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

There are still seats available at our upcoming Annual Community Association Leadership Conference at the Barbara B. Mann Center on Monday, January 24, 2011 from 9:00 to 12:30 PM.
Check-in begins at 8:30 AM.

 The Conference will focus on the 2010 legislative changes and recent case law impacting Florida's communities, including topics such as:

• Enabling associations to collection more unpaid assessments
• Collecting rent from tenants of owners who are in arrears
• Board elections, responsibilities and certification
• The new Distressed Condominium Relief Act

A special feature: A panel of Becker & Poliakoff's construction attorneys discussing common construction issues facing community associations, followed by a Q&A session where attendees can get answers to whatever questions they may have. You may also submit your questions in advance to questions@becker-poliakoff.com .

Participating Community Association Managers (CAMs) will earn 2 continuing education credits (Legal Update 2011).

CLICK HERE to register.

I look forward to seeing you there!

Joseph E. Adams, Esq.

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Becker & Poliakoff will conduct its 35th Annual Community Association Leadership Conference series beginning on January 24, 2011 to March 26, 2011 at various locations throughout the state.

This FREE conference will focus on legislative changes impacting Florida's communities. Attendees will learn about significant amendments enacted during the 2010 legislative session in Tallahassee. Topics include new remedies for collecting delinquent accounts, changes to suspension of use rights and voting rights, board elections and qualifications, as well as the most recent case law affecting shared ownership housing communities.

A special feature: A panel of Becker & Poliakoff's construction attorneys discussing common construction issues facing community associations, followed by a Q&A session where attendees can get answers to whatever questions they may have. You may also submit your questions in advance to questions@becker-poliakoff.com.

Locations & registration information can be found here.

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This week marks the second week of the legislative session and things are getting downright hot inside the capitol as it relates to community association bills. While only mid-week, I have been involved with numerous meetings regarding SB 1196 and HB 561, the ca package getting the most attention by the Legislature. I have met with the sponsors…Sen. Fasano, Sen. Ring, Rep. Bogdanoff, Rep. Hudson…with interest groups ranging from bankers, managers, CPA’s, insurance agents, with committee staff, etc. Progress is being made on several fronts and as language is negotiated which provide workable solutions to real challenges, we will get that out via the CALL website (www.CALLbp.com) for your review and input.

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Free Educational Forums for Board Members, Property Owners and Managers Announced at 15 Locations Around Florida. Conference will focus on Strategies for Communities to Deal with Economic Crisis.

Becker & Poliakoff announces its Annual Community Association Leadership Conferences beginning on January 15, 2010 where attendees will learn strategies to deal with the financial issues facing their Florida communities. Topics will include liability of owners versus subsequent purchasers, collecting rents in lieu of assessments, depositing rents into the court registry, extraordinary receiver appointments and extra-judicial remedies, among others.

A panel of Becker & Poliakoff’s attorneys from a variety of practice groups will answer questions during the third hour of the conference. You may submit questions in advance for the panel members by email to questions@beckerpoliakoff. com. Please indicate which event you are attending in the subject line of the email, so that the panelists can do their best to respond at the event you attend. See page 3 for Conference dates and locations.

Register today for this free conference at www.becker-poliakoff.com/events/ca/ for the event nearest you.

For dates, locations and registration information - continue reading (below)

Register today for this FREE conference at www.becker-poliakoff.com/events/ca/ for the event nearest you.

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The Maison Grande and other bankruptcy filings by community associations have spurred interest in reorganization of debt.  Is bankruptcy an option for your cash strapped community?  What issues do you need to consider?   Bankruptcy Attorney Aleida Martinez Molina answers the following questions for community associations struggling with bills and bad debt.

CAN CONDOMINIUM OR HOMEOWNERS ASSOCIATIONS FILE FOR BANKRUPTCY?  Yes. Under certain circumstances, condominium associations have successfully reorganized under Chapter 11 of title 11 of the United States Code, 11 U.S.C. sections 101, et seq. (“Chapter 11” and “the Code,” respectively). This phenomenon is not unique to Florida – there have been successful condominium association reorganizations throughout the United States.

WHAT IS A BANKRUPTCY IN THE CONTEXT OF A COMMUNITY ASSOCIATION? The first point to understand is that Chapter 11 is a reorganization process – not liquidation under Chapter 7 of the Code. As such, it can provide associations the protections of the automatic stay and other relevant Code provisions while allowing them to formulate a plan of reorganization to extricate themselves from the particular financial situation.

UNDER WHAT CIRCUMSTANCES DOES IT MAKE SENSE TO REORGANIZE? The Code has unique provisions which in essence give associations a more level playing field to negotiate with creditors. A number of associations find themselves with daunting contracts or leases which they might renegotiate or simply reject if able to do so. A reorganization could, under the appropriate circumstances, accomplish this goal. Another example is filing for bankruptcy protection in order to prevent a judgment creditor from seizing or garnishing bank accounts. An association with a judgment or upcoming trial could turn to a reorganization as a way to automatically stay the lawsuit/collection of the judgment and permit a realistic settlement. Finally, associations finding themselves threatened with the shut-off of service by utilities or other providers can, under certain circumstances, resort to reorganizations to temporarily prevent this drastic action.

WHAT IS REQUIRED FOR AN ASSOCIATION TO REORGANIZE? Proper authority from the Board and appropriate attorney fees and costs. In addition, an association should file a reorganization with a clear understanding of its exit strategy (i.e., a plan of reorganization).

COSTS ASSOCIATED WITH A REORGANIZATION: Reorganizations are not inexpensive and simple matters – filing fees to the bankruptcy court alone exceed $1,000. The debtors also need to pay quarterly fees to the United States Trustee while the reorganization is pending. Any debtor (association or otherwise) needs to contact competent counsel in time to prepare budgets and plan accordingly. It can and is done – even in dire situations where utility services are about to be interrupted. Counsel can advise how to properly prepare the necessary documents, authority and budget to reorganize under the Code.

WHAT HAPPENS TO ASSOCIATION RESIDENTS WHEN A COMMUNITY ASSOCIATION REORGANIZES? Ideally, nothing directly. If the association files with appropriate board authority and a reasonable game plan, the association should be able to function and provide the necessary services to the association property and residents.

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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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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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