant.
 

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Fourth District Court of Appeal Enunciates Two-Pronged Test to Evaluate Decisions Made by the Board of Directors of a Community Association.

The officers and directors of community associations have a fiduciary relationship to the members (owners), as stated in §718.111(1)(a) and §720.303(1), Florida Statutes.  The directors are obligated to discharge their responsibilities in good faith.  Board decisions are generally protected by the "business judgment rule".  The theory behind this rule is that Courts should not substitute their judgment for the judgment of the elected or appointed board members, so long as the members of the board acted in compliance with established standards of conduct.   Florida Statutes, Section 718.111(1)(d), provides:

 (d) As required by s. 617.0830, an officer, director, or agent shall discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner he or she reasonably believes to be in the interests of the association. An officer, director, or agent shall be liable for monetary damages as provided in s. 617.0834 if such officer, director, or agent breached or failed to perform his or her duties and the breach of, or failure to perform, his or her duties constitutes a violation of criminal law as provided in s. 617.0834; constitutes a transaction from which the officer or director derived an improper personal benefit, either directly or indirectly; or constitutes recklessness or an act or omission that was in bad faith, with malicious purpose, or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.

The new test to determine whether the board's decision should be protected by the business judgment rule comes from a case where an owner prevented the association from extending balcony concrete repairs into her unit.   The engineer for the project said to remove the concrete four inches beyond the corrosion, which necessitated work in the unit, not just the balcony.  The owner hired her own engineer who said the extra work wasn't necessary.

The association sued to gain access to the unit to perform the repairs recommended by the project engineer.  The appellate court explained that its review of the board's decision was limited by the business judgment rule and held:

...courts must give deference to a condominium association's decision if that decision is within the scope of the association's authority and it is reasonable - that is, not arbitrary, capricious, or in bad faith [emphasis added]

The case was sent back to the trial court for analysis pursuant to the new test, to wit:

• Does the board have authority to invade the unit to perform common element repairs?
• and, if so
• Is the decision to do so reasonable or, in other words, was the board decision to invade the unit arbitrary, capricious or made in bad faith?

This case is hot off the press and therefore not final if the parties file motions for rehearing.

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With oil from the recent catastrophe in the Gulf reaching Florida 's coast line, now is the time to become informed on what your options are to protect your communities.

Join Becker & Poliakoff's Disaster Claims Recovery Team  Friday, June 25 at 3:00 - 4:00  PM EDT for a live web event, where you will learn about:

• The BP claims process
• The insurance claims process
• How to spot the pitfalls that hinder recovery

Presenting from Becker & Poliakoff's Disaster Claims Recovery Team are John Cottle, Esq.  and  Sanjay Kurian, Esq.   The webinar will be moderdated by Cara Thomas, Esq.

John Cottle, Esq.	Sanjay Kurian, Esq.	Cara Thomas, Esq.

 There is no cost to participate.  Register today by using this link:

https://compx11.eventcenterlive.com/cfmx/ec/register/reg.cfm?BID=1&RegID=B53FB847

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Loose Lips Sink Ships - Board Discussion of Obtaining Legal Advice Results in Waiver of Privilege.

Communications between an attorney and his or her client have been privileged and confidential for basically as long as there has been a legal system.  Some say the attorney-client privilege has its roots in ancient Rome. Early English common law recognized the privilege as important to encourage disclosure of information that may be necessary for the attorney to provide effective counsel without fear of the information becoming public.   Its no surprise that Florida's legislators recognized the value of the privilege and excluded attorney-client privileged documents from member inspection rights in Section 718.111(12), Florida Statutes. 

Community association board members may not understand the privilege or how to protect the confidentiality of advice received from the association's attorney.  Now and then I receive a copy of my letter to one client from another client asking whether the issue applies to them.   I cringe when a contractor's attorney calls after receiving a copy of my letter identifying weaknesses in my client's position.  The association is the client and has the right to voluntarily waive its privilege - but was there a discussion of the consequences of the waiver or was the disclosure by one board member who "was just trying to help"?  Unfortunately, once the cat is out of the bag its very difficult, and in some cases impossible, to prevent further disclosure.

A recent Summary Final Order from the Arbitration Section of the Division of Florida Condominiums, Time Shares and Mobile Homes demonstrates that the privilege may be waived unintentionally, simply by discussing whether to obtain legal advice on a particular issue in an open forum. 

In this case the board proposed increasing the budget by more than 35%.  Owners questioned the board's authority to adopt such a large increase without the affirmative vote of the members.  The discussion of whether the board should adopt the budget or obtain legal advice first was at a duly-noticed board meeting.  Ultimately one of the board members made a motion to seek legal advice and the majority of directors voted in favor.

Later, one of the owners requested access to the official records, including the legal opinion analyzing the governing documents with respect to the budget increase.  The association allowed access to all the requested records other than the legal opinion.  The arbitrator ruled that since the board discussed the issue at an open board meeting there was no intent to keep its subsequent communications with or advice from the attorney confidential.  The board was ordered to make the legal opinion available for inspection. 

There is a lesson here - community associations may need to have policies in place to safeguard confidential information.  Board members should understand this valuable privilege and think twice before discussing any sensitive legal issues in an open forum or with any third parties. 

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SB 1196 Includes New Remedies for Collecting Money Owed to Associations.

Community leaders and managers have complained for years about investor owner delinquencies.  Why should the owner continue to collect rent from his or her tenant without paying maintenance fees and/or assessments?  Sure, both the Condominium and Homeowners Acts allowed the association to apply to the Court to request the appointment of a rent-receiver, but to take advantage of that provision it had to file the foreclosure lawsuit.  The law requires notices to the delinquent owner, preparation and recording of the claim of lien, filing and serving the foreclosure lawsuit - all before the association could ask the Judge for authorization to collect rent.  It could take several months to obtain the appropriate Court Order - all while the account remains delinquent. In some cases the tenant moves out before the association has the chance to collect any rent.  Of course there are costs and expenses involved with that whole process. 

Recently (as reported on this blog in Condo Receiver Helps Collect Assessments; Q&A: Condo Receivers; Collecting Rent from Tenants; Q&A: Collecting Rent from Tenants (revisited) ) the Courts have extended the law to allow 'blanket receiverships' for all units subject to foreclosure - and even more recently some Orders were entered authorizing the receiver to collect rent from tenants occupying units even before the association filed for foreclosure.

Well, in response to those cries for help the legislature included a 'self-help' procedure for associations.  The first paragraph of this portion of the new law says:

If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the condominium unit to the association, and the tenant must make such payment. The demand is continuing in nature and, upon demand, the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner.
 

 The Association must follow a specific procedure to collect rent from tenants.  There are some pitfalls to avoid.  Its a good idea to discuss these issues with counsel or allow counsel to send the demands on your behalf. 

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Associations have new enforcement mechanisms available - due process requires careful planning & paperwork for associations to take advantage of these new remedies effectively.

 Condominium Associations:

Up until now condominium associations had to have authority to levy fines in the recorded governing documents and did not have the ability to tell delinquent owners to stay out of the pool or gym.  That changes as a result of SB 1196.

After July 1, 2010 (the effective date of the new law), condominium associations will be able to levy fines as a result of violations of the governing documents or rules.  Of course the association must still provide 14 days written notice of the violation and the opportunity for a hearing before a committee of unit owners before imposing any fines,  The fine cannot be levied or imposed if the committee does not agree.

Delinquent condominium owners have more to worry about than fines - the new laws will allow the association to suspend voting rights and use of common, recreational facilities if they are more than ninety (90) days past due in paying a monetary obligation.  The term "monetary obligation" is not defined  - it could include non-assessment obligations such as late fees, fines, transfer approval or screening fees and the like.  The association cannot suspend the use of limited common elements (such as the balcony attached to the unit), nor may it suspend portions of the property necessary to access the unit - such as hallways, elevators, parking spots, etc.  The association cannot suspend utilities.

Homeowners Associations:

The new laws actually limit homeowners' associations powers when it comes to suspensions.  In the past, suspensions could be imposed in the HOA context for either use violations (violations of the governing documents or rules) or delinquencies.  After July 1, 2010, suspensions may only be imposed by HOAs when a member is more than ninety (90) days past due. While it doesn't make sense (especially since Section 720.3085 limits late fees for delinquent assessments), the changes arguably limit fining as well.  Fourteen (14) days written notice and an opportunity for a hearing before a committee is required in either case.  If the committee (by majority vote) does not agree with the fine or suspension, it may not be imposed. 

HOAs cannot suspend use of portions of the property necessary to access the parcel (roads, etc.) or utility services. 

The law prohibits the HOA from filing a lien if the fine is less than $1,000 - does that mean that it can lien for fines of $1,000 or more?  Well, that remedy certainly needs to be included in the governing documents - so check with counsel.  If you're governing documents limit the amount of the fine, now is a good time to consider amendments.

Fines and suspensions must be considered at a properly noticed meeting.  Written notice of the fine or suspension (voting or use) must be furnished to the owner (and occupant if applicable).

Will these new procedures and remedies work?  Its hard to say, but attempting to take advantage of these remedies without following the required procedures is certainly likely to lead to disputes and may expose the association to liability.  Proceed with caution.

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The law isn't even effective yet and everyone wants to know where, when and whether they need the "board certification" required by the changes to §718.112(2)(d), Florida Statutes in SB 1196. 

All good questions but please let me clarify - condo directors elected after the effective date of the law either need to provide the association with a certificate containing various representations or evidence they have completed an education course. 

The statute says:

b. Within 90 days after being elected or appointed to the board, each newly elected or appointed director shall certify in writing to the secretary of the association that he or she has read the association’s declaration of condominium, articles of incorporation, bylaws, and current written policies; that he or she will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association’s members. In lieu of this written certification, the newly elected or appointed director may submit a certificate of satisfactory completion of the educational curriculum administered by a division-approved condominium education provider. A director who fails to timely file the written certification or educational certificate is suspended from service on the board until he or she complies with this subsubparagraph. The board may temporarily fill the vacancy during the period of suspension. The secretary shall cause the association to retain a director’s written certification or educational certificate for inspection by the members for 5 years after a director’s election. Failure to have such written certification or educational certificate on file does not affect the validity of any action.

The 2008 amendments to Section 718.112(2)(d)3., of the condominium act required candidates for the board to submit a certification form (prepared by the Division) to the association along with their notices of intent.  This change now requires the elected directors (not candidates) to certify:

• they have read the governing documents & association's policies;
• they will work to uphold the documents & policies to the best of their ability; and
• they will faithfully discharge their fiduciary responsibilities.

Who is an approved education provider?  Well Becker & Poliakoff is of course!  We have provided education to board members, licensed property managers & industry representatives for more than thirty (30) years.  The Firm offers on-line education as well as live, interactive webinars for those who cannot take off work or devote a Saturday to course work.

There are other approved providers in the State of Florida - CAI (Community Associations Institute) is a provider and offers on-line courses in addition to live seminars (most of which are free).

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Thank you everyone for the thoughtful questions and comments regarding SB 1196.  I have literally received hundreds of questions and comments over the past week - either through this site or by email.  Since many of the questions relate to the same issues, I'd like to share some of the responses. 

QUESTION:  Rumor has it that the Governor has a bill before him that would raise the voting approval to 75% for apparently new Condo and/or HOA amenities. True or false?

RESPONSE: You may be referring to the new section 720.31, Florida Statutes. It says that HOAs can acquire leased property, memberships and other interests in lands or facilities (including country clubs, marinas, golf courses, etc.) more than a year after recording the Declaration if the governing documents contain that authority or if 75% of the members agree.

QUESTION:  Are cable TV services considered a utility? Our HOA pays approx. $50 per month per unit for basic services. Comcast has refused to cut the services for those people who have stopped paying their maintenance fees, even if we pay the monthly dues and pay for the service to shut off the service. Without cable TVs service, it might give those people who have refused to pay their maintenance fees, an incentive to do so.

RESPONSE: You hit the $64,000 question. Maybe Comcast will change its policy as a result of the new law. I understand Comcast (and perhaps some other providers) believed that suspending service to individuals constituted a violation of the telecommunications act and federal regulations. Check back in a few weeks - we will be sure to post something related to suspending cable/television programming and are planning a webinar devoted to telecommunication issues in light of SB 1196. 

(P.S.  If your community is paying $50 per month for basic bulk services it should attempt to renegotiate that deal.)

QUESTION: Please inform me if there is a new requirement for board members to take a class or an exam to run for the board otherwise the association will be null and void.
Is this something new? please let me know

RESPONSE: The new law (effective July 1) requires board members to provide the association with a certification or evidence of completion of an approved course within 90 days of being elected or appointed.

QUESTION: Does SB1196 say anything about the requirement of installing hard wired smoke detectors in condominium buildings that are less than 3 stories in height? Is it still a requirement in these buildings?

RESPONSE: SB 1196 contains a provision that allows buildings of less than 4 stories with outside access (catwalks) to avoid installing manual fire alarms.

QUESTION: The new law stipulates that upon foreclosure the lender must now pay up to 12 months of back hoa dues or 1% of loan balance vs 6 months. Is that effect immediately once the bill goes into effect regardless of when the loan was placed on the property?

RESPONSE: While it is hard to predict how the lenders will interpret the bill, many community association attorneys believe that the new law will apply to acquisitions of title by lenders that take place July 1, 2010 forward, if the original mortgage was recorded after April 1992 (the effective date of the "safe harbor").

Remember, this information doesn't constitute legal advice & these responses are general in nature. Please consult with counsel to determine how the new laws will impact your operations.

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Community association leaders and managers should become aware of changes to record inspection obligations now that SB 1196 has been signed into law.

Roster List (Condo):

The roster list is an important document.  Telephone numbers have traditionally been included in the roster list, despite objections over the years.  The roster list also includes email addresses of the members if they have consented (or requested) to receive notices and other association information by email.  SB 1196 says that the email addresses and telephone numbers of the members must be removed from the association's records if the owner revokes consent to receive notice by electronic transmission.  Please discuss modifications to the roster or creating a procedure for owner consent to include this information with association counsel, as many owners have come to rely upon the roster or directory to remain in contact with friends and neighbors.

Civil Penalties (Condo):

Last year the act was amended to authorize civil penalties against anyone (individuals - i.e. board members, manager, etc.) that knowingly or intentionally defaced or destroyed accounting records.  It also authorized civil penalties for knowingly or intentionally failing to create or maintain the accounting records.  SB 1196 now limits the civil penalties to the time period the records are required to be maintained.  Penalties are likewise not appropriate for failing to create or maintain these records unless there is a finding of intent to harm the association or one or more of its members.

Misuse of Information (Condo):

We know the association cannot publish debtor lists or use the delinquency records to embarrass or harass its members, but the board (or management) has little to no control over what happens to records once they are in the possession of a unit owner.  SB 1196 says the association is not responsible for misuse of records properly obtained in connection with an owner's rights to inspect and copy.

Personnel Records (Condo & HOA):

Personnel records for association employees such as payroll, disciplinary actions, health and insurance records are no longer accessible to members.  I know a few managers that are happy with this change.

Owner Information (Condo & HOA):

Private information such as email addresses, telephone numbers, emergency contact information, social security numbers, driver's license and credit card numbers of the owners are not accessible to members.

Condo and HOA owners are not entitled to obtain the association's passwords, electronic security records, software or operating systems that manipulate data.

Presumption (HOA):

In HOAs the presumption that the association willfully failed to make records available if the records were not available within 10 business days only arises if the request was sent via certified mail, return receipt requested.

Inspection Costs (HOA):

If the association does not have a copy machine at the record site, or the owner requests more than 25 pages of records, copies may be made by an outside vendor or management company personnel - in that case the association may charge for the actual costs of the copies and hourly charges for vendor or employee time to cover the administrative costs to the vendor or the association.

You may need to change your association's record retention and/or inspection policies in light of these changes.

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BP announced that it has accepted responsibility under the Oil Pollution Act of 1990 (OPA) and created a claims process for obtaining compensation for losses.    Even though oil has yet to hit Florida's beaches, condominium and other property owners have both lost income and incurred expenses as a result of the oil spill.  Click HERE to review the claims manual.  A word to the wise - think carefully before you accept compensation or sign any documentation supplied by BP.  You may inadvertently release BP from additional claims or damages.

BP bears responsibility for various categories of damages, such as:

• Removal and Cleanup Costs
• Property Damage
• Subsistence Loss
• Net Lost Government Revenue
• Net Lost Profits/Earning Capacity
• Costs of Increased Public Services; and
• Natural Resource Damage

BP has reportedly paid out more than $3 million in damages to Floridians thus far.  The Miami-Herald indicated there are complaints about the lack of oversight regarding these claims, while BP's 40+ page claims manual states that the United States Coast Guard plays a "significant role". 

Condominium associations are not immune to losses and damages from the oil spill.  Many associations in the Panhandle area run in-house rental programs and/or collect revenue from an on-site rental agent to supplement annual budgets.   Moreover, associations are joining together to decide whether to devote funds to protect the beaches with barriers such as floating booms and the like.  Those types of efforts are expensive.

Attorneys John Cottle and John Townsend have been hard at work meeting with community association clients to discuss potential losses, the powers and duties of the association with respect to mitigation efforts, preserving evidence of loss and the claims process.  We strongly encourage community association leaders and managers not to bear the burden of this event without appropriate legal counsel.  One mistake and the next claim could be against you, instead of (or in addition to) BP.

You can find the state of Florida’s online resource for information about its response to the oil spill at http://www.dep.state.fl.us/deepwaterhorizon/default.htm. 
 

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 Concern for Florida's Consumers Important in Decision to Veto SB 2044 (Property Insurance) and SB 1964 (Design Professional Liability).

Governor Crist vetoed SB 2044, despite support from the Florida Insurance Commissioner and other industry representatives.  The Governor expressed his concerns that increases in insurance premiums and changes to mitigation discounts would be especially hard on Florida's consumers during "these very difficult economic times".

Consumer protection was likewise a major factor with respect to the veto of SB 1964.  Governor Crist agreed with critics of the bill who argued design professionals are not entitled to avoid liability, effectively "removing a consumer's right to bring a tort action against them for economic damages caused by their negligence".  Shifting the burden of economic loss to consumers without sufficient alternative remedies was not acceptable to the Governor.

On the other hand, HB 965, relating to real property assessments, received the Governor's approval.  Owners of properties affected by Chinese drywall may be entitled to a downward adjustment of the assessed value of the property for tax purposes.   Contact your local Property Appraiser to request re-valuation - you may be entitled to a significant discount.

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SB 1196 contains significant changes for community associations.  

Governor Crist had until June 1, 2010 to act on SB 1196.  While I have included bullet point explanations of some of the changes, over the next few weeks please check for more in depth information about how these new provisions will impact your association's operations.

Community associations across the state are breathing a sigh of relief - many of them will not be required to retrofit the buildings with fire sprinklers or install fire alarms, both expensive propositions in light of the record number of foreclosures and budget shortfalls.  In most cases elevator upgrades can be put off for five (5) years - hopefully the residential market will gain stability in that time, making the costs associated with the elevator improvements easier to fund.

Attention:  If you are a non-paying, non-resident unit owner and lease your unit, the association may demand future payments of rent from the tenant to satisfy your financial obligations, without filing a lawsuit first. 

Legislators all over the state heard complaints about the repair, upkeep and staffing requirements associated with recreational facilities.  Paying unit owners were demonstrably upset (justifiably so) that non-paying owners could enjoy the use of the recreational facilities, in some cases precluding paying owners from use due to over-crowding.  Under this new law, associations can suspend the use of recreational facilities if assessments are more than ninety (90) days past due.  Of course, associations cannot suspend any utility services, parking spaces or means of access to the unit.  The effectiveness of suspending use rights remains to be seen, but the provision itself should make owners think twice before defaulting.

This bill also includes the "Distressed Condominium Relief Act".  While the act doesn't protect buyers that acquire title after July 1, 2012, it will impact condominium associations for a number of years with respect to warranty, construction, accounting claims and the like.

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