A few Roundups back we determined that, based on a recent case decided by the 11th Circuit Court of Appeals, community association managers collecting assessments are not subject to the Federal Fair Debt Collections Practices Act. This week, we visit a different issue that, once again, will be of great interest to community association managers.

In 2006, Florida’s Second District Court of Appeals held that a manager was not liable for an injury where the injured plaintiff claimed the manager was at fault for their injury. In that case, Greenacre Properties, Inc. v Rao, 933 So. 2d 19 (Fla. 2d DCA 2006), the plaintiff argued i) "that the property management company breached its contract with the . . . homeowners’ association and ii) that the property management company negligently performed its duties under the contract with the Association....". The court did not agree and held that, "a person who is not a party to a contract cannot sue for a breach of the contract even if the person receives some incidental benefit from the contract… and "nothing in the indirect relationship between an association’s members and the agents [meaning the manager] performing the association’s duties under a written contract … create a fiduciary duty…".

In a much more recent case, decided March 6, 2013, Pedro v. The Claridges Condominium, Inc., Case no. 4D11-3494, the Fourth District Court of Appeals reviewed "de novo" style whether a trial court properly dismissed a complaint alleged against a manager. In Pedro, the plaintiffs alleged that the Claridges Condominium association, through its employee property manager, improperly placed, installed, and operated an emergency power generator next to the plaintiffs’ unit. The unit owner plaintiff sued for private nuisance, trespass, and negligence. The manager moved to dismiss the lawsuit based on the Greenacre decision discussed, above. While the trial court had agreed with the manager’s motion to dismiss the case, the 4th DCA did not and, as a result, it reversed the trial court’s decision.

By way of background, a Motion to Dismiss, with very few exceptions, must be filed by a defendant and heard by the trial court before the defendant must serve their "answer" to the plaintiff’s complaint. In plain non-legalese English, in Pedro the 4th DCA’s reversal of the trial court’s decision means that the lawsuit will continue and the defendant is now required to serve their "answer."

In deciding whether to grant a motion to dismiss, the trial court only looks to the "four corners of the complaint" to determine whether a cause of action against the defendants is properly pled. In other words, are all of the necessary elements that together create the cause of action present? For example, if the allegation is an unlawful battery, did the plaintiff allege an unlawful touching occurred? In reviewing a trial court’s final ruling on a defendant’s motion to dismiss, the appellate court employs a method of review referred to as "de novo" (a fancy legal term that means the appellate court can make its own determination as if this were the first time the matter is being decided and then substitute its ruling in place of the trial court’s previous determination).

In the Pedro case, the appellate court looked to four corners of the complaint and determined that all of the elements for each cause of action were set out in the Plaintiff’s complaint. Therefore, the court found there was "a basis for liability against both the Association and/or the property manager."

The Pedro complaint, unlike the Greenacre case, did not allege liability based on the contractual relationship between the parties. However, the trial court relied heavily on the Greenacre case in making its determination. It is for that reason the 4th District Court of Appeals reversed the trial court’s decision. In other words, the trial court mistakenly relied on Greenacre which pertained to a breach of contract situation as contrasted against the allegations of private nuisance, trespass, and negligence alleged in the Pedro lawsuit.

Because the court’s opinion was issued on March 6, there remains time for re-hearing and possibly another appeal. But, in the meantime, the case will remand (another fancy legal term that means "return") to the trial court where the issues will be heard and liability, if any, decided. So what does all this mean? It means we will have to wait and see if the trial court determines whether a manager has liability for private nuisance, trespass, and negligence when the manager acts as agent for the Association.

In an even more recent trial court case that lasted three weeks, a Palm Beach County trial court found a condominium association 30 percent responsible, its management company 60 percent responsible, and the young bicycle rider 10 percent responsible for an accident that led to that bicycle rider’s death. The theory against the management company was that it failed to undertake proper maintenance and trimming of hedges that were twice the lawfully permitted height. I’d expect an appeal based on the Greenacre case, but we’ll have to wait and see.

***

(3-6-13)

NEW LEGISLATION PENDING: SERVICE ANIMALS

You Be the Judge

If you live in a community association, and especially if you serve as a board member in an otherwise "No Pets Allowed" community, few subjects are more polarizing than that of a member’s request for a "Service Animal," most especially, an "emotional support dog." On February 27, State of Florida Representative Ricardo Rangel, (District 43, Dem, Osceola County) filed House Bill 1073, titled "Service Animals." It is officially referred to as the "Dawson and David Caras Act."

For many situations, HB 1073 clarifies that a person seeking an emotional support pet MUST have a disability and the service animal must be trained or perform tasks of benefit to the disabled person requesting the accommodation. In many respects, HB 1073 codifies the holdings of various court decisions into the Laws of the State of Florida. If enacted into law, relevant portions of HB 1073, with which every board member and manager should be familiar, follow:

• Definition of a Service Animal. "Service Animal" is defined as "any domesticated animal that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. The work or tasks performed by a service animal must be directly related to the handler’s disability. Examples of work or tasks include, but are not limited to, assisting individuals who are blind or have low vision with navigation and other tasks, alerting individuals who are deaf or hard of hearing to the presence of people or sounds, providing nonviolent protection or rescue work, pulling a wheelchair, assisting an individual during a seizure, alerting individuals to the presence of allergens, retrieving items such as medicine or the telephone, providing physical support and assistance with balance and stability to individuals with mobility disabilities, and helping individuals with psychiatric or neurological disabilities by preventing or interrupting impulsive or destructive behaviors."

• Emotional Support Animal. "The crime deterrent effects of an animal’s presence and the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for the purposes of this paragraph."

• Proof. "Documentation that the service animal is trained is not a precondition for providing service to an individual accompanied by a service animal."

• Vaccines. "A housing accommodation may request proof of compliance with vaccination requirements."

• No Extra Charge. "An individual requiring assistance who has a service animal is entitled to full and equal access to all housing accommodations … and that individual is not required to pay extra compensation for the service animal."

• Trainers. "Any person who trains a service animal, while engaged in the training of such an animal, has the same rights and privileges with respect to access to public facilities and housing accommodations … as is provided for a person … who is accompanied by a service animal. … an individual who is the trainer of a service animal is entitled to full and equal access to all housing accommodations provided for in this section, and that individual is not required to pay extra compensation for the service animal."

• Public Accommodations. "An individual requiring assistance has the right to be accompanied by a service animal in all areas of a public accommodation that the public or customers are normally permitted to occupy. A public accommodation may ask if an animal is a service animal or what tasks the animal has been trained to perform in order to determine the difference between a service animal and a pet. A public accommodation may not impose a deposit or surcharge on an individual requiring assistance as a precondition to permitting a service animal to accompany the individual requiring assistance, even if a deposit is routinely required for pets."

While it remains to be seen whether HB 1073 will be voted into law, there is no doubt that it raises many new concerns. For instance, while there are statutory enumerated remedies for a place of public accommodation, such as a hotel, to demand removal of the service animal that growls, excessively barks, bites, poses a threat, or fails to respond to its trainer, there are no similar remedies for those same situations that may occur within a condominium or homeowners’ association. In addition, a long standing principle of legislative interpretation, overly simplified, is that the inclusion of a specific item in a law is interpreted to mean that the legislature intended the exclusion of all other similarly situated items. Does that mean because "proof of vaccination" can be requested, that no other questions of substantiation can be asked?

Criminal misdemeanor charges can be filed against a person, firm, or corporation and/or their agent who interferes with the rights of a person requiring service animal assistance. Such charges can also be filed against a person who knowingly and fraudulently represents themselves as the owner or trainer of a service animal.

Should you have strong feelings that HB 1073 should (or should not) be voted into law, you should contact your state legislators to let your voice be heard.

***

(2-20-13)

The Latest News On Managers and the Federal Fair Debt Collection Practices Act

Florida licensed community association managers (a/k/a LCAMS) and management companies can take great comfort knowing that on December 19, 2012, the 11th Federal Judicial Circuit Court of Appeals, with jurisdiction over federal cases originating in the states of Alabama, Florida and Georgia, firmly established that community association managers and management companies are not "debt collectors" within the confines of the Federal Fair Debt Collection Practices Act (the "FDCPA").

In Angela Harris v. Liberty Community Management, Inc., the court for the 11th Circuit explained, "the FDCPA, imposes civil liability on debt collectors for certain prohibited debt collection practices, but also exempts some individuals and entities from its provisions. The exemption at issue in this appeal [set out in 15 U.S.C s. 1692a(6)(F)(i)], provides that the FDCPA does not apply to persons or entities "collecting or attempting to collect any debt owed . . . another to the extent such activity is incidental to a bona fide fiduciary obligation," and the question presented is whether this exemption applies to a management company which collects unpaid assessments on behalf of a homeowners association." The court held that, "it does, so long as the collection of such assessments from homeowners is not central to the management company’s fiduciary obligations."

Central to the court’s reasoning was the fiduciary relationship of the manager in favor of the association and that the efforts to collect the Association’s past due assessments was incidental to a myriad of other important management duties. Therefore, a carefully crafted management agreement that both i) spells out the management’s fiduciary duties and ii) lists out many of manager’s duties will help further solidify that neither the manager nor the management company are "debt collectors" within the meaning of the FDCPA which will keep the management company from being subjected to the harsh financial penalties of the FDCPA.

Nevertheless, state law still applies. Chapter 559, Florida Statutes, contains the Florida Consumer Collection Practices Act. It applies to "all persons", and that means pretty much everyone involved in collecting a debt, even association managers. Amongst this Act’s many provisions, in collecting consumer debts, it is a violation for any person to:

• Disclose to a person other than the debtor or her or his family information affecting the debtor’s reputation, whether or not for credit worthiness, with knowledge or reason to know that the other person does not have a legitimate business need for the information or that the information is false.

• Disclose information concerning the existence of a debt known to be reasonably disputed by the debtor without disclosing that fact (that the debt is under dispute).

• Willfully communicate with the debtor or any member of her or his family with such frequency as can reasonably be expected to harass the debtor or her or his family, or willfully engage in other conduct which can reasonably be expected to abuse or harass the debtor or any member of her or his family.

• Use profane, obscene, vulgar, or willfully abusive language in communicating with the debtor or any member of her or his family. Use or threaten force or violence.

• Claim, attempt, or threaten to enforce a debt when such person knows that the debt is not legitimate, or assert the existence of some other legal right when such person knows that the right does not exist.

• Use a communication that simulates in any manner legal or judicial process or that gives the appearance of being authorized, issued, or approved by a government, governmental agency, or attorney at law, when it is not.

• Publish or post, threaten to publish or post, or cause to be published or posted before the general public, individual names or any list of names of debtors, commonly known as a deadbeat list, for the purpose of enforcing or attempting to enforce collection of consumer debts.

• Mail any communication to a debtor in an envelope or postcard with words typed, written, or printed on the outside of the envelope or postcard calculated to embarrass the debtor. An example of this would be an envelope addressed to "Deadbeat, Jane Doe" or "Deadbeat, John Doe."

• Communicate with the debtor between the hours of 9 p.m. and 8 a.m. in the debtor’s time zone without the prior consent of the debtor.

***

(2-6-13)

Assessments and Association Owned Units

Everyone is talking about it, the meaning of the Third District Court of Appeal’s January 23, 2013 opinion in Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. This ground-shattering, ill reasoned case will negatively affect thousands of community associations throughout Florida. For years, we have known that the winning bidder at a lender’s foreclosure sale (other than a first mortgagee lender entitled to the safe harbor protection, meaning the lesser of one-percent of the initial mortgage or 12 months back assessments) remains fully liable to the association for past due assessments. Maybe, not anymore.

This case, one of the worst rulings in years, favors investors and lenders, over the already financially cash strapped associations throughout the state. To make matters worse, it is already being misconstrued by winning bidders of foreclosure sale auctions who wrongly assert that, based on the Aventura case, they have no liability for past due assessments. With that in mind, let us begin our analysis by looking at what the Third District Court of Appeals did NOT say. The Court did not proclaim that every third party bidder who acquires title to an association unit as a result of a lender’s foreclosure auction has no liability at all for past due assessments. Rather, it merely reversed the trial court’s summary judgment order initially issued in favor of the Association.

In the Aventura case, the Association foreclosed its assessment lien before the first mortgagee foreclosed its mortgage, and as a result, the Association owned the unit for a while, subject of course, to the first mortgage. Soon after, the first mortgagee lender foreclosed its interest in the unit which divested the Association of its title to the unit in favor of the third party winning bidder at the court ordered foreclosure auction. Afterwards, the Association, relying on the joint and several liability provisions set out in Section 718.116, Florida Statues, demanded all of the back assessments from Aventura Management, the third party bidder and auction winner. While the trial court had agreed with the Association at summary judgment, the Third DCA reversed the trial court’s order in favor of the third party bidder. This means, the matter at issue is anything but fully decided as either side can file a renewed motion for summary judgment. Moreover, it will be some time before the matter is heard at trial.

Upon closer examination, the Third DCA reversed the trial court’s summary judgment ruling which required Aventura to pay past due assessments that included the period of time the unit was owned by the Association. However, nowhere in the Aventura opinion did the Third DCA order that a third party purchaser has no prior assessment liability, whatsoever. Rather, by reversal of the trial court’s summary judgment, the Third DCA, pointed out that Aventura, as the winning bidder was not liable to the Association for the amounts due as claimed by the Association.

Importantly, the Third DCA also pointed out that the Association’s lien still survives, but failed to explain the practical effect of the lien’s survival. This is a very important distinction that leaves open the possibility that an association who owns a unit as a result of its assessment foreclosure, in addition to being able to sue the prior owner(s) for assessment deficiencies, may still be able to make demand upon the third party winner of the lender’s foreclosure auction so long as past due assessments, late fees, and interest that came due during the period of association ownership of the unit are omitted. Of course, there are a great many other considerations to take into account such as the amount in controversy and the association’s risk tolerance which should be discussed with the association’s legal counsel, in advance.

The Aventura decision is not binding until the 30-day deadline to appeal has past. If neither party appeals then, unless a different district court of appeal issues a contrary opinion to Aventura, or the legislature enacts a new law to stifle its effect, we are stuck with this decision, but, at least in the short term, ONLY as applied to situations that mirror the facts of the Aventura case.

***

(1-23-13)

Total Recall (it’s not just a movie)

Often times, community association board members have to make difficult decisions. Sometimes, their decisions affect the entire community equally, and at other times, decisions made by the board may negatively affect only a few or even just one member. As a result, and even in the best of times, not everyone is always happy. Unhappy association members can express themselves in several different ways. If it’s close to election time, unhappy members might decide to challenge the incumbent board members. But, if the next election is months away, a board member, or even the entire board, may find itself subject to a "recall" petition. When the result of a recall action is approved by the association’s board or by the Division of Florida Condominiums (the "Division"), it is referred to as "certified."

Any condominium or homeowners’ association board member may be recalled and removed from office, with or without cause, during a special members meeting by the vote of a majority of all the members who were entitled to vote the member into office. In its "Recall Guide" the Division explains that "the procedural requirements for a recall at a meeting are challenging and complex. Therefore, a recall at a meeting is seldom successful and owners are strongly discouraged from attempting a recall in this manner." With that in mind, another method to carry out a recall is by a written agreement signed by a majority of all the members who were entitled to vote the member onto the board. However, in both instances, there are unique and technical requirements that must be followed. Failure to do so will result in a failed recall, meaning that the recall action will not be certified.

BOARD MEMBERS BEWARE: Interestingly, even if the recall action would have failed, if the board fails to follow the unique and technical requirements as set out in both Florida Statutes and the Florida Administrative Code, then even what would have led to a failed recall could end up being certified (approved) by the Division.

The key to avoid such a result is for the association’s board to understand its need to act with a real sense of urgency. An association’s board of directors must hold a duly noticed board meeting within five (5) full business days after adjournment of the special members meeting or within five (5) full business days after the service of the written recall agreement upon the board. The purpose of this board meeting is to determine whether to certify or not to certify (approve or not approve) the recall. Failure of the board to follow this extremely important step will lead to a technical default and the recall will be certified. If the recall is certified, then the recalled board member must turn over to the board any and all records and property of the association in their possession.

Alternatively, if the board determines not to certify the alleged victorious result of the recall, the board MUST, within five (5) full business days after the board meeting, file a recall petition (technically called a "Petition for Arbitration") with the Division. Failure to do so could again likely lead to a successful recall, even when the recall action would have otherwise failed! If the arbitrator certifies the recall as successful, the recall will be effective upon mailing of the final order of arbitration to the association.

If the recall of a board member is certified, that board member is removed from office. If a majority of the board members are successfully recalled, the replacement candidates are elected by the unit owners during the recall process. If less than a majority of the board members are recalled, then the association’s members do not elect replacements, but rather the remaining board members fill the vacancies created by the recall by appointing replacement board members of their choice.

Recalling an officer of the association is a whole different story. What can a board do when it’s unhappy with its president, or any other officer? Must the entire community be involved in the recall process? The answer to this inquiry is a simple and resounding, "NO" (most of the time). Typically, and subject to the association’s governing documents, each officer serves at the pleasure of the board. In those instances, it is the board members of the association who decide the association’s officers at a properly noticed board meeting. When a community, or its board, is unhappy with an officer’s job performance, then the association’s board can vote the officer out of office. Of course, that person is still a voting member of the board, but their role as officer of the association has changed.

***

(1-9-13)

Sneak Peak, The 2013 Florida Legislative Session

Happy New Year! The regular session of the Florida Legislature begins on the first Tuesday after the first Monday in March and continues for 60 consecutive days. The 2013 Florida legislative session will officially begin on March 5, 2013 and looks to be a busy one! So far, House Bills 73 and 87, and Senate Bill 120, are already filed and winding their way through the legislative process.

House Bill 73 was filed on December 28, 2012 by Representative Moraitis and, if voted into law, its provisions become effective July 1, 2013. It is a fairly comprehensive Bill that:

• exempts certain elevators from specific code update requirements;

• revises provisions relating to terms of condominium board of administration members;

• revises condominium unit owner election & association meeting notice & record keeping requirements;

• provides requirements for condominiums relating to election challenges, recalls, & installation of impact glass or other code-compliant windows;

• provides requirements for condominiums created within condominium parcels;

• revises provisions relating to imposing remedies;

• revises liability of unit owners;

• provides liability limitations of certain first mortgagee or its successors or assignees;

• revises records not accessible to members or parcel owners;

• revises provisions relating to amendment of declarations;

• provides criteria for consent to amendments; and

• requires notice to mortgagees regarding proposed amendments.

On January 3, 2013, House Bill 87 was filed by its co-sponsors, Representatives Passidomo and Moraitis. This Bill only addresses the foreclosure process and would be effective upon becoming law. This Bill:

• revises the limitations period for commencing an action to enforce claim of deficiency judgment after foreclosure action;

• specifies required contents of complaint seeking to foreclose on certain types of residential properties;

• authorizes sanctions against plaintiffs who fail to comply with complaint requirements;

• requires the court to treat collateral attack on final judgment of foreclosure on mortgage as a claim for monetary damages;

• prohibits the court from granting certain relief affecting title to foreclosed property;

• limits the amount of a deficiency judgment;

• revises a class of persons authorized to move for expedited foreclosure;

• provides requirements & procedures with respect to order directed to defendants to show cause;

• provides that failures by a defendant to make filings or appearances may have legal consequences;

• requires the court to enter a final judgment of foreclosure & order foreclosure sale; and

• provides for liability of persons who wrongly claim to be holders of, or entitled to enforce, a lost, stolen, or destroyed note & cause mortgage secured thereby to be foreclosed.

On December 14, 2012, Senator Latvala filed Senate Bill 120 dealing with condominiums. This Bill, if passed into law, becomes effective upon becoming law and provides for:

• condominium units to come into existence regardless of requirements or restrictions in a declaration;

• extending the amount of time that a clerk may hold a sum of money before notifying the registered agent of an association that the sum is still available and the purpose for which it was deposited;

• changing the requirements relating to the circumstances under which a declaration of condominium or other documents are effective to create a condominium; and

• revising the conditions under which a developer may amend a declaration of condominium governing a phase condominium, and provides for an extension of the 7-year period for the completion of a phase, etc.

On February 27, the PM-EXPO will once again host a fabulous all day community association expo. In addition to the amazing exhibitor hall, numerous seminars of interest to managers and board members are presented. You will not want to miss the advanced manager and accountant panel, which I will be moderating, where your questions are fair game! Joining me on this bright and esteemed panel are Joe Gilbert, LCAM and owner of GRS Management; Nikki Monahan, LCAM and Vice President of The Continental Group; and association auditor Donna Seidenberg, CPA of the Fuoco Group. More information coming soon.

In addition, Kaye Bender Rembaum announces that it will be hosting free seminars providing insight into the developments in the law over the past year, and answers to questions submitted in advance.

• Wednesday, January 9, 9:30 a.m. at South County Civic Center in Delray Beach;

• Wednesday, January 23, 6:45 p.m.: McDonald Center, North Miami Beach;

• Wednesday, Feb. 6, 2013 6:30 p.m.: Bonaventure Town Center Club, Weston;

• Tuesday, Feb. 12, 2013, 6:45p.m.: ArtServe, Fort Lauderdale; and

• Tuesday March 5, 6:45 p.m.: Deerfield Beach Chamber of Commerce.

Interested attendees should specify which seminar location they want to attend, and send questions or topics for discussion, to KBRLegalSeminar@piersongrant.com or call 954-776-1999, ext. 230.

***

(12-26-12)

When is a manager

not a MANAGER?

While the ink in the Third District Court of Appeal’s December 12, 2012 opinion in Coronado Condominium Association vs. La Corte is still wet and the Court’s decision is not final until disposition of any timely motions for rehearing, this case will be of great interest to managers and board members alike as it clearly suggests that a community association should not be subjected to a claim for punitive damages for acts committed by the association’s manager when that manager is acting pursuant to a contract between the management company and the association.

In this case, La Corte was the plaintiff in the underlying litigation who alleged all sorts of misdeeds were committed by the association’s manager. In his proposed third amended complaint, La Corte added a verified motion for leave to add a claim for punitive damages against the association. According to the Court, La Corte described "numerous alleged misrepresentations, acts, and omissions on the part of the employees serving as the property manager for the Association and others working for a contractor performing balcony work at the Coronado Condominium."

The Court pointed out that the individual employee was a licensed property (community association) manager, but not a controlling officer, director, or "manager" of the association as a corporate entity. Similarly, La Corte’s allegations regarding his balcony repair, trespass claims, use of his bathroom, damage to the walls of his unit, and removal of carpeting and plumbing parts, did not involve active, knowing participation by, or the consent or gross negligence of the Association as an entity. The Court held that La Corte’s pleadings did not meet the specific and heightened rules established by the Legislature in Section 768.72(3) of the Florida Statutes, necessary to bring a claim for punitive damages against the association based upon the acts of its manager.

Section 768.72(3), Florida Statutes, provides, that, "in the case of an employer, principal, corporation, or other legal entity, punitive damages may be imposed for the conduct of an employee or agent only if the conduct of the employee or agent meets the criteria specified in subsection (2) of the Statute that defines the requirements for ‘intentional misconduct’ and ‘gross negligence’ and:

(a) The employer, principal, corporation, or other legal entity actively and knowingly participated in such conduct;

(b) The officers, directors, or managers of the employer, principal, corporation, or other legal entity knowingly condoned, ratified, or consented to such conduct; or

(c) The employer, principal, corporation, or other legal entity engaged in conduct that constituted gross negligence and that contributed to the loss, damages, or injury suffered by the claimant."

La Corte mistakenly assumed that the alleged misconduct of the individual property manager was akin to acts of misconduct committed by the Association. The Third DCA noted that the manager was not an officer or director and that La Corte’s allegations did not comply with the statutory procedure to impute the alleged misconduct to the Association as employer of the alleged tortfeasors (or as a corporate defendant) for purposes of the punitive damage claim. To decide otherwise, the court continued "would be contrary to the plain language of the statute."

This case makes clear that a manager must control the corporation for the entity to be subject to punitive damages for the acts of its manager. Remember, a community association manager manages the association’s property, but it is the association’s board and officers that control and manage the corporate entity which we affectionately refer to as the "association."

***

(12-12-12)

LIAR, LIAR Pants On Fire!

In Garvin v. Tidwell, decided in October, 2012, Florida’s 4th District Court of Appeals had the opportunity to review a settlement agreement successfully negotiated by the parties during a mediation that took place during trial. This case was about a horse who allegedly bucked and caused injuries to its fallen rider. But, it’s not the facts of the underlying action that are of interest. Rather, this case explains what can happen after a settlement is reached, when it is learned by one of the parties that the other party failed to disclose relevant information during the "discovery" stage of the trial court proceedings.

After reaching the settlement, Garvin argued that Tidwell failed to provide full disclosure during the lower court’s discovery stages. But, for that failure to disclose key facts, a settlement may not have been reached at all, and minimally can cause the other party to undervalue the worthiness of their own claim. In Garvin v. Tidwell, during "discovery", an "interrogatory" (a fancy legal term that, in simple terms, means a written question asked by one party to be answered in writing by the other party) asked for the names of persons and any documents concerning the care, maintenance, and training of the horse including medical issues. Tidwell had described the horse as a "gentleman" and "lazy." After settlement, Garvin learned of an advertisement that, as it would turn out, was a "smoking gun" type of document.

The advertisement quoted Tidwell as saying that she decided to give the medication "Ex Stress" to her horse, Buster, because he "can be a little difficult at times", she said. During depositions Tidwell failed to mention that she gave Buster the calming supplements and failed to mention Buster’s "difficult" behavior. After learning of this new information, Garvin sought to have the settlement agreement voided. The trial court initially sided with the horse’s owner, but the 4th District Court of Appeal reversed in favor of Garvin, the deceived party.

In Garvin, the 4th DCA explained, "Florida courts have long recognized that one of the primary functions of ‘discovery’ is to enable parties to enter settlement negotiations with an understanding of their chances of success at trial. A primary purpose in the adoption of the Florida Rules of Civil Procedure is to prevent the use of surprise, trickery, bluff and legal gymnastics. Revelation through discovery procedures of the strength and weaknesses of each side before trial encourages settlement of cases and avoids costly litigation. Each side can make an intelligent evaluation of the entire case and may better anticipate the ultimate results... ‘Evasive or incomplete’ answers can amount to a failure to answer and may also warrant the imposition of sanctions."

In making its point, the 4th DCA looked to a 2001, Third District Court of Appeal case, Leo’s Gulf Liquors v. Lakhani. In that case, the 3d DCA discussed the importance of "honesty" in discovery. The court explained that, "[w]itnesses who give sworn testimony by way of interrogatories, at depositions, pretrial hearings and trial, swear or affirm to tell the truth, the whole truth, and nothing but the truth. We expect and will settle for nothing less. Lawyers who advise their clients and/or witnesses to mince words, hold back on necessary clarifications, or otherwise obstruct the truth-finding process, do so at their own, and the clients’ peril." The Third District also made clear that a witness’ oath to tell the truth is equally demanding at depositions. In the end, the 4th DCA found that Tidwell violated her discovery obligations by failing to disclose the Ex Stress advertisement and information known to her about her horse, Buster’s, behavior which prompted the use of Ex Stress.

The lesson to be learned today is one we all learned in kindergarten so long ago, "liars never prosper."

***

(11-28-12)

Appeals Court Affirms Valet’s Duty to Hand Over Keys to Intoxicated Persons

Recently, an interesting case was decided by Florida’s Second District Court of Appeal. The Court deter-mined the liability of a valet parking service when returning keys to an "obviously intoxicated customer." In Weber v. Marino Parking Systems, a November, 2012 case, the Second DCA held that the valet parking service does not owe a duty to third parties to refrain from returning the car keys to a car’s owner, even when the valet parking service knows the driver is intoxicated!

In Weber, a wrongful death action was filed against Marino Parking Systems by the mother of a young woman killed as a passenger in an automobile accident. The driver was found to have been intoxicated. The girl’s mother accused Marino Parking Systems, a valet company, of improperly handing the keys over to an obviously intoxicated driver.

In rendering its decision, the Court referred to another case where a bailor/bailee relationship existed. In that case, it was held, "because the customer already owned the car, a repair shop could not be liable for negligently entrusting the car back to its owner."

In simple terms, the "bailor" gives a personal item of theirs to the "bailee" to hold in trust.

Similarly, in Weber, the Court found that the valet cannot be liable for negligently entrusting the car back to its rightful owner.

The Court found that a "bailor/ bailee" relationship existed between the car’s owner and Marino Parking Systems. It used that relationship as the primary reason to rule in favor of the valet company. Essentially, the Court’s decision had more to do with legal theory and prior case law rather than simple common sense.

The Court even noted that a valet parking service could be liable for "conversion" had it not returned the car to its [intoxicated] rightful owner. The term "conversion" refers to the situation where a person exerts unauthorized use or control of another’s property to such a degree that it creates a legal obligation to compensate the aggrieved party for the unauthorized use of their property.

Too many moms, dads, sisters, brothers, family members and friends are painfully aware of the consequences of drunk driving. In rendering future decisions, the courts would be wise to put more emphasis on protection of society and our loved ones rather than outdated principles of law. In addition, Florida legislature could enact new legislation providing protection to a valet service who withholds a driver’s keys when a driver is clearly intoxicated.

***

(11-14-12)

WHY IT MATTERS?

Holiday Decorations Versus Religious Symbolism

Thanksgiving is almost here. You can feel the holiday cheer is in the air. The recent over abundance of political signs is giving way to holiday decorations, some which are clearly religious symbols while others are secular. What does your community display?

A reader once asked, "If our community allows a Christmas tree and Menorah, doesn’t the Board have to allow a Nativity scene and the Ten Commandments, too?" Interestingly, the answer is most likely, "no." This result is due to the United States Supreme Court’s guidance as to which objects are "religious" and which items are not. Christmas trees and Menorahs, too, are considered "holiday symbols," meaning secular. On the other hand, Nativity scenes and the Ten Commandments denote religious symbolism. If the association displays "holiday symbols" then most likely the board would be on solid footing to deny the member’s request. But, if the board is already displaying other religious symbols, then, to avoid a claim of religious discrimination, the member should be allowed to display their requested religious object, too.

In 1989, in the County of Allegheny v. American Civil Liberties Union, the United States Supreme Court held that, "the determination of whether decorations, which presently or have been in the past used for religious purposes, including those used to commemorate holidays, turns on whether the viewers would perceive the decoration(s) to be an endorsement or disapproval of individual religious choices."  Thus, the constitutionality of the object in question is judged according to the standard of the "reasonable observer." In this way, the intent of the person who created the holiday/religious display is avoided in favor of the opinion of the "reasonable observer" which was determined our highest Court.  

Even though Christmas trees once carried religious connotations, the Supreme Court found that a Christmas tree, by itself, is not a religious symbol. "Today Christmas trees typify the secular celebration of Christmas" the Supreme Court said.  The Court also noted that numerous Americans place Christmas trees in their homes without subscribing to Christian religious beliefs and that Christmas trees are widely viewed as the preeminent secular symbol of the Christmas holiday season.  

In contrast, our Nation’s highest Court stated that a menorah is a religious symbol that serves to commemorate the miracle of the oil as described in the Talmud.  However, the Court continued that the menorah’s significance is not exclusively religious, as it is the primary visual symbol for a holiday that is both secular and religious.  When placed next to a Christmas tree, the Court found that "the overall effect of the display to recognize Christmas and Chanukah as part of the same winter holiday season, has attained secular status in our society."

As to the Ten Commandments, in a 1980 U.S. Supreme Court case, Stone v. Graham, the Court held that the Ten Commandments are undeniably religious in nature and that no "recitation of a supposed secular purpose can blind us to that fact."  The Court stated that, "the Commandments do not confine themselves to secular matters (such as honoring ones parents or prohibiting murder), but instead embrace the duties of religious observers."

If a member of your community wants to include their religious symbol in the association’s holiday display, remember to consider the types of symbols already being displayed by the association as compared to the member’s request. Once your community displays religious symbols, then it will need to allow other requested religious symbols to avoid claims of religious discrimination. Use the guidance from the Supreme Court’s cases to differentiate between a secular symbol and a religious symbol.  The rules of kindergarten work best: treat everyone fairly and treat them as you would want to be treated.

Another important holiday decoration issue concerns whether the decoration constitutes a material alteration of the common elements/area? Remember, that subject only to the terms of the declaration of covenants in a condominium association, the unit owners must vote to approve material alterations of the common elements, while in a homeowners’ association, the board of directors governs such decisions.

Some communities, like mine, avoid the holiday decoration versus religious symbol debate altogether. Every year, in my peaceful HOA, an oversized, festive, gloriously secular, huge red bow is hung on each of the entry gates. I look forward to seeing them each year, for then I know holiday cheer is near.   

***

(10-31-12)

It’s Budget Time at Grizwalds and Goblins Community Association

It’s Halloween time, and that means it is that time of year for boards of community associations everywhere to prepare next year’s association budget. A good budget is reflective of good financial planning. In practice, it is anything but an exact science.

When examining the community association budget process, there are a few subtle nuisances and a couple of glaring distinctions between those budget related laws set out within Chapter 720 that governs homeowner associations (HOAs) as compared to Chapter 718 that governs condominium associations (CAs). Let’s take a look.

Notice Requirements:

• HOA board meeting notices must include a statement that assessments will be considered and, as per statute, "the nature" of the assessments. There is no definitive advance HOA board budget meeting notice requirement set out in Chapter 720, so be sure to check your HOA’s bylaws for any specific requirements. (As an aside, please do not confuse this with the special assessment procedures where it is required for any meeting at which special assessments will be considered that written notice must be mailed, delivered, or electronically transmitted to the members and parcel owners and such notice must be posted conspicuously on the property or broadcasted on closed-circuit cable television not less than 14 days before the meeting.

• At least 14 days before any CA board meeting at which a proposed annual budget of an association will be considered, the board must hand deliver to each unit owner, or mail to each unit owner at the address last furnished to the association by the unit owner, or electronically transmit to the location furnished by the unit owner for that purpose 1) a notice of such meeting and 2) a copy of the proposed annual budget (that includes fully funded reserves).

Committees and Workshops:

• The HOA’s notice requirements apply to the meetings of any HOA committee or other similar body, when a "final decision" will be made regarding the expenditure of association funds.

• Meetings of a CA committee to make recommendations to the board regarding the association budget are subject to the Notice Requirements, above.

Providing Copies:

• The HOA must provide each member with a copy of the annual budget OR a written notice that a copy of the budget is available upon request at no charge to the member.

• The CA must send a copy of the proposed budget (showing reserves fully funded for the year) with the board’s budget meeting notice. Limited proxies for unit owner vote must include a statutory proscribed disclaimer regarding the inherent financial risk in rendering such a decision.

Budgetary Considerations:

• The HOA’s budget must reflect the estimated revenues and expenses for that year, along with expected deficits (bad debt) and surpluses. The budget must also set out separately all fees or charges paid for by the association for recreational amenities, whether owned by the association, the developer, or another person.

• The CA’s proposed annual budget of estimated revenues and expenses must be detailed and must show the amounts budgeted by accounts and expense classifications. The CA can only assess for such items as authorized by statute or the CA’s own governing documents.

Reserves:

• HOA reserves are not mandatory but can be mandatorily required only IF they were initially created by the developer or were voted on, and approved, by a majority of the total voting interests of the community. Both of these types of HOA reserves are loosely referred to as "statutory" reserves. If your HOA assesses for "statutory" reserves, then the assessment revenues collected must only be used for authorized reserve expenditures unless their use for other purposes is approved in advance by majority vote at a meeting at which a quorum is present. If your HOA assesses for "non-statutory" reserves, (meaning that the budget may have a line item called "reserves", but they are not "statutory" reserves), then there are no limitations on the board’s expenditure of these monies.

• CA reserves are initially mandatory in that all residential CA boards must pass the budget with reserves included. After, the unit owners can vote to waive or reduce the reserves. CA reserves can only be spent for their designated purpose unless otherwise approved by a majority of a quorum comprising the voting interests.

PRACTICAL TIP 1: Compare last year’s actual expenditures to last year’s budget, and also compare it to what is set out in the upcoming year’s budget. This simple comparison can be most illuminating.

PRACTICAL TIP 2: Take a look at the existing "bad debt" and see how aged it is. Determine whether it is time to "write it off". In practical terms, this means that the dues paying members in good standing have to make up that shortfall as required to meet the ongoing expenses of the association. In the event that your community association budget does not include a bad debt line item, then consider adding a "bad debt" line item at this time.

***

(10-17-12)

Political Yard Signs

Unless you share similar political views, your neighbor’s front yard sign supporting their favorite political candidate may be upsetting, but, that alone is not a reason for the board to demand the sign’s removal. However, a well-crafted and properly adopted rule prohibiting all signs is likely lawful and enforceable. Today’s issue de jure is, "Can a homeowner or condominium association prohibit the display of political yard signs?" In short, "yes, it likely can." The reason the word "likely" is used is due to the fact that, as yet, there is no Florida case law which directly answers this inquiry. But, given other existing cases, such a rule is more likely than not, enforceable.

In examining an association’s "no sign" rule, let us first address the argument heard every four years, "This is America! The First Amendment protects the right of all homeowners to display political signs." Wishing this to be true will not help. In fact, the First Amendment concepts of freedom of speech and freedom of expression apply to governmental settings. As such, they act as both a shield and a sword to prevent the government from stifling your free speech rights.

In contrast, homeowner or condominium associations are not governmental entities. (Though admittedly they govern, they have no nexus to local or federal government.) In 1987, the Florida Supreme Court held, in Quail Creek POA v. Hunter, that neither a homeowners’ association’s recordation of its covenants in the public records, nor the enforcement of its covenants in state court, created a sufficient nexus to evidence "state action" such that the First and Fourteenth Amendment would apply. With that in mind, any homeowner would be hard pressed to argue otherwise. Admittedly, there are occasions when the Florida Supreme Court applies other rights set out in our Federal Constitution, but not in this instance. (Then again, at times, the courts are not as predictable as we might otherwise like to think.)

Courts have long since held that owners give up certain liberties when living in an association. In 2002, the Florida Supreme Court held, in Woodside Village v. Jahren, that certain individual rights must be compromised when one chooses to live in a condominium association.

With that as our backdrop, any "no-sign" rule should be artfully drafted to help ensure enforceability. There is no margin for error. The dispositive court cases regarding rule enforceability make clear that a sign restriction must be "clear and unambiguous" to be enforceable against an owner. Remember, a basic principal of contract interpretation is that ambiguous terms are held against the drafting party. As a practical matter, in plain English, this means that in the event the rule is even slightly confusing, then the homeowner will receive the benefit of the doubt. Also, any covenant or rule must be applied fairly to avoid selective enforcement rebuttals; so, if Dorothy the Democrat is told to remove her lawn sign, so too must Roger the Republican be similarly told.

Thus, a homeowners’ association could, more likely than not, enforce its no-sign policy which includes prohibiting political signs. Also, as a general rule, courts favor covenants adopted by the membership over rules adopted by the board; meaning, the former serves to increase the association’s chances of prevailing.

Upon legal challenge, a court might be more inclined to uphold a no-sign rule that does not include an absolute prohibition, but rather, that regulates the length of time the sign can be displayed, its size, where it can displayed, and by when it must be removed, too. Before demanding that an owner remove their political sign, the board should review its homeowners’ association’s "signage" rules. If the rule at issue is not patently clear, then it is likely time to consider amendment before enforcement. Consider, too, election season is short. By the time a lawsuit for an injunction to enforce the "no-sign" covenant is fully resolved, it might be time to consider the next presidential candidate!

***

(10-3-12)

A Homeowner's Continued Right to See the Ocean: A Matter of Degree

Did you know that, for the most part, the State of Florida holds title to lands under navigable waters and a part of the foreshore (which, in plain English, means the land between the high and low watermarks). This land is held in trust for all of us to enjoy, but the State is free to dispose of it, too, so long as certain protections are in place. One such protection is the right of an upland owner to an unobstructed view of the Channel (meaning a navigable waterway). What started out as common law rights, are codified in Chapter 271, Florida Statutes.

With that in mind, let us examine the story of Joe who purchases a condominium 20 stories high on the beach. From his gorgeous unit, there are spectacular views. He can look east, northeast, and southeast. He can enjoy unobstructed views across the ocean’s expanse. From a different balcony, he looks out to the west, northwest and southwest. From this position, he can see the beautiful downtown skyline. Then, Joe’s worst fear comes to life when he learns that two new buildings, taller and wider than his condominium, are proposed. The first building will be built on the property next door that is adjacent to his condominium, and the other will be built across the street, to the west, directly behind his condominium. When that building is completed, Joe’s view of the lovely downtown skyline will be forever gone. What rights does Joe have? Sadly, not much when it comes to the view of the skyline, but it is a different story looking east. Let us first examine the loss of the skyline view.

Florida law disdains negative easements. A negative easement is a promise not to do something with a certain piece of property, such as not building a structure more than one story high or not blocking a skyline view by constructing a building. A negative easement is sometimes referred to as an easement of light and air. Simply put, there is no right to a negative easement unless such a requirement is set out in a recorded deed restriction. Therefore, if Joe wants to continue to enjoy his view of the downtown skyline, he might consider buying a unit in the new condominium. However, the same is not true for Joe’s view of the ocean. In this instance, Joe is likely to fare a whole lot better as the body of "riparian law" extends certain protections to owners of "upland" property. Such rights include "the right to an unobstructed view of the channel". But, does "unobstructed" mean the same thing as "unencumbered"?

When it comes to Joe’s right to view the ocean, there is no bright-line test used to measure when his view is unreasonably impaired. In a 1957, Florida Supreme Court case, Hayes. v. Bowman, the existing owner argued that his neighbor’s project should not be allowed to proceed because it would unreasonably interfere with his existing view of the ocean. The homeowner argued that he should be free from all interference to his view of the ocean. He argued that his viewing rights should extend diagonally from the corners of his property line, while the developer owner of the adjacent property argued that the homeowner’s right to an unobstructed view of the ocean should only extend directly east from the corners of the property line. The Court rejected both of these arguments and held that "in any given case, the riparian rights of an upland owner must be preserved over an area "as nearest practicable" in the direction of the Channel so as to distribute equitably the submerged lands between the upland and the Channel. In making such "equitable distribution" the court must give due consideration to the lay of the upland shoreline, direction of the Channel and the correlative rights of the adjoining upland owners.

Therefore, Joe’s continued right to view the ocean will require judicial determination. Is Joe’s view unreasonably obstructed or merely encumbered? In the Hayes case, the Court upheld the lower Court’s ruling in favor of the developer because it found that the lower Court decision in the developer’s favor "did no violence" to the right of the appellant. In other words, while the view might have been encumbered, it was not found to be unreasonably obstructed. However, it should be noted that the Court’s decision was made based on the evidence presented. With this in mind, it should be mentioned that, had the party who complained about their diminished view presented more substantial evidence to document their situation, perhaps a different result would have been achieved.

***

(9-19-12)

An Association's Right to Deny Property Transfer

The other day, board member Earl P. asked if a clause in his association’s declaration was enforceable. The clause provided that "before an owner can sell their unit, the association, in its sole unfettered discretion, must approve the transaction." Well Earl, if that is the entirety of the clause, then it is very likely this type of approval clause does not pass muster. For reasons more fully explained below, the clause will not withstand judicial challenge.

There is a long standing legal concept that prohibits "unreasonable restraints on alienation". In an overly simplistic sense, it means that restrictions on the transfer of property must be reasonable. Absolute restrictions on the transfer of real property are not considered reasonable and are disdained by the courts. The term "alienation" is nothing more than a fancy legal word that means "transfer." Whenever the term or a variation of it appears, just substitute the word "transfer" in it’s place.

In 1984, the 3rd District Court of Appeal held in Aquarian Foundation v. Sholom House,  "a condominium association’s board of directors may have considerable latitude in withholding its consent to a unit owner’s transfer, [however] the resulting restraint on alienation (transfer) must be reasonable." In this manner, the court continued, "the balance between the right of the association to maintain its homogeneity and the right of the individual to alienate (transfer) his property is struck." The association argued its right to deny the purchase was balanced by a different provision in the declaration known as a "reverter". (A "reverter clause" means the deed reverts back to a specific party upon the occurrence of specific events.) However, the court did not agree and found that the reverter clause only created a veiled obligation of the association to purchase the unit upon its denial. But, the court reasoned, if upon denial, it was mandatory for the association to provide a substitute buyer, then the restriction could have been valid.  

In 1993, in Camino Gardens Ass’n Inc. v. McKim,  the 4th District Court of Appeal reviewed a case where the association’s declaration was amended to provide that the prohibition on the sale, lease, or occupancy of any lot in the subdivision to anyone OTHER THAN a duly admitted member in good standing of the association was prohibited. The court held that, "in its purest sense, this provision is a condition to alien (transfer) only to particular persons, was perpetual in duration, and effects every type of alienation.  When viewed in combination with the association bylaws defining membership, the provision becomes a condition prohibiting conveyance without the consent of the Association." In other words, the owner was absolutely and fully prohibited from selling their property to anyone except other existing owners.

As a result, the court found the restriction invalid. 

In 1977, in Coquina Club v. Mantz, the Second District Court of Appeal reviewed an association’s declaration that contained a certain age restriction (that was otherwise lawful at the time), and that also required the association to provide a substitute buyer upon its denial of a purchaser. In this case, the applicant did not meet the age requirement and was therefore "facially" disqualified. Therefore, the court reasoned that in light of the "facial disqualification" the association did not have to provide, the otherwise required, substitute buyer. 

To re-cap, if a restriction is absolute, applies to all sales and is perpetual in duration, then it is invalid.  In other words, limitless power of denial is rendered judicially improper and unlawful.  If the association has the right to deny a purchaser, but the declaration is void of any standards by which such decisions should be made, the restriction is most likely invalid.

If the declaration requires a substitute buyer be provided by the association when it denies a proposed transaction, then the restriction likely has validity. If the applicant is "facially" disqualified, the association need not provide the otherwise required substitute buyer.

If the association has the right to deny an applicant "for-cause", then to withstand judicial scrutiny, the declaration needs to minimally provide for standards as to what "for-cause" means. For example, if the declaration provides that "for-cause" meant "felons who committed crimes of moral turpitude", then based on the existing cases, the restriction is, more than likely, valid.  Another "for-cause" standard could be as simple as requiring the applicant to be truthful. If a lie is later discovered, then the above line of cases suggests that a "for-cause" denial based on a facial disqualification would be justified.  There is another important lesson to be learned. Legislation to set parameters regarding an association’s approval rights is long overdue.

Leshana tova to all those celebrating Rosh Hashanah. May you and your families be inscribed for a good year!

***

(9-5-12)

Storm Damage and the Misunderstood Public Adjuster

The storm is over and sadly the association’s club-house is damaged. The manager calls the association’s insurance company to report the claim. They arrange for their "adjuster" to survey your damage and issue a report. The insurance carrier reviews the report and determines the association’s entitlement for the loss it suffered. So far, the board is pleased at the insurance company’s responsiveness and the adjuster’s attentiveness who genuinely sympathizes with the association’s loss. Everyone is starting to feel a little better about the situation. The manager starts to arrange for the substantial repairs that must be undertaken. The repair estimates arrive while the board waits for the insurance carrier’s valuation. Then, the report arrives. The board is panic struck as they read I that the association’s claim is valued at $300,000, and the least repair estimate was $700,000. What went wrong and how did this happen?

An old expression comes to mind, "the good Lord helps those who help themselves." In this made up story, that likely at times resembles real life, the association did not avail themselves of what some consider to be the most important part of making an insurance claim. The association did not retain a Public Adjuster to value the claim.

Albeit the term "Public Adjuster" can be a bit of a misnomer and is confusing. Let’s address that right now. A Public Adjuster is a state licensed insurance claims adjuster who advocates for YOU in appraising and negotiating your insurance claim.

In general, there are three classes of insurance claims adjusters: i) "staff adjusters" who are employed by an insurance company or self-insured entity), ii) "independent adjusters" who are independent contractors hired by the insurance company, and, iii) "Public Adjusters" who are hired by the policyholder.

The Public Adjuster works for you, the property owner, and not the insurance company. Aside from attorneys and your insurance broker, Public Adjusters are advocates for your rights. Public Adjusters are experts on property loss adjustment who are retained by policyholders to assist in preparing, filing and adjusting insurance claims. Employed exclusively by a policyholder who has sustained an insured loss, these professionals manage every detail of the claim, working closely with the insured to provide the most equitable and prompt settlement possible. A Public Adjuster inspects the loss site immediately, analyzes the damages, assembles claim support data, reviews the insured’s coverage, determines current replacement costs and exclusively serves the client, not the insurance company. Public Adjusters are also beneficial when it is clear that the insurer will pay the claim and the only issue is the proper identification of all losses and their valuation and cost to repair.

A typical wind storm, fire or flood policy contains hundreds of provisions and stipulations, constantly changing forms and endorsements, and many complex details such as inventory appraisals and real estate evaluations that are required in case of a loss. Most policyholders are not aware that they have the burden of proof.

Best of all, Public Adjusters are highly motivated to ensure that you receive every penny you can because they typically charge a percentage of the insurance settlement. It’s money well spent! How do I know? Because even as an attorney, I used them, too. Years ago, after we were hit with multiple storms back to back, my own claim was undervalued. My Public Adjuster helped ensure that my claim was properly compensated.

Whether you’re an association board member or homeowner, if your property suffers damage from a casualty event, remember to avail yourselves of the benefits of a reputable Public Adjuster.

***

(8-22-12)

Don't be Guilty of Unauthorized Practice of Law

Consider this: A quasi-governmental utility company, let’s call it "Florida Electric" (a fictitious company) seeks to enter the sprawling common areas of several sub-associations to do some below ground work necessary to provide better service. While each sub-association is managed by the same management company, each sub-association is represented by a different law firm. The first time Florida Electric requests a sub-association sign their "Easement Agreement" the manager sends it to that sub-association’s lawyer who substantially edits the document to provide better protection for their association client.

Florida Electric makes the same request of the other sub-associations. Rather than involve each of the remaining sub-associations’ lawyers, the manager privately shares the previously negotiated Easement Agreement with the other sub-associations to avoid legal expenses for the other sub-associations. While this is a made-up story, similar events do happen in the real world, and likely with more frequency then we are aware. Let’s take a look at just a few issues that can arise from such events.

For starters, the manager has done the other sub-associations an extreme disservice by practicing law without a license. Each community is set up to function differently by their developers, and that includes different easement rights and differing degrees of authority granted to each board. What may have been permissible by one sub-association board could be prohibited without an owner vote in another. Moreover, the limits for Florida Electric’s liability may need to be set at differing amounts pending insurance coverage concerns that also often differ greatly amongst similarly situated sub-associations. Likely, the manager could face civil and criminal theft of service charges. A complaint to the Florida Division of Professional Regulation is a very real possibility, too. Moreover, the manager has exposed the board members to liability, too, as they are complicit factors in the managers bad acts and have completely abrogated their duty to exercise their reasonable business judgment in such an illicit scheme.

The Supreme Court of Florida has given The Florida Bar the duty to investigate and take action against the unlicensed practice of law through "The Standing Committee on Unlicensed Practice of Law." It is currently considering a request for formal advisory opinion on whether certain activities, when performed by community association managers, constitute the unlicensed practice of law.

In a recent written request from the Chairman of the Florida Bar’s Real Estate Section, confirmation is sought that the activities previously found to be the unlicensed practice of law in the Florida Supreme Court’s 1996 opinion continue to be the unlicensed practice of law. Those activities include the drafting of a claim of lien and satisfaction of claim of lien; preparing a notice of commencement; determining the timing, method, and form of giving notices of meetings; determining the votes necessary for certain actions by community associations; addressing questions asking for the application of a statute or rule; and advising community associations whether a course of action is authorized by statute or rule. The Chairman also asked the Standing Committee to confirm if the unlicensed practice of law for a community association manager includes:

1) Preparation of a Certificate of Assessments due once the delinquent account is turned over to the association’s lawyer;

2) Preparation of a Certificate of Assessments due once a foreclosure against the unit has commenced;

3) Preparation of Certificate of Assessments due once a member disputes, in writing, to the association the amount alleged as owed;

4) Drafting of amendments (and certificates of amendment that are recorded in the official records) to the governing documents;

5) Determination of number of days to be provided for statutory notice;

6) Modification of limited proxy forms promulgated by the State;

7) Preparation of documents concerning the right of the association to approve new prospective owners;

8) Determination of affirmative votes needed to pass a proposition or amendment to recorded documents;

9) Determination of owners’ votes needed to establish a quorum;

10) Drafting of pre-arbitration demand letters required by Section 718.1255, Florida. Statutes;

11) Preparation of construction lien documents;

12) Preparation, review, drafting and/or substantial involvement in the preparation/execution of contracts, including construction contracts, management contracts, cable television contracts, etc.;

13) Identifying, through review of title instruments, the owners to receive pre-lien letter; and

14) Any activity that requires statutory or case law analysis to reach a legal conclusion.

To read a full copy of the Chairman of the Florida Bar Real Estate Section’s letter seeking the advisory opinion, go to www.Floridabar.org. Then, click the "lawyer regulation" link, and then click "unlicensed practice", and finally click "formal advisory opinions".

***

(8-8-12)

You be the Judge!

Is it a Misinterpretation of Assessment Laws, or a Good Business Practice?

If you serve on your association’s board, then you already know many lenders are hesitant to foreclose on their mortgage. What you may not know is why? Lenders know that once they complete their mortgage foreclosure, they could end up owning the property, and if so, then along with property ownership comes the requirement to pay assessments, too. To avoid paying assessments, some lenders may stall their mortgage foreclosure. In other instances, and as has been repeatedly reported by the media, many lenders lack the required documents to commence their foreclosure actions, too.

What you may not know is that because of the lender’s decision to stall the process or worse still, to not foreclose at all, a business savvy association can foreclose its assessment lien to end up in ownership of the unit, and rent the foreclosed property to earn income. This is especially attractive for some associations who are either risk tolerant, or, due to their own financial resources, have nothing to lose. Obviously, there are business concerns that will be unique to each situation and should be discussed with your association’s lawyer in advance.

Remember, even if the association forecloses its assessment lien and thus takes title to the property, the lender still has its secured and superior interest in the property, in that the property now owned by the association remains as the collateral for the delinquent owner’s loan. Therefore, the pending mortgage foreclosure both makes property less marketable and rentable for less than market value. There is an additional, and very real concern, too.

Florida law, more specifically, Sections 718.116(1) and 720.3085(2)(a), Florida Statutes, provides that a prior owner is jointly (meaning, together) and severally (meaning, individually) responsible for the prior assessments and other charges that previously came due. A position being advanced with more and more frequency by foreclosing lenders, and even by third party purchasers who end up in ownership of the foreclosed unit after the association, is that the application of the above referenced laws make the association that successfully foreclosed their assessment lien and therefore end up in prior ownership of the unit, responsible for all prior assessments and charges. This argument is made to argue that once the lender takes title as a result of foreclosing its mortgage lien, that it does not owe back assessments. In fact, those making these arguments suggest to the court that that the language of the referenced Statutes is patently clear, and, until the Legislature provides clarification, or an appellate court provides an opinion that the referenced Statutes do not apply to the association, the judge must follow Statutes as written and therefore apply joint and several liability to the extreme detriment of the association. Despite lobbying by numerous community association firms (including ours), no such clarification is yet provided. Worse still, the position presented by lenders, above, is actually contrary to the intent of those Statutes.

Truth be told, blind application of this theory as suggested by many lenders is neither necessary, nor proper! The laws at issue were created for the purpose of providing a remedy to associations for an owner’s nonpayment of assessments. It is inequitable to apply those Statutes as a punishment for an association electing to avail itself of its sole remedy to collect assessments and related charges, especially when the same lender making the argument is the same lender that dragged its feet to foreclose in an effort to avoid having to pay any assessments at all.

The attorneys at Kaye Bender Rembaum have repeatedly devoted resources and pushed for a legislative fix to clarify the lender’s responsibility to pay for back assessments without regard to whether an association first took title to the unit. Thank you to attorney Alan Schwartzseid who greatly contributed to today’s article.

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(7-25-12)

A Community Association Member's Bill of Rights

Living in a community association brings with it many obligations and responsibilities such as the need to pay assessments and maintain your property.  Additionally, living in a community association also means that every member has certain basic rights. Do you know your rights?

YOUR BILL OF RIGHTS

1) The right to receive at least 48 hours notice of board and certain committee meetings inclusive of an agenda of the items to be addressed;

2) The right to receive at least 14 days notice of annual and special members’ meetings and any meeting at which the board will consider a special assessment, and rules pertaining to a condominium unit or HOA lot use;

3) The right to receive as a condominium unit owner the appropriate notice for committee meetings where the committee will take final action on behalf of the board or make recommendations to the board regarding the budget; and the right as a homeowners association lot owner to receive the appropriate notice for committee meetings where a final decision will be made regarding the expenditure of association funds or where the committee will make decisions regarding architectural decisions with respect to specific parcel of residential property owned by a member of the community;

4) The right to address the board on each and every agenda item, subject to reasonable rules adopted by the board;

5) The right to record board and member meetings subject to reasonable restrictions;

6) The right to receive at least 14 days prior notice of any hearing where consideration of a fine may be levied against you for failing to abide by the associations governing documents;

7) The right to vote for the board so long as you are not delinquent greater than 90 days in any monetary obligation due to the association;

8) The right to use the common areas and common elements of the association so long as you are not delinquent greater than 90 days in any monetary obligation due to the association;

9) The right to inspect the association’s official records subject to the reasonable rules adopted by the association;

10) The right to vote for recall of any existing board member;

11) The right to run for the Board of Directors so long as you are not delinquent greater than 90 days in any monetary obligation to the association and are not a convicted felon whose rights have not been restored for at least five years;

12) The right to receive certain financial records as it relates to the association;

13) The right to exclusive use of your unit or lot, as the case may be;

14) The right to participate in the decision of whether the association should bring certain lawsuits;

15) The right to express your opinions free from "SLAPP" lawsuits.

* * * * *

In short, SLAPP lawsuits are used to stifle and otherwise silence critics. The term "SLAPP" is an acronym for "strategic lawsuits against public participation." The goal of any person in bringing a slap suit against an association member is to invoke fear in the member and increase their legal costs, etc., which lead to the exhaustion or abandonment of the member’s criticism.

Warning, an esoteric thought follows: In many ways SLAPP lawsuits are similar to the Alien and Sedition Act passed into law by President John Adams in 1798 in support of a more powerful and centralized government. In brief and by way of over simplification, when this Act was in effect you could be arrested for speaking out against the president. Supporters of the Act argued that the Act allowed people to say what they wanted against the government, but it did not mean they were free from governmental retaliatory action after the comment was made. Thus, citizens were free to express themselves, but it was not without consequence.

Nevertheless, from a practical perspective, the Alien and Sedition Act stifled free-speech because while you can say what was on your mind, you certainly could be arrested or otherwise penalized for doing so. If an association member had to worry each time they spoke up against the present board that a lawsuit could be brought against them or a fine levied for speaking their mind, then the First Amendment of the United States Constitution would be nothing more than a meaningless mockery of a sham of a travesty shrouded in enigma wrapped inside of a quagmire. With that as our backdrop, while association members are free to express their thoughts, they should do so with respect for their board members in light of the hard work they put in for the betterment of the community.

***

(7-11-12)

A not so "EASY COME" 

— but a very "EASY GO"

No Implied Warranties for Off Site 

Improvements for Homeowner Associations

For some time now condominium and cooperative associations alike benefited from the implied warranty of habitability for construction defect damages. While these rights are codified in Florida Statutes Chapter 718 (the "Condominium Act") and Chapter 719 (the "Cooperative Act"), there is no similar codification in Chapter 720 (the "Homeowners’ Association Act").

In plain English, and loosely stated, the "implied warranty of habitability" means that the home, as built, is reasonably fit for its intended purpose (i.e., that the home is suitable to live in). But, just how far does the "home" extend? In other words, if an off-site improvement, such as the roadways or drainage system, falls victim to a construction defect, does that mean the home is unsuited for occupancy? While a court said "Yes", the Florida Legislature and the Governor said "No."

In July 2012, in Lakeview Reserve v. Marondo, the 5th District Court of Appeals recognized, and thus judicially created, implied warranties for off-site homeowners’ association improvements. The sole issue in the case was whether the homeowners’ association could maintain a claim for breach of the common law implied warranties of fitness and merchantability, also referred to as a warranty of habitability, against a builder/developer for defects in certain off-site improvements including roadways, drainage systems, retention ponds and underground pipes in a residential subdivision.

In Lakeview Reserve, the Association filed a complaint against the Developer for breach of the implied warranties of habitability based on latent defects (a fancy legal term that, in plain English, means "hidden defects") in the subdivision’s common areas. Specifically, it claimed that the roadways, retention ponds, underground pipes, and drainage systems throughout the subdivision were defectively constructed. The Developer filed a "motion for summary judgment" (another fancy legal term that means there are no disputed facts and the party that filed the motion believes it is entitled to a verdict in its favor based on the application of existing law), arguing that the common law implied warranties do not
extend to the construction and design of off-site improvements in a subdivision, because these structures do not immediately support the home(s). The trial court agreed with the Developer but, on appeal, the 5th DCA reversed the trial court’s decision and ruled in favor of the HOA. Then, on April 27, 2012, House Bill 1013 was signed into law by Governor Scott, which killed the recently created judicial remedies.

However, and importantly, all is not yet lost. House Bill 1013 made patently clear that both the HOA’s and the purchaser’s of homes within them have other existing rights to pursue causes of action arising from defects based on contract, tort or statute. In the end, what does all of this mean to your HOA? It simply means that if an off-site improvement is the subject of a construction defect, such as an improperly built drainage system, an HOA and/or a member can still bring a cause of action against the developer for such things as failure to build the system as designed, etc., but the HOA won’t have the ability to include an additional cause of action for damages to off-site improvements that stem from a breach of the implied warranty of habitability.

***

(6-27-12)

Who Rescues Who?

The Southern District Recognizes Emotional Support Dogs are Service Animals, too!

Pets make happy homes. After a hard day, it sure is great to come home to a wagging tail. No one would deny the benefit of a trained service dog who assists the visually impaired. Sadly, the same cannot be said in regard to emotional support dogs. Even the courts have been split on this issue. Some courts, looking to regulations promulgated under the Americans with Disabilities Act, have held that only a trained service animal may qualify as a reasonable accommodation. However, more recent court decisions recognize that the Fair Housing Act (the "FHA") has no such "training" requirement, and thus have concluded that an emotional support animal may be considered for a "reasonable accommodation" under the FHA when the animal is necessary for a disabled person to enjoy equal housing rights.

Let’s face it, when the decision is made to live in a condominium, certain liberties must give way in favor of communal living. Often, it is the unit owner who is required to compromise their behavior to conform to the condominium’s rules. But, at times, the condominium association, acting through its board, is the one that needs to compromise their rules in favor of one or two unit owners. What if a situation arises where a purchaser requests an exception to the rules and regulations before they take ownership and becomes an association member? What rights does a prospective owner have? More specifically, if dogs are not allowed, can a disabled prospective owner be denied unit ownership based on their properly completed application where the purchaser requests a "reasonable accommodation" to bring their emotional support dog into the condominium where dogs are prohibited?

On May 28, 2012, in denying a defendant condominium association’s motion for summary judgment where the association argued that emotional support dogs who have no special training are not "service animals", the federal court for the Southern District of Florida, in Falin v. Condominium Association of LA Mer Estates, Inc., explained that the Federal FHA (as amended by the Fair Housing Amendments Act of 1988) make it unlawful "to discriminate in the sale or rental, or to otherwise make unavailable or deny, a dwelling to any buyer or renter because of a handicap of ... that buyer or renter [or] any person associated with that buyer or renter...discrimination includes ... a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling." Read together, the court explained, "these provisions make clear that refusing to make reasonable accommodations violates the FHA’s general prohibition against denying housing based on a disability." To establish a reasonable accommodation claim, a plaintiff must show that "(1) he [or a person associated with him] is disabled or handicapped within the meaning of the FHA, (2) a reasonable accommodation was requested, (3) such accommodation was necessary to afford him [or the associated person] an opportunity to use and enjoy his dwelling, and (4) the defendants refused to make the requested accommodation."

The defendant condominium association’s main argument in support of their motion for summary judgment focused on the third element; specifically, whether 95 year old Ms. Falin’s request for an accommodation to allow her 21 year old emotional support dog was necessary to afford her an opportunity to use and enjoy her condominium unit. The association went so far as to point out that Ms. Falin’s dog was not a "service animal" that was trained to perform a specific task, such as helping guide a blind person or recognizing the onset of seizures. In fact, the record shows conclusively that the dog had no such training, but instead served only as an "emotional-support animal" for Ms. Falin. However, her doctor opined that the dog helped remedy Ms. Falin’s anxiety, difficulty in sleeping, and related symptoms. In the end, the court sided with the prospective owner clearing the way for the case to head towards trial when they held that a disabled person’s emotional support dog, without any specific training, can still be a "service animal".

In making a request for a reasonable accommodation for a service animal, be it for an emotional support pet or otherwise, remember that a licensed physician must clearly explain your recognized disability and how the requested accommodation will assist you in the opportunity to use and enjoy your dwelling.

Another lesson can be gleaned from this decision, too. Don’t get caught in the trap of believing that only unit owners have standing to sue their association based on the rules and regulations. While that may be true more often than not because owners need "legal standing" to bring their claim, which they get by virtue of association membership, in the right circumstances, other laws can create such "standing" in favor of non-owners, too.

***

(6-13-12)

Is Your Association Remodeling? Are You? If You Don’t Mind Paying Twice, Then Don’t Read This!

If anyone other than the contractor with whom you have a signed contract is performing services or providing goods to your property, then you have financial exposure and could end up paying twice, unless you understand a few terms and make sure a few steps are followed. Florida’s construction lien law is both a blessing and a curse. Sadly, it seems that the only people that truly grasp its implications are contractors and lawyers. Simply put, if you pay the general contractor, but they fail to pay a subcontractor or supplier, then you could be responsible to pay them, even though you paid the general contractor, unless you protected yourself.  To do so, first we’ll examine contractors, architects, landscape architects, interior designers, engineers, etc. when such individuals are in direct contract with the owner of the property. Then we’ll examine suppliers (also known as "materialmen) and subcontractors who are doing work on the property, but have no direct contractual relationship ("privity") with the owner.

Pursuant to Chapter 713, Florida Statutes, any person or firm that performs services as an architect, landscape architect, interior designer, engineer, or surveyor who is performing their services pursuant to a contract with the owner, has a lien on the real property improved for any money that is due for his or her services. In addition, a supplier, laborer, or other contractor in "privity" with the owner, has a lien on the real property improved for labor, services, materials or other items required by or furnished in accordance with their contract.

Where it gets tricky, and where your liability to pay twice is created, is when a subcontractor  or supplier performs work or services on your property and they are NOT in direct contract with you, the owner (meaning that there is no "privity" between the owner and the person providing the services or goods). It’s easy to protect yourself. To do so, you need to understand a few new terms, the "notice of commencement", "notice to owner" and "partial and full payment affidavits". So long as you sign the "notice of commencement" and ensure your general contractor records it, the subcontractors and suppliers with whom you have no privity, can record and send you their "notice to owner." So long as you are certain to demand partial and full receipt, be sure you receive partial and final payment affidavits from the general contractor along the way, too.

For the suppliers and subcontractors to be in a position to record and send their "notice to owner", you are responsible to make sure your general contractor records the "notice of commencement" that is duly executed by you, as the property owner. To record their "notice to owner", the subcontractors and suppliers look to the "notice of commencement". In fact, the cautious subcontractor won’t begin work if they are not in privity with the owner when the "notice of commencement" is not recorded.

The "notice to owner" is a publicly recorded document that is also sent to the property owner to alert him or her of all subcontractors and suppliers who are not in direct privity with the owner and are providing services or goods to the owner’s property. In order for the subcontractor and suppliers to perfect their lien rights, they must serve their "notice to owner" which sets forth the name and address of the person or entity providing the goods or services, a  description of the real property being improved, and the nature of the services or materials furnished or to be furnished. If, after the "notice of commencement" is recorded, the supplier or subcontractor doesn’t complete the "notice to owner", then, after a certain amount of time is passed, in the event you paid the general contractor who fails to pay the subcontractor or supplier, they will have a difficult time arguing that you, the property owner, are still responsible to pay them.

Prior to each payment, the property owner, at their sole option, can require the general contractor to first provide an affidavit which sets forth the names of each subcontractor and supplier who had  not been paid in full, and  the amounts due, or to come due, for labor, services or materials furnished. The owner has the right to rely on the contractor’s affidavit in making the partial and final payment meaning that any subcontractor or supplier who did not complete the "notice to owner" and where the owner of the property has no knowledge of the individual doing any work, then the lien rights of such subcontractor or supplier are not vested and do not attach to the property.  

If you don’t follow these simple steps, then you’re at full risk for paying twice for the same work.

***

(5-30-12)

Use Right Suspensions and Fining, and Protesting Board Action through Non-Payment of Assessments

Not too long ago, both condominium and homeowners’ associations were provided a legislative gift. Regardless of whether or not your community’s declaration provides for use right and voting right suspensions, along with fining provisions, the Florida Legislature provided them for you. They even provided the procedural mechanism to enact them, too. In so far as a member’s monetary delinquent obligation that is greater than 90 days delinquent is concerned, the board has the power to suspend use rights of the common areas and common elements, suspend the delinquent member’s voting rights, and can even levy fines. Comparatively, as it relates to all other types of violations, a committee of members not related to, or living with, board members must initially decide to enact a suspension or fine and recommend that board adopt the committee’s findings before they can be levied against the offending member. If the board does not agree, the fine or use right suspension cannot be enacted. While in the context of delinquent monetary obligations, the board makes its decisions at a properly noticed board meeting, which requires 48 hours notice to the community of all items on the agenda, the "covenant enforcement committee" is required to provide the offending member at least 14 days notice and an opportunity for hearing prior to their meeting.

At times I am asked, "How can that be? Can the legislature really just overwrite our governing documents like that?" Well, yes it can … (sort of). The answer depends on whether or not the issue under consideration is a "substantive right" as compared to a "procedural" matter. As often discussed in this column, the declaration of covenants is, at its essence, a contract between the members and their association. While the legislature cannot impair existing contractual rights, it can create new procedures which are binding upon their effective date.

To add some clarity, let’s more closely examine a first mortgagee’s assessment liability after foreclosing its mortgage. As you are undoubtedly aware, for the most part, the successful 1st mortgagee, upon taking title to a unit as a result of their own mortgage foreclosure, is responsible to pay the lesser of 1% of the initial mortgage or 12 months back assessments. More specifically, in the HOA context, the 1st mortgagee safe harbor only applies to mortgages entered into after the effective date of the legislation, that being July 1, 2008. Therefore, if a mortgage was entered into prior to July 1, 2008 the provisions in the declaration control. The reason is because the legislature cannot impair existing contractual rights. Because the lender made its loan in detrimental reliance upon the terms of the declaration, the legislature could not interfere with the rights created prior to its legislation. Comparatively, in examining use right and voting suspensions along with fines, the Florida Legislature’s recent adoption of new laws in this regard is of a "procedural" nature. Therefore, all condominium and homeowners’ associations must follow the procedures the Florida Legislature has created to enact use right and voting suspensions and the levy of fines, too.

In 2011, in "Tahiti Beach HOA v. Pfeffer", the 3rd DCA affirmed the trial court’s partial summary judgment in favor of homeowners who were contesting their association’s foreclosure action filed against them based on what tuned out to be an improperly levied fine for a violation of the governing documents. The association had adopted its fining rules in the early 1990s. In explaining their rationale for supporting the trial court’s decision, the 3rd DCA held that the fining provisions enacted in 1995 by the Florida Legislature were not followed by the association. Procedural changes in the law apply to all associations retroactively because they do not impair existing contractual rights. In other words, the association failed to follow the then existing procedural laws when it enacted the fine which formed the basis of the association’s foreclosure. The moral of the story is don’t get caught in the trap of thinking that just because your community’s declaration provides a different use right and voting suspension and fining regime that you can ignore Florida law. If you do, you’ll suffer the same consequences as the Tahiti Beach HOA.

On a different note, it’s hard to fathom that there are still some association members who believe they can withhold payment of assessments as a form of silent protest taken against board action. Do not under any circumstances do that! Rather, the correct way to handle the situation is to pay any assessments due. Then, you can separately challenge the board’s action that led to the assessment. In "Coral Way v. 21/22 Condominium Association", the 3rd DCA held that unit owners who argue that their board breached their fiduciary duty could not refuse to pay assessments because of the alleged unauthorized acts. The Court held that a member’s duty to pay assessments is conditioned solely upon unit ownership and whether the assessment complies with the governing documents. The remedy for an upset owner must be brought as an independent claim. Protesting board action through non-payment of assessments has been repeatedly rebuked by the courts.

***

(5-16-12)

Today’s Double Hitter

(i) The Continuing Saga of Lender Financial Liability to Association's Post Foreclosure

(ii) The Florida Supreme Court Takes On Robo-Signing

In continuing our discussion regarding the recovery of late fees, interest, costs and attorney fees that are incurred against an owner’s unit/lot prior to a first mortgagee’s acquisition of title to the unit/lot, let us take a look at the analysis from the association’s point of view. By now, it is rather commonplace knowledge that, generally speaking and as per Florida law, a first mortgagee who successfully forecloses their mortgage is liable to the association for the lesser of 1% of the initial mortgage or 12 months back assessments (a/k/a, the "Safe Harbor Rule"). But, is the first mortgagee obligated to pay the late fees, interest, costs and attorney’s fees, too?

Many learned lawyers say, yes they are! Here’s why: both the Condominium Act and Homeowners’ Association Act contain the Safe Harbor Rule. Moreover, both Acts also provide that an association is also entitled to recover its late fees, interest, costs and attorney fees incurred in an action to foreclose a lien or an action to recover a money judgment for unpaid assessments. It is here that the legal argument of "expresio unious est exclusion alterius" has significant meaning. In plain English, this Latin expression means that the inclusion of one item specifically excludes all other items. As applied to first mortgagees who as a result of their own loan foreclosure litigation end up owning the foreclosed unit (or lot), the association can argue that if the legislature had intended to limit an association’s ability to recover the late fees, interest, costs and attorney fees from the new owner (that being the first mortgagee lender who had successfully foreclosed their mortgage) then it should have said so in the legislation.

Since the legislature i) created the Safe Harbor Rule, and ii) in different sub-sections of both Acts created the statutory entitlement for the association to recover late fees, interest, costs and attorney fees and iii) excluded the terms "late fees, interest, costs and attorney fees" from within the term "assessment", there are compelling arguments that the Safe Harbor Rule only limits the first mortgagee’s assessment liability and NOT the first mortgagee’s liability for other monies due and owing. Moreover, in recording an assessment lien, both Acts make quite clear that the lien, once recorded, applies to the delinquent assessment obligation and also secures the attorney’s fees, costs and interest. If attorney’s fees, costs, and interest were to be included within the term "assessment", then there would be no need to make separate reference to them. Thus, the association can often successfully argue that had the legislature meant to limit the association’s right to recover late fees, interest, costs and attorney’s fees from the first mortgagee who now owns the foreclosed unit (or lot) it could have said so in the Safe Harbor Rule. Since it doesn’t, there is no limitation on their recovery. Of course, the lenders argue to the contrary.

What can we glean from this? Well, the Florida Supreme Court would do us all a favor by addressing whether an association is fully entitled to recover, from the first mortgagee owner, its attorney’s fees, late fees, costs, and interest incurred. Rather, last week, the Florida Supreme Court heard, "sua sponte", (a fancy legal word that means, "on their own") an equally important case affecting lenders and borrowers.

In that case, when you take into account that the parties in the underlying litigation had already settled their dispute, and the State’s highest court still moved forward to hear the case, it is even more telling. At the heart of this litigation is whether a lender can re-file their mortgage foreclosure lawsuit after voluntarily dismissing their mortgage foreclosure case upon learning that their loan documents upon which the foreclosure complaint is based were fraudulent.

The Court noted that the use of a foreclosing lender’s "voluntary dismissal" due to fraudulent supporting documentation and later re-filing of the same case based on corrected paperwork was of great public importance due to the numerous mortgages affected. On the one hand, if the Court allows the lenders to re-file their mortgage foreclosure case, then it could be argued that such a "scheme" could be used to file fraudulent lawsuits over, and over again. On the other hand, if the lenders are not allowed to re-file their foreclosure lawsuit after having voluntarily dismissed their first attempt to foreclose the mortgage based on faulty paperwork, then the homeowner would be entitled to an unjust windfall.

From a practical perspective, it would not be surprising if the Court renders a decision that is, at least in part, based on the lender’s actual or imputed knowledge. If the Trial Court has reason to believe that the lender knew, or should have known, that the loan documents upon which the foreclosure is filed, are forged, then, in that circumstance, the lender should be prohibited from re-filing their case. Such acts should be punished, even if a homeowner receives the unintended windfall. There is a point to be made here. After all, what good are laws if there are no consequences? However, if the lender had no such knowledge, the lender should be able to re-file their case. Stay tuned and keep reading "Rembaum’s Association Roundup" to learn what the Court decides and to stay up to date with recent developments that can affect your association. It is, after all, the "news that an association could use" (after checking in with your association’s legal counsel).

***

(5-2-12)

Elections, Insurance, and a Senseless Death

This season, more than any other of late, the issue of condominium election ballot verification reared up. The condominium election process is unique and very regulated. In addition to many other requirements, ballots are to be placed in an inner plain and unmarked envelope which is to be placed inside a larger envelope which must, as per Florida law, contain the unit owner’s name, address, unit number and signature. As part of the election process, this information is later verified against the associations’ membership records to ensure that only the unit owner, or the unit owner’s designated voter, cast their ballot. It is the plain inner envelope that guarantees anonymity.  

Given the sheer volume of units in many condominium communities, which translates to the number of ballots that can be received, the process of tabulating the ballots can take hours. To speed things up, some condominium communities prefer to verify the outer envelope information in advance of the election ballot tabulation that takes place during the annual members’ meeting. That said, and what may come as a surprise to some, is that you cannot just start verifying the outer envelopes. If you do, then your entire election is subject to challenge.  Tampering with the election materials creates an inescapable cloud over the entire election process from which there is no escape, but a new election. It is so simple to avoid, too. 

Section 61B-23.0021, of the Florida Administrative Code, details the verification process as follows: "Any association desiring to verify outer envelope information in advance of the meeting may do so as provided herein. An impartial committee designated by the board may, at a meeting noticed in the manner required for the noticing of board meetings, which shall be open to all unit owners and which shall be held on the date of the election, proceed as follows. For purposes of this rule, "impartial" shall mean a committee whose members do not include any of the following or their spouses: 1) Current board members; 2) Officers; and 3) Candidates for the board. At the committee meeting, the signature and unit identification on the outer envelope shall be checked against the list of qualified voters. The voters shall be checked off on the list as having voted. Any exterior envelope not signed by the eligible voter shall be marked ‘Disregarded’ or with words of similar import, and any ballots contained therein shall not be counted."  Now you know how to have your cake and eat it, too. Just follow the simple procedures to verify the outer envelopes and you can be home in time for the 10:00 P.M. news. 

Once you are elected to the board, make certain the directors’ and officers’ liability coverage is in place. In most instances, a board member’s duty is to exercise their reasonable business judgment. They can make decisions that later turn out great or bad, but so long as they acted reasonably under the circumstances, and without malicious intent, the association’s insurer typically stands by their coverage obligations. Noteworthy is that, as related to procurement of insurance, a condominium board member’s statutory duty as set out in s. 718.111(11), Fla. Stat, is one of "best efforts." Casualties of all sorts can occur at any time. For example, just look to the recent tragedy that led to the death of Trayvon Martin.

Friends, family and clients are all asking, will George Zimmerman’s homeowners’ association be sued? Yes, most likely it will. That is one deep pocket not likely to be missed. We could also see intentional tort claims brought against the individual directors by the victim’s family.  If such claims are victorious, then it’s the individual directors who are liable, not the association’s insurer. Under the circumstances, as reported thus far, a finding of individual board member liability is not unlikely.

The more difficult question to answer is whether the HOA will have liability for its actions or failures to act? Was the association, based on the acts of its boards (both past and present) negligent or grossly negligent (reckless disregard that rises to such a level so as to appear to be an almost willful violation of the safety of others)? If so, the insurers would likely fight to pay only their fractionalized share of the association’s blame. This is referred to as "contributory negligence" where each culpable party pays their share of the blame. You might also hear about some court activity where the plaintiffs try to force the association to suffer its judgment separate from the other defendants. Doing so could create opportunity for larger settlements and judgments. Think of it this way, would you rather receive just $1,000 from 10 people, or have 10 people each give you $1,000?

In many ways, suing a homeowners’ association is like suing a successful, well capitalized corporation. Without proper insurance coverage in place, a judgment against your association would also be your next special assessment. Make sure your association’s insurance professional is made aware of all activities taking place in your community, from watch committee activity to use of the clubhouse by private organizations. Crime and accidents occur everywhere, at any time, when you least expect it and without notice.  Advance planning is your only defense.  

***

(4-18-12)

A Legislative Update & More

House Bill 319, the 2012 community association legislation package, went down in flames due to op-position brought about by a grass roots style organized campaign. The short story is that this legislation contained a provision which clarified that first mortgagee lenders, upon taking title to a foreclosed unit, would not be responsible for the attorneys’ fees and costs beyond the statutory "safe harbor" liability, which is the lesser of 1% of the initial mortgage, or 12 months’ back assessments. Until recently, there was little uncertainty amongst well versed association legal counsel that the "safe harbor" provisions did not include these additional items. Now, however, with the rise of collection lawyers and collection agencies providing association collection services, new arguments were crafted suggesting that first mortgagees also owe additional monies beyond the statutorily provided safe harbor provisions. We’ll have to wait to see how this issue resolves itself in future legislation. In the long run, some battles are not worth fighting. I am not so sure that messing with the banking lobby, one of the most powerful in the state, will prove worthwhile. With their power and influence, they could strategically tack some other pro-lender community association legislation onto a future bill just before its passing ... and then everyone will stare at each other dumbfounded and ask, "how did that happen?"

House Bill 1013 was signed into law. This Bill killed recently created judicial remedies based on the implied warranty of fitness, merchantability and habitability for construction defect damages related to a community’s improvements such as roads and other infrastructure improvements. The text of this law points out that it does not alter or limit existing rights of purchasers to pursue other causes of action arising from defects based on contract, tort or statute. However, it should be pointed out that both the Condominium and Cooperative Acts, Chapters 718 and 719, respectively, include substantial construction defect remedies, whereas Chapter 720, the Homeowners’ Association, does not contain similar protections.

Kimberly Miller, a Palm Beach Post staff writer, recently reported that the Florida Bar has nearly 1400 complaints filed against attorneys related to the housing crisis. She reports the complaints include such things as mortgage fraud, foreclosure fraud, and loan modification misconduct. Thus far, approximately 208 of these complaints have been resolved. Apparently, it was reported that these cases represent 17% of all open complaints with the Florida Bar. Attorney David Stern, who ran one of the publicized foreclosure mills, still remains a member in good standing. For those familiar with the "robo–signing" debacle of mortgage documents, it raises the question of just how much investigation must be done when an institution client regularly provides previously executed document upon which the foreclosure is based. Unless the lawyer knew, or should have known, that the documents were repeatedly forged, then it’s the forger who should have liability, not the lawyer.

On July 1, 2010, the Florida Legislature approved extending the "bulk buyers" protections. The original Bill contained a sunset provision meaning that the legislation was drafted to automatically expire two years later. In short, prior to this legislation becoming law, a "developer" was anyone who bought more than seven units in a condominium building. As a practical matter, buyers of more than seven condominium units were forced to assume the same construction defect warranty risks as the developer who actually built the condominium. As a result, bulk buying of remaining inventory was naturally discouraged. Many investors were reluctant to buy more than seven units because of the increased risk of being sued for construction defect liability. Proponents of the Bill report that, since its initial passing, there have been more than 100 bulk deals of condominium sales in South Florida, thereby helping to alleviate the surplus of condominium units. Governor Scott extended the sunset provisions for an additional three years, meaning that it will now expire July, 2015, unless again extended.

***

(4-4-12)

The New Wild Wild West, Florida

When did Florida become the new "Wild Wild West"? Not too long ago, the term brought to mind campfires, prairie dogs, open plains, and yes, some aspect of lawlessness, too. Florida, with its palm trees and pristine beaches, was best known as the "sunshine state." Now, thanks to the Florida Legislature and the influence of gun lobbyists, Florida may be best known as the "shoot-em-up" state. The death of Trayvon Martin by neighborhood watch person, George Zimmerman, raises social and legislative questions. These questions can reach right into the heart of your community association. To understand why, we need to examine Florida’s gun laws, Chapter 790, Florida Statutes.

Florida law provides that municipal and county ordinances cannot take precedence over State gun laws. In fact, local governments cannot enact more restrictive gun laws than those of the State government. State law even prohibits local governments from regulating firearms and ammunition. Employees are permitted to bring guns to work so long as the gun is left in their car, in their employer owned parking lot.

Florida’s "stand your ground" law has four critical parts: 1) A person can presume the threat of bodily harm or death from someone who breaks into that person’s home or occupied vehicle. In that context, deadly force is permitted. 2) So long as a person has the right to be where they are, there is no duty to retreat if attacked. A person is allowed to use deadly force if necessary to prevent death, great bodily harm to oneself or another, or to prevent the commission of a forcible felony. 3) The person using such force, as permitted by law, is exempt from criminal prosecution and cannot even be arrested unless there was probable cause that the force used was unlawful. As an aside, it is this part of the law that likely played a pivotal role in the police department’s decision to not arrest Zimmerman. 4) If civil action is brought against the individual who used deadly force, and where the court finds the defendant did have probable cause to use deadly force, the defendant is even entitled to prevailing party attorneys’ fees.

In addition, Chapter 790, Florida Statutes, contains a short list of "do not carry" places where the holder of a concealed weapons permit cannot carry their weapon. Except for those places, anyone who owns a concealed weapons permit can bring their gun, albeit concealed. With this backdrop in mind, the implications to community associations are enormous. Can a community association prohibit the holder of a concealed weapon permit from carrying their concealed weapon in the clubhouse? Can members of a neighborhood watch group be prohibited from carrying their concealed weapon when performing their duty?

Unfortunately, community association clubhouses did not make it on the "do not carry" list. This means that even if a community’s governing documents prohibits guns in the clubhouse, the holder of a concealed weapons permit would likely be entitled to ignore that requirement or, in any event, successfully challenge it.

If your community has a neighborhood watch group, certain policies should be adopted by the board. For example, direct contact with a suspicious person should not be permitted under any circumstances. If suspicious activity is taking place, the only activity of the neighborhood watch member should be to call the police or a security guard. The board could also consider adopting a policy that prohibits the carrying of a concealed weapon when performing neighborhood committee watch duties. Since such a requirement could invite legal challenge, be sure to first check with your community’s lawyer. If my community had an active neighborhood watch committee, I’d surely sleep better knowing such policies were in place. Often, common sense makes the most sense.

***

(3-21-12)

TELL OL PHAROH, 

LET MY PEOPLE GO!

Almost every year, around this time, I hear "Our con-dominium association won’t let us build a Sukkah, but allows Christmas trees and menorahs. The board is discriminating and I am going to sue!" Before you do that, there are a few things to consider. Let’s start by asking, "What is a Sukkah?"

A Sukkah is a temporary, open roofed structure constructed for use during the week-long Jewish festival of Sukkot celebrating freedom from slavery under Egyptian tyranny. While I personally favor Sukkahs, and would like to report that they must be permitted, such is not the case. A community association can prohibit the construction of a Sukkah in the common elements by a member provided that i) the board does not arbitrarily deny the member’s request, and ii) the board treats all similar requests in a like manner, such that other members cannot place their religious and holiday symbols in the common elements either.

Is the association’s denial a violation of a member’s First Amendment right to free speech? No, because the First Amendment applies to government action. The association is a private corporation and is not part of government. While an association does not need to comply with the requirements of the First Amendment, it does need to fairly enforce its governing documents. An association’s declaration is a contract that specifies the mutual rights and obligations of the members and the association. It often details the permitted uses in and on the common elements. Restrictions in a declaration are upheld so long as they serve a legitimate purpose and are reasonably applied.

In Savanna Club Worship Service, Inc. v. Savanna Club Homeowners’ Association, Inc., 456 F.Supp.2d 1223, 1227 (S.D. Fla. 2005), the court upheld an association’s prohibition of a worship club holding services in common areas because the association’s rule that prohibited worship services was reasonable in the context of a planned residential community. The court also applied a balancing test of sorts when it noted that, had the worship club been allowed to use the common area auditorium, it would have prevented other members from their right to use the facility.

The board’s standard in reaching its decision of whether or not to approve a member’s request to construct a Sukkah in the common areas is to exercise its reasonable business judgment. So long as the board does so, and there is no evidence of fraud, self-dealing, dishonesty or incompetency, then it would be difficult for a member to successfully challenge such a decision.

An association MUST act fairly and equally towards all members to avoid selective enforcement claims. In other words, if an association allows other members to display their holiday decorations, but denies a member’s request to construct a Sukkah, then the association could be subject to claims of discrimination. Therefore, if the request to build the Sukkah is denied, all requests from owners to erect or place any holiday or religious decorations or items in or on the common elements should also be denied. Does this mean that, if our association denies a member’s request to build a Sukkah or place other items of religious connotation in the common areas, the association is prohibited from displaying a Christmas tree and menorah? I am glad you asked.

Ignoring the subject of material alterations, the U.S. Supreme Court held that a Christmas tree, by itself, is not a religious symbol… although Christmas trees once carried religious connotations, today they typify the secular celebration of Christmas. In contrast, a menorah was found to have more religious significance. But, when placed next to a Christmas tree, the Court found that the overall effect of the dual display a recognition of both Christmas and Chanukah as part of the same winter holiday season, which has attained secular status in our society. County of Allegheny v. American Civil Liberties Union, Greater Pittsburgh Chapter, 492 U.S. 573 (1989).

So, what are the lessons we can learn from this? Association board’s must treat their members reasonably and fairly when deciding such issues and cannot, under any circumstances, favor one religious group over another. Christmas trees are clearly permissible subject to counter–arguments pertaining to, perhaps ethereal, material alteration concerns. Menorahs are clearly permissible when placed next to a Christmas tree, but, may or may not be permissible in their absence. Sukkah’s must be allowed if there is a history of board accommodation provided to other religious groups, and can be denied if there is no such history. Of course, you can avoid these issues by building your Sukkah in the backyard (assuming you have one). Practically speaking, since the holiday of Sukkot lasts around one week, by the time anyone complains it is likely the holiday will be over and the Sukkah removed. Nevertheless, if a unit owner demonstrates a flagrant disregard of the governing documents, they could be the subject of a lawsuit for injunctive relief, brought by the board, to ensure such behavior is not repeated.

***

(2-22-12)

The Interim Status of 

House Bill 319

Around this time every year, association boards everywhere want to know how this year’s proposed legislation will affect their association. Me too! The truth is, it is impossible to guess which parts of a proposed bill will actually survive the legislative process.

As far as 2012 is concerned, this year’s legislative bill that most affects community associations is House Bill 319. Since this bill was originally proposed a few short weeks ago, it has undergone five amendments and is now officially labeled "HB 319c2." The "c2" means that the bill is going through the committee hearing process and may have numerous amendments, and the amendments can change the original concept of the bill. In some instances, the bill can be rewritten and a "committee substitute" takes the place of the original. The next committee may again rewrite the bill, and sometimes more than one bill may be combined. The committee’s substitute bill continues to carry the identifying number(s) of the original bill(s) filed. The "c2" designation is a committee substitute for the initial committee substitute. As to HB319, there are too many committee amendments to list them all. Three such amendments that might be of interest follow.

In this latest version of the bill, the author makes what is referred to as a "clarification" (remember, that is the author’s term, not mine) to the amount of assessments a first mortgagee lender owes an association for back assessments after the conclusion of its foreclosure lawsuit. Lawyers have debated this issue for far too long, and clarification is needed. Some say this clarification is too one sided in favor of the lenders…see what you think.

The revised text of this bill provides that, in determining the assessment liability of the first mortgagee who successfully completed their foreclosure, the assessment calculation excludes interest, administrative late fees, attorneys’ fees, or any other fee, cost or expense that came due prior to the lenders’ acquisition of title. The underlined text below is the new language that is being proposed to Section 718.116, Florida Statutes.

"The liability of a first mortgagee or its successors or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments, interest, administrative late fees, reasonable costs and attorney fees, and any other fee, cost, or expense incurred in the collection process that became due before the mortgagee’s acquisition of title is limited to the lesser of: Only the unit’s unpaid common expenses and regular periodic assessments that which accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or b. One percent of the original mortgage debt…the first mortgagee or its successors or assignees who acquire title to a unit by foreclosure or by deed in lieu of foreclosure are NOT liable for any interest, administrative late fee, reasonable cost or attorney fee, or any other fee, cost, or expense that came due prior to its acquisition of title. This subparagraph is intended to clarify existing law."

Two other proposed changes include election challenges and hurricane preparedness. As to the former, any challenge to the election process must be commenced within 60 days after the election results are announced. As to the latter, the Condominium Act would include code compliant windows, doors, or other types of code-compliant hurricane protection in addition to shutters and impact glass.

***

(2-8-12)

ELECTION PROPAGANDA

While the spoils belong to the winner, don’t let sour grapes spoil your association’s election. There are many ways to spoil an election. To name just a few, the ballots may not have all of the candidate’s names listed; in a condominium election, the premature opening of the outer envelopes often leads to a new election; and the failure to allow the members to observe the tallying of the ballots. There is also another type of election spoiler that is the subject of today’s column.

Last year, I was driving through an association on my way to a board meeting. A young woman handed me what I thought was literature about an upcoming show in the clubhouse. Rather, it was negative election propaganda. After reading it, I was sick to my stomach. The propaganda did not directly identify the candidate who was being verbally attacked, and moreover, it was not even signed by the coward(s) who wrote it.

I would venture an educated guess that its anonymous author(s) thought they were being clever by not identifying the name of the board candidate whom they were negatively writing about. Later that morning, when I read the handout, I was shocked! Amongst other things, the candidate running for the board was referred to as a thief and a liar. It was patently clear who the anonymous writer was writing about because the writer also included sufficient personal information about the candidate they were defaming, such that even I could figure it out.

On the one hand, it’s great to see a contested association election. It is always wonderful to have more candidates than available seats on the board. So often, the opposite occurs. On the other hand, it’s despicable when an association election leads to such ghastly and reprehensible behavior.

Depending on the severity of certain activities that occur during an association election, and their overall effect on the election, determines whether a new election is warranted. For example, in 2004, the president of a condominium association prepared a letter on association letterhead, signed by him as president which commented in a negative light on the assertions made in a candidate information sheet. The president’s letter was included in the second notice of election mailed to the unit owners. Florida Administrative Code, Rule 61B-23.0021(8), clearly prohibited the board from commenting on a candidate in the second notice of election. The Division of Condominium held that, to permit a board member to comment on a candidate, even where such action is short of full board participation or board approval, would render the safe haven provisions of the rule meaningless. A new election was ordered.

As to mistakes that sometimes lead to a new election, the result often depends on whether the mistake changed the result of the election. For example, in 1993, where a condominium board discovered shortly before the election that a candidate was ineligible to sit on the board, the fact that the ineligible person was not withdrawn due to time constraints did not render the election void. The result of the election would not have changed if the ineligible candidate had been withdrawn from consideration.

In 1994, when a condominium association discovered that eleven ballots were missing and were not counted by the association, and in 1996, when a condominium association improperly disregarded two ballots, and where the error was unintentional and did not affect the outcome of the election, the Division of Condominium, in both instances, did not require a new election. Pragmatically, neither error would have changed the outcome. The lesson of today’s column is simple. If the news you need to share is so compelling, do so with truth and honesty, and have the courage to stand behind what you write.

***

(1-25-12)

Gearing Up for the 2012 Legislative Session

It’s hard to believe that the 2012 legislative session is already underway. It seems like just yesterday we were discussing the 2011 legislative amendments .

The legislation that pertains to community associations is often beguiled with all sorts of consequences, some intended and some not so intended. In its initial draft, House Bill 319, which you will be hearing more and more about, sought to make a great number of changes to Chapters 718, 719, and 720, which pertain to condominium, cooperative, and homeowners’ associations, respectively. While it’s learned author likely had the best of intent, it’s the proposed amendments to well crafted pieces of legislation that can sometimes yield unexpected results and give rise to trepidation and fear.

For example, House Bill 319 is a great example. As you’ll read below, House Bill 319 addresses a great number of legislative amendments affecting community associations. Before the Bill could even get off the ground, another legislator sponsored an amendment to it that would eliminate the recently enacted law that clarifies, in brief, that association members whose right to vote is suspended due to delinquent assessment obligations that are greater than 90 days past due are not counted towards the quorum and are not counted towards the total voting interests. This means that if 10 owners’ votes are suspended in a 100 unit condominium where there is a quorum requirement of one-third of the total members and where it takes a majority of all members to pass on the item being considered, the quorum is 28 rather than 33 and the tally needed to pass the measure is 46 rather than 51. The amendment of House Bill 319 begs the following question: If the law still permits an association board to suspend the votes of a delinquent member, then shouldn’t the law also provide guidance as to the effect of such suspended votes on the quorum and total tally requirements? Oy vey!

Following are just a few of the items addressed in House Bill 319: exempting certain elevators from specific code update requirements; prohibiting the Department of Business and Professional Regulation from publishing a community association manager’s personal home address, unless it is for the purpose of satisfying a public records request; revisions to condominium unit owner meeting notice requirements; revising record-keeping requirements of condominium association boards; requiring challenges to an election to commence within a certain time period; providing requirements for challenging the failure of a board to duly notice and hold the required board meeting or to file the required petition for a recall; providing requirements for recalled board members to challenge the recall; providing duties of the division regarding recall petitions; providing requirements for a condominium association board relating to the installation of hurricane shutters, impact glass, code-compliant windows or doors, and other types of code-compliant hurricane protection under certain circumstances; conforming provisions in Chapters 719 and 720 to be more similar to Chapter 718 in an effort to create parity; revising liability of certain condominium unit owners acquiring title; revising provisions relating to imposing remedies against a non-compliant or delinquent condominium unit owner or member; revising voting requirements under certain conditions; providing requirements for the completion of phase condominiums; creating new definitions and providing requirements for condominiums created within condominium parcels; providing for the establishment of primary condominium and secondary condominium units; providing requirements for association declarations; authorizing a primary condominium association to provide insurance and adopt hurricane shutter or hurricane protection specifications under certain conditions; providing requirements relating to assessments; providing for resolution of conflict between primary condominium declarations and secondary condominium declarations; providing requirements relating to common expenses due the primary condominium association; revising the restriction on officers and full-time employees of the ombudsman from engaging in other businesses or professions; revising the time limitation for classification as a bulk assignee or bulk buyer; specifying additional records that are not accessible to unit owners; revising provisions relating to the amendment of cooperative documents; providing legislative findings and a finding of compelling state interest; providing criteria for consent or joinder to an amendment; requiring notice regarding proposed amendments to mortgagees… and the list goes on and on and on.

Be sure to keep reading future columns of Rembaum’s Association Roundup to learn how House Bill 319, and numerous other Bills, may soon affect your community association.

***

(1-11-12)

Happy New Year! If week one is any example, it’s already shaping up to be a great new year. Nevertheless, soon we’ll be asking ourselves if 2012 will be more of the same… a depressed economy, low home values and continued foreclosure filings, or, on the other hand, will we begin to feel the effects of a more sound economy where we’ll see a combination of new home construction, and an increase in sales and leasing? Let’s hope for the latter! In the meantime, let’s take a new look at an old subject, the "court of equity."

Remember, in English common law, the "court of equity" was held in a totally different court from the "court of law." A "court of law" applies laws adopted by society, while a "court of equity" permits a judge to apply various remedies to right a wrong where there is no adequate remedy at law. When laws exist that address a controversy, the "court of equity" is without power to craft a remedy. Further, if a contract provides a particular remedy in the event of breach, and the wronged party sues for a different remedy, no matter how just the requested relief may be, the court should dismiss the lawsuit. Why? Because the law of the contract prevails.

Today, these two courts have merged. Yet, the principle of the "court of equity" hold true. Simply stated, this means that if the "law" provides a remedy to an aggrieved party, the "court of equity" should not be applied. Equity remains a principle within the law to be used to right a wrong, but only where the law does not provide a remedy.

This brings us to a very recent case from the Second District Court of Appeal (that is not quite final due to another possible appeal). The case is Alorda v. Sutton Place Homeowners Association, case no. 2D10-3966. Even if the decision is overturned, the lessons learned from this case hold true. In brief, homeowner and association member Alorda was accused of not purchasing the property insurance as required by the Sutton Place declaration. The declaration provided a solution to such a dilemma. As per the covenants, Sutton Place could "force place" the required insurance policy. This means that the association would purchase the coverage and bill it back to the non-conforming member. Importantly, because the covenants provided this relief, other forms of relief, such as an equitable request to seek an injunction from the court to require the member to purchase the required insurance would (at least, should), eventually fail.

Before filing suit, and before the Alordas told their association they had purchased the required insurance, the association filed a lawsuit seeking an injunction from the court that would require Alorda to purchase the insurance. Shortly after filing the lawsuit, Alorda provided proof of the required coverage. This left only the attorney fees at issue. Should Alorda have to pay the association’s attorney fees? In short, yes, but only if, as the Court of the Second District reminds us, the association had followed the remedy set out in its declaration ... which was to "force place" the coverage.

Because Sutton Place did not do so, and instead asked the court for a different remedy, the Second District Court of Appeal held that attorney fees were not awardable in favor of the association because it sued for an equitable relief, where there was another remedy available at law.

What is the moral of the story? Glad you asked. Follow the remedy that is in the declaration before asking the court to craft a different one.

***

(12-28-11)

New Mediation Requirements to Usher in the New Year

In a few short days, the year 2012 will arrive. By now, our entire nation has felt the impact of the mortgage foreclosure crisis. We have learned that the situation was far more grave than we were initially led to believe. Meanwhile, the cost of living continues to rise, while long standing benefits and income levels decrease. Will 2012 be another doom and gloom year? I sure hope not!

While not making headline news yet, there may be reason for hope that the worst of the real estate crisis is over. Maybe, developers will begin construction for homes in new and existing community associations while shrewd investors continue bargain hunting. There sure are some great real estate bargains out there.

It would be great if December’s good will and cheer lasted all year. It always seems around the middle of January that the well runs dry. When it does, there are two changes to court ordered mandatory mediation that every association board member should know.

The first comes to us from a December 19, 2011 Order from the Florida Supreme Court and is limited to lender foreclosure litigation. By way of background, a statewide managed mediation program for residential mortgage foreclosure cases began in 2009. The program was created to help alleviate the overcrowded court dockets caused by the residential foreclosure crisis and the mortgage litigation that followed in its wake. The Court determined "it cannot justify continuation of the program." Nevertheless, cases already referred to the foreclosure mediation program remain subject to its requirements. No new cases will be referred. This foreclosure mediation program that was recently abolished should not be confused with the mediation that regularly occurs during litigation ... which brings us to the second change you should know about.

Effective January 1, 2012, the Florida Rules of Civil Procedure require all parties attending mediation to take the following action in writing at least 10 days prior to the date of the mediation: 1) identify who will appear on behalf of the association, and 2) those attending must certify they have actual settlement authority.

On January 1, Rule 1.720 of the Florida Rules of Civil Procedure, will provide, in relevant part, that "a ‘party representative having full authority to settle’ shall mean the final decision maker with respect to all issues presented by the case who has the legal capacity to execute a binding settlement agreement on behalf of the party. Nothing herein shall be deemed to require any party or party representative who appears at a mediation conference in compliance with this rule to enter into a settlement agreement ... unless otherwise stipulated by the parties, each party, 10 days prior to appearing at a mediation conference, shall file with the court and serve all parties a written notice identifying the person or persons who will be attending the mediation conference as a party representative or as an insurance carrier representative, and confirming that those persons have settlement authority."

In plain English, this means that the board must provide its representative(s) attending the mediation with settlement authority without the need for further ratification and approval at a subsequent board meeting. Depending upon how this modified rule of Florida Civil Procedure is implemented and interpreted, it could require a majority of the board to attend the mediation so that the settlement can be approved right then and there. Alternatively, since there is an obligation to settle, perhaps it will be sufficient for the association’s representative attending the mediation to have full settlement authority subject only to "certain limits not to exceed" as decided by the board in advance of the mediation.

May your new year be filled with happiness and prosperity.

***

(12-14-11)

The Importance of a Word

In this week’s column we will examine two new court cases. The first case addresses an association’s obligation to enforce its own covenants. In the second case, we will revisit "blanket receiverships". See if you can find the common theme before you get to the end.

On December 7, in Heath v. Bear Island, the Fourth District Court of Appeal held that an association did not have a duty to take legal action to enforce its own declaration. However, it is extremely important to understand the rationale behind the court’s decision. In this case, a member sued their association claiming certain members made major changes and improvements to their unit that were made without first seeking the association’s approval, and that the association had a duty, but failed to act.

In finding that the association had no such duty, the court noted that the declaration provided that the association "...may, but shall not be required to seek enforcement of the declaration." In this instance, it was the plain language of the declaration that explicitly made enforcement, as the court stated "a purely discretionary decision on the part of the association." It would be interesting to see how the same court would rule in the absence of such language in the declaration.

Changing subjects, did you know that in the past there were two different types of courts: a "court of law" and a "court of equity." Now, the same court wears both hats. The court of law refers to the court that focuses its attention on the laws created by society. The court of equity is reserved for those instances where there is no law on point, and the court is within its discretion to apply principles of equity to right a wrong. In brief, a court is not free to apply principles of equity when there is a law on point.

On November 23, in Metro – Dade Investments v. Granada Lakes Villas, the Second District Court of Appeal reaffirmed the trial court’s equitable right to appoint a receiver. In this case, an owner of 55 of 248 condominium units sued the association seeking an appointment of a receiver to manage the affairs of the association.

Initially, the trial court ruled in favor of the defendant association and concluded that certain parts of the Condominium and Not For Profit Act, Chapters 718 and 617, Florida Statutes, respectively, prevented the trial court’s ability to appoint a receiver. However, and thankfully, the appellate court held that, while Chapters 718 and 617 provided for certain situations where a receiver may (there’s that permissive word again) be appointed, they are not the only situations. In other words, it does not mean that those situations described in Chapters 718 and 617 are the only situations where the trial court can appoint a receiver. This information can be extremely helpful, especially to an association seeking an appointment of a "blanket receiver."

The request of an association for the appointment of a "blanket receiver" is typically made when an association is experiencing significantly high association assessment delinquencies and where such units remain mostly vacant. With the appointment of the blanket receiver, the receiver can have court granted authority to lease those units in an effort to offset the association’s assessment shortfalls. It is good to know from the prior case that the trial court is well within its jurisdictional limits to permit the appointment of a blanket receiver.

The common theme is the power of the word "may." Always remember that "may" means that you might or might not. Comparatively, the word "shall" creates a duty and means that you "must."

***

(11-30-11)

The Effect of The Issuance of a Tax Deed on Delinquent Assessments

What do community associations and local governments have in common? They can both foreclose your property for failure to pay assessments/taxes. Tax liens are a county’s best enforcement mechanism to collect delinquent property taxes. By way of background, once an owner becomes sufficiently delinquent in the payment of property taxes, the property becomes subject to a tax lien which may ultimately be foreclosed by applying for a tax deed. The county sells the liens to the lowest bidder who agrees to pay the back taxes that are due and who will charge the property owner the least amount of interest.

If taxes are not timely paid, then in the year following the year for which the taxes were due, tax lien certificates may be sold by the county tax collector of the county in which the real property is located. The tax certificates are sold to the person who will pay the outstanding taxes, interest, costs, and charges and will demand the lowest rate of interest from the owner of the property. Once the tax certificate is sold, the owner of the property has two years in which to pay the owner of the tax certificate the amounts due. If the property owner does not reimburse the owner of the tax certificate, then the owner of tax certificate can apply to convert it into an actual deed.

The application for a tax deed by the holder of the tax certificate cannot be made sooner than two years after the purchase and resulting issuance of the tax certificate. These two years are provided by law to allow the taxpayer the opportunity to redeem the tax certificate. Interestingly, once the tax lien certificate is acquired, its owner is prohibited from contacting the owner of the property for at least two years. You should note that even Florida homestead protection will not protect an owner from losing their property due to delinquent taxes. Most other liens get wiped out in the process.

Except as otherwise provided by Florida law, specifically Chapter 197, Florida Statutes, "no right, interest restriction, or other covenant shall survive" the issuance of a tax deed, except for the lien of record held by a municipal and county government unit special taxing district, or community development District shall survive. Even mortgages generally do not survive the issuance of a tax deed (of course, this does not mean that an individual’s liability for the "note" was extinguished). Importantly, community association liens are extinguished by issuance of the tax deed.

However, while the association’s lien maybe extinguished, the restrictions and covenants as set forth in the declaration still survive. Chapter 720, the Homeowners’ Association Act, provides that the declaration of covenants shall be enforceable after issuance of a tax deed. The issuance of a tax deed does not extinguish the association’s future ability to record liens against the property. The same holds true for condominium associations, too. Because an association can record future liens against the property, an interesting question arises as to whether an association may record a lien for assessments which became due prior to the issuance of a tax if the association had not recorded its lien prior to the issuance of the tax deed. While it is likely that all assessments that came due prior to the issuance of the tax deed will be extinguished by operation of law, there might be room to test the boundaries of the tax deed issuance. As is always the case, small facts can have a huge impact on legal analysis. Always consult with your association’s lawyer before taking action.

***

(11-16-11)

The Florida Power of Attorney Act

Did you know that the Florida Power of Attorney Act, Chapter 709 Florida Statutes, underwent a major overhaul this year? While its obvious these changes are more likely to have an impact on your estate plan, they can also impact your community association.

For example, there are times that an association member will grant a power of attorney to a family member, friend, or even their lawyer to deal with their association matters. In determining whether the holder of the power of attorney acquired the necessary authority to act for the association member, the "powers" provision of the power of attorney instrument would have to be carefully reviewed to ensure the holder possesses the requisite authority to act for the member. As you are about to read, the power of attorney instrument must provide this specific power.

Primarily the new legislation applies to those powers of attorney created by an individual (not a company or other entity) and can include those already in effect as well as those created on or after the effective date of the legislation. In addition, these changes do not affect proxies used for voting.

The power of attorney instrument must specify the authority that the agent can exercise. No longer can an agent rely on general powers type language that provides broad nonspecific type authority to the agent. So, for example, language in a power of attorney instrument that grants full power and authority to the agent "to exercise or perform any act, power, duty, right or obligation whatsoever" would be largely ineffective. The revised legislation now requires extreme specificity as to which powers the agent can exercise on the grantor’s behalf (with two limited exceptions which pertain to investment transactions and banking matters).

With this in mind, let’s examine the situation where an unknown person shows up at the association’s annual meeting with the power of attorney and says that they are representing a member for purposes of the annual meeting. Unless the power of attorney specifically provides the right of the holder to attend the meeting and act on behalf of the member in that context, then the power of attorney is likely not valid for such purpose.

Execution of the power of attorney form itself is also of paramount importance. Both a durable power of attorney and a non-durable power of attorney that is used to convey real property requires two witnesses and a notary to be a valid instrument.

Your agent, the person who holds your power of attorney, now has certain mandatory duties, too. For example, your agent must not act in a manner contrary to your known desires and they have a duty to keep adequate records.

These changes to Florida’s Power of Attorney Act are the subject of all day seminars. Clearly there isn’t sufficient room in this column to explain all of the nuances regarding the new legislation. Thus, what you should glean from today’s column are:

1) The holder of the power of attorney that plans on attending an association meeting, must ensure the power of attorney instrument contains specific powers to attend the meeting and act for the member. A "general powers" clause is not sufficient.

2) If your estate plan includes a power of attorney instrument, you should seek consultation with your lawyer to discuss any implications that may result from these new laws.

***

(11-2-11)

Yes, its true and no, your eyes do not deceive you. The name of this informative column has changed. Thank you to everyone who offered their suggestions, and most especially to Ms. Tiffany Jackson from Bristol Management Services whose suggestion was just perfect.

Recently, an inquiry from a reader asked whether condominium board meetings to discuss personnel matters are subject to the otherwise required board meeting notice requirements, and if minutes must be taken during the meeting? It was suggested that because the new laws that went into effect on July 1, 2011 provide that such meetings are "privileged meetings", meaning that only board members can attend, that the usual meeting notice and the taking of minutes were not required.

This new law is set out in section 718.112, Florida Statutes and provides, "Notwithstanding any other law, the requirement that board meetings and committee meetings be open to the unit owners does not apply to: a) Meetings between the board or a committee and the association’s attorney, with respect to proposed or pending litigation, if the meeting is held for the purpose of seeking or rendering legal advice; or b) Board meetings held for the purpose of discussing personnel matters (the underline part is the new text).

It is much too early to have any definitive case law to answer these inquires. Therefore, common sense shall prevail. There is no reason why such board meetings should not should be subject to the standard board meeting notice requirements. Had the drafters of the new laws desired to provide an exemption from posting the meeting notice or for the taking of minutes, then such information could have been included in the new laws. It wasn’t. Therefore, such meetings still require the posting of the meeting notice and agenda and thus include the date, time, place, of the meeting along with the agenda, too.

Like any other board meeting, the notice should be posted forty-eight hours in advance. In addition, until the law is amended or the courts tell us otherwise, the minutes should be taken, too. However, such minutes should remain sequestered with other privileged records of the association. Even if the taking of minutes was not so required, its always smart to keep a record to prove that the board exercised its reasonable business judgment. The same is true for homeowner associations, too.

If you have topics for future articles please email them to jeffrembaum@gmail.com

***

(10-19-11)

The question of whether association committee meetings are subject to the same meeting notice requirements as board meetings comes up more often than you might expect. In large part, the answer depends on what is being discussed at the meeting. The answer is also slightly different for condominium associations as compared to homeowners associations.

As to condominium associations, meetings of a committee to take final action on behalf of the board or make recommendations to the board regarding the association’s budget are always subject to meeting notice and posting requirements and CANNOT be exempted. However, meetings of a condominium association committee that do not take final action on behalf of the board or make recommendations to the board regarding the association’s budget can be exempted from the mandatory notice requirements ONLY IF those meetings are exempted from the meeting notice requirements in the association’s bylaws. Before you ask, "No, having the exemption in the declaration of condominium or the articles of incorporation does not count!"

Homeowners’ association committees have slightly different committee meeting notice requirements. HOA meetings of any association committee or other similar body must adhere to the meeting notice and posting requirements when a final decision will be made regarding the expenditure of association funds. Also meetings of any homeowner association body vested with the power to approve or disapprove architectural decisions with respect to a specific parcel of residential property owned by a member of the community, must be similarly noticed.

With all of this great information as our backdrop, let’s turn our attention to the required meeting notices. In general, as to condominium associations, adequate notice is required for all board meetings and committee meetings and such notice is required to be posted in a conspicuous place in the community at least 48 hours in advance of the meeting, except in an emergency. However, written notice of any meeting at which non-emergency special assessments, or rules regarding unit use, will be considered must be mailed, delivered, or electronically transmitted to the unit owners and be posted in a conspicuous place on the condominium property at least 14 days before the meeting. Remember, that as to the latter, the person providing the notice must complete the "affidavit of mailing."

Again, there are subtle, but nevertheless important, distinctions for homeowner associations. HOA’s must post notice of all board meetings as well as for non-exempt committee meetings. In this instance, notice of all board meetings must be posted in a conspicuous place in the community at least 48 hours in advance, except in an emergency. Written notice of any meeting at which special assessments will be considered, or at which rules regarding parcel use will be considered must be mailed, delivered, or electronically transmitted to the members and parcel owners and be posted in a conspicuous place on the property at least 14 days before the meeting. Again remember, that as to the latter, the person providing the notice must complete the "affidavit of mailing."

Remember, too, that all items to be discussed at any meeting for which notice is required, must be identified in the posted notice.

***

(10-5-11)

Kids look forward to being 18....they get more freedom and fewer restrictions. In a strange way, it’s a good analogy to explain the effect of Florida’s Marketable Record Title Act, Chapter 712, Florida Statutes, (a/k/a "MRTA"). Like the 18 year old teenager, land that is subjected to recorded restrictions and covenants recorded at least 30 years ago are free and clear of such restrictions and covenants except for those which are otherwise preserved by law. MRTA prevents property from being over burdened with restrictions.

MRTA was enacted by the Florida legislature in 1963. Its purpose is to terminate covenants and restrictions recorded against properties that are older than the "root of title," for example a deed that was recorded at least 30 years ago. If the covenant at issue was recorded prior to the "root of title," then unless the covenant is lawfully preserved or unless it fits neatly into a statutory exception, the covenant is no longer enforceable and like the teenager, the land is now free of restrictions. Explained even simpler, covenants recorded against properties that are older than the "root of title" are extinguished unless they meet an exception, are preserved, or after expiration, revived. Rather than MRTA, perhaps this Act should be called the "terminator."

Does MRTA mean a homeowners’ association declaration of covenants and restrictions can begin to expire, on a lot by lot basis, after 30 years from the recording of the declaration? You bet it does. But, this same logic does not apply to extinguish the covenants are a part of the declaration of condominium. Like vampires (it is October), the covenants in a declaration of condominium continue to live on. This is because one of the exceptions to MRTA includes the situation where a deed must reference the official record book and page of the declaration as recorded in the county’s records to describe the property. Think of it this way, a condo unit exists only by virtue of the declaration of condominium. Without a reference back to the declaration of condominium there is no way to legally describe the unit being sold. Therefore, because this scenario is one of the statutory exceptions to MRTA, its "terminating" effect has no relevance for those who own condo units.

However, homeowner associations and commercial associations are not so lucky as their covenants can and sometimes do expire (but no earlier than 30 years after the recording of the declaration). Here’s why: a deed for pretty much everything but a condominium unit legally describes the real estate being transferred as either a platted lot or by meets and bounds. A declaration of covenants is not needed to create the lot being sold because the lot exists independent of the recorded declaration. But to sell a unit in a condominium, you first have to create the unit through the recording of the declaration of condominium. It is that instrument that lawfully and magically converts air space into a transferable property interest that you think of as your "unit." The condominium unit only exists as a result of the prior recording of the declaration of condominium that caused the "unit" to spring into life. Without it, there is no condo and no condo unit to sell. Now you understand why the condo declaration is itself a title document, too. Right? Whew!

As to homeowner association, commercial association, and other non-condo association covenants, they can all begin to expire as early as 30 years after the date they are initially recorded. But, there IS a mechanism to preserve and prevent them from being extinguished, and it’s far simpler than trying to reinstate them after MRTA took hold and terminated them.

It is impossible to fully explain all of the nuances of MRTA in this short column, so just remember this: if your non-condominium declaration is 28 years old (within 2 years of being recorded 30 years ago), then start planning now to preserve the covenants. If your non-condominium covenants are 29 years old or older (and are thus within one year of being 30 years old), then you must call your attorney ... yesterday!

[Ahem, what are you waiting for?]

***

(9-21-11)

Material Alterations

(No, this does not refer to hemming your slacks!)

Recently, several readers inquired about the legal concept referred to as a "material alteration" which was best defined in 1971 by the Fourth District Court of Appeals in the seminal case, Sterling Village v. Breitenbach. In this case, the court examined whether the installation of glass jealousy windows on a screened lanai constituted a material alteration of the common elements. The court provided an excellent, clear and concise definition, when it explained that "the term ‘material alteration or addition’ means to palpably or perceptively vary or change the form, shape, elements or specifications of a building from its original design or plan, or existing condition, in such a manner as to appreciably affect or influence its functions, use or appearance."

The Condominium Act requires the affirmative vote of 75% of the members to approve material alterations of the common elements absent specific language set out in the association’s declaration to the contrary. The purpose of these provisions requiring an affirmative vote of the members prior to making material alterations, is to protect the members from board action, where the unanticipated changes could dramatically affect the cost and/or enjoyment associated with home ownership within a community association.

A board should never try to clothe a material alteration as maintenance." In the past, courts have held that replacing a concrete tennis court with clay, changing roof products from cedar to terra-cotta, changing the color scheme of building, and redecorating a lobby, all constituted a material alteration of the common elements for which the requisite vote of the owners was required. Material alterations also include the removal of an existing amenity such as a gazebo, as compared to maintaining and replacing it at the conclusion of its useful life.

Nevertheless, at times the courts appear to support a board’s decision to make what might otherwise be considered a material alteration, without the necessary affirmative vote of the members where the material alteration is reasonably necessary to protect the common elements or safety of the owners. For example in 1984, the Second District Court of Appeal, in Cotrell v. Thorton, held that the board had the right to extend the height of the seawall because it was necessary to protect the common elements from erosion and storm damage. In another case, the Florida Division of Condominium held that where the board installed a security fence without the vote of the owners, such activity did not constitute a material alteration because the fence was shown to be necessary to protect the safety of the association’s members where the association had established a history of criminal activity.

Other cases where the courts seem to sometimes, but not always, support a board’s right to make material alterations without the vote of the owners, is where the board justifies its alteration by asserting the material alteration at issue is necessary due to existing construction comprised of sub-standard materials. For example, in 1998 the Florida Division of Condominiums held in Krietman v. Decoplage Condominium Association, that a board’s decision to replace acoustical ceiling tiles with drywall and replace ceramic floor tiles with marble was allowed where the drywall was shown to be more effective and durable, and the ceramic tiles were below present standards. In other cases, the result was contrary and a vote of the owners was required. When it comes to a board’s decision to make material alterations based on a better product, as yet there is no bright line test to determine whether the better product can be substituted without triggering a prior need for owner approval.

Each time a board makes material alterations to its common elements, careful consideration must be paid to whether a vote of the owners is required. In fact, the starting point for any board faced with such decisions should include that such changes are, in fact, material alterations. At a minimum, the board should seek competent legal advice so that it can exercise its reasonable business judgment to make an informed and well reasoned decision.

***

(9-7-11)

Who Pays Association Attorney Fees Resulting From a First Mortgagee Foreclosure?

Are association attorneys’ fees incurred during a first mortgagee lender’s foreclosure action collectible from that lender after it acquires title to a unit as a result of its foreclosure lawsuit?

While probably not, it is likely you have heard at least once, about how a first mortgagee lender paid not only the "Safe Harbor", but the association’s attorney’s fees that it incurred, too. It is also likely that it is not for the reasons you might expect.

As to condominium associations, Section 716.116(6)(a), Florida Statutes, provides that:

"The association may bring an action in its name to foreclose a lien for assessments in the manner a mortgage of real property is foreclosed and may also bring an action to recover a money judgment for the unpaid assessments without waiving any claim of lien. The association is entitled to recover its reasonable attorney’s fees incurred in either a lien foreclosure action or an action to recover a money judgment for unpaid assessments."

From this language, the legislature made it very clear that the association can recover attorney fees incurred during the association’s assessment foreclosure action. Noticeably, similar language is missing from the law that describe a first mortgagee lender’s liability for assessments incurred prior to acquisition of title in favor of the lender which it obtained as a result of its own first mortgage foreclosure. In this regard, Section 718.116(1)(b), Florida Statutes, provides,

"The liability of a first mortgagee... who acquires title to a unit by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee’s acquisition of title is limited to the lesser of: (a) the unit’s unpaid common expenses and regular periodic assessments which accrued or came due during the [past] 12 months...; or (b) one percent of the original mortgage debt..."

(We refer to this as the "Safe Harbor".)

By way of the simplest of explanations, associations argue that since the law does not provide that the association is prohibited from collecting the attorney’s fees, it can. Bank lawyers argue that had the legislature wanted to provide that right to associations, it would have said so in the law. Since the law provides that an association can collect its attorney’s fees incurred when the association is foreclosing, but does not provide this clear right to associations when the first mortgagee lender is foreclosing, the first mortgagee banks argue that they are not responsible for the association’s attorney’s fees that were incurred during the bank’s foreclosure.

On January 4, 2010, in Brown Bark v. Torres, a federal decision from the Southern District of Florida where the first mortgagee lender foreclosed its mortgage against a unit owner in a condominium association, the court held that the provisions in the law that require the payment of attorney fees to the association apply "when an association itself brings a lien foreclosure action or an action to recover a money judgment for unpaid assessments."

So, why at times do lenders pay the association’s attorney’s fees when paying their "safe harbor" obligation? Perhaps, it is because some do not know better? Perhaps, it is because the amount of fees demanded are far less than the hourly rates of the lender’s attorney needed to contest the claim? Perhaps, it is because the Torres decision discusses some, but not all of the arguments that an association can assert in its efforts to collect their attorney’s fees?

What is clear is that if, by chance, a person of influence in our State’s legislature is reading this, they can remedy this situation by adding some language to existing law to clarify the successful first mortgagee lender’s "ancillary assessment obligations," after acquiring title to a unit as a result of its foreclosure.

A legislative remedy would be a benefit to everyone in the State. Remember, lawyers are advocates. If there is an opening or loophole we are liable to use it to our client’s advantage. Clarifying this law will lessen attorney’s fees for everyone. Lenders and associations alike will be able to quantify the monies owed by the first mortgagee lender’s who acquire title as a result of their mortgage foreclosure.

Oh, never mind, that would make too much sense.

***

(8-24-11)

Lender Payment of Assessments During Foreclosure

Never underestimate the United States bankruptcy courts. As a much younger lawyer, I was amazed to learn that in a bankruptcy proceeding, rather than requiring a process server to serve the complaint upon the defendants, a debtor-plaintiff can actually serve their complaint upon the creditor-defendants by U.S. First Class Mail! Yes, the bankruptcy court is full of surprises. A bankruptcy court might even be able help fix the unfixable, unanswerable problem: How can an association require a first mortgagee lender to pay assessments during the lender’s own self-stalled foreclosure?

If you’re following recent developments in the foreclosure courts, you already know that many lenders have stopped their foreclosures cold because they have no confidence in their very own mortgage documents. Apparently, with the securitization of mortgage backed securities, "Wall Street" failed to keep track of the actual mortgage documents. For analogy, imagine the paperwork that evidences each residential mortgage as a stack of paper six inches high. Imagine how many six inch stacks of paper can fit into a semi-trailer. Now imagine each semi-trailer full to the brim with these six inch stacks. Remember, each six inch stack represents only one mortgage. Think of the loaded semi-trailer as the hard asset upon which each mortgage backed security was created; one semi-trailer for each mortgage backed security that was created. With that in mind, imagine that the semi-trailer representing only one of seemingly countless mortgage backed securities, is bought and sold multiple times each day to multiple investors from all over world…every day for several years. What happened to the semi-trailers? Where are all of those loan documents that together comprise the mortgage backed security?

Recently, "60 Minutes" suggested that hundreds of thousands of loan documents were re-created by companies outsourced by our Nation’s largest lending institutions. These re-created documents are nothing more than forgeries. Any lawyer who knowingly forecloses a debtor based on fraudulent documents commits a fraud on the court, not to mention exposing their client to significant liability. Meanwhile, associations, large and small, suffer from a continued lack of assessment revenue from these stalled foreclosures.

For a time, upon proper motion, the trial courts were ordering stalling lenders to either move their foreclosures along or pay assessments. On appeal, the appellate courts reversed. Primarily, they held that where a remedy at law exists, the trial courts could not create equitable relief for associations. With that in mind, how can the lender ever be responsible to pay assessments before it finally acquires title to the property?

The answer, pending the financial strength of your association, might be a bankruptcy to reorganize the debts of the association. In these situations, a Chapter 11 bankruptcy might just be what the doctor ordered. Not only does it provide the restructuring of existing debts, but it allows the federal bankruptcy court to do what the state courts cannot. Specifically, under Federal bankruptcy law, the court can order the secured creditor (in this case, the lender whose mortgage is secured by the property) to pay a "surcharge" during the reorganization.

As recently discussed in the very recent United States, Southern District Bankruptcy Court decision, In re the Spa at Sunset Isles Condominium Association, the Federal bankruptcy "surcharge" can be implemented to require a lienholder (the lender) to be charged with the reasonable costs and expenses incurred by the debtor (the association) to preserve or dispose of the lienholder’s collateral to the extent that the lienholder derives a benefit as a result.

The lender had argued that any order requiring it pay the "surcharge" was improper because state law had already prohibited requiring the lender to pay towards the upkeep of the property prior to the time it acquires title to the property as a result of its own foreclosure. The Bankruptcy Court looked to Article VI, of the United States Constitution, the Supremacy Clause, which provides that the laws of the United States "shall be the supreme law of the land and the judges in every state shall be bound thereby, anything in the Constitution or Laws of any state to the contrary notwithstanding." The Court required the lender to pay their pro rata share of preserving the association’s common elements.

Not every association is a candidate for a Chapter 11 bankruptcy. Pending the number of foreclosures in your community, the financial shortfall created by the debt, the association’s cash on hand, the ability of the association to pay its debts, etc., a Chapter 11 Bankruptcy may or may not be appropriate. Clearly, the necessary first step is consultation between the board and qualified bankruptcy counsel.

***

(8-10-11)

Every year, after the legislative session is concluded, it is always an adventure to see how various "bills" were tweaked along their way to becoming laws. Drafting legislation is a process in which the bill’s author must not maintain any pride of authorship whatsoever. For example, often a bill’s text is tweaked when Senate and House bills are combined, each needing to leave their unique mark. This year’s 2011 community association legislation is no exception, and as a result, both the Condominium and Homeowners Association Acts now provide that "an association, or its successor or assignee, that acquires title to a unit through the foreclosure of its lien for assessments is not liable for any unpaid assessments, late fees, interest, or reasonable attorney’s fees and costs that came due before the association’s acquisition of title in favor of any other association, as defined in s. 718.103(2) or s. 720.301(9), which holds a superior lien interest on the unit. This subparagraph is intended to clarify existing law."

Before we examine how this law can affect your association, let’s first take a peak at how the new law actually "clarifies existing law". Remember learning not to believe everything you read? Well, it’s true! There is no chance this new law is a clarification of existing law because there is no existing law addressing this subject matter in the first place!!! Nevertheless, let’s apply the new law to a hypothetical situation that will soon likely mirror real life events.

Let’s say Daniel Debtor lives in a sub-association community that has a master association, too, and that Daniel is behind in his assessment obligations to both the sub-association in the amount $3,000.00, and to the master association in the amount of $2,500.00. Both associations send Daniel Debtor the statutorily required notice of intent to record a lien and notice of intent to foreclose the lien. Not only was the master association’s declaration recorded before the sub-association, but the master association recorded its lien against Daniel’s property one month before the sub-association. As fate would have it, the sub-association decides to foreclose, acquires title to the home, and leases it out to Timmy Tenant for $500.00 per month. Shortly after the sub-association acquired ownership of the home, the lender begins its own foreclosure and as a result, around one year later, Betty Buyer purchases the home during the court ordered auction. What does Betty owe to the master association?

Betty Buyer will only have to pay assessments that remain due to the master association from the date the sub-association acquired the title. As a result of the new law, the master association’s prior assessment debt against this lot (through the date the sub-association acquired title) is wiped out because the sub-association along with its successors in title, no longer have liability to pay the master association’s assessment arrearage. Title to the home passes from the sub-association to Betty through a "clerk’s deed" because she was the successful bidder at the lender’s court ordered auction. Thus, Betty Buyer is a "successor" in title to the sub-association. Applying the new law, the master association’s prior lien that secured its assessments owed is completely wiped out through the date the sub-association acquired title. WHAT WAS THAT…HUH?

That’s right! Based on this new law, the association that first acquired title wipes out any other association’s assessment lien through the date of acquisition of title without regard to the actual lien priority. What was that you ask? You believe that this sparkling new law actually retroactively impairs existing contracting rights? Well, at its very core, every "declaration" is a contract between the community and each homeowner. In addition many declarations have language that provides that a recorded lien dates back to the day of recording of the declaration itself! There even already exist other statutes that address lien priority, too. Does this mean, similar to the application of the "safe harbor" statutes that define a lender’s assessment liability, that this new law only applies to declarations recorded after the effective date of the new law? Could be.

Remember, Timmy Tenant? During the year it owned the home, the sub-association leased it to him. Timmy is a tenant and not a "successor or assignee" to the sub-association’s acquisition of title. With that in mind, can the master association make demand upon the sub-association’s tenant to pay the rent to master association? A most excellent question indeed! Until the courts provide guidance or the legislature amends this new law, we’ll all be well advised to watch this one closely. Stay tuned…..

***

(7-27-11)

CONTRACTS

a few gentle reminders for your consideration (pun intended)

There are times the ol’ adage, "you can pay me now or you can pay me more later" really rings true. When it comes to needing a lawyer’s assistance after the contract is executed by the parties all too often, it is true. Once the finger pointing starts, the manager is instructed to involve the lawyer. All to often, the lawyer then discovers their client entered into a contract that she or he did not even know about. To make matters worse, the contract has terms that clearly favor the other side. Here are a few tips to consider before your association executes its next contract.

In regard to a contract for construction type services, did the association engage an engineer or other requisite professional to prepare a bid package for the association to provide to multiple potential vendors? If not, it is difficult, if not impossible to compare apples to apples.

Did the vendor provide the contract they want to use or did the association provide the vendor their contract prepared by the lawyer? Take it from someone on the inside, it is typically less costly to have the lawyer provide a contract for the association to present to the vendor, than to have to re-draft and negotiate the vendor’s already preferred contract. Experience dictates that there is typically a reason why the vendor wantsto use "their" contract. Likely, that is the same reason the association might want to think twice before using it. Of course, there are times that the vendor’s version is the only contract that can be initially used such as cable and direct TV service contracts. But, remember, even these contracts can be negotiated to one degree or another.

Does the contract provide for a designated association and contractor representative to coordinate the association’s flow of instructions and communication to the vendor? Doing so, can serve to not only create meaningful relationships, but can importantly prevent cost over runs, conflicting instructions and overall job site confusion as to who is to do what and when.

Does the contract provide for proof of insurance and workers compensation coverage? Is a "performance bond" warranted under the circumstances? Should it be? A performance bond is a simple concept. In essence, insurance is purchased so that if certain circumstances prevent the selected contractor from completing their contractual obligations, the performance bond is activated to ensure the project is completed.

What is the term of the contract? Is it terminable "for cause" or "without cause"? If it is the former, then what does the term "for cause" actually mean? The last thing you want to see as the reviewing attorney, is a contract that is terminable "for cause" and no guidance within the four corners of the contract as what that means. Rest assured, that if a definition is not provided and the contract is terminated "for cause", the Trier of Fact, be it judge or jury, will have to likely determine whether such cause actually existed. Depending on the result, this might not be what you expected when "rolling the dice".

Does the contract provide for a singular term with two automatic renewals or a singular term with options to renew? Which is better depends on many factors not limited to the overall scope of the contract, and material costs. In the context of multi-year contracts, the ability of the association to remember, say in four years that if the association does not want the contract to renew automatically, it must actually take definitive steps to ensure it does not do so can be often overlooked until its too late and yet another renewal period is triggered. Four years can be a lot of time especially with the board changing each year. Add to that a change in management, and that contract the members wanted to terminate could easily be overlooked.

Did the entire board have the opportunity to review the contract prior to the board meeting? If not, why not? Any member of the board has the right to request that they receive the board meeting materials for review prior to the designated meeting time and place. How long in advance depends upon the complexity of the matters at hand and volume of materials that correlate to it. Does your association have a binder or word file that details each of its contracts, when they expire, and when and how they renew or terminate? If not, make one and look at it every quarter, if not each month.

Hopefully, after the contract is executed, everything happens according to the contract. In the event of a contract dispute and litigation follows, even if the association prevails, rarely is "happiness" the result. That said, the happier client will almost certainly be the one that consulted with their lawyer prior to execution. We end, where we began… with another adage of course: "an ounce of prevention is worth a pound of cure"; and it sure is less expensive, too!

***

(7-13-11)

Treat Others as You Wish to be Treated

On November 16, 2010, in Alley v. Les Chateaux Condominium Association, Inc., the U.S. Federal Court for the Middle District of Florida denied the defendants’ motions to dismiss served in response to a unit owner’s lawsuit which she filed to protect her continued right to utilize her golf cart as a "reasonable accommodation" that is necessary to ensure an equal opportunity for a disabled person to use and enjoy their dwelling.

In 2003, while living in Ohio, Ms. Alley was diagnosed with a paralyzed diaphragm and a thyroid disorder. About a year later, Ms. Alley and her husband relocated to Florida at her doctor’s recommendation. The Alley’s purchased a condominium unit in Les Chateaux Condominiums which is in a large campus with facilities located at significant distances from each other and from Ms. Alley’s condominium unit. During her interview, the Board approved Ms. Alley’s request to use a golf cart on the premises on the basis it was needed as a reasonable accommodation for a recognized disability.

In October, 2008, Ms. Alley received a letter from the newly-elected President of the Board of Directors threatening to remove the golf cart if updated medical documentation was not received within 30 days. While Ms. Alley provided the Board with the updated medical report, she alleged the association did not re-approve her use of the golf cart.

On January 5, 2009, Ms. Alley filed a complaint with the Pinellas County Office of Human Rights, the local agency that investigates complaints of housing discrimination, alleging discrimination based on handicap or disability. They agreed and filed a Determination of Reasonable Cause and Charge of Discrimination against defendants, alleging a violation of the Federal Fair Housing Act.

As a part of her lawsuit, Ms. Alley asserted that the condominium association failed to respond to her request for the reasonable accommodation of a golf cart, thereby denying her request. In addition, Ms. Alley asserted that following the receipt of the demand for further medical documentation she became the victim of harassment and threats. Ultimately, she sued the condominium association, its management company, and the individual board members for: i) violation of the Florida and Federal Fair Housing Acts; ii) injunctive and declaratory relief for violation of both Fair Housing Acts; and iii) retaliation under both Fair Housing Acts. In response, the defendants filed motions to dismiss Ms. Alley’s claims for failure to state a claim upon which relief may be granted.

In ruling on the defendants’ motions to dismiss the court recognized that to prevail under the FHA, Ms. Alley must establish that i) she is disabled or handicapped within the meaning of the FHA, ii) that she requested a reasonable accommodation, iii) that such accommodation was necessary to afford her an opportunity to use and enjoy her dwelling, and iv) the defendants refused to make the requested accommodation." Remember, an individual is handicapped, for the purposes of the Fair Housing Act, if he or she i) has a physical or mental impairment which substantially limits one or more of such person’s major life activities, ii) has a record of such impairment, or iii) is regarded as having such an impairment. The Court noted that Ms. Alley had correctly pled the necessary elements to survive the motions to dismiss filed by the defendants and thus the case continued along. In considering the motion, the court looked to another case where the defendant allowed the plaintiff to use a ramp for 20 years and then refused to have it replaced when it was stolen which supported the allegation that the defendant acted intentionally to preclude the ultimate enjoyment of their dwelling in violation of the Fair Housing Act.

Had the defendants truly treated Ms. Alley the way any of us would similarly wish to be treated, it is doubtful that you would have just read this gentle reminder to do just that.

***

(6-29-11)

The 2011 Legislative Update  & Some News for Homeowner Associations

Spoiler alert! On June 21, Governor Scott affixed his signature to House Bill 1195 and yet another new law was born (actually, it was a whole bunch of new laws.). As much as I would like to, within the constrained space of this column it is impossible to discuss the entire 2011 legislative update as it affects community associations. Of course as time permits, many of its subjects will be addressed in upcoming columns. Read below to learn how you can receive your own copy of "Rembaum’s Association Roundup, The 2011 Legislative Update." Since we last discussed HB 1195’s effect on condominium associations, let’s take a sneak peak at how, at least in a couple regards, these new laws affect homeowners associations.

Use Right Suspensions: Homeowner associations are now treated similar to condominium associations in that neither are required to provide 14 days hearing notice to appear in front of a committee for use right suspensions so long as the use right suspension is the result a member’s delinquency that is greater than 90 days past due. Therefore, without the need to appear before a committee and without the previously required 14 days notice, use right suspensions for failing to pay delinquent monetary obligations which are more than 90 days past due may be levied BY THE BOARD at a properly noticed meeting without a need for a committee hearing. Upon board approval, the use right suspension is not in effect until the association first mails or hand delivers notice of the suspension notice to the parcel owner, and if applicable its occupants, licensees and invitees. All use right suspensions and voting suspensions end by operation of law upon the Association’s receipt of the full payment due.

Without regard to language in the declaration, a homeowners association may suspend voting rights of a parcel owner or member for the nonpayment of any monetary obligation that is more than 90 days delinquent. A voting interest or consent right allocated to an owner or member which has been suspended by the association may not be counted towards the total number of voting interests necessary to constitute a quorum, the number of voting interests required to conduct an election, or the number of voting interests required to approve an action pursuant to the condominium act, the declaration, articles or bylaws. If the voting suspension is levied by the board for failing to pay a monetary obligation that is greater than 90 days past due, then 14 days notice and a hearing in front of a committee is not required. Notwithstanding, all voting suspensions must be approved by the board at a properly noticed board meeting and are not effective until the association provides notice by mail or hand delivery to the parcel’s owner, and if applicable the parcel’s occupant, licensee, or invitee

A person who is greater than 90 days delinquent in the payment of a monetary obligation to the association is not eligible for board membership. A person who has been convicted of a felony is not eligible for board membership if their civil rights have not been restored for at least five years prior as of the date the person seeks election to the board. Previous board action is not invalidated if it is later discovered that the person was ineligible to serve on the board.

In an effort to provide a substantive and far more complete review, "Rembaum’s Association Roundup, The 2011 Legislative Update" will soon be available. It explains many of this year’s new laws most likely to affect community associations. To download your complimentary copy, please send an email request to associationroundup@siegfriedlaw.com with only these following words in the subject line: "2011 update." It may be a couple of weeks before the link is active and before you receive your electronic copy, or it could be sooner. Before taking action on any of the new laws, remember to first discuss your intent with the association’s lawyer. Often, there are finer nuances of which you should be aware.

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(6-15-11)

Florida Friendly Landscaping

In a chat room conversation, two owners were debating whether Florida’s xeriscaping law applied to their association. One owner believed that since their HOA’s declaration was recorded prior to the effective date of the legislation, it did not apply; that owner was wrong. It applies without regard to when the declaration was recorded.

As we experience this season’s drought, all you need to do is canoe along the Loxahatchee River (or look out the car window in some places), to see its unusually shallow depth as roots once covered with water now lay bear. Lake Okeechobee is so low that it can no longer spill into the canals that feed some of our local reservoirs. Xeriscaping’s goals are to conserve water, protect the environment and still create a visually appealing yard. Albeit, beauty is in the eyes of the beholder. The term "Xeriscape" originated in Denver, Co., during a drought in the early 1980s. In our great State, we refer to is as "Florida-friendly landscaping" as governed by Chapter 373, Florida Statutes.

Florida-friendly landscaping is defined in Section 373.185, Florida Statutes, to mean "quality landscapes that conserve water, protect the environment, are adaptable to local conditions, and are drought tolerant. The principles of such landscaping include planting the right plant in the right place, efficient watering, appropriate fertilization, mulching, attraction of wildlife, responsible management of yard pests, recycling yard waste, reduction of stormwater runoff, and waterfront protection. Additional components include practices such as landscape planning and design, soil analysis, the appropriate use of solid waste compost, minimizing the use of irrigation, and proper maintenance."

As applied to all residential community associations, the law also provides that a "deed restriction or covenant may not prohibit or be enforced to prohibit any property owner from implementing Florida-friendly landscaping on his or her land…" Even local governments cannot interfere. Local government ordinances cannot prohibit, or be enforced to prohibit any property owner from implementing Florida-friendly landscaping on their land.

The reason why the homeowner above was incorrect is because of the text in the statute that makes the law retroactive. The law provides that conserving and protecting the state’s water resources is a "compelling public interest" and "that the participation of homeowners’ associations and local governments is essential to the state’s efforts in water conservation and water quality protection and restoration." When government relies on its "police powers" (a/k/a to protect the health, safety, and welfare of our citizens), then the law in question applies without regard to the otherwise necessary "impairment of existing contract" analysis. (Remember, The Grand Condominium v. Cohn from a few weeks back?) The competing interests of an association’s well-dratted architectural guidelines which provide for Florida friendly landscaping alternatives, as contrasted against an owners’ request to plant a beach front cactus garden should prove interesting.

On a completely different note, every now and then a case comes along too interesting not to share. As I was catching up on some reading this past weekend, I came across this gem from the Florida Division of Arbitration Division. In "Domaine Delray Condominium Association v. Koylan", a 2010 decision, the arbitrator held that the unit owner and his son must stop the following activities: i) littering on the common elements, ii) screaming in their unit, iii) yelling at board members, iv) allowing transients from staying in the unit, v) appearing nude in the common elements, vi) digging up sod on the common elements, vii) using the pool to wash their pots and pans, viii) leaving the association water running, ix) to cease maintaining unsanitary conditions in their unit, x) covering the windows with prohibited materials, xi) creating disturbances that required police and fire department to visit the condominium. Events like this remind me how lucky most of are, and how much I enjoy living in my quiet HOA.

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(6-1-11)

Parking Spaces, the ADA, and Reasonable Accommodations

Not too long ago, I was asked by one our readers whether their condominium association was required to exchange an owner’s long ago developer assigned parking space for a guest parking space that is regularly used by other disabled individuals where the parking space in question is located near the front entrance, and the requested exchange was based on the owner’s physical disability. Let’s assume for today’s discussion that there is no question whatsoever that the physical disability is, in fact, real, and that it is verified by physicians licensed to practice medicine in the State of Florida, etc. Notwithstanding, the previous developer assignment of the parking spaces, if there is a space available, then more than likely, the association would need to honor the request.

Not too long ago, the United States First Circuit Appellate Court, re-affirmed that the Puerto Rico condominium act does trump the Federal Fair Housing Act. In, Astralis Condominium Association v. Secretary, United States Department of Housing and Urban Development, on behalf of Carlos Garcia-Guillen, No. 09-2497, 09-2589, U.S. App. Ct., 1st Circuit, Sept. 16, 2010, this U.S. appeals court denied a condominium association’s request for judicial review of an order from HUD that granted handicapped parking spaces to disabled condominium owners and this affirmed the lower ruling.

The Astralis condominium association maintained a large number of unallocated parking spaces, including 10 handicapped spaces. Two of the handicapped spaces were located 45 feet from the entrance to the complainants’ unit. Under the condominium governing documents, the unallocated parking spaces are time-limited and are common elements to be used by residents and visitors on a first-come, first-served basis.

The complainant unit owners both suffered from a physical disability. In 2006, they requested that the association grant them the exclusive use of the two handicapped parking spaces nearest their unit. After several attempts to reach an agreement with the board, they began to occasionally use the nearby handicapped parking spaces without authorization and without regard to the time limits. Because their use violated the association’s parking policy, security guards cited them for the infractions. The unit owners filed a complaint with HUD. In 2008, HUD filed a charge of discrimination pursuant to the Fair Housing Amendments Act of 1988.

Following a hearing on the matter, the administrative law judge from HUD found that the association had violated federal law by refusing to grant a reasonable accommodation and by unlawfully retaliating against the complainants. The judge directed that the complainants receive exclusive use of the two handicapped parking spaces at issue in exchange for the originally assigned parking spaces they owned. In addition, money damages were awarded, and the association was enjoined from further interfering. The association petitioned for judicial review, and HUD cross-appealed for enforcement of the order. On behalf of the Unit Owner’s, HUD prevailed.

Federal law prohibits discriminatory housing practices based on a person’s handicap and is drafted to prevent: disparate treatment; disparate impact; and failure to make reasonable accommodation. To establish a prima facie case of failure to grant a reasonable accommodation under the "Act", a person must show that he is handicapped within the purview of the Americans with Disabilities Act and that the party charged knew or should have known of thier handicap. Next, they must show that they requested a particular accommodation that is both reasonable and necessary to allow them an equal opportunity to use and enjoy their home. Lastly, they must show that the party charged refused to make the requested accommodation.

The association argued that the administrative judge’s order was improper because sinmilar to Florida, Puerto Rico condominium law has specific prerequisites for the transfer of common elements in condominium developments. Under Puerto Rico’s condominium law, the transfer of common elements after construction of the property requires the unanimous consent of the condominium owners. The Appellate Court held that even though this provision could conceivably be construed to preclude compliance, the association was duty bound NOT to enforce a statutory provision if doing so would cause unlawful discrimination and thus upheld the prior ruling.

With that in mind, what if there were three guest spaces by the front doors and ten requests for transfer of those spaces? What if a disabled unit owner habitually parks in the guest space because the association refuses to transfer parking space? What if in that same scenario there are more requests than available parking spaces? What if it’s a mixed use condominium with both residential and commercial units and the requested exchange would result in the parking lot no longer complying with local zoning and land use ordinances? Well, welcome to my world…

Remember, to always be guided by doing what is right under the circumstances.

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(5-18-11)

2011 LEGISLATION

The 2011 legislative session has ended. While there are more than a few bills affecting community association’s that are waiting for the governor’s seal of approval or veto, the one with the most impact to community associations is House Bill 1195. It is to this legislation we turn our attention today and for the next several weeks. Many changes were made in this Bill to Chapters 718 (the Condominium Act), 719 (the Cooperative Act) and Chapter 720 (the Homeowner’s Association Act) that are more grammatical than substantive in nature. For example, where prior legislation provided that "nothing contained herein shall apply", it now reads "This paragraph does not apply to…" or the word "before" is used in place of "preceding." These changes evidence an attempt to provide more clarity. Only time will tell. In any event where such changes are made that do not effect, intent or application of the provision, then such changes will not be addressed herein. This is the first part of a multi-part series on the legislative 2011 changes IF and only if they actually become law.

A condominium, cooperative, or other multifamily residential building that is less than four stories in height and has an exterior corridor for egress is exempt from the requirement to install a manual fire alarm system. Simply, this change adds a floor to the exemption. In the past the limit was two stories, now it’s three. Also, the new revised law now applies far more broadly than its predecessor that only applied to condominiums.

The Condominium Act now requires the Association to obtain facsimile numbers in addition to email addresses for those members who opt to receive electronic meeting notices. If a unit owner opts to receive electronic notices, then the email and fax number are subject to disclosure upon receipt of an official record request. Though the information still comprises a part of the official records but was not provided because the unit owner opted in to receive electronic notice, then the records are not subject to disclosure in response to another owner’s official record request. But, there is no penalty if the association inadvertently provides the information. Lest there be any doubt, this means accidental disclosure.

The attorney client privilege exception continues to include records prepared for litigation and is now broadened to include records prepared in "anticipation of litigation" as compared to the requirement that such litigation was "imminent civil or criminal" litigation.

Other records of the association that are not subject to disclosure as a result of an official records request include management company employee records and written agreements with an employee or management company, or budgets, or financial records that indicate the compensation paid to an employee. Clarification is provided to grant immunity to an association who inadvertently provides unit owner information so long as the owner voluntarily provided the information and it was not requested by the association.

Agenda meeting notices must "identify all" agenda items.

A candidate running for the board MUST be eligible to serve at the time of submitting their notice of intent to run. In effect, this means that board candidates must be current in their assessments 40 days prior to the annual meeting where the election will take place as that is the deadline by which a candidate must submit their intent to run form.

The requirement for board member certification within 90 days of election or appointment to the board by written certification that the board member read the association’s declaration, articles, bylaws and written polices, will work towards upholding such documents and policies to the best of their ability and that they will faithfully discharge their fiduciary duty to the association or by taking the Division of Condominium approved class, now includes that the division approved class can be taken up to one year in advance and that the class not be re-taken so long as the director remains in continuous board service.

It is now codified that in addition to hurricane shutters, that upon approval of a majority of the voting interests of the association, impact glass or other code compliant windows can be installed and maintained by the association.

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(5-4-11)

NEW DEFENSE TO AN ASSOCIATION ASSESSMENT FORECLOSURE

For some time now an association assessment debtor was precluded from arguing that their failure to pay assessments which led to their association’s foreclosure of the debtor’s unit (or lot) was due to the association’s failure to maintain the common areas. In other words, an owners failure to pay assessments could not be justified on the basis of the association’s failure to perform its duties. In far simpler terms, the courts have held that the ol’ "tit for tat" argument was not sufficient to avoid paying assessments. In 1987, in the case of Abbey Park HOA v. Bowen, the 4th District Court of Appeal held just that.

In this seminal case, Bowen failed to pay her monthly assessments which resulted in Abbey Park HOA filing an action to foreclose its claim of lien against Bowen. In response, Bowen filed an answer, affirmative defense and counterclaim. The affirmative defense asserted that Bowen was not liable for the assessments because Abbey Park failed to maintain the common elements as per the declaration of covenants. The counterclaim sought a mandatory permanent injunction to compel Abbey Park to maintain the common elements and damages for Abbey Park’s alleged breach of the declaration. In reliance on an earlier 1980 4th DCA opinion, Sandles v. Sheridan Lakes, the 4th DCA held that the affirmative defense of failure to maintain the common elements "is inadequate as a matter of law." Since then, courts have routinely held that an associations failure to maintain common elements is not a viable excuse to avoid paying assessments.

Fast forward to a brand new decision, E. Qualcomm v. Global, issued April 27, 2011: In this very recent 4th DCA case where the Court’s opinion is still wet on the page and the parties still have time to appeal, the assessment debtors alleged as an affirmative defense that their association failed to maintain the common areas and that as a result the owner was entitled to a "set-off". The owner also raised a counter claim for the association’s alleged failure to maintain the common areas. You’re right if you think this sounds familiar to the Abbey Park case. So why did the 4th DCA reverse the trial court’s summary judgment ruling entered in favor of the plaintiff/association? Some might argue that this new case eviscerates Abbey Park. Whoaa… slow down!

The E. Qualcomm v. Global holding is not at all contrary to the long standing principal that a counter claim for failure to maintain common areas is not a viable defense to an association assessment foreclosure. In this recent case, while it is true the appellate court reversed the summary judgments that were granted by the trial court in favor of the Association as to 1) possible damages due to the defendant as a result of the counter claim and 2) the Association’s assessment foreclosure, the appellate court did not reverse the assessment foreclosure summary judgment because the association failed to maintain the common areas. Rather, it did so because the association had not properly refuted the set off counter claim used as an affirmative defense.

The Court did not even mention its own prior holding in the seminal case, Abbey Park. Perhaps the court didn’t do so because it wasn’t necessary. Here, the appellate court reversed the partial summary judgment of foreclosure in favor of the association because it found the association had not properly refuted them. Maybe if the Association had argued the rationale of Abbey Park during its summary judgment hearing, or if it did so, then if the trial court had included a detailed discussion of the effect of Abbey Park in its resulting Order, at least the partial summary judgment of foreclosure entered on behalf of the Association would have survived? In any event, during the appeal, the defendant paid its assessment deficiency. The debtor’s decision to pay the back assessments due and owing could also be the reason why the appellate court did not rely on its prior Abbey Park decision…. It did not have to as the issue was mooted by the debtor’s payment (or, could it be the result of the lawyer who initially lost the trial court portion of the Abbey Park case is now a sitting judge on the 4th DCA?). Sadly, this also means that we’ll never get the needed clarity and this case will, no doubt, be misconstrued to mean something contrary to what it actually does mean. Nevertheless, the decision does highlight yet another reason for the association to properly maintain the common areas/elements.

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(4-6-11)

You Spoke, the Legislature Listened!

THE GOOD NEWS: About two weeks ago, House Bill 5005 contained language that would have deregulated the licensure of community association managers and dismantled the "Arbitration Section" of the Division of Condominiums where so many disputes are affordably resolved. Association lawyers, lobbyists, managers, and boards asked their clients and members to contact their legislators to request that this objectionable language be removed. Your efforts paid off! I am pleased to report that while pending HB 5005 may become law and in so doing, a great many professions may no longer be regulated, the language regarding managers and the arbitration section was removed from the bill.

THE BAD NEWS: Also about two weeks ago, the Department of Justice’s recent amendment to the rules defining "service animals" under the ADA went into effect. The new definition is much narrower and eliminated almost all other pets from qualifying as "service animals," but for dogs. Most noteworthy, it excluded dogs requested for emotional support. If you attended one of my recent condominium board certification seminars, then you know the other permitted pet, albeit in certain circumstances, is a miniature horse (true, but don’t ask...).

On February 17, 2011, the U.S. Department of Housing and Urban Development issued a memo to its Office of Fair Housing and Equal Opportunity Regional Directors that the impact of this new Rule, is not applicable to the Fair Housing Act or to Section 504 of the Rehabilitation Act of 1974. The author of the memo noted that, "the preambles to the new rules state that emotional support animals do not qualify as service animals under the ADA but may ‘nevertheless qualify as permitted reasonable accommodations for persons with disabilities under the Fair Housing Act.’"

The new ADA definition only applies to state and local government services, public accommodations, and commercial facilities. Meanwhile, the broader Fair Housing Act, to which the new ADA definition does not apply, pertains to "housing" such as condominium and housing associations. To clarify, in this context, the requested emotional support animal is not limited to just dogs (or for that matter miniature horses, too).

Therefore, in order to qualify for a reasonable accommodation, the person requesting the right to a service animal must provide evidence of their disability defined generally as "a physical or mental impairment that substantially limits a major life activity." The service animal must be reasonably necessary to afford the disabled person an equal opportunity to use and enjoy a dwelling or to participate in their dwelling. Importantly, there must also be a relationship, or nexus, between the person’s disability and the assistance or service that the animal provides.

JUST THE NEWS: A recent case that affects community associations was published by the Florida Supreme Court, Cohn v. the Grand Condominium Association. This case deals with the application of new legislation on an already existing and recorded declaration of condominium. Do not be misled into believing that this new case means that all newly enacted legislation does not apply to your association. All that the Florida Supreme Court did was to re-confirm that there are certain sacrosanct rights that cannot be modified or extinguished through new legislation. In this important, but not at all ground breaking case, the Court held that "voting rights" could not be altered by later adopted legislation. That is consistent with the term with which you may already be familiar, "Kaufman language." More on this topic coming soon... Stay tuned....

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(3-23-11)

2011 Legislative Alert: In Peril

This proposed legislation will terminate the condominium arbitration program and deregulate licensed community association managers. HB 5005 repeals Part VIII of Chapter 468 of the Florida Statutes which governs the licensure and regulation of Community Association Managers and management firms as well as the Regulatory Council of Community Association Managers. The community association management licensure requirements ensure a level of competency in the profession of community association management. HB 5005 also deletes Section 718.1255 Florida Statutes which would terminate the Division of Condominium’s Arbitration Section. The Division of Condominium Arbitration Section provides a cost effective means of having certain disputes heard.

HB 5005 started out as the result of Governor Scott’s mandate to review all state regulations ostensibly in an effort to curtail legislative spending. In response, the Florida House of Representatives Business and Consumer Affairs Committee drafted Proposed Committee Bill BCAS 11-01 (now HB 5005) that deregulates the State’s ability to regulate a great number of professions, not just community association managers and the Division of Condominium Arbitration Section.

If the Arbitration Section is dismantled, it is not known at this time whether the "door tax" that each condominium association pays to the Division each year would continue to be assessed. The "door tax" is approximately $4.00 per unit and often leads to a surplus that is spent by the legislature on other budget items. Thus, legislation designed to save taxpayers money will do the opposite in so far as it relates to the Division of Condominium. If the "door tax" is eliminated, then the Proposed Committee Bill is even less thought out than initially imagined. If the "door tax" is not eliminated, and the Arbitration Section is dismantled, then where is the excess revenue being spent?

The Arbitration Section provides unit owners and associations with a far less expensive alternative to filing a lawsuit in circuit court. The Arbitration Section provides jurisdiction over improper meeting notices, the failure of a board to take or not take action when required to do so, official record inspection disputes, and condominium and homeowners association election and recall disputes. In an already over crowded court system, how is a community association or unit owner to obtain appropriate, and timely relief?

Licensed community association managers play a valuable role in the administration and operation of community associations. Ensuring that managers are licensed means that, at a minimum, your community benefits from the services of a manager who had been trained in the State of Florida’s community association regime ... with State statutes regulating a great many activities that take place within a community association. To name just a few: meeting notices, board member elections, official record requests, assessment calculations, material alteration issues, insurance special assessments, budgets, etc. If the State is going to continue to regulate community associations, then it has an obligation to ensure there are properly trained managers who can provide the day to day management services required by today’s community association regime.

It was reported that the Community Association Institute explained that deregulation of community association managers would eliminate the consumer protection of the 3.5 million Floridians living in community associations. Moreover, deregulation would jeopardize the protection of the estimated $2.5 billion of annual operating funds and the estimated $2 billion of investment accounts held for long-term maintenance and replacement for community associations in Florida.

To read HB 5005, which sailed though its committee hearings in less than a day and totals 318 pages, type this link into your browser:

http://www.flsenate.gov/Session/Bill/2011/5005/BillText/Filed/PDF.

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(3-9-11)

2011 Legislative Process

Ready or not, its time to start discussing the proposed legislation that will affect you condominium or homeowners association. At the moment, there are three "bills" you should know about: Senate Bill 530, Senate Bill 712, and Senate Bill 1516.

By far, Senate Bill 530 is the more comprehensive of the three. It provides the clear right of an association member to provide their consent to their association to give out the member’s email address and facsimile number. Condominium association board meetings held for the purpose of discussing personnel matters would not be open to the unit owners (similar to homeowners associations). Board members can be pre-certified to serve on their condominium board by taking the required certification course up to one year in advance, and once met, the board member certification remains valid during any time the board member continuously serves on the board. A provision is added in Section 718.116 that the association may charge any reasonable expenses for collection services incurred relating to a delinquent account. Partial terminations of the condominium are further addressed. All unit owner suspensions caused by delinquent monetary obligations must occur at a properly notice board meeting. Finally, Part VII of chapter 718 pertaining to bulk purchasers and bulk assignees will receive a much needed overhaul. As to both condominium and homeowner associations payments provided by a tenant to the association, made upon the demand from the association due the landlord/unit owner’s delinquency, shall be applied "the unit owner’s most delinquent monetary obligation."

Senate Bill 1516 provides that in addition to hurricane shutters, a condominium board can, upon a majority vote of the voting interests of the condominium, install impact glass or other code-compliant windows. This bill provides that if the condominium or homeowners association owns a unit as a result of an association foreclosure that the association is NOT jointly and severally liable with the prior owner. This is important to ensure that the subsequent owner remains responsible for the previous amounts due. Regarding homeowners associations, co-owners of a parcel cannot serve at the same time unless there are not enough eligible candidates, a person is more than 90 day delinquent in a monetary obligation would not be eligible to serve, and any convicted felon whose rights have not been restored for at least 5 years is not eligible to serve on the board.

Senate Bill 712 makes patently clear that condominium use right suspensions can include recreational facilities, pools, gyms, meeting rooms, cable television service, internet service, and valet service. Electric and water are added to the types of services that are not permitted to be suspended.

To learn more about each bill visit http://www.flsenate.gov.

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(2-23-11)

Accepting less assessments than the amount 

due to facilitate a short sale

Just last week, a unit owner living in a Pinellas County condominium sued his association, it’s board of directors, and the manager for failing to provide access to the association’s records within the statutory designated time frame and is seeking class action certification against them for breach of fiduciary duty. In short, the plaintiff-unit owner accused his board of breaching their fiduciary duty to the association by making decisions outside the context of a properly noticed board meeting which led to acceptance of less than the full amount of assessments that were due and owing in order to facilitate certain short-sales. As a result, the plaintiff alleges, all of the remaining unit owners have had to pay assessments to the association to make up for the board’s improperly made decisions.

It is noteworthy that while the plaintiff squarely alleged that the board failed to discuss the short-sale decisions during properly noticed board meetings, the plaintiff failed to allege whether, or not, the board had the lawful authority to accept anything less than the full amount of the back assessments due. The board’s failure to make these decisions during a properly noticed board meetings, while at issue, is not "THE ISSUE". The failure to render the short sale decisions during properly noticed board meetings can be remedied by ratifying the previously improperly made decisions during a properly noticed board meeting. In fact, doing so would likely lead to rendering this part of the plaintiff’s complaint as, "moot."

"THE ISSUE" not raised in the complaint is whether the condominium board has the lawful authority to accept an amount of assessments less than the full amount due to facilitate a short sale where the association is not a party to actual litigation at the time the decision is rendered. Compare and contrast the following two statutory provisions:

§718.116(9) "No unit owner may be excused from the payment of his or her share of the common expense of a condominium unless all unit owners are likewise proportionately excused from payment..."

§718.111(3) "...the association may ... settle ... actions or hearings in its name on behalf of all unit owners concerning matters of common interest to most or all unit owners..."

The issue not raised in the litigation is one worthy of further consideration. In any event, it is clear that, but for emergencies, all decisions of the board should be made during properly notice board meetings. As to the delicate balance between the two aforementioned statutory provisions, at a minimum, by making the short-sale decisions during properly noticed board meetings, a record, in the form of the minutes, will be created. The minutes will evidence that the decision was made in the correct forum, that the board considered the issues at hand, and exercised it’s reasonable business judgement in deciding to accept, or not accept, anything less than the full amount assessments due and owing. Remember, the condominium association board does not have be "right" as much as it needs to be in a position to evidence that it exercised its reasonable business judgement. Remember, it is far simpler, and less costly, to do things the right way, the first time, every time.

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(2-9-11)

Do you have questions that never seem to get answered; are you concerned about the property’s upkeep? There is a sure-fire remedy. Put your time where your mouth is and GET ELECTED TO THE BOARD OF DIRECTORS. (I did.)

Condominium association elections and homeowner association elections have as much in common as a television and a computer. They both let you see the final result, but the similarity ends there.

About condominium association elections: At least 60 days before the scheduled election, the association must provide its unit owners a first notice of the date of the election and the opportunity to run for the board. Any person desiring to be a candidate for the board must give written notice of their intent to be a candidate at least 40 days before the election. A one page letter size information sheet can be furnished by the candidate to the Association at least 35 days before the election. Then, at least 14 days prior to the election, the association must send out the annual meeting and second election notice which includes the agenda, the candidate information sheet(s), and the ballot that lists all candidates along with the inner and outer envelopes, limited proxy if for other meeting issues and a designated voter form. The election is decided by a plurality of the ballots cast. While there is no quorum requirement, at least 20% of the eligible voters must cast a ballot in order to have a valid election of the members of the board. No one can run from the floor. A unit owner may not permit any other person to vote his or her ballot, and any ballots improperly cast are invalid. A properly cast ballot is placed in an inner envelope and the inner envelope is then placed in an outer envelope. The outer envelope must be signed by the designated voter and provide the address and unit number of the designated voter. Proxies cannot be used for voting for a board member.

About homeowner’s association elections: A quorum of at least 30% of the members, in person or by proxy, must be attained to have a valid election. A member can vote by ballot if present at the meeting or by proxy if they cannot attend the annual election. The election requires a 14 day notice, but many such associations provide additional notices to encourage more member participation. Check your governing documents as there may be other requirements for elections set forth therein.

Is there anything in common? In both instances, an election is not required unless more candidates file notices of intent to run or are nominated than board vacancies exist. Also, methods are available to suspend delinquent members from voting.

A final reminder for Condominium Associations: Within 90 days after being elected or appointed to the board, each director must certify in writing to the secretary of the association that they have read the association’s declaration of condominium, articles of incorporation, bylaws, and current written policies; that they will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association’s members. In lieu of this written certification, the new director may submit a certificate of satisfactory completion of the educational curriculum administered by a DBPR approved condominium education provider such as, well, this author (me). Please note that a director who fails to timely file the written certification or educational certificate is suspended from the board until he or she complies. The secretary shall cause the association to retain a director’s written certification or educational certificate for inspection by the members for 5 years after a director’s election.

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(1-26-11)

It’s election season again and you know what that means, right? If you live in a condominium, then typically at your annual meeting, in addition to the election, the association’s opportunity to vote to waive or reduce reserves takes place, too. Here are a few helpful hints to keep in mind:

Condominium association budgets must include fully funded reserves in their annual budget for each item whose replacement costs are greater than $10,000.00. Each such item is required to have its own line item reserve in the budget, unless the association decides to "pool" their reserves. This means that there is one line item for all items within the "pooled" reserve. Reserves must only be used for their designated purpose unless the unit owners vote to use them for a different purpose. If the unit owners do not vote to waive or reduce the reserves, then, pursuant to state law, the fully funded reserves go into effect.

Reserves should be budgeted based on a straight line method. This means that if the cost to replace the roof is $100,000 and its life is 30 years, the association should include $3,333.33 per year for reserves (100,000 \ 30). If repairs are made that affect the remaining useful life, then the association can take that into account, too. Effective July 1, 2010, the requirement to have a reserve study was deleted from Chapter 718, Florida Statutes, the Condominium Act.

To waive or reduce condominium reserves requires an affirmative vote of the majority of the unit owners at a members’ meeting where a quorum was present. To use condominium reserves for a different purpose other than for which they were accrued or to begin "pooling" reserves, a majority of all unit owners must vote in favor of this change. The requirement that a developer controlled board cannot raise the budget by greater than 115% over the previous year does not, amongst a few other things, include the tabulation of the reserves in the budget calculation that determines whether the increase is greater than 115% over the prior year.

Homeowners’ association reserves are a bit different. There is no requirement that forces an HOA to include reserves in the budget unless the developer initially includes them, or the majority of the entire membership votes in favor of accumulating reserves. Therefore, if your HOA’s budget includes a line item called "reserves" but neither the members voted to accumulate them, nor did the developer initially vote to establish them, then the HOA’s reserves are more akin to a voluntary savings account.

Regardless of whether you live in an HOA or a condominium, it pays to be circumspect as to how your association board presents the choice to waive or reduce the reserves. More often than not, the limited proxy/ ballot provides the choice to fully waive or to reduce by either a certain percentage or by leaving it up to the discretion of the board. Providing more than one choice means that your association is less likely to accomplish either result, and the unintended, but very real result, is that the required votes to pass either option is diluted. If the Board is going to provide the option to waive or reduce, then consider presenting only one option.

Keep in mind that, reserves are forced savings accounts to replace items that have a limited life so that the money is accrued by the time you need to replace the reserved item. While waiving or reducing reserves may seem like it’s saving you money, consider the fairness of the following scenario: Mr. Jones lives in a condominium where reserves are waived year after year. After 20 years of enjoying his home, Mr. Jones moves. Six months later a new roof is required. The result is that Mr. Jones enjoyed the roof for those 20 years and never had to contribute towards the savings for a new roof. Meanwhile, the person that bought his unit is stuck with the special assessment bill!

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(1-12-11)

It's that time of year again ... It's Election Season!

It’s January and you know what that means - it’s election season. Let’s take a moment and review the 2010 legislation’s impact.

Remember that as of July 1, 2010, the mandatory condominium board member certification requirement shifted from a pre-election requirement to that of a post-election requirement. In other words, it’s only after you’re elected to the board that you need to comply with the certification requirement.

Once elected or appointed to a condominium board, each board member must, within 90 days of their election or appointment to the board, either i) satisfactorily complete a DBPR Division of Condominium approved board member education class, or ii) certify in writing to their association, via the secretary, that the new board member has read the governing documents and written policies, will work to uphold them, and will faithfully discharge their responsibilities as a member of the board. If the required education certification or certification to the board is not submitted to the association’s secretary within 90 days of the election or appointment, the new director is suspended from board service until they comply. The association is required to maintain the proof of certification for five years.

Regarding staggered terms of the condominium association board, if the bylaws permit staggered terms of not more than 2 years, and so long as they are approved by a majority of the unit owners, then, and only then, do two year staggered terms remain in effect.

In a condominium association of more than 10 units, co-owners of a unit may not serve on the board at the same time unless they own more than one unit or unless there are not sufficient eligible candidates to fill the vacancies on the board at the time of the election.

Condominium board member term limits are still in effect with this caveat: if there are more vacancies than candidates running for the board, then a unit owner who was otherwise term limited can still serve on the board.

As in days gone by, condominium board elections do not require a quorum of the unit owners to hold the election. Rather, at least twenty percent of all eligible voters must cast a ballot in order to have a valid election of the board. On the other hand, a homeowners’ association board election does require a quorum of at least thirty percent of the entire membership to be present in person or by proxy in order to have a valid election of the board, unless an even lower number is provided in the bylaws.

A homeowners’ association election can be held by secret ballot if the governing documents so provide, but voting must be conducted using the inner and outer envelope system similar to the well established condominium election regime. However, unlike condominium elections, a homeowners’ association must always allow owners to run from the floor. Any homeowners’ association board member who is appointed to fill an unexpired term remains in that position until the term expires (as compared to serving until the next annual meeting or election).

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(12-15-10)

Are you sick and tired of lenders who stall their foreclosures? How many lender foreclosures are taking place in your community and how long have they been going on? What are you doing about it? Don’t settle for the wait and see approach. There are some simple strategies your community can use to make sure the lender’s foreclosure leads to a timely sale of the foreclosed property (well more timely, anyway). Today’s article will explain a few strategies to consider.

Setting the lender’s foreclosure case for trial means that the lender will be forced to argue their "Motion for Summary Judgment" where almost all foreclosures are resolved, and where the reward for arguing the successful motion leads the way to the judicial sale. Simply stated, this motion, which must take place before the trial, is where the moving party argues that 1) there are no material facts in dispute, and 2) that the moving party is entitled to judgment as a matter of law. Now, an association can ask the court to set the judicial sale date, too.

Just last Friday, on December 10, 2010, in LR5A-JV, etc. v. Little House, LLC, et. al., the 5th District Court of Appeal held that the Matanzas Shores Owners’ Association, an association in the position of a junior lien holder, could request that the court set the sale date in a mortgage foreclosure case. The Court ruled that the successful senior lien holder does not possess the sole right to control when the judicial sale date is set.

On appeal, the senior lien holder argued that the association, as a junior lien holder, cannot demand that a foreclosure sale date be set, and that the trial court erred as a matter of law in setting the date for the judicial sale. The Association countered that the law vested in the trial court possessed the ultimate authority to order the judicial sale. The Court found in favor of the junior lien holder, which in this instance was an association. It remains to be seen whether the sale could be cancelled if requested by the senior lien holder.

Do not make the mistake of thinking that just because your association did not file an "Answer" to the lender’s foreclosure action that the association does not have the ability to petition the court for various forms of relief. The association can set the trial date once the case is "at issue", meaning once the motions to dismiss are resolved and the "Answers" are filed, it can set the hearing date for the lender’s motion for summary judgment - after a party files their motion; it can petition the court for a blanket receivership; it can also petition the court to appoint a receiver for the specific property being foreclosed; and now it can ask the court to set the sale (auction date) date, too.

I hope you are enjoying this festive holiday season.

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(12-1-10)

Christmas Trees, Menorahs, and Red Bows. 

OH MY!

Does your association display holiday symbols or are they religious symbols? Are Christmas trees, Menorahs, Nativity scenes, or the Kikombe cha Umoja (The Unity Cup displayed during Kwanza) religious symbols? Maybe still, the symbol is something totally different, like a big red bow. A few of the issues a Board should consider in displaying such symbols (and in no particular order) are: What are the costs? Is it in the budget? Is it a common expense authorized by the community’s governing documents? Will the display cause a material alteration for which a vote of the owners is required? Is the display a holiday or religious symbol? If the community displays religious symbols, then you’d best be prepared for having opened Pandora’s Box, too.

If the community allows a Christmas tree and Menorah, doesn’t the Board have to allow a Nativity scene and the Ten Commandments, too? Probably not. Luckily we have some guidance from the United States Supreme Court to help us differentiate between symbols. In 1989, in County of Allegheny v. American Civil Liberties Union, the Court held that the determination of whether decorations, including those used to commemorate holidays (which are or have been religious in nature, are religious, or not), turns on whether viewers would perceive the decoration(s) to be an endorsement or disapproval of their individual religious choices. The constitutionality of the object is judged according to the standard of a reasonable observer.

Thus, the Court found that a Christmas tree, by itself, is not a religious symbol; although Christmas trees once carried religious connotations, "Today they typify the secular celebration of Christmas" the Court said. The Court also noted that numerous Americans place Christmas trees in their homes without subscribing to Christian religious beliefs and that Christmas trees are widely viewed as the preeminent secular symbol of the Christmas holiday season.

In contrast, the Court stated that a menorah is a religious symbol that serves to commemorate the miracle of the oil as described in the Talmud. However, the Court continued that the menorah’s significance is not exclusively religious, as it is the primary visual symbol for a holiday that is both secular and religious. When placed next to a Christmas tree, the Court found that the overall effect of the display to recognize Christmas and Chanukah as part of the same winter holiday season, has attained secular status in our society.

As to the Ten Commandments, in a 1980 case, Stone v. Graham, the Supreme Court held that that the Ten Commandments are undeniably religious in nature and that no "recitation of a supposed secular purpose can blind us to that fact." The Court stated that the Commandments do not confine themselves to secular matters (such as honoring ones parents or prohibiting murder), but instead embrace the duties of religious observers.

If a member of your community wants to include their symbol in the association’s holiday display, remember to consider the types of symbols already being displayed by the association as compared to the member’s request. Once your community displays a religious symbol, then there is a good chance your community will need to allow other requested religious symbols to avoid a claim of religious discrimination. Use the guidance from the Supreme Court’s cases to differentiate between a secular symbol and a religious symbol. The rules of kindergarten work best: treat everyone fairly and treat them as you would want to be treated. To do all that is quite simple.

A conservative board would only allow the display of the Tree and Menorah. Even better, and as we do in my community association, we display an oversized, festive, gloriously secular, and quite lovely red bow on each of our entry gates. I look forward to seeing them each year, for then I know holiday cheer is so very near. I can only hope that the groups of us, who will congregate by those gates to share in a holiday brew, are not later accused of holding a religious service. I sure would miss those bows.

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(11-17-10)

Can we still publish our membership directory?

Effective July 1, 2010, in the context of which documents are not subject to a member’s official record request both the Condo and HOA Acts provide that, "Notwithstanding the provisions of this paragraph the following records are not accessible to members or parcel owners: social security numbers, driver’s license numbers, credit card numbers, electronic mailing addresses, telephone numbers, emergency contact information, any addresses for a parcel owner other than as provided for association notice requirements, and other personal identifying information of any person, excluding the person’s name, parcel designation, mailing address, and property address." See 718.111(12) and 720.306 Florida Statutes.

The question is whether these prohibitions only apply to a member’s official record request or is the new provision meant to be interpreted more broadly in light of the phrase, "Notwithstanding the provisions of this paragraph" to mean the association cannot publish the phone numbers and email addresses of its members? If so, you’d best "STOP THE PRESS." Sadly, the answer is anything but clear. Thus, while the community can still publish the directory, to be on the safe side, the phone numbers and email addresses should not be included unless you have the consent of the member to do so.

If you want to publish the phone numbers and email addresses, the association will need to obtain the consent of each member whose phone and/or email address you intend to publish. Alternatively, the association could amend its governing documents to include a provision that membership in the community automatically means that the member consents to having their phone number and email address published. Of course, if the amendment is adopted, before you publish the directory, the association should provide each member the right to opt out. To protect the privacy of the members, the directory should include a disclaimer that it is not for release outside of the community or for solicitation purposes.

The remedy for a violation would most likely be in the nature of injunctive relief. This means the member asks the court to order the association to remove the name and email address. Of course there are prevailing party attorney fees, too. I will leave with this thought to ponder, what if the member’s phone number appears on the entrance gate system? Hmmmmm.

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(November 3, 2010)

How many times has your association lawyer asked for a unit owner’s revised account statement that shows the past due assessments? There are at least four occasions where a ledger is needed. It is needed to send the initial collection letter informing the owner that if they do not pay a lien, it will be recorded, it is needed when preparing the lien, it is needed when preparing the foreclosure complaint, and it is needed when preparing an estoppel. Often the lawyer is asked, "why do we need to send another one…nothing changed….?" It may be a moderate inconvenience, but it sure is a needed one.

In a 2009 association foreclosure case, the association foreclosed its assessment lien. The final judgment of foreclosure awarded the plaintiff association two special assessments that were not included (pled) in the association’s foreclosure complaint. The defendant appealed to have the two special assessments removed from the judgment and the Fourth District Court of Appeal agreed. The 4th DCA held that the association was not entitled to relief for the special assessments because the association’s lawyer did not include the assessments in its complaint. The failure to plead the two special assessments led to the outcome that the Association was not entitled to them in the court’s judgment of foreclosure. So, the next time your lawyer repeatedly asks for a revised account statement, you can begin to understand why. Remember, if you don’t include the sources of all money to the association, you are not entitled to it as a form of relief in the court’s award.

Has your association set the lenders’ first mortgagee foreclosure cases for trial? Did you even know that the association can do so? Well, once the case is "at issue" any party can set the matter on the court’s trial docket. The term "at issue" means the parties have been served and the defendants have either answered the allegations or a default is entered against them for failing to do so. In a Third District Court of Appeal case, a condominium association sought sanctions against a lender for its lack of diligence in prosecuting its own foreclosure action. As a result, the trial court ordered the lender to diligently proceed within 30 days or pay the unit’s monthly assessments. However, the 3d DCA reversed the trial court. The appellate court held, "Because there was no statutory basis for sanctions, the association’s relief could not be granted and also noted that the association could have set the case for trial but didn’t. The moral of the story is that if your association has units subject to a lender’s first mortgagee foreclosure lawsuit and the case has not yet been set for trial; discuss this with the association’s lawyer.

In May 2010, a condominium association filed a motion to compel a lender to proceed with its foreclosure or begin paying the monthly assessments. The trial court ruled in favor of the association and found that it was fair and equitable for the lender to pay assessments if there was not a good reason for its delay. The lender appealed and the Fourth District Court of Appeal in reversing the trial court ruling held that a first mortgagee is only responsible to pay assessments after acquiring title.

On a different note, the statutory protection in favor of a foreclosing lender that requires them to pay the lesser of 12 months back assessments or 1% of the initial mortgage, whichever is less, only applies to the first mortgagee. If anyone other than the first mortgagee acquires title to the property as the result of the foreclosure action, then such third-party is responsible for 100% of all back assessments due and owing. As a result of the foreclosure sale, if title to the foreclosed property is vested in the name of anyone other than the first mortgagee, then that party is responsible for 100% of all back assessments due and owing.

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(October 20, 2010)

Hollywood Comes to a Mortgage Foreclosure Lawsuit Near You

Did you know? A lender has 5 years past the maturity of its note, secured by a mortgage, to foreclose its lien. If a lender chooses not to foreclose its investment, that is its right (or is it)? Have you heard of the foreclosure lawsuit being strangely referred to as the "mortgage terminator"? In this very recent case, the borrower stopped paying its assessments and the association foreclosed its assessment lien while the lender slept. After the association obtained title to the home in its name, the association then filed a lawsuit against the lender and alleged, amongst other things, that the failure of the bank to foreclose was an "unreasonable restraint on alienation (transfer)" and the association won! But, did you know that the lender shared in the victory, too?

There must be a reasonable explanation for this illogical outcome where a lender walked away from its collateral. The home was initially mortgaged for more than its value, the association was the owner as a result of its own assessment foreclosure lawsuit and the home was in need of repair. Along came the "mortgage terminator" lawsuit and the bank simply released their mortgage and walked away. Being in Florida, and using the most technical legal term, the lender "cut bait." The result being, the initial borrower is off the hook, the lender is divested of a toxic asset which they already financially recouped when the Feds purchased over a trillion and a half dollars in mortgage backed securities. The association deservedly ended up owning the unit to fix up and sell or rent. The facts that led to this outcome were extremely unique- a perfect storm. They are not likely to be repeated often.

Have you heard that many lenders are stalling their foreclosure litigation due to their own ineptitude? How many times must community associations suffer the burden of the ailing housing crisis? Home prices continue to drop, interest rates are at an all time low, yet money is hard to find for most of us. Community associations are facing unprecedented financial challenges caused by ever increasing assessment delinquency rates. When a borrower fails to pay their mortgage, most likely they also will avoid paying their assessment obligation, too. Banks are in no hurry whatsoever to push their foreclosures along when weighed against the struggling economy, a continued assessment obligation, and no real ability to sell the property, let alone at any chance of a profit. To top it all off, and as you already now know, the lender already recouped its financial loss when the Feds purchased the mortgage backed securities in an effort to prop up our ailing economy, which was made ill by the effects of the deregulation of the banking system, which directly led to Wall Street’s bundling (bumbling?) and securitization of mortgages.

Should the borrower be entitled to escape their financial liability to the lender merely because in preparing for the mortgage litigation, the lender’s representative failed to take the time to actually review the loan documents? In addition, apparently, the Wall Street geniuses behind the furious sale of bundled mortgages lacked any evidence they understood the logistical requirements for tracking the paper mortgages backing their securities. Now that the bottom has dropped out of the housing market and the banks are foreclosing on properties whose mortgages were used as collateral for investments that went sour, for which the Feds already paid back to Wall Street, we learn of a new wrinkle. In many instances, the lender’s representative, whose job it is to attest and swear to the accuracy of the documents being presented in the foreclosure litigation failed to actually do so. As a result, and at a tremendous cost to community associations, many lenders have stalled their foreclosures to ensure the accuracy of their pleadings. Each lender should be financially responsible for the delay caused by their lack of oversight. As long as there is no reason to suspect actual fraud or wrongdoing in the foreclosure litigation, then the foreclosure should continue. Rarely do you hear of a defendant in a foreclosure action raise as a defense, "Hey, that’s not my mortgage."

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2010 Legislative Update

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This week’s column is the last part of the formal 2010 legislative update. In today’s column we will take a look at the impact of SB 1196 on Chapter 617, Florida Statutes, a/k/a the "not-for-profit act." All too often the application of this important Chapter is misunderstood. Can you imagine what would happen if a delinquent homeowner could resign their membership in the association to avoid an association assessment lien foreclosure or if a majority of the board could recall one or all the minority based members? Well, the not-for- profit act clearly allows such things to occur. So, it’s a good thing that there are limits on this very important Chapter as it is applied to community associations.

Condominium, homeowner, and cooperative associations are not only subject to their enabling legislation (for example Chapter 718 for condos, Chapter 720 for homeowners’ associations and Chapter 719 for cooperatives), but they are also subject to Chapter 617, Florida Statutes, Florida’s "not-for-profit act." It is the act of "incorporation" that forms a new corporate entity. The new entity is created through the filing of its articles of incorporation. The bylaws provide the organization with its much needed operational guidance. The difference between religious institutions, charities and even hospitals that use Chapter 617 as their enabling legislation and a community association, is that the community association takes the further step of declaration of covenants against the real property for which the not-for-profit community association was formed.

At times, conflict and confusion results from the differences between Chapter 617 and the community association Acts. A simple example is that a Chapter 617 proxy is valid for eleven (11) months while according to the community association Acts, a proxy is valid for ninety (90) days from the date of the meeting for which it was intended. To clear up some of the confusion, I participated in drafting legislation, passed in 2009, which provides that in the event of any conflict between the community association Acts and Chapter 617, then the provisions of the community association Acts have priority.

More specifically, Section 617.1703 Florida Statutes provides that, "In the event of any conflict between the provisions of ‘this chapter’ (referring to Chapter 617) and Chapter 718 regarding condominiums, Chapter 719 regarding cooperatives, Chapter 720 regarding homeowners’ associations, Chapter 721 regarding timeshares, or Chapter 723 regarding mobile home owners’ associations, the provisions of such other chapters shall apply." In addition, the provisions of Sections 617.0605-617.0608 which pertain to transfer of membership interests, resignation of members, termination, expulsion, suspension, and purchase of memberships do not apply to corporations regulated by any of the foregoing chapters or to any other corporation where membership in the corporation is required pursuant to a document recorded in the county property records.

Additional clarification was provided as a result of Senate Bill 1196 which provides that, 1) the provisions of Chapter 617, Florida Statutes, which apply to voting by members, do not apply to a corporation regulated by Chapter 718, 719 or 720, Florida Statutes, 2) the provisions of Chapter 617, Florida Statutes, which apply to removal of directors, do not apply to a corporation regulated by Chapter 718, 719 or 720, Florida Statutes, and 3) the provisions of Chapter 617, Florida Statutes, that apply to access to records do not apply to a corporation regulated by Chapter 718, 719 or 720, Florida Statutes.

Is the application of SB 1196 helping your association, is it is causing your association grief, is there a subject you’d like to see addressed in future columns, do you want to receive your free e-mail version of future articles? If so, please send an email to associaitonroundup@siegfriedlaw.com.

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PART VIII: SENATE BILL 1196

(September 22, 2010)

FINANCIAL REPORTING REQUIREMENTS, SPECIAL ASSESSMENTS AND RESERVES

This week we continue our series on the new laws brought about by Senate Bill 1196, which became effective on July 1, 2010. Today’s column addresses new multi-condominium reserve requirements, new opt-in procedures for accounting reports for condominiums with fewer than 75 units, new requirements to levy a homeowners’ association special assessment and directives to the Division of Condominiums in regard to reserves.

Do you live in a multi-condominium association? If you do, you should know that the Division of Condominiums is required by a mandate set forth in Senate Bill 1196, to adopt new rules setting forth uniform reporting requirements for multi-condominium associations. The new rules must include standards for presenting a summary of association reserves, including a good faith estimate disclosing the annual amount of reserve funds necessary to fully fund each reserve line item based on a straight line accounting method. The disclosure will not apply to reserves funded according to the pooling method.

Do you live in a condominium with fewer than 75 units? If you do, the unit owners can vote to prepare a report of cash receipts and expenditures in lieu of the normally required financial statement. Previously, this was limited to condominium association that governed fewer than 50 units.

A developer controlled homeowners association cannot levy a special assessment if the developer is guaranteeing the budget shortfall unless a majority of the parcel owners other than the developer have approved the special assessment by a majority vote at a duly called meeting of the membership where a quorum is present. What is a developer controlled association to do when during the developer guarantee period the developer fails to pay the association’s financial shortfall? For the time being, it looks like the members will either have to wrestle control of the association from the developer by filing a lawsuit or the developer controlled board will need to amend the budget. In the meantime, the developer controlled board should authorize the association’s lawyer to send a demand letter and commence the steps necessary to record a lien against the developer’s lots within the association.

If homeowners’ association reserve accounts have not been established by the developer or established by a majority vote of the unit owners, the funding of such reserve accounts is limited to the extent that the governing documents limit increases in assessments, including reserves.

If the budget for an existing homeowners’ association does not provide for reserves because such reserve accounts have not been established by the developer or voted upon by a majority of the members, the financial report for the association must include specific disclaimer language as set forth in Chapter 720, the Homeowners’ Association Act. The same is true if the homeowners’ association budget does not provide for funding for deferred expenditures not limited to capital expenditures and deferred maintenance, though the required disclaimer language differs in the case of the latter.

In the next issue of the Association Roundup we will begin wrapping up this multi-part series on the changes brought about by the Florida Legislature’s adoption of Senate Bill 1196. If you want to receive your free e-mail version of future articles please email your request to associationroundup@siegfriedlaw.com to begin receiving the iRoundup. You can opt out at any time.

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PART VII: SENATE BILL 1196

(September 8, 2010)

INSURANCE, FIRE SPRINKLER RETROFITTING AND ELEVATORS

Welcome to part VII of our continued discussion of Senate Bill 1196. As hurricane after hurricane are passing us by, let us take a look at some of the changes to the Condominium Act and their effect on insurance provisions, deductibles, fire sprinkler retrofitting, and elevator safety compliance.

Loss Assessment Coverage: Residential condominium unit owner insurance policies issued on or after July 1, 2010 must include at least $2,000.00 in property loss assessments coverage for all assessments made as a result of the same direct loss to the property. Every individual unit owner’s residential property policy must contain a provision stating that the coverage afforded by the policy is excess over the amount recoverable under any other policy covering the same property.

Force Placement: The law that previously provided the authority to a condominium association to "force place" insurance coverage on unit owners that did not purchase insurance on their unit has been eliminated. If the association wants to force the owner to purchase insurance coverage, then its remedy is to enforce the covenants though the filing of a lawsuit seeking an injunction to compel compliance.

Unit Owner Obligation to Insure Personal Property: Condominium association insurance policies issued on or after January 1, 2009 must exclude all personal property within the unit or limited common elements which are located within the boundaries of the unit and serve only that unit. Such property and any insurance thereupon is the responsibility of the unit owner.

Insurance Appraisal: Condominium association property insurance must be based on the replacement cost of the property to be insured as determined by an independent insurance appraisal, or update of a prior appraisal, and the replacement cost must be determined at least once every 36 months. The meeting notice where the Board will establish the amount of the deductibles, no longer has to include the amount of the proposed deductible, the available funds, the assessment authority relied upon by the Board, and estimate the potential assessment amount against each unit. However, the association should still include the discussion of the deductible as an agenda item.

Fire Sprinkler Retrofit: Unit owners may opt out of retrofitting association common areas with a fire sprinkler system by the affirmative vote of a majority of all voting interests. If an association does not opt out of the fire sprinkler retrofit, the deadline to comply with the otherwise required retrofit has been extended to the end of 2019. A condominium, cooperative or multifamily residential building that is less than four (4) stories in height and has a corridor providing an exterior means of egress is not required to install a manual fire alarm system under the Life Safety Code adopted in the Florida Fire Prevention Code.

Elevators: Elevators in condominiums and multi-family residential buildings with certificates of occupancy issued as of July 1, 2008 are exempt from updating to the Safety Code for Existing Elevators and Escalators, ASME A17.1 and A17.3 requiring modifications for Phase II Firefighters’ Service on existing elevators. The exemption applies for 5 years or until the elevator is replaced or requires major modifications, whichever occurs first. The exemption does not apply to buildings with certificates of occupancy issued after July 1, 2008. Condominiums and multi-family residential buildings may request variances before or after the expiration of the 5 year term.

If you would like to receive the electronic version of "Rembaum’s Association iRoundup" please send an email request to associationroudup@siegfriedlaw.com.

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PART VI: SENATE BILL 1196

(August 25, 2010)

TELECOM CONTRACTS & HOA OFFICIAL RECORD REQUESTS (Revisited)

There is a new term to explain the unintended consequences of recently enacted legislation. From now on, to alert you to these issues, the term "Glitch Alert" will be used. It is often said that the definition of a "political camel" is a horse that went through the political sub-committee process (the humps were caused by the political glitches that arose while traveling from sub-committee to sub-committee…just like our laws).

As a general rule, a condominium association can only assess its owners for those expenses authorized by its governing documents and as allowed by statute. This is due to the fact that a condominium exists by virtue of its enabling legislation (yup, you guessed it Chapter 718, Florida Statutes a/k/a the Condominium Act). Until July 1, 2010, the date when the changes from Senate Bill 1196 went into effect, if a condominium association entered into a bulk contract for internet and other telecom services, the association was required to ensure that the expense was permitted by the declaration of condominium as there was no support for the expense within the Condominium Act. This was disguisable from bulk cable expenses, where the expense is statutorily considered a "common expense" and therefore assessable against the unit owners. Good news, with a stroke of the pen the legislature ensured that internet services are also deemed a "common expense."

For those condo associations that want to bring their building into the 21st century, the Florida legislature has made things a bit easier. The cost of communications services as defined by Chapter 202, Florida Statutes, and which includes information services or internet services obtained pursuant to a bulk contract, are now considered "common expenses" of the condominium association. So, in plain English, this means the board has the power to enter into bulk telecom contracts. Remember, the requirements of bidding the project may remain applicable depending on the association’s budget and cost of the service.

GLITCH ALERT: Does the authority of the board to enter into a bulk telecom contract include the right to materially alter the common elements that is necessary to install the new equipment? Typically, unless the declaration of condominium provides otherwise, it takes a vote of 75% of the unit owners to make material alterations. It would only make sense that the right of the board to execute the bulk telecom contract impliedly includes the right to materially alter the common elements. But on the other hand, it can be argued that had the legislature intended this otherwise logical consequence it would have included it in the legislation. Time will tell….

GLITCH ALERT: Several weeks back we discussed a new requirement to Chapter 720, the Homeowners’ Association Act. This change requires a member requesting to inspect the homeowners’ association’s official records make their request via certified mail, return receipt requested in order to create a rebuttable presumption that if the association does not comply with the request within 10 days, that it willfully did so. If the failure to provide the inspection was willful, the association can easily be subjected to a financial penalty. However, a plain reading of the amended legislation clearly suggests that a member could make the written request to the association without sending it certified, return receipt requested. In that event, the association is still required to make the records available within the statutorily required ten days; however, if the association does not comply, it does not create the presumption that the failure to do so was "willful." The homeowners’ association could still have liability for failing to comply with a written request within 10 days, but it is a tougher burden for the requesting member to prove that the association willfully failed to provide the records. So, for the request to have any real teeth, the request should be delivered by certified mail, return receipt requested.

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PART V: SENATE BILL 1196

(August 11, 2010)

CONDOMINIUM ASSOCIATION LENDER LIABILITY FOR ASSESSMENTS and HOA AGREEMENTS

Welcome to part V of our continued discussion of Senate Bill 1196: In this week’s article we’ll address a lender’s revised financial liability for past due condominium assessments when taking title as a result of foreclosure and a homeowners’ association’s ability to enter into agreements to acquire leaseholds, memberships, country clubs, golf courses, marinas, parking areas, and other recreational facilities. The discussion regarding the "glitches" in Senate Bill 1196 must wait a bit longer… so stay on the look out.

Have you heard? What is all this excitement about the new condominium first mortgagee liability all about? I hate to be the bearer of bad news, but it is not the panacea that many believe it to be. In brief, the legislation, effective July 1, 2010 provides that the amount of past due maintenance fees that can be collected when a first mortgagee for a condominium loan acquires title to a unit as a result of its own foreclosure is increased to the lesser of 12 months of past due assessments (up from 6 months) or 1% of the initial mortgage amount. However, it is unlikely that any first mortgagee will be subject to the 12 months, rather than the existing 6 months liability, unless the mortgage was recorded after the effective date of the new legislation, July 1, 2010.

Both the United States of America and State of Florida Constitutions provide prohibitions on Congress’s ability to pass laws that impede existing contracts. Since the declaration is a contract, and the lender is a third party intended beneficiary of the existing contract, the lender has the continued right to rely on the terms of the contract, in this instance, the declaration, that were in existence at the time the lender made its loan. So, in short, most likely, this provision is more a future benefit then a present cash cow. In any event, when you do the math, it is more likely that 1% of the initial mortgage amount will be less than 12 months back assessments.

For those condominium associations that have "Kaufman language" in their declarations prior to the lender recording their mortgages, then you might be able to assert an argument that the new lender liability applies. If your declaration provides that the Declaration is subject to Chapter 718 "as amended" (yup, you guessed - "as amended" = Kaufman language) then the mortgagee (and everyone else in the world) is on notice that the declaration is subject to the legislative changes to Chapter 718. This concept is referred to as "Kaufman language." The term is derived from the name of the case that applied the concept. If your declaration does not contain such language, then the applicable law as applied to your declaration is the law that is in effect at the time the declaration was recorded. Of course, this is true for substantive changes only. Procedural changes apply to every declaration regardless of when the declaration was recorded and regardless of the inclusion of Kaufman language.

On a completely different note, a homeowners’ association may enter into an agreement to acquire leaseholds, memberships, country clubs, golf courses, marinas, parking areas, and other recreational facilities, regardless of whether or not such lands are contiguous to the association. If such agreements are not entered into with 12 months of the initial recording of the declaration, they may only be entered into if authorized by the association as a material alteration or substantial addition to the common areas or association property. If the declaration is silent on the subject, then any such agreement requires the approval of 75% of the total voting interests of the association.

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PART IV: SENATE BILL 1196

(July 28, 2010)

OFFICIAL RECORDS and HOA ELECTIONS

Welcome to part IV of our continued discussion of Senate Bill 1196: In prior articles we discussed the association’s right to suspend use of the common elements and common areas for failure of a unit owner or member to pay their assessments, a homeowner association’s right to foreclose fines in excess of $1,000.00, how to collect rent from a tenant whose landlord/ unit owner is not paying assessments, and how the new legislation affects boards of directors, officers and committee members. This week we will review the new official record requirements and, to a lesser degree, homeowner association elections, both of which were effective July 1, 2010.

Regarding condominium associations, a new addition to Chapter 718, the Condominium Act, provides that the association is not responsible for the use or misuse of the information provided in response to an official record request, unless the association has an affirmative duty not to disclose such information pursuant to Chapter 718, Florida Statutes.

A new requirement is added to Chapter 720, the Homeowners’ Association Act, that requires a member requesting to inspect the homeowner association’s official records make their request via certified mail, return receipt requested. So, no more email requests, or requests scribbled on a napkin!

Both condominium and homeowners’ association official records exempt from disclosure now include:

1) Any record protected by the lawyer-client privilege as described in Florida Statute Section 90.502 and any record protected by the work product privilege;

2) Information obtained in connection with the approval of a lease, sale or other transfer of a parcel/unit;

3) Personnel records of association employees, including disciplinary, payroll, health and insurance records;

4) Social security numbers, drivers license numbers, credit card numbers, electronic mailing addresses (a/k/a email addresses), emergency contact information, and any addresses of a parcel/unit owner other than as provided to fulfill the association’s notice requirements, and other personal identifying information of any person, excluding the person’s name, unit/parcel designation, mailing address and property address;

5) Any electronic security measure that is used by the association to safeguard data including passwords; and

6) The software and operating system used by the association which allows manipulation of data, even if the owner owns a copy of the same software used by the association. The data is part of the official record (and subject to inspection).

A few words to the wise: Remember that just because certain records are not subject to inspection, they still comprise a part of the "official records" of the association. Also, plan ahead. It is not a matter if your association will receive a request to review the official records, it’s a matter of "when." With that in mind, create a second folder for each unit/ parcel owner. Place into the new folder just the information that is subject to inspection.

Regarding homeowner associations’ elections and ballots, if the governing documents permit voting by secret ballot by the members not in attendance at a meeting for the election of directors, such ballots must be submitted in an inner and outer envelope in the same manner as a condominium election ballot.

Be sure to read the next issue of the Condo News when this column will re-address: 1) use right suspensions and answer "why can’t we suspend cable," or can we and 2) "can the rent collected from a delinquent unit owner’s tenant be applied to the unit owner’s past due arrearage or only to future monetary obligations, not yet due?" Stay tuned….

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PART III: SENATE BILL 1196

(July 14, 2010)

BOARD MEMBER COMPENSATION, VACANCIES, CERTIFICATION AND ABANDONMENT OF OFFICE.

Welcome to part III of our continued discussion of Senate Bill 1196: In our last two articles we discussed the association’s right to suspend use of the common elements and common areas for failure of a unit owner or member to pay their assessments, a homeowner association’s right to foreclose fines in excess of $1,000.00, how to collect rent from tenants whose landlord, unit owners are not paying their assessments, and an introduction as to how the new legislation affects boards of directors, officers and committee members. This week we continue discussing how the new legislation affects the association’s board, officers, and committees.

Homeowners’ association directors, officers or committee members may not be compensated from the association for the performance of their duties as a director, officer or committee member, and may not benefit financially from their service to the association. That said, this does not preclude reimbursement for out of pocket expenses, insurance proceeds, any fee or compensation authorized in the governing documents, or a developer’s representative from serving on the board and benefitting financially from service to the association.

In a homeowner’s association, unless provided otherwise in the bylaws, a vacancy occurring on the Board before the expiration of a term may be filled by the majority vote of the remaining directors, even if the remaining directors constitute less than a quorum, or if necessary, even by a sole director. Alternatively, the association may hold an election to fill the vacancy.

Regarding condominium associations, an association of more than 10 units, or in a condominium association that does not contain timeshare units or timeshare interests, co-owners of a unit may not serve on the Board at the same time, unless they own more than one unit or, and don’t miss this, there are not enough eligible candidates to fill the vacancies on the Board. That change is significant and is not to be overlooked.

Remember that ill thought of condominium election form that had to be signed in advance of running for the condominium board? You know, the form that acknowledged the prospective board member had read and understood the association’s governing documents? Well, the certification form is no longer required to be mailed to all unit owners with the first notice of annual meeting, and is no longer required to be signed by the candidates running for the board in advance of the election. As a result of the new legislation, the certification form, or a certificate of completion of an educational curriculum administered by a division approved education provider, must be submitted to the association within 90 days of being elected or appointed to the Board. Failure to do so shall result in that Board member being suspended (not permanently removed) from service on the board until he or she complies. The board may temporarily fill the vacancy during the suspension. The certificate or education certificate must be retained by the association for five (5) years.

As mentioned in the last article, a condominium director or officer who is more than 90 days delinquent in the payment of any monetary obligation due to the association shall be deemed to have abandoned the office, creating a vacancy in the office to be filled by law. Previously, only maintenance assessments counted towards the delinquency. Also, the legislation is drafted in such a way that the association has no discretion whatsoever as to whether or not to suspend the delinquent director or officer. Rather, the abandonment of occurs by operation of law commencing on the 91st day of the delinquency. Part IV of our continued discussion will address changes to official record requests, official records protected from disclosure and homeowner association elections.

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PART  II: SENATE BILL 1196

(June 30, 2010)

FLAGPOLES, COLLECTING RENT, & THE ATTORNEY CLIENT PRIVILEGE

Part II of our continued discussion of Senate Bill 1196: In the last edition we addressed the association’s right to suspend use of the common elements and common areas for failure of a unit owner or member to pay their assessments. We also discussed a homeowner association’s ability to foreclose fines in excess of $1,000.00.

Unintended Consequences. As with any legislation amending existing law, there can be unintended consequences. Senate Bill 1196 is no exception. With that in mind, please note that previously, if a homeowner association’s declaration provided for suspension of use rights, the member’s opportunity to be heard at the committee hearing was not required. However, with the application of the new legislation, even if the governing documents allow a suspension of use rights without the need for the hearing before the committee, the hearing process is still required. In today’s article we first address, in honor of Independence Day, flag poles, followed by how to collect rent from tenants whose landlord, unit owners are not paying their assessments and begin learning how the new legislation affects boards of directors, officers and committee members.

Flagpoles: Flagpoles erected by members of a homeowners’ association are now subject to the setback and location requirements that are in the declaration and remain subject to all local government building codes. Previously, the flagpole could be erected just about anywhere on the member’s lot.

Collecting Rent To Offset Delinquent Unit Owner/Member Assessments: A condominium association, upon proper written notice, may collect the rent from the tenant of a unit owner that is delinquent in the payment of assessments to the association. The association can even sue for eviction if the tenant does not remit the rent to the association. An amendment prohibiting unit owners from renting their units, or altering the duration of the rental term, or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period, applies only to unit owners who consent to the amendment and unit owners who "acquire" title to their units after the effective date of the amendment. Previously, the word "purchase" was used in place of the word "acquire". Therefore, if title of a unit was transferred by means other than purchase, and at the time of transfer of title the unit was not subject to the leasing restriction because the previous owner did not vote in favor of them, then the new owner was grandfathered. Well, not anymore. As soon as the unit is acquired by anyone other than the owner who did not vote in favor of the new leasing restrictions, the new owner is subjected to them as if he or she voted in favor of their adoption.

As to homeowner associations, upon proper written notice, the association may collect the rent from the tenant of a unit owner that is delinquent in the payment of assessments to the association. The association can also sue the tenant for eviction if the tenant does not remit the rent to the association. While not specifically addressed in the legislation, it would appear to be a logical consequence to include the attorney fees and costs of the eviction litigation as an assessment against the parcel.

Attorney Client Privileged Meetings: Meetings between a homeowner’s association board or committee and the association’s attorney to discuss proposed or pending litigation, or to discuss personnel matters are not open to members. This clarifies that discussions regarding personnel matters do not have to be open to members so long as the attorney is present. However, do not make the mistake of believing that such meetings are not subject to the typical meeting notice requirements… they are!

Condominium Association Board Member Delinquencies: A condominium director or officer who is more than 90 days delinquent in the payment of any monetary obligation due to the association shall be deemed to have abandoned the office, creating a vacancy in the office to be filled by law. Previously, only "maintenance assessments" counted towards the delinquencies.

In the next issue, we will continue our discussion on the effects of the SB1196 on board members, officers, and committees.

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PART 1:  SENATE BILL 1196

(June 16, 2010)

INTRODUCTION TO SB 1196 AND SUSPENSION OF USE RIGHTS

The long wait is over. On June 1, 2010, Governor Crist signed Senate Bill 1196 into law. It is codified in Chapter 2010-174, of the “Laws of Florida” and becomes effective July 1, 2010.  Through the next 7 “Association Round Up” articles I will provide details on how this Bill will effect your association.  Thereafter, I will discuss the nuisances of the Bill, how to apply various provisions to your association, what to watch out for, what can get you into and out of hot water, and how this new legislation is being applied throughout the great state of Florida.  On July 1, 2010, the new laws should be merged into their respective statutory chapters and available to view on line at www.flsenate.gov. We now begin with Part I of this multi-part part series pertaining to the 2010 legislative session.

Some highlights of Senate Bill 1196 include: members who do not pay their assessments can be prohibited from using the amenities such as the club house and pool; when a unit owner is delinquent in their assessment obligation, upon notice to their tenant, the tenant is obligated to pay their rent directly to the association. If they do not, then the association may evict them; for homeowner associations, fines over $1,000.00 can become a lien against a member’s lot, which really means that HOA fines have significance again; for condominium associations, first mortgagees acquiring a unit as a result of foreclosure will be responsible for the lesser of 12 months (currently 6 months) back assessments or one percent of the initial mortgage.  While effective July 1, this last change will most likely not have any practical effect for some time to come. 

 Suspension of Use Rights: Let’s begin our discussion with the suspension of common element and common area use rights.  If a condominium unit owner is delinquent more than 90 days in the payment of a monetary obligation due to the association, the association may suspend the right of that owner and their guests from use of the common elements, common facilities or any other association property until the monetary obligation is paid.  This does not apply to limited common elements intended to be used by only that unit such as a balcony, utility services provided to the unit, parking spaces and elevators. The association must impose the reasonable suspension at a properly noticed board meeting, and after imposition of such suspension, the association must notify the unit owner and, if applicable, the unit’s occupant, licensee, or invitee by mail or hand delivery. If that owner is delinquent more than 90 days in the payment of a monetary obligation due to the association, the association may suspend the right of the owners to vote in association matters.  Lawyers currently disagree as to the type of notice, if any, that must be provided to the delinquent unit owner in advance of levying the fine.  More on that issue in future articles.

 As to delinquent homeowner association members, if a member is delinquent more than 90 days in the payment of a monetary obligation due to the association, the association may suspend the right of the member and their guest to use the common areas and facilities until the monetary obligation is paid.  This does not apply to the portion of the common areas that must be used to provide access to the parcel, or utility services provided to the parcel.  Unlike condominium associations where the use right suspension is levied at a board meeting and is effective after notice to the delinquent unit owner, as applied to homeowner associations, the suspension may not be imposed without at least 14 days notice and an opportunity to be heard before a committee comprised of members other than the board or their relatives.  Like condominium associations, after the suspension is imposed, the association must notify the unit owner and, if applicable, the unit’s occupant(s) by mail or hand delivery. 

 Once again, fines have real enforcement power similar to days gone by.  For homeowner association fines that are in excess of $1,000.00, the fine can become a lien against a parcel. This means that rather than have to sue the fined member to collect the fine, the Association can follow its usual collection procedures and use the foreclosure process.

 Next issue we’ll continue our discussion and learn the procedure to make a tenant pay their rent to the association when a delinquent owner fails to pay their assessments; and discuss new legislation concerning board members, officers, and committee members.  

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How to Save a Firefighter's Life; Save Taxes on Short Sales; and the 2010 Florida Legislative Session: an Enigma Wrapped in a Quagmire or Politics as Usual?

(June 2, 2010)

Is your condominium constructed with "light weight trusses"? If you don’t know, find out. A firefighter’s life may depend on it! The Aldridge-Benge Firefighter Safety Act became law on December 13, 2009. The law requires all commercial, industrial and multi-family unit residential buildings constructed with lightweight truss components to be marked with an approved emblem or symbol to alert the firefighters of the use of this type of construction. In response to seeing this warning, the firefighters can take necessary precautions when entering the building. The bright red reflective signage is to be permanently affixed, four to six feet from the from the floor. It is attached to the building within 24 inches to the left of the main entry door. Existing buildings were to comply by March 14, 2010. Do our firefighters and yourselves a favor: if you are unsure of compliance or need to but have not as yet complied, take immediate action. A firefighter’s life depends on it!

Ok, all you short sale buyers and sellers, come gather around and listen up: House Bill 109 provides that the documentary stamp tax presently due on the unpaid indebtedness is forgiven under certain circumstances. But, not until July 1, 2010. To save seventy cents per hundred dollars you will need to wait until July 1, 2010 to close on your short sale because that is when House Bill 109 becomes effective. In the meantime, read up on the Bill at "www.flsenate.gov".

As I write this week’s column, I had hoped to have real news regarding the 2010 Legislation Session and most especially Senate Bill 1196, the omnibus Bill that will both overhaul and clarify various parts of Chapters 718 and 720 Florida Statutes, the Condominium and Homeowners Acts, respectively. SB 1196 was presented to Governor Crist on May 17, 2010. He has a few more days to sign it into law or veto it. If he does nothing, then SB 1196 will be effective on July 1, 2010. We’ll know soon. Visit "www.flsenate.gov/data/civics/idea_to_law_chart.pdf" to learn how a Bill becomes law.

A little insight into the politics behind the politics: Last year, Governor Crist vetoed the 2009 version of SB 1196 because it contained an extension to the deadline for compliance with multi-family high rise fire safety provisions. Governor Crist explained that he would never approve the Bill with such language. Yet, the 2010 Bill still contains a similar, if not the exact same, exemption. So what’s the difference?

In 2009, Governor Crist was a Republican, and there was significant effort by conservative lobbyists to force the Governor’s veto. In 2010, Governor Crist is no longer a Republican. He declared himself an Independent in reaction and protest to the Republican party’s failure to support his run for the United States Senate. Whether this Bill will become law is anyone’s guess. Since he has not yet vetoed it, I predict it will become law.

On this Memorial Day weekend, I’ll wrap up this week’s column by saying thank you to those who previously and presently serve in our Armed Forces, and to those who selflessly gave their lives to ensure our freedoms. Take a private moment and reflect on our fallen sons and daughters, who are all, in a fashion, the descendants of immigrants who fled to this great nation. I remain forever grateful for your sacrifice.

This just in at press time Tuesday June 1, 2010: Governor Crist signed Senate Bill 1196. More to come in next week’s column when we will begin providing detailed information on the these new laws.

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Does your Condo Association have hazard insurance to protect your home?

(May 19, 2010)

Here it comes… another hurricane season. Is your condominium association ready? From changing the oil in generators, to emergency evacuation procedures, to making sure your insurance policies are in place, every detail is important. Failure to properly prepare for causalities is a disaster waiting to happen.

A few weeks ago a Lauderhill condominium building was destroyed by fire. The board, of this already cash strapped association, had decided to not purchase insurance to save money. Now, their financial consequence has gone from bad to downright miserable. The consequences for failure to buy insurance are horrific.

In this regard, Florida law, more specifically, Chapter 718 (known as the Condominium Act) provides the association no discretion whatsoever. Hazard insurance must be purchased! While the Board has discretion as to the amount of the deductible, the association is required to purchase the insurance. The association is required to use its "best efforts" to maintain adequate insurance. Dropping coverage for casualties such as windstorm, fire, and depending on the location of the building, flood coverage, is reckless behavior.

At what point will the law hold directors responsible for failure to purchase hazard insurance? The board’s duty is to act reasonably under the circumstances. It can make wrong decisions, so long as the decision was reasonable. The trend in the law has been to protect board members so long as they did not act in a self-serving manner. It is one thing if the board chose not to purchase insurance because the association had no funds. It is another thing if assessment collections were limited due to unit owner delinquencies and the pool was still kept open and the bulk cable bill was paid at the expense of the insurance policy. While I enjoy my cable as much as the next guy, insurance coverage is far more important.

If Senate Bill 1196 becomes law, there will be some interesting changes to insurance law as it affects condominiums. Rather than a requirement to purchase adequate "hazard" insurance, the association will need to purchase adequate "property" insurance. An association controlled by the unit owners must use its best efforts to obtain adequate property insurance. Obviously, I am bringing to light the difference between the words "hazard" and "property", the latter being far broader in scope.

The association is responsible to buy insurance for all portions of the condominium property as originally installed. The association’s coverage excludes personal property within a unit, floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, built-in cabinets and countertops and window treatments, and limited common elements… which are located within a unit and serve only that unit. A limited common element is a subset of the common elements. All unit owners own an undivided interest in the common elements, but a unit owner can acquire an exclusive use right to the limited common element. Balconies and parking spaces are typical limited common elements.

Living in this great State has benefits. The warmth of the sun and the smell of the salt air are just two. But, did you know that over half of all floods occur outside of the nationally recognized flood zone. Given our elevation at sea level, is a board really doing the association a favor by avoiding the purchasing flood insurance?

Remember, it is not so much a matter of if your association needs insurance… it is a matter of when it will need to report a claim.

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2010 Legislative Update

(May 5, 2010)

Welcome to the first 2010 legislative update in our series. The following community association legislation has passed both the House and Senate. Whether the Governor uses his power to veto, signs the Bill(s) into law, or does nothing at all remains to be seen (if he does nothing, then the Bill(s) becomes law, too). In this ever changing, politically charged landscape, anything could happen.

Senate Bills 1196 and 1222, along with House Companion Bill 561, were combined and are generally referred to as Senate Bill 1196. Together, they contain the most legislation that has direct and significant impact on community associations. First we take a quick look at the Bill’s impact on condominium associations.

Insurance: The Bill clarifies the condominium meeting notice procedures for setting insurance deductibles; eliminates the mandatory requirements for individual unit owner policies; the provisions modify the eligibility requirements for board members, and it modifies the certification process for board members, requiring the certification after election.

Elevators: It authorizes a condominium association to waive, by majority a vote of the membership, the retrofit of an elevator to operate at times when power is not available to the building, and it provides for a delay in the retrofit of a special access key for elevators until the elevator is replaced or requires major modification; the provisions provide for bulk telecommunication services and expands the existing statutory language to include new technologies.

Bulk Purchasers: The provisions contain an initiative to provide for modified regulations as applied to a purchaser of condominium units in bulk, in circumstances where the condominium is in financial distress or is pending bankruptcy. It provides regulations for the protection of existing unit owners and clarified responsibilities and liabilities for the bulk purchaser.

Assessment Delinquency: The provisions provide new statutory procedures to allow a delinquent financial obligation due the association from a delinquent unit owner directly from the rental payments of a tenant occupying the unit. The bill also permit amendments allowing the Association to collect delinquent assessments directly from tenants when the unit owner/landlord is delinquent and provide for other sanctions against the delinquent owner; the provisions would permit the association to suspend the use of rights to common elements and recreational amenities of a unit owner or unit occupant when the unit owner is more than 90 days delinquent in a financial obligation due the association.

It will also permit the association to suspend the voting rights of a unit owner who is more than 90 days delinquent in financial obligations due the association. The legislation increases the responsibility of a mortgagee for delinquent condominium assessments from 6 months to 12 months or 1% of the original mortgage balance, whichever is less. The bill modifies the termination section of the Condominium Act to clarify the criteria for economic distress and the ability to recreate a condominium on the property.

The provisions would require a director to vacate the office when delinquent in the payment of any fee, assessment or special assessment due to the association for more than 90 days and would disqualify any unit owner from seeking election to the Board if the owner is more than 90 days delinquent in a financial obligation to the Association.

Fire Safety: The Bill extends the deadline for retrofitting fire sprinklers from 2014 to 2019, and it eliminates the restrictions on unit owners to waive the retrofit requirement by a majority vote. It also exempts buildings of less than four (4) stories with exterior corridors from installing a manual alarm system; the legislation clarifies the current policy of the Division of Condominiums requiring a separate accounting for escrow deposits in new condominium projects.

Homeowner Associations: The provisions modify the rights of unit owners to access records of the association to protect proprietary software, computer passwords and other personal information of unit owners and association employees; the provisions prohibit compensation for officers and board members of an association governed by the Homeowners Association Act, and the Bill clarifies election procedures when directors are elected by secret ballot. The legislation adds conforming changes to the Homeowner Association Act that authorize community associations to enter recreation and use agreements with membership approval in the same manner as condominium associations; it prohibits a developer from levying a special assessment prior to turnover.

Websites to track legislative process include www.flsenate.gov; www.myfloridahouse.com; and www.leg.state.fl.us.

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Not All "Coral" is Under the Sea

(April 21, 2010)

Why are the following two foreclosures different than any other? What do "coral," "foreclosures" and "declaration amendments" have in common? Read on, and find out as this week we review the impact of two recent foreclosure cases that greatly effect homeowners’ association collections throughout the great State of Florida.

Until recently, as a result of a first mortgagee stalling its foreclosure case to avoid its assessment obligations, lawyers for the association would petition the court seeking an order that the lender be required to pay assessments during its willful failure to diligently prosecute its foreclosure case. Well, no more. On April 14, in Deutsche Bank v. Coral Key Condominium, 35 Fla. L. Weekly D835b (Fla. 4th DCA 2010), the Fourth District Court of Appeals held that even though the lender failed to take any activity for seven months, the trial court’s order, which required the lender to pay assessments as a form of equitable punishment for causing the extended delay, was not enforceable. The appellate court held, that the law is clear: the first mortgagee is responsible to pay assessments only after it acquires title to the foreclosed property. Sadly, lenders who delay their cases are now further rewarded. What can you do when the lender stalls? At a minimum, discuss setting the bank’s case on the court’s trial docket with your community’s lawyer. Doing so will establish a trial date for the lender’s foreclosure action from which further delay will be granted only upon a showing of good cause.

Remember the good old days starting July 1, 2008 when the legislature amended Section 720.3085 of the Homeowners’ Association Act thereby requiring first mortgagees, upon acquiring title as a result of its foreclosure, to pay the lesser of 12 months back assessments or one percent of initial mortgage? Regardless of language in the associations’ declarations, first mortgagees were expected to pay their obligation pursuant to statute. Well, no more.

There is a long established notion in the law that government can not create laws that impact existing contractual obligations. In fact, the Florida Constitution provides, "No bill of attainder, ex post facto law or law impairing the obligation of contracts shall be passed." As a result, the first mortgagee lenders claimed that they were entitled to rely on the law in existence at the time their mortgage was created and therefore the requirements of Section 720.3085 did not apply to mortgages in existence prior to its enactment. On February 19, 2010 the Second District Court of Appeals in Coral Lakes Community v. Busey Bank, 2010 WL 567251 (Fla. 2d DCA 2010), agreed. This means that if your homeowners’ association declaration has terms, as many, many do, that, "The first mortgagee is not liable for past due assessments upon acquiring title as a result of a foreclosure," then the legislature’s creation of an obligation requiring them to pay back assessments as applied to existing mortgages is akin to a constitutional violation, at least as it relates to liens recorded prior to the 2008 statutory amendment.

Arguably, even if a mortgage and/or lien is recorded after the effective date of the 2008 amendment to Section 720.3085, if your homeowners’ association declaration still has language that does not require the lender to pay back assessments upon acquiring title to property as a result of a foreclosure, then the lender can argue that it still owes nothing for back assessments. The only way to cure this with certainty is to amend your declaration to conform to the legislation.

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Slapp Suits

(April 7, 2010)

What is a SLAPP SUIT and why should I care? "SLAPP" is an acronym for a Strategic Lawsuit Against Public Participation. SLAPP suits are lawsuits that are intended to censor, intimidate and silence critics of development. Our Legislature has ensured that SLAPP suits against condominium and homeowners associations are illegal.

For example, if a community association objects to a zoning amendment sponsored by a developer, then without the legislative prohibition against SLAPP suits, the Developer could otherwise impose substantial legal costs on the objecting association by filing a lawsuit against it. This would force the association to pay the costs of a legal defense until the association abandons their objections. Not only are SLAPP suits costly, but such lawsuits stifle our Constitutionally protected freedom of speech and expression. Our Florida Legislature’s point is simple. When local government is working in tandem with big business to create commercially viable, and in some instances even necessary, opportunities that could change the character of your community, you should not have to fear being sued as a result of expressing your opinion.

Did you know that on April 14, 2010 the Town of Palm Beach is holding its first of two statutorily required readings for two new ordinances that will drastically amend its Comprehensive Plan and is also modifying the Town’s zoning code provisions, all of which is to create a new overlay area within the "Commercial Town-Serving Zoning District?" The new overlay district’s boundaries will be between N. County Road and Bradley Place to Royal Poinciana Way and Park Ave. On April 28, 2010, the Town’s Architectural Commission will consider demolition of the existing Publix and construction of a new 50,870 sq. ft. building. On May 12, 2010 the Town Council is scheduled to hear Publix’s site plan review, special exception requests, and variance requests.

If you live in this area your world is about to change. Why? Ask Publix. It seeks to exceed to maximum height limitation from the allowed 20 feet to 37 feet; to have light poles higher than the allowed 15 feet to a new maximum of 23 feet; to exceed the maximum 150 feet building length to 245 feet; to exceed the two permitted roof top towers to a total of eight; to decrease set backs from 18 feet to 10 feet; and finally, to increase the maximum allowed 15,000 square foot building to an astounding 50,870 square feet.

Will the extra shelf space provide a shopping experience with more choices? Sure it will. But at what cost to the near-by residents? Semi-trucks are proposed to exit through the residential portion of Sunrise Ave. Light poles, even if uni-directional, will be a nuisance as the entire building is being moved to the east and thus nearer to existing residents. More vehicular and semi-truck traffic should be expected as should more noise (especially with 8 roof top towers).

To assemble the 4.36 acre site, many Town residents are now at risk of losing out on otherwise commercially available parking. Certainly, the Town of Palm Beach should consider ensuring, as a part of its approval process, that Publix be required to give back to the community by ensuring its residents can park their cars. To ignore the parking issue, is to ignore the real needs of citizens who live in the "to be created" overlay district. If the new one story building is going to be 37 feet high, why not build a two-story parking garage and double the available parking?

If you have an opinion, attend the hearings and let your voice be heard!!!

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Fiduciary Duty and Liability of Board Members, part 2

(March 24, 2010)

Today’s column is the second part of a two-part series regarding board member fiduciary duty and liability for failing to properly exercise that duty. Part one addressed protections afforded to board members by the "Business Judgment Rule." (See article below)

The "Business Judgment Rule" protects a corporation’s board of directors’ business judgment so long as the board acted in a "reasonable" manner. In general, absent actual wrongdoing in the form of fraud, self dealing, or unjust enrichment, corporate directors and officers cannot be held personally liable for corporate acts. The protection afforded by the Business Judgment Rule fades when the board member’s act crosses the line from "negligence" to "gross negligence." The term "gross negligence" means serious carelessness while the term "negligence" is the opposite of diligence, or being careful.

The Third District Court of Appeal in Perlow v. Goldberg, 700 So.2d 148 (Fla. 3d DCA 1997), held that the Business Judgment Rule extends itself to acts of simple negligence. The Court examined the Condominium Act, the Florida Business Corporation Act and the Florida Not For Profit Act, Sections 718,303(1)(d), 607.083(1) and 617.0834(1) Florida Statutes, respectively. The Court found that, "Each of these three sections requires more than simple negligence before personal liability for monetary damages attaches for the board member’s alleged wrongful act(s)."

The Business Judgment Rule, however, does not apply where a board member breaches his or her fiduciary duty. Under a tort theory, acts of gross negligence can expose the board member to liability. In B & J Holding Corporation v. Weiss, 353 S0.2d 141, S0.2d 141(Fla. 3d DCA 1978), the Third District Court of Appeal held that "where the acts constituting a breach of contract also amount to a cause of action in tort, there may be recovery of exemplary damages upon the proper allegations and proof of the intentional wrong, insult, abuse or gross negligence constituting an independent tort."

The Condominium Act provides in Section 718.111 (1)(d), that: "…An officer, director, or agent shall be liable for monetary damages as provided in Section 617.0834 if such officer, director, or agent breached or failed to perform his or her duties and the breach of, or failure to perform, his or her duties constitutes: 1) a violation of criminal law constitutes a transaction from which the officer or director derived an improper personal benefit, either directly or indirectly; or 2) constitutes recklessness or an act or omission that was in bad faith, with malicious purpose, or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.

Section 617.0834 Florida Statutes establishes liability for Officers and Directors of a not-for profit corporation for their "recklessness". The statute provides,

"An officer or director of a nonprofit organization… is not personally liable for monetary damages to any person for any statement, vote, decision, or failure to take an action, regarding organizational management or policy by an officer or director, unless: 1) the officer or director breached or failed to perform his or her duties as an officer or director and 2) the officer’s or director’s breach of, or failure to perform, his or her duties constitutes recklessness or an act or omission that was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. For the purposes of this section, the term "Recklessness" means the acting, or omission to act, in conscious disregard of a risk known, or so obvious that it should have been known, to the officer or director; and known to the officer or director, or so obvious that it should have been known, to be so great as to make it highly probable that harm would follow from such action or omission."

Absent fraud, criminal activity, self dealing or unjust enrichment, the Business Judgment Rule applies when determining if a member of the Board of directors of a condominium association is personally liable for breaching a fiduciary duty. Grossly negligent or reckless conduct pierces the protection of the Business Judgment Rule and may expose an association board member to liability.

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Fiduciary Duty and Liability of Board Members, part 1

(March 10, 2010)

This week, we begin a two-part series regarding board member fiduciary duty and liability for failing to properly exercise that duty. Part one addresses protections afforded to the board by the "Business Judgment Rule." Part Two addresses how the Businesses Judgment Rule will not protect a board member for breach of their fiduciary duty. After reading both parts of this series, you will better understand the fiduciary duty owed to your Association by your board members and hopefully understand that back-seat quarterbacking the reasonable decisions they make is not in anyone’s best interest. If you want to effectuate change, run for the board.

There are two terms with which you should be familiar: "negligence" and "gross negligence. In this context, "gross negligence" means serious carelessness while "negligence" is the opposite of "diligence", or being careful. The standard of ordinary negligence is the conduct one expects from the proverbial "reasonable man." By analogy, if somebody has been grossly negligent, that means they have fallen well below the ordinary standard of care one expects. Such actions warrant the label of being "gross."

The phone call the other day went like this: Ring! Ring! "Hello, Mr. Rembaum speaking." The caller responds, "My name is Mr. Neverhappy and my condo board is spending money we don’t have! The other day they signed a landscape contract and we are paying twice as much as our neighboring association for less service and then they bought a coffee machine and new computer for the office. They have to be stopped." Then, I explain, with due respect to Mr. Neverhappy, that his board does not have to be "right" and that they can make decisions that turn out to be costly or even wrong. So long as the board acted reasonably under the circumstances, chances are the Business Judgment Rule will protect their decisions.

In Florida, the Business Judgment Rule operates as a shield to protect association board members when exercising their reasonable judgment in the regular course of conducting association business. The courts have held that the "Business Judgment Rule" will protect a corporation’s board of directors’ business judgment as long as the board acted in a "reasonable" manner. P.S. Farrington v. Casa Solana Condominium Association, Inc., 517 So.2d 70 (Fla. 3d DCA 1987).

In Florida, corporate directors generally have wide discretion in the performance of their duties and a court of equity will not attempt to pass upon questions of the mere exercise of business judgment, which is vested by law in the governing body of the corporation. Lake Region Packing Association, Inc. v. Furze, 327 So.2d 211 (Fla. 1976) citing Orlando Orange Groves v. Hale, 119 Fla. 159, 161 So. 284 (1935). Just because the board’s decision turned out bad, does not mean the court will hold the board responsible for the damages arising out of their bad decisions. Courts refuse to supplement their judgment for that of the association’s board. Florida courts reject judicial intervention into management decisions where no impropriety is shown.

Generally, Board members can act negligently. The Fourth District Court of Appeal held in Munder v. Circle One Condominium, Inc., 596 So.2d 144 (Fla. 4th DCA 1992), that "in general, absent actual wrongdoing in the form of fraud, self dealing, or unjust enrichment, corporate directors and officers cannot be held personally liable for corporate acts."

The Condo Act provides in Section 718.111 (1)(d), that: "an officer, director, or agent shall discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner he or she reasonably believes to be in the interests of the association…" To see the rest of this statute, you will want to read Part-two. It will address how grossly negligent or reckless conduct may expose an association board member for liability for breach of their fiduciary duty.

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Blanket Receiverships

(February 24, 2010)

The 2010 Florida Legislature convenes on March 2. It could turn out to be one very long roller coaster ride. Did you know that there are currently more community association bills filed, than the number of eggs laid by a sea turtle (well almost)? Once the field starts to narrow a bit, the legislation will be the subject of future articles. In the meantime, you should be aware that the banking industry has sponsored legislation to remove foreclosures from the jurisdiction of the courts by converting Florida to a non-judicial foreclosure state. Astonishingly, 37 states already use this process. Under such a plan as it exists in some states, the foreclosure can take as little as 3 months and as long as a year. Supporters argue, the process is more efficient and will prevent future back logs in the courts. Perhaps, if the banking industry had better controls in place when it created the current crisis by lending too much money to those who had no business borrowing in the first place, the current crisis could have been avoided. As yet, the bill does not have a number or a sponsor. If the legislation were to pass, it would be like rewarding your child for picking a fight. It makes no sense. Let us turn our attention to a more positive subject.

In Florida, blanket receiverships (a/k/a equitable receiverships) have emerged to aid collections for associations. While I addressed this issue several months ago, given the number of inquires I have received, I am re-visiting the topic. The process to create the blanket receivership is simple and should not cost more than several hours of your lawyer’s time to create. In short, upon a motion by the association, and if granted, by order of court, a blanket receiver is appointed to collect rent from tenants whose landlord/unit owners are delinquent in their assessment obligation. David Ryder is a court-appointed receiver who manages blanket receiverships around the State. I share with my readers the results of our conversation below in hopes that this technique will help your association’s bottom line.

An blanket receivership is easy to understand: a court of equity (in this case, a Florida circuit court) appoints a receiver with specific powers to enforce the court’s order to pay to the receiver, as a de facto agent of the association, the rent otherwise due the landlord. Those powers usually deviate from or expand our existing laws to provide a better or more creative solution to the problem at hand. The association blanket receivership is an equitable receivership that replaces the plain-vanilla receiverships that are based strictly on Florida statutes. These concepts are recognized as "common law." Florida’s blanket receiverships for associations are now merging with equitable receivership concepts, giving the receiver increased and more flexible powers. The authority and purpose of association blanket receiverships will continue to evolve in the coming months as the courts encounter new, creative requests designed to keep associations solvent. Currently, there is a 50/50 chance as to whether the motion will be granted, which often depends on the judge.

In its most basic form, statutory association receiverships (as compared against the equitable blanket receiverships) allow a receiver to collect rent from tenants when units are in foreclosure. This law requires that the receiver be appointed in separate legal actions against each unit. The concept of the blanket receivership expands this idea to allow for one receiver to become the "blanket" receiver for all of the properties within the association where the unit owner has a renter and fails to timely meet their assessment obligation. This obviates the need for a separate motion for each singular receivership action which is limited to foreclosure situations, only. The latest equitable blanket receivership allows for the receiver to collect rent from tenants when the unit owner is delinquent to the association, and notably not yet in foreclosure, which is otherwise required by Florida law to enact the statutory based form of receivership.

With many unit owners upside-down and walking away from their properties, these new-fangled blanket receiverships could speed the process of getting needed money to associations.

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Flippers and Reverse Foreclosures ... what do they have in common?

Not much, but they are the subjects of today's column ...

(February 10, 2010)

Do you like "flippers"? No, not the mammal. I am re-ferring to the investors who buy a house today, only to sell it for what they hope is a profit, tomorrow. The Fair Housing Administration (the "FHA") is largest government insurer of mortgages in the world and discourages "flipping." In laymen’s terms, the FHA’s rules and regulations set forth that if the seller did not own the home for at least 90 days, then the buyer could not qualify for a FHA backed loan. Well, starting on February 1, 2010, the rule against "flipping" does not apply for one full year so long as the "flipper" does not make more than a 20% return on the quick flip, and in an effort to cut down on collusion, fraud, and unscrupulous behavior, the transaction is at "arms length." Arms length means that the flipper cannot convey the property for less than market value or convey the property to a family member, etc. in an effort to qualify the sale for the "flipper" exemption where the deal would not otherwise qualify. So long as the transition is at arms length and the seller does not make more than a 20% profit on the flip, the 90 day holding requirement does not apply, and the FHA will back the mortgage. Because the FHA will provide the lender insurance against the potential barometer default, the borrower is more likely to find a lender in this already very credit tight market. In light of the lender’s lowered risk, this should hopefully translate to a lower interest rate for the borrower, too! The FHA hopes that this will help reduce the surplus of inventory of homes on the market.

Have you heard of the term "reverse foreclosure?" It’s a term used to describe the situation where an association owns a unit as a result of its own association assessment foreclosure and forces the title to the property upon a lender who has stalled their foreclosure action against the same property. By way of background, there exists in the law the notion that one’s actions cannot cause as "unreasonable restraint on alienation" which means you cannot take action that would unreasonably restrain the transfer of real property. Recently, when a foreclosing lender failed to diligently prosecute its own foreclosure action, that was exactly what the association successfully argued to the Court. Why would a bank not want to complete its foreclosure? Because upon taking title to a unit in a condominium the lender/unit owner owes the association the lesser of 6 months back assessments (one year back assessments if the home is in a homeowner’s association) or one percent of the initial mortgage plus all assessments due on the unit from the day the lender/unit owner takes title in its name.

In the very recent Miami-Dade court case, where as a result of the association’s previous assessment foreclosure lawsuit, the association obtained ownership of a unit that was still subject to the first mortgage, the first mortgagee foreclosed its lien against the association. In a totally unprecedented turn of events, the association forced the lender to take title to the unit far sooner than if left to the devises of the already stalling foreclosing lender. The association argued to the Court that the lender failed to diligently prosecute its foreclosure and that its lack of effort along with the continued existence of the lender’s lien still recorded against the property, created an "unreasonable restraint on alienation." In support of its position, the association also waived its right to satisfy the previous owner’s loan. With that, the Court divested the association of its ownership of the unit and vested title in the name of the foreclosing lender. It remains to be seen whether the decision will be appealed and if so, the eventual outcome.

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New FHA Guidelines May Relieve Sagging Condo Sales

(January 27, 2010)

The Federal Housing Administration (FHA) is the largest government insurer of mortgages in the world. While borrowers must meet certain requirements established by FHA to qualify for the insurance, lenders bear less risk because the FHA will pay the lender if a homeowner defaults on their loan. If a condominium qualifies for FHA backed loans, then the lender is likely to accept a lower down payment. Without the FHA, borrowers could be expected to put down 20% or even 30% to qualify. Generally, no more than 15 percent of total units can be more than 30 days behind on condominium association assessments to qualify for FHA backed loans.

The FHA reports it has insured over 37 million home mortgages and 47,205 multifamily project mortgages since 1934. According to the FHA’s website, currently, the FHA has 5.2 million insured single-family mortgages and 13,000 insured multifamily projects, which includes condominiums, in its portfolio. According to HUD’s website, for FHA backed loans, HUD has approved only 15 condominium projects in West Palm Beach, 37 in Ft. Lauderdale, and 339 in Miami. The Palm Beach Post recently reported that there is only one new construction condominium in West Palm Beach that qualified for a loan backed by the FHA.

In early December 2009, the FHA adopted new guidelines in an effort to provide relief to sagging condo sales. New FHA guidelines on condominium financing include (1) allowing individual units to qualify rather than requiring an entire building to earn approval though February 10, (2) temporarily increasing from 30% to 50% the number of units in a building that can be financed with FHA loans, (3) requiring 50% of units to be owner-occupied while temporarily allowing vacant, bank-owned or rented units to be excluded from the calculation, (4) allowing for condo board approval of a buyer subject to the Fair Housing Act, and (5) removing the per sale legal certification requirement for condominium documents.

On January 20, 2010, the FHA announced several other changes it intends to implement. New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%. The FHA will reduce allowable seller concessions from 6% to 3%. Both changes are expected to go into effect in the early summer, 2010. In addition, in early spring the up-front mortgage insurance premium will increase by 50 basis points to 2.25%.

Recently, it was reported that the FHA could run out of funds as early as 2011, and that it may need another federal bailout. Add to that (1) the very real potential of a failing commercial loan market when, beginning in May 2010, many large commercial loans around the U.S. mature along with corporate downsizing leading to and resulting in the need for less overall rented square footage, (2) the ever looming maturity dates of residential ALT "A" loans where borrowers received loans based on credit scores rather than income where the value of such loans at least equals the previous subprime loans; (3) rising unemployment; (4) an oversupply of manufactured goods, and (5) a surplus of residential units on the market when the subprime foreclosures finally work their way through the courthouse. As a result, we could be in for a very bumpy ride in the third and fourth quarters of this year akin to a downward spiral of the world’s largest roller coaster. Let us hope not!

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