We are happy to feature video clips from time to time on this blog. The post from the other day spurred several questions regarding unit owner access to official records. Please listen to our Community Association Practice Group Leader discuss this important subject.
What is your policy for handling records inspections by owners? Do you have written rules? Where .jpg)
are the records inspections held? How many hours does the owner have to review the requested records? Does anyone help facilitate the inspection?
If you are a condo or HOA board member and cannot answer these questions, its time to consider rules governing owner record inspections. Association leaders must understand their obligation to allow member access to records to avoid costly disputes that may increase tension in the community.
The Division handles numerous complaints from condo owners claiming that associations fail to allow access to the Official Records. Sometimes those complaints, and arbitration cases, result in fines against the association. Other times the association clearly shows that the owner was wrong in one way or another. The Division publishes a very comprehensive practical guide for use by community leaders (board members) and homeowners. While the Condominium Act forms the basis for the guide, HOA leaders and owners should find it useful as well as the laws are similar (but not the same so please consult with counsel). You can download the guide HERE.
There are some records that are not accessible to owners. Those records include:
What rules are valid and what rules are unreasonable when it comes to record inspections? Some of the Division rulings may surprise you - we will provide some examples in a future post.
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One of the most daunting aspects of construction projects is understanding the different legal documents presented (or that should be presented) by contractors, subcontractors, laborers, and suppliers. Although construction contracting is not something most board members are familiar with, the State of Florida requires them to follow very detailed procedures when making payments to the contractors hired to do work on the condominium property. If payments aren't made correctly you may face liens on the property that interfere with sales and which may be foreclosed by the contractor.
The first step to take when commencing a construction project is to record a Notice of Commencement. Florida Statutes require you to record a Notice of Commencement in the public records identifying the legal title of the property being improved, and the names and addresses of the owner (or association as the agent of the owners), contractor, lender, bond surety (if any), and any other individuals who should receive copies of documents associated with the Florida Construction Lien Law. It is also critical to make sure that if your contractor or subcontractors are posting payment bonds (which may exempt your property from liens), those bonds must be recorded in the County Records along with the Notice of Commencement. A copy of the Notice of Commencement and Bond should also be given to the appropriate building department and inspecting authority.
As your construction progresses, you will receive documents called Notice to Owner. Sometimes these documents are called Notice to Owner/Preliminary Notice and are usually served upon you via Certified Mail. If you included your fax number in the Notice of Commencement, the Notice to Owner may also be faxed to you. They may also hand-deliver it to you and, in some instances, it may just be posted on your job site. It is very important that you keep track of everybody who has served a Notice to Owner on you. The Notice to Owner is not a cloud on title; rather, it is a document from those entities, hired by your contractor, that you must ensure get paid to avoid liens on your property.
Every time you pay your contractor for the construction on the project, which may vary depending upon your specific contract, it is vital that you ensure that all subcontractors and suppliers that have served you with a Notice to Owner have been paid in full. Before you make payments to your contractors, you should call everybody who served a Notice to Owner on you and find out how much they are owed. When you make your next payment to your contractor, it is critical that you make sure that you get a Release from everybody who served a Notice to Owner in the amounts which you learned are due. If you do not get a Release in that amount, you can be sure the company is not being paid, and they will look to you later for payment or lien your job. Sometimes, you may even want to consider writing joint checks, which are checks made payable jointly to your contractor and the company who served the Notice to Owner. These checks, even though they are joint in nature, will still count as payment towards your contractor and still be credited against the contract price. The bottom line is to ensure that everyone who serves a Notice to Owner is current with their payments every time you pay your contractor, and issue a Release of Lien to reflect this. The Florida Construction Lien Law also gives you the right to require a list of money owed to subcontractors from your contractor every time you make a payment. This Affidavit should be given to you by your contractor, but the law does not allow you to legally rely on whatever the contractor tells you. Rather, you have an affirmative duty to make sure everyone who serves a Notice to Owner is paid in full.
When the final payment under your contract becomes due, you should not make final payment until the contractor gives you an Affidavit stating that all lienors under the direct contract who have timely served a Notice to Owner have been paid in full or, alternatively, identify the names of the lienors who have not been paid in full and the amount due or to become due to each of them. Once again, although this Affidavit is helpful, you have no legal right to rely on it for any entity who served a Notice to Owner. Do not, under any circumstances, make your final payment to your contractor until you receive final Releases of Lien from every entity who served a Notice to Owner. If there is a problem getting these releases, you must make sure that everyone serving a Notice to Owner gets paid before you issue that last check to the contractor.
It is often a difficult procedure to ensure that you make your final payments properly, so please consult with the Association's Attorney if you have any questions whatsoever. From time to time we will include case examples involving associations on this blog.
Ok - Florida's Government in the Sunshine Act does not apply to community associations, but community associations do have what is commonly referred to as 'sunshine' requirements. Several years ago the Firm published a pamphlet outlining the 'dos' and 'don'ts' of noticing meetings. We have recently updated this publication to incorporate changes to the statutes governing community associations and include more information for volunteer board members and CAMs.
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Check out our other informative publications.
Download this informative pamphlet to learn about or refresh your knowledge of:
We include a chart for your use as a at-a-glance guide as well.
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HOA rules - do they go too far? We talked about the delicate balance between congenial community living and the desire to avoid certain conduct in Lemonade Stands & Other Evils in HOAs.
Owners complained that the HOA was too strict - why shouldn't neighborhood kids be permitted to sell lemonade from the front lawn? Was that really a business use or business activity that interfered with peaceful community operations?
In this recent story a no-solicitation rule is under attack by parents of Boy Scouts participating in a food drive. The HOA declined to allow the Boy Scouts to knock on doors asking for donations. The HOA leaders are afraid of a slippery slope, which is understandable considering how the Courts scrutinize was appears to be inconsistent or selective enforcement of covenants and restrictions. The president said “Once we open the door for the Boy Scouts to solicit within our community, then why not the Girl Scouts, why not the local schools, civic organizations, churches,” to Florida Today.
Florida Today featured the following report:
How does your community handle these types of issues? Solicitation is traditionally prohibited in community associations. One of the reasons homeowners choose to live in private, gated communities is to avoid interruptions by strangers selling candy, fund raising for a school, distributing literature, etc. Should the board make exceptions? If so, what are the determining factors and how can the board distinguish between fund raising efforts to support the local high school football team, the Red Cross, relief for Haitian hurricane victims or the Scouting for Food drive?
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Drought conditions, watering restrictions, bank foreclosures and abandoned homes - all have an impact of yard and grounds maintenance. All have an impact on the look and feel of a community as well as owner/resident satisfaction. As a member of a board of directors you have to ask yourself, "is the time, energy, money and aggravation of fighting with cash-strapped homeowners to re-sod, re-plant annuals, perform property inspections, hold violation/fining hearings, etc. worth the effort?" That question is especially relevant in light of pertinent Florida laws. One of the provisions of the Homeowners' Association Act says:
§720.3075(4):
(a) The Legislature finds that the use of Florida-friendly landscaping and other water use and pollution prevention measures to conserve or protect the state’s water resources serves a compelling public interest and that the participation of homeowners’ associations and local governments is essential to the state’s efforts in water conservation and water quality protection and restoration.
(b) Homeowners’ association documents, including declarations of covenants, articles of incorporation, or bylaws, may not prohibit or be enforced so as to prohibit any property owner from implementing Florida-friendly landscaping, as defined in s. 373.185, on his or her land or create any requirement or limitation in conflict with any provision of part II of chapter 373 or a water shortage order, other order, consumptive use permit, or rule adopted or issued pursuant to part II of chapter 373.
Another chapter of the Florida Statutes defines the term "Florida-friendly" landscape. It likewise prevents HOAs from enforcing deed restrictions in a way that precludes the use of these techniques.
§373.185(3)
(a) The Legislature finds that the use of Florida-friendly landscaping and other water use and pollution prevention measures to conserve or protect the state’s water resources serves a compelling public interest and that the participation of homeowners’ associations and local governments is essential to the state’s efforts in water conservation and water quality protection and restoration.
(b) A deed restriction or covenant may not prohibit or be enforced so as to prohibit any property owner from implementing Florida-friendly landscaping on his or her land or create any requirement or limitation in conflict with any provision of part II of this chapter or a water shortage order, other order, consumptive use permit, or rule adopted or issued pursuant to part II of this chapter.
So - what are the rules in homeowners associations? Is the requirement to maintain a lush green lawn still the norm? If so, should that be the case? Doesn't seem so in light of these requirements. Consequently, HOA boards and committees are updating architectural control
guidelines to reflect current thought about Florida landscape with an eye towards maintaining the aesthetic quality of the neighborhood while making life a little easier (and less expensive) for the homeowners.
The West Volusia Beacon reported that several homeowners in a DeLand HOA removed all of the St. Augustine grass and replaced it with Florida native plantings. Neighbors were thrilled with the results and so were the homeowners - they capped off sprinklers for good and hardly ever have a need to water the landscape. Water collected in a rain barrel provides enough of a supplement during dry spells and weekly mowing has been replaced with quarterly care of jasmine, palms, coco plum and other drought-tolerant plants.
Support from the HOA makes a huge difference. Have you really taken a look at the Architectural Control Criteria or landscape guidelines in the past few years? If not, I encourage community leaders and managers to work with your local University of Florida - IFAS Extension and residents to develop updated guidelines that work for everyone. You can find out more about Florida-Friendly landscaping at www.floridayards.org. Check out the plant database to see what beautiful options are available.
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Board members learn about and evaluate proposed community projects by comparing different products, services, prices, methods and means to accomplish the same objective. Community leaders should know that the Florida statutes require competitive bidding for significant contracts.
For condominiums and cooperatives, the statutes requires competitive bidding for service contracts and contracts for the purchase or lease of materials or equipment that cost more than 5% of the annual budget (including reserves). For a homeowner’s association, the requirement is the same, except there is a higher threshold of 10% of the total annual budget, (including reserves). HOAleader recently published articles about bidding, one of them is Save the HOA Money: Create Bidding Guidelines.
The board doesn't have to accept the lowest bid and the law doesn't specify how many bids the board must collect and review. In fact, sometimes a higher bid is the better choice for the association. Bids must be kept on file as an official record and made available for inspection by owners, upon written request. The HOA statute requires the association to keep bids on file for one (1) year. The condo statute includes bids in the section governing accounting records - those are kept for at least seven (7) years. Many associations make the mistake of throwing out rejected bids to reduce the volume of paperwork in the office. Unfortunately that may lead to trouble when an owner requests to see those bids later on.
There are exceptions to bidding requirements in Florida for certain contracts. Many professional services are exempt such as contracts with attorneys, accountants, CAMs, architects and engineers. Contracts for emergency service are likewise exempt.
What happens if there is only one provider in the area? If the proposed provider is the only source for that service, equipment or material within the county, the board doesn't need to go through the exercise of obtaining bids from vendors outside the geographic area.
Obtaining more than one bid can give the board greater insight into how to approach a problem. Nonetheless, it is still a good idea to use professional consultants when the bids relate to a significant construction or repair project as the scope of services may be expressed in a highly technical way. Some bids may contain the use of proprietary products or services that make it very hard to replace or repair in the future unless the association hires the same vendor. You certainly want to compare "apples to apples" bids when deciding what products or services are best for your association.
Boards of Directors of Community Associations Can Delegate Tasks to Management, but Cannot Delegate Decision Making Responsibility.
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I was happy to contribute to an article published by HOAleader regarding the responsibilities and obligations of a Board of Directors. The author indicated that through her research, she learned that some management company contracts authorize management to select the association's attorney and to decide how to handle enforcement and collection matters without the board's involvement or approval. I've heard this complaint from board members in different forms from time to time and its not limited to management, some law firm retainers likewise allow the law firm to decide when to file and how to handle association legal issues, particularly when it comes to collection of delinquent assessments. I have to shake my head when I hear "management has attorneys that handled everything - we don't know" when I ask why something was done (or not done) in a particular case. That practice is dangerous for a number of reasons.
Board members must realize they have ultimate responsibility for association operations and actions (or non-action). Sure, a "package deal" with management (or another service provider) that rids the board members of the headaches associated with reviewing legal matters (particularly collections) and making strategic decisions may sound attractive. Please ask yourself various questions:
Hiring a professional CAM can benefit the association tremendously but the bottom line is this is your community and if you serve on the board you must be involved in association decisions. You can read the article Should Your HOA Manager Approve All Lawsuits by clicking on the title.
Why do condos & HOAs need to hire attorneys? Let's just tell the CAM they have to ....
You can complete that phrase a thousand times. Examples:
In these troubling economic times, community associations are looking for their managers to perform as many functions as possible, and with managers being better educated and more experienced, they are more willing to use their knowledge and perform those additional functions. Nevertheless, a manager is restricted to performing tasks permitted by law for a licensed community association manager. It is unfair to ask or expect your CAM to perform tasks that may expose them to penalties for the Unlicensed Practice of Law (UPL), yet many associations saddle the manager with those tasks in an attempt to save money. Moreover, many times efforts to save a few dollars here or there backfires on the community association and the manager often gets the blame.
CAMs are expected to understand and know many community association and other laws. They are expected to know the statutory election process, they are expected to know that official records must be made available for inspection, they are expected to know board meetings cannot be held without notice (except for limited circumstances) as well as a whole host of other information. So, why is it wrong for the board tell the CAM to prepare and record Claims of Lien or proposed amendments to the governing documents? Why can't the board ask the CAM to evaluate how case law or statutes apply to your documents? There's a very important reason why - you would be asking them to commit a crime known as Unlicensed Practice of Law ("UPL"). UPL is punishable by up to a year in jail and a $1000 fine.
Good managers know when the service requested by the Board exceeds the manager’s authority and will refer the matter to the appropriate professional. A good manager will also refer a matter to the appropriate professional when the manager is unsure whether the matter exceeds his or her authority. Your manager is not trying to "get out of" doing work or shirking his or her responsibilities when they say the board needs a legal opinion on some issue or the attorney needs to prepare certain documents. They are protecting your community and adhering to professional ethics.
You may be interested in reading this Opinion issued by the Florida Bar. The linked document described what actions are considered UPL.
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A few years ago CNN reported that a woman was fined close to $2 million as a result of downloading music without paying. Recently the Palm Beach Post alerted community association leaders to this potential source of liability.
Are members of the board of directors illegally downloading protected content from the Internet? What about the staff? Probably not, but that hasn't stopped the porn industry from filing hundreds of lawsuits against community association Internet customers because someone used its wireless network to download content without permission or without compensation. In fact, Anita Ramasastry, a Justicia columnist, reports that these Florida lawsuits are part of a growing trend. She says that more than 130,000 individuals have been sued for allegedly downloading adult or “B” movies illegally via BitTorrent, a peer-to-peer file-sharing application.
You may want to look into these issues if your association offers free wifi to residents. It may be possible to configure these networks to block the use of Peer-to-Peer file sharing programs that are typically used to share copyrighted materials. However, filtering software has been known to "throw the baby out with the bath water" - restricting access to resources and information on the web.
If your association offers a wifi network, do you have use policies in place to protect you from these types of claims? Do you have a way to know who is using your network for illegal purposes? Does your contract with the Internet provider require you to indemnify and hold it harmless as a result of any claims of illegal use? What happens if there is a breach in your wifi network - is the personal information of users exposed? These are all novel issues that associations may need to confront as intellectual property owners become more vigilant when protecting their rights.
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I want to thank all the fire and life safety officials that read the original post entitled Does Your Condo or HOA Have an Automated External Defibrillator?
My post mentioned possible misuse of these devices, but I was reminded that the device will analyze the victims hearth rhythm once the electrodes are placed on the victim's chest. If the circumstances warrant, the device will charge and announce when it is time to push the "shock" button. A professional at the Tamarac Fire Department explained that the device will not deliver the shock if someone presses the button by accident.
I also heard from representatives of the American Red Cross and the Southern Cardiac Arrest Association (SCAA). SCAA is a national non-profit organization based in Washington, D.C. with 50 chapters throughout the United States. The President of the local chapter explained that there are close to 1,000 deaths per day as a result of sudden cardiac arrest. The chapter educates community leaders about risk factors, provides CPR and AED training, as well as serves as a survivors' support network.
Tony Cortese, Manager of the Health and Safety Department for the American Red Cross advised that the local Red Cross office can facilitate purchase of a defibrillator at a discount and set up free training on the devise. It likewise leads CPR/AED certification for many groups and organizations as part of its mission to have the community ready to prevent, prepare and respond to emergencies.
With all of these resources available, maybe its time for your community to evaluate whether to purchase an AED.
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Ever been to a community association meeting where it takes a half hour (or more) to address the form of the minutes from the previous meeting? I've seen reasonable people debate, argue and become animated over the content of meeting minutes. Criticisms such as "that's not what I said" or "you only included a portion of what I said" are common. These discussions create tension that could easily be avoided. Community leaders asked the following question:
Question:What should be in our minutes? We have entire conversations and "thank yous" to everyone, added in each month.
The content of the minutes is somewhat stylistic. The minutes must include the date, time (when called to order) and place of the meeting. Minutes of a board meeting must include the names of the board members that participated (in person or by teleconference). The minutes must include all motions and how each director voted (or abstained from voting) on each motion. It is a good idea to attach the notice of the meeting to the minutes and, if an affidavit of mailing/delivery is required, go ahead and attach that document as well. That way all the documents relevant to noticing the meeting and a record of all actions taken at that meeting are in the same place (the minute book).
While some provisions (i.e. recall procedures) require specific findings in the minutes, as a general matter the minutes are merely a record of all the actions taken at meeting of the general membership, a committee or of the Board.
Minutes of a general membership meeting should reflect the number of members participating, whether in person or by proxy and describe notice of the meeting. Again, if an affidavit is required, its a good idea to attach that document to the minutes. The administrative rules require a record of certain votes in the minutes. For example, Rule 61B-22.006(7) of the Florida Administrative Code requires the minutes of the association to reflect the actual number of votes cast by the membership to waive the requirement for audited, reviewed or compiled financial statements and specify the type of financial statement to be prepared as a substitute.
Here is an excerpt of a piece I wrote for a magazine several years ago:
Perhaps Sgt. Joe Friday from Television’s Dragnet said it best when he requested “Just the facts, Ma’am”. In my opinion there are too many opportunities to editorialize when summaries of statements made by the members are included in the minutes. Unless the Secretary (or other person that prepares the minutes) has made a video or audiotape of the meeting, attributing specific comments to specific individuals may provide yet another source of controversy within an Association and the comments rarely help (but often hurt) the Association in the future if the same issues are addressed repeatedly without affirmative action on the part of the Board. Owners often argue that completely accurate statements appear out of context in the minutes and are therefore misleading, not accurately conveying the issue or position of the member on an issue. Creating an actual transcript of the meeting is overly cumbersome and unnecessary.
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The American Heart Association encourages the purchase and availability of automatic external defibrillators and many community associations have already purchased this life safety equipment for on-site use. These machines have become commonplace in airports, hotels and shopping centers throughout the country.
You may wonder if there is any downside to having this machine available in the community association setting. While Florida's Cardiac Arrest Survival Act provides broader liability insulation than the Good Samaritan Statute, the protection is not absolute. The Cardiac Arrest Survival Act does protect the owner of the device from civil liability if:
However, specific training isn't required if:
The Internet has many resources available for community leaders showing the proper use of this device, including the following:
Each community association should first consult with its insurance adviser or liability carrier to learn whether there are special conditions associated with purchase or use of a defibrillator. Your carrier may require testing and regular maintenance of the unit. Your carrier may require employees to undergo training.
While the Florida law offers protection from civil liability under most circumstances, that immunity will not necessarily apply if the machine malfunctions. However, fire and life safety officials indicate that the machines will not deliver an electrical shock unless the circumstances so warrant. The AED devices have become less expensive over the years and actually walk the user through the process with audible commands. Associations should test the battery every so often (yearly) and replace the pads when they expire.
Having a defibrillator on the property could mean the difference between life or death of a resident. If your community is considering such a purchase, please consult with your insurance adviser and legal counsel. Moreover, contact your local first responders - many fire departments will gladly send a representative to come speak to your residents about the use and responsibilities of ownership of these devices as well as train your employees in life safety measures.
More in our series of questions asked by local community leaders.
Question: What makes a contract legal? Who has to sign it? Is it only our Secretary?
Answer: There are entire treatises devoted to this subject.
From an attorney’s point of view, contracts must contain mutual obligations and adequate consideration to be valid and binding. The parties to the contract must have the legal capacity to contract (i.e. an incompetent person cannot enter into binding contracts) and the object or purpose of the contract must be legal (i.e. a contract to murder someone is not legally binding). These issues are much more complex than they seem and thousands of cases each year address disputes whether contracts are legal or binding.
Community association boards confront various contract issues from time to time and should have a basic understanding of legal obligations so as not to incur unnecessary liability or expense. One issue we see frequently concerns the doctrine of apparent authority. An association can be held liable for a contract entered into by someone with apparent authority, even if that person did not have actual authority. We’ve all heard of situations where the President, Vice President or even Manager goes out and enters into a contract before the board even knows or agrees to buy that product or service. The doctrine of apparent versus actual authority is well settled in the law. For example the Fourth District Court of Appeals held:
“When, in the usual course of business of a corporation, an officer or other agent is held out by the corporation or has been permitted to act for it or manage its affairs in such a way as to justify third persons who deal with him in inferring or assuming that he is doing an act within the scope of his authority, the corporation is bound thereby.”
Officers of corporations typically have authority to enter into contracts on behalf of those corporations. If the other party to the contract is led to believe the person they are negotiating with has authority and they rely on that apparent authority to their detriment, the association may bear responsibility for damages and expenses.
Consequently, it is very important to define the authority of the officers and the manager. If the board wants to enable the President to contract for minor repairs without advance authorization, it should adopt a resolution to that effect – and put the exact limits on expenditures in that resolution. Many associations allow their managers to contract for repairs or buy supplies so long as they spend less than $500 or $1,000 at a time.
Officers (President, Vice President and so on) must likewise understand they do not acquire any special power when they are elected or appointed to their position. With limited exceptions, contracts must be approved by the Board of Directors, voting at a duly called meeting.
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A local community activist recently asked several industry professionals to answer questions submitted to her by community association board members. You can check this site over the next several days to see my answers to some of the questions:
Question Regarding Authority of the Manager and Competitive Bids: We are in a community where we were just billed a great deal of money for electrical work and were told "the Management's electrician did the work". We are wondering why it is not under the maintenance provided under our contract? Why is the electrician not handled like every other vendor then-where [we get bids for] the work?
Answer: Your first task is to review the contract with the management company. Many management contracts give the manager the authority to effectuate repairs for certain items without advance board approval. In the vast majority of cases, the manager’s authority is restricted to a specific dollar amount (i.e. $500, %1,000 or higher in emergency situations). If you don’t have this limitation, make sure your board includes one in the next renewal or simply address this issue with the manager now (by board resolution) so everyone is on the same page when it comes to association expenditures. The manager needs direction from the board when it comes to repairs – some boards want the manager to “simply take care of problems”, while other boards want to be more involved and formally approve the scope of the work in addition to selecting the contractor to perform the work.
Second, you need assurances that any work was done by licensed and insured professionals and that the work was properly permitted, if a permit was required for the work. The management company should have no problem with providing you with verification of license and insurance.
Note: We have included information on this site about building permits and contractor licensing requirements. Please see Protecting the Association Against Unlicensed Contractors and Does the Association Need a Building Permit? for more information.
Condo and HOA laws require bids generally if the work to be performed will cost more than 5% (condo) or 10% (hoa) of the annual budget. There are exceptions for specific types of professional services and most boards will obtain competitive bids for any project expected to cost more than a couple thousand dollars (sometimes less), to make sure the cost of the work is not out of the ordinary.
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Does your community association enforce all pet restrictions uniformly and consistently? It’s typical, expected, and almost commonplace when community association boards of directors, managers, maintenance staff or residents “ignore” what is seen as harmless violations of the recorded restrictions or rules and regulations with regard to pets, only to be outraged later when someone sneaks in a 60 lb. pit bull or a 4 foot snake. Sometimes the board’s lack of action stems from its reluctance to spend money to enforce the pet restriction and/or sympathy for the long-term resident and his or her “cute little kitty” or “very quiet bird.”
However, that "niceness" is likely to work against the board in the end. A board of directors in Palm Harbor has reportedly reconsidered enforcement action against a homeowner with a dog weighing more than 35lbs. ABC Action news reported:
Pursuant to Florida case law, the defense of selective enforcement may be established by demonstrating that an association failed to enforce the restrictions in its governing documents against comparable violations. In Killearn Acres Homeowners Assoc., Inc. v. Keever, the board of directors prevailed in a case seeking a homeowner to remove a satellite dish on the side yard since the unit owner could show no other instances of dishes being permitted on a side yard. In another case the court rejected a home owner's attempt to establish selective enforcement by showing the board ignored home businesses, fences, decorative items and solar panels. In, McMillan v. Oaks of Spring Hill Homeowner’s Assoc., Inc., the association was able to obtain a court order requiring the owner to remove a shed that had been installed in their yard. On the other hand, in Prisco v. Forest Villas Condominium Apartments, Inc. the board lost the enforcement case against a dog owner where the owner proved the board did not require owners to remove cats from the property.
In this Palm Harbor matter, the board reportedly decided to reconsider taking enforcement action since the owner acquired the dog after her brother's tragic death. Its difficult to know whether the board's reconsideration stems from the circumstances or from the selective enforcement claim.
The 'take-away' for community leaders and managers: Do your homework. Summer is typically slower than other parts of the year - so conduct a survey of the residents and determine who owns pets and what pets are on the property. Review your parking restrictions and vehicle registrations. Conduct inspections to determine whether there are any non-conforming uses. If the rules are important to the community, take them seriously, as a few 'slips through the cracks' can be fatal to an enforcement action.
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Board members can catch a lot of heat if the community pool closes, especially in this time of the year. We first explained the Virginia Graeme Baker Pool and Spa Safety Act in Many Florida Condos & HOAs Must Comply with Pool & Spa Safety Act and then re-addressed issues concerning community pools in the following posts:
Community Pools are Subject to Health Department Regulation
Pool & Spa Safety Requirements Revisited
Many associations have installed the compliant drain covers, as well as addressed the direct suction issue. The federal requirements apply to virtually any pool operated by a community association, and are independent of state permitting regulations.
Well ... there is a voluntary recall of several types of consumer pool and spa drain covers. The U.S. Consumer Product Safety Commission (CPSC) announced the availability of a Drain Cover Recall Hotline, at (866) 478-3521, which is open 24 hours a day, seven days a week.
Check with your pool contractor and see whether your pool installed drain covers by any of the following manufacturers:
I included links to the relevant websites (click on the manufacturer name above).
Community leaders should also check whether the condominium or cooperative association needs to renew its exemption from regulations imposed on public pools. You don't want the health department to close your pool and you certainly don't want defective safety products in your community's pool.
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I am often asked by readers whether guest restrictions are enforceable. Residents often want to know whether the Association can require them to notify management when guests arrive or whether it is appropriate to require guests to register with the Association. The answer to these questions is, almost inevitably, “it depends”. Readers are not usually satisfied with this answer and I can certainly understand why. Nonetheless, there are so many factors that need to be taken into consideration in each particular set of circumstances that makes answering any other way disingenuous.
The first point in the start of the analysis is the source of the rule or the policy sought to be enforced. There are different standards for restrictions contained in a document of high priority (such as the Declaration of Condominium or a Declaration of Covenants and Restrictions) as opposed to documents with a lesser priority (such as Board policies or Board-made rules). Generally, rules made by an Association are subject to a three (3) pronged test for enforceability, to wit:
In Florida, there must be some authority for a Board of Directors to create or promulgate rules and regulations regarding use or occupancy of the property. Some governing documents give the Board of Directors plenary power to adopt, modify or otherwise change use restrictions. Other governing documents limit the Board’s authority to rule making regarding use of the common areas or common elements and still other governing documents require a membership vote to enact new use restrictions. Section 718.112(2)(c), Florida Statutes and Section 720.303(2)(c), Florida Statutes, requires both Condominium and HOA Boards to deliver notice of the Board meeting to the members at least fourteen (14) days in advance if the Board intends to adopt, change or otherwise consider rules regarding the use of the unit or the individual parcel. Consequently, the first step in determining whether a rule is enforceable is to determine whether the Board of Directors acted within the scope of its authority and whether it followed the procedures required both in the governing documents and applicable Florida law.
The second part of the test requires an analysis of the existing documents that have priority over rules and regulations. Rules cannot conflict with the governing documents. It is relatively easy to determine whether a rule contradicts an expressed right or privilege set forth in the documents. For example, if the Declaration prohibits owners from maintaining more than two (2) pets on the property, the Association cannot enact a rule that prohibits pets altogether. An amendment to the Declaration is required to eliminate an owner's right to maintain one or two pets on the property. Determining whether a rule contradicts an inferred right is far more complicated.
Finally, rules cannot be arbitrary or reflect capricious decision making. The third part of the test requires the rule to be “reasonable”. Obviously the term “reasonable” is much like the term “beauty” – everyone has a different standard.
Accordingly, once the first two steps are satisfied, it is necessary to evaluate whether the guest rules or guest restrictions are based upon some legitimate objective. The State of Florida addressed guest registration rules in a Declaratory Statement issued several years ago. The Association involved required all guests to sign in with a security guard upon entering the property and further required information on an Overnight Registration Form to register guests staying overnight. When a unit owner challenged the Association’s “need to know”, it emphasized that the rule served an important safety function, assisted in enforcement of other rules requiring use of licensed and insured contractors and contributed to making the condominium “more comfortable, safe and contented experience for all concerned”. The Division concluded that the rule advanced legitimate objectives of the Association and found that registration requirement did not violate the Florida Statutes.
The Division has had the opportunity to consider many rules enacted by community associations over the past eleven (11) years in connection with its arbitration program. We will include more examples of rules that have either been upheld or rejected, from time to time.
Answer: They all impact communities and community association operations!
Yesterday I attended the CAI Annual National Conference & Exposition being held at the Boca Raton Resort, where industry leaders from around the world shared innovative and emerging issues impacting community associations, community association leadership, management and operations. Becker & Poliakoff lead several presentations including:
The Impact of the Fair Housing Act on Deed Restrictions, Rules and Regulations.
The session addressed legal obligations on the part of community associations, such as the duty to make reasonable accommodations in policies and allow modifications to the physical premises for disabled persons (or persons associated with disabled persons). It also included the various types of accommodations, describing the trials and tribulations arising from the presence of miniature horses, parrots and other types of emotional support animals in a community association setting.
Aging Owners: New Challenges for Associations.
How many of you face different challenges every day as a result of aging or infirm residents? This session gave community leaders tips and practical advice how to balance the rights and needs of owners suffering from dementia, physical incapacitation and alienation by relatives, while preserving the rights and protecting the safety of neighbors.
Another presenter offered a fascinating program on the effective use of media for crisis management, damage control and to tout community accomplishments. I found the discussion on new technology quite interesting as well. Did you know that with relatively low cost you can offer your residents more security, improved energy efficiency, remote control of household lighting, appliances, air conditioning and more all from their computers, smart phones or televisions? Wouldn't it be great to be able to have valet bring around your car, unlock the door for the pest control service (and watch them perform the service) and then re-lock the door, authorize package delivery, turn on or off the lights, pre-heat the oven and a whole host of other things from your office or on the way home? More importantly, new technology for monitoring and preserving the health and safety of the residents is available. For communities with aging residents, wouldn't it be great to have notice a resident hasn't risen from bed, left the home or suffered a fall immediately, rather than being surprised when an ambulance arrived or, even worse, when a neighbor demands you break down the door due to an offensive odor?
More programs will take place today and tomorrow. Mr. Poliakoff will also be available to sign his book "New Neighborhoods" in the bookstore from noon to 3:00 pm.
The Florida Condominium Act requires both developer-controlled associations and unit-owner controlled associations to prepare a “Frequently Asked Questions and Answers” (commonly referred to as a “Q&A Sheet”). The Q&A Sheet must include information:
The Q&A Sheet must be updated annually and must be kept as part of the association’s official
records. It must be provided to a prospective purchaser of a condominium unit in connection
with resales of a unit. The completed, up-to-date “Frequently Asked Questions and Answers” form, and any application forms required in connection with the association’s transfer approval authority, must be provided to the seller and prospective purchasers at no charge.
Keeping and updating the Q&A Sheet is one area where many condominium associations are not diligent, and are often in violation of the law.
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Florida HOAs are in the national spotlight again. This time the attention doesn't center around the housing market meltdown, the foreclosure crisis or budget shortfalls though. It concerns what commenters have called overzealous enforcement of use restrictions. A community in Palm Beach County shut down a lemonade stand operated by neighborhood children. Here is the video spot that aired on television:
Use restrictions are a very important part of community association living. Many people choose to move into a particular community due to enforcement of use, maintenance and architectural restrictions. It makes sense, residents may not want to look at basketball hoops, soccer goals and other play or sports structures when driving to and from work everyday. They may not want to see 5 cars, campers and trailers parked in a driveway or on the front lawn. Car repair, cooking in the front yard (BBQ) and yard sales are almost universally prohibited in community associations. The same is true with respect to operation of unlicensed businesses, most business or commercial uses, signage (other than specific signs of certain shapes and sizes) and solicitation.
Is a lemonade stand or door-to-door Girl Scout cookie sales the evils sought to be avoided by these restrictions? Probably not.
Nonetheless, there are competing interests the board of directors must take into account. If the board does nothing about a lemonade stand will it have a hard time stopping someone from selling other products from their home (whether visible to the public or not)? If a child is permitted to go door-to-door selling cookies, can a resident real estate agent walk door to door soliciting listings?
This example shows that community leaders need to carefully tailor their own rules and regulations, as well as architectural restrictions, to meet the needs of the community.
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The Quail Run story demonstrates the power one, two or a few delinquent owners have over the paying owners. According to the Sun-Sentinel, close to 100 condo owners have been shut out of the pool, clubhouse and other Quail Run recreational facilities, even though a very small minority are behind in payment of maintenance fees.
The Condominium Act was amended, effective July 1, 2010, to allow associations to suspend use rights in the event an owner is more than ninety (90) days delinquent. Section 718.303, Florida Statutes says in part:
If a unit owner is delinquent for more than 90 days in paying a monetary obligation due to the association, the association may suspend the right of a unit owner or a unit’s occupant, licensee, or invitee to use common elements, common facilities, or any other association property until the monetary obligation is paid.
There is a similar provision in the statutes that govern homeowners' associations operations. Section 720.305, Florida Statutes likewise states (in part):
If a member is delinquent for more than 90 days in paying a monetary obligation due the association, an association may suspend, until such monetary obligation is paid, the rights of a member or a member’s tenants, guests, or invitees, or both, to use common areas and facilities and may levy reasonable fines of up to $100 per violation, against any member or any tenant, guest, or invitee.
Thus, it is evident that the association (whether a condominium association or a homeowners' association) has certain remedies available to it against a delinquent owner. The question here is whether this punishment may be imposed against all owners in a particular sub-association when some are delinquent and others paid in full.
Many communities are developed with several neighborhoods inside a large subdivision. There is a master association that bears responsibility for certain portions of the property, generally including the roads, perimeter fencing or walls, security gates and recreational facilities. In newer communities, typically the governing documents will give the master association's board the choice to 1. collect assessments directly from the individual owners, or 2. to require the sub-association to pay the aggregate amount. Obviously the latter is far easier for the master association administratively - keeping track of 5, 8, 10 or 15 payments is a lot easier than keeping track of hundreds or thousands of payments from individuals. The master doesn't necessarily need to keep track of property transfers or participate in many of the lender foreclosure actions when the sub-association bears responsibility for payment of the assessments attributable to its units/homes (although in many cases it may be wise).
Not all governing documents give the master association the options stated above. Some of the declarations merely require the sub-association to act as a conduit, not as a guarantor of payment. Some declarations actually require the master association to collect assessments from the individual owners.
One of the sub-association boards in the Quail Run community decided it could not absorb the costs of owners in default and only paid the master association for the unit owners that submitted their payments. The master association, relying on the language of Section 718.303, Florida Statutes, then suspended use rights for everyone in that neighborhood, rather than limiting the suspension to the owners in default. A hearing was recently held to determine whether the master association was right or wrong by taking that action. We'll be sure to report on further developments in this particular case as they become known. In the meantime, be sure counsel has reviewed your governing documents to see what options are available to secure your community's continued viability.
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State Regulations Up for Consideration in Addition to Federal Requirements. Community Association Pools & Spas May Require Retrofits. Exemptions Must be Renewed.
The Virginia Graeme Baker Pool and Spa Safety Act became effective on December 19, 2008. It established mandatory federal requirements to mitigate entrapment hazards in public swimming pools and spas, and required the installation of drain covers that meet certain performance standards. While many associations have installed the compliant drain covers, many have not addressed the direct suction issue. The federal requirements apply to virtually any pool operated by a community association, and are independent of state permitting regulations. Moreover, community association pools are often considered 'public pools' subject to regulation by Chapter 514, Florida Statutes.
In addition to the federal law, the state rules were amended in May of 2009 to provide that pools that qualify for a state permitting exemption are now required to renew their exemption every two years, starting July 2010. Historically, the exemptions were issued once, and never had to be renewed. These exemptions are only available to condominiums and cooperatives that adequately restrict or prohibit short-term rentals. Homeowners associations do not enjoy the same types of exceptions and therefore must comply with requirements governing public pools in Florida.
Renewal is tough and often denied if the association no longer adequately restricts rentals, creating a dilemma. Should the association attempt to modify the governing documents to impose rental restrictions to qualify for the exemption? Should it pursue the permit?
Expensive remodeling of the pool might be necessary to meet the extensive construction and configuration requirements necessary to obtain the permit.
Florida legislators are also considering state safety regulations. SB1480/HB1409 would require an anti-entrapment system and many pools with a single drain would also need:
Please consider the options available to the association and consult with counsel to ensure your community's pool remains available for use.
I frequently post comments received by readers along with responses on this site. Today I received valuable information from a reader that I want to share with you as a separate posting:
I agree with Lisa that this is a large issue facing associations. We are overwhelmed with the Social Media revolution. As I have said in a number of posts in many blogs, this is a "blessing and a curse" for associations. As one of the largest writers of community association directors and officers liability nationwide, including the wonderful state of Florida which is probably warmer than our 11 degrees here in Cleveland today, the social media revolution is high on our radar. Since this is a new phenomena, the waters are still not tested. I am quite supportive of association websites and social media for associations and their authorized board members to disseminate information, but beyond that, social media is a trap for the unwary for most associations. We defend associations whether the allegations are frivolous, false or fraudulent. Accordingly, whether allegations by association members are true or not, there are huge concerns about "defamation", "invasion of privacy" and "harassment" that come to mind. Before an association sponsors or engages in social media, especially open forums, I recommend you set up an appointment with Lisa or your own association counsel and be educated on the potential issues. You should also keep in mind that many association D&O policies expressly exclude claims for "defamation", "invasion of privacy", "discrimination" and "emotional distress" claims arising from these types of claims. Remember, we live in a great country that allows people to sue one another whether they have a legitimate claim or not.
Joel Meskin, Esq., CIRMS
The CIRMS designation is awarded by CAI to persons that demonstrate a high level of competency within the risk management profession.
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The social media phenomenon is huge. I hear the word "Twitter" practically every day on television news programs, talk shows or on the radio and have established a Twitter account in an effort to learn what the fuss is all about. Social networking sites like Facebook, Twitter, YouTube and Linked-In provide an easy way to disseminate information. These new means of connecting on-line often can replace community association mailings and provide a forum for the residents to connect with each other as well as the board of directors.
Community associations often have websites that feature for sale items (homes or personal property), photos of the community and community events, forms for use by homeowners to request architectural approval or report maintenance/repair needs, a link to the governing documents and much, much more. Many associations post financial information on line on pages protected by passwords, allow members to review their account to see if payment was posted and even pay assessments. Websites have served associations well over the past decade and therefore extending communication by utilizing social networking platforms is not unexpected. In fact, a quick search of sites like Facebook and Linked-In shows many community associations (or their members) have already ventured in to this arena.
However, as with any new endeavor, the benefits must be weighed against the detriments. Questions are bound to arise. Who is entitled to post information or comments? Is there a filter before the general public has access to the information? Is the Board liable for erroneous information? Can the association post information about owner use violations? What if the owner isn't really in violation? Can the site include photographs of community residents or individual homes? Is the content of the site considered "official records" of the association? If so, what are the retention requirements? We discuss some of these issues in the following posts:
E-mails, Instant Messages (IM), Twitter & Board Meetings, Are E-mails, Instant Messages (IM), & Twitter Transcripts "official" records of the Association?, and Are E-mails, Instant Messages (IM), & Twitter Transcripts "official" records of the Association? (Round 2).
I also found the article, Social Networking Can Improve Communications But Watch our for the Liability Risks interesting as it notifies community leaders about potential pitfalls associated with use of social media sites. The author warns community leaders to be cognizant of potential claims of libel/defamation, copyright infringement, invasions of privacy, plagiarism and interference with contract, to name a few. This article also addresses whether insurance coverage is typically available for claims and surmises that exclusions will appear in future policies.
What should you include in your community association social media policy? Well, you want to prohibit profane language or terms that relate to a particular ethnic, racial or other protected group of course. You probably don't want to allow your members (or "friends") to use the site to solicit business prospects. You need to reserve the right to refuse to post or delete any content or material that is not suitable for the site. You also need the appropriate disclaimers. This is just a partial list to alert you to some of the considerations involved when embarking into the world of social media.
Let us know how your community uses social networking to further association goals and objectives.
In our litigious society, lawsuits are just a part of life. Whether its a foreclosure, divorce, business dispute, credit card debt, injury claim from a traffic accident or otherwise, its likely that several of the residents of your community are and will be involved in lawsuits from time to time.
When a lawsuit is filed, the Clerk of Court issues a summons. The summons is served (delivered) to the other parties to the lawsuit, along with a copy of the lawsuit. These documents may be delivered by the sheriff or a process server. While there are different options available to "serve" a lawsuit in different circumstances, personal service (delivery) by the sheriff or process server is by far the most prevalent.
The arrival of a process server at the front gate or lobby entrance to a property leaves community association leaders in a quandary - do you allow this person in and let them do their job (ignoring safety, security or guest entry rules) or do you stop them? If your rules require announcement of all visitors, do you call the resident and let them know the process server is on the way?
Under Section 843.02, Florida Statutes, regardless of whether the process server is a law enforcement officer or specially appointed by the Court, resistance of the process server’s efforts to serve process is against the law. Please note the following:
The Association is not obligated to accompany the Process Server once access has been permitted. The Board of Directors may choose to establish a procedure which would require a security guard to accompany the Process Server in the Condominium and on the grounds in general. Of course, this is all predicated upon establishment of proper identification of the Process Server, and by the production of legitimate documents to be served in the possession of the Process Server.
Florida legislators want to clearly specify the obligation on the part of the community association - two bills have been filed this year with the following language:
A person authorized to serve process shall be granted unannounced access to the common areas, both general and limited, of condominiums, gated communities, or any secured residential areas where a defendant or witness resides or is known to be.
We'll let you know what happens with this and other bills in our Capitol Conversation posts from time to time. In the meantime, community leaders must understand that process servers are authorized to perform certain tasks which may necessitate access to the community.
There are still seats available at our upcoming Annual Community Association Leadership Conference at the Barbara B. Mann Center on Monday, January 24, 2011 from 9:00 to 12:30 PM.
Check-in begins at 8:30 AM.
The Conference will focus on the 2010 legislative changes and recent case law impacting Florida's communities, including topics such as:
A special feature: A panel of Becker & Poliakoff's construction attorneys discussing common construction issues facing community associations, followed by a Q&A session where attendees can get answers to whatever questions they may have. You may also submit your questions in advance to questions@becker-poliakoff.com .
Participating Community Association Managers (CAMs) will earn 2 continuing education credits (Legal Update 2011).
CLICK HERE to register.
I look forward to seeing you there!
Joseph E. Adams, Esq.
While it is important. serving on the association's board is time consuming and can often become frustrating. You have a multitude of issues competing for your attention - whether its adopting the budget, monitoring performance and renewing service contracts, insurance renewals, supervision/hiring and retention of employees or collecting delinquent assessments. Board members are also faced with the task of enforcing rules and regulations. How many times have you heard the following as a board member?
Rules and Regulations set forth the standard of conduct expected of community residents. Rule enforcement preserves the aesthetic quality of the neighborhood, maintains order and enhances community living. Many people buy a condominium or a home in a neighborhood because they like the way the grounds look, the parking garage isn't full of owner's junk, paint isn't peeling off the houses, people aren't blasting their radios late at night and guests have to register at the entrance. However, they become annoyed or downright argumentative when the board instructs them to pressure clean the roof, turn down the radio at night, discontinue parking a truck on the property and to get rid of a dog or cat where pets are against the rules.
Rule violations bring on additional complaints from the compliant owners. Then you hear "why haven't you done anything" or "when are you going to stop so-and-so from x, y or z". Some boards give up after writing letters and issuing warnings thinking they cannot enforce the rules effectively, but that is not the case. With careful planning, careful rule making and a policy of consistent enforcement, owners are forced to comply with rules and, in many cases, must pay reasonable attorney's fees and costs as a result. Here are some tips:
2010 changes to the condominium and homeowners' association statutes provide for additional remedies. The association may levy fines and/or suspend use rights under certain circumstances.
If your rules are important then don't be afraid to enforce those rules. If the rules are no longer relevant to your community, change the rules. Community association regulations are designed to change as a result of changes in the community. Some changes can be made at the board level while other changes require membership approval.
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Every business entity (corporation, limited liability company, and limited partnership) is required to file an Annual Report each year with the Department of State, Division of Corporations in order to maintain its “active” status. Many associations use the internet (www.sunbiz.org) to file the Annual Report, change the Registered Agent or change officer/director information. It is a quick and easy way to take care of the association's renewal filing.
Be careful to look closely at any emails asking you to file the Annual Report. The Florida Department of State, Division of Corporations issued a consumer alert notifying sunbiz users of offers from a private company to facilitate filing the Annual Report. Arvitas, LLC sends emails for the purpose of soliciting business for itself. It charges a fee to file the Annual Report - which is not 100% exactly clear if you read the official looking email quickly. I received many of these emails recently. Click HERE to look at the form of email - it invites you to file your Annual Report with a simple click of a button.
Please go to sunbiz directly to file your Annual Report or contact your attorney for assistance.
Don't forget - if your elections are in January, February, March or April, there is time to file before the May 1, deadline (so you can include accurate information about the officers and directors). If you fail to file the Annual Report the state administratively dissolves the corporation (whether profit or not-for-profit). If the corporation is not "active" according to the State of Florida, it cannot continue to do business. Officers and/or directors become exposed to personal liability when the corporation is dissolved.
If your corporation has been dissolved as a result of failing to file an Annual Report, go to sunbiz right away and reinstate the corporation. Reinstatement relates back to and takes effect as of the effective date of the dissolution, thus protecting individual directors and officers and validating actions that took place during the period of time the corporation was inactive (to a certain extent).
Does Your Business or Organization Have Policies in Place to Prevent Identity Theft?
Why Is This Rule Necessary?
Identity theft results in billions of dollars in losses each year to individuals and businesses. Identity theft is described by the FTC as a fraud attempted or committed using identifying information of another person without authority.
What Action Is Required?
The Rule requires covered businesses and organizations to implement reasonable policies and procedures for detecting, preventing, and mitigating identity theft.
What Businesses or Organizations Must Comply?
The Rule broadly defines the types of businesses or organizations that must comply. Any business or organization that regularly provide goods or services first and allow customers to pay later are covered. Examples include utilities, health care providers, lawyers, accountants, and other professionals, and telecommunications companies. In addition, the definition includes anyone who regularly participates in the decision to extend, renew, or continue credit, including setting the terms of credit. For example, a third-party debt collector who regularly renegotiates the terms of a debt would be considered a creditor under the Rule.
To help you determine whether your business or organization must comply, the FTC published A How-To Guide for Business, at www.ftc.gov/redflagsrule. Frequently Asked Questions and Answers can be found HERE.
What about Condos or HOAs?
Community Associations Institute (CAI) also published information about this Rule. It said:
The regulations issued by the FTC provide that any entity that is engaged in providing installment plans where the payment for goods and services is delayed would be required to comply with the requirements of the regulations. While we do not believe that community associations were the target of these provisions, given the broad language and the broad manner in which courts and regulators interpret such language, we believe that the FTC could find that such rules apply to some associations. As such, one response to ensure an association is protected from FTC enforcement would be to put in place a program that complies with the requirements issued by the FTC.
CAI says if your association accepts installment payments for assessments or other required payments or there is a reasonable risk of identity theft of consumer data, it may fall under the Rule. Both the Condominium and Homeowners' Acts prohibit a community association from disclosing personal resident information such as social security numbers, credit card numbers, credit histories and the like.
Community leaders should review the records maintenance and records access policies of the association and those of management. You may want to discuss this issue with counsel, especially if you haven't updated roster lists or otherwise secured records that are not accessible to the members.
It is not unusual for non-compliant tenants or tenancies to create dissension in a community. Sometimes the tenants haven't been screened, there may be too many occupants or too many vehicles, the tenants make noise and don't care if they disturb the neighbors, the tenants use so much water it seems like the shower is on all day, the tenants don't recycle, don't clean up after their pets (or bring pets on the property where prohibited) and litter, leaving association personnel (or volunteers) to clean up - the list can go on and on...
Residents complain to the board and the board asks counsel "Can't we just evict them?"
Well, there are specific procedures that must be followed in order to evict or otherwise remove a disruptive tenant and the person or entity seeking such eviction or removal must have the legal authority to do so. Eviction is a remedy specifically tailored to termination of tenancies pursuant to landlord-tenant laws. The Association is not the owner of the property and not the landlord - therefore a traditional eviction action is usually not an option.*
However, the Association has the legal authority to enforce the governing documents (including rules and regulations). Section 718.303, Florida Statutes specifically requires tenants (and other occupants) to comply with those rules as well as the Condominium Act. Section 720.305, Florida Statutes says the same for HOAs. Additionally, the governing documents usually impose an obligation on the owner to control and bear responsibility for the conduct of any tenants, guests or occupants.* The Association may file a lawsuit* (or Petition for Arbitration depending upon the relief sought) asking the Court for relief from the problems caused by problematic tenants. The Association can even ask the the Court for an Order requiring the tenants to vacate the premises which is what the Association asked in the Briarwinds Condominium Association v. Rigsby and Wood, No. 3D10-329, case. The Third District allowed the Association to continue its case for injunctive relief against the owner and tenant.
What if you have a bad owner? Under Florida law, owners and tenants have different property rights. The Florida Statutes provide condominium and homeowner association owners with an exclusive right to possess their property. In Kittel-Glass v. Oceans Four Condominium Association, 648 So.2d 827 (Fla. 5th DCA 1995), the Court held that an association could not permanently enjoin an owner from entering their own unit. Not to worry though - Associations have several options when faced with owner non-compliance, some of which are explained in other posts.
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As you already probably know, the Condominium Act was amended as a result of SB 1196. Newly elected Board Members must either take a state approved educational course to qualify for Board service or submit a written certification to the Secretary of the Association.
This course, “Everything You Wanted To Know About Being A Board Member But Were Afraid To Ask!”, will be taught at various locations throughout the state. All instructors are attorneys practicing Community Association Law and have been certified by the Department of Business & Professional Regulation.
Why Attend?
- Comply with State Law - rather than simply "certify" yourself
- Understand your legal responsibilities and obligations including your “fiduciary duty”
- Receive our new publication “You’re a Board Member, Now What?” for day to day questions and strategies for handling board responsibilities
- Receive a Quick Reference Guide of checklists, statutory deadlines and charts to assist with elections, meetings and other Board responsibilities.
Topics Covered:
Operations * Records Maintenance * Dispute Resolution * Budgets & Reserves
*Elections * Financial Reporting & More
Registration is required and you will receive your Certificate of Completion at the end of the course. ClickHERE for the schedule and information how to register.
The post outlining new §720.303(12), Florida Statutes created a lot of buzz. While there several .jpg)
comments posted on the site, the majority of questions, complaints and comments were sent to me directly and therefore not published.
I agree, the new law seems harsh. What if your HOA's president owned a landscaping company and wanted to give the association the absolutely best price while ensuring quality work? The president certainly has a vested interest in the job, as shotty work will reflect poorly on his or her company, he or she will not enjoy the property as much and complaints about the work may make home life miserable. The new statute ostensibly does not allow the association's board to contract with that company, unless the governing documents or membership authorize the contract.
There is a different provision for directors serving on condominium association boards. Section 718.3026, Florida Statutes says (in part):
As to any contract or other transaction between an association and one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are directors or officers or are financially interested:
At the next regular or special meeting of the members, the existence of the contract or other transaction shall be disclosed to the members. Upon motion of any member, the contract or transaction shall be brought up for a vote and may be canceled by a majority vote of the members present. Should the members cancel the contract, the association shall only be liable for the reasonable value of goods and services provided up to the time of cancellation and shall not be liable for any termination fee, liquidated damages, or other form of penalty for such cancellation.
This law provides the association with more flexibility while safeguarding member interests at the same time. It is closer to the standards imposed on all Florida not-for-profit corporations. An outright ban is not necessary so long as the director discloses his or her interest, the deal is fair and the majority of other directors vote in favor of the transaction.
The Condominium Act also specifically prohibits any director, officer or manager from accepting goods or services without payment if the person or company providing the goods or services has a business relationship with the association or has submitted a proposal for a job or service. This doesn't apply to trinkets or meals provided in connection with trade fairs or educational programs, but is intended to equalize the playing field for all vendors/service providers as well as prevent directors from taking advantage of their positions.
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As a result of SB 1196, the law now prohibits HOA directors, officers, or committee members from receiving any salary or compensation from the association for the performance of his or her duties as a director, officer, or committee member. This is basically the same rule that applies to condominium association directors.
However, Section 720.303(12), Florida Statutes significantly expands the restrictions upon HOA directors, officers and committee members. In addition to the above, the law also says that a director, officer, or committee member “may not in any other way benefit financially from service to the association.” The reference to "service to the association" in this second part of the sentence is not limited to those services performed in connection with the duties of the director, officer or committee member. That is a substantial change in the law. Read strictly, this means that HOA directors, officers, or committee members:
The previous law allowed the association to enter into contracts with companies involving 'interested directors', if the director disclosed his or her financial interest, if the contract was fair and reasonable, and if the interested director refrained from voting.
There are exceptions. If your community has and still employs or contracts with companies in which a director has a financial interest (stands to gain from the contract), there are two options laid out in the statute. Compensation is permitted if it is authorized by the governing documents or if the members vote to authorize compensation. The vote should take place in advance of hiring or contracting with an 'interested director'.
Reimbursement for out-of-pocket expenses is specifically allowed. If your community has not developed a procedure for application and payment for out-of-pocket expenses, now is a good time to create your procedures and formally adopt them at a meeting. Most governing documents authorize the board to reimburse directors (and others) for expenses, but do not specifically outline what types of expenses may be incurred, whether certain types of expenses require advance approval, what documentation must be submitted or who approves the reimbursement, etc.
There are other exceptions for directors appointed by the developer, for recovery of insurance proceeds and if all members benefit financially from some action taken by the association.
The Federal Trade Commission ("FTC") announced proposed revisions to its "Green Guides". It is accepting public comment on these proposed changes until December 10, 2010. The FTC is charged with responsibility for prevention of fraudulent, deceptive and unfair business practices.
Apparently the FTC found consumers were misled by greenwashing techniques on the part of marketers. Greenwashing (as stated in Wikipedia) is:
(a portmanteau of "green" and "whitewash") is a term describing the deceptive use of green PR or green marketing in order to promote a misleading perception that a company's policies or products (such as goods or services) are environmentally friendly. Greenwashing may be described as "spin".
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There are many reasons why this issue should concern community associations. Community associations have traditionally been a prime target for certain practices. Think about all the communities that paid large up front payments to what they later learned were unlicensed contractors. We hear about far too many cases of fraud, theft and embezzlement of community association funds these days. The Florida Attorney General investigated recovery firms claiming to correct problems associated with timeshare unit re-sales and found that certain companies charged 'exorbitant fees' even though they provided very little service.
Losses may result from working with well intentioned service providers as well.
Budget shortfalls drive association boards to consider alternatives for their communities. Some of these communities have saved tremendously, just by changing certain practices or updating and improving certain systems. I discuss some of these techniques in "Green" Practices to Ease Future Financial and Budgeting Concerns and HOAs Can Save With Florida-Friendly Landscaping. Now is the time to consider retrofits and 'retro-commissioning' building systems to increase energy efficiency and reducing water use and expense, but community leaders have to scrutinize representations very carefully.
Paying attention to energy efficiency is important for another reason - government regulation. New York City's new Energy Conservation Code requires existing residential buildings i.e. condominiums and cooperative buildings (larger than 50,000 square feet) to:
I saw an announcement indicating these efforts will save New York City residents approximately 750 million dollars a year. Efficiency regulations for new construction in certain areas in Miami-Dade County are already on the books - they govern construction of residential buildings as well as commercial buildings. Its just a matter of time before statewide regulations, codes and local ordinances require community associations to increase efficiency in connection with repair projects or possibly require improvements and retrofits for this purpose.
If your community is interested in pursuing options that will save the association money while reducing waste and water usage at the same time, I encourage you to work with lawyers and consultants familiar with the U.S. Green Building Counsel's Leadership in Energy and Environmental Design rating system, even if you're not interested in certification. Those professionals should be proficient in community association operations, laws, regulations and governing documents, financing as well as construction law to ensure the project goes smoothly.
I'll include more information about some of the legal issues community associations need to consider in connection with these types of projects in a later post. To review a copy of the proposed revisions to the Green Guides click HERE.
Common Exemptions for Condominium and Cooperative Associations do not Apply to Homeowners' Associations.
The Florida Department of Health enforces regulations on public swimming pools. While community association pools are generally not open to the public, its likely they are considered public pools for the purpose of compliance with Chapter 514 of the Florida Statutes and Rule 64E-9 of the Florida Administrative Code.
The Florida Administrative Code defines a "public pool" as basically any pool that does not qualify as a private pool. Section 514.011, Florida Statutes defines a private pool as a facility used only by an individual, family, or living unit members and their guests which does not serve any type of cooperative housing or joint tenancy of five or more living units. Condominium and cooperative associations have the benefit of the exemptions set forth in Section 514.0115 which say:
Pools serving no more than 32 condominium or cooperative units which are not operated as a public lodging establishment shall be exempt from supervision under this chapter, except for water quality.
Pools serving condominium or cooperative associations of more than 32 units and whose recorded documents prohibit the rental or sublease of the units for periods of less than 60 days are exempt from supervision under this chapter, except that the condominium or cooperative owner or association must file applications with the department and obtain construction plans approval and receive an initial operating permit. The department shall inspect the swimming pools at such places annually, at the fee set forth in s. 514.033(3), or upon request by a unit owner, to determine compliance with department rules relating to water quality and lifesaving equipment. The department may not require compliance with rules relating to swimming pool lifeguard standards.
Unfortunately, these exemptions do not mention homeowners' associations. Even condominium communities (with more than 32 units) must comply with new safety requirements and must remember to apply for renewal as required by the code.
Enforcement of the revised pool regulations has put a strain on some community associations, such as the Rose Garden Villas in Lee County where the residents will have to spend over $200,000 on rebuilding costs. Community leaders question why it is necessary to comply with these stricter requirements after the pool has been open without incident for years and years.
The government may require reasonable changes in existing buildings in order to comply with new requirements and standards for the protection of health and safety of the public, regardless of the fact the buildings complied with the applicable codes at the time of construction. Nonetheless, not all regulations are retroactive and variances are available in the appropriate circumstances. If your community faces this dilemma, its a good idea to discuss whether you can appeal a denial of an exemption or obtain a variance.
Has Your Cable Provider Offered to Pay a Lump-Sum Fee for Exclusive Marketing or Access Rights?
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Many of my clients have been approached by cable operators with a request for an access agreement or marketing agreement. Many times these are exclusive agreements, although in my recent experience the provider has limited the exclusivity portions to on-site marketing to residents. Many times these agreements contain references to voice, video and data services or simply broadband services, without a specific explanation of what those services entail. Clients are thrilled with the up front lump-sum payment.
Other types of service providers are also offering community associations, especially large community associations, lump-sum "loyalty" payments in connection with a renewal or extension of the contract.
Those payments can mean tens of thousands of dollars added to the association's coffer to pay past-due bills, maintenance projects and other community expenditures. Wow - doesn't that sound wonderful? Who wouldn't want to take advantage of these opportunities? Money, when you were going to renew a contract anyway? Money, just for allowing a company to access your community or to hand out flyers every now and then?
We can thank Milton Friedman for reminding us "there is no such thing as a free lunch". The money isn't free - there are corresponding obligations of the association in these agreements which, if violated or not performed, subject the association to liability for damages.
Here are just a sampling of the issues to consider:
These and other factors must be taken into consideration before entering into any agreement. If your community is approached with this offer, please consult your attorney.
Parton v. Palomino Lakes Property Owners Association, Inc.
While the legal process may seem slow and involve a significant amount of paperwork, this case shows what can happen if owners and directors decide to take enforcement matters into their own hands.
The Partons owned a lot within the Palomino Lakes Community, subject to the governance by the Palomino Lakes Property Owners Association, Inc. The governing documents prohibited mobile homes. The Partons decided to install a modular home and attempted to have it delivered to the homesite. Four (4) owners, (three [3] of which being members of the board of directors of the association) blocked the delivery by blockading the entrance to the subdivision. This happened on three (3) separate occasions.
As a result, the Partons filed suit against these owners and the Association and immediately obtained injunctive relief, as the Court apparently agreed that the modular home to be permanently attached to a concrete slab, was not a mobile home. The Partons amended their complaint to add counts for damages based upon tortuous interference with contract and civil conspiracy. A jury awarded the Partons $5,000.00 in compensatory damages and further awarded punitive damages against Larry Vinson in the amount of $60,000.00, Ila Vinson in the amount of $40,000.00 and against Linda Drielbelbis in the amount of $50,000.00! The Court also awarded the Partons prevailing party attorney’s fees and costs.
The Partons actually appealed from the Final Order, primarily on two grounds claiming:
The Court agreed with both contentions and instructed the trial court to revise the judgment to reflect that all four (4) individual defendants were responsible (jointly and severally) for both the compensatory damage award of $5,000.00 and the attorney fee award for that portion of the work was likewise the responsibility of all of them, jointly and severally.
Having those portions of the judgment reflect joint and several liability enables the Partons to collect the entire sum from one or less than all defendants, leaving those payors responsible for seeking contribution from the other defendants.
The extreme personal liability in this case could have easily been avoided by consultation with legal counsel when the problem first arose. Proper interpretation of the deed restrictions, as well as counseling regarding the procedures by which to enforce the deed restrictions is crucial to successful association operations. The reported decision doesn’t explain how the board members were held personally liable, but resorting to self-help under these circumstances was clearly wrong, leaving an undesirable outcome.
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The statutes governing community associations require notice of meetings to encourage owner participation.
HOAleader recently published an article on this subject: HOA Meetings: Does Your State Have Rules for Your Meeting Agendas?
Here are some handy reminders - there are additional options in the statutes. This list is not intended to be all inclusive.
| TYPE OF MEETING | Condo/Co-op | HOA |
| Board meeting | 48 hours posted (or pursuant to documents) with agenda | 48 hours posted (or pursuant to documents) |
| Budget meeting | 14 days mailed (along with a copy of the proposed budget) and posted, unless documents require a longer time period | Pursuant to documents |
| Annual meeting | 60 days for first notice; 14 days for second notice, mailed, delivered or electronically transmitted | 14 days mailed, delivered or electronically transmitted (unless documents require more notice) |
| Board meeting to levy a special assessment | 14 days mailed and posted-- condos must also include the purpose & estimated amount of special assessment in the meeting notice (14 days applies to meetings to establish the insurance deductible as well) | 14 days mailed and posted |
| Board meeting to adopt rules regarding unit or parcel use | 14 days mailed (along with a copy of the proposed rule) and posted | 14 days mailed (along with a copy of the proposed rule) and posted |
| Member meeting | Pursuant to By-Laws (usually at least 14 days mailed, delivered or electronically transmitted) | 14 days mailed, delivered or electronically transmitted (unless documents require more notice) |
| Committee meeting | Committees that take final action on behalf of the board or make recommendations to the board regarding the association budget must notice their meetings 48 hours in advance, and the meetings must be open to the unit owners | Must be posted 48 hours in advance when a final decision will be made regarding the expenditure of association funds and to meetings of any committee vested with the power to approve or disapprove architectural decisions with respect to a specific parcel of residential property owned by a member of the community |
| Committees that DO NOT take final action on behalf of the board or make recommendations to the board regarding the association budget must notice their meetings 48 hours in advance, and the meetings must be open to the unit owners, UNLESS the By-Laws provide otherwise | ||
| Meetings with the Association attorney | Must be noticed 48 hours in advance, but are not open to unit owners when the meeting is held for the purpose of seeking or rendering legal advice | Must be noticed 48 hours in advance (or pursuant to documents), but are not open to owners when the meeting relates to proposed or pending litigation or personnel matters. |
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While the recall process is widely known, many community leaders are unaware of a process authorized by the Division of Florida Condominiums, Time Shares and Mobile Homes referred to as a "reverse recall".
A recall attempt may fail if the Board of Directors does not handle the recall effectively. In many instances there is a member of the Board that is not well liked or otherwise is adversarial to the remaining members. While any individual may start a recall effort, the Board cannot legally “bend the rules” and certify a recall that should not be certified due to lack of proper votes or the use of an improper form of written agreement. Moreover, failing to call or hold a meeting does not, under all circumstances, automatically entitle the unit owners to certification of the recall attempt.
What does a recalled board member do when the Board certifies a recall that he or she knows should not have been certified? What does a recalled Board member do when it is discovered that he or she was recalled without being given the opportunity to address the board at a meeting called for the purpose of determining whether or not to certify the attempt? The recalled Board member may file a Petition for Arbitration with the Division of Florida Land Sales, Condominiums and Mobile Homes. Those Petitions are known as “reverse recalls”.
As described in Ringler v. Tower Forty One Association, Inc., Arb. Case No. 2005-04-1867, a reverse recall is a proceeding in which “the board member whose recall was certified initiates the proceeding, joined by any other unit owners who wish to be included as petitioners, arguing that the recall effort was certified in error and naming the association as a party”. The party filing for arbitration may challenge the board’s actions or in actions relating to the recall process and may challenge the recall procedure itself, such as the form of written agreement or vote at a meeting. In Ringler, the board received the written agreements for recall and failed to call a meeting. Mr. Ringler was notified that the recall was effective before he even knew that the board was served. The property manager accepted service of the written agreements and delivered them to another board member. That board member purportedly failed to notify anyone else (although that allegation was disputed).
Since service on the Association’s manager is effective service, the recall against Mr. Ringler was ultimately certified, but in Scariati v. The Villages of Emerald Lakes One Condominium Association, Inc., Arb. Case No. 2005-02-1485, the arbitrator reversed the recall as it was discovered that there weren’t enough written agreements signed by owners to effectuate a valid recall. In Scariati, the petitioner alleged she was not permitted to examine the recall written agreements before or even at the board meeting to determine whether or not to certify the effort. Once she had that opportunity, she discovered the improprieties. The recall was not certified, even though the board voted to certify, as a result of the board’s improper behavior and the fact that the recall was void ab initio.
There is a substantial difference between recall arbitrations and “reverse” recall arbitrations. There is no mechanism for recovery of prevailing party attorneys’ fees in the arbitration of a recall. However, since a “reverse” recall is a Petition filed by a unit owner (or owners), attorney’s fees are awardable to the prevailing party. Thus, it is important not to ignore procedural requirements in connection with a recall attempt as machinations on the part of the board may expose the Association to liability for the opposing side’s fees and costs.
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How does your community address complaints? Is there a published procedure or is every complaint handled differently? Who has authority to handle the complaints? HOA Leader recently published an article with tips for handling homeowner complaints. Here is a link to one of the tips:
HOA Complaints: Turn Owners' Frowns Upside Down
How many times have board members heard the following complaints and made the following responses:
1. The unit owner across the hall from me constantly cooks food that stinks up the entire hallway, can’t you do something about this? (Typical Board response: What stinks to you may be perfume to others, please be tolerant.)
2. I’m afraid of my next door neighbor’s large dog. I saw him lunge at another dog, and he’s always growling. I think he might attack another animal or a child. (Typical Board response: Dogs are expressly allowed by our documents. There’s nothing we can do.)
3. This is the third time I’ve complained about water intrusion into my apartment from upstairs. Why won’t you fix the problem ? (Typical Board response: The water is coming from the upstairs neighbor’s unit, not the common elements and, therefore, we aren’t responsible.)
4. One of the unit owners continually harasses me, and I can’t stand it anymore. Lately, every time I see him he shouts out derogatory racial slurs. It’s getting to the point that I can’t even stand living here. (Typical Board response: This is a problem between you and your neighbor; we can’t control what people believe.)
Did the board respond appropriately? Maybe yes, maybe no – it’s a matter of degree.
The first complaint is in the nature of a nuisance complaint. The owner claims that the neighbor’s use interferes with the peaceful possession and use his or her unit. Under this circumstance (or similar complaints regarding noise, music, etc.), the board has an obligation to determine whether the behavior actually constitutes a nuisance in violation of the documents. The board is put in the position of balancing competing interests and determining whether the use is reasonable versus whether the use creates an actual, material, physical discomfort to a person of average sensibilities.
The second complaint may deserve more attention. An association may be held liable for injuries resulting from a dog bite, if it is proven that the association had knowledge of the dog’s propensity for violent or aggressive behavior. Even when the association’s documents allow for pets, it may be entitled to an order removing the dog, if it becomes a nuisance. I'll explain more about dangerous dog laws in another post.
The third complaint is heard often. Since the association has the duty to maintain, repair, protect and replace the common elements, it has the obligation to investigate the situation in order to ascertain the source of the water leak. If the water is leaking from the common elements, the association has an obligation to fix the problem. The association may have certain avenues available if a water leak from one unit results in damages to the common elements or other units. An “enforcement of maintenance” or other self-help remedy in the governing documents is extremely beneficial under these circumstances. Note - I haven't mentioned insurance - that subject will be addressed in a future posting on this site.
Finally, “harassment” is very difficult to define and even more difficult to remedy. Nothing an association can do will turn people into nice or pleasant people. However, if the level of harassment rises to physical violence or unlawful discrimination, the association may be held liable. In Casa del Mar Condominium Association, Inc. v. Richartz, 641 So.2d 470 (Fla. 3rd DCA 1994), the Court held that an association has standing (authority) under Section 718.303, Florida Statutes, to seek an injunction against a unit owner to prevent future acts of physical violence, or threats of violence, against the association, its directors, employees and residents. Moreover, in at least one case, an association paid more than a half million dollars to settle a case in which an African-American unit owner claimed that the board did nothing to protect her from the racial and sexual slurs, derogatory comments and physical threats of another owner.
Association boards must be cognizant of the happenings in the community and take member complaints seriously to avoid liability.
One of the provisions of SB 1196, which became effective on July 1, 2010, requires each newly elected or appointed board member to make certain representations to the association in writing. New Section 718.112(2)(d)3.b., Florida Statutes 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.
Many readers have asked where can they find a sample certification form. The Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares and Mobile Homes has published a form on its website. Click the link below:
Of course, board members also have the option of completing an educational curriculum administered by an approved education provider instead of submitting this certification.
Sample Condominium Association Board Member Certification Form
The Miami-Herald reported a story about the widow of the Nova Southeastern University.jpg)
professor that was attacked and killed in his Plantation home. She filed a civil lawsuit Friday alleging negligence by the management company and condominium association - she claims those entities were supposed to conduct background checks on tenants.
The article quotes the attorney for the widow who said ``They certainly did not meet up to their obligations concerning a proper background check as well as an approval of Randy W. Tundidor,'' Williams said. ``A very simple check would show evictions and the like.''
Tenant background checks are not required by state condominium law. In fact, an association can only perform a background check if such action is authorized by the governing documents. In this particular matter, the tenants resided in a townhome condominium owned by the slain professor. The professor and his family did not reside in the same complex, so its hard to understand how the condominium association (or its management company) would have been able to prevent these individuals from allegedly driving over to his house, allegedly entering his house and engaging in the alleged attack.
Even if the "simple" background check did show past evictions and the like, the condominium association and its management company are specifically prohibited from sharing that information with the landlord/owner. Section 718.111(12), Florida Statutes prohibits the association from sharing any information obtained in connection with its investigation of a proposed tenant. That statute also prohibits the board from sharing social security numbers, credit card numbers, credit history reports or "any personal identifying information" with the members. Federal laws likewise prohibit disclosure of credit and other background information.
What happened to the professor is a tragedy. How anyone could commit such a heinous crime is beyond me, especially if what has been alleged is true and the whole dispute involves payment or non-payment of a security deposit and/or maintenance of the rented property.
That being said - was this murder the condominium association's fault? Was it the management company's fault? I hope you agree that the condominium association and management company should not be held liable for this tragic loss.
"Take-aways" for community leaders and managers:
Finally, speak to your legal counsel and perhaps insurance professional if crimes have been committed within the community. You may have options to improve community safety while limiting the association's exposure to liability - all at the same time.
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Lawsuits Against Employers for Violations of the Fair Labor Standards Act & Other Employment Claims are on the Rise.
Some community associations have one employee, while others may have a hundred or more employees. Think about it - maybe your community employs a CAM, grounds maintenance people, a concierge, office assistants, front desk personnel, activity coordinators, beach attendants, valet, building engineers, cleaning staff - the list of people necessary to operate many community associations goes on and on. These individuals may have access to sensitive or proprietary information, such as unit owner or resident medical or health related records. When the economy is tight (like now) employment related claims and lawsuits rise dramatically - I read one article that said the number of lawsuits filed against employers for violations of the Fair Labor Standards Act (FLSA) rose by 40% each year for the past several years in a row!
If you are a member of a Board of Directors of a community association and have answered "yes" or don't know the answer to any of these questions, an employee manual should be a priority. Unfortunately, many community associations neglect to spend the time or devote the funds to this task. A well-drafted employee manual can minimize your exposure to both employment related and third-party liability claims - but make sure to have a Labor and Employment Attorney from your state draft and/or review the manual. Since employment laws vary from state to state and change quite frequently, using a 'form' from a neighboring community or from the Internet may do more harm then good.
HOA restrictions and covenants typically contain provisions limiting use of the property to a "single-family" residence. These use restrictions likewise typically prohibit any "business" or "commercial" use of the home. However, as discussed in other posts on this blog, enforcement of deed restrictions or covenants may implicate other laws, particularly the Fair Housing laws. Associations are prohibited by Federal, State and many local laws from discriminating against protected classes. Unlawful discrimination includes, among other things, the refusal to make a reasonable accommodation in policies or practices and interference with the lawful use and and enjoyment of the residence.
In the past, Florida courts have interpreted Section 419.001(2), (addressing community residential houses), and Section 393.062, (addressing developmental disabilities), of the Florida Statutes as support for the premise that a group home is the functional equivalent of a single family residential unit and does not justify enforcement of deed restrictions to the contrary. In at least one of the cases the court found that the association must show the use (three unrelated disabled adults) constitutes a nuisance and the mere fact that the residents of the home were not related was not a violation of the single-family use restriction. Another case found that enforcement of the prohibition against commercial or business use was discriminatory as applied against a particular small group home.
The county has joined efforts on behalf of an owner, based upon a legal memorandum prepared by the County Attorney's Office, after a finding of reasonable cause was issued by the Pinellas County Office of Human Rights. TBO.com reported the story.
What does this mean for Homeowners Associations?
Finally, there are many educational resources available to community leaders and managers. Take advantage of those opportunities.
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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.
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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.
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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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:
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).
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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Webinar on Friday, May 21, 2010 from 10:00 AM – 11:30 AM EDT 2010 FLORIDA LEGISLATIVE SESSION: Join Becker & Poliakoff's Community Association Leadership Lobby ("CALL") for a live web seminar about which bills passed, which ones didn't and what you need to know with respect to new laws affecting Community Associations and their residents. Click below to Register:
David Muller and Yeline Goin , Co–Executive Directors of CALL, will be joined by Travis Moore , CALL's lobbyist in Tallahassee, as well as guest speaker State Rep. Ellyn Bogdanoff , whose sponsorship of the companion House Bill 561 gives her special insight on the bill's issues, which include condominium insurance, elevator retrofitting, fire-sprinkler and fire-alarm retrofitting, and collection and foreclosures. For those in the Broward/Miami-Dade County area: CAI-Southeast Florida Chapter will present Rep. Bogdanoff with an Outstanding Service Award for her vision and fortitude. Register at CAI's website. This is the first in a series of webinars planned for the next several months featuring special guests from various industries. Don't miss out! |
"Florida-Friendly" Landscaping Found to Conserve Water and Prevent Pollution. HOAs and Large Property Owners Also Realize Significant Savings.
I reviewed the annual budget for a large HOA master association recently and was surprised that maintenance of the grounds accounted for more than 40% of the association's annual expenses. The budget included line items for various grounds maintenance such as:
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Budget Analysis
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| Landscaping Contract | $ 342,000 |
| Irrigation Contract | $ 7,000 |
| Mulching | $ 35,000 |
| Tree Trimming | $ 50,000 |
| Pest Control | $ 15,000 |
| Irrigation Repair | $ 12,000 |
| Planting Annuals | $ 0 |
| Fertilization | $ 24,000 |
| Landscaping "Extras" | $ 30,000 |
The Manager explained that irrigation repair was a constant source of expense. There is a school in the community and the pick-up waiting area formed over the association's landscape. Pumps required constant maintenance and repair and the association uses a vendor to detect leaks or weaknesses in the system Pest control became an enormous expense, due to white-fly and other insects. It also became more expensive to thwart algae and plant growth in the lakes/ponds (which supply water for irrigation) due to all the nutrients from the fertilizer used to keep the lawn/turf areas green and lush. All-in-all these costs amount to over $500,000 annually.
Wow - that is a lot of money.
The University of Florida reports that Ocean Gallery, a 42 acre community comprised of 439 condominiums saved $65,000 its first year after employing Florida-Friendly landscaping practices.
The Ocean Hammock Community won awards. both within Florida and nationally. In 2009, Ocean Hammock won an Award of Excellence for its landscape maintenance by the Florida, Nursery Growers and Landscape Association and it also won the Professional Landcare Network Environmental Improvement Grand Award. For a full case study of improvements and savings, click HERE.
Florida-Friendly landscaping is defined in the Statutes. Section 373.185, Florida Statutes says, in part:
"Florida-friendly landscaping" means quality landscapes that conserve water, protect the environment, are adaptable to local conditions, and are drought tolerant. The principles of such landscaping include planting the right plant in the right place, efficient watering, appropriate fertilization, mulching, attraction of wildlife, responsible management of yard pests, recycling yard waste, reduction of stormwater runoff, and waterfront protection. Additional components include practices such as landscape planning and design, soil analysis, the appropriate use of solid waste compost, minimizing the use of irrigation, and proper maintenance.
Check back to this site for more resources and examples of significant savings gleaned from innovative thinking and planning.
There are only a few short weeks left for Florida's elected officials to pass meaningful legislation and at this point in the session it seems that the HB 561/SB 1196 Bill Package is the most likely to pass. These bills are in a constant state of flux and the information below only highlights major points in the bills (as of April 15, 2010). We encourage you to review the full text of the bills by accessing the Senate’s website here for HB 561 and here for SB 1196 and likewise encourage CALL members to contact the appropriate legislators by using the Legislator Connect feature on its website (www.callbp.com). Here are a few highlights from the bills:
Fire Alarm Systems: - Amending s. 633.0215, F.S.
Buildings less than four stories with exterior means of egress and exterior corridors will not have to install a manual fire alarm system (per Section 9.6, Life Safety Code in the Florida Fire Prevention Code).
Fire Sprinkler Retrofit - Amending s. 718.112 and s. 719.1055(5), F.S
Full “opt-out” will be permitted with affirmative vote of two-thirds (2/3rds) of the entire membership. Will only permit reconsideration of opt-out vote once every three years at a special meeting called by a petition of 10% of the voting interests.
Extends deadlines for associations that don’t opt out to the end of 2019.
Elevators – Amending s. 553.509(2) and 399.02, F.S., (Phase II Firefighters’ Service)
Allows for a five (5) year delay to retrofit with a special access key for elevators in condominiums and cooperatives unless the elevator is replaced or requires major modification. Allows associations to "opt-out" of elevator operation by alternative power source with affirmative vote of majority of owners of condominium.
Designation of Limited Common Elements by Amendment - Creates s. 718.110(14), F.S. - only in SB 1196
Allows association to designate limited common elements by amendment, so long as the building component is designed for use by specific owners.
Official Records – s. 718.111(12), F.S.
Common Expenses - Amending s. 718.115(1)(d)1., F.S.
Communication services (as defined in Chapter 202), information services, and internet services obtained pursuant to a bulk contract shall be deemed a common expense. (In HB 561 contracts entered into for these services by the developer or prior to transition may be canceled within 120 days of the transition meeting.)
HB 561 also creates new §718.112(3), F.S. that allows the bylaws of umbrella organizations governing a minimum of 1000 units to employ a marketing firm for the community as a common expense.
Board Eligibility – Amending s. 718.112(2)(d), F.S.
Co-owners in condominiums with more than 10 units cannot serve together unless they own more than one unit or there are not enough volunteers to fill all slots. Does not apply to timeshare condominiums.
Requires directors to supply association with new certification form or take a state-approved education class. Directors are suspended until they comply.
Collections and Foreclosures – Amending s. 718.116 and s. 719.109(3), F.S
Changes mortgagee liability cap from 6 months to 12 months after acquisition of title by foreclosure (or deed in lieu) but retains 1% cap.
Association may demand a tenant pay rent to the association to satisfy delinquency for that condominium unit with written notice to the unit owner. Landlord/owner must provide tenant with credit for any amounts paid to association. Association can evict tenant that fails to comply.
Enforcement Mechanism – Amending s. 718.303, F.S.
Filling Vacancies on Board – Creating s. 719.106 (1) 6, F.S.
Vacancies are filled for remainder of the term by vote of majority of remaining directors, even if less than a quorum or only one director. In the alternative, the Board may hold an election to fill the vacancy.
There are many more provisions - click below for additional content and come back to this site for information on changes to the Homeowners' Association Act (Chapter 720, Florida Statutes) and updates directly from Tallahassee.
Continue Reading...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:
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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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:
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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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!
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.
In response to my last post (Records Retention: Risks of Failing to Comply with the Statute – Fines and the Division) I received a query from a subscriber as follows:
With regards to records retention, will you be able to address the paperless office and what records can be scanned and saved into a hard drive and what cannot. Also what is done with the documents that have been scanned?
In today’s age of technology and going green, I found the query to be so relevant to my Records Retention topic that I chose to respond via a formal post so all subscribers could benefit.
Both the condominium and homeowners statutes require Associations to maintain official records. They do not strictly require that this be done in paper format. Rather §718.111(12)(b) for condominiums provides:
The official records of the association shall be maintained within the state…. This paragraph may be complied with by having a copy of the official records of the association available for inspection or copying on the condominium property or association property, or the association may offer the option of making the records of the association available to a unit owner either electronically via the Internet or by allowing the records to be viewed in electronic format on a computer screen and printed upon request.
From the language above it is clear that a condominium can maintain its records electronically. Section 720.303(5) for homeowner associations on the other hand is not as clear:
The official records shall be maintained within the state and must be open to inspection and available for photocopying by members…. This subsection may be complied with by having a copy of the official records available for inspection or copying in the community.
It is important to note that while not clearly providing authority for maintaining electronic records, the statute does not explicitly prohibit it. As such, if done properly, going paperless in an HOA should not be a problem.
Any Association making the decision to electronically archive (“e-archive”) its official records must think through all aspects of the task before taking the first step toward going paperless. Below are some of the items to be considered:
The e-archive system permits inspections and copies by members within the time frames required by the statutes.
The documents are e-archived in a manner which does not permit manipulation of the final document.
If you have gone to any website or bought software for your personal use lately, you find that many links are to a PDF document and while you can read, print and search the document, you cannot readily alter its contents. This is the type of protection an Association wants for its documents. E-archiving the document in Word or Wordperfect format does not prevent the inadvertent “save” which saves over the original document such that the integrity of the Association’s official records would be compromised. Further, saving in Word or Wordperfect does not permit the capture of the signature(s) at the bottom of a letter, notice, memorandum, and so forth which are added to the final document after it is printed but before it is sent out. Since there are plenty of programs on the market that give you the protection of a PDF document, the Association should consider which is its best option (see next item).
Research and investment in the software (e.g., Adobe, back-up software) and hardware (e.g., scanners, computers, back-up drives) necessary to ensure the e-archive system is properly set up, updated/maintained, searchable, and readily accessible to ensure statutory compliance.
It is important to know that the equipment employed in the e-archive system could be subject to inspection/forensic examination as part of a lawsuit such that the items should purchased and maintained by the Association and/or its managers, and not individual Board members. See both upcoming posts (February and March 2010) for more on this topic.
Continue Reading...IRS Audit of City Practices Important Lesson for Community Associations. Improper Classification May Result in Penalties and Tax Liabilities.
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Many community associations classify maintenance personnel and others as "independent contractors" to avoid withholding federal income tax, dealing with workers' compensation insurance and the belief that such classification insulates the association from liability.
But calling someone an “independent contractor” does not mean they are not an employee. Many other factors must be analyzed. A recent preliminary report issued by the IRS in connection with an audit of the City of Deerfield Beach found that 42 workers were classified incorrectly. The IRS considers facts in three broad categories, including 1.) behavioral control 2.) financial control and 3.) the type of relationship. Within these three categories, you must look at the following criteria to determine employee or independent contractor status:
We encourage community leaders to discuss this issue with counsel in order to avoid complicated and potentially expensive future disputes.
You may be wondering why such a simple topic is being addressed in a blog after all isn’t records retention 101 the first thing an Association Board and its managers learn? The truth is I have found that many times the Association simply does not follow the statute and this can cause problems. I have had Boards tell me that former Board members or the prior management company did not return all the documents; the e-mails communicating with the managers were not kept; the final version of a document sent to the members was not kept; or we have documents dating back to the beginning of time. In many instances, the Board simply shrugs off the issue. The truth is not properly maintaining the Association’s records could result in:
In this post, I will address the first 2 items above; the next 2 will be addressed in my next post and the one after that will touch briefly on things the Association can do to ensure statutory compliance.
Statutory Fine
Whether a condominium or a homeowners association, both statutes which govern the retention and inspection of your records permit a fine to be levied against the Association for failure to timely produce records requested in an inspection. [§718.111(12)(c) and §720.303(5)] If the Association is not properly maintaining its records then each time a member asks to see the “missing” records the Association would be unable to produce them for inspection. In that instance, the Association has exposed itself a fine of $50 per day fine (up to the statutory cap) in damages to the member. There is also nothing which prohibits the same member from asking to see the records over and over again turning the Association’s non-compliance with the statute into a money making venture. This risk continues until the missing records fall outside the statutorily mandated retention period.
Division Investigation
A condominium member could file a complaint with the Division claiming the Association is not in compliance with the Condominium Act. An investigation by the Division is never welcome as there could be other issues the Division uncovers as part of its investigation which the Association was not even aware of. Assuming no other violations are found, the Association could still be subject to a fine imposed by the Division for the failure to properly maintain its records.
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Associations May Lose the Ability to Enforce Covenants and Restrictions as a Result of the Marketable Record Title Act (MRTA).
While the MRTA Statute was primarily intended to simplify real property transfers by eliminating “stale claims”, association leaders and homeowners must understand that the recorded covenants and restrictions governing their communities may be considered "stale" after a certain period of time.
I'm not referring to the duration of the covenants (usually a paragraph that says something to the effect that the covenants are effective for 50 years and then renew for successive periods of ten years) themselves. I'm talking about a law that may nullify the duties and obligations set forth in the recorded documents during the initial period (or a renewal, as applicable).
What would happen if your community didn't have enforceable covenants? Would homeowners pay assessments or maintenance fees (maybe some would - most probably would not)? Would homeowners build swimming pools (if permitted by code) in the front yard or build an addition that made their house look like a Victorian Mansion in a Key West style community (they may)? How would that impact everyone else? How would you feel if your neighbor had Al Goldstein's taste in art or the local Steelers fan decided his house must be black & gold and the association didn't have the power to do anything about it?
Section 712.02 of the Florida Statutes, in pertinent part, provides:
Any person having the legal capacity to own land in the state, who, alone or together with his predecessors in title has been vested with any estate in land of record for 30 years or more, shall have a marketable record title to such estate and land, which shall be free and clear of all claims except the matters set forth as exceptions to marketability in [F.S.] 712.03.
Accordingly, a person who has owned (or through his/her predecessors in title has owned) his/her land for 30 years or more has marketable record title free and clear of all restrictions (which includes Covenants) unless the restrictions are specifically disclosed and referenced in a document that passes title. The 30-year period commences upon the “root of title”, which (without being too technical) is basically the first deed to each lot that is transferred after the Covenants are recorded.
Don't worry - there is good news.
If you haven't discussed this issue with your Community Association Attorney yet, don't wait any longer. Find out what steps you need to take to protect and enforce the recorded covenants.
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Florida has distinct and separate laws regarding “homestead” or a “homestead exemption”.
One set of laws are the laws that protect homestead property from forced sale and from having a judgment or other liability result in a lien against the property. This exemption is governed by Article 10, Section 4, of the Constitution of the State of Florida, which exempts a homestead from forced sale and provides that no judgment or execution shall be a lien thereon.
Another set of laws regarding homestead are the laws which reduce the taxable value of residential real property by up to $25,000 for qualified residents. Pursuant to Section 196.031, Florida Statutes, everyone who qualifies for the initial homestead tax exemption is also entitled to an additional exemption of up to $25,000 on the assessed valuation greater than $50,000 for all levies other than school district levies.
In 1992 Florida voters approved the "Save Our Homes" Amendment to the Florida Constitution. If a homestead property qualifies for "Save Our Homes" protection, the yearly assessed value will not increase by more than 3 percent of the prior year's assessment (or the percentage change in the Consumer Price Index, whichever is less). While there are exceptions to the increases in valuation for new construction or improvements to the property, this protection results in thousands of dollars in savings for many Florida homeowners.
In order to qualify for the homestead tax exemption and "Save Our Homes" protection, there must be an actual intent to live permanently in a place, coupled with actual use and occupancy. Ultimately, all that is required to claim a homestead is that the person intends to reside on the property and in good faith makes the same his permanent home. The property appraiser makes a factual determination whether the property qualifies as the applicant's "permanent residence" for homestead purposes.
Improper, or fraudulent, homestead filings cost counties millions of dollars. Lori Parrish, the Broward County Property Appraiser, created a Fraud Unit, staffed with a combination of career law enforcement officers and knowledgeable appraisers in 2005 when she first took office. According to the Broward County Property Appraiser's website, as of mid-2008, the Fraud Unit investigated nearly 15,000 cases, which resulted in over $19 million in back tax liens and penalties. It also added more than $3 billion dollars worth of property into the tax roll due to fraudulent and unlawful exemptions. Investigators discovered many fraudulent exemptions as a result of reports from associations indicating which properties (units or homes) were leased or rented. The Lee County Property Appraiser, Ken Wilkinson, supports a requirement for community associations to supply information regarding leased or rented units to the local property appraiser's office.
How do you feel? Should community leaders and managers have an obligation to rat out owners leasing their properties (while claiming homestead)?
HB 115 Includes Major Changes for Condominium and Homeowners Associations; Disciplinary Actions Against Managers for Misconduct or Negligence; Provides for Suspension of Use and Voting Rights in Condominiums; Authorizes Filing Liens for Fines, Etc.
Representatives Ambler and Robaina filed HB 115, this week. HB 115 is a bill devoted to community association issues. The bill contains numerous provisions designed to improve community associations' collection efforts as well as protections for homeowners by mandating specific notice of the intent to take certain actions and requiring the ombudsman to create additional educational materials. The bill also addresses distressed condominium and bulk purchaser/subsequent developer issues.
The full text of the bill is 106 pages long.
Some of the highlights include:
The Community Association Leadership Lobby ("CALL") and other organizations are likely to publish more detailed information about the bill and its potential impact on community association operations. Please refer back to this site for further information pertaining to specific portions of the bill.
Appellate Court Confirms Right of Condominium Association Members to Cancel Cable Television Contracts Entered Into By Developer Prior to Turnover. Nontheless, exercising this right provided by Florida Law may not be so easy.
By now you probably heard that a Florida appellate court ruled a condominium association may use Section 718.302, Florida Statutes, to terminate a cable agreement entered into by the developer prior to turnover. Section 718.302, Florida Statutes, states that any contract made by a developer prior to turnover that provides for the “operation, maintenance, or management of a condominium association or property serving the unit owners of a condominium…may be cancelled by unit owners other than the developer…by concurrence of the owners of not less than 75% of the voting interests other than the voting interests owned by the developer..."
In Comcast of Florida, L.P. vs. L'Ambiance Beach Condominium Association, Inc., No. 4D08-2326 ,Comcast argued that cable agreements are not for the "operation, maintenance, or management" of the association or property serving the unit owners and thus, Section 718.302 did not apply. Comcast also argued that Section 718.115(d), Florida Statutes, which is specific to television programming, was the only statute that should apply to canceling cable agreements.
The court rejected Comcast's arguments. The court concluded that because the agreement provided for cable television service for all unit owners, the cost was part of the monthly maintenance fee, and the service provider was required to service and maintain the cable television, the agreement was one for the “operation, maintenance, or management” of the cable television services. Therefore, the agreement could be cancelled by a vote of 75% of the voting interests.
This case is beneficial to condominium residents in several respects, primarily as a result of the issues concerning ownership, use and control of the wiring throughout the property.
Nonetheless, an association in the Naples area understands how difficult it is to actually effectuate termination. The Association must pay Comcast $10,000 a month on behalf of 330 units, when many of them are not occupied and the owners are not paying assessments or maintenance fees. While Comcast's spokesperson said the company is reviewing the appellate decision, it did not necessarily agree that the decision applied statewide the Collier Citizen reported.
Another warning - look at the contract to see whether Florida Law even applies. Recently I have seen several contracts for television programming service (whether cable or satellite) and contracts for office equipment such as copiers and computers that contain what is known as a "choice of law" provision. This provision states that the contract is governed by the law of a particular jurisdiction (other than Florida) and any dispute regarding the contract (intending to include disputes over cancelation) must be brought and litigated in that jurisdiction.
Please let us know if you have questions regarding your contracts and do NOT sign any contract that is governed by law other than Florida Law.
Associations struggling with bad debt pushing the envelope trying to make up for deficits.
Earlier this week news reports showed homeowners living without water service to their homes. The association shut down the water service because the homeowner didn't pay maintenance fees for several months. The homeowners' attorney claims that the Board acted illegally. The Board, on the other hand, wants to put as much pressure on the owners to pay maintenance fees.
In an earlier post I described actions prohibited by Florida's consumer protection laws. I received quite a few comments indicating that associations regularly publish debtor lists to embarrass or harass the delinquent owners and associations have shut down cable or other television programming, restricted access to recreational facilities, deactivated entry devices for security gates to the property (forcing owners to use the guest gate) and stopped other services. But can an association in Florida shut down services when an owner doesn't pay?
Condominium Associations cannot prohibit owners' access or use of the common elements. Section 718.106, Florida Statutes guarantees every owner's right to use the common elements, which would include the recreational facilities (if part of the condominium), regardless whether they have fulfilled their responsibility to pay maintenance fees. However, in response to cries from community leaders throughout the State, legislation was proposed during the 2009 session to permit condominium boards to suspend certain rights of use as a result of non-payment. We are likely to see proposals in the 2010 session addressing this issue as well. Community leaders and managers can stay up-to-date with respect to legislative activities by participating in the Community Association Leadership Lobby (CALL), which is a Statewide not-for-profit advocacy effort that not only monitors, but participates in drafting legislation designed to improve association operations.
Homeowners' Associations do have support to suspend use of "common areas and facilities" if the governing documents are written in a certain way. Section 720.305, Florida Statutes contains the following provisions:
If the governing documents so provide, an association may suspend, for a reasonable period of time, the rights of a member or a member's tenants, guests, or invitees, or both, to use common areas and facilities and may levy reasonable fines, not to exceed $100 per violation, against any member or any tenant, guest, or invitee. A fine may be levied on the basis of each day of a continuing violation, with a single notice and opportunity for hearing, except that no such fine shall exceed $1,000 in the aggregate unless otherwise provided in the governing documents. A fine shall not become a lien against a parcel. In any action to recover a fine, the prevailing party is entitled to collect its reasonable attorney's fees and costs from the nonprevailing party as determined by the court.
A fine or suspension may not be imposed without notice of at least 14 days to the person sought to be fined or suspended and an opportunity for a hearing before a committee of at least three members appointed by the board who are not officers, directors, or employees of the association, or the spouse, parent, child, brother, or sister of an officer, director, or employee. If the committee, by majority vote, does not approve a proposed fine or suspension, it may not be imposed.
The requirements of this subsection do not apply to the imposition of suspensions or fines upon any member because of the failure of the member to pay assessments or other charges when due if such action is authorized by the governing documents.
The term 'common areas' is defined in the Homeowners' Association Act, but the term 'common facilities' is not described. The governing documents may define the term 'common area' more specifically and may even include (generally by an amendment) a definition of 'common facilities', but is the cable service either? What about water service? Are the pipes carrying the water or the wires carrying the television programming owned and/or maintained by the Association? What if the television programming is through a satellite system and you don't even have any wires in the common areas?
These questions have yet to be answered by an appellate court. An adverse ruling with respect to either of these types of actions exposes community associations (and their leaders under certain circumstances) to liability, so it is very important to consult with counsel before trying to shut off any type of service.
It is also important to note that the statutes specifically prohibits restricting access to the individual home. It says:
Suspension of common-area-use rights shall not impair the right of an owner or tenant of a parcel to have vehicular and pedestrian ingress to and egress from the parcel, including, but not limited to, the right to park.
Community leaders can and should be proactive when it comes to collecting assessments and maintenance fees, but they need to be concerned with liability issues. Therefore, I encourage you to consult with counsel to determine what, if any, changes to the governing documents will improve your position, as no association can operate without its primary (and generally only) source of revenue.
Child's Injury Demonstrates Need for Pool & Spa Safety Retrofit.
It took more than an hour for rescue workers to free a small child's arm from a pool drain yesterday. Newspaper and television reports showed emergency workers cutting through concrete and portions of a pipe to release the child. She was later taken to the hospital by helicopter. Luckily she was able to keep her head above water during the rescue effort.
Community association pools are often considered 'public pools' subject to regulation by Chapter 514, Florida Statutes. Pools operated by private condominium and cooperative associations with less than 32 units are generally exempt from certain regulations, but still have to comply with water quality standards. If the condominium or cooperative has more than 32 units, any pool or spa is considered a 'public pool', unless the recorded governing documents absolutely prohibit less than sixty (60) days rentals (or subleases in the cooperative context). Condominium and cooperative associations must comply with water quality standards and maintain the appropriate life saving equipment regardless of these exceptions. Condominium and cooperative associations desiring exempt status must file documents with the Department of Health and receive an initial operating permit.
The Department of Health inspects public pools, including those at condominiums, cooperatives and subdivisions, annually.
Homeowners' Associations do not enjoy the same types of exceptions and therefore must comply with requirements governing all public pools.
The Virginia Graeme Baker Pool and Spa Safety Act became effective on December 19, 2008. It requires public pool owners and/or operators to:
The Consumer Product Safety Commission (CPSC) publishes guidelines for approved retrofits and the Florida Department of Health publishes technical information and protocol for retrofits.
We encourage community leaders (and management) to work with reputable contractors to ensure that any modifications are done in compliance with the code. The Pool and Spa Industry published a warning indicating that some installations are not complete and noting problems with "sloppy" work or price gouging.
What has been your experience retrofitting pools and spas? Did you require a modification permit from the Department of Health (DOH)?
I often get questions from Boards asking what can be done to ensure compliance with the governing documents. My answer is always “Stop being Mr. Nice Guy!” If the violators do not believe there will be repercussions for their acts then there is no incentive for them to stop the behavior.
In essence, an Association needs to have a clear cut policy in place which sets forth the steps which will be taken when there is a violation of its governing documents or a failure to pay assessments. For the latter the Association should discuss the collection process with its collection attorney and create a system which initiates automatically when a payment is first in arrears rather six or twelve months down the road.
For a document violation, the Association should work with its attorney to create a system by which demand letters can be generated and deadlines calendared for further action. For example, if an owner has violated a provision of the governing documents the first step could be a letter from the Association seeking compliance within a specific number of days and advising the matter will be turned over to counsel for failure to comply. Should the owner fail to comply the next step would be to have the attorney issue the demand. This demand would also be time sensitive and would advise of the Association’s position that it will pursue the matter through arbitration, mediation or other legal proceeding and that same may result in an exposure to fees and costs to the owner. The Association could opt for a second demand by the attorney as part of its policy to serve as a “final notice.” Once the deadlines in the demands have lapsed the next step should automatically come in to play. This next step would be non-binding arbitration, pre-suit mediation and/or litigation depending on the nature of the Association (condominium v. homeowners) and the violation.
The theory behind such a clear cut procedure is not to promote wide-spread litigation but rather to deter the inappropriate behavior. Once the owners see that the Association is taking a hard line they will be less inclined to deviate from what is expected of them.
Court Rules in Favor of Use Blanket Receiver to Collect Rental Income When Investment Owners Fail to Satisfy Financial Obligations to Association.
The Miami Herald and Sun-Sentinel both reported that the Third District Court of Appeal denied a challenge to an Order appointing a 'blanket' receiver to collect rental income from tenants when the unit's owner failed to pay assessments. The owner challenging the Order owns several units, most or all of which are in delinquency status. The appellate Court denied a request for a Writ of Prohibition, allowing the Association to continue enforcement of the blanket order requiring rent to be paid to the receiver to satisfy outstanding assessments and other sums due.
This 'mini-receiver' program has been very successful in South Florida. The Order entered in the Verabella Falls Condominium Association case specifically requires the receiver to collect all rents and monies from tenants due to unit owners when the unit's owner is subject to a foreclosure action for the failure to pay past due assessments. It also permits the receiver to engage a property manager to offer unoccupied units for lease or rent when the unit's owner is a defendant in foreclosure proceedings filed by the Association.
Seminars will be held throughout the State to explain the success of these programs to community leaders. Please check this site for more information regarding those seminars and other educational events.
Several months ago, I posted an entry that discussed repair responsibilities after a casualty (see “What Happens when the Hot Water Heater Bursts?”). A similar (and equally important) topic involves incidental damages. That is, what happens when, during the course of performing its maintenance obligations, the association damages part of a unit that the unit owner is otherwise obligated to maintain?
Certainly, if the association is negligent in performing its maintenance and such negligence causes damage to the owner’s unit or personal property, the association is liable for the damage. But, what about situations where the association must cut into unit ceilings, floors or walls to repair common element pipes? The resulting damage to wood flooring, carpeting, tiling, paint or wallpaper is not the result of negligence in these instances. But is it fair for the unit owners to pay for the repairs when they had nothing to do with causing the damage?
Typically, a Declaration of Condominium (“Declaration”) will contain an “incidental damage” clause that provides the association must repair damages to a unit caused during the association’s repair of the common elements. However, not all Declarations have this language. In the absence of such language, unit owners are indeed responsible to repair damages to their unit and/or personal property caused by the association during the course of the association performing maintenance to the common elements. In fact, even with an “incidental damage” clause in the Declaration, absent negligence, the association is not responsible to repair or pay for damages it causes (during the performance of its maintenance responsibilities) to unit owner improvements or upgrades.
Presently, there are no appellate case decisions in Florida on this issue. However, there are several arbitration decisions on point. The Condominium Act requires that most condominium disputes go through the state’s mandatory non-binding arbitration program. Arbitration decisions are not “law” and a court is free to accept or reject their holdings. Still, arbitration decisions are persuasive authority and many Florida courts do follow them.
For example, in Salamone v. Golden Horn Condominium Association, Inc., Case No. 96-0370, the arbitrator did not require the association to replace owner improvements or modifications to the balconies, even though they were considered a part of the unit, and even where the association’s declaration contained an incidental damage clause, where the damages are occasioned by the association’s maintenance function. Similarly, in Harrison v. Land's End Condominium Association, Inc., Case No. 94-0298, a unit owner argued that the association was obligated to restore the balcony floor covering (i.e. tiling) after the same was destroyed during a condominium restoration project. In ruling that the association did not have to repair or replace the balcony tiling, the arbitrator concluded that the association would not have granted permission for improving the balcony floors if it was understood that all other unit owners would have to pay to replace the covering after proper work by the association.
The general tenor of these and other reported arbitration decisions appears to be that the unit owner is responsible to repair improvements or “upgrades” to the unit damaged by the association’s maintenance of the common elements. However, with respect to those items in a unit originally installed by the developer (e.g. original paint, wallpaper, carpeting and tiling), it appears that the Association would be responsible to repair them (as a common expense) if they are damaged during the process of association maintenance to the common elements.
Remember, this post deals strictly with normal maintenance and repair and has absolutely nothing to do with casualty repairs. Casualty repairs are governed by an entirely different set of rules in the Florida statutes.
Community Association Boards of Directors Must Safeguard Association Funds.
Recent Arrests and Reported Losses Demonstrate Lack of Financial Oversight.
Community Associations simply cannot function without adequate cash flow. Community leaders have a fiduciary obligation to monitor and protect the Association's funds. Handling the finances of the Association can be a daunting task, especially if the volunteer leaders do not have any background in accounting or finance. There are many state and federal laws governing budgeting, financial reporting, taxation and the like and a lack of sufficient oversight exposes the Association to loss from theft.
Community leaders cannot abrogate their responsibilities solely by hiring management or contracting with a bookkeeping service. Recently it appears there has been an increase in Associations that have been victimized by these professionals. The Sun-Sentinel reported some Associations lost hundreds of thousands of dollars as a result of alleged theft by an employee of the management company. One Association found out there were problems with its account when checks bounced. The management company had the authority to write checks, balance the books and make deposits. The directors of each of the Associations involved apparently did not review all the source documents to verify that payments were made and the balances on each of the accounts.
A similar situation occurred in Collier County, Florida. Authorities arrested a bookkeeper working for a management company for 21 counts of grand theft. The Naples Daily News reported that the bookkeeper made fraudulent bank transfers from the Associations' accounts into her personal accounts.
Communities comprised of older residents are especially susceptible to fraud schemes. The Charlotte Square condominiums in Port Charlotte, Florida reported over $1 million in losses.
Community leaders are encouraged to:
Always be alert to new or different spending patterns. While the volunteer leaders are not expected to become experts, they must have a basic understanding of the Association's finances, its expenditures and obligations, as well as seek out the relevant information to make informed decisions.
In my last post, I touched on an actual decision Humphrey v. Carriage Park CAI by the Division on this matter. I am now going to address a Legal Opinion regarding “Access to Association E-Mails” put forth by the Division on March 6, 2002. The Legal Opinion provides that if e-mails are used as a form of communication between the Board and manager to handle the operation of the Association then they are subject to inspection by owners in the condominium setting. Although this Legal Opinion does not address Associations under Chapter 720 specifically, the same reasoning should apply.
The key to this Legal Opinion is that the e-mails being addressed are not amongst the Board [as in Humphrey] but rather from members of the Board to its employee, the manager. There is no requirement that a Board interact with a manager solely during a Board meeting. If that were the case, the Association would never get anything done and this would be in contravention of the statute which vests the power to manage with the Board.
Reading this Legal Opinion in conjunction with Humphrey one might get confused as to why e-mails exchanged by directors on their personal computers or PDAs even if they address the operation of the Association are not “official records” while those to the manager are. The answer would appear to be in the reasoning put forth in Humphrey that e-mails amongst the Board are not written communication to the Association because there is no obligation on the recipient-director’s part to read the e-mails. There is however a duty on the part of a manager to read a communication from an agent (i.e., director) of his employer (i.e., the Association). It is a subtle difference but a difference nonetheless.
The Legal Opinion goes on to note that the Division has “no regulations expressly requiring archiving e-mails, but… if the e-mail correspondence relates to the operation of the Association property, it is required to be maintained by the Association, whether on paper or electronically….“ In other words once the Board communicates with its employees via e-mail regarding the operation of the Association those records are subject to the same inspection (and thus retention) requirements as all other “official records” of the Association.
Recently, Congress enacted legislation that requires all over the air broadcast television signals to be transmitted in a digital format. This means that the aerial, “rooftop” and “rabbit ear” antennas designed to receive analog signals will no longer be of any use. In fact, if your television set is not capable of receiving a digital signal, you will need to purchase a converter box (or perhaps a new TV) to be able to continue watching your favorite programs.
This change (from analog to digital) will undoubtedly result in more subscriptions to satellite (i.e. DIRECTV) service. Owners will begin installing antennas and other devices to their units and lots. Thus, boards need to be familiar with the applicable federal laws governing the installation of satellite antennas.
The FCC addresses this situation in its Over the Air Reception Devices (“OTARD”) Rule to Section 207 of the Federal Telecommunications Act of 1996. This rule prohibits a condominium or homeowner’s association from enforcing restrictions that unreasonably impair the installation, maintenance, or use of antennas used to receive video programming. The OTARD rule applies to video antennas, including direct to home satellite dishes that are less than one meter (39 inches in diameter), television antennas, and wireless cable antennas. The rule also applies to antennas that receive and transmit fixed wireless signals to access the Internet. However, the rule does not apply to amateur (“ham”) radio antennas, CB antennas or other antennas that do not receive video programming.
The OTARD rule applies to owners who place video (or Internet) antennas on property that they own or lease or on property that is within their exclusive use or control (such as a balcony or patio). The rule does permit an association to enforce reasonable restrictions that do not impair the antenna installation or the ability to receive a quality signal. Restrictions needed for safety or historic preservation, for example, would be acceptable and enforceable.
It is important to note that the OTARD rule and other FCC restrictions do not apply to the association’s common elements or common property. No owner has the right to install a satellite antenna (including wiring and related hardware), or anything else for that matter, upon, in or over the common elements or common properties. As such, boards may properly adopt and enforce rules restricting owners from installing antennas or other items on or across its common elements or common properties.
On March 30, 2009 the Division issued a Final Order in Humphrey v. Carriage Park CAI a case involving among other things a request for records where the owner sought “all correspondence, e-mails to or from the Department of Business and Professional Regulation.”
In its ruling the Division stated that there was no violation for failing to produce e-mails which never became the official records of the Association. The Division explained:
The Division in a footnote to its opinion stated a different decision could be reached “if the Association owns a computer on which management conducts business including e-mails…; or if e-mails are printed up and passed around for discussion at a board meeting.”
Given the ever changing trends in technology and the manner in which Associations conduct business, a Board needs to be wary that the status of e-mails as official records despite the Humphrey decision is still in flux. In other words, tomorrow, these very same e-mails which today are not official records could be. Also while a link has never been made equating IM or Twitter transcripts to e-mails this too could change as these forms of e-communication become more and more popular amongst Board members.
For more information on the role of e-communications and Association look at my May 12, 2009 post or the recent article by the Sun-Sentinel titled Boards a-Twitter about laws.
SB 714 Designed to Clarify Insurance Requirements & Provide Relief to Homeowners by Delaying Fire Sprinkler Retrofit.
Condominium Unit Owners Required to Maintain Insurance Coverage.
Governor Charlie Crist vetoed SB 714. Too bad - SB 714 would have relieved Condominium Unit Owners from maintaining individual property insurance and likewise relieved Associations from the burden of requesting insurance certificates.
Governor Crist expressed his concerns regarding the fire sprinkler retrofitting extension in his veto letter, citing safety risks. This means that condominium associations throughout Florida will have to retrofit their buildings, or partially retrofit (if authorized by membership vote as set forth in Section 718.112(2)(l), Florida Statutes) by December 31, 2014, something that struggling condominium associations cannot afford at this time.
Read Governor Crist's veto letter (click here).
Gary A. Poliakoff explained the negative impact of the veto in correspondence to the Governor (click here to read that letter) highlighting how significantly condominium and community associations have been hurt by the mortgage foreclosure crisis.
Consequently, the following insurance requirements, largely resulting from 2008 legislation, are still in effect:
A press conference is being held today, June 4, at the South County Civic Center located at 16700 Carter Road, Delray Beach, Florida at 1 P.M. Senator Deutch and Representative Kelly Skidmore will address legislative issues, foreclosures and ways to confront association financial losses. CALL urged Senator Deutch to ask the Speaker of the House and the President of the Senate to call a special session to address these important problems.
Community leaders are encouraged to contact their elected representatives and express their concerns.
Florida Law Governs Rules or Covenants Prohibiting Solar Collectors or other Renewable Resource Energy Devices.
Many community leaders may not be aware of Section 163.04, Florida Statutes which prohibits enforcement of restrictions precluding homeowners from obtaining energy from renewable resources.
Florida's legislators made sure this law applied to Condominium and Homeowners' Associations with amendments shortly after the Taylor v. The Ridge at the Bluffs HOA case.
Owners of condominium units are specifically permitted to install solar collectors or energy devices, so long as the installation is wholly within the boundaries of the unit and does not involve patio or balcony railings. The Statute says, in relevant part:
A deed restriction, covenant, declaration, or similar binding agreement may not prohibit or have the effect of prohibiting solar collectors, clotheslines, or other energy devices based on renewable resources from being installed on buildings erected on the lots or parcels covered by the deed restriction, covenant, declaration, or binding agreement. A property owner may not be denied permission to install solar collectors or other energy devices by any entity granted the power or right in any deed restriction, covenant, declaration, or similar binding agreement to approve, forbid, control, or direct alteration of property with respect to residential dwellings and within the boundaries of a condominium unit. Such entity may determine the specific location where solar collectors may be installed on the roof within an orientation to the south or within 45° east or west of due south if such determination does not impair the effective operation of the solar collectors.
While many states have adopted similar legislation to encourage the use of renewable energy sources, it seems that community association leaders have yet to embrace improvements requested by homeowners within the communities. In fact, there is an effort to create federal regulations securing home and/or unit owners' access to renewable energy improvements and the public is critical when HOA or Condo Boards reject homeowner requests based solely on aesthetic grounds.
On the other hand, the Philadelphia Business Journal reports that communities with energy efficiencies built in- including solar panels, have retained value, even in this market. Lower utility bills is an attractive feature that causes the property to stand out from the competition.
The boundaries of a unit vary from condominium to condominium. Boundaries are described differently in similar types of properties - so a ruling in one community does not mean that another association cannot prohibit owner modification requests. Community leaders are encouraged to consult with counsel to determine the scope of the Association's rulemaking authority before a dispute arises.
Additionally, condominium associations may take advantage of energy saving devices to reduce expenses. The Condominium Act was amended to permit the installation of solar collectors and other energy efficient improvements. Progressive leaders of community associations will discover long-term savings and increase property values at the same time.
For more information and examples of great projects see 'Green' Practices to Ease Future Financial & Budgeting Concerns.
State of Florida’s Division of Administrative Hearings finds that Industry Bulletins and Technical Advisories issued by Bureau of Elevator Safety are not improperly adopted rules.
Retrofits required for Universal Elevator Keys, Automatic Fire Alarm Initiating Devices and Replacement of Single Wall Hydraulic Cylinders.
A state or municipality may require building owners or occupants to make improvements essential to life safety. The public has a right to the safest method of protection and the government generally has the duty to provide such protection. Accordingly, a local government may require reasonable changes in buildings previously built in order to comply with new codes and standards for the protection of health and safety, notwithstanding the fact that the buildings and improvements, at the time of construction, complied with the regulations then in effect.
A factor to be considered when analyzing the validity of regulations requiring changes in existing buildings, is whether the public welfare demands retroactive application, and whether the property owners are unreasonably burdened vis-à-vis the public benefit. The question then is whether the burden upon the property owner is so great compared to the public benefit that the ordinance must be held invalid. Courts have found that there are "no hard and fast rules" in these cases.
A court will analyze the application of the ordinance or code from a cost-benefit perspective and determine whether the ordinance is reasonable as applied to existing buildings or whether the ordinance deprives the owners of their property rights without due process. As you might imagine, on life safety issues, the courts will ordinarily be inclined to rule in favor of the exercise of the government police power.
Government agencies themselves are often at odds with each other with regard to enforcement of codes and retroactive application of building safety requirements. Recently the City of Miami Beach was at odds with the Department of Business and Professional Regulation, Division of Hotels and Restaurants over enforcement of Industry Bulletins and Technical Advisories issued by the Bureau of Elevator Safety requiring compliance with standards published by the American Society of Mechanical Engineers.
The Department of Professional Regulation indicated that it specifically intended to “require the single wall hydraulic cylinder safety provision of the ASME A17.1, 2000 Code [Section 8.6.5.8] to be enforced as part of the annual elevator inspection.” It indicated that this provision was “so important to life safety that corrective action is required for all existing single wall hydraulic cylinder elevators.”
Extensions and variances are available under certain, but limited, circumstances. Please contact us if your community needs advice how to handle an adverse Elevator Inspection Report.
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In these pressing economic times, Board members are trying to do whatever it takes to save money. While this mindset is certainly prudent, Boards need to be careful about being "penny wise and pound foolish." Clients regularly call and ask what they can do to stop owners from violating the association's use restrictions. This inquiry is typically followed with a caveat that the Board cannot spend a lot of money on legal fees to procure compliance. In other words, get these people to comply with our rules but do it cheaply. Hence, the fining process.
Imposing fines may indeed be an inexpensive alternative to filing lawsuits or arbitration petitions but does it actually help in curing violations or deterring owners from violating the association's use restrictions?
First, associations cannot even consider this option unless the authority to impose fines is found within the governing documents (e.g declaration of condominium, declaration of restrictive covenants or the bylaws). If the board indeed has the power to impose fines, it must establish a separate (fining) committee. The committee must consist of at least 3 owners who are not board members, not related to board members and do not live in the same household as a board member. Then, before any fine may be imposed, the Board must provide the offending owner with reasonable advance notice (i.e. 14 days) of the date, time and location for the owner to appear before the fining committee. The offending owner must be given the opportunity to explain to the committee why a fine should not be levied. If the fining committee determines not to impose a fine, no fine may be imposed. The Board cannot overrule the fining committee and levy a fine where the committee votes not to impose a fine.Even if the committee votes to fine an offending owner, the fine cannot exceed $100.00 per day for a continuing violation and no fine in a condominium may exceed $1,000.00 for any single violation. Homeowners associations actually have the ability to levy fines in excess of $1,000.00 but may only do so if the specific fine amount is described within its governing documents.
But, do fines really work? In both condominiums and homeowners associations, no fine (if unpaid) may become a lien against the owner's home or unit. Therefore, if a unit owner fails to pay a fine, the association’s recourse to collect the fine would be to file a claim for damages in small claims court. Also, and perhaps most importantly, the imposition of a fine does not automatically cure the underlying violation. A fine does not force the owner to comply. Indeed, many owners would gladly pay a $1,000.00 fine in order to keep their dog or continue with that fourth-story addition on their home. Thus, while imposing fines may seem like an attractive and cost-effective solution, it does not guaranty an owner's compliance with the association's governing documents. If an owner refuses to abide by the rules, the Board's only realistic option may be to file suit (or an arbitration petition as the case may be) and seek the entry of an injunction against the non-complying owner. If successful, the association is entitled to an award of its reasonable attorney's fees and costs. Then, if such owner fails to comply, the judge may levy sanctions, hold the owner in contempt of court or ultimately issue a bench warrant for the owner's arrest.
So, does the fining process really work?
Magazines/Newspapers, TV shows, movies, and radio programs are all a buzz about people communicating instantly through Twitter, IM, e-mails and the like. Too often we are tempted to shoot off an email or see someone on IM and shoot them a quick message and this temptation is seeping into the way in which Board members communicate with each other.
Can these communications be considered Board Meetings?
Florida case law has yet to answer this question. Both Florida Statutes Section 718.112 and 720.303 provide that a Board meeting exists whenever a quorum of the Board meets to discuss Association business. Merriam-Webster defines meet as “to come into the presence of”; “to come together with especially at a particular time or place”; “to come into contact or conjunction with.” The term “meet” originally required in-person meetings and has since been expanded to include meetings conducted telephonically.
Without any legal precedent to guide us, we need to look at the word “meet” as a communication of the Board which provides for instant responses/interactions amongst the Board members. Accepting that, e-mails should not be considered a meeting since responses could take minutes or hours or even days to be sent. For the responses to be instantaneous, the Board would have had to agree to all be available via e-mail at a set date/time. IM on the other hand, is more along the lines of having a conference call and therefore could more appropriately be deemed a Board meeting when a quorum of the Board is present in the IM chat.
Even with the above delineation, the Board needs to be very careful to ensure that when a quorum of the Board is communicating outside of a properly noticed meeting that no decisions (no matter how large or small) are made. This avoids arguments in litigation that the action of the Board was improper and therefore invalid.
Stay tuned, my next posts will touch on whether these items are considered “official records” of the Association.
As you have probably seen on T.V. or read in the newspapers, this is Earth Week. That may, or may not, matter to you as an individual, as a community leader or as a property manager.
Regardless of your individual feelings about environmental concerns such as climate change or energy policies, smart decision making mandates consideration of comprehensive planning and utilization of techniques to glean cost savings associated with improving energy efficiency while reducing energy, waste and water consumption costs. Thus, every community leader, member of a Board of Directors, and property manager should become aware of the laws, programs and opportunities available to reduce expenses of the community, especially in light of budget shortfalls.
While there may be a mind-set that believes it is too expensive to be “green”, that is not necessarily the case and, in fact, the opposite may be true. Community Associations may not be able to afford not to be “green” in light of the long-term cost saving opportunities.
H.B. 7135, creating the 2008 Florida Energy and Economic Development Act, received unanimous approval from the legislature last year. Goals of the legislation include stimulating the economy, reducing pollution and increasing energy efficiency (of course) in an effort to propel use of alternate energy and create “green” industry jobs. The legislation specifically imposes efficiency requirements for state buildings and directs the state to purchase fuel-efficient vehicles. It also continues state programs for solar energy rebates and creates funds for renewable energy grants. The State of Florida allocated $5 million in rebates to property owners that purchased and installed solar energy systems in 2007 & 2008. Changes to the Florida Administrative Code reduce connection costs associated with solar and other renewable energy systems as well as credit (offset) costs for creating power. Condominium Associations, therefore, may not only reduce their energy consumption costs by installing renewable energy devices, but actually may create a new revenue stream from energy credits. Condominium Associations are uniquely positioned to take advantage of these rebates, cost saving techniques and possible new revenue streams as a result of Section 718.113(8), Florida Statues, which provides:
Notwithstanding the provisions of this section or the governing documents of a condominium or a multicondominium association, the board of administration may, without any requirement for approval of the unit owners, install upon or within the common elements or association property solar collectors, clotheslines, or other energy-efficient devices based on renewable resources for the benefit of the unit owners.
There are plenty of examples of the “business case” for simple retrofits and changes in practices. Building maintenance and repair is an ongoing process and long-term considerations have proven highly beneficial. Some low cost improvements have a remarkably high return and implementation of “sustainable strategies” when tackling major renovation/repair projects are likely to increase the value of the property in addition to lowering operating costs. Some examples include:
FBI Field Office, Chicago, Illinios:
Total improvements and modifications lowered operating costs by more than $400,000.00 annually. Minor changes, including replacing exit signs and sealing connections for a cost of less than $10,000 resulted in annual savings of more than $25,000. The property owner was “paid back” for that investment in 4 months. An energy audit and resulting changes to the HVAC system at a cost of approximately $15,000 results in an annual savings of over $50,000! Simple landscape changes resulted in lowering water bills by $12,000 annually. How many of us would reject a 400% return on an investment?
USAA Realty Company:
Lighting retrofits, installation of motion sensors instead of timers, installation of LED exit signs and window tinting at a cost of approximately $140,000 resulted in $71,000 annual savings. The property owner was “paid back” for the costs of the improvements in less than two years and now enjoys those savings perpetually.
Adobe Towers / Multiple Hi-Rise Office Buildings:
Major improvements cost initially over $1 million, but rebates reduced those costs by approximately $300,000 and the annual savings of $900,000 increased the value of the building by over $10 million!
Can your community afford not to reduce its future expenses?
I encourage you to share experiences regarding efforts on your part or the part of your association to improve energy efficiency, reduce waste and reduce water consumption, both positive and negative. Please check back for further information, tips and resources or contact us for guidance.
Yesterday Senator Fasano moved to amend SB 1012 to eliminate submerged land lease fees for single-family and multi-family residential docking facilities.
If approved, not only would the existing exemption for single-family homes continue (and provide additional benefits to owners of larger single-family properties), but multi-family residential properties will not have to pay submerged land lease fees in the future. Community Associations Institute ("CAI") a national non-profit organization dedicated to enhancing community association operations, primarily through outreach, education and advocacy efforts, led the charge against fee increases for community associations.
The amendment is scheduled to be considered on Thursday, April 16, 2009.
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Proposed SB 1012 would require rules to impose increased fees for submerged land leases.
SB 1012, filed by Senator Constantine along with the Committee on General Government Appropriations and the Committee on Environmental Preservation and Conservation seeks the imposition of new rules governing submerged sovereign land leases. If passed by the legislature, the Board of Trustees of the Internal Improvement Trust Fund would adopt rules that, among other things:
Some community associations are justifiably concerned about the possible increased rates, especially considering the current economic climate. The President of a condominium in Tierra Verde indicated fees payable to the State would increase by more than 400% for her community.
We encourage community leaders to evaluate the impact of passage of this bill upon their communities. In this day and age of budget shortfalls, every increase in expenses impacts Association operations. It is also important to determine whether fee increases may be passed on to dock users or must be absorbed as a common expense.
Recently I was asked whether it would be a conflict of interest for a director to serve on both an association and master association at the same time. Assuming the governing documents of both the association and master association do not prohibit this, one must look to Florida Statutes to determine permissibility.
Florida Statute 617.0802 provides a basic set of criteria for a person to be eligible to sit as a director on a board. The most important thing to know though is that it defers to the governing documents of the corporation for limitations on who can hold such a position. In other words if an association’s governing documents require a person be a member of the association to serve on the board then it trumps the premise under Section 617.0802(1) that a director need not be a member of the corporation.
In a Homeowner's Association setting [720.306(9)] all members of the association shall be eligible to serve on the board of directors while in the Condominium setting [718.112(2)(d)(3)], directors can be unit owners or other eligible persons. Ownership of a property is not required by statute, but the governing documents may impose ownership or membership criteria.
Once a director, the person shall pursuant to Florida law [617.0830; 718.111(1)(d)] discharge his or her duties:
Director conflicts of interest are also addressed by Florida Statute [617.0832]. Whenever there is a relationship or interest between a director of an association and a person or entity the association is doing business with there exists a conflict of interest. The conflict in and of itself does not or invalidate the agreement if:
Going back to the question at hand, it appears that there is no language in the Florida Statutes which prohibits a director of a master association from sitting on a sub-association’s board or vice versa.
For information on master associations and their elections, read Master Associations Required to Elect Board by Joe Adams.
Economic Stimulus Package Changes COBRA and mini-COBRA Procedures and Rules.
On February 17th, 2009, President Obama signed a $787 billion economic stimulus plan known as the American Recovery & Reinvestment Act of 2009. Changes to both federal COBRA and state ("mini-COBRA) regulations may require action on the part of employers. The Act includes Federal funds to subsidize sixty-five (65%) percent of COBRA or state continuation (Mini-COBRA) premiums for up to nine months. Eligibility is limited by income.
Federal COBRA impacts any employer with twenty (20) or more employees. Many community associations do not have this many employees and therefore are not concerned with the changes.
However, in Florida, entities with less than twenty (20) employees are subject to "mini-COBRA" regulations. Any employees "involuntarily separated" from employment between Sept. 1, 2008, and Dec. 31, 2009 qualify for the subsidy. Employees who lost their jobs between Sept. 1, 2008, and February 19th, 2009, but failed to initially elect COBRA because it was unaffordable, have sixty (60) days to elect COBRA and receive the subsidy, however, they will have to pay the full premiums for the coverage period from the date of separation to the date of enactment of the law.
If the employee elected to take COBRA on or after September 1, 2008, they will be eligible to receive the subsidy prospectively for up to the maximum nine-month period.
Associations with employees are encouraged to confirm that their payroll vendors or COBRA administrators have systems in place to ensure compliance. Consultation with legal counsel is also recommended.
A blog reader recently posed a question containing the following statement:
We are a HOA of 8000 parcels, and we do not have Statutory required membership or developer reserves.
Membership (mandatory or voluntary) in an homeowners association (HOA) is not regulated by Statute. Section 720.301(9), Florida Statutes defines an "homeowners' association" or "association" subject to the requirements of Chapter 720 as:
... a Florida corporation responsible for the operation of a community or a mobile home subdivision in which the voting membership is made up of parcel owners or their agents, or a combination thereof, and in which membership is a mandatory condition of parcel ownership, and which is authorized to impose assessments that, if unpaid, may become a lien on a parcel. The term "homeowners' association" does not include a community development district or other similar special taxing district created pursuant to statute.
In the event the association is considered a "homeowners' association" pursuant to Chapter 720, Florida Statutes and the budget contains reserve accounts (as defined therein), those reserves must be determined, maintained and waived in compliance with the statute.
More information is available about governance of homeowners' associations from Florida Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares and Mobile Homes.
Attention Residents in Broward, Palm Beach and Miami-Dade Counties:
Broward County's Permitting, Licensing and Consumer Protection Division issued a warning to residents not to be misled if they receive a letter from “National Department of Renewable Resources”. Apparently this organization says it is authorized to obtain compensation for recycling shortfalls.
This organization claimed that State of Florida passed a law that allows fines to be levied against homeowners who fail to follow the mandatory recycling policies enacted by Broward, Palm Beach and Miami-Dade counties. Full information about Florida's recycling laws may be obtained from the Florida Department of Environmental Protection.
This is a question I am asked seemingly on a daily basis. It has some variations in format; perhaps involving a burst pipe, toilet/shower leak, or air-conditioner drip pan overflow but the theme is always the same. That is, something involving the unexpected flow of water happens within a unit which causes damage to other units, typically the unit(s) located directly below the water event, and to the common elements. Who is responsible to repair the damage? Who is responsible to pay for the repairs?
Water intrusion events like these are usually considered casualties. A casualty is something that happens unexpectedly, through no fault of anybody. Hurricanes, tornadoes, strong storms and other Acts of God are easy examples of casualty events. A burst pipe within the ceiling, floor or wall is also, most often than not, a casualty because no one can accurately predict when a pipe will fail. Of course, this will change where, for example, a unit owner or the association is aware of an existing pipe leak and does nothing to fix it. Similarly, where a condominium association has a rule requiring owners to replace their hot water heaters at least once every 10 years, the 11 year-old hot water heater that bursts will probably not be a casualty event.
Continue Reading...Much has been written about the insurance requirements for condominium associations and condominium owners. The Florida Condominium Act has been amended significantly over the years in this regard. Major changes resulted from the 2003 legislative session, by defining the terms “building”, “condominium property,” “insurable improvements,” and other terms contained in declarations of condominium when dictating the scope of property covered by the master policy. More recent amendments, some of which effective January 1, 2009, caused a whirlwind of controversy over unit owner coverage mandates and provisions allowing associations to “force place” coverage.
On the other hand, the Florida Statutes pertaining to Cooperative Associations have not received much attention, nor is there any statutory guidance for the scope of coverage required other than a reference in Section 719.104(3), Florida Statutes, to the obligation to procure “adequate insurance” to protect the association property. Consequently, the directors of a typical Cooperative Association containing multi-family buildings (whether high rise or low rise buildings) are often offered the same products that are available for Florida Condominium buildings and properties, regardless of whether the coverage is appropriate.
As a preliminary matter, there is a fundamental difference between a condominium and a cooperative property, even if the buildings are exactly identical. In a condominium, the unit owners (often referred to as “Members”) actually own a parcel of real estate subject to individual ownership - the condominium unit (as defined by the Declaration of Condominium). Those owners (Members) also own a share of the common elements. In a cooperative, the corporate entity (the Cooperative Association) is the usually the sole owner or lessee of the entire property, which includes the land and all buildings and improvements upon the land, including the individual units. The owners (often referred to as “Stockholders”, “Shareholders” or “Members”) own a share of the corporation and are assigned the exclusive use right to one unit. Thus, the “cooperative parcel” is defined as the share or other evidence of the ownership interest in the corporation (such as a membership certificate, stock certificate or the like) along with the Proprietary Lease, Occupancy Agreement or other muniment of title or possession to the unit itself.
The insurance products designed for condominium properties may not be “adequate” for cooperative properties, as the coverage required for a cooperative is dictated by the governing documents of the Cooperative Association. The Proprietary Lease (or Occupancy Agreement), Bylaws and other governing documents should clearly delineate the responsibilities associated with maintenance and insurance of the cooperative property, allocating certain portions of the property to the Association and others to the Shareholders. While the insurance industry appears to address the differences between various types of properties it is abundantly clear that many association leaders are not aware of the differences, nor able to ensure the policies they purchased are “adequate”, leaving themselves exposed to liability for damages in the event of uninsured losses.
Cooperative Association Boards are encouraged to undertake a comprehensive review of their insurance policies and the coverage afforded by each policy. Consult with counsel to determine whether amendments to the governing documents or changes in coverage are necessary or advisable under the circumstances.
Fannie Mae recently announced several changes to its standards and reintroduced its Project Eligibility Review Service (PERS).
Link to PDF: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/condogls/pdf/projectreviewsummaryfaq.pdf
PERS review is required for new and newly converted condominiums in Florida, while optional in projects located elsewhere throughout the United States. Fannie Mae likewise announced an intention to publish a list of ineligible projects, which are those projects failing the PERS process.
It will be much more difficult for purchasers to obtain mortgage financing if the mortgage cannot be sold on the secondary market to Fannie Mae and the like. Its requirements include the following:
Thus, changing §718.111(11), Florida Statutes to eliminate mandatory unit owner insurance coverage may not necessarily change the fact that more condominium unit owners (in Florida and elsewhere) will purchase said coverage. Lenders that want to offer financing compliant with Fannie Mae standards will require new purchasers to provide evidence of personal coverage (contents coverage, generally a HO-6 policy), much like the requirement for borrowers purchasing single family homes.
Moreover, efforts to change lender responsibility for condominium assessments and dues after mortgage foreclosure are likely to fail if those changes would preclude lenders from offering the attractive rates and down payments available for Fannie Mae backed mortgages.
Many Associations have just completed their election season and find that a person or persons newly elected to the Board are involved in a case being defended or prosecuted by the Association. Now what? Clearly, a conflict of interest exists but participation in a lawsuit against the Association is not one of the factors that makes you ineligible to sit on the Board. Therefore, the person(s) can take their seat on the Board so long as every other aspect of the election process was valid.
The Board however still needs to take measures to ensure that the strategy and legal opinions obtained from counsel on behalf of the Association continue to be privileged. This can be accomplished in a few ways. One option is for the person(s) with the conflict to recuse themselves from participating in any meeting/vote regarding the lawsuit. Their fiduciary duty to the Association would be fulfilled but what if that means there is no quorum of the Board to make a decision? Also, they would have to know of the meeting in order to recuse themselves and this would tip them off that something was up?
The better alternative is to have an open Board meeting for the sole purpose of creating a committee of members of the Board who do not have the conflict of interest. This meeting would be open to all members of the Board and the Association. The persons with the conflict should be allowed to vote on the issue and their fiduciary duty should dictate that they vote in favor of such a committee. During this meeting the Board should also vest all powers necessary to allow settlement or resolution through appeal in the committee. Otherwise, if the committee continually had to return to the Board for more authority, the person(s) with the conflict would be able to deduce what was going on and the creation of the committee would be for naught.
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