Community 

Association 

Counselor

 

By

Laura M. Manning-Hudson and Roberto C. Blanch

Last Updated 04/12/2014

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(3-19-14)

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

By Laura M. Manning-Hudson

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

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

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

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

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

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

 

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(3-5-14)

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

By Roberto C. Blanch

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

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

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

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

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

 

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(2-19-14)

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

By Laura M. Manning-Hudson

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

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

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

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

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

 

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(2-5-14)

Progressive Condo Associations Working to Accommodate Electric Cars

By Laura M. Manning-Hudson

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

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

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

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

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

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

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

 

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(1-22-14)

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

By Roberto C. Blanch

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

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

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

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

 

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(1-8-14)

Parking Spaces = Hot Commodities

By Laura M. Manning-Hudson

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

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

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

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

 

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(12-25-13)

Association Receiverships

By Roberto Blanch

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

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

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

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

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(12-11-13)

My Association Has

Finally Turned Over – 

Now What Do We Do?

By Laura M. Manning-Hudson

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

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

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

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

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

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

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

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

 

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(11-27-13)

Homeowner Alterations

By Roberto C. Blanch

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

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

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

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

 

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(11-13-13)

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

By Laura M. Manning-Hudson

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

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

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

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

 

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(10-30-13)

A Basic Contractual Understanding

By Roberto C. Blanch

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

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

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

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

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

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

 

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(10-16-13)

Negotiating the Short Sale Waters

By Laura M. Manning Hudson

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

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

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

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

 

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(10-2-13)

HOAs: To Reserve or not to Reserve???

By Roberto C. Blanch

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

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

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

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

 

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(9-18-13)

New Broward County Ordinance to Affect Community Associations

By Laura M. Manning-Hudson

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

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

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

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

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

 

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(9-4-13)

Do you Really Need to Install a

Fire Sprinkler System in your

Condominium Building?

By Roberto C. Blanch

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

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

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

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

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

 

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(8-21-13)

Association Held Liable For

Excessive Collection Demands

By Laura M. Manning-Hudson

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

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

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

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

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

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

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

 

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(8-7-13)

Do New Laws Provide

Unintended Consequences?

By Roberto C. Blanch

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

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

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

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

 

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(7-24-13)

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

By Laura M. Manning-Hudson

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

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

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

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

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

 

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(7-10-13)

Condominium Association Prevails Over Lender

By Roberto C. Blanch

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

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

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

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

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(6-26-13)

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

By Laura M. Manning-Hudson

 

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

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

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

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

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

 

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(6-12-13)

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

By Laura M. Manning-Hudson 

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

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

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

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

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

 

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(5-29-13)

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

By Laura M. Manning-Hudson

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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(5-15-13)

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

By Roberto C. Blanch

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

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

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

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

 

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(5/1/13)

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

By Laura M. Manning-Hudson

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

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

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

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

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

 

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(4-17-13)

Effective Collection Tactics for Associations Against Owners Who File for Bankruptcy

By Roberto C. Blanch

— Part Two

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

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

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

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

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

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

 

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(4-3-13)

Effective Collection Tactics for Associations Against Owners Who File for Bankruptcy

By Roberto C. Blanch

— Part One

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

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

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

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

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

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

 

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(3-20-13)

Assessment Collections Practices are Leading to Lawsuits

By Laura Manning-Hudson

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

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

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

 

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(3-6-13)

2013 Community Association Proposed Legislation

By Roberto C. Blanch

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

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

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

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

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

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

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

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

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

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

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

 

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(2-20-13)

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

By Laura M. Manning Hudson

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

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

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

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

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

 

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(2-6-13)

ALERT: 

3rd District Appellate Opinion may affect Collection Strategies!

By Roberto C. Blanch

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

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

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

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

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

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

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

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(1-23-13)

The Laws Governing Condominium Association Meetings and Meeting Notifications

By Laura M. Manning-Hudson

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

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

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

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

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

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

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

 

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(1-9-13)

Top 10 Collections Resolutions for 2013

By Laura M. Manning-Hudson

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

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

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

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

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

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

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

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

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

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

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

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

 

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(12-26-12)

Hidden Costs For Associations Playing Music or Movies in Common Areas

By Roberto C. Blanch

Many community associations provide for music and movies to be played in the common areas or common elements for the enjoyment of guests and residents. For instance, an association may play a series of songs over the stereo system at the association clubhouse dining facilities in hopes of providing a pleasant dining experience for residents and their guests. Another community may provide a similar environment for those entitled to use its gym facilities. Yet another community may schedule a weekly movie night for residents at no charge to those interested in attending. The foregoing scenarios are all too common throughout many community associations in Florida and may result in hidden costs to the associations in the event that the appropriate safeguards are not implented.

Title 17 of the United States Code, known as the "Federal Copyright Act," grants certain exclusive rights to the owners of copyrighted works, such as the right of a musical composer to "perform the copyrighted work publicly." The term "perform" is defined in the Federal Copyright Act to mean "to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible." In addition, the Act provides that to perform the work "publicly" means "... to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times."

In light of the foregoing and in accordance with other general provisions of the Copyright Act, it has been suggested that businesses broadcasting background music to the public must obtain a license to play such music. While there are exceptions to copyright infringement for small businesses, including restaurants, when they broadcast radio or televisions shows, the same businesses are not exempt from copyright infringement when they play music from devices such as tapes or compact discs. Based upon the foregoing, certain facilities that publicly play recorded music from devices such as compact discs must obtain a license from the songwriter or the songwriter’s agent to play such music.

Federal copyright law permits a songwriter or his agent to grant permission to others to legally "perform" the songwriter’s copyrighted work "publicly" and thus avoid copyright infringement claims. These performance rights are generally licensed on behalf of copyright owners by business entities or associations known as "performing rights" societies. The three major performing rights societies recognized by the Federal Copyright Act are the American Society of Composers, Authors and Publishers ("ASCAP"); BMI; and SESAC, Inc. These societies may grant a license to commercial establishments to use the music in their repertoire through a licensing agreement. The license entitles the commercial establishment to play only the music in that society’s repertoire. Therefore, it may be necessary to enter into a licensing agreement with more than one society.

As an alternative to obtaining performance licenses from performing rights societies, commercial establishments may enter into an agreement with a commercial music services provider, which in turn enters into the licensing agreements with the performing rights societies. Under this arrangement, the commercial establishment only enters into one contract with the commercial music services provider and pays the provider for the privilege of playing copyrighted music rather than entering into licensing agreements with various performing rights societies.

Please note that Florida law imposes certain obligations on performing rights societies by statute, such as disclosure requirements that societies must meet when presenting proprietors with information on their services and requirements with which their contracts with proprietors must adhere. However, a discussion of these requirements is outside of the scope of this opinion. As such, it is advisable to have counsel for the association review any disclosures together with proposed agreements provided by a performing rights society prior to the association entering into any such agreement in order to determine whether they comply with Florida law.

Observance of the foregoing requirements may mean the difference between compliance with applicable copyright laws or committing potentially costly violations of such laws. Consult with your association legal counsel for an opinion as to your exposure if your community engages in activities or services such as those described above.

 

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(12-12-12)

Clear Dog Policies Help to Avoid Disputes, Confusion for Community Associations

By Laura M. Manning-Hudson

Doggie disputes are a common issue for many owners and board members in South Florida condominium communities. In today’s housing market, many people who were previously living in a single-family home are now finding themselves living in condominiums or deed-restricted communities with their pets. Subsequently, association boards are now facing more situations involving dogs and dog owners in their communities. However, by taking a new look at their policies concerning "man’s best friend," associations can better serve their community by adopting policies specifically pertaining to the board’s ability to quickly and fairly deal with any dog-related issues that may arise, including how to deal with what some have called "dangerous dogs."

Most governing documents have provisions concerning dogs, but many lack the specificity required by boards in order to remove the dogs should they be determined to be a danger to the community. By adopting a policy that provides when a dog may be determined to be a nuisance and must be removed, both boards and pet owners are better served by having specific parameters to assist them when it comes to incidents such as dog bites, lunging, growling, and intimidating behavior or aggression toward other residents or dogs in the community. Additionally, more and more condominium and HOA documents are specifically identifying certain breeds of dogs that are deemed to be dangerous and prohibited in the community. Typically these are the Doberman Pinscher, Pit Bull and Rottweiler breeds. (The origination of these lists of dangerous dogs goes back to homeowner’s insurance policies.) Some documents use a weight-limit maximum for pets, which also serves to prohibit most of the larger breeds of potentially dangerous dogs.

Any policies adopted by a board should specify the type and number of incidents and/or complaints that can be used by the board to determine when a dog is a nuisance (or perhaps dangerous) and must be removed from the property. Most dog owners know and understand their own dog’s individual personality and tendencies, so owners will be better equipped to use their own judgment to mitigate potential incidents that are detailed in the rules, such as waiting for the next elevator if another dog owner is already in it with their pet. Also, by establishing in the pet policy the specific number and types of incidents that can be considered aggressive behavior, a board will be able to make uniform decisions when it comes to all dogs in their community – regardless of size or breed – and avoid any arbitrariness in their decisions that could result in a successful challenge by an owner before the Division of Condominiums.

Another rule that associations should consider is requiring residents who own dogs to maintain a homeowner’s or renter’s insurance policy to insure against any dog incidents that could occur in or around the condominium property. Associations should also consider the creation of a rule that provides that dog owners agree to indemnify and hold the association harmless from any liability resulting from incidents involving a dog.

The pet policies and restrictions in community association governing documents and rules tend to vary greatly depending on the individual property and the prevailing mindset of the community. Community associations that wish to make their property user-friendly for dog owners who abide by the rules should make every effort to enact clear and detailed rules and pet policies that make sense for their community and eliminate the potential for arbitrary enforcement.

 

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(11-28-12)

Appellate Ruling Upholds Dismissal of Wrongful Death Lawsuit Against Valet Company for Returning Vehicle to Intoxicated Driver

By Roberto C. Blanch

Many of the condominiums and condo-hotels in South Florida offer valet parking for the convenience of their residents and guests. With so many gatherings and celebrations taking place at these properties, the valet companies that provide these services sometimes face the difficult situation of whether to provide an individual who is clearly intoxicated with their vehicle for them to drive. The question then arises: Are the valets legally liable for any incidents resulting from visibly intoxicated drivers to whom they have returned vehicles?

The recent ruling by Florida’s Second District Court of Appeal in the case of Debbie Weber v. Marino Parking Systems, Inc. provides some clarity for valet companies in this situation. The court upheld the lower court’s dismissal of the lawsuit, which was filed on the grounds of wrongful death by Weber against the valet company after it returned the vehicle to an obviously intoxicated driver who then got into accident that caused the tragic death of his passenger, the plaintiff’s daughter.

The court ruled that a valet parking service does not owe a duty to third parties to refrain from returning a vehicle to an obviously intoxicated driver. In its ruling, the court acknowledged that cars, just like firearms, are dangerous instruments, but unlike gun sellers, a valet is not acting as a seller, lessor, donor, lender or bailor in providing its services. Instead, it serves as a bailee, which is defined as one who holds property for another. Bailees, the court concludes, do not have a superior right to control the property, which means that valets have no discretion to refuse to return the vehicle without potentially being liable for a conversion.

While this ruling does seem to shield the valet parking service providers from legal liability in these cases, there are other measures that the valet companies and the condominiums and condo-hotels which retain them can and should take to dissuade intoxicated individuals from demanding their vehicles and driving off. These include hiring off-duty uniformed police officers to provide on-site security for large parties and special celebrations, and coordinating with local taxi companies to have taxis available for these events. The horrors of the consequences of drunk driving are too serious to ignore, and we encourage valet companies and the properties that they serve to take all of the precautions at their disposal to avoid enabling intoxicated individuals from getting behind the wheel.

 

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(11-14-12)

Lawsuit by Neighborhood Association Against Homeowner for Water-Conserving Yard Will Test Florida’s Xeriscaping Law

By Laura M. Manning-Hudson

In 2009, the Florida legislature amended the HOA Act to prevent HOAs from prohibiting "Florida friendly landscaping" or enforcing landscaping criteria against owners who use "Florida friendly landscaping." Florida friendly landscaping is defined as landscaping that does not require sprinklers and chemicals to survive, but exists in our natural Florida climate. Since 2009, several disputes between associations and owners have arisen over the use of these xeriscaping techniques, most of which have been resolved amicably. However, a new lawsuit filed by a neighborhood association in Orange County, Florida, against a homeowner should add some clarity as to how the courts will apply this controversial law.

In the case of Summerport Residential Property Owners Association v. Parker, homeowner Renee Parker was sued by her association after she replaced the St. Augustine grass in her yard with an Argentine bahia sod variety that is considerably hardier and requires significantly less watering and fertilizer. The HOA documents specifically require St. Augustine grass for lawns. The HOA is seeking an order from the court forcing Parker to permanently cease violating the community association’s landscaping rules – or return the lawn to St. Augustine type grass.

Parker claims that she filed an application for modification with the association detailing the areas to be replanted and a list of the plants to be used, but she never received a response. When she didn’t receive a response from her HOA, Parker went ahead with her landscaping plans. Parker is also claiming that the HOA is violating Florida Statute 720.3075 by attempting to enforce its landscaping rules and requiring her to remove the Florida friendly landscaping and plants that she installed. The defense of the Florida friendly landscaping prohibition raises several legal issues for both Parker and the HOA.

Our other community association attorneys and I will continue to keep a close eye on the outcome of this case, as it should help to clarify how the courts will apply this law. Until we see a determination on the application of this statute, however, the lesson for both HOAs and homeowners is to follow the procedures set out in your community’s governing documents regarding modifications to the exterior of the property. If there is a requirement that an owner file an application before making any modification, then owners should comply – regardless of the type of plants they are intending to install. And, as for HOAs, if the governing documents set out a time deadline to respond to such a request for modification, ensure that your association responds in a timely manner.

We will cover the outcome of this case in our blog at www.FloridaHOALawyerBlog.com in the coming months, and we encourage community association directors and members as well as property managers to submit their email address in the subscription box in the blog in order to receive all of our future articles.

 

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(10-31-12)

TV News Report on Association Lien Foreclosures Sold at Foreclosure Auctions Mischaracterizes These Investments as Deceptive, Valueless

By Roberto Blanch

The recent report by Patrick Fraser of the South Florida Fox affiliate WSVN Channel 7 took many of the community association attorneys at our firm by surprise. The report featured what appeared to be novice and uninformed real estate investors who claimed to have been duped into buying community association lien foreclosure sales from a Miami-Dade online foreclosure auction. They are now working with a foreclosure listing company to get their money back, and the president of the company is quoted in the story claiming that he considers these investments to have no real value, and all of those who are buying them are completely uninformed as to what they are actually acquiring and will end up losing their money.

Association lien foreclosures are nothing new, as they have served for decades as legal recourse for associations to foreclose on unit owners who do not pay their assessments.

Due to the abundance of foreclosure cases that have been filed along with the robo-signing debacle that ensued, bank foreclosure cases now often take years instead of months to complete. As a result of the delays in bank foreclosures, community associations have been forced to pursue foreclosure of their own liens given that they could no longer simply wait for banks to finalize their foreclosure cases.

Associations, with assistance from their counsel, reassessed their legal strategy and began utilizing their lien rights to foreclose on units, obtain ownership, and either lease the residences or negotiate short sales with the banks in order to recoup the past-due assessments along with the late fees, interest, and attorneys’ fees and costs. With respect to investors, in some circumstances, these association foreclosures have represented extremely valuable investments to those who conduct proper research before bidding. Some investors have been able to acquire title to condominium units for less than $5,000, and they have then been able to reside in or rent out these residences for months - and sometimes years - before the bank forecloses its first mortgage. Others have placed themselves in a position to negotiate with the lender and possibly obtain free and clear title to the unit. There are even rare cases in which banks complete their foreclosure, obtain ownership of the property and then fail to pay the assessments to the association. The associations are then able to exercise their lien rights, foreclose on the bank and acquire the property via the association lien foreclosure auction, as it is then free and clear of all other liens except possibly a tax lien, which is typically a nominal amount in comparison to the value of the property.

No matter what type of foreclosure is involved (e.g., bank, association, etc.), investing in foreclosed real estate is a huge industry with thousands of experienced professionals who understand that diligent and proper research is a required cost of doing business. It is no coincidence that all of the public foreclosure auction websites have multiple layers of disclosures and disclaimers stressing the importance of doing research and noting that superior liens may exist on the listed properties. Despite these warnings and the old adage that "If it looks too good to be true, it probably is," uninformed and novice investors do, in limited circumstances, purchase property at these sales which may be encumbered by superior liens placing the winning bidder’s investment at risk.

The bottom line is that the associations are not making any representations about these foreclosures or using them in an attempt to deceive novice investors into bidding on them in the foreclosure auctions without prior knowledge of a superior bank lien. The associations are simply using the legal recourse at their disposal to collect what they are owed, and it is incumbent upon the buyers in these auctions to heed all of the warnings and do their homework before bidding.

 

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(10-17-12)

Community Associations' Rights to Interview and Screen New Tenants, Buyers

By Roberto C. Blanch

There seems to be a common misunderstanding by the directors of many community associations in Florida as to their rights to approve and screen individuals seeking to purchase or rent homes within their communities. An overwhelming number of board members seem to think that their associations have unfettered rights to interview, screen and either accept or reject prospective owners or tenants who are interested in purchasing or renting units within their community. Often times, these directors are disappointed to learn that Florida law and their association’s governing documents are not as restrictive as they would like.

Unreasonable restraints on the alienation of property are disfavored by Florida courts. In other words, previous legal cases addressing the restrictions on a person’s ability to sell or transfer real property have upheld the restrictions only to the extent that they are considered reasonable. Therefore, to ascertain what approval rights the association may have regarding a prospective tenant or purchaser, the association should begin by reviewing its own governing documents. If the community’s declaration of covenants or declaration of condominium does not contain a provision authorizing the association to reject potential purchasers or tenants, the board should refrain from disapproving any tenant or purchaser except in the event of exigent circumstances (the applicability of which should first be analyzed and determined by association counsel).

However, an association’s board is not necessarily free to approve or disapprove prospective purchasers and tenants merely because the authority to do so appears in the association’s governing documents. As I indicated, the requirement to obtain an association’s approval prior to selling or leasing a home or unit is deemed to be a restraint on the alienation of such real property, and as such, that restraint may only be imposed to the extent that it is reasonable. An arbitrary disapproval of a tenant or purchaser is likely to be unenforceable. One measure that the courts have determined to be reasonable when disapproving a potential sale of a home or unit is the "right of first refusal," which would require an association or its designated representative to step in and consummate the sale or lease of the potential purchaser or tenant who is disapproved. This protective measure is deemed to enable the association to exercise some level of control as to the individuals that may reside in a community without unreasonably limiting the owner’s right to sell or lease the property.

Other grounds that might be argued to be reasonable in connection with the disapproval of an applicant seeking to reside in a community may include the following: (1) the applicant has been convicted by a court of a felony involving violence to persons or property, or a felony demonstrating dishonesty or moral turpitude, and has not had their civil rights restored; (2) the application for approval, on its face, or the conduct of the applicant, indicates an intent to act in a manner inconsistent with the association’s governing documents; (3) the applicant has a history of disruptive behavior or disregard for the rights and property of others as evidenced by his conduct in other residences, social organizations or associations; and (4) the applicant has failed to provide the information required to process the application in a timely manner, or has materially misrepresented any fact or information provided in the application or screening process. In no event, however, may an association disapprove a proposed purchaser or lessee on the basis of race, gender, religion, national origin, or physical or mental handicap.

This article provides a basic overview of the limitations affecting associations with regard to the ability to approve or disapprove individuals seeking to purchase or lease within the community. Given the sensitive nature of those rights – and the potential for liability should the association overstep its rights – associations consult with legal counsel to obtain a clear understanding as to their right to approve or disapprove potential purchasers and tenants.

 

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(10-3-12)

Lessons Learned from Tragic HOA Shooting in Kentucky

By Roberto C. Blanch

The recent case in Louisville, Ky., of a shooting at an HOA meeting that left a 73 year-old former president of the association dead on the scene of a gunshot wound to the head was a horrific tragedy. The alleged shooter was a member of the HOA who had a history of disputes with the association over a fence that the association said did not meet its height or design requirements, and he is now being held on a $1 million bond.

This case illustrates some of the real and disconcerting dangers that may arise in an HOA or condo association community in the event of escalated disputes between owners and the board. Boards and owners become embroiled in disputes on a regular basis, and the boards must remain cognizant of the possibility of dangerous individuals taking violent actions against their members or others in the community.

For some association boards, these types of disputes are going to be inevitable due to the actions of individual owners. As such, associations should take care to act as reasonably and professionally as possible in the process of enforcing all of their restrictions and rules, even with the most recalcitrant owners. Boards should be cautious and vigilant with all of their enforcement actions, and they should not take lightly any potentially dangerous threats to their safety and security as well as that of the other members of the community.

If a unit owner makes any kind of threat of physical harm against a board member or fellow owner in response to an enforcement action, the matter must be taken with the utmost seriousness and should be immediately referred to the local police department. Efforts should also be coordinated with association counsel to ensure that the association is proceeding with appropriate action to avoid casualties and damage that may be caused by the threatening individual.

Determining whether a threat is vague or veiled is ultimately left up to the judgment of the board members and/or owners who are involved, but boards should always err on the side of caution with these disputes. As the recent shooting in Kentucky reminds us, they can and sometimes do escalate to become serious matters of life and death.

 

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(9-19-12)

What is a Covered "Collapse" for Insurance Purposes?

By Laura M. Manning-Hudson

Recently, the Fifth District Court of Appeal issued the opinion of Kings Ridge Community Association v. Sagamore Insurance Company, clarifying what constitutes a covered "collapse" under an All Risk Business Owner’s policy. On February 24, 2010, the association’s clubhouse began to shake, which was apparently caused by a failure of the roof trusses, which had deflected downward by approximately twelve inches. As a result, the drop ceiling and soffits deflected downward, and there was a substantial depression in the flat roof.

The association made a claim to Sagamore, the insurer which had issued an "All Risk" policy. Sagamore instituted an action for declaratory relief seeking a determination as to whether the damage caused by the truss failure constituted a covered loss.

Under the policy, "collapse," defined as "an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose," was a covered cause of loss. Furthermore, the policy provided coverage for a collapse caused by:

(d) Weight of people or personal property; (e) Weight of rain that collects on a roof; (f) Use of defective material or methods in construction,

It was undisputed that the failure of the roof trusses was caused by ponding rain, heavy A/C equipment and defective truss construction.

However, the trial court entered a summary judgment of no coverage based upon the following exclusions:

(c) A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building;

(d) A building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.

The Fifth District Court of Appeal, relying upon the dictionary definition of "standing" reversed, commenting:

Moreover, "standing" is defined as "upright on the feet or base; remaining at the same level, degree, or amount for an indeterminate period." Merriam-Webster’s 1216. Prior to the incident of February 24, 2010, the drop ceiling, flat roof, and trusses were upright on their base and had remained at the same level, degree, and amount of height for an indeterminate period. At the time of the incident, they collapsed. Immediately after the incident, they were no longer upright on their base; they were no longer at the same level, degree, or amount of height that they had previously maintained. Therefore, by definition, the drop ceiling, flat roof, and trusses are not standing and this section [these sections] does [do] not apply.

The court held that the policy was subject to two different interpretations and thus ambiguous. Consequently, as ambiguous policies are read in favor of coverage, the association was entitled to coverage.

When dealing with insurance issues, it is important to carefully consider the insurance carrier’s position in light of the policy language. Our South Florida community association lawyers have a great deal of experience with insurance issues, and we are available to respond to associations’ insurance questions and provide counsel on all insurance matters.

 

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(9-5-12)

Is Your Association Utilizing All of The Tools Available To It?

By Laura M. Manning-Hudson

Many times I receive calls from condominium and homeowners association board members and managers who are at their wits end with certain residents in their community who cannot seem to follow the rules. These are the residents who paint their homes without seeking and receiving approval, move tenants into their units under the cover of darkness and probably have a Labrador retriever in a no-pet building. They play their tv’s and stereos too loud and too late at night. You know who I’m talking about. There’s one in every community. But I find that many associations are completely unaware of some of the tools that the legislature has given them to assist in the enforcement of their rules. Both the Condominium Act and the Homeowners Association Act contain similar tools for enforcing restrictions against non-conforming residents. However, associations must be careful when utilizing these tools as failing to "dot your i’s" or "cross your t’s" may result in all of your hard work going down the tubes. Specifically, section 718.303, Florida Statutes, and Section 720.305, Florida Statutes, provide that associations may impose fines, suspend use rights, and suspend the voting rights of residents who fail to comply with any provision of the association’s governing documents or who become more than 90 days delinquent in paying any of their monetary obligations to the association.

Fines may be levied on the basis of each day of a continuing violation (for example, a resident leaves their bicycle out on the balcony - in violation of a no bicycle rule - for days on end). The fine may not exceed $100 per violation, or $1000 in the aggregate. What this means is that the association may fine the resident that leaves their bicycle out on the balcony up to $100 per day for every day that the bicycle is on the balcony - up to 10 days. The maximum amount of the fines for the bicycle on the balcony is $1000.

Imposing the fine or suspension, however, is the tricky part that associations want to be mindful of. The association must provide the resident with at least 14 days’ written notice of a hearing to be held in front of a violation or fining committee. The members of the committee may not be board members or persons residing in a board member’s household. After providing 14 days’ notice, the committee conducts the hearing (somewhat like a mini trial) and then considers and decides whether a fine or suspension should be imposed, and if so, what amount the fine - or the duration of the suspension - should be. IMPORTANT: if the committee does not agree with the imposition of a penalty, then the penalty may not be imposed!

Another tool that associations may use is suspending a residents’ right to use the common areas or to vote due to their failure to comply with their monetary obligations to the association. An association may suspend a members’ voting rights or rights to use the common areas if the member is more than 90 days delinquent in any monetary obligation due to the association. Therefore, if you have a resident who has been fined for having his bicycle out on the balcony for days on end (and of course, it’s the same resident that enjoys using the association’s pool and gym facilities) the association may suspend that resident’s right to use those common area facilities until such time as the fines are paid. Obviously for some communities, these tools are just the first steps to be taken in order to gain compliance with the association’s governing documents. Failure by a resident to comply after fines and suspensions are imposed may result in the need to take further legal action, but many times the imposition of a suspension or a fine is enough to get people to take notice.

For those communities that have to take non-conforming residents to the next level, following the steps above is crucial to winning a case as failure by the association to follow the procedures above may result in losing a case or having a court find that the fine or suspension was not imposed according to the statute and is therefore unenforceable. Obviously, many of the tools that the legislature has provided are ones that associations may utilize on their own without the necessity of retaining counsel - which keeps costs and expenses down. However, it is recommended that you consult with your association’s attorney when getting started in order to ensure that your process comports with all of the statutory requirements.

 

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(8-22-12)

Basic Recall Procedures

By Roberto C. Blanch

One inquiry community association members often present is how a director may be removed from the association’s board. The response to this question is usually a simple one for an attorney to provide – but understandably a complicated one for many owners to comprehend. While some situations may result in a board member’s disqualification from the association’s board (e.g., nonpayment of monetary obligations exceeding 90 days, selling home in communities having ownership requirements for directors, voluntary resignations by directors), in Florida a qualified community association director may only be removed pursuant to a procedure known as a "recall."

Members of a Florida community association board may be recalled and removed from office with or without cause by a majority of all voting interests of the association by vote at a meeting or by agreement in writing. If the recall is to be achieved at a meeting, a minimum of 10 percent of the association’s voting interests must provide for the giving of notice of the meeting. The notice for such meeting must state that the purpose of the meeting is to recall one or more directors, and if a majority or more of the board is subject to recall, the notice shall also state that an election to replace recalled board members will be conducted at the meeting. If less than a majority of the board is recalled, the existing board members may fill the vacancies. If a majority or more of the existing board is recalled, an election shall be conducted at the meeting to fill the vacancies resulting from the recall.

Within five days of the adjournment of the members meeting to recall one or more of the directors, the board shall properly notice and hold a board meeting to consider whether to certify or reject the recall. If the board certifies the recall, then the recall is effective upon certification.

Alternatively, directors may be recalled by written agreement. A sample of the form to be used in a recall by written agreement is provided on the website of the Division of Florida Condominiums, Timeshares, and Mobile Homes ("Division") at: www.myfloridalicense.com/dbpr/lsc/documents/recallsample.pdf. In this form of recall, the name of the directors sought to be recalled must be listed and the form must provide spaces by the name of each board member sought to be recalled so that the person executing the agreement may indicate whether the director should be recalled or retained. If a majority or more of the existing board members are to be recalled, the agreement shall list at least as many eligible persons who are willing to be candidates for replacement board members as there are board members subject to recall, and it should contain additional spaces for write-in votes. Further, there must be a signature line for the person executing the agreement to affirm he/she is authorized to cast the vote for his unit. The original agreement must be served on the board by certified mail or personal service. As with recall efforts conducted at a meeting, the board must call a meeting within five business days after service of the agreements and either certify the recall agreements.

In the event the board fails to certify the recall (whether a recall by written agreement or by vote at a meeting), they must file a petition for arbitration with the Division within five business days of adjournment of the board meeting. If the board fails to duly hold a meeting to vote on whether to certify or reject the recall, then the recall shall be deemed effective.

The foregoing serves as a brief outline of the recall procedures for removal of community association directors in Florida and shall not be exclusively relied upon for recall efforts. While the owners seeking to remove a director must always consult with the governing documents for the association in case there may be additional requirements or procedures for the removal of a member of the community’s board, Florida law provides the minimum requirements that must be adhered to for the removal of such director. Although there have been little changes to such procedures for many years, an increased understanding of community association laws and procedures seems to have led to greater use of the recall process to remove directors deemed to be undesirable. Fortunately, careful adherence to the legal procedures will provide successful results for the parties seeking the recall. However, just one seemingly insignificant failure to follow such procedures may render an otherwise well supported recall effort ineffective. In light of this, owners seeking to commence recall efforts are encouraged to seek the advice of counsel or the representatives from the Division in order to ensure a successful outcome to their recall effort.

 

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(8-8-12)

Associations Should Turn to Managers for Property Management, Not Legal Work

By Laura M. Manning-Hudson

I recently wrote about the problems that can occur when community associations enter into contracts for renovations without having their attorney review and finalize the contract for the work. These contracts are not the only area in which community associations can make the mistake of forgoing the counsel and expertise of their attorneys to their detriment. In fact, community associations often turn to their licensed CAM property managers for matters that they truly should be referring to their attorneys. The Florida Bar plans to revisit the issue with a new advisory opinion on the unlicensed practice of law by property managers in the coming months.

In 1996, the Supreme Court of Florida reviewed an advisory opinion issued by The Florida Bar in cases involving the activities of community association managers that constituted the unlicensed practice of law. The court’s review of the advisory opinion held that property managers can take on ministerial actions that do not require legal expertise and interpretation, including the completion of forms for the state’s office of corporations and annual reports; certificates of assessments; first and second notices for elections; ballots; written notices of annual meetings; board meeting and annual meeting agendas, and affidavits of mailings.

However, the advisory opinion adopted by the court also found that managers would be engaging in unauthorized legal practice 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 held that the drafting of a Notice of Commencement form also constitutes the practice of law, as does 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. 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 - also constitutes the practice of law by a CAM.

With the upsurge in collections issues and the issuance of claims of lien by associations during the last five years, many CAMs have responded to their association’s needs by taking on the preparation of lien documents themselves rather than turning to the association attorney. This has led to cases in which claims of lien have been invalidated due to mistakes in legal descriptions and recording errors. By undertaking these tasks for their boards, property managers could face the imposition of fines for the unlicensed practice of law by The Florida Bar as well as the possibility of having their CAM licenses revoked or suspended.

Association boards should bear in mind that the preparation of claims of lien, Notices of Commencement and other legal documents do not typically incur significant attorney fees, but the ramifications of problems with 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, and thereby risk exposure to their managers of potential fines and license issues.

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(7-25-12)

Don't Pay Twice for that Construction Project

By Roberto C. Blanch

Many individuals or associations have been victimized by unscrupulous contractors. These experiences include detection of defective work resulting in costly disputes with contractors and efforts to correct deficiencies; contractors abandoning jobs; and the filing of liens on the owners’ property, despite payment for such services or goods having been made to the contractor. A basic understanding of construction lien laws may minimize exposure to the problems described above. Chapter 713, Florida Statutes (the "Construction Lien Laws"), provides protection to owners engaging contractors to perform work on their property and protects contractors, their subcontractors, suppliers and other professionals to ensure that they are paid for their services.

For instance, a lienor has the right to record a lien against real property if such lienor is not paid for services, labor or materials provided for the improvement of such property. A lienor may be a contractor; subcontractor; sub-subcontractor; laborer; materialman who contracts with the owner, a contractor, a subcontractor, or a sub-subcontractor; or certain professionals (such as engineers or architects). While the owner of real property may be able to ascertain his exposure to a lien resulting from non-payment to a contractor that he has engaged for the performance of improvements to his property, his exposure to liens from non-payment to other lienors may be difficult to ascertain given that it is typically the contractor hired by the property owner that is entrusted with the obligation to pay the other parties having a right to place a lien on the property. For example, the property owner may be aware that he has entered into a contract with ABC Contractor for the installation of a pool on his property; however, he may be unaware that ABC Contractor has engaged XYZ Subcontractor to excavate the land where the pool will be, or that the plaster and other materials have been purchased from DB Suppliers. In the above example, lienors engaged by ABC Contractor must be paid for their services, labor and materials. While the property owner may be aware that he has paid ABC Contractor, he may be unaware of XYZ Subcontractor or DB Suppliers. Failure to ensure that payment has been issued to XYZ Subcontractor or DB Suppliers may result in the filing of a lien against the owner’s property by such lienors, even if the owner paid ABC Contractor.

The laws provide property owners with tools to notify the general public of their agreements with contractors hired for the improvement of real property so that potential lienors that have a right to file a lien on the owner’s property may in turn, provide the owner with notice of their rights to lien for non-payment. In such cases, the property owner will file a Notice of Commencement in the public records of the county in which the property being improved is located. Those having lien rights for the work being performed and materials being supplied will be able to serve the property owner with a Notice to Owner advising the owner that they have been hired by the contractor to provide services or materials in connection with the project. Once a property owner is alerted as to the existence of all parties having a right to lien the property in connection with the improvement, the owner is in a position to ensure that all lienors are paid by the contractor, thus reducing each respective lienor’s rights to record a lien to the extent that they receive payment on the owner’s behalf. In order to ensure that lienors have been paid, the owner should condition that the contractor and other lienors provide releases of lien upon their receipt of payment.

The Construction Lien Laws consist of a tedious set of statutes – complicated further by case law interpreting legal disputes involving such laws. Although, the foregoing serves as a basic introduction of such laws, managers and directors must implement the procedures to protect against pitfalls such as those described above. Managers and directors should work closely with their engineers and attorneys to ensure that a contractor’s requested payment is conditioned upon satisfactory performance of work and compliance with procedures and forms included in the Construction Lien Laws.

 

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(7-11-12)

Hints for Preventing a

Condominium Nightmare

By Laura M. Manning-Hudson

Has this ever happened at your condominium? You’re on the Board of Directors. The building has not been painted in 20 years and could definitely use some restoration. You realize that a special assessment is going to have to be passed in order to start a painting and restoration project, but before an assessment can be passed, you need to know how much it’s going to cost. Bids for a painting and restoration contractor are requested and ultimately High & Dry Painting Company ("High & Dry") is hired to do the work. Without having an attorney look anything over, the Association signs a contract with High & Dry and the project is under way. High & Dry arrives at the building along with a crew and equipment and finishes the job in a month. The Association writes a check for the full amount of the contract and everybody is happy. Or so you thought.

Six months later the paint starts to crack, the manager realizes that High & Dry forgot to deliver a warranty for the work, and the Association has just received a document in the mail entitled "Claim of Lien" from ABC Equipment Supply, a company the Association did not contract with, threatening to file a lawsuit against the Association and lien the entire building if payment is not made within 30 days. In addition, the unit owners are disgruntled with the work and start to discuss whether they should challenge the special assessment because they don’t think the restoration work was even needed. Now what? Begrudgingly you call the Association’s attorney and advise him or her of all that has transpired and hope that the nightmare will soon end. After a little research by the attorney you’re told that not only was High & Dry not licensed, but they have since closed up shop and run for the hills. The nice little project has turned into a nightmare for the Association.

All of this could have been avoided if the Association’s attorney had been contacted when the determination was made that the building needed to be painted and restored. The fact that the Association did not have an attorney review the contract was the root of every other problem in the scenario outlined above because contracts performed by unlicensed contractors are unenforceable in law or equity. Accordingly, the contract that the Association entered into which may have provided a warranty is now unenforceable and High & Dry is nowhere to be found. When an Association signs an agreement with a contractor it must be diligent in obtaining all of the appropriate releases not only from the contractor, but also from the subcontractors, material men and suppliers hired by the contractor. Even if the Association has no knowledge of who ABC Equipment Supplier is, and regardless of whether the Association paid High & Dry for the full contract amount, the Association may still be responsible for any outstanding sums owed to ABC.

Contractual problems or disputes such as the example set forth above may be avoided by the board simply seeking the advice of a professional or expert prior to the signing of an agreement. In the case of third party contracts, an attorney would be able to prepare a contract to protect the Association from unlicensed and uninsured contractors. Having used the services of an engineer or other professional for advice as to needed repairs and restoration will further insulate the board from liability when the disgruntled unit owners threaten legal action.

Some condominiums tend to rely heavily on their property managers. However, property managers may not engage in the unlicensed practice of law. This includes the giving of legal advice and counsel to others as to their rights and obligations under the law and the preparation of legal instruments, including contracts, by which legal rights are either obtained, secured or given away, although such matters may not then or ever be the subject of proceedings in a court.

Finally, preventing a condominium nightmare by having an attorney review a third party contract or consulting with an expert can save an Association thousands of dollars in unexpected costs for repair, not to mention attorneys’ fees spent defending and prosecuting actions on behalf of the Association.

 

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(6-27-12)

Timely Insurance Info for Unit Owners at Start of Hurricane Season

By Roberto C. Blanch

At the onset of another hurricane season, now is one of the best times of the year for condominium associations in Florida to remind unit owners about their insurance requirements and liabilities under state law.

Florida law stipulates that the association will maintain insurance for all portions of the condominium property as originally installed or renovated. However, the statutes do not provide that the association’s insurance coverage must extend to personal property or limited common elements inside of the individual residences. Essentially, the owners are responsible for maintaining their own insurance to cover damages to the floors, walls, ceilings, electrical fixtures, appliances, cabinets, counters and window treatments in their units.

The owners should also be reminded that they can be held liable if, for example, water damage from their unit causes damage to other units or the common elements. This underscores the importance to encourage owners to maintain adequate insurance coverage, as a leak in their residence could seep into the walls and cause significant damage to the units or common elements below.

With the start of another hurricane season, associations would be well advised to develop and distribute a letter to remind their unit owners that it is incumbent upon them to maintain their own homeowner’s insurance policies to cover their personal property, the limited common elements inside of their residences and other property not insured by the association.

Our community association attorneys regularly write about important issues for Florida HOAs and condominium associations in our blog at www.FloridaHOALawyerBlog.com, and we encourage association members and directors as well as property managers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

 

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(6-13-12)

New Law Eliminates Important Homeowner, HOA Protections Against Construction Defects in Community Infrastructure Systems

By Laura M. Manning-Hudson

HB 1013, one of the most surprising and anti-consumer pieces of new legislation for Florida homeowners and HOAs, was recently signed into law by Gov. Scott. HB 1013 was passed in direct response to the Fifth District Court of Appeal’s decision in the case of Lakeview Reserve Homeowners Association, Inc. v. Maronda Homes of Florida, Inc.. In Maronda, the appellate court extended the common law warranty of fitness and merchantability to off-site improvements such as roads and drainage systems within a community. The new law eliminates an HOA’s cause of action for breach of the common law warranty of fitness and merchantability as it pertains to defective roads, walls, drainage areas, utilities, or any other improvements that are not located on or under the lot on which the home is constructed or which do not "immediately and directly support the habitability of the home itself."

In Maronda, the HOA sued the developer alleging defective construction of private roads, drainage systems, retention ponds and underground pipes within the subdivision. The appellate court reversed the trial court’s decision and ruled that the implied warranty of habitability extends to developers and contractors that have built communities with defective infrastructure because purchasers of new homes in a subdivision "must rely on the expertise of the builder/developer for proper construction of these complex structures, where they are in an inferior position to inspect the work and to correct the defects in the construction phase and where the defects are not readily discernable to the average homeowner." The Fifth DCA specifically held that roads, drainage systems, retention ponds and underground pipes are all essential services that support the habitability of the home for purposes of the application of the implied warranties.

HB 1013 becomes the law on July 1, 2012. However, there is a possibility that the new law will face a constitutional challenge because its application is intended to be retroactive – meaning that it applies to issues and cases already in existence. Because the new law is retroactive, it may be considered to be an impairment of an existing contract – which is unconstitutional in Florida. However, until such a challenge is made, the law will now only allow homeowners to bring claims for damages due to defective construction if they can prove a breach of the building code or negligence in the design of the infrastructure systems. These claims can be difficult to prove, since, typically, all of the building permits and inspections have been passed by a builder during construction, and infrastructure systems are built in accordance with proven designs.

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

A hearing in the Maronda case before the Florida Supreme Court was slated for later this year, however it is yet to be seen how the parties will address the passage of HB 1013 and whether the hearing will go forward.

Other community association attorneys at our firm and I were very surprised by the passage of this new law, as it appears to us to be unfairly allowing developers, contractors and engineers to avoid liability for defects in infrastructure systems that can lead to significant and costly repairs for HOA communities and their homeowners. We will continue to monitor and write about this and other important issues for Florida community associations in this blog, and we encourage board members, unit owners and property managers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

 

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(5-30-12)

Legal Risks Associated with Biometric Resident Access Systems

By Laura M. Manning-Hudson

Community associations are constantly striving to implement new, more effective and more convenient security systems for their owners. One new trend that is starting to replace the magnetic cards, key fobs and code-key number pads controlling resident access is biometrics. These biometrics systems are predominantly fingerprint recognition scanners. While there is a significant legal concern that comes with the use of these systems that community associations should be aware of, there are also contractual measures that may be used in order to address and mitigate these concerns.

There is no doubt that biometrics will become more prevalent in the years to come, as it can be very effective and cost efficient. Biometrics offers owners the convenience of doing away with cards, fobs and codes to gain access to the property. Its deployment costs are becoming very reasonable, and it offers considerable savings by diminishing the need for security guards to monitor and control resident access at all of the entrances into a property.

However, the inherent problem with these biometric security systems is that they are gathering and storing personal identification information. The U.S. Constitution guarantees individuals the right to privacy and due process, so community associations must be extremely careful with the information collected through biometrics (i.e., fingerprints). If an individual’s private information is compromised or provided to any third party – including the government – without due process, it can be found to be a violation of the resident’s constitutional right to privacy, which could have significant legal and financial repercussions for the association.

Community associations that are considering using biometric security systems to provide a cost-effective and secure solution for resident access on their properties should understand this particular vulnerability. Associations should work with a qualified and experienced attorney in order to address these concerns with vendors of the biometric security systems. Attorneys can review and add language to the contract referencing that the association has been assured and guaranteed that the information will not be shared and is adequately protected. Realistically, there are no true guarantees that a breach in the vendor’s system could never take place and expose the information collected. However, by including indemnification clauses and other language in the contract, associations can work to ensure that they avoid taking on significant legal liability in their deployment of 21st century security systems for residents.

 

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(5-16-12)

Condominium Associations Have the Right to Access Owners’ Residences for Maintenance and Repairs to the Common Elements

While Florida law provides that condominium associations have the right to access all units in the condominium for maintenance and repairs to the common elements, many unit owners are often reluctant to provide a copy of the key to their unit to the association. Owners cite a variety of reasons for their unwillingness to provide the association with a copy of the key and allow access to the residence, but in reality there are no valid reasons for owners to avoid complying with this aspect of the state’s condominium laws.

Florida law specifically provides that condominium associations have the irrevocable right of access to each unit during reasonable hours when it is necessary for the maintenance, repair or replacement of the common elements or any portion of the unit that the association is required to maintain, as well as to prevent damage to common elements. Most condo association governing documents also include language regarding the right to access the units and requiring owners to provide the association with a copy of the key to the residence for the association to keep.

The most typical use of this right to access the residences is for projects involving work on the balconies and windows. Contractors require access to the units for these projects, and many times they also need to temporarily store the equipment that they are using for the work on private balconies and ground-floor terraces while the projects are underway.

Unfortunately, even for these important renovation projects, there always seems to be at least one owner who attempts to refuse to comply or insists that the access or equipment storage be restricted in a manner that is not conducive to the completion of the work. Many owners do not realize that the law states that the condo associations have this irrevocable right of access for these purposes, and if necessary the associations can file suit for injunctive relief to gain access to the units of recalcitrant owners and store some of the equipment as required for the work to be completed.

For associations and property managers, it is important to bear in mind that they are not allowed to use the keys to gain access to residences unless it is specifically for these types of projects involving the common elements or to prevent damage to the common elements. For example, if there is a known leak and water is seeping through the walls or ceiling of the space below a residence, the association and management can access the unit to inspect the plumbing and repair the leak in order to prevent further damage. However, if the association simply suspects that there is a plumbing issue, such as a running toilet, but there is no evident leak or property damage, it is not allowed to just access the residence. Instead, the association should contact the unit owner to inquire about the plumbing issue and schedule a time to inspect the fixtures as necessary. Maintenance and repairs of toilets, faucets and other plumbing fixtures inside of the residences are generally the responsibility of the individual unit owners, so the association and management must work with the individual owners to address any such issues.

Whenever possible, the association and property management should contact the unit owner in advance of using their right to access the unit. However, in cases involving property damage of an emergency nature, the association would be able to use the key to access the unit even without advance notice to the owner. It is imperative for associations to keep copies of the keys to all of the units in the building in a secure location with restricted access only for the property manager and/or specific board members. Condominium associations that do not have copies of keys to all of the residences in their buildings should consider adopting a rule requiring that the unit owners provide them with copies of the keys.

Associations facing unit owners who refuse to provide a copy of the key or grant access to their unit as required by law should file a petition for arbitration with the Division of Condominiums to force the owners to comply. Because the law is very clear about this irrevocable right of access for condominium associations for the purposes described in this article, they are virtually guaranteed to prevail in these arbitrations. Filing a lawsuit against the owner for injunctive relief to access the residence is also possible for extreme cases in which the owner refuses to comply with the arbitration ruling.

 

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(5-2-12)

Concerns for Associations Over Neighborhood Watch Programs Spurred by Trayvon Martin Case

By Roberto C. Blanch

In the wake of the tragic death of Trayvon Martin, associations throughout the country are now reassessing btheir involvement in neighborhood watch programs in their communities.

In reaction to news reports about the legal implications of the actions of neighborhood watch volunteers within community associations, the Community Associations Institute (CAI) recently issued a press release with helpful guidelines and recommendations for community associations that wish to implement watch programs manned by volunteer residents in their communities. The press release stipulates that associations should work with their local police department to implement these programs, create a process for recruiting responsible volunteers who will follow all of the written procedures for the security measures, and continuously reinforce these procedures and the do-not-engage rules with the volunteers. Our firm is very active with the South Florida CAI chapters, and we applaud the organization for issuing this press release to help associations gain a better understanding of the proper procedures for implementing neighborhood watch programs in their communities.

Security has traditionally been one of the most important considerations that associations feel compelled to address, but budget constraints limit their ability to hire professional security guards for on-site monitoring and protection for their residents. In response, many associations resort to creating neighborhood watch programs, which are typically comprised of volunteer owners who agree to keep a watchful eye for suspicious activity.

The Trayvon Martin case illustrates the concerns for associations that organize their own watch programs. In light of this tragic case, many associations are likely to avoid partaking in the organization and implementation of these programs, because doing so could result in significant liability for the association. Notwithstanding these concerns, if associations feel compelled to participate in the organization of a watch program and endorsing it in their community, they should do so with the utmost precautions detailed in the CAI release. These include organizing workshops with their local police department to establish procedures and training for the individuals who volunteer to participate in order to help ensure that they limit their involvement to watching and listening for suspicious activity and contacting the police when necessary, rather than taking on active duties to follow and engage individuals who are suspected of being involved in criminal activity. It is also important for the associations to stress in their written procedures that these individuals are not allowed to conduct armed patrols in the community.

In addition, the associations should consult with their insurance carriers and agents to determine whether they are covered for liabilities that may be caused by the actions of the watch volunteers, who should be vetted by the association with a criminal records background check. If the association learns of any questionable conduct or history of criminal activity by the volunteer, they should take immediate steps to disallow any involvement in the watch program by the individual.

There are many reasons why associations should avoid formally creating these watch groups and leave it up to the individual owners to band together to develop their own efforts outside of the auspices of the association. However, for associations that cannot or will not distance themselves from the formation of the watch groups, they should follow these and other guidelines, including those suggested by CAI, and consult with their own attorneys in order to limit their potential liability to the greatest possible extent.

 

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(4-18-12)

Responding to Requests for Permission for Service Animals from Residents

By Laura M. Manning-Hudson

Requests by residents for permission to keep service animals in their units are becoming more and more common throughout community associations in South Florida. In many cases, the requests are for emotional support animals, and the resident’s disability is not readily apparent. Even though these requests have become fairly common, many no-pet communities remain uncertain as to how they should respond, especially when the resident skirts the rules and brings the animal into their unit under the cover of darkness.

Associations facing this scenario should avoid knee-jerk denials of requests for permission to keep the animal without first requesting additional information from the resident. By law, associations are entitled to ask the resident about the nature of the disability and other pertinent information to enable the association to determine if the request is legitimate and whether the dog is a necessary accommodation in order for the resident to be able to use and enjoy the dwelling. A flat-out denial without any evaluation or request for additional information will open the community up to a successful fair housing discrimination complaint by the resident.

Associations are also entitled to inquire about how the disability affects the resident’s major life activities (walking, breathing, working, seeing, hearing are examples of some defined major life activities), and how the animal assists the individual with this major life activity that is impaired by their disability. Associations may also request that the resident provide this information from their doctor.

If a resident does not respond to the association’s request for information regarding the disability, then, in the case of a no-pet building, it is reasonable for the association to proceed with the filing of a petition for arbitration with the Division of Florida Condominiums seeking removal of the animal from the premises. If the resident fails to provide the requested information and instead files a fair housing discrimination complaint, the association will be able to demonstrate that it never declined to permit the service animal but simply asked for more information that was not provided.

The most difficult disabilities that associations grapple with are those disabilities that are relieved by emotional support animals as opposed to a service animal. However, just because the disability is not readily apparent, but rather psychological in nature, does not mean that the resident’s claim is bogus or deniable. If a resident is being treated for depression, especially if they have lost a spouse or loved one and are receiving psychiatric therapy and perhaps also medication, it is difficult to deny a doctor’s claim that the animal provides the emotional support that is necessary for them to perform the most basic major life activities such as going to work, buying the groceries and even simply just getting out of bed.

Associations must keep in mind that it is the resident’s burden to prove the disability and that the relief provided by the service animal is necessary to afford them an equal opportunity to use and enjoy the dwelling. Associations should always request and evaluate all of the necessary information in order to make an informed decision as to whether to grant permission for the animal.

 

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(4-4-12)

A Review of the Election Process at Annual Meetings

By Laura M. Manning-Hudson

Spring is typically the time of year when condominium associations hold their annual meetings and elections. While many areas of the Condominium Act defer to association’s governing documents, the laws governing the board member election process are black and white and must be strictly adhered to. It is imperative that an association follow the election process exactly as it is detailed in the statute in order to avoid the possibility that the entire election be invalidated after a challenge.

Of course, the process begins with the proper notices. The first notice of the annual meeting and election must be distributed to the owners no later than 60 days prior to the date of the annual meeting and election, and the second notice must be sent out no later than 14 days prior to. Failure to adhere to these deadlines could render the election invalid. The notices must include the annual meeting date, time and location. The first notice must also provide the deadlines for owners to submit their notices of intent run for the board. An owner desiring to be a candidate for the board must submit their notice of intent 40 days prior to the election, failing which, their name cannot be included on the ballot. For those owners who submit notices of intent to be a candidate, the statute provides that they may submit a resume at least 35 days before the scheduled election.

For the election itself, the process detailed in the statute is exceedingly clear. In order to maintain the owners’ right to privacy, the owners should place their actual ballots sealed inside of an inner envelope that is marked "Ballot Only." That inner envelope should then be placed into an outer envelope that has the owner’s name, unit number and signature.

In order to have the election (i.e., open and count the ballots), at least 20 percent of the membership has to cast a ballot. After counting the envelopes cast and verifying that the 20 percent threshold has been met, volunteer members who are not related to anyone running for the board should be appointed to open the envelopes and count the votes. These volunteers should first open the outer envelopes and separate inner "Ballot" envelopes. Then the inner envelopes should be opened and separated from the ballots before counting the votes. It is actually not a problem if there is no inner envelope, as owners are allowed to waive their right to privacy for their vote. However, the outer envelope with the name, unit number and signature is absolutely imperative or the ballot cannot be accepted.

It is generally recommended by most experienced community association legal counsel to have the association’s attorney attend the annual meeting to verify that every facet of the election process is followed to the letter. For condominium associations that may not have their attorney attend any other board meeting through the course of the typical year, they would be well advised to have their attorney attend and certify the annual meeting and election. Also, keep in mind that new board members are now required by the State of Florida to attend an approved board member certification course or submit written verification to the association secretary within 90 days of being elected or appointed. Our firm regularly conducts complimentary Board Member Certification seminars and webinars, and we encourage new board members to contact us or visit our firm website for more information or to RSVP.

 

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(3-21-12)

Are Owners’ E-mail Addresses Accessible for Inspection as Official Association Records?

By Roberto C. Blanch

My last article addressed owner accessibility to community association records, and one type of record which bears particular attention is that of owners’ e-mail addresses. Recent legislative changes to the laws governing community associations were enacted to protect information which some owners may prefer to withhold from inspection by the general public.

Florida laws governing community associations require that association official records include the electronic mailing addresses of owners consenting to receive notices via e-mail. That said, the e-mail addresses are not accessible for inspection by the owners, except in the event that the owner who provides the e-mail address consents to its disclosure or the address is provided to the association to fulfill the notice requirements.

Cases involving an owner’s issuance of consent to disclose his or her e-mail address as an official record should be fairly straightforward. Presumably, the owner’s written consent authorizing the disclosure will be obtained and kept on record by the association.

The more difficult determination to make is whether an owner’s e-mail address was provided to the association to fulfill the association’s notice requirements. First, a determination should be made as to what "notice requirements" are being addressed. Is it the requirement to notify owners of meetings and elections or the requirement to notify owners of virtually anything related to the association (e.g., informal owner meetings, damages to the common elements, a fire which may have occurred, etc.)? Next, it should be determined whether the owner provided the e-mail address to the association for the specific purpose of fulfilling the association’s notice requirements, or did they provide the address incidentally and without appreciating the consequences of providing it to association. Absent having been provided with consent by the owner for disclosing the e-mail address, these issues must be resolved before an association discloses e-mail addresses in response to requests for inspections of its official records.

In light of this, associations and owners may be better served to eliminate the room for doubt with regard to the access rights certain owners may have to the e-mail addresses provided to the association. For instance, the association’s board may implement a policy and adopt a resolution informing the owners as to the purposes for which e-mail addresses are going to be used, and depending on the contemplated use, whether the e-mail addresses will be subject to inspection as an official record. The board may also consider preparing a notice to the owners advising them that they can consent to the disclosure of their e-mail addresses consistent with the Florida Statutes, or providing the owners with the opportunity to restrict the purposes for which their e-mail addresses may be used so that accessibility is restricted.

Boards should work closely with association counsel and management to ensure that the proper notices and resolutions are drafted using clearly defined guidelines and disclosures to owners regarding their e-mail addresses.

 

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(3-7-12)

Are Your Community’s Records Accessible to Owners?

By Roberto C. Blanch

Community associations often fail to comply with the requirement under Florida law to provide owners with timely access to official records or responses to inquiries, and these violations can expose the associations to costly penalties and legal expenses. The applicable laws provide that association official records shall be made available to owners within days of the submission of a written request (5-10 days depending on the type of community). Failure to provide access to the records within the time specified by the applicable laws may create a rebuttable presumption of a willful failure to comply with the law, which can subject an association to damages.

Florida statutes include the following among the list of records that associations are required to maintain: a copy of the plans, permits, warranties, and other items provided by the developer; photocopies of the declaration, by-laws, articles of incorporation and rules and regulations; a current roster of all owners; insurance policies; and financial records. Condominium associations must maintain these official records within the state for at least 7 years and make them available for inspection to a unit owner within 45 miles of the condominium property or within the county in which the condominium property is located.

There are also several types of association records which are not accessible to owners, such as: records protected by the lawyer-client or work-product privilege; information obtained by an association in connection with the approval of the lease, sale, or other transfer of a unit; personnel records of association or management company employees; medical records of unit owners; and certain personal information of the owner, when consent for disclosure is not provided by the owner (e.g., social security numbers, driver’s license numbers, credit card numbers, e-mail addresses, telephone numbers, and other contact information). Boards should ensure that protected records are not disclosed during records inspections.

With regard to responses to written inquiries, Florida law requires condominium and cooperative boards to respond within 30 days of receipt with either a substantive response or a reply indicating that a legal opinion or advice from the Division of Condominiums has been requested. If the board requests advice from the division, the board shall, within 10 days of its receipt of the advice, provide in writing a substantive response to the inquirer. If a legal opinion is requested, the board shall, within 60 days after the receipt of the inquiry, provide in writing a substantive response to the inquiry. Costly consequences may result from a failure to provide a timely substantive response to the inquiry.

Associations may adopt reasonable rules regarding the frequency, time, location, notice and manner of record inspection and copying. Boards may also adopt reasonable rules regarding the frequency and manner of responding to inquiries, and association governing documents may also contain additional restrictions governing the possible rules to be imposed.

Community associations should consult with experienced legal counsel to avoid the pitfalls of untimely responses to records requests or improper responses to owner inquiries.

 

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(2-22-12)

Are Your Property Improvements Material Alterations?

By Roberto C. Blanch

Before commencing a new project or improvement to an association’s property, it is essential for community association board members to review and follow the procedures which are required. Florida statutes restrict the ability of board members to authorize certain alterations to their community’s property. For instance, the applicable statutes provide that condominium board members in Florida cannot effectuate material alterations to the common elements without the approval of 75 percent of the voting interests, unless otherwise provided in the association’s governing documents.

Condominium associations in Florida have been required to obtain unit owner votes for improvements as minor as painting the bottom section of columns in a garage in order to make them more visible to the drivers. Other precedential examples of "material alterations" requiring unit owner votes have included the redecorating of common-element facilities, painting the exterior of buildings, and changes to roofs or pool-deck flooring.

The governing documents for most community associations will contain provisions addressing how to proceed with making alterations. Some documents may provide that the association’s board alone is authorized to proceed with making the alteration. Others may set monetary limits as to alterations that may be effectuated by board vote alone, and some require a unit owner vote but at a lower approval percentage than what is statutorily required.

However, in certain situations, material alterations have been permitted without unit owner votes, such as alterations which are required to protect the safety of residents. In one such example, a condominium was permitted to have a fence installed in order to protect against a high volume of documented criminal activity. Material alterations have also been permitted without unit owner votes to provide for the installations of "better systems." For example, a condominium association was allowed to install a new pool deck surface because it was heralded as being a more economical system to maintain and repair, and it would make repairs to underlying common-element components more affordable and practical.

To a great extent the restrictions pertaining to material alterations do not apply to homeowner associations, given that the Florida Statutes governing HOAs do not contain these same types of restrictions. However, some homeowner association governing documents do contain restrictions to alterations of common areas and association property.

Community association boards should consult with legal counsel to ascertain the extent to which they are required to obtain a vote of the owners with regard to a project, and if so, whether any recognized exceptions exist. This will help them to avoid the consequences of not getting the required vote, which may include having to get the vote and/or revert the alterations to their pre-alteration condition if the vote is not obtained.

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(2-8-12)

A Guide on the Turnover Process for Community Associations

By Laura Manning

Community associations may only have to go through it once, but the turnover of the association from the developer to the unit owners is of critical importance for the long-term financial health of associations. Here is a helpful overview for the community associations that are now undergoing the process:

Pursuant to Florida law, the developer has to "turnover" all of the association’s documents to the unit-owner controlled association. These include, but are not limited to, the original recorded declaration of condominium, articles of incorporation and bylaws, the minute books, financial records, bank accounts and statements, personal property of the association (e.g., indoor and outdoor furniture, office equipment, computers, etc.), and all of the construction plans and specifications including a list of names and addresses of all of the contractors, subcontractors and suppliers utilized in the construction or remodeling of the condominium. The developer must also provide copies of all of the insurance policies, certificates of occupancy, permits, warranties, unit-owner roster, and all of the contracts that the developer controlled association may have executed for services such as for management, cable, telephone, security and other services.

Two of the most critical items that must be provided by the developer to the unit owner controlled association are an inspection report, which must be completed and signed by an architect or engineer, and a financial audit, which must be prepared by an independent certified public accountant. The inspection report must consist of a detailed list of the required maintenance, useful life and replacement costs for the roof, structure, fire protection systems, elevators, heating/cooling systems, electrical, plumbing, pool, pavement, drainage, irrigation, and paint. If the unit owners are already seeing problems with any of these elements as the report is being issued, they must immediately compare what they are actually seeing and experiencing with the information in the report in order to determine if there is a defect.

If the association disagrees with the developer’s financial audit or wishes to verify the sums that it shows, the association should immediately retain its own accountant to evaluate the audit. This should also be the same approach with the inspection report, as associations that believe there is a defect that is overlooked in the developer’s report should hire their own engineer to complete inspections and submit a report that addresses the construction issues.

In general, associations would be well advised to immediately address any construction or financial issues with the developer during the turnover process rather than afterwards. The longer that an association waits before addressing any construction issues, the easier it becomes for the developer to be able to claim that the problem may be due to improper maintenance rather than a defect for which it could be liable.

 

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(1-25-12)

Service Animals and Your Community

By Roberto C. Blanch

The governing documents of many community associations contain provisions banning or restricting pets, including limitations on the number of pets, their weight and types of animals allowed. However, despite these restrictions, many community associations find that some of their residents are determined to have pets in their homes and will find a way around the rules. One of the strategies that is often used by these pet owners is claiming that they are entitled to have the pet due to a disability.

The Fair Housing Amendments Act of 1988 (FHA) prohibits various forms of discrimination against handicapped persons in connection with a dwelling. As a result, community associations may be required to provide disabled individuals with reasonable accommodations or exceptions to certain rules, regulations or policies, including pet restrictions.

When presented with a request for a reasonable accommodation for a disability, community association boards should not feel threatened to automatically grant the request. Unfortunately, some non-disabled residents seek to take advantage of the provisions of the FHA in order to obtain permission to maintain a pet. They submit a written request or even a doctor’s note under the guise that their pet is required as a service animal to assist them with their disability. However, community association boards have the right to make reasonable inquiries of the disabled individual and their medical provider in order to evaluate whether to grant the exception.

In evaluating such requests, boards must determine whether the person requesting the accommodation is actually "handicap" and whether the accommodation is necessary to afford the resident an equal opportunity to use and enjoy the dwelling. For instance, the association is justified in requesting information from the member’s doctor that is reasonably required to evaluate whether the accommodation should be granted. Courts have recognized associations’ ability to request expert evidence under oath as to the nature of an allegedly disabled person’s impairment, the manner in which such impairment substantially limits one or more of the resident’s major life functions or activities, and how the requested pet is necessary to afford an equal opportunity to use and enjoy the dwelling.

Of course, if the accommodation is granted, safeguards should be implemented to ensure that the pet is not a threat to the safety of others in the community and does not unreasonably interfere with the rights of other residents or their guests to use the community’s facilities. The directors of community associations should work closely with their management and legal counsel to ensure that their community’s pet restrictions are upheld while simultaneously granting reasonable accommodations when necessary.

 

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(1-11-12)

Suspension of Common Element Use Rights

By Roberto Blanch

Directors and managers of Florida community associations seem to be on a never-ending search for effective tools to compel unit owners or their tenants and guests to comply with the association’s rules and restrictions. Until not too long ago, Florida condominium association boards were practically limited to filing lawsuits or imposing fines in order to address violations.

During the last several years, condominium associations have gained the ability to suspend the rights of an owner, tenant or invitee to use common elements, common facilities or any other association property, in the event that the owner of the unit is delinquent more than 90 days in paying a monetary obligation to the association. In addition, condo associations may now also suspend, for a reasonable period of time, the right of a unit owner, or a unit owner’s tenant, guest or invitee, to use the common elements, common facilities or any other association property for the failure to comply with any provision of the declaration, the association bylaws or reasonable rules of the association.

While not required for suspensions of use rights for non-payment, suspensions for violations of the governing documents may only be imposed if the association provides the owner with at least 14 days’ written notice and an opportunity for a hearing. If applicable, the unit’s occupant, licensee or invitee must also receive such notice. The hearing must be conducted and held before a committee of other unit owners who are neither board members nor persons residing in a board member’s household. If the committee does not agree, then the suspension may not be imposed.

Ultimately, the success of this remedy may depend upon various factors, including whether the community has the ability to enforce the suspension, whether there are community facilities that are worthwhile suspending, and whether there are qualified owners who are willing to serve on the committee that is required to impose the suspension. Lastly, when implementing the suspension, board members should be aware of what the association may be required to do in order to enforce the suspension in the event that the suspended individual defies it.

In light of the implications and procedural considerations related to the suspension of use rights, we encourage board members and managers alike to work closely with their association’s legal counsel in order to determine the best course of action to address violations in their community.

 

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(12-28-11)

Use Eviction Proceedings Effectively Against Tenants Who Refuse to Comply with Rent Payment Demands

By Laura Manning

Community associations throughout Florida have benefited greatly from last year’s amendments to the Condo Act enabling associations to collect rent payments directly from tenants of delinquent owners. Associations are now able to quickly and effectively evict tenants who refuse to comply with their demands for rent. However, some associations needlessly delay filing for eviction against tenants with creative excuses for nonpayment.

Many renters who refuse to comply with an association’s demand for rent are residing in units that are in foreclosure. They usually have short-term or month-to-month leases, and are often paying reduced rental rates because of the pending foreclosure. When they receive the association’s demand, they reply by indicating that they are no longer paying rent to the owner, or that the owner has agreed to let them remain in the residence until the foreclosure is over.

For many associations, this type of reply from a tenant causes them to question their ability to evict. However, the association simply needs to follow the procedures set out in the Condo Act by sending an initial letter requiring the tenant to make their monthly payments to the association. If the tenant does not comply, then the association has the right to commence eviction proceedings as if it were the landlord by sending a three-day notice of nonpayment. If payment is still not made, the association can immediately file a complaint for eviction. After being served, the tenant has five days to respond or make the rent payment into the court registry. Failure to do either results in an immediate default judgment for removal of the tenant with a writ of possession.

Once the eviction process is underway, the association should bear in mind that it is still possible to negotiate with the tenant to try and get them to start making some sort of a monthly payment. Sometimes tenants agree to pay an amount equal to the monthly maintenance fee.

As the slow pace of the foreclosure crisis continues in South Florida, cases of tenants refusing to comply with rent demands by associations are bound to also continue. For the associations that hope to recover from the housing market meltdown as quickly as possible, using eviction proceedings offers them a powerful new collection tool.

 

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(12-14-11)

Associations Should Carefully Consider the Effects of Suspending a Member’s Voting Rights

By Laura Manning

In addition to a condominium’s or HOA’s right to suspend a delinquent member’s rights to use a community’s shared amenities, the legislature has also enabled associations with the right to suspend the voting rights of its delinquent unit owners. However, unlike with the suspension of the rights to use the pool or the fitness center, there are some potential drawbacks for associations to carefully consider when it comes to suspending a member’s voting rights.

Both HOAs and condominium associations have the ability to suspend the voting rights of owners who are delinquent in the payment of any monetary obligations exceeding 90 days. These suspensions are automatically lifted upon the payment in full of all monetary obligations currently due and overdue by the member.

In order to suspend the voting rights of a delinquent member, the law does not require notice or a hearing (as is required for suspension of use rights for violation of the governing documents). Associations only need to adopt a collection policy which includes the suspension of voting rights as a remedy, and this policy should be communicated to the membership in writing. An association that wants to adopt this suspension policy will typically establish it at a regular board meeting where a 48-hour notice will have gone out to the membership indicating that the board "will be voting to adopt a policy whereby unit owners who are delinquent more than 90 days will have their voting rights automatically suspended until they become current in their monetary obligations to the association."

While seemingly easy enough to adopt, unfortunately the use of this remedy against delinquent members has the potential to backfire on associations that may rely on the votes of their large numbers of owners (whether they are delinquent or not) on a regular basis. Voting suspensions serve to reduce the pool of potential voters on any issues that require membership votes. Further, the statute provides that the number of owners who would be needed to constitute a quorum is reduced by the number of units with suspended voting rights. There remains some debate as to whether this was the true intent of the revision to the statute by the legislature. This uncertainty therefore creates the potential for votes to be challenged by recalcitrant members on the grounds of whether the association achieved the required number of voters to fulfill the quorum.

In light of the issues that potential voting suspensions may pose to communities that have a hard enough time getting votes in the first place, the most prudent policy for associations that rely on the votes of all of their members in order to carry on with business would be to avoid the suspension of voting rights. Condominium associations and HOAs in the state should carefully consider these suspensions and utilize them as well as all of the other collections remedies and measures that the law permits.

 

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(11-30-11)

Community Associations Should Effectively Utilize Florida Division of Condominiums Arbitration Program to Enforce Violations

By Laura Manning

Welcome to the first edition of my new Community Association Counselor column in The Condo News. I have helped hundreds of community associations over the last 13 years as an attorney in my firm’s Coral Gables and West Palm Beach offices, and I look forward to making this column an excellent source for information on the most important issues affecting condominium associations and HOAs throughout Palm Beach County and the Treasure Coast.

One of the primary areas of my practice has been helping condominium associations enforce their rules against violating unit owners. Condo associations have the option of using the Division of Condominium’s Mandatory Non-Binding Arbitration Program for quick and fair resolutions to the vast majority of disputes involving the enforcement of restrictions found in an association’s governing documents. In fact, condo associations are not allowed to take disputes involving pets, unapproved construction/modifications, nuisance violations, elections and meetings to the local courthouse without first filing a petition for arbitration under this state program.

All appearances with the arbitrators in these cases are via telephone, or for the rare, complicated case, a live web-conference is used. Arbitrations typically take from two to six months from start to finish, depending on the nature of the violation and the owner’s defenses, if any.

In the case where the arbitrator’s decision is favorable to the association but the owner still refuses to comply, the association is required to file a complaint in county or circuit court to confirm the arbitration award, which is routinely quickly confirmed since the award is admissible into evidence for the court to consider. With a judgment entered by the court, the association is then able to impose all of the penalties and consequences that its policies allow, including recovery of its attorney’s fees and costs from the owner.

In general, condominium associations would be well advised to take advantage of the arbitration program to enforce their policies and restrictions when they are disregarded by rogue owners. The arbitration process is designed to be inexpensive and expeditious for both the association and its members. However, many associations are still reluctant to use this process to enforce the rules against owners who are in violation, even when the owner blatantly refuses to comply. For these associations, not enforcing the restrictions may result in the waiver or loss of the right to enforce those restrictions in the future, which would be unfair to all other members who follow the rules.

 

 

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


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