Community 

Association 

Counselor

 

By

Laura M. Manning-Hudson and Roberto C. Blanch

Last Updated 10/23/2014

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(10-15-14)

Right of Access to Personnel Evaluations, Background Screenings for Community Association Directors, Members

By Roberto C. Blanch

Our firm receives a great deal of questions about association matters from the readers of our blog and the listeners of our radio show on WIOD 610-AM every Sunday at noon. We try to provide specific responses to each and every inquiry that we receive. Recently, we received a question from a condominium association board member in Sarasota pertaining to a topic that we have not covered in quite some time and would like to revisit.

The reader explained that his association conducts an annual evaluation of the association’s property manager that includes an evaluation questionnaire. The evaluation meetings were conducted with the manager by each of the board members, and the evaluation questionnaire forms were collected by the manager who later delivered them to the board president. The reader asks if there are any Florida laws that govern the right of association board members to access these personnel evaluation forms as well as the results of the background screening that was used prior to the hiring of the property manager.

The laws related to community association official records and their accessibility to association members and directors specifically designate "personnel records" of the employees of associations as protected official records. The statutes for both condominiums and HOAs specifically stipulate that personnel records are not to be made accessible to unit owners. However, these and other types of protected official records must also be maintained by the association, and they must be made available to all board members. The members of the board of directors are fiduciaries of the association, and as such they are obligated to make important financial and administrative decisions for the association. In order to carry out their function in this role, they must have access to all of the protected official association records that are specifically barred from the unit owners who are not directors of the association. In addition, it should be noted that there may be other factors that must be considered with regard to the right of a director or association member to have access to such records. As such, we recommend that community association board members consult with legal counsel with inquiries they might have in connection with the specific circumstances of their community’s personnel records.

Our firm’s other HOA and condominium association attorneys and I work very closely with our clients to help them to avoid and detect theft and fraud in their communities. We write in this column as well as in our blog at www.FloridaHOALawyerBlog.com about important legal and administrative issues affecting associations in Florida, and we encourage association directors, members and property managers to enter their email address in the subscription box in the blog in order to automatically receive all of our future articles.

 

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(10-1-14)

Recent Arbitration Decision Offers Stern Warning to Associations Making Certain Alterations Without a Membership Vote

By Laura M. Manning-Hudson

An arbitration decision rendered earlier this year by the State of Florida Division of Condominiums involving a dispute over alterations approved by a condominium board without a prior meeting and vote of the unit owners did not surprise our firm’s community association attorneys. We often find ourselves reminding association directors and property managers that the changes they are considering – albeit seemingly minor in nature – could be among those changes that are considered "material alterations" requiring approval by the membership.

While what constitutes a "material" alteration is not always clear, the rule of thumb is that if it changes the color, form, shape, elements or specifications from the original design or plan, or existing condition, in such a manner as to appreciably affect or influence its function, use, or appearance, then it is material. And, while the additional costs and time commitments that the approval process entails can be considered a bit ponderous, this recent decision serves as an important reminder of the potentially significant economic repercussions of forgoing the vote.

The case involved alterations that were approved by the Nine Island Avenue Condominium Association board of directors, which included changes and improvements to the pool deck furniture including cushions and fixtures, trellis, observation deck, pool steps and ladder, landscaping, the color of the paint in the koi pond, and the removal of a water filtration system. After a hearing that took two full days and included a number of witnesses and experts for both the unit-owner petitioner, Ms. Jacqueline Simkin, and the association, the arbitrator found in favor of the unit owner and concluded that prior approval by the unit owners was required for practically every single alteration that had been made at the property.

The order concludes:

"Unless the alteration is approved by 66 2/3% of the unit owners, no later than December 31, 2014, the Association shall:

a. Return the color of the recreation deck waterways and curbing to the original light gray, and return the color scheme of the deck furnishings to original grey-blue, or something substantially similar;

b. Rebuild the trellises to the original footprint, design intent, appearance, and natural weathered wood finish, subject to current code requirements;

c. Return the gazebo to its original natural weathered wood finish;

d. Rebuild the wooden observation deck over the waterway;

e. Replace the pool egress ladders with ladders substantially similar to original, such that the steps extend farther down into the water and can be used as a means of egress from the pool by unit owners;

f. Return the entrance drive landscaping to its original, or substantially similar, condition; and

g. Repair or replace the building water filtration system with a comparable system utilizing current technology."

Depending on how the final vote of the members turns out, the association may be facing significant expenses in order to return some or all of these elements to their original condition prior to the alterations being completed. These expenses, not to mention the potentially contentious nature of the meetings that will lead up to the vote as a result of this significant lapse in judgment, will certainly prove to be more costly and difficult for the association than the vote that it should have undertaken prior to moving forward with the alterations. Not to mention the attorneys fees and costs incurred by the association in defending this proceeding – and the unit owner’s attorneys fees and costs which the association will be responsible to reimburse.

This costly lesson comes free of charge to all other Florida condominium association boards of directors that are considering moving forward with what potentially may be considered a "material alteration" without obtaining prior membership approval as required by the Condominium Act. Bypassing the approval process is simply not worth the financial risk, as this condominium association learned the hard way.

 

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(9-17-14)

New Case of Theft, Fraud by a South Florida Homeowners Association President

By Roberto C. Blanch

Yet another case of theft and fraud inflicted on an association by an HOA president made local South Florida headlines recently. According to news reports, Michelle Changar-Coe, a former homeowners association president, has been arrested and stands accused of embezzling more than $180,000 from her Tamarac community. Police reports indicate that she forged dozens of checks totaling $181,441.85 which were deposited into her bank account. The authorities reported that the fraud and theft occurred at the Mainlands Section 7 homeowners association from January 2009 through December 2013. Changar-Coe, 44, forged the signatures of four persons without their consent between May 2011 and October 2013. While conducting an audit of financial records, a board member found several checks from community funds that appeared to be forged with his signature and reported it to police. He later found a check for $20,475 that he never recalled signing and had been made payable to a "Michel Chandar," a name that was later found to be bogus.

Changar-Coe is being accused of creating a fraudulent agreement for the association to pay a "city liaison" $2,575 per month for representation at City Hall. However, "no such position existed with the city of Tamarac, according to two city officials who provided sworn statements," reads the police report. She continued to invoice and collect from the association for the fake job from May 2011 to November 2013 using the name of Michelle Charger. Investigators found checks deposited into Changar-Coe’s personal bank account bearing the supposed city liaison’s name. She has been charged with first-degree grand theft of more than $100,000 and four counts of fraud.

An article by Tamarac Talk (www.tamaractalk.com) further details how the fraud was finally uncovered, detailing that "[r]resident Steve Soloff was suspicious, and informed the board that he had visited the City of Tamarac and spoke with City Clerk Pat Teufel" who had informed him ". . . that in her 10-year tenure with the city, she has never heard of any agreement by a homeowners association to hire a city liaison . . . " and that ". . . she knew of no person named Michelle A. Charger."

Apparently, key details of the fraud were uncovered as a result of a former director’s investigation of discrepancies uncovered in connection with the association’s finances in early 2012, when a fraudulent court document was presented demanding that such director and another director both resign immediately or face a $1 million lawsuit.

The above account underscores the importance for association directors and managers to implement procedures and policies aimed to avoid the victimization of the association and its members. These efforts may include requiring that at least two board members sign all checks, the requirement for background checks and screenings for managers and employees, the thorough review of all bank statements and financial records presented to directors and managers, the establishment of low limits on discretionary expense approvals without board authorization by the property manager, and a detailed review and understanding by directors of the association’s yearly financial audits performed by independent professionals.

Additionally, the foregoing story also highlights the relevance of what a thorough review of association records may reveal following a detailed inspection of official records by or on behalf of owners having reasonable suspicions of wrongful activity by directors or other association representatives. Lastly, this story suggests that in the event that directors have doubts or questions regarding suspicious activities or documents presented to the association, then such concerns should be promptly reported to association counsel for evaluation.

Our firm’s other HOA and condominium association attorneys and I work very closely with our clients to help them to avoid and detect theft and fraud in their communities. We write in this column as well as in our blog at www.FloridaHOALawyerBlog.com about important legal and administrative issues affecting associations in Florida, and we encourage association directors, members and property managers to enter their email address in the subscription box in the blog in order to automatically receive all of our future articles.

 

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(9-3-14)

Appellate Ruling Creates New Wrinkle Over Acceptance of Partial Payments That Are Endorsed as Full Payments

By Roberto c. Blanch

As if collections of delinquent accounts were not already difficult enough for condominium associations and HOAs in Florida as the state recovers from the foreclosure crisis, a recent ruling by the Second District Court of Appeal has unfortunately created a new wrinkle that will require community association managers, directors and their legal counsel to pay close attention when accepting partial payment of assessments from owners. The court’s ruling in the case of St. Croix Lane Trust v. St. Croix at Pelican Marsh Condominium Association essentially now makes it a necessity for associations to consult with experienced legal counsel when they receive checks that are in any way endorsed as representing the full and final payment of assessments owed by the owner on whose behalf the payment is made.

Prior to this ruling, associations and their attorneys were guided by the 2008 ruling by the Third District Court of Appeal in the case of Ocean Two Condominium Association v. Kliger which held that associations cannot refuse partial payments of assessments made by or on behalf of owners. In its opinion, the court in Ocean Two further suggested that its conclusion might even apply in the event that the partial payment included a restrictive endorsement such as "Paid in Full" or "Full and Final Payment."

However, in the St. Croix case, the unit owner’s attorney specifically wrote to the association attorney stating that the payment made by the owner in the amount of $840 was to be considered as the full and complete payment for the settlement of the account, which the association claimed was delinquent in excess of $38,000. While the association responded to the owner’s attorney by denying that the partial payment was the full and final payment of the amount owed, it accepted and deposited the check, applying the funds as a partial payment in accordance with Florida condominium law.

Despite the previous ruling in the Ocean Two case, the appellate panel in St. Croix reversed the trial court’s ruling, finding that the association’s depositing of the check containing the above-described restrictive endorsement operated as an "accord and satisfaction," resulting in a waiver of the association’s right to collect the remaining debt alleged to be owed by the owner.

This ruling appears to create a conflict with regard to the extent to which the appellate courts will consider the partial payment of assessments including restrictive endorsements to constitute an "accord and satisfaction" of a larger debt owed by the owner on whose behalf the partial payment is made. As such, it is possible that this conflict may ultimately be taken up for resolution by the Florida Supreme Court or may result in action by the state legislature.

In the meantime, associations should pay very close attention to any payments that are made with restrictive endorsements of any kind indicating that such payments reflect the complete and final payment of the amount owed to the association. Managers and directors presented with similar circumstances would be well advised to consult with experienced and qualified legal counsel before depositing such payments if they are not indeed for the full and final amount owed.

Our community association attorneys will continue to monitor and write about the consequences of this ruling as they relate to the handling of partial payments that are made with restrictive endorsements indicating such payments to be full payments. We encourage association directors and members as well as property managers to submit their email address in the subscription box at the top right of our blog at www.FloridaHOALawyerBlog.com in order to automatically receive all of our future articles.

 

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(8-20-14)

Foreclosed Homeowners Get Windfall From Surplus Money

By Laura M. Manning-Hudson

Would you be surprised to learn that an owner could walk away from his home, stop making mortgage payments, avoid all personal liability for debt on the property, and still make nearly $100,000 after the property is foreclosed upon by a mortgage lender? Well, it happened.

In a recent opinion released on July 23rd by the Third District Court of Appeal in Miami, the appellate court ordered approximately $99,500 in surplus funds to be returned to Miami residents Walter and Eider Pineda. The ruling reversed a trial court order which directed the funds to be applied as payment toward the balance owed to the first mortgage lender, instead of being disbursed to the Pinedas. A review of this interesting ruling reveals that it was more of a case of the foreclosure auction buyer (third-party purchaser) making mistaken assumptions – rather than a novel legal argument. Nonetheless, the result was a huge amount of money in the pocket of the foreclosed ex-owners of the property despite their non-payment of two mortgages.

Nocari Investment, LLC, was the high bidder at the foreclosure sale of the Pinedas’ property. Nocari’s bid was approximately $100,000 over the bank’s final judgment and Nocari took title to the property subject to a first mortgage that was still pending on the property. Nocari argued that the $100,000 surplus should be directed to the first mortgage bank in order to pay down what was owed on that mortgage by the Pinedas. Nocari also argued that it would be inequitable for the Pinedas to have the surplus funds since they had filed for bankruptcy protection and received a discharge of their debt to the first mortgage lender. While Nocari believed that the surplus funds would be refunded back to Nocari and applied as payment toward the superior lien on the property, the appellate court sympathetically disagreed. The opinion reads, in part, as follows:

While we are sympathetic to Nocari’s equitable argument, the fact remains that distribution of surplus foreclosure proceeds is governed by a plain and unambiguous statutory procedure which clearly provides that the owner of record is entitled to the surplus proceeds. Where the legislature has provided such a process, courts are not free to deviate from that process absent express authority.

Neither the statutes nor the case law governing distribution of surplus foreclosure sale proceeds provides a mechanism authorizing a third-party purchaser to obtain the surplus. The statute is clear: the owner of record at the time of the recording of the lis pendens is entitled to any surplus proceeds . . . Nocari was neither an "owner of record," an assignee of an owner, nor "subordinate lienholder," . . . and thus was not entitled to any surplus funds.

While there was no community association involved in this case, the ruling highlights some important lessons for associations, third-party purchasers and consumers in general as we all continue to endure the foreclosures of so many homes in South Florida. For community associations, the ruling should serve as a reminder of the importance of preserving their ability to collect surplus funds generated by foreclosure sales. Community associations are often named as subordinate lienholders in mortgage foreclosure cases, and they should engage counsel to closely monitor the status of such cases, file appropriate responses to protect their interests and entitlement to surplus generated by the foreclosure sale, and file timely motions with the court so they are not barred from collecting foreclosure surplus. For the third-party purchasers, the ruling illustrates the importance of due diligence and working with qualified legal counsel in order to act with certainty and understand the complete ramifications of their bids made at foreclosure auctions.

I, along with our firm’s other community association attorneys, work very closely with our clients on foreclosure cases and motions for surplus to ensure that their lien rights and ability to collect as subordinate lienholders are protected. We monitor and write about important legal and business issues affecting Florida community associations in our firm’s blog at www.FloridaHOALawyerBlog.com, and we encourage association directors, members and property managers to submit their email addresses in the subscription box at the top right of the blog in order to automatically receive our future articles.

 

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(8-6-14)

Court Ruling Finds Fannie Mae Does Not Qualify for Safe Harbor Protection from Liability for All Unpaid Assessments in Foreclosure Cases

By Laura M. Manning-Hudson

A recent ruling in Broward County Circuit Court could have significant implications for Fannie Mae and the community associations with units in various stages of bank foreclosure. In the case of Federal National Mortgage Association v. Park Place at Pompano Condominium, the court ruled that Fannie Mae was not entitled to the statutory "safe harbor" that limits the amount of assessments that first mortgagees must pay to associations when they take title to a unit through foreclosure.

Under Florida law, first mortgagees – or their successors or assigns – who acquire title to a unit through foreclosure or a deed in lieu of foreclosure are only responsible to condominium associations for payment of unpaid condo dues in an amount equal to 12 months of assessments or one percent of the original mortgage debt, whichever is less. In cases where owners have not paid their condo dues in years and the bank finally takes title to the unit, this usually amounts to just a couple of thousand dollars.

However, in the Park Place ruling, the court found that even though Fannie Mae bought the loan and had been the assignee of the first mortgagee’s right to bid at the foreclosure sale, Fannie Mae did not receive an assignment of the mortgage as is required by Florida law. When Fannie Mae filed an action against the condominium association to have the court determine whether it was entitled to the "safe harbor" amounts, the circuit court agreed with the association that an actual "assignment of mortgage" had to be executed in order for Fannie Mae to be considered an assignee of the first mortgagee and to receive the safe harbor protections afforded to lenders in foreclosure cases.

The ruling applied the provisions of Section 701.02, F.S. which provides that an assignment of a mortgage is ineffective in law or equity against creditors and subsequent purchasers "unless the assignment is contained in a document, that in its title, indicates an assignment of mortgage and is recorded according to law."

Prior to this ruling, Fannie Mae had consistently been able to cap its exposure for past due condominium assessments in Florida by claiming to be the equitable assignee of the first mortgagee. However, in light of the recent ruling in this case, Fannie Mae may now be treated like any other new owner acquiring title to a foreclosed property, meaning it may be found to be jointly and severally liable with the prior owner for all unpaid common expenses and assessments.

As this was a circuit court ruling, it remains to be seen whether other Florida circuit courts will follow along the same lines or whether they will continue to find that Fannie Mae is the equitable assignee of the first mortgagee. In addition, the federal mortgage agency may now decide to alter its procedures and go through the formalities of assigning the loan.

Our firm’s other community association attorneys and I will monitor the repercussions of this decision as it plays out in similar cases in the coming months, and we will provide updates for community associations and property managers as they become available in our blog at www.FloridaHOALawyerBlog.com.

 

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(7-23-14)

Condo Associations’ Rights to Enter, Maintain and Rent Abandoned Units Expanded by New Florida Law

By Roberto C. Blanch

The Florida Legislature has enacted a number of new laws over the last several years that were in direct response to the foreclosure crisis and the meltdown in the housing market. The latest example of such a law was enacted during this year’s legislative session and deals with abandoned units in condominiums.

The new law, § 718.111(5)(b), essentially enhances certain rights of access to units. However, it also provides that condominium associations may now enter abandoned units in order to inspect, make repairs, remediate mold, restore utilities, or otherwise maintain and preserve the condominium property. The law defines abandoned units as one that is the subject of a foreclosure action and no tenant appears to have resided in the unit for at least four continuous weeks without prior written notice to the association, or when there is no foreclosure and no tenant appears to have resided in the unit for two consecutive months without prior written notice to the association and the association is unable to contact the owner.

The law stipulates that associations must provide at least 48 hours prior written notice of their intent to enter an abandoned unit to the owner at the last address reflected in the association’s records. In addition, if the owner has previously consented in writing to receiving email notifications, the association can email this notice to the owner.

Any expenses incurred by associations pertaining to abandoned units may be an assessment against the unit owner and enforceable as an assessment against the unit, meaning it can be subject to a lien and foreclosure if not paid. The new law also enables associations to obtain a court-appointed receiver in order to lease the abandoned unit and use the rental income to offset its costs and expenses as well as for unpaid assessments.

This new law should help to provide some clarity and relief for condominium associations that have been forced to contend with abandoned units in the aftermath of the foreclosure crisis. It will enable associations to move quickly in petitioning the courts to appoint a receiver and begin collecting rent for abandoned units in order to cover their expenses and assessments. While it might be advisable to pursue some of the remedies made available by this new law, questions remain regardng whether it will afford the intended relief envisioned by the legislature. Association directors and managers would be well advised to consult with their legal counsel prior to implementing steps in furtherance of pursuing remedies afforded by this law.

 

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(7-9-14)

Pet Pig Dispute in Lake Worth Association Makes the Local News

By Laura M. Manning Hudson

One of the more memorable service animal disputes that my fellow community association attorneys at our law firm and I recall learning about was chronicled recently in a report by WPTV- NBC Channel 5 News in Palm Beach County. The station’s story had many of the most common elements found in service animal disputes: a pet owner insisting that her association must allow her to keep the family pet because the pet helps alleviate anxiety disorders, and an association that is demanding removal of the animal because it is expressly prohibited by the association’s governing documents. The key difference in this case is that Wilbur, the animal in question, is a 65 pound pot-bellied pig.

The dispute is taking place in a suburban Lake Worth community, and it appears to have all of the makings for one that will be headed for litigation due to the obstinacy being displayed by both sides.

"I didn’t know it was a problem until we got a violation letter," explains the owner, in the station’s report. She says that her association is trying to force her to get rid of her pig, and she vows that she "will fight, fight, fight with everything I have to keep this animal here."

She explains that she is determined to keep Wibur because of what he means to her two kids, and she has produced documents for the association demonstrating that both of her children have been previously diagnosed with ADHD and one of them with Asperger's Syndrome. The owner indicates that she has even had Wilbur trained and registered in an animal assisted therapy program at the Humane Society of Broward County. She insists that "he helps them come out of their shell."

The report goes on to explain that the association’s rules clearly state that "only common household pets" and "no livestock" are allowed in the community. It notes that lawyers representing the association said in a statement that they are trying to verify the medical conditions of the children in order to verify whether Wilbur qualifies as a service or emotional support animal.

"A pot-bellied pig is not a common animal, but it’s a lot more common than you think," says the owner. In fact, the Palm Beach County Commission has voted to no longer consider pot-bellied pigs as "livestock," but they also decided that it would be up to specific associations to determine whether they can be allowed as pets.

Pursuant to Florida’s Fair Housing Act, an association is required to make reasonable accommodations in its rules, policies, practices, or services, when such accommodations may be necessary to afford a disabled person an equal opportunity to use and enjoy a dwelling. The failure to make an accommodation when required could result in a discrimination complaint being filed against the association. However, while the Fair Housing Act requires that an association may have to allow a resident to keep what would otherwise be a prohibited pet, such pet cannot become a nuisance to other residents.

It will be interesting to see how this case turns out. Both sides appear to have strong arguments to support their respective positions, and there is no doubt that it would be reasonable for a court to find that pigs are not common household pets. However, because pot bellied pigs are becoming increasingly common as pets, perhaps the time has come for associations to consider amending their governing documents to specify the types of animals that are allowed. Otherwise, they too may one day face the possibility of difficult and costly litigation to determine the outcome of a pet pig as a service animal in their community.

 

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(6-25-14)

HOA Takeover Case in Las Vegas Provides Lessons for Florida Community Associations Elections

By Roberto C. Blanch

Community association boards control the purse strings of the communities they govern, and as such they have been long-standing targets of individuals seeking to defraud associations. A recent case involving the takeover of a number of Las Vegas HOAs in a scheme to steer large construction contracts to a Nevada general contractor appears to have set a new bar for the heights to which individuals will go in their efforts to defraud HOAs for contracts worth millions of dollars.

The accounts of the Nevada case read as if they come directly from the pages of a novel about a wild and far-flung criminal enterprise, proving yet again the old adage that reality can be stranger than fiction. The U.S. Justice Department investigation revealed that 11 homeowners associations were defrauded of millions of dollars in the takeover scheme that took place from 2003 to 2009, and federal prosecutors are seeking jail time for the defendants in addition to approximately $25 million in restitution. The alleged mastermind behind the scheme has pleaded not guilty to conspiracy and fraud charges leveled against him and 10 others.

Besides conspiring to commit mortgage fraud in order to secure mortgages for straw buyers in the communities, the defendants are accused of getting their straw buyers elected to the boards through bribery, ballot stuffing, intimidation and dirty tricks. Once on the board of the HOAs, these directors would secure lucrative construction contracts benefiting the organizers of the fraud. Accounts tell of co-conspirators traveling to Mexico to print phony ballots and counting ballots in co-conspirators’ offices, and one co-conspirator used his master key at a condominium complex to remove ballots from mailboxes. Other tactics involved "dumpster diving" efforts to retrieve discarded ballots at a condominium complex that would be used to fix an election, and attending HOA board meetings in order to intimidate board members who were not friendly with the individuals involved in the scheme. It is also alleged by a co-conspirator that he regularly witnessed HOA board members come to the office of another co-conspirator to receive cash payments.

A total of 35 defendants have now pleaded guilty in the case, leaving the remaining defendants to stand trial on Oct. 14. The investigation into the scheme is considered to be the largest public corruption case ever brought by the Justice Department in Nevada.

This case serves as an important reminder for Florida community associations about the level of involvement and vigilance that is necessary in order to help avoid becoming a victim of this type of fraud. It is imperative for unit owners to monitor and participate in their association’s elections and meetings, and they should always be on alert for suspicious tactics by owners or other groups surrounding board member campaigns and elections. Owners should also ensure that they vote in all elections and submit their own ballots whenever possible, as fraudsters will typically attempt to secure and utilize ballots from those who do not normally vote in the elections or do not reside in the community or condominium. In addition, owners should determine whether their ballot was counted or disallowed at the election due to the submission of more than one ballot for their unit.

If association members believe that suspicious political activity has taken place and the integrity of their board of directors and their election has been compromised as part of a conspiracy to commit fraud, they should consult with highly experienced legal counsel in order to discuss and determine their next steps. Election recalls, court appointed receivers, and injunctive relief precluding boards from awarding contracts to conspiring vendors are among the measures that can be pursued in order to correct or avoid injustices that may have occurred or may be in the works. Additionally, experienced community association legal representation may aid in processes related to criminal investigations by state and federal law enforcement agencies in such cases.

 

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(6-11-14)

Service Dog Dispute Costs South Florida Condo Association $300,000

By Laura M. Manning-Hudson

Several of my colleagues and I have written extensively in previous articles and in our firm’s blog at www.FloridaHOALawyerBlog.com about the issues surrounding service dogs in communities that maintain strict restrictions against pets. We have discussed how many of these communities have been forced to contend with residents whose requests for exemptions for service dogs have been highly questionable and, in some cases, even complete shams. However, a recent case that was covered in an article in The Miami Herald illustrates the dangers that associations – and their board members – may face if they grossly miscalculate and overreact to a request for a service dog from an individual who is obviously disabled.

In Sabal Palm Condos of Pine Island Ridge Ass’n v. Fischer, unit owner Deborah Fischer suffered from multiple sclerosis and was confined to a wheelchair, so she acquired Sorenson, a trained service dog. The association’s pet policy only allowed for a cat or fish, or another pet weighing less than 20 pounds and only with prior permission of the board. Fischer asked the condominium association to accommodate her disability by allowing her to keep Sorenson, who weighs more than 20 pounds.

The association responded by requesting copies of Fischer’s medical records from all of her healthcare providers who diagnosed or treated her disability, which she claimed made a service dog necessary. Sabal Palm also requested that she provide "all documents relating to the nature, size and species of dog, as well as all documents regarding any training it received."

Fischer provided the association with a letter from Sorenson’s trainer describing the tasks he was trained to perform, and she enclosed a photo of herself in her wheelchair with Sorenson.

However, this was not good enough for the association, and Sabal Palm went on to request additional documentation, which Fischer provided, that made her disability and her need for a service dog extremely evident and clear.

Shockingly, the association responded by filing a lawsuit against Fischer and her husband seeking a declaratory judgment that it need not accommodate Fischer by allowing her to keep Sorenson based on the fact that the dog was over the 20 pound weight restriction. Fischer countersued claiming that the association and its president discriminated against her when it refused to accommodate her request to keep Sorenson.

The court found that Sabal Palm violated the federal Fair Housing Act (FHA). The judge’s 30-page order states that the defendant’s disability was so obvious and her need for a service dog had been so clearly established that the association failed to reasonably accommodate her disability as required by federal law.

"Sabal Palm got it exactly — and unreasonably — wrong," wrote U.S. District Judge Robert N. Scola, Jr. That the condo association "turned to the courts to resolve what should have been an easy decision is a sad commentary on the litigious nature of our society. And it does a disservice to people like Deborah who actually are disabled and have a legitimate need for a service dog as an accommodation under the FHA," Judge Scola concluded. In addition, the court also found that the association’s president was personally liable to Fischer, as "[i]ndividual board members or agents such as property managers can be held liable when they have personally committed or contributed to a Fair Housing Act violation."

After Scola ruled in the Fischers’ favor, their attorney negotiated a $300,000 settlement with Sabal Palm.

The lessons from this case should be very clear to associations and their directors. Residents who are obviously visibly disabled and establish that they need the assistance of a service animal should be accommodated. Unfortunately, abuse by individuals without disabilities masquerading the need for fake service animals has lead many associations to distrust applicants to the detriment of those who are truly disabled. However, associations that turn to the courts to confirm their decision to deny accommodations in such cases without using common sense or listening to the advice of highly qualified and experienced legal counsel can bring significant legal liabilities and expenses to their communities.

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(5-28-14)

Preserving HOA Covenants and Restrictions Under the Florida Marketable Record Titles Act

By Roberto C. Blanch

Even though it has been in place for decades, many homeowners association directors are unaware of the requirements under the Florida Marketable Record Titles Act (MRTA) for HOAs to reaffirm and renew their covenants and restrictions 30 years after they were originally recorded in the local county records. MRTA was created to extinguish claims to property which are at least 30 years old in an effort to stabilize property law by clearing old defects from titles, limiting the period of record searches, and clearly defining marketability by extinguishing old interests of record. One of the unintended consequences of the Act is that the Declarations of Covenants, Conditions and Restrictions recorded for HOAs may be set to expire after 30 years of the date which they were recorded. However, MRTA provides a specific process for HOAs to renew and preserve their covenants and restrictions in order to keep them in place after the 30-year term. Keep in mind that for most HOAs, if the residents are no longer compelled to act in accordance with the community’s declaration, the results could be catastrophic for the association’s administration and finances.

The statute requires that a "Notice to Preserve" must be filed in the public records of the county where the property is located prior to the expiration of the 30-year period. This Notice must be approved by at least two-thirds of the members of the board of directors, and the notice of the meeting regarding the ratification of the Notice to Preserve must be provided at least seven days prior using the statutorily required meeting notice procedures.

For associations seeking to revive declarations that have already expired, MRTA also provides procedures.

The statute includes guidelines as to the substance of the Declaration of Covenants, Conditions and Restrictions that is being submitted for revival, and it establishes that "the proposal to revive a declaration . . . shall be initiated by an organizing committee consisting of not less than three parcel owners located in the community . . . and no later than 60 days after the date the proposed revived declaration and other governing documents are approved by the affected parcel owners, the organizing committee or its designee must submit the . . . . materials to the Department of Community Affairs for review.

HOA declarations enable the associations to impose fees, file liens, collect assessments and implement other protocols that provide for the administration and financial viability of the community. It is imperative that HOAs preserve or revive and maintain their covenants and restrictions under MRTA in order to avoid potentially severe consequences, including the possibility of challenges by lot owners arguing that the covenants and restrictions with respect to their lot have been extinguished. Our firm’s other community association attorneys and I strongly advise HOAs to check the recording date for their declarations and work with experienced legal counsel in order to avoid the expiration of their governing documents under MRTA.

 

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(5-14-14)

Legislature Passes Bill to Allow Some Legal Work Performed by Community Association Managers

By Laura M. Manning-Hudson

With the ending of the most recent legislative session on May 2, 2014, the Florida Legislature ad-dressed the issue of what many attorneys in Florida have considered the unlicensed practice of law by community association managers. House Bill 7037 was adopted this term and expands the role that CAMs play in the associations that they administrate. Effective July 1, 2014, community association managers will now have a much broader scope of powers and duties, including the ability calculate the votes required for a quorum or to approve an amendment, to negotiate financial terms of contracts (subject to approval by the association), determine amounts due to the association before the filing of a civil action, draft pre-arbitration demands, meeting notices and agendas, and calculate and prepare assessment and estoppel certificates.

However, many of the recent amendments to a community association manager’s responsibilities are directly contradictory to the opinion of The Florida Bar, which has taken this issue to the Florida Supreme Court. Pursuant to the state’s constitution, the Supreme Court has exclusive jurisdiction to define the practice of law and regulate the unlicensed practice of law in the state.

As I wrote in this column in October of 2012, the Supreme Court previously adopted an advisory opinion that found that managers would be engaging in the unauthorized practice of law if they should prepare claims of lien and satisfactions of claims of lien documents, as these documents require legal descriptions of the property and establish the lien rights of community associations. The opinion also provided that the drafting of a notice of commencement form would also constitute the practice of law, as would determining the timing, method and form of giving notices of meetings, and determining the votes necessary to take certain actions – because such determinations necessitate an interpretation of Florida law and the association’s governing documents. In addition, responding to the association’s questions regarding the application of the law to specific matters being considered and advising the association that a specific course of action may or may not be authorized under the law would also constitute the practice of law by a CAM.

While many associations believe that they will be able to avoid additional expenses in legal fees if managers perform these tasks, there are a number of legal decisions that illustrate the complications that can arise when managers take on legal responsibilities. Compliance with a statute is critical when it comes to demand letters, claims of lien and pre-arbitration notices. In many cases, associations have ended up incurring more in legal fees to correct mistakes than they likely would have had to spend had they originally used their attorney.

Association boards should bear in mind that the preparation of claims of lien, notices of commencement and other legal documents do not typically result in significant attorney fees, but the ramifications of errors in these documents and forms can prove to be very costly. It is simply not worth the risk for associations or their managers to prepare these documents in order to avoid the relatively nominal legal fees.

 

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(4-30-14)

Community Association Boards Need to Know and Understand the Exclusions and Requirements in their Association Insurance Policies 

By Roberto C. Blanch

Community associations maintain a number of different types of insurance policies to cover various risks, including physical damage, bodily injury, and employee or director dishonesty. Association boards typically rely on their insurance agents to help them shop the major insurance carriers for the most competitive premiums and coverage. Ultimately, policies are acquired by associations, often times with little thought about their provisions other than the costs of the premiums related to the coverage. However, recent experiences with two of our firm’s community association clients have served as reminders pertaining to the importance for board members and property managers to understand the provisions of their insurance policies, including the exclusions and conditions of such coverage.

The first case involved a lawsuit filed against a community association wherein a unit owner claimed that he sustained property damage due to water leaking from a fire sprinkler discharged within the unit located above his unit. The owner alleged that the association was negligent in its hiring of a contractor engaged to perform annual evaluations of the building’s fire sprinkler system. During one of the inspections, a sprinkler pipe burst causing major water damage to the claimant’s residence and other portions of the common elements and units located below. When the association filed its insurance claim related to the damage caused by the leak, the insurance carrier denied coverage indicating that the association failed to meet some of the complex conditions for defense and coverage to be afforded. Specifically, the policy in question required that tedious steps be taken to ensure that the association was named as an additional insured under the contractor’s policies, and it also stipulated that the contracts with such contractors include an indemnification clause to protect the association.

The second example involves a dispute regarding a request for a service animal accommodation at a condominium. After the association responded to the request with specific inquiries regarding the nature of the accommodation and disability, the unit owner filed a lawsuit against the association alleging that its requests are discriminatory. The association filed a claim under its "directors and officers" insurance policy to cover its legal costs and defense, but the carrier immediately responded by pointing out that the policy specifically excluded coverage for any claims related to assistance animals.

In both of the above examples, the respective association board members and property managers claimed that they were unaware of the exclusions or coverage conditions, despite the costly consequence to the associations related to the associations’ failure to comply. While the above-described exclusions or coverage conditions may be rare or may not be found in all community association insurance policies, these cases illustrate the need for managers and directors to be informed as to the critical terms of their insurance policies. In an effort to avoid encountering costly experiences such as these, it is vital for association boards and property managers to have a detailed discussion with their insurance agents and legal counsel in order to gain a comprehensive understanding about the exclusions of their associations’ insurance policies and the conditions with which associations must comply to ensure that they are obtaining the coverage for which they are under the impression they have paid.

 

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(4-16-14)

Appellate Court Once Again Restricts Condo Association’s Collections After Association Takes Ownership of Foreclosure Unit

By Roberto C. Blanch

Last year, several of our firm’s community association attorneys wrote in our blog at www.FloridaHOALawyerBlog.com about the Third District Court of Appeal’s decision in the case of Spiaggia Ocean Condominium Association Inc. v. Aventura Management LLC that has since caused many Florida condominium associations to reconsider their collections strategy. In its 2013 split decision, the appellate panel ruled that when the association obtained title to a unit through its own foreclosure action, it lost its ability to collect assessments from the third-party purchaser at the bank’s foreclosure sale. The appellate court reversed the order from the Miami-Dade trial court and remanded the case back to the trial court. However, on remand the trial court again ruled in favor of the association, and the third-party purchaser appealed again to the Third DCA. Instead, this time the appellate court reversed the trial court ruling and remanded the case back to the trial court with specific instructions to enter judgment in favor of the third-party purchaser.

The new unanimous appellate panel found that the trial court misinterpreted the appellate court’s original majority opinion last year, but Judge Leslie B. Rothenberg wrote for the panel that the previous 2-1 split decision was "somewhat ambiguous" and "could have been clearer."

In the 2013 majority opinion, the appellate court found that Florida law clearly provides that "the previous owner is jointly and severally liable" together with the new owner for all unpaid assessments that come due up to the time of the transfer of title. "The plain language of the Statute does not state or suggest that an exception is to be made when the previous owner is the condominium association." Therefore, by positioning itself as the "previous owner," the majority held that the condominium association became liable for the unpaid assessments and could not then impose that liability solely onto the eventual new owner.

After the case was remanded back to the trial court, the trial court ruled that all three parties were jointly and severally liable for the unpaid assessments, but that the association as the creditor could collect in full from any of the three parties it chose. The trial court ruled that the third-party purchaser was required to pay the full amount of unpaid assessments, and that its only remedy was to seek contribution from the prior owners: the association and the original owner.

The new appellate ruling concludes that the trial court "erred in holding Aventura Management jointly and severally liable with the prior two owners," the association and the original owner who went into foreclosure. The new appellate opinion finds that the third-party purchaser "cannot be held liable for the unpaid assessments of the original owner." The third-party purchaser could only be held liable for the unpaid assessments of the immediate prior owner, the association.

The Third DCA’s recent ruling in this case sends a clear message to Florida condominium associations that when they take title to a unit, they will be unable to collect prior owners’ past-due assessments from the subsequent third-party purchaser at the bank’s foreclosure sale. The Florida legislature remedied this loophole for homeowners associations last year by amending the law to exclude homeowners associations, under Florida Statutes Chapter 720 governing HOAs, from being considered as the previous owner under the statute when HOAs take ownership of foreclosure units prior to banks’ foreclosures. We will have to wait and see whether the Florida legislature will take similar action in 2014 in order to remedy this issue for condominium associations under Chapter 718, Florida Statutes.

 

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(4-2-14)

Enforcing Rules by Imposing Fines

By Laura Manning-Hudson

One of the most common topics that our firm’s other community association attorneys and I are asked about is how to enforce association rules against residents who purposefully and repeatedly violate them. First and foremost, it is important that rules and regulations, and other requirements set forth in an association’s governing documents, be enforced uniformly to every member, director and resident, lest they be rendered meaningless and unenforceable over time. For repeat violators who appear to have no intention of complying and living by the rules, one of the most effective weapons for an association to use is the imposition of fines.

Florida law allows both HOAs and condominium associations to impose fines against members, tenants, guests and invitees who violate the community’s declaration, articles of incorporation, bylaws or any rules adopted by the association. For both HOAs and condominiums, fines may not exceed $100 per violation, and the fines may be imposed for each day that the violation continues, with a statutory cap that the fines cannot exceed $1,000 per violation.

In both HOAs and condominiums, it is important to follow the statutory procedures for the imposition of fines in order to enforce them at a later date. In order to impose a fine, the association must create a "fining committee" – some call it the "violations committee" or the "covenants committee," but whatever your community decides to call it, the committee must be comprised of three unit owners who are NOT on the association’s board of directors – or are NOT the spouse or family member of a director. Once a violation is committed, the offending resident (owners and tenants alike) must be given 14-days notice of a hearing before the committee, which, after hearing all of the facts, decides whether a fine should be imposed. Interestingly (and importantly), if the committee decides that a fine should not be imposed, then the board of directors must accept that decision and the fine may not be imposed. However, if the committee decides that a fine should be imposed, then the board of directors has the option to (1) set the fine amount or (2) waive the fine altogether.

Once fines are imposed, the next question is always "how do we collect them?" While condominiums may not convert fines into liens, the HOA statute does provide that if the fine exceeds $1,000, then the fine can be converted into a lien against the homeowner’s property. Certainly the fine can be collected in the event an estoppel is issued for a sale of the unit, and all associations have the ability to file legal actions to recover fines, in which case the prevailing party is also entitled to recover its reasonable attorneys’ fees and costs in the matter.

Ultimately, if the fining process does not result in compliance and the rule violations and non-payment continue, condominium associations may file petitions for arbitration with the Division of Condominiums, and HOAs may file suit in county or circuit court to enforce the violations and the fines. For cases in which the rule breaker has clearly demonstrated that they will continue to refuse to comply with the rule and pay the fine imposed by the association, pursuing legal action against the violator is typically highly effective.

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(3-19-14)

Florida Legislature Considering Bill to Shop Condominium Policies From Citizens Property Insurance to New Private Companies

By Laura M. Manning-Hudson

For the last several years, the state of Florida has been pursuing major efforts to shrink the size of the state-run Citizens Property Insurance, and the company’s policy count has reached its lowest level since 2006. Now the legislature is considering expanding these efforts to Citizens’ insurance policies for condominiums and apartments. Senate Bill 7062 would increase rates for new master condo policies and allow unregulated "surplus lines" insurers to pull existing condominium and apartment policies away from Citizens. However, in an election year when Gov. Rick Scott has expressed concerns about any measures that would increase rates, the bill faces a difficult uphill climb.

Recently, the Senate’s Banking and Insurance Committee, which is now considering and shaping the bill, voted to eliminate a measure that would have allowed rate hikes of up to 15 percent for commercial-residential policies instead of the current 10 percent maximum. An amendment to the bill stipulates that "prominent notice" must be given stating that surplus lines policies are not protected by the Florida Insurance Guarantee Association and their rates are not controlled by the Florida Office of Insurance Regulation. The amendment also allows Citizens policyholders to reject offers from surplus lines companies, and it states that those who opt to switch from Citizens to a surplus lines carrier will be allowed to switch back to Citizens if they so choose.

The lawmakers in the committee did not debate a provision in the bill that eliminates a discount for master condo policies which bundle hurricane coverage with other perils such as fire and plumbing leaks (which is what condominiums purchase now). The bill would preclude Citizens from selling these "multi-peril" bundled policies, so condo associations would be required to purchase separate hurricane and "all other perils" policies at very likely a higher cost. This provision would only apply to new policies issued after June 30, 2014.

Currently, there are few insurers that are actively involved in the commercial-residential market. Citizens underwrites 43 percent of the market, representing nearly $93 billion in insured value. American Coastal Insurance Co., QBE Insurance Corp. and American Capital Assurance Corp. represent another 40 percent, and the remaining 20 percent is shared among a handful of other insurers. There are also very few insurance agents who specialize in the commercial-residential market for condominium policies.

Citizen Property Insurance has issued statements indicating that it would take 18 months to develop the commercial business clearinghouse, but even then it would have to be different than the personal-residential clearinghouse because of the complex nature of these policies for condos and apartments. According to Citizens, the number of commercial-residential policies only represents two percent of its overall policy count, but that two percent accounts for 20 percent of the insurer’s probable maximum loss from a hurricane.

Our firm’s other community association attorneys and I will continue to monitor the status of this bill, and we will post updates as they become available in our blog at www.FloridaHOALawyerBlog.com.

 

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(3-5-14)

Are Owner Email Addresses, Telephone and Fax Numbers Exempt from Disclosure Requirements to Unit Owners?

By Roberto C. Blanch

Florida community association attorneys are often asked whether unit owner fax numbers, telephone numbers and email addresses are condominium official records, and if so, whether they must be made available to unit owners requesting such information pursuant to a request to inspect association official records.

The answer to this issue is found in Section 718.111(12)(c)(5), Florida Statutes, which specifies certain condominium association records which are exempt from disclosure to unit owners. Specifically, the law provides that the association’s official records do include unit owner fax numbers, telephone numbers and email addresses, but an owner’s right to inspect association official records does not extend to other owners’ social security numbers, driver’s license numbers, credit card numbers, email addresses, telephone numbers, facsimile numbers, emergency contact information, addresses "… other than as provided to fulfill the association’s notice requirements…"

Based upon this provision, email addresses and fax numbers are exempt from disclosure unless an owner has provided consent to receive notices by electronic transmission. The law does, however, go on to provide that an association may print and distribute to parcel owners a directory containing the name, parcel address and telephone number of each parcel owner, but the owners may exclude their telephone numbers from the directory by so requesting in writing to the association. As such, associations should consult with legal counsel for an opinion on procedural recommendations prior to developing and circulating such a directory.

While the association’s main roster may include telephone numbers, these telephone numbers are not published to other unit owners. The only information that is subject to disclosure are the names, unit designations, mailing addresses, property addresses and, as stated in the statute, email addresses and fax numbers only if provided to the association for notice purposes. While such information may not be accessible to unit owners, there may be exceptions for unit owners who are board members of the association. Additionally, while the law establishes parameters sought to protect against the disclosure of unit owners’ sensitive information, it establishes that the association is not liable for the inadvertent disclosure of information that is protected by the statute if the information is included in an official record of the association and is voluntarily provided by an owner and not requested by the association.

The foregoing illustrates yet one more facet of the issues involved in the administration of community associations. Seeking the assistance of qualified and experienced community association legal counsel may further serve to ensure that community association directors and managers steer clear of the pitfalls that may arise due to their failure to adhere to complex community association laws.

 

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(2-19-14)

Lenders Win Another Decision Barring Community Associations from Collecting Interest, Costs and Fees in Addition to Assessments

By Laura M. Manning-Hudson

The recent decision in the case of United States of America v. Forest Hill Gardens East Condominium Association, Inc. and Forest Hill Gardens Property Owners’ Association, Inc. serves to clarify an issue that many community associations have faced in years past. That is: Are foreclosing lenders responsible for costs, late fees, interest and attorneys fees in addition to the 12 months or one percent of past due assessments? Many law firms attempted to collect these fees on behalf of their community association clients and, for many years, banks paid. However, in recent years, the banks have started challenging the demand for payment of anything other than the statutory safe harbor amounts that they legally owe. The summary judgment issued by the federal district court in Forest Hill Gardens sends a strong warning to associations that are considering making these demands in the future.

The decision came in early January with the court issuing a partial summary judgment in favor of the federal government and its Housing and Urban Development agency (HUD), which as a result of bank foreclosures had become the successor and assignee to the mortgages issued on two units at the Forest Hill Gardens East condominium in West Palm Beach. The ruling found that HUD was not liable for interest and attorney fees as well as other collections costs against the units during the twelve-month period prior to foreclosure. The court found the statutory provision stipulating that foreclosing lenders are liable to community associations only for the "safe harbor" amounts of the last 12 months of assessments or one percent of the mortgage, whichever is less, to mean exactly what it says. The court also found that the association’s demands for additional funds for interest, collections costs and attorney fees had no legal basis.

To make matters worse for the condominium association – which had attempted to argue that a provision of its declaration of condominium was invalid – the court agreed with HUD that not only was the association’s declaration of condominium still valid, but that the provision at issue – which provided that foreclosing lenders will not be liable for any assessments which were due prior to taking title to a unit – applied in this case. The court found that HUD had no liability whatsoever to the association for the unpaid assessments that accrued prior to its taking title to each of the two units. Nada. Zero.

Further, potentially exacerbating the results of this disastrous ruling for the association in this case, the court may determine that the association must pay HUD’s attorney fees for the defense that it mounted to counter the association’s demands for sums that exceeded the safe harbor maximums. In a similar case issued last year, the Third District Court of Appeal in Miami ruled that a foreclosing lender was entitled to collect its attorney fees from an association.

While this ruling does not set a legally binding precedent for future rulings on this issue in state courts in Florida, the message that it and similar rulings in the state and appellate courts are sending to community associations appears to be very clear. Florida community associations would be well advised to avoid seeking sums from foreclosing lenders that exceed the safe harbor maximums, as more and more decisions are finding in favor of lenders. In addition, associations that pursue these "other" costs risk the possibility of having to pay lenders’ legal fees and costs, and they may also end up receiving nothing from the lenders for past-due assessments based on antiquated provisions from the associations’ own governing documents.

 

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(2-5-14)

Progressive Condo Associations Working to Accommodate Electric Cars

By Laura M. Manning-Hudson

With the spike in gasoline prices over the last five years, plug-in electric vehicles (PEV) are becoming increasingly popular, and auto industry analysts predict that Florida will be among the leading states in the country for PEVs. For those who reside in a single-family home, plugging in these vehicles for overnight charging presents little difficulty, however the challenges of charging them overnight can be significant for someone who lives in a condominium. Our firm has already had several condominium association clients inquire about their responsibilities and options for accommodating these cars, and their approaches toward finding a solution can vary a great deal.

There are three different levels of PEV charging stations. A level one charging station requires a standard 110-volt household outlet and takes anywhere from 12 to 20 hours for a full charge. A level two charging station uses a 220-volt outlet – such as those that are used for large kitchen appliances, water heaters and washer/dryers – and is two to four times faster than a level 1. A level 3 charging station is the most expensive type of charging station costing in the range of $50,000 and therefore not likely to be considered by most associations.

Due to the abundance of standard 110-volt outlets coupled with the low cost of installation, a level one charging station would seem to be the easiest to deploy and use, and many condominiums may be able to accommodate PEVs simply by using existing outlets or installing new ones in the parking garage.

As PEVs become more and more popular however, associations may want to consider installing a level 2 charging station in order to make the property more appealing to their current and future unit owners with electric cars. The installation cost for level 2 charging stations averages around $2,000 for basic models and, in addition to the faster charge times of four to eight hours for a full charge, some of the more advanced level 2 charging stations also feature retractable or suspended cords, usage tracking and billing capabilities, and the ability to charge up to four cars at once.

There are several challenges for condominium associations when dealing with these charging stations. First, as we know, parking spaces are hot commodities in condominiums. Therefore, determining the most beneficial location for installing a level 2 charging station could present an issue for a condominium, as could a request for the installation of additional level 1 outlets throughout a parking garage. Generally, there is nothing in a condominium’s governing documents that would obligate an association to equip a parking space with a separate electrical outlet. However, because most board’s are empowered to approve an owner’s request to install one (since residential unit owners cannot usually make any additions, alterations or improvements in or to the common elements without the prior consent of the board), the next issue is overcoming the location. Are there any common element areas where a station could be installed? Will the association have to ask owners to transfer, swap or relocate parking spaces? Does the association have the power to require owners to swap or transfer their parking spaces? These are all questions that must be answered before a condominium can make a determination as to what type of charger to install and where to put it.

Additionally, associations should be advised that utility costs incurred by an individual owner through the use of the electrical outlet would not constitute a common expense for which the association and, therefore, all the unit owners would be responsible. Therefore, associations should require that the utility costs for the electrical outlet be separately metered and billed directly to the unit owner. FPL can add sub-meters for these outlets in order for the association to bill the PEV owners for the electricity that their vehicles consume. FPL estimates that electric bills will go up by approximately $34 per month in order to charge a PEV enough to drive 1,000 miles per month. The company offers some excellent information and resources for condominium associations that are considering their options for accommodating PEVs at www.fpl.com/electricvehicles, and questions can also be sent to electric-vehicles@fpl.com.

Again, while the location of such a station in the parking garage and the allocation of parking spaces around it for PEVs present certain obstacles for associations, the added benefit and marketability of the property to PEV owners could easily outweigh these financial and administrative burdens. And, as the usage of PEVs continues to grow, progressive-minded associations that embrace this new technology could gain a significant marketing edge by helping their unit owners to go green and drive electric.

 

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(1-22-14)

Community-Wide Smoking Bans Are Sparking Up Debate at Condo Associations and HOAs

By Roberto C. Blanch

The Miami Herald and the South Florida Sun Sentinel featured articles in recent weeks about communities that are implementing community-wide smoking bans, including inside of the private dwellings of the residents. The Florida Clean Indoor Air Act already prohibits smoking inside of public buildings, which is interpreted to include the indoor common areas of condominium developments, but there are no laws regulating smokers’ rights to smoke inside of their units or in their private balconies, porches and yards. As smoking rates continue to decline due to the adverse health problems associated with smoking and secondhand smoke, the question of whether community associations can impose community-wide smoking bans, including inside of owners’ residences, is becoming a very hot topic with associations across the country.

The associations and boards that take up this issue and seek to implement such a ban may face significant challenges. New developments, such as the AquaVita Las Olas condominium which was featured in the Sun Sentinel article and will open later this year in Fort Lauderdale, are instituting smoking bans in their original declaration of covenants and condominium documents, so buyers are aware of the restrictions prior to their purchase. However, for existing communities which seek to institute such a ban on their current and future owners, their ability to amend their declaration of covenants with these new restrictions may ultimately be challenged, and the enforcement of such a ban may present serious difficulties.

Existing communities wishing to implement the bans by a new amendment to their governing documents would be wise to consider several measures to make the new restrictions more practical and enforceable. Chief among these would be to create a "grandfather exception" to allow existing owners who are smokers to continue to smoke inside of their residences but to ban any new owners from doing so after the amendment has been ratified. Another suggestion would be to allow owners and their guests to smoke in the private balconies of condominium residences but to ban smoking inside of the units, as the complaints about secondhand smoke typically come from neighboring residents who indicate that the smoke and odor seeps through air vents and walls from adjoining units. In addition, the enforcement of the new smoking restrictions will become difficult if not impossible, as association boards and property managers will be unable to determine whether violations are taking place if they are denied access to the residences of owners who are suspected of smoking.

Given these considerations, condominium associations and HOAs that are adamant about implementing these smoking bans should consult with their attorneys and work with their owners, including both the proponents of the new bans as well as the smokers who wish to maintain the status quo. By using grandfather exceptions, allowing smoking in the balconies and only seeking bans for the residences of new owners who are informed of the smoking restrictions prior to their purchases, these restrictions may stand a better chance of becoming viable solutions for communities wishing to ban smoking within their properties as widely as possible.

 

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(1-8-14)

Parking Spaces = Hot Commodities

By Laura M. Manning-Hudson

What is it about a parking space that gets people so worked up? Have you ever pulled in to your parking lot and found that a random car was parked in your assigned space? Has your condominium’s board ever re-assigned the parking spaces in your building? For some folks, these situations would raise their blood pressure through the roof. But why? Because, parking spaces are hot commodities if you live in a condominium.

When residents purchase their condominium units from a developer, they are generally assigned one parking space and may have the option of purchasing a second or third parking space for monetary value. In most condominiums however, after the developer has turned over control of the association to the owners, any parking spaces that were not assigned to a unit become common elements of the association – or guest parking spaces. Translation – there are no more parking spaces available for sale.

Therefore, if you are an owner who purchased long after turnover, when it comes to the parking space(s) assigned to your unit, basically, you get what you get. Or do you? In a condominium, parking spaces are generally identified as limited common elements (common elements that are for the exclusive use of one unit) that are appurtenant to the unit to which they are assigned. In the past, limited common elements could not be transferred away from the unit that they were originally assigned to by the developer. However, after many court cases involving unit owners’ attempts to transfer parking and storage spaces, the Florida Condominium Act now provides a mechanism for unit owners to legally transfer limited common elements to other unit owners. Section 718.106(2)(b), Florida Statutes, provides that the right to transfer [the exclusive right to use] a limited common element [such as a parking space] is allowed so long as the declaration of condominium as originally recorded, or as amended, authorizes such a transfer – and the transfer is completed according to the requirements set forth in the declaration.

In some condominiums, parking spaces are worth upwards of $10,000 to $15,000. Where parking is limited, some owners are willing to pay high dollar amounts in order to obtain extra parking spaces for their unit. However, it is imperative that if you are a condominium owner looking to purchase (or sell) a parking space that you first look to your condominium’s declaration in order to determine if transferring is allowable; and if so, find out what the requirements are for effectuating such a transfer. If the transfer is not done in strict compliance with the requirements set forth in the declaration, a dispute will inevitably arise over the ownership and use of the parking space. And while the "seller" may be long gone, we have seen many disputes over parking spaces escalate into court cases costing the owners thousands of dollars in legal fees.

 

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(12-25-13)

Association Receiverships

By Roberto Blanch

One of the more feared scenarios in community association living is that a receiver may be appointed to operate your association. Often times, owners, managers and directors alike have referred to such a possibility with great trepidation. Yet despite the general fears associated with the appointment of a receiver for a community association, it seems little is known by the general community association public regarding the reasons why one would be appointed, the extent of such receiver’s powers and the general consequences associated with such an appointment.

A receiver is a neutral party judicially appointed to administer the affairs, and act on behalf of, a party or entity that is deemed to be unable to act on its own behalf. However, the appointment of a receiver is an extreme legal remedy that courts usually try to impose as a last resort. The receiver is required to report to the court its actions and receive authorization from the court to act on behalf of the party for whom it was appointed. The powers granted to a receiver may be broad, with regard to acting on behalf of the party for whom it was appointed, or limited to certain stipulated acts designated by the court. Generally, the receiver is provided with compensation for its services and is reimbursed for its expenses in carrying out its duties. For instance, receivers may engage professionals such as accountants and attorneys to represent its interests, and the costs related to such engagements are typically paid by the entity or party for whom the receiver has been appointed to act.

While such appointments may be rare, receivers may be appointed to represent community association for various reasons. For instance, if an association fails to fill vacancies on the board of administration sufficient to constitute a quorum in accordance with the association’s bylaws, then any unit owner may give notice of his or her intent to apply to the court for the appointment of a receiver to manage the affairs of the association. The laws governing the associations further specify that the salary of the receivers and the court costs and attorney’s fees related thereto shall be the association’s responsibility. Additionally, while such a remedy appears to have been made obsolete due to the recent legislative changes providing associations to recover rents paid for units owned by delinquent owners, if a unit is rented or leased during the pendency of a condominium unit foreclosure action, the association is entitled to the appointment of a receiver to collect the rent paid by such tenant. In such case, the expenses of the receiver shall be paid by the party which does not prevail in the foreclosure action. Furthermore, the laws governing condominium associations in Florida provide for the appointment of a receiver to allow for the proper function of an association in the event certain association affairs cannot be performed following a natural disaster. Lastly, it should be noted that any vendor or other party seeking payment or other type of performance from an association can seek to have the courts appoint a receiver in the event the association appears to be unable to so perform or conduct business with such vendor or other party. The appointment of a receiver in such an event will likely be sought as an additional remedy in an action by such party or vendor against the association seeking damages or other relief against the association.

As evidenced by the foregoing, the appointment of a receiver can be a complex matter which can prove to be costly and frustrating for associations. That said, as is indicated by the foregoing, a well-operated association can avoid having to deal with the expenses and inconveniences of receivers, provided such association’s board is adequately manned to address the business and affairs of the association. In the event an association is confronted with the threatened appointment of a receivership, swift action should be taken to consult with legal counsel to ensure that the association’s interests are adequately defended in such action.

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(12-11-13)

My Association Has

Finally Turned Over – 

Now What Do We Do?

By Laura M. Manning-Hudson

While the recession certainly put a damper on construction over the last several years, the economy is on the upswing and construction of condominiums and single family homes is booming again in South Florida. With the increase in construction and sales, developers of many communities that were built in the mid-2000’s are now turning over control of those associations to the owners. For those owners whose communities have been run by the developer for many years, turnover can seem a bit intimidating. The following is a basic overview of the turnover process.

As a practical matter, transition in a community association is a nebulous process and cannot always be neatly delineated into specific categories. There will be tremendous variations from association to association depending on the order of priority in which each Board addresses turnover issues. One of the first acts of the newly elected unit owner controlled Board should be engaging competent professionals to guide them through the maze of post-turnover issues. These professionals may include managers, attorneys, accountants, engineering or design professionals, and insurance consultants.

An attorney specializing in the representation of condominium and homeowners associations will often be the first professional retained and will be instrumental in putting the "turnover team" together by recommending qualified accountants and engineers. An accountant experienced in community association issues should be retained to review all financial records of a association including the turnover audit as specified in Section 718.301(4)(c), Florida Statutes, or to review the annual financial reports of a homeowners association as specified in Section 720.307(3), Florida Statutes. The accountant should work in conjunction with the association’s legal counsel to review the financial records to determine whether funds collected for the payment of common expenses were properly expended by the developer controlled Board.

Finally, the Board should retain a professional engineer to inspect the physical condition of the condominium building or the common areas in a homeowners association. The engineer’s report should specify any deviations from the approved plans and specifications, descriptions of any building code violations, and areas of poor workmanship. Regardless of whether the association is ultimately able to recover the costs of correcting any construction defects from the developer, the engineering report is often a useful tool in establishing programs for preventive maintenance and for determining proper funding of association reserve accounts.

In addition to retaining the above professionals, the newly elected Board should immediately attend to items such as changing signatures on bank accounts or establishing new bank accounts; changing the registered agent of the corporation; verifying that the corporation is in good standing and all fees are current; verifying that the yearly fees due to the Division are current (if any); verifying that payment to all vendors, contractors and other parties are current; verifying that payments for all insurance premiums are current; verifying the expiration dates of all insurance policies; and establishing a regular schedule for Board meetings.

After the performance of the immediate housekeeping tasks, the Board should establish short and long term objectives in connection with the operation of the association. These acts may include establishing committees to assist the Board (such as finance, architectural control, screening, grievance, and document revision committees), reviewing the status of collection of assessments and implementing a collection policy; and reviewing all of the records turned over by the developer with particular emphasis on review of agreements, financial records, plans and specifications (in connection with the evaluation of construction issues), and the association’s governing documents.

In addition to compliance with all statutory requirements of properly noticing all meetings of the Board and of the unit owners, the association’s by-laws should be thoroughly reviewed so that all meeting forms and procedures are specifically tailored to any particular requirements therein. Additionally, it should be noted that Florida Statutes governing associations require directors to complete Certification Forms or participate in State-approved Board Member Certification Courses prior to a pre-determined deadline.

The turnover process is lengthy and complicated. However, by employing patience and the proper qualified representation, newly appointed members of a post-turnover community may ensure achieving optimal results for the benefit of their investment and their association.

 

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(11-27-13)

Homeowner Alterations

By Roberto C. Blanch

Some individuals argue that maintaining the uniform appearance of the homes or units in many condominium or homeowner associations is a valuable aspect of owning a home governed by community associations. However, often times, the owners of homes or units governed by community associations seek to deviate from such uniformity and endeavor to implement alterations to the appearance of their homes or units. The willingness of boards of directors to agree to some of the proposed alterations varies widely from one community to another – and in some instances, associations may not even have the right to oppose proposed alterations. When presented with a situation in which an owner is interested in making an alteration to his home or unit, community association directors should consider certain factors prior to making their determination.

First, it must be determined whether the Association has the right to approve or disapprove the proposed alteration. For instance, in the event that the proposed alteration is deemed to affect or alter common elements or common areas, then the association may not have an option but to deny the proposed alteration given that some statutes and the provisions of some community association governing documents restrict the ability of owners or associations to effectuate changes to the common areas or elements. Furthermore, in some instances, alterations to the common areas or elements may only be allowed in the event a certain vote of the owners or directors is obtained. For example, Florida Statutes provide that material alterations to condominium common elements may not be effectuated unless approved by the vote of 75% of the association’s voting interests, unless otherwise provided in the association’s governing documents. While home owner associations do not have a corresponding material alteration statutory restriction, the governing documents of such associations may provide a requirement for an ownership vote to approve alterations to the common areas - as is the case with many condominium associations.

Another issue that should be considered by community associations in connection with owner requests to proceed with alterations is how the alteration may impact the association’s obligations to maintain, repair, replace or insure the areas affected by the alteration. For instance, the owner of a condominium unit may want to enclose a patio by installing a new roof over the affected area and extending the enclosed area of the unit. Such alterations result in the creation of new areas that will have to be maintained, repaired, replaced and insured. Furthermore, even if the association is deemed not to be required to maintain, repair or insure such improvements, the creation of such improvements may affect existing improvements for which the association is responsible. In light of the foregoing, for those circumstances in which the association is inclined to allow owners to alter, the association directors should consider establishing a contractual relationship between the owner and the association to clearly define how the maintenance, repair, replacement and insurance responsibilities related to such improvements are to be divided. The proposed agreement may further serve to clarify other conditions related to the alteration and the association’s approval thereof. For instance, the proposed agreement should establish requirements for the owner to engage licensed and insured contractors, for the work to be performed in accordance with professionally drafted plans and for required permits to be issued for the performance of the work. Additionally, provisions could be included in such agreement for the protection of the association during and after performance of the work, such as insurance and indemnification protection to be provided by or on behalf of the contractor to perform the work.

The foregoing underscores the importance of exercising caution when presented with owner requests to alter home, units or common elements in properties governed by community associations. In light of the broad impact and long term effect that owner alterations might produce, it is advisable for community association directors and managers to consult with qualified and experienced legal counsel to ensure that the association is adequately protected.

 

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(11-13-13)

Do I Really Have To Turn Over A Copy Of The Key To My Castle?

By Laura M. Manning-Hudson

For anyone who lives in a condominium you know that there are certain trade offs that are made as compared to living in a single family home. For instance, you don’t have to mow your own grass, you don’t have to paint your own home, and you don’t have to maintain your own landscaping. But you do have to allow your condominium association into your unit and sometimes you even have to give them a copy of the key. Yes, the State of Florida requires that all condominium associations have the irrevocable right to access all condominium units. Recall that an association has a duty to protect the common elements of the condominium and preclude damage to owner’s units caused by the common elements. As such, the legislature has recognized this duty and codified the duty in Section 718.111(5), Florida Statutes. While an association’s right of access to the units is broad and not restricted to instances in which an emergency is presented, it comes into play whenever the association’s related functions of maintenance, repair, or replacement of property are implicated, and, although the statute does not require that each owner turn over a copy of the key to their unit, many condominium documents, rules and even simple board policies require owners to provide management with a copy of the key to their unit.

There have been numerous challenges to an association’s right to require that a copy of an owner’s key be turned over – all of which have been upheld even amid allegations from owners that they fear theft of their valuables or simply don’t trust their board members. Both the Division of Condominiums and Florida courts have found that an association’s right of access – which is provided for the protection of all unit owners – outweighs any concerns by owners that their valuables could be taken especially where precious minutes could be lost if the association had to find an owner or neighbor or resort to a locksmith for breaking down the door.

While access is allowed, it is not unlimited. Such access must be during reasonable hours, when necessary, for the maintenance, repair, or replacement of the common elements or any portion of a unit to be maintained by the association. In order to avoid the potential for unnecessarily upsetting residents, whenever it is practical or possible, condo association boards should provide notice to their residents of an upcoming inspection in order to allow the resident the opportunity to be present for the inspection. It is also good business practice to have more than one person enter the unit with the contractor. Failure to allow the association access to the unit, or even to turn over a copy of the key to the unit (if required by the association’s governing documents) could result in the association taking legal action against the resident.

Finally, for those associations that do maintain copies of keys to units, instituting safeguards to protect the keys by limiting the number of personnel who have access to the keys and/or who know where the keys are located, goes a long way in ensuring and gaining the trust of the residents.

 

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(10-30-13)

A Basic Contractual Understanding

By Roberto C. Blanch

On a regular basis community association directors and managers are involved in activities resulting in the creation of contracts binding the associations they serve. The nature of such contracts vary and including the creation of contracts for services to be performed for the benefit of the Association or the maintenance or improvement of property. Often times, association directors or managers commit the association to contracts without being aware of such fact or the consequences of the relationship created. The following serve as some tips to consider whenever engaging other parties to provide goods or services for the association.

1. Be aware that you might be entering into a contract binding the association. Often times, vendors or contractors present association directors or managers with "Proposals." Directors or managers might be asked to sign such forms unaware that doing so may submit the association to a contract. As such, it is important to always read every document provided to an association by vendors or contractors, understand the terms thereof and not sign anything if the intent is to have association counsel or another professional review the terms thereof prior to signing same.

2. Know the nature of the contract into which you are entering - what is the contract for? An ideal contract for goods or services is one that clearly describes the services or goods to be provided. For instance, a contract for the painting of an association building should specifically identify products to be used, include a professionally drafted set of specifications for the application of such products, and indicate the warranty that must be furnished for the products used. In many instances, it may be advisable for the association to engage a qualified expert, such as an engineer, to assist with this process.

3. What are the association’s obligations regarding such contract? The contract should indicate what the association is required to do in exchange for the products or services to be performed. For instance, is the association required to provide payment in a lump sum or installments; is the agreement for a definitive period or for a term of several weeks, months or years; does the association need to provide insurance or indemnification for the benefit of the other party? While associations may expect to obtain services or goods as a result of the established contractual relationship, at times vendors or contractors will expect to receive more than payment from the associations.

4. What protections are incorporated into the contract for the benefit of the association? Association contracts should afford protections for the benefit of the association. For instance, a time period should be established for the completion of the service to be performed and terms should be identified for any conditions for payment to be made to the other party. Additionally, the agreement should require that the other party be licensed and obtain permits if necessary. The other party should provide insurance protection for the association and indemnify the association for risks which may not be covered by or exceed the other party’s insurance. Additionally, while most contractual relationships begin on amicable terms, every contract should include a provision establishing the terms pursuant to which the contract may be terminated should such relationship take a turn for the worse.

While the foregoing serves only as an outline of basic concepts that should be considered when establishing relationships potentially resulting in contractually binding the association, community association directors should recognize the importance of seeking qualified and experienced legal counsel and community association management to assist the association in navigating through such an undertaking. In most instances, taking a few extra steps and investing a nominal amount of association resources may mean the difference between having a successful contractual experience or a much more costly one.

 

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(10-16-13)

Negotiating the Short Sale Waters

By Laura M. Manning Hudson

As the South Florida real estate market continues to recover, short sales have become a popular foreclosure alternative. In a short sale, the property’s purchase price is less than the total amounts owed to creditors who hold liens against the property. Accordingly, the owner is required to negotiate a settlement with all of his or her creditors in order to sell the property free and clear of any liens. Condominium associations are often one of those creditors. Commonly, an offer to satisfy the past due assessments, late fees, interest and attorney’s fees and costs is less than the full amount owed to the association. Accordingly, once presented with an offer, the association must address the question of whether it should accept less than the full amount owed and, if so, how much less.

First, associations should view short sales as a positive alternative to foreclosure since the delinquent owner will be replaced by a new, paying customer. In evaluating a short sale offer, information is key. Upon receipt of a short sale offer, the association should request (1) a copy of the lender’s approval letter, (2) a copy of the purchase agreement, and (3) a copy of the proposed HUD-1 settlement statement. The HUD-1 settlement statement identifies how the sale proceeds will be distributed to the lender, the broker(s), the junior lien holders and the association – as well as any charges imposed upon the purchaser and seller. The HUD-1 settlement statement may even reflect a payment to the delinquent owner which is commonly characterized as a "short sale incentive fee" or "relocation fee". If the HUD-1 settlement statement reflects a payment back to the delinquent owner, we recommend that the association object and demand that the association be paid in full prior to the delinquent owner receiving proceeds from the sale. Unfortunately, due to the callousness of some delinquent owners, they may refuse to cooperate and execute the necessary documentation without some form of compensation.

In many instances, we see that the first offer presented to our association clients is slightly greater than the safe harbor protection of 12 months of assessments or 1% of the mortgage, whichever is less. Be advised that the initial offer can always be negotiated and the association should not be afraid to make a counter offer and demand a higher amount. The board of directors should review the purchase price to determine if it represents the fair market value for the property and whether there is the possibility of demanding additional sums from the purchaser. Payments beyond those reflected in the approval letter may be paid to the association by the purchaser so long as they are subsequently approved by the lender and reflected in the HUD-1 settlement statement. There cannot be any side agreements between any of the parties. Following the points identified above, will arm your community association with the tools it needs to obtain either payment in full or a reasonable and fair settlement.

I hope the foregoing proves to be an informative tool for your community association. If you should have any further questions regarding your community association’s rights in a short sale, please feel free to contact our office.

 

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(10-2-13)

HOAs: To Reserve or not to Reserve???

By Roberto C. Blanch

Many homeowner associations’ boards of directors find themselves working on their association bud-gets for the upcoming fiscal year. A good deal of those budgets will include line items for the funding of unforeseen contingencies. In some instances, the directors preparing such budgets will classify the funds in those line items as "Reserve" funds without knowing that laws governing Florida homeowner associations provide for special treatment of such funds. Since the use of designated reserve funds are restricted by Florida law, community association directors should exercise caution before categorizing a budgetary contingency line item as a reserve account.

Specifically, Florida law provides HOA boards with the discretion to fund their association’s budget with reserve accounts for capital expenditures and deferred maintenance for which the association may be responsible, except to the extent that the association’s developer established the reserves or the associations’ membership elected to provide for budgetary reserves. Therefore, while it is advisable for associations to have some funds on hand for anticipated capital expenditures and deferred maintenance, in the event that HOA reserves were not established by the association’s developer or the associations’ membership, then boards might wish to consider categorizing such funds as something other than "reserves" (e.g. "Contingency Funds"). Of course, directors in those communities without "reserve" accounts should be mindful of limits that might be imposed upon increases resulting in the level of assessments charged to owners as a result of the increases to budgetary funding for capital expenditures and deferred maintenance. Additionally, directors HOAs without established reserves will have to be sure to comply with statutorily required disclaimers to the association’s membership if the association is responsible for the repair and maintenance of capital improvements that may result in special assessments if reserves are not provided. The terms of such disclaimer will differ in the event that formal reserves have not been established but the association is providing for the funding of capital expenditures and deferred maintenance.

For those HOAs with reserves established by the association’s developer or membership, directors should pay special attention to the statutory conditions for the funding of such accounts and the limitations imposed by law as to the use of the funds accrued in reserve accounts. For instance, the applicable statutes provide a formula that must be followed as to the annual funding of the reserve account. Additionally, once reserves are formally established, the applicable statutes permit for the funding of reserves to be reduced or waived upon obtaining a favorable vote from a majority of the association’s membership voting at a meeting at which a quorum is present. Lastly, the funds that have accumulated in reserve accounts shall remain in such accounts and shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a meeting at which a quorum is present.

Once again, the foregoing serves to illustrate the importance of having HOA directors work closely with a team of experienced and qualified community association managers, accountants and attorneys in order to steer clear of the pitfalls that may arise in the complex world of community association administration.

 

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(9-18-13)

New Broward County Ordinance to Affect Community Associations

By Laura M. Manning-Hudson

We often comment on the necessity of community associations to comply with fair housing laws in terms of making adjustments in rules and regulations for residents who request accommodations. For instance, the most common scenario arises when a condominium that has a "no pet" rule is faced with a resident who requires a service animal or an emotional support animal. Sometimes, residents request modifications to the common areas in order to accommodate their disabilities. State and Federal legislation regulate housing providers’ (this includes community associations) obligations to provide reasonable accommodations. Many local governments also address and/or mirror the State and Federal laws in their codes or ordinances. Most recently, however, the Broward County Board of County Commissioners amended the Broward County Code to impose additional restrictions specifically on condominium, homeowner and cooperative association boards.

Chapter 16 ½ of the Broward County Code of Ordinances sets forth Broward County’s Human Rights laws which protect individuals from discrimination based on race, color, religion, sex, national origin, age, marital status, political affiliation, familial status, disability, sexual orientation, pregnancy, or gender identity or expression, in connection with employment, public accommodations, and real estate transactions. Like other local governments, Broward County’s Human Rights Ordinance mirrors State and Federal laws in many respects. However, Chapter 16 ½-35.6 now requires that within ten (10) days of receipt of an application (or amended application) to purchase or rent a unit, association boards shall provide the applicant with written acknowledgement of receipt of the application. Then, within forty-five (45) days after receipt of a complete application, the association shall either reject or approve the application and provide the applicant with written notice of same. If the application is rejected, the written notice must state the reason for the rejection.

Community associations’ power to approve applicants for rent or purchase is derived from their governing documents. Similarly, where there is power to approve an application, there is power to disapprove – if to approve said applicant would otherwise violate a restriction in those same governing documents. These additional restrictions imposed by Broward County, while intended to afford additional protections to individuals buying or renting in deed restricted communities, impose additional burdens on community association boards. As discussed above, State and Federal regulations already require associations to make reasonable accommodations in their rules, policies, practices, or services, when such accommodations may be necessary to afford a disabled person an equal opportunity to use and enjoy a dwelling. Now, however, an association could be subject to a code enforcement violation or fine for failure to comply with this new law.

Accordingly, associations in Broward County would be well advised that upon receiving an application that looks as if it may need to be denied based upon a violation of the governing documents, to verify the provision in the governing documents before issuing a denial. Additionally, if the applicant that is being denied is a member of a protected class of individuals – or could be defined as disabled under State and Federal laws, then an association is well advised to check in with its legal counsel before denying an application in order to determine what, if any, additional information or documentation may be requested from the applicant in order to support the applicant’s need for the accommodation – and protect the association from claims against it for discrimination. Finally, associations may want to tighten up any written rules and regulations or policies and procedures that have been in practice for many years (but perhaps have not been in writing) in order to avoid infractions under this new ordinance.

Because it is very likely that other governments will follow, it is a heads up of what is probably to come.

 

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(9-4-13)

Do you Really Need to Install a

Fire Sprinkler System in your

Condominium Building?

By Roberto C. Blanch

Many condominium buildings throughout Florida will be required by local municipal ordinance or other requirements to retrofit their buildings with code-compliant fire sprinkler systems. The estimates provided to a good deal of those associations indicate that the costs associated with such retrofitting may exceed the million dollar range. However, the owners of units in a large number of the condominium associations which would be required to retrofit their buildings with fire sprinkler systems may not be in a position to pay the assessments that may have to be imposed by the association in order to comply with the foregoing retrofit requirements. Fortunately, Florida law offers condominium associations with breathing room - providing unit owners with the ability to vote to forego the retrofitting that may be required by the local governmental authorities having jurisdiction.

The Florida Condominium Act provides that the local governmental authorities having jurisdiction cannot require a condominium building to be retrofitted with a fire sprinkler system if a majority of the voting interests within the condominium vote to forego such retrofitting. Those associations that do not vote to forego the retrofitting requirement may not be obligated to retrofit their buildings prior to December 31, 2019. The law further provides that associations which have not obtained the vote to forego the retrofitting requirement, and which have not yet achieved compliance with the applicable retrofit requirements, will have to initiate the application process for the issuance of a building permit by December 31, 2016, for the installation of such fire sprinkler system by the December 31, 2019, deadline.

It is important to keep in mind that the above-described majority vote of the association’s voting interests may be obtained by written consent of the association’s members or by a vote at a duly noticed meeting at which a quorum has been achieved. If the vote is to be taken at a meeting, then the use of limited proxies may facilitate the association’s efforts to obtain the vote. Once the required vote is achieved, then other steps must be followed. For instance, a certificate of the vote to forego the retrofitting requirement will have to be filed in the public records of the county where the condominium is located. Additionally, a written notice must be sent to the owners within 30 days of the vote announcing the successful results and a notarized affidavit must be kept with the association’s official records to document that the foregoing notice was properly sent. Within 60 days from recording the above-described certificate, the association must also file a notice with the Florida division of condominiums announcing the successful vote. Lastly, each unit owner is required to provide a copy of the notice sent by the association to anyone renting his unit and to the purchaser of the owner’s unit prior to the closing of such sale.

It should be noted that the decision to forego retrofitting is one that should be carefully evaluated by condominium directors, managers and unit owners given that buildings which forego retrofitting will not have the fire sprinkler systems that could play a vital role in protecting the residents of such buildings from injury and damage in the event of a fire. Additionally, buildings that forego retrofitting may be required to pay higher insurance premiums and may be subject to lower property values due to the lack of life safety systems valued by some purchasers. Moreover, even after a successful vote to forego retrofitting, owners of units in a condominium may trigger a vote to require retrofitting, provided at least 10% of the voting interests petition for such a vote.

Given the tedious requirements involved in above-described process and the impact such vote might have on a community, it is advisable that associations seek the assistance of their legal counsel in the process to ensure that the votes have been properly obtained and to minimize the risk of liability that may result from a failure to comply with the applicable requirements.

 

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(8-21-13)

Association Held Liable For

Excessive Collection Demands

By Laura M. Manning-Hudson

While most associations these days accept that a bank’s liability for past due assessments is capped at 12 months of assessments or 1% of the original mortgage amount, whichever is less, some associations push the envelope and still attempt to collect more. However, a newly released opinion from the Third District Court of Appeal illustrates the risks and exposure that associations and their attorneys take when seeking amounts in excess of the statutorily allowed maximum.

In Ocean Bank v. Caribbean Towers Condominium Association, Inc., the appellate court addressed both the issue of the association attempting to collect more than the statutory maximum – and the bank’s claim for attorney’s fees for having to fight it out with the association. In Caribbean Towers, the bank brought foreclosure actions against two condominium unit owners. The bank named the association as a defendant in both cases because the association had liens for unpaid assessments. The bank ultimately obtained foreclosure judgments and subsequently purchased the units at the foreclosure sale. Notwithstanding the statutory maximum, the association issued estoppels for the full amount of the past due unpaid assessments, plus interest, late fees and attorney’s fees. Because the association repeatedly demanded payment of the liens in excess of the statutory maximum amounts, the bank was forced to delay closings on the units.

Thereafter, in an attempt to resolve the dispute quickly, the bank filed post-judgment motions against the association in the foreclosure actions requesting application of the statutory cap to the association’s liens and an award of attorney’s fees pursuant to Section 718.303(1), Florida Statutes. Section 718.303(1), Fla. Stat., provides that the prevailing party is entitled to recover its attorney’s fees in disputes between unit owners and associations. Both trial courts agreed with the bank regarding the application of the statutory maximum. However, both trial courts declined to award the bank its attorney’s fees and costs.

The appellate court agreed with the trial courts’ findings that an association is not entitled to recover anything in excess of the statutory limit of 12 months of assessments or 1% of the original mortgage amount, whichever is less. However, the appellate court held that the bank was entitled to recover its attorney’s fees for having to litigate the association’s position – which one trial court referred to as "frivolous". The appellate court found that while the bank’s claims for attorneys fees did not exist at the beginning of its foreclosure cases, when the dispute for unpaid assessments arose, the bank was the owner of the units, and therefore was entitled to its attorney’s fees as the prevailing party.

In its opinion, the appellate court stressed the excessive demands of the association, noting that for one unit, the association claimed almost nine (9) times that which it was entitled to collect, and on the other unit, the association improperly claimed more than thirteen (13) times the amount which it was entitled.

As a result of the association pushing the envelope and attempting to get more than it was allowed by law, the association exposed itself to a claim for attorney’s fees that could possibly be in the thousands of dollars, if not more. If appellate attorney’s fees are awarded to the bank, the association will likely be accountable for paying those fees as well.

This decision highlights the importance of seeking counsel from community association attorneys with regard to association collection policies and uncertainties about the association’s ability to recover attorney’s fees, costs and other charges from a bank or other purchaser.

 

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(8-7-13)

Do New Laws Provide

Unintended Consequences?

By Roberto C. Blanch

The recent session of the Florida legislature produced a series of new laws affecting community associations in Florida. However, often times the creation of new laws have unintended consequences that could not be foreseen.

One example of the foregoing relates to the provisions of Section 718.112(2)(d)2, Florida Statutes, governing the qualifications of candidates seeking to be elected to a condominium association’s board, which were modified by HB 73. Prior to July 1, 2013, a candidate seeking to be elected to a condominium board was required to meet certain procedural thresholds established by the statute and statutory eligibility criteria included in the above-enumerated statute. Such eligibility criteria provided that the following individuals could not be listed on a ballot for a condominium election: (i) a person who has been suspended or removed from the board by the Division under Chapter 718, Florida Statutes; or (ii) a person who is delinquent in the payment of a fee, fine or special or regular assessment owed to the association for more than 90 days. However, after July 1, 2013, the second prong of the foregoing criteria was revised to preclude condominium election ballots from including the names of individuals who are delinquent in the payment of monetary obligations due to the association. Such legislative change broadened the scope of the types of debts that may disqualify an individual from being considered for condominium board election. Prior to July 1, 2013, a candidate would be ineligible if he was delinquent by more than 90 days in his obligation to pay the association a fee, fine or special or regular assessment. Now, the 90 day requirement has been eliminated and the debt has been expanded to include any "monetary obligation" owed to the association.

However, in those associations where there is no requirement for directors to be unit owners, it would be possible to have a non-unit owner - with no obligation to pay assessments to the association - run for election – whereas a unit owner who is delinquent in his monetary obligations to the association may not do so. Additionally, while a sitting director may not be considered disqualified from the board until he has been delinquent in his payment of monetary obligations to the association for more than 90 days, the tolerance for a candidate is significantly lower. The foregoing issues present interesting questions. For instance, in those condominiums with no requirement for directors to be unit owners, does it make sense to remove the requirement for unit owners to be current on their monetary obligations to the association? Additionally, would it not make sense to disqualify directors from the board the moment they become delinquent, as is the case with regard to the consideration of a candidate as ineligible for election to the condominium association board? Additionally, was it intended for all possible monetary obligations owed to the Association to serve as the basis for a potential disqualification from eligibility to run for election to the board? For instance, should the eligibility also extend to those owners that may have monetary judgments entered against them by the association, albeit not related to their assessments, fines or fees?

The foregoing illustrates that new laws may not always eliminate problems or questions related to condominium governance but may create a new line of issues or uncertainties. This result highlights the importance of seeking counsel from community association attorneys with regard to the new laws affecting your community association and the impact that such laws might have.

 

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(7-24-13)

Supreme Court Responds to Law Eliminating Important Homeowner, HOA Protections Against Construction Defects in Community Infrastructure Systems

By Laura M. Manning-Hudson

In previous articles and blogs we wrote about a new law enacted in 2012 which we considered one of the most surprising and anti-consumer pieces of legislation for Florida homeowners and HOAs. Section 553.835, Florida Statutes, was enacted in 2012 in direct response to a decision from the Fifth District Court of Appeal in the case of Lakeview Reserve Homeowners Association, Inc. v. Maronda Homes of Florida, Inc., where the appellate court extended the common law warranty of fitness and merchantability to off-site improvements such as infrastructure, roadways, retention ponds and drainage systems within a community, holding that "essential services" must include items that obviously support the home and make it habitable including roads for ingress and egress, drainage systems to divert flooding, retention ponds to correct water flow damage, and underground pipes (whether they be storm water or sanitary sewer pipes) which are necessary for living accommodations. The new law however, eliminated an HOA’s cause of action for breach of the common law warranty of fitness and merchantability as it pertains to improvements that are not located on or under the lot on which the home is constructed or which do not "immediately and directly support the habitability of the home itself." The new law was specifically enacted "to reject the decision by the Fifth District Court of Appeal in the Maronda case…" and was also intended to apply to all cases accruing before, pending on, or filed after the July 1, 2012 effective date of the statute.

But earlier this month the Supreme Court of Florida issued its opinion agreeing with the appellate court below and chastising the legislature for overstepping its bounds stating "[t]he statute even provides that the purpose of the law is to place limitations on the applicability of the doctrine or theory of implied warranty of fitness and merchantability, and to reject the decision by the Fifth District Court of Appeal in the Maronda case. This is a clear violation of separation of powers because the Legislature does not sit as a supervising appellate court over our district courts of appeal."

The attempt by the legislature to limit the Lakeview Reserve HOA’s ability to continue to pursue its existing cause of action against its developer and builder would have had the effect of just pulling the rug right out from underneath the HOA. The wisdom of the Supreme Court prevailed however and the Lakeview Reserve HOA will be able to maintain its claim because generally, once a cause of action accrues, it becomes a vested right – which means that it is a right that may not be eliminated or curtailed in any manner. Because in Maronda, the HOA had already filed suit for breach of implied warranties when the statute was enacted, its cause of action became a vested right which could not be taken away by an act of the legislature.

Even so, the developer and builder argued that the Supreme Court should not apply implied warranties beyond what the statute prescribes because it is generally the province of the Legislature to balance public policy and define the scope of the implied warranties. The Supreme Court fired back again stating "[i]t is however, the province of this Court and not the Legislature to decide issues of constitutional validity when a statute attempts to retroactively abolish common law remedies or the elements of such actions." The Supreme Court also held that the new law does not apply to any causes of action that accrued before the effective date of the law.

With the passage of this new law, it is more imperative than ever that the turnover process for communities include thorough testing and inspections of the infrastructure and drainage systems by a certified engineer. If the community is experiencing flooding prior to turnover, the association should have its engineer inspect and identify any flaws in the infrastructure that may require additional work or repairs. Many times in the past, when these types of defects have arisen, the parties have been able to settle their issues because reputable developers and contractors generally take responsibility for faulty infrastructure and make the necessary repairs.

 

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(7-10-13)

Condominium Association Prevails Over Lender

By Roberto C. Blanch

A recent article in the June 24th, 2013, edition of the Miami Herald featured a David vs. Goliath story telling of how a local South Florida condominium association defeated a national banking institution in its effort to foreclose a mortgage encumbering a unit owned by the association. The association in question acquired title to the unit following its foreclosure of a claim of lien filed against the unit as a result of the former unit owner’s failure to pay the association’s assessments.

In the case of U.S. Bank vs. Rivka Bichler, et al., U.S. Bank filed a mortgage foreclosure action against Rivka Bichler, purportedly the owner of a unit at the condominium governed by the Peninsula Condominium Association, Inc. ("Association"). However, as is the case with many Florida condominium associations, the Association also pursued its own action against the owner of the unit in question to collect condominium assessments owed to the Association by such owner. The Association prevailed in its action and was ultimately vested with title to the unit following the auction of the unit. Meanwhile, the bank’s case was dismissed and subsequently re-filed against the Association following the date that the Association acquired title to the unit. However, in defending against the new foreclosure action filed by the bank, the Association argued that the bank was barred in proceeding with its case alleging that it filed the new case after the statute of limitations expired in connection with the bank’s claim. While the parties disagreed as to the date upon which the five-year statute of limitations began to run, the court granted summary judgment in favor of the Association and dismissed the bank’s foreclosure action against all defendants.

The foregoing case marks an important victory for the Association and will likely serve as a model for many other community associations in Florida which are similarly situated. The case further highlights the importance of seeking the guidance and involvement of qualified community association legal counsel at all points of the collection process – even in the defense of actions filed by lenders to foreclosure upon unpaid mortgages encumbering units within the communities governed by associations. In many cases, community associations have been reluctant to pursue collection of their liens when a bank’s foreclosure action is pending – citing that the safe harbor protections afforded to lenders serves as a deterrent to pursuing collection of assessments. Additionally, many associations disfavor pursuing an active defense of mortgage foreclosure actions filed against owners of units or homes governed by the association, speculating that there may be little reward for the costs associated with such efforts. However, in some of the above-described cases, the involvement of qualified community association legal representation may serve to assist associations with successfully dismissing improperly filed lender foreclosure actions – and some of those cases may serve as a final adjudication of the lender’s rights to foreclose.

As was the case with the Peninsula Condominium Association’s defense, an association’s efforts to defend against a mortgage foreclosure action may result in a significant win fall for the association. For a more detailed analysis of your association’s rights in lender foreclosure collection cases, it is suggested that you consult with your community association counsel.

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(6-26-13)

Appellate Court Reverses Foreclosure Judgment for Lack of Proper Notice to Unit Owners by Association

By Laura M. Manning-Hudson

 

A decision earlier this month by the Third District Court of Appeal serves as a good lesson to community associations and their attorneys about the importance of working closely with their process servers to ensure that all of the statutory requirements for service or "constructive service" on unit owners in foreclosure actions are met. In the case of Castro v. Charter Club Inc., the appellate panel reversed a Final Judgment of Foreclosure finding that the search and inquiry performed by the Charter Club condominium association and its attorneys did not satisfy the constructive notice statute, its notice by publication was improper, and the foreclosure judgment against the homeowners was void and must be vacated.

In this case, the association’s process server went to the Castro’s daughter’s home address, which the couple had listed as their alternate address and billing address with the association. The daughter stated that she gave the process server the new address for the Castros, but the server never wrote it down. The process server then went to a wrong address in search of the Castros, and no further attempts were made to revisit the daughter to verify the correct address. The process server also did not advise the daughter that he was there to serve the Castros with a complaint for foreclosure.

In addition, the association had approved the Castros to lease their unit to a tenant who paid rent directly to the association’s attorney in order to pay down the past-due assessments. The association received rent payments for two years prior to moving forward with its foreclosure action. The association never attempted to contact the tenants to see if they knew the correct address for the Castros.

As a result, the court found that the association did not use all of the knowledge in its command or extend its inquiry to those persons likely or presumed likely to know the facts that it sought. Its affidavit of diligent search filed with the trial court merely stated that the Castros’ residence was unknown, and it failed to provide the information and addresses that were known to the association for the daughter and tenant. The appellate opinion also notes that the process server’s return of service affidavit was defective where it stated that the server had discontinued trying to serve the Castros with the complaint and summons "for the reasons detailed in the comments below" but failed to include any such comments.

Pursuant to Florida law, in order to employ "constructive service" on an owner who cannot be located, associations must strictly adhere to the requirements set forth in the statute and reasonably employ the knowledge at its command, make diligent inquiry, and exert an honest and conscientious effort appropriate to the circumstance to acquire the information necessary to enable it to effect personal service on the defendant. The efforts in this case appear to have fallen far short of these requirements, and as a result the association’s foreclosure judgment was found to be void and had to be vacated. We encourage condominium associations and HOAs in Florida to exercise diligence in their work with their attorneys and process servers to locate unit owners and ensure proper notice to those unit owners in foreclosure actions.

 

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(6-12-13)

Inspections, Work Logs Imperative to Protect Condominium Associations Against Defective Concrete Restoration Projects

By Laura M. Manning-Hudson 

During the lifespan of every concrete building in South Florida, a concrete restoration project is virtually un-avoidable. Concrete restoration is among the most expensive construction renovation projects that associations have to take on. As such, many associations try to mitigate the costs as much as possible, but the old adage that an ounce of prevention is worth a pound of cure certainly holds true with these projects.

When undertaking a concrete restoration project, an association should be very mindful of its record keeping with regard to the project. My colleagues and I have experienced a number of instances where our association clients have had defects manifest themselves only a few years after a concrete restoration project was completed. An association can have a difficult time proving that the contractor was responsible where there are inadequate and incomplete records of the work that was performed. After inspecting the defects in question, many contractors respond that they are not responsible for the work on the affected areas. Associations must then request records and work logs to verify the contractors’ claims. In many instances, once the association requests records, it is determined that the contractors and engineers did not keep detailed work logs of the work that was performed, leaving the association with little evidence to prove their claims. When the association keeps its own records of the work being performed, this problem is avoided.

There are a number of additional measures that associations should take to avoid this scenario and protect themselves against the potential for inferior and defective work in concrete restoration projects. The foremost among these is the retention of an independent third-party engineer or project manager to oversee and chronicle the restoration work, and to help ensure that all of the work is performed in a cost-effective and timely manner. A third-party project manager not only protects the interest of the association during the construction process but also protects the association’s interests should defects in the restoration work arise in the future. The benefits of hiring a third-party project manager are countless. For example, project managers assist in the evaluation and hiring of the project engineer and contractor; evaluate the work of the engineer and contractor; hold timely meetings to review the process of the work being performed; review the payment requisitions and daily logs; and keep the association informed of any potential issues on the project.

In addition to the use of an independent engineer or project manager, the association’s attorney should also be called upon to review and or draft the contracts for the restoration project. The association should ensure that its contract includes stipulations requiring that the general contractor and engineer maintain and provide to the association detailed work logs of all of the work performed. The standard warranty language in general construction contracts will not suffice without the detailed work logs showing exactly what work was performed and the location of such work in every facet of the building. It is much more difficult to hold contractors liable for defects in areas that are not documented as having been part of the restoration work performed.

Although these additional measures will add to the cost of the concrete restoration project, without them the associations are taking a significant risk in being unable to hold contractors responsible for defects that may arise in the restored areas. Additionally, these added costs are minimal compared to the costs that the associations may endure in litigation or in repairs to the areas which had been restored. There is no doubt that concrete restoration projects are expensive, time consuming and a nuisance to the residents of the building. However, keeping these measures in place throughout the process will mitigate the time and money spent on the project as well as result in a well done concrete restoration project, thus retaining the value of the building as well as the safety of the residents.

 

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(5-29-13)

Fourth DCA Rules Insurance Companies Not Required to Provide Coverage for all Portions of Condominium Property

By Laura M. Manning-Hudson

A recent decision from the Fourth District Court of Appeal found that notwithstanding the requirements of Section 718.111, Florida Statutes, insurance companies are not required to provide an association with coverage for "all portions of the condominium property located outside the units" and "all portions of the condominium property for which the declaration of condominium requires coverage by the association." In the case of Citizens Property Insurance Corp. v. River Manor Condominium Association, Inc., Citizens Property Insurance Corp. ("Citizens") insured River Manor Condominium Association, Inc. (the "Association") for a residential condominium comprised of three buildings and exterior common elements. The condominium was damaged by Hurricane Wilma and, when the parties were unable to agree on the extent of the damage, they participated in a mandatory appraisal process that resulted in an award that specified the total loss sustained by each building and the exterior common elements.

The policies issued by Citizens for each building excluded from coverage "other structures on the demised locations, set apart from the building by clear space," including such things as carports, swimming pools, walks, and decks. Under such exclusion, the condominium’s exterior common elements would be excluded from coverage. However, the policies also contained a provision requiring them to be amended to "conform" to any conflicting statutes of the state in which the property was located. The Association claimed that the exclusion conflicted with Section 718.111, Fla. Stat. At the applicable time, Section 718.111(11), Fla. Stat. (2005), provided, in part, as follows:

(a) A unit-owner controlled association shall use its best efforts to obtain and maintain adequate insurance to protect the association, the association property, the common elements, and the condominium property required to be insured by the association pursuant to paragraph (b) . . .

(b) Every hazard insurance policy issued or renewed on or after January 1, 2004, to protect the condominium shall provide primary coverage for:

1. All portions of the condominium property located outside the units;

2. The condominium property located inside the units as such property was initially installed, or replacements thereof of like kind and quality and in accordance with the original plans and specifications or, if the original plans and specifications are not available, as they existed at the time the unit was initially conveyed; and

3. All portions of the condominium property for which the declaration of condominium requires coverage by the association.

(This provision, as amended, is now found in Section 718.111(11)(d) and (f), Fla. Stat. (2012).

The trial court agreed with the Association and awarded final judgment to the Association, including the amounts that the appraisal attributed to the exterior common elements that were otherwise excluded from coverage.

The appellate court reversed, however, finding that Section 718.111(11), Fla. Stat., governed only condominium associations and not insurers. The court, guided by well-established principles of statutory interpretation, stated that while a statute must be given its plain and obvious meaning, it must be read in the context of the surrounding sections. The court also stated that the language of a statute must not be interpreted so as to lead to an absurd or unreasonable conclusion.

In interpreting Section 718.111(11), Fla. Stat., the court first noted that this section is contained within Chapter 718, which is aptly titled the "Condominium Act," the purpose of which is to give statutory recognition to the condominium form of ownership and to establish procedures for the creation, sale and operation of condominiums. The court went on to explain that the aim of Section 718.111(11), Fla. Stat., is not to further regulate insurance companies, as that industry is extensively regulated in other parts of the Florida Statutes. Instead, Section 718.111(11), Fla. Stat., imposes insurance obligations on associations and their boards.

By further examining the requirement in what was then numbered as Section 718.111(11)(a), Fla. Stat. (2005), that associations use their "best efforts to obtain and maintain adequate insurance to protect the association, the association property, the common elements, and the condominium property required to be insured by the association...," the court found that the purpose of subsection (11) was to identify the types of insurance the association was responsible for obtaining and the level of effort it must use to do so (i.e., "best efforts"). If the Association’s argument that subsection (11) imposed an obligation on insurers to provide such coverage, subsection (11)(a) requiring the Association to exercise its "best efforts" would be rendered meaningless - the Association would not have to use any effort to obtain the required insurance as coverage could be obtained by legislative command if an insurer refused to provide it.

As such a result would be unreasonable, the court, therefore, concluded that subsection (11) was intended to impose an obligation only on associations to use their "best efforts" to obtain the required coverage, and it recognized that there may be time where market forces prevent this objective from being achieved. When read as a whole, Section 718.111(11), Fla. Stat., does not impose any obligation on insurers, and the court reversed the portion of the judgment that awarded damages to the Association for excluded items under Citizens’ policies, i.e., the exterior common elements.

Based on this ruling, associations should carefully review their insurance policies with their insurance agents and/or experienced community association attorneys to determine the extent of coverage provided. Even though the statute requires associations to exercise their "best efforts" to obtain adequate insurance, insurers are under no obligation to provide such coverage. Therefore, associations may have to obtain more than one policy or pay higher premiums to obtain the necessary coverage for the condominium.

 

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(5-15-13)

HOA’s Settlement with Trayvon Martin Family Illustrates Liability Issues Involving Neighborhood Watch Programs

By Roberto C. Blanch

Last year I participated in a discussion with an Associated Press reporter and wrote about a central Florida community association’s apparent endorsement of George Zimmerman as its neighborhood watch captain and his involvement in a tragic incident that took the life of the 17-year-old Trayvon Martin. I addressed the possibility that the victim’s family may file a wrongful death civil suit against the association. Last month, news broke about the purported settlement reached between the parents of the victim and the association for an undisclosed amount reported by several news outlets to be in excess of $1 million.

During the course of the litigation and a mediation attempt prior to the settlement, it was reported that under the heading "Neighborhood Watch," the HOA’s newsletter recommended that residents first call police and then "please contact our Captain, George Zimmerman ... so he can be aware and help address the issue with other residents." This apparent endorsement of Zimmerman, who claimed to have been acting in the above-described capacity when the teenage victim lost his life, may have been considered by the association’s board and counsel to expose the association to liability in the lawsuit.

The Community Associations Institute (CAI) offers an excellent article on neighborhood watch program considerations for HOAs that is available at www.caionline.org/neighborhoodwatch. The article discusses how associations should work with their local police department to implement these programs, create a process for recruiting responsible volunteers who will follow all of the written procedures for the security measures, and continuously reinforce these procedures and the do-not-engage rules with the volunteers.

This article from the CAI is recommended for all community association board members and managers who are considering implementing or have already implemented a watch program in their community. As I wrote in my article last year, there are many reasons why associations should avoid formally creating these watch groups and leave it up to the individual owners to band together to develop their own efforts outside of the auspices of the association. However, for associations that cannot or will not distance themselves from the formation of the watch groups, they should follow the guidelines offered by CAI and consult with qualified legal counsel in order to limit their potential liability.

 

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(5/1/13)

House Bill 1339 Would Enable Foreclosing Lenders to Avoid Paying Their Fair Share to Community Associations

By Laura M. Manning-Hudson

Our other community association attorneys and I have been keeping a watchful eye on the bills impacting condominium associations and HOAs that have been proposed for the current legislative session in Tallahassee. Of the several bills that are being considered, House Bill 1339 filed by Representative George R. Moraitis attempts to clarify existing law, while it also appears to be the most potentially troublesome new legislation for community associations in the state. As it now stands, the bill includes language that would, on the one hand, clarify the responsibility of third-party purchasers of foreclosed condominium units but, on the other hand, diminish the financial liabilities of foreclosing lenders to the community associations.

One of the proposed changes to the Condominium Act presented in HB 1339 provides that a first mortgagee bank who acquires title to a unit by foreclosure is not liable for any interest, administrative late fees, reasonable costs or attorney fees, or any other fees, costs or expenses that came due prior to its acquisition of title. This new provision was drafted with the intent of clarifying the existing law. As the statute is currently drafted, for many years associations have sought to collect attorneys’ fees, interest, and costs over and above the statutory "safe harbor" amounts of the lesser of 12 months of assessments or one percent of the original mortgage. If this change is implemented by the legislature, banks will have even less financial incentive to complete their foreclosures in a timely fashion, and the community associations would need to pass the burden to their paying owners for all of the fees and costs associated with pursuing their collection efforts against the owners who are not paying.

One of the benefits of the proposed legislation, however, is that these same late fees, interest, costs and attorneys fees incurred by an association will definitively be collectible from subsequent purchasers of units (no matter how they acquire title). As the statute exists today, purchasers are jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of the title to the unit. Many "subsequent purchasers" have argued that this provision does not include attorneys’ fees, costs, interest and late fees, and only means "assessments" in the purest sense of the word. Therefore, if this change is implemented by the legislature, condominiums will likely collect more than they have in the past, as there will be no fear of being challenged for attempting to collect these other amounts.

One other potential amendment present in HB 1339 is with regard to an association’s right of access to a unit. As the statute is currently drafted, an association has the irrevocable right to access a unit during reasonable hours when it is necessary to prevent damage to the common elements or other units. This bill would amend the Condominium Act to provide associations with a right to enter abandoned units for inspection, make repairs, turn on the power, and otherwise protect, preserve and maintain the unit and adjoining common elements. Any expenses incurred by an association for this work would be chargeable to the unit owner and enforceable like an assessment. Additionally, the association may file an action in court to appoint a receiver to rent abandoned units for the benefit of the association in order to offset the association’s costs and expenses of maintaining, preserving and protecting the unit.

The legislature remains in session until May 3rd and there are several bills in committee that could affect condominium and homeowners associations. We will continue to monitor the legislative session and post updates in our blog at www.FloridaHOALawyerBlog.com if and when any of these changes are adopted or signed into law. For more information on the pending bills affecting community associations go to: www.myfloridahouse.gov or www.flsenate.gov.

 

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(4-17-13)

Effective Collection Tactics for Associations Against Owners Who File for Bankruptcy

By Roberto C. Blanch

— Part Two

In the first part of this article, I discussed how a Chapter 13 bankruptcy does not require debtors to hand over any property to creditors. Instead, they must use their income to pay all or some of what is owed over a three to five year period, depending on the scope of the debt and income. Most unit owners who file for Chapter 13 are striving to keep their residence, and many attempt to take advantage of a debtor friendly component of the bankruptcy laws affording a debtor the right to "strip off" all junior mortgages, lines of credit and association liens in the event that the debtor proves to the court that the value of their unit is less than the amount due on their first mortgage. If successful, then the unit owner may receive the benefit of a complete avoidance of an association’s lien claim that existed as of the date of the bankruptcy filing.

For owners in Chapter 13 bankruptcy who are trying to formulate a plan to repay some of their debt, the association has the right to review and object to the plan being considered by the bankruptcy court. However, bear in mind that judges tend to be fairly lenient in favor of debtors who make a good faith effort to confirm a repayment plan resulting in a restoration of their financial lives. In reviewing the owner’s proposed repayment plan, a primary concern of an association should be to verify that the amount that the debtor claims to the court that they owe to the association is correct and includes interest and attorneys’ fees. To best protect the association’s claim in the bankruptcy case, the association should file a "Proof of Claim," which details to the penny exactly what the association is owed by the unit owner as of the bankruptcy filing date.

As mentioned, many Chapter 13 bankruptcy debtors attempt to utilize the lien stripping provisions of the bankruptcy code that enable them to have the bankruptcy court wipe away any second mortgages and association liens tied to the property if they are able to demonstrate that they owe more to their first mortgage lender than what their home is worth. If successful, then the owner will be able to avoid all sums due the association as of the bankruptcy filing date. However, note that in order to gain the benefit of the lien stripping laws, the owner must complete his or her bankruptcy plan and remit all payments due under the plan to the bankruptcy court. If the owner’s Chapter 13 case is dismissed for any reason or if the case is converted to a Chapter 7 liquidation (usually because the owner could no longer afford the Chapter 13 plan payments) then the association’s lien will be reinstated against the unit. Importantly, and as some consolation to the association, the owner remains liable to the association for all assessments that come due after the bankruptcy filing, even if a lien stripping action is in place. In other words, if the owner is maintaining the unit in either Chapter 7 or 13, the owner is liable for all assessments that accrue against the unit after the bankruptcy filing date.

As Jeffrey Berlowitz, our firm’s attorney who focuses primarily on bankruptcy matters, has noted in previous articles and videos in our blog at www.FloridaHOALawyerBlog.com, he has helped associations to avoid having their past-due assessments wiped away by Chapter 13 debtors using lien stripping. This is accomplished by countering the owner’s value of their home with an appraisal procured by the association which demonstrates that the current market value is actually greater than the amount due under the owner’s first mortgage.

Last, but not least, and of significant importance, once a bankruptcy case has commenced under any chapter (7, 11 or 13), there is an "automatic stay" on all collection actions by any creditor, including the association. No creditor may continue to collect a pre-bankruptcy debt from a debtor after the bankruptcy case has commenced, unless the court authorizes that creditor to do so. There are mechanisms and procedures to be followed in seeking "stay relief" from the court to resume collections, and these actions should be coordinated with a bankruptcy attorney who focuses on creditors’ rights.

Upon the issuance of a bankruptcy discharge in favor of a unit owner, which signifies the successful completion of the bankruptcy case, the stay on collections is lifted, but the association is no longer able to pursue personal liability against the unit owner for their debt which was owed as of the date of the bankruptcy filing. However, the association can and should pursue its lien rights by initiating a foreclosure action against the unit itself. This will help ensure that it will receive the maximum reimbursement from the foreclosing lender allowed under Florida law and from any potential third party who successfully bids on the unit at the foreclosure sale. The association should also send a letter to the owner acknowledging it is aware of the bankruptcy discharge and will act accordingly, including by exercising its rights to pursue a foreclosure action against the property itself as allowed under the law, and not seek monetary relief against the owner, personally.

 

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(4-3-13)

Effective Collection Tactics for Associations Against Owners Who File for Bankruptcy

By Roberto C. Blanch

— Part One

Associations have been contending with unit owners who file for personal bankruptcy protection in greater numbers since the start of the economic crisis. In response to a unit owner bankruptcy, and in an effort to preserve and protect the rights of an association as a creditor in the bankruptcy proceeding, a number of effective tactics have emerged for associations and their attorneys when faced with a unit owner bankruptcy filing.

Typically, unit owners file either a Chapter 7 or Chapter 13 bankruptcy petition, both of which are personal bankruptcy filings. A Chapter 7 bankruptcy case is filed by an individual and involves the complete liquidation of a debtor’s non-exempt assets to pay creditors in exchange for a discharge of the debtor’s remaining debt, giving the debtor what is referred to as a "fresh start." In Chapter 7, an individual can wipe out many types of unsecured debt and certain secured debt (in the event the debtor surrenders possession of the secured creditor’s collateral – typically real estate or an automobile). However, in the event the debtor elects to retain their real property or automobile, the secured obligation survives the bankruptcy and the debtor remains responsible for these secured obligations during and after the close of the bankruptcy case. This affects an association to the degree an owner elects to retain their unit. If such an election is made, then a Chapter 7 debtor remains obligated to pay the assessments that come due after the bankruptcy filing. Otherwise, if the owner surrenders the unit, then the owner will receive a full discharge of all monetary obligations to the association.

To the extent there is a distribution to creditors in a Chapter 7 case, which is not the norm, the amount creditors will receive is determined by the value of the debtor’s non-exempt assets that are liquidated for the benefit of creditors.

With regard to real property, a unit owner who files for Chapter 7 bankruptcy is either retaining the unit and will agree to continue to pay the monthly assessments that become due after the bankruptcy case is filed, or alternatively, will surrender their unit as a result of the proceedings. In this context, associations should be cognizant of whether the owner is retaining or surrendering their unit. A retention of the unit most often results in the owner maintaining current with the assessments after the bankruptcy is filed. A surrender of the unit, which means the owner is relinquishing possession of the unit to his or her secured creditors (the first mortgage lender and/or the association), will result in the owner discharging all monetary obligations due the association as of the date of the bankruptcy filing. Additionally, at the successful conclusion of a Chapter 7 bankruptcy case, the owner will receive a discharge of all sums due the association as of the date of the bankruptcy filing. However, as stated, if the owner elects to retain the unit, then the owner will remain liable for all assessments that come due after the bankruptcy case is filed.

Sometimes called a personal reorganization bankruptcy, a Chapter 13 bankruptcy does not require debtors to hand over any property to creditors. Instead, they must use their income to pay all or some of what is owed over a three to five year period, depending on the scope of the debt and income. Those who qualify for Chapter 13 must submit a detailed repayment plan that is subject to objections by creditors and must ultimately be approved by the court. Most owners who file for Chapter 13 are striving to keep their residence. However, unit owners are now attempting to take advantage of a debtor friendly component of the bankruptcy laws affording a debtor the right to "strip off" all junior mortgages, lines of credit and association liens in the event the debtor proves to the court that the value of their unit is less than the amount due on their first mortgage. If successful, then the unit owner may receive the benefit of a complete avoidance of an association’s lien claim that existed as of the date of the bankruptcy filing.

The second part of this article in the next issue of Condo News will continue to discuss Chapter 13 bankruptcies and a new remedy for associations that are facing lien stripping which our firm’s bankruptcy attorney, Jeffrey Berlowitz, has been using with a great deal of success. It will also cover the "automatic stay" on all collection actions by any creditor, including the associations, that takes place once a bankruptcy case has commenced under any chapter (7, 11 or 13).

 

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(3-20-13)

Assessment Collections Practices are Leading to Lawsuits

By Laura Manning-Hudson

There have been several recent lawsuits involving associations that have created quite a stir among condominiums and homeowners associations where owners are alleging that law firms (and associations) are improperly seeking to collect unpaid assessments, interest and other charges in violation of Florida law and the association’s governing documents. For example, in the case of USA v. Keys Gate Community Association, Inc. which was filed in February 2012, the government sued the association after the U.S. Department of Housing and Urban Development (HUD) obtained title to a foreclosed home in the community. The government’s lawsuit alleged that the association sought to collect an improper amount of assessments, interest, late charges, attorney’s fees and costs from the new owner (HUD). The suit includes allegations that the claim of lien was invalid because it encumbered the subject property for more money than HUD was legally required to pay, and it further alleges that the claim of lien violated Section 720.3085, Florida Statutes, in that it failed to itemize the charges which the association claimed were owed by HUD. The suit also claims that the claim of lien prevented HUD from being able to sell the property, and alleges numerous causes of action for slander of title, tortious interference with a business relationship, breach of contract, and declaratory relief.

Similar claims regarding the collection of unpaid assessments and other charges have been alleged against other community associations by foreclosing banks which take title to the property, as well as third party investors who acquire title to properties. Florida is not alone, as other states, including Nevada, are also seeing lawsuits pertaining to collections practices and lien amounts.

The lesson here for community associations is to work closely with management and attorneys in order to ensure that the association is seeking to collect the proper amounts from new owners, and to comply with statutory safe harbor limitations as well as any limitations set forth in the association’s governing documents, if applicable. This will enable associations to avoid lawsuits which could potentially force them to pay significantly more in damages than the amount in dispute.

 

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(3-6-13)

2013 Community Association Proposed Legislation

By Roberto C. Blanch

The 2013 Florida legislative session will soon kick into high gear, and with it will come another round of bills related to Florida community associations. This article provides a brief overview of bills that have been filed in the Florida Legislature which aim to create new laws that will impact condominium, cooperative and homeowner associations in Florida.

SB 596: This bill is aimed at Homeowners Associations. It seeks to rename the Florida Division of Condominiums to include HOAs and would also require annual funds collected by the Division relating to the regulation of HOAs to be deposited into the Florida Condominium, Homeowners Association, Timeshares and Mobile Homes Trust Fund. The bill further seeks the establishment of the Office of the Community Association Ombudsman.

HB73 / SB436: These companion bills are the primary vehicles pushing for changes to the laws that govern Florida HOAs, condominiums and cooperatives. Once again, the bills aim to create exemptions of certain elevators from legally mandated code update requirements. If adopted, the law would delay mandated updates to elevators in some community association buildings for implementation of Phase II Firefighters Service until the elevator is replaced or requires major modification.

The bills also seek to remove requirements for a unit owner vote to approve two-year terms for condominium directors and would allow such terms if provisions for them are included in an association’s by-laws or articles of incorporation. Procedural changes are also proposed aimed at clarifying the posting of notices for meetings when using broadcast notices, and at the retention of condominium board member certification certificates for 5 years or for the duration of a director’s uninterrupted tenure.

These bills include proposed revisions to community association laws related to election dispute arbitrations so that such proceedings must be commenced within 60 days from the announcement of election results. New procedures and deadlines for filing recall petitions are also proposed in the event that the association fails to do so timely. The new procedures would create a limit to the nature of the proceeding and would provide a window of time for filing recalls (i.e., not within 60 days of a scheduled re-election or before 60 days from election of the director(s) sought to be recalled).

The legislative changes proposed in this session further seek to expand upon the existing statutory protections related to hurricane shutters and glass installed in condominium buildings by broadening the scope to also reference hurricane "protection" as well as new provisions which are submitted to implement deadlines to add phases in phase condominiums and to clarify developers’ ability to create "condos within condos."

The proposed legislation included in these bills further aims to establish clarifications pertaining to the ability of community associations to suspend the use of common elements due to owners’ or residents’ noncompliance, and the bills also seek to implement restrictions on an association’s ability to suspend use rights for noncompliance to more closely resemble the common areas that are not able to be suspended for non-payment.

These bills contain proposed legislation that would clarify that lawyer-client privileged and work-product privileged documents are not reviewable by owners in HOAs and cooperatives, thus creating other clarifications to official records provisions to more closely resemble the provisions applicable to condominiums. Lastly, proposed changes are included to create certain situations limiting the requirement to obtain mortgagee consents for some votes in cooperatives and HOAs.

SB120/HB175: These companion bills were filed on behalf of developer interests and were proposed to address concerns regarding Interstate Land Sales Act compliance matters to clarify when a condominium comes into existence. These bills contain technical revisions that practitioners will have to be mindful of as many deadlines and timeframes currently included in the Condominium Act commence upon the filing of the Declaration of Condominium – a critical event that the proposed legislation seeks to modify.

HB87: This bill includes proposed revisions aimed at streamlining mortgage foreclosure cases. Many hope that the enactment of this bill will result in procedures that may be used by community associations to assist in having mortgage foreclosures expedited. Expediting mortgage foreclosures is expected to minimize the time associations typically wait before a paying owner is placed in legal title to an otherwise non-performing unit.

All community association stakeholders are encouraged to keep a watchful eye on the progress of these and other bills that have been filed given that their possible enactment may result in significant changes to the Florida community association arena.

 

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(2-20-13)

Third DCA Opinion Deals Significant Blow to Condo Associations That Foreclose on Units in Advance of Banks

By Laura M. Manning Hudson

For the past several years we have written many articles in our firm’s blog at www.FloridaHOALawyerBlog.com encouraging condominium associations to aggressively move their foreclosure cases forward in order to take ownership of those units whose owners are delinquent in advance of the banks’ foreclosures. RealtyTrac’s data shows that it takes an average of 2.5 years for bank foreclosures in Florida to conclude. By aggressively pursuing their own foreclosures, associations were able to acquire title to the units and subsequently lease them in order to recoup some of their back-due fees. This strategy has become increasingly popular with condo associations, which have benefited economically from the approach and, in turn, regained financial stability. However, a recent ruling by the Third District Court of Appeal should cause condominium associations to reconsider.

Our other community association attorneys and I were quite surprised by the appellate court’s reversal of the lower court’s ruling in the case of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. In Aventura, the lower court found that the condo association (which had acquired title to a unit through its own foreclosure) was entitled to bill all of the outstanding past-due fees to the eventual new owner, subsequent to the bank’s foreclosure.

The appellate court disagreed and reversed the decision, finding that Florida law clearly provides that "the previous owner is jointly and severally liable" together with the new owner for all unpaid assessments that come due up to the time of the transfer of title. The opinion reads: "The plain language of the Statute does not state or suggest that an exception is to be made when the previous owner is the condominium association." Therefore, by positioning itself as the "previous owner," the majority held that the condominium association became liable for the unpaid assessments and could not turn around and impose that liability solely onto the eventual new owner.

Justice Frank A. Shepherd wrote the dissenting opinion and stated: "Applying these rules to the case before us, it is apparent the fundamental purpose of the Legislature in promulgating section 718.116 was to assist condominium associations to be made whole in the collection of past due assessments, while at the same time not unduly impairing the value of collateral held by first mortgagees. In furtherance of this design, the Legislature has given condominium associations a statutory lien on each condominium unit over which it has jurisdiction, to secure payment of assessments without the necessity of filing a claim of lien in the public records, with the single exception of first mortgagees, where record notice is required. § 718.116(5)(a). Thus, under the legislative scheme, third-party purchasers of condominium units, like Aventura Management, LLC, are subject to old-fashioned caveat emptor principles. Their protection lies in satisfying themselves before purchase, whether by contract or judicial sale, of the status of past-due assessments on the unit."

Our other condominium association attorneys and I agree with Justice Shepherd’s dissenting opinion. In our communications with Florida legislators prior to and during the 2013 legislative session that starts in March, we will be urging them to enact new legislation to exempt condominium associations who take title to units via their own foreclosures from liability for past-due assessments. Until such legislation is ratified, condominium associations that are considering pursuing their own foreclosure actions and taking title to units in advance of banks’ foreclosures should consult with qualified legal counsel to examine the specifics of their case in light of this new decision.

 

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(2-6-13)

ALERT: 

3rd District Appellate Opinion may affect Collection Strategies!

By Roberto C. Blanch

In its recent opinion in the case of Aventura Management, LLC vs. Spiaggia Ocean Condominium Association, Inc., the Third District Court of Appeal may have significantly impacted the collection strategies implemented by many condominium and homeowner associations in Florida. The case involved a condominium association’s efforts to recover full payment of past-due assessments and related amounts against an entity that acquired title to a unit resulting from a lender’s foreclosure of the mortgage on such unit. At the time that the entity acquired title to the unit, the condominium association was the owner of the unit in question – having taken title to the unit as a result of being the prevailing bidder at the clerk’s sale following the foreclosure of the association’s lien on the unit.

In its attempts to recover payment from the new entity unit owner, the association argued that the condominium statutes in Florida provide that unit owners are jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title to the unit. While the trial court apparently agreed with the association’s position, the appellate court disagreed, determining that the association was the "previous owner" as contemplated in the statutes and as such, the association was jointly and severally responsible for the assessments together with the person or entity that owned the unit prior to the association.

The appellate court was not persuaded by the association’s arguments that it was not responsible for the assessments and other amounts owed to the association. These arguments included claims that the applicable statutes were not intended to apply to associations acquiring title to units as a result of their own foreclosure cases, and that the new entity owner knew or should have known that it was responsible for the past-due assessments and other sums.

The appellate court is relevant given that the current legal and economic climate for community associations continues to be dominated by excessive mortgage foreclosure actions, which at times are dueling with community association efforts to collect on unpaid assessments owed by the owners of units subject to such mortgage foreclosure actions.

In light of the legislative protection for lenders foreclosing on their mortgages on units in community associations, prior to the inundation of court dockets with mortgage foreclosure cases, community associations were traditionally reluctant to aggressively pursue foreclosure actions on their own liens if the same unit was subject to a mortgage foreclosure action. However, the economic and real estate market crash coupled with the glut of mortgage foreclosure cases and the robo-signing fiasco dealt a crippling effect to the court system and the ability of community associations to collect upon delinquent owners. The board of directors of community associations and their management and legal counsel were forced to depart from the traditional philosophy of standing on the sidelines while bank foreclosure cases proceeded at speeds less than snail’s pace. As a result, community associations commenced aggressively pursuing their lien foreclosure cases notwithstanding the existence of lender foreclosure cases on the same property – in hopes that such efforts would aid in mitigating prolonged periods of weakened cash flow to the associations.

As a result of these strategies, many community associations foreclosed upon their liens, resulting in the acquisition of such foreclosed homes by third parties or more typically, the acquisition of such homes by the associations themselves – in both instances, subject to the foreclosing lenders’ mortgage liens. In cases where associations acquired title, some of these associations continued to pursue collection of past-due assessments from the eventual third-party purchaser who acquired title to the home at the conclusion of the lender’s foreclosure case – despite objections from such new third-party owners. However, in light of the ruling in the Aventura Management, LLC case, community associations will have to think twice before continuing with such aggressive strategies.

Accordingly, this decision underscores the importance for community association managers and directors to consult with qualified legal counsel regarding the pros and cons of pursuing various strategies related to the collection of delinquent association assessments.

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(1-23-13)

The Laws Governing Condominium Association Meetings and Meeting Notifications

By Laura M. Manning-Hudson

One area of the law which our community association lawyers get asked about on a regular basis is the notice requirements for the various types of condominium association board meetings. Condo associations must strictly follow the statutory requirements for noticing board meetings in order to avoid potential legal complications. This article will serve as a refresher for condominium association board members and unit owners on compliance with the basic laws governing notification of association board meetings.

There are two levels of notification which are required by law for different types of condominium association board meetings. For all general board meetings that must be open to the unit owners, the minimum standard requirement is that the notice with the corresponding meeting agenda ("Notice") be posted at least 48 hours immediately prior to the meeting. The association must post and maintain the Notice in a conspicuous place on the condominium property, and the Notice must specifically identify the agenda items that are slated for discussion.

However, some board meetings must be noticed 14-days in advance. The notice for such meetings must be posted on the condominium property as well as delivered to each owner. While Section 718.112, Florida Statutes, does not require the Notice to be mailed, we highly recommend it, given that the post office may provide proof of the mailing, which may become necessary if the distribution of the notice is called into question. Further, many owners do not reside in the building and have provided another address for all association correspondence, making personal delivery impossible in some instances. This 14-day Notice is required for board meetings involving discussion and voting of proposed annual budgets of an association or revisions to such budgets, non-emergency special assessments, establishment of the deductible for property/casualty insurance, or changes to the association’s rules regarding unit use.

Exceptions to the above-described meeting notice requirements may apply for emergency board meetings. However, these meetings are generally limited to emergencies that may result in harm to persons or property.

Closed meetings of the board which are not open to unit owners are limited by law only to meetings with the association’s attorney with respect to proposed or pending litigation, when the meeting is held for the purpose of seeking or rendering legal advice, or meetings of the board alone to discuss personnel matters. While the law allowing for such closed meetings does not speak to a notice requirement, as a conservative measure, we recommend that the Notice be posted in a conspicuous place on the condominium property at least 48 hours prior to the meeting. The notice for such meetings should clearly indicate that it is a closed and private meeting of the board.

Should the board fail to notice meetings in accordance with the requirements of The Condominium Act, the board may be required to re-convene any meetings which are found to be non-compliant with the statutory requirements, and any votes and decisions made during such meetings may have to be repeated. Boards found to be repeat offenders may be fined by the state’s Division of Condominiums. Additionally, decisions that are made during the improperly noticed meetings can be called into question, and owners who have been adversely affected by board actions can mount challenges. Such unit owner challenges may result in litigation, which is time consuming and costly to associations. There is also the potential that prospective owners will look into the complaints filed with the Division of Condominiums against the association, possibly raising a red flag in the minds of potential buyers as to the desirability of owning a unit in the condominium.

Associations and their boards should bear in mind that the majority of their board meetings will only require the 48-hour posted Notice, so compliance with that aspect of the meeting procedures should be fairly simple and straightforward. However, there will be instances in which Notice of a meeting must be posted conspicuously on the condominium property and mailed to each unit owner at least 14 days prior to the meeting, or in which the association’s governing documents require a different procedure regarding the issuance of a board meeting notice. If uncertain as to which notice requirements are applicable, it is advisable to contact the association’s legal counsel for guidance.

 

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(1-9-13)

Top 10 Collections Resolutions for 2013

By Laura M. Manning-Hudson

The start of the year marks an ideal time for community associations to take a close look at their collections practices and establish some new year’s resolutions to make their efforts effective. Here are our top 10 suggestions for the best collections resolutions for associations to adopt for 2013:

1. Avoid Delays – Delays in taking action to collect delinquent dues and assessments from owners only encourage them to continue to avoid paying their share. It is natural to sympathize with owners who are struggling financially, but association boards have a fiduciary duty to protect the interest of the association as a whole. Associations should adopt uniform collections policies that call for expeditious action to begin the collections process.

2. Rely on Experts – Associations should rely on their attorneys to guide them through the different options that they have available to collect from delinquent owners. Part of being automatic with your collection process is knowing when to take the next step and what that step should be.

3. Review The Governing Documents – It is imperative for boards to review the association governing documents in order to determine whether new rules need to be adopted to establish uniform collections procedures for the property.

4. Issue Demand Letters Quickly – Associations that do not establish uniform collections procedures slow down the start of the process by delaying the use of a demand letter once an owner’s payments are delinquent. There are many owners who will refuse to pay until they receive such a letter.

5. File a Lien – Florida law requires that condominiums wait at least 30 days and HOAs at least 45 days from the issuance of the demand letter before they can file a lien against the owner’s property for continued nonpayment. Associations should expeditiously exercise their lien rights by filing the claim of lien against the owner’s property immediately after the statutory waiting period expires.

6. File Foreclosure Actions – Florida law requires that associations provide a delinquent owner with an intent to foreclose letter prior to initiating a foreclosure action. Condominiums must wait at least 30 days and HOAs at least 45 days from the issuance of the intent to foreclose letter before filing the foreclosure action. Once the lien is in place and the owner has been provided with an intent to foreclose letter, associations and their attorneys should assess the status of any foreclosure actions by banks with superior first-mortgage liens in order to determine if delays in the lenders’ foreclosure case creates a window of opportunity for the association to quickly foreclose and take title to the delinquent owner’s unit

7. Move Quickly to Collect from the Tenants of Deadbeat Landlords – A Florida law that became effective July 1, 2010, and has become a very effective collections tool allows associations to demand and collect the rent from the tenants of delinquent owners.

8. Offer Payment Plans – In today’s economy and housing market, associations are finding that offering payment plans to owners who fall behind but want to avoid foreclosure and keep their residence makes a great deal of sense. It may not lead to recouping all of the past-due balances as quickly as the associations would like, but by offering and agreeing on a reasonable repayment plan the associations can recoup a great deal of what they are owed over time while avoiding the headaches, delays and expense of continued collections and foreclosure squabbles.

9. Promptly Reply to Owner’s Inquiries – Associations and their attorneys should work to ensure that they respond quickly to owners who raise any questions or concerns after receiving the initial demand letter or the intent to foreclose letter.

10. Suspend Owners’ Rights to Use Amenities and Vote in Association Matters – Florida law allows an association to suspend the right of a member, or the member’s tenant, guest, or invitee, to use common areas for nonpayment of monetary obligations which are more than 90 days delinquent, including the pool, tennis courts, and fitness center, as well as access to the clubhouse. An association may also suspend the voting rights of an owner for nonpayment of monetary obligations more than 90 days delinquent. Suspension of use or voting rights imposed for delinquent monetary obligations must be approved at a properly noticed board meeting. Upon approval, the association must notify the parcel owner and, if applicable, the owner’s occupant, licensee or invitee by mail or hand delivery. Many communities have found that the ability to suspend use and voting rights has been an extremely effective tool.

The challenges facing community associations in South Florida will not disappear anytime soon, but by adopting these collections resolutions for 2013 the associations can take important steps towards alleviating the financial strains caused by delinquent owners.

 

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Laura Manning-Hudson is a partner with Siegfried, Rivera, Hyman, Lerner, De La Torre & Sobel in the firm’s West Palm Beach office. She focuses on community association law and earned her law degree from the University of Miami and bachelor’s degree from Florida State University. She can be reached at (561) 296-5444 or via e-mail at lmanning@siegfriedlaw.com.

Roberto C. Blanch is a shareholder at the law firm of Siegfried Rivera Hyman Lerner De La Torre Mars and Sobel P.A. and practices in the firm’s community association law department. Mr. Blanch works at the firm’s main office located in Coral Gables, FL and may be reached by telephone at (305) 442-3334 or by email at rblanch@srhl-law.com

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