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

Boards of Directors of Community Associations Can Delegate Tasks to Management, but Cannot Delegate Decision Making Responsibility.

I was happy to contribute to an article published by HOAleader regarding the responsibilities and obligations of a Board of Directors.  The author indicated that through her research, she learned that some management company contracts authorize management to select the association's attorney and to decide how to handle enforcement and collection matters without the board's involvement or approval.  I've heard this complaint from board members in different forms from time to time and its not limited to management, some law firm retainers likewise allow the law firm to decide when to file and how to handle association legal issues, particularly when it comes to collection of delinquent assessments.  I have to shake my head when I hear "management has attorneys that handled everything - we don't know" when I ask why something was done (or not done) in a particular case.  That practice is dangerous for a number of reasons.

Board members must realize they have ultimate responsibility for association operations and actions (or non-action).  Sure, a "package deal" with management (or another service provider) that rids the board members of the headaches associated with reviewing legal matters (particularly collections) and making strategic decisions may sound attractive.  Please ask yourself various questions:

• Is the relationship such that one or both of the parties benefit by increasing the amount of legal work or pursuing claims (such as insurance claims and the like)?
• What happens if the service provider tells the law firm to do something questionable? 
• The law firm may discuss the pros and cons of the action as well as the potential exposure of the action with the service provider - did you have the opportunity to evaluate that risk?
• Who are the service providers loyal to- each other or to your association? 

Hiring a professional CAM can benefit the association tremendously but the bottom line is this is your community and if you serve on the board you must be involved in association decisions.  You can read the article Should Your HOA Manager Approve All Lawsuits by clicking on the title.

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I am often asked by readers whether guest restrictions are enforceable. Residents often want to know whether the Association can require them to notify management when guests arrive or whether it is appropriate to require guests to register with the Association. The answer to these questions is, almost inevitably, “it depends”. Readers are not usually satisfied with this answer and I can certainly understand why. Nonetheless, there are so many factors that need to be taken into consideration in each particular set of circumstances that makes answering any other way disingenuous.

The first point in the start of the analysis is the source of the rule or the policy sought to be enforced. There are different standards for restrictions contained in a document of high priority (such as the Declaration of Condominium or a Declaration of Covenants and Restrictions) as opposed to documents with a lesser priority (such as Board policies or Board-made rules). Generally, rules made by an Association are subject to a three (3) pronged test for enforceability, to wit:
 

1. The Board of Directors must have authority to promulgate the rule (authority granted by the Declaration of Condominium or other governing documents);
2. The rule cannot conflict with any of the rights conferred by any of the documents of higher priority, whether those rights are expressly stated or reasonably inferable; and
3. The rule must be reasonable (explained as rationally related to a legitimate objective of the Association).

In Florida, there must be some authority for a Board of Directors to create or promulgate rules and regulations regarding use or occupancy of the property. Some governing documents give the Board of Directors plenary power to adopt, modify or otherwise change use restrictions. Other governing documents limit the Board’s authority to rule making regarding use of the common areas or common elements and still other governing documents require a membership vote to enact new use restrictions. Section 718.112(2)(c), Florida Statutes and Section 720.303(2)(c), Florida Statutes, requires both Condominium and HOA Boards to deliver notice of the Board meeting to the members at least fourteen (14) days in advance if the Board intends to adopt, change or otherwise consider rules regarding the use of the unit or the individual parcel. Consequently, the first step in determining whether a rule is enforceable is to determine whether the Board of Directors acted within the scope of its authority and whether it followed the procedures required both in the governing documents and applicable Florida law.

The second part of the test requires an analysis of the existing documents that have priority over rules and regulations. Rules cannot conflict with the governing documents. It is relatively easy to determine whether a rule contradicts an expressed right or privilege set forth in the documents. For example, if the Declaration prohibits owners from maintaining more than two (2) pets on the property, the Association cannot enact a rule that prohibits pets altogether. An amendment to the Declaration is required to eliminate an owner's right to maintain one or two pets on the property. Determining whether a rule contradicts an inferred right is far more complicated.

Finally, rules cannot be arbitrary or reflect capricious decision making. The third part of the test requires the rule to be “reasonable”. Obviously the term “reasonable” is much like the term “beauty” – everyone has a different standard.

Accordingly, once the first two steps are satisfied, it is necessary to evaluate whether the guest rules or guest restrictions are based upon some legitimate objective. The State of Florida addressed guest registration rules in a Declaratory Statement issued several years ago. The Association involved required all guests to sign in with a security guard upon entering the property and further required information on an Overnight Registration Form to register guests staying overnight. When a unit owner challenged the Association’s “need to know”, it emphasized that the rule served an important safety function, assisted in enforcement of other rules requiring use of licensed and insured contractors and contributed to making the condominium “more comfortable, safe and contented experience for all concerned”. The Division concluded that the rule advanced legitimate objectives of the Association and found that registration requirement did not violate the Florida Statutes.

The Division has had the opportunity to consider many rules enacted by community associations over the past eleven (11) years in connection with its arbitration program. We will include more examples of rules that have either been upheld or rejected, from time to time.
 

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The social media phenomenon is huge.  I hear the word "Twitter" practically every day on television news programs, talk shows or on the radio and have established a Twitter account in an effort to learn what the fuss is all about.  Social networking sites like Facebook, Twitter, YouTube and Linked-In provide an easy way to disseminate information.  These new means of connecting on-line often can replace community association mailings and provide a forum for the residents to connect with each other as well as the board of directors.

Community associations often have websites that feature for sale items (homes or personal property), photos of the community and community events, forms for use by homeowners to request architectural approval or report maintenance/repair needs, a link to the governing documents and much, much more.  Many associations post financial information on line on pages protected by passwords, allow members to review their account to see if payment was posted and even pay assessments.  Websites have served associations well over the past decade and therefore extending communication by utilizing social networking platforms is not unexpected.  In fact, a quick search of sites like Facebook and Linked-In shows many community associations (or their members) have already ventured in to this arena.

However, as with any new endeavor, the benefits must be weighed against the detriments.  Questions are bound to arise.  Who is entitled to post information or comments?  Is there a filter before the general public has access to the information?  Is the Board liable for erroneous information? Can the association post information about owner use violations?  What if the owner isn't really in violation?  Can the site include photographs of community residents or individual homes?  Is the content of the site considered "official records" of the association?  If so, what are the retention requirements?  We discuss some of these issues in the following posts:

E-mails, Instant Messages (IM), Twitter & Board Meetings, Are E-mails, Instant Messages (IM), & Twitter Transcripts "official" records of the Association?, and Are E-mails, Instant Messages (IM), & Twitter Transcripts "official" records of the Association? (Round 2).

I also found the article, Social Networking Can Improve Communications But Watch our for the Liability Risks  interesting as it notifies community leaders about potential pitfalls associated with use of social media sites.  The author warns community leaders to be cognizant of potential claims of libel/defamation, copyright infringement, invasions of privacy, plagiarism and interference with contract, to name a few.  This article also addresses whether insurance coverage is typically available for claims and surmises that exclusions will appear in future policies.

What should you include in your community association social media policy?  Well, you want to prohibit profane language or terms that relate to a particular ethnic, racial or other protected group of course.  You probably don't want to allow your members (or "friends") to use the site to solicit business prospects.  You need to reserve the right to refuse to post or delete any content or material that is not suitable for the site.  You also need the appropriate disclaimers.  This is just a partial list to alert you to some of the considerations involved when embarking into the world of social media.

Let us know how your community uses social networking to further association goals and objectives. 

 

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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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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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Section 718.111(11), Florida Statutes requires all unit-owner controlled condominium associations to use 'best efforts' to obtain and maintain adequate insurance. 

There have been many debates over the years regarding insurance coverage for condominium associations and the individual unit owners.  Some attorneys and industry representatives take the position that owner insurance (insurance for the contents of the unit and the portions of the unit not insured by the master policy) has been required by law for years, others contend that the law does not require individual coverage at all.  Debates concentrating on the proper scope and amount of coverage for the association pursuant to the master policy are likely to continue, regardless of the pending changes to the Condominium Act. 

The obligation to obtain master coverage (a policy issued to the association) for a multi-family building is not subject to debate.  Even though money is tight, the economy is in trouble and many owners are faced with hard times, there are certain obligations that cannot be ignored.  The tragedy faced by the unfortunate owners of the condominium building that burnt down in Broward County, Florida last week is made exponentially worse by the fact there is no insurance coverage.

Mortgage payments and property taxes do not vanish into thin air when the building burns down.  Will these owners have the funds to re-build?  Do they have any recourse? Probably not, says Gary Poliakoff.  What about the impact on the neighboring condominiums?  Living next to a partially demolished building is not likely to be pleasant or have a positive impact on property values.

Condominium directors, officers and unit owners - take advantage of the educational opportunities offered by various organizations to learn about the realities of condominium living and ownership.  Educational sessions offered by CAI are generally free to community leaders.  While you may not have the ability to prevent a fire, you can prevent this situation from happening to you by understanding the responsibilities of ownership and association operations.

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