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

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:

• At least 80% of the occupied units must be occupied by at least one resident over the age of 55;
• The community must publish and adhere to policies and procedures demonstrating an intent by the housing provider (the Association) to provide housing for persons 55 years of age or older.
• The community must engage in adequate age verification procedures and routinely determine the occupancy of each unit to update the community census; and - here in Florida
• The community needs to register with the Florida Commission on Human Relations and keep that registration current.

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.

• Email This
• Print
• Share Link

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.

Asset Searches Can Be Helpful in the Decision Making Process

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.

• Email This
• Print
• Comments (7)
• Trackbacks
• Share Link

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.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.  

• Email This
• Print
• Comments (5)
• Trackbacks
• Share Link

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:

1. Activate Your Disaster Plan. Once residents are safe, the community must begin surveying the property and assessing the damage. A designated information facilitator should set up system of information sharing among local homeowners and a disaster coordinator should serve as liaison to emergency services providers;
2. Secure your community from acts of vandalism and looting;
3. Remove storm debris to prevent accidents from occurring on the property;
4. Secure building structures to mitigate further damage;
5. Evaluate & Determine needs for immediate reconstruction and evaluate financing options including advances from insurance company for financial advances. BEWARE OF ANY INSURANCE COMPANY OFFERING MONEY IN EXCHANGE FOR RELEASES OR SETTLEMENTS.
6. Suspend or cancel on-going contracts such as lawn or pool maintenance if allowed for in your contract;
7. Review governing documents particularly anything related to "repair after casualty" provisions in the insurance section to establish process for reconstruction;
8. Initiate reconstruction planning using the five phases of reconstruction: project planning/scheduling; construction bidding; contract negotiations; construction/repair/rehabilitation; project completion/close out.
9. Review Insurance policies to determine filing requirements for proof of loss forms.
10. Meet with licensed professionals familiar with your community which may include: a) architect/engineer to assess damage and prepare plans; b) construction manager to oversee selection of general contractor and begin competitive bidding process; c) attorney to review insurance policies, governing documents, construction contracts and any vendor agreements; and d) public adjuster who is independent of your insurance company's adjuster who can be helpful with the nuances of an ambiguous insurance policy. Most independent adjusters work for a fee based upon percentage of insurance proceeds.

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Miami-Herald reported a story about the widow of the Nova Southeastern University 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:

1. Make sure the governing documents of the community specify that any information obtained in a background investigation cannot be shared;
2. Make sure the governing documents advise the owners that any investigation or background checks are solely for the benefit of the association (as the association cannot act as a guarantor);
3. If the community does engage in background checks, make sure those documents are safeguarded and the governing documents authorize the board of directors to reject certain applications for tenancy approval based upon articulated justifications; and
4. Review transfer approval procedures with association counsel - you may be surprised to learn your community does not have many options, even if the applicant does not seem 'suitable' for one reason or another.

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.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

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! 

• How will you protect your association from wage and hour claims?
• Do you have time cards or require employees to "clock" in or out?
• Do your employees often work during non-business hours?  How do you account for that time?
• What is your association's policy on overtime or "comp" time?
• Do your employees have access to the association's office, unit owner files, keys to units or the Internet?
• Do any of your employees ever enter any of the units when the owner isn't present?
• Do your employees leave the property as part of their job (trips to home depot, bank runs, etc.)?
• What is your policy on allowing employees to perform work for individual unit owners?
• Do any of your employees have use of a unit as part of their compensation package?  If so, what policies are in place in that regard?  What if someone is hurt in that unit?  What if there are damages to the unit?  What happens if the association wants to terminate that employee?
• Does your community classify the maintenance person, landscaper, office assistant, bookkeeper or manager as an independent contractor?  You may be surprised to learn that such classification may not protect you from employment related claims.

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.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

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:

• Part of the property may qualify for an exemption
• Foreclosure & delinquency rates
• Structural or storm damage / construction work limiting use of the property
• Changes in the surrounding area i.e. blocked views from new construction
• Increased property insurance costs
• Changes in use - chinese drywall & other limitations on use

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. 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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:

• Does the board have authority to invade the unit to perform common element repairs?
• and, if so
• Is the decision to do so reasonable or, in other words, was the board decision to invade the unit arbitrary, capricious or made in bad faith?

This case is hot off the press and therefore not final if the parties file motions for rehearing.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Comments (7)
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Comments (13)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (25)
• Trackbacks
• Share Link

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:

• SB 1196, Relating to Community Associations
• HB 663, Relating to Building Safety
• HB 713, Relating to Department of Business and Professional Regulation
• HB 1035, Relating to Elevator Safety
• HB 1411, Relating to Timeshare Foreclosures

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. 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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)

• Owner entitled to presumption that Association willfully denied record access after 10 business days if owner submits request via certified mail, return receipt requested.  Doesn't address what happens if no one picks up the certified letter.
• Association may charge "reasonable costs" in addition to photocopy fees to reimburse it or a vendor for the lost employee time associated with duplicating the records.
• Personnel records for the association's employees will not be subject to inspection (including disciplinary, payroll, health, insurance).
• Personal identifying data of members (ss #, credit card #, emergency contact info, etc.) will not be subject to inspection, although the address used for association mailings is still part of the roster list and subject to inspection.
• Passwords used to safeguard data and software and/or operating systems will not be subject to inspection.

Budgets & Reserves:  §720.303(6)

• Disclosure in financial report must notify owners of vote necessary to mandate reserves.
• If budget does include 'voluntary reserves', financial report must disclose that the funds may be used for non-reserve purposes and not calculated by statutory method.
• 'Statutory' reserves are reserve accounts established by the developer or created by membership vote.

Director Compensation:  §720.303(12)

Salary or compensation is generally prohibited for performing services as director, officer or committee member unless:

• the financial benefit of a lawful board action will benefit all or a significant number of members;
• the payment is reimbursement for out-of-pocket expenses (each association should adopt procedures or protocols for expense reimbursement, limits and types of expenditures that will be reimbursed);
• the payment is for recovery of insurance proceeds;
• the salary or compensation is authorized by the governing documents;
• the fee, salary or compensation is authorized by membership vote in advance; and/or
• a developer appointee may benefit financially from service to the association.

Fines/Suspensions of Use Rights:  §720.305

• Fines & Suspensions authorized if the member is delinquent for more than 90 days;
• Fines less than $1,000 cannot become a lien (doesn't specifically say that liens are permitted for fines exceeding $1,000);
• Suspensions cannot apply to utility services or property used to access the parcel;
• Written notice to the person fined or suspended is required.

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.

These are just brief bullet points, please refer to the actual legislation for more detail.  Committee amendments are still being filed and considered.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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.

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. 

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Court Rules in Favor of Condominium Association After Lender Fails to Move Foreclosure Proceedings Along or Comply With Court Orders.   

On Feb. 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:

1. Owner’s bankruptcy;
2. Difficulties in service of process;
3. Countrywide’s Consent Judgment - implying the parties (owner and lender) were engaged in the loss mitigation process;  and
4. the Court’s Order of May 29, 2009 was illegal pursuant to F.S. 718.116 and the U.S. Bank v. Tadmore case.

The association countered with the following arguments:

1. The Owner’s bankruptcy case was discharged in 2007 and did not cause a 3-year delay;
2. The Affidavits of Service showed that service was attempted during an 8-day stretch from March 1-8, 2007 and then again on April 23, 2007, all of which were unsuccessful. The next attempt at service was June 12, 2008, which was successful, but there was no explanation for the intervening delay;
3. Countrywide’s Consent Judgment was filed Nov. 10, 2008, more than a year after the property was surrendered in bankruptcy and didn't even apply since the borrower (unit owner) abandoned the property; and (among other things)
4. The facts of this case were so egregious that sanctions were appropriate.

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.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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". 

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:

• delay enforcement of code mandated elevator improvements (specifically ASME 17.1 and 17.3) in condominiums or cooperatives where the Certificate of Occupancy was issued on or prior to July 1, 2008, for five (5) years or until the elevator is replaced or requires major modification (whichever happens first);
• eliminate any requirement for condominiums or cooperatives that are less than four (4) stories and has exterior corridors to install a manual fire alarm as required by §9.6 of the Life Safety Code (as adopted by the Florida Fire Prevention Code);
• clarify that in a condominium association with more than 10 units, co-owners of a unit cannot serve on the board together unless they own more than one unit and are not co-occupants of a unit;
• require board members to certify (in writing) that they have read the laws and governing documents, will work to uphold the documents and policies and faithfully discharge their fiduciary responsibilities (or submit a certificate of satisfactory completion of approved educational curriculum), failing which they are automatically disqualified from service;
• allow high-rise condominium and cooperative associations to vote to completely avoid any obligation to retrofit the buildings with a fire sprinkler system or engineered life safety system and extend the deadline for others to 2019; and
• authorize bulk contracts for communication services, information services or internet services.

Stay tuned for more legislative updates direct from Tallahassee as these (and other) changes are likely to substantially impact community association operations.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks
• Share Link

What policies does your community have in place regarding the use, storage and operation of golf carts?  Can owners ride the golf carts to the local convenience store, coffee shop or hair dresser?  Adoption of a new proposal will allow local governments to create their own regulations governing the use of golf carts, which pleases many Condo & HOA owners.  In Bradenton, Florida seniors listed golf cart usage as a priority, as the cost is insignificant and many of them have given up driving automobiles.  The Bradenton Herald recently included a story describing what changes would result from SB 2448. 

Ambiguities regarding the use of golf carts are not new.  In 2002, the Florida Attorney General released an Advisory Legal Opinion in reply to an inquiry regarding whether a municipality may impose a minimum age requirement for the operation of a golf cart which was more restrictive than those found in the Florida Statutes or whether a City may require the operator of a golf cart to have a valid Florida Driver’s License, the answer to both being 'no'.  In 2004, Charlie Crist, as Florida's Attorney General, issued an Advisory Legal Opinion (AGO 2004-60) implying that a community association could not adopt rules prohibiting persons under the age of 16 from using golf carts on public streets in the country club community.   He also indicated that the Association could not force golf cart users to use child safety devices, which resulted in changes to the Florida Statutes.

Under proposed SB 2448, the local government would be obligated to:

1. issue a finding that golf carts, bicycles and pedestrians can share the sidewalk safely;
2. consult with the Department of Transportation;
3. restrict speed to no more than 15 mph and only permit use on sidewalks at least 8 feet wide;
4. retain (or supplement) golf cart equipment requirements; and
5. post appropriate signage.

Community associations need to address golf cart, scooter and other transportation device use and storage issues carefully - even with respect to private property.  Consult with counsel to determine what types of regulations are appropriate and enforceable.  It is also a good idea to check whether the insurance policies contain exclusions or specific requirements for claims involving golf carts.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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!

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

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! 

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

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.
 

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

IRS Audit of City Practices Important Lesson for Community Associations.  Improper Classification May Result in Penalties and Tax Liabilities. 

Many community associations classify maintenance personnel and others as "independent contractors" to avoid withholding federal income tax, dealing with workers' compensation insurance and the belief that such classification insulates the association from liability.

But calling someone an “independent contractor” does not mean they are not an employee. Many other factors must be analyzed. A recent preliminary report issued by the IRS in connection with an audit of the City of Deerfield Beach found that 42 workers were classified incorrectly.  The IRS considers facts in three broad categories, including 1.) behavioral control 2.) financial control and 3.) the type of relationship. Within these three categories, you must look at the following criteria to determine employee or independent contractor status:

• The existence and specific terms of a contract.
• When and where the work is performed.
• Who owns the tools and equipment that are used.
• What degree of instruction is given to perform tasks.
• Is the service provider subject to a performance evaluation system.
• Is training provided to the service provider.
• Are expenses reimbursed.
• Is the service provider permitted to provide services to others, as well.
• What is the method of calculating payments to the service provider.

 We encourage community leaders to discuss this issue with counsel in order to avoid complicated and potentially expensive future disputes.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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! 

• Email This
• Print
• Comments (10)
• Trackbacks
• Share Link

You Tell Us !

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

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

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

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

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

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

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link