We are happy to feature video clips from time to time on this blog. The post from the other day spurred several questions regarding unit owner access to official records. Please listen to our Community Association Practice Group Leader discuss this important subject.
We are very pleased to announce that the effort to deregulate Community Association Managers has been officially stopped. The House Committee on Economic Affairs, chaired by Rep. Dorothy Hukill of Ormond Beach, passed an amendment to HB 5005 this morning removing all references to Community Association Manager (“CAM”) deregulation and all references to the elimination of the Division of Florida Condominiums, Timeshares and Mobile Homes. By adopting this amended language, current law regarding these matters will remain unchanged. A copy of the amended version of HB 5005 can be read by accessing the CALL website (www.callbp.com). CALL will continue to monitor this Bill very closely as the Legislative Session continues, to ensure that troublesome amendments are not later added.
This tremendous victory has resulted from weeks of multiple meetings in Tallahassee with elected officials and their staff by CALL's Co-Executive Directors Yeline Goin and David Muller and our entire lobby team coupled with a deluge of calls and emails from common interest ownership communities statewide. All of our hard work is continuing to pay off. The voice of the community association populace continues to be heard loud and clear in Tallahassee!
Our CALL team has also been diligently working on a community association package to fix some of the items left unclear (or unworkable) by last Session's SB 1196. This year's Senate Bill, (CS/SB 530, sponsored by Senator Fasano) will be heard in its second committee (Senate Committee on Community Affairs) on Monday, March 28th at 1 p.m. The House Companion Bill, (HB 1195, sponsored by Rep. Moraitis) will be heard by the House Civil Justice Subcommittee very soon. At that hearing we anticipate that the language of CS/SB 530 will be adopted so both the House and Senate Bills will be identical as they continue moving through the legislative process. We are at the Capitol now working on this very important legislation and will keep you appraised as further details emerge.
Sincerely,
Yeline Goin and David Muller, Co-Executive Directors
Community Association Leadership Lobby (CALL)
Please visit our "CALL" Website at www.callbp.com to view the full text of the bills "CALL" is tracking.
You know the old adage that “you can’t fight City Hall”? Well I’m here to tell you that you can and we did (successfully) on behalf of one of our homeowner association clients in Sunrise.
Many associations are located adjacent to or near commercial businesses. Business owners often petition local governments (in this case, the City of Sunrise) for special exceptions or exemptions to advance their business’s interests. These types of changes are typically dealt with by local volunteer boards such as the Planning & Zoning Board or by the City Commission. However, variances that may aid businesses can be harmful, even dangerous, to adjacent Association residents. Community leaders and their homeowners must become informed about such requests and do what it takes to oppose them when appropriate.
The Sunrise case is a perfect example. A local bar & grill in a shopping center next to an association petitioned the City to extend their hours later in the evening and to change their business use to “nightclub”. The Association opposed the request due to prior issues in the shopping center and due to the fact that the shopping center is in complete disrepair. Residents were concerned that if the bar & grill obtained the extended hours, they would be exposed to more vagrancy, loud music and noise, drunk drivers, and that pedestrian and vehicular traffic would trespass through their ungated community.
The Sunrise City Commission reviewed the request by the business owner as well as the opposition’s arguments against the request. Instead of blindly allowing the business to expand without regard for the neighborhood, the Sunrise City Commission listened intently to the resident’s concerns and gave the residents the relief that they were looking for.
Lesson learned: if you carefully and strategically pick your battles and put the right resources in place, you can not only fight City Hall but you can win.
Showcase Your Excellence - Submit Your Entry for Consideration by Independent Judges in the Florida Communities of Excellence Awards!
This independently judged program enables the top communities in the state to promote their accomplishments and raise their profiles while documenting their success and enabling others to learn from their accomplishments across numerous categories. Publisher and sponsor Jim McMurray noted the awards "saw 100% growth in its first two years and the program will expand even further for 2011.” Florida Community Association Journal co-founded the Awards with the law firm Becker & Poliakoff, P.A.
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Communities often rely upon the advice, effort and fortitude of their managers. Therefore, "Managers of Excellence” will also be selected. This award is to recognize professionals working with communities that have distinguished themselves with consistently high rankings in the initial three years of the Awards.
There are plenty of categories so every size, type and shape of community can participate. Go to: Florida Communities of Excellence for more information and entry forms.
In nearly every case where a first mortgage of record exists on a property, the association's lien is subordinate or inferior to that mortgage. This means if an association elects to foreclose its lien and takes title to the property, it will take title subject to the right of the first mortgagee to foreclose its mortgage. Associations in the past were reluctant to foreclose when the mortgagee already commenced its own foreclosure action or when the value of the property did not exceed the amount of debt secured by the first mortgage. That's changing now.
Associations are now making the decision to foreclose more often under these circumstances. The primary reason for this is serious delay in the prosecution of the mortgagee's foreclosure case. These delays are brought on by a variety of factors including the sheer volume of cases handled by the mortgagee's law firm, protracted efforts to work with the borrower either to short sale the property or modify the loan, problems associated with serving necessary parties with the foreclosure complaint or locating original documents that are to be filed with the court, back log in the courts and even strategic decisions by mortgagees to slow down the process.
In some cases, associations can obtain favorable results when foreclosing, even against properties that have fair market values below their mortgaged amount. Sometimes the homeowner has the means to pay the association but has elected to spend money on other concerns. Because foreclosure results in the owner losing title to the property, if the owner has the means to pay and does not desire to walk away, they pay rather than lose title. Foreclsoure can be a powerful deterrent for owners who have the means to pay but elect not to or to pay late because they hear others doing the same. Another option is the association's right to rent the property once it takes title, if permitted by the association's governing documents. For some associations, the rental market is favorable and significant income can be recovered before the mortgagee forecloses and takes title.
Many times the owner cannot or will not pay and rental is not a viable option. However, associations still make the decision to foreclose for any number of reasons. Because so many mortgage foreclosures are being contested by owners raising defenses unique to the mortgage foreclosure action, and thus stalling the mortgage foreclosure case for months or even years, the association can effectively render those defenses moot as they relate to the mortgagee's foreclosure by foreclosing the association's lien. When the owner is divested of title by the association, the owner will drop or lose the fight against the lender in the mortgage foreclosure action, thus paving the way for the lender to take title and begin paying assessments. Another option for associations taking title is negotiating a short sale with the lender or tendering a deed in lieu of foreclosure to the lender. I have also filed motions in mortgage foreclosure actions notifying the court that the association has taken title and does not contest the mortgagee's foreclosure, therefore, speeding up the lender's acquisition of title. These associations understand the key is getting a paying owner into the property sooner rather than later. That way, more in terms of future assessments are recovered rather than lost while a mortgage foreclosure lingers on for years and no one pays the assessments.
What every association should consider is each case is different and the association is well served if it carefully considers all of its options and selects a strategy that works best in any given case. In this ever changing environment, there is no one size fits all approach.
In the wake of Attorney General investigations, self-imposed lender moratoriums on foreclosures and a mounting back up of pending mortgage foreclosure cases, community associations are searching for alternatives to waiting out the storm. It was once the norm that associations would take a wait and see approach when an owner delinquent in the payment of assessments was also facing a mortgage foreclosure. Particularly, in this economy when the amount due on the mortgage exceeds the fair market value of the property. However, now it is too often that associations are left withering on the vine while the mortgage foreclosure action goes on for months or even years.You may have heard that several major lending institutions, including Bank of America, GMAC and JP Morgan Chase, are putting foreclosures on hold in Florida. Our Attorney General joined other states to investigate mortgage foreclosures throughout the country. We expect other lenders and mortgage servicing companies to make similar announcements in the near future.
Why? Well recent news reports that the people signing thousands of affidavits in court proceedings did so without verifying ownership of the loan and the amounts due. They reportedly did not review original documentation or have any personal knowledge of the facts alleged in the affidavits. Some representatives have reportedly signed 8,000 to 10,000 affidavits a month. The lenders and/or mortgage servicers need to review and assess whether these foreclosures and filings comply with state laws.
Although it is uncertain how much delay these current reviews will add to the foreclosure process, most experts believe it is only delaying the inevitable. We believe it will take thirty to sixty days for the companies to perform an internal review. This is not good news for Florida's community associations. Various research outlets currently list the average length of the foreclosure process in Florida between 14 and 17 months. Some foreclosures are taking much longer.
Community associations must recognize their rights as a party in these actions. Community leaders cannot sit back and wait for the banks to figure out what they are going to do next. The Florida Rules of Civil Procedure govern these cases in litigation - the banks (and bank attorneys) have to follow the rules and if they do not, they can be made to suffer the consequences. Courts have imposed significant sanctions against banks and their law firms for failing to abide by court orders regarding the prosecution of foreclosure cases.
Certainly, the overwhelming number of foreclosures filed in Florida is challenging the resources of the courts, but boards that wait and simply ride out the storm can lose out on valuable rights (and dollars) for their communities. There are alternatives to simply waiting out the bank foreclosure which, if successful, can help move the process along. However, these alternatives must evaluated on a case by case basis and in consultation with your association's counsel.
Common Exemptions for Condominium and Cooperative Associations do not Apply to Homeowners' Associations.
The Florida Department of Health enforces regulations on public swimming pools. While community association pools are generally not open to the public, its likely they are considered public pools for the purpose of compliance with Chapter 514 of the Florida Statutes and Rule 64E-9 of the Florida Administrative Code.
The Florida Administrative Code defines a "public pool" as basically any pool that does not qualify as a private pool. Section 514.011, Florida Statutes defines a private pool as a facility used only by an individual, family, or living unit members and their guests which does not serve any type of cooperative housing or joint tenancy of five or more living units. Condominium and cooperative associations have the benefit of the exemptions set forth in Section 514.0115 which say:
Pools serving no more than 32 condominium or cooperative units which are not operated as a public lodging establishment shall be exempt from supervision under this chapter, except for water quality.
Pools serving condominium or cooperative associations of more than 32 units and whose recorded documents prohibit the rental or sublease of the units for periods of less than 60 days are exempt from supervision under this chapter, except that the condominium or cooperative owner or association must file applications with the department and obtain construction plans approval and receive an initial operating permit. The department shall inspect the swimming pools at such places annually, at the fee set forth in s. 514.033(3), or upon request by a unit owner, to determine compliance with department rules relating to water quality and lifesaving equipment. The department may not require compliance with rules relating to swimming pool lifeguard standards.
Unfortunately, these exemptions do not mention homeowners' associations. Even condominium communities (with more than 32 units) must comply with new safety requirements and must remember to apply for renewal as required by the code.
Enforcement of the revised pool regulations has put a strain on some community associations, such as the Rose Garden Villas in Lee County where the residents will have to spend over $200,000 on rebuilding costs. Community leaders question why it is necessary to comply with these stricter requirements after the pool has been open without incident for years and years.
The government may require reasonable changes in existing buildings in order to comply with new requirements and standards for the protection of health and safety of the public, regardless of the fact the buildings complied with the applicable codes at the time of construction. Nonetheless, not all regulations are retroactive and variances are available in the appropriate circumstances. If your community faces this dilemma, its a good idea to discuss whether you can appeal a denial of an exemption or obtain a variance.
Wednesday, September 29, 2010
2:00 PM – 3:00 PM EDT (1:00 PM – 2:00 PM CDT)
An insurance claim that develops into a lawsuit can be a process fraught with obstacles. We will review actual Florida cases where claimants filed suit against their insurance companies, each with very different outcomes. Ken Direktor, Chair of Becker & Poliakoff's community association law practice group will moderate, with Rob Rubin, a trial lawyer in the firm's West Palm Beach office, who will provide insightful legal analysis of the cases. Special guest Andrea Northrop, a commercial insurance agent with Insurance Office of America, Florida 's largest privately-held insurance agency, will present an insurer's perspective.
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| Kenneth S. Direktor, Esq. Becker & Poliakoff Ft. Lauderdale |
Robert Rubin, Esq. |
Andrea C. Northrop Insurance Office of America Jupiter  |
Wednesday, September 29, 2010
2:00 PM – 3:00 PM EDT (1:00 PM – 2:00 PM CDT)
Register below and you will receive a confirmation email with information on how to participate.
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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:
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.
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:
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.
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:
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 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.
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.
The law is not clearly developed as to whether Boards may prohibit unit owners or tenants from smoking inside the units. There is no Florida appellate case that interprets the Act to allow the prohibition of smoking inside a unit. However, case law in other jurisdictions have affirmatively upheld restrictions against smoking in a home and have awarded damages as a result of second hand smoke, under certain circumstances. For example a California Court issued a restraining order prohibiting an owner from smoking in his garage, as the smoke permeated into a neighboring condominium unit. Similarly, a Florida Circuit Court entered a ruling allowing a neighboring unit to recover damages for nuisance, trespass and breach of the covenant of quiet enjoyment as a result of second hand smoke, even after the homeowner installed a purifier and the association installed a mechanical fan designed to prevent smoke from entering neighboring units. Further, in 2007 a California city enacted an ordinance that prohibits smoking in apartments, condominiums, and townhouses that share a common floor and ceiling. Under the ordinance, such owners must include no-smoking provisions in all new leases and renewals of existing leases. So, the concept of completely banning smoking in one’s own home is not that far-fetched.
Florida law provides that restrictions within a condominium declaration are presumed to be valid and enforceable as long as they are not wholly arbitrary in their application, in violation of public policy, or abrogate some fundamental constitutional right. The question of whether smoking in the home is part of a fundamental constitutional right has not been addressed by the United States Supreme Court. However, in 1995, the Florida Supreme Court ruled that there is no state or federal constitutional right to smoke when it decided that a governmental entity could refuse to hire smokers. See Kurtz v. City of North Miami, 653 So.2d 1025 (Fla. 1995). Thus, until there is a determination otherwise, it is reasonable to believe that restrictions against smoking, if created through an amendment(s) to the declaration of condominium (with the requisite membership approval), are valid and enforceable.
In fact, the Board on its own could probably even adopt a rule that prohibits smoking in the units (which typically does not require a membership vote) because such a rule relates to the health, safety and welfare of the unit owners. Like they say, where there’s smoke there’s fire.
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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.
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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