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

What is your policy for handling records inspections by owners?  Do you have written rules?  Where are the records inspections held?  How many hours does the owner have to review the requested records?  Does anyone help facilitate the inspection?

If you are a condo or HOA board member and cannot answer these questions, its time to consider rules governing owner record inspections.  Association leaders must understand their obligation to allow member access to records to avoid costly disputes that may increase tension in the community.

The Division handles numerous complaints from condo owners claiming that associations fail to allow access to the Official Records.  Sometimes those complaints, and arbitration cases, result in fines against the association.  Other times the association clearly shows that the owner was wrong in one way or another.   The Division publishes a very comprehensive practical guide for use by community leaders (board members) and homeowners.  While the Condominium Act forms the basis for the guide, HOA leaders and owners should find it useful as well as the laws are similar (but not the same so please consult with counsel).  You can download the guide HERE. 

There are some records that are not accessible to owners. Those records include:

1. Any record protected by the lawyer-client privilege as described in s. 90.502 and any record protected by the work-product privilege, including records reflecting mental impressions, conclusions, litigation strategy, or legal theory of the attorney or the association prepared in connection with pending or anticipated litigation/adversarial proceedings.
2. Information obtained by an association in connection with the approval of the lease, sale, or other transfer of a unit.
3. Personnel records of association or management company employees, including, but not limited to, disciplinary, payroll, health, and insurance records.  However written employment agreements or budgetary/financial records showing compensation is still open to the owners.
4. Medical records of unit owners.
5. Social security numbers, driver’s license numbers, credit card numbers, e-mail addresses, telephone numbers, facsimile numbers, emergency contact information, addresses of a unit owner other than as provided to fulfill the association’s notice requirements. An owner may agree to allow the association to disclose contact information. The association is not liable for the inadvertent disclosure of information if it is included in an official record of the association and is voluntarily provided by an owner as opposed to being requested by the association.
6. Electronic security measures that are used by the association to safeguard data, including passwords.
7. The software and operating system used by the association which allow the manipulation of data, even if the owner owns a copy of the same software used by the association. Only the data is part of the official records of the association.

 What rules are valid and what rules are unreasonable when it comes to record inspections?  Some of the Division rulings may surprise you - we will provide some examples in a future post.

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

Investing the Association's Funds?  If so you should be familiar with the Prudent Investor Rule.

Does your association have a written policy with regard to investment of association funds? If so, does the board of directors monitor the investment to ensure compliance with the policy, and, is the policy reviewed and updated from time to time? If not, is the board of directors exposing itself to needless liability under both common law and statutory obligations of prudent management?

Whether your association is a condominium association governed primarily by Chapter 718, Florida Statutes, or a Homeowners association governed primarily by Chapter 720, Florida Statutes, it is imperative that the governing body of the association invest association funds in a reasonably prudent manner. In serving as directors and/or officers of these corporations, individuals expose themselves to liability for mismanagement and, in many cases non-management, of association funds. Officers and directors sit in a position of trust and confidence, requiring that their actions be exercised in good faith and in the best interests of all unit owners. For example, since all budgets must include reserves for capital expenditures and deferred maintenance, unless waived in accordance with Section 718.112(2)(f), Florida Statutes, a primary responsibility of the board is the protection of, and hopefully the enhancement of, the association's reserve funds.

Boards of directors are faced with the delicate task of balancing their financial goals, needs, and obligations. On the one hand, the association wants a strong return or yield on its investment, sufficient to meet the ever-increasing costs of repair or replacement of common areas. On the other hand, it is necessary to maintain sufficient liquidity in the event of an emergency. The security or safety of the investment is equally important. Therefore, boards of directors are faced with legitimate and substantial questions, such as: whether or not to hire a professional money manager, what type of investment policy should be adopted, and how best to monitor the portfolio, once a policy is implemented.

Community Associations Institute (CAI) recommends associations invest only in savings accounts, FDIC-insured certificates of deposit, U.S. Treasuries and government agency bonds. Board members need to consider the goals and objectives of the association as well as regular income and its existing capital. Risky investments are not appropriate.  However, in this day and age when interest in savings accounts is practically zero, what other types of investments will suffice?

Keep these maxims in mind:

• While a director can delegate investment authority to fellow directors or third parties, they must continue to supervise and monitor these activities.  You can delegate authority, but cannot delegate responsibility.
• Appointing an investment committee is not a bad idea, but that doesn't mean the other directors can ignore the association's financial position. If there are committees, make sure they meet and conduct the business they are charged with in compliance with the statutes. Final decisions should be made or ratified at a meeting of the board and there should be minutes of committee meetings or recommendations.
• Some governing documents contain language hindering a well-thought out investment plan. You may need to amend to implement a suitable investment policy.

Take the advice from Sergeant Phil Esterhaus from Hill Street Blues and be careful out there. ...

 

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

Attention HOA and other home owners, board members and CAMs:

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

Last November I posted a blog ( Homeowners' Associations: New Ruling Supports Compensation for Construction Defects)  alerting readers to an important appellate decision holding that buyers and homeowners' associations are entitled to a common law implied warranty of fitness and merchantability with respect to the roadways, drainage systems, retention ponds and underground pipes in a residential subdivision.  Florida Condominium Law provides condominium purchasers with implied warranties of fitness and merchantability with respect to the roof and structural components of buildings as well as mechanical, electrical and plumbing systems serving the common elements, but homeowners' associations do not have the same protection.

The Lakeview Reserve Homeowners v. Marondo Homes, Inc., case is now pending before the Supreme Court of Florida.  Oral arguments took place on December 6.

This case is truly important - so important that advocacy groups filed amicus briefs in support of the appellate ruling.   So important that the Florida Home Builders Association (FHBA) and National Association of Home Builders (NAHB) also filed briefs in opposition to implied warranties.

FHBA and NAHB contend that since roads and drainage areas are owned by an association, not individual homeowners, defects in these structures generally have no direct effect on home habitability.  In my opinion that doesn't really make sense.  How can you live in a home without access to the home over a safe roadway?  The roadways, underground plumbing, retention ponds and drainage facilities are essential.  In fact, the residential dwellings probably couldn't qualify for a Certificate of Occupancy without these improvements.  

CALL submitted a brief on behalf of its 4,000 +/- member communities in the State of Florida since the issue of whether a developer of a residential subdivision provides common law implied warranties for the roadways, retention ponds, underground pipes, and drainage systems throughout that subdivision is one of great importance to hundreds of thousands, if not millions, of Florida residents living in homeowners’ associations. CAI likewise submitted a brief contending that developers owe a duty to the homeowners and their homeowners’ association to turn over common area structures that are fit for use and do not impair the habitability or merchantability of the homes. 

We will report on the outcome of this appeal when the Supreme Court publishes its decision.

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

HOA rules - do they go too far?  We talked about the delicate balance between congenial community living and the desire to avoid certain conduct in Lemonade Stands & Other Evils in HOAs.   

Owners complained that the HOA was too strict - why shouldn't neighborhood kids be permitted to sell lemonade from the front lawn?  Was that really a business use or business activity that interfered with peaceful community operations?

In this recent story a no-solicitation rule is under attack by parents of Boy Scouts participating in a food drive.  The HOA declined to allow the Boy Scouts to knock on doors asking for donations.  The HOA leaders are afraid of a slippery slope, which is understandable considering how the Courts scrutinize was appears to be inconsistent or selective enforcement of covenants and restrictions.  The president said “Once we open the door for the Boy Scouts to solicit within our community, then why not the Girl Scouts, why not the local schools, civic organizations, churches,” to Florida Today.

Florida Today featured the following report:

How does your community handle these types of issues?  Solicitation is traditionally prohibited in community associations.  One of the reasons homeowners choose to live in private, gated communities is to avoid interruptions by strangers selling candy, fund raising for a school, distributing literature, etc.  Should the board make exceptions?  If so, what are the determining factors and how can the board distinguish between fund raising efforts to support the local high school football team, the Red Cross, relief for Haitian hurricane victims or the Scouting for Food drive?

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

The Florida Community Association Journal has featured articles about the Communities of Excellence Award winners over the past year.  All of the finalists showed wonderful initiative.  Its really a pleasure to see community volunteers work side-by-side with management (and staff) to improve their situation and community life.  Many of the associations in the Financial Innovation category suffered major hardships - all of them had significant delinquencies and resulting budget shortfalls.  Improving collections and re-negotiating existing contracts were typical strategies employed by associations to increase revenue and reduce expenses.  The bulk of the finalists took advantage of the 2010 legislative changes that allowed community associations to collect rent directly from tenants when the owners failed to pay assessments.

Two winners stood out for thinking 'outside the box'.  

The Village Walk Homeowners Association in Sarasota investigated the costs of retrofitting/upgrading traditionally powered heating and cooling equipment.  The manager found the costs were comparable to a geothermal system after figuring in the government discount for employing renewable energy resources.  Installing geothermal heating for the two pools paid for itself in 18 months and now the association saves $65,000.00 annually.  The cooling system for the restaurant improved indoor air quality, maintained a far cooler temperature and saves the association 10% on energy costs each year.  The system is more powerful, works better and reduces operating costs all at the same time.

I was at the Communities of Excellence event and honored to present the Trendsetter Award to Central Park at Metrowest.  The board of directors took advantage of a great opportunity and created a "win-win" for the community and local residents.  The association's president learned about a federally funded Back to Work Grant Program.  The association applied to be an employer and was accepted into the program!  The association had the benefit of several employees for 13 weeks - unemployed local residents received a much needed paycheck while Central Park Metrowest received much needed clean up and maintenance work.  This program worked so well that the association participated in a federal summer youth program (also federally funded) the following year.  20 local teens got work experience while the association reduced its vendor expenses.

I think many people would be surprised how much effort it takes to turn a community association around.  Sure, its easy to lament about how 'upside down' you are with your mortgage or to complain about the lack of services and poor appearance of your community when its struggling to make ends meet.  Its much, much harder to pull up your sleeves, figure out what its going to take to improve the community and then implement those initiatives.  It takes dedication and tremendous perseverance to accomplish what these, and other communities, accomplished.  If you haven't participated in the Florida Communities of Excellence program, I highly recommend it - especially if you're thinking that there's no hope for your community.

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

Budget season for condo/HOA directors may not be as fun as rabbit season is for Elmer Fudd, but both must understand that preparation and regulatory compliance is key.  Elmer must comply with regulations if he wants to take that rabbit home - association directors must comply with budget requirements and procedures if they want the association to successfully collect assessments.

For condo directors:  Does your budget include all the required provisions?  Does it specify the beginning and end date?  Does the budget identify the assessment amount by unit type?  Has the board prepared a current reserve schedule and is that attached (and made part of) the budget?  What notice is required?  We know that Section 718.112(2)(e), Florida Statutes says 14 days notice is required, but do your community documents create additional obligations?  Do you have to give the members the opportunity to vote on the budget - that's not typical but some community documents leave that power to the members rather than the board.  How do you handle costs associated with limited common elements in the budget?

For HOA directors:  Are your budgets in the same exact format as condo association budgets?  Do you mail the proposed budget with notice of the budget meeting?  Do you send it out to the members afterwards?  What about reserve accounts - does your association have statutory reserves, non-statutory reserves and do you know the difference?  Does it contain the appropriate disclosures?

Association leaders also have to contend with year end financial reporting requirements as well.  Do you need an audit?  Are there enough funds in the budget to pay for an audit?  How can you make sure your financial reports will be produced in a timely manner?  How do you distribute the financial reports or do you have to at all (there are options in the statutes)?

The Division of Florida Condominiums, Timeshares and Mobile Homes publishes a very helpful manual.  While the manual is geared toward condominiums, HOA directors may find the information useful this budget season.  Click here for Budgets & Reserves Made Easy.

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

Drought conditions, watering restrictions, bank foreclosures and abandoned homes - all have an impact of yard and grounds maintenance.  All have an impact on the look and feel of a community as well as owner/resident satisfaction. As a member of a board of directors you have to ask yourself, "is the time, energy, money and aggravation of fighting with cash-strapped homeowners to re-sod, re-plant annuals, perform property inspections, hold violation/fining hearings, etc. worth the effort?"  That question is especially relevant in light of pertinent Florida laws.  One of the provisions of the Homeowners' Association Act says:
 

§720.3075(4):

(a) The Legislature finds that the use of Florida-friendly landscaping and other water use and pollution prevention measures to conserve or protect the state’s water resources serves a compelling public interest and that the participation of homeowners’ associations and local governments is essential to the state’s efforts in water conservation and water quality protection and restoration.
(b) Homeowners’ association documents, including declarations of covenants, articles of incorporation, or bylaws, may not prohibit or be enforced so as to prohibit any property owner from implementing Florida-friendly landscaping, as defined in s. 373.185, on his or her land or create any requirement or limitation in conflict with any provision of part II of chapter 373 or a water shortage order, other order, consumptive use permit, or rule adopted or issued pursuant to part II of chapter 373.

Another chapter of the Florida Statutes defines the term "Florida-friendly" landscape.  It likewise prevents HOAs from enforcing deed restrictions in a way that precludes the use of these techniques.  

§373.185(3)

(a)   The Legislature finds that the use of Florida-friendly landscaping and other water use and pollution prevention measures to conserve or protect the state’s water resources serves a compelling public interest and that the participation of homeowners’ associations and local governments is essential to the state’s efforts in water conservation and water quality protection and restoration.
(b) A deed restriction or covenant may not prohibit or be enforced so as to prohibit any property owner from implementing Florida-friendly landscaping on his or her land or create any requirement or limitation in conflict with any provision of part II of this chapter or a water shortage order, other order, consumptive use permit, or rule adopted or issued pursuant to part II of this chapter.

So - what are the rules in homeowners associations?  Is the requirement to maintain a lush green lawn still the norm?  If so, should that be the case?  Doesn't seem so in light of these requirements.  Consequently, HOA boards and committees are updating architectural control guidelines to reflect current thought about Florida landscape with an eye towards maintaining the aesthetic quality of the neighborhood while making life a little easier (and less expensive) for the homeowners.  

The West Volusia Beacon reported that several homeowners in a DeLand HOA removed all of the St. Augustine grass and replaced it with Florida native plantings.  Neighbors were thrilled with the results and so were the homeowners - they capped off sprinklers for good and hardly ever have a need to water the landscape.  Water collected in a rain barrel provides enough of a supplement during dry spells and weekly mowing has been replaced with quarterly care of jasmine, palms, coco plum and other drought-tolerant plants. 

Support from the HOA makes a huge difference.   Have you really taken a look at the Architectural Control Criteria or landscape guidelines in the past few years?  If not, I encourage community leaders and managers to work with your local University of Florida - IFAS Extension and residents to develop updated guidelines that work for everyone.  You can find out more about Florida-Friendly landscaping at www.floridayards.org.  Check out the plant database to see what beautiful options are available.

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

Board members learn about and evaluate proposed community projects by comparing different products, services, prices, methods and means to accomplish the same objective.   Community leaders should know that the Florida statutes require competitive bidding for significant contracts.

For condominiums and cooperatives, the statutes requires competitive bidding for service contracts and contracts for the purchase or lease of materials or equipment that cost more than 5% of the annual budget (including reserves). For a homeowner’s association, the requirement is the same, except there is a higher threshold of 10% of the total annual budget, (including reserves). HOAleader recently published articles about bidding, one of them is Save the HOA Money: Create Bidding Guidelines.

The board doesn't have to accept the lowest bid and the law doesn't specify how many bids the board must collect and review.   In fact, sometimes a higher bid is the better choice for the association.  Bids must be kept on file as an official record and made available for inspection by owners, upon written request.  The HOA statute requires the association to keep bids on file for one (1) year. The condo statute includes bids in the section governing accounting records - those are kept for at least seven (7) years.  Many associations make the mistake of throwing out rejected bids to reduce the volume of paperwork in the office.  Unfortunately that may lead to trouble when an owner requests to see those bids later on.

There are exceptions to bidding requirements in Florida for certain contracts.  Many professional services are exempt such as contracts with attorneys, accountants, CAMs, architects and engineers.  Contracts for emergency service are likewise exempt. 

What happens if there is only one provider in the area? If the proposed provider is the only source for that service, equipment or material within the county, the board doesn't need to go through the exercise of obtaining bids from vendors outside the geographic area. 
 

Obtaining more than one bid can give the board greater insight into how to approach a problem.  Nonetheless, it is still a good idea to use professional consultants when the bids relate to a significant construction or repair project as the scope of services may be expressed in a highly technical way.  Some bids may contain the use of proprietary products or services that make it very hard to replace or repair in the future unless the association hires the same vendor.  You certainly want to compare "apples to apples" bids when deciding what products or services are best for your association.

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

Boards of Directors of Community Associations Can Delegate Tasks to Management, but Cannot Delegate Decision Making Responsibility.

I was happy to contribute to an article published by HOAleader regarding the responsibilities and obligations of a Board of Directors.  The author indicated that through her research, she learned that some management company contracts authorize management to select the association's attorney and to decide how to handle enforcement and collection matters without the board's involvement or approval.  I've heard this complaint from board members in different forms from time to time and its not limited to management, some law firm retainers likewise allow the law firm to decide when to file and how to handle association legal issues, particularly when it comes to collection of delinquent assessments.  I have to shake my head when I hear "management has attorneys that handled everything - we don't know" when I ask why something was done (or not done) in a particular case.  That practice is dangerous for a number of reasons.

Board members must realize they have ultimate responsibility for association operations and actions (or non-action).  Sure, a "package deal" with management (or another service provider) that rids the board members of the headaches associated with reviewing legal matters (particularly collections) and making strategic decisions may sound attractive.  Please ask yourself various questions:

• Is the relationship such that one or both of the parties benefit by increasing the amount of legal work or pursuing claims (such as insurance claims and the like)?
• What happens if the service provider tells the law firm to do something questionable? 
• The law firm may discuss the pros and cons of the action as well as the potential exposure of the action with the service provider - did you have the opportunity to evaluate that risk?
• Who are the service providers loyal to- each other or to your association? 

Hiring a professional CAM can benefit the association tremendously but the bottom line is this is your community and if you serve on the board you must be involved in association decisions.  You can read the article Should Your HOA Manager Approve All Lawsuits by clicking on the title.

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

Why do condos & HOAs need to hire attorneys?  Let's just tell the CAM they have to ....

You can complete that phrase a thousand times.  Examples:

• evict that bad tenant
• record a Lien against that owner
• prepare that contract and notice of commencement
• draft amendments to the governing documents, etc.

In these troubling economic times, community associations are looking for their managers to perform as many functions as possible, and with managers being better educated and more experienced, they are more willing to use their knowledge and perform those additional functions. Nevertheless, a manager is restricted to performing tasks permitted by law for a licensed community association manager.  It is unfair to ask or expect your CAM to perform tasks that may expose them to penalties for the Unlicensed Practice of Law (UPL), yet many associations saddle the manager with those tasks in an attempt to save money.  Moreover, many times efforts to save a few dollars here or there backfires on the community association and the manager often gets the blame.

CAMs are expected to understand and know many community association and other laws.  They are expected to know the statutory election process, they are expected to know that official records must be made available for inspection, they are expected to know board meetings cannot be held without notice (except for limited circumstances) as well as a whole host of other information.  So, why is it wrong for the board tell the CAM to prepare and record Claims of Lien or proposed amendments to the governing documents?  Why can't the board ask the CAM to evaluate how case law or statutes apply to your documents?  There's a very important reason why - you would be asking them to commit a crime known as Unlicensed Practice of Law ("UPL"). UPL is punishable by up to a year in jail and a $1000 fine.  

Good managers know when the service requested by the Board exceeds the manager’s authority and will refer the matter to the appropriate professional. A good manager will also refer a matter to the appropriate professional when the manager is unsure whether the matter exceeds his or her authority.  Your manager is not trying to "get out of" doing work or shirking his or her responsibilities when they say the board needs a legal opinion on some issue or the attorney needs to prepare certain documents.   They are protecting your community and adhering to professional ethics.

You may be interested in reading this Opinion issued by the Florida Bar.  The linked document described what actions are considered UPL.
 

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

The Sun-Sentinel included a story about a South Florida condo owner this week.  The condo owner filed a law suit against the condominium association for discrimination, claiming that the association failed to make a reasonable accommodation.  The deaf owner reportedly demanded the association to make arrangements and pay for a sign-language interpreter at meetings, shows or condo activities, so he can participate in those activities.

Community leaders and managers should know that the Fair Housing Act prohibits any person to refuse to make a reasonable accommodation in rules, policies, practices, or services, when such accommodations may be necessary to afford a handicapped person equal opportunity to use and enjoy a dwelling unit.  The use of the dwelling unit likewise includes the public and common use areas available to unit owners.  

The housing provider (community association in this context) must make requested accommodations unless:

1. the accommodation imposes an undue financial or administrative burden, or
2. requires a fundamental alteration in the nature of its program.

There is a big distinction between accommodations and modifications under the Fair Housing Laws.   A modification is generally defined as any change to the public or common use areas of a building or any change to a dwelling unit.  In 2008, the Department of Justice (“DOJ”) and the Department of Housing and Urban Development (“HUD”) issued a Joint Statement providing technical assistance regarding the rights and obligations of handicapped persons and housing providers under the Act relating to reasonable modifications.  The Joint Statement gives examples of modifications that are typically considered reasonable, such as:

1. widening doorways to make rooms more accessible for persons in wheelchairs;
2. installing grab bars in bathrooms;
3. lowering kitchen cabinets to a height suitable for persons in wheelchairs;
4. adding a ramp to make a primary entrance accessible for persons in wheelchairs; or
5. altering a walkway to provide access to a public or common use area.

Modifications are made at the expense of the person requesting the modification.  Accommodations are made by the housing provider and can result in an expense to the housing provider.  However, if the expense creates a financial burden on the housing provider, it is not reasonable.  The Joint Statement issued by DOJ and HUD regarding reasonable accommodations says you determine whether a requested accommodation presents an undue financial and administrative burden on a case-by-case basis taking various factors into account, such as the cost, the resources of the provider, the benefit of the accommodation, and whether alternatives
would meet the disability-related needs.

So, what will happen in this case?  We'll have to wait to hear whether the costs to all of the owners and the administrative burden placed on association management make this particular request unreasonable under the circumstances.

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

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.
 

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

Has your association collected rent from tenants when the landlord/owners fail to pay assessments?  If so, you should be aware that the 2011 Florida community association legislation (HB 1195) includes a form of letter to use when notifying a tenant to make rent payments to the condo or HOA.  The statute clarifies the obligation on the part of the tenant to divert rent payments to the association.  Section 718.116(11)(a), Florida Statutes provides, in relevant part, the following:

Pursuant to section 718.116(11), Florida Statutes, the association demands that you pay your rent directly to the condominium association and continue doing so until the association notifies you otherwise.  Payment due the condominium association may be in the same form as you paid your landlord and must be sent by United States mail or hand delivery to ...(full address)..., payable to ...(name)....  Your obligation to pay your rent to the association begins immediately, unless you have already paid rent to your landlord for the current period before receiving this notice. In that case, you must provide the association written proof of your payment within 14 days after receiving this notice and your obligation to pay rent to the association would then begin with the next rental period. Pursuant to section 718.116(11), Florida Statutes, your payment of rent to the association gives you complete immunity from any claim for the rent by your landlord for all amounts timely paid to the association. 
 

The 2010 statute already protected tenants against eviction by the landlord when payments were made to the condo or HOA as a result of the association's demand.  That didn't stop landlords from threatening eviction or otherwise intimidating tenants though.   There should be less and less resistance as more Florida residents become aware of the law - hopefully improving the association's bottom line!

• Email This
• Print
• Comments (6)
• Trackbacks
• Share Link

The 2011 community association legislation clarifies owner privacy rights and expands owner access to employee salary information, among other things.  Did you know?

Owner Privacy Rights/Directories:

The 2010 amendments to the statutes provided that owners’ telephone numbers, e-mail addresses and other “personal identifying information” could not be made accessible to other owners. This upset many association leaders and residents which publish owner directories, telephone books, e-mail group lists, and the like. The previous statute did not say whether or not personal identifying information could be published if the owner whose information was being published signed a waiver form. The new statute permits owners to authorize the disclosure of such information, provided that their consent is evidenced in writing.

Employee Salary Information:

The 2010 amendments to the condominium statute provided that “personnel records” for condominium association employees were not available for owner inspection, mirroring a provision already found in the homeowners’ association statute. HB 1195 provides that while “personnel records” are still protected from owner inspection, salary information regarding any particular employee, as well as any employee’s written employment agreement, are part of the “official records.”  Thus, employee salary information is available for inspection by owners in both condominiums and homeowners’ associations.

Closed Board Meetings:

HB 1195 amends the condominium statute to mirror the Homeowners’ Association Act. Now, under both laws, a board can hold closed meetings (prevent owner attendance and observation) regarding “personnel matters.” The law still permits association boards and committees to also meet in closed session with association legal counsel under certain circumstances.

Board Term Limits:

HB 1195 makes it clear that term limits for condominium association directors, if contained in the bylaws, are valid. There remains doubt as to whether term limits are effective in the HOA context for the time being.

Right to Speak at HOA Board Meetings:

The Homeowners’ Association Act has been amended to state that owners have the right to speak at meetings of the board with reference to “all designated items.” Under previous law, HOA members could only speak at board meetings as a matter of right if so provided in the bylaws, or if the owners called for a special board meeting by a complicated petition process. The condominium statute has, for decades, allowed unit owners to “participate” at board meetings with respect to all designated agenda items. Curiously, the new provisions in the Homeowners’ Association Act, while providing that members now have the right to
speak with reference to “designated items”, does not require the HOA board to publish an
agenda with its posted notice, as is the case in condominiums.

Board Eligibility:

The condominium statute has been amended to clarify that a candidate must be eligible to serve on the board at the time of the deadline for submitting a notice of intent (forty days before the election) in order for his or her name to be listed on the ballot. For example, if a unit owner is more than ninety days delinquent in the payment of assessments to the association at the time of deadline for submitting a self nomination, they would not be eligible to run for the board. Interpretations of the previous statute were that such a person would need to be placed on the ballot, on the theory that they could cure their ineligibility (for example, bringing their account current) prior to taking their seat on the board.
 

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

I want to thank all the fire and life safety officials that read the original post entitled Does Your Condo or HOA Have an Automated External Defibrillator?

My post mentioned possible misuse of these devices, but I was reminded that the device will analyze the victims hearth rhythm once the electrodes are placed on the victim's chest.  If the circumstances warrant, the device will charge and announce when it is time to push the "shock" button.   A professional at the Tamarac Fire Department explained that the device will not deliver the shock if someone presses the button by accident.

I also heard from representatives of the American Red Cross and the Southern Cardiac Arrest Association (SCAA).  SCAA is a national non-profit organization based in Washington, D.C. with 50 chapters throughout the United States.  The President of the local chapter explained that there are close to 1,000 deaths per day as a result of sudden cardiac arrest.  The chapter educates community leaders about risk factors, provides CPR and AED training, as well as serves as a survivors' support network.

Tony Cortese, Manager of the Health and Safety Department for the American Red Cross advised that the local Red Cross office can facilitate purchase of a defibrillator at a discount and set up free training on the devise. It likewise leads CPR/AED certification for many groups and organizations as part of its mission to have the community ready to prevent, prepare and respond to emergencies.

With all of these resources available, maybe its time for your community to evaluate whether to purchase an AED.

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

The American Heart Association encourages the purchase and availability of automatic external defibrillators and many community associations have already purchased this life safety equipment for on-site use.  These machines have become commonplace in airports, hotels and shopping centers throughout the country.

You may wonder if there is any downside to having this machine available in the community association setting.  While Florida's Cardiac Arrest Survival Act provides broader liability insulation than the Good Samaritan Statute, the protection is not absolute.   The Cardiac Arrest Survival Act does protect the owner of the device from civil liability if:

• The device is properly maintained and tested; and
• Employees or agents of the owner have received appropriate training in the use of the device.

However, specific training isn't required if: 

1. The device is equipped with audible, visual, or written instructions on its use, including any such visual or written instructions posted on or adjacent to the device;
2. The employee or agent utilizing the device was not an employee or agent who would have been reasonably expected to use the device; or
3. There wasn't a reasonably sufficient time period between hiring the employee or agent and the event, or between the acquisition of the device and the occurrence of the harm.

 The Internet has many resources available for community leaders showing the proper use of this device, including the following:

Each community association should first consult with its insurance adviser or liability carrier to learn whether there are special conditions associated with purchase or use of a defibrillator.  Your carrier may require testing and regular maintenance of the unit.  Your carrier may require employees to undergo training.

While the Florida law offers protection from civil liability under most circumstances, that immunity will not necessarily apply if the machine malfunctions.  However, fire and life safety officials indicate that the machines will not deliver an electrical shock unless the circumstances so warrant.  The AED devices have become less expensive over the years and actually walk the user through the process with audible commands.  Associations should test the battery every so often (yearly) and replace the pads when they expire. 

Having a defibrillator on the property could mean the difference between life or death of a resident.  If your community is considering such a purchase, please consult with your insurance adviser and legal counsel.  Moreover, contact your local first responders - many fire departments will gladly send a representative to come speak to your residents about the use and responsibilities of ownership of these devices as well as train your employees in life safety measures.

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

We are pleased to announce that this year’s large community association bill, HB 1195, which previously passed out of the Legislature was formally signed into law yesterday by Governor Rick Scott. The effective date of HB 1195 is July 1, 2011.  You can view the full text of HB 1195 by accessing the CALL website (www.callbp.com). 

CALL has also prepared a comprehensive summary of HB 1195 and several other important bills that impact community associations. [PDF]

CALL worked closely with the sponsors of HB 1195 over the past year to ensure the best possible result for community associations. 

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

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.

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

A local community activist recently asked several industry professionals to answer questions submitted to her by community association board members.  You can check this site over the next several days to see my answers to some of the questions:

Question Regarding Authority of the Manager and Competitive Bids: We are in a community where we were just billed a great deal of money for electrical work and were told "the Management's electrician did the work".  We are wondering why it is not under the maintenance provided under our contract? Why is the electrician not handled like every other vendor then-where [we get bids for] the work?

Answer:  Your first task is to review the contract with the management company. Many management contracts give the manager the authority to effectuate repairs for certain items without advance board approval. In the vast majority of cases, the manager’s authority is restricted to a specific dollar amount (i.e. $500, %1,000 or higher in emergency situations). If you don’t have this limitation, make sure your board includes one in the next renewal or simply address this issue with the manager now (by board resolution) so everyone is on the same page when it comes to association expenditures. The manager needs direction from the board when it comes to repairs – some boards want the manager to “simply take care of problems”, while other boards want to be more involved and formally approve the scope of the work in addition to selecting the contractor to perform the work.

Second, you need assurances that any work was done by licensed and insured professionals and that the work was properly permitted, if a permit was required for the work. The management company should have no problem with providing you with verification of license and insurance.

Note:  We have included information on this site about building permits and contractor licensing requirements.  Please see Protecting the Association Against Unlicensed Contractors and Does the Association Need a Building Permit?  for more information.

Condo and HOA laws require bids generally if the work to be performed will cost more than 5% (condo) or 10% (hoa) of the annual budget. There are exceptions for specific types of professional services and most boards will obtain competitive bids for any project expected to cost more than a couple thousand dollars (sometimes less), to make sure the cost of the work is not out of the ordinary.
 

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

Join Becker & Poliakoff's CALL team along with Special Guest Representative Moraitis, Jr., the sponsor of HB 1195.

Live Webinar — Monday, June 13, 2011
1:30 PM – 3:00 PM EDT

2011 FLORIDA LEGISLATIVE SESSION:
New Laws Affecting Community Associations

The 2011 Florida Legislative Session came to an end upon adjournment on Saturday, May 7.  House Bill 1195, sponsored by Rep. George Moraitis, Jr. (R-FL 91st District), passed during the Legislative Session and will soon be headed to the Governor for final action.  The CALL team of Ken Direktor,  David Muller and Yeline Goin, Co–Executive Directors of CALL, will be joined by Travis Moore, CALL’s lobbyist in Tallahassee, along with our Special Guest Rep. Moraitis, for an in-depth analysis of this bill as well as others that affect daily operations in your community.  Click on the register button below to sign up for this very important event!

Ken Direktor, Esq. West Palm Beach	David Muller Sarasota
Yeline Goin, Esq. Tallahassee, Ft. Myers	Travis Moore Tallahassee

Register today! You will  receive a confirmation email with information on how to participate from the convenience of your computer.

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

Association leaders and managers must comply with federal and state anti-discrimination laws.  That's a given.

Association leaders and managers, therefore, cannot enforce certain policies and procedures when a resident (prospective resident or someone associated with a resident) is entitled to an accommodation due to disability.  Persons suffering from various medical, mental and emotional conditions can meet the statutory definition of disabled or handicapped and are therefore entitled to accommodations in association rules or policies, if that accommodation is necessary to provide the person with disabilities with the full opportunity to enjoy the dwelling.

With all that in mind, would you think a Board of Directors must accommodate a request for permission to use medically prescribed marijuana to treat cancer, debilitating back injuries, glaucoma or otherwise?  Community association documents typically prohibit any illegal use of the property, but does the board have to make an exception?

HUD says NO when it comes to public housing, public services, activities or programs.  A HUD memorandum issued in January of this year explains why public housing agencies, owners of federally assisted housing or owners/operators of facilities or services subject to the ADA would not have to allow the use of medical marijuana.   There are two primary reasons cited in the memo:

First -

Section 504 of the Rehabilitation Act (part of the Fair Housing Act) and Title II of the Americans with Disabilities Act (ADA) don't generally apply to Condos & HOAs.  Both of these laws exclude any illegal drug user (regardless of the reason) from protection.  The law says:

The term "individual with a disability" does not include an individual who is currently engaging in the illegal use of drugs...

Thus, someone who is disabled (i.e. blind, deaf, mobility impaired, etc.) will not be considered disabled within these statutes if there is illegal drug use.

Second -

Illegal drug use, by itself, will not eliminate protection for disabled persons under the FHA.  This law is very relevant for community associations and claims based on an association's failure to accommodate a disability are almost becoming commonplace.  HUD's general counsel takes the position that a request for permission to use medical marijuana is just not reasonable and therefore does not have to be granted.

An accommodation isn't reasonable if it:

1. requires a fundamental alteration in the nature of the housing or the provider's operations; or
2. imposes an undue financial and administrative burden on the housing provider.

The use of medical marijuana isn't legal in Florida and that's probably why I haven't encountered any requests for accommodations of this type.  However, several states across the country are allowing its use.  Therefore, community leaders should check with counsel before blindly rejecting any request along these lines.

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

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.

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

Community leaders struggle with budget shortfalls every day.  What if there was something you could do when owners fall behind in maintenance payments, mortgages and other expenses?  Do you agree that a six month reprieve from mortgage payments can enable homeowners to bring their account with the association current?  If so, you need to learn about the financial assistance available.

The state received close to a billion dollars in federal funds to help struggling homeowners fend off foreclosure.  The program, administered by the Florida Housing Finance Corp., is designed to provide homeowners with some "breathing room" by giving them a temporary break on mortgage payments.  By raising awareness of the program and offering assistance to qualified applicants, community leaders can help improve residents' financial situations while improving the association's financial condition at the same time.

Eligibility Criteria:  Applicants must be eligible to receive assistance.  Help is limited to those Floridians that are unemployed or under-employed, not those suffering financial hardships as a result of divorce, disability or death of one of the borrowers.  An applicant ...

• Must be a Florida resident;
• Must occupy property as primary residence (the property cannot be vacant, abandoned or rented);
• Borrower/co-borrower must be unemployed or underemployed through no fault of his/her own, which makes the first mortgage unaffordable;
• Must have documented total household income at or below 140% of the area median income (AMI), adjusted for household size;
• Must have an active checking/savings account that can be debited by the ACH method of funds transfer;
• May not have unencumbered assets of $5,000 or more, or three times the current monthly mortgage payment (whichever is greater);
• Cannot have a bankruptcy that has not been discharged or dismissed; and
• Cannot have been convicted of a mortgage-related felony in the last 10 years.

Click HERE for frequently asked questions and answers about the Hardest-Hit Fund.  TheFlorida Housing Finance Agency hopes to assist close to 40,000 people with this program - wouldn't you like your owners to take advantage of this opportunity, especially if that will help them catch up on delinquent assessments?

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

LIVE WEBINAR
Disaster Planning for the 2011 Hurricane Season - Are You Ready to Weather the Storm?

Wednesday, June 1, 2011
10:00 AM– 11:00 AM 
 

Hurricane Season is officially here. While we have had a couple of years in Florida that have perhaps lulled us into a certain complacency, the prediction in 2011 is for nine hurricanes in the Atlantic. Are you ready to weather the storm?

Join Bill Strop, who will moderate this webinar, and Rob Rubin and Sanjay Kurian, to learn about recent cases and experiences resulting from recent disasters that will affect how you prepare yourself and your community before the storms hit.  Both Bill and Sanjay are Florida Board Certified Construction Lawyers with tremendous expertise in repair/reconstruction issues.  Bill and Rob both spent years working on behalf of insurance companies, so they know the tactics and techniques relied upon by carriers to deny or discount claims.
 

William Strop, Esq. Fort Lauderdale	Sanjay Kurian, Esq. Fort Myers	Robert I. Rubin Esq. West Palm Beach

Click below to register and you will receive a confirmation email with information on how to participate
 

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

One of the principles I learned when I first became a member of this Law Firm has now been called into question, at least somewhat, by a new ruling issued by the Fourth District Court of Appeal. 

I initially learned that the obligation of the association to maintain and care for the property is completely independent of and not contingent upon the obligation on the part of the owners to pay assessments.  I also learned that, conversely, the obligation to pay assessments (pursuant to a properly levied budget or properly levied special assessment) was likewise independent of and not contingent upon claims that the Association failed to maintain the property or otherwise failed to meet expectations.

Associations have become embroiled in litigation over the past several years.  Many times the response to a foreclosure lawsuit comes in the form of an attack against the board. Nonpaying owners have tried to justify their actions due to claims of neglect of the property, inefficient management or wasteful spending.  In the past those claims were not considered a proper defense in the foreclosure case.  The owner may, in fact, have a viable claim against the association (however, in many cases there is a non-actionable difference of opinion) and those claims would need separate consideration by the Court, but those allegations would not serve as an excuse for non-payment.

Recently the appellate court overturned a summary judgment ruling in favor of an association.  The ruling in E. Qualcom Corp. v. Global Commerce Center Association, Inc. is not final yet.  If the ruling becomes final then associations may have to jump through another hoop and avoid another obstacle to collect delinquent assessments.

Qualcom owned a unit in a commercial condominium and stopped paying assessments.  One of its defenses to the association's foreclosure included a claim for set-off.  The owner alleged that the association's failure to fix the roof led to damages to its property and loss of revenue.  The owner claimed it should be entitled to a reduction (or set-off) in the amount owed based on its losses.  How many times have you heard something similar?

The appellate court found it was improper to grant a summary judgment for the association in light of these unrefuted allegations.  The court said the association should have been required to refute these allegations or to show that the defense was legally insufficient.  What is odd is that prior case law found those types of defenses (the lobby isn't clean, the pool is shut down, there is water leaking into my unit) legally insufficient.

I'm sure community leaders and managers would agree that associations already face too many obstacles.  Let's hope this case does not create an additional one.

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

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.
 

• Email This
• Print
• Comments (6)
• Trackbacks
• Share Link

The Cohn decision follows long-standing precedent in Florida regarding the applicability of statutory amendments to condominium or community association operations.  If the governing documents of the association contain "magic language"  incorporating statutes (in this case, the Condominium Act) as amended from time to time, statutory changes impact operations, rights and obligations of owners, the association governing the owners and, in some cases, third party vendors or service providers.  

With this recent ruling by the Florida Supreme Court you've probably heard statements similar to those below over the past month or so:

"Florida legislators cannot impair contract rights.  Since the declaration for my condominium doesn't limit co-owners from serving on the board together, my wife and I are entitled to both serve at the same time if we are elected." 

"Since the declaration for my condominium does not allow the board to suspend my use rights, I am entitled to use any part of the common areas.  It doesn't matter whether I pay assessments or not."

"The declaration doesn't include amendments to the law, therefore this board doesn't need to bother with the so called 'mandatory' arbitration process, we go straight to a lawsuit to address owner violations."

I've thus far refrained from providing an analysis of the case on this blog.  Since the ruling seems to have created somewhat of a panic among community leaders and managers, a discussion of the broader issue is appropriate.

Article I, Section 10, of the Florida Constitution prohibits the legislature from passing a law “impairing the obligation of contracts”. The U.S. Constitution does pretty much the same.  Declarations of community associations are considered, for most purposes, to be contract. So, the general rule is new laws cannot change the specific rights and obligations set forth in community association Declarations.  However, like all general rules in the law, there are exceptions.  The three major exceptions (that come into play most often with respect to community associations) are:

The "Magic Language" Exception:

This is basically an agreement to be bound by future changes to the law.  The Florida Supreme Court explained that both state and federal court cases in Florida have held that parties to a contract (declaration) voluntarily decide whether the details are protected or allow for future changes to the law.  By incorporating the law "as amended from time to time" in the governing documents, the parties (owners, the declarant, the association) agree that the declaration is subject to future changes in the law.

The Procedural/Remedial vs. Substantive Exception:

This provision in the constitution has been interpreted, by the courts, to only prohibit legislative changes to pre-existing “substantive” contract right. In very general terms, substantive laws address rights and obligations, while procedural laws describe the manner in which those rights and responsibilities are exercised (procedure) and enforced (remedy).   The analysis necessary to determine what is considered "substantive" and what is considered either "procedural" or "remedial" is often tricky.  Disagreements whether something is substantive or procedural/remedial often wind up in the courts (including the dispute in the Cohn case over allocation of voting rights).  This new case reminds us to conduct the analysis before automatically acting as if the new law controls, especially when the governing documents do not contain the "magic language" referenced above.

The Compelling Public Purpose Exception:

Just because a law impairs a substantive contract right doesn't mean it is always unconstitutional (either on a state or federal level).  If it can be shown the law is necessary or appropriate to achieve some compelling public purpose, it will trump pre-existing contracts.  Think about minimum wage or child labor laws.  Think about housing discrimination laws or life and safety regulations.  It was not unusual for early deed restrictions to prohibit people of color (not stated that way) from buying property or living in a community.  It was and still is not unusual for state and local governments to adopt new building codes for life and safety purposes that apply to existing buildings.

Now, think about the ruling from the other end of the spectrum.  If new laws didn't apply to existing communities (unless there was "magic language") many owners would not have the right:

• to attend or participate at board meetings
• to review financial records
• to display the U.S. flag
• to invite public officials or candidates to speak
• to prevent the board from materially altering or substantially changing condominium common elements
• to install hurricane shutters and much, much more

Consequently, there is no reason to be overly alarmed as a result of this Florida Supreme Court ruling.  Yes; you may want to discuss the pros and cons of adding language to the governing documents to incorporates future statutory changes with counsel.  Yes; you should consult with counsel before taking action solely in reliance on the language contained in new laws.   However, you should not automatically assume none of the laws apply to you (as owners, community leaders, managers, etc.) simply because you cannot find the "amended from time to time" language in the documents governing your community.

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

Indian River Commission Unanimously Rejects Application to Place a Construction Debris Processing Facility Nearby Residential Communities.

Keith M. Poliakoff

Although Wall-e was incredibly popular Pixar film, when a developer attempted to use the name for his concrete crushing, mulch, general construction, and demolition recycling plant (A-1 Walee), he received much more than a day at the movies.  Instead, the under–the-radar application was met head-on by more than 1,200 homeowners who had discovered only two weeks earlier, that a nine acre construction debris processing facility had been slated to be built less than a half mile from their homes, and get this, on land owned by the family of the Indian River County Tax Collector.

After the Planning and Zoning Board approved the item without any notice, the community leaders banned together, created their own website, and hired Becker & Poliakoff’s Government Law & Lobbying team to help them devise a strategy to oppose the item at the County Commission’s quasi-judicial hearing.

First, a new corporation, the South County Preservation Society, LLC, was created to allow all of the communities to be heard under one voice.  The presidents of all of the neighboring HOA’s became the new company’s board of directors.  Working with the Board, the Becker & Poliakoff team reviewed the application, the code, and hired the necessary experts to defeat the application.  

On March 22, 2011, more than four hundred residents wearing red t-shirts flooded the Commission chambers in opposition to the project.  The red shirted residents dominated the crowd.

The Applicant and County staff testified that this use was harmonious with its agricultural land use and zoning.  In essence, the Applicant argued, that because the concrete or wood to be processed at its factory could come from or could be used in agriculture, that it was an agricultural use.  

To bolster its proposition, the applicant presented some of the most interesting expert testimony we have ever heard.  They called up a property appraiser who testified that this use would not devalue the neighboring residential lots.  His evidence was not based on comparable values, but solely on “what he heard” at the Commission meeting.  The applicant also called up a geologist, who presented two kitchen glasses filled with concrete rock, which upon closer examination actually contained contaminants.  

After concluding a barrage of cross-examination questions to discredit the applicant’s witnesses,
the Becker & Poliakoff team, on behalf of the South County Preservation Society, presented unrefuted evidence that this use was incompatible with the surrounding area.  Expert after expert, including a civil engineer, environmental engineer, general contractor, medical doctor and even an organic farmer, presented hard evidence that this type of use would be incompatible and potentially dangerous to the surrounding community.   

After eight hours of testimony, it took the Commission less than 5 minutes to deliberate and to unanimously conclude that this use was not compatible with surrounding land uses, that it would create adverse impacts on public health, safety and general welfare, and that it would not promote orderly development.

The result is best expressed by a representative of the South County Preservation Society who wrote:

“Your firm has always been professional, efficient, and has done a great job whenever called upon by our board of directors (foreclosures, covenant/restriction enforcement, etc).

We had a major issue arise here in Indian River County 3-4 weeks ago. The Planning &Zoning Commission of Indian River County (IRC) had already passed and recommended to have a recycling/debris crushing facility be built in an agriculture/residential area where over 1,200 homes would be within .07 mile away from this "heavy industrial" type of facility (special exception).

Once … . I found out about their intention, we quickly gathered 13 HOA presidents from our area together to see if we could stop this project from being built so close to our homes.

On March 8th I contacted Keith Poliakoff of your Land Use and Zoning division and briefed him of our issue here in Vero Beach. Keith Poliakoff along with Marcie Nolan and Michelle Klymko from that day forward took on our challenge and in only 14 days put together an amazing "presentation" in court on March 22 that was so overwhelming to the five IRC commissioners that they voted 5-0 to not allow this A1 Walee Recycling Plant to be built.

Keith and Marcie's presentation … is "beyond words."  They made quite an impact on the commissioners and the over 400 homeowners (dressed in red) who were present in court that day.  Over 4,000 residents in this south county area of Vero Beach owe a great deal of gratitude to your attorneys who represented us. They preserved our property values from dropping, our quality of life, and let IRC staff realize that we would just not roll over and let this facility be built without a fight.

Below is the website that also has a lot of information that kept homeowners informed all along the way the last 3-4 weeks of our fight. There are also comments posted. http://saynowaytowalee.wordpress.com/”

Congratulations to the residents of South County, who united and made a difference.  If you are interested in watching any part of the hearing, go to http://www.ircgov.com/  and click on the March 22, 2011 meeting link.

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

Florida HOAs are in the national spotlight again.  This time the attention doesn't center around the housing market meltdown, the foreclosure crisis or budget shortfalls though. It concerns what commenters have called overzealous enforcement of use restrictions.  A community in Palm Beach County shut down a lemonade stand operated by neighborhood children.  Here is the video spot that aired on television:

Use restrictions are a very important part of community association living.  Many people choose to move into a particular community due to enforcement of use, maintenance and architectural restrictions.  It makes sense, residents may not want to look at basketball hoops, soccer goals and other play or sports structures when driving to and from work everyday.  They may not want to see 5 cars, campers and trailers parked in a driveway or on the front lawn.  Car repair, cooking in the front yard (BBQ) and yard sales are almost universally prohibited in community associations.  The same is true with respect to operation of unlicensed businesses, most business or commercial uses, signage (other than specific signs of certain shapes and sizes) and solicitation.

Is a lemonade stand or door-to-door Girl Scout cookie sales the evils sought to be avoided by these restrictions?  Probably not. 

Nonetheless, there are competing interests the board of directors must take into account.  If the board does nothing about a lemonade stand will it have a hard time stopping someone from selling other products from their home (whether visible to the public or not)?  If a child is permitted to go door-to-door selling cookies, can a resident real estate agent walk door to door soliciting listings?

This example shows that community leaders need to carefully tailor their own rules and regulations, as well as architectural restrictions, to meet the needs of the community. 

• Email This
• Print
• Comments (6)
• Trackbacks
• Share Link

Appellate Court Allows Homeowners to Build and Maintain Structure on Lot Despite Recorded Restrictions. 

We've discussed the Marketable Record Title Act (MRTA) on this site in the past in the post entitled:

HOA Leaders Need to Understand MRTA.  Please refer back to that post for background information concerning this important issue.

There are several appellate decisions involving MRTA issues, including at least two cases decided by the Florida Supreme Court.  Nonetheless, association practitioners continued to debate whether certain actions prevented MRTA from extinguishing restrictions and covenants found in a community declaration.  The Second District's recent decision in Matissek v. Waller addresses one of the debated issues.

Hidden Lakes Estates is a deed restricted community in Pasco County, Florida.  It was developed as an airpark community that would include its own airport and permit residents to build and maintain airplane hangars on their lots.  The declaration of restrictions specifically required homeowners to use "masonry or similar materials" in the construction of any buildings - including airplane hangars.  There were amendments to these restrictions recorded several years later, but none of the amendments changed the masonry building construction requirement.  In fact, the masonry construction requirement was re-stated in a recorded amendment.

Mr. and Mrs. Matissek bought some property in the community in 1995 and in 2007 started to build a steel framed airplane hangar with steel paneled walls.  One of the neighbors notified Mr. Matissek that the restrictions prohibited steel framing and required the use of masonry construction.  That didn't stop Mr. Matissek - he built his hangar they way he originally intended.

The neighbor, Mr. Waller, did not appreciate this violation of the deed restrictions, so he filed a lawsuit to enforce the masonry requirement.  His lawsuit contended the building was in violation and therefore must be removed.  Mr. Matissek responded by saying the restrictions could not be enforced against him due to MRTA.  The restrictions were originally recorded in 1971.  Mr. Matissek claimed that his property was not bound by those restrictions, since 30 years had come and gone long before construction began.

The trial court somewhat agreed with Mr. Matissek and somewhat agreed with Mr. Waller.   It said that the 1971 recorded restrictions were extinguished by MRTA, but since the masonry requirement was re-recorded in 1977 (in an amendment), the amendment was still enforceable.  The trial court ordered Mr. Matissek to remove the hangar based on the 1977 amendment, but he wasn't ready to give up just yet so he filed an appeal. 

The appellate court agreed with Mr. Matissek - it found that the 1977 amendments could not stand on their own - those amendments were revisions (or re-statements) of the 1971 document.  The amendments were not "muniments" of title.  These amendments did not change or modify the title to the property and were not considered a "vital link in the chain of title".  It didn't matter that the amendments were recorded within 30 year period.  The appellate court reversed the order requiring Mr. Matissek to remove the steel hangar and ruled that his property was free and clear from the Hidden Lakes Estates restrictions. 

Community leaders can prevent this type of situation from happening in their communities.  Florida law allows homeowners' associations to extend the restrictions if they haven't expired.  The law also allows homeowners' associations to breath new life into restrictions that have inadvertently expired.  Discuss these issues with your counsel before problems result.

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

We receive a number of reader inquiries on a weekly basis.  In most cases a response to the inquiry is included in the comment field itself, after the relevant blog post.  Here are a few of the inquiries received in the last week, with our responses:

QUESTION: How can I learn if my townhouse is FHA certified?

RESPONSE: Go to this website to look up your community: https://entp.hud.gov/idapp/html/condlook.cfm

QUESTION: Do Florida Statutes address a CPA audit report that is anything other than a unqualified report? For example: The Board of Directors declines to present a statement of cash flows and a qualified report is issued by the CPA.

RESPONSE: The association's members can vote to waive an audit for three (3) consecutive years and during that time merely produce a report of cash receipts and expenditures. The Association must engage an accountant to prepare an audit in the fourth year if the revenue exceeds $400,000.

QUESTION: We are an 11 unit condominium. Must we send a 60 day first notice of our Annual condominium meeting? Do current Florida condominium statutes and bylaws govern our procedures?

RESPONSE: Section 718.112(2)(d), Florida Statutes allows an association of 10 or fewer units to vote for different election and voting procedures. Generally statutes relating to remedies or procedure will override conflicting governing documents. Condominium elections must be held in compliance with the statutes and yes, the first notice must be furnished to the members at least sixty (60) days in advance.

QUESTION: We need the legal ability to remove a owner who fails to follow condo laws, rules and regulations - not abiding by the 55 and older rule - having a grandson live there. Any help would be greatly appreciated.

RESPONSE: If the community qualifies as Housing for Older Persons (HOPA), then the association can proceed by filing a lawsuit (if in the jurisdiction of the 4th DCA) or file a Petition for Arbitration with the Division of Florida Condominiums, Time Shares and Mobile Homes.
The governing documents must clearly define the occupancy restrictions. Our Firm has successfully handled several cases involving violations of age restrictions.

QUESTION: I am a property manager and hear of associations with rules and guidelines that are not equal. I have found a condo association that allows owners to have pet but renters can not. Can they do this? Would this fall under a discrimination to renters?

RESPONSE: An analysis must be done to determine whether rules and regulations are valid and enforceable in any particular case. I am aware of at least one arbitration decision that upheld a rule prohibiting tenants to bring pets on to the property.

Remember, the information on this site is general in nature and not intended as legal advice.  We try to point you in the right direction, but encourage you to discuss the specific facts and circumstances of issues impacting your association with counsel. 

• Email This
• Print
• Comments (19)
• Trackbacks
• Share Link

The Federal Housing Administration (FHA) implemented a new approval process for condominium projects and insurance requirements for mortgages on individual units in November, 2009.  FHA also announced certain exceptions to its standard criteria.  Please note the following:

The November 2009 guidelines temporarily increased the number of permitted FHA insured loans in a particular project from 30% to 50%.  100% of the loans can be FHA insured if the project meets all of the basic condominium standards and the additional items: 

• The project is 100 percent complete and construction has been completed for at least one year;
• 100 percent of the units have been sold and no entity owns more than 10 percent of the units in the project (for projects with fewer than 10 units, single entity may own no more than 1 unit);
• The budget includes a line item (10%) for funding replacement reserves for capital expenditures and deferred maintenance; 
• Home owners are in control of the Association; and
• At least 50 percent of the owners occupy the property.

Project Eligibility Requirements - The following requirements apply to all Condominium Project approvals:

Minimum number of units: Projects must consist of two or more units.
Insurance Coverage:  Adequate hazard and liability insurance and, when applicable, flood and fidelity insurance.
Right of First Refusal:  A right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act.
Commercial Space:  No more than 25 percent of the property’s total floor area in a project can be used for commercial purposes. The commercial portion of the project must be of a nature that is homogenizes with residential use.
Investor Ownership: No more than 10 percent of the units may be owned by one investor. For condominium projects with ten or fewer units, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100 percent complete.
Delinquent Home Owners Association (HOA) Dues: No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payments.
Owner-occupancy Ratios: At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units
FHA Concentration: From 30% to 50%, with exceptions available.
Budget Review:  This review must determine that the budget is adequate and:
• Includes allocations/line items to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project;
• Provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; and
• Provides adequate funding for insurance coverage and deductibles

In cases where the budget documents do not meet these standards, the mortgagee may request a reserve study to assess the financial stability of the project. The reserve study cannot be more than 12 months old. When reviewing the reserve study, consideration must be given to items that have been replaced after the time that the reserve study was completed. 

FHA approvals expire according to the schedule published in Expiration of FHA/Fannie Mae Approvals: Will Your Condominium Units Qualify for Mortgage Financing? 

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

Community Leaders Can Reduce Condo & HOA  Budgets by Taking Advantage of Rebate and Incentive Programs. 

We have included various money-saving tips for associations on this blog over the past two years.  The case studies show how some associations trimmed up to $100,000 annually as a result of changed practices - especially through use of Florida Friendly Landscaping and irrigation changes.  This month's Florida Community Association Journal contains several examples of money-saving initiatives on the part of community associations.   Madeira Beach Yacht Club saved close to $20,000 per year on waste removal as a result of its recycling program.  The La Playa Condominium on Longboat Key installed solar panels to heat the pool.  It will "make back" the initial cost of installation in the first two years.  The owners in the Tower Residences in Coconut Grove save approximately 18% per month on electric bills by replacing lighting.  All of these communities are saving money and yours can too if the Board takes the right steps.  Many utility companies offer evaluations, rebates and incentives.  Here are a few:

Florida Power and Light (FPL) offers the following opportunities:

•Free Business Energy Evaluations provide comprehensive analysis of facility energy use and recommendations for cost-effective energy efficiency improvements.

•Building Envelope rebates include window treatments ($0.50-$1.00 per sf), ceiling insulation ($0.10-$0.15 per sf) and reflective roof measures ($0.45 per sq. ft.). Projects must be approved in advance in order to qualify for incentives.

•FPL's Interior Building programs provide incentives for efficient lighting (e.g., rebates of 65 cents to $4 for each linear fluorescent lamp), a variety of HVAC and chiller equipment, thermal energy storage, refrigeration and water heating equipment. Installations must be approved in advance.

Progress Energy offers financial incentives and services for a wide variety of energy efficiency measures and equipment upgrades in existing buildings and new construction including HVAC, motors, lighting, cool roofs, green roofs, roof, thermal energy storage, and window films. The utility also provides cost-shared services for existing buildings including ceiling insulation upgrades, duct check and repair, rooftop air conditioner recommissioning and PTAC/PTHP coil steam-cleaning when walk-through audits suggest these measures.

Through its Energy for Life program, Florida Public Utilities offers free energy audits and project design assistance as well as financial incentives for indoor lighting efficiency retrofits ($100 per kW reduced).

Tampa Electric Company (TECO) offers financial incentives for a range of energy-efficient equipment from lighting and air conditioning (including chillers) to heat pump water heaters and motors, as well as for envelope improvements such as duct repair, insulation and window film. TECO also offers free basic energy audits and very low-cost comprehensive energy audits (for facilities of greater than 100,000 sf or with peak demand over 500 kW) to evaluate facility energy use and opportunities for energy efficiency improvements.

There are so many options for associations to trim expenses by reducing energy use and conserving water its impossible to list them all.  I encourage you to discuss your particular situation with counsel - you may be surprised by what you hear.

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

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.

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

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.

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

A Ruling in Favor of the Matanzas Shores Owners Association Will Help Your Community Push Mortgage Foreclosure Cases to Sale.  Do Not Allow the Lender to Stall the Sale in Order to Avoid Paying Assessments and Maintaining the Property.

LR5A-JV v. Little House LLC, Fifth District Court of Appeal, Case No. 5D09-3857

The lender named Matanzas Shores as a defendant in order to foreclose the Association's liens.  The Association's lien is subordinate to a first mortgage - with the exception of the 'safe harbor' payments required by the Condominium and Homeowners' Associations Acts (which is also referred to a the 'super-lien' provision).  The Court entered Final Judgment of foreclosure against the property in 2008. 

The Association didn't want to wait around for lender to act - so its counsel filed a Motion to Schedule the Sale.  The lender objected - claiming it was entitled to set the sale and if it wanted to wait that was its choice.  This is the issue that went up on appeal. 

The Association argued:

1. The Court has the authority to schedule the sale pursuant to §45.031, Florida Statutes;
2. Since foreclosure cases involve the equity jurisdiction of the Court, the Court should consider the interests of all of the parties to the case when setting the sale date; and
3. Since the Supreme Court's Task Force on Residential Foreclosures recognized that Associations suffer when foreclosures take longer than they should, the Court can and should facilitate prompt resolution of these cases when possible.

The Lender objected - still claiming it, as the plaintiff in the case, had control over the process.  The Lender also argued that even if the Court did have authority to schedule the sale, doing so at the Association's request was an abuse of discretion.  The Appellate Court completely rejected the lender's arguments.

The Task Force report prompted the Supreme Court of Florida to Issue New Foreclosure Rules.  One of those rules created a new procedure and form for use to change the sale date initially set by the clerk.  This new form is called the Motion to Cancel and Reschedule Foreclosure Sale.   Associations need the property to be sold to start collecting assessments from the new owner going forward.  This new form requires the lender to explain why it wants to cancel the sale.  It also directs the Court to set a new sale date, rather than keeping properties in an "extended limbo between final judgment and sale". [Quote from Task Force]

What Will the Lender Pay?

Counsel for the Association fears that the dispute between the lender and the Association is far from over.  The statutes require the lender to pay assessments upon acquisition of title.  Well, here the Court said that the sale should have taken place in 2008.  Should the Association be penalized for the gap between the initial sale date and the date the sale actually occurs?  Should the lender pay assessments for the two plus years it took to appeal?  We may hear more about this case in the future.

This ruling brings welcome relief to many Associations throughout the state.  If your community is waiting for the Court to re-schedule a sale or waiting for a lender to ask the Court to schedule a sale, wait no longer.  Speak to your counsel about filing a Motion to Set the Sale.  Along those lines, if your community is waiting for a lender to set its summary judgment hearing or re-schedule its summary judgment hearing - speak to counsel.  You have options to push these cases to conclusion - take advantage of them!

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

The Community Association Leadership Lobby (CALL) Announced Last Week it is Working on a 'Glich' Bill to Clarify Several Community Association Rights and Remedies.

The purpose of the CALL bill is to make proposed changes to Chapters 718, 719 and 720, Florida Statutes to address certain “glitches” resulting from SB 1196.  Co-Executive Directors Yeline Goin and David Muller explained that any large piece of legislation is likely to have unintended consequences and need further clarification.
 

So far, the CALL bill proposes many important legislative items, such as:

• Allowing condo boards to meet in private to discuss personnel matters just like HOA boards;
• Allowing condos and HOAs to collect management company collection charges from delinquent owners and clarify the parameters of action on the part of management;
• Ensuring that rent collected from a tenant is applied to the oldest balance on the unit owner's account; and
• Ending any argument that cable or television programming is a “utility service” - authorizing immediate suspension when a unit owner is more than 90 days delinquent. 

The CALL team always entertains comment from its members.  If you are a member or would like more information, please visit www.callbp.com or email call@becker-poliakoff.com.
 

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

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.

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

As a result of SB 1196, the law now prohibits HOA directors, officers, or committee members from receiving any salary or compensation from the association for the performance of his or her duties as a director, officer, or committee member.   This is basically the same rule that applies to condominium association directors.

However, Section 720.303(12), Florida Statutes significantly expands the restrictions upon HOA directors, officers and committee members.  In addition to the above, the law also says that a director, officer, or committee member “may not in any other way benefit financially from service to the association.”  The reference to "service to the association" in this second part of the sentence is not limited to those services performed in connection with the duties of the director, officer or committee member.  That is a substantial change in the law.  Read strictly, this means that HOA directors, officers, or committee members:

• cannot work as association employees;
• cannot serve as a paid manager; and
• cannot provide services through firms or business entities in which such persons hold a financial interest.

The previous law allowed the association to enter into contracts with companies involving 'interested directors',  if the director disclosed his or her financial interest, if the contract was fair and reasonable, and if the interested director refrained from voting.

There are exceptions.  If your community has and still employs or contracts with companies in which a director has a financial interest (stands to gain from the contract), there are two options laid out in the statute.  Compensation is permitted if it is authorized by the governing documents or if the members vote to authorize compensation.  The vote should take place in advance of hiring or contracting with an 'interested director'.

Reimbursement for out-of-pocket expenses is specifically allowed.  If your community has not developed a procedure for application and payment for out-of-pocket expenses, now is a good time to create your procedures and formally adopt them at a meeting.  Most governing documents authorize the board to reimburse directors (and others) for expenses, but do not specifically outline what types of expenses may be incurred, whether certain types of expenses require advance approval, what documentation must be submitted or who approves the reimbursement, etc.

There are other exceptions for directors appointed by the developer, for recovery of insurance proceeds and if all members benefit financially from some action taken by the association.

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

Squatters Occupying Abandoned Homes May Have Claim Against Owners While Authorities Charge Adverse Possession Filers With Fraud.

A company called Helping Hands Properties, Inc. claimed 48 properties in Broward, including a $1 million house in Coral Springs.   Another, Saving Florida Homes, Inc. filed notice in official county records that it was taking possession of 100 homes in Broward and three in Palm Beach County - up to 10 properties were claimed in just one day.   The company owners say that taking possession of dilapidated properties improve the neighborhood.  Authorities say they are just trespassing and stealing.  Are these companies just manipulating the system for their own benefit or are they performing a public service?  What can you do if this happens in your neighborhood?

Adverse Possession - What is it?

Florida statutes address adverse possession - a process to obtain title without buying a property.  To acquire title by adverse possession, such possession must be adverse, hostile, open or notorious, exclusive and uninterrupted, for seven years.

There are two types of adverse possession. Adverse possession under "color of law" (§95.16, Florida Statutes) means the possessor’s ownership claim is based upon a written document in the county public records. Adverse possession without "color of law"(§95.18, Florida Statutes) means there is no recorded document purportedly creating ownership.

To claim adverse possession under color of law, the document (deed, etc.) does not have to be valid. However, the possessor must have accepted the instrument in the honest belief that it conveyed ownership. Possession means that the property has actually been used or enclosed. 

Adverse possession without color of law is not based on any recorded document, but mere use of the property is not enough to claim ownership or entitlement. The possessor must pay the property taxes and installments of all special improvement liens levied against the property by the state, county and city. The additional requirement of tax payments not only evidences the possessor claims ownership, but places the record owner on notice that property taxes are being paid by someone else. That gives the record owner an opportunity to investigate and take action.

Remember - possession must be open, notorious and hostile to claim adverse possession. Permissive use, like when you allow kids to play soccer, use motorbikes or camp on the property, means the possession is not adverse.  

In a New York Times article, one of the company owners explained he allowed tenants to fix up the property instead of paying rent.  Strategic defaults create plenty of opportunities to seize abandoned homes.  Letters sent to property owners and banks notifying them of the plan to take over the home were reportedly ignored.  He now faces up to 15 years in prison.

This tactic can pose problems for community associations.  More and more community associations have acquired title to homes as a result of foreclosures.  Those associations must monitor the use of the property and file eviction actions to remove unauthorized occupants to avoid claims of adverse possession.  The same is true for bank-owned properties.  A lender may not be aware of the actual use or condition of the home, especially if its not actively marketed for sale.  The association needs to remain cognizant of the actual use and take action to verify whether that use complies with the governing documents.  Ignoring use violations creates even further problems, especially when the association tries to take action much, much later.

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

Court Holds that Homeowners' Associations Can Recover Damages for Breach of Common Law Implied Warranties from the Builder or Developer.

Florida's Fifth District Court of Appeal recently issued a significant ruling finding home buyers and homeowners' associations are entitled to a common law implied warranty of fitness and merchantability with respect to the roadways, drainage systems, retention ponds and underground pipes in a residential subdivision. The Court considered the marketing materials indicating that homes were available for immediate occupancy, essentially "move-in" condition.

The decision, Lakeview Reserve Homeowners v. Marondo Homes, Inc., No. 5D09-1146 (Fla. 5th DCA), was filed on October 29, 2010.  Since it conflicts with case law from another Florida district, the question whether to extend the home buyer's warranty to improvements that are necessary to live in the home, even if those improvements do not physically support the structure of the home itself, was certified for consideration by the Supreme Court of Florida.  

There is a tremendous amount of work that takes place in a subdivision before construction of the homes or recreational facilities and placement of landscaping.  The infrastructure in large communities can cost millions of dollars.  The Developer usually funds that work*, hoping for an even big return by selling the individual houses.  

Correcting defects in the infrastructure can likewise cost millions of dollars.  How many of us are familiar with portions of neighborhoods that flood every time it rains?  How many people that you know had sewage back up into their homes repeatedly, only to discover later that the underground drainage pipe wasn't connected properly?  If the municipality owns and services the underground infrastructure, it will correct problems, but that is not the case for many homeowners' associations. 

The Court found that certain types of improvements were necessary to live in a home - drainage systems, underground pipes, etc.  It further said since a home buyer:

• cannot really inspect this portion of the property before purchase,
• does not have the ability to correct the work during the construction phase, and
• would not typically recognize problems with these portions of the property even if they were allowed on to the site during this early construction phase

they "must rely on the expertise of the builder/developer for proper construction of these complex structures".   Consequently, according to this case, If the builder/developer represents that everything is ready for immediate occupancy, it must warrant that the improvements necessary for occupancy are fit for their particular purpose.  Clearly a significant ruling.

The Court declined to extend this notion of implied warranty to subdivision features it did not consider essential, such as a clubhouse or recreational facilities.  That doesn't mean, however, that homeowners' associations cannot seek to recover damages from builders or developers for defects in these areas.   Defect litigation and alternative dispute resolution pursuant to Chapter 558 (the Construction Defects statute) are viable courses of action to resolve complaints about the inadequacy of construction, violation of building codes and the like.  For more information about construction defects generally, please visit our companion blog, Florida Construction Law Authority.

* I say 'usually' because there are various different methods of financing infrastructure.  If your community is located within a Community Development District (CDD) or Special Taxing District (STD), these costs may be passed on to the home owners.   

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

Is your Association Leaving Money on the Table?

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

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

Strategic Defaults - According to Wikipedia:

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

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

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

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

Asset Searches Can Be Helpful in the Decision Making Process

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

• Email This
• Print
• Comments (15)
• Trackbacks
• Share Link

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

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

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

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

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

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

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

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

HOA Complaints:  Turn Owners' Frowns Upside Down

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments (6)
• Trackbacks
• Share Link

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments (26)
• Trackbacks
• Share Link

SB 1196 contains significant changes for community associations.  

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

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

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

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

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

• Email This
• Print
• Comments (52)
• Trackbacks
• Share Link

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

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

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

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

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

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

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

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

"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.

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

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

Records Access:   §720.303(5)

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

Budgets & Reserves:  §720.303(6)

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

Director Compensation:  §720.303(12)

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

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

Fines/Suspensions of Use Rights:  §720.305

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

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

Adopts 'condo-like' double envelope procedure.

Collecting Rent from Tenants:  §720.3085(8)

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

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

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

Special Assessments by Developer (before turnover):  §720.315

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

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

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

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.

• Email This
• Print
• Comments (8)
• Trackbacks
• Share Link

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.

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

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

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

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

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

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

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

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