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OPPAGA Report Finds that Insureds Received Larger Insurance Settlements when Public Adjuster Involved in Claim.  Florida Legislature Considers Additional Regulations Governing Solicitation by Public Adjusters. 

 The number of public adjusters in Florida increased by more than 300% over the last six (6) years - no doubt as a direct result of the catastrophic damages caused by hurricanes in 2004 and 2005.  As the deadline to file Hurricane Wilma claims becomes closer and closer, more homeowners, association leaders and building managers are being solicited to re-open old claims.  In the aftermath of Hurricane Wilma many distraught association leaders readily 'signed on the dotted line' after being told 'not to worry' about the association's insurance claim or repairs to the property. 

Did the use of a public adjuster make a difference?  The report issued by the Office of Program Policy Analysis & Government Accountability (OPPAGA) finds that claims took longer but payouts were higher when a public adjuster represented the insured.  In fact, Citizens Property Insurance Corporation paid insureds represented by public adjusters at least five time (5x) more than it paid insureds handling claims by themselves.

While Section 626.8795, Florida Statutes specifically prohibits the public adjuster from having anything to do with the repair or reconstruction of the damaged property, contractors and public adjusters often seemed interchangeable to association leaders.  The Department of Financial Services recently stepped-up enforcement efforts against contractors - including United Roofing Systems.    Moreover, solicitations became so intrusive that the Florida laws were amended in both 2008 and 2009 to impose restrictions:

• limiting hours of solicitation (in person or by telephone) from Monday through Saturday between 8:00 a.m. and 8:00 p.m.;
• prohibiting contact with policyholders until at least 48 hours after an event; and
• limiting fees to 10% of the claims related to declared emergencies and 20% for all other new claims.

 SB 2264, filed by Senator Bennett seeks to control solicitation by public adjusters even more and according to the Sun-Sentinel, industry groups are all for it, claiming that public adjusters lead to higher premiums.  Among other things the bill seeks to:

• prohibit solicitation in person or by phone (unless the insured is someone they know or a family member);
• require written communications to include the word 'ADVERTISEMENT' in red ink and be sent via regular mail (not certified or registered);
• prohibit mailers until 30 days after the insurable event takes place; and importantly
• cap fees at the 10%/20% limits for re-opened claims.

Contracts between insureds and public adjusters often result in disputes leading to expensive and protracted litigation.  It is therefore extremely important to consult with counsel before entering into any contract with a public adjuster or contractor after a casualty occurs.  For more information on disaster planning and recovery, please go to www.hurricane-recovery.com.

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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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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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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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A reader recently posed the following inquiry:

I am interested in your thoughts about Fee Simple Communities foreclosing on properties and working with the banks to accept a short sale. As President of a small community (65 units) HOA, we have foreclosed on 3 units and soon to be 5. All but one have a mortgage and all 4 mortgages are above the value of the property. The banks are not accepting short sale offers without involvement from the mortgagor which in cases in close to impossible. Three of the banks are in foreclosure with the longest process exceeding 3 years. Motions to compel are denied and we are looking for creative ways to speed this process and begin to collect from a new homeowner or at least get my 1%/12.

This situation is becoming more and more prevalent throughout the State. Attorney Kevin Miller provides the following comments:

A motion for case management conference can be a useful tool on behalf of any association involved in a mortgage foreclosure action. In this motion, the association's counsel asks the court to establish reasonable deadlines to bring the case to conclusion, ultimately resulting in a foreclosure sale whereby either the mortgagee or another party will take title to the property. In instances where the association has already foreclosed and taken title to the property, and the mortgagee has filed its own foreclosure, the association may be able to simply consent and stipulate to a judgment and either bring about a sale or transfer of title much sooner. Particularly when the foreclosing party plaintiff is the mortgagee and the defendant owner is the association, and there are no other parties to the action. 
 

What about the 'short sale' option?  

The U.S. Treasury announced new federal guidelines that give lenders a 10-day limit in which to respond to short sale purchase offers. These rules may provide much needed relief, as the Sun-Sentinel reported approximately 40% of South Florida homeowners owe more than the property is worth.  The rules also provide financial incentives for both sellers and lenders.

Is the Association really entitled to any payment from a first mortgagee when the it forecloses its mortgage after the Association has foreclosed its claim of lien?

Remember, the statutes provide for joint and several liability with the previous owner (with the exception of the safe harbor provisions for first mortgagees).  Thus, once the Association takes title to a unit or home after completing a lien foreclosure case, it technically becomes liable for the debt of the previous owner and cannot necessarily seek to collect that debt from a subsequent owner, even if the subsequent owner is a mortgagee.  Any subsequent owner (mortgagee or otherwise) bears responsibility for payment of all assessments from and after the date title is acquired.

We will address additional options in further posts, including the benefits and detriments to renting the properties acquired as a result of foreclosure.  Stay tuned.
 

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2010 looks like it will be another active year in the foreclosure reform area. According to Yeline Goin, Co-Executive Director of Becker & Poliakoff’s Community Association Leadership Lobby (CALL) “there are already several Bills in play which we expect to generate a lot of discussion in Tallahassee this year.”   Some of them include the following:
 

House Bill 115: This proposal states that during the pendency of a foreclosure action, if the unit is occupied by a tenant, the association may demand that the tenants pay rent directly to the association, with a right of eviction for non-compliance. This Bill would also permit the condominium association to suspend certain common element use rights for nonpayment, although utility services could not be suspended. Voting rights could also be suspended for delinquencies. Similar amendments are proposed in this Bill for Chapter 720, the Florida Homeowners Association Act.

Senate Bill 164: This proposal requires any mortgagee which has not completed its foreclosure within six months from filing its foreclosure lawsuit to pay the “statutory cap” (six months of past due assessments or one percent of the original mortgage debt, whichever is less) during the pendency of the lawsuit. This proposal would apply to condominiums only.

House Bill 329: This proposal would also allow the collection of rents directly from tenants, and permit suspension of certain common element use rights and voting rights. Significantly, this Bill also deletes the statutory cap and would require a foreclosing lender to pay all unpaid assessments if the foreclosure action is not completed within a year.

House Bill 337/Senate Bill 968: This Bill states that if an owner is delinquent in the payment of assessments, they can be restricted from running for office, holding office, serving on committees, leasing units, or using the common areas.

House Bill 419/Senate Bill 864: This Bill is similar to a couple of others already discussed regarding the right to demand payment of rents directly from tenants. This proposal also states that an association’s claim of lien can include the cost of collection efforts by management companies or licensed managers.

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Bankruptcy Court Finds "the Unit Owners are Not a Bottomless Well, From which Water May be Drawn Eternally With No Consequences" and Grants Maison Grande's Motion to Reject Unexpired Lease.

 As I mentioned in July in Bankruptcy An Option for Finally Distressed Condos & HOAs, the 99 year lease for certain recreational and parking facilities placed the most stress on Maison Grande Condominium Association's finances.   Owners of the 502 units in the oceanfront condominium enjoyed the use of the pool, the pool deck and the parking spots leased to the association, but simply could not keep up with the increasing rent, taxes, insurance and maintenance of these amenities.

Rent for the leased parcel in 1971 was $20,160 per month ($241,920 per year).  Now the association is required to pay $112,241 per month ($1,346,903 per year), regardless of whether all owners pay assessments on a timely basis.  The association reported that as much as 25% of its members were delinquent in payment of assessments and since many lacked equity in the units, they were also subject to mortgage foreclosure proceedings.

The bankruptcy court found that the decision to pursue bankruptcy and reject the lease was a "sound exercise of the Debtor's business judgment".   The decision contains a very comprehensive explanation of the business judgment rule, along with appropriate citations.

This is not the first time a Condominium Association pursued relief in the bankruptcy court.  In 1984 the court approved rejection of a 99-year lease, indicating that "the Court will not second guess the business judgment of [the] ... Board of Directors unless there is a showing that their judgment is clearly erroneous".  In re Condo. Ass'n of Plaza Towers South, Inc., 43 B.R. 18,22 (Bankr. S.D. Fla. 1984). 

The Order is apparently being appealed.  The parties in the case are expected to submit written argument and a hearing is scheduled for March 16th.

Is bankruptcy an option for your struggling association?  For more information please refer to the Questions & Answers previously posted on this site.

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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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The Florida Condo & HOA Law Blog is just about to have its first birthday.  Over the past year we have covered important issues to community leaders and managers regarding association operations, insurance responsibilities, collections and foreclosures, legislative changes, new case law, mortgage and lending issues, contractor disputes, enforcement of covenants and much, much more. 

We are proud to say that our readers include board members, unit and/or home owners, prominent community leaders, governmental officials, industry professionals, local and national media representatives as well as licensed community association managers in Florida and elsewhere.

Please Note:  The host of this site is making some technological improvements, but that means you will need to re-subscribe to receive future updates.  You will receive an email inviting you to re-subscribe.  Subscribing is as easy as typing your email address on the link provided in the email.

Don't miss out - we have a lot more information to share with our readers.  In fact, we are expanding the scope of our coverage in 2010 to include even more information about real estate and construction issues that impact community associations.  Be on the lookout for additional authors, videos, newsfeeds and more.  Of course, we will provide a detailed analysis of legislative activities and will include posts direct from the capital as items are considered.   

Stay up-to-date by re-subscribing! 

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You Tell Us !

As seen today on the Sun-Sentinel Condo Blog, legislators and government officials need to know exactly how community associations are struggling in order to promote meaningful change.

Take the Survey Issued by the Community Association Leadership Lobby (CALL) to demonstrate the magnitude of the financial crisis on Associations and to influence the decisions made by legislative, regulatory, business and community leaders across Florida. 

Please spend a few minutes taking the Survey.  The responses are completely confidential - neither you nor your community’s name will be identified in the aggregate responses reported.

The deadline for completing the CALL Survey on Community Association Financial Stability is October 25th, so please take a few minutes now to provide your responses and help us achieve a deeper and more accurate understanding of the financial impact that the mortgage foreclosure crisis and economic downturn has had on your community.

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Close to 200 Community Leaders and Professional Property Managers participated in the first of a series of webinars presented by Becker & Poliakoff, P.A.

On Wednesday, May 28, 2009, CALL presented a webinar explaining legislative activities during the 2009 legislative session.  Co-executive directors Yeline Goin and David Muller were active in Tallahassee and throughout the State of Florida during the latest legislative session, advocating for the interests of Florida Community Associations.

Attorney Yeline Goin started the session with an in-depth explanation of the impact of SB 714, which was sent to the Governor on May 18th.  Governor Crist has 15 days to sign or veto the bill before it becomes law.  Ms. Goin alerted the participants to lobbying efforts encouraging a Governor's veto.

SB 714 impacts insurance obligations of condominium associations and condominium owners, addresses eligibility for service on a board of directors of a condominium association, as well as fire and life safety issues.  Please click here for more information about the Bill.

Attorney David Muller explained changes resulting from SB 2080 which would prohibit Community Associations from enforcing deed restrictions that preclude xeriscaping.  Becker & Poliakoff previously provided its clientele with the University of Florida's recommendations for 'Florida-friendly' landscaping in its Community Update publication.

Mr. Muller alerted the participants to increased filing fees for foreclosure lawsuits, explained changes to Chapter 617, Florida Statutes that would result from SB 2330 and impacts from HB 1495.  He noted that despite reports from other sources, HB 1495 does not include a condominium mitigation loan program that was initially contemplated by the legislature.

Mr. Muller advised the participants of CALL's continuing effort for legislative changes necessary to improve Community Association financial problems, particularly with regard to the financial responsibilities of lenders and investor-owners.

To View Becker & Poliakoff’s Insider's Analysis of the 2009 Legislative Session - New Laws Affecting Community Associations go to:

http://events.vcall.com/VCall/ReplayLogin.aspx?room=2146003612

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