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

In anticipation of Friday's webinar, here is the first in our two-part checklists for community associations.

Becker & Poliakoff's 12-point Hurricane Preparedness Checklist includes the following tips for those who need to prepare their communities for the upcoming hurricane season: 

1. Disaster Plan – Do a risk analysis of potential consequences of a storm and develop a complete disaster plan, designating a responsible community member as Disaster Plan Coordinator and another as Information Facilitator to field queries and respond to from community members;
2. Evacuation Routes - Establish clear building or community evacuation routes and be sure that all community members are provided with copies or printouts and that routes are clearly marked as storms approach; conduct building or community evacuation drills in the weeks leading up to hurricane season;
3. Emergency Generators & Supplies – Be sure emergency generators are in working order and have adequate fuel supplies, stock a building or community emergency supplies storeroom with flashlights, batteries, water and other necessities for residents and employees in the aftermath of a tropical storm;
4. Backup Computer Files – Be sure that computer files crucial to running the building and association are backed up to CDs or Portable Storage Devices and keep a list of office computer hardware and software vendors and repairmen in case computers crash or systems fail; 
5. Secure the Premises – Make preparations for routine lockdown of the building or other facilities as a storm approaches, so the building is secure during the storm and safe from vandalism or looting if a hurricane strikes; 
6. List of Owners & Employees – Have on hand a current, hard-copy reference list complete with the names all property owners, emergency contact numbers and details of second residence addresses, as well as a list of all association employees, with full contact details; 
7. Photograph or Video Premises – Keep a visual record through video or photographs of premises, facilities and buildings to facilitate damage assessment and speed damage claims in a storm aftermath; 
8. Building and Facilities Plans – Make sure a complete set of building or community plans are readily available for consultation by first-responders, utilities workers and insurance adjusters following a storm; 
9. Insurance Policies & Agent Details – Be sure all insurance policies are current and coverage is adequate for community property, facilities and common areas and compliant with State Law; full contact details for insurance companies and agents should be readily available in the event of a storm; 
10. Bank Account Details & Signatories – Keep handy a list of all bank account numbers, branch locations and authorized association signatories, and make contingency plans for back-up signatories in case evacuation or relocation becomes necessary; 
11. Mitigation of Damages – In the immediate aftermath of a storm, take the necessary steps to mitigate damages -- this includes "Drying- In," which is the placement of tarps on openings in the roof and plywood over blown out doors and windows, and " Drying –Out," which is the removal of wet carpet and drywall to prevent the growth of mold; and, 
12.  Debris Removal – Have a plan for speedy removal of debris by maintenance staff, outside contractors or civic public works employees, should a hurricane topple trees and leave debris in its wake. 

Learn more valuable tips during the free webinar Anatomy of a Disaster Claim, presented by Board Certified Construction Law attorneys and special guest engineer Rick Slider.  Return to this site for a checklist of items for communities to consider immediately after a storm.

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Governor Crist Issues Executive Order 10-01 Establishing Gulf Oil Spill Economic Recovery Task Force.

The Executive Order issued today is intended to facilitate efforts to recover for losses resulting from the oil spill.  The task force is in addition to the "pro-bono" legal advisory council chaired by former Attorneys General Bob Butterworth and Jim Smith.  The task force will:

• Coordinate State efforts to assist affected business and industries;
• Monitor BP's compensation and claims processes;
• Gather data regarding economic losses and industry indicators;
• Promote business and tourism; and
• Disseminate information and communicate with affected parties.

The Attorney General's office also launched a deepwaterhorizon website to keep Floridians informed about the State's efforts.  Citizens are encouraged to prepare for losses and protect themselves from fraud.

Community associations need to be aware that several governmental agencies have jurisdiction over coastline/beachfront issues.  It may be necessary to secure permits from the Army Corps of Engineers (“ACE”) and/or the Florida Department of Environmental Protection (“DEP”) before taking any action. Violating regulations could result in serious consequences.

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Community Association Boards of Directors Must Safeguard Association Funds.

Recent Arrests and Reported Losses Demonstrate Lack of Financial Oversight.

Community Associations simply cannot function without adequate cash flow.  Community leaders have a fiduciary obligation to monitor and protect the Association's funds.  Handling the finances of the Association can be a daunting task, especially if the volunteer leaders do not have any background in accounting or finance.  There are many state and federal laws governing budgeting, financial reporting, taxation and the like and a lack of sufficient oversight exposes the Association to loss from theft.

Community leaders cannot abrogate their responsibilities solely by hiring management or contracting with a bookkeeping service. Recently it appears there has been an increase in Associations that have been victimized by these professionals.  The Sun-Sentinel reported some Associations lost hundreds of thousands of dollars as a result of alleged theft by an employee of the management company.  One Association found out there were problems with its account when checks bounced.  The management company had the authority to write checks, balance the books and make deposits.  The directors of each of the Associations involved apparently did not review all the source documents to verify that payments were made and the balances on each of the accounts.

A similar situation occurred in Collier County, Florida.  Authorities arrested a bookkeeper working for a management company for 21 counts of grand theft.  The Naples Daily News reported that the bookkeeper made fraudulent bank transfers from the Associations' accounts into her personal accounts.

Communities comprised of older residents are especially susceptible to fraud schemes.  The Charlotte Square condominiums in Port Charlotte, Florida reported over $1 million in losses. 

Community leaders are encouraged to:

• Store blank and canceled checks in a secure location;
• Notify the bank/financial institution when officers change immediately and keep control of bank signature cards;
• Create precautions for Internet banking and bill paying;
• Review source documents (invoices, bank statements, deposit slips) with management reports and consider having the bank send duplicate statements;
• Avoid master vendor accounts and place low limits on credit and/or store charge cards; and
• Obtain adequate fidelity bonding and employee dishonesty coverage for all persons authorized to sign checks or drafts.

Always be alert to new or different spending patterns.  While the volunteer leaders are not expected to become experts, they must have a basic understanding of the Association's finances, its expenditures and obligations, as well as seek out the relevant information to make informed decisions.

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On March 30, 2009 the Division issued a Final Order in Humphrey v. Carriage Park CAI a case involving among other things a request for records where the owner sought “all correspondence, e-mails to or from the Department of Business and Professional Regulation.”

In its ruling the Division stated that there was no violation for failing to produce e-mails which never became the official records of the Association.  The Division explained:

• The property of an individual director does not become the property of the Association because of his office on the Board.
• Even if directors communicate among themselves by e-mail strings or chains, about the operation of the Association, the status of the electronic communication on their personal computer would not change.
• An e-mail to an individual or all directors as a group, addressed to their personal computers, is not written communication to the Association because there is no obligation for a director to turn on a personal computer with any regularity, or to open and read e-mails before deleting them.

The Division in a footnote to its opinion stated a different decision could be reached “if the Association owns a computer on which management conducts business including e-mails…; or if e-mails are printed up and passed around for discussion at a board meeting.”

Given the ever changing trends in technology and the manner in which Associations conduct business, a Board needs to be wary that the status of e-mails as official records despite the Humphrey decision is still in flux. In other words, tomorrow, these very same e-mails which today are not official records could be. Also while a link has never been made equating IM or Twitter transcripts to e-mails this too could change as these forms of e-communication become more and more popular amongst Board members.

For more information on the role of e-communications and Association look at my May 12, 2009 post or the recent article by the Sun-Sentinel titled Boards a-Twitter about laws.

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Many communities were marketed as 'adult communities' and the governing documents contain provisions prohibiting permanent occupancy by children.  Are they legal or enforceable?  Joseph Adams provides a brief explanation.

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Just how far can a Board go in placing restrictions upon an owner’s ability to smoke in a condominium association? Many Boards want to prohibit smoking in or upon the common elements. Some Boards want to prevent owners, tenants and guests from smoking within the units.

With several states (including Florida) having recently banned smoking in public places, this issue has been the topic of much conversation among condominium directors. There is no appellate case decision in Florida to guide us here. However, this author believes that an association can, through an amendment to the Declaration of Condominium, prohibit smoking within the condominium common elements and the units. In fact, the Board could probably do it by adopting a rule which, in most cases, wouldn’t even require a membership vote.

The Florida Clean Indoor Air Act (“the Act”), contained within Chapter 386 of the Florida Statutes, provides a uniform state-wide code to keep public places and public areas reasonably free from tobacco smoke. The Act prohibits people from smoking, except in designated smoking areas contained within the common elements. However, association’s can never permit smoking in the common element hallways, corridors, lobbies, aisles, water fountain areas, restrooms, stairwells, entryways, or conference rooms. All other indoor “common areas” are also “no smoking”, unless the Board has specifically designated the area as a smoking area. Smoking may occur outdoors unless the Board has adopted a no smoking policy with respect to outdoor areas.

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Is the economy influencing the Courts? 

It seems that the trend has shifted from rulings in favor of condominium developers to rulings in favor of  purchasers and more lawsuits on the behalf of buyers are being filed in Courts throughout Florida.  Attorneys have come up with creative arguments against developers in an attempt to cancel contracts and obtain return of initial deposits, or at least portions of those deposits. 

As reported in the Wall Street Journal and other news sources, just over six  (6) months ago the U.S. District Court in Miami dismissed several lawsuits brought against the developer of the Opera Tower Condominium, ruling that the buyers could not rely upon the marketing materials associated with the project.  However in the last two (2) months rulings have agreed with claims made by purchasers.  Just recently the Eleventh Circuit Court of Appeals upheld a ruling against the developer of the Lake Buena Vista Resort as a result of completing the project a mere five (5) days after the deadline promised in contracts with purchasers.  The buyers  were entitled to receive their deposits back, in spite of the developer's claim the delay was beyond its control.  Attorneys for buyers predict similar rulings in the future. 

In December,  2008, the Fourth District Court of Appeal upheld a ruling requiring the developer to return deposits on contracts concerning the 200 East Palmetto Park  building.  The Court found that the project did not qualify for exemptions to the Interstate Land Sales Full Disclosure Act (often referred to as "ILSA"), regardless of an advisory opinion from the Department of Housing and Urban Development (HUD) that was relied upon by the developer.

Unoccupied and unfinished condominium projects are likely to remain prevalent in Florida for the time being, creating opportunities for new investors and home buyers.  However, filing claims against the entire property and including lenders in these types of lawsuits complicates financing for potential purchasers and may impact continued operation and maintenance of the properties.  Please return to this site for periodic updates regarding these issues.

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Question: I am a member of a homeowners’ association. Our board recently hired a new management company. The owner of the management company is also a resident/property owner in our community. Some of us feel that this creates a conflict of interest. What is your opinion on this? T.W. (via e-mail)

Answer: As long as the owner of the management company is not also a member of your association’s board of directors, I do not believe that conflict of interest concerns in the traditional legal sense are presented.

There is no legal prohibition against contracting with a property owner within your community. I have seen a few associations which have bylaw provisions which prohibit contracting with association members, but such provisions are certainly the exception.

There are a couple of different ways to look at this. Some may argue that because the owner of the management company also has an investment in your community, he or she will go “above and beyond” to ensure that the community’s needs are served, thus protecting their own investment and keeping their friends and neighbors happy. Others would argue that contracting with an association member is a bad idea, because friendships and internal community politics could obscure the objective viewpoint the board should have in dealing with contractors.

Whether contracting with a neighbor or a total stranger, I always recommend that contracts between community association management firms and associations contain a liberal termination clause, with or without clause, upon reasonable notice (such as thirty days).

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