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

The Department of Business and Professional Regulation (DBPR) issued its Report to the Governor, President of the Florida Senate and Speaker of the Florida House of Representatives Regarding Costs Associated with Fire Sprinkler Retrofits and the Impact of Retrofitting on Insurance Premiums.

When Florida first adopted the Uniform Fire Code, the administrative code required all high-rise buildings to be protected throughout by an approved, supervised automatic sprinkler system or an engineered life safety system approved by the local Fire Marshall within 12 years of January 1, 2002.  The 2003 Florida legislature modified this requirement for high-rise condominiums by adopting SB 592 (now modified further and set forth in Section 718.112(2)(l), Florida Statutes).  It allows two-thirds of the unit owners in a condominium to vote for a partial retrofit, rather than a full retrofit of the buildings.  The deadline for completion was extended to the end of 2014.

Last year the Florida legislature adopted SB 714, a bill primarily devoted to insurance issues.   If the bill would have become law the deadline for condominium associations to retrofit the buildings (or retrofit the common areas with owner approval or implement improvements set forth in an approved Engineered Life Safety System "ELSS") would have been further extended to 2025.

Governor Crist vetoed SB 714 citing safety reasons.  He directed the DBPR to study retrofit costs and any impact on insurance premiums.  The report contains the following conclusions and recommendations:

• Community association leaders are taxed with immediate needs -  "most notably collecting regular assessments and addressing a significant wave of foreclosures".  Unit Owners are likely to reject any attempts to impose the costs associated with retrofits. 
• Efforts on the part of the Division are necessary to increase awareness of the sprinkler retrofit requirements.
• Insurance discounts resulting from retrofits are insignificant because the discount (if available) does not apply to the windstorm portion of the policy.  Moreover, no credits or discounts are required for a partial (common area) sprinkler system.  The Division recommended legislative action to provide for insurance discounts.

The report contains several exhibits, including a copy of the results of the CALL survey and a report issued by the Space Coast Communities Association.

Whether your association opt-out, retrofits, implements an ELSS or otherwise, community leaders need to have a plan in place.  Please answer the following questions for yourself and for the benefit of the residents of the community:

1. Do you have a fire emergency plan?
2. Have residents and employees been given full instructions on the details of the plan?
3. Can the buildings be evacuated to the street without interfering with emergency personnel?
4. How will you handle physically challenged residents evacuation?
5. Are all exit doors and exitways clear?  Are emergency facilities in place and functional?

Please contact us if your association needs help complying with life safety requirements or developing (and implementing) life and fire safety plans for the community.

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 Chapter 558, Florida Statutes, the construction defect and notice statute, was changed by the legislature in the most recent term. The changes made by the legislature are as follows:

* The term "completion of a building or improvement" is now defined to include the issuance of a Certificate of Occupancy or equivalent, or substantial completion. "service" was not previously defined.’s efforts to complete a project.

* Service of the Notice of Claim is to be by certified mail, hand delivery or courier with evidence of delivery.

* If the statutory notice is not provided then the court shall stay, not abate, the action.

* The notice requirement shall not interfere with the owner

* Notice is not required for a project that has not been completed.

* The trigger for the dates of completion under the statute are service rather than receipt of the notice.

* No construction lien rights shall accrue for destructive testing unless the owner contracts for the work.

* The timeframe within which information shall be exchanged is now to be within 30 days and includes specifications, as-built plans, photographs and expert reports.

* Chapter 558 shall apply to all contracts for improvements entered into after October 1, 2009.

The above changes are effective as of October 1, 2009. As always, if you are entering into a contract for construction work, or have claims relating to prior construction work, it is important to know your rights and remedies under the notice statute.

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On very rare occasions will a building permit not be required. When in doubt, the Association should assume that a permit must be obtained.

Most construction work requires a permit. Section 104.1.1 of the Florida Building Code provides:   “Any owner, authorized agent or contractor who desires to construct, enlarge, alter, repair, move, demolish, or change the occupancy or occupant content of a building or structure, or any outside area to be used as part of the building’s designated occupancy (single or mixed) or to erect, install, enlarge, alter, repair, remove, convert, or replace any electrical, gas, mechanical or plumbing system, the installation of which is regulated by the technical codes, or to cause any such work to be done, shall first make application to the building official and obtain the required permit for the work.”

Building permits are issued by the local building official in the name of the person performing the work and only licensed contractors, or owners/builders may obtain a permit. 

It is not surprising that Associations are not familiar with local building codes. Most Associations believe that it is the contractor’s responsibility to make sure a building permit has been obtained, but that is not the case. The Association, as property owner is held responsible for obtaining the required building permit. 

Many times, a contractor may try to avoid the building permit requirement. However, if the building inspector finds the work in progress without the required permit, the Association will be cited (not the contractor) for having work done without a permit. This usually results in double fees for the permit and/or fines for having work done without a permit.

Why get a permit? Because it is the law. Working without a permit is illegal and can result in fines and cause problems for the Association down the road. A permit provides the Association the services of building department plans reviewers, inspectors and technical experts. In addition to providing advice, these experts approve each phase of the construction project, verifying that the work is performed pursuant to the applicable building code and the approved plans. A building permit and compliance with the applicable building codes protects the Association. It ensures that the completed work meets certain specific quality standards that will protect the Association and its membership.

If the Association does not obtain the necessary permit, the building authority will issue an advisory notice. Once a permit is obtained, the cost is usually double for an after the fact permit. Furthermore, there may be fees for a third party engineering analysis if areas of the work are concealed or do not meet code. If no action is taken, a Notice of Violation is issued which usually results in fines being levied against the Association. 

The State of Florida and its different local jurisdictions, require standards of construction for all properties in the state. The state relies on local governments to enforce these regulations. If the Association is not certain if a permit is required it should call the local building department before any work begins. 

Always ask to see the permit for the project. If no permit is obtained, the Association will be legally responsible.

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Associations lose hundreds of thousands of dollars to unlicensed and uncertified contractors every year. Associations should protect their property by avoiding unlicensed contractors. Unlicensed individuals cannot pull permits and usually carry no insurance. Licensing is not necessarily a measure of competence but it presupposes a certain degree of professionalism and commitment to the industry. When dealing with an unlicensed contractor and the work is not done in accordance with the applicable building codes or workmanship standards, there is no recourse against the unlicensed individual other than through the courts.

Although licensing is not a guarantee of the contractor’s work, it can protect the Association from a number of potential problems such as:

• Unlicensed contractors are often unfamiliar with building codes, inspection sequences and inspection requirements.
   
• Limited recourse for breach of contract and/or defective work. When dealing with a licensed contractor, the Association always has the option of contacting the appropriate licensing agency. Some agencies are able to resolve issues and assist in recovering consumer losses. At a minimum, licensing agencies have the authority to suspend or revoke licensing privileges. This does not eliminate all contractor problems, but does provide contractors with an incentive to conduct fair business practices and comply with the law.
   
• Unlicensed contractors are usually uninsured. If an Association uses an unlicensed contractor and property damage occurs, the individual may have no way of reimbursing the Association for damages caused. Furthermore, if a third party suffers an injury at the Association’s property, there may be no insurance coverage. Many homeowners insurance policies exclude claims arising from unlicensed construction practices.
   
• Unlicensed contractors cannot pull permits. If the Association pulls the permits for an unlicensed contractor, then the Association, not the person doing the work, is held responsible.
   
• If the Association hires an unlicensed contractor, the Department of Business and Professional Regulation or the Building Department may issue a cease and desist order to stop the work, and may decide to take legal action against the Association to impose civil penalties for aiding and abetting unlicensed activities.
   
• If the Association hires an unlicensed contractor and the work is not completed in accordance with state and local building codes, the Association may have to pay additional monies to have the work brought into compliance.
   
• If an unlicensed contractor does not pay his subcontractors or suppliers, the Association may be liable for these costs. Subcontractors and/or suppliers who work for unlicensed contractors still have the right to file liens on the Association’s property.

There are steps that Associations can take to help protect themselves from unlicensed contractors. When hiring a contractor, Associations should:

1. Always ask to see the State of Florida license.
    
2. Note the license number and verify that the license is current and in good standing. To check on the license, call 850-487-1395 or visit www.myfloridalicense.com.
    
3. Ask for references and check each one.
    
4. Always get several estimates for comparison.
    
5. Never pay in cash, and never provide large up-front deposits. Beware of scams when individuals ask for money up-front or will only accept cash.
    
6. Beware of writing checks made payable to individuals especially, when the Association is dealing with a company or a corporation.
    
7. Everything should be in writing. At a bare minimum, a contract should include the contractor’s names, address and professional license number; a detailed description of the work to be completed and materials to be supplies; a completion date and total cost.
    
8. Have an attorney review all contracts before signing anything.

In these economic times, there are many individuals who try to hold themselves out as licensed contractors. They usually make promises of quick and inexpensive repairs and require large up-front deposits. When work needs to be done, Associations should choose a contractor carefully and make sure the contractor is properly licensed and insured.

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It is important for all condominium purchasers to know the very strong warranties that come with their purchase of a condominium unit. A developer grants each first-time purchaser of a condominium unit implied warranties under Section 718.203, Florida Statutes. The warranties are for fitness of purchase and merchantability and commence upon the issuance of the Certificate of Occupancy for the subject improvement and continue for three years or one year from turnover, whichever comes last, but in no event more than 5 years from C.O. There is also an implied warranty of fitness for purpose for contractors and suppliers providing labor and material to the construction of the Condominium improvements. This warranty commences upon the issuance of a Certificate of Occupancy and continues for 3 years. 

The warranty period should not be confused with the statute of limitations. An Association’s statute of limitations with regard to known defects is tolled until transition of the Association and expires 4 years from transition. This means that as to known defects, responsible parties have to be pursued within the 4 year period from transition. For latent defects, that is claims which are not known and cannot be discovered through the exercise of reasonable diligence, suit can be brought for up to ten years from completion of each improvement. This means that so long as any suit is commenced within 4 years from the time the defects were discovered or should have been discovered with the exercise of reasonable diligence, which shall not exceed 10 years, the suit will be timely.

Of course the Chapter 558, Florida Statutes, procedure may toll the statute of limitations, and I will discuss more about that next post.

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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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One of the most important issues for any legal claim is the statute of limitations, and claims for construction defects are no different. The statute of limitations is the time frame within which a lawsuit must be filed in order to have any recovery against the party or parties responsible for the damage. This is especially important where the defect is one resulting in building leaks.

Assume that you hire a roofing contractor who replaces your roof. The day after making final payment you discover water damage on the ceiling. You determine the new roof is leaking. You have 4 years from that date within which to file suit. The reason is that a claim for construction defects must be brought within four years of the time that a defect was discovered, as in our hypothetical, or should have been discovered through the exercise of reasonable diligence. The Statute of Limitations would begin to run from the date of the first leak. This puts the onus on an owner to not ignore the problem, but conduct reasonable investigation and file suit if necessary. The liability of the contractor is not endless, but is limited by the statute of repose, which cuts off any and all claims for construction defects ten years from the completion of the contract. For example if the leak was discovered 7 years after completion of the contract, then you would only have 3 years left to file suit.

An important point is that the limitations period continues to run, even if the contractor attempts to repair the roof. I have seen numerous cases over the years where people had the contractor attempting to repair the building to no avail, and then found themselves outside the limitations period. Unfortunately, there is no tolling of the limitations period. If the contractor spends years trying to fix the roof, and suit was not filed within 4 years, then you have lost your legal rights. Every owner should be vigilant and take necessary steps to protect their rights.

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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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In 2007, the Florida Supreme Court issued its opinion in United States Fire Insurance Company v. JSUB, Inc. The case involved allegations that the site work subcontractor used improper computation and testing methods which caused damage to foundations, drywall, and other parts of the project. The question before the Court was whether an insured general contractor had coverage for damages caused by the faulty workmanship of the site work subcontractor under a standard CGL policy.  The question was answered in favor of the insured. Pursuant to the Court's reasoning, the defective work performed by the subcontractor that damaged the general contractor's completed work constituted "property damage". The Court held that the faulty workmanship by the subcontractor which was neither intended nor expected was an "occurrence" and that therefore the cost of repairing the damage caused by the defective workmanship was "property damage" within the meaning of the CGL policy. Although the Court found coverage under the CGL policy for the damage which resulted from the subcontractor's defective work, it left open the question of whether coverage existed for the defective work itself. 

In 2008, the Florida Supreme Court applied the JSUB reasoning in the case of Auto-Owners Insurance Company v. Pozzi Window Company and determined that a CGL policy provided coverage for repairing or replacing the defective work of a negligent subcontractor. The Pozzi case involved allegations of defective installation of windows in a commercial building. In keeping with its opinion in JSUB, the Court held that if the windows were not defective prior to installation but were damaged by the defective installation by the subcontractor, coverage would exist for the cost of repair or replacement of the windows. However, a different result would follow if the windows were defective themselves before being installed and the damage to the completed project was therefore caused by defective windows rather than defective workmanship or installation.

The JSUB and Pozzi decisions have provided a greater level of clarity for construction defect insurance claims. Although these Court opinions have lead to changes in CGL policy forms, they have the potential to expand insurance coverage of construction defects under comprehensive general liability or CGL policies.

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Developer's Challenge to Notice of Meeting not Proper Defense to Construction Defect Claim

Lake Forest Master Community Association, Inc. v. Orlando Lake Forest Joint Venture, et al., Case No. 5D08-2096

Lake Forest Master Community Association, Inc. ("Lake Forest") filed a lawsuit for construction defects against the Developer, after the membership voted in favor of doing so as required by Section 720.303(1), Florida Statutes. 

The Developer claimed that Lake Forest shouldn't be permitted to continue its lawsuit since it failed to properly notice the meeting.  The trial court agreed and entered Summary Judgment against Lake Forest.

Section 720.303(1), Florida Statutes, provides, in relevant part:

After control of the association is obtained by members other than the developer, the association may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all members concerning matters of common interest to the members, including, but not limited to, the common areas; roof or structural components of a building, or other improvements for which the association is responsible; mechanical, electrical, or plumbing elements serving an improvement or building for which the association is responsible; representations of the developer pertaining to any existing or proposed commonly used facility; and protesting ad valorem taxes on commonly used facilities. The association may defend actions in eminent domain or bring inverse condemnation actions. Before commencing litigation against any party in the name of the association involving amounts in controversy in excess of $100,000, the association must obtain the affirmative approval of a majority of the voting interests at a meeting of the membership at which a quorum has been attained.

Lake Forest appealed the ruling.  While it could have re-filed, re-filing would have impacted its case tremendously due to a change in Section 95.11(c)(3), Florida Statutes, which is the statute of repose.  The statute of respose changed from 15 to 10 years.  Re-filing the lawsuit would have eliminated any claims associated with latent construction defects that existed in excess of ten (10) years.

The appellate court evaluated the procedures utilized by Lake Forest to call the annual meeting, as well as the procedures utilized to recess and reconvene the meeting. The court noted:

• Notice of the annual meeting was furnished by mail to all owners and posted as required by law.  The mailing included a general proxy;
• Minutes of the annual meeting indicated that the members agreed to recess the meeting and reconvene it for specific date. There was testimony indicating that the President likewise announced the time and place for reconvening the meeting;
• At the reconvened meeting, the President announced the annual meeting would be reconvened again at a specific date, place and time.  That information is reflected in the minutes;
• A Motion was made, seconded and the majority of members participating voted in favor of filing legal action against the developer when Lake Forest reconvened the meeting the second time.

The Court relied on both Section 720.306(7), Florida Statutes and the Association's bylaws when concluding it was not necesary for Lake Forest to send written notice of reconvening the meeting to the entire membership, since the date, time and place were announced before it went into recess.  

Moreover, the Court also concluded that dismissal of the case by Summary Judgment was not appropriate even if the Association failed to comply with technical procedural rules.  Rather, it said the case should have been abated for a period of time to enable the Association to correct procedural deficiencies.

This case clarifies several important points of law for community associations.

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The total dollar amount of government construction contracts awarded to businesses annually is multi-billions.  Increasingly, government contracts both at the federal and local level are awarded to organizations that reserve a certain percentage of the total award for minority owned businesses.  Now more than ever it pays to be a certified Minority Business Enterprise.

MBE certification is the process by which a business is validated by a certifying agency as being at least 51% owned, managed, operated and controlled by an ethnic minority or a group of minorities.  Most agencies recognize minority group members as U.S. citizens who are African-American, Hispanic-American, Native American, Asian-Pacific American and Asian-Indian American. 

MBE certification at the federal, state and local level grants bidders additional evaluation credit if they use MBEs.  It also allows businesses to be eligible to bid on contracts set aside specifically for minority companies and provides minority companies with positive exposure by getting them into minority business directories and databases used by corporations for referrals.  Furthermore, government agencies and private sector companies may have specific goals for minority owned businesses.  Even if a firm does not intend to do business with government agencies minority certification still provides a means to distinguish a business in the market place during these challenging economic times.

In order to be eligible to become certified as a minority business enterprise with the State of Florida, a business must meet all of the following criteria:

• Engaged in commercial transactions.
• Domiciled in Florida.
• At least 51% owned by minority person(s) who are permanent residents of Florida.
  • "minority" is defined in Chapter 288.703, Florida Statutes as African America, Hispanic American, Asian America, Native American or American Woman.
  • "American" is defined as a citizen of the United States of America.
• Managed and controlled by minority person(s).
• Performing a useful business function.
• A small business which:
  • is independently owned and operated;
  • has a net worth of not more than $5 million; and
• employs 200 or fewer full-time, permanent employees.

At present, there are literally billions of dollars of pending contract opportunities in Florida each containing minority business owner goals. Receiving these lucrative contracts takes more than an offer to provide the service or goods at a low price.If a company is not certified, then these dollars may be going to other companies who took the time and effort to become certified. In spite of the paperwork, the certification process can be lucrative and rewarding. As companies gain expertise and develop business relationships in this market, owners find that a mix of government and private contracts is a major factor assisting continued work and cash flow during economic downturns.

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Today’s Fort Myers News-Press has an article about a new bill proposed by state Representative Gary Aubuchon.  The proposed bill will further regulate what steps owners must take to pursue claims for construction defects.

Florida already has Chapter 558 which is, per its own terms, an “alternative method to resolve construction disputes that would reduce the need for litigation as well as protect the rights of property owners.” Chapter 558, governs all properties which may be the subject of a construction defect claim: single family homes, condominium units, condominium associations and commercial properties. Over the last several years there have been changes to the statute. Representative Aubuchon’s bill appears to have more changes in store for Chapter 558.

As of this post I have not seen a copy of the bill, but based upon the article the bill provides:

            1. Requirements for the exchange of specific material for the claimed defects

            2. Deadline for the exchange of information, and attendant penalties

            3. Changes language about testing for defects

            4. Authorizes parties to agree to mediation

Section 558.004(15) creates a right for parties to demand “discoverable evidence relating to the construction defects” but failed to specify a time frame within which such materials should be provided. The section also references that penalties can be imposed by a court without specifying what the penalties are. However, any penalties for the failure to provide documents, or “discoverable evidence,” impede on the court’s rule-making authority. The courts determine the scope of discovery, as well as what is, and is not, evidence. There are significant issues of constitutionality raised here.

The language about testing for defects will be very important. As the law stands now, a contractor can already request to destructively test an allegedly defective building component subject to the statute’s restrictions.  What more or less will be required under the proposal?

Finally, parties in a civil dispute (whether in suit or not) have always had the opportunity to agree to mediation. You do not need a statute to agree to it.. Although it is unclear if such mediation would be made mandatory prior to filing suit. If so,  this would just be one more impediment to owners being able to pursue their claims and a further hoop to jump through for owners. It would take away from owners the right to gauge for themselves if mediation would be beneficial.

Stay tuned for further updates.

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Last week I wrote about Indemnification. Specifically about hiring contractors and ensuring that contract clauses were properly worded so that the Association was being indemnified and not providing the indemnity. At the end, I concluded by noting that indemnification in the absence of adequate insurance may be illusory. What does that mean?

Remember that the whole idea for indemnification is to have another party hold the Association free from liability for any negligent conduct. However, if the indemnitor does not have adequate funds then what good is the indemnification? 

For example, Happyland Condominium contracts with Acme Lawn Care for monthly maintenance services. Acme is a small shop with only a 10-year old truck and 2 riding lawn mowers as assets (total value $5,000) and no insurance. One month Acme is driving the truck from the front to the back of the property when the it runs into and kills a jogger. The Association and Acme are sued by the family for wrongful death, and millions of dollars in damages. The Association has put in the contract that Acme shall indemnify the Association from any claims made against the Association as a result of Acme’s conduct. The Association demands that Acme indemnify it against the wrongful death claim.

Despite the language of the contract, Acme does not have the wherewithal to defend the association or hold it harmless from liability. In such a case, the Association would be responsible to defend itself against any claim (ostensibly through its own insurance carriers) with no recourse against Acme for out-of-pocket expenses (such as the insurance deductible). Also, if the Association’s insurance is insufficient, or the claim denied, then the Association could itself be facing significant liability. If Acme had insurance, then the Association could be able to recoup against Acme’s carrier for anything not covered by the Association’s own carrier, and would also give the Association’s carrier the possible right to subrogate against Acme’s carrier.

Clearly, it is important that in addition to language about indemnification that all vendors/service providers also have adequate insurance. This would provide actual protection for the Association, not just the illusion of protection. Such requirements should be put into the contract, and verified at the start of any work as well as at periodic points during the life of the contract.

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Indemnification. A scary word and a confusing subject. However, almost all contracts for services contain requirements for one party to indemnify the other from damages. Often these clauses are in small type of allegedly “standard form” agreements. For purposes of today’s blog, let us discuss non-construction services. Indemnification for construction contracts is governed by section 725.06, Florida Statutes which is not applicable to non-construction contracts. Look at any contract you have with a service provider and inevitably the following language, or similar, will appear:

Party A agrees to the fullest extent permitted by law, to indemnify and hold harmless Party B, its officers, directors, members and employees from all liabilities, damages, losses and costs, including but not limited to reasonable attorney’s fees, to the extent caused by the negligence, recklessness or intentional wrongful conduct of Party A.

In layman’s terms, this means that one party (the indemnitor) has contractually obligated itself to protect a second party (the indemnitee) against damages which may result from the indemnitor’s conduct. These damages would include any foreseeable damages resulting from a negligent act or omission, including damages to person or property.  Sounds easy enough. However, who is indemnifying whom?

The language most often seen in these contracts is similar language to the form language above:

Association agrees to the fullest extent permitted by law, to indemnify and hold harmless contractor, its officers, directors, members and employees from all liabilities, damages, losses and costs, including but not limited to reasonable attorney’s fees, to the extent as a result of any work done at the Condominium by contractor.

The Association has agreed to indemnify the contractor for work done at the condominium by the contractor. It requires the Association, which does not control the project or those working on it, to protect the contractor. Why would the Association agree to this? Think about the fire alarm monitoring, elevator maintenance or other monthly service provider. Many of these companies perform services, which if done improperly, could result in damage to persons or property and ultimately claims against the Association. Courts will enforce such agreements to indemnify, even if it is a bad deal for one side.

All service contracts should require the contractor to indemnify the Association. If the contractor will not negotiate the term, then another contractor should be considered. These terms, like most contract terms, can be negotiated even if the contractor says such terms are “industry standard.” The Association should be protected from sloppy safety procedures, carelessness or negligence of the contractor. Finally, remember that indemnification in the absence of adequate insurance may be illusory, but that is a subject for another day.

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There are various safety retrofits required in the State of Florida, many of them involving elevators and fire safety.  Every building in the State of Florida containing six or more stories is required to retrofit their elevators to allow operation in fire emergency situations with one master key.  Florida's Department of Financial Services publishes a map showing the seven (7) emergency response regions as well as a list of the vendors authorized to perform the installation and issue uniform keys. 

The installation must be complete and the property compliant no later than October 1, 2009.

Additionally, elevator inspections must be performed annually by a Certified Elevator Inspector or the State of Florida may contract with the County or Municipality for elevator inspection services.  Nonetheless, Section 399.02, Florida Statutes requires the building owner or operator to bear responsibility for obtaining the inspections, the safe operation of the elevator, the proper maintenance of the elevator and correction of any deficiencies noted in the annual inspection.   An elevator maintenance contract will not insulate the building owner or operator (including an Association) from liability for damages or personal injuries.  Elevator maintenance contracts are governed by Section 399.01, Florida Statutes and further requirements are found in the Florida Administrative Code. 

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