We are happy to feature video clips from time to time on this blog. The post from the other day spurred several questions regarding unit owner access to official records. Please listen to our Community Association Practice Group Leader discuss this important subject.
What is your policy for handling records inspections by owners? Do you have written rules? Where .jpg)
are the records inspections held? How many hours does the owner have to review the requested records? Does anyone help facilitate the inspection?
If you are a condo or HOA board member and cannot answer these questions, its time to consider rules governing owner record inspections. Association leaders must understand their obligation to allow member access to records to avoid costly disputes that may increase tension in the community.
The Division handles numerous complaints from condo owners claiming that associations fail to allow access to the Official Records. Sometimes those complaints, and arbitration cases, result in fines against the association. Other times the association clearly shows that the owner was wrong in one way or another. The Division publishes a very comprehensive practical guide for use by community leaders (board members) and homeowners. While the Condominium Act forms the basis for the guide, HOA leaders and owners should find it useful as well as the laws are similar (but not the same so please consult with counsel). You can download the guide HERE.
There are some records that are not accessible to owners. Those records include:
What rules are valid and what rules are unreasonable when it comes to record inspections? Some of the Division rulings may surprise you - we will provide some examples in a future post.
Investing the Association's Funds? If so you should be familiar with the Prudent Investor Rule.
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Does your association have a written policy with regard to investment of association funds? If so, does the board of directors monitor the investment to ensure compliance with the policy, and, is the policy reviewed and updated from time to time? If not, is the board of directors exposing itself to needless liability under both common law and statutory obligations of prudent management?
Whether your association is a condominium association governed primarily by Chapter 718, Florida Statutes, or a Homeowners association governed primarily by Chapter 720, Florida Statutes, it is imperative that the governing body of the association invest association funds in a reasonably prudent manner. In serving as directors and/or officers of these corporations, individuals expose themselves to liability for mismanagement and, in many cases non-management, of association funds. Officers and directors sit in a position of trust and confidence, requiring that their actions be exercised in good faith and in the best interests of all unit owners. For example, since all budgets must include reserves for capital expenditures and deferred maintenance, unless waived in accordance with Section 718.112(2)(f), Florida Statutes, a primary responsibility of the board is the protection of, and hopefully the enhancement of, the association's reserve funds.
Boards of directors are faced with the delicate task of balancing their financial goals, needs, and obligations. On the one hand, the association wants a strong return or yield on its investment, sufficient to meet the ever-increasing costs of repair or replacement of common areas. On the other hand, it is necessary to maintain sufficient liquidity in the event of an emergency. The security or safety of the investment is equally important. Therefore, boards of directors are faced with legitimate and substantial questions, such as: whether or not to hire a professional money manager, what type of investment policy should be adopted, and how best to monitor the portfolio, once a policy is implemented.
Community Associations Institute (CAI) recommends associations invest only in savings accounts, FDIC-insured certificates of deposit, U.S. Treasuries and government agency bonds. Board members need to consider the goals and objectives of the association as well as regular income and its existing capital. Risky investments are not appropriate. However, in this day and age when interest in savings accounts is practically zero, what other types of investments will suffice?
Keep these maxims in mind:
Take the advice from Sergeant Phil Esterhaus from Hill Street Blues and be careful out there. ...
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The Florida Community Association Journal has featured articles about the Communities of Excellence Award winners over the past year. All of the finalists showed wonderful initiative. Its really a pleasure to see community volunteers work side-by-side with management (and staff) to improve their situation and community life. Many of the associations in the Financial Innovation category suffered major hardships - all of them had significant delinquencies and resulting budget shortfalls. Improving collections and re-negotiating existing contracts were typical strategies employed by associations to increase revenue and reduce expenses. The bulk of the finalists took advantage of the 2010 legislative changes that allowed community associations to collect rent directly from tenants when the owners failed to pay assessments.
Two winners stood out for thinking 'outside the box'.
The Village Walk Homeowners Association in Sarasota investigated the costs of retrofitting/upgrading traditionally powered heating and cooling equipment. The manager found the costs were comparable to a geothermal system after figuring in the government discount for employing renewable energy resources. Installing geothermal heating for the two pools paid for itself in 18 months and now the association saves $65,000.00 annually. The cooling system for.gif)
the restaurant improved indoor air quality, maintained a far cooler temperature and saves the association 10% on energy costs each year. The system is more powerful, works better and reduces operating costs all at the same time.
I was at the Communities of Excellence event and honored to present the Trendsetter Award to Central Park at Metrowest. The board of directors took advantage of a great opportunity and created a "win-win" for the community and local residents. The association's president learned about a federally funded Back to Work Grant Program. The association applied to be an employer and was accepted into the program! The association had the benefit of several employees for 13 weeks - unemployed local residents received a much needed paycheck while Central Park Metrowest received much needed clean up and maintenance work. This program worked so well that the association participated in a federal summer youth program (also federally funded) the following year. 20 local teens got work experience while the association reduced its vendor expenses.
I think many people would be surprised how much effort it takes to turn a community association around. Sure, its easy to lament about how 'upside down' you are with your mortgage or to complain about the lack of services and poor appearance of your community when its struggling to make ends meet. Its much, much harder to pull up your sleeves, figure out what its going to take to improve the community and then implement those initiatives. It takes dedication and tremendous perseverance to accomplish what these, and other communities, accomplished. If you haven't participated in the Florida Communities of Excellence program, I highly recommend it - especially if you're thinking that there's no hope for your community.
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Budget season for condo/HOA directors may not be as fun as rabbit season is for Elmer Fudd, but both must understand that preparation and regulatory compliance is key. Elmer must comply with regulations if he wants to take that rabbit home - association directors must comply with budget requirements and procedures if they want the association to successfully collect assessments.
For condo directors: Does your budget include all the required provisions? Does it specify the beginning and end date? Does the budget identify the assessment amount by unit type? Has the board prepared a current reserve schedule and is that attached (and made part of) the budget? What notice is required? We know that Section 718.112(2)(e), Florida Statutes says 14 days notice is required, but do your community documents create additional obligations? Do you have to give the members the opportunity to vote on the budget - that's not typical but some community documents leave that power to the members rather than the board. How do you handle costs associated with limited common elements in the budget?
For HOA directors: Are your budgets in the same exact format as condo association budgets? Do you mail the proposed budget with notice of the budget meeting? Do you send it out to the members afterwards? What about reserve accounts - does your association have statutory reserves, non-statutory reserves and do you know the difference? Does it contain the appropriate disclosures?
Association leaders also have to contend with year end financial reporting requirements as well. Do you need an audit? Are there enough funds in the budget to pay for an audit? How can you make sure your financial reports will be produced in a timely manner? How do you distribute the financial reports or do you have to at all (there are options in the statutes)?
The Division of Florida Condominiums, Timeshares and Mobile Homes publishes a very helpful manual. While the manual is geared toward condominiums, HOA directors may find the information useful this budget season. Click here for Budgets & Reserves Made Easy.
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Board members learn about and evaluate proposed community projects by comparing different products, services, prices, methods and means to accomplish the same objective. Community leaders should know that the Florida statutes require competitive bidding for significant contracts.
For condominiums and cooperatives, the statutes requires competitive bidding for service contracts and contracts for the purchase or lease of materials or equipment that cost more than 5% of the annual budget (including reserves). For a homeowner’s association, the requirement is the same, except there is a higher threshold of 10% of the total annual budget, (including reserves). HOAleader recently published articles about bidding, one of them is Save the HOA Money: Create Bidding Guidelines.
The board doesn't have to accept the lowest bid and the law doesn't specify how many bids the board must collect and review. In fact, sometimes a higher bid is the better choice for the association. Bids must be kept on file as an official record and made available for inspection by owners, upon written request. The HOA statute requires the association to keep bids on file for one (1) year. The condo statute includes bids in the section governing accounting records - those are kept for at least seven (7) years. Many associations make the mistake of throwing out rejected bids to reduce the volume of paperwork in the office. Unfortunately that may lead to trouble when an owner requests to see those bids later on.
There are exceptions to bidding requirements in Florida for certain contracts. Many professional services are exempt such as contracts with attorneys, accountants, CAMs, architects and engineers. Contracts for emergency service are likewise exempt.
What happens if there is only one provider in the area? If the proposed provider is the only source for that service, equipment or material within the county, the board doesn't need to go through the exercise of obtaining bids from vendors outside the geographic area.
Obtaining more than one bid can give the board greater insight into how to approach a problem. Nonetheless, it is still a good idea to use professional consultants when the bids relate to a significant construction or repair project as the scope of services may be expressed in a highly technical way. Some bids may contain the use of proprietary products or services that make it very hard to replace or repair in the future unless the association hires the same vendor. You certainly want to compare "apples to apples" bids when deciding what products or services are best for your association.
Boards of Directors of Community Associations Can Delegate Tasks to Management, but Cannot Delegate Decision Making Responsibility.
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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:
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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A case recently issued by the 3rd District Court of Appeal confirms unit owner obligations to pay validly adopted assessments. The Court in Coral Way Condominium Investments, Inc. v. 21/22 Condominium Association, Inc., recited two important statements, one of which was made by the Florida Supreme Court in 1994 in the Ocean Trail Unit Association, Inc. v. Mead, case. Unit owners must understand the following pronouncements:
Avoidance of the payment of a valid assessment, however, is not a remedy available to unit owners to cure unauthorized acts by officers or directors of an association.
A unit owner’s duty to pay assessments is conditional solely on whether the unit owner holds title to the condominium unit and whether the assessment conforms to the Declaration of Condominium and By-Laws of the Association, which are authorized by Chapter 718, Florida Statutes.
Coral Way owned several condominium units in the 21/22 Condominium. It challenged both the need and the validity of a special assessment levied by the Board of Directors. Coral Way claimed that it had evidence that the association paid for items that were not common expenses. It alleged that the association paid legal fees that were not incurred by the association. It also contended that the financial records did not reflect a lump sum payment made to the association in connection with a roof top lease. This unit owner took the position that a special assessment would not have been necessary and the association would have had the funds to accomplish the repairs identified if it accounted for the income associated with the rooftop lease or spent money for non-association expenses.
This issue comes up quite often. I mentioned in the Can Complaints about Association Operations Become a Defense Against Foreclosure post that owners often refuse to pay assessments when they feel the association neglects the property, manages ineffectively or wastes association funds. The case mentioned in that post concerned a set-off. While the facts that support a claim for set-off may be exactly the same as those in a claim for a Breach of Fiduciary Duty, the legal issues are quite different. The 4th District of Appeal made it perfectly clear that even if the Board of Directors breached their fiduciary duties, Coral Way still had to pay legally adopted assessments. Since the association followed the proper procedures and the assessment was to pay for a legitimate repair, Coral Way could not avoid its obligation to pay, even if it was later entitled to reimbursement as a result of wrongful use of association funds or accounting irregularities.
The bottom line result here is very important for unit owners to understand. The association’s obligation to maintain the property and otherwise fulfill its fiduciary duties is completely separate and independent of your obligation to pay validly adopted assessments (pursuant to a budget or a special assessment, as the case may be).
Why do condos & HOAs need to hire attorneys? Let's just tell the CAM they have to ....
You can complete that phrase a thousand times. Examples:
In these troubling economic times, community associations are looking for their managers to perform as many functions as possible, and with managers being better educated and more experienced, they are more willing to use their knowledge and perform those additional functions. Nevertheless, a manager is restricted to performing tasks permitted by law for a licensed community association manager. It is unfair to ask or expect your CAM to perform tasks that may expose them to penalties for the Unlicensed Practice of Law (UPL), yet many associations saddle the manager with those tasks in an attempt to save money. Moreover, many times efforts to save a few dollars here or there backfires on the community association and the manager often gets the blame.
CAMs are expected to understand and know many community association and other laws. They are expected to know the statutory election process, they are expected to know that official records must be made available for inspection, they are expected to know board meetings cannot be held without notice (except for limited circumstances) as well as a whole host of other information. So, why is it wrong for the board tell the CAM to prepare and record Claims of Lien or proposed amendments to the governing documents? Why can't the board ask the CAM to evaluate how case law or statutes apply to your documents? There's a very important reason why - you would be asking them to commit a crime known as Unlicensed Practice of Law ("UPL"). UPL is punishable by up to a year in jail and a $1000 fine.
Good managers know when the service requested by the Board exceeds the manager’s authority and will refer the matter to the appropriate professional. A good manager will also refer a matter to the appropriate professional when the manager is unsure whether the matter exceeds his or her authority. Your manager is not trying to "get out of" doing work or shirking his or her responsibilities when they say the board needs a legal opinion on some issue or the attorney needs to prepare certain documents. They are protecting your community and adhering to professional ethics.
You may be interested in reading this Opinion issued by the Florida Bar. The linked document described what actions are considered UPL.
The Sun-Sentinel included a story about a South Florida condo owner this week. The condo .jpg)
owner filed a law suit against the condominium association for discrimination, claiming that the association failed to make a reasonable accommodation. The deaf owner reportedly demanded the association to make arrangements and pay for a sign-language interpreter at meetings, shows or condo activities, so he can participate in those activities.
Community leaders and managers should know that the Fair Housing Act prohibits any person to refuse to make a reasonable accommodation in rules, policies, practices, or services, when such accommodations may be necessary to afford a handicapped person equal opportunity to use and enjoy a dwelling unit. The use of the dwelling unit likewise includes the public and common use areas available to unit owners.
The housing provider (community association in this context) must make requested accommodations unless:
There is a big distinction between accommodations and modifications under the Fair Housing Laws. A modification is generally defined as any change to the public or common use areas of a building or any change to a dwelling unit. In 2008, the Department of Justice (“DOJ”) and the Department of Housing and Urban Development (“HUD”) issued a Joint Statement providing technical assistance regarding the rights and obligations of handicapped persons and housing providers under the Act relating to reasonable modifications. The Joint Statement gives examples of modifications that are typically considered reasonable, such as:
Modifications are made at the expense of the person requesting the modification. Accommodations are made by the housing provider and can result in an expense to the housing provider. However, if the expense creates a financial burden on the housing provider, it is not reasonable. The Joint Statement issued by DOJ and HUD regarding reasonable accommodations says you determine whether a requested accommodation presents an undue financial and administrative burden on a case-by-case basis taking various factors into account, such as the cost, the resources of the provider, the benefit of the accommodation, and whether alternatives
would meet the disability-related needs.
So, what will happen in this case? We'll have to wait to hear whether the costs to all of the owners and the administrative burden placed on association management make this particular request unreasonable under the circumstances.
Condominium and community association owners are apparently taking advantage of the old adage"the best defense is a good offense".
There seems to be a new trend - not a good one - where owners file lawsuits as a result of the amount claimed by the association as due on an estoppel certificate. Condo and HOA laws require the association to issue an estoppel certificate or statement indicating what is due and owing with respect to the property in connection with a sale or other transfer. In most cases the new owner must pay for any delinquency accrued on the account. The former & current owner are jointly and severally liable for the overdue balance. However, the law does not prevent the new owner from seeking reimbursement from the seller/former owner. Consequently, in practically all voluntary sales (including short sales or distressed sales), the title company or other agent handling the transaction will request an estoppel certificate from the association and ensure those amounts are paid in connection with the closing. In some cases the buyer and seller negotiate for the buyer to take over installment payments of a special assessment, but most of the time the title insurer (and attorneys) will insist on payment of all outstanding obligations.
First mortgagees acquiring title as a result of foreclosure (or deed in lieu of foreclosure) are entitled to a “safe haven” – they are not responsible for all past due amounts, just the lesser of 12 months of assessments or 1% of the original mortgage amount, with limited exceptions.
Associations that acquire title were also subject to this joint and several liability but that has changed as a result of HB 1195 somewhat. The new law states:
An association, or its successor or assignee, that acquires title to a unit through foreclosure if its lien for assessments is not liable for any unpaid assessments, late fees, interest, or reasonable attorney’s fees and costs that came due before the association’s acquisition of title in favor if any other association … which holds a superior lien interest on the unit.
Over the past year or two I have learned about many lawsuits filed by new owners when the association tried to collect amounts it arguably wasn’t entitled to collect. In some of the cases first mortgagees were billed for late fees for the entire duration of the delinquency, attorney’s fees incurred by the association in connection with the bank's foreclosure and a host of other charges that became due before the Certificate of Title (in addition to the 12 months or 1%). In other cases, buyers or mortgagees were billed for the entire delinquency on the account, even if the association was the previous owner. Kate Berry, in an article for American Banker, explained that mortgage servicers typically will not front the funds to pay HOA/condo dues and expenses even though the Freddie Mac and Fannie Mae require the servicer to pay until the property is sold.
These lawsuits haven’t made their way through the appellate courts, so we don’t have precedent to rely upon yet. Nonetheless, it is my hope that this ‘trend’ will prompt association boards to have frank and open discussions with counsel regarding the appropriate amount to bill new owners for past-due balances, to minimize the risk of a lawsuit and avoid the time, expense and effort necessary to defend a lawsuit.
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I want to thank all the fire and life safety officials that read the original post entitled Does Your Condo or HOA Have an Automated External Defibrillator?
My post mentioned possible misuse of these devices, but I was reminded that the device will analyze the victims hearth rhythm once the electrodes are placed on the victim's chest. If the circumstances warrant, the device will charge and announce when it is time to push the "shock" button. A professional at the Tamarac Fire Department explained that the device will not deliver the shock if someone presses the button by accident.
I also heard from representatives of the American Red Cross and the Southern Cardiac Arrest Association (SCAA). SCAA is a national non-profit organization based in Washington, D.C. with 50 chapters throughout the United States. The President of the local chapter explained that there are close to 1,000 deaths per day as a result of sudden cardiac arrest. The chapter educates community leaders about risk factors, provides CPR and AED training, as well as serves as a survivors' support network.
Tony Cortese, Manager of the Health and Safety Department for the American Red Cross advised that the local Red Cross office can facilitate purchase of a defibrillator at a discount and set up free training on the devise. It likewise leads CPR/AED certification for many groups and organizations as part of its mission to have the community ready to prevent, prepare and respond to emergencies.
With all of these resources available, maybe its time for your community to evaluate whether to purchase an AED.
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The American Heart Association encourages the purchase and availability of automatic external defibrillators and many community associations have already purchased this life safety equipment for on-site use. These machines have become commonplace in airports, hotels and shopping centers throughout the country.
You may wonder if there is any downside to having this machine available in the community association setting. While Florida's Cardiac Arrest Survival Act provides broader liability insulation than the Good Samaritan Statute, the protection is not absolute. The Cardiac Arrest Survival Act does protect the owner of the device from civil liability if:
However, specific training isn't required if:
The Internet has many resources available for community leaders showing the proper use of this device, including the following:
Each community association should first consult with its insurance adviser or liability carrier to learn whether there are special conditions associated with purchase or use of a defibrillator. Your carrier may require testing and regular maintenance of the unit. Your carrier may require employees to undergo training.
While the Florida law offers protection from civil liability under most circumstances, that immunity will not necessarily apply if the machine malfunctions. However, fire and life safety officials indicate that the machines will not deliver an electrical shock unless the circumstances so warrant. The AED devices have become less expensive over the years and actually walk the user through the process with audible commands. Associations should test the battery every so often (yearly) and replace the pads when they expire.
Having a defibrillator on the property could mean the difference between life or death of a resident. If your community is considering such a purchase, please consult with your insurance adviser and legal counsel. Moreover, contact your local first responders - many fire departments will gladly send a representative to come speak to your residents about the use and responsibilities of ownership of these devices as well as train your employees in life safety measures.
We are pleased to announce that this year’s large community association bill, HB 1195, which previously passed out of the Legislature was formally signed into law yesterday by Governor Rick Scott. The effective date of HB 1195 is July 1, 2011. You can view the full text of HB 1195 by accessing the CALL website (www.callbp.com).
CALL has also prepared a comprehensive summary of HB 1195 and several other important bills that impact community associations. [PDF]
CALL worked closely with the sponsors of HB 1195 over the past year to ensure the best possible result for community associations.
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A local community activist recently asked several industry professionals to answer questions submitted to her by community association board members. You can check this site over the next several days to see my answers to some of the questions:
Question Regarding Authority of the Manager and Competitive Bids: We are in a community where we were just billed a great deal of money for electrical work and were told "the Management's electrician did the work". We are wondering why it is not under the maintenance provided under our contract? Why is the electrician not handled like every other vendor then-where [we get bids for] the work?
Answer: Your first task is to review the contract with the management company. Many management contracts give the manager the authority to effectuate repairs for certain items without advance board approval. In the vast majority of cases, the manager’s authority is restricted to a specific dollar amount (i.e. $500, %1,000 or higher in emergency situations). If you don’t have this limitation, make sure your board includes one in the next renewal or simply address this issue with the manager now (by board resolution) so everyone is on the same page when it comes to association expenditures. The manager needs direction from the board when it comes to repairs – some boards want the manager to “simply take care of problems”, while other boards want to be more involved and formally approve the scope of the work in addition to selecting the contractor to perform the work.
Second, you need assurances that any work was done by licensed and insured professionals and that the work was properly permitted, if a permit was required for the work. The management company should have no problem with providing you with verification of license and insurance.
Note: We have included information on this site about building permits and contractor licensing requirements. Please see Protecting the Association Against Unlicensed Contractors and Does the Association Need a Building Permit? for more information.
Condo and HOA laws require bids generally if the work to be performed will cost more than 5% (condo) or 10% (hoa) of the annual budget. There are exceptions for specific types of professional services and most boards will obtain competitive bids for any project expected to cost more than a couple thousand dollars (sometimes less), to make sure the cost of the work is not out of the ordinary.
Join Becker & Poliakoff's CALL team along with Special Guest Representative Moraitis, Jr., the sponsor of HB 1195.
Live Webinar — Monday, June 13, 2011
1:30 PM – 3:00 PM EDT
2011 FLORIDA LEGISLATIVE SESSION:
New Laws Affecting Community Associations
The 2011 Florida Legislative Session came to an end upon adjournment on Saturday, May 7. House Bill 1195, sponsored by Rep. George Moraitis, Jr. (R-FL 91st District), passed during the Legislative Session and will soon be headed to the Governor for final action. The CALL team of Ken Direktor, David Muller and Yeline Goin, Co–Executive Directors of CALL, will be joined by Travis Moore, CALL’s lobbyist in Tallahassee, along with our Special Guest Rep. Moraitis, for an in-depth analysis of this bill as well as others that affect daily operations in your community. Click on the register button below to sign up for this very important event!
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Ken Direktor, Esq.
West Palm Beach |
David Muller
Sarasota |
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Yeline Goin, Esq.
Tallahassee, Ft. Myers |
Travis Moore
Tallahassee |
Register today! You will receive a confirmation email with information on how to participate from the convenience of your computer.
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Association leaders and managers must comply with federal and state anti-discrimination laws. That's a given.
Association leaders and managers, therefore, cannot enforce certain policies and procedures when a resident (prospective resident or someone associated with a resident) is entitled to an accommodation due to disability. Persons suffering from various medical, mental and emotional conditions can meet the statutory definition of disabled or handicapped and are therefore entitled to accommodations in association rules or policies, if that accommodation is necessary to provide the person with disabilities with the full opportunity to enjoy the dwelling.
With all that in mind, would you think a Board of Directors must accommodate a request for permission to use medically prescribed marijuana to treat cancer, debilitating back injuries, glaucoma or otherwise? Community association documents typically prohibit any illegal use of the property, but does the board have to make an exception?
HUD says NO when it comes to public housing, public services, activities or programs. A HUD memorandum issued in January of this year explains why public housing agencies, owners of federally assisted housing or owners/operators of facilities or services subject to the ADA would not have to allow the use of medical marijuana. There are two primary reasons cited in the memo:
First -
Section 504 of the Rehabilitation Act (part of the Fair Housing Act) and Title II of the Americans with Disabilities Act (ADA) don't generally apply to Condos & HOAs. Both of these laws exclude any illegal drug user (regardless of the reason) from protection. The law says:
The term "individual with a disability" does not include an individual who is currently engaging in the illegal use of drugs...
Thus, someone who is disabled (i.e. blind, deaf, mobility impaired, etc.) will not be considered disabled within these statutes if there is illegal drug use.
Second -
Illegal drug use, by itself, will not eliminate protection for disabled persons under the FHA. This law is very relevant for community associations and claims based on an association's failure to accommodate a disability are almost becoming commonplace. HUD's general counsel takes the position that a request for permission to use medical marijuana is just not reasonable and therefore does not have to be granted.
An accommodation isn't reasonable if it:
The use of medical marijuana isn't legal in Florida and that's probably why I haven't encountered any requests for accommodations of this type. However, several states across the country are allowing its use. Therefore, community leaders should check with counsel before blindly rejecting any request along these lines.
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Board members can catch a lot of heat if the community pool closes, especially in this time of the year. We first explained the Virginia Graeme Baker Pool and Spa Safety Act in Many Florida Condos & HOAs Must Comply with Pool & Spa Safety Act and then re-addressed issues concerning community pools in the following posts:
Community Pools are Subject to Health Department Regulation
Pool & Spa Safety Requirements Revisited
Many associations have installed the compliant drain covers, as well as addressed the direct suction issue. The federal requirements apply to virtually any pool operated by a community association, and are independent of state permitting regulations.
Well ... there is a voluntary recall of several types of consumer pool and spa drain covers. The U.S. Consumer Product Safety Commission (CPSC) announced the availability of a Drain Cover Recall Hotline, at (866) 478-3521, which is open 24 hours a day, seven days a week.
Check with your pool contractor and see whether your pool installed drain covers by any of the following manufacturers:
I included links to the relevant websites (click on the manufacturer name above).
Community leaders should also check whether the condominium or cooperative association needs to renew its exemption from regulations imposed on public pools. You don't want the health department to close your pool and you certainly don't want defective safety products in your community's pool.
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The case against a condo association in Century Village reported by the Sun-Sentinel prompted me to alert readers of the consequences associated with violations of state and federal fair housing laws. If you aren't familiar with the case click HERE for the most recent article. In short, Broward County filed a lawsuit against the condominium association for discrimination and retaliation because it refused to grant a resident permission to keep a small dog after her doctor gave her a prescription for the dog as an emotional support animal.
Please keep in mind that there are consequences for unlawful discrimination, which includes the failure to make a reasonable accommodation or allow a reasonable modification if necessary to ameliorate the effects of a disability.
Florida Fair Housing Act – Administrative Remedies
The complainant may file housing discrimination Complaint with the Florida Commission on Human Relations. The Commission (or local agency) is generally required to first attempt informal methods such as conferences with the parties, conciliation agreements, and persuasion. If the complaint cannot be resolved within 180 days, the complainant may commence a civil action in the appropriate court, or may petition for an administrative hearing. If the Commission determines, as a result of its (or a local agency’s) investigation, that there is reasonable cause to believe that a discriminatory practice has occurred, the Attorney General, upon request of the aggrieved party, must bring an enforcement action and may also institute a civil action. As an alternative, the Commission or local agency may commence an administrative proceeding pursuant to the Florida Administrative Procedures Act (Chapter 120 of the Florida Statutes).
Florida Fair Housing Act – Direct Civil Action
The Commission (or local agency) may commence a civil lawsuit. That lawsuit must be filed within two years after an alleged discriminatory housing practice has occurred.
Federal Fair Housing Act – Administrative Remedies – Complaint and Investigation
In addition to the remedies set forth in the Florida Law, an complainant may elect to file a Complaint of a discriminatory housing practice with the Secretary of Housing and Urban Development. If the agency concludes that prompt judicial action is necessary to carry out the purposes of the Act, it may immediately bring a civil action for appropriate temporary or permanent relief plus damages and penalties.
Federal Fair Housing Act – Administrative Remedies – Action after Investigation
If a charge is issued, either party (the accused or accuser) may elect to have the claims asserted in the charge resolved in a civil action. If that happens, the Attorney General files suit on behalf of the complainant in federal district court. If the case continues through the administrative process, and the administrative law judge (ALJ) finds discrimination, he or she shall grant "appropriate relief", which may include an award of actual damages, injunctive and equitable relief, and civil penalties against the offender.
Federal Fair Housing Act – Direct Civil Action
The complainant may bring an action in federal district court. Exhaustion of administrative remedies is not a prerequisite to bringing suit, however a suit may not be commenced after an ALJ has commenced a hearing on a charge involving the same discriminatory practice.
Federal Fair Housing Act – Enforcement by Attorney General
When the Attorney General has reasonable cause to believe that a person or group of people are engaging in a pattern and practice of discrimination that raises an issue of general public importance, the Attorney General may commence a civil action in the appropriate federal district court.
Community leaders can consult with counsel to develop a policy or procedure for handling accommodation requests.
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Community leaders struggle with budget shortfalls every day. What if there was something you could do when owners fall behind in maintenance payments, mortgages and other expenses? Do you agree that a six month reprieve from mortgage payments can enable homeowners to bring their account with the association current? If so, you need to learn about the financial assistance available.
The state received close to a billion dollars in federal funds to help struggling homeowners fend off foreclosure. The program, administered by the Florida Housing Finance Corp., is designed to provide homeowners with some "breathing room" by giving them a temporary break on mortgage payments. By raising awareness of the program and offering assistance to qualified applicants, community leaders can help improve residents' financial situations while improving the association's financial condition at the same time.
Eligibility Criteria: Applicants must be eligible to receive assistance. Help is limited to those Floridians that are unemployed or under-employed, not those suffering financial hardships as a result of divorce, disability or death of one of the borrowers. An applicant ...
Click HERE for frequently asked questions and answers about the Hardest-Hit Fund. TheFlorida Housing Finance Agency hopes to assist close to 40,000 people with this program - wouldn't you like your owners to take advantage of this opportunity, especially if that will help them catch up on delinquent assessments?
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One of the principles I learned when I first became a member of this Law Firm has now been called into question, at least somewhat, by a new ruling issued by the Fourth District Court of Appeal.
I initially learned that the obligation of the association to maintain and care for the property is completely independent of and not contingent upon the obligation on the part of the owners to pay assessments. I also learned that, conversely, the obligation to pay assessments (pursuant to a properly levied budget or properly levied special assessment) was likewise independent of and not contingent upon claims that the Association failed to maintain the property or otherwise failed to meet expectations.
Associations have become embroiled in litigation over the past several years. Many times the response to a foreclosure lawsuit comes in the form of an attack against the board. Nonpaying owners have tried to justify their actions due to claims of neglect of the property, inefficient management or wasteful spending. In the past those claims were not considered a proper defense in the foreclosure case. The owner may, in fact, have a viable claim against the association (however, in many cases there is a non-actionable difference of opinion) and those claims would need separate consideration by the Court, but those allegations would not serve as an excuse for non-payment.
Recently the appellate court overturned a summary judgment ruling in favor of an association. The ruling in E. Qualcom Corp. v. Global Commerce Center Association, Inc. is not final yet. If the ruling becomes final then associations may have to jump through another hoop and avoid another obstacle to collect delinquent assessments.
Qualcom owned a unit in a commercial condominium and stopped paying assessments. One of its defenses to the association's foreclosure included a claim for set-off. The owner alleged that the association's failure to fix the roof led to damages to its property and loss of revenue. The owner claimed it should be entitled to a reduction (or set-off) in the amount owed based on its losses. How many times have you heard something similar?
The appellate court found it was improper to grant a summary judgment for the association in light of these unrefuted allegations. The court said the association should have been required to refute these allegations or to show that the defense was legally insufficient. What is odd is that prior case law found those types of defenses (the lobby isn't clean, the pool is shut down, there is water leaking into my unit) legally insufficient.
I'm sure community leaders and managers would agree that associations already face too many obstacles. Let's hope this case does not create an additional one.
Answer: They all impact communities and community association operations!
Yesterday I attended the CAI Annual National Conference & Exposition being held at the Boca Raton Resort, where industry leaders from around the world shared innovative and emerging issues impacting community associations, community association leadership, management and operations. Becker & Poliakoff lead several presentations including:
The Impact of the Fair Housing Act on Deed Restrictions, Rules and Regulations.
The session addressed legal obligations on the part of community associations, such as the duty to make reasonable accommodations in policies and allow modifications to the physical premises for disabled persons (or persons associated with disabled persons). It also included the various types of accommodations, describing the trials and tribulations arising from the presence of miniature horses, parrots and other types of emotional support animals in a community association setting.
Aging Owners: New Challenges for Associations.
How many of you face different challenges every day as a result of aging or infirm residents? This session gave community leaders tips and practical advice how to balance the rights and needs of owners suffering from dementia, physical incapacitation and alienation by relatives, while preserving the rights and protecting the safety of neighbors.
Another presenter offered a fascinating program on the effective use of media for crisis management, damage control and to tout community accomplishments. I found the discussion on new technology quite interesting as well. Did you know that with relatively low cost you can offer your residents more security, improved energy efficiency, remote control of household lighting, appliances, air conditioning and more all from their computers, smart phones or televisions? Wouldn't it be great to be able to have valet bring around your car, unlock the door for the pest control service (and watch them perform the service) and then re-lock the door, authorize package delivery, turn on or off the lights, pre-heat the oven and a whole host of other things from your office or on the way home? More importantly, new technology for monitoring and preserving the health and safety of the residents is available. For communities with aging residents, wouldn't it be great to have notice a resident hasn't risen from bed, left the home or suffered a fall immediately, rather than being surprised when an ambulance arrived or, even worse, when a neighbor demands you break down the door due to an offensive odor?
More programs will take place today and tomorrow. Mr. Poliakoff will also be available to sign his book "New Neighborhoods" in the bookstore from noon to 3:00 pm.
The Florida Condominium Act requires both developer-controlled associations and unit-owner controlled associations to prepare a “Frequently Asked Questions and Answers” (commonly referred to as a “Q&A Sheet”). The Q&A Sheet must include information:
The Q&A Sheet must be updated annually and must be kept as part of the association’s official
records. It must be provided to a prospective purchaser of a condominium unit in connection
with resales of a unit. The completed, up-to-date “Frequently Asked Questions and Answers” form, and any application forms required in connection with the association’s transfer approval authority, must be provided to the seller and prospective purchasers at no charge.
Keeping and updating the Q&A Sheet is one area where many condominium associations are not diligent, and are often in violation of the law.
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The Cohn decision follows long-standing precedent in Florida regarding the applicability of statutory amendments to condominium or community association operations. If the governing documents of the association contain "magic language" incorporating statutes (in this case, the Condominium Act) as amended from time to time, statutory changes impact operations, rights and obligations of owners, the association governing the owners and, in some cases, third party vendors or service providers.
With this recent ruling by the Florida Supreme Court you've probably heard statements similar to those below over the past month or so:
"Florida legislators cannot impair contract rights. Since the declaration for my condominium doesn't limit co-owners from serving on the board together, my wife and I are entitled to both serve at the same time if we are elected."
"Since the declaration for my condominium does not allow the board to suspend my use rights, I am entitled to use any part of the common areas. It doesn't matter whether I pay assessments or not."
"The declaration doesn't include amendments to the law, therefore this board doesn't need to bother with the so called 'mandatory' arbitration process, we go straight to a lawsuit to address owner violations."
I've thus far refrained from providing an analysis of the case on this blog. Since the ruling seems to have created somewhat of a panic among community leaders and managers, a discussion of the broader issue is appropriate.
Article I, Section 10, of the Florida Constitution prohibits the legislature from passing a law “impairing the obligation of contracts”. The U.S. Constitution does pretty much the same. Declarations of community associations are considered, for most purposes, to be contract. So, the general rule is new laws cannot change the specific rights and obligations set forth in community association Declarations. However, like all general rules in the law, there are exceptions. The three major exceptions (that come into play most often with respect to community associations) are:
The "Magic Language" Exception:
This is basically an agreement to be bound by future changes to the law. The Florida Supreme Court explained that both state and federal court cases in Florida have held that parties to a contract (declaration) voluntarily decide whether the details are protected or allow for future changes to the law. By incorporating the law "as amended from time to time" in the governing documents, the parties (owners, the declarant, the association) agree that the declaration is subject to future changes in the law.
The Procedural/Remedial vs. Substantive Exception:
This provision in the constitution has been interpreted, by the courts, to only prohibit legislative changes to pre-existing “substantive” contract right. In very general terms, substantive laws address rights and obligations, while procedural laws describe the manner in which those rights and responsibilities are exercised (procedure) and enforced (remedy). The analysis necessary to determine what is considered "substantive" and what is considered either "procedural" or "remedial" is often tricky. Disagreements whether something is substantive or procedural/remedial often wind up in the courts (including the dispute in the Cohn case over allocation of voting rights). This new case reminds us to conduct the analysis before automatically acting as if the new law controls, especially when the governing documents do not contain the "magic language" referenced above.
The Compelling Public Purpose Exception:
Just because a law impairs a substantive contract right doesn't mean it is always unconstitutional (either on a state or federal level). If it can be shown the law is necessary or appropriate to achieve some compelling public purpose, it will trump pre-existing contracts. Think about minimum wage or child labor laws. Think about housing discrimination laws or life and safety regulations. It was not unusual for early deed restrictions to prohibit people of color (not stated that way) from buying property or living in a community. It was and still is not unusual for state and local governments to adopt new building codes for life and safety purposes that apply to existing buildings.
Now, think about the ruling from the other end of the spectrum. If new laws didn't apply to existing communities (unless there was "magic language") many owners would not have the right:
Consequently, there is no reason to be overly alarmed as a result of this Florida Supreme Court ruling. Yes; you may want to discuss the pros and cons of adding language to the governing documents to incorporates future statutory changes with counsel. Yes; you should consult with counsel before taking action solely in reliance on the language contained in new laws. However, you should not automatically assume none of the laws apply to you (as owners, community leaders, managers, etc.) simply because you cannot find the "amended from time to time" language in the documents governing your community.
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The Quail Run story demonstrates the power one, two or a few delinquent owners have over the paying owners. According to the Sun-Sentinel, close to 100 condo owners have been shut out of the pool, clubhouse and other Quail Run recreational facilities, even though a very small minority are behind in payment of maintenance fees.
The Condominium Act was amended, effective July 1, 2010, to allow associations to suspend use rights in the event an owner is more than ninety (90) days delinquent. Section 718.303, Florida Statutes says in part:
If a unit owner is delinquent for more than 90 days in paying a monetary obligation due to the association, the association may suspend the right of a unit owner or a unit’s occupant, licensee, or invitee to use common elements, common facilities, or any other association property until the monetary obligation is paid.
There is a similar provision in the statutes that govern homeowners' associations operations. Section 720.305, Florida Statutes likewise states (in part):
If a member is delinquent for more than 90 days in paying a monetary obligation due the association, an association may suspend, until such monetary obligation is paid, the rights of a member or a member’s tenants, guests, or invitees, or both, to use common areas and facilities and may levy reasonable fines of up to $100 per violation, against any member or any tenant, guest, or invitee.
Thus, it is evident that the association (whether a condominium association or a homeowners' association) has certain remedies available to it against a delinquent owner. The question here is whether this punishment may be imposed against all owners in a particular sub-association when some are delinquent and others paid in full.
Many communities are developed with several neighborhoods inside a large subdivision. There is a master association that bears responsibility for certain portions of the property, generally including the roads, perimeter fencing or walls, security gates and recreational facilities. In newer communities, typically the governing documents will give the master association's board the choice to 1. collect assessments directly from the individual owners, or 2. to require the sub-association to pay the aggregate amount. Obviously the latter is far easier for the master association administratively - keeping track of 5, 8, 10 or 15 payments is a lot easier than keeping track of hundreds or thousands of payments from individuals. The master doesn't necessarily need to keep track of property transfers or participate in many of the lender foreclosure actions when the sub-association bears responsibility for payment of the assessments attributable to its units/homes (although in many cases it may be wise).
Not all governing documents give the master association the options stated above. Some of the declarations merely require the sub-association to act as a conduit, not as a guarantor of payment. Some declarations actually require the master association to collect assessments from the individual owners.
One of the sub-association boards in the Quail Run community decided it could not absorb the costs of owners in default and only paid the master association for the unit owners that submitted their payments. The master association, relying on the language of Section 718.303, Florida Statutes, then suspended use rights for everyone in that neighborhood, rather than limiting the suspension to the owners in default. A hearing was recently held to determine whether the master association was right or wrong by taking that action. We'll be sure to report on further developments in this particular case as they become known. In the meantime, be sure counsel has reviewed your governing documents to see what options are available to secure your community's continued viability.
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State Regulations Up for Consideration in Addition to Federal Requirements. Community Association Pools & Spas May Require Retrofits. Exemptions Must be Renewed.
The Virginia Graeme Baker Pool and Spa Safety Act became effective on December 19, 2008. It established mandatory federal requirements to mitigate entrapment hazards in public swimming pools and spas, and required the installation of drain covers that meet certain performance standards. While many associations have installed the compliant drain covers, many have not addressed the direct suction issue. The federal requirements apply to virtually any pool operated by a community association, and are independent of state permitting regulations. Moreover, community association pools are often considered 'public pools' subject to regulation by Chapter 514, Florida Statutes.
In addition to the federal law, the state rules were amended in May of 2009 to provide that pools that qualify for a state permitting exemption are now required to renew their exemption every two years, starting July 2010. Historically, the exemptions were issued once, and never had to be renewed. These exemptions are only available to condominiums and cooperatives that adequately restrict or prohibit short-term rentals. Homeowners associations do not enjoy the same types of exceptions and therefore must comply with requirements governing public pools in Florida.
Renewal is tough and often denied if the association no longer adequately restricts rentals, creating a dilemma. Should the association attempt to modify the governing documents to impose rental restrictions to qualify for the exemption? Should it pursue the permit?
Expensive remodeling of the pool might be necessary to meet the extensive construction and configuration requirements necessary to obtain the permit.
Florida legislators are also considering state safety regulations. SB1480/HB1409 would require an anti-entrapment system and many pools with a single drain would also need:
Please consider the options available to the association and consult with counsel to ensure your community's pool remains available for use.
I frequently post comments received by readers along with responses on this site. Today I received valuable information from a reader that I want to share with you as a separate posting:
I agree with Lisa that this is a large issue facing associations. We are overwhelmed with the Social Media revolution. As I have said in a number of posts in many blogs, this is a "blessing and a curse" for associations. As one of the largest writers of community association directors and officers liability nationwide, including the wonderful state of Florida which is probably warmer than our 11 degrees here in Cleveland today, the social media revolution is high on our radar. Since this is a new phenomena, the waters are still not tested. I am quite supportive of association websites and social media for associations and their authorized board members to disseminate information, but beyond that, social media is a trap for the unwary for most associations. We defend associations whether the allegations are frivolous, false or fraudulent. Accordingly, whether allegations by association members are true or not, there are huge concerns about "defamation", "invasion of privacy" and "harassment" that come to mind. Before an association sponsors or engages in social media, especially open forums, I recommend you set up an appointment with Lisa or your own association counsel and be educated on the potential issues. You should also keep in mind that many association D&O policies expressly exclude claims for "defamation", "invasion of privacy", "discrimination" and "emotional distress" claims arising from these types of claims. Remember, we live in a great country that allows people to sue one another whether they have a legitimate claim or not.
Joel Meskin, Esq., CIRMS
The CIRMS designation is awarded by CAI to persons that demonstrate a high level of competency within the risk management profession.
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QUESTION: Last year our condo association members voted to "waive" the annual CPA Review. Must the question be presented to the membership for a vote each year, or can the board have the review done unless specifically requested to place the question before the membership?
RESPONSE: The board must have financial statements prepared in compliance with the statute and administrative rules, unless the members vote to reduce the level of review necessary for that fiscal year. Thus, the members must vote each time the association desires to reduce the level of year-end review. The administrative rules require the vote to take place in the fiscal year concerned (in other words, if you want to waive the audit of the 2010 financial statements, then take the vote in 2010). Administrative rules also require the minutes to include the number of votes cast by the membership and the review/report prepared instead of those contemplated by law. However, condo associations CANNOT waive the reporting requirements for more than 3 consecutive years.
QUESTION: What is or was the rational behind 1196 restricted owner information such as phone numbers and email addresses from being included in an owner roster. Is it possible for the association to produce a roster of these items if the owners agree to include the information?
RESPONSE: Owners around the state attended meetings held by various committees. Distribution of "private" information was one of the prevalent complaints. Many associations have abandoned directories as a result of the new law, while others have collected individual waivers from the unit owners. Your association should consult with counsel before preparing or distributing any directory.
QUESTION: I purchased a condo at the court online auction. It seems that the association foreclosed for non payment of ass. fees. And now I am told that I am responsible for the first and second mortgage on the condo unit? is this true , and if so what can I do?
RESPONSE: The buyer bears responsibility for any mortgages or other obligations that haven't been foreclosed out by the association's lien foreclosure case. In most cases the association will foreclose against both the owner and any junior lien holders (including second mortgagees or owners of lines of credit).
I hear this last question or variations on this question quite often now that many circuits implemented an on-line auction system. Buyers of condo units or homes in communities governed by homeowners’ associations are jointly and severally liable for all assessment obligations of the previous owner. First mortgagees are exempt from this rule and have limited responsibility, other buyers are not. Buyers also bear responsibility for maintenance of the property, correcting any code violations and compliance with the rules and regulations. Do your homework, that ‘great’ deal may not be as great as it appears.
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We receive a number of reader inquiries on a weekly basis. In most cases a response to the inquiry is included in the comment field itself, after the relevant blog post. Here are a few of the inquiries received in the last week, with our responses:
QUESTION: How can I learn if my townhouse is FHA certified?
RESPONSE: Go to this website to look up your community: https://entp.hud.gov/idapp/html/condlook.cfm
QUESTION: Do Florida Statutes address a CPA audit report that is anything other than a unqualified report? For example: The Board of Directors declines to present a statement of cash flows and a qualified report is issued by the CPA.
RESPONSE: The association's members can vote to waive an audit for three (3) consecutive years and during that time merely produce a report of cash receipts and expenditures. The Association must engage an accountant to prepare an audit in the fourth year if the revenue exceeds $400,000.
QUESTION: We are an 11 unit condominium. Must we send a 60 day first notice of our Annual condominium meeting? Do current Florida condominium statutes and bylaws govern our procedures?
RESPONSE: Section 718.112(2)(d), Florida Statutes allows an association of 10 or fewer units to vote for different election and voting procedures. Generally statutes relating to remedies or procedure will override conflicting governing documents. Condominium elections must be held in compliance with the statutes and yes, the first notice must be furnished to the members at least sixty (60) days in advance.
QUESTION: We need the legal ability to remove a owner who fails to follow condo laws, rules and regulations - not abiding by the 55 and older rule - having a grandson live there. Any help would be greatly appreciated.
RESPONSE: If the community qualifies as Housing for Older Persons (HOPA), then the association can proceed by filing a lawsuit (if in the jurisdiction of the 4th DCA) or file a Petition for Arbitration with the Division of Florida Condominiums, Time Shares and Mobile Homes.
The governing documents must clearly define the occupancy restrictions. Our Firm has successfully handled several cases involving violations of age restrictions.
QUESTION: I am a property manager and hear of associations with rules and guidelines that are not equal. I have found a condo association that allows owners to have pet but renters can not. Can they do this? Would this fall under a discrimination to renters?
RESPONSE: An analysis must be done to determine whether rules and regulations are valid and enforceable in any particular case. I am aware of at least one arbitration decision that upheld a rule prohibiting tenants to bring pets on to the property.
Remember, the information on this site is general in nature and not intended as legal advice. We try to point you in the right direction, but encourage you to discuss the specific facts and circumstances of issues impacting your association with counsel.
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The Federal Housing Administration (FHA) implemented a new approval process for condominium projects and insurance requirements for mortgages on individual units in November, 2009. FHA also announced certain exceptions to its standard criteria. Please note the following:
The November 2009 guidelines temporarily increased the number of permitted FHA insured loans in a particular project from 30% to 50%. 100% of the loans can be FHA insured if the project meets all of the basic condominium standards and the additional items:
Project Eligibility Requirements - The following requirements apply to all Condominium Project approvals:
Minimum number of units: Projects must consist of two or more units.
Insurance Coverage: Adequate hazard and liability insurance and, when applicable, flood and fidelity insurance.
Right of First Refusal: A right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act.
Commercial Space: No more than 25 percent of the property’s total floor area in a project can be used for commercial purposes. The commercial portion of the project must be of a nature that is homogenizes with residential use.
Investor Ownership: No more than 10 percent of the units may be owned by one investor. For condominium projects with ten or fewer units, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100 percent complete.
Delinquent Home Owners Association (HOA) Dues: No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payments.
Owner-occupancy Ratios: At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units
FHA Concentration: From 30% to 50%, with exceptions available.
Budget Review: This review must determine that the budget is adequate and:
• Includes allocations/line items to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project;
• Provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; and
• Provides adequate funding for insurance coverage and deductibles
In cases where the budget documents do not meet these standards, the mortgagee may request a reserve study to assess the financial stability of the project. The reserve study cannot be more than 12 months old. When reviewing the reserve study, consideration must be given to items that have been replaced after the time that the reserve study was completed.
FHA approvals expire according to the schedule published in Expiration of FHA/Fannie Mae Approvals: Will Your Condominium Units Qualify for Mortgage Financing?
Community Leaders Can Reduce Condo & HOA Budgets by Taking Advantage of Rebate and Incentive Programs.
We have included various money-saving tips for associations on this blog over the past two years. The case studies show how some associations trimmed up to $100,000 annually as a result of changed practices - especially through use of Florida Friendly Landscaping and irrigation changes. This month's Florida Community Association Journal contains several examples of money-saving initiatives on the part of community associations. Madeira Beach Yacht Club saved close to $20,000 per year on waste removal as a result of its recycling program. The La Playa Condominium on Longboat Key installed solar panels to heat the pool. It will "make back" the initial cost of installation in the first two years. The owners in the Tower Residences in Coconut Grove save approximately 18% per month on electric bills by replacing lighting. All of these communities are saving money and yours can too if the Board takes the right steps. Many utility companies offer evaluations, rebates and incentives. Here are a few:
Florida Power and Light (FPL) offers the following opportunities:
•Free Business Energy Evaluations provide comprehensive analysis of facility energy use and recommendations for cost-effective energy efficiency improvements.
•Building Envelope rebates include window treatments ($0.50-$1.00 per sf), ceiling insulation ($0.10-$0.15 per sf) and reflective roof measures ($0.45 per sq. ft.). Projects must be approved in advance in order to qualify for incentives.
•FPL's Interior Building programs provide incentives for efficient lighting (e.g., rebates of 65 cents to $4 for each linear fluorescent lamp), a variety of HVAC and chiller equipment, thermal energy storage, refrigeration and water heating equipment. Installations must be approved in advance.
Progress Energy offers financial incentives and services for a wide variety of energy efficiency measures and equipment upgrades in existing buildings and new construction including HVAC, motors, lighting, cool roofs, green roofs, roof, thermal energy storage, and window films. The utility also provides cost-shared services for existing buildings including ceiling insulation upgrades, duct check and repair, rooftop air conditioner recommissioning and PTAC/PTHP coil steam-cleaning when walk-through audits suggest these measures.
Through its Energy for Life program, Florida Public Utilities offers free energy audits and project design assistance as well as financial incentives for indoor lighting efficiency retrofits ($100 per kW reduced).
Tampa Electric Company (TECO) offers financial incentives for a range of energy-efficient equipment from lighting and air conditioning (including chillers) to heat pump water heaters and motors, as well as for envelope improvements such as duct repair, insulation and window film. TECO also offers free basic energy audits and very low-cost comprehensive energy audits (for facilities of greater than 100,000 sf or with peak demand over 500 kW) to evaluate facility energy use and opportunities for energy efficiency improvements.
There are so many options for associations to trim expenses by reducing energy use and conserving water its impossible to list them all. I encourage you to discuss your particular situation with counsel - you may be surprised by what you hear.
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The Federal Fair Housing Act prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability). Florida State and local ordinances likewise prohibit housing providers, including community associations, from discriminating against anyone protected by the law.
You may have an understanding of the fair housing laws and also know that discrimination on the basis of handicap (or disability) includes the refusal to permit reasonable accommodations or modifications. Are you aware of other protected classifications? Local ordinances, on a county and/or municipal level, also govern actions of housing providers. In addition to the classifications mentioned above, some local ordinances include age, marital status, political affiliation and sexual orientation in the protected classifications.
Community associations need to be aware of the local ordinances. A board member or manager may make a statement or take an action in violation of the law for what seems like a perfectly valid reason. In some cases those decisions ultimately required the association (or management) to pay thousands, even hundreds of thousands, of dollars in damages and penalties. Some examples include:
The Justice Department just announced its largest settlement of a housing discrimination case. The housing provider (property management) paid $1.25 million to settle claims of failing to grant reasonable accommodations to disabled persons. Assistant Attorney General Thomas E. Perez said: “Property owners and managers have no excuse for violating our nation’s fair housing laws by refusing to accommodate people with disabilities.”
Board members - please take the time and the effort to understand these and other fair housing requirements.
Does Your Business or Organization Have Policies in Place to Prevent Identity Theft?
Why Is This Rule Necessary?
Identity theft results in billions of dollars in losses each year to individuals and businesses. Identity theft is described by the FTC as a fraud attempted or committed using identifying information of another person without authority.
What Action Is Required?
The Rule requires covered businesses and organizations to implement reasonable policies and procedures for detecting, preventing, and mitigating identity theft.
What Businesses or Organizations Must Comply?
The Rule broadly defines the types of businesses or organizations that must comply. Any business or organization that regularly provide goods or services first and allow customers to pay later are covered. Examples include utilities, health care providers, lawyers, accountants, and other professionals, and telecommunications companies. In addition, the definition includes anyone who regularly participates in the decision to extend, renew, or continue credit, including setting the terms of credit. For example, a third-party debt collector who regularly renegotiates the terms of a debt would be considered a creditor under the Rule.
To help you determine whether your business or organization must comply, the FTC published A How-To Guide for Business, at www.ftc.gov/redflagsrule. Frequently Asked Questions and Answers can be found HERE.
What about Condos or HOAs?
Community Associations Institute (CAI) also published information about this Rule. It said:
The regulations issued by the FTC provide that any entity that is engaged in providing installment plans where the payment for goods and services is delayed would be required to comply with the requirements of the regulations. While we do not believe that community associations were the target of these provisions, given the broad language and the broad manner in which courts and regulators interpret such language, we believe that the FTC could find that such rules apply to some associations. As such, one response to ensure an association is protected from FTC enforcement would be to put in place a program that complies with the requirements issued by the FTC.
CAI says if your association accepts installment payments for assessments or other required payments or there is a reasonable risk of identity theft of consumer data, it may fall under the Rule. Both the Condominium and Homeowners' Acts prohibit a community association from disclosing personal resident information such as social security numbers, credit card numbers, credit histories and the like.
Community leaders should review the records maintenance and records access policies of the association and those of management. You may want to discuss this issue with counsel, especially if you haven't updated roster lists or otherwise secured records that are not accessible to the members.
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As you already probably know, the Condominium Act was amended as a result of SB 1196. Newly elected Board Members must either take a state approved educational course to qualify for Board service or submit a written certification to the Secretary of the Association.
This course, “Everything You Wanted To Know About Being A Board Member But Were Afraid To Ask!”, will be taught at various locations throughout the state. All instructors are attorneys practicing Community Association Law and have been certified by the Department of Business & Professional Regulation.
Why Attend?
- Comply with State Law - rather than simply "certify" yourself
- Understand your legal responsibilities and obligations including your “fiduciary duty”
- Receive our new publication “You’re a Board Member, Now What?” for day to day questions and strategies for handling board responsibilities
- Receive a Quick Reference Guide of checklists, statutory deadlines and charts to assist with elections, meetings and other Board responsibilities.
Topics Covered:
Operations * Records Maintenance * Dispute Resolution * Budgets & Reserves
*Elections * Financial Reporting & More
Registration is required and you will receive your Certificate of Completion at the end of the course. ClickHERE for the schedule and information how to register.
Continental Group Property Management issued a response to the article that appeared in the Sun-Sentinel entitled "Property Managers Make Money Off Condo's Insurance". I commented on the article in the post entitled More on Conflicts of Interest: Management Company Commissions?
The letter explains the relationship between Continental and First Service Financial (FFI). Its CEO notes that Continental's clients saved $1.5 million in insurance premiums in the past 12 months alone and stressed that the relationship between the companies is disclosed.
You can read the letter by clicking HERE.
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A Ruling in Favor of the Matanzas Shores Owners Association Will Help Your Community Push Mortgage Foreclosure Cases to Sale. Do Not Allow the Lender to Stall the Sale in Order to Avoid Paying Assessments and Maintaining the Property.
LR5A-JV v. Little House LLC, Fifth District Court of Appeal, Case No. 5D09-3857
The lender named Matanzas Shores as a defendant in order to foreclose the Association's liens. The Association's lien is subordinate to a first mortgage - with the exception of the 'safe harbor' payments required by the Condominium and Homeowners' Associations Acts (which is also referred to a the 'super-lien' provision). The Court entered Final Judgment of foreclosure against the property in 2008.
The Association didn't want to wait around for lender to act - so its counsel filed a Motion to Schedule the Sale. The lender objected - claiming it was entitled to set the sale and if it wanted to wait that was its choice. This is the issue that went up on appeal.
The Association argued:
The Lender objected - still claiming it, as the plaintiff in the case, had control over the process. The Lender also argued that even if the Court did have authority to schedule the sale, doing so at the Association's request was an abuse of discretion. The Appellate Court completely rejected the lender's arguments.
The Task Force report prompted the Supreme Court of Florida to Issue New Foreclosure Rules. One of those rules created a new procedure and form for use to change the sale date initially set by the clerk. This new form is called the Motion to Cancel and Reschedule Foreclosure Sale. Associations need the property to be sold to start collecting assessments from the new owner going forward. This new form requires the lender to explain why it wants to cancel the sale. It also directs the Court to set a new sale date, rather than keeping properties in an "extended limbo between final judgment and sale". [Quote from Task Force]
What Will the Lender Pay?
Counsel for the Association fears that the dispute between the lender and the Association is far from over. The statutes require the lender to pay assessments upon acquisition of title. Well, here the Court said that the sale should have taken place in 2008. Should the Association be penalized for the gap between the initial sale date and the date the sale actually occurs? Should the lender pay assessments for the two plus years it took to appeal? We may hear more about this case in the future.
This ruling brings welcome relief to many Associations throughout the state. If your community is waiting for the Court to re-schedule a sale or waiting for a lender to ask the Court to schedule a sale, wait no longer. Speak to your counsel about filing a Motion to Set the Sale. Along those lines, if your community is waiting for a lender to set its summary judgment hearing or re-schedule its summary judgment hearing - speak to counsel. You have options to push these cases to conclusion - take advantage of them!
Flood Insurance is required to secure financing, from a federally regulated or federally insured lender, to buy, build, or improve structures in Special Flood Hazard Areas (SFHA's).
Community associations throughout the State have been approached by companies that study the topography and/or other features of their development in order to prepare data for use by the Federal Emergency Management Agency (FEMA) to determine whether the community's flood hazard assessment is correct. As a direct result of these efforts, several communities have been reclassified from Special Flood Hazard Areas (SFHA) into areas of "moderate" or "minimal" flood risk. Some Boards engaged these services with the goal of eliminating the cost of flood insurance from the association's annual budget.
CBS4 (Miami) recently ran a story about the FEMA mapping system. It found that the National Flood Insurance Program became $18.7 billion dollars in debt after hurricanes Katrina, Rita and Wilma. The television report indicated that FEMA executives intend to pay off some of this debt by changing flood maps and increasing the number of properties that require insurance. Miami-Dade maps were just released and revised Broward maps are due out next year.
Community association boards should discuss these requirements, and their options, with both counsel and insurance advisers. According to statistics published by FEMA, up to 25% of flood losses happen outside of special flood zones. Dropping master coverage may impact individual owners if their lenders require coverage. In the long run it may, in fact, cost each owner more without the master policy.
Conflicts of interest, or at least claims of conflict of Interest are in the news lately. The Sun-Sentinel ran an article entitled "Property Managers Make Money Off Condo's Insurance" on Sunday. It says some of the property management companies are affiliated with insurance agencies that procure property insurance. If the board of directors selects the products or insurance package recommended by the management company, in some cases the agency will share the commission. Commissions can run into the tens of thousands of dollars per policy. Critics argue that this financial incentive skews management's recommendations. Community association board members often look to and rely upon the expertise of their managers/management companies when making significant decisions.
The Department of Financial Services, Division of Agent and Agency Services is considering rules prohibiting "unlawful inducements" in connection with property insurance. The rule, if adopted, would prohibit:
Some of these are obviously problematic, but "business as usual" in many industries.
Is it wrong to contribute to charities or non-profit organizations when your client supports those efforts? Is it wrong to obtain discounts on behalf of your clients? Isn't that one of the factors that plays a part in deciding which agent (or any service provider for that matter) to use? If the agent has access to discounts that are not available to other agents, doesn't that benefit the association? Same with reducing the commission - the premium goes down if the agent will agree to accept less of a commission from the insurance carrier. How does that harm the association?
On the other hand, do the board members (and unit or home owners) know of this financial incentive? Are they able to compare 'apples to apples' quotes for products and services? Do they know they have options when it comes to financing insurance premiums? Is the association getting the best rate for the financing?
Disclosure here is key. Board members need to ask those tough questions and carefully review different proposals. Insurance is a major part of an association's budget. If the board is not sure, hiring a consultant to compare packages and prices is well worth the expense - it could even save your association money in the long run if there are changes in coverage necessary or appropriate under the circumstances.
The Federal Trade Commission ("FTC") announced proposed revisions to its "Green Guides". It is accepting public comment on these proposed changes until December 10, 2010. The FTC is charged with responsibility for prevention of fraudulent, deceptive and unfair business practices.
Apparently the FTC found consumers were misled by greenwashing techniques on the part of marketers. Greenwashing (as stated in Wikipedia) is:
(a portmanteau of "green" and "whitewash") is a term describing the deceptive use of green PR or green marketing in order to promote a misleading perception that a company's policies or products (such as goods or services) are environmentally friendly. Greenwashing may be described as "spin".
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There are many reasons why this issue should concern community associations. Community associations have traditionally been a prime target for certain practices. Think about all the communities that paid large up front payments to what they later learned were unlicensed contractors. We hear about far too many cases of fraud, theft and embezzlement of community association funds these days. The Florida Attorney General investigated recovery firms claiming to correct problems associated with timeshare unit re-sales and found that certain companies charged 'exorbitant fees' even though they provided very little service.
Losses may result from working with well intentioned service providers as well.
Budget shortfalls drive association boards to consider alternatives for their communities. Some of these communities have saved tremendously, just by changing certain practices or updating and improving certain systems. I discuss some of these techniques in "Green" Practices to Ease Future Financial and Budgeting Concerns and HOAs Can Save With Florida-Friendly Landscaping. Now is the time to consider retrofits and 'retro-commissioning' building systems to increase energy efficiency and reducing water use and expense, but community leaders have to scrutinize representations very carefully.
Paying attention to energy efficiency is important for another reason - government regulation. New York City's new Energy Conservation Code requires existing residential buildings i.e. condominiums and cooperative buildings (larger than 50,000 square feet) to:
I saw an announcement indicating these efforts will save New York City residents approximately 750 million dollars a year. Efficiency regulations for new construction in certain areas in Miami-Dade County are already on the books - they govern construction of residential buildings as well as commercial buildings. Its just a matter of time before statewide regulations, codes and local ordinances require community associations to increase efficiency in connection with repair projects or possibly require improvements and retrofits for this purpose.
If your community is interested in pursuing options that will save the association money while reducing waste and water usage at the same time, I encourage you to work with lawyers and consultants familiar with the U.S. Green Building Counsel's Leadership in Energy and Environmental Design rating system, even if you're not interested in certification. Those professionals should be proficient in community association operations, laws, regulations and governing documents, financing as well as construction law to ensure the project goes smoothly.
I'll include more information about some of the legal issues community associations need to consider in connection with these types of projects in a later post. To review a copy of the proposed revisions to the Green Guides click HERE.
Are you completely familiar with the insurance coverage available to your association? Will you have FIGA coverage in the event your insurance carrier becomes insolvent?
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The Florida Insurance Guarantee Association (FIGA) was created to ease the burden on policyholders with claims when an insurance carrier becomes insolvent. FIGA coverage is limited to licensed insurers in the State of Florida, otherwise referred to as admitted carriers. When an admitted insurance company becomes insolvent, the FIGA pays eligible claims. However there is no FIGA coverage for non-admitted or unlicensed products, such as surplus lines or is a self-insurer covered in the non-admitted market.
While FIGA steps into the shoes of the dissolved carrier, payment limits are established by statute, not the original policy. The way the policy is written for a multi-building association is important - very important as demonstrated by the recent ruling in Florida Insurance Guarantee Association v. B.T. of Sunrise Condominium Association, Inc. The ruling is hot off the press and therefore subject to rehearing upon proper Motion.
There are seven (7) buildings within the B.T. of Sunrise Community. All of them were damaged by Hurricane Wilma. The association filed its insurance claim with the carrier, Southern Family. Southern Family assigned one claim number to the entire claim and paid for certain damages before it went insolvent.
The association was not satisfied with the amount paid by Southern Family and therefore requested supplemental payments from FIGA. FIGA issued a check for what it believed was its statutory limit: $300,000 minus $100 for the FIGA deductible. The association then challenged FIGA's finding - there were seven (7) buildings, each listed separately, each covered for a specific amount and each had a specific premium payment based on the coverage amount. Why would FIGA only pay for one claim? The association argued FIGA should pay for seven (7) claims.
That issue was decided in the association's favor at the trial level. FIGA appealed and the Fourth District likewise ruled in favor of the association. FIGA will now have to participate in the appraisal process with respect to each building - with separate limits of coverage for each building.
Please review your policies and declaration pages carefully, then discuss this issue with your insurance professional. Make sure your community has the maximum benefit fromFIGA coverage.
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The Federal Fair Housing Act (FHA) prohibits discrimination in any activities relating to the sale or rental of a dwelling because of race, color, religion, sex, handicap, familial status or national origin. The term "familial status" is defined as one or more individuals (who have not yet attained the age of 18 years) being domiciled with a parent or guardian or a designee of such parent. State statutes (Chapter 760, Florida Statutes) and local ordinances also regulate housing discrimination in regards to age, marital status, political affiliation, sexual orientation and other classifications. Adding "familial status" to the list of protected classifications made former "adults only" communities either apply for an exemption or change their practices.
The most common exemption is known as the Housing for Older Persons Act (HOPA) exception that applies to communities operating as “55 or over” housing. To qualify for this exemption, the following criteria must be met:
If the community does not qualify for the Housing for Older Persons exemption, it must allow families with children. It doesn't matter if there are no other children. It doesn't matter if the community doesn't have facilities for children or a place for them to play. A community in Orange City, Florida recently agreed to pay $415,000 in monetary damages and civil penalties after the court found that the defendants violated the FHA by engaging in a pattern or practice of discrimination against families with children. The Department of Justice prosecuted the lawsuit against the housing provider.
The Fair Housing Center of the Greater Palm Beaches recently filed suit against a condominium association in Boca Raton, Florida for familial status discrimination. The association first rejected a sale to a man with three children and later refused to approve a tenancy where two children were expected to live in the unit. Both governmental agencies and private fair housing advocacy groups use "testers" in support of discrimination claims.
If you're not sure your community is in compliance with the requirements of the Housing for Older Persons Act, please consult with legal counsel.
Is your Association Leaving Money on the Table?
Bank foreclosures continue to be an impediment to collection of unpaid assessments in many communities. Sure, after the 2010 legislation became effective, community associations are entitled to collect either 1% of the original mortgage debt or 12 months worth of assessments from the mortgagee (whichever is less), but what about the rest of the balance? Does it disappear into thin air?
Because a bank foreclosure will usually directly impact the ability to successfully lien and foreclose, communities must be aware of other alternatives to collect unpaid assessments.
Strategic Defaults - According to Wikipedia:
A strategic default is the decision by a borrower to stop making payments (i.e. default) on a debt despite having the financial ability to make the payments.
While many owners who lose their units in foreclosure cannot pay, it is important to remember that a unit owner is personally liable for all unpaid assessments that are left when a bank forecloses. The Association may seek to collect the balance on the account from the former owner. More and more, people who do have assets make choices to abandon properties because there is no equity. If there is a possibility that an owner has assets to satisfy a judgment, a community should consider taking action against a former member to collect those unpaid assessments.
Many associations are thinking short-term instead of long-term when they decide to forgo pursuing a money judgment for the balance between what a lender pays if it takes title as a result of foreclosure and the outstanding obligations on the account. Yes, there are costs involved. If the association doesn't have a lawsuit pending, it needs to file a lawsuit. There are attorneys fees, filing fees, costs associated with service of process, etc. If the association already has its lawsuit pending, most of those costs have already been absorbed - so why not wait for the bank to foreclose (and pay its statutory obligation), then continue to pursue the balance against the former owner? A judgment is recorded in the county and with the State's registry; it is initially valid for 10 years and can be renewed for another 10 years. During that time if the debtor desires to buy another property, obtain financing for purchase of a vehicle, college, etc., the judgment will appear.
While the debtor/former owner may not have sufficient cash-flow right now, who knows what the future will bring? If the debtor has significant assets in another state, the association can even take the extra step of domesticating the judgment in another state and pursue collection efforts there.
An asset search may help discover assets. It is more difficult (sometimes almost impossible) to collect from a corporate unit owner or a foreign person. Nonetheless, your community should consider its options after a bank foreclosure - you may be leaving money on the table.
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Condominium conversions became tremendously popular (because they were profitable) during the housing boom. Many old tired apartment buildings were converted to condominium ownership, remodeled and then the units sold. In some cases the developer substantially remodeled the building and improvements by updating plumbing and electrical systems, replacing the roof, replacing or modernizing elevators and "gutting" the interiors. In other cases the developer merely installed tile where there was carpet, upgraded the kitchen with fancy cabinets, stainless steel appliances and granite counter tops then painted before selling the units. If the developer of the conversion project funded converter reserves, unit purchasers are left without statutory warranties.
When an apartment building is being converted to a condominium, Section 718.616, Florida Statutes requires the developer to provide each prospective buyer, as part of the Prospectus or Offering Circular, with certain inspection reports from professionals. These reports focus on the physical condition of various portions of the building and improvements. With respect to certain aspects of the building (such as the roof, structure, heating, plumbing and electrical systems), the owner must disclose the age of the component, the estimated remaining useful life of the component, the estimated current replacement cost, and the structural and functional soundness of the component. The specific purpose of the disclosure requirement is to protect the prospective purchaser by allowing them to make an informed decision whether to purchase a "new" unit in what may be an old building.
We are all guilty of not reading the "fine print" from time to time. That was especially true when purchasers found what seemed to be an affordable price for a condominium unit in the hot real estate market. Unfortunately for many of those buyers, some of those buildings needed substantial work. Levying assessments to repair elevators, perform concrete work, repair damages from roof leaks and other expenses in a "new" condominium is stressful for the members of the board of directors and causes friction between the owners and the board.
If the developer is out of the picture, bankrupt, no longer in business, etc. is there any recourse for the association and its members?
There is, especially if the building disclosures weren't accurate. Florida Courts have found that the engineers and other professionals preparing these disclosures supplied expert information which was intended to and did guide and inform prospective purchasers on the condition of the building. Accordingly, if engineers or other professionals provide false information which reaches and is relied upon by people who are expected to receive and rely on the information, they may be held liable for expenses incurred by the association to repair or remedy the undisclosed defects. There was an effort by the legislature this year to vitiate remedies against design professionals. That bill was vetoed by Governor Crist.
This is not to say every statement of false information in an inspection report in a condominium conversion will lead to a potential claim. It will, however, open the door for those associations where purchasers were truly harmed by the misrepresentations of professionals who are supposed to be providing honest, objective evaluations of the condominium property.
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While the recall process is widely known, many community leaders are unaware of a process authorized by the Division of Florida Condominiums, Time Shares and Mobile Homes referred to as a "reverse recall".
A recall attempt may fail if the Board of Directors does not handle the recall effectively. In many instances there is a member of the Board that is not well liked or otherwise is adversarial to the remaining members. While any individual may start a recall effort, the Board cannot legally “bend the rules” and certify a recall that should not be certified due to lack of proper votes or the use of an improper form of written agreement. Moreover, failing to call or hold a meeting does not, under all circumstances, automatically entitle the unit owners to certification of the recall attempt.
What does a recalled board member do when the Board certifies a recall that he or she knows should not have been certified? What does a recalled Board member do when it is discovered that he or she was recalled without being given the opportunity to address the board at a meeting called for the purpose of determining whether or not to certify the attempt? The recalled Board member may file a Petition for Arbitration with the Division of Florida Land Sales, Condominiums and Mobile Homes. Those Petitions are known as “reverse recalls”.
As described in Ringler v. Tower Forty One Association, Inc., Arb. Case No. 2005-04-1867, a reverse recall is a proceeding in which “the board member whose recall was certified initiates the proceeding, joined by any other unit owners who wish to be included as petitioners, arguing that the recall effort was certified in error and naming the association as a party”. The party filing for arbitration may challenge the board’s actions or in actions relating to the recall process and may challenge the recall procedure itself, such as the form of written agreement or vote at a meeting. In Ringler, the board received the written agreements for recall and failed to call a meeting. Mr. Ringler was notified that the recall was effective before he even knew that the board was served. The property manager accepted service of the written agreements and delivered them to another board member. That board member purportedly failed to notify anyone else (although that allegation was disputed).
Since service on the Association’s manager is effective service, the recall against Mr. Ringler was ultimately certified, but in Scariati v. The Villages of Emerald Lakes One Condominium Association, Inc., Arb. Case No. 2005-02-1485, the arbitrator reversed the recall as it was discovered that there weren’t enough written agreements signed by owners to effectuate a valid recall. In Scariati, the petitioner alleged she was not permitted to examine the recall written agreements before or even at the board meeting to determine whether or not to certify the effort. Once she had that opportunity, she discovered the improprieties. The recall was not certified, even though the board voted to certify, as a result of the board’s improper behavior and the fact that the recall was void ab initio.
There is a substantial difference between recall arbitrations and “reverse” recall arbitrations. There is no mechanism for recovery of prevailing party attorneys’ fees in the arbitration of a recall. However, since a “reverse” recall is a Petition filed by a unit owner (or owners), attorney’s fees are awardable to the prevailing party. Thus, it is important not to ignore procedural requirements in connection with a recall attempt as machinations on the part of the board may expose the Association to liability for the opposing side’s fees and costs.
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How does your community address complaints? Is there a published procedure or is every complaint handled differently? Who has authority to handle the complaints? HOA Leader recently published an article with tips for handling homeowner complaints. Here is a link to one of the tips:
HOA Complaints: Turn Owners' Frowns Upside Down
How many times have board members heard the following complaints and made the following responses:
1. The unit owner across the hall from me constantly cooks food that stinks up the entire hallway, can’t you do something about this? (Typical Board response: What stinks to you may be perfume to others, please be tolerant.)
2. I’m afraid of my next door neighbor’s large dog. I saw him lunge at another dog, and he’s always growling. I think he might attack another animal or a child. (Typical Board response: Dogs are expressly allowed by our documents. There’s nothing we can do.)
3. This is the third time I’ve complained about water intrusion into my apartment from upstairs. Why won’t you fix the problem ? (Typical Board response: The water is coming from the upstairs neighbor’s unit, not the common elements and, therefore, we aren’t responsible.)
4. One of the unit owners continually harasses me, and I can’t stand it anymore. Lately, every time I see him he shouts out derogatory racial slurs. It’s getting to the point that I can’t even stand living here. (Typical Board response: This is a problem between you and your neighbor; we can’t control what people believe.)
Did the board respond appropriately? Maybe yes, maybe no – it’s a matter of degree.
The first complaint is in the nature of a nuisance complaint. The owner claims that the neighbor’s use interferes with the peaceful possession and use his or her unit. Under this circumstance (or similar complaints regarding noise, music, etc.), the board has an obligation to determine whether the behavior actually constitutes a nuisance in violation of the documents. The board is put in the position of balancing competing interests and determining whether the use is reasonable versus whether the use creates an actual, material, physical discomfort to a person of average sensibilities.
The second complaint may deserve more attention. An association may be held liable for injuries resulting from a dog bite, if it is proven that the association had knowledge of the dog’s propensity for violent or aggressive behavior. Even when the association’s documents allow for pets, it may be entitled to an order removing the dog, if it becomes a nuisance. I'll explain more about dangerous dog laws in another post.
The third complaint is heard often. Since the association has the duty to maintain, repair, protect and replace the common elements, it has the obligation to investigate the situation in order to ascertain the source of the water leak. If the water is leaking from the common elements, the association has an obligation to fix the problem. The association may have certain avenues available if a water leak from one unit results in damages to the common elements or other units. An “enforcement of maintenance” or other self-help remedy in the governing documents is extremely beneficial under these circumstances. Note - I haven't mentioned insurance - that subject will be addressed in a future posting on this site.
Finally, “harassment” is very difficult to define and even more difficult to remedy. Nothing an association can do will turn people into nice or pleasant people. However, if the level of harassment rises to physical violence or unlawful discrimination, the association may be held liable. In Casa del Mar Condominium Association, Inc. v. Richartz, 641 So.2d 470 (Fla. 3rd DCA 1994), the Court held that an association has standing (authority) under Section 718.303, Florida Statutes, to seek an injunction against a unit owner to prevent future acts of physical violence, or threats of violence, against the association, its directors, employees and residents. Moreover, in at least one case, an association paid more than a half million dollars to settle a case in which an African-American unit owner claimed that the board did nothing to protect her from the racial and sexual slurs, derogatory comments and physical threats of another owner.
Association boards must be cognizant of the happenings in the community and take member complaints seriously to avoid liability.
Within hours of any disaster, affected communities will be besieged with offers by companies and individuals offering disaster recovery assistance.
Please resist the urge to contract with these initial providers until you have done the following:
Following these ten steps will help communities recover and rebuild as quickly and effectively as possible.
Best Advice: Make sure every contract is with a Florida Licensed and Insured Contractor and that it is reviewed by a Licensed Florida Attorney, prior to signing.
We thank all the webinar participants who shared personal experiences and submitted well thought-out questions to the facilitators. If you could not attend today, please return to this site for a link to the recorded presentation.
The Miami-Herald reported a story about the widow of the Nova Southeastern University.jpg)
professor that was attacked and killed in his Plantation home. She filed a civil lawsuit Friday alleging negligence by the management company and condominium association - she claims those entities were supposed to conduct background checks on tenants.
The article quotes the attorney for the widow who said ``They certainly did not meet up to their obligations concerning a proper background check as well as an approval of Randy W. Tundidor,'' Williams said. ``A very simple check would show evictions and the like.''
Tenant background checks are not required by state condominium law. In fact, an association can only perform a background check if such action is authorized by the governing documents. In this particular matter, the tenants resided in a townhome condominium owned by the slain professor. The professor and his family did not reside in the same complex, so its hard to understand how the condominium association (or its management company) would have been able to prevent these individuals from allegedly driving over to his house, allegedly entering his house and engaging in the alleged attack.
Even if the "simple" background check did show past evictions and the like, the condominium association and its management company are specifically prohibited from sharing that information with the landlord/owner. Section 718.111(12), Florida Statutes prohibits the association from sharing any information obtained in connection with its investigation of a proposed tenant. That statute also prohibits the board from sharing social security numbers, credit card numbers, credit history reports or "any personal identifying information" with the members. Federal laws likewise prohibit disclosure of credit and other background information.
What happened to the professor is a tragedy. How anyone could commit such a heinous crime is beyond me, especially if what has been alleged is true and the whole dispute involves payment or non-payment of a security deposit and/or maintenance of the rented property.
That being said - was this murder the condominium association's fault? Was it the management company's fault? I hope you agree that the condominium association and management company should not be held liable for this tragic loss.
"Take-aways" for community leaders and managers:
Finally, speak to your legal counsel and perhaps insurance professional if crimes have been committed within the community. You may have options to improve community safety while limiting the association's exposure to liability - all at the same time.
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Lawsuits Against Employers for Violations of the Fair Labor Standards Act & Other Employment Claims are on the Rise.
Some community associations have one employee, while others may have a hundred or more employees. Think about it - maybe your community employs a CAM, grounds maintenance people, a concierge, office assistants, front desk personnel, activity coordinators, beach attendants, valet, building engineers, cleaning staff - the list of people necessary to operate many community associations goes on and on. These individuals may have access to sensitive or proprietary information, such as unit owner or resident medical or health related records. When the economy is tight (like now) employment related claims and lawsuits rise dramatically - I read one article that said the number of lawsuits filed against employers for violations of the Fair Labor Standards Act (FLSA) rose by 40% each year for the past several years in a row!
If you are a member of a Board of Directors of a community association and have answered "yes" or don't know the answer to any of these questions, an employee manual should be a priority. Unfortunately, many community associations neglect to spend the time or devote the funds to this task. A well-drafted employee manual can minimize your exposure to both employment related and third-party liability claims - but make sure to have a Labor and Employment Attorney from your state draft and/or review the manual. Since employment laws vary from state to state and change quite frequently, using a 'form' from a neighboring community or from the Internet may do more harm then good.
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Community Leaders Can Challenge Property Tax Assessments With Board Resolution.
Hasn't the real estate market changed in the last few years? Owners and Board Members long for the days of escalating prices when everyone paid maintenance fees and even if they didn't, there was plenty of equity in the property to satisfy delinquencies after or in connection with a foreclosure.
That has all changed. Revenue is down and so are property values. Shouldn't you pay less? Of course you should and probably do - property appraisers have been adjusting values, but are the new numbers realistic? Both the multi-family and single family home values fell dramatically - now is the time to establish a lower base assessment for yourselves and your owners.
How? Pursuant to Section 194.011(3), Florida Statutes, condominium, cooperative and homeowners associations can file a joint petition. The relevant portion of the statute says:
A condominium association, cooperative association, or any homeowners' association as defined in s. 723.075, with approval of its board of administration or directors, may file with the value adjustment board a single joint petition on behalf of any association members who own parcels of property which the property appraiser determines are substantially similar with respect to location, proximity to amenities, number of rooms, living area, and condition. The condominium association, cooperative association, or homeowners' association as defined in s. 723.075 shall provide the unit owners with notice of its intent to petition the value adjustment board and shall provide at least 20 days for a unit owner to elect, in writing, that his or her unit not be included in the petition.
Thus, once the Board of Directors passes a resolution it may file the tax appeal petition with the Value Adjustment Board. The Value Adjustment Board will appoint a Special Magistrate to conduct a hearing to determine whether the market value of the property set forth on the TRIM notice was higher than the actual market value on January 1 of this year.
The collective power of the association is useful in the appeals process. First, the per property fee for filing is less. The fee may be paid by the Association, in fact §718.111(3), Florida Statutes and §720.303(1), Florida Statutes specifically authorizes the association to protest ad valorem taxes for the common facilities. The common elements and facilities are nominally valued for tax purposes, since the actual value is included in the value of the homes/units.
Factors to Consider in a Protest:
Each unit or home owner is given the opportunity to opt-out of the appeal if they want to pursue an appeal on their own or just don't want to participate.
Use professionals to assist in the tax appeal process. A professional should know how to craft the appeal, can determine whether any exemptions apply and understands the process - all to present your case in the most favorable light.
Community leaders should understand the financial wherewithal of the associations they lead. Unit and Home Owners also have rights to review financial records. It seems like we hear about theft of association funds more and more these days. Simply leaving finances in the hands of a manager, bookkeeper or treasurer is not enough. For some practical ideas how to stay "in the know", please see the following article published by HOAleader:
Five Questions to Ask Your Manager about Your Homeowner Association's Finances
Fourth District Court of Appeal Enunciates Two-Pronged Test to Evaluate Decisions Made by the Board of Directors of a Community Association.
The officers and directors of community associations have a fiduciary relationship to the members (owners), as stated in §718.111(1)(a) and §720.303(1), Florida Statutes. The directors are obligated to discharge their responsibilities in good faith. Board decisions are generally protected by the "business judgment rule". The theory behind this rule is that Courts should not substitute their judgment for the judgment of the elected or appointed board members, so long as the members of the board acted in compliance with established standards of conduct. Florida Statutes, Section 718.111(1)(d), provides:
(d) As required by s. 617.0830, an officer, director, or agent shall discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner he or she reasonably believes to be in the interests of the association. An officer, director, or agent shall be liable for monetary damages as provided in s. 617.0834 if such officer, director, or agent breached or failed to perform his or her duties and the breach of, or failure to perform, his or her duties constitutes a violation of criminal law as provided in s. 617.0834; constitutes a transaction from which the officer or director derived an improper personal benefit, either directly or indirectly; or constitutes recklessness or an act or omission that was in bad faith, with malicious purpose, or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.
The new test to determine whether the board's decision should be protected by the business judgment rule comes from a case where an owner prevented the association from extending balcony concrete repairs into her unit. The engineer for the project said to remove the concrete four inches beyond the corrosion, which necessitated work in the unit, not just the balcony. The owner hired her own engineer who said the extra work wasn't necessary.
The association sued to gain access to the unit to perform the repairs recommended by the project engineer. The appellate court explained that its review of the board's decision was limited by the business judgment rule and held:
...courts must give deference to a condominium association's decision if that decision is within the scope of the association's authority and it is reasonable - that is, not arbitrary, capricious, or in bad faith [emphasis added]
The case was sent back to the trial court for analysis pursuant to the new test, to wit:
This case is hot off the press and therefore not final if the parties file motions for rehearing.
Loose Lips Sink Ships - Board Discussion of Obtaining Legal Advice Results in Waiver of Privilege.
Communications between an attorney and his or her client have been privileged and confidential for basically as long as there has been a legal system. Some say the attorney-client privilege has its roots in ancient Rome. Early English common law recognized the privilege as important to encourage disclosure of information that may be necessary for the attorney to provide effective counsel without fear of the information becoming public. Its no surprise that Florida's legislators recognized the value of the privilege and excluded attorney-client privileged documents from member inspection rights in Section 718.111(12), Florida Statutes.
Community association board members may not understand the privilege or how to protect the confidentiality of advice received from the association's attorney. Now and then I receive a copy of my letter to one client from another client asking whether the issue applies to them. I cringe when a contractor's attorney calls after receiving a copy of my letter identifying weaknesses in my client's position. The association is the client and has the right to voluntarily waive its privilege - but was there a discussion of the consequences of the waiver or was the disclosure by one board member who "was just trying to help"? Unfortunately, once the cat is out of the bag its very difficult, and in some cases impossible, to prevent further disclosure.
A recent Summary Final Order from the Arbitration Section of the Division of Florida Condominiums, Time Shares and Mobile Homes demonstrates that the privilege may be waived unintentionally, simply by discussing whether to obtain legal advice on a particular issue in an open forum.
In this case the board proposed increasing the budget by more than 35%. Owners questioned the board's authority to adopt such a large increase without the affirmative vote of the members. The discussion of whether the board should adopt the budget or obtain legal advice first was at a duly-noticed board meeting. Ultimately one of the board members made a motion to seek legal advice and the majority of directors voted in favor.
Later, one of the owners requested access to the official records, including the legal opinion analyzing the governing documents with respect to the budget increase. The association allowed access to all the requested records other than the legal opinion. The arbitrator ruled that since the board discussed the issue at an open board meeting there was no intent to keep its subsequent communications with or advice from the attorney confidential. The board was ordered to make the legal opinion available for inspection.
There is a lesson here - community associations may need to have policies in place to safeguard confidential information. Board members should understand this valuable privilege and think twice before discussing any sensitive legal issues in an open forum or with any third parties.
SB 1196 Includes New Remedies for Collecting Money Owed to Associations.
Community leaders and managers have complained for years about investor owner delinquencies. Why should the owner continue to collect rent from his or her tenant without paying maintenance fees and/or assessments? Sure, both the Condominium and Homeowners Acts allowed the association to apply to the Court to request the appointment of a rent-receiver, but to take advantage of that provision it had to file the foreclosure lawsuit. The law requires notices to the delinquent owner, preparation and recording of the claim of lien, filing and serving the foreclosure lawsuit - all before the association could ask the Judge for authorization to collect rent. It could take several months to obtain the appropriate Court Order - all while the account remains delinquent. In some cases the tenant moves out before the association has the chance to collect any rent. Of course there are costs and expenses involved with that whole process.
Recently (as reported on this blog in Condo Receiver Helps Collect Assessments; Q&A: Condo Receivers; Collecting Rent from Tenants; Q&A: Collecting Rent from Tenants (revisited) ) the Courts have extended the law to allow 'blanket receiverships' for all units subject to foreclosure - and even more recently some Orders were entered authorizing the receiver to collect rent from tenants occupying units even before the association filed for foreclosure.
Well, in response to those cries for help the legislature included a 'self-help' procedure for associations. The first paragraph of this portion of the new law says:
If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the condominium unit to the association, and the tenant must make such payment. The demand is continuing in nature and, upon demand, the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner.
The Association must follow a specific procedure to collect rent from tenants. There are some pitfalls to avoid. Its a good idea to discuss these issues with counsel or allow counsel to send the demands on your behalf.
SB 1196 contains significant changes for community associations.
Governor Crist had until June 1, 2010 to act on SB 1196. While I have included bullet point explanations of some of the changes, over the next few weeks please check for more in depth information about how these new provisions will impact your association's operations.
Community associations across the state are breathing a sigh of relief - many of them will not be required to retrofit the buildings with fire sprinklers or install fire alarms, both expensive propositions in light of the record number of foreclosures and budget shortfalls. In most cases elevator upgrades can be put off for five (5) years - hopefully the residential market will gain stability in that time, making the costs associated with the elevator improvements easier to fund.
Attention: If you are a non-paying, non-resident unit owner and lease your unit, the association may demand future payments of rent from the tenant to satisfy your financial obligations, without filing a lawsuit first.
Legislators all over the state heard complaints about the repair, upkeep and staffing requirements associated with recreational facilities. Paying unit owners were demonstrably upset (justifiably so) that non-paying owners could enjoy the use of the recreational facilities, in some cases precluding paying owners from use due to over-crowding. Under this new law, associations can suspend the use of recreational facilities if assessments are more than ninety (90) days past due. Of course, associations cannot suspend any utility services, parking spaces or means of access to the unit. The effectiveness of suspending use rights remains to be seen, but the provision itself should make owners think twice before defaulting.
This bill also includes the "Distressed Condominium Relief Act". While the act doesn't protect buyers that acquire title after July 1, 2012, it will impact condominium associations for a number of years with respect to warranty, construction, accounting claims and the like.
A number of bills CALL tracked this session were sent to Governor Crist recently. He has until June 1, 2010 to act (veto or sign) on the following bills:
We've included bullet point summaries of SB 1196 on this blog, but refer you to the actual text of the bill for more complete information. Community Update will outline the impact of important bills on community associations - Becker & Poliakoff''s association clients will receive the electronic version shortly.
The Governor's office is in the process of reviewing SB 1964. We've included concerns about this bill before in Condos/HOAs Have a Lot to Lose if Design Professional Protection Bills Become Law. In 1999, the Florida Supreme Court codified a long standing principle that design professionals should be held accountable for economic loss damages that they cause just like other professionals in Florida. Board certified construction law attorney Steve Lesser said the following:
[Design professionals] have an obligation to design to meet code and protect the health, life & safety concerns of consumers. An error in design judgment can be devastating to a unit owner and homeowners that cause damages and in fact- economic damages. An elevator that fails to operate at the appropriate speeds and breaks down results in loss of use which is an economic loss. Imagine how this could impact elderly unit owners. A parking garage that is not properly shored up based on engineering calculations can result in economic loss. These consumers are largely lay persons that often sign agreements (presented by the professional) that contain limitation of liability clauses.
Please contact the Governor's office to express your support or opposition to 2010 legislation. Make your voices heard in Tallahassee.
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Webinar on Friday, May 21, 2010 from 10:00 AM – 11:30 AM EDT 2010 FLORIDA LEGISLATIVE SESSION: Join Becker & Poliakoff's Community Association Leadership Lobby ("CALL") for a live web seminar about which bills passed, which ones didn't and what you need to know with respect to new laws affecting Community Associations and their residents. Click below to Register:
David Muller and Yeline Goin , Co–Executive Directors of CALL, will be joined by Travis Moore , CALL's lobbyist in Tallahassee, as well as guest speaker State Rep. Ellyn Bogdanoff , whose sponsorship of the companion House Bill 561 gives her special insight on the bill's issues, which include condominium insurance, elevator retrofitting, fire-sprinkler and fire-alarm retrofitting, and collection and foreclosures. For those in the Broward/Miami-Dade County area: CAI-Southeast Florida Chapter will present Rep. Bogdanoff with an Outstanding Service Award for her vision and fortitude. Register at CAI's website. This is the first in a series of webinars planned for the next several months featuring special guests from various industries. Don't miss out! |
Community Leaders, Management, Staff and Owners Must Act Now to Protect Their Investments, Livelihoods and Homes.
Gulf Coast communities have dealt with a lot of casualties over the years. Many owners were displaced for years after Hurricane Opal. Opal's 20 foot storm surges destroyed buildings and businesses. While special assessments mounted to cover mitigation, repair and other costs, property owners & businesses that cater to community association management/vacation rentals lost their source of revenue - a double whammy.
Oil continues to gush into the Gulf of Mexico. This disaster is as potentially damaging to the Gulf Coast communities as any hurricane or tornado. News reports indicate an oil slick the size of Delaware hovers offshore and is likely to make landfall in significant amounts. Gulf shore residents can expect tar on the beach, an ocean sheen, fish and birds washing up onto shore and more. Needless to say, tourists are already canceling their plans to visit the Gulf Coast and business are showing signs of distress. While there are still a lot of unknowns, the effect of this spill on the environment and the economy on the northern Gulf Coast is certain to be devastating.
Community leaders, managers, staff members & owners all have a role in minimizing losses. Please, protect yourselves and your investments. Implement your disaster plan and document all losses, including cancellations of vacation plans, beach clean up, damages to personal property and the like.
As with any catastrophic loss, Gulf Coast owners and residents can expect a mass influx of outsiders looking to benefit from this unfortunate event. Contractors, public adjusters and yes, even attorneys, are likely to swoop down on the region. BP created a claims process - anyone believe that the oil company is looking out for your best interests?
Becker & Poliakoff Attorneys have represented community associations in the Gulf Coast/Panhandle area for more than twenty (20) years. Helping clients recover from casualty losses is one of our services. Attorneys Ray Newman, John Cottle, Angela Chao Clark and John Townsend are already in the process of advising clients how to minimize their losses and prepare for the legal issues they will need to confront in the coming days, weeks, months - perhaps years.
John Cottle explained to Tallahassee Democrat publication that obtaining the remedies available under the federal Pollution Act of 1990, requires evidence of losses. Board Certified Construction Attorney Sanjay Kurian (a contributor to this blog) indicated that insurance claims are not easy or simple matters in an article published by the News Press. His experience comes from helping community associations recover insurance proceeds from Hurricanes Charley, Jeanne, Francis & Katrina (among other cases).
Becker & Poliakoff has maintained a fully staffed office in Panhandle area since 1998, representing hundreds of community associations with respect to board/association operations, interpreting and enforcing covenants and restrictions, regulatory compliance issues, disaster recovery, insurance claims, construction disputes and more.
For more information on what you can do now to prepare, minimize your losses and ultimately recover for your damages, please visit www.hurricane-recovery.com. We wish for the best for the Gulf Coast, surrounding areas and all of Florida.
The Regular Session ends April 30th. We've previously highlighted changes in SB 1196 and HB 561 that would impact Condos & Co-Ops, here is some information for HOA leaders and managers:
Records Access: §720.303(5)
Budgets & Reserves: §720.303(6)
Director Compensation: §720.303(12)
Salary or compensation is generally prohibited for performing services as director, officer or committee member unless:
Fines/Suspensions of Use Rights: §720.305
Voting for Directors by Secret Ballot: §720.306(8)
Adopts 'condo-like' double envelope procedure.
Collecting Rent from Tenants: §720.3085(8)
Association may demand rent directly from tenant if owner is delinquent.
Acquisition of Recreational Leaseholds or Other Property/Property Use Rights: §720.31(6)
Similar to §718.114 (condo act). Allows association to enter agreements to acquire leaseholds, memberships or other possessory or use rights in lands and facilities. Must be fully described in the declaration or if the action is not taken within 12 months of recording, the declaration must authorize said action as a material alteration/substantial improvement or at least 75% of the members must vote in favor of the action.
Special Assessments by Developer (before turnover): §720.315
Pre-transition, developer controlled association may not levy special assessments without the approval of a majority vote of non-developer interests. Vote must take place at duly-called meeting at which a quorum has been attained.
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These are just brief bullet points, please refer to the actual legislation for more detail. Committee amendments are still being filed and considered.
Today is Earth Day - so I'm re-posting some information about energy efficiency, waste and water reduction improvements or techniques that have saved building owners money as well as information about the $1.7 million in savings Fannie Mae enjoyed by employing "green" practices.
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Condominium Associations can reduce their energy consumption costs by installing renewable energy devices and are in a position to possibly create a new revenue stream. 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."
HOAs have many options available to reduce annual budgets. There are plenty of examples of the “business case” for simple retrofits and changes in practices.
FBI Field Office, Chicago, Illinois:
Total improvements and modifications lowered operating costs by more than $400,000.00 annually. How many of us would reject a 400% return on an investment?
USAA Realty Company:
Spending $140,000 resulted in $71,000 annual savings.
Adobe Towers / Multiple Hi-Rise Buildings:
Major improvements cost initially over $1 million, but rebates reduced those costs by approximately $300,000 (net cost $700,000) 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?
Fannie Mae's data center saves an average of $340,000 per year in operating expenses as a result of the use of energy efficient systems and sustainable landscaping practices.
Can your community benefit from some changes? Some changes are easy and very affordable. Please let us know if your community is interested in an evaluation of the property for this purpose and please share what your community has done to reduce its expenses.
We will post more information concerning Florida-friendly landscaping and water conservation methods to continue examples of how community associations can save money by embracing new ideas.
Court Rules in Favor of Condominium Association After Lender Fails to Move Foreclosure Proceedings Along or Comply With Court Orders.
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eb. 8, 2007, the Bank of New York filed a mortgage foreclosure lawsuit against a unit owner, naming the Moorings at Edgewater Condominium Association, Inc. as an additional defendant in the case. The defaulting unit owner filed for bankruptcy on May 1, 2007, which resulted in an automatic stay of the foreclosure lawsuit. The unit owner surrendered the property and was discharged from bankruptcy several months later. The lender waited almost a year from the bankruptcy discharge to file its Motion for Summary Judgment, but never set that Motion for hearing, leaving the association in limbo.
Becoming quite frustrated as a result of the delay, the association hired Attorney Scott Petersen of Becker & Poliakoff's Sarasota office, who filed a Motion to Compel as a result of the delay. The Court granted the association's Motion and Ordered the bank to move its mortgage foreclosure case along on or before June 29, 2009. Remember, the unit owner surrendered the property, did not reside in the unit and did not contest the mortgage foreclosure action.
After Bank failed to obey the Court’s Order, Attorney Peterson scheduled a hearing on an Order to Show Cause for September 24, 2009. The lender attempted to file a Notice of Voluntary Dismissal to avoid the Show Cause hearing. The Court ultimately granted the Order to Show Cause, ruling that the bank must pay regular and special assessments as a result of the inordinate delay.
After two months of non-payment, Attorney Petersen filed a Motion for Contempt when the Bank's attorney did not respond to correspondence. The Bank argued the following as justification for its delay:
The association countered with the following arguments:
This victory for the association shows community leaders cannot sit back and wait for the bank to foreclose. Moreover, there are many steps that proactive leaders can take now to guard against future delinquencies and to improve the association's position.
Representative Bogdanoff Explains Amendments in CS/CS/HB 561 at Becker & Poliakoff's Leadership Seminar. Representative Sachs announces she will "continue to fight for fairness in foreclosures".
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Over 450 volunteer board members, professional community association managers and industry representatives listened intently to Representative Bogdanoff on Saturday at the Kravis Center during the Becker & Poliakoff Leadership Seminar. They were pleased to hear that CS/CS/HB 561 includes provisions that would:
Stay tuned for more legislative updates direct from Tallahassee as these (and other) changes are likely to substantially impact community association operations.
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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:
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:
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:
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.
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!
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.
Senate Bill 780: This Bill would require a financial institution that institutes a foreclosure proceeding to timely pay all fees associated with or owed by that property, including but not limited to homeowner’s association fees, maintenance fees, and property taxes.
Senate Bill 1196: This proposal, similar to several of the others mentioned above, includes the right to collect management company charges as part of the association’s lien, permit interception of rents, and permit suspension of common element use rights and voting rights. This proposal is applicable to both condominiums and homeowners’ associations.
Senate Bill 1270: This Bill would permit a condominium association to disallow use of common area facilities by unit owners who are delinquent in the payment of assessments by more than ninety days.
Senate Bill 1272: This proposal would change the condominium “statutory cap” from six months of past due assessments/one percent of original mortgage debt (whichever is less) to twelve months past due assessments/one percent of original mortgage debt (whichever is less). This Bill further provides that in addition to the “statutory cap”, if a first mortgagee institutes a foreclosure action, the mortgagee is liable for any special assessments levied against a unit during the pendency of such action for damage to the condominium property.
As you can see, there is no shortage of State Legislators who agree that relief for associations is long overdue. We will include information on the progress of these and other bills as information becomes known. Please come back to this site for legislative updates direct from the Capitol.
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.
IRS Audit of City Practices Important Lesson for Community Associations. Improper Classification May Result in Penalties and Tax Liabilities.
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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:
We encourage community leaders to discuss this issue with counsel in order to avoid complicated and potentially expensive future disputes.
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!
You Tell Us !
As seen today on the Sun-Sentinel Condo Blog, legislators an.gif)
d 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.
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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