The Condo News print newspaper is published every other Wednesday. It is circulated throughout Palm Beach County, from Delray to North Palm Beach, and from Singer Island, Palm Beach and South Palm Beach to Royal Palm Beach, in Condominium, Cooperative and Home Owner Association Communities. For more information, or to have the Condo News  brought to your community, e-mail us or write to: P.O. Box 109, West Palm Beach, FL 33409. Tel:(561) 471-0329


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Rembaum's

Association

Roundup

By Jeffrey A. Rembaum, Esq.

Jeffrey Rembaum, Esq. is a community association lawyer with the law firm Kaye Bender Rembaum, in its Palm Beach Gardens office.  His law practice consists of representing condominium, homeowners, and cooperative associations, developers and unit owners throughout Florida.  He can be reached by email at JRembaum@KBRLegal.com or by calling 561-241-4462 or toll free: 1-800-974-0680.

Last Updated 04/12/2014

The Community Association News 

That You Can Use!

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(3-19-14)

Assistance Animals and the FHA- A New Case To Consider

On March 13, 2014, the United States District Court for the Southern District of Florida entered its 33 page Omnibus Order in Sabal Palm Condominiums of Pine Island Ridge Association, Inc. v. Fisher, et al. The term "Omnibus" was used in the title of this order to reflect the myriad of issues addressed by the Court. The Sabal Palm opinion addresses a disabled owner’s request for an assistance animal trained to alleviate problems caused by the owner’s multiple sclerosis. In this case, Fisher’s (the unit owner) request for an assistance animal was related to an observable disability where copious information was provided to Sabal Palm at its request to substantiate the need for the assistance animal. Rather than grant the reasonable accommodation, Sabal Palm sued Fisher for declaratory judgment to have the trial court determine whether Sabal Palm was required to grant the reasonable accommodation and to decide the extent of the medical records that it was entitled to receive. In response, Fisher counterclaimed against Sabal Palm alleging discrimination and also sued the president in his PERSONAL capacity. Thereafter, motions to dismiss were served. Attention is now turned to the instructional value of this resulting Omnibus Order.

First and foremost, the Court recognized that when it comes to emotional support assistance animal requests there is plenty of abuse being suffered by housing providers. The Court even sites to a report "prepared for a Senate Informational Hearing on the subject of fake service [sic, assistance] dogs" and acknowledges that this is a growing problem. The Court even went so far as to state that "there is some reason to be skeptical of requests to keep a dog as an accommodation for a disability in certain cases, particularly cases where the dog assists the disabled person by rendering emotional support." However, Sabal Palm treated Fisher with unjustifiable skepticism when it decided to file the lawsuit for declaratory judgment against her. By that time, the Court seems to have concluded, that Sabal Palm should have granted the request for the accommodation based on all of the information in Sabal Palm’s possession.

Lessons to be learned from this case include:

1) A board member can be sued in their personal capacity for a violation under the Fair Housing Act ("FHA") where the board member acted recklessly, in bad faith, or with wanton and willful disregard to human rights. (So, while the Court allowed Fisher’s cause of action against the president, in his personal capacity, it is not yet known whether the president will be found liable. Rather, the Court merely perfected the cause of action and in so doing, did not dismiss the claim.)

2) In examining these types of discrimination cases, the Court referred to another seminal case, Oberbrook, where that court looked at three factors to analyze: i) the extent of housing providers delay and obstruction of the request by the filing of a lawsuit by the housing provider, ii) the state of the law at the time the lawsuit was filed, and iii) whether the housing provider’s delay in granting the accommodation request had the effect of depriving the disabled person their requested accommodation.

3) In response to a request for a reasonable accommodation, a housing provider may request reliable disability-related information that i) is necessary to verify the person meets the FHA’s definition of disability, ii) describes the need for the accommodation, and iii) shows the relationship between the person’s disability and the need for the requested accommodation.

4) When the disability is readily apparent, the housing provider may not request additional information about the requestor’s disability. When the disability is not obvious, the housing provider may request more information limited to precisely what is not obvious.

5) A request for a reasonable accommodation can be constructively denied based on delay in rendering the decision.

6) Punitive damages are available under the FHA for a "refusal to accommodate" claim if a court finds that a discriminatory housing practice has occurred or is about to occur.

In the Sabal Palm case, it was found that Sabal Palm had more than enough information to conclude that Fisher was entitled to the requested accommodation. Yet, Sabal Palm requested even more information. The Court also found that the FHA’s Joint Statements (where the interpretation of the FHA of both the Department of Housing and Urban Development and the Department of Justice can be found) did not support Sabal Palm’s decision to sue for a declaratory judgment. Likely, this was due to the fact that the Court believed Fisher had more than met her burden to substantiate her disability and her need for the assistance animal.

 

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(3-5-14)

Your Introduction to the 2014 Community Association Legislation

This year’s legislative session begins on March 4, 2014 and ends on May 31, 2014. If you think all of the "bills" are drafted during the 60 day legislative session, think again. January 24, 2014 was the deadline for submitting requests for drafts of general bills, including requests for companion bills, and February 28, 2014 at 5:00 P.M. was the deadline for approving final drafts of general bills, including companion bills. After the conclusion of the legislative session, the Governor can veto the bill, do nothing (which allows the bill to become law on its effective date), or sign the bill into law (in which case the bill may spring into law, or will later become law on its effective date, as set out in the bill). If the bill was vetoed by the Governor, then a two-thirds vote in both the Florida Senate and House is required to override it. This year’s legislative session looks to be moderately busy with many proposed community association bills.

Senate Bill 798 (SB 798) includes many changes to existing law. Leasing amendments to a condominium declaration would not apply to those who vote against the amendment, but, obviously, would apply to those who vote in favor of it, and in contrast to today’s legislation, would be applicable to those who do not cast a vote at all. A condominium association would be granted the authority to enter the unit to inspect abandoned units and make certain repairs and even to turn on power to the unit to run the a/c to prevent mold. Provisions are included for the appointment of a receiver to collect rent.

Oddly, SB 798 provides that "a [condominium board] member may use e-mail as a means of communication but may not cast a vote on an association matter via e-mail." Likely, this provision was created with the best of intent, but hopefully will be deleted or tweaked to make better sense. At present, board members cannot vote by e-mail, but sometimes in a true post-casualty emergency, e-mail may be the viable means of communication for some board members. It is also patently obvious that everyone, even board members, may use e-mail to communicate. The question is whether such communication by the board majority constitutes a board meeting. Of course, SB 798 does not grapple with that important and very relevant issue. It’s early in the session, so let us all hope this provision gets eliminated, or edited, to be of greater value. On the brighter side, SB 798 also allows board members to vote via video conferencing rather than just on a speakerphone, as presently exists.

Clarification is added to foreclosure legislation affecting condominium, cooperative and homeowner associations to provide that a subsequent owner is jointly and severally liable with the previous owner for not only unpaid assessments, but also interest, late fees, reasonable costs and attorney fees incurred by the association incident to the collection process. Further clarification is provided to make clear that, in the event the association owned the unit, the subsequent owner may still have liability for the period prior to the association’s ownership.

Outgoing board members are required to relinquish all association records within 5 days. If not, civil penalties may be incurred. The deadline for financial reporting is increased form 60 days from the conclusion of the fiscal year, to 90 days along with an additional 30 days to provide the report to the owners.

Cooperatives and homeowner associations are granted new emergency powers and many of the bill’s legislative amendments to Chapter 718, Florida Statutes, the "Condominium Act", would also apply to Chapter 719, Florida Statutes, the "Cooperative Act."

House Bill 425 (HB 425) makes numerous clarifications to the Condominium Act to clarify many of its provisions apply to residential condominiums only. Obviously, the sponsor of HB 425 is asserting that the scheme for protections and safeguards of unit owners in residential condominiums is not necessary for unit owners of both commercial and condo-hotel ventures. Rather than carve out the parts of the Condominium Act that do not apply, the state would be far better served by a new chapter of laws to govern non-residential condominiums.

House Bill 7037 (HB 7037) addresses community association managers and would, in essence, allow managers to do many activities which are, by today’s standards, considered the practice of law. The type of activities that would not constitute the "unlicensed practice of law" would include, to name a few, calculating the number of votes to adopt an amendment (sometimes, a very complicated task requiring legal interpretation), negotiating contracts regardless of the type of contract, preparing pre-arbitration demands and preparing liens. Ultimately, given the overly broad provision of HB 7037, it could be interpreted to mean the manager is lawfully able to perform all tasks to ensure compliance with the community’s governing documents.

 

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(2-19-14)

"Burdens" Sure Can Be A Burden!

Eight years ago, the Fourth District Court of Appeals held that when a unit owner who was accused of failing to abide by the association’s covenants challenged the association by asserting that the association failed to follow its own covenants (which later formed the basis of the association’s lawsuit against the owner), the association had the burden to prove to the court that it had, in fact, complied with the requirements set out in its own declaration. Interestingly, the unit owner was not required to prove anything. Rather, all that the unit owner had to do was allege that the association failed to comply with its own declaration in the unit owner’s affirmative defenses, set out in the unit owner’s "answer" to the association’s "complaint."

In this lawsuit, McKenna v. Camino Real Village Association, Inc., 877 So. 2d 900 (Fla. 4th DCA 2004), the association filed a foreclosure action against a unit owner for unpaid assessments. Prior to filing the lawsuit, the association accelerated the remaining assessments due for the budget year. As an affirmative defense, the unit owner alleged that the association failed to comply with its own declaration by failing to provide prior notice to him, as required by the association’s declaration, that the association had accelerated the remaining assessments for the budget year. As a result of the association’s summary judgment motion, the trial court nevertheless granted its verdict in favor of the association.

Later, upon the unit owner’s appellate challenge, the Fourth District Court of Appeals reversed the trial court’s decision. The appellate court held that, once the unit owner filed the affirmative defense asserting the association failed to comply with its own declaration, the association then had the burden to prove that it complied with the requirements of its own declaration. As a result, the case was remanded back to the trial court for additional proceedings.

More recently, in July 2013, the Fourth District Court of Appeals re-visited the issue concerning an association’s burden of proof. In Boyle v. Hernando Beach South Property Owners Association, Inc., Case No. 5D12-2993, the homeowners’ association filed a lawsuit against a member alleging that the member failed to maintain his lot "in a neat, clean and orderly condition" as required by its declaration of covenants, by failing to properly landscape his lot and trim his trees. At summary judgment, the trial court granted an injunction in favor of the association that required the member to comply with the association’s covenants. The member appealed.

Summary judgment motions are ingrained in the rules governing civil procedure. Its purpose is to promote "judicial economy." In matters where there are no material facts in dispute, the party filing such a motion argues that they are entitled to judgment in their favor as a matter of law. Remember, a jury determines the facts, and the court applies the law.

In reviewing the trial court record, the appellate court noted that the affidavits provided by the association which, like the complaint, alleged the member failed to maintain his lot "in a neat, clean and orderly condition," failed to demonstrate how the member’s landscaping and trees were not properly maintained. In other words, the association failed to present evidence to the trial court to prove the member had actually failed to maintain his lot "in a neat, clean and orderly condition." Therefore, the appellate court reversed the trial court’s injunction and remanded (meaning sent it back) the case back to the trial court for further proceedings. It is important to recognize that, while the homeowner may have won a small battle, the actual war is still to be fought… at trial. While the association can learn from the appellate court’s decision by ensuring it submits the, up until now, lacking evidence as a part of its case in chief during trial. However, if, prior to filing the lawsuit, the association never clearly explained to the member how his landscaping and trees were not in compliance, then it’s likely the association is up the proverbial creek without a paddle and without a life-preserver, too.

 

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(2-5-14)

Save a Tree, Help the Environment and Start Saving Money Today!

Community associations are held hostage to rising prices. When prices go up, assessment increases soon follow. The recent postal stamp increases are no exception. The size of your association and amount of mailings during the year can really take a toll on the budget. Why not give your association a quick financial boost by sending electronic notices rather than paying for all those stamps? Electronic notices can be used for all sorts of official notices; however, there are a few prohibitions. In Chapter 718, governing condominium associations, and Chapter 719, governing cooperative associations, the word "electronic", including variations such as "electronically", appears 24 times, while in Chapter 720, only 17 times.

Both the Condominium and Cooperative Acts specifically authorize, legalize and legitimize bylaw provisions that provide for giving notice by electronic transmission whether as originally recorded or even by later amendment. The term "electronic transmission" can refer to a facsimile and, just as easily, to an e-mail or any other transmission that, well, simply put, transmits to the intended recipient electronically. (How is that for circular logic?) With that in mind, the clever, cost-conscious association should start to gather its members’ e-mail addresses and consents for the association’s use of e-mail for meeting notices.

E-mail can be utilized for notice of membership meetings, board meetings and even committee meetings. It can be used for election notices, too. In order for an association to notice by e-mail, the association’s bylaws must provide for providing meeting notices electronically and each member must specifically consent, in advance. Take a look at your association’s bylaws to see if your association is already authorized to start gathering its members’ consents to receive e-mail notices. If it is not already there, then talk to your association’s lawyer about amending the bylaws to include this simple cost saving solution and protection against rising postal costs.

Condominium, homeowner and cooperative associations are responsible to maintain the e-mail addresses and facsimile numbers of unit owners consenting to receive notice by electronic transmission.

The e-mail addresses and facsimile numbers of the association’s members are not accessible to the association’s other members if the member whose e-mail address or facsimile address did not consent to receive notice by electronic transmission. The association would be advised to obtain such consent in writing.

The Condominium, Homeowner and Cooperative Association Acts provide that an association may print and distribute to parcel owners a directory containing the name, parcel address and telephone number of each parcel owner and that any owner can exclude his or her telephone number from the directory by so requesting, in writing, to the association. Oddly, e-mail addresses are not mentioned which can be remedied through a bylaw amendment that specifically provides that the directory can include e-mail addresses of those members who consent to receive their association notices electronically unless advised, in writing, by the owner, to the contrary.

On the bright side, the association is not liable for an inadvertent disclosure of the e-mail address or facsimile number for receiving electronic transmission of notices.

Neither facsimile nor e-mail can be used as a method of giving notice of a recall meeting. In addition, electronic notices cannot be used by condominium associations that previously voted to forego retrofitting, when the unit owners next consider the issue.

To start your savings, check your association’s bylaws for the required authorization and start gathering those e-mail addresses. It’s good for the environment, too!

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(1-22-14)

A Call to Action ... The Latest Wrinkle in Lender Assessment Liability

If you live in either Monroe, Miami-Dade, Broward, Palm Beach, Martin, St. Lucie, Indian River, Okeechobee or Highlands county, then you will want to know about the January 3, 2014 decision entered by the United States District Court for the Southern District of Florida (the "Court"). For that matter, if you live in an association somewhere in the great State of Florida, then you still need to know about this case: United States v. Forest Hill Condo Association and Forest Hill Property Owners’ Association, where the the Court examined the financial obligation of a foreclosing first mortgagee to a condominium association and homeowners’ association (the "POA") when the unit owner not only defaulted on their mortgage but also failed to pay assessments. The dispute came about when after taking title as a result of the lender’s foreclosure, the U.S. Department of Housing and Urban Development ("HUD"), as a successor and assignee to the foreclosing lender, requested an estoppel from both of the associations

Both associations claimed the HUD was liable for all unpaid assessments, together with other fees and charges, including attorney’s fees, levied against the unit in the twelve-month period prior to foreclosure. HUD, on the other hand, contended it was entitled to the protection of a statutorily-created "safe harbor" which limits its liability. It actually fared better, at least as to how much it owed the condominium association for back assessments.

The Court examined whether interest, late fees, collection costs and attorney’s fees were properly included in both associations’ estoppels. The Court concluded that the answer was "no". The Court reasoned that since assessments are common expenses shared amongst all of the owners and that since the interest, late fees, collection costs and attorney’s fees are assessments levied against an individual as opposed to all of the owners, such individual assessments are not collectable under the "safe harbor" laws.

While HUD was found liable to the POA for back assessments, astoundingly, and to the extreme detriment of the condominium association, the Court took an unexpected left turn when it held that HUD had no liability to the condominium association for any of the past due unpaid assessments that accrued prior to taking title. In reaching this decision, the Court also looked to the condominium association’s declaration and noted that its clear provisions provided that a foreclosing lender had no assessment liability whatsoever, as compared against the legislative requirements set out in section 718.116, Florida Statutes, referred to as the "safe harbor." The term "safe harbor" refers to the foreclosing lender’s liability to the association for back assessments where the lender, as the prior first mortgagee, is responsible to pay the association the lesser of 12 months’ back assessments or one percent of the initial mortgage. The Court also noted that the condominium’s declaration made it clear that, where permitted, the provisions of the declaration were paramount to the provisions of Chapter 718, Florida Statutes, commonly referred to as the Condominium Act.

What the Court did not discuss was that the initial safe harbor statute contained in the Condominium Act provided that it applied to first mortgages recorded after April 1, 1992. While this language was later removed, it was clear that the safe harbor provisions applied if the owner’s mortgage was entered into after this date. These safe harbor provisions create a procedural regime where lenders can estimate their financial liability in the event of foreclosure which, at least as to this condominium association, some might argue, the court completely ignored!

It will be interesting to see whether other courts follow along and apply this case’s holding. With regard to this decision’s precedential value, based on a legal doctrine called "stare decisis", the decision of the Southern District Court in this case is merely persuasive authority, meaning that other courts do not have to follow the decision of this case but may take it into consideration. With the exception of the U.S. Supreme Court, no state court is bound by a federal court’s determination regarding state law. In fact, federal courts must follow state courts when analyzing state laws as state courts are the bodies charged with interpreting and applying state laws.

This latest case should be a call to action for all community association board members to contact their legislators and insist that they clarify the safe harbor provisions in this year’s legislation so that the safe harbor laws apply to all lenders!

 

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(1-8-14)

E-Mails and E-Mail Addresses

Who is entitled to the e-mail addresses of your association’s members? Are e-mails sent between board members part of an association’s official records? What about e-mails sent by a board member to the manager?

Only the e-mail addresses of unit owners who have either consented to receive notice by e-mail or have consented in writing to the disclosure of their e-mail addresses are subject to review during an official record inspection. Section 718.111(12), Florida Statutes, provides, with regard to unit owner e-mail addresses, that "[t]he association shall also maintain the electronic mailing addresses… of unit owners consenting to receive notice by electronic transmission. The electronic mailing addresses… are not accessible to unit owners if consent to receive notice by electronic transmission is not provided in accordance with [this subsection]." This topic was discussed in Cohen v. Harbour House (Bal Harbour) Condominium Association, Inc., Arb. Case No. 2012-02-3139 (Summary Final Order / Lang / June 29, 2012).

In the Cohen case, a unit owner requested a list of all of the e-mail addresses of the members, however did not receive such a list. The unit owner alleged that she was improperly denied the e-mail addresses. However, it was discovered that the association did not have consent from any members to use their e-mail for the purposes of receiving official notices nor did the association have written consent to disclose the protected information from any member. Therefore, the arbitrator held that "[b]ecause, under the statute, no unit owner has submitted his or her email address for notice requirements or consented in writing to disclosure of his or her email address, the [a]ssociation did not improperly deny access by [the unit owner] to its list of email addresses."

In today’s instant world, e-mail allows us to express our thoughts at anytime, anywhere. It is so convenient that it is unavoidable for board members to use it to discuss association business. As the official records of condominium, homeowner and cooperative associations are subject to inspection with limited exception, the question often asked is whether e-mails, including e-mails between board members and between one or more board members and the association’s manager, constitute part of the association’s official records that are subject to inspection by the members.

Several categories of records, while still constituting a part of the official records, are not subject to a member’s inspection request. For example, attorney-client privileged correspondence, medical records, information obtained by an association in connection with the approval of the lease, sale or other transfer of a unit and social security numbers, just to name a few, are not subject to a member’s inspection request but still constitute a part of the association’s official records.

On March 6 2002, the then Chief Assistant General Counsel of the Department of Business and Professional Regulation ("DBPR") issued an opinion which provided that "[c]ondominium owners do have the right to inspect e-mail correspondences between the board of directors and the property manager as long as the correspondence is related to the operation of the association and does not fall within the… statutorily protected exceptions… [The DBPR does not have] regulations expressly requiring archiving e-mails, but… if the e-mail correspondence relates to the operation of the association property, it is required to be maintained by the association, whether on paper or electronically, under chapter 718, Florida Statutes."

In Humphrey v. Carriage Park Condominium Association, Inc., Arb. Case No. 2008-04-0230 (Final Order / Campbell / March 30, 2009), an arbitrator of the Division of Florida Condominiums, Timeshares, and Mobile Homes held that "…e-mails… existing… on the personal computers of individual directors… are not official records of the association… Even if directors communicate among themselves by e-mail strings or chains, about the operation of the association, the status of the electronic communication on their personal computer would not change. Similarly, an e-mail to an individual director or to all directors as a group, addressed only to their personal computers, is not written communication to the association." The arbitrator reasoned that "[t]his must be so because there is no obligation to turn on [the] personal computer with any regularity, or to open and read emails before deleting them."

Simply stated, if one was to rely on the guidance cited herein, e-mails solely between board members, even a board majority, are not part of the official records, e-mails between the board and the manager are part of the official records and unit owner e-mail addresses are only subject to inspection where a unit owner has either consented to receive notice by e-mail or has consented in writing to the disclosure of his/her e-mail address. That having been said, it is in my opinion that e-mail communications that involve a board majority are still subject to the board meeting notice requirements already required by Chapter 718, Florida Statutes, more commonly known as the "Condominium Act."

 

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(12-25-13)

Your Association’s New Year’s Resolutions

 

For many of us, the cusp of a new year brings a time for reflection and resolution. New Year’s resolutions come in all shape and sizes. Maybe you want to resolve to eat healthier, save for retirement, take that dream vacation you’ve been dreaming of, or even adopt a new pet to name just a few. But, why stop there? Community associations can make New Year’s resolutions, too. The board’s adoption of New Years’ resolutions can be a great strategy to get things done. Maybe it’s time to amend and restate the governing documents, adopt new rules, become a 55 and over age restricted community, re-asphalt the roads, vote on installing windstorm protection for the entire condominium building and so much more. A New Year’s resolution is a plan for action (well, it can be anyway).

The New Year is a great time to resolve to stop smoking. Anyone who has quit smoking knows how hard it is to do. But, make no mistake about it, it can be done. There are no words that comfort a recent quitter going through nicotine withdrawal. Quitting smoking is more than just a decision … it’s a process, and the more support a smoker tying to quit can get, the better. Associations can lend a hand in the process, too, by adopting no-smoking policies. An association can even consider amending its governing documents to prohibit smoking and become a smoke-free community.

The Florida Clean Indoor Air Act, section 386.204, Florida Statutes, already provides a smoking ban for all the indoor common elements such as hallways, entryways and conference rooms. However, smoking in the outside common elements would remain permissible, unless prohibited in the governing documents.

As to prohibiting smoking inside of the privately owned units, Florida has not yet developed substantial case law on the subject. However, the Florida Supreme Court’s decision in the oft cited Woodside case stands for the proposition that the will of the associations’ members, through adoption of new restrictions, is not only permissible, but is judicially supported, too. So long as that holds true, the only question remaining is whether existing smokers would have a claim for being "grand-fathered." Clearly, the board should discuss all of the pros and cons of creating a smoke-free community with the association’s lawyer.

In a 2009, Florida Division of Arbitration case, Belleair Palms Terrace Association v. Smalenberger, where a unit owner was alleged to have removed extensive portions of the common element drywall in his unit which facilitated the passage of cigarette smoke into adjoining units, the unit owner was ordered to restore all drywall in his unit and to cease smoking in the unit during the required installation of the drywall.

While County Court cases do not provide precedential value, they can at least provide some limited guidance. In one such Broward County Court Case, Merrill v. Bosser, the court found that excessive smoke gave rise to a claim for trespass.

In Massachusetts, where a resident brought a claim against their neighbor due to the noxious smoke, the court found that the second hand smoke was considered a breach of the "covenant of quiet enjoyment."

Interestingly, as far back as 2006, a Colorado court ruled in favor of a no smoking amendment to a declaration of condominium. The court found that the passage of the amendment to the Declaration of Covenants, Conditions and Restrictions was proper, reasonable, made in good faith and not arbitrary and capricious. The plaintiffs who challenged the no-smoking ban were not able to establish that the newly adopted no-smoking amendment violated public policy or otherwise abrogated a constitutional right.

Consider taking a few minutes at your next board meeting to adopt a few resolutions for your community. Then, tell all of the members, and make it happen. Above all, have a great 2014 and HAPPY NEW YEAR!!!!!

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(12-11-13)

Holiday Decorations or Religious Symbols ... You Be The Judge

Holiday cheer is in the air. Thanksgiving and Hanukkah have passed. Christmas is almost here. It’s time to decorate. You know what that means, right? Right! It’s time again to re-visit holiday decorations in the context of condominium and homeowners’ associations. HOAs are indeed fortunate and good tidings are abundant because unless the HOA’s declaration provides to the contrary, the HOA’s board of directors decides matters pertaining to material alterations. Comparatively, for condominium associations, unless their declaration provides to the contrary, seventy-five percent of the members must approve material alterations. So, while an HOA can decorate their common areas to their heart’s content, it’s not always so easy for a condominium association to follow suit. Some condominium associations argue that since day one their holiday decorations are displayed from Thanksgiving through New Years and, therefore, the failure to display the decorations would also be a material alteration upon which a member vote would be required.

While some holiday decorations are of a secular nature, others are clearly religious symbols. A reader once asked, "If our community displays 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 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, all members who request displaying their religious symbols should be allowed to do so as well.

In a different case, the United States Supreme Court held that, "the determination of whether decorations are used for religious purposes, 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 decoration in question is judged according to the standard of the "reasonable observer."

Even though Christmas trees once carried religious connotations, the Supreme Court found that a Christmas tree, by itself, is not a religious symbol. "[T]oday [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, the Supreme 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 "recognizes that both Christmas and Hanukkah are part of the same winter holiday season, which has attained a secular status in our society." We learn from their logic that a menorah display, without a Christmas tree nearby, is a religious object, but when displayed together, the menorah is secular.

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. Remember, to avoid claims of religious discrimination, too. Once your community displays a religious symbol, it will need to allow other requested religious symbols. 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. In the meantime, please pass the latkes and eggnog. HAPPY HOLIDAYS!

 

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(11-27-13)

NO TRUCKS ALLOWED

Well, most trucks are not allowed

If you live in a community association, and most especially if you serve on the board of directors, you must have a basic understanding of Federal laws that provide certain established rights to persons with disabilities. These laws require housing providers, which includes community associations, to make reasonable accommodations for persons with disabilities. A reasonable accommodation is a change in rules, policies, practices, or services so that a person with a disability will have an equal opportunity to use and enjoy a dwelling unit or common space. The HUD.gov website explains that "a housing provider should do everything [it] can to assist…" However, this does not include an expectation that the housing provider pay for the requested reasonable accommodation unless the expense is of a de minimis nature. Reasonable accommodations can be required at all stages of the housing process, and this includes the association’s application process for prospective owners.

The Federal Fair Housing Laws define a person with a disability as "‘[a]ny person who has a physical or mental impairment that substantially limits one or more major life activities; has a record of such impairment; or is regarded as having such an impairment.’ In general, a physical or mental impairment includes hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness [such as depression], AIDS, AIDS Related Complex, and mental retardation that substantially limits one or more major life activities. Major life activities include walking, talking, hearing, seeing, breathing, learning, performing manual tasks, and caring for oneself."

Requests for reasonable accommodations can vary greatly. To mention just a few: a request for a professional to "sign" at board meetings for a hearing impaired person, a request for a wheelchair ramp for the clubhouse, a request by a wheelchair bound person for a parking spot by the front door, a request for a hoist to lower and raise a disabled person into the pool, a request for a "service animal" (such as a guide dog for a visually impaired person); and a request for an "assistance animal" (most commonly, the emotional support happy dog (or other animal) for a person suffering from depression.

While future articles will address the similarities and differences between "service animals" and "assistance animals", today’s focus is on an association’s owner’s reasonable accommodation request for an otherwise prohibited vehicle such as, in this instance, an ambulance converted for private transport. As reported on October 30, 2013 on the HUD.gov website, the Department of Housing and Urban Development announced settlement of a claim against a Las Vegas homeowners’ association where it was alleged the HOA refused to grant a reasonable accommodation to a family who purchased an ambulance to transport their disabled son who could only be transported in a prone (lying down) position:

The U.S. Department of Housing and Urban Development (HUD) announced that a Las Vegas homeowners association, its management company, and the owner of a rental property will pay $65,000 under a Conciliation Agreement resolving allegations that they violated the Fair Housing Act when they refused to grant a family’s request to park in the driveway of its home an ambulance that the family needed to transport its son, who has a disability, to and from medical appointments.

The Fair Housing Act prohibits discrimination based on disability and requires housing providers, including homeowners associations, to make reasonable accommodations in their rules, policies, practices or services when needed to provide persons with disabilities an equal opportunity to use or enjoy a dwelling.

"Homeowners associations must grant reasonable accommodations that enable residents to meet the needs of family members with disabilities," said Bryan Greene, HUD’s Acting Assistant Secretary for Fair Housing and Equal Opportunity. "Homeowners associations have the same responsibility as housing providers to follow fair housing laws."

The family filed a complaint with HUD alleging that, after it purchased an ambulance to transport its son to and from medical appointments, the homeowners association refused to permit the family to park the ambulance in the family’s driveway. The son’s disability makes it necessary to transport him in a prone position. The family alleged that, despite providing the homeowners association with a letter documenting the family’s need for the ambulance, the association and its property management company refused the family’s requests, citing association rules that do not allow residents to park commercial vehicles on their properties.

Under the terms of the conciliation agreement, Harbor Cove Homeowners Association, First Columbia Community Management, Inc., and HAE Investments, LTD, will pay $65,000 to the family and establish a reasonable accommodation policy for future requests. In addition, the parties agree to revise the management practices, rental agreements, and occupancy rules of Harbor Cove Homeowners Association to better accommodate the needs of persons with disabilities.

While there is no doubt as to legitimacy of the aggrieved family’s need for the ambulance to transport their disabled son, these events illustrate two areas of abuse, too. The first type of abuse occurred by the HOA’s board when it denied the requested transport vehicle. The second type of abuse is the type where a 6’4", 370 pound mammoth of a man named "Bubba", feigning a disability that was recognized only by a "social worker" with no medical training, makes a reasonable accommodation request for his "dually" truck (those big trucks with 4 rear tires that are great for towing other vehicles) followed by a request for his 7 pound designer malti-poo. Presently, doctors, PHD’s, social workers and other mental health professionals (whoever/whatever they are) can all substantiate the disability. But, until the Federal Laws are amended to require that only doctors and PHD’s are able to substantiate the disability, the potential for abuse will continue, and it may not be too long before "Bubba" lives in your community.

Wishing everyone a joyous Thanksgiving day and for those who celebrate Hanukkah, too, a very happy Thanksgivukkah!

 

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(11-13-13)

Financial Reporting Requirements Followed by an Interesting Turnover Case

Before you know it, 2014 will be here. Many associations end their fiscal year on December 31st. With that in mind, this is a great time to review the financial reporting requirements.

Within 90 days after the end of the fiscal year, or annually on such date provided in the bylaws, the association must have prepared a financial report on the financial activities of the preceding fiscal year. Within 21 days after the financial report is completed, but no later than 120 days after the end of the fiscal year, the board must provide each member with a copy of the financial report or, at a minimum, provide written notice that a copy of the financial report is available upon request, at no charge to the members.

The financial report must consist of a complete set of financial statements prepared in accordance with generally accepted accounting principles. The level of financial reporting that must be prepared by the board is based on the total annual revenue (including reserves) of the association, as follows:

1. An association with total annual revenues of $150,000 or more, but less than $300,000, shall prepare compiled financial statements.

2. An association with total annual revenues of at least $300,000, but less than $500,000, shall prepare reviewed financial statements.

3. An association with total revenues of $500,000 or more shall prepare audited financial statements.

4. An association with total annual revenues of less than $150,000 shall prepare a report of cash receipts and expenditures.

Interestingly, if the board desires to raise the level of financial reporting, it may be increased without membership approval by board action alone, unless the governing documents provide otherwise. In addition, if the board is not inclined to approve a heightened level of reporting, but the members want to do so, then upon twenty (20%) percent of the parcel owners petitioning the board to increase the level of financial reporting from that required by Statute for that fiscal year, the board must notice and hold a membership meeting within thirty (30) days of receipt of the petition. To raise the level of financial reporting, a majority of members present at such meeting must cast their vote in favor of doing so.

However, lowering the reporting threshold is a different matter entirely because only the members can make that decision. To accomplish this, a majority of members present at a properly noticed membership meeting must cast their vote in favor of lowering the level of financial reporting. The meeting must take place prior to the end of the fiscal year in question.

On a completely different note, and interesting nonetheless, just two weeks prior to turnover, the developer, in Courvoisier Courts, LLC v. Courvoisier Courts Condominium Assoc. Inc., a 2012 case decided by Florida’s Third District Court of Appeal (the "3rd DCA"), assigned the remaining limited common element parking spaces and storage spaces to one of its remaining units still for sale and thus still under the control of the developer. In brief, "common elements" are owned by all of the unit owners together in indivisible shares. Typically all unit owners have the right to use the common elements. On the other hand, "limited common elements" are a subset of the common elements where only particular unit owner(s) have the right of use associated with the limited common element at issue. For example, while the condominium parking lot is typically a common element (meaning all owners have the right to traverse it), the parking spaces may be limited common elements (meaning only the assigned unit owner has the right to use their assigned parking space).

In Courvoisier Courts, the association argued that the developer was required to turn over all of the remaining limited common elements as a part of the turnover requirement and that the developer’s right to the remaining parking and storage spaces terminated upon turnover. The trial court agreed with the association and ordered the developer to convey all limited common elements to the association. The developer appealed, and the 3rd DCA reversed the trial court’s decision.

In so doing, the 3rd DCA looked to the declaration of condominium and noted that "[a]ny parking spaces and storage spaces that have not been assigned by the time Developer has sold all Units owned by it will become common elements and become the property of the Association." Since the developer assigned the remaining limited common element parking spaces and storage units prior to turnover, the court ruled in favor of the developer affirming controlling case law that provides a court may not violate the clear meaning of a contract in order to create an ambiguity.

 

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(10-30-13)

Short Sales, Construction Indemnity, Attorney Fees 

and Other Interesting and Important News

What do short sales, Florida’s Marketable Record Title Act, construction agreement indemnities, the term, "defalcation", prevailing party attorney fees, and the implied covenant of good faith and fair dealing have in common? Well, not too much, except that they are discussed in today’s Rembaum’s Association Roundup.

Did you know, generally speaking, that forgiveness of a real estate loan is considered a taxable event by the I.R.S.? For example, say a homeowner owes $400,000 to their lender for their home that, due to market conditions, is only worth $300,000. If the lender allows the homeowner to short-sell the property for the lesser amount of $300,000, then the homeowner has received a taxable benefit of $100,000, meaning the homeowner would be expected to pay income tax on the forgiven $100,000 portion of the debt. Until now there has been legislation in place that acts to prevent the I.R.S. from taxing the homeowner for that portion of their loan that was forgiven by the lender. However, the legislation will expire on December 31st. With that in mind, if you are short selling your home, you might consider doing so prior to the new year or hope that Congress extends this benefit.

The Marketable Record Title Act, or MRTA for short, is set out in Chapter 712, Florida Statutes. MRTA operates to extinguish covenants recorded against real property not sooner than 30 years after the covenant was recorded against the property. While MRTA operates against homeowners’ association declarations, it does not operate against condominium association declarations. In Southfields of Palm Beach Polo and Country Club HOA v. McCullough, a 2013 case, the Fourth District Court of Appeals recently held that an HOA has a duty, which can be enforced by mandatory injunction, to take certain steps to prevent the horrible effects of MRTA from operating against a homeowners’ association. So, if your HOA’s declaration was recorded close to 30 years ago, then time is of the essence to ensure the effects of MRTA don’t begin to render your HOA declaration meaningless.

As to construction contracts, remember that if the contractor promises an unlimited indemnity in the event of damages, the contractor’s promise is absolutely meaningless unless the promise to indemnify contains a monetary cap. We are reminded by the First District Court of Appeals, in Griswald Ready Mix Concrete v. Reddick, a 2012 case, that Florida Statutes, section 725.06 requires the contractor’s indemnity to contain a monetary limitation in order to be enforceable.

In the "Jeopardy" category of words you have likely never heard of … for $500.00, Alex, comes the term "defalcation" (pronounced, dee-fal-kay-tion). It is a term used in Title 11 of United States Code, Section 523 and refers to the failure of a fiduciary to produce the funds entrusted to them. The Eleventh Circuit has held in the matter of In Re Bullock, that to be accused of "defalcation" the person holding the funds need not have engaged in fraud, embezzlement or even misappropriation, but does require more than mere negligence… such as being "objectively reckless" to give rise to a claim for defalcation.

As to a community association seeking prevailing party attorney fees for enforcing the terms of its declaration, in Alorda v. Sutton Place, the Second District Court of Appeals held that if the covenants provide for a legal remedy, and instead the association sued the non-conforming owner for injunctive relief for refusing to comply with the covenants, then even though the association prevailed, it is not entitled to prevailing party fees as to the injunctive relief it won.

Finally, in QBE Insurance Corp. v. Chalfonte Condominium Association, Inc., a 2012 case, the Florida Supreme Court reminds us that Florida contract law recognizes "an implied covenant of good faith and fair dealing" in every contract. "This implied covenant is intended to protect ‘the reasonable expectations of the contracting parties in light of their express agreement’." Further, it must relate to the performance of a specific term of the contract.

 

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(10-16-13)

Vague Architectural Standards?

What Every Board Member Needs To Know!

If your association seeks to compel compliance with
the maintenance provisions of its governing documents,
before filing a lawsuit the association first needs to ensure that there are clear and unambiguous standards and that the offending owner is not only informed of the violation, but also, informed of the specific steps that must be undertaken to bring the property into compliance.

In September 2013, the Fifth District Court of Appeals rendered its decision in Boyle v. Hernando Beach South Property Owners Association, Inc. (the "Association") in regard to whether a homeowners’ association was entitled to an injunction against Boyle, a homeowner, for failing to properly maintain his lot. More specifically, it was alleged that his landscaping and trees needed to be trimmed and properly maintained and that the mold on the home needed to be cleaned or removed. The association had filed a lawsuit seeking an injunction to force the owner to comply with the covenants. The trial court agreed and issued an injunction.

The resulting specifically required defendant Boyle to "properly maintain[ ] and trim[ ] the landscaping and trees and clean[ ] or remov[e] the mold on the home." The injunction further provided that "if Boyle fail[ed] to comply, the Association may enter and maintain the property and place a lien on the property that could be foreclosed if the costs incurred by the Association in bringing the property up to standard are not paid."

The trial court case was resolved as a result of the "summary judgment" proceedings which are employed as a part of litigation, as we are reminded by the Fifth DCA, "to avoid the expense and delay of trials when all facts are admitted or when a party is unable to support by any competent evidence a contention of fact." To prevail in such a motion, the moving party must prove that there are no genuine issues of material fact and that the moving party is entitled to judgment in their favor as a matter of law.

During the trial court’s motion for summary judgment hearing, the association presented "affidavits of five officers and directors of the Association stating that, based on their personal knowledge, Boyle ‘failed to properly maintain his lot… Specifically, the landscaping and trees need to be trimmed and properly maintained. Additionally, mold on the home needs to be cleaned/removed.’" The trial court agreed and granted the injunction compelling Boyle to properly maintain his landscaping and clean or remove the mold.

Then homeowner Boyle filed an appeal arguing that there were material issues of fact in dispute, and therefore, the trial court’s summary judgment order was inappropriate and "that the supporting affidavits were insufficient." Boyle also contended that his affirmative defenses were not properly negated by the Association and "the pertinent part of the [covenants were] vague and ambiguous." [emphasis added]

On appeal, Boyle argued that the summary judgment evidence in the record did not indicate "how he was in violation of the [covenants]." In regard to the landscaping and trees, the Fifth DCA agreed. In so doing, the Fifth DCA held that the affidavits submitted by the Association merely mirrored the allegations of the complaint filed by the Association reasserting that Boyle’s landscaping and trees were not properly trimmed and maintained. But there were no allegations and there was no evidence presented to show how the landscaping and trees had not been properly maintained and trimmed.

The Court held that given the lack of evidence presented by the Association to establish that Boyle’s landscaping and trees were not maintained "in a neat, clean and orderly condition," it is unclear how Boyle had violated the covenants and what steps he needed to take to ensure that his landscaping and trees are in compliance.

Interestingly, the Court found that the mold on the house was another matter that did not suffer from the same infirmities as the issue regarding the landscaping and trees because the mold on the house was established by the statements made in the affidavits, which, in the eyes of the Court, left no room for speculation or conjecture. The existence of mold on the subject home was a readily observable fact to the five board members who swore to their personal knowledge, which was not refuted by counter-affidavit or other proof.

In the end, the Fifth DCA reversed the part of the trial court order regarding the landscaping and trees and upheld the part of trial court order regarding the mold. The reported decision of this case evidences that Boyle had refuted the landscaping claim against him, and Boyle had not similarly refuted the mold claim. Had Boyle done so, then perhaps the Fifth DCA would have also overturned that part of trial court’s order, too.

In any event, there is nugget to be gleaned from this case. If an association is going to seek a court order to compel compliance with the governing documents, it first had better ensure there clear standards and that the offending homeowner is informed of the steps that must be taken to bring their property into compliance.

 

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(10-2-13)

Condominium Association Neighborhood Watch Gone Rogue

This week, Palm Beach Post writer, Jan Musgrave, re-ported on yet another community association security debacle that tragically led to a shooting and near fatality. Of course, everyone is familiar with George Zimmerman and the senseless death of Trayvon Martin. The tragedy at the center of this story, while only recently concluded, began in 2010.

On September 25, 2013, The Palm Beach Post (the "Post") reported that the Northlake Villa Condominium was ordered to pay $1.5 million dollars to the victim of a shooting where the assailant, Jack Abrams, was the associations "deputized" security guard and who wasn’t even an owner, but was the live-in boyfriend of a board member. Because Abrams had been appointed by the association’s board to enforce the condominium’s rules and regulations, a Palm Beach County jury last week found that the association was liable for Abrams’s inexplicable fit of anger.

The Post reported that, in 2010, Abrams "lost it" when a woman left the condominium’s laundry room door open. Abrams vented his displeasure loudly. The woman’s boyfriend, wondering what the commotion was, ventured into the hallway where Abrams proceeded to shoot him three times leading to, as reported, 24 blood transfusions, 12 surgeries, and more to come. During the trial, the Post reported that the following facts were presented:

• When the board appointed Abrams, no background checks were done.

• Abrams received an "other than honorable discharge" in 2000 from the U.S. Marines Corps for drug use and other character flaws.

• A psychiatrist and psychologist who examined Abrams, as part of the criminal case, agreed he suffered from post-traumatic stress disorder and paranoia.

• When North Palm Beach police searched his apartment, they discovered an arsenal of weapons including five guns, seven combat knives, and 1,400 rounds of ammunition.

• Others testified about Abrams’s increasingly erratic behavior. It was reported that he accosted people in the parking lot if they didn’t park their cars between the lines.

• The day before he shot the victim, he told one resident: "I’m getting so sick and tired of this laundry room. I’m going to kill someone over it."

… Sadly, that is exactly what he did. Abrams shot the owner’s boyfriend "due to a mixture of rage and intoxication." While a security expert testified during trial that such "poor decision-making by neighborhood and condo associations is becoming increasingly common", it was not poor decision making that led to the judgment against the condominium. Rather, it was that the board failed to act. By failing to act, the board conducted itself with reckless abandon.

The "standard" by which association board members should conduct themselves is referred to as "reasonable business judgment." In plain English, this does not mean a board must always be right in their decision making. Rather, they must act reasonably under the circumstances. So, when a board defies the requirements of its own governing documents by deputizing a non-owner as a defacto committee chair of security, turns a blind eye to reports of its residents as to Abrams’s erratic behavior, and fails to conduct even a simple background check before appointing individuals to the neighborhood watch committee, it’s not likely anyone would believe the board acted reasonably. Rather, the board acted with a reckless and wonton abandon endangering the life of every owner, tenant, and guest.

It can be difficult to determine the fine line between acting with reckless abandon as compared against making, what may turn out to be, a really dumb decision. The Northlake Villa Condominium learned the hard way that there is such a line. Will George Zimmerman’s community association bear financial liability for the death of Trayvon Martin? Did his association’s board act with reckless abandon and fail to fulfill its duty by exercise of its reasonable business judgment?

Interestingly, the State of Georgia’s appellate courts have held that a condominium association, being a purely legislative created form of ownership (similar to Florida’s condominium regime) does not owe a duty to provide security in the common areas where it previously disclaimed such responsibility in its declaration of condominium. Likely, this would be true in Florida, too.

However, when a board fails to act when it should have, there are very real consequences. The Abrams case teaches us that where an association creates a neighborhood watch committee, the board should take "reasonable" (there is that word again) measures during the appointment process, such as running background checks and ensuring those appointed to office meet any requirements set out in the governing documents.

To the reader who asked whether an association member who owns a concealed weapon permit is allowed to bring their weapon into the "no weapons allowed" clubhouse, the answer is "yes, they are." However, to the extent the member makes it known that he or she is carrying a concealed weapon, they are likely in violation of state laws, as the weapon is not concealed if its owner chooses to waive concealment by blabbing about it.

 

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(9-18-13)

A Member’s Right to Challenge Their Declaration

The association’s "declaration of covenants and restrictions" is a contract between the association and its members. Amongst other things, it provides for the rights and obligations of both parties. Until recently, lawyers often debated the statute of limitations applicable to a community association member’s legal challenge of their association’s member approved amendment(s). Generally speaking, section 95.11, Florida Statutes, provides that a legal action based on a contract dispute must be brought within five years from the time the aggrieved party knew, or should have known, of the matter that is the subject of the litigation.

In this context, lawyers often disagree as to when the five year period begins to accrue. For example, do the five years begin when the amendment is recorded, or some other time, such as when a member took title to their property? Of course, in the latter example, the association would never truly be free from a new owner’s challenge. Additionally, if a potentially aggrieved member is time barred from challenging an amendment, then by simply re-titling their property from themselves to perhaps a family trust, they could likely bring in an otherwise time barred claim. Drawing from municipal law cases, lawyers representing associations often argue that the five year statute of limitations should begin to run from the date an amendment is recorded.

Recently, an association member upset about an amendment requiring members to pay mandatory country club fees filed a lawsuit against her association. The trial court entered summary judgment in favor of the association because the amendment had been in effect for greater than five years. However, the 4th District Court of Appeal reversed on August 24, 2013, when in Harris v. Aberdeen Property Owners Association, Inc., et al, Case. No. 4D12-1435 (Fla. 4th DCA 2013), the Court held that "until Harris took title [to her HOA lot] in October of 2006 or, alternatively, until she was assessed membership fees, there was no "immunity, power, privilege or right of the complaining party" that was "dependent upon the facts or the law applicable to the facts … Because Harris filed suit within five years of taking title, it was an error for the trial court to enter summary judgment based on the statute of limitations."

This case is not a good one for community associations because it means that any member of an association can challenge the declaration and its amendments for the first five years of that member’s ownership of their lot (or unit) without regard to age of the declaration or the amendments. In other words, and as absurd as it sounds, an association’s declaration and its amendments are never free from the legal challenges so long as the challenge is brought by a member(s) who has not owned their property for at least five years.

Associations, like governments, should have the absolute right to know when their declaration and its amendments are free from member challenge. ATTENTION ALL FLORIDA LEGISLATORS: A LEGISLATIVE FIX TO THIS DEBACLE IS NEEDED!

 

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(9-4-13)

Attention HOA Board Members

The $24.99 Rule

As of July 1, 2013, many new laws concerning community associations went into effect. If you serve on a homeowners’ association board, there is a new law on the books you might want to discuss at the dinner table. Well, that may not be the best place because, if you are not careful, it might be your last meal as a homeowners’ association board member. Florida Statute, section 720.3033, now provides, in part that,

"an officer, director, or manager may not solicit, offer to accept, or accept any good or service of value for which consideration has not been provided for his or her benefit or for the benefit of a member of his or her immediate family from any person providing or proposing to provide goods or services to the association….

However, an officer, director, or manager may accept food to be consumed at a business meeting with a value of less than $25 per individual or a service or good received in connection with trade fairs or education programs."

As punishment for eating a meal costing $25.00 or more, the new law takes an odd twist. The remaining board members now have the legislative authority to "kick" the accused board member off the board for enjoying a business meal costing $25.00 or more. (It’s ok, your eyes are not playing tricks. It is true.) Read it for yourselves…. section 720.303 also provides,

"If the board finds that an officer or director has violated this subsection, the board shall immediately remove the officer or director from office. The vacancy shall be filled according to law until the end of the director’s term of office."

In an even odder twist of fate, the law does not provide any guidance whatsoever as to how the remaining board members are to decide the guilt or innocence of the accused violator. Should the standard be "beyond a reasonable doubt" (meaning without a doubt.. 100% guilty), "by a preponderance of the evidence" (meaning greater than 50% chance the accused is guilty) or maybe the standard should be "clear and convincing evidence" (meaning that the burden of proof is somewhere in between the former two categories). Come to think about it, is the accused board member even entitled to any type of notice of the accusations, hearing, and trial? Is the accused board member entitled to defense?

An interesting question is whether the $25.00 limitation also applies to a "service or good received in connection with trade fairs or education programs"? A plain reading of the new legislation could be interpreted to mean that there is no limit on the value of the good or service received in connection with a trade show or fair. It’s not too likely that was the intent of the legislation, but…

On a related note, if the association enters into a contract or other transaction with any of its directors, or a company in which any of its directors are financially interested, the new legislation provides that the board must enter certain disclosures required by law into the written minutes of the meeting. In addition, the board must approve the contract by an affirmative vote of two-thirds of the directors present, compared to the typical majority otherwise required.

Then, at the next regular or special meeting of the members, the board must disclose the existence of the contract to the members. Upon motion of any member, the contract must be brought up for a vote and may be canceled by a majority vote of the members present. If the members cancel the contract, the association is only liable for the reasonable value of goods and services provided up to the time of cancellation, and is not liable for any termination fee, liquidated damages, or other penalty for such cancellation.

With all of this in mind, homeowners’ association board members would be wise to bring a box lunch and eat dinner at home.

 

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(8-21-13)

All that Glitters is Not Gold

Every now and then you might read about a home-owner who defaulted on his or her mortgage and ended up getting their house for FREE. This past Sunday is no exception. In the August 18, 2013 edition of the Palm Beach Post, Staff Writer Kimberly Miller’s headline article is titled "How to get your house for free: Rare but possible." This well written, in-depth article begins with the following sentence:

"Florida’s five-year deadline to foreclose on a home is ticking on thousands of aging cases statewide, giving lucky borrowers a shot at a free house and catching banks with muddled files unaware."

While the title to the article is catchy, Ms. Miller very quickly points out that "a very specific set of circumstances must be in play for a homeowner to walk away a jack pot winner." Actually, you’re likely to have a better chance of being hit by lightning… over and over again. To be the recipient of such a windfall, you’ll need a very perfect storm. Let’s take a deeper look into the circumstances minimally needed to set such a stage.

At its core, the mortgage and note between the lender-bank and its borrower is a contract. Whenever there is a breach of contract, only a limited period of time exists for the non-defaulting party to file a lawsuit against the party that caused the breach. Section 95.11, Florida Statutes, provides that an action to foreclose a mortgage and an action based on a breach of contract obligation, or liability founded on a written instrument must be commenced within five years from the date the non-defaulting party knew, or should have known, of the activity that gave rise to the default. In the context of a borrower who defaults on their mortgage payments, the lender has five years to bring their lawsuit to foreclose their mortgage and note against the defaulting borrower. In the most simplistic terms possible, the "note" is defined as a contract that holds the borrower responsible for the monies borrowed, while the "mortgage" is defined as the contract that allows the lender to recover the collateral, in this case, the house, from the defaulting borrower (and most times from any other party who acquires the property prior to the conclusion of the lender’s foreclosure action).

The lender actually has five years from the date the last payment is due to foreclose their mortgage. How then does the occasional lender find themselves in the opposite position of being foreclosed out of foreclosing their own defaulting borrower? It’s actually quite simple.

The majority of all mortgages contain a provision that allows the lender to accelerate all the remaining payments in the event of a borrowers default. As a knee-jerk reaction to a borrower’s failure to make timely payments, prior to initiating the foreclosure lawsuit, the lender will often accelerate all remaining payments. For example, if a borrower entered into a 30 year loan on January 1, 2000, the lender would have until January 1, 2035 to finally file a lawsuit to foreclose their mortgage and note. However (and this is a big "however"), if the borrower stopped making his or her mortgage payments on January 1, 2010, and, as a result, the lender accelerated all of the remaining sums due, then the lender would only have five years (through January 1, 2015) in which to bring its foreclosure lawsuit. In that scenario, if the lender did not file its foreclosure lawsuit by January 1, 2015, then "all the glitters" might just turn into gold after all.

As a result of the 2007 real estate market collapse, thousands of borrowers ended up defaulting in their loan payments. In response, lenders accelerated all remaining payments and initiated foreclosure lawsuits. Only afterwards did many lenders get caught with their proverbial pants down when they realized they did not have the necessary documents to foreclose their loans. Meanwhile, as the Steve Miller Band would sing in their noted song, "Fly Like an Eagle"… "time keeps on slippin’, slippin’, slippin’ into the future." Before you know it, five years has passed since the time of the lender’s decision to accelerate its mortgage and then… OOPS!

 

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(8-7-13)

2013 ASSOCIATION LEGISLATION, selected provisions

HOA BOARD MEMBER CERTIFICATION. Effective July 1, 2013, within 90 days of taking office, all HOA board members are required to become "certified" by either taking an approved HOA Board Member Certification Course or by certifying in writing that the board member has read the association’s declaration of covenants, articles of incorporation, bylaws, and current written rules and policies; that he or she 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.

To meet this new requirement, Attorney Jeffrey Rembaum, of Kaye Bender Rembaum, Attorneys At Law, will be presenting three (3) FREE HOA Board Member Certification Courses, generously sponsored by FirstService Residential (formerly, The Continental Group). These FREE courses will be held on August 13 and 27, from 12:30 PM to 2:30 PM and August 20, from 7:00 PM to 9:00 PM at the South County Civic Center located at 16700 Jog Road, Delray Beach. To reserve your seat(s), contact Janeal Aponte at 561-989-5064 or Janeal.aponte@fsresidential.com.

In addition, Kaye Bender Rembaum, Attorneys At Law, is offering the following FREE HOA Board Member Certification Courses from 6:30 PM to 8:30 PM on August 27, September 24, and October 29 in the Firm’s beautiful Pompano Beach office located at 1200 Park Central Boulevard, South. To reserve your seat(s), contact Odalis Milanes at 954-928-0680 or Odalis@KBRLegal.com.

A MEMBER’S RIGHT TO SPEAK. At members meetings, all HOA members have the right to speak for at least three (3) minutes on all items open for discussion or included in the agenda without regard to any provision to the contrary in the governing documents or rules adopted by the board or membership. Similarly, at board meetings, all HOA members also have the right to speak on all items open for discussion or included in the agenda, however, the law does not provide for the same minimum three (3) minutes. In both instances, the board can adopt reasonable rules regarding frequency, duration, and other manner of member statements. Every board should consider doing so. As compared to condominium associations, a condominium association member has the right to speak only with reference to all "designated agenda items" at both member meetings and board meetings. Similarly with HOAs, a condominium association may adopt written reasonable rules governing the frequency, duration and manner of member statements. In the condominium context, there are no statutory time limitations imposed on member statements.

ELECTION CHALLENGES & RECALLS. Any challenge to a condominium or homeowners’ association election process must be commenced within sixty (60) days after the election results are announced. Recall attempts cannot be conducted until at least sixty (60) days after the election and not within the sixty (60) day period prior to the subsequent election.

A NEW TAX LOOMS OVERHEAD (A/K/A THE BOSTON TEA PARTY, CONTINUED). You likely already know that the Division of Florida Condominiums, Timeshares and Mobile Homes (the "Division") requires condominium associations to pay a fee (aka, a tax) of approximately $4.00 per unit, per year. The revenue is used to offset the Division’s operating costs and programs. But, did you also know that the Florida Legislature diverts the lion’s share of this collected revenue for other expenditures not all related to the Division’s needs by commingling the revenues into the State’s general coffers?

Apparently, the Legislature is considering reaching even deeper into your wallet. By November 22, 2013, every HOA is required to inform the Division of, amongst other things, the total number of parcels and total amount of revenues and expenses from the association’s annual budget. The collected information is to be presented to the Governor, the President of the Senate, and the Speaker of the House of Representatives by December 1, 2013, and each year thereafter. For what other reason could such information be required, if not to consider additional taxes? Perhaps we should all meet by the intracoastal waterway, tea in hand...

NEW HOA OFFICER AND DIRECTOR CONFLICT OF INTEREST LAWS. If the association enters into a contract or other transaction with any of its directors or other entity in which an association director is also a director or officer or is financially interested (except in other community associations), the board member (1) must disclose the facts of the relationship, (2) such facts must be entered into the minutes, (3) an affirmative vote of two-thirds of the directors present is required to approve the contract (minus the vote of the interested/conflicted director), and (4) the contract or transaction must be fair and reasonable. In addition, at the next regular or special meeting of the members, the existence of the contract (or transaction) must be disclosed to the membership. Upon motion of any member, the contract or transaction shall be brought up for a vote and may be canceled by a majority vote of the members present. If the members cancel the contract, the association is only liable for the reasonable value of goods and services provided up to the time of cancellation and is not liable for any termination fee, liquidated damages, or other penalty.

A HOA director or officer charged by information or indictment with a felony theft or embezzlement offense involving the association’s funds or property is removed from office, and the board must fill the vacancy. However, if the charges are resolved without a finding of guilt or without acceptance of a plea of guilty or nolo contendere, the director or officer must be reinstated. A HOA member who has such criminal charges pending may not be appointed or elected to a position as a director or officer.

A HOA is required to maintain insurance or a fidelity bond for all persons who control or disburse funds of the association. If annually approved by a majority of the voting interests present at a properly called meeting of the association, the association may waive the requirement of obtaining an insurance policy or fidelity bond for all persons who control or disburse funds of the association. Why would members vote to do that?

The board must immediately remove an officer or director from office if the board finds that such person solicited, offered to accept, or accepted any good or service of value for which consideration has not been provided for his or her benefit or for the benefit of a member of his or her immediate family from any person providing or proposing to provide goods or services to the association, excluding food to be consumed at a business meeting with a value of less than $25.00 per individual and services or goods received in connection with trade fairs and education programs. It is not clear from a plain reading of this new legislation whether the $25.00 cap is intended to also apply to services or goods received in connection with trade fairs and education programs.

 

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(7-24-13)

Revisiting Homeowners’ Association’s Developer Liability for Off-Site Improvements

About a year ago, Rembaum’s Association Roundup reported that the 5th District Court of Appeals ("5th DCA"), in Lakeview Reserve v. Maronda, recognized that the rights of homeowners’ association members included the implied warranty of habitability for off-site homeowners’ association improvements built by the developer such as roadways, drainage systems, retention ponds, underground pipes, etc. The sole issue in the case was whether the homeowners’ association could maintain its claim against the homeowners’ association’s developer for breach of the common law implied warranties of fitness and merchantability, also referred to as the "implied warranty of habitability."

Lakeview Reserve alleged that its developer, Maronda Homes, defectively designed and constructed the subdivision’s infrastructure, roadways, retention ponds, underground pipes, and drainage systems, breaching the implied warranties of fitness and merchantability for the residential home development and causing damage to the entire residential subdivision. Lakeview Reserve asserted that the defects were latent, as they were not readily discoverable by home purchasers who lacked specialized knowledge and were undiscoverable by home buyers upon the exercise of reasonable diligence at the time of purchase. Lakeview Reserve also alleged that it sustained serious damages due to the defects because one of its obligations as the homeowners’ association was to correct and repair the subdivision’s structural defects which impacted the homes in the development. Initially, the trial court agreed with the developer. On appeal, the 5th DCA reversed. This meant that the homeowners’ association could sue the developer for a breach of the implied warranty of habitability. Then, the Florida Legislature gutted the 5th DCA’s decision by passing new legislation, section 553.835(4), Florida Statutes, effective July 1, 2012.

Section 553.835(4), Florida Statutes, provides that "there is no cause of action in law or equity to a purchaser of a home or to a homeowners’ association based upon the doctrine or theory of implied warranty of fitness and merchantability or habitability for damages to offsite improvements." The statute defines the term "offsite improvements" as "the street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is not located on or under the lot on which a new home is constructed… and also includes the street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is located on or under the lot but that does not immediately and directly support the fitness and merchantability or habitability of the home itself." The law also provides that it applies to all cases accruing before, pending on, or filed after that date.

The Florida Supreme Court recently examined the retroactivity aspect of the new law, and, on July 11, 2013, held, in Maronda v. Lakeview Reserve, case No. SC10-2292, that, "for the retroactive application of a law to be constitutionally permissible, the Legislature must express a clear intent that the law apply retroactively, and the law must be procedural or remedial in nature. Remedial statutes operate to further a remedy or confirm rights that already exist, and a procedural law provides the means and methods for the application and enforcement of existing duties and rights. In contrast, a substantive law prescribes legal duties and rights and, once those rights and duties are vested, due process prevents the Legislature from retroactively abolishing or curtailing them."

The Florida Supreme Court found that section 553.835, Florida Statutes, is substantive and is not remedial in nature because it does not simply clarify an existing right, but rather, prescribes legal duties and rights. Therefore, the new law could not be constitutionally applied retroactively to Lakeview Reserve or to any causes of action that accrued before the law’s effective date. As to homeowners’ associations created after the effective date of section 553.835, Florida Statutes, unless the legislature amends or abolishes the law, there is likely little chance of successfully bringing a claim for breach of the implied warranty of habitability.

In rendering its decision, the Florida Supreme Court clearly expressed its unhappiness with the Legislature’s "side-stepping" the 5th DCA’s earlier decision, as evidenced by the Court’s comment when it declared, "the Legislature does not sit as a supervising appellate court over our district courts of appeal."

 

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(7-10-13)

Failed Condominium Projects … Now What?

Until not too long ago, if an investor or foreclosing lender acquired seven or more condominium units, there was limited legal authority from the Florida Division of Condominiums to hold that person or company in the shoes of the original developer for all of the construction defect liability and failed financial obligations. Then, along came the 2007 financial crash. Failed condominium projects were everywhere and sophisticated investors knew not to buy seven or more units for fear of tremendous liability for acts in which the investor did not at all participate. Enter, Part VII of the Condominium Act, Chapter 718, Florida Statutes … to the rescue.

In 2010, to solve this crisis, Part VII of the Condominium Act, was passed into law. It is appropriately titled, the "Distressed Condominium Relief Act". In short, the "Relief Act" allows a mechanism for investors to acquire failed condominium projects and then sell the units at arms length without acquiring the liability of the failed developer for any construction defects and/or assessment funding obligations of the failed developer. However, the acquirer of these bulk units is only labile for their own construction activities. There are even safe guards built into the Relief Act to protect against using it improperly as a shield against liability by prohibiting the bulk transferee from being related to the failed developer.

Before the Relief Act was enacted, and forgetting the "robo-signing" debacle that led to the lender foreclosure delays of an extreme magnitude, lenders were very reluctant to foreclose their failed condominium projects due to their inherent financial liability for construction defects and prior developer funding obligations. But, with the Relief Act springing into law, commerce resumed as failed condominium projects were taken over by sophisticated investors, and lenders saw fit to safely foreclose. Importantly, investors and lenders felt safe to acquire more than seven units from the failed condominium project.

AND THEN…

On February 27, 2013, in The Porto Venezia Condominium Association, Inc., v. WB Fort Lauderdale, the United States District Court for the Southern District of Florida held that a lender who loaned millions of dollars to a developer for construction of a condominium project and who accepted a deed in lieu of foreclosure for the now built, but unsold condominium units, could be liable to purchasers for what are commonly referred to as the Chapter 718.203, Florida Statutes, "statutory implied warranties of habitability" that form the basis of the cause of action against developers for construction defects arising from the original construction of the condominium. In short, the Southern District Court held that "WB" as the successor to the initial lender, "ING Direct, FSB", was still a "developer" and, as such, could be liable for the activities of the original developer during the forthcoming trial brought by The Porto Venezia Condominium Association.

Interestingly, the trial court had held that WB was not liable as a lender-developer and had held that, "having engaged in no construction itself, it could not be liable for construction defects." The trial court had also found that, "WB could not be liable under the Florida Building Code because it had not engaged in any construction." As for negligence, the trial court found that, "because all construction had been completed, WB did not breach any duty, even duties that could arise if a lender took an active part in developing a construction project." However, in overturning the trial court, the Southern District Court held that, "because the Florida Legislature crafted a broad definition of "developer" that captures both builder-developers and lender-developers, the Court should not have cut away statutory obligations that ride along with entities meeting that definition." Even the Southern District Court admitted that "it is peculiar to make a lender a guarantor of the construction of others, because Florida law elsewhere is clear that such liability is inappropriate."

So what does all this mean? It could mean that the Relief Act was not considered as a part of the Southern District Court’s analysis because it did not exist at the time the loan was made and still did not exist when WB took title as a result of its acceptance of a deed in lieu of foreclosure. It could also mean that, because the Southern District Court did not address the lack of applicability of the Relief Act in its written opinion, the WB case could again frighten lenders from lending on new projects and foreclosing failed condominium projects due to the lack of clarity in regard to the lender’s financial liability upon foreclosure of the condominium project. Perhaps the Florida Legislature will see fit to clarify the applicability of the Relief Act to encourage future lending practices.

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(6-26-13)

A Preview of Laws to Come

House Bill 73 and House Bill 7119 were signed into law and will become the law of the land on July 1, 2013. Let’s take a look at a few highlights of this legislation.

Official Records. A condominium and homeowners’ association shall allow a member, or his or her authorized representative, to use a portable device, including a smart phone, tablet, portable scanner, or any other technology capable of scanning or taking photographs, to make an electronic copy of the official records in lieu of the association’s providing the member, or his or her authorized representative, with a copy of such records. The association may not charge a member, or his or her authorized representative, for the use of a portable device.

Member Directories. A condominium and homeowners’ association may print and distribute, to parcel owners, a directory containing the name, parcel address, and telephone number of each parcel owner. However, an owner may exclude his or her telephone number from the directory by requesting in writing to the association.

Board Member Certification Requirements. Similar to the already existing condominium board member certification requirements, within 90 days after being elected or appointed to the board, all cooperative and homeowners’ association board members must either 1) submit a certificate of having satisfactorily completed the educational curriculum administered by a division-approved education provider within 1 year before, or 90 days after, the date of election or appointment OR 2) certify in writing to the secretary of the association that he or she has read the association’s declaration of covenants, articles of incorporation, bylaws, and current written rules and policies; that he or she 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. The written certification or educational certificate is valid for the uninterrupted tenure of the director on the board. A director who does not timely file the written certification or educational certificate shall be suspended from the board until he or she complies with the requirement. The board may temporarily fill the vacancy during the period of suspension.

Election Challenges. Any condominium or homeowners’ association election challenge must be filed within 60 days of the date of the election or the challenge is forever time barred. On the other hand, no recall of an existing board member may be conducted during the first 60 days of the board member’s service on the board.

HOA Amendments. Within 30 days after recording an amendment to a homeowners’ association’s governing documents, the association must provide copies of the amendment to the homeowners’ association’s members.

Member’s Right to Speak at HOA Members Meeting. The requirement that a member provide advance written notice to exercise their right to speak on all items on the agenda was deleted. Therefore, notwithstanding any provision to the contrary in the governing documents, or any rules adopted by the board or by the membership, a member and a parcel owner have the right to speak for at least 3 minutes on any item.

HOA Budgets. If reserve accounts are established by the developer, the budget must designate the components for which the reserve accounts may be used.

Financial Reporting for Homeowners’ and Condominium Associations. The threshold dollar values have changed. Total revenue of $100,000 $150,000 or more, but less than $200,000 $300,000, requires the association to prepare compiled financial statements.

Total revenue of $200,000 $300,000 or more, but less than $400,000 $500,000, requires the association to prepare reviewed financial statements.

Total revenue of $400,000 $500,000 or more, requires the association to prepare audited financial statements.

Total revenue of less than $100,000 $150,000, the association shall prepare a report of cash receipts.

An association that operates fewer than 75 50 units, regardless of the association’s annual revenue, shall prepare a report of cash receipts and expenditures in lieu of financial statements (as set out above).

Staggered Terms for Condominium Board Members. Reference to staggered terms and requirements for unit owner approval was deleted from The Condominium Act and replaced with the following, "If a condominium association’s bylaws or articles of incorporation permit terms of no more than two years the association board members may serve two year terms."

Condominium Association Hurricane Protection. The Condominium Act was amended to include impact glass, code-compliant windows or doors, or other types of code-compliant hurricane protection meaning that a unit owner who has installed other types of code-compliant hurricane protection that comply with the current applicable building code is entitled to receive a credit when the same type of other code-compliant hurricane protection is installed, and the credit shall be equal to the pro-rata portion of the assessed installation cost assigned to each unit.

Manager Liability. A new law was created that provides for disciplinary measures if a manager violates any provision of Chapter 718, Chapter 719, or Chapter 720 during the course of performing community association management services pursuant to a contract with a community association.

 

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(6-12-13)

2013 Interim Legislative Update

On June 7, Governor Scott signed House Bill 87 commonly referred to as the "Foreclosure Bill" or "HB 87" into law. As a result, so long as none of the defendants in the case raise a defense to the lender’s foreclosure, any of the parties can move the court for an "order to show cause for entry of final judgment of foreclosure." This step obviates the need for further hearings such as the motion for summary judgment and orders the clerk to set a sale date. If all goes according to plan, these new laws will be of great benefit to condominium, homeowners’, cooperative, and commercial associations as they will shave months and months from the otherwise languishing foreclosure process. However, when property is erroneously foreclosed, there is little hope for the homeowner to set aside the foreclosure and regain title to their property. At best, the homeowner in that situation can recover monetary damages but not their home. YOUCH! HB 87 became effective on the day Governor Scott signed it into law, June 7, 2013.

Not often mentioned in the news is Senate Bill 342 ("SB 342"). It was signed into law by Governor Scott on May 30, and provides that homesteaded property can be rented for as long as 30 days per calendar year without being in danger of losing a previously filed homestead exemption on the property. If the homesteaded property is rented for more than 30 days, then the owner is in great danger of losing their homestead exemption. SB 342 becomes law on July 1.

If you have been thinking about installing a solar pool heater or other renewable energy source device, there is new benefit thanks to House Bill 277 ("HB 277") which the Governor also signed on May 30. HB 277 acts to ensure that the appraised property tax value of your property cannot increase due to the installation of such equipment.

Have you heard about House Bill 999 ("HB 999")? Boat owners and marina developer- operators surely have! This legislation provides great incentive for the latter group to lease state submerged lands at a lease rate to be deemed fair by the Board of Governors, which fully waives the need for competitive bid. The legislation also provides a 30% discount to the lessee/marina owner-operator if they advertise their boat slip availability to the general public reciting in the ad, "first come, first serve."

The general public could really benefit from the legislation by way of many more affordable and leasable boat slips. But, there is a catch. For the marina owner to qualify for the 30% discount off the State’s annual sovereign land lease rate, the marina owner, leasing the marina’s land from the State, can only offer boat slip leases to the general public with a maximum term of 12 months. Also, the lease between the marina owner and the boat owner must not include any auto renewal terms. This means that boat slip lessees must remember to sign a new lease each year. This requirement will help ensure the boat slips remain in active use.

HB 999 also provides residential homeowners whose land borders "sovereign lands" what amounts to a no fee "use right" to build a maximum of four boat slips behind their single family home. In addition, owners in a multi-family development that has "multi-family docks" are not required to pay lease fees for a "preempted area" equal to or less than 10 times the shoreline times the number of units with docks in the multifamily development. This one almost sounds too good to be true, we’ll see…

Meanwhile, expansive community association House Bill 73 is just waiting to be presented to the Governor. Upon becoming law, it will provide that, amongst many other changes, homeowner association board members must complete certification requirements similar to what is already in effect for condominium association board members and provides association owners the right to use their own electronic portable devices to make copies of the association’s official records. Senate Bill 120, also waiting to be presented to the Governor, will create a new type of condominium regime for "condos in a condo" through creation of some new concepts including "primary condominiums" and "secondary condominiums," along with the requisite primary and secondary condominium associations necessary to operate them.

 

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(5-29-13)

And the Beat Goes On…

Automated external defibrillators ("AED") are portable medical equipment that deliver an electrical impulse to the heart to disrupt and hopefully correct an otherwise fatal irregular heart beat. AEDs are designed for easy use and are credited with saving countless lives. The "Cardiac Arrest Survival Act" is codified in s. 768.1325, Florida Statutes. It answers many serious questions regarding the liability associated with ownership of these little life-saving gems.

Simply put, the laws governing AEDs were designed to encourage consumer purchase, placement and use of AEDs by shielding the AED’s owner and operator from liability, so long as the most minimum of requirements are followed. The rules are simple… here we go….

RULE 1: Any person who uses or attempts to use an automated external defibrillator device on a victim of a perceived medical emergency, without objection of the victim of the perceived medical emergency, is immune from civil liability for any harm resulting from the use or attempted use of such device (with a couple of exceptions, explained below.)

RULE 2: Notwithstanding any other provision of law to the contrary, (and with little exception as discussed below), any person who acquires the device and makes it available for use, including, but not limited to, a community association organized under chapter 617, chapter 718, chapter 719, chapter 720, chapter 721, or chapter 723, is immune from such liability, if the harm was not:

a) due to the failure of such person to properly maintain and test the device; OR

b) due to the failure of providing appropriate training in the use of the device to an employee or agent of the acquirer when the employee or agent was the person who used the device on the victim, except that such requirement of training does not apply if:

     1. The device is equipped with audible, visual, or written instructions on its use, including any such visual or written instructions posted on or adjacent to the device; OR

     2. The employee or agent was not an employee or agent who would have been reasonably expected to use the device; OR

     3. The period of time elapsing between the engagement of the person as an employee or agent and the occurrence of the harm, or between the acquisition of the device and the occurrence of the harm in any case in which the device was acquired after engagement of the employee or agent, was not a reasonably sufficient period in which to provide the training.

RULE 3: The immunity described above does not apply to a person if:

(a) the harm involved was caused by that person’s willful or criminal misconduct, gross negligence, reckless disregard or misconduct, or a conscious, flagrant indifference to the rights or safety of the victim who was harmed; OR

(b) the person is a licensed or certified health professional who used the automated external defibrillator device while acting within the scope of the license or certification of the professional and within the scope of the employment or agency of the professional;

Additionally, there is no requirement to place the AED at any particular location, and there is no requirement to have an employee trained to operate the AED on the premises.

A strict and literal interpretation of these laws means that when an association installs the AED and includes the "how to" instructions with the device and properly maintains and tests the device, the association should be immune from liability. Notably, an insurer cannot exclude damages resulting from the use of an AED from coverage under a general liability policy issued to the community association. Nevertheless, it is still a good idea to discuss the decision to purchase an AED with the association’s insurance agent. The association could consider offering classes taught by the requisite professional in the use of the AED, too.

With all of this information in mind, if the association acquires an AED, let folks know where it is kept. If the AED is going to be brought from location to location, say from the clubhouse to the golf course during a golf event, then there should be clear policies governing such activities so that everyone can easily find the AED, if needed. For example, if the AED is taken from its usual location for better proximity to a special event, then a brightly colored notice could be left in the AED’s regular location to let others know where to find it. Finally, common sense dictates that at least one person should be trained in its use, and responsible for the AED’s maintenance and testing schedule.

Save a life!

 

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(5-15-13)

House Bill 87

In response to the continuing foreclosure logjam, the 2013 Florida Legislature passed House Bill 87 ("HB 87"). While it remains to be seen whether the HB 87 will become LAW, it provides clear procedures for a lender to follow when trying to foreclose property where the lender cannot locate the original paperwork, including, most importantly, the original note signed by the borrower. The stated purpose of HB 87 is to "expedite the foreclosure process by ensuring initial disclosure of a plaintiff’s status and the facts supporting that status, thereby ensuring the availability of documents necessary to the prosecution of the case."

Those against HB 87 argue that it further erodes the Constitutional protection that prevents Congress from enacting laws that impair substantive contractual rights. Those in favor of HB 87 argue that its remedies create new procedures that will alleviate an already over-burdened judicial process of foreclosure. The gravamen of this issue will likely turn on the newly created requirement that, as a pre-requisite to raising any defense, a foreclosure defendant is first required to deposit the alleged monetary shortfall into the registry of the court. Those against HB 87 might argue that such a requirement can lead to extreme abuse. For example, what happens if an unscrupulous lender alleges an amount not lawfully due? According to HB 87, the defendant must still deposit the monetary shortfall into the court registry to be in a position to contest the lender’s false allegations.

By way of background, on May 12, 2013, the Palm Beach Post reported that, in 2012, there were 186,651 new foreclosure cases filed in Florida and another 156,069 foreclosure cases were "re-opened." Included in those figures are Palm Beach County’s foreclosure filings where 13,500 new foreclosure cases were filed, while another 13,389 cases were re-opened.

A judicial workgroup found that almost thirty percent of Palm Beach County’s pending foreclosure cases are at least three years old, and more than fifty-one percent have been on-going for two or more years as compared to the rest of the State, where only forty-two percent of foreclosure cases have been pending for greater than two years. This is compared against non-foreclosure litigation matters where the average jury trial case takes approximately eighteen months and non-jury cases take around twelve months to reach closure. Considering that foreclosure cases are routinely disposed of by the court in non-jury settings, the judicial workgroup’s findings are even more alarming.

The workgroup, according to the Palm Beach Post, explained that the court has limited power over two barriers that prevent the cases from moving faster. The first is that the courts have limited power to force the foreclosing bank to move their case along, and the second has a lot to do with the lender’s lost paperwork and other procedural problems.

HB 87 also provides that, in a legal proceeding to set aside, invalidate, or challenge the validity of a final judgment of foreclosure of a mortgage or to establish or reestablish a lien or encumbrance on the property in abrogation of the final judgment of foreclosure of a mortgage, the court shall treat such request solely as a claim for monetary damages and may not grant relief that adversely affects the quality or character of the title to the property.

Amongst its many other provisions, HB 87 also provides that the Florida "Supreme Court is requested to amend the Florida Rules of Civil Procedure to provide expedited foreclosure proceedings in conformity with this act and is requested to develop and publish forms for use in such expedited proceedings."

A few years back, lawyers representing community associations sought and found relief against the banks’ delays by invoking the trial court’s equitable remedies. For a few months, it seemed there might be a few judicially crafted remedies that could be used against stalling lenders. However, the lenders appealed the trial court’s exercise of its equitable powers. It did not take long for the State’s appellate courts to rule that, where legal remedy existed, trial courts were not free to exercise equitable relief. As a result, tens of thousands of foreclosure cases continue to stall.

We will all know soon enough if the Governor will veto HB 87, sign it into law, or do nothing at all, which, ultimately, has the same effect as signing the Bill. As long as the Governor doesn’t veto it, House Bill 87 becomes law on July 1, 2013. If you feel strongly one way or the other, please email the Governor and share your thoughts, "for" or "against."

 

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(5-1-13)

Citizens Insurance,

What You Should Know

Citizens Insurance Company, known as the insurer of last resort, lawfully escaped providing coverage for what, at least one condominium association believed, was properly insured property under the association’s casualty policy. Just weeks after the Third "District Court of Appeals" (the "DCA") ruled, in the Aventura case, that third party bidders do not have to pay assessment arrearages in response to a first mortgage foreclosure where an association has first acquired title to the unit by foreclosing its own assessment lien, the Fourth DCA just reversed a trial court’s decision where the trial court had decided that Citizens needed to provide coverage in favor of the association for "all property located outside the unit and all portions for which the declaration of condominium required coverage."

On April 10, 2013, the Fourth DCA, in Citizens Property Insurance Corporation v. River Manor Condominium Association, Inc., held that merely because the Association’s insurance policies contained a provision requiring that the policy be amended "to conform to any conflicting statutes of the State where the property is located" did not mean that Citizens was required to provide such coverage as required by the 2005 version of section 718.111(11), of the Florida Condominium Act.

In this case, Citizens agreed to pay the insured, River Manor Condominium Association, Inc., only for those specific items set out in the policy, but not for the additional items as set out in section 718.111(11), Florida Statutes, which, in 2005, provided:

"Insurers issue insurance policies for all portions of the condominium property located outside the unit, and all portions of the condominium property for which the declaration of condominium requires coverage provided by the association."

The River Manor Condominium Association, Inc. argued that application of section 718.111(11), Florida Statutes, to the plain meaning of their Citizens insurance policy meant that Citizens was obligated to insure every part of the condominium as required by the 2005 statute. The trial court agreed and granted "summary judgment" (no material fact at issue and the moving party is entitled to judgment as a matter of law) in favor of the Association. However, the Fourth DCA held that the text at issue in the insurance policy did NOT create any obligations on Citizens to provide such coverage as set in section 718.111(11).

Because the issue under consideration by the Fourth DCA invoked a matter of statutory interpretation, its level of review was, what lawyers refer to as, "de novo." This type of review allows the appellate court to review the entire lower court record anew, as if it were the first time all over again. The result being that the appellate court can substitute its judgment for that of the lower court, and that is exactly what they did!

The moral of this horrible tale is quite simple. Even though today’s version of section 718.11(11), Florida Statutes, pertaining to this issue is very different, if your association’s insurance policy has a clause similar to the clause in River Manor’s policy, then in all probability your association might not have the coverage you think it does. It’s a good time to review your community association’s insurance policy with the association’s insurance agent or attorney.

For contrast, the current version of section 718.11(11), of the Condominium Act, provides, in relevant part, that:

(f) Every property insurance policy issued or renewed on or after January 1, 2009, for the purpose of protecting the condominium must provide primary coverage for:

1. All portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications.

2. All alterations or additions made to the condominium property or association property pursuant to s. 718.113(2).

3. The coverage must exclude all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any insurance thereupon is the responsibility of the unit owner.

Since the River Manor court also held that "the Condominium Act regulated condominiums, - not insurance companies," if your association’s insurance policy does not mirror the current version of section 718.11(11), and/or contains language similar to the text contained in the River Manor policy (regarding "conforming the policy to existing law"), then the association needs to address the situation sooner than later.... now.

 

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(4-17-13)

Amendments ...

How Far is Too Far?

Can an amendment to a homeowners’ association’s declaration of covenants (or "declaration of condominium" for all of you condo dwellers) go too far? Is there a "line in the sand" that cannot be crossed when amending the governing documents? Can an amendment be so noxious that, even if properly adopted, a court will strike it down? Well, the answer depends...

In testing the boundaries of an amendment, the gravamen question is this: who passed the amendment? Was it the owner controlled association that voted in favor of it, or was the amendment enacted by a developer’s unilateral power to amend the declaration during the period of developer control?

Generally speaking, a community has a wide berth to adopt amendments, desired by the members, when it is the members themselves who vote in favor of the change. For example, in 1976, in Seagate Condominium Ass’n, Inc. v. Duffy, the Fourth District Court of Appeal upheld a vote of the owners amending their declaration of condominium prohibiting leasing of any units, except for limited periods in cases of hardship. The Court also ruled that the amendment was retroactive in that it even applied to owners who purchased their units before the amendment was adopted. As often repeated, and as initially penned in 1981 by the Fourth District Court of Appeal in Hidden Harbour Estates, Inc. v. Basso, courts recognize that restrictions found in a declaration "are clothed with a very strong presumption of validity which arises from the fact that each individual unit owner purchases his unit knowing of and accepting the restrictions to be imposed." This includes the possibility that the members may vote to change things up from time to time. Thus, there is broad authority for a member controlled community association to vote in favor of amending, deleting, or even adding new restrictions. Think of it this way... When you choose to live in a community association governed by a declaration, you know (or you should by now know) that you’re giving up a certain sense of control in that the "majority rules."

Is a developer’s unilaterally adopted amendment provided the same "presumption of validity" similar to an amendment adopted by the owners? Generally, even unilateral developer amendments are given a broad berth of presumptive validity, too. Nevertheless, there are times when the courts have held that a developer’s unilaterally adopted amendment to a declaration goes too far. Most especially, this occurs when the developer’s amendment changes the "general scheme of the community." For example, in 2009, in Ironhorse v. Chismark, just before turnover, the developer adopted a unilateral amendment to the HOA declaration. The amendment required membership in a country club where such membership was previously voluntary. Requiring the HOA members to join the country club through a unilateral developer’s amendment to the declaration was struck down by the Fourth District Court of Appeal because such a requirement changed the "general scheme of the community." In a very recent 2013 case, Flescher v. Oak Run Associates, the Fifth District Court of Appeals struck down a developer’s unilateral amendment to the community’s declaration that would have permitted the developer to pocket any surplus leftover from the members’ dues.

On the one hand, a developer has a right to amend the restrictive covenants so long as such right is reserved and change is reasonable. On the other hand, the developer’s power to amend must be exercised in a reasonable manner so as to not destroy the "general scheme of the community." The bottom line is this: while a unilateral developer enacted amendment may disappoint a homeowner’s expectations, if it does not change the general character of the community or the burdens between the grantor and grantee, then the amendment is likely to withstand judicial challenge. Amendments properly and lawfully adopted by the members are even more likely to withstand judicial challenge.

 

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(4-3-13)

Estoppels:

Financial versus Informational

The Informational Estoppel

Often times, buyers of residential properties request certain information from the community association where the property is situated. While there is no obligation to provide anything other than the documents required by law, such as the financial estoppel and, the often looked, Question and Answer Sheet, a good reason to respond to such requests is to help facilitate lot and unit sales, especially in light of the fact that the requesting party needs to pay for such information. While not the subject of today’s column, the Question and Answer Sheet provides basic information regarding the community, such as general and special assessments and rules regarding unit use, etc.

Sections 720.303(5)(d) and 718.111(12)(e)(1), Florida Statutes, provide that homeowners associations and condominium associations, respectively, or their authorized agent, may charge a reasonable fee to the prospective purchaser, lienholder, the current parcel owner, or member, for providing good faith responses to requests for information by, or on behalf of, a prospective purchaser or lienholder, other than that required by law, so long as the fee does not exceed $150.00 plus the reasonable cost of photocopying and any attorney’s fees incurred by the association in connection with the response.

Pursuant to Section 718.111(12)(e)(2), Florida Statutes, a condominium association and its authorized agent are not liable for providing such information in good faith pursuant to a written request if the person providing the informational estoppel includes a written statement in substantially the following form: "The responses herein are made in good faith and to the best of my ability as to their accuracy." Sadly, parallel protection does not exist in Chapter 720.

The Financial Estoppel

The financial estoppel is required by law to be provided by a community association, or their agent, to a perspective purchaser. Pursuant to Sections 718.116 and 720.3085,1 Florida Statutes, the financial estoppel must be provided by both condominium associations and homeowners associations, respectively, within 15 days after the date on which a request for an estoppel certificate is received from a parcel owner or mortgagee, or his or her designee. It must be signed by an officer or authorized agent of the association.

The certificate must disclose all assessments and other monies owed to the association with respect to the HOA parcel or condominium unit. An association, or its agent issuing the estoppel, may charge a fee for the preparation of such certificate. The fee must be included in the certificate, and is payable upon the preparation of the certificate. However, for the association or its agent to charge the fee, the authority to do so must be established by a written resolution adopted by the board or provided by a written management, bookkeeping, or maintenance contract.

If the financial estoppel certificate is requested in conjunction with the sale or mortgage of a unit, but the closing does not occur, and no later than 30 days after the closing date for which the certificate was sought, the preparer receives a written request, accompanied by reasonable documentation, that the sale did not occur, from a payor that is not the unit owner, the fee must be refunded to that payor within 30 days after receipt of the request. However, the refund is the obligation of the seller-unit owner, and the association may collect it from the seller-unit owner in the same manner as an assessment (meaning that it is a lien-able expense, if not paid). Persons relying on the financial estoppel certificate receive its benefits and protections, too.

Unlike the informational estoppel, if an association does not provide the financial estoppel within the 15 days provided by statute, a lawsuit can be brought to compel compliance, and the prevailing party is entitled to recover their reasonable attorney’s fees.

Has your association established lawful authority to charge a fee for the financial estoppel?

 

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(3-20-13)

MANAGER LIABILITY

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.

 

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(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.

 

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(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.

 

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(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.

 

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(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.

Free Seminars, Save the Dates

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.

 

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(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."

 

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(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."

 

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(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.

 

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(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.   

 

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(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.

 

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(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!

 

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(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.

 

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(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!

 

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(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.

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(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".

 

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(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.

 

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(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.

 

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(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.

 

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(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.

 

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(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.

 

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(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).

 

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(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.  

 

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(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.

 

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(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.

 

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(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.

 

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(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.

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(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.

 

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(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.

 

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(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.

 

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Jeffrey Rembaum, Esq. is a community association lawyer with the law firm Kaye Bender Rembaum, in its Palm Beach Gardens office.  His law practice consists of representing condominium, homeowners, and cooperative associations, developers and unit owners throughout Florida.  He can be reached by email at JRembaum@KBRLegal.com or by calling 561-241-4462 or toll free: 1-800-974-0680.

 

 

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