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

Board members are often asked to decide whether to approve or deny a request to keep an animal in a "no-pet" community.  Those decisions are highly scrutinized.

The Philadelphian Owners' Association (POA) faces discrimination charges filed by HUD over its process for evaluating requests for accommodation or service animals.  The charge seems to ignore differences between service animals as defined by the Americans with Disabilities Act (ADA) and emotional support animals required as accommodations under the Fair Housing Act (FHA).  If you are not familiar with those distinctions, please refer to a previous post titled "Lions, Tigers & Bears, Oh My ....The Difference Between Service Animals & Emotional Support Animals".  The Firm's Community Update addressed distinctions between ADA and FHA recently as well.  Please read "Do You Have to Build a Ramp?  Fair Housing Laws Collide".

In this new charge HUD contends that the POA:

• required burdensome and invasive medical documentation before requests for accommodation would be considered,
• severely limited access to the complex's facilities for residents accompanied by assistance animals, and
• failed to address several instances of harassment of residents requiring assistance animals.

 This charge alleges that the Association's requests for verification are improper - more than improper, illegal.   The charge specifically says:

Respondent POA‟s pet policies discriminate against persons with disabilities in need of an assistance animal in many ways. For example, persons with disabilities who use an assistance animal may not enter the following areas when accompanied by their assistance animal: passenger elevators, lobby, lobby sitting rooms, library, art room, social rooms, swimming pool areas, fitness rooms, library, mailroom, common areas, management office or laundry room. In addition to its denials of valid reasonable accommodation requests, Respondent POA‟s pet policies seek private medical information from a resident requesting an accommodation, to which it is not entitled.

Will this charge result in a finding of discrimination and fines, penalties or damages assessed against the association?  The board was entitled to request verification of the disability and need for accommodation in Hawn v. Shoreline Towers Phase I CAI, but that case did not involve claims that the association facilitated a hostile environment for persons with disabilities by failing to stop intimidation and harassment by other residents.

I encourage your association to adopt a policy for handling requests for reasonable accommodations under the FHA.

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Condominium and community association owners are apparently taking advantage of the old adage"the best defense is a good offense".

There seems to be a new trend - not a good one - where owners file lawsuits as a result of the amount claimed by the association as due on an estoppel certificate. Condo and HOA laws require the association to issue an estoppel certificate or statement indicating what is due and owing with respect to the property in connection with a sale or other transfer.  In most cases the new owner must pay for any delinquency accrued on the account.  The former & current owner are jointly and severally liable for the overdue balance.  However, the law does not prevent the new owner from seeking reimbursement from the seller/former owner. Consequently, in practically all voluntary sales (including short sales or distressed sales), the title company or other agent handling the transaction will request an estoppel certificate from the association and ensure those amounts are paid in connection with the closing. In some cases the buyer and seller negotiate for the buyer to take over installment payments of a special assessment, but most of the time the title insurer (and attorneys) will insist on payment of all outstanding obligations.

First mortgagees acquiring title as a result of foreclosure (or deed in lieu of foreclosure) are entitled to a “safe haven” – they are not responsible for all past due amounts, just the lesser of 12 months of assessments or 1% of the original mortgage amount, with limited exceptions.
Associations that acquire title were also subject to this joint and several liability but that has changed as a result of HB 1195 somewhat. The new law states:

An association, or its successor or assignee, that acquires title to a unit through foreclosure if its lien for assessments is not liable for any unpaid assessments, late fees, interest, or reasonable attorney’s fees and costs that came due before the association’s acquisition of title in favor if any other association … which holds a superior lien interest on the unit.
 

Over the past year or two I have learned about many lawsuits filed by new owners when the association tried to collect amounts it arguably wasn’t entitled to collect. In some of the cases first mortgagees were billed for late fees for the entire duration of the delinquency, attorney’s fees incurred by the association in connection with the bank's foreclosure and a host of other charges that became due before the Certificate of Title (in addition to the 12 months or 1%).  In other cases, buyers or mortgagees were billed for the entire delinquency on the account, even if the association was the previous owner.  Kate Berry, in an article for American Banker, explained that mortgage servicers typically will not front the funds to pay HOA/condo dues and expenses even though the Freddie Mac and Fannie Mae require the servicer to pay until the property is sold.

These lawsuits haven’t made their way through the appellate courts, so we don’t have precedent to rely upon yet. Nonetheless, it is my hope that this ‘trend’ will prompt association boards to have frank and open discussions with counsel regarding the appropriate amount to bill new owners for past-due balances, to minimize the risk of a lawsuit and avoid the time, expense and effort necessary to defend a lawsuit.
 

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More in our series of questions asked by local community leaders. 

Question:  What makes a contract legal? Who has to sign it? Is it only our Secretary?

Answer: There are entire treatises devoted to this subject.

From an attorney’s point of view, contracts must contain mutual obligations and adequate consideration to be valid and binding. The parties to the contract must have the legal capacity to contract (i.e. an incompetent person cannot enter into binding contracts) and the object or purpose of the contract must be legal (i.e. a contract to murder someone is not legally binding). These issues are much more complex than they seem and thousands of cases each year address disputes whether contracts are legal or binding.

Community association boards confront various contract issues from time to time and should have a basic understanding of legal obligations so as not to incur unnecessary liability or expense. One issue we see frequently concerns the doctrine of apparent authority. An association can be held liable for a contract entered into by someone with apparent authority, even if that person did not have actual authority. We’ve all heard of situations where the President, Vice President or even Manager goes out and enters into a contract before the board even knows or agrees to buy that product or service. The doctrine of apparent versus actual authority is well settled in the law. For example the Fourth District Court of Appeals held:

“When, in the usual course of business of a corporation, an officer or other agent is held out by the corporation or has been permitted to act for it or manage its affairs in such a way as to justify third persons who deal with him in inferring or assuming that he is doing an act within the scope of his authority, the corporation is bound thereby.”

Officers of corporations typically have authority to enter into contracts on behalf of those corporations. If the other party to the contract is led to believe the person they are negotiating with has authority and they rely on that apparent authority to their detriment, the association may bear responsibility for damages and expenses.

Consequently, it is very important to define the authority of the officers and the manager. If the board wants to enable the President to contract for minor repairs without advance authorization, it should adopt a resolution to that effect – and put the exact limits on expenditures in that resolution. Many associations allow their managers to contract for repairs or buy supplies so long as they spend less than $500 or $1,000 at a time.

Officers (President, Vice President and so on) must likewise understand they do not acquire any special power when they are elected or appointed to their position. With limited exceptions, contracts must be approved by the Board of Directors, voting at a duly called meeting.

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The case against a condo association in Century Village reported by the Sun-Sentinel prompted me to alert readers of the consequences associated with violations of state and federal fair housing laws. If you aren't familiar with the case click HERE for the most recent article.  In short, Broward County filed a lawsuit against the condominium association for discrimination and retaliation because it refused to grant a resident permission to keep a small dog after her doctor gave her a prescription for the dog as an emotional support animal.

Please keep in mind that there are consequences for unlawful discrimination, which includes the failure to make a reasonable accommodation or allow a reasonable modification if necessary to ameliorate the effects of a disability.

Florida Fair Housing Act – Administrative Remedies
The complainant may file housing discrimination Complaint with the Florida Commission on Human Relations.  The Commission (or local agency) is generally required to first attempt informal methods such as conferences with the parties, conciliation agreements, and persuasion. If the complaint cannot be resolved within 180 days, the complainant may commence a civil action in the appropriate court, or may petition for an administrative hearing.  If the Commission determines, as a result of its (or a local agency’s) investigation, that there is reasonable cause to believe that a discriminatory practice has occurred, the Attorney General, upon request of the aggrieved party, must bring an enforcement action and may also institute a civil action.  As an alternative, the Commission or local agency may commence an administrative proceeding pursuant to the Florida Administrative Procedures Act (Chapter 120 of the Florida Statutes).

Florida Fair Housing Act – Direct Civil Action
The Commission (or local agency) may commence a civil lawsuit.  That lawsuit must be filed within two years after an alleged discriminatory housing practice has occurred.

Federal Fair Housing Act – Administrative Remedies – Complaint and Investigation
In addition to the remedies set forth in the Florida Law, an complainant may elect to file a Complaint of a discriminatory housing practice with the Secretary of Housing and Urban Development.  If the agency concludes that prompt judicial action is necessary to carry out the purposes of the Act, it may immediately bring a civil action for appropriate temporary or permanent relief plus damages and penalties. 

Federal Fair Housing Act – Administrative Remedies – Action after Investigation
If a charge is issued, either party (the accused or accuser) may elect to have the claims asserted in the charge resolved in a civil action. If that happens, the Attorney General files suit on behalf of the complainant in federal district court. If the case continues through the administrative process, and the administrative law judge (ALJ) finds discrimination, he or she shall grant "appropriate relief", which may include an award of actual damages, injunctive and equitable relief, and civil penalties against the offender.

Federal Fair Housing Act – Direct Civil Action
The complainant may bring an action in federal district court.  Exhaustion of administrative remedies is not a prerequisite to bringing suit, however a suit may not be commenced after an ALJ has commenced a hearing on a charge involving the same discriminatory practice.

Federal Fair Housing Act – Enforcement by Attorney General
When the Attorney General has reasonable cause to believe that a person or group of people are engaging in a pattern and practice of discrimination that raises an issue of general public importance, the Attorney General may commence a civil action in the appropriate federal district court.
 

Community leaders can consult with counsel to develop a policy or procedure for handling accommodation requests.

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Big prestige brings big money - at least that what developers hoped for when marketing some fabulous projects (or projects that were supposed to be fabulous) in South Florida, Las Vegas, New York and other high profile places.  Buyers rushed to put down deposits on condominiums in the Canyon Ranch building, the Jorge Perez/George Clooney building, the new Trump project or whatever 'brand' name was hot at the time.

What happens when the prestige, the panache, the whole milieu of the project changes (or fails to materialize) because the brand backs out?  The people that bought condos and apartments in the Trump International Hotel and Tower planned for Fort Lauderdale don't want Trump to simply walk away from the failed project with impunity.  The Miami federal judge presiding over the lawsuit recently sided with those buyers and refused to allow Trump out, in spite of his claim he was not a developer but merely licensed his name to to the project developers. 

Marketing materials and the media flooded Miami with news about "Trump's latest development".  When construction costs soared and the real estate market went south, Trump withdrew his support and removed his name from the project (as reportedly permitted by a licensing agreement).  Buyers say they lost hundreds of thousands of dollars in deposits and should be able to pursue reimbursement from Trump, among others.

While the Judge refused to grant Trump's motion to dismiss, Courthouse News Service reports the buyers were not as persuasive with their other arguments.  The Court will not allow the plaintiffs' claim for punitive damages to go forward because, he ruled, Florida law does not allow punitive damages in cases of breach of contract (unless there is merit to an independent tort claim).  He also rejected claims of  breach of the covenant of good faith and fair dealing.

There is an important lesson here for condominium buyers (and all property buyers in general), you MUST read the fine print.  While this lawsuit survived a motion to dismiss, this is merely the beginning.  There is a long road ahead and thousands of dollars have already been lost.

Developers are required to create and supply prospective buyers with a prospectus or offering circular in communities with over 20 residential units.  Buyers are entitled to a Frequently Asked Questions & Answers sheet and deposits in excess of 10% of the purchase price must be held in escrow if the condominium project isn't substantially completed.  This prospectus contains very important disclosures - it describes the condominium property and the recreational amenities, the number of units that are contemplated to use the facilities, use rights associated with the property (and limitations on use) as well as a whole host of other issues that impact the value of the property.  

I can't tell you the number of times Association Attorneys have had to give clients disappointing news that was already disclosed in the governing documents.  People pay a premium for a golf course view, sometimes only to learn that the owner of the golf course plans to change the use, allow the public or start offering golf clinics.  Community leaders often cannot understand why they have to pay another association to maintain mitigation or wildlife areas that have nothing to do with their community - but its in the governing documents.  That 'brand' associated with a project during the sales & marketing push may not be around in the long run.  You need to consider those issues and if in doubt, don't hesitate to seek counsel.  Better to be safe than sorry - especially in these uncertain times.

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I am often asked by readers whether guest restrictions are enforceable. Residents often want to know whether the Association can require them to notify management when guests arrive or whether it is appropriate to require guests to register with the Association. The answer to these questions is, almost inevitably, “it depends”. Readers are not usually satisfied with this answer and I can certainly understand why. Nonetheless, there are so many factors that need to be taken into consideration in each particular set of circumstances that makes answering any other way disingenuous.

The first point in the start of the analysis is the source of the rule or the policy sought to be enforced. There are different standards for restrictions contained in a document of high priority (such as the Declaration of Condominium or a Declaration of Covenants and Restrictions) as opposed to documents with a lesser priority (such as Board policies or Board-made rules). Generally, rules made by an Association are subject to a three (3) pronged test for enforceability, to wit:
 

1. The Board of Directors must have authority to promulgate the rule (authority granted by the Declaration of Condominium or other governing documents);
2. The rule cannot conflict with any of the rights conferred by any of the documents of higher priority, whether those rights are expressly stated or reasonably inferable; and
3. The rule must be reasonable (explained as rationally related to a legitimate objective of the Association).

In Florida, there must be some authority for a Board of Directors to create or promulgate rules and regulations regarding use or occupancy of the property. Some governing documents give the Board of Directors plenary power to adopt, modify or otherwise change use restrictions. Other governing documents limit the Board’s authority to rule making regarding use of the common areas or common elements and still other governing documents require a membership vote to enact new use restrictions. Section 718.112(2)(c), Florida Statutes and Section 720.303(2)(c), Florida Statutes, requires both Condominium and HOA Boards to deliver notice of the Board meeting to the members at least fourteen (14) days in advance if the Board intends to adopt, change or otherwise consider rules regarding the use of the unit or the individual parcel. Consequently, the first step in determining whether a rule is enforceable is to determine whether the Board of Directors acted within the scope of its authority and whether it followed the procedures required both in the governing documents and applicable Florida law.

The second part of the test requires an analysis of the existing documents that have priority over rules and regulations. Rules cannot conflict with the governing documents. It is relatively easy to determine whether a rule contradicts an expressed right or privilege set forth in the documents. For example, if the Declaration prohibits owners from maintaining more than two (2) pets on the property, the Association cannot enact a rule that prohibits pets altogether. An amendment to the Declaration is required to eliminate an owner's right to maintain one or two pets on the property. Determining whether a rule contradicts an inferred right is far more complicated.

Finally, rules cannot be arbitrary or reflect capricious decision making. The third part of the test requires the rule to be “reasonable”. Obviously the term “reasonable” is much like the term “beauty” – everyone has a different standard.

Accordingly, once the first two steps are satisfied, it is necessary to evaluate whether the guest rules or guest restrictions are based upon some legitimate objective. The State of Florida addressed guest registration rules in a Declaratory Statement issued several years ago. The Association involved required all guests to sign in with a security guard upon entering the property and further required information on an Overnight Registration Form to register guests staying overnight. When a unit owner challenged the Association’s “need to know”, it emphasized that the rule served an important safety function, assisted in enforcement of other rules requiring use of licensed and insured contractors and contributed to making the condominium “more comfortable, safe and contented experience for all concerned”. The Division concluded that the rule advanced legitimate objectives of the Association and found that registration requirement did not violate the Florida Statutes.

The Division has had the opportunity to consider many rules enacted by community associations over the past eleven (11) years in connection with its arbitration program. We will include more examples of rules that have either been upheld or rejected, from time to time.
 

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The Florida Condominium Act requires both developer-controlled associations and unit-owner controlled associations to prepare a “Frequently Asked Questions and Answers” (commonly referred to as a “Q&A Sheet”).  The Q&A Sheet must include information:

• regarding unit owners’ voting rights;
• unit use restrictions, including restrictions on leasing of a unit;
• indicating whether and in what amount the unit owners or the association is obligated to pay rent or land use fees for recreational or other commonly used facilities;
• identifying the amount of the current assessment levied pursuant to the budget for each unit type and whether payment is required monthly, quarterly, or otherwise;
• identifying any court cases in which the association is currently a party of record where the association may face liability in excess of $100,000; and
• whether membership in a master or recreational facilities association is mandatory and, if so, what fees are be charged per unit type.

The Q&A Sheet must be updated annually and must be kept as part of the association’s official
records. It must be provided to a prospective purchaser of a condominium unit in connection
with resales of a unit. The completed, up-to-date “Frequently Asked Questions and Answers” form, and any application forms required in connection with the association’s transfer approval authority, must be provided to the seller and prospective purchasers at no charge.

Keeping and updating the Q&A Sheet is one area where many condominium associations are not diligent, and are often in violation of the law.

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The Quail Run story demonstrates the power one, two or a few delinquent owners have over the paying owners.  According to the Sun-Sentinel, close to 100 condo owners have been shut out of the pool, clubhouse and other Quail Run recreational facilities, even though a very small minority are behind in payment of maintenance fees.

The Condominium Act was amended, effective July 1, 2010, to allow associations to suspend use rights in the event an owner is more than ninety (90) days delinquent.  Section 718.303, Florida Statutes says in part:

If a unit owner is delinquent for more than 90 days in paying a monetary obligation due to the association, the association may suspend the right of a unit owner or a unit’s occupant, licensee, or invitee to use common elements, common facilities, or any other association property until the monetary obligation is paid.

There is a similar provision in the statutes that govern homeowners' associations operations.  Section 720.305, Florida Statutes likewise states (in part):

If a member is delinquent for more than 90 days in paying a monetary obligation due the association, an association may suspend, until such monetary obligation is paid, the rights of a member or a member’s tenants, guests, or invitees, or both, to use common areas and facilities and may levy reasonable fines of up to $100 per violation, against any member or any tenant, guest, or invitee.

Thus, it is evident that the association (whether a condominium association or a homeowners' association) has certain remedies available to it against a delinquent owner.  The question here is whether this punishment may be imposed against all owners in a particular sub-association when some are delinquent and others paid in full.

Many communities are developed with several neighborhoods inside a large subdivision.  There is a master association that bears responsibility for certain portions of the property, generally including the roads, perimeter fencing or walls, security gates and recreational facilities.  In newer communities, typically the governing documents will give the master association's board the choice to 1. collect assessments directly from the individual owners, or 2. to require the sub-association to pay the aggregate amount.  Obviously the latter is far easier for the master association administratively - keeping track of 5, 8, 10 or 15 payments is a lot easier than keeping track of hundreds or thousands of payments from individuals.  The master doesn't necessarily need to keep track of property transfers or participate in many of the lender foreclosure actions when the sub-association bears responsibility for payment of the assessments attributable to its units/homes (although in many cases it may be wise).

Not all governing documents give the master association the options stated above.  Some of the declarations merely require the sub-association to act as a conduit, not as a guarantor of payment.  Some declarations actually require the master association to collect assessments from the individual owners.

One of the sub-association boards in the Quail Run community decided it could not absorb the costs of owners in default and only paid the master association for the unit owners that submitted their payments.  The master association, relying on the language of Section 718.303, Florida Statutes, then suspended use rights for everyone in that neighborhood, rather than limiting the suspension to the owners in default.   A hearing was recently held to determine whether the master association was right or wrong by taking that action.  We'll be sure to report on further developments in this particular case as they become known.  In the meantime, be sure counsel has reviewed your governing documents to see what options are available to secure your community's continued viability.

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Associations, community leaders and managers are often the target of housing discrimination claims.  It is against Florida law to discriminate against anyone with respect to sale, rental or terms and conditions of housing based upon race, color, national origin, sex, handicap, familial status or religion.

New HUD rules would expand the categories of persons entitled to protection on a federal and sometimes state level, depending on the program.  HUD seeks to clarify that housing cannot be denied based on marital status, sexual orientation, or gender identity and, further, specify that all eligible families will have the opportunity to participate in HUD programs.  These categories of protected class are already included in many local ordinances throughout Florida.  You can review the proposed text of the rule HERE.

HUD already defines the term “family” with a broad scope in connection with many of its housing programs.  Its definition includes a single person and families with or without children. HUD’s proposed rule would clarify that families where one or more members of the family may be an LGBT individual, have an LGBT relationship, or be perceived to be such an individual or in such relationship would not constitute a basis for excluding those families from HUD benefits. The current definition of the term ‘‘family,’’  is based on the U.S. Housing Act of 1937 (42 U.S. 1437a) (1937 Act).  Section 3(b)(3)(B) of the 1937 Act provides as follows:
 

Families.—The term ‘‘families’’ includes families with children and, in the cases of elderly families, near-elderly families, and disabled families, means families whose heads (or their spouses), or whose sole members, are elderly, near-elderly, or persons with disabilities, respectively. The term includes, in the cases of elderly families, near-elderly families, and disabled families, 2 or more elderly persons, near elderly persons, or persons with disabilities living together, and 1 or more such persons living with 1 or more persons determined under the public housing agency plan to be essential to their care or well-being.

There are various resources on this site that address discrimination issues, such as:

Condos & HOAs: It Pays NOT to Discriminate - Case Examples 

Do Group Homes & Assisted Living Facilities Violate HOA Covenants & Restrictions? 

55 & Over Housing: What is the 80/20 Rule? 

We will continue to address discrimination issues in the future and alert you to new cases or administrative decisions from time to time.
 

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In our litigious society, lawsuits are just a part of life. Whether its a foreclosure, divorce, business dispute, credit card debt, injury claim from a traffic accident or otherwise, its likely that several of the residents of your community are and will be involved in lawsuits from time to time.

When a lawsuit is filed, the Clerk of Court issues a summons.  The summons is served (delivered) to the other parties to the lawsuit, along with a copy of the lawsuit.  These documents may be delivered by the sheriff or a process server.   While there are different options available to "serve" a lawsuit in different circumstances, personal service (delivery) by the sheriff or process server is by far the most prevalent.

The arrival of a process server at the front gate or lobby entrance to a property leaves community association leaders in a quandary - do you allow this person in and let them do their job (ignoring safety, security or guest entry rules) or do you stop them?  If your rules require announcement of all visitors, do you call the resident and let them know the process server is on the way? 

Under Section 843.02, Florida Statutes, regardless of whether the process server is a law enforcement officer or specially appointed by the Court, resistance of the process server’s efforts to serve process is against the law.  Please note the following:
 

• A Process Server is considered to be an Officer of the Court.
• Denial of access to a Process Server may constitute obstruction of justice, which carries criminal penalties.
• Thus, the Association is obligated to allow the Process Server to proceed to the address listed in the summons.

The Association is not obligated to accompany the Process Server once access has been permitted. The Board of Directors may choose to establish a procedure which would require a security guard to accompany the Process Server in the Condominium and on the grounds in general. Of course, this is all predicated upon establishment of proper identification of the Process Server, and by the production of legitimate documents to be served in the possession of the Process Server.

Florida legislators want to clearly specify the obligation on the part of the community association - two bills have been filed this year with the following language:

A person authorized to serve process shall be granted unannounced access to the common areas, both general and limited, of condominiums, gated communities, or any secured residential areas where a defendant or witness resides or is known to be. 

We'll let you know what happens with this and other bills in our Capitol Conversation posts from time to time.  In the meantime, community leaders must understand that process servers are authorized to perform certain tasks which may necessitate access to the community.
 

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The Firm recently published its last community association newsletter for the year.  For the past few years Volume XII of Community Update is a Year In Review. We take this opportunity to re-visit the articles that appeared in our publication during the past year and hope you find it useful as a reference to the important issues that impact your daily operations. You can access the Community Update archives through the Links section on the right-hand side of this site.

2010 Webinars Available On-Demand

Funding Owner Delinquencies: Collecting Rent From Tenants

Moderated by Lisa Magill, Presented by Scott Petersen and Guest Seth Heller.

Analysis of an Insurance Coverage Lawsuit

Moderated by Ken Direktor, Presented by Robert I. Rubin and Guest Andrea C. Northrop.

As one year ends another begins and so does another series of events intended to benefit our clients, industry contacts and friends. Condominium Board Member Certification classes are scheduled throughout the State and many of you already registered to attend the Annual Community Association Leadership Conference in your area.

Because the goodwill of those we serve is the foundation of our success, it's a real pleasure to say "Thank You" as we wish you a full year of health, happiness and prosperity.

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Every business entity (corporation, limited liability company, and limited partnership) is required to file an Annual Report each year with the Department of State, Division of Corporations in order to maintain its “active” status.   Many associations use the internet (www.sunbiz.org) to file the Annual Report, change the Registered Agent or change officer/director information.  It is a quick and easy way to take care of the association's renewal filing.

Be careful to look closely at any emails asking you to file the Annual Report.  The Florida Department of State, Division of Corporations issued a consumer alert notifying sunbiz users of offers from a private company to facilitate filing the Annual Report.  Arvitas, LLC sends emails for the purpose of soliciting business for itself.  It charges a fee to file the Annual Report - which is not 100% exactly clear if you read the official looking email quickly.  I received many of these emails recently.  Click HERE to look at the form of email - it invites you to file your Annual Report with a simple click of a button.

Please go to sunbiz directly to file your Annual Report or contact your attorney for assistance.  

Don't forget - if your elections are in January, February, March or April, there is time to file before the May 1, deadline (so you can include accurate information about the officers and directors).  If you fail to file the Annual Report the state administratively dissolves the corporation (whether profit or not-for-profit).  If  the corporation is not "active" according to the State of Florida, it cannot continue to do business.  Officers and/or directors become exposed to personal liability when the corporation is dissolved.  

If your corporation has been dissolved as a result of failing to file an Annual Report, go to sunbiz right away and reinstate the corporation.  Reinstatement relates back to and takes effect as of the effective date of the dissolution, thus protecting individual directors and officers and validating actions that took place during the period of time the corporation was inactive (to a certain extent).

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Does Your Business or Organization Have Policies in Place to Prevent Identity Theft?

Why Is This Rule Necessary?

Identity theft  results in billions of dollars in losses each year to individuals and businesses.  Identity theft is described by the FTC as a fraud attempted or committed using identifying information of another person without authority.

What Action Is Required?

The Rule requires covered businesses and organizations to implement reasonable policies and procedures for detecting, preventing, and mitigating identity theft.

What Businesses or Organizations Must Comply?

The Rule broadly defines the types of businesses or organizations that must comply.  Any business or organization that regularly provide goods or services first and allow customers to pay later are covered.  Examples include utilities, health care providers, lawyers, accountants, and other professionals, and telecommunications companies. In addition, the definition includes anyone who regularly participates in the decision to extend, renew, or continue credit, including setting the terms of credit. For example, a third-party debt collector who regularly renegotiates the terms of a debt would be considered a creditor under the Rule.

To help you determine whether your business or organization must comply, the FTC published A How-To Guide for Business, at www.ftc.gov/redflagsrule.  Frequently Asked Questions and Answers can be found HERE.

What about Condos or HOAs?

Community Associations Institute (CAI) also published information about this Rule.  It said:

The regulations issued by the FTC provide that any entity that is engaged in providing installment plans where the payment for goods and services is delayed would be required to comply with the requirements of the regulations. While we do not believe that community associations were the target of these provisions, given the broad language and the broad manner in which courts and regulators interpret such language, we believe that the FTC could find that such rules apply to some associations. As such, one response to ensure an association is protected from FTC enforcement would be to put in place a program that complies with the requirements issued by the FTC.

CAI says if your association accepts installment payments for assessments or other required payments or there is a reasonable risk of identity theft of consumer data, it may fall under the Rule.  Both the Condominium and Homeowners' Acts prohibit a community association from disclosing personal resident information such as social security numbers, credit card numbers, credit histories and the like. 

Community leaders should review the records maintenance and records access policies of the association and those of management.  You may want to discuss this issue with counsel, especially if you haven't updated roster lists or otherwise secured records that are not accessible to the members.

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It is not unusual for non-compliant tenants or tenancies to create dissension in a community.  Sometimes the tenants haven't been screened, there may be too many occupants or too many vehicles, the tenants make noise and don't care if they disturb the neighbors, the tenants use so much water it seems like the shower is on all day, the tenants don't recycle, don't clean up after their pets (or bring pets on the property where prohibited) and litter, leaving association personnel (or volunteers) to clean up - the list can go on and on...

Residents complain to the board and the board asks counsel "Can't we just evict them?"

Well, there are specific procedures that must be followed in order to evict or otherwise remove a disruptive tenant and the person or entity seeking such eviction or removal must have the legal authority to do so.   Eviction is a remedy specifically tailored to termination of tenancies pursuant to landlord-tenant laws.  The Association is not the owner of the property and not the landlord - therefore a traditional eviction action is usually not an option.* 

However, the Association has the legal authority to enforce the governing documents (including rules and regulations).  Section 718.303, Florida Statutes specifically requires tenants (and other occupants) to comply with those rules as well as the Condominium Act.  Section 720.305, Florida Statutes says the same for HOAs.  Additionally, the governing documents usually impose an obligation on the owner to control and bear responsibility for the conduct of any tenants, guests or occupants.*  The Association may file a lawsuit* (or Petition for Arbitration depending upon the relief sought) asking the Court for relief from the problems caused by problematic tenants.  The Association can even ask the the Court for an Order requiring the tenants to vacate the premises which is what the Association asked in the Briarwinds Condominium Association v. Rigsby and Wood, No. 3D10-329, case.  The Third District allowed the Association to continue its case for injunctive relief against the owner and tenant.

What if you have a bad owner? Under Florida law, owners and tenants have different property rights. The Florida Statutes provide condominium and homeowner association owners with an exclusive right to possess their property. In Kittel-Glass v. Oceans Four Condominium Association, 648 So.2d 827 (Fla. 5th DCA 1995), the Court held that an association could not permanently enjoin an owner from entering their own unit.   Not to worry though - Associations have several options when faced with owner non-compliance, some of which are explained in other posts.

• * In some cases a tri-party agreement or other contractual relationship may provide the basis for use of the eviction process.
• * If they don't, consider proposing amendments.
•  *An HOA may be required to send a pre-suit demand for mediation.

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The United States Department of Housing and Urban Development (“HUD”) announced recertification deadlines for condominium projects that had received approval for FHA-backed mortgage insurance prior to October 1, 2008.    

In the past many association leaders viewed FHA financing negatively.  The decline in real estate values and banking crisis has eliminated many options from conventional lenders.  Lenders will not finance properties if the loan is not acceptable to the secondary market (Fannie Mae, Freddie Mac and the like).   FHA requires a minimum down payment of  only 3.5%, but it also requires proof of affordability and satisfactory credit scores. FHA guidelines limit housing costs to 31% of income which means a new buyer must earn 3 times the monthly mortgage and association dues.

Whether you think the economy is on its way to recovery, or gearing up for a double dip recession, having your community approved as a FHA/Fannie Mae eligible project is one way to increase the marketability of units in your condominium.

Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a stated mission to provide liquidity, stability and affordability to the U.S. housing and mortgage markets and to increase the amount of funds available in order to make homeownership and rental housing more available and affordable. Fannie Mae works with mortgage bankers, brokers and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates.

If your unit owners are experiencing difficulty in selling or refinancing their units, and your community is not a Fannie Mae or FHA approved project, you may want to investigate whether it would be worthwhile for your project to become approved. Fannie Mae or FHA approval just may bring more buyers to the table for those units “for sale” because financing will be more readily available. Additionally, the increased marketability of those units currently for sale in a Fannie Mae or FHA approved project not only helps the current sellers, but also serves to increase the value of all units in the condominium. This will not only help owners currently looking to sell or refinance, but will also help those unit owners who may wish to sell or refinance their units in the future.
 

While there are fees associated with the application for Fannie Mae or FHA project approval and the securing of an attorney review letter in support of same, the unit owners of your condominium, whether or not their units are on the market at the current time, might agree that such costs and fees are worthwhile to assist in the free flow of funds to be lent to homebuyers in your condominium at affordable rates.

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The post outlining new §720.303(12), Florida Statutes created a lot of buzz.  While there several comments posted on the site, the majority of questions, complaints and comments were sent to me directly and therefore not published.

I agree, the new law seems harsh.  What if your HOA's president owned a landscaping company and wanted to give the association the absolutely best price while ensuring quality work?  The president certainly has a vested interest in the job, as shotty work will reflect poorly on his or her company, he or she will not enjoy the property as much and complaints about the work may make home life miserable.  The new statute ostensibly does not allow the association's board to contract with that company, unless the governing documents or membership authorize the contract.

There is a different provision for directors serving on condominium association boards.  Section 718.3026, Florida Statutes says (in part):

As to any contract or other transaction between an association and one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are directors or officers or are financially interested:

• The association shall comply with the requirements of s. 617.0832.
• The disclosures required by s. 617.0832 shall be entered into the written minutes of the meeting.
• Approval of the contract or other transaction shall require an affirmative vote of two-thirds of the directors present.

At the next regular or special meeting of the members, the existence of the contract or other transaction shall be disclosed to the members. Upon motion of any member, the contract or transaction shall be brought up for a vote and may be canceled by a majority vote of the members present. Should the members cancel the contract, the association shall only be liable for the reasonable value of goods and services provided up to the time of cancellation and shall not be liable for any termination fee, liquidated damages, or other form of penalty for such cancellation.

This law provides the association with more flexibility while safeguarding member interests at the same time.  It is closer to the standards imposed on all Florida not-for-profit corporations.  An outright ban is not necessary so long as the director discloses his or her interest, the deal is fair and the majority of other directors vote in favor of the transaction.

The Condominium Act also specifically prohibits any director, officer or manager from accepting goods or services without payment if the person or company providing the goods or services has a business relationship with the association or has submitted a proposal for a job or service.  This doesn't apply to trinkets or meals provided in connection with trade fairs or educational programs, but is intended to equalize the playing field for all vendors/service providers as well as prevent directors from taking advantage of their positions.

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Attorney Steven B. Lesser Recognized as "Construction Lawyer of the Year" for South Florida & Attorney Gary A. Poliakoff Receives Broward County's 2011 Pioneer Award.

Steven B. Lesser Chairs the Firm's Construction Law Practice Group.  He is Board Certified in Construction Law by the Florida Bar and devotes his practice exclusively to construction law and litigation. He successfully represented homeowner Phillipe Moransais in a landmark case before the Florida Supreme Court (Moransais v. Heathman, et al.) which in effect, reshaped construction law in Florida.  The current, 17th edition of "The Best Lawyers in America" designates one single lawyer in each specialty in each large legal community.  Mr. Lesser was the only South Florida Attorney to receive the 2011 designation in Construction Law.

Gary A. Poliakoff is a founding principal of the Firm and served as its Managing Shareholder for 35 years.  Mr. Poliakoff has been a consultant to State Legislatures and the White House in drafting common interest ownership housing legislation.  Mr. Poliakoff formerly served as a member of the State of Florida Condominium Study Commission and of the State of Florida Advisory Council on Condominiums.  Since 1973, the Broward County Historical Commission has sponsored an annual event honoring Broward County Pioneers recognizing individuals who have made significant contributions to preservation and education.  Mr. Poliakoff accepted the award at an event hosted by Mayor Ortis of Pembroke Pines in the presence of over 150 community leaders and elected officials.

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The Federal Trade Commission ("FTC") announced proposed revisions to its "Green Guides".  It is accepting public comment on these proposed changes until December 10, 2010.  The FTC is charged with responsibility for prevention of fraudulent, deceptive and unfair business practices.

Apparently the FTC found consumers were misled by greenwashing techniques on the part of marketers.  Greenwashing (as stated in Wikipedia) is:

(a portmanteau of "green" and "whitewash") is a term describing the deceptive use of green PR or green marketing in order to promote a misleading perception that a company's policies or products (such as goods or services) are environmentally friendly.  Greenwashing may be described as "spin".

There are many reasons why this issue should concern community associations.  Community associations have traditionally been a prime target for certain practices.  Think about all the communities that paid large up front payments to what they later learned were unlicensed contractors.  We hear about far too many cases of fraud, theft and embezzlement of community association funds these days.  The Florida Attorney General investigated recovery firms claiming to correct problems associated with timeshare unit re-sales and found that certain companies charged 'exorbitant fees' even though they provided very little service.

Losses may result from working with well intentioned service providers as well.

Budget shortfalls drive association boards to consider alternatives for their communities.  Some of these communities have saved tremendously, just by changing certain practices or updating and improving certain systems.  I discuss some of these techniques in  "Green" Practices to Ease Future Financial and Budgeting Concerns and HOAs Can Save With Florida-Friendly Landscaping.  Now is the time to consider retrofits and 'retro-commissioning' building systems to increase energy efficiency and reducing water use and expense, but community leaders have to scrutinize representations very carefully. 

Paying attention to energy efficiency is important for another reason - government regulation.  New York City's new Energy Conservation Code requires existing residential buildings  i.e. condominiums and cooperative buildings (larger than 50,000 square feet) to:

• Conduct a 'benchmark' analysis of energy and water usage by May, 2011;
• Renew the energy performance rating each year thereafter;
• Conduct energy audits every ten (10) years;
• Retro-commission which is loosely defined as improving operation and function of base building systems, adjusting building systems for increased efficiency and changing operational practices; and
• Upgrade lighting by 2025 and install electrical submeters in certain areas.

I saw an announcement indicating these efforts will save New York City residents approximately 750 million dollars a year.  Efficiency regulations for new construction in certain areas in Miami-Dade County are already on the books - they govern construction of residential buildings as well as commercial buildings.  Its just a matter of time before statewide regulations, codes and local ordinances require community associations to increase efficiency in connection with repair projects or possibly require improvements and retrofits for this purpose.

If your community is interested in pursuing options that will save the association money while reducing waste and water usage at the same time, I encourage you to work with lawyers and consultants familiar with the U.S. Green Building Counsel's Leadership in Energy and Environmental Design rating system, even if you're not interested in certification.   Those professionals should be proficient in community association operations, laws, regulations and governing documents, financing as well as construction law to ensure the project goes smoothly.

I'll include more information about some of the legal issues community associations need to consider in connection with these types of projects in a later post. To review a copy of the proposed revisions to the Green Guides click HERE.

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The rule of caveat emptor is sage advice.

Now is a terrific time to buy a home, whether a condominium, single-family home or other type of housing.  Homes prices have fallen, interest rates are low and there are plenty of homes on the market to choose from.  I encourage you to take advantage of this opportunity if you can.  However, please know what you are buying - save yourself from heartache and future troubles.    HOA Examiner recently ran a string of articles with advice for home buyers, particularly first time buyers.  A couple of them are posted below:

• HOA Rules and Regulations: friend?
• HOA Rules and Regulations: foe? (no, it isn't that bad)

I'd like to reiterate and expand on some of the points mentioned.  

Your home is your Castle, right?  This maxim, originating as far back as the 1700's, stands for the proposition that a homeowner may do as he (or she) pleases in his (or her) home, free from invasions of privacy.   Well, when you buy a home in a community governed by an association, you cannot always do what you please, so its important to understand both the benefits and the obligations of shared ownership housing.

 One Florida appellate court explained this concept succinctly.  It said:

Every man may justly consider his home his castle and himself as the king thereof; nonetheless his sovereign fiat to use his property as he pleases must yield, at least in degree, where ownership is in common or cooperation with others. The benefits of condominium living and ownership demand no less. The individual ought not be permitted to disrupt the integrity of the common scheme through his desire for change, however laudable that change might be.
[Stirling Village Condominium Association v. Breitenbach, 251 So.2d 685 (Fla. 4th DCA 1971].

With that in mind, here is some additional advice for home buyers:

• Read the Documents!  All of the contributors to the HOA Examiner articles listed this as the number one priority.  You need to understand what is permitted and what is prohibited.
• Look at the Budget:  What will you have to pay in monthly or quarterly fees?  The mortgage may be affordable, but you cannot afford the home if you cannot pay the assessments (maintenance fees) required.  Associations in Florida have the right to foreclose if assessments aren't paid in a timely manner.   
• Look at the Financial Statements: Is there money in reserve for major projects?  Did the association collect the bulk of the budgeted assessments?  How many special assessments were levied?
• Ask Questions:  If you feel the governing documents are vague, ask!  Ask whether you are allowed to have 2 or 3 cars, ask whether your visitors can park on the street overnight, ask whether you need permission to change the exterior appearance of the home or hang holiday lights from your balcony.  Ask when the association last replaced the roof.  Ask if there are any plans to renovate the clubhouse or security gate.  The board will welcome someone who genuinely cares about the rules because they want to be in compliance.

As I said to Adam Sinclair, you can live very happily in an association setting, once you find the right place for your lifestyle.  Neighbors can turn into life-long friends, you and your family can enjoy the amenities, comfort, security and maintenance standards community associations have to offer.  Don't fret, the right community is waiting for you to find it!

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While the recall process is widely known, many community leaders are unaware of a process authorized by the Division of Florida Condominiums, Time Shares and Mobile Homes referred to as a "reverse recall".

A recall attempt may fail if the Board of Directors does not handle the recall effectively.  In many instances there is a member of the Board that is not well liked or otherwise is adversarial to the remaining members. While any individual may start a recall effort, the Board cannot legally “bend the rules” and certify a recall that should not be certified due to lack of proper votes or the use of an improper form of written agreement. Moreover, failing to call or hold a meeting does not, under all circumstances, automatically entitle the unit owners to certification of the recall attempt.

What does a recalled board member do when the Board certifies a recall that he or she knows should not have been certified? What does a recalled Board member do when it is discovered that he or she was recalled without being given the opportunity to address the board at a meeting called for the purpose of determining whether or not to certify the attempt? The recalled Board member may file a Petition for Arbitration with the Division of Florida Land Sales, Condominiums and Mobile Homes. Those Petitions are known as “reverse recalls”.

As described in Ringler v. Tower Forty One Association, Inc., Arb. Case No. 2005-04-1867, a reverse recall is a proceeding in which “the board member whose recall was certified initiates the proceeding, joined by any other unit owners who wish to be included as petitioners, arguing that the recall effort was certified in error and naming the association as a party”. The party filing for arbitration may challenge the board’s actions or in actions relating to the recall process and may challenge the recall procedure itself, such as the form of written agreement or vote at a meeting. In Ringler, the board received the written agreements for recall and failed to call a meeting. Mr. Ringler was notified that the recall was effective before he even knew that the board was served. The property manager accepted service of the written agreements and delivered them to another board member. That board member purportedly failed to notify anyone else (although that allegation was disputed).

Since service on the Association’s manager is effective service, the recall against Mr. Ringler was ultimately certified, but in Scariati v. The Villages of Emerald Lakes One Condominium Association, Inc., Arb. Case No. 2005-02-1485, the arbitrator reversed the recall as it was discovered that there weren’t enough written agreements signed by owners to effectuate a valid recall. In Scariati, the petitioner alleged she was not permitted to examine the recall written agreements before or even at the board meeting to determine whether or not to certify the effort. Once she had that opportunity, she discovered the improprieties. The recall was not certified, even though the board voted to certify, as a result of the board’s improper behavior and the fact that the recall was void ab initio.

There is a substantial difference between recall arbitrations and “reverse” recall arbitrations. There is no mechanism for recovery of prevailing party attorneys’ fees in the arbitration of a recall. However, since a “reverse” recall is a Petition filed by a unit owner (or owners), attorney’s fees are awardable to the prevailing party. Thus, it is important not to ignore procedural requirements in connection with a recall attempt as machinations on the part of the board may expose the Association to liability for the opposing side’s fees and costs.
 

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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. 

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