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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. ...

 

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CALL recently notified its members of changes to HB 319 which is the community association bill filed by Rep. Moraitis.  The changes were considered and approved by the House Civil Justice Subcommittee on December 7th.  The five (5) amendments:

1. Clarify that condo election procedures do not apply to timeshare condominium associations.
2. Clarify that mortgagees only have to pay 12 months of base assessments that accrued prior to acquisition of title (or 1% of the original mortgagee, whichever is less), but also clarify that other purchasers bear responsibility for all debts owed by the prior owner including collection costs and attorney's fees;  
3. Require a majority of condominium unit owners to approve creating a "condo within a condo", giving those owners a voice in determining the future of their community;
4. Conform the laws governing cooperative associations to be more consistent with condo laws.  This portion of the bill would allow co-ops to hold closed board meetings to discuss personnel matters; impose a deadline for challenging elections; require board member education or self-certification and otherwise mirror portions of the condo laws; 
5. Clarify mortgagee financial obligations in homeowners’ associations.

Future amendments to the bill will hopefully speed-up foreclosures and give judge’s more power to impose sanctions for delays.  There are efforts to relieve associations from liability for payment of past due amounts when title to property is acquired as a result of lien foreclosure.  

Look for more legislative updates directly from Tallahassee as this is just one of the bills being tracked by CALL.
 

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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.

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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.

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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.

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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. 

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

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

Answer: There are entire treatises devoted to this subject.

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

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

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

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

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

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

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Does your community association enforce all pet restrictions uniformly and consistently?  It’s typical, expected, and almost commonplace when community association boards of directors, managers, maintenance staff or residents “ignore” what is seen as harmless violations of the recorded restrictions or rules and regulations with regard to pets, only to be outraged later when someone sneaks in a 60 lb. pit bull or a 4 foot snake. Sometimes the board’s lack of action stems from its reluctance to spend money to enforce the pet restriction and/or sympathy for the long-term resident and his or her “cute little kitty” or “very quiet bird.”

However, that "niceness"  is likely to work against the board in the end.  A board of directors in Palm Harbor has reportedly reconsidered enforcement action against a homeowner with a dog weighing more than 35lbs.   ABC Action news reported:

Pursuant to Florida case law, the defense of selective enforcement may be established by demonstrating that an association failed to enforce the restrictions in its governing documents against comparable violations. In Killearn Acres Homeowners Assoc., Inc. v. Keever, the board of directors prevailed in a case seeking a homeowner to remove a satellite dish on the side yard since the unit owner could show no other instances of dishes being permitted on a side yard. In another case the court rejected a home owner's attempt to establish selective enforcement by showing the board ignored home businesses, fences, decorative items and solar panels. In, McMillan v. Oaks of Spring Hill Homeowner’s Assoc., Inc., the association was able to obtain a court order requiring the owner to remove a shed that had been installed in their yard.  On the other hand, in Prisco v. Forest Villas Condominium Apartments, Inc. the board lost the enforcement case against a dog owner where the owner proved the board did not require owners to remove cats from the property.

In this Palm Harbor matter, the board reportedly decided to reconsider taking enforcement action since the owner acquired the dog after her brother's tragic death.  Its difficult to know whether the board's reconsideration stems from the circumstances or from the selective enforcement claim. 

The 'take-away' for community leaders and managers:  Do your homework.  Summer is typically slower than other parts of the year - so conduct a survey of the residents and determine who owns pets and what pets are on the property.  Review your parking restrictions and vehicle registrations.  Conduct inspections to determine whether there are any non-conforming uses.  If the rules are important to the community, take them seriously, as a few 'slips through the cracks' can be fatal to an enforcement action.

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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.

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Answer: They all impact communities and community association operations!

Yesterday I attended the CAI Annual National Conference & Exposition being held at the Boca Raton Resort, where industry leaders from around the world shared innovative and emerging issues impacting community associations, community association leadership, management and operations.   Becker & Poliakoff lead several presentations including:

The Impact of the Fair Housing Act on Deed Restrictions, Rules and Regulations.

The session addressed legal obligations on the part of community associations, such as the duty to make reasonable accommodations in policies and allow modifications to the physical premises for disabled persons (or persons associated with disabled persons).  It also included the various types of accommodations, describing the trials and tribulations arising from the presence of miniature horses, parrots and other types of emotional support animals in a community association setting.

 Aging Owners: New Challenges for Associations.

How many of you face different challenges every day as a result of aging or infirm residents?  This session gave community leaders tips and practical advice how to balance the rights and needs of owners suffering from dementia, physical incapacitation and alienation by relatives, while preserving the rights and protecting the safety of neighbors.

Another presenter offered a fascinating program on the effective use of media for crisis management, damage control and to tout community accomplishments.  I found the discussion on new technology quite interesting as well.  Did you know that with relatively low cost you can offer your residents more security, improved energy efficiency, remote control of household lighting, appliances, air conditioning and more all from their computers, smart phones or televisions?  Wouldn't it be great to be able to have valet bring around your car, unlock the door for the pest control service (and watch them perform the service) and then re-lock the door, authorize package delivery, turn on or off the lights, pre-heat the oven and a whole host of other things from your office or on the way home?  More importantly, new technology for monitoring and preserving the health and safety of the residents is available.  For communities with aging residents, wouldn't it be great to have notice a resident hasn't risen from bed, left the home or suffered a fall immediately, rather than being surprised when an ambulance arrived or, even worse, when a neighbor demands you break down the door due to an offensive odor?

More programs will take place today and tomorrow.  Mr. Poliakoff will also be available to sign his book "New Neighborhoods" in the bookstore from noon to 3:00 pm.

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I promised an update on the Master Association Blocks Owners from Pool and Recreational Facilities post when a result became known.   A Palm Beach County Circuit Court Judge ruled yesterday that the Master Association governing the Quail Run community was not entitled to suspend use of the recreational facilities by all of the owners in one of the condominiums within the community.  The Court found that Section 718.303, Florida Statutes did not allow the Master Association to suspend the use rights of the compliant, paying owners, due to delinquencies on the part of a few.  Part of the Order says:

"The statute requires that each delinquent member be treated singularly as the Court finds that the statute does not provide that a member who is current in his or her obligations be penalized for payment failure of another member who is delinquent."

Since this is an interim Order in a Circuit Court case, it does not have precedential value, meaning it does not rule over other cases.  However, the ruling reflects one Judge's interpretation of the law.  Thus, community leaders are encouraged to discuss the authority to suspend use rights for an entire subdivision as well as the possible consequences of that action with counsel.

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Over 40% of the Home Loans Issued in Two Major Florida Cities in February are Government-Insured FHA Loans. 

The marketability of the homes in your community is highly dependent upon the availability of mortgage financing.  We've included several posts on this site regarding purchase money financing issues over the past 2 years, including reporting on the changes to federal underwriting guidelines. Since mortgage financing (or lack thereof) severely impacts community association operations, Community Associations Institute (CAI) announced it is "stepping up its Congressional and federal regulatory advocacy on behalf of American homeowners, home buyers and common-interest communities."   CAI issued a statement on behalf of its 30,000 members that included the following quote:

"The stakes for homeowners, home buyers and communities are enormous,” says CAI Chief Executive Officer Thomas M. Skiba, CAE. “Rules being developed today may likely govern mortgages for the next several decades. If you live in an association or work in the community association industry, you need to understand the magnitude of these issues, keep abreast of the latest developments and weigh in when such opportunities are available.”  

You can learn more about CAI's new initiative at Mortgage Matters.

The mortgage crisis is also evident by comparing the percentages of FHA backed home loans.  FHA project approval has proven to be a significant factor in home sales. DataQuick Information Systems reports the following increases in Florida:

The future of GSE (Government Sponsored Enterprise) financing is also up-in-the air.  However, Fannie Mae announced an incentive program it says will help stabilize communities.  Purchasers of Fannie-Mae owned HomePath properties are eligible for financial assistance to help pay up to 3.5% of the closing costs.  Fannie Mae-owned HomePath properties are listed on HomePath.com and most listings include detailed property descriptions, photographs, information about local schools and more.

Proactive community leaders have taken steps to ensure their communities are approved for favorable purchase financing.  You may want to discuss project approval or certification with your community association attorney.

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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.

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 Many of you are anxiously awaiting for the 2011 Florida Communities of Excellence Awards presentation.  Here is a video featuring 2010 finalists so you can see a sampling of some of the fabulous initiatives by community associations.

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I frequently post comments received by readers along with responses on this site.  Today I received valuable information from a reader that I want to share with you as a separate posting:

I agree with Lisa that this is a large issue facing associations. We are overwhelmed with the Social Media revolution. As I have said in a number of posts in many blogs, this is a "blessing and a curse" for associations. As one of the largest writers of community association directors and officers liability nationwide, including the wonderful state of Florida which is probably warmer than our 11 degrees here in Cleveland today, the social media revolution is high on our radar. Since this is a new phenomena, the waters are still not tested. I am quite supportive of association websites and social media for associations and their authorized board members to disseminate information, but beyond that, social media is a trap for the unwary for most associations. We defend associations whether the allegations are frivolous, false or fraudulent. Accordingly, whether allegations by association members are true or not, there are huge concerns about "defamation", "invasion of privacy" and "harassment" that come to mind. Before an association sponsors or engages in social media, especially open forums, I recommend you set up an appointment with Lisa or your own association counsel and be educated on the potential  issues. You should also keep in mind that many association D&O policies expressly exclude claims for "defamation", "invasion of privacy", "discrimination" and "emotional distress" claims arising from these types of claims. Remember, we live in a great country that allows people to sue one another whether they have a legitimate claim or not.

Joel Meskin, Esq., CIRMS

The CIRMS designation is awarded by CAI to persons that demonstrate a high level of competency within the risk management profession.

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

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

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

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

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

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

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

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

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

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Most community association leaders are familiar with the fact that they have to hold off on collection activities (such as sending further demand letters, filing a lien or prosecuting the association's foreclosure case) when an owner files for bankruptcy protection. 

One important protection offered by the bankruptcy law gives the debtor "time to catch his/her breath" by stopping any and all actions by creditors against that debtor.  This "time out" is known as the automatic stay.  Creditors (whether secured or unsecured) cannot initiate or continue any actions designed to collect the debt included in the bankruptcy petition.  The creditor cannot begin or continue action with respect to:

1. lawsuits,
2. efforts to gain control of the debtor's property, 
3. perfecting or enforcing a lien, or
4. efforts to set-off the debt.

2010 changes to the condominium and homeowners' association acts gave boards of directors additional enforcement tools, including the right to suspend use of recreational facilities when the owner's debt is more than ninety (90) days past due.  The association can suspend use rights by corporate action in compliance with the procedures set forth in the applicable statute,  without filing any pleading or lawsuit in court, filing a petition for arbitration with the state or filing a Claim of Lien securing debt. 

So, the question becomes: can the association suspend use rights if the owner filed bankruptcy?  At least one bankruptcy Court said "no". 

An association in Miami suspended an owner's internet service and deactivated the key fob (or other entry device) for recreational amenities at the condominium pursuant to Section 718.303, Florida Statutes.  The owner immediately filed an Emergency Motion for Contempt in the bankruptcy court, claiming this action violated the automatic stay.  The Court agreed.  It held that suspension of privileges to use common areas was "in effect an act of coercion to compel the debtors to pay the past due association assessments".  The Court ordered the association to reinstate all privileges forthwith.

Associations need to consult with counsel to protect their rights as creditors in bankruptcy cases.  The association can participate in the bankruptcy proceeding to ensure the amounts claimed are correct and in some cases ask the court for permission to proceed with collection activities, especially if the debtor does not reside in the property. 

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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.

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Is Your Community Excellent?  

Are you proud of the special programs and services that make your community stand out from the crowd?   Then submit a nomination for an award in one or more of the ten categories judged in this year's program.  The Florida Communities of Excellence Awards honor and document the admirable achievements of condominium and homeowners associations throughout the state.
 

A distinguished panel of independent experts with backgrounds in community management, consulting, public safety, public policy, education, journalism, energy & water conservation and environmental advocacy, will evaluate entries in these categories:

1. Best Web Site and Internet Communications (Presented by Comcast) 
2. Trendsetter Awards (Presented by Associa) 
3. Safety & Security Initiatives 
4. Disaster Preparedness Initiatives 
5. Civic Volunteerism and Advocacy 
6. Family Friendly Programs & Initiatives 
7. Financial Innovation (Presented by The Continental Group) 
8. Florida-Friendly Landscaping™ 
9. Energy & Water Conservation (Non-landscaping) 
10. Sustainable Practices (Non-landscaping)

Judges include representatives from the University of Florida and the University of Florida's Extension Service, the Florida Fire Chiefs Association,  the Sun-Sentinel, Nova Southeastern University and AARP, among others.  Learn more about the Judges HERE.

There's not much time left - nominations must be submitted no later than January 15, 2011.  Click HERE for the nomination form. 

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

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

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

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

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

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

Why Is This Rule Necessary?

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

What Action Is Required?

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

What Businesses or Organizations Must Comply?

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

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

What about Condos or HOAs?

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

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

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

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

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Flood Insurance is required to secure financing, from a federally regulated or federally insured lender, to buy, build, or improve structures in Special Flood Hazard Areas (SFHA's).

• If your property is higher than the Base Flood Elevation, then you may request a Letter of Map Amendment (LOMA) or a Letter of Map Revision (LOM-R) by submitting an elevation certificate to FEMA. If the re-designation is granted, your lender may choose not to require Flood Insurance.
• If you were required to get insurance by a lender and then your property is re-designated by FEMA, you may request a refund of the premium paid for flood insurance coverage.  Conversely, flood insurance may be required if your property is reclassified as a SFHA.
• Regardless of map changes, lenders do not have to waive flood insurance requirements and may decide that flood insurance coverage is still required as a condition of the mortgage or other financing.

Community associations throughout the State have been approached by companies that study the topography and/or other features of their development in order to prepare data for use by the Federal Emergency Management Agency (FEMA) to determine whether the community's flood hazard assessment is correct. As a direct result of these efforts, several communities have been reclassified from Special Flood Hazard Areas (SFHA) into areas of "moderate" or "minimal" flood risk. Some Boards engaged these services with the goal of eliminating the cost of flood insurance from the association's annual budget.

CBS4 (Miami) recently ran a story about the FEMA mapping system. It found that the National Flood Insurance Program became $18.7 billion dollars in debt after hurricanes Katrina, Rita and Wilma.  The television report indicated that FEMA executives intend to pay off some of this debt by changing flood maps and increasing the number of properties that require insurance.  Miami-Dade maps were just released and revised Broward maps are due out next year.

Community association boards should discuss these requirements, and their options, with both counsel and insurance advisers.  According to statistics published by FEMA, up to 25% of flood losses happen outside of special flood zones.  Dropping master coverage may impact individual owners if their lenders require coverage. In the long run it may, in fact, cost each owner more without the master policy.

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

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

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

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

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

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

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

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

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

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

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

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Has Your Cable Provider Offered to Pay a Lump-Sum Fee for Exclusive Marketing or Access Rights? 

Many of my clients have been approached by cable operators with a request for an access agreement or marketing agreement.  Many times these are exclusive agreements, although in my recent experience the provider has limited the exclusivity portions to on-site marketing to residents.  Many times these agreements contain references to voice, video and data services or simply broadband services, without a specific explanation of what those services entail.  Clients are thrilled with the up front lump-sum payment.  

Other types of service providers are also offering community associations, especially large community associations, lump-sum "loyalty" payments in connection with a renewal or extension of the contract.

Those payments can mean tens of thousands of dollars added to the association's coffer to pay past-due bills, maintenance projects and other community expenditures.  Wow - doesn't that sound wonderful?  Who wouldn't want to take advantage of these opportunities?  Money, when you were going to renew a contract anyway?  Money, just for allowing a company to access your community or to hand out flyers every now and then? 

We can thank Milton Friedman for reminding us "there is no such thing as a free lunch".   The money isn't free - there are corresponding obligations of the association in these agreements which, if violated or not performed, subject the association to liability for damages.

Here are just a sampling of the issues to consider:

1. Term/Length of Agreement:  Will this technology change?  Will your community be stuck with a provider for what seems like forever when dozens of new companies have entered the market and those have better services for better prices?   
2. Easement vs. License:  An easement is generally a non-revocable interest in land - it is a valuable property right.  A license, on the other hand, is revocable and allows use without conveyance of property rights.  Does your community have the authority to grant an easement?  Over what property exactly?
3. Exclusivity:  The association is prohibited by law from entering into certain kinds of exclusive contracts.
4. Marketing Rights:  What exactly does the Association have to do to comply?  Does it have to distribute flyers door-to-door by hand?  Who's going to do that?  Do you have to allow the company to go door-to-door?  What about your non-solicitation rules?  What about your security?  
5. Prohibit Unauthorized Use:  Most of the bulk-contracts contain a provision requiring the association to prohibit unauthorized use of the service.  Let's take cable for example - is the association going to inspect each unit or home and turn on every t.v. to determine whether the resident has access to channels outside his/her subscription agreement?  Is the association even permitted to undertake this action?

These and other factors must be taken into consideration before entering into any agreement.  If your community is approached with this offer, please consult your attorney.

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A housing conference is taking place today in Washington, D.C., where industry leaders and government officials are discussing the future (if any) of Fannie Mae, Freddie Mac and other Government Sponsored Enterprises (GSE) that offer mortgages.

These entities (Fannie, Freddie, etc.) are backed by the U.S. government.  Government backing lowers lending costs which translates to lower mortgage rates for consumers.  In theory, lowering mortgage rates and providing consumers with more access to capital encourages home ownership, increases home values and supports thousands of industries with hundreds of thousands of employees.  Both Fannie and Freddie have been in conservatorship since 2008 and supporting cash-flow needs with a credit line from the U.S. government.    Now the government (and many industry experts) wants the private sector to play more of a part in home financing.

What does this mean for community associations?  It could mean several things: 

• It could mean that future home purchasers will have to fund a larger down payment.  If home or unit owners have more at stake in the property they will be more likely to take care of the property and less likely to default. 
• It could mean that the historically low mortgage rates will go up - making homes or condominium units less affordable.  Higher interest rates may prolong sales of abandoned properties. 
• It may mean that Fannie, Freddie and other GSEs will be required to dispose of properties acquired as a result of failed mortgages even at a loss - resulting in better bargains.  

Fannie Mae recently auctioned close to 100 South Florida properties.  Those properties were only offered to owner-occupants (individuals and families who plan to live in the homes), not investors, in an effort to stabilize neighborhoods severely impacted by foreclosures.

There are some obvious benefits to GSE financing and some obvious detriments.  One benefit is flexibility - government backing allows Fannie Mae to offer hardship relief to home/unit owners.  For example, Fannie has the ability to offer loan forbearance to mortgagors plagued with chinese drywall.   Skipping six (6) months of principal payments may be all that is needed for homeowners to catch up with other financial obligations (such as community assessments).

Community association leaders and members can take strategic actions to stabilize their own communities.  Community associations have the power to regulate use and occupancy of the properties, the level of maintenance and care required, and can even establish guidelines regarding the financial responsibilities of new members.  With a little planning, advice of counsel and other professionals and effort by board members, committee members and other volunteers - you can make your community better positioned in the future.

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The Federal Fair Housing Act  (FHA) prohibits discrimination in any activities relating to the sale or rental of a dwelling because of race, color, religion, sex, handicap, familial status or national origin. The term "familial status" is defined as one or more individuals (who have not yet attained the age of 18 years) being domiciled with a parent or guardian or a designee of such parent. State statutes (Chapter 760, Florida Statutes) and local ordinances also regulate housing discrimination in regards to age, marital status, political affiliation, sexual orientation and other classifications.  Adding "familial status" to the list of protected classifications made former "adults only" communities either apply for an exemption or change their practices.

The most common exemption is known as the Housing for Older Persons Act (HOPA) exception that applies to communities operating as “55 or over” housing. To qualify for this exemption, the following criteria must be met:

• At least 80% of the occupied units must be occupied by at least one resident over the age of 55;
• The community must publish and adhere to policies and procedures demonstrating an intent by the housing provider (the Association) to provide housing for persons 55 years of age or older.
• The community must engage in adequate age verification procedures and routinely determine the occupancy of each unit to update the community census; and - here in Florida
• The community needs to register with the Florida Commission on Human Relations and keep that registration current.

If the community does not qualify for the Housing for Older Persons exemption, it must allow families with children.  It doesn't matter if there are no other children.  It doesn't matter if the community doesn't have facilities for children or a place for them to play.  A community in Orange City, Florida recently agreed to pay $415,000 in monetary damages and civil penalties after the court found that the defendants violated the FHA by engaging in a pattern or practice of discrimination against families with children.  The Department of Justice prosecuted the lawsuit against the housing provider.

The Fair Housing Center of the Greater Palm Beaches recently filed suit against a condominium association in Boca Raton, Florida for familial status discrimination.  The association first rejected a sale to a man with three children and later refused to approve a tenancy where two children were expected to live in the unit.  Both governmental agencies and private fair housing advocacy groups use "testers" in support of discrimination claims.

If you're not sure your community is in compliance with the requirements of the Housing for Older Persons Act, please consult with legal counsel.

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

HOA Complaints:  Turn Owners' Frowns Upside Down

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Has your carrier been 'red-flagged'?  The Florida Association of Insurance Agents and other industry professionals warned the legislature about carrier financial instability, underwriting losses and reductions in surplus funds.  Sarasota's Herald-Tribune reports that "Weak Insurers put Floridians at Risk" and notes that carriers in Florida are highly more leveraged than in other states.

The Herald-Tribune's investigation found:

• One third of homeowners rely on private insurance carriers that exhibit at least one sign of financial risk;
   
• More than 100,000 homeowners rely on companies that can barely pay claims for fires, let alone hurricanes or other casualties; and
   
• Almost one-third of the private carriers have decreased cash set aside for claims.

A presentation by Insurance Commissioner Kevin McCarty stated:

• A license to operate as an insurer should never be confused as a complete guarantee if financial health and profitability.  These are private companies and sometimes economic conditions can create financial distress to one degree or another.

• Solvency regulation is designed to reduce financial risks for the policyholder by proactive early detection of potential insurer distresses; and

• Current market conditions have impacted insurers to varying degrees and will likely continue.

Herald-Tribune identifies six (6) carriers with red flags:  Homewise Preferred; Magnolia Insurance; Northern Capital Insurance; People's Trust; Sunshine State; and Southern Oak Insurance.  Coral Insurance and American Keystone insurance failed last year and Magnolia is reportedly under state supervision, but has not been liquidated.

Citizens' Insurance Corp., has become the primary insurer.  However there is an understanding in the industry that premiums charged by Citizens are 40-60% below sustainable rates, leaving Floridians subject to assessments for casualty losses.

Community leaders are well advised to educate themselves about the financial stability of the carriers providing coverage to their communities and to understand whether FIGA provides any relief in the event of insolvency.

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The Florida Condo & HOA Law Blog is just about to have its first birthday.  Over the past year we have covered important issues to community leaders and managers regarding association operations, insurance responsibilities, collections and foreclosures, legislative changes, new case law, mortgage and lending issues, contractor disputes, enforcement of covenants and much, much more. 

We are proud to say that our readers include board members, unit and/or home owners, prominent community leaders, governmental officials, industry professionals, local and national media representatives as well as licensed community association managers in Florida and elsewhere.

Please Note:  The host of this site is making some technological improvements, but that means you will need to re-subscribe to receive future updates.  You will receive an email inviting you to re-subscribe.  Subscribing is as easy as typing your email address on the link provided in the email.

Don't miss out - we have a lot more information to share with our readers.  In fact, we are expanding the scope of our coverage in 2010 to include even more information about real estate and construction issues that impact community associations.  Be on the lookout for additional authors, videos, newsfeeds and more.  Of course, we will provide a detailed analysis of legislative activities and will include posts direct from the capital as items are considered.   

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