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

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.

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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.  

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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

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The Miami-Herald reported a story about the widow of the Nova Southeastern University 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:

1. Make sure the governing documents of the community specify that any information obtained in a background investigation cannot be shared;
2. Make sure the governing documents advise the owners that any investigation or background checks are solely for the benefit of the association (as the association cannot act as a guarantor);
3. If the community does engage in background checks, make sure those documents are safeguarded and the governing documents authorize the board of directors to reject certain applications for tenancy approval based upon articulated justifications; and
4. Review transfer approval procedures with association counsel - you may be surprised to learn your community does not have many options, even if the applicant does not seem 'suitable' for one reason or another.

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! 

• How will you protect your association from wage and hour claims?
• Do you have time cards or require employees to "clock" in or out?
• Do your employees often work during non-business hours?  How do you account for that time?
• What is your association's policy on overtime or "comp" time?
• Do your employees have access to the association's office, unit owner files, keys to units or the Internet?
• Do any of your employees ever enter any of the units when the owner isn't present?
• Do your employees leave the property as part of their job (trips to home depot, bank runs, etc.)?
• What is your policy on allowing employees to perform work for individual unit owners?
• Do any of your employees have use of a unit as part of their compensation package?  If so, what policies are in place in that regard?  What if someone is hurt in that unit?  What if there are damages to the unit?  What happens if the association wants to terminate that employee?
• Does your community classify the maintenance person, landscaper, office assistant, bookkeeper or manager as an independent contractor?  You may be surprised to learn that such classification may not protect you from employment related claims.

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.

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Pinellas County Assists Homeowner With Battle Against Homeowners Association Over Operation of Assisted Living Facility.

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?

• First - community leaders and managers must be aware that fair housing laws may impact enforcement or other board decisions.
• Second - it is important to create fair housing policies and procedures to evaluate fair housing claims, requests for accommodations or modifications and the transfer approval process.
• Third - do not treat fair housing investigations lightly.  Work with counsel and the investigating office - the investigators attempt to conciliate these matters before issuing any findings.
• Fourth - review your insurance policies.  Many policies do provide coverage for defense and other costs.

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.

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

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

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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:

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

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

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

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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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"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:

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.

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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.

• Individual director liability for failure to maintain or destruction of official records is limited to cases where there is intent to harm the association or one or more of its members.
• Association not liable for unit owner misuse of information obtained from official records.
• Exempts personnel records (disciplinary, payroll, health and insurance records) from unit owner access.
• E-mail addresses, telephone numbers, emergency contact information, and any unit owner contact information other than the addresses to send notices are exempt from unit owner access.
• Association’s electronic or computer security data, including passwords, software and operating systems are exempt from unit owner access.

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.

• Allows suspension of use rights if owner is more than 90 days past due. Cannot suspend use of limited common elements, utility service, parking spaces, elevators or impede access to/from unit.
• Requires board to vote on suspension/fine at duly noticed board meeting and advance notification to the unit owner.
• Allows association to suspend voting rights after 90 days of non-payment.

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.

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

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

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

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

The Master Declaration said (in part) the following:

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

 The Sub-Association Declaration said (in part):

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

Seem pretty similar, right?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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! 

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As promised in last time, this post continues to address issues regarding an Association’s failure to comply with the statutory mandates of records retention. This post is a bit more intense as there are exceptions to consider.

 Spoliation/Presumption Against the Association in a Lawsuit/Arbitration
If the missing documents are important to a case regardless of who the opposing party might be (e.g., member, contractor, manager, etc.), the Court could find that the Association spoliated the evidence. This is a fancy way of saying the Association destroyed evidence. This finding could be issued regardless of the intent of the Association. After a finding of spoliation the Court could instruct a jury that if the evidence were not destroyed it would serve to show that the Association conducted itself inappropriately as it pertains to the issues in the case. In essence the Association is then burdened with having to show it did nothing wrong. This does not always work and a finding could be made against the Association such that it would loose the case. In addition to the presumption against the Association a Court could also sanction the Association with the sanction taking the form of the striking of pleadings (claims or defenses depending on the role of the Association in the case) in addition to a monetary fine (commonly referred to as a sanction).

Evidence Used Against Association in a Lawsuit/Arbitration
If the Association retains records past the time mandated by the statute could this could also work against the Association. The Association should create a succinct procedure for destroying records which exceed the 7 year retention required for most records. The only exception to this is if a case is already pending against the Association or if the Association believes a case could be filed against it on a specific issue which is the subject of the records which are subject to destruction. The Association should speak to its attorney if it is not certain if this “exception” applies at any given time.

Knowing there is a rule and an exception is great but not understanding why they are important does not help the Association at all. The problem with keeping records past the mandated time when the exception is not present is that at time those records could show the Association did something inappropriately. For example, assume the governing documents require a 75% member vote to be amended. In 2000 the Board put an amendment prohibiting the over-night parking of motorcycles at the Association up for a membership vote. The Association voted to pass the amendment by 73% but due to a counting error it was believed the full 75% vote had been obtained. Based on the error, the amendment was recorded and became a part of the Association’s governing documents. In 2009, a new member of the Association begins parking his motorcycle over-night at the Association. The Board makes a demand which the member refuses to comply with and legal action is taken. As part of discovery, the Association is asked to produce all records regarding the amendment of the documents. The Association having not discarded any of its records since its creation in 1980 produces all records to counsel who is required to produce those records to the member. The ballots and voting materials show the vote was 73% and the amendment never passed. The Association looses its case and could have to pay the legal fees and costs incurred by the member in defending against the case. On the other hand if the records had been properly destroyed (1 year for the ballots and 7 years for all other pertinent records) there would have been no way to show that the vote was not the 75% mandated by the governing documents, the amendment would have been upheld and the Association would have prevailed.

You may ask, why the records were produced if the Association was not required to keep them? Simple, once the Association determines records pertinent to a case were not discarded, it cannot then destroy them as this could lead to a claim of spoliation. The Association can also not ask its counsel to destroy the records or otherwise refrain from producing them as that would result in an ethical violation of the rules governing attorney conduct which could result in both a claim of spoliation against the Association and disciplinary action against the attorney.

Do not despair remember I promised that the third post on this issue would give Associations guidance on how to limit their exposure. 

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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.

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IRS Audit of City Practices Important Lesson for Community Associations.  Improper Classification May Result in Penalties and Tax Liabilities. 

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:

• The existence and specific terms of a contract.
• When and where the work is performed.
• Who owns the tools and equipment that are used.
• What degree of instruction is given to perform tasks.
• Is the service provider subject to a performance evaluation system.
• Is training provided to the service provider.
• Are expenses reimbursed.
• Is the service provider permitted to provide services to others, as well.
• What is the method of calculating payments to the service provider.

 We encourage community leaders to discuss this issue with counsel in order to avoid complicated and potentially expensive future disputes.

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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:

• Statutory Fine
• Division Investigation
• Spoliation/Presumption Against the Association in a Lawsuit/Arbitration
• Evidence Used Against the Association in a Lawsuit/Arbitration

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. 

• First, most of the time MRTA does not impact condominiums or condominium association covenants and restrictions, but there are some cases where MRTA may apply if easements or other restrictions are not referenced in the Declaration.  
• Second, there are procedures set forth in the Statutes to preserve and protect covenants and restrictions that have not yet expired.  Handling this issue while the covenants are still in effect saves a lot of hassle (and expense) later on.
• Third, there are also procedures for homeowners and homeowners associations to follow if the thirty (30) years has come and gone already to revive or renew the covenants and restrictions. 

 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)? 

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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:

• Procedures to authorize a loan or line of credit;
• 24 hours notice before entering a unit for any purpose (other than an emergency);
• The ability to demand rent paid by a tenant directly, without Court action;
• The ability to evict a tenant if the tenant fails to pay rent;
• The ability to prohibit owners from using common elements if they are more than 90 days delinquent in paying assessments;
• The ability to suspend members' voting rights;
• A "Florida Condominium Handbook";
• Prohibiting fees in HOAs in connection with sale, lease or other transfer of a parcel;
• Removing the prohibition against filing a Lien for fines over $1,000 for HOAs; and
• Substantially revised dispute resolution procedures for HOAs.

 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.

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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.

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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.

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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:

1. Replace the main drain/grate cover with a code compliant cover meeting the standards established by the American Society of Mechanical Engineers (ASME).
2. Modify suction drainage systems to minimize the likelihood of becoming stuck or trapped in the drain.  Some of the options include installing a gravity drainage system with a collector tank, installing an automatic pump shut-off system or a drain disabling device.  

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)? 

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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.
 

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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.

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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.

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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:

• Store blank and canceled checks in a secure location;
• Notify the bank/financial institution when officers change immediately and keep control of bank signature cards;
• Create precautions for Internet banking and bill paying;
• Review source documents (invoices, bank statements, deposit slips) with management reports and consider having the bank send duplicate statements;
• Avoid master vendor accounts and place low limits on credit and/or store charge cards; and
• Obtain adequate fidelity bonding and employee dishonesty coverage for all persons authorized to sign checks or drafts.

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.

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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.
 

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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.    

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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 property of an individual director does not become the property of the Association because of his office on the Board.
• Even if directors communicate among themselves by e-mail strings or chains, about the operation of the Association, the status of the electronic communication on their personal computer would not change.
• An e-mail to an individual or all directors as a group, addressed to their personal computers, is not written communication to the Association because there is no obligation for a director to turn on a personal computer with any regularity, or to open and read e-mails before deleting them.

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.

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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:

1. Unit Owner coverage is still mandatory. 
2. Unit Owner insurance coverage must contain $2,000 "special assessment" coverage.  SB 714 would have corrected the language to "loss assessment" coverage. 
3. The Association is still required to be named an additional insured and loss payee on insurance policies issued to Unit Owners.
4. Association boards must set the master policy insurance deductible at an open board meeting - the notice of the meeting must contain the amount of the proposed deductible, available funds and cite the assessment authority as well as estimate potential assessments against each unit for possible casualty costs that are not funded by insurance coverage.
5. Unit Owners are still required to insure "improvements and additions" that benefit fewer than all the owners.  This is problematic from a number of perspectives, especially in light of the fact that the term "improvements and additions" is not defined.  This provision in Section 718.111(11)(g)(1), Florida Statutes may be interpreted to mean that Unit Owners bear responsibility for portions of the property traditionally insured by the master policy, such as balconies, vehicle enclosures such as carports (if the coverage is available), storage spaces and the like. 

 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.

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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.

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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?  

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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.
 

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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.

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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:

• Create a "standard" lease term of at least 10 years;
• Create extended lease terms of up to 25 years under certain circumstances;
• Create fees for new leases, expansions of existing leases and modification of uses permitted pursuant to existing leases;
• Change existing rates for leases allowing for designated slip (where boat slips are assigned) use to $.30 per square foot, if the property is not located within an aquatic preserve;
• Change existing rates for leases allowing designated slip use (assigned slips) to $.60 per square foot if the property is located within an aquatic preserve;
• Provide for automatic adjustments of up to ten (10%) percent in fees paid to the State every five (5) years based upon the Consumer Price Index (CPI); and
• Provide for late fees.

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.

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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:

• In good faith;
• With the care an ordinarily prudent in the same position would use; and
• In a manner he reasonably believes to be in the association’s best interest

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:

• Disclosure was made to the board or committee which authorized, approved, or ratified the agreement (the vote of the director with the conflict is not counted); 
• Disclosure was made to the members entitled to vote on the agreement and they authorized, approved, ratified it; or 
• The agreement is fair and reasonable as to the association at the time it is authorized by the board, committee or members. 
• In the Condominium the setting the following additional criteria [718.3026(3)] apply to avoid conflicts:
  
• The disclosures to the directors shall be entered into the written minutes of the meeting where they are made; 
• Approval of the agreement shall require an affirmative vote of 2/3 of the directors present; and
• The disclosure to the members shall be made at the next regular or special members meeting after the agreement is made.

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.

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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.

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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.

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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.

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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.

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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. 

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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:

• At least seventy (70%) percent of the units must be pre-sold in a new condominium or a newly converted condominium. Waivers are available on a case-by-case basis.
   
•  In existing projects, the Association must have evidence of fidelity bonds or insurance (which is required pursuant to §718.111(13), Florida Statutes for all persons who control or disburse funds for a Condominium Association).
   
• A single person or entity cannot own more than ten (10%) percent of the project, although exceptions are available on a case-by-case basis.
   
• No more than fifteen (15%) percent of the total units in the project may be thirty (30) days or more behind in payments to the Association.
   
• Borrowers must purchase additional hazard insurance (unit owner coverage), regardless of the Master Policy.
   
• The project must budget for “adequate” reserves (generally defined as 10% of the annual budget but determined on a case-by-case basis).
   
• The lender cannot bear responsibility for payment of more than six (6) months’ of unpaid dues or charges.

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.

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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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