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Is your Association Leaving Money on the Table?

Bank foreclosures continue to be an impediment to collection of unpaid assessments in many communities.  Sure, after the 2010 legislation became effective, community associations are entitled to collect either 1% of the original mortgage debt or 12 months worth of assessments from the mortgagee (whichever is less), but what about the rest of the balance?  Does it disappear into thin air?

Because a bank foreclosure will usually directly impact the ability to successfully lien and foreclose, communities must be aware of other alternatives to collect unpaid assessments.

Strategic Defaults - According to Wikipedia:

A strategic default is the decision by a borrower to stop making payments (i.e. default) on a debt despite having the financial ability to make the payments.

While many owners who lose their units in foreclosure cannot pay, it is important to remember that a unit owner is personally liable for all unpaid assessments that are left when a bank forecloses.  The Association may seek to collect the balance on the account from the former owner.  More and more, people who do have assets make choices to abandon properties because there is no equity.  If there is a possibility that an owner has assets to satisfy a judgment, a community should consider taking action against a former member to collect those unpaid assessments.

Many associations are thinking short-term instead of long-term when they decide to forgo pursuing a money judgment for the balance between what a lender pays if it takes title as a result of foreclosure and the outstanding obligations on the account. Yes, there are costs involved. If the association doesn't have a lawsuit pending, it needs to file a lawsuit. There are attorneys fees, filing fees, costs associated with service of process, etc. If the association already has its lawsuit pending, most of those costs have already been absorbed - so why not wait for the bank to foreclose (and pay its statutory obligation), then continue to pursue the balance against the former owner? A judgment is recorded in the county and with the State's registry; it is initially valid for 10 years and can be renewed for another 10 years. During that time if the debtor desires to buy another property, obtain financing for purchase of a vehicle, college, etc., the judgment will appear.

While the debtor/former owner may not have sufficient cash-flow right now, who knows what the future will bring? If the debtor has significant assets in another state, the association can even take the extra step of domesticating the judgment in another state and pursue collection efforts there.

Asset Searches Can Be Helpful in the Decision Making Process

An asset search may help discover assets. It is more difficult (sometimes almost impossible) to collect from a corporate unit owner or a foreign person.  Nonetheless, your community should consider its options after a bank foreclosure - you may be leaving money on the table.

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

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

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

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

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

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

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How does your community address complaints?  Is there a published procedure or is every complaint handled differently?  Who has authority to handle the complaints?  HOA Leader recently published an article with tips for handling homeowner complaints.  Here is a link to one of the tips:

HOA Complaints:  Turn Owners' Frowns Upside Down

How many times have board members heard the following complaints and made the following responses:

1. The unit owner across the hall from me constantly cooks food that stinks up the entire hallway, can’t you do something about this? (Typical Board response: What stinks to you may be perfume to others, please be tolerant.)

2. I’m afraid of my next door neighbor’s large dog. I saw him lunge at another dog, and he’s always growling. I think he might attack another animal or a child. (Typical Board response: Dogs are expressly allowed by our documents. There’s nothing we can do.)

3. This is the third time I’ve complained about water intrusion into my apartment from upstairs. Why won’t you fix the problem ? (Typical Board response: The water is coming from the upstairs neighbor’s unit, not the common elements and, therefore, we aren’t responsible.)

4. One of the unit owners continually harasses me, and I can’t stand it anymore. Lately, every time I see him he shouts out derogatory racial slurs. It’s getting to the point that I can’t even stand living here. (Typical Board response: This is a problem between you and your neighbor; we can’t control what people believe.)

Did the board respond appropriately? Maybe yes, maybe no – it’s a matter of degree.

The first complaint is in the nature of a nuisance complaint. The owner claims that the neighbor’s use interferes with the peaceful possession and use his or her unit. Under this circumstance (or similar complaints regarding noise, music, etc.), the board has an obligation to determine whether the behavior actually constitutes a nuisance in violation of the documents. The board is put in the position of balancing competing interests and determining whether the use is reasonable versus whether the use creates an actual, material, physical discomfort to a person of average sensibilities.

The second complaint may deserve more attention. An association may be held liable for injuries resulting from a dog bite, if it is proven that the association had knowledge of the dog’s propensity for violent or aggressive behavior. Even when the association’s documents allow for pets, it may be entitled to an order removing the dog, if it becomes a nuisance.  I'll explain more about dangerous dog laws in another post.

The third complaint is heard often. Since the association has the duty to maintain, repair, protect and replace the common elements, it has the obligation to investigate the situation in order to ascertain the source of the water leak. If the water is leaking from the common elements, the association has an obligation to fix the problem. The association may have certain avenues available if a water leak from one unit results in damages to the common elements or other units. An “enforcement of maintenance” or other self-help remedy in the governing documents is extremely beneficial under these circumstances.  Note - I haven't mentioned insurance - that subject will be addressed in a future posting on this site.

Finally, “harassment” is very difficult to define and even more difficult to remedy. Nothing an association can do will turn people into nice or pleasant people. However, if the level of harassment rises to physical violence or unlawful discrimination, the association may be held liable. In Casa del Mar Condominium Association, Inc. v. Richartz, 641 So.2d 470 (Fla. 3rd DCA 1994), the Court held that an association has standing (authority) under Section 718.303, Florida Statutes, to seek an injunction against a unit owner to prevent future acts of physical violence, or threats of violence, against the association, its directors, employees and residents. Moreover, in at least one case, an association paid more than a half million dollars to settle a case in which an African-American unit owner claimed that the board did nothing to protect her from the racial and sexual slurs, derogatory comments and physical threats of another owner.

Association boards must be cognizant of the happenings in the community and take member complaints seriously to avoid liability.  

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Lawsuits Against Employers for Violations of the Fair Labor Standards Act & Other Employment Claims are on the Rise.

Some community associations have one employee, while others may have a hundred or more employees.  Think about it - maybe your community employs a CAM, grounds maintenance people, a concierge, office assistants, front desk personnel, activity coordinators, beach attendants, valet, building engineers, cleaning staff - the list of people necessary to operate many community associations goes on and on.  These individuals may have access to sensitive or proprietary information, such as unit owner or resident medical or health related records.  When the economy is tight (like now) employment related claims and lawsuits rise dramatically - I read one article that said the number of lawsuits filed against employers for violations of the Fair Labor Standards Act (FLSA) rose by 40% each year for the past several years in a row! 

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

If you are a member of a Board of Directors of a community association and have answered "yes" or don't know the answer to any of these questions, an employee manual should be a priority.  Unfortunately, many community associations neglect to spend the time or devote the funds to this task.   A well-drafted employee manual can minimize your exposure to both employment related and third-party liability claims - but make sure to have a Labor and Employment Attorney from your state draft and/or review the manual.  Since employment laws vary from state to state and change quite frequently, using a 'form' from a neighboring community or from the Internet may do more harm then good.

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Community leaders should understand the financial wherewithal of the associations they lead.  Unit and Home Owners also have rights to review financial records.  It seems like we hear about theft of association funds more and more these days.  Simply leaving finances in the hands of a manager, bookkeeper or treasurer is not enough.  For some practical ideas how to stay "in the know", please see the following article published by HOAleader:

Five Questions to Ask Your Manager about Your Homeowner Association's Finances

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SB 1196 Includes New Remedies for Collecting Money Owed to Associations.

Community leaders and managers have complained for years about investor owner delinquencies.  Why should the owner continue to collect rent from his or her tenant without paying maintenance fees and/or assessments?  Sure, both the Condominium and Homeowners Acts allowed the association to apply to the Court to request the appointment of a rent-receiver, but to take advantage of that provision it had to file the foreclosure lawsuit.  The law requires notices to the delinquent owner, preparation and recording of the claim of lien, filing and serving the foreclosure lawsuit - all before the association could ask the Judge for authorization to collect rent.  It could take several months to obtain the appropriate Court Order - all while the account remains delinquent. In some cases the tenant moves out before the association has the chance to collect any rent.  Of course there are costs and expenses involved with that whole process. 

Recently (as reported on this blog in Condo Receiver Helps Collect Assessments; Q&A: Condo Receivers; Collecting Rent from Tenants; Q&A: Collecting Rent from Tenants (revisited) ) the Courts have extended the law to allow 'blanket receiverships' for all units subject to foreclosure - and even more recently some Orders were entered authorizing the receiver to collect rent from tenants occupying units even before the association filed for foreclosure.

Well, in response to those cries for help the legislature included a 'self-help' procedure for associations.  The first paragraph of this portion of the new law says:

If the unit is occupied by a tenant and the unit owner is delinquent in paying any monetary obligation due to the association, the association may make a written demand that the tenant pay the future monetary obligations related to the condominium unit to the association, and the tenant must make such payment. The demand is continuing in nature and, upon demand, the tenant must pay the monetary obligations to the association until the association releases the tenant or the tenant discontinues tenancy in the unit. The association must mail written notice to the unit owner of the association’s demand that the tenant make payments to the association. The association shall, upon request, provide the tenant with written receipts for payments made. A tenant who acts in good faith in response to a written demand from an association is immune from any claim from the unit owner.
 

 The Association must follow a specific procedure to collect rent from tenants.  There are some pitfalls to avoid.  Its a good idea to discuss these issues with counsel or allow counsel to send the demands on your behalf. 

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SB 1196 contains significant changes for community associations.  

Governor Crist had until June 1, 2010 to act on SB 1196.  While I have included bullet point explanations of some of the changes, over the next few weeks please check for more in depth information about how these new provisions will impact your association's operations.

Community associations across the state are breathing a sigh of relief - many of them will not be required to retrofit the buildings with fire sprinklers or install fire alarms, both expensive propositions in light of the record number of foreclosures and budget shortfalls.  In most cases elevator upgrades can be put off for five (5) years - hopefully the residential market will gain stability in that time, making the costs associated with the elevator improvements easier to fund.

Attention:  If you are a non-paying, non-resident unit owner and lease your unit, the association may demand future payments of rent from the tenant to satisfy your financial obligations, without filing a lawsuit first. 

Legislators all over the state heard complaints about the repair, upkeep and staffing requirements associated with recreational facilities.  Paying unit owners were demonstrably upset (justifiably so) that non-paying owners could enjoy the use of the recreational facilities, in some cases precluding paying owners from use due to over-crowding.  Under this new law, associations can suspend the use of recreational facilities if assessments are more than ninety (90) days past due.  Of course, associations cannot suspend any utility services, parking spaces or means of access to the unit.  The effectiveness of suspending use rights remains to be seen, but the provision itself should make owners think twice before defaulting.

This bill also includes the "Distressed Condominium Relief Act".  While the act doesn't protect buyers that acquire title after July 1, 2012, it will impact condominium associations for a number of years with respect to warranty, construction, accounting claims and the like.

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A number of bills CALL tracked this session were sent to Governor Crist recently.  He has until June 1, 2010 to act (veto or sign) on the following bills:

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

We've included bullet point summaries of SB 1196 on this blog, but refer you to the actual text of the bill for more complete information.  Community Update will outline the impact of important bills on community associations - Becker & Poliakoff''s association clients will receive the electronic version shortly.

The Governor's office is in the process of reviewing SB 1964.  We've included concerns about this bill before in Condos/HOAs Have a Lot to Lose if Design Professional Protection Bills Become Law.  In 1999, the Florida Supreme Court codified a long standing principle that design professionals should be held accountable for economic loss damages that they cause just like other professionals in Florida. Board certified construction law attorney Steve Lesser said the following:

[Design professionals] have an obligation to design to meet code and protect the health, life & safety concerns of consumers.  An error in design judgment can be devastating to a unit owner and homeowners that cause damages and in fact- economic damages.  An elevator that fails to operate at the appropriate speeds and breaks down results in loss of use which is an economic loss.  Imagine how this could impact elderly unit owners.  A parking garage that is not properly shored up based on engineering calculations can result in economic loss.  These consumers are largely lay persons that often sign agreements (presented by the professional) that contain limitation of liability clauses. 
 

Please contact the Governor's office to express your support or opposition to 2010 legislation.  Make your voices heard in Tallahassee. 

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"Florida-Friendly" Landscaping Found to Conserve Water and Prevent Pollution.  HOAs and Large Property Owners Also Realize Significant Savings.

I reviewed the annual budget for a large HOA master association recently and was surprised that maintenance of the grounds accounted for more than 40% of the association's annual expenses.  The budget included line items for various grounds maintenance such as:

The Manager explained that irrigation repair was a constant source of expense.  There is a school in the community and the pick-up waiting area formed over the association's landscape.  Pumps required constant maintenance and repair and the association uses a vendor to detect leaks or weaknesses in the system   Pest control became an enormous expense, due to white-fly and other insects.  It also became more expensive to thwart algae and plant growth in the lakes/ponds (which supply water for irrigation) due to all the nutrients from the fertilizer used to keep the lawn/turf areas green and lush.  All-in-all these costs amount to over $500,000 annually.

Wow - that is a lot of money.

The University of Florida reports that Ocean Gallery, a 42 acre community comprised of 439 condominiums saved $65,000 its first year after employing Florida-Friendly landscaping practices.

 The Ocean Hammock Community won awards. both within Florida and nationally.  In 2009, Ocean Hammock won an Award of Excellence for its landscape maintenance by the Florida, Nursery Growers and Landscape Association and it also won the Professional Landcare Network Environmental Improvement Grand Award. For a full case study of improvements and savings, click HERE.

Florida-Friendly landscaping is defined in the Statutes.  Section 373.185, Florida Statutes says, in part:

"Florida-friendly landscaping" means quality landscapes that conserve water, protect the environment, are adaptable to local conditions, and are drought tolerant. The principles of such landscaping include planting the right plant in the right place, efficient watering, appropriate fertilization, mulching, attraction of wildlife, responsible management of yard pests, recycling yard waste, reduction of stormwater runoff, and waterfront protection. Additional components include practices such as landscape planning and design, soil analysis, the appropriate use of solid waste compost, minimizing the use of irrigation, and proper maintenance.
 

Check back to this site for more resources and examples of significant savings gleaned from innovative thinking and planning.

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The Regular Session ends April 30th.  We've previously highlighted changes in SB 1196 and HB 561 that would impact Condos & Co-Ops, here is some information for HOA leaders and managers: 

Records Access:   §720.303(5)

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

Budgets & Reserves:  §720.303(6)

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

Director Compensation:  §720.303(12)

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

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

Fines/Suspensions of Use Rights:  §720.305

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

Voting for Directors by Secret Ballot:  §720.306(8)

Adopts 'condo-like' double envelope procedure.

Collecting Rent from Tenants:  §720.3085(8)

Association may demand rent directly from tenant if owner is delinquent.

Acquisition of Recreational Leaseholds or Other Property/Property Use Rights:  §720.31(6)

Similar to §718.114 (condo act).  Allows association to enter agreements to acquire leaseholds, memberships or other possessory or use rights in lands and facilities.  Must be fully described in the declaration or if the action is not taken within 12 months of recording, the declaration must authorize said action as a material alteration/substantial improvement or at least 75% of the members must vote in favor of the action.

Special Assessments by Developer (before turnover):  §720.315

Pre-transition, developer controlled association may not levy special assessments without the approval of a majority vote of non-developer interests.  Vote must take place at duly-called meeting at which a quorum has been attained.

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

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There are only a few short weeks left for Florida's elected officials to pass meaningful legislation and at this point in the session it seems that the HB 561/SB 1196 Bill Package is the most likely to pass. These bills are in a constant state of flux and the information below only highlights major points in the bills (as of April 15, 2010). We encourage you to review the full text of the bills by accessing the Senate’s website here for HB 561 and here for SB 1196 and likewise encourage CALL members to contact the appropriate legislators by using the Legislator Connect feature on its website (www.callbp.com).  Here are a few highlights from the bills:

Fire Alarm Systems: - Amending s. 633.0215, F.S. 

Buildings less than four stories with exterior means of egress and exterior corridors will not have to install a manual fire alarm system (per Section 9.6, Life Safety Code in the Florida Fire Prevention Code).

Fire Sprinkler Retrofit - Amending s. 718.112 and s. 719.1055(5), F.S

Full “opt-out” will be permitted with affirmative vote of two-thirds (2/3rds) of the entire membership. Will only permit reconsideration of opt-out vote once every three years at a special meeting called by a petition of 10% of the voting interests.

Extends deadlines for associations that don’t opt out to the end of 2019.

Elevators – Amending s. 553.509(2)  and 399.02, F.S., (Phase II Firefighters’ Service)

Allows for a five (5) year delay to retrofit with a special access key for elevators in condominiums and cooperatives unless the elevator is replaced or requires major modification.  Allows associations to "opt-out" of elevator operation by alternative power source with affirmative vote of majority of owners of condominium.

Designation of Limited Common Elements by Amendment - Creates s. 718.110(14), F.S. - only in SB 1196

Allows association to designate limited common elements by amendment, so long as the building component is designed for use by specific owners.

Official Records – s. 718.111(12), F.S.

• Individual director liability for failure to maintain or destruction of official records is limited to cases where there is intent to harm the association or one or more of its members.
• Association not liable for unit owner misuse of information obtained from official records.
• Exempts personnel records (disciplinary, payroll, health and insurance records) from unit owner access.
• E-mail addresses, telephone numbers, emergency contact information, and any unit owner contact information other than the addresses to send notices are exempt from unit owner access.
• Association’s electronic or computer security data, including passwords, software and operating systems are exempt from unit owner access.

Common Expenses - Amending s. 718.115(1)(d)1., F.S.

Communication services (as defined in Chapter 202), information services, and internet services obtained pursuant to a bulk contract shall be deemed a common expense. (In HB 561 contracts entered into for these services by the developer or prior to transition may be canceled within 120 days of the transition meeting.)

HB 561 also creates new §718.112(3), F.S. that allows the bylaws of umbrella organizations governing a minimum of 1000 units to employ a marketing firm for the community as a common expense.

Board Eligibility – Amending s. 718.112(2)(d), F.S.

Co-owners in condominiums with more than 10 units cannot serve together unless they own more than one unit or there are not enough volunteers to fill all slots. Does not apply to timeshare condominiums.

Requires directors to supply association with new certification form or take a state-approved education class. Directors are suspended until they comply.

Collections and Foreclosures – Amending s. 718.116 and s. 719.109(3), F.S

Changes mortgagee liability cap from 6 months to 12 months after acquisition of title by foreclosure (or deed in lieu) but retains 1% cap.

Association may demand a tenant pay rent to the association to satisfy delinquency for that condominium unit with written notice to the unit owner. Landlord/owner must provide tenant with credit for any amounts paid to association. Association can evict tenant that fails to comply.

Enforcement Mechanism – Amending s. 718.303, F.S.

• Allows suspension of use rights if owner is more than 90 days past due. Cannot suspend use of limited common elements, utility service, parking spaces, elevators or impede access to/from unit.
• Requires board to vote on suspension/fine at duly noticed board meeting and advance notification to the unit owner.
• Allows association to suspend voting rights after 90 days of non-payment.

Filling Vacancies on Board – Creating s. 719.106 (1) 6, F.S.

Vacancies are filled for remainder of the term by vote of majority of remaining directors, even if less than a quorum or only one director. In the alternative, the Board may hold an election to fill the vacancy.

There are many more provisions - click below for additional content and come back to this site for information on changes to the Homeowners' Association Act (Chapter 720, Florida Statutes) and updates directly from Tallahassee.

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Appellate Court sides with Homeowner in Parking Enforcement Litigation.  Owner Permitted to Park Large Pick-Up Truck in Driveway.

Eagles Master Association, Inc. v. Vizzi - link to Summary Judgment Ruling.

Interpreting governing documents of condos & HOA is tricky sometimes.  While there is an emphasis on the 'plain meaning' of the words - sometimes the exact meaning of the words doesn't make sense in the context or is otherwise unreasonable for one reason or another.  The Second District Court of Appeal found that the plain meaning of one of the sentences of the Eagles Master Association's Declaration didn't make sense on its own.  After considering several factors, it found that the Association's interpretation of the Declaration was simply unreasonable, inconsistent with other provisions and therefore incorrect.  The result?  Victory for the homeowner after reportedly spending two hundred thousand ($200,000) dollars in legal fees - some or all of which to be reimbursed by the Association.

Like any case, this case involved several legal issues.  The homeowner challenged the legitimacy of the Master Association's board.  There was the issue of whether the Master Association declaration of covenants had priority over the Sub-Association documents in the event of a conflict.  There were amendments to analyze as well.

The Master Declaration said (in part) the following:

Vehicles and Parking.  No vehicles shall be regularly parked in The Eagles except on a paved driveway or inside a garage.  No trucks or vehicles which are used for commercial purposes, other than those present on business may be parked in The Eagles unless inside a garage and concealed from public view. Pick-up trucks, boats, trailers, campers, vans, motorcycles and other recreational vehicles ... shall not be permitted in The Eagles except while loading or unloading the contents thereof or while parked inside a garage and concealed from public view.

 The Sub-Association Declaration said (in part):

Vehicles.  No motor vehicles shall be parked on the Properties except on paved or concrete driveway or in a garage.  No motor vehicles which are primarily used for commercial purposes, other than those present on business, nor any trailers, may be parked on the Properties unless inside a garage and concealed from public view. Boats, trailers, commercial trucks, commercial vans, motorcycles and other recreational vehicles shall be parked inside of garages and concealed from public view.

Seem pretty similar, right?

The Master Association took the position that its declaration required all pick-up trucks, vans, etc. to park in an enclosed garage (concealed from view), except for short periods of loading and unloading.  This truck was too large to fit inside the garage.  The Court disagreed.  It said:

1. Interpreting the declaration was a matter of law;
2. If at all possible, any inconsistent provisions should be reconciled;
3. All of the terms & provisions should be read together with the goal of making each term meaningful; and
4. Any doubts must be resolved in favor of the free use of the property (against the party seeking to enforce the restriction).

In the end, the Court found that the better interpretation of both documents lead to the conclusion that while commercial trucks and commercial vans were banned from parking on the driveways unless garaged or there for business purposes, other trucks (including pick-up trucks and SUV's registered as trucks) used for personal transportation were allowed.

Community leaders should analyze the current documents and consult with counsel to ensure that the restrictions and covenants are written in a way that supports the common interpretation.  Remember, any ambiguity is resolved against the person/entity trying to enforce the document.  Thus, review your existing practices and consider amending the documents to create enforceable rules and regulations that fit your community's goals and residents' needs.

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2010 looks like it will be another active year in the foreclosure reform area. According to Yeline Goin, Co-Executive Director of Becker & Poliakoff’s Community Association Leadership Lobby (CALL) “there are already several Bills in play which we expect to generate a lot of discussion in Tallahassee this year.”   Some of them include the following:
 

House Bill 115: This proposal states that during the pendency of a foreclosure action, if the unit is occupied by a tenant, the association may demand that the tenants pay rent directly to the association, with a right of eviction for non-compliance. This Bill would also permit the condominium association to suspend certain common element use rights for nonpayment, although utility services could not be suspended. Voting rights could also be suspended for delinquencies. Similar amendments are proposed in this Bill for Chapter 720, the Florida Homeowners Association Act.

Senate Bill 164: This proposal requires any mortgagee which has not completed its foreclosure within six months from filing its foreclosure lawsuit to pay the “statutory cap” (six months of past due assessments or one percent of the original mortgage debt, whichever is less) during the pendency of the lawsuit. This proposal would apply to condominiums only.

House Bill 329: This proposal would also allow the collection of rents directly from tenants, and permit suspension of certain common element use rights and voting rights. Significantly, this Bill also deletes the statutory cap and would require a foreclosing lender to pay all unpaid assessments if the foreclosure action is not completed within a year.

House Bill 337/Senate Bill 968: This Bill states that if an owner is delinquent in the payment of assessments, they can be restricted from running for office, holding office, serving on committees, leasing units, or using the common areas.

House Bill 419/Senate Bill 864: This Bill is similar to a couple of others already discussed regarding the right to demand payment of rents directly from tenants. This proposal also states that an association’s claim of lien can include the cost of collection efforts by management companies or licensed managers.

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