Laura M. Manning-Hudson and Roberto C. Blanch

Last Updated 10/04/2015



Theft, Fraud Schemes and How Community Associations Can Avoid Them

By Roberto C. Blanch

In our column that appeared in the last issue of Condo News, Laura Manning-Hudson wrote about the disturbing trend of increased cases of fraud, theft and embezzlement at Florida community associations that she and many other association attorneys have been seeing. The damage that can be inflicted on associations by unscrupulous managers, employees and board members is indeed very severe, and this column will focus on the types of schemes that appear to be most prevalent and some of the best practices for associations to employ in order to help to avoid becoming a victim.

One of the most elementary strategies that are used by fraudsters is the pilfering of cash received from owners for their monthly assessments, which can be easily concealed by destroying copies of the receipts. The more elaborate schemes often entail under-the-table payments, bribes or kickbacks involving vendors that are actually co-conspirators. This could take the form of overpayments to the vendors that are then returned directly to the employee or board member instead of to the association. Other times it may involve a simple kickback from the vendor as an ongoing reward for their inflated contract.

The association’s checking account tends to be the primary vehicle for the theft and embezzlement of funds. Forged signatures and counterfeit checks may be used, and some fraudsters create fictitious vendors and issue payments directly to themselves using a bogus company name. Association credit cards have also been used in a similar fashion.

Election fraud aimed at taking a majority voting control of an association’s board in order to gain control of its purse strings is also one of the ploys that is being used with considerable success. By tampering with the ballots, stuffing the ballot box with forged and counterfeit ballots, and destroying legitimate ballots, fraudsters have been able to gain control of association boards in order to hatch and execute elaborate schemes to filch thousands of dollars from their associations each month.

Some of the best practices associations may implement to avoid being victimized include employing a high level of vigilance for all assessment payments, including verifying that the account number on the back of all of the returned checks matches the association’s account.

It is also important to ensure the independence of your association’s accounting firm by having it be selected by a vote of the board as opposed to the property manager. These accounting firms are called on to complete comprehensive annual audits, including a thorough review of the files for every member and vendor, as opposed to relying solely on reports.

Associations should also consider requiring two board members to sign all association checks. It is never recommended that associations allow property managers or other non-directors to sign association checks.

A designated board member should also conduct monthly reviews of the bookkeeping with the property manager, and this should include any credit card statements. Bank statements should also be required to be sent to the designated board member as well as the manager. The monthly review of these statements should include a careful review of all the checks that were issued and the signatures for each.

It is also wise to rotate the board membership on a regular basis and avoid having the same individuals in charge of the board or finances for considerable lengths of time.

For any payments received in cash, it is best to use a three-part cash receipt book so that copies of the receipts go to the payer, one for the bank deposit records and one for the bookkeeper.

By using these and other precautionary measures, community associations can make it as difficult as possible for managers, employees and board members to deploy schemes aimed at defrauding associations.




New Embezzlement Case at S. Fla. Condo; Best Practices for Associations to Avoid Theft

By Laura M. Manning-Hudson

If it seems as if there have been more and more stories in the news recently about condominium association’s funds being stolen or misappropriated by either board members or property managers, it’s because it’s true. Many of the reports have been coming from Bob Norman of Local 10 News (WPLG), the ABC affiliate for Miami-Dade, Broward and the Keys.

Norman’s latest story aired on Aug. 28, and the video of his report is featured in my post from Sept. 10 in our firm’s community association law blog at The story discusses the arrest of the former property manager of The Waterway condominium in Hollywood, Fla., for the alleged embezzlement of $228,000 from the association.

The transcript of the report reads:

A condo manager who allegedly embezzled nearly a quarter of a million dollars from a Hollywood Beach homeowners association was in Broward County circuit court for the first time Friday after police said she fled across the state.

Kristin Glansen, 35, pleaded not guilty to the allegation that she stole $228,000 in an embezzlement scheme from The Waterway condominium on Hollywood Beach, where she was entrusted as manager. After her plea, she had no comment as she shielded her face from a Local 10 News camera on her way out of the courtroom.

With a grand theft warrant out for her arrest, Glansen moved across the state to Clearwater, where she rented a home in that city’s historic district. After just a couple days in her home, her landlord, who asked that she not be named, became suspicious. The landlord said she did a Google search of Glansen and saw a Local 10 story reporting that Glansen was wanted by police, so she promptly called authorities, who quickly made the arrest.

"I’m glad they caught her," condo resident Jorge Quiros said. "I just couldn’t believe that she was able to take the money so easily and disappear like that."

Glansen allegedly created a fake company called Willis Homes, which has a very similar name to the condo’s actual insurance company, Willis of Florida, and wrote multiple checks to the fake company while letting the condo association’s actual insurance lapse, according to court records.

"The scheme was even more troubling when one considers what could have happened in the event of a flood, fire or other disaster," wrote Hollywood police Detective Larry Van Dusseldorp in his probable cause affidavit, adding that there was "overwhelming factual evidence of her guilt."

The information uncovered by Norman for his report is similar to that of many other cases that he and other Florida journalists have chronicled over the last several years which appear to be a disturbing trend in condominium and homeowner associations. Board members should pay close attention to the business of the association in order to avoid becoming the next victim of an unscrupulous manager or director. As we have discussed in the past, a board member’s responsibility is not limited to simply showing up at meetings to vote. Recall that board members are charged with a fiduciary responsibility to protect the interests of the entire association and all of its members. This means being vigilant about the business of the association.

The association in this case broke one of the cardinal rules of association management by allowing the property manager to sign checks on its behalf. Board members should be the only individuals allowed to sign checks, and I typically recommend that at least two board member signatures be required. Looking at the supporting documentation, backup and invoices for those checks is also important.

In addition, associations should be diligent when hiring new managers including performing background checks and checking references. While individuals who have been convicted of a felony (whose residency rights have not been restored) cannot serve as directors, some associations even go so far as to run background searches on candidates or seated board members.

Associations should also request duplicate statements from their banks, and the statements should be sent to someone other than the person who is handling the bookkeeping. In addition, association accounts should be independently and professionally audited at least once per year.

By taking these and other precautions, associations can help to avoid becoming the victim of fraud, theft and embezzlement.




Reviewing and Updating Associations’ Governing Documents and Bylaws

By Roberto c. Blanch

For condominium associations and HOAs, effective governing documents are essential for their successful management and financial well-being. Association boards should regularly review their governing documents and bylaws to ensure their continued functionality and eliminate provisions that may have become archaic.

Deciding whether the documents and bylaws need to be amended can be difficult, and ratifying new amendments with the approval of the membership often presents significant challenges. Most governing documents include voting requirements for amendments stipulating that they must be approved by super majorities of two-thirds or three-fourths of the membership.

One of the best approaches for associations to take in reviewing and updating of their governing documents is for the board of directors to appoint a revision committee for the documents. The committee, which should work together with the association attorney, should review all of the bylaws and develop suggested changes as necessary.

Some of the most common provisions of the association documents which may benefit from updates include those pertaining to voting, collections, leasing and fining procedures. Many associations are implementing amendments to limit voting rights to members who are not delinquent in their financial obligations to the association, and some are addressing recent statutory amendments authorizing electronic voting. Other associations are incorporating amendments to maximize their ability to recover attorney’s fees incurred for collection efforts, ban short-term rentals using websites such as Airbnb and other online listing services, strengthen their ability to fine members who refuse to comply with the community’s rules, and address rules involving pets and the use of the community’s amenities by members who are in arrears to the association.

Once the committee has identified changes to the bylaws that it would like to propose, they should present them to the board of directors. If the board approves, the committee should then work on drafting the amendments with the association’s legal counsel to ensure their enforceability and the likelihood of their adoption.

Before the proposed amendments are put to the membership for a vote, they should be presented and discussed with the members during the association’s monthly meetings or in special meetings that are called expressly for the purpose of proposing and considering the changes.

In order to facilitate the adoption of proposed amendments, they should be scheduled for votes at times during which higher voter turnout is expected, such as during the annual meeting. The text of the proposed amendments should be included in the delivery of notice for the meeting and its agenda, and the use of limited proxies should be considered for those who cannot attend the meeting in person.

While the process for changing a community association’s governing documents can be difficult and tedious, it is unwise for associations to ignore outdated provisions in their bylaws or avoid implementing important changes that can provide significant benefits.




Reviewing and Updating Associations’ Governing Documents and Bylaws

By Roberto C. Blanch

For condominium associations and HOAs, effective governing documents are essential for their success-ful management and financial well being. Association boards should regularly review their governing documents and bylaws to ensure their continued functionality and eliminate provisions that may have become archaic.

Deciding whether the documents and bylaws need to be amended can be difficult, and ratifying new amendments with the approval of the membership often presents significant challenges. Most governing documents include voting requirements for amendments stipulating that they must be approved by super majorities of two-thirds or three-fourths of the membership.

One of the best approaches for associations to take in reviewing and updating of their governing documents is for the board of directors to appoint a revision committee for the documents. The committee, which should work together with the association attorney, should review all of the bylaws and develop suggested changes as necessary.

Some of the most common provisions of the association documents which may benefit from updates include those pertaining to voting, collections, leasing and fining procedures. Many associations are implementing amendments to limit voting rights to members who are not delinquent in their financial obligations to the association, and some are addressing recent statutory amendments authorizing electronic voting. Other associations are incorporating amendments to maximize their ability to recover attorney’s fees incurred for collection efforts, ban short-term rentals using websites such as Airbnb and other online listing services, strengthen their ability to fine members who refuse to comply with the community’s rules, and address rules involving pets and the use of the community’s amenities by members who are in arrears to the association.

Once the committee has identified changes to the bylaws that it would like to propose, they should present them to the board of directors. If the board approves, the committee should then work on drafting the amendments with the association’s legal counsel to ensure their enforceability and the likelihood of their adoption.

Before the proposed amendments are put to the membership for a vote, they should be presented and discussed with the members during the association’s monthly meetings or in special meetings that are called expressly for the purpose of proposing and considering the changes.

In order to facilitate the adoption of proposed amendments, they should be scheduled for votes at times during which higher voter turnout is expected, such as during the annual meeting. The text of the proposed amendments should be included in the delivery of notice for the meeting and its agenda, and the use of limited proxies should be considered for those who cannot attend the meeting in person.

While the process for changing a community association’s governing documents can be difficult and tedious, it is unwise for associations to ignore outdated provisions in their bylaws or avoid implementing important changes that can provide significant benefits.




Florida Condo Associations, HOAs Contending with Growing Wave of Rule Violating Airbnb Rentals

Guest Column by 

Michael Chapnick:

For this week’s edition of Condo News, I am pleased to offer a guest column by my colleague Michael E. Chapnick, who is also a partner with our law firm in our West Palm Beach office. Michael has focused on community association law since 1996, and his article is on the issues that are now arising at South Florida condominium associations involving short-term rentals via Airbnb and other similar websites:

A recent article in The Boston Globe chronicled the case of a condo owner who earned rave reviews as a host on the vacation rental website Airbnb. He went to great lengths to accommodate the needs and whims of his guests, but apparently his willingness to oblige did not extend to his condominium association and fellow neighbors.

The unit owner was fined $9,700 for violating his condominium association’s rules against short-term rentals via the increasingly popular website, which allows users to list their residences for short-term rentals aimed at guests who desire more homey accommodations. The owner has retained an attorney to try to negotiate a lower fine, and he is quoted as saying that he "didn’t expect, as an owner, having somebody else in my own home would be a problem."

Perhaps he should have known better, as most association’s covenants and rules prohibit short-term rentals, and some even include an application process with background checks for prospective tenants. Yet he and other unit owners are claiming ignorance of the rules after being hit with fines ranging anywhere from $100 to $1,000, depending on their associations’ bylaws, for each night that they have rented their units, according to the newspaper’s report.

With South Florida’s countless luxury waterfront condominiums replete with investor-owned units that sit idle during large swaths of the year, the growing popularity of Airbnb and its rivals HomeAway and VRBO represents a potentially significant new problem area that should receive the attention of many association boards throughout the region. The prospect of a revolving door of short-term guests presents security and nuisance concerns, especially for condominiums, and the boards of the state’s condo associations would be well advised to review and possibly strengthen their covenants to specifically ban these types of rentals as well as ensure adequate enforcement provisions and procedures.

For those associations which are already contending with owners who are utilizing these websites for short-term rentals or suspect that it is taking place, their rules enforcement actions should begin with thorough investigations. In a non-confrontational and courteous manner, the property manager or board member should inquire with the new guests in the residences that are suspected of being rented as to the nature of their agreement with the unit owner and how they discovered the property. They should document their findings, and they should also research the websites to find and save the offending listings.

Armed with this information, they can then move forward on two fronts: directly with the owner as well as with Airbnb or the website listing the unit. Airbnb includes in its terms and conditions for hosts that they must comply with the rules governing rentals in their communities, and the site reserves the right to purge any listings that it deems to be in violation of its terms. Presumably, the company and its rivals would be willing to consider the removal of listings by hosts that are in violation of community association rules, and one of my colleagues at our firm has learned of a case from a client in which Airbnb was contacted by the association and pulled a listing from its site after it learned of the rule violation.

In addition, associations should share the evidence that they have gathered of the rentals using these websites with their legal counsel, who can use the information to issue an immediate cease and desist letter to the unit owner and help the association to determine an appropriate enforcement mechanism. However, for unit owners who have already begun enjoying the rewards of their rentals, it is a safe bet that they will be reluctant to discontinue them.

For the ardent renters who will refuse to comply with these demands and continue to rent their residences, the association counsel should move quickly to file a Petition for Mandatory Non-Binding Arbitration on the rule violation with the state’s Division of Condominiums, Time Shares and Mobile Homes, administered under the Department of Business & Professional Regulation. The Division of Condominiums, through its Arbitration Division, is equipped to quickly and efficiently conduct arbitrations on disputes involving covenant and rule violations, and its final orders can involve both the issuance of injunctive relief (i.e., requiring someone to do or not do something), as well as requiring the non-prevailing party to pay the reasonable attorneys’ fees and costs of the prevailing party incurred in bringing the action to enforce the association’s covenants and rules.

In the new peer-to-peer sharing economy, Airbnb and the other websites enabling homeowners to rent their residences to short-term guests are here to stay and likely to enjoy continued growth in the years to come. The associations in Florida that wish to avoid these short-term rentals should act now in order to protect the interests of their members.




Three-Year Jail Term Begins for Former Condo Manager Convicted of Stealing Over $200,000 from Association

By Roberto C. Blanch

The recent news about the start of a three-year jail sentence for the former property manager of a Sarasota, Fla.-area condominium who was convicted of stealing more than $200,000 from the association she managed sent a resounding message about the severe repercussions that property managers and association directors can face for theft and fraud.

According to several news reports, Judy Paul, 51, was sentenced to three years in prison followed by 10 years of probation, and was ordered to pay $200,000 in restitution to the Sand Cay Condominium Association, following her conviction in July, 2013, on felony counts including grand theft and scheming to defraud more than $50,000. It was further reported that Paul was scheduled to surrender at a court hearing on July 1 but failed to appear. The reports state that when she subsequently appeared in court at a later date, she pleaded with the judge for mercy, claiming that she suffered from several medical conditions including uncontrollable bowels, post-traumatic stress disorder as a result of the conviction, and that she attempted to end her life two days before she was originally scheduled to surrender.

Paul’s case was the first to be brought to trial by the White Collar Crime Division of the State Attorney’s Office formed in 2013. Her fraud was discovered when a routine 2009 audit uncovered more than 50 checks that she had issued and cashed or deposited into her own bank accounts. Evidence presented at the trial revealed that she also purchased a Harley-Davidson motorcycle with association funds, and the unit owners were forced to cover the association’s shortfalls through assessments.

This case underscores the importance for association directors and property managers to implement procedures and policies aimed at avoiding the theft of association funds by those who are typically authorized to have access to them. These efforts may include requiring that at least two board members sign all checks and review documentation supporting the invoice or obligation to be paid, 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 by the property manager without board authorization, and a detailed review and understanding by directors of the association’s yearly financial audits performed by independent professionals. Directors should also coordinate with the association’s insurance agent to confirm that the association is adequately insured to best protect against such instances of fraud, theft and other types of employment dishonesty.

The severe prison sentence and financial restitution imposed in this case against the convicted former property manager should send a compelling message to unscrupulous managers and association directors who contemplate taking part in schemes to defraud and steal from their association.




Tenants’ Rights in Condominium Communities

By Laura M. Manning-Hudson

Our firm’s other community association attorneys and I are often asked by condominium association board members about the rights of tenants who are renting units in a condominium to use the common elements – as well as their ability to participate and vote in meetings and elections.

The Condominium Act provides that tenants who are leasing units in communities "shall have all use rights in the association property and those common elements otherwise readily available for use generally by unit owners." This means that associations must allow renters to have the same use rights as unit owners to the pool, fitness center, clubhouse, tennis court, etc. Renters may also use the parking spaces designated for their unit.

For unit owners who are leasing their residences, the law also provides that they "shall not have such rights except as a guest, unless such rights are waived in writing by the tenant." The law further provides: "The association shall have the right to adopt rules to prohibit dual usage by a unit owner and a tenant of association property and common elements otherwise readily available for use generally by unit owners." This means that owners who rent out their units may not also come by to swim in the pool whenever they want!

With regard to association meetings and voting, tenants do not typically have the right to attend meetings because they are not owners, however, tenants who are conferred with a Power of Attorney by their unit owners may attend and speak at the association meetings. Voting rights and requirements for board membership are generally document specific and can be found in the association’s bylaws.

Another issue that often arises is whether condominiums can prohibit tenants from having pets even if the governing documents allow unit owners to have pets. The issue turns on the exact language in an association’s governing documents. Many board members are surprised to learn that they may adopt rules that restrict tenants from having pets based on the language in their recorded documents – but this is not always the case. Many association documents require a unit owner vote to amend the documents in order to restrict tenants from having pets.

Finally, if a tenant or their landlord/unit owner violates the association’s rules and regulations or other governing documents, the Condominium Act has empowered the association to restrict the tenant’s ability to use the common elements. This also applies to the tenants of unit owners who become more than 90 days delinquent in the payment of their association dues.

With so many investor-owned units in South Florida condominium communities, significant percentages of tenants under short and long-term leases are likely to be a permanent characteristic. Associations should bear in mind that laws do exist to protect tenants’ rights in order to help ensure that associations avoid the possibility of unforeseen legal liabilities.




Barking up the Wrong Tree

By Roberto C. Blanch

Yogi Berra once said "it ain’t over ‘till it’s over." That statement perfectly describes the most recent decision to come out of Florida’s Fourth District Court of Appeal dealing with a unit owner’s request for a reasonable accommodation under the Fair Housing Amendment Act of 1988 (FHAA) to keep an emotional support animal despite her association’s restrictions.

The case of Carolyn Hoffman v. Leisure Village, Inc. of Stuart, Fla. actually involved two dogs. As to the first dog, Hoffman and her association ended up in litigation which resulted in a settlement agreement whereby the association allowed her to keep the dog, with the understanding that she would not get another dog after it passed away, and if she did get another one she would have to move from Leisure Village.

Upon the death of her dog in 2010, Hoffman was diagnosed with chronic depression and her psychiatrist recommended that she get another dog to support her emotionally. Her attorney made a request to Leisure Village for an accommodation under the FHAA, but the request was denied. She got the dog anyway.

The association then went back into court and asked the judge to enforce the settlement agreement. At the same time, Hoffman filed a complaint with the U.S. Department of Housing and Urban Development (HUD) claiming that she was wrongfully denied an accommodation of her disability under the FHAA, and her complaint was ultimately sent to the Florida Commission on Human Relations (FCHR) for investigation. Before FCHR could finish its investigation, the trial court ordered Hoffman to remove her dog from the association.

When FCHR completed its investigation three months later and found cause to believe that a fair housing violation had occurred, Hoffman first tried to file a claim in federal court, and then back in state court, claiming discrimination. The courts dismissed her case, saying that she had waived her right to bring a new claim and all of the issues had already been decided in the case relating to her first dog.

The Fourth DCA found that the trial court did not even have the authority to decide Hoffman’s discrimination claim because while she had started the process of filing complaints with HUD and FCHR, FCHR did not even complete its investigation of the claim until three months after the court dismissed her claims. The court examined the law and found that Hoffman was required to exhaust the administrative process (i.e., filing a discrimination claim with HUD and having that claim investigated to conclusion) before she was entitled to file a lawsuit. The appellate panel reversed the dismissal of her discrimination claim, thereby allowing her to pursue it back in the trial court.

The lesson to be learned from Hoffman and Leisure Village is even when it appears that a fair housing dispute has been resolved by agreement, it is not necessarily over . . . "until it’s over."




Florida Supreme Court Adds Clarity to Activities That Constitute the Unlicensed Practice of Law by Community Association Managers

By Laura M. Manning-Hudson

In 1996, the Florida Supreme Court issued an advisory opinion regarding the activities of licensed community association managers ("CAM") that would constitute the unlicensed practice of law. In 2013, The Florida Bar weighed in on the issue when its Standing Committee on Unlicensed Practice of Law submitted a report to the state’s highest court for its consideration. On May 14, 2015, the Court filed its final opinion based on the Bar’s submission.

The Court upheld its findings from the 1996 opinion and adopted all of the recommendations provided by the Bar in its 2013 report. The Court found that the following tasks performed by CAMs are not considered the unlicensed practice of law:

• Preparation of a certificate of assessments due once the delinquent account is turned over to the attorney for the association

• Preparation of a certificate of assessments due once foreclosure against the unit has commenced

• Preparation of a certificate of assessments due once the member disputes in writing to the association the amount alleged as owed

• Drafting pre-arbitration demand letters

The Court ruled that the following tasks performed by CAMs are considered the unlicensed practice of law:

• Drafting of amendments to the declaration, bylaws, and articles of incorporation that are recorded in the public records when such documents are to be voted on by the members

• Preparation of construction lien documents

• Preparation, review, drafting and/or substantial involvement in the preparation/execution of contracts, including construction contracts, management contracts, cable television contracts, and others

• Any activity that requires statutory or case law analysis to reach a legal conclusion

The Court found that the following tasks performed by CAMs may or may not be considered the unlicensed practice of law, depending upon the facts and circumstances involved in each case:

• Determination of the number of days to be provided for a statutory notice

• Modification of limited proxy forms

• Preparation of documents concerning the right of the association to approve new prospective owners and/or tenants

• Determination of affirmative votes needed to pass a proposition or amendment to recorded documents

• Determination of votes needed to establish a quorum

• Identifying, through the review of title instruments, the owners who are to receive pre-lien letters

The Court’s ruling includes examples that help to clarify whether or not these activities constitute the unlicensed practice of law. The complete ruling with the examples that are provided for each of these tasks is available at

With the upsurge in collections and the issuance of demand letters and claims of lien by associations, many CAMs have responded to their association’s needs by taking on the preparation of these documents rather than turning to the association attorney. This has led to cases in which demand letters and claims of lien have been invalidated due to mistakes in legal descriptions and recording errors. Association boards should bear in mind that the preparation of demand letters, claims of lien, Notices of Commencement and other legal documents do not typically incur significant attorney fees, but the ramifications of errors in these documents can prove to be very costly. If The Florida Bar determines that a property manager has engaged in the unlicensed practice of law, that manager could face the imposition of fines as well as the possibility of having their CAM license revoked or suspended. 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, and thereby risk exposure to their managers of potential fines and license issues.




An Overview on Condominium and HOA Reserve Funds, Links to Key Informational Resources

By Roberto C. Blanch

For community associations, preserving the property and its common areas is one of the foremost duties of the association directors. Beyond the day-to-day maintenance responsibilities, association directors and managers are responsible to develop funding plans for the upkeep and replacement of common facilities such as elevators, roofs, heating/cooling systems, swimming pools, decks and balconies. These funding plans generally take the form of accumulated budgetary reserves to help spread the anticipated costs of deferred maintenance or capital expenditures for the associations’ common facilities or building components over the estimated remaining useful lives of the components. Maintaining well-funded reserves enables associations to avoid large annual assessment increases or special assessments that can create financial hardship for the unit owners at those times when raising funds is required to perform the necessary deferred maintenance or replacement.

For condominium associations, establishing and funding reserve funds is an obligation of the board, as reserves are statutorily required to be included in condominium association budgets that must be adopted each year. Specifically, condominium associations must maintain reserve funds for roof replacement, exterior paint, pavement resurfacing and all other items for which the replacement or deferred maintenance costs exceed $10,000. Additionally, depending upon certain circumstances, the boards of some homeowners associations may also be required to budget for reserves, depending upon whether it is required by the association’s governing documents as established by the developer or voted for by the association members. While the funding of reserves may be waived or reduced on an annual basis upon obtaining the appropriate membership vote, community association boards may not be automatically required to submit such a question for a vote of the membership.

In an effort to ensure the proper funding of reserves it is in the best interests of most associations to retain highly qualified and experienced consultants to prepare an objective reserve study for the association. These studies are used to assess the actual costs for the ongoing maintenance of all of common facilities and building components. They include a detailed analysis of the current condition of the major components as well as a financial breakdown for their expected maintenance, repair or replacement costs. The experts who prepare these studies use a formula that takes into account the estimated cost of deferred maintenance or replacement as well as the remaining useful life of the component.

In light of the higher costs typically associated with comprehensive reserve studies, some smaller associations have opted for a simpler analysis, such as a Five-Year Capital Plan that is prepared by experienced professionals. Such a plan may be used by the board to determine the level of reserves expected to be required.

In addition to properly establishing and maintaining reserve funding and preventing deficits thereof, association board members have a fiduciary duty to the unit owners to ensure that a community’s reserve funds are protected and invested properly. Risky investments are not appropriate for these funds, and it is highly recommended for associations to turn to qualified professionals for their investment and tax advice. It is also imperative for reserve funds to be accounted for appropriately and accurately in the financial statements, audit reports, budgets and other financial and administrative community association records.

For condominium associations and their directors, one of the most helpful informational resources related to reserves is available online from the Florida Department of Business and Professional Regulation, Division of Condominiums. The agency’s "Budgets and Reserve Schedules: A Self-Study Training Manual" is the state’s official training manual for condominium association directors and members on association budgets and reserves. Click here to read and print the manual:

Another very helpful resource for all types of community associations is the "Reserve Studies/Management Best Practices Report" issued by the Foundation for Community Association Research, which is available by clicking on the following link:

Community association board members must consider many factors in order to properly assess and fund their associations’ reserve accounts. With the proper guidance and planning, properly established and funded reserve accounts assist associations to avoid unexpected financial burdens for all of the unit owners.




Legislative Update: Estoppel Certificate Bill Dead, Bill to Make Administrative Changes To Association Practices Passes

By Roberto C. Blanch

The premature adjournment "sine die" of the recent session of the Florida House of Representatives spelled the demise of various bills that had not yet been passed. One such bill was HB 611, which was the subject of one of our recent columns and blog articles describing the various changes that were being proposed by the bill in connection with procedures and charges related to estoppels provided by community associations.

A bill that did pass both the House and Senate is HB 791, which soon will be sent to Gov. Scott for his final approval before it is enacted. This bill makes some important updates to the state’s laws governing community association practices and procedures and includes the following changes:

• The requirement for electronic notices to be authorized by association’s bylaws for some meetings of the board, membership and association committees is eliminated.

• Establishes that the role of the fining committee is to confirm or reject the fines levied by the board.

• Suspension of voting rights or right to use common elements will apply to members as well as their tenants and guests, regardless of the number of units owned by the member, even if the delinquency or failure that resulted in the suspension arose from less than all of the multiple units owned by a member.

• Proxies will be allowed to be submitted to the association via fax or email.

• When voting rights are suspended, the voting interest allocated to the unit will be subtracted from the total number of voting interests.

• Establishment of procedures for implementation of electronic online voting for elections and other unit owner votes.

• A clarification that partial payments may be applied to outstanding amounts.

• Extends the "Distressed Condominium Act" (i.e., the "bulk buyer" law) until 2018.

• Amends the official records "catch-all" provision to include "written" records, as already appears in the HOA Act.

• Names Chapter 720 the "Homeowners’ Association Act."

• Provides that the "governing documents" of an HOA include rules and regulations.

• The failure to provide notice of recording amendment in an HOA does not affect the validity of the amendment.

Most of the foregoing changes help to clarify and update the existing statutes in an effort to enable associations to overcome some problem areas arising in connection with the laws governing condominium, cooperatives and homeowners associations. However, a few of the changes included in the bill, such as the introduction of electronic online voting, are expected to cause considerable issues as directors, managers and their legal counsel work to navigate through the process related to the implementation of such measures.

Association members, directors and community association property managers should be mindful of these changes and work closely with their legal counsel to address any questions regarding these changes should they eventually become law.





New Florida Bill Presents Serious Concerns for Estoppel Certificates Issued by Community Associations

By Laura M. Manning-Hudson

A bill was recently introduced in the current session of the Florida Legislature that presents significant concerns for community associations. House Bill 611 (SB 736 in the Senate) aims to make major changes to the process, costs and effect of the estoppel certificates prepared by associations. Estoppel certificates are used by associations (and their attorneys and property managers) in order to provide owners with an accurate accounting of the amounts owed to an association as of a particular date. Prospective buyers and title companies rely on these estoppel certificates in order to bind the association to the exact amount stated in the certificate until the expiration date set forth in the certificate.

According to the current language, associations have the authority to charge a fee for the estoppel certificate which is payable by the requesting party upon preparation of the certificate. There is no set limit to this fee, except that it must be established by a written resolution of the board of directors or provided by a written management, bookkeeping or maintenance contract. However, the proposed bill intends to impose a maximum estoppel fee of $100 to $150, as opposed to a "reasonable fee." Since the preparation of estoppel certificates can be highly detailed and labor intensive for experienced professionals, the newly proposed fee range is severely inadequate and may lead to increased management and legal fees which would be passed on to associations. In fairness, these fees should only be borne by the requesting party.

The bill also aims to eliminate the ability of an association and its agents to collect an estoppel fee prior to the closing of the sale of the underlying property by requiring that the estoppel certificate be paid from the proceeds of the sale. In addition, the proposed bill provides for extremely limited recourse for the collection of the fee should the closing never occur. Ultimately, the association may become liable for any fees that go uncollected.

The bill further proposes the reduction in the number of days that associations have to respond to estoppel requests from 15 down to 10 days. In complex cases such as those that include fines levied against an account in addition to delinquent maintenance dues and/or litigation, the preparation of an estoppel certificate typically exceeds 10 days. According to the proposals found in the bill, associations that are unable or fail to meet the 10-day deadline will have effectively waived any claims for the amounts due that would have been provided in the estoppel certificate. This is an extreme measure that would seriously impact an association’s right to collect unpaid assessments.

Another important concern for associations is that the proposed bill requires all estoppel certificates to be valid for 30 days from their issuance, and prevents the association and its agents from collecting additional assessments or other costs that accrue within those 30 days. In the case where an estoppel certificate is being requested for a delinquent account in litigation, attorneys would either have to stay the case pending payment or would need to include additional attorney’s fees if there are pending matters to be addressed within the 30-day period from the issuance of the estoppel.

Lastly, the proposed bill requires waiver language to be included in the estoppel certificate preventing the association from collecting moneys in excess of the amount set forth in the estoppel certificate.

For professionals who prepare estoppel certificates for community associations on a regular basis, the measures that are being put forth in this bill appear to be draconian. As such, we are encouraging association directors, members and property managers to contact their local representatives to express their concerns and disapproval with this bill. The contact information for the legislators for every district in the state can be found at




A Review of Some Best Practices for Association Annual Meetings, Elections

By Roberto C. Blanch

As the season for annual meetings and elections at South Florida community associations comes to a close, our firm’s other association attorneys and I are reminded of the significance of following all of the necessary protocols to ensure that association meetings and elections run as smoothly as possible. This topic further serves as a priority to many of our community association clients, causing many of them to inquire about safeguarding their election procedures and other issues such as perceived discrepancies between statutory election guidelines and the related provisions of their associations’ governing documents.

Below is a recap of recommended best practices related to annual meeting and election procedures that have been discussed in articles in our firm’s blog at

First, in an effort to promote participation and ensure voting by the qualified individuals, it is advisable that association management take the steps to verify that the association’s roster of owners is current and includes a description of all the individuals on title to the home or unit. The roster should further be organized in numerical order by unit numbers or addresses to facilitate the registration and ballot verification process. While a search of the county public records deed database is the most accurate source to verify ownership of units or homes, a more economical approach is to verify the ownership from the county’s property appraiser’s office. Once obtained, these records should be placed in a binder, together with copies of the deeds organized in the same order as the roster or sign-in sheet. Consider organizing the binder with dividers separating each floor/street, as this step may further facilitate the verification of ownership on the day of the meeting or election.

Proxies received prior to the meeting should be verified so as to ensure that they are dated and signed by the owner or other qualified voting member. Once the proxies have been verified, they should be logged in on the sign-in sheet, and a note should be included on the sheet indicating who the proxy is for the corresponding unit in order to ensure that the designated proxy signs-in for the unit or home at the meeting. If a proxy has a deficiency or is found to be questionable during the validation process, it should be set aside for the association attorney to review.

Additionally, the period between the proxy verification process and the time of the meeting may be used to enable the unit owner to cure any defects or resolve problems that may have been identified with regard to the proxy form. The valid proxies should be organized in a folder in the same order as the sign-in sheet for reference at the time of the meeting.

Ballots received in advance of the election should be organized in the order of the roster. The board should further consider appointing an independent committee to validate that the outer ballot envelopes have been properly executed and signed by the qualified voter(s) prior to the scheduled time of the election. This process will serve to further streamline the ballot validation process, which would otherwise have to be performed at the time of the meeting. Bear in mind that outer ballot envelopes may not be opened prior to the meeting.

It is important to remember that unlike proxies, voting certificates do not expire unless they are rescinded or replaced by another voting certificate. As such, a voting certificate binder should be organized in numerical order by unit or lot number or by street address of the unit or lot. As the voting certificates tend to remain valid until rescinded or as otherwise specified above, those received for the scheduled meeting or election should be included in the binder as replacements for any voting certificates previously provided for corresponding units or lots. Voting certificates are typically required for all units owned by multiple individuals or by a corporation or other legal entity. However, we caution that many community association documents require that voting certificates be submitted for units owned by husband and wife as well.

The executed Proof of Notice Affidavit for the annual meeting should also be available at the meeting. In addition, be sure to have plenty of blank ballots, envelopes (inner and outer ballot envelopes) and voting certificates on hand at the election for use by any owner who has lost or misplaced their ballot or voting certificate and would like to cast a ballot in person at the election.

By adhering to these suggested best practices, working with qualified community association legal counsel and following all of the other prescribed protocols for the annual meeting and election, associations can help to ensure that their elections are in compliance with Florida law.




Miami Herald Guest Column by Jeffrey Berlowitz: Chapter 11 Bankruptcy is Viable Option for Condo Associations, HOAs

By Laura M. Manning-Hudson

Our firm’s Jeffrey S. Berlowitz wrote the following guest column, which appeared in the March 23 edition of The Miami Herald’s "Business Monday" section:

While the housing market in South Florida is continuing its recovery, many of the community associations in the region are still struggling with delinquencies by unit owners in the payment of their association dues. The shortfalls in the associations’ collections, which in some cases have also been exacerbated by gross mismanagement or even theft by members of association boards, are causing scores of South Florida condominium and homeowners associations to experience significant difficulties in satisfying their operational expenses.

For associations that are incapable of meeting all of their financial obligations, seeking relief through a Chapter 11 bankruptcy reorganization plan has now become a viable option in order to avoid forcing some unit owners to pay more than their proportionate share of the assessments.

While many typically think of financial reorganization under Chapter 11 as being reserved exclusively for large corporations, condominium and homeowners associations are also entitled by law to file for this form of bankruptcy relief. In fact, over the last few years, a couple of South Florida associations have already emerged through a successful Chapter 11 reorganization and regained their financial footing.

Chapter 11 is a designed financial reorganization program that is operated under bankruptcy court supervision, and it enables an association to restructure its debt with the protection of an "automatic stay," which halts creditor collection proceedings during the pendency of the bankruptcy case unless they are otherwise allowed by the court. An association in Chapter 11 has the opportunity to negotiate with its creditors, cancel or renegotiate onerous contracts and leases, and avoid the seizure of assets and garnishing of bank accounts by creditors holding judgments.

In South Florida, two recent cases of association bankruptcies highlight the potential benefits for financially strapped condominiums and HOAs. The first was The Spa at Sunset Isles, which is a 232-unit condominium in Palm Beach County that filed for Chapter 11 bankruptcy in 2010. Because the community’s financial strains were being caused by many units under foreclosure, the bankruptcy court issued an order requiring the lenders that were languishing in their foreclosure actions to begin paying monthly assessments to the association before taking title to the units and, at the same time, ordered them to complete their foreclosure actions. Given that certain of The Spa’s units were in foreclosure proceedings for more than three years, the bankruptcy court’s order provided immediate and substantial relief. Ultimately, the community confirmed its reorganization plan with substantial funds in its operating account resulting from the payments it received from the foreclosing lenders.

Another recent South Florida association bankruptcy was filed last November by the Bella Luna Condominium Association, which was facing court battles with creditors, a 25 percent delinquency rate among its residents, and a threat from the City of Hialeah to cut off its water due to significant arrears in the payment of its water and sewer bills. With the help of the bankruptcy court, the condominium was able to slash its unsecured debt by approximately 85 percent and restructure its remaining debt, paving the way for this community to regain its financial well-being.

With the modest pace of the recovery in the housing market, many community associations are still facing significant financial distress, and Chapter 11 bankruptcy reorganization represents perhaps their best possible opportunity for a positive financial future. In fact, for associations that continue to face an exorbitant percentage of units in prolonged foreclosures, the ruling in the Palm Beach County case could set the tone for similar cases in the future. It has the potential to open the door for other associations to seek similar relief whereby lenders behind with their foreclosure actions are forced to begin paying assessments before they take title to the units, which will undoubtedly compel them to expedite their foreclosures.

In light of the two successful Chapter 11 bankruptcy reorganizations by South Florida community associations, the associations that currently find themselves in unsustainable financial straits may consider a bankruptcy reorganization filing as a viable option for a potentially solid financial future.




Magazine Article by Gary Mars: HOAs, Condo Associations Must Implement Safeguards to Prevent Election Fraud

By Laura M. Manning-Hudson


Our firm’s Gary M. Mars contributed the following guest column for the April issues of Our City Weston and Our City Davie magazines:

A recent case in Las Vegas has set a new bar for the heights to which criminals will go in their efforts to defraud condo associations and HOAs for contracts worth millions of dollars. A U.S. Justice Department investigation revealed that 11 homeowners and condominium associations in Las Vegas were defrauded of millions of dollars in a board of directors takeover scheme that took place from 2003 to 2009. Federal prosecutors are seeking jail time for the defendants in addition to approximately $25 million in restitution, and 37 defendants have taken plea agreements and are facing prison sentences while the remaining four defendants are awaiting trial.

The defendants are accused of getting their straw unit buyers elected to community associations’ boards of directors through forgery, bribery, ballot stuffing and dirty tricks, all with the help of a Kung Fu grandmaster to intimidate wary board members. As disclosed under his plea agreement, this martial arts expert admitted that the conspirators would rig the associations’ board of director elections by using stolen and forged ballots so that they could win a majority voting control of the boards in order to secure lucrative contracts once control of the board and association was obtained. Co-conspirators traveled to Mexico to print phony ballots, used the master key at a condominium complex in order to remove ballots from mailboxes, and retrieved discarded ballots from a condominium’s dumpsters.

Community association boards control the purse strings of the communities that they govern, and they have been long-standing targets for unscrupulous board members. For those who own residences in condo and HOA communities, this board takeover scheme underscores the level of involvement and vigilance that is necessary in order to help ensure that their community associations avoid this type of fraud.

Unit owners should make every effort to vote in all elections and submit their own ballots, as fraudsters will typically attempt to secure and utilize forged ballots from those who do not normally vote in the elections. They should also attend the election meeting and determine whether their ballot was counted or disallowed due to the submission of more than one ballot for their unit.

If association members believe that the integrity of their board of directors has been compromised, they should consult with highly experienced legal counsel in order to discuss and determine their next steps. Election recalls, court appointed receivers, and injunctions precluding boards from awarding contracts are among the measures that can be pursued, and criminal investigations by state and federal law enforcement are also possibilities that can come into play.




Florida’s HB 501 Seeks to Limit Construction Defect Claims to Seven Years from Date of Completion

By Roberto C. Blanche

In addition to Florida House Bill 87, which was the sub-ject of an article I recently authored in this publication, House Bill 501 also presents serious concerns for community associations, property owners and the general public. The bill seeks to reduce the statute of repose for construction-related claims from the current 10 years to just seven years – meaning that if the bill becomes law, those with claims related to construction defects will have only seven years from the date of the completion of construction to file their claims for the design, planning or construction of any improvement to real property.

Unlike the statute of limitations, which establishes a time limit within which an action must be brought from the time a cause of action accrues, the statute of repose bars a claim after the conclusion of the period of repose, even if the claim is for a concealed or latent defect that was not discovered until years after the completion of construction. It holds contractors, subcontractors, architects, engineers and other construction-industry professionals free from all liability after the set term of time expires. Under Florida law, the statute of limitations for construction defects expires four years after the defect is discovered or should have been discovered using due diligence, but the statute of repose currently expires (even if the statute of limitations has not run) ten years after the later of:

• the date of actual possession by the owner;

• the date of the issuance of a certificate of occupancy;

• the date of abandonment of construction if not completed; or

• the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer.

HB 501 seeks to reduce the period of repose from 10 to seven years, so after seven years any latent structural defects or other latent defects that have not manifested themselves beforehand would become solely the responsibility of the property owner. For community associations, this change would be particularly troublesome because, unlike the period for the statute of limitations, which does not begin to run until after turnover of control from the developer, the clock starts ticking for the period of repose at the completion of construction, which may often be years before the turnover. Thus, if the turnover of a property from the developer is delayed beyond the normal course for some reason, the period for a community association to bring any claims related to the construction of the property governed by the association could be quite short, as no extension is given to the association under the period of repose under current law or under the proposed bill.

Typically, construction defect claims for community associations are only brought after turnover has taken place, as the turnover process includes an independent engineering inspection of the structural and mechanical elements. Also, prior to the turnover, the unit owners will not be as informed and involved with the management and administration of the property while it is still being overseen by the developer. And, it would be cost-prohibitive and impractical for individual unit owners to commission an engineering inspection and report for the common areas on their own, and then file suit for the construction defects of the whole condominium on their own.

Shortening the statute of repose to seven years could also create an incentive for developers to limit their exposure to construction defect liability by delaying the turnover as long as possible, as the longer they wait to complete the turnover, the shorter the window becomes for the association to identify any defects and pursue a claim under the statute of repose.

Builders and their lobbyists supporting the bill argue that most construction defects become apparent within a few years of the completion of construction, but the fact is that some of the most costly and cumbersome defects to repair are concealed latent structural and mechanical defects that can take well over seven years to become evident. A well-known and oft-cited example of this took place years ago in Key West when one of the area’s largest concrete firms used salt water to mix its concrete. The residual salt in the concrete caused the reinforcing steel to corrode, but the defect did not become fully apparent until years after the completion of construction.

The current ten year statute of repose was already previously reduced from fifteen years in 2006, and the additional reduction to seven years that is being considered appears to be receiving mixed reviews by the lawmakers. Two civil engineers gave expert testimony against the bill before the House’s Civil Justice Subcommittee, which narrowly passed the bill by a vote of 7-6 and sent it on to the House Judiciary Committee.

Our firm encourages community association stakeholders, including directors, property owners and managers, to contact their state representatives and senators to share their concerns regarding HB 501 and HB 87.




Elections 101

By Laura M. Manning-Hudson

With the New Year comes new plans, new resolutions and . . . elections. For many community associations election season is well under way and, as easy as an election may seem (go out, get the votes, and count the ballots – right?), there are so many statutory nuances in the electoral process that, if handled improperly, can invalidate the entire election and cost the association both time and money. In an effort to assist association boards and hopefully avoid costly mistakes during the process, we have outlined the pertinent information that you need to know.

The Election Process:

o First notice of election

• The first notice must be mailed, emailed, or hand delivered to the membership at least 60 days prior to the annual meeting/election day.

• The notice must include:

1. The date, time and location of the meeting and election.

2. The number of seats that are open for election.

3. Details surrounding the information sheet that candidates must submit if they wish to run for the board.

o Receipt of intents to run for the board

• All eligible persons who wish to run for the board must submit their notice of intent to be a candidate for election no less than 40 days prior to the annual meeting/election.

• Notice of intent may be submitted via mail, email, or hand delivered statement.

• Any notices of intent received on the 39th day before the election (regardless of the day of the week that the 40th day falls on) – are deemed invalid and those names may not be placed on the ballot.

• Each eligible candidate then has an additional 5 days (35 days prior to the election) to submit an information sheet (resume) to the association which will be mailed out with the second meeting notice.

o Second notice of election

• The second notice of election must be mailed, emailed or hand delivered to the membership at least 14 days prior to the annual meeting/election.

• The Second Notice should include:

o Instructions for casting a ballot.

o The notice and agenda for the annual meeting (which will include the election).

o Any information sheets (resumés) submitted by eligible candidates.

o The ballot listing all of the eligible candidates’ names in alphabetical order.

o An inner envelope labeled "Ballot Only" and an outer envelope labeled with the address of the property manager or the association.

o Voting

• In order to be valid, the unit owner’s name must be printed on the outer envelope, together with the unit number, and the eligible voter’s signature.

• The eligible voter must select a candidate using the ballot included with the second notice and place it in the inner envelope.

o The inner envelope must then be placed in the outer envelope

• The outer envelope may then be mailed or hand delivered to association or property manager.

• The same process must be utilized (ballot, inner envelope and outer envelope) at the annual meeting up until the time that the inspectors of the election begin to open the outer envelopes.

While this process may seem tedious and time consuming, it is extremely important to remember that the process is in place to ensure a fair election. When casting your vote, keep in mind the importance of the board in your community. The board generally serves as the "people’s voice" and handles the day to day operations and decisions of the association and, in conjunction with the manager, ensures that the community runs smoothly. Annual meetings and elections are an extremely critical time for any community association, so it is important that they are treated as such.

Please be advised that you may contact your attorney to handle the election for your association, as they are able to monitor and assist with the process to ensure all steps are followed correctly.




Changes to Construction Defect Claims Process Being Considered by Florida Legislature Create Concerns for Associations, Property Owners

By Roberto C. Blanch

House Bill 87 aims to amend Chapter 558, Florida Statutes, in an effort to help contractors and design professionals avoid construction defect litigation. However, if enacted, the bill could present some problems for community associations and property owners. If enacted, HB 87 would require community associations or other property owners wishing to pursue a construction defect claim to meet additional procedural requirements which could require substantial expenditures on engineering fees before being able to file suit. The bill would also require property owners to produce potentially large amounts of documents to the contractor or design professional before being permitted to file suit without imposing a similarly broad requirement on the contractor or design professional, and it would impose monetary sanctions against property owners who file suit for construction defects in several circumstances, while not providing for any sanctions against contractors or design professionals in similar situations.

Some of the proposed changes under HB 87 include: Revising the definition of the term "Completion of a building or improvement" to include issuance of a temporary certificate of occupancy, which could potentially shorten the statute of limitations for a property owner to file suit for construction defects; Providing additional requirements for a notice of claim, including the identification of specific location(s) of each alleged construction defect, as well as the specific provisions of the building code, project plans, project drawings, project specifications, or other documentation, information, or authority that serve as the basis of the claim for each alleged construction defect; Revising the requirements for a response to a notice of claim to address monetary settlement offers; Providing that, if a claimant proceeds with an action that includes any claim previously resolved in accordance with Chapter 558, the associated portion of that action shall be deemed frivolous (the term "previously resolved" is not defined); Providing for sanctions for such frivolous claims, including attorneys’ fees; Revising the provisions relating to production of records requested under Chapter 558, to include a claimant’s maintenance records and other documents related to the discovery, investigation, causation, and extent of the alleged defects identified in the notice of claim and any resulting damages; Providing for sanctions for construction defect claims that were solely the fault of a claimant or its agents, including costs of investigation, testing, and attorneys’ fees. (No sanctions are provided against a defendant if the defect is deemed to be solely the defendant’s fault.)

The bill would require more detailed settlement proposals from contractors that wish to extend a settlement offer, but it provides no penalties for defendants that fail to comply with this requirement. However, the associations and property owners that file claims are subjected to several potential penalties if they do not comply with the requirements under the proposed modifications to Chapter 558.

As it now stands, HB 87 would cause significant obstacles and undue burdens on property owners and community associations that wish to pursue construction defect claims. Community association stakeholders are encouraged to become informed about this bill and its progress in Tallahassee, and to contact their district’s elected State Representative to oppose the adoption of House Bill 87. The bill has currently been assigned to the Civil Justice Subcommittee, the Business & Professions Subcommittee and the Judiciary Committee. It must pass those committees before being presented to the full Florida House of Representatives in the 60-day legislative session that begins March 3, 2015. If passed, the new law would take effect October 1, 2015.




New vs. Almost-New

By Roberto C. Blanch

Constant new development of residential and mixed-use towers can be seen all over South Florida, with new projects being announced constantly. The construction of these new towers evokes buyers to ask themselves: What is better, new or old? The answer to that question is triggering existing community associations to spruce up their communities by giving them a facelift in an effort to stay competitive.

With the intention of luring buyers to choose new over old, newer buildings are offering luxuries such as: sleek and polished designs, newer amenities, revolutionized living technology and the idea of being the first to live in a space that has not yet been inhabited. Add-ons such as state of the art fitness centers, exclusive resident spa services and five-star concierge and building services are making the choice of selecting new construction more appealing. However, this option commonly comes with a heavier price tag and some unexpected issues. A few draw-backs such as unforeseen construction delays and unknown kinks arising after construction are common issues owners face when selecting new construction. They also face the infamous turnover phase — a time that could be very difficult for newly established community associations if they lack the right experts to guide them through the process. These challenges have prompted older towers to improve their buildings with hopes of enticing these buyers to look their way.

Older buildings are using the risks buyers face when purchasing new construction to their benefit. Towers over three years old are labeling themselves "established," having already dealt with most, if not all, construction defects found after the developer turned over control. They also highlight the fact that their boards are more seasoned, helping buyers feel like they are placing their investment in knowledgeable hands. Also, construction delays would never be an issue since these units are all move-in ready. In addition to highlighting some of the benefits that come with moving into an established community, many older condo towers are also making the effort in renovating their spaces to update their design to match the designs offered in newer construction. Some have gone as far as converting racquetball courts into multi-purpose rooms, yoga rooms, arts and crafts rooms and additional fitness centers. Simply by turning something old into something almost-new, these towers are keeping up with newer condos and competing at a price level that tends to be much more affordable, while still offering a similar style of living. With this in mind, the boards of these older buildings should be cautioned that their association’s governing documents may prevent some of the proposed changes, and that many alterations and improvements must be approved by the association membership. Accordingly, it is advisable for community association counsel to be involved in the planning of any such changes.

It will be interesting to see what buyers will choose once most of these towers are finalized. Our firm’s community association attorneys have assisted numerous clients with redesign projects throughout the years. We write in this column as well as in our blog at 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.




Firm Prevails in Appellate Ruling: Bank’s Foreclosure Delays Exceeded Statute of Limitations, $1.4 Million Penthouse Goes to Miami Beach Condo Association

By Roberto C. Blanch

Our firm is very pleased to have prevailed on behalf of one of our community association clients before the Third District Court of Appeal in the opinion filed Wednesday, Dec. 17, in the case of Deutsche Bank Trust Company Americas v. Harry Beauvais et. al. The appellate panel affirmed the Miami-Dade Circuit Court’s summary judgment that we had secured earlier this year barring Deutsche Bank from foreclosing on its $1.43 million first-mortgage on a penthouse at the Aqua Condominium in Miami Beach which the association had acquired ownership of in 2011 through its own foreclosure action. Since the bank failed to file its foreclosure action within the five-year statute of limitations period, it was barred from seeking to collect the amounts due under the mortgage.

At the trial court level, we successfully argued that the bank had "started the clock" for the filing of its foreclosure action in January, 2007 when its loan servicer filed the initial foreclosure suit and accelerated the amounts due under the mortgage. The foreclosure was dismissed when the lender’s attorneys failed to appear at the initial case management conference in December, 2010. For unexplained reasons, the bank then waited until December, 2012 to file its second foreclosure action, nearly a full calendar year after the five-year statute of limitations had expired. The circuit court granted our motion for summary judgment declaring the first mortgage held by the lender unenforceable, null and void and discharged of record from the penthouse unit.

The bank appealed the circuit court’s judgment. Along with our co-counsel Todd Wallen, we successfully countered the bank’s contention before the appellate panel that its second filing represented a new foreclosure action. The Third DCA determined that the initial foreclosure suit triggered the commencement of the statute of limitations and, thus, the filing of the subsequent action, after expiration of the statute of limitations, was therefore barred. As a result, the Third DCA affirmed the circuit court’s order that the lender was barred from foreclosing on its mortgage, but it reversed the court’s finding that the bank’s mortgage was null and void. The end result is that although the mortgage remains on the property until its expiration, the lender is precluded from taking any action to collect the debt, thus allowing the association to continue to rent the unit without fear of an eventual foreclosure action by the lender.

This opinion is emblematic of the ultimate negative consequences that lenders are facing due to their failure to timely enforce their rights. After years of suffering due to the dilatory tactics of lenders, an association has finally caught a break and will benefit by this ruling. Every citizen of this state is bound by the applicable statute of limitations, and the Third DCA made it clear that banks are no exception. The ruling represents the first appellate opinion on a decision barring a lender from foreclosing on its mortgage due to the expiration of the statute of limitations, and it is likely to be considered by the Florida Supreme Court which is set to hear a similar case.




Don’t Get Scrooged By Your Neighbors During the Holidays

By Laura M. Manning-Hudson

Holidays are time for out of town visitors, lots of parties with family and friends, and the inevitable traffic that all of the festivities bring with them. Unfortunately, not all neighbors and communities welcome the season and all that it brings with open arms. Typical complaints that many boards deal with during the holiday season revolve around high traffic, high noise levels and violations of parking rules. However, by taking certain precautions ahead of time, residents can hopefully avoid being scrooged by their neighbors and having their holiday spirit deflated.

If you are hosting a party, a good rule of thumb is to plan ahead in terms of parking. Find out about the guest parking in your community – where spaces are located and how many spaces are available is a good starting point. If you live in a gated community, find out if visitors will be required to go through a security gate or obtain guest parking passes beforehand. Some communities require that a guest list be provided to security prior to the party so that guests can more easily be identified when entering the community and then directed to the appropriate parking locations. You may also want to ask around to see if any of your neighbors will be out of town and whether your guests can use their parking spot while they are away. If guest parking is limited or just not accessible, you may have to park visitors outside of the community and shuttle them in.

From the board’s perspective, make sure that your community is prepared to accommodate the increased traffic and parking during the holidays. The parking rules may differ from association to association, but the most important thing to consider is to keep the roads safe for other drivers and emergency vehicles. Gatehouses or guard gates should be well-staffed to ensure that visitors aren’t forced to wait long periods of time in order to be granted entry. Also, make sure that security follows your community’s protocol when allowing visitors access – you don’t want them bypassing security procedures in an effort to avoid long lines. If your community has roving security guards, make sure that officers are continuously moving through the property — extra security presence helps deter unruly behavior.

Since South Florida is notorious for its nightlife and parties, make sure to keep your noise levels in check when hosting your holiday gathering. Ask yourself at what point does sound become noise. Keep in mind that each county has noise ordinances that regulate the times of day that noise levels should be kept at a minimum. The most common times which counties allow loud music to play are Sunday through Thursday until 10 p.m., and Friday through Saturday until 11 p.m. If the designated noise restrictions are ignored, your neighbors may call the police with a nuisance complaint and your party may be over before you’ve been able to ring in the New Year. Officers will typically give a warning, but if the noise persists, you may receive a ticket or even be arrested for public nuisance.

Finally, parties and family gatherings often mean that our furry friends get booted to the garage, backyard, balcony, or confined to a crate indoors – and with that may come incessant barking, whining and howling. While neighbors and board members may not call animal control unless they have reason to believe the animal’s safety is in jeopardy, they do have a right to exercise what is legally referred to as "quiet enjoyment" of their residences. If you have already been warned about your animal’s disruptive behavior and the issue persists, you could face fines or other legal action.

While the holidays are a hectic time of year, communities that plan ahead are better served – as are their residents who know (and hopefully follow) the rules. We encourage association directors and members to review their community’s parking, party and security rules at board meetings leading up to the holiday season. Distribution of information to the membership is key with the ultimate goal to make the season merry and bright while not ruining the magic for those around you.




Know Your Association’s Rules before Hanging the Mistletoe

By Laura M. Manning-Hudson

'Tis the season to be jolly! Or is it? The time of year is near where holiday songs are being sung, and lights and other decorations are being hung. However, before you start decking the halls – you may want to check your association’s rules for spreading the holiday cheer. Not all communities are keen on holiday décor. In fact, some communities ban the use of inflatable snow globes and over excessive lights. The best way to know your community’s position on the matter is to start by asking if there are any rules or policies in place for holiday decorations. If your neighbors don’t know, find a board member or certainly the property manager can steer you in the right direction.

If your association allows decorations, the most common rule of thumb is to keep them on your property and keep them to a minimum. If there are no rules in place regarding holiday decorations, the association has the right to ask you to remove your decorations should they interfere with common elements, draw too much attention causing unnecessary traffic, or if the light and noise are disrupting those around you. In a condominium association, this applies to the outside of the unit including the front door (the exterior side is generally a common element). Something else to keep in mind is the amount of time that the decorations are displayed. It is recommended that decorations should be up no longer than thirty days prior to and thirty days after the end of holiday season – after all, the holidays should be celebrated during the month of the "main event."

Unfortunately, some communities can be rather "scrooge-like" and have rules against all decorations. While the Condominium Act prohibits associations from refusing to allow religious objects (not exceeding 3 inches wide, 6 inches high and 1.5 inches deep) from being attached to the mantel or frame of the door, there are some associations that prohibit the placement of any décor whatsoever. Your association may have penalties in place for those wanting to spread merry cheer with lights, nativities and dancing snowmen. Penalties may include a request to immediately remove decorations or may even come in the form of a fine (with notice and opportunity to be heard, of course); it all depends on the rules and regulations set forth in your association’s governing documents and bylaws.

If you are wondering whether there are any loopholes to the bah-humbug attitude, perhaps there are, but in order to find out you need to do your research. We recommend that you attend board meetings, check the state laws and review your association’s rules and regulations. And, before you storm into a board meeting fuming with frustration, keep in mind that even though your home is your property, you did agree to a specific set of rules and regulations when you joined the community. It is best to be well informed before you are asked to take down your décor or worse – asked to pay a fine for something as innocent as displaying some holiday spirit. If you are on the board at your community and there are no rules in place for holiday décor, you may want to suggest adopting a policy at the next board meeting, voting on the policy and then distributing the new rules to the membership.




Miami-Dade and Broward County Ordinances Require Community Associations to Provide Reasons for Denying Applicants for Rentals or Purchases; Will Palm Beach County Follow Suit?

By Roberto C. Blanch

A large number of community associations require applications from prospective buyers and tenants who wish to acquire or rent dwellings in their communities, and many of these communities further require background checks to be performed on the prospective residents as well. However, directors and management representatives of many Miami-Dade and Broward community associations are unaware of county ordinances requiring them to provide written notices or responses to applicants seeking to rent or purchase within such communities, including disclosing the specific reasons for applications that are rejected. While Palm Beach County and many other Florida counties have not yet adopted similar ordinances, it is difficult to imagine that such measures aimed at eliminating discrimination in housing would encounter significant resistance if proposed in the future.

Prior to the adoption of these ordinances, associations in Miami-Dade and Broward counties were not required to specify the reason for rejecting a prospective tenant or buyer, unless the notice requirement was included in their governing documents. Similarly, unless otherwise specified in its governing documents, such community associations were not obligated to reach decisions on whether to approve or disapprove such applications within any specific period of time.

These ordinances, adopted in 2013 in Broward and earlier this year in Miami-Dade, were aimed at prohibiting associations from declining prospective buyers or tenants based upon discriminatory reasons, and establish the following requirements:

1. Within 15 days after receipt of any incomplete or incorrectly completed application (or amended application) to purchase or rent a dwelling, the condominium association, homeowners’ association or cooperative association shall provide the applicant with written notice specifically identifying any and all items in the application that need to be completed or corrected.

2. Within 45 days after receipt of a correctly completed application, the condominium association, homeowners’ association, or cooperative association shall either reject or approve the application and shall provide the applicant with written notice of same. If the application is rejected, the written notice must state with specificity each reason for the rejection.

3. If the condominium association, homeowners’ association, or cooperative association fails to comply with [these] provisions, the [County Human Rights Section or Commission on Human Rights] may send a demand letter requesting that the condominium association, homeowners’ association, or cooperative association, within 10 days after the date of the demand letter, provide to the applicant and the Director or the Commission a written acknowledgement of application receipt, notice of approval or rejection of the application, and notice specifying each reason for the rejection (if applicable). The failure of the condominium association, homeowners’ association, or cooperative association to timely comply with this provision may be considered in determining whether reasonable cause exists to believe the association’s decision or action was discriminatory.

These ordinances make it imperative for Miami-Dade and Broward community association directors and managers to be mindful of deadlines established not only in the association’s governing documents but those that may be established in the ordinances as well. Further, these community association directors and managers must be sure to take the steps necessary to provide timely notice of deficient applications for approval without regard to whether such action was required pursuant to the associations’ governing documents. Directors and managers of community associations in Miami-Dade and Broward counties should have their governing documents reviewed and should possibly consider amending same in order to ensure that their approval and screening procedures comply with these requirements. Additionally, directors and managers of community associations located in other jurisdictions should consult their legal counsel to ascertain whether the local government governing their community has ordinances establishing similar restrictions. It is further important for directors and managers to consult with their community’s legal counsel to determine whether their governing documents permit the denial of prospective residents and, if so, upon what grounds the denial must be based.




Preparing for the Snowbird – the Unofficial State Bird of Florida

By Laura M. Manning-Hudson

Last winter was particularly brutal for many parts of the country, and it was among the coldest on record in large swaths of the midwest. For south Florida however, the weather was as mild and beautiful as ever. TV viewers across the country were often reminded of the spectacular south Florida weather on national television showing ubiquitous scenes of sunbathers on the beach during the nationally televised NBA playoffs.

South Florida’s mild winters have made the Snowbird, those part-time residents who flock here by the hundreds of thousands from December through March, the unofficial state bird of Florida. Many of these Snowbirds own units in condominiums and homeowners association communities, making it necessary for full time residents and managers to adjust to the influx of residents. In order to make the transition into the "season" run smoothly, community associations can take a few simple steps to prepare.

For full time residents, board members and managers, the return of the Snowbird is the ideal time to reconnect with friends and ensure that the association has all of their current contact information. Snowbirds should also be sure to change their mailing addresses for all association communications from their residences up north to their local address in the community.

A nice way to welcome Snowbirds back to their winter homes is with a special reception for all of the residents in the community clubhouse or pool area. Speaking of which, the association’s common areas (card rooms, meeting rooms, pool areas, and clubhouse) are also likely to see more engagement by residents hosting their own gatherings and events over the holidays. Anyone who may be considering reserving the common areas for private gatherings should be reminded to schedule ahead of time with management in order to ensure availability.

Boards of directors should also be prepared for increased attendance at meetings. There will certainly be more architectural review submissions from unit owners who are planning changes to their seasonal homes, so any architectural review committee should be prepared for the increased work load.

For condominiums, parking garages will be much fuller, and management should be prepared to promptly respond to any parking or security issues that may arise in order to avoid their escalation into disputes between residents. Residents who live in gated communities should also confirm that their access cards/fobs/transponders are active in order to avoid pileups of vehicles at community entrances.

By working closely together and planning ahead, association boards and their property managers can make the transition into the busy winter season run as smoothly as possible.




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 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.




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.




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 ( 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 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.




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 in order to automatically receive all of our future articles.




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, 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.




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




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.




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.




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.




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 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.



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.




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.




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.




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 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.




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.



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




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.




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.




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, and questions can also be sent to

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.




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.




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.




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

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

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