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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 10/23/2014

The Community Association News 

That You Can Use!

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(10-15-14)

Condominium Termination

Absolute Power Corrupts Absolutely!

Whether the revamping of the condominium termination procedures began in 2003 due to known problems in Florida’s termination procedures or whether the revamping occurred in 2007 as a result of several prior horrific storm seasons which led to distressed, fractured and unsustainable condominium projects throughout the State of Florida, the obvious fact is that, in 2007, the Florida legislature completely revamped the condominium termination process in an effort to simplify the termination process. But, is the cure even worse than the disease?

Prior to July 1, 2007, to terminate the condominium, a condominium association needed to obtain the approval of 100% of both the condominium unit owners and mortgage lienholders, unless otherwise provided in the declaration of condominium. In the off chance that such a vote was obtained, the condominium property became owned by the unit owners as "tenants in common" which would then require the filing of an "equitable partition" lawsuit – a lengthy process – so the condominium property could be sold and the proceeds distributed. At risk of pointing out the obvious, one sole disgruntled owner could prevent a justifiable and necessary termination necessitated by extreme damage to the condominium incurred as a result of casualty.

After the 2007 amendment, the new condominium termination procedures provide that the affirmative vote of only 80% of the unit owners, unless otherwise provided in the declaration of condominium, is needed to approve, what Chapter 718, Florida Statutes calls, a "plan of termination", so long as not more than 10% of the unit owners vote to object the "plan of termination". In this new termination regime, mortgage lienholders consent is not needed and thus irrelevant. According to attorney Martin A. Schwartz, "there is a lack of clarity in the statute on whether a mortgagee has to receive the full amount of its mortgage or only the value of the underwater unit. Lenders have generally accepted less than their principal amount since they are receiving the full current value of their collateral." This could lead to continued liability for the borrower to satisfy the shortfall.

While these relaxed procedural hurdles to condominium termination have helped numerous real estate projects get back on their feet in one manner or another, a disturbing trend has arisen in which developers are using these termination provisions as a means of taking over condominiums and forcing unit owners out of their homes to turn these fledgling condominiums into rental properties, or to perhaps build newer, more dense condominium projects. After the condominium bubble burst and the condominium recession in Florida grew, investors, like sharks sensing blood in the water, sensed opportunities to purchase condominium units at incredibly low prices, sometimes purchasing the majority or all of the units in a condominium project, otherwise known as a "bulk purchase". Having purchased a majority, if not all, of the units in a condominium, the developer, or "bulk buyer", then had control over the condominium association. An owner of more than 50% of the units can legitimately control the board of directors and thus control the condominium association, too.

With control of the condominium association, the bulk buyer could commence the termination of the condominium. In this new termination process, governed by section 718.117, Florida Statutes, a termination trustee – typically, the condominium association itself – records a "plan of termination" which meets the requirements of Chapter 718, Florida Statutes. Once the "plan of termination" is recorded, title to all of the units automatically transfers to the termination trustee, and all liens automatically transfer to the sale proceeds. The "plan of termination" typically grants the termination trustee the power to sell the condominium property, including all of the units, at fair market value as determined by an independent appraisal, which amount can be below the amount borrowed by the owner.

The proceeds of the sale then get distributed in the following manner: (1) to the termination trustee for its reasonable fees and costs; (2) to any lienholders of liens recorded prior to the declaration of condominium; (3) to any purchase money lienholders, (aka, lenders- but the amount of their share could be less than the amount borrowed by individual owners); (4) to any lienholders of liens entered into by the condominium association which have been consented to by the unanimous consent of unit owners; (5) to any creditors of the condominium association; and finally (6) to the unit owners as set out in the "plan of termination".

This trend of condominium take over and termination which, in today’s market, is likely the conversion of condominiums into rental properties, has the practical and real world possibility of forcing unit owners to sell their homes at depressed prices, likely for less than what is owed to their lenders, leaving them without a home, with the remaining debt on their mortgage liens, and with no money for a down payment on a new home. Can you think of worse situation?

This is a very unfortunate turn of events to what was created as a panacea to save otherwise defunct properties. In fixing the problem, the Legislature could at least ensure that no condominium owner will be left owing money to their lender as a result of their condominium’s termination when the termination is the result of a bulk buyer acquiring control as compared against a termination necessitated by a casualty event.

Although amendments to the condominium termination provisions of section 718.117, Florida Statutes, failed during the 2014 Florida Legislative Session, change must be made to avoid, or at the very least, curb, the incidences of abuse of its procedures. Will Floridians be harmed before the Legislature acts?

 

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(10-1-14)

Leasing Your Home?

Don’t Blame Me If You Don’t Read This

If your association has ever considered filing an eviction lawsuit against a unit owner’s tenant, then you need to know about a recent Third District Court of Appeal case, Shteyn vs. Grandview Palace Condominium Association, decided September 24, 2014. This case is so fresh that the ink isn’t dry yet. In fact, the decision is not final until the 30 day period in which either party may decide to appeal further has lapsed. It is unlikely, but remotely possible. So, let’s take a deeper look.

In Shteyn, the association sought i) to "evict" the tenants, ii) to "eject" the tenants and iii) an injunction (meaning, to force through court order) to prohibit the tenants from violating the association’s rules and regulations. An "ejectment" action is a lawsuit brought by the property owner to remove a party who is unlawfully occupying the property. It differs from an "eviction" in that an eviction requires a landlord-tenant relationship whereas an ejectment does not. For example, if the occupant claims they are not paying rent, then an eviction action may not be the right cause of action. By including both claims for eviction and ejectment, the plaintiff-association covered all of its bases.

After the association filed its lawsuit, the tenants moved out. As a result, the claims for eviction and ejectment were rendered moot. The tenants also argued that the association’s cause of action for injunctive relief should be rendered moot, too. Typically, in order for an association to maintain standing against an owner or tenant, that individual must still maintain their relationship as a resident within the association. Because the tenants moved out, that relationship no longer existed, and thus, the tenants argued they were no longer subject to the court’s jurisdiction in so far as the association’s claim for injunctive relief was concerned. The Court disagreed.

The Court looked to section 718.303 (1)(b)(e), Florida Statutes (2013), which provides, in part, that "[a]ctions for… injunctive relief… may be brought by the association against… [a] unit owner… [a]ny tenant leasing the unit, and any other invitee occupying a unit." However, the prior tenants admitted that at the time the lawsuit was brought, they were occupying the unit. Therefore, the Court found that the circuit court had subject matter jurisdiction at the time the association filed its lawsuit and that the fact that the tenants moved out after the lawsuit was filed in no way divested the circuit court of its jurisdiction. The Court, quoting another case, provided that "a defendant cannot automatically moot a case simply by ending its unlawful conduct once sued." In addition to seeking an injunction to enjoin the tenants from violating the association’s rules and regulations, the association also sought an injunction to permanently enjoin the tenants from ever again residing at the condominium. Therefore, the Court determined that the circuit court continued to have subject matter jurisdiction to decide the association’s claim for injunctive relief.

Remember too that ultimately, when an association prevails in a lawsuit against an owner’s tenant, so long as the unit owner was included as a party defendant in the litigation, the unit owner-landlord will ultimately be responsible for the association’s prevailing party attorney’s fees incurred in the lawsuit against the owner’s tenant. With that in mind, a well-educated owner will always intercede and resolve their association’s concerns with the owner’s tenant because it is far less expensive to handle the matter then than it is to be sued as a co-defendant along with the tenant and be responsible for all of the association’s fees and costs. It is like going out to dinner, not eating and then being fully responsible to pay for everybody else’s meal! It is a no-win situation.

 

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(9-17-14)

Emotional Support Animals

Don’t Let Your Association Step In It!

Remember those funny Seinfeld episodes when Jerry’s father, Mort, served on the board of directors of that fictitious and loony community, Del Boca Vista, that was supposedly in Boca Raton, Florida? Well, apparently, in Miami there is condominium named Del Vista Towers. While there is no relation between the two, we will soon know if Del Vista Towers earns the reputation of that fictional association with a similar name. Reporter Samantha Joseph, in the August 1, 2014 edition of the Daily Business Review, reported that Miami’s Del Vista Towers is being sued by one of its unit owners for failing to permit an owner, who suffers from post-traumatic stress disorder ("PTSD") and severe depression, to have his assistance animal in accordance with the Fair Housing Act ("FHA") - a pit bull.

During a motion for summary judgment hearing, Del Vista Towers argued that a Miami-Dade ordinance prohibits pit bulls; therefore, the condominium association did not have to grant the owner’s request. According to reporter Joseph, and to the contrary of the association’s arguments, Judge Jose Martinez agreed with the owner’s position that the U.S. Department of Housing and Urban Development allows reasonable accommodation without regard to breed, that emotional support animals do not require any training and that if the county ordinance were enforced, it would violate the FHA by permitting a discriminatory housing practice in that by denying the owner’s request to keep his pit bull, he is not afforded an equal opportunity to use and enjoy his dwelling. The Judge’s rulings appear consistent with prior FHA decisions. While there is no such thing as a sure thing in any court case, it will be quite a surprise if the owner does not ultimately prevail in this one.

In considering the delicate nature of requests for emotional support animals there is a minefield of mistakes that community associations can trip over. Some of these mistakes were recently made by Bhogaita v. Altamonte Heights Condominium Association, Inc., Case No. 13-12625; 13-13914 (11th Cir., August 27, 2014) in which a judgment against the association, in favor of the unit owner, was upheld by the U.S. Court of Appeals for the Eleventh Circuit. In this case, the unit owner, who suffers from PTSD that developed as a result of a sexual assault which occurred during the unit owner’s military service, purchased a dog, "Kane," whose weight exceeded the association’s 25-pound pet weight restriction. Two years after acquiring the dog, the association demanded the dog’s removal due to the weight violation. In response, the unit owner provided two letters from his treating psychiatrist which provided that, due to mental illness, the unit owner had limitations regarding social interaction and coping with stress and anxiety and that an emotional support animal would help the unit owner cope with the disability.

In response to the doctor’s letters, the association made its first mistake, some might say, the association really stepped in it (pun intended) by requesting detailed information regarding the unit owner’s disability and the dog’s training – the association requested additional information when the minimum threshold to establish entitlement to an emotional support animal had already been reached by the unit owner. The Court found that such threshold had been met by the letters from the unit owner’s psychiatrist because they (i) described the nature and cause of the unit owner’s PTSD diagnosis, (ii) provided that the unit owner was substantially impaired in the major life activity of working and (iii) explained that the dog alleviated the unit owner’s disability related symptoms. Additionally, although not discussed by the Court, it is worthy to note that the FHA, unlike the Americans with Disabilities Act, does NOT require specific training for emotional support animals or service-type animals.

Nevertheless, despite having met the minimum threshold, the unit owner responded to the association’s request for additional information by providing a third letter from the psychiatrist and a personal response answering each of the association’s questions in turn. In this response, the psychiatrist and the unit owner described the unit owner’s PTSD and how it affects major life activities. In addition, the unit owner mentioned a physical disability related to multiple knee surgeries and knee injuries suffered during his military service.

After obtaining this response and learning of the newly claimed physical disability, the association made its second and third mistakes (twice and in addition to committing the first mistake again!) by requesting very detailed information regarding the unit owner’s disabilities and demanding that if the unit owner failed to respond by a certain deadline, he had to remove the dog!

The Court provided that, although the association is empowered to conduct a "meaningful review" of the unit owner’s request for a reasonable accommodation, "[t]he failure to make a timely determination after meaningful review amounts to constructive denial of a requested accommodation." The Court also provided that a "meaningful review" is for the association to gather "information necessary to apprise [the board of directors] of the disability and the desired need for an accommodation" and that requesting information outside what is minimally required by the FHA is beyond the scope of a "meaningful review."

Remember that any information sought must be relevant to the request and must be within the scope of a "meaningful review" and that, once the association has the information to satisfy the minimum requirements of the FHA, the association should approve the requested accommodation within a timely manner. It is important to note that an evaluation of a request for a reasonable accommodation under the FHA is a highly fact-specific analysis and must be reviewed on a case-by-case basis. Community associations should seek the assistance of their legal counsel when in receipt of such a request.

 

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(9-3-14)

Get that Sign Out of Here!

Your neighbor’s front yard sign supporting their favorite political candidate may be upsetting. But that alone is not a reason to spray paint over it, yell obscenities every time you see your neighbor leaving to go to work or for the association’s board or directors to demand the sign’s removal.

This begs the question, "Can a homeowners’ association 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 are no Florida cases that directly answer this inquiry. However, given other existing cases, a well-crafted and properly adopted rule prohibiting such signs is likely lawful and enforceable.

In examining an association’s "no sign" rule, let us first address the argument heard during every presidential, state and local election seasons, "This is America! The First Amendment protects the right of all homeowners to display political signs on their property." RIGHT? WRONG! The right to freedom of speech as provided by the First Amendment is not an absolute right and, moreover, the First Amendment concepts of freedom of speech and freedom of expression apply only to governmental settings. As such, the First Amendment acts as both a shield and a sword to prevent the government from stifling your free speech rights.

A community association is not an extension of our government. Though homeowners’ associations and condominium associations do provide a system of governance, they are not governmental entities and 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. Thus, 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.

Courts have long since held that owners give up certain liberties when living within a community association. In 2002, the Florida Supreme Court held, in Woodside Village v. Jahren, that certain individual rights must be compromised when you choose to live in a condominium. With this in mind, any sign prohibition should be artfully drafted to help ensure enforceability and must be equally enforced. 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 each owner. Remember, a declaration of covenants is a contract between an association and an owner. A basic principal of contract interpretation is that ambiguous terms are held against the drafting party. This means that in the event the rule is even slightly confusing, then the homeowner will likely receive the benefit of the doubt. Also, any covenant or rule must be applied fairly to avoid selective enforcement rebuttals.

That rules prohibiting signs must be artfully drafted was a point made very clear to the homeowners’ association in Shields v. Andros Isle Property Owners Association, Inc. in which the Fourth District Court of Appeal of Florida decided in favor of the homeowner who displayed a sign in her car window despite the association’s sign prohibition. The association’s rules prohibited the display of signs "on any lot", except a "for sale" sign of a certain size, and prohibited signs on a vehicle. The Court, using the definition of a "lot" in the association’s declaration, interpreted these rules to mean that no sign, except a "for sale" sign, may be on the land or on the exterior of a vehicle. However, there was no prohibition for signs displayed from within a vehicle.

In consideration of the above, 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 of directors; meaning, a "no sign" rule approved by the membership serves to increase the association’s chances of prevailing should the rule be challenged.

Upon legal challenge, a court might also 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 when it must be removed. Before demanding that an owner remove their political sign, the board should review its community association’s sign rules. If the rule at issue is not patently clear, then it is likely time to consider amendment before enforcement. Consider also, election season is short. By the time a lawsuit for an injunction to enforce the "no sign" rule is fully resolved, it might be time to consider the next electoral candidate!

 

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(8-20-14)

PAID IN FULL

Watch Out For These Dangerous and Very Costly Words

What does your association do when an owner sends the association their assessment payment for less than full amount due? Say the owner owes $1,000.00, and only sends in $100.00 and on their check writes "paid in full." Do you deposit the check and bill the owner for the difference? If you answered yes, then you are likely in the majority. But, given Florida’s Second District Court of Appeal, August 8, 2014, opinion in St. Croix Lane Trust (the "St. Croix Trust") & M.L. Shapiro, Trustee (the "St. Croix Trustee") v. St. Croix at Pelican Marsh Condominium Association, Inc. (the "Association"), you might seriously reconsider depositing that check in favor of sending it back to the owner and demanding full payment, instead. The answer will depend on whether the owner disputed the amount due.

In this case, the St. Croix Trust acquired its unit as a result of a foreclosure. Upon talking title, the Association demanded $38,586.11 as the assessments that remained due and owing. The St. Croix Trustee disputed the assessment amount and argued to the Association that it only owed $840.00. The St. Croix Trustee then sent its check in the amount of $840.00 to the Association and in so doing, wrote a restrictive endorsement on their check, "paid in full." While the Association continued to seek the difference from the St. Croix Trustee, the attorney handling this collection matter for the Association deposited the $840.00 check. The Court held that the St. Croix Trust did not owe the balance due because the restrictive endorsement written on its check combined with the Association’s lawyer’s act of depositing the check was a de facto acceptance of the St. Croix Trust’s $840.00, a process in legal terms referred to as an "accord and satisfaction."

An "accord and satisfaction" is discussed in section 673.111, Florida Statutes, more commonly known as the "Condominium Act." This section provides, in relevant part, that:

"(1) If a person against whom a claim is asserted proves that that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, that the amount of the claim was unliquidated or subject to a bona fide dispute, and that the claimant obtained payment of the instrument, the following subsections apply.

(2)…[T]he claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim."

While there are a few exceptions to subsection (2), above, the Court found that none of them applied to this situation. The Court also held that none of the stated exceptions to the application of subsection (2) applied and thus, "[i]f the Association did not wish to accept the $840 check in full settlement of its claims in accordance with the [St. Croix] Trust’s tender, then it should have returned the check instead of negotiating [depositing] it."

Being an astute reader of this column, you are already aware that that section 718.116(3) of the Condominium Act (as well as a similar provision set out in the Chapter 720, also known as the "Homeowners’ Association Act") provides, in relevant part, that:

"…. Any payment received by an association must be applied first to any interest accrued by the association, then to any administrative late fee, then to any costs and reasonable attorney’s fees incurred in collection, and then to the delinquent assessment. The foregoing is applicable notwithstanding any restrictive endorsement, designation, or instruction placed on or accompanying a payment." [emphasis added]

The Court looked to the legislative history and staff analysis of the legislation and found that it meant that, even if a check contained a restrictive endorsement which provided some other formula for the application of a payment, that nevertheless the monies were to be applied first to the accumulated interest, followed by late fees, attorney’s fees and costs and then to the delinquent assessment. In the Court’s opinion, the staff analyses confirmed that the pertinent language was added to invalidate restrictive endorsements that provide a formula for the application of payments other than as set forth in the statute. The Court found "nothing in the staff analyses suggesting that the amendment was intended to make section 673.3111 [the accord and satisfaction statute, above] inapplicable to condominium associations or that the amendment would otherwise alter Florida law concerning accord and satisfaction solely for the benefit of condominium associations."

The key to understanding this outcome is that the St. Croix Trustee, an association member, had first disputed the assessment amount due, and then sent in the St. Croix Trust’s $840.00 check that contained the restrictive endorsement, "paid in full" which was deposited by the Association (or in this case, its attorney). With this in mind:

1) If the debt is disputed and less than the full amount due is provided with the written endorsement "paid in full," do not deposit the check. Instead, send it back to the debtor and demand that the full amount past due be remitted.

2) If there is no dispute and less then the full amount due is sent in by the debtor and the check provided by the debtor contains written endorsement "paid in full," then if the association deposits the check, it can argue that there was no "accord and satisfaction." However, it may not be worth the risk, which leaves us with the safest alternative set out in No. 3 below.

3) Any time the association receives a check containing the written endorsement "paid in full," then, unless the check actually represents the full amount due, do not deposit it but rather send it back and demand the debtor resubmit their check, this time in full.

With this newest wrinkle to association assessment collections, the Florida legislature should come to the aid of associations and clarify that if a debtor writes "paid in full" on their check, it is fully and unequivocally meaningless.

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(8-6-14)

2014 Florida Legislature: Less is Not Always Best

Significant Changes to the Commercial Condominium Regime

Recently, several new laws went into effect that only affect commercial condominiums. While only a few of these changes make sense, most do not and illustrate the significant misunderstanding of the need to protect all condominium unit owners without regard to whether the condominium is residential or commercial.

Remember, before you get too excited, this article only addresses changes to COMMERCIAL, and NOT residential condominium associations.

Why our Florida legislators have determined that unit owners of commercial condominiums are not entitled to the same protections as owners of residential condominiums shall forever remain a mystery. If you own a unit in a commercial condominium, you need to be aware of these important changes. There is no longer any protection for an owner of a minority of units in a commercial condominium, WHATSOEVER! In other words, there is no equality – whoever owns the most units or the most square footage is "King of the Condo", FOREVER AND EVER AND EVER AND EVER AND EVER!!!

The changes affecting only commercial condominium associations include:

• Board members can serve for unlimited terms.

• If there is more than one owner of the commercial condominium unit then all of the owners can serve on the board at the same time thereby completely obliterating fair representation on the board.

• Board members do not have to sign a "loyalty oath" that they have read the condominium documents and will discharge their fiduciary duties in a responsible manner. In effect, this means the controlling owners/board members can do what is best for them, personally, and not what is best for the condominium association.

• The election requirements for running and voting for the board as set out in Chapter 718, Florida Statutes (the "Condominium Act"), are no longer applicable to commercial condominiums.

• Voting by "general proxy" is permitted for all matters, even elections of the board. A "general proxy" allows the proxy holder to vote however he or she sees fit on ANY matter that may be undertaken, while a "limited proxy" lists the issues that a proxy holder may cast a vote for on behalf of a voting interest and instructs the proxy holder on how to vote on those issues. Until this new law went into effect, even owners of commercial condominiums had to vote by limited proxy. Now that this requirement has been removed for commercial condominiums, once a commercial unit owner appoints their proxy, that person can cast the vote of their choosing on any and every matter under consideration. If you add the right of the general proxy holder to the new board member rights, you can begin to understand the dangers. Most unit owners end up appointing a board member to act as their proxy. Given the board will now be fully controlled by the owners who own the largest or the most units, commercial condominium unit owners who do not understand these new UBER-dangers, will soon find themselves completely and utterly powerless to stop the board from doing what is best for their own individual interests.

• The hurricane shutter, impact glass and other hurricane protection provisions set out in the Condominium Act no longer apply to commercial condominiums. Does the legislature really believe that commercial condominiums are immune from dangers of hurricanes? Oh brother!

• The build-out of what is referred to as a "phased condominium project" occurs in phases, just as the title suggests. Until now, once the phase plan is established, early purchasers are protected from drastic development changes that could negatively affect their property value and assessment liability. As to commercial condominiums, these protections are now completely obliterated. The unsuspecting commercial condominium purchaser will, no doubt, bear the brunt of this new legislation.

There is, however, one change that does make sense.

• It is clarified that the Division of Florida Condominiums, Timeshares, and Mobile Homes, which has jurisdiction over certain disputes in residential condominiums, has no jurisdiction whatsoever over similar disputes in a commercial condominium.

While it is a commonly accepted legal principal that the purchaser of commercial property purchases such commercial property at their own risk and, for all practical purposes, has little recourse against the seller for nondisclosure, these recent changes to the commercial condominium regime are reckless and extremely dangerous. In the end, if you purchase a commercial condominium, DANGER WILL ROBINSON, DANGER!

 

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(7-23-14)

A Deeper Look into New Legislation Affecting Condominium, Homeowners’ and Cooperative Associations

Assessments, Insurance, E-mail Communications, 

Directories & Emergency Powers

Chapter 718, Florida Statutes, is referred to as Florida’s Condominium Act. Section 718.116 of the Condominium Act has been revised to provide that the term "previous owner" relative to the joint and several obligations to the association for unpaid assessments, does not include a condominium association that acquires title to a delinquent property through foreclosure or by deed in lieu of foreclosure. However, the liability of a present owner, such as a third party purchaser in a lender foreclosure, is limited to unpaid assessments that accrued before the association acquired title. Of great interest is that interest, late fees, attorney’s fees and costs incurred by the association in foreclosing on the unit, along with assessments obligations that came due while the association held title to the unit, will not be the present owner’s obligation. Similar changes were made to Chapter 720, Florida Statutes, otherwise known as the Homeowners’ Association Act, last year.

Section 718.111(11) of the Condominium Act regarding insurance, has once again been revised. Subsection (j) now provides that, in the absence of an insurable event, any repairs that are required will be made by the association or the unit owner, in accordance with the declaration or bylaws. This law clears up some confusion that was created by a few prior court cases which generally held that whoever had the duty to insure (the association as compared to the unit owner) also had the duty to effectuate the repair, regardless of the provisions in the declaration. Now we know to look to the declaration or bylaws to make such determinations. However, this new law does not clarify whether a casualty for which coverage is denied is considered an "insurable event" (Oh Brother!).

A great number of questions are being mulled as to board member to board member e-mail communications. Section 718.112 of the Condominium Act now authorizes board members to use e-mail as a means of communication, however, this new law also clarifies that board members may not cast their vote on an association matter via e-mail. (Sorry HOA board members, this only applies to condominium associations, for now.) So, just what can be discussed? On one end of the spectrum, clearly, setting the board’s agenda items for its next meeting would seem appropriate. On the other end of the spectrum, voting via e-mail is a "no-no" and violates the new legislation. What about everything in between? For example, can the board discuss the condition of the swimming pool and the need to acquire bids for consideration at the next board meeting? Can the board discuss via e-mail the need for a new gate? A parking garage repair? A raise for the manager? Just what can be discussed in these e-mail communications? Well, try to look at it this way. When communicating via e-mail, do not communicate any differently than if you were on the street, eye to eye with your fellow board member. In that way, you are bound to stay in the safe zone.

Associations can already publish in their community directory the address and phone number provided by a member for their official association meeting notices and the like. New legislation was passed that also permits all condominium, cooperative and homeowners’ associations to publish all of their members’ telephone numbers in the community directory, but any owner can opt-out in writing and not have their numbers listed. Additionally, subject to the affirmative written consent of an owner to opt-in, such owner can consent in writing to the disclosure of other additional contact information by the association (for example, e-mail addresses).

Homeowners’ Association Boards have been provided clear emergency powers similar to those previously provided to Condominium Association Boards. In the event of a state of emergency, a HOA board may:

• conduct board and membership meetings after notice of the meetings is provided in as practicable a manner as possible;

• cancel and reschedule an association meeting;

• designating assistant officers, who are not directors, to step into the shoes of an officer in the event an officer is incapacitated or unavailable;

• relocate the principal office of the association;

• enter into agreements with counties and municipalities to assist with debris removal;

• implement a disaster plan before or immediately following the state of emergency event is declared, which may include turning or shutting off elevators, electricity, water, sewer, security systems or air conditioners;

• based upon advice of emergency management officials or upon advice of licensed professionals retained by the board, determine any portion of the property unavailable for entry or occupancy;

• mitigate further damage, including taking action to contract for the removal of debris and to prevent or mitigate the spread of mold, regardless of which party is responsible by the governing documents or law to insure, or remove fixtures and personal property.

• levy special assessments without a vote of the owners;

• borrow money and pledge association assets as collateral without a vote of the owners.

 

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(7-9-14)

159 New Laws That Did Not Go Up in Smoke — A Quick Look at Medical Marijuana … No Smoke, No Foul

In addition to the numerous changes to Chapters 718, 719, and 720 of the Florida Statutes, more commonly known as the Condominium Act, the Cooperative Act, and the Homeowners’ Association Act, respectively, many other laws went into effect today, too. A few of the changes as reported in the July 1st edition of the Miami Herald include Florida’s $77 billion dollar budget which went into effect.

• It would appear that if a Floridian threatens to use a gun, or fires a warning shot, such actions might avoid criminal prosecution. The new law signed by Governor Rick Scott was brought about after a Jacksonville woman was initially sentenced to 20 years in prison after firing a shot near her estranged husband. She had unsuccessfully argued Florida’s "stand your ground defense" to a judge who rejected her claim. As a result, she was sentenced under Florida’s "10-20-Life" law, which requires mandatory sentences for using a gun. This new law provides that Florida’s "10-20-Life" rule may not apply in instances of threatened use of force when the victim threatens to use a gun, or fires a warning shot.

• Tax collectors’ offices can handle concealed-weapon license applications.

• Electronic cigarette sales to minors are prohibited.

• Insurance companies may not deny coverage or increase your rates because you own a gun.

• The "Florida GI Bill" provides for university tuition waivers for veterans.

• School districts will need to establish a system for parents to contest the selection of certain textbooks and classroom materials.

• There is an increase in penalties for drivers who leave the scene of serious accidents.

• There are changes to the Sunshine Laws which remove certain items from public access, including personal information of people involved in animal research and certain personal contact information that you might find in vehicle crash reports.

• The budget also includes additional funds to deal with water pollution and additional funding for child welfare programs.

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With all the chatter about medical marijuana taking place in the state, I was recently asked whether a condominium association that has lawfully adopted a no-smoking policy must allow a resident to smoke their medicinally prescribed marijuana (assuming it’s not illegal at some time in the near future). In examining the Fair Housing Act, if the resident has a disability that affects a major life function recognized by federal, state or local law, and the medical marijuana is prescribed to help alleviate the disability, you might think that in order to provide the resident equal opportunity to use and enjoy the unit, a reasonable accommodation must be granted. Think again, because at the present time, marijuana remains a "controlled substance" under federal law. Therefore, the protections provided by the Fair Housing Act do NOT apply to medical marijuana use.

An even more interesting question is whether Florida, if it does adopt laws allowing use of medical marijuana, will sue the federal government for interference with state law. In the meantime, should medical marijuana become legal, an easy solution to the no-smoking dilemma may well rest on the patient’s ability ingest their medication without having to smoke, such as using vaporization, consuming medical marijuana in food, teas and tinctures… No smoke, no foul.

 

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(6-25-14)

2014 Legislative Results 

— a continuing series

Cooperative Associations

Every year about this time I am asked, "How does this year’s legislation affect our cooperative? Jeff, you wrote about condominium and homeowners’ associations’ legislation, what about us cooperatives?" You asked for it, you got it!

Owner Directories. A cooperative association may publish a directory providing ALL of the telephone numbers associated with an owner in addition to an owner’s name and address. An owner can also provide their written consent to the disclosure of other contact information which is otherwise not supposed to be disclosed by the cooperative.

Return of Records and Property by Outgoing Board and Committee Members. Within five days after the new board and committee members are elected or appointed, all prior board and committee members are now under a statutory obligation to return all official records and property of the cooperative in their possession, or control, to the incoming board and committee members. Those outgoing board and committee members who willfully and knowingly fail to return such records and property are subject to penalties imposed by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

Financial Reporting. Within 90 days following the end of the fiscal year, unless otherwise provided in the bylaws, the cooperative must prepare and complete, or have prepared and completed, a financial report for the preceding fiscal year. The financial report, or a notice that the financial report is available at no cost upon request, must then be provided to the owners within 120 days following the end of the fiscal year, unless otherwise provided in the bylaws. A majority of the members present at a membership meeting can vote to waive the financial reporting requirement for a fiscal year but cannot do so for more than three consecutive years and can vote to raise the level of financial reporting. Financial reports are to be prepared in the following manner:

• An association in a community of fewer than 50 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures, unless the declaration or other recorded governing documents provide otherwise.

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

• An association with total annual revenues between $150,000 and $299,999 shall prepare a compiled financial statement.

• An association with total annual revenues between $300,000 and $499,999 shall prepare a reviewed financial statement.

• An association with total annual revenues of $500,000 or more shall prepare an audited financial statement.

Board Member Eligibility and Suspension. A member who has pending charges for felony theft or embezzlement involving the association’s funds or property may not be appointed or elected to a position as a director or officer. A member who has been convicted of any felony in any state or who has been convicted of any offense in another state which would be considered a felony if committed in Florida is not eligible for board membership unless their rights have been restored for at least 5 years as of the date the member seeks election to the board. A member who has been suspended or removed by the Division of Florida Condominiums, Timeshares, and Mobile Homes or who is delinquent in the payment of any monetary obligation due to the association is not eligible to be a candidate for board membership and may not be listed on the ballot.

A director or officer charged with felony theft or embezzlement involving the association’s funds or property is suspended from office; the vacancy of which is filled by the board until the end of the suspension or the end of the term, whichever occurs first. 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 shall be reinstated for the remainder of the term. The validity of an action by the board is not affected if it is later determined that a board member is ineligible for board membership because the board member was convicted of a felony.

Emergency Powers. A cooperative can perform several actions in the event of a "state of emergency", unless specifically prohibited by the association’s recorded governing documents. Among others, such actions of the board include the following: (i) designating assistant officers, who are not directors, which will step into the shoes of an officer in the event the officer is incapacitated or unavailable; (ii) conducting, canceling or rescheduling association meetings and providing notice of such meetings in as practicable a manner as possible as the board deems appropriate under the circumstances; (iii) mitigating further damage, which may include the removal of debris and the removal of wet drywall, cabinets and fixtures; (iv) implementing a disaster plan before or immediately following the "state of emergency" event; (v) requiring the evacuation of the cooperative property; and (vi) contracting, on behalf of the owner and at the owner’s expense, for items or services which the owner is responsible. Additionally, based upon the advice of emergency management officials or licensed professionals hired by the board, the board may determine if the property or any portion of the property is unavailable for entry or occupancy or if the property or any portion of the property can be safely inhabited or occupied.

The board may, without a vote of the members, levy special assessments and borrow money, using the association’s assets as collateral, to fund repairs and to carry out the association’s business in the event the operating funds are not enough.

All of these emergency powers are only available to the board for a period of time that is reasonably necessary to mitigate further damage and make repairs and to protect the health, safety and welfare of the association and the residents of its community.

 

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(6-11-14)

The 2014 Legislative Results, 

a continuing series

House Bill 807’s Effect on Homeowners’ Associations

In this article we’ll review House Bill 807’s (HB 807) effect on Florida Homeowners’ Associations (HOA). As mentioned when we discussed HB 807’s effect on condominiums, on May 2, 2014, HB 807 was approved by both the Florida’s House of Representatives and Senate. However, HB 807 is not yet law. In order for HB 807 to become effective law, Governor Rick Scott can either sign HB 807 into law or take no action at all thus allowing HB 807 to become law on July 1, 2014, HB 807’s effective date. That said, Governor Scott does have the ability to veto HB 807 if he so chooses. Among other changes affecting residential properties, HB 807 makes some notable changes and additions to Chapter 720, Florida Statutes, (a/k/a the "Homeowners’ Association Act"). This article will give you a sneak peek into four notable changes if HB 807 is adopted into law.

1. Handicap Accessible Meeting Locations. HB 807 requires that HOA board meetings and membership meetings be held at a location accessible to physically handicapped persons IF it is requested by a physically handicapped person who has a lawful right to attend the meeting.

This new language may likely be a reaction to the decision made in a Dade City, Pasco County, Florida case regarding a wheelchair bound man’s desire to attend his homeowners’ association meetings. According to Laura Kinsler, as she reported for the Pasco Tribune and the Tampa Tribune on March 25, 2014, John Whitt, a wheelchair-bound member of the homeowners’ association, wanted to attend board meetings but was prevented access because the board insisted on holding its meetings on an unfinished lakefront lot that was not wheelchair accessible.

According to the article, the wheelchair bound member accused his association of violating the Fair Housing Act (FHA) and also for not having meetings that were open to all members as required by Chapter 720, Florida Statutes. The case was ultimately dismissed, as reported by Ms. Kinsler, when a newly assigned judge "ruled that ‘there is no legal basis to support the plaintiffs’ contention that the open meeting provision of [the law] requires wheelchair accessibility’ since private community associations are not subject to the federal Americans [w]ith Disabilit[ies] Act [(ADA)]." Notably, the ADA applies to areas of public accommodation, while the FHA applies to housing providers, which includes residential community associations.

Oddly, the FHA was not discussed which, at least in this author’s opinion, would require that a reasonable accommodation be granted to the wheelchair bound member so that he could attend the HOA’s meetings. Nevertheless, despite the perplexing outcome to this case, HB 807 provides a legislative remedy to the ruling in this case.

2. Emergency Powers. HB 807 creates section 720.316, which is a brand new section to the Homeowners’ Association Act. It provides for "emergency powers". Under this new section, a HOA can perform several actions in the event of a "state of emergency", unless such acts are specifically prohibited by the association’s recorded governing documents. Such actions of the board include the following: (i) designating assistant officers, who are not directors, which will step into the shoes of an officer in the event the officer is incapacitated or unavailable; (ii) conducting, canceling or rescheduling association meetings and providing notice of such meetings in as practicable a manner as possible as the board deems appropriate under the circumstances; (iii) mitigating further damage, which may include the removal of debris and the removal of wet drywall, cabinets and fixtures; and (iv) implementing a disaster plan before or immediately following the "state of emergency" event. Additionally, based upon the advice of emergency management officials or licensed professionals hired by the board, the board may determine if the property or any portion of the property is unavailable for entry or occupancy or if the property or any portion of the property can be safely inhabited or occupied.

In the exercise of these emergency powers, the board may, without a vote of the members, levy special assessments and borrow money, using the association’s assets as collateral, to fund repairs and to carry out the association’s business in the event the operating funds are not enough.

These emergency powers are only available to the board for a period of time that is reasonably necessary to mitigate further damage and make repairs to protect the health, safety and welfare of the association and the residents of the community.

3. Member Directories. Currently, section 720.303(5)(c)5, Florida Statutes, provides that a HOA can prepare and provide its members with a directory containing the name, address and telephone number of each owner. HB 807 amends this section to allow a HOA to publish ALL of the telephone numbers associated with each owner. In addition, an owner can provide their written consent to the disclosure of other contact information which is otherwise not supposed to be disclosed by the homeowners’ association.

4. Amendment Mailings. HB 807 provides that, if the association mailed a copy of a proposed amendment to the members prior to the membership vote to approve the proposed amendment and the proposed amendment was unchanged from the time of mailing all the way to the vote of the members, then the association only has to notify the members that the proposed amendment was adopted and that a copy of the amendment is available, upon written request to the association, at no charge to the member. The notice to the members must also provide the official record book and page number of the recorded amendment. In addition, it can be electronically transmitted to those members who have consented to receiving their association notices electronically.

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(5-28-14)

Hurricane Season is Almost Here ... Is Your Association Prepared?

June 1st marked the beginning of the 2014 hurricane season, and is only days away. Weather forecasters from Colorado State University predict a below average hurricane season. They anticipate that nine tropical storms will form but that only three will develop into hurricanes, "it only takes one landfall event near you to make this an active season", says meteorologists Philip Klotzbach of Colorado State University’s Tropical Meteorology Project. So, is your association prepared for this hurricane season?

It is important that association’s board of directors ensure that the association’s insurance policies are in place and that the board understands the association’s coverages and deductibles. It is important that the board of directors of a condominium association understand that, pursuant to section 718.111(11) of the Condominium Act, they must use their "best efforts" to obtain and maintain adequate insurance to protect the association, the condominium property and the common elements.

Even though a hurricane may pass in a matter of hours, the effect of a hurricane can last for days, weeks or even months depending on the strength of the hurricane and the damage it leaves in its wake. After a storm has passed it is important that the board members survey the damage caused by the storm. Some great tools for the association’s board, after a hurricane, are walkie-talkies, a disposable camera, a notepad and a pen or a pencil to take notes (remember, we used to use these things before our smart phones! No Power = No smart phones, too!). These tools will help board members keep in contact with one another after a storm and will help the board document any damage to the condominium property for insurance purposes.

If you haven’t done so already, the association should adopt a written hurricane plan. On a related note, the association should create and distribute to its board members a list of trusted vendors, including the contact information for each vendor. This can really come in handy in the event damages are sustained. Such vendors may include, to name just a few, restoration specialists, landscapers, plumbers, electricians, insurance contacts, including the association’s insurance agent’s contact information. Additionally, board members should know how to locate electrical meters, fire system panels, water shutoffs and any other relevant property features are located and how to operate such features.

Pursuant to section 718.111(5), Florida Statutes, a condominium association has "the irrevocable right of access to each unit during reasonable hours, when necessary for the maintenance, repair, or replacement of any common elements or of any portion of a unit to be maintained by the association pursuant to the declaration or as necessary to prevent damage to the common elements or to a unit or units." Access to units is of particular importance in the event of a storm. Condominium associations should ensure that it has keys to access each unit. All associations should ensure they have accurate contact information for each of its owners.

There are several simple things an association can do to help prevent damage to the property in the event of a tropical storm or hurricane. Trees, although beautiful, can cause a great amount of damage in a storm. Associations should make sure that the palms and other trees located on the condominium property are properly trimmed in advance of hurricane season. Anything that can fly around should be stowed away, such as roof tiles and patio furniture. Associations should also adopt rules and regulations which provide for what unit owners must do in the event of a tropical storm or hurricane, such as hurricane shutter use. With regard to an association’s official records, hard copy records, such as insurance binders, member contact information, bank account information, etc., can be stored in water tight containers and should be backed up on an external hard drive and with a cloud-based data storage service.

It is important that the board members remain in contact with each other in the event of a tropical storm or hurricane and, above all, to keep an open line of communication with its unit owners. Unit owners should be informed of the status of the property and the actions the board of directors is taking to repair or replace any damaged condominium property. Hurricane events are stressful. Communication is key!

 

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(5-14-14)

A Sneak Peak Into The 2014 Legislative Results

On May 2, 2014, House Bill 807 (HB 807), was ap-proved by both the Florida’s House of Representatives and Senate. It now awaits the signature of Governor Rick Scott to make it effective law or, if he does nothing at all, it will still become law. That said, Governor Scott does have the ability to veto HB 807 if he so chooses. Among other changes affecting residential properties, HB 807 makes some notable changes and additions to Chapter 718, Florida Statutes, more commonly known as the "Condominium Act." This article will give you a sneak peek into five notable changes.

1. Right to Enter an Abandoned Unit. HB 807 amends section 718.111(5), Florida Statutes, regarding a condominium association’s right to access an abandoned unit. Under these new provisions, a condominium association can enter an abandoned unit to inspect the unit and the adjoining common elements, to make repairs as needed, to turn on the utilities to the unit and to otherwise maintain and protect the unit and adjoining common elements.

A unit is considered abandoned under the following circumstances: i) the unit is under foreclosure and no tenant appears to have lived at the unit for four consecutive weeks without prior written notice to the condominium association, or ii) no tenant appears to have lived at the unit for two consecutive months without prior written notice to the condominium association and the condominium association is unable to contact the owner or determine the owner’s whereabouts after reasonable efforts. Prior to entering an abandoned unit, the condominium association must send two days notice of its intent to enter the unit to the owner at their last known address.

Any costs associated with the abandoned unit are chargeable to the owner and, no doubt of interest to many readers, such costs are assessable against the unit. Additionally, the condominium association can request that the court appoint a receiver to lease the abandoned unit. The rent collected is credited against the monies due to the association and receiver.

2. Unit Owner Directories. Currently, section 718.111(12)(c)5, Florida Statutes, provides that a condominium association can prepare and provide its members with a directory containing the name, address and telephone number of the unit owners. HB 807 amends this section to allow a condominium to publish ALL of the telephone numbers associated with unit owners. In addition, unit owners can provide their written consent to the disclosure of other contact information which is otherwise not supposed to be disclosed by the condominium association.

3. Return of Records and Property by Outgoing Board and Committee Members. HB 807 adds a new subsection "(f)" to the official records requirements located in section 718.111(12), Florida Statutes. This new subsection imposes a statutory obligation on outgoing board and committee members to return all official records and property of the condominium association in their possession, or control, to the incoming board and committee members within five days after the new board and committee members are elected or appointed. Those outgoing board and committee members who willfully and knowingly fail to return such records and property are subject to penalties imposed by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

What is noticeably absent from this new provision is the application of this statutory obligation on outgoing officers, too. While in the overwhelming majority of condominium associations the officers are comprised of board members, it is certainly possible for the board to select officers who are not board members, unless otherwise prohibited in the governing documents. This means that officers who are not board members would be free from this particular statutory obligation and civil penalty.

4. Board Member E-mail Communication, Attendance and Voting. A new provision is added by HB 807 to section 718.112(2)(c), Florida Statutes, which provides that board members may use e-mail to communicate to one another but cannot use e-mail to cast a vote on condominium association matters. However, while the board members are provided the right to communicate via e-mail, there is no mention in the legislation whether the board majority or only the board minority may do so.

Finally, yes finally, board members can appear and vote at board meetings not only via speakerphone, but now by video conference or similar real-time electronic or video communication so long as a speaker is used so that everyone can hear the "electronically appearing" board member. While likely apparent, a board member’s electronic appearance is counted towards establishment of a quorum, too.

5. Assessment Liability as Applied to a Condominium Association. HB 807 further defines the term "previous owner" in section 718.116(1)(a), Florida Statutes, as it relates to a unit owner’s liability for the unpaid assessments of the previous owner and provides for how such liability is applied when the condominium association was a prior owner of the unit.

This new language is likely a reaction to the decisions of the Third District Court of Appeal in Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc., Case No. 3D13-1437 (Fla. 3d DCA March 5, 2014) and Park West Professional Center Condominium. v. Londono, 38 Fla. L. Weekly D2510 (Fla. 3d DCA November 27, 2013). In both cases, the Court held that a unit owner is only liable for the unpaid assessments of the immediate-prior unit owner, and according to the Spiagga court case, if the prior owner was the association, then, by way of an oversimplification, the debt merged into the ownership as a result of the association taking title to the unit and, therefore, since you can’t owe money to yourself, the assessment debt re-sets to zero. In any event, thanks to HB 807, condominium associations have some new clarity in this regard. As amended by HB 807, section 718.116(1)(a), Florida Statutes, would additionally provide, in pertinent part, that:

"For purposes of this paragraph the term ‘previous owner’ does not include an association that acquires title to a delinquent property through foreclosure or by deed in lieu. A present unit owner’s liability for unpaid assessments is limited to unpaid assessments that accrued before the association acquired title to the delinquent property through foreclosure or by deed in lieu."

This new language added to section 718.116(1)(a), Florida Statutes, if and when it becomes effective, removes a condominium association from the classification of being a "previous owner," which means that a unit owner is not jointly and severally liable to the condominium association for the unpaid assessments that came due while the condominium association owned the unit. However, unlike the holdings of the Court cases previously mentioned, a unit owner would be jointly and severally liable for the unpaid assessments of other former owners pursuant to these new provisions.

Stay tuned for future legislative updates including HB 807’s effect on homeowner associations.

Unless vetoed, HB 807 becomes law on July 1, 2014.

 

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(4-30-14)

Assessment Liability: A Buoy to Third Party Purchasers and Foreclosing Lenders in the "Safe Harbor"

On January 3, 2014, in U.S. v. Forest Hill Gardens East Condominium Association, Inc., the United States Federal District Court for Florida’s Southern District held that the provision of the condominium association’s declaration, which provided that a foreclosing lender had no liability to the association to pay its share of common expenses or assessments pertaining to the foreclosed unit which became due prior to the foreclosing lender’s acquisition of title, trumped the provisions of section 718.116(1)(b), Florida Statutes, commonly referred to as the "safe harbor" provision, which would have entitled the association to the receipt of the lesser of one percent of the initial mortgage or 12 months back assessments. Because this case is being used as the basis for avoidance of lender assessment liability upon taking title as a result of the lender’s mortgage foreclosure, it is important that every community association manager and community association board member understand why the Court reached this very distinguishable conclusion.

Since at least 1992, every foreclosing lender of a condominium unit has been responsible to pay the "safe harbor" amount. What makes this situation so very different that the Court held the lender had no liability but to pay assessments as they came due AFTER taking title? The Forest Hill Gardens East Declaration of Condominium (the "Declaration") contained some very unique and extremely uncommon language. The provision at issue provided that "the present provisions of the Condominium Act… are incorporated…" into the Declaration and that "the provisions of this Declaration… shall be paramount to the Condominium Act..." Of great importance to understanding the Court’s logic is that, in this case, the Declaration was recorded in 1980, long before the version of section 718.116, Florida Statutes, at issue was amended by the Florida legislature in 1991.

After first confirming that your association’s declaration does not contain a similar provision, the next time a foreclosing lender argues that they do not have to pay the "safe harbor" in reliance on the Forest Hill Gardens East case, you know better.

On a related but different note, the Forest Hill Gardens East case clarifies that interest, late fees, collection costs and attorney’s fees are not to be added to the "safe harbor" amounts when otherwise due because, the Court reasoned, these expenses are neither common expenses nor regular periodic assessments.

Two other recent cases discuss a third party purchaser’s liability to a condominium association in the context where (1) the condominium association first foreclosed a unit assessment lien and, as a result, ended up owning the unit, and then (2) the lender foreclosed its unpaid mortgage which wiped out the association’s ownership interest in the unit and then (3) as a result of the lender’s foreclosure, a third party ended up being the winning bidder at the lender’s foreclosure auction and took ownership of the foreclosed unit.

Both the Third District Court of Appeal in Park West Professional Center Condominium Association, Inc. v. Londono, decided November 27, 2013, and the Fourth District Court of Appeal in Aventura Management v. Spiagga Ocean Condominium Association, Inc., decided on March 3, 2014, held that the joint and several liability of the new owner for past assessments only related back to the prior owner, that being the association. Neither association could look to the prior owners’ assessment deficiencies and collect it from the winning third party bidder of the lender’s foreclosure sale. Thus, these cases are being used to assert that the third party purchaser of a lender foreclosure does not have to pay bask assessments that were accrued as a result of the delinquencies of all other owners of the unit, but only for those of the immediate prior owner.

While, pursuant to section 718.116(1)(a), Florida Statutes, each owner is jointly and severally liable to the association for the back assessments that remain unpaid, a plain reading of these cases would suggest the new owner is only liable for the unpaid assessments of the immediate prior owner. Technically, this is true, but it is crucial to understand that the unpaid assessments of each owner become the next owner’s responsibility. But, in these two cases, it was the association itself that was the immediate prior owner. Thus, carrying the unpaid balances of the other prior owners forward the association as the immediate prior owner and then to the third party purchaser who acquired the unit as a result of the lender’s foreclosure sale, meaning that the new owner does indeed have no liability for the prior unpaid assessments. The reason why is not fully explained in either case. Simply put, because the association took title to the units, the debts of all prior owners of that unit were wiped clean as of the day the association took title. In other words, the debt merged into the ownership of the unit. Because, in both cases, the associations were the immediate prior owner of the units, the prior assessment debts were all carried forward to the association and, for all intents and purposes, were wiped out since you can’t owe money to yourself.

So, the next time a third party purchaser tries to argue that they are only responsible to pay the back assessments of the immediate prior owner, you will know that only applies if the immediate prior owner was the association. If it was anyone else, you might say, after confirming with your association’s lawyer, PAY UP, PAL!

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(4-16-14)

A Strange Encounter Between the Fair Housing Act and the Marketable Record Titles to Real Property Act

In a recent Dade City case, a Pasco County judge ruled that a homeowners association (HOA), which had specially assessed its members for mounting legal fees regarding a costly dispute over wheelchair access to its meetings, has no authority to assess homeowners for its legal bills because the HOA’s covenants had expired likely due to the Marketable Record Titles to Real Property Act (MRTA). According to Laura Kinsler as she reported for the Pasco Tribune and the Tampa Tribune, John Whitt, a wheelchair-bound member for the homeowners’ association wanted to attend board meetings but was prevented access because the board insisted on holding its meetings on an unfinished lakefront lot that was not wheelchair accessible.

According to the article, the wheelchair bound member accused his association of violating the Fair Housing Act (FHA) and also for not having meetings that were open to all members as required by Chapter 720, Florida Statutes. Early in the case, it seemed the member would rue the day. He had won the often hard to obtain and revered temporary emergency injunction, which in this case, required the association to meet for the entire year in wheelchair accessible locations. However, as fate would have it, the case was reassigned. Ms. Kinsler reported that the case was dismissed when the new judge "ruled that ‘there is no legal basis to support the plaintiffs’ contention that the open meeting provision of [the law] requires wheelchair accessibility’ since private community associations are not subject to the federal Americans [w]ith Disabilit[ies] Act [(ADA)]."

The outcome is perplexing because while the ADA and the FHA are similar in application, they apply to two very different situations. The ADA applies to areas of public accommodation, while the FHA applies to housing providers, which includes residential community associations. Occasionally however, the ADA will apply to a residential community association where there is a "public use" at play, such as when an association rents its clubhouse for weddings. The reason the case is perplexing is because, as reported, the plaintiff sued under the FHA, but oddly, the trial court issued its ruling citing the ADA. If this is the case, then we may not have heard the last of this case yet. But, WAIT! It gets better still.

During the pendency of the case, the association’s legal bills, according to the article, reached "upwards of $70,000." After the association levied its third special assessment, several other association members sued the association asserting that the deed restrictions had expired. Ostensibly, while the article does not specifically explain why, it was likely the effect of MRTA which, by way of an over-simplified explanation, abolishes restrictions recorded against real property not sooner than 30 years after their initial recordation, subject only to certain exceptions. Under Florida law, a HOA is permitted, by board action alone, to take certain measures prior to the expiration of the 30 years to preserve the community’s declaration of covenants and restrictions. If that does not occur, then it is required that a majority of those members affected vote in favor of revitalizing the community’s declaration of covenants and restrictions. If not, then the covenants no longer have any enforceability, including the right of the HOA to levy assessments.

Every HOA board member should be aware that according to a 2013, 4th District Court of Appeal decision, Southfield’s of Palm Beach Polo and Country Club, et. al. v. McCullough, the court held that HOA board members can have personal liability for allowing their covenants to expire, though the extent of their personal liability was not discussed. In another case, a lawyer was found to have liability where the lawyer failed to advise their HOA client of an impending 30 year MRTA deadline. As an aside, condominium association board members can let out a big sigh of relief because the nasty effects caused by the application of MRTA do not apply to condominium associations.

On a related note, Senate Bill 1450 was recently introduced which would require all HOAs to have meetings in locations that are accessible to physically handicapped persons. On an unrelated note, some good news to report: that nasty pending 2014 legislative bill that would have required a door tax to be paid by every HOA member in the state, similar to the $4.00 per condominium owner tax, died a deserving death a few days ago!

 

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(4-2-14)

Assistance Animals: A Not So Happily Ever After

How many times have you heard the old axiom, "ignorance of the law is no excuse?" Well, it’s never more true than in the Fair Housing Act (FHA) reasonable accommodation request for an "emotional support animal" arena.

In a 2012 Fourth District Court of Appeal case, Sun Harbor Homeowners’ Association, Inc. v. Bonura, the homeowners’ association brought an action against a homeowner for violation of it’s no dog policy. As could be expected, the homeowner counterclaimed asserting that his live-in fiancée was entitled to the use of an "emotional therapy dog" (referred to by HUD as an "assistance animal/emotional support animal").

Initially, the association demanded removal of Bonura’s fiancée’s dog due to the association’s no dog policy. In response, Bonura demanded an accommodation and informed the association that the dog was a "registered service dog" needed to assist his fiancée with her disability. Bonura did not provide any specificity as to the nature of the disability, but however, provided a "Registered Service Dog Certificate" purchased from an online vendor. In response, the association advised him, in writing, that he needed to have his request for accommodation placed on the association’s agenda for the next board meeting at which he would need to:

"1) demonstrate that a resident suffers from a medical disability or handicap, unless the disability or handicap was visible, and indicating that any written information provided by the resident would not be copied or shared and would be returned after viewing;

2) demonstrate how the service animal [sic] can or will reasonably accommodate the disability;

3) demonstrate that the service animal [sic] has special skills or training to accommodate the handicap; and

4) demonstrate how the special skills and in training of the service animal [sic] and will set it apart from an ordinary pet."

To make a long story short, the Court ruled in favor of the association, and in so doing noted that Bonura never requested to be placed on the association’s agenda and that Bonura did not provide the necessary information for the association to conduct a meaningful review of the request for the accommodation.

If this case had been recently filed and had Bonura minimally alleged that the need for the assistance animal was related to his fiancée’s emotional disability, the outcome would likely have been drastically different. Here is why: On April 25, 2013 the U.S. Department of Housing and Urban Development (HUD), issued a Fair Housing Equal Opportunity Notice, FHEO – 2013–01 ("FHEO Notice") and provided significant clarity as to Americans with Disabilities Act (ADA) "service animals" as compared against FHA "assistance animals" (and it’s subset classification of "emotional support animals"). First and foremost, the ADA applies to places of public accommodation. The FHA applies to housing providers, such as community associations. There can be some interplay between the ADA and the FHA such as a community association that allows it’s clubhouse to be rented out to the general public. The term "service animals" only refers to dogs (or miniature horses) and applies to the ADA, which as of this recent FHEO Notice, specifically excludes "emotional support animals." In short, the practical application of excluding "emotional support animals" from the definition of "service animal," means that a public facility does not need to permit "emotional support animals." In any event, FHA "emotional support animals" do not require any specific training or certification whatsoever. Therefore, by asking whether the fiancée’s animal had special skills or training to accommodate the disability and how the special skills and training which set the animal apart from an ordinary pet would likely have cost the association thousands, if not hundreds of thousands of dollars, in penalties.

According to the FHEO Notice, after a housing provider receives a request for an assistance animal, the housing provider must consider: 1) does the person seeking to use and live with the animal have a disability, i.e., a physical or mental impairment that substantially limits one or more major life activities? and 2) does the person making the request have a disability-related need for an assistance animal? In other words does the animal work, provide assistance, perform tasks or services for the benefit of the person with the disability or provide emotional support that alleviates one or more of the identified symptoms or effects of the persons existing disability?

Remember, breed, size and weight limitations may not be applied to an assistance animal. While an association may require a pet deposit, the association may not require deposits for assistance animals. Furthermore, again according to the FHEO Notice, the assistance animal is allowed in all areas of the premises where persons are normally allowed to go, unless doing so would impose an undue financial and administrative burden or would fundamentally alter the nature of the housing provider’s (the association’s) services.

Finally, remember that if the assistance animal in question poses a direct threat of harm to others or would cause substantial damage to the property of others, based on objective evidence and not mere speculation or fear, then that specific animal may be prohibited.

Wait until you read Florida House Bill 849, which is gaining traction in the legislature. Rather than use the FHA and ADA definitions, this legislation confuses the term "service animal" to also include "assistance animals" with the exception of an "emotional support animal" that, at least in this bill, stands on its own.

 

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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.

 

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(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.

 

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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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