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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 08/22/2016

The Community Association News 

That You Can Use!

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(8-17-16)

2016 Legislation of Interest to Community Associations

The 2016 Regular Session of Florida’s Legislature ended without any substantial piece of community association legislation becoming law. However, there are a few bills that passed into law that are of interest to community associations.

Every board and manager should be aware of new requirements in regard to an application for lease submitted by a servicemember, community residential homes, and private residential elevators.

Application for Tenancy by a Servicemember:

• If an applicant for lease is a servicemember, ALL Florida community associations must, within a seven-day period, notify the servicemember in writing of an application approval or denial and, if denied, the reason for denial. Absent a timely denial of the rental application, the landlord must lease the rental unit to the servicemember if all other terms of the application and lease are complied with. This requirement is not waivable under any circumstances whatsoever – even by the parties themselves! A "servicemember" is defined as "any person serving as a member of the United States Armed Forces on active duty or state active duty and all members of the Florida National Guard and United States Reserve Forces."

Requirements for "Community Residential Homes":

• A "community residential home" is a dwelling licensed to serve residents who are clients of the Department of Elderly Affairs, the Agency for Persons with Disabilities, the Department of Juvenile Justice, or the Department of Children and Families or licensed by the Agency for Health Care Administration which provides a living environment for 7 to 14 unrelated residents who operate as the functional equivalent of a family, including such supervision and care by supportive staff as may be necessary to meet the physical, emotional, and social needs of the residents. This new law establishes site requirements for community residential homes and provides that a community residential home may not be licensed within 1,200 feet of an existing community residential home.

Private Residential Elevators:

• All new elevators installed in private residences must have a clearance of no more than three (3) inches between the hoistway doors and the edge of a hoistway landing and must have certain doors and gates to withstand a specified amount of force and to reject a sphere of a specified size under certain circumstances.

Discharge of a Firearm:

• Any person who recreationally discharges a firearm outdoors in a residential area with a density of one (1) unit or more per acre commits a first degree misdemeanor, unless the discharge was to lawfully defend life or property, in performing official duties requiring the discharge of a firearm, the discharge does not pose a risk to life, safety, or property, or the discharge was accidental.

Repeal of Cohabitation Prohibition:

• Although not enforced in some time, the prohibition of cohabitation by unmarried men and women that was previously contained in Section 798.02, Florida Statutes, of the State’s criminal code, has been officially removed.

Changes Related to the Building Code and the Fire Prevention Code:

• Combined Local Appeals Board. Local boards created to address issues arising under the Florida Building Code or the Florida Fire Prevention Code may combine their respective appeals boards to create a single, local board. The combined local appeals board may grant certain alternatives or modifications through procedures outlined in NFPA 1, Section 1.4, but may not waive the requirements of the Florida Fire Prevention Code.

• Appealing Decisions. Any decision by the local fire official regarding application, interpretation, or enforcement of the Florida Fire Prevention Code or by the local building official regarding application, interpretation, or enforcement of the Florida Building Code, or the appropriate application of either code or both codes in the case of a conflict between the codes, may be appealed to a local administrative board.

• Joint Committee. All decisions of the local administrative board in regard to the application, enforcement, or interpretation of the Florida Fire Prevention Code, or conflicts between the Florida Fire Prevention Code and the Florida Building Code, are subject to review by a joint committee composed of members of the Florida Building Commission and the Fire Code Advisory Council, and decisions of the local administrative board related solely to the Florida Building Code are subject to review as set forth in Section 553.775, Florida Statutes.

• Minimum Radio Signal Strength for Fire Department Communications in High Rise Buildings. The local jurisdiction must determine the minimum radio signal strength for fire department communications in all new high-rise and existing high-rise buildings. Existing buildings are required to comply with minimum radio strength for fire department communications and two-way radio system enhancement communications by January 1, 2022.

• Minimum Fire Safety Standards for Existing Buildings. The local fire official may consider the fire safety evaluation systems found in NFPA 101A, Guide on Alternative Solutions to Life Safety, adopted by the State Fire Marshal, as acceptable systems for the identification of low-cost, reasonable alternatives. It is also acceptable to use the Fire Safety Evaluation System for Board and Care Facilities using prompt evacuation capabilities parameter values on existing residential high-rise buildings.

 

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(8-3-16)

The Condominium Fire Sprinkler Retrofit

A Continuing Saga

Each week, I receive a multitude of calls and e-mails from condominium association clients, and non-clients alike, regarding the fire safety retrofit requirements. The confusion arises because of a 2010 amendment to section 718.112 of the Florida Statutes which, prior to 2010, provided an opportunity to condominium associations whose condominium building was greater than 75 feet in height, to opt-out of the requirement to retrofit the condominium with fire safety sprinklers. Effective July 1, 2010, this legislation was amended to remove the 75 feet in height requirement, meaning that, at least insofar as Florida law is concerned, a plain reading of the legislation means that all condominium associations must either be prepared to undergo a fire sprinkler system retrofit, or opt-out of this requirement.

On the other hand, the Florida Fire Protection Code has continually provided that the Life Safety Code requires high-rise buildings (meaning buildings 75 feet in height or higher) to either undergo a fire sprinkler system retrofit or implement an Engineered Life Safety System.

While many learned association counsel, with whom I have discussed this matter, and I agree that the requirement to install the fire safety system retrofit and the ability to opt-out was intended to apply to high–rise condominium buildings, the post 2010 legislation set out in chapter 718, Florida Statutes, more commonly referred to as the Condominium Act, requires all condominiums to be prepared to opt-out of the requirement to install the fire sprinkler system retrofit or initiate a permit application for the fire sprinkler system retrofit with local government showing that the retrofit will be complete by December 31, 2019. It is generally agreed that this was not the intended result.

Read the statute below and see what you think. Section 718.112(2)(l) of the Florida Statute provides, in relevant part, as follows:

Notwithstanding chapter 633 or of any other code, statute, ordinance, administrative rule, or regulation, or any interpretation of the foregoing, an association, residential condominium, or unit owner is not obligated to retrofit the common elements, association property, or units of a residential condominium with a fire sprinkler system in a building that has been certified for occupancy by the applicable governmental entity if the unit owners have voted to forego such retrofitting by the affirmative vote of a majority of all voting interests in the affected condominium. The local authority having jurisdiction may not require completion of retrofitting with a fire sprinkler system before January 1, 2020. By December 31, 2016, a residential condominium association that is not in compliance with the requirements for a fire sprinkler system and has not voted to forego retrofitting of such a system must initiate an application for a building permit for the required installation with the local government having jurisdiction demonstrating that the association will become compliant by December 31, 2019.

I have read articles on this subject whose authors take the position that condominiums below 75 feet in height need not be concerned with the requirement set out in section 718.112 (2)(l), above. Nevertheless, only judges have the ability to interpret Florida Statutes in this manner. Therefore, it is important for the board of directors of each condominium association to make their own decision as to whether they want to adhere to the requirements set out in Florida law. At a minimum, before a non-high-rise condominium (below 75 feet) decides that the relevant provisions of section 718.112, Florida Statutes, is not applicable to their condominium association, they should consult with both the association’s attorney and the local jurisdiction’s fire official. At the end of the day, there is no harm to the non-high-rise condominium choosing to take the opt-out vote. In the meantime, a committee of several attorneys is seeking clarification from the Division of Florida Condominium that the need to install the fire sprinklers or opt-out, etc., is applicable to only high-rise condominiums and not those below 75 feet.

IMPORTANT: Clearly, high-rise condominiums are affected by the requirement to retrofit or opt-out. But, here is what you may not realize and absolutely need to know: if your high-rise condominium votes to opt-out of the need to retrofit with a fire sprinkler system, then the Life Safety Code will require that condominium association to prepare an Engineered Life Safety System commonly referred to an "ELSS." Therefore, before opting out of the need to retrofit the condominium with a fire sprinkler system, the association might consider comparing the costs.

Finally, some good news, according to the Life Safety Code, if your high-rise condominium building has exits from all of the units that lead directly to an outdoor corridor, then the condominium will not be required to install the fire sprinkler retrofit or an ELSS.

 

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(7-20-16)

OFFICIAL RECORD REQUESTS

Back To Basics

In an all too familiar story, the association’s board of directors has decided to authorize repairs due to neglected maintenance. Of course, not every association member is happy with the board’s decision. The rumor-mill is all a flutter and accusations are rampant. While the board knows it is doing the right thing, the "members group and opposition" is up in arms and out for blood. An official record request is received by the association. A member of the opposition group demands copies of all engineering opinions which provide that the maintenance is required along with all contracts associated with the project. The member writes in his request that he will call for an appointment to come by and pick up these records. The member doesn’t call. The association does not provide the records. In response, the member sues the association for failing to provide the records within the statutorily required time. Has the association done anything wrong?

In a court case similar to the above facts, Ridge Groves Condominium Association v. Misserville, a 2016 Florida Second District Court of Appeal case, a condominium unit owner, Michael Misserville, requested an appointment to inspect and copy a roster of all residents as well as the association’s insurance policies and stated that he would call sometime within the next five days to set the appointment. However, he never called to set the appointment to inspect and copy the requested records, and the association did not send him a copy of the records requested. Nevertheless, Misserville sued the association claiming that the association violated Florida law, more specifically, section 718.111(12)(c) of the Florida Statutes, which provides that if the association fails to provide a unit owner with records within ten business days of the request, then a rebuttable presumption is created that the association willfully failed to comply and damages can be awarded in favor of the aggrieved member.

It should be noted that all associations have the lawful right to adopt reasonable rules and regulations governing the frequency, time, location, notice, and manner of record inspections and copying. In the Misserville case, the association had adopted an official records request form which provided that the member must call for an appointment.

During the trial court portion of this case, the trial court found that there was no evidence that the association had adopted the rule governing the need for the member to set the appointment and, rather shockingly, found that the association was legally obligated to deliver the records. How the trial court could reach such a conclusion is beyond words because it is rather elementary that an association is never required to provide copies of requested records in response to a member’s official record request unless, somehow, the association had obligated itself to do so. Rather, the association’s only obligation is to provide a reasonable opportunity for the member to inspect the official records and make available for copying those records specifically requested within the statutory time period. The appellate court took notice that the association had actually copied all of the records requested and set them aside in the association’s office in anticipation of Misserville’s call. Further, the appellate court found that the trial court’s conclusion that the association failed to comply with the official record request was unsupported by both evidence and law and, therefore, that portion of the judgment was reversed in favor of the association.

While the Misserville case analyzed official records requests under Chapter 718 of the Florida Statutes, more commonly known as the Condominium Act, there are a few subtle differences between the official record request provisions set out in the Condominium Act as compared to the Homeowners’ Association Act under Chapter 720 of the Florida Statutes.

As to condominium associations, the records of the association must be made available to a unit owner within 45 miles of the condominium property or within the county in which the condominium property is located and within five business days after receipt of a written request by the board or its designee. The records can also be made available to the member on the property or the association may offer the option of making the records available to a unit owner electronically via the Internet or by allowing the records to be viewed in electronic format on a computer screen and printed upon request. The failure of the association to provide the records within ten business days after receipt of a written request creates a rebuttable presumption that the association willfully failed to do so in which case the owner is entitled to actual damages or minimum damages for the association’s willful failure to comply in the amount of $50 per calendar day for up to ten days beginning on the 11th working day after receipt of the written request.

As to homeowners’ associations, section 720.303(5), Florida Statutes, requires that the records must be made available to a member for inspection or photocopying within 45 miles of the community or within the county in which the association is located. Similar to the Condominium Act, the official records can also be made available for inspection in the community or at the option of the association, by making the records available to the owner electronically via the Internet or by allowing the records to be viewed in electronic format on a computer screen and printed upon request. After receipt by the board, or its designee, of a written request for official records, the official records must be provided within ten business days (as opposed to five business days for condominium associations).

As to another point of distinction, in order for a homeowners’ association member to be entitled to a rebuttable presumption that the association willfully failed to comply with the requirements regarding official record requests, the member MUST make their request by certified mail, return receipt requested. Note that there is no similar requirement for "certified mail, return receipt requested" in the Condominium Act. Similar to the Condominium Act, the homeowners’ association member who is denied access to the official records is entitled to actual damages or minimum damages in the amount of $50 per calendar day for up to ten days, beginning on the 11th business day after the board’s receipt of the written request.

While the Condominium Act does not have statutorily set costs that a condominium association can charge for providing copies of official records to a unit owner, the Homeowners’ Association Act provides that a homeowners’ association may impose fees to cover the cost of providing copies of the official records including the cost of copying and cost required for personnel to retrieve and copy the records if the time spent retrieving and copying the records exceeds one half hour and if the personnel costs do not exceed $20 per hour. Personnel costs may not be charged for record requests that result in the copying of 25 or fewer pages. The association may charge up to $0.25 per page for copies made on the association’s photocopier.

Both condominium and homeowners’ associations allow a member, or their authorized representative, to use a portable device including smart phone, tablet, portable scanner, or other technology capable of scanning or taking photographs to make an electronic copy of the official records in lieu of the association providing the member, or the member’s authorized representative, with a copy of the records and, in such event, the association cannot charge a fee to the member or the member’s authorized representative for use of the portable device.

With all of the above in mind, remember that your community association has the lawful right to adopt reasonable rules and regulations governing the frequency, time, location, notice, and manner of record inspections and copying of its official records. If your association hasn’t, why not?! It is simple enough to do and typically not very expensive. Any association that hasn’t already done so should reach out to the association’s lawyer for further discussion.

 

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(7-6-16)

Associations Can Once Again Foreclose Their Assessment Lien After a Lender Commences Its Foreclosure

Kaye Bender Rembaum Crushes the Quadomain Decision

Like people, associations can have good days and bad days. Not too long ago, in December 2012, as a result of the Florida’s Fourth District Court of Appeal (4th DCA) decision in U.S. Bank National Association v. Quadomain Condominium Association, Florida associations experienced a very bad day. By way of an overly simplistic explanation, the Quadomain case has been applied to effectively block an association from initiating an assessment foreclosure after a lender’s recording of its lis pendens, a notice of a pending foreclosure, where the association had not yet recorded its assessment lien. This was disastrous because, in practical application, it means that if the association had not yet recorded its lien before the lender’s recording of its lis pendens, the association was barred from foreclosing its assessment lien. In plain English, the recording of a lis pendens places the world on notice of the litigation concerning real property such that, if the property is transferred, the buyer takes the property subject to the outcome of the litigation.

Then, on June 29, 2016, Florida community associations had a very good day because of the 4th DCA’s opinion in the case of Jallali v. Knightsbridge Village Homeowners Association, Inc., in which Kaye Bender Rembaum was instrumental as legal counsel for the appellee, Knightsbridge Village Homeowners Association, Inc. In Jallali, the 4th DCA recognized that the association’s recorded interest related back to the date the association’s declaration is recorded, and once again, perfected an association’s right to foreclose, in spite of the lender’s recordation of its lis pendens.

Although the 4th DCA’s judgment in Jallali is not yet final (because the appellant, Jallali, has 15 days to file a motion for rehearing), Kaye Bender Rembaum successfully argued that the association’s assessment lien foreclosure action was not barred by the lender’s pending mortgage foreclosure action, despite being commenced after the lender’s mortgage foreclosure action and thus, after the recordation of the lender’s lis pendens, because the association’s claim of lien relates back to the recordation of the declaration, which was recorded before the lender’s notice of lis pendens, and because the association’s assessment lien foreclosure action was against the owner and member of the association and not the superior interest of the lender.

In order to understand the 4th DCA’s discussion and determination in Jallali, it is necessary to know what happened in Quadomain. In Quadomain, the lender recorded its lis pendens and commenced foreclosure of its mortgage. While the lender’s mortgage foreclosure action was underway, the owner of the property died, and the unit transferred to the owner’s heirs. Once the lender found out about the owner’s passing, the lender recorded a supplemental notice of lis pendens to name the new owners in the mortgage foreclosure action. After the lender recorded the supplemental notice of lis pendens, the association recorded its assessment lien against the lender (who had obtained a certificate of title against the deceased owner) and commenced foreclosure of its assessment lien against the lender.

The 4th DCA in Quadomain held that the association’s assessment lien foreclosure action was barred due to the lender’s pending mortgage foreclosure action based upon the 4th DCA’s application of section 48.23 of the Florida Statutes, which provides that the recording of an active notice of lis pendens against a property constitutes a bar to the enforcement of an unrecorded interest in the property unless the holder of the unrecorded interest intervenes in the pending foreclosure action within 30 days after the notice of lis pendens is recorded. Because of the length of time it may take for lender mortgage foreclosure actions to reach final conclusion, the use of the decision in Quadomain has been problematic for associations whose assessments have gone unpaid during the lender’s mortgage foreclosure action.

However, to the sheer happiness of associations throughout this great State, the Quadomain decision was clarified (some folks might say, "corrected") by the 4th DCA in Jallali. Similar to the facts in Quadomain, in Jallali, the lender recorded a notice of lis pendens and commenced foreclosure of its mortgage. While the lender’s mortgage foreclosure action was pending, the association recorded its assessment lien against the owner and successfully foreclosed its assessment lien against the owner. On appeal, the owner, relying on Quadomain, argued that the association’s assessment lien foreclosure action was barred because of the lender’s pending mortgage foreclosure action. The 4th DCA, distinguishing the Jallali case from the Quadomain case, and rightfully so, held that the lender’s recording of a notice of lis pendens does not bar the association’s subsequent assessment lien foreclosure action against the owner where the association’s lien is imposed under the association’s declaration which was recorded before the lender recorded its notice of lis pendens. Additionally, the 4th DCA provided that section 48.23 of the Florida Statutes was intended to protect the lender, not the delinquent homeowner.

Germaine to the 4th DCA’s decision was language in the Knightsbridge Village’s declaration that all liens, once recorded, relate back to the date that the declaration was initially recorded. Not all declarations contain this relation back language. Does yours? If not, the board should discuss amending the declaration to include the "relation back" language with the association’s lawyer.

 

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(6-22-16)

Application for Tenancy by a Service Member and

The Statutory Limitation on Condominium Association Transfer Fees

Pursuant to section 83.683 of the Florida Statute, if an applicant for lease is a servicemember ALL Florida community associations must, within a seven-day period, notify the servicemember in writing of an application approval or denial and, if denied, the reason for denial. Absent a timely denial of the rental application, the landlord must lease the rental unit to the servicemember if all other terms of the application and lease are complied with. This requirement is not waivable under any circumstances whatsoever – even by the parties themselves! A "servicemember" is defined as "any person serving as a member of the United States Armed Forces on active duty or state active duty and all members of the Florida National Guard and United States Reserve Forces."

On a different note, Florida law is very specific in terms of a condominium association’s ability to charge an application fee to prospective owners and tenants. As of late, the news is reporting that, as to those condominium associations and management companies that have been charging more than allowable fee, they could find themselves a named defendant in a class action lawsuit in the not-too-distant future. Here is what you need to know.

Apparently, more than a few condominium associations believe that they can charge additional fees for such things as, to name just a couple, credit reports and criminal background checks. Even certain management companies, acting as the agent of the condominium association, believe that they can charge a separate fee, too. This is simply not the case, and such action violates Florida law.

Section 718.112(i) of the Florida Statutes is patently clear. No charge shall be made by a condominium association in connection with the sale, mortgage, lease, sublease, or other transfer of a unit unless i) the association is required to approve such transfer and ii) a fee for such approval is provided for in the declaration, articles, or bylaws. Any such fee may be preset, but in no event may such fee exceed $100 per applicant other than husband/wife or parent/dependent child, which are considered one applicant. However, if the lease or sublease is a renewal of a lease or sublease with the same lessee or sublessee, no charge shall be made. In addition, the condominium association may, if the authority to do so appears in the declaration or bylaws, require that a prospective lessee place a security deposit, in an amount not to exceed the equivalent of one month’s rent, into an escrow account maintained by the association.

If the condominium association’s expenses in obtaining credit and criminal history reports exceeds the $100.00, the association bears the additional expense. Adding insult to injury, some management contracts provide that any fee charged by the association in connection with the sale or lease application is fully earned by the management company. In those instances, the condominium association does not even gain the benefit of the $100.00 fee to offset its expenses. What does your association’s management contract provide?

 

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(6-8-16)

A Failure To Pay Assessments Will Negatively Affect Credit Scores

It’s about time and long overdue

Until now, failing to make timely assessment payments could lead to additional charges for late payment fees, interest charges, collection fees, and may even result in the filing of a lien against your property and foreclosure of the recorded lien. However, delinquent assessments rarely show up in the member’s credit report, unless the debt becomes a matter of public record (e.g., an assessment foreclosure) or the debt is reported to the credit bureaus by a collections agency.

While residential in character, operating a community association is still a business. In fact, the Community Association Institute reported in its 2014 Statistical Review that of the approximately 333,000 community associations in the United States, community associations and property management companies collect approximately $70 billion in assessment payments each year. Until now, a member could miss a $30.00 minimum credit card payment and be penalized with a lower credit score, but if that same member was thousands of dollars delinquent in his or her assessment payments, it would not negatively affect their credit score, unless formal collections actions are taken by the association, such as turning over the delinquent account to a collections agency which reports the debt to the credit bureaus or a judgment of foreclosure is ordered against the owner. Well, this great injustice is about to change.

Typically, reporting debts to credit reporting agencies requires membership to the credit bureaus. This is a strict and costly process. However, it is sometimes possible for community association related debts to appear on a member’s credit report because the credit reporting agencies have employees which comb the public records for this type of information, including accounts with collections agencies, civil money judgments, and foreclosures. Once this debt appears on the member’s credit report, their credit score is severely lowered by as much as 300 points in the case of an assessment foreclosure.

Until recently, late assessment payments did not affect a member’s credit report or credit score. However, non-traditional credit data sources, including community association assessment payments, will soon begin to regularly appear on credit reports, and a missed payment will negatively affect credit scores. Equifax Inc. ("Equifax"), one of the three major credit reporting agencies, has recently entered into an agreement with Sperlonga Data & Analytics ("Sperlonga"), a data aggregation business for non-standard credit data sources, and will soon take into account community association assessment payments.

Homeowners who are late on assessment payments should expect to see a negative effect on their credit report and credit score. Similarly, homeowners who make timely assessment payments may soon see a positive effect on their credit report and credit score. A test run of the new community association assessment reporting will begin in August 2016 with full reporting planned for October 2016.

As stated by Matt Martin, chairman and founder of Sperlonga, "Until now, HOA payments have gone largely unreported to the national credit reporting agencies. Our service will help elevate association payments to the same level of importance as the consumer’s other financial obligations like residential mortgages, auto loans and credit card payments. Property owners that pay HOA fees on time should begin to see the similar impact to their credit reports as they would with other payment obligations traditionally found in a credit report, while associations and property management companies should begin to see reduced delinquencies and improved cash flow. Our goal is to empower homeowner associations and management companies with the same credit reporting tool that banks and lenders already use to manage consumer debt and credit-related payments."

Mike Gardner, senior vice president and sales leader at Equifax, has stated, "Equifax is committed to providing consumers with additional means for building their credit histories. Introducing new sources of data beyond what has traditionally been found on credit files can provide additional insight into a consumer’s financial behavior and help deliver expanded credit access."

Critics of the new community association assessment reporting argue that assessments are not the same types of debt as mortgages or other loans because associations do not provide financing for purchased goods, they provide property maintenance and services only. In this instance, the critic’s arguments of this new aspect to credit reporting is completely meritless. Simply put, if a member does not want to see their credit score go down, then they should pay their assessments on time. This type of credit reporting is long overdue and should be welcomed by community associations throughout Florida and the rest of the United States.

 

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(5-25-16)

Florida-Friendly Landscaping vs Architectural Approval

Planting Flowers? Read This First!

Both Chapter 373, Florida Statutes, regarding Florida’s water resources, and Chapter 720, Florida Statutes, regarding homeowners’ associations, provide for the use of Florida-friendly landscaping in promoting the efficient and clean use of water resources. "Florida-friendly landscaping," otherwise known as "xeriscaping," means using low-maintenance plants and environmentally sustainable practices to save residents money and to protect Florida’s natural resources by creating quality landscapes that conserve water, protect the environment, are adaptable to local conditions, and are drought tolerant. The principles of Florida-friendly landscaping include planting the right plant in the right place, efficient watering, appropriate fertilization, mulching, attraction of wildlife, responsible management of yard pests, recycling yard waste, reduction of storm water runoff, and waterfront protection. Additional components include practices such as landscape planning and design, soil analysis, the appropriate use of solid waste compost, minimizing the use of irrigation, and proper maintenance. But this does not entitle a homeowner to ignore their community’s architectural approval provisions.

Both Chapters 373 and 720, Florida Statutes, provide that a covenant cannot prohibit or be enforced so as to prohibit any owner from implementing Florida-friendly landscaping on their land or create any requirement or limitation in conflict with any water consumption provision, rule, or regulation. Occasionally, a homeowner may interpret this language to mean that their homeowners’ association cannot enforce the landscaping covenants set out in their community’s declaration. However, this is simply not the case.

Let’s get something straight, the Florida-friendly landscaping provisions of Chapters 373 and 720, Florida Statutes, do not prohibit a homeowners’ association from enforcing its architectural review and approval procedures as proscribed by its declaration of covenants, nor do they prohibit a community association from limiting or prohibiting the use of certain landscaping materials, including the use of turf alternatives, for example, rock lawns and wooden decks, in furtherance of its obligations to promote the ascetic quality and value of its community.

In fact, the Florida-Friendly Landscaping Model Covenants, Conditions and Restrictions for New and Existing Community Associations, prepared by the University of Florida, Department of Environmental Horticulture for the Florida-Friendly Landscaping Program, in conjunction with the Florida Department of Environmental Protection, proposes model covenants, conditions, and restrictions which require owners to obtain the prior written approval of the homeowners’ association prior to the installation of any landscaping, including Florida-friendly landscaping.

This being the case, in a homeowners’ association which requires that an owner obtain the approval of the homeowners’ association to make architectural changes to their lot, an owner who wishes to install landscaping, even Florida-friendly landscaping, on their lot must first obtain the approval of the homeowners’ association. Failing to get the approval of the homeowners’ association before installing the landscaping could lead to the removal of the unapproved landscaping, fines, common area use right suspensions, and individual assessments, causing unnecessary grief and expense to both the owner and the homeowners’ association.

While the Florida-friendly landscaping legislation came into being in 2009, these laws apply retroactively. The law provides that conserving and protecting the state’s water resources is a "compelling public interest" and "that the participation of homeowners’ associations and local governments is essential to the state’s efforts in water conservation and water quality protection and restoration." When government relies on its "police powers" (a/k/a to protect the health, safety, and welfare of our citizens), then the law in question applies without regard to the otherwise necessary "impairment of existing contract" analysis.

Although the Florida-friendly landscaping laws have been effective for many years now, and have retroactive application, some homeowners’ associations have not yet adopted landscaping standards which take Florida-friendly landscaping principles into consideration. If your community has not done so, then the Board should consult its lawyer to further discuss incorporating Florida-friendly landscaping into your governing documents.

 

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(5-11-16)

SOBER HOMES

Are They Coming to Your Community? 

What You Need to Know

Most commonly, when a community association is faced with a Fair Housing Act complaint, it is with regard to "reasonable accommodation" issues such as a request for an emotional support animal. Less common are Fair Housing Act complaints based on failure to grant a "reasonable modification" such as the need for the construction of a ramp so a wheelchair bound person may have access to the clubhouse. While failure to grant both reasonable accommodation and modification requests continue to dominate the Fair Housing Act landscape, the presence of "sober homes" throughout South Florida, particularly in Palm Beach County, is becoming a great public concern as well.

In most instances, sober homes are afforded protection under the Fair Housing Act. They are known by other names, too, such as halfway houses, group homes, recovery residences, etc. Sober homes are homes located in single-family communities which house multiple recovering drug and alcohol addicts in, what is hopefully, their final steps to sober living. While a well-run sober home can go unnoticed, a poorly supervised sober home can cause severe disruption in an otherwise tranquil community association causing the board to deal with such issues as littering, noise, parking problems, break-ins, thefts, and even drug and suicide related deaths.

Although zoning ordinances and a community’s covenants may require that a community contain single-family residences only, these requirements are trumped by the federally legislated Fair Housing Act, which makes it unlawful for a housing provider, including community associations, to discriminate in the sale or rental of dwellings based on race, color, national origin, religion, sex, familial status, or disability. Because drug and alcohol addiction is classified as a disability, community associations may find themselves forced to make reasonable accommodations to their covenants to allow sober homes to exist within their communities.

The existence of sober homes in single-family communities, and the fear that sober homes may appear, has caused many residents to speak up and reach out to local government officials who are similarly restrained by federal laws. Although local government officials are restrained by the Fair Housing Act in this regard, hopefully the collective voices of Palm Beach County residents and government officials have been heard by the U.S. Department of Housing and Urban Development (HUD), the federal agency charged with the administration of the Fair Housing Act.

As published in the Palm Beach Post on Monday, May 2, 2016, by Staff Writer, Joe Capozzi, HUD’s Assistant Secretary, Gustavo Velasquez, recently toured some of the sober houses in Delray Beach and met with about 30 local government officials regarding the prevalence of sober homes. HUD plans to issue a Joint Statement together with the U.S. Department of Justice (DOJ) as early as August of this year to provide guidelines for towns and cities desiring to enact ordinances intended to regulate the presence of sober homes in their communities.

As reported in Mr. Capozzi’s Palm Beach Post article, Congresswoman Lois Frankel, who organized the meeting with HUD, said "We are hoping to get from them some further guidance that will allow the cities [and] local governments to craft ordinances or laws that can balance the legal protections for people with disabilities and the ability for people to live in safe healthy neighborhoods."

While the meeting between local government officials and HUD was not open to the public, some insight was given as to what may be set out in the forthcoming Joint Statement. As reported, the guidance provided by HUD and the DOJ may provide a distinction between occupants of a sober home and the companies that operate them and may provide clarification as to what is considered to be a "fundamental change in the character of a neighborhood." As always with Fair Housing Act issues, the determination of what is an appropriate action with regard to a sober home will likely be determined on a case-by-case basis. If your community is faced with dealing with a sober home, before taking any action, the board should discuss the situation with the association’s lawyer.

 

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(4-27-16)

The Right of Inspection of the Official Records of the Association

Members of a Florida community association have a statutory right to access their community association’s "official records", subject to limited exceptions, including for example, records protected by the attorney-client privilege and records containing a member’s medical information. Both Chapter 718 and Chapter 720 of the Florida Statutes, regarding condominium associations and homeowners’ associations, respectively, provide that association members have the right to inspect the official records of the association, which includes the right to make or obtain copies, often at the member’s expense. The failure to timely respond to such a request can lead to statutory damages.

In the event a community association fails to timely make its official records available to a requesting member within 10 days of the request, a rebuttable presumption of the association’s willful failure to comply with an official records request is created which can subject the association to a claim for damages, too. That said, many times the same mistake is made when seeking to obtain copies of desired official records – the member requests the association send them copies of the desired official records rather than requesting an inspection of the official records.

Imagine this scenario, a member of a condominium association sends a letter to the manager of their condominium association requesting copies of the association’s repair records regarding repairs which were recently conducted by the condominium association to the member’s balcony, be sent to him within the statutory timeframe. Weeks pass, and the unit owner never received the copies of the requested official records. Using the force of Chapter 718, Florida Statutes, as his sword, the member sends the manager of the condominium association another letter, this time erroneously demanding the copies be provided to him together with the full amount of statutory damages for failing to timely respond which can be $50.00 per day up to $500.00, or actual damages.

While the member’s frustration is understandable, because damages for the association’s failure to timely make its official records available to the member are statutorily provided, the language of the statute regarding the inspection and copying of an association’s official records must be "strictly construed," meaning that the statute is interpreted solely based upon the language of the statute.

Due to this strict construction of the statute, many arbitration decisions of the Division of Florida Condominiums, Timeshares, and Mobile Homes (the Division) have held that when request is only made for copies of official records, instead of requesting access to inspect the official records, then the request is not in compliance with the requirements of Chapter 718, Florida Statutes, and therefore, is not subject to the timing requirement and monetary penalty of the statute. A few examples of the Division’s arbitration orders follow:

• The demand by the unit owner’s attorney for minutes, accounting records, receipts and expenditures, and financial reports of the association was not a request for inspection; therefore, the arbitration case was dismissed. Franklin v. Village Square Condominium Association, Inc., Arb. Case No. 2012-02-1447, Final Order Dismissing Petition without Prejudice (May 16, 2012).

• The unit owner’s e-mail request to provide copies of specified documents was not a request for inspection of official records; therefore, the arbitration case was dismissed. Federico v. Mariner Pointe Condominium Association, Inc., Arb. Case No. 2011-04-1330, Final Order of Dismissal (Aug. 23, 2011).

• The plain language of the statute does not require condominium associations to provide copies on demand or any particular form of copies; it is limited to providing access upon request, with an opportunity for the requestor to make copies. Lee v. Winston Towers 100 Association, Inc., Arb. Case No. 02-4897, Final Order (Jan. 3, 2003).

• In order to fall within application of the statute, a unit owner must request an opportunity to inspect official records. The unit owner requested that certain documents be mailed to him which did not comply with the statute; therefore, the unit owner’s request for statutory damages was denied. Bolt v. Bayshore Terrace Condominium Inc., Arb. Case No. 2010-04-6107, Summary Final Order (November 10, 2010).

Further, an association is not required to research its official records and cherry-pick those records requested by members. Notwithstanding the form of the member’s official records request, an association may comply with a member’s request by having a copy of its official records available for inspection or copying within the community, within 45 miles of the community, or within the county in which the community is located, or the association may offer the option of making the records available to a member on the internet or by electronic format on a computer screen and printed upon request. Remember, too, that an association can adopt reasonable rules and regulations governing the inspection such as where the request must be delivered, and the length of a member’s inspection so long as the inspection is not limited to less than one, eight hour day per month.

 

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(4-13-16)

HAS "HUD" GONE TOO FAR?

The Rights of Criminals to 

Live in your Community

Anyone who believes that big government does not already intrude too far into the lives of the citizenry of the United States of America will be even more disgusted with the U.S. Department of Housing and Urban Development’s ("HUD") General Counsel’s April 4, 2016 advisory opinion where HUD most clearly provides felons more rights than non-felons under the Federal Fair Housing Act (the "Act"). That’s right, the same Federal Agency that has allowed an ever growing, over-abundance of assistance animals into your "no-pet" or otherwise restricted pet community has thrown us another curve ball aimed at further restricting the right of a community association to determine its newest residents.

Generally, the Act prohibits discrimination in the sale, rental, or financing of residences, and in other housing-related activities, on the basis of race, color, religion, sex, disability, familial status or national origin. As recently upheld by the United States Supreme Court, a claim for a violation of the Act based on "disparate impact" is permissible. Such a claim occurs where the application of a seemingly neutral policy or procedure has a discriminatory effect on a particular group of people on the basis of race, color, religion, sex, disability, familial status or national origin.

HUD’s most recent opinion begins by providing statistics such as "100 million U.S. Adults (1/3 of the population) have a criminal record of some sort, the prison population of 2.2 million is the largest in the world, 650,000 individuals are released from prison each year, and over 95% of those incarcerated will be released at some point. African Americans and Hispanics are convicted and incarcerated at rates disproportionate to their share of the general population." Therefore, HUD reasons that criminal record-based barriers to housing are likely to have a disproportionate impact on minority home seekers.

On April 4, 2016, HUD issued guidance from its Office of the General Counsel regarding the application of the Act on the use of criminal arrests and convictions by housing providers, which includes community associations, to screen potential purchasers and renters. This guidance issued by HUD provides, in its conclusion, that:

Because of widespread racial and ethnic disparities in the U.S. criminal justice system, criminal history-based restrictions on access to housing are likely disproportionately to burden African Americans and Hispanics. While the Act does not prohibit housing providers from appropriately considering criminal history information when making housing decisions, arbitrary and overbroad criminal history-related bans are likely to lack a legally sufficient justification. Thus, a discriminatory effect resulting from a policy or practice that denies housing to anyone with a prior arrest or any kind of criminal conviction cannot be justified, and therefore such a practice would violate the Fair Housing Act… Selective use of criminal history as a pretext for unequal treatment of individuals based on race, national origin, or other protected characteristics violates the Act.

In arriving at this conclusion, HUD discusses the three element standard by which criminal history-based screening provisions are evaluated:

1) Whether the Criminal History Policy or Practice Has a Discriminatory Effect: Under this element, an aggrieved person must show that the application of criminal history-based screening results in a disparate impact on a group of people based on their race or national origin. Typically, this is shown by the use of statistical data and is determined on a case-by-case basis.

2) Whether the Criminal History Policy or Practice is Necessary to Achieve a Substantial, Legitimate, Non-discriminatory Interest: A community association is responsible for promoting the health, safety, and welfare of its members. Most, if not all, board members would agree that keeping criminals out of their communities is in furtherance of this responsibility. However, in the event of challenge, HUD will require that the association present "reliable evidence that its policy or practice of making housing decisions based on criminal history actually assists in protecting resident safety and/or property." As such, HUD will require an association to prove a negative, meaning an association will have to somehow show that its community is safer because its criminal-history based screening has kept the criminals out. How HUD expects an association to prove this remains a mystery.

3) Whether There Is a Less Discriminatory Alternative: In this final element, an aggrieved person must show that the association’s interest (established in the second element) could be served by a less discriminatory practice, meaning is there a way the interest can be met by further limiting and qualifying the use of criminal history information? HUD provides that these qualifying factors may include, "the facts or circumstances surrounding the criminal conduct; the age of the individual at the time of the conduct; evidence that the individual has maintained a good tenant history before and/or after the conviction or conduct; and evidence of rehabilitation efforts."

An Exemption: A community associateon will not be liable under the Act for refusing a sale or lease to a person with a prior conviction for "drug manufacturing or distribution" regardless of any discriminatory effect it may create. Why? Because section 807(b)(4) of the Act does not prohibit conduct taken against a person who has done so. This exemption does not lend itself to mere "possession" crimes.

Practical Application of HUD’s April 4, 2016 Opinion: When drafting sales and leasing approval rights for an association, consider including a list of factors that "may" be considered. The word "shall" should be avoided to provide better decision making flexibility. As to convictions, to stay on the safer side of HUD’s latest opinion, boards of directors should only consider disapproving a sale or lease to recent convictions of only the most egregious crimes, otherwise known as crimes of moral turpitude, such as a felony involving violence to persons or property or a felony demonstrating extreme dishonesty. If your community’s governing documents assert an outright ban against approving a sale or lease for anyone with a criminal history, then such language should be amended as soon as possible.

Why HUD does not take into account the personal choices that led to the person’s incarceration will always be a mystery. We do not need HUD to go out of its way to protect the rights of convicted felons. What we need are criminal justice laws that make better sense.

 

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(3-30-16)

CONDOMINIUM FIRE SPRINKLER SYSTEMS

Clarity for a Confusing Situation

Which residential condominium associations are required to install a fire sprinkler system in their condominium building or, in the alternative, hold a vote for the members to opt out of the requirement to install the fire sprinkler system? Does the requirement to install the fire sprinkler system apply to all residential condominium buildings regardless of height, or does it refer to only those residential condominium buildings that are considered "high-rise" buildings? Rarely has there been so much confusion.

First, some background. The Florida Fire Prevention Code, as further discussed in Florida Statute Chapter 633, is based, in large part, upon the National Fire Protection Association Fire Code (referred to as "NFPA 1") along with the Life Safety Code (referred to as "NFPA 101"). Chapter 31, Section 3.5.11 of the Life Safety Code, as amended by the Florida Fire Prevention Code, requires all "high-rise" buildings to be protected by an approved, automatic fire sprinkler system no later than December 31, 2019. The Florida Fire Prevention Code allows an "Engineered Life Safety System" as an alternative to the fire sprinkler system.

The section of law that is causing confusion is Florida Statute section 718.112 (2)(l). As you read the following provision, ask yourself whether you believe it applies to all residential condominiums, or only to "high-rise" buildings. This section of Florida law provides, in relevant part that, "notwithstanding chapter 633 or of any other code, statute, ordinance, administrative rule, or regulation, or any interpretation of the foregoing, an association, residential condominium, or unit owner is not obligated to retrofit the common elements, association property, or units of a residential condominium with a fire sprinkler system in a building that has been certified for occupancy by the applicable governmental entity if the unit owners have voted to forego such retrofitting by the affirmative vote of a majority of all voting interests in the affected condominium. The local authority having jurisdiction may not require completion of retrofitting with a fire sprinkler system before January 1, 2020. By December 31, 2016, a residential condominium association that is not in compliance with the requirements for a fire sprinkler system and has not voted to forego retrofitting of such a system must initiate an application for a building permit for the required installation with the local government having jurisdiction demonstrating that the association will become compliant by December 31, 2019." Sadly, and candidly quite obvious given the number of reader emails I received on the subject, this section of the Condominium Act does not provide the necessary clarity to answer this question: Must every residential condominium either install fire sprinkler systems or hold a vote of the owners to opt out, or do the fire sprinkler requirements only apply to condominium associations whose residential condominium building(s) are considered "high-rise" buildings?

Simply put, while this section of the Condominium Act does not provide that it specifically applies only to "high-rise" buildings, the actual requirements, as set out in the Life Safety Code, more specifically the NFPA 101 Chapter 31, Section 3.5.11, only requires the installation of the fire sprinkler system in what is referred to as "high-rise" buildings. The NFPA 101 defines the term "high-rise building" as any building where the floor of an occupiable story is greater than 75 feet above the lowest level of fire department vehicle access. In other words, without directly saying so, it appears that Florida Statutes section 718.112 (2)(l) was designed to function in parity with the relevant provision(s) of the Florida Fire Prevention Code. When section 718.112(2)(l) is read together with Chapter 31, Section 3.5.11 of the Life Safety Code, it is pretty obvious that the fire sprinkler system requirements and the condominium association opt-out procedures only apply to "high-rise" buildings.

Adding to the confusion is that earlier versions of section 718 112 (2)(l) provided, "[f]or purposes of this subsection, the term ‘high-rise building’ means a building that is "greater than 75 feet in height where the building height is measured from the lowest level of fire department access to the floor of the highest occupiable story." Later, this text was amended out of the statute.

So, what is the bottom line? Does a condominium association whose buildings are not considered "high-rise" buildings have to install fire sprinkler systems or opt out by taking the necessary vote prior to December 31, 2016? While it seems clear that the fire sprinkler provisions do not apply to non -"high-rise" buildings, any unqualified person’s opinion may or may not be a correct opinion when later judicially challenged. Sometimes even the clearest points of law become all muddled up in the courtroom. Imagine a situation where a non-"high-rise" building experiences a catastrophic fire, and great harm is caused to both person and property. It would not be at all surprising for any resulting lawsuit brought by the injured’s attorney to include a claim for breach of fiduciary duty against the association and its board members for failure to install the fire sprinkler system or to have taken the requisite vote of the owners to opt out of the installation requirement. With that in mind, there is only one way to gain the clarity needed.

NON- "HIGH RISE" CONDOMINIUMS: In order to have certainty as to whether your non-"high-rise" condominium is required to install a fire sprinkler system or take the vote to opt out, an opinion of a quailed professional is needed. In this instance, it would be miraculously wonderful if the State Fire Marshall would issue a public statement. Absent that, an association should make inquiry to the Bureau of Fire Prevention, Division of State Fire Marshall, or their local Fire Marshall. Your association’s attorney should be able to assist in facilitating this communication for you.

"HIGH RISE" CONDOMINIUMS: By December 31, 2016, the "high-rise" condominium that is not in compliance with the requirements for a fire sprinkler system and that has not voted to forego retrofitting of such a system must initiate an application for a building permit for the required installation with the local government having jurisdiction demonstrating that the association will become compliant by December 31, 2019. The automatic sprinkler system is not required if the members voted to opt-out. It is also not required when every dwelling unit has exterior exit access which can include balconies, porches, and rooftop decks under certain circumstances. In addition, the automatic sprinkler system is not required in buildings having an approved engineered life safety system designed by a professional engineer that specializes in fire and life safety design. If a board believes their condominium is exempt for the forgoing reasons, then it should consult with a qualified fire safety engineer, State Fire Marshall or other qualified individual to render such opinion.

 

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(-3-16-16)

The Final Chapter of the 2016 Legislative Session

What started with a loud bang, ended on March 11, without so much as a fizzle.

The 2016 legislative session which ended on March 11, started out 60 days earlier with a flurry of activity insofar as Florida’s community associations are concerned. This year’s proposed legislation included such measures as capping estoppel fees, strict requirements as to when estoppels must be issued and how they were to be paid for, mandatory websites for condominium associations with greater than 500 units and homeowners’ associations with greater than 7,500 parcels, requirements for delinquent assessment agreements that served to only protect the deadbeat owner who failed to pay their fair share of assessments, new requirements for director and officer conflicts of interest, requirements for homeowners’ associations to notice all of its committee meetings, requirements that would have prohibited associations from enforcing speed limits on association property, new requirements that would have made it significantly more difficult for homeowners’ associations to regulate leasing of parcels, strict requirements for the time of day in which a homeowners’ association election could take place, requirements that all future legislative amendments to Chapter 718 would apply to all condominiums throughout the state, new certified written inquiry requirements for condominium associations, prohibitions against a condominium association’s approval of transfer of title unless there was evidence of a significant security interest, and finally, a massive bill which would have revamped all of the community association legislation presently in existence to mirror one another and which would have required homeowners’ associations to come under the jurisdiction of a Florida agency to be retitled the Division of Florida Condominiums, Homeowners’ Associations, Timeshares, and Mobile Homes.

Lawyers and lobbyists on both sides of the aisle worked to have these measures passed into law, to temper many of these unreasonable proposed legislative initiatives, and in many instances, to defeat these initiatives, too. Yet, during this year’s legislative session it seemed as though many of the aforesaid proposals were destined to become law. Surprisingly, Florida’s legislators, to the significant benefit of association members everywhere, got bogged down in other more pressing matters, such as the Governor’s proposed tax cuts, and none of the these community association initiatives were passed into law.

Yes, I’ll say it again, NONE OF THESE INITIATIVES WERE PASSED INTO LAW!

Of possible interest to condominium associations is a new law set out in House Bill 535 which provides that "the local fire official can consider low-cost reasonable alternatives" but it is debatable whether it is applicable to the already existing requirement that by December 31, 2016, a residential condominium association that is not in compliance with the requirements for a fire sprinkler system and that has not voted to forego retrofitting of such a system must initiate an application for a building permit for the required fire sprinkler system retrofit installation with their local government demonstrating that the association will become compliant by December 31, 2019. Associations should contact their legal counsel to discuss whether your association is required to address the fire sprinkler retrofit by December 31, 2016 because it likely will require a vote of the membership by December 31, 2016 to opt out of the retrofit requirement.

Your chance to make a difference: As to the 2017 Legislative Session, it is time to revisit a condominium association’s ability to require hurricane protection and the process governing such procedures. Please provide me with any comments you may have regarding the requirements legislating a condominium association’s ability to require hurricane shutters such as, for example, whether an owner can install different protection, whether an owner should be forced to pay for new protection if they already have code compliant protection where the association opts to install different code compliant protection, etc. Most especially, if your condominium association installed hurricane protection throughout the condominium, please provide me with any comments that you may have as to what would have made the process a better experience. Please direct all of your comments and suggestions directly to me at jrembaum@kbrlegal.com.

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(3-2-16)

Florida Law Requires A New Fire Sprinkler System for Your Condominium

Florida law is patently clear. By December 31, 2016, a residential condominium association that is not in compliance with the requirements for a fire sprinkler system and that has not voted to forego retrofitting of such a system must initiate an application for a building permit for the required fire sprinkler system retrofit installation with their local government demonstrating that the association will become compliant by December 31, 2019. So, if your condominium association does not want to incur this expense, then the association must act now, before it is too late, by presenting an option to its members to opt-out of this requirement by the December 31, 2016 deadline which will be here before you know it.

Section 718.112(2)(l), Florida Statutes allows an association to vote to forego the retrofitting of the fire sprinkler system upon the approval of a majority of the entire membership (not a majority of a quorum). The vote may be undertaken at a duly-noticed membership meeting or by the written consent process in lieu of having a membership meeting. Voting by written consents or written agreements may be utilized by an association regardless of whether the bylaws or the declaration specifically permit voting by written consents or written agreements. On the other hand, if a membership meeting is held, fourteen (14) day advance written notice must be sent to the entire membership by mail or hand-delivery. If the vote is successful, then the vote to forego the retrofit is only considered effective when the certificate attesting to the vote is recorded in the public records of the county where the condominium is located.

In addition, if the vote to forego the retrofit is approved by the unit owners, the condominium association must also send written notice to the entire membership of the outcome within 30 days of the vote. Further still, the providing of this notice must be evidenced by an affidavit executed by the person sending the notice and kept with the condominium association’s official records. As the last step to this process to opt out of the need to retrofit, the condominium association must also report the results of the vote and recording of the certificate to the Division of Florida Condominiums, Timeshares, and Mobile Homes (the "Division").

If by December 31, 2016, a majority of the members of the condominium association do not vote in favor of approving to forego the retrofit, the association must submit a building permit application with the applicable local governmental authorities on or before December 31, 2016 regarding its intent to comply with the applicable fire and life safety codes. Then, the retrofit of the condominium must be completed by December 31, 2019. In addition, if a condominium association undertakes retrofitting of its condominium, then the condominium association is also statutorily required to report the per-unit cost of the retrofit work to the Division.

In the event a condominium association has previously voted to forego the retrofit, and now wants to reverse that decision, the membership has the ability to vote to require the retrofit at a membership meeting. The affirmative vote of all of the members is needed in order to require the retrofit. The vote to require the retrofit may only be called once every three (3) years, and electronic transmission cannot be used to provide notice of the membership meeting.

In rendering your decision to retro fit or to not retrofit, ask yourself whether you would rather live in a condominium building with up-to-date life safety equipment. Even though it might be a costly project, in the rare circumstance it is needed, it is worth more than a billion dollars when your life is at stake. In fact, some might say that the decision to go ahead with the fire sprinkler retrofit is priceless.

 

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(2-17-16)

Another Fine Legislative Mess Only Problems and No Solutions With House Bill 1357

When Florida’s legislature is in session, there is never a shortage of topics to write about. House Bill 1357 ("HB 1357") is no exception. It is another overreaching piece of legislation that will only serve to make assessment debts harder to collect and will cause association assessments to increase in order to comply with its overreaching and micro-managing requirements. HB 1357 is inartfully conceived. There is no intent to criticize anyone that participated with HB 1357, but rather to point out the many problems that will be created should such an ill-conceived legislative effort be passed into law.

Statutorily Required Websites: Condominium associations with 500 or more units and homeowners’ associations with 7,500 or more parcels must create and maintain a legislatively required website which mandates stringent, onerous, and, quite candidly, obnoxious requirements as to what must be contained and continually updated therein. If a community desires to spend its assessment revenues in this manner, then that should be a decision for each individual community and not mandated by the State. Unnecessary litigation will ensue by every unhappy association member who believes that their association’s website does not contain the information as required by statute. This legislation will require associations to engage the service of yet another professional requiring significant payment for services rendered. In some instances, it could even require a full-time dedicated IT/website employee in order to maintain HB 1357’s ongoing posting requirements. If passed into law, it would only be a matter of time until some other legislature makes these requirements applicable to each and every community association in the State, regardless of their size.

Impediments to Collection of Past Due Assessments: Regarding the collection of past due assessments by condominium and homeowners’ associations, the decision of the association to take legal action to collect unpaid assessments or to use a third-party to collect unpaid assessments should not be dependent upon whether the Association has complied with new statutory obligations that require newly written collection policies that mandate when payment plans can be considered, their terms, inclusive of a mandated six month payment plan. The entire scope of the association’s collection regime should be set out in its declaration and not by way of a separate statutorily required written collection policy. The ability of a community association to offer a payment plan is unique as to each request made by an association member. The association must have complete flexibility in terms of structuring such payment plans and the factors for consideration of such plans and should not be subject to stringent requirements as would be required by this legislation which clearly removes the ability of an association to have the necessary discretion needed to create flexible payment plans. In and of itself, this legislation will impede the ability of an association to readily collect past due debts and will increase every association’s legal fees by requiring the adoption of yet another collection policy. It will create significant impediment to the collection of past due assessments.

Conflicts of Interest: Regarding condominium and homeowners’ association director and officer conflicts of interest, all sorts of new disclosures and procedures are creating conflicts of interest that may occur when the association may hire an officer, director or other relative of a director or officer. The use of the term "relative of a director or officer" is fully undefined and most problematic. Does this mean that a board member’s wife’s fourth cousin once removed on her grandmother’s uncle’s side of the family is included within the scope of the term "relative"? In terms of the board’s ability to remove a director or officer who violates the conflict of interest legislation, HB 1357 provides the board the unquestionable and incontestable ability to remove a sitting board member without any avenue of redress for that board member to dispute the findings of the board. This will create an unjust, unfair result. It is only a matter of time until an a board of directors majority, unhappy with a fellow board member, makes false accusations against such board member and removes them using this legislation as a pretext to do so.

HOA Committee Meetings: This part of HB 1357 completely revamps the homeowner associations’ need to notice committee meetings. At present, the need to notice committee meetings is quite different for condominium versus homeowner associations. In short, all condominium association committee meetings must be noticed unless there’s an exemption in the bylaws. This is not so for homeowner associations where it is only necessary to notice committee meetings when final expenditure of association funds are considered or architectural decisions are made. This has provided great flexibility to homeowner associations to operate more efficiently. For example the condominium association has to notice its bake sale committee meetings, while the homeowners’ association bake sale committee does not similarly need to do so. This legislation will change this requirement so that homeowners’ association committee meetings of every nature must be noticed, minutes taken, etc. This is just another example of bad, ill-conceived legislation likely caused by one or two unique circumstances rather than looking at the good of the whole.

Safety on the Roadways: There should be no impediment to an association’s ability to create a safe environment for its members. Rarely is speeding within a homeowners’ association not problematic. Yet, HB 1357 makes it unlawful for a homeowners’ association to enforce and impose statutorily imposed traffic laws as provided in Chapter 316, Florida Statutes. The ability of a homeowners’ association to take measures to reduce speeding within the community should not be prohibited. Oftentimes, community association roads have speed limits posted below the minimum speed that would otherwise be allowed by law and therefore, lower than that as would be enforced by law enforcement. As a result, community associations with speed limits, such as 15 miles per hour, need the ability to adequately control speeding on their roadways. This legislative initiative will cause serious injury and likely death if passed into law… it is just a matter of time.

Leasing: Investors’ leasing rights should not be paramount to owners’ rights to protect their community from becoming a rental community. However, the legislature wants to create an unfair regime for homeowners’ associations, as it did for condominium associations to protect the investors. As to a member’s rental of their property within a homeowners’ association, HB 1357 makes effort to mirror existing condominium association legislation that requires all rental restrictions to be set out within the declaration of condominium. What the legislature does not seem to understand is that community associations are not rental communities but rather are first and foremost communities for owners to live in. Therefore, it is extremely important for community associations to easily amend their community’s rental requirements. The fact that investors choose to gobble up homes in a homeowners’ association is the unique individual decision of the investor, but the investor does so with the understanding and risk tolerance that the board of directors or members could later change the rental requirements. Complete flexibility is needed to protect the lifestyle for those members who live within the community. In other words, the rights of the members living in the association’s community should be paramount to offsite investor owners seeking rental income.

HB 1357 requires homeowners’ association voting to take place from 7 AM to 7 PM. It is ridiculous. It is also diametrically opposed to the absentee balloting process.

The likely unintended consequence, yet very real occurrence, that will be created if this legislation is adopted will be significantly increased assessments for all association members in order to comply with the requirements of the legislation in terms of hiring requisite technology personnel to create and administer the association’s statutorily required websites and fees to legal counsel to create the necessary written collection policies for collection of assessments. Removing the ability of a community association to control speeding on its roadways is ill-conceived and, simply put, reckless.

 

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(2-3-16)

An Unfair Bar to Association Assessment Foreclosures

A Call to Action for Florida’s Legislature

Sometimes bizarre results occur from otherwise mundane laws. The arena of a lender’s mortgage foreclosure versus an association’s foreclosure of its assessment lien can certainly be characterized as one such example. Nothing is worse than a lender who refuses to take their foreclosure to final judgment and sale, or a litigious homeowner who knows how to use the legal system to stall the lender’s foreclosure case. In both cases, it is the association that suffers greatly because, more likely yet than not, the owner is not paying assessments during the pendency of the lender’s foreclosure action. Because of the owner’s failure to pay assessments, the association should be permitted to foreclose, especially when the lender’s foreclosure case is dragging on and on. Right? Well, not according to a few recent appellate cases.

As a prerequisite to filing a lawsuit over real property, a lis pendens is recorded in the county’s public records, the purpose of which is to place the public on notice of the pending litigation so that if the property is sold, the new owner knows that they have acquired the property subject to the outcome of the pre-existing litigation. According to section 48.23, Florida Statutes, once the lis pendens is recorded, any person with an unrecorded interest or lien against the property, must intervene in the lawsuit within 30 days of the recording of the lis pendens or else they are time barred from doing so. This can have a significant chilling effect on an association’s right to otherwise lawfully collect the past due assessments that accrued against the property through the date the lis pendens was recorded. Sadly, it gets worse.

The problem is not in the appellate court’s application of the law, but rather the problem lies within the law itself. As things stand today, if a lender forecloses and the association does not bring its assessment foreclosure case by intervening in the lender’s foreclosure within 30 days of the date of the lender’s filing of its lis pendens, then the association is barred from bringing its assessment foreclosure lawsuit that includes assessments due up to the time of the recording of the lender’s lis pendens.

Recall that an association must first send its intent to lien and intent to foreclosure letters to the non-paying owner before it can foreclose. What if the owner timely paid assessments right up until the commencement of the lender foreclosure? This means that the association cannot timely intervene in the lender’s foreclosure because it is statutorily prohibited from filing an assessment foreclosure until the time periods for both the intent to lien and intent to foreclose letters have fully run. The real world consequence of this "mishigas" (legal word for crazy nonsense) is that the association is left with no legal remedy, cannot foreclosure and must, at least for the time being, allow the dead-beat to remain in the association because it is legally prohibited from foreclosing the association’s assessment lien, unless it did so within 30 days of the lender’s recording of its lis pendens, which the association cannot do unless it sent both the intent to lien and foreclose letters and waited the statutory prescribed times by which time the 30 days in which to bring the association’s claim has expired.

In U.S. Bank National Association v. Quadomain Condominium Association Inc., decided in 2012 by Florida’s 4th District Court of Appeals, the Court held that the lower court presiding over the lender’s foreclosure action which created the lis pendens had exclusive jurisdiction to adjudicate any interest in the subject property from the date the lis pendens is recorded to the date it enters final judgment. Therefore, to foreclose the association’s lien, the association was statutorily required to intervene in the lender’s foreclosure case within 30 days of the lender’s recording of the lis pendens and not by way of foreclosing in a different court. Since the association had foreclosed in a different court, its previous successful foreclosure was reversed.

On January 27, 2015 the 4th DCA, in Jallali v. Knightsbridge Village HOA, Inc., again ruled against an association who did not move to intervene in a lender’s stalled foreclosure within 30 days of the lender’s recording of its lis pendens and reversed a different lower court’s judgment in favor of the association. That said, in this case, the association’s claims did not accrue for more than three years after the lis pendens was recorded, so how could the Association comply with the statutory requirement? Attorney Robert Kaye adds, "this is an unjust, inequitable result relative to innocent associations when lenders do not timely complete foreclosures."

It is hard to fathom that the legislature intended this strange and financially devastating consequence, especially when both the Condominium Association Act and the Homeowners’ Association Acts, Chapters 718 and 720 of the Florida Statutes, respectively, provide for joint and several liability for the recovery of assessments against a new owner that were not paid by the predecessor owner. A simple solution to this complex problem can be found by excluding association assessment lien foreclosures from the requirements of section 48.23, Florida Statutes. When Florida’s legislature takes the time to enact this simple cure, then associations will have the lawful right to once again foreclose their assessment liens without regard to the lender’s stalled foreclosure action pending against the same property.

 

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(1-20-16)

Mold: Is there a Fungus among Us?       Part 2 of 2

Rights of Inspection and Abandoned Units: What You Need to Know

Florida, with its warm winters and sandy beaches, is a refuge from the bitter cold. It is one of our State’s best attributes and is so very welcoming to our Northerly neighbors. But when you combine the heat with levels of high humidity, unwelcome guests arrive in the form of mold – some of it toxic, too! The likelihood of mold is even more so for those units which have been abandoned. With no power being supplied to the unit, the air conditioning cannot run and thus, the overall wetness factor can increase dramatically. In this situation, the condominium association is often left with the burden of remediating and repairing the damages caused by the mold.

Property insurance policies differ in kind and scope from insurer to insurer with regard to whether or not mold damage is a covered peril under the policy. Without a specific mold rider, the chances are slim that mold would be a covered peril. Whether mold contamination is covered under your association’s policy will depend on the specific policy language, the cause or causes of the mold contamination, and the timelines of notification to the insurance company. Today’s mold policies typically require notice within 14 days of the onset of the mold, and not 14 days from when the association discovered the mold. Therefore, it is important that the board of directors carefully read and understand their association’s insurance policy obligations. Generally, most insurers attempt to exclude coverage for mold damage associated with long-term leaks, water intrusion from a construction defect, normal wear and tear, deferred maintenance, or poor repairs. As such, some insurers may deny a claim for mold damage arguing that the damage took place over a long period of time, meaning greater than two weeks, rather than damage from a sudden and accidental water damage event, meaning a leak that happened within two weeks.

This being the case, Floyd Nichols, Vice President at Insurance Office of America, recommends that condominium association boards check each of their condominium units which are abandoned or unoccupied for extended periods of time on a biweekly basis. This is not only so the condominium association can timely remediate any mold damage before the remediation becomes extensive but also in an effort to avoid the association’s insurer’s denial of a mold damage claim.

While mold might begin to grow in the unit, it will quickly spread to the common elements. The duty to repair the condominium’s common elements will fall to the association without regard to the owner who may have caused the problem. This is not to say that the association might not be able to subrogate its claim against the owner, but because the Florida legislature removed the requirement for all unit owners to have force placed insurance, subrogation on claim could prove quite problematic.

Because mold typically develops in areas which are likely the condominium association’s responsibility to maintain, repair, and replace (for example, drywall), the condominium association may use its irrevocable right of access to a unit, found in section 718.111(5)(a), Florida Statutes, to enter the unit during reasonable hours to conduct the necessary repair or replacement. Advance notice should be provided whenever possible.

A condominium association has additional rights regarding access to an abandoned unit under relatively new provisions set out in section 718.111(5)(b), Florida Statutes. Pursuant to this section, 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 expense incurred by the association in inspecting the unit and the adjoining common elements, in making needed repairs, in turning on the utilities to the unit and in otherwise maintaining and protecting the abandoned unit and adjoining common elements are chargeable to the owner of the abandoned unit. These expenses are also assessable against the abandoned unit. What will prove very interesting is what effect the lender’s safe harbor assessment benefits as set out in section 718.116, Florida Statutes, or other legal arguments which limit assessment recovery will have on the condominium association’s ability to recover its expenditures. As a different tact, 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 the receiver.

 

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(1-6-16)

Mold: Is there a Fungus among Us?

Part 1 of 2

Insurance: What You Need To Know

Welcome 2016! While the expression "out with the old and in with the new" comes to mind, remember, too, that this is a great time for review. Start off the new year by reviewing your association’s insurance policies to better understand the perils that it does, and does not, cover. Of particular concern to Florida’s community associations, especially condominium associations, is how casualties stemming from slow leaks and resulting mold are handled. Sadly, I see coverage denials for this type of damage as commonplace.

Absent a "rider," mold damage is typically excluded from today’s property and casualty insurance policies. While limited coverage may be available in the form of a "rider," they come with significant strings attached. Most mold riders provide for a strict period of time that if missed will forever bar the association’s recovery. More specifically, and according to insurance agent-broker, Floyd Nichols of the Insurance Office of America, commercial property insurance will not cover "continuous or repeated seepage or leakage of water or the presence or condensation of humidity, moisture, or vapor that occurs over a period of 14 days or more." It’s important to note that notice must be provided to the insurance company within 14 days of the beginning of the leak and not within 14 days of its discovery.

According to Nichols, "on a regular basis we see claims that occur because the unit owner has been away from their property for a period of time that exceeds 14 days. On many occasions we will see a denial of coverage due to the 14 day provision. Most frequently we are seeing the issue arise on older properties because, even though we want to think our buildings will last forever, leaks do occur for a variety of reasons although the problem can happen in newer properties as well (think of a leaking ice maker line, a toilet that continues to run or broken washing machine hoses). What could be mitigated as a small claim will many times become a claim that can cost tens of thousands of dollars to repair. Additionally, the association might very well find itself responsible to mitigate and repair the problem without regard to who must bear the ultimate responsiblity for the damages in order to protect other owners in the building from being exposed to mold, etc." In addition, an association can be required to effectuate the repair as a requirement set out in its declaration, too.

Nichols recommends to his association clients that the board ask their unit owners, especially snow birds and those on extended vacations, to provide for inspection of their units on a regular basis to avoid the 14 day exclusion. Although the inspection will not guarantee that the claim will be paid by the carrier, timely inspections will hopefully eliminate the implementation of this exclusion and hopefully save all parties much expense in the way of dollars and time.

An association could even develop a regular inspection schedule. Florida Statutes, section 718.111(5), provides that "the 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. Condominium associations can even require keys to all units be provided, but the association has a responsibility to ensure the keys are properly secured. Whenever possible, an association should always provide advance notice prior to entering an owner’s unit and always have at least two persons conduct inspections.

Whenever a casualty is suffered, Nichols recommends that their insured associations contact his office immediately. "We believe it is an agent’s responsibility to provide assistance and direction to them. Most often, they are not used to dealing with these types of issues and this is the time for the agent to help. We can meet with the adjusters and contractors on site and have a better understanding of the claim when it is time to deal with the insurance company." If you have a specific insurance coverage question, Floyd Nichols can be reached at 561-721-3771.

In Part 2 of this two part series, we will discuss how a condominium association can inspect abandoned units and obtain possession in order to lease them and collect rent in accordance with Chapter 718 of the Florida Statutes which governs Florida’s condominium associations.

 

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(12-23-16)

Secular Holiday Symbols versus Religious Symbols

In my homeowners’ association, we display an oversized, festive, gloriously secular, snowflake on our entry gates. It is quite charming and does not denote any type of religious connotation. Does your association display a secular holiday symbol, too or does it display a religious symbol? Are Christmas trees, menorahs, Nativity scenes, or the Kikombe Cha Umoja (The Unity Cup displayed during Kwanza) secular or religious symbols? How can you tell the difference?

Luckily, we have some guidance from the United States Supreme Court to help associations differentiate between secular and religious symbols. In 1989, in County of Allegheny v. American Civil Liberties Union, the Court held that the determination of whether decorations, including those used to commemorate holidays (which are or have been religious in nature), are religious or not, turns on whether viewers would perceive the decorations to be an endorsement or disapproval of their individual religious choices. The constitutionality of the object is judged according to the standard of a reasonable observer.

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

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

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

If a member of your community wants to include their religious symbol in the association’s holiday display, remember to consider the types of symbols already being displayed by the association as compared to the member’s request. Once your community displays a religious symbol, then there is a good chance your community will need to allow other requested religious symbols to avoid a claim of religious discrimination. Use the guidance from the Supreme Court’s cases to differentiate between a secular symbol and a religious symbol. With that in mind, if an association allows a Christmas tree and menorah, the board of directors, far more likely than not, would not have to allow a members request to display a Nativity scene and Ten Commandments display, too. The rules of kindergarten work best: treat everyone fairly and treat them as you would want to be treated.

Happy Holidays and Have a Sweet New Year.

 

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(12-9-15)

Three Pending House Bills Affecting All of Florida’s Community Associations

In anticipation of Florida’s 2016 legislative session, Representative John Cortes of Florida’s House of Representatives filed three bills affecting community associations and managers. Omnibus style House Bill 667 is massive in its scope. Its author begins by fully repealing Chapter 719 regulating Florida’s cooperatives and Chapter 720 regulating Florida’s homeowners’ associations and then amends Chapter 718 to include many of the provisions of the repealed Florida Statutes, albeit, at times, with many significant differences. A new term is created, "common interest community" which refers to all types of residential communities and makes them subject to the provisions of the significantly overhauled Chapter 718. This Bill is 441 pages long.

While all the changes are too numerous to mention, a few of the major changes which appear in the first 150 pages include:

• Without regard to constitutional protections against impairment of existing contracts, House Bill 667 makes all future legislative amendments to Chapter 718, which would regulate all common interest communities, applicable to your community whether you want it to or not.

• The transfer of homes (referred to as "units") cannot be restricted unless the transfer is likely to threaten the security of the residents, association property, and the financial status of the association or the ability of the association to qualify for institutional mortgage financing. This diminishes many associations otherwise existing broad approval rights.

• Upon receipt of a certified written inquiry from a member, the association’s obligation is to provide what is defined in this legislation as a "substantive response." Further, any substantive response must include, at a minimum, a restatement of the issue presented by the owner, the board’s written response to the issue, and the board’s actions or intended actions in response to the issue, in addition to all other facts, opinions, requests, and positions taken that are relevant to the issue. A unit owner who does not receive a substantive response within 15 days is entitled to the actual damages or minimum damages for the association’s willful failure to comply with this paragraph. The minimum damages will be $100 per calendar day for up to 20 business days, beginning on the 16th business day after receipt of the written request.

Thus, while the concept of one chapter of law to govern all types of residential associations may one day prove worthwhile, in its present form, House Bill 667 needs work. As yet, this Bill does not have a Senate sponsor.

While Representative Cortes’ House Bill 667 seeks to completely revamp all existing Florida community association legislation, he has also filed House Bill 653 which attempts to bring the statutes regarding homeowners’ associations closer to those which govern condominiums and cooperatives (i.e., requiring the use of limited proxies for votes of the owners and conducting elections in the same manner as condominium elections). As was attempted during last year’s legislative session, House Bill 653 also seeks to make homeowners’ associations subject to the oversight (and fees) of the, to be renamed, "Division of Florida Condominiums, Homeowners’ Associations, Timeshares, and Mobile Homes."

With regard to community association managers, Representative Cortes’ House Bill 665 creates liability on the part of a community association manager for damages incurred from offering incorrect advice. The Regulatory Council of Community Association Managers name is changed to the "Board of Community Association Managers" and additional new regulations regarding the membership and authority of the "Board of Community Association Managers" have also been amended and added in this Bill. House Bill 665 revises provisions relating to licensure of community association managers and community association management firms to require that a community association manager’s license expires on September 30th of even numbered years requiring renewal every two years.

House Bill 665 also requires community association manager pre-licensure education consisting of not more than 40 hours of in-person instruction by a department-approved provider which must cover all areas of the examination including a new list of 22 fundamental management skills and knowledge. This is 18 hours more than what is presently required. The odd part is the sentence structure. If "not more than 40 hours of in-person instruction" is required, does that mean the course can be taught in as little as 1 hour (not that it could)?

Based on these few bills, Florida’s 2016 legislative session, which was expected to be a quiet year as related to community associations, could turn out to be quite active.

 

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(11-28-15)

THE RESERVE PROCESS

To Fund or Not to Fund, That is the Question

As the end of 2015 nears, so too does the end of the fiscal year for many condominium associations throughout Florida. Most condominium association boards have begun to prepare their association’s annual budget for the upcoming year. Sometimes there is confusion amongst condominium association boards as to whether or not they must fully fund reserves as part of the budget adoption process and the timing as to when it is appropriate to present the opportunity to waiver or reduce the reserves to the unit owners. In short, the condominium association’s budget, with the reserves fully funded, must be presented to the unit owners. At that time, alternative budgets may also be presented that show the effects of waiving or reducing the reserves, too. At the sole discretion of the board, the unit owners can be presented the opportunity to waive or reduce the reserves before or after the board’s adoption of the budget.

A reserve must be established for roof replacement, building painting, pavement resurfacing and any other project that has an anticipated cost of greater than $10,000. Pursuant to section 718.112(2)(f) of the Florida Statutes and Rule 61B-22.005 of the Florida Administrative Code, Florida condominium associations must fully fund reserve accounts for deferred property maintenance and replacement projects. Only after the budget has been presented to the owners with fully funded reserves can the board, if it so desires, present to the unit owners the opportunity to vote to waive or reduce the reserves.

At the discretion of the board, the owners should be presented with the opportunity to waive or reduce the reserves based on the presented budget that establishes the reserves as fully funded. Pursuant to section 718.112(2)(f), Florida Statutes, in order for reserves to be either waived or reduced by the unit owners, at least a majority of those unit owners present, in person or by proxy, at the meeting at which a quorum of the unit owners is attained must approve the waiver or reduction of reserves. The amount or percentage of the reserve reduction that is presented for vote is set at the discretion of the board. Moreover, the vote to waive or reduce reserves can be with regard to all reserve items or for only select reserve items. It would not be correct for the board to present the budget without reserves and then provide the owners the opportunity to partially or fully fund the reserves. Remember, that the process requires the board present the budget with reserves fully funded and then the unit owners can have the opportunity to waive or reduce.

If voting by limited proxy is used, the proxy must include the following disclosure in bold, capital letters and in a font size larger than any other font used in the limited proxy:

WAIVING OF RESERVES, IN WHOLE OR IN PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.

If the unit owners do not approve the waiver or reduction of reserves, the reserves must be fully funded as presented in the budget. If the unit owners do approve the waiver or reduction of reserves, the waiver or reduction is only good for the budget year in question. If the following year the condominium association board would like to propose waiving or reducing reserves, the opportunity to waive or reduce reserves must be presented to the unit owners once again.

How much is needed for a reserve account will depend on several factors, including, for example, the estimated remaining useful life of the asset and its replacement cost. Additionally, the manner in which the reserve funds are to be maintained will depends on whether the reserves are keep as separate line-item reserve accounts or as "pooled" reserves. In any event, the budget adopted by a condominium association board must first and foremost include fully funded reserves.

A multicondominium association must adopt a separate budget of common expenses for each condominium the association operates and adopt a separate budget of common expenses for the association. This can accomplished as sub-parts of the same master budget.

Reserve funds and any interest accruing thereon must remain in the reserve account or accounts, and may be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a duly called meeting of the association. The only voting interests that are eligible to vote on questions that involve waiving or reducing the funding of reserves, or using existing reserve funds for purposes other than purposes for which the reserves were intended, are the voting interests of the units subject to assessment to fund the reserves in question. To pass any vote regarding waiving, reducing, pooling or using the reserves for a different purpose requires a majority of a quorum of the unit owners present, in person or by proxy, at a membership meeting. In the case of a multicondominium, a majority of a quorum of the unit owners comprising a particular condominium, in the same percentage as a quorum of the members is otherwise established, present, in person or by proxy, at a membership meeting may approve the waiver or reduction of reserves.

 

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(11-11-15)

The 2015 Estoppel Bill is Back and Ready to Hurt Florida’s Community Associations

A CALL TO ACTION

But for the abrupt ending of the 2015 legislative session, Florida’s government would already have caused another wrinkle in our free market economy by passing a law regulating the cost of goods in the stream of commerce. The worst bill to affect Florida’s community associations is back and could be become law unless you tell your legislators to "VOTE NO." Florida’s House of Representatives and Senate seek to regulate both the cost and process of the issuance of the "association estoppel". There are two bills at play: House Bill 203 and its companion, Senate Bill 722.

The "association estoppel" is a legally binding document that sets out the assessment monies that remain due and owing. There exists tremendous liability for its issuance. The buyer is only responsible for the monies set out as due in the estoppel letter. If completed incorrectly and a lesser amount due is stated, well, too bad. Apparently, lobbyists, title companies and other real estate professionals have just about convinced Florida’s legislators, albeit falsely, about the great harm being caused by Florida’s community associations, a state wide epidemic of disastrous consequence stemming from an association’s otherwise lawful right to create a process of issuance and to charge reasonable fee for providing its estoppel.

This atrocious legislation, that is expected to become law (unless you do something about it), dictates that the estoppel is due within ten business days of the request, no matter what. And, if it is issued after ten business days, no matter what the reason – good cause or otherwise – no fee may be charged! To make matters worse, the request for an estoppel can arrive via email. Based on a plain reading of these bills, rather than having to comply with standard procedures to ensure proper delivery of the request, the person requesting the estoppel can email a board member or manager at their personal email address to start the ten day clock.

According to the House version of the bill, the fee for the estoppel certificate may not exceed $200.00 if, on the date the certificate is issued, no delinquent amounts are owed to the association. If an estoppel certificate is requested on an expedited basis and delivered within three business days after the request, the association may charge an additional fee of $100.00. If delinquent amounts are owed to the association for the applicable unit, an additional fee for the estoppel certificate may not exceed $200.00. The Senate’s companion bill only mentions a reasonable fee.

In the past, an estoppel certificate only inured to the benefit of the party requesting it. Now, according to these bills, after issuance of the estoppel it is binding on every Tom, Dick or Harry who can be considered a successor or assign of the person who requested it. That means that Tom, Dick and Harry gets the benefit of the previously issued estoppel, and they do not even have to pay for it!

Pursuant to these bills, an association cannot require the payment of any fees as a condition for the preparation or delivery of an estoppel. Imagine going to the grocery store, loading up your friend’s car with your groceries to get them home and not having to pay the store until you eat the food. If you don’t eat the food, then you don’t have to pay for the groceries. But, your friend, whose car delivered the groceries for you must pay in your stead. This is exactly how the new estoppel legislation works.

No one who requests the estoppel has to pay for it when they receive it. In other words, the person or company who does the work for the association by preparing the estoppel has no lawful right to get paid at the time of performing their service. Rather, this decade’s worst association related legislative initiative provides that the fee can only be paid from the proceeds of the closing. If the closing does not occur, the person who requested the estoppel has no liability whatsoever. But, the burden for payment then shifts to the seller. How many months will that take?

It is expected that the estoppel legislation will become the law of the land with an effective date of July 1, 2016. This situation is the perfect example of a series of laws being adopted to fix a problem that only exists in the minds of a select few and even then for an extremely short period of time. Back during the uptick of the prior real estate crisis, there were a few bad apples who charged way too much for the issuance of the estoppel. Rather than going after these bad apples, the bad acts of the very few are being used to create hysteria and to hurt Florida’s community associations to the very real benefit of Florida’s realtors and title companies. It is shameful how easy our legislators are being deceived to believe that they are fixing a problem that, in reality, doesn’t even exist. Once again, our legislature to the rescue. Ugh!

To learn more visit, "smashthehometax.com"

 

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(10-28-15)

Managers, Did You Sign A Non-Compete Agreement?

Providing community association management services to community associations is highly competitive. Because of this competitiveness and the substantial financial investment made by a community association management company in its managers, many community association management companies require their managers to sign non-compete agreements as a condition of their employment. Often, once signed, the non-compete agreement is not thought of again until the manager decides to work for a different community association management company.

Under Florida law, non-compete agreements may be enforced by the prior employer so long as they are reasonable in time, geographical, line of business and are in place to protect a legitimate business interest of the employer as defined by section 542.335, Florida Statutes. Typically, non-compete agreements lasting up to two years in duration and covering geographical areas where the employer actually conducts business will be considered enforceable by a court. Further, pursuant to section 542.335(g)1., Florida Statutes, in determining the enforceability of a non-compete agreement, a court cannot take into consideration "any individualized economic or other hardship that might be caused to the person against whom enforcement is sought."

However, this express prohibition against considering the hardship created on the former employee may be losing its sting based upon the unpublished August 27, 2015 opinion of the Eleventh Circuit Court in TransUnion Risk and Alternative Data Solutions, Inc. v. MacLachlan, No. 15-10985.

In the MacLachlan case, the employee, MacLachlan, signed a non-compete agreement which provided that MacLachlan could not engage in the same or any similar business for one year. MacLachan was recruited by a rival company and began employment with this rival company three days after issuing his resignation to TransUnion Risk and Alternative Data Solutions, Inc. ("TRADS"). In an effort to enforce the non-compete agreement, TRADS then filed an action with the court for an injunction to prohibit MacLachlan from working for its rival company. During litigation, MacLachlan argued, among other defenses, that TRADS was not entitled to receive an injunction because the harm of the injunction to MacLachlan would outweigh any damage to TRADS. On appeal, the Eleventh Circuit Court, a Federal court with jurisdiction over Alabama, Florida and Georgia, found in favor of MacLachlan.

In doing so, the Eleventh Circuit Court analyzed the construction of section 542.335, Florida Statutes. The Court found that the express prohibition against considering the hardship which might be caused to the former employee as set out in section 542.335(g)1., Florida Statutes, was only with regard to determining whether or not a non-compete agreement is enforceable, and not with regard to the enforcement of the non-compete clause.

Once a non-compete agreement is deemed enforceable, the statute then sets out certain rules for enforcement. Because TRADS was seeking enforcement of the non-compete agreement and not a determination of whether or not the non-compete agreement was enforceable, the Court determined that it was permitted to take the hardship caused to the former employee into consideration when determining the manner of enforcement of the non-compete agreement.

While the MacLachlan case is not exactly binding on Florida state courts because it is a Federal court ruling and is an unpublished decision, it can be used as persuasion in other cases where the non complete agreement creates a hardship on the prior employee. In other words, if successful, this means that courts may begin to consider the financial and other hardships caused to the former employee through strict enforcement of a non-compete agreement. Whether this case will have significant impact on managers who sign non-compete agreements that prevent them from seeking employment with a competitor is something that only time will tell.

 

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(10-14-15)

The $12 Million Hedge:

A Warning to Community Associations and Their Managers

There can be real consequences if a community association and its manager overlook areas of the community that are in need of maintenance, as required either by the community association’s own covenants or by the local code of ordinances. Recently, the failure of a community association and its management company to properly maintain the association’s hedges led to a $12 million damage award. The story was the subject of an October 8th, Palm Beach Post article by Staff Writer Jane Musgrave.

Based upon a 2013 verdict by a Palm Beach County jury, a Town of Jupiter condominium association was found negligent for failing to properly trim its hedges contributing to the death of a 9 year old boy. As a result, the boy’s parents were awarded $12 million by jurors. As reported, the hedges located at the entrance to the condominium community were approximately 56 inches in height. However, the Code of Ordinances for the Town of Jupiter required that such hedges be no taller than 30 inches in height. Therefore, the hedges of this condominium association were nearly twice the height permitted by local code. In addition to the height of the hedges, a stop sign, which stood 37 inches tall, was nearly four feet shorter than the height required by the Florida Department of Transportation. The height of the hedges and the height of the stop sign together became a "fatal obstruction," the parent’s attorney told jurors during the trial, as report by Ms. Musgraves. As to the fatal incident, Ms. Musgraves report that:

The youth, who was riding bicycles on the sidewalk with his father, Andre Kovacs, was killed when an elderly condo resident, who couldn’t see over the hedges, plowed into him as she was driving out of the complex on U.S. 1 just south of Indiantown Road in 2011.

After the verdict of the trial court finding in favor of the boy’s parents was upheld by Florida’s Fourth District Court of Appeal, the jury found that the condominium association was 30 percent responsible, that the community association management was 60 percent responsible, and that the driver of the vehicle which struck the boy was 10 percent responsible for the death of the boy. While the parents settled with the driver for $100,000, the limits of the driver’s insurance policy, as reported by Ms. Musgraves, the parents may receive a total of $12.5 million in damages from the condominium association and its management. Sadly, the death of this young boy and the devastating financial hit to the condominium association’s owners and the condominium association’s manager could have been avoided.

Because the jury found the association’s management more responsible for the accident than the association, itself, this case may be quite troubling for management companies. Clearly, if the manager suggests action based on the community’s declaration or the local code of ordinances and the board ignores such advice, a record should be kept by management. In addition, board members need to understand and recognize their duty to ensure that their association complies with both its maintenance and repair obligations set out in the association’s declaration and the local code of ordinances, too.

To read Ms. Musgrave’s October 7, 2015 Palm Beach Post article, titled Parents to get $12M verdict in son’s 2011 bicycle death in Jupiter, in its entirety please visit http://bit.ly/1hstP8K.

 

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(9-30-15)

So Your Association Changed Attorneys… Now What?

An association has decided to change its legal counsel and transfer all existing matters to its new lawyer. The management company sends the request to the prior law firm only to be told that a retaining lien has been asserted. Until the lien is satisfied, the law firm refuses to transfer the files. Is that legal? Can the lawyer really do that? In short, you bet they can. A Florida attorney can enforce their rights to be paid before transferring the association’s files through asserting a retaining lien, a charging lien or both under the right circumstances.

A retaining lien is a passive lien and rests entirely on the right of an attorney to retain possession of the association’s documents, money and files as security for payment of the fees and costs earned by the law firm. A retaining lien covers the balance due for all legal work done on behalf of the client, regardless of whether the property is related to the matter for which the money is owed to the attorney. Further, a retaining lien cannot be impaired by the client securing the right to inspect and copy the papers or compelling their production by subpoena.

An attorney’s retaining lien was the subject of a recent condominium association case in Florida’s Third District Court of Appeal in the case of Conde & Cohen, P.L. v. Grandview Palace Condominium Association, Inc., 2015 WL 4637285 (Fla. 3d DCA 2015). In Conde & Cohen, the law firm was retained by the association over a period of years to represent it in a number of matters. Following a change in the association’s board of directors, new counsel was retained to represent the association. Upon learning of this action, the law firm asserted retaining liens in five lawsuits. Unable to convince the law firm to release its files in these five cases, the association filed an action against the law firm seeking injunctive relief and a declaration that the law firm’s retaining liens were invalid and that the association’s new counsel should be allowed to copy the law firm’s files.

The Court, squashing the order of the trial court which held in favor of the association, held that an attorney has a right to a retaining lien on all of the client’s property in the attorney’s possession, whether related to only one specific matter, until the attorney is paid where a valid retaining lien has been asserted. The attorney asserted it may retain the property subject to the lien until that attorney has been paid, or, if the client can demonstrate a pressing need for the property, then they can be required to post adequate security, such as a bond, for the amount in controversy. In this case, because the association did not provide any evidence as to the requisite showing of pressing necessity and did not post adequate security, the court held that the trial court’s order compelling the law firm to hand over its files was improper.

A different type of lien is referred to as a charging lien which attaches onto any monetary recovery due to the client at the conclusion of a lawsuit. Unless the client pays what is owed to the attorney prior to the conclusion of the lawsuit, the attorney will be entitled to recover such amounts from any monetary recovery received by the client in the lawsuit. To impose such a charging lien, the attorney must show the following four requirements:

1. An express or implied contract between the attorney and the client (in the case of a community association, this requirement will more likely than not be satisfied because Florida Statutes requires that all association contracts for services must be in writing);

2. An express or implied understanding for payment of the attorney’s fees out of the recovery;

3. Either an avoidance of payment or a dispute as to the amount of fees; and

4. Timely notice.

Often times a charging lien is asserted in a personal injury case where the client changes lawyers mid-stream. Because in this type of case, the attorney’s fees are typically only received when the client receives a settlement or wins at trial, if the client changes lawyers, the previous lawyer wants to be paid for their efforts. So, they assert the charging lien. In the context of a community association, a charging lien could result should the attorney prevail in one or more assessment collection cases, and they remain unpaid.

The easiest way to avoid a retaining lien and/or charging lien is to be sure to ask if any legal fees are due as a part of the attorney transfer process.

 

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(9-16-15)

Important Terms in

Construction Contracts

The older your association may be, the more likely it has engaged the services of a contractor, engineer, architect or other construction or design professional to perform a maintenance, repair, replacement or capital improvement project. The process can be very daunting. Even the smallest of projects can have unexpected and disastrous consequences, such as the electrician hired to make a small repair who accidentally started a fire caused by an electrical short. In any contract review, the lawyer’s job is to help the association plan for the unexpected. Because most contracts will be prepared by the contractor and then presented to the association for execution, they will favor the contractor. The association should always rely on its legal counsel to review the contract and minimally provide an addendum whose terms are superior to that of the contract prepared by the contractor. Following are few contract terms that should be addressed in the addendum if they are not already addressed in the contract:

Scope of Work. The scope of work section of the contract is the core of the contract itself. It describes the work to be undertaken. It should be supplemented with specific repair protocols prepared by the requisite professional. A carefully drafted scope of work can help the association avoid later disputes.

Change Orders. In the event a change in the work is needed, such as adding or deleting aspects of the project or changing the selected materials, the construction contract should provide a mechanism by which the association and the contractor can make these changes. Change order provisions should minimally require that a change order be in writing, approved and agreed to by the association and the contractor and specify the effect the change order will have on completion of the work. It should also provide for any additional fees that will be charged as a result.

Authorized Contact. The contract should provide for a specific individual to act as liaison between the association and the contractor.

Payments. Any payment provisions should include "retainage" which allows the association to withhold a percentage of the monies due to the contractor from each payment until satisfactory completion of the work including the punch list. On the one hand, the contractor deserves to get paid, on the other hand the contractor needs to be sufficiently motivated to come back at the end of then job to compete the punch list. Five to ten percent is a reasonable retainage.

Notice of Commencement Process. To protect the association from paying twice for the same work, a Notice of Commencement must be completed and recorded so that those contributing services or supplies for the work must first give notice to the association. Before a construction or remodeling project may begin, the association must require the contractor to assist it with completing the Notice of Commencement process. Only by doing this can the association protect itself from subcontractors and suppliers who claim they have not been paid. The Notice of Commencement must be recorded with the county clerk of court and posted at the job site in the form of a certified copy. Prior to filing a lien, a lienor who does not have a direct contract with the association, must serve the association with a Notice to Owner before commencing, or within forty five (45) days of commencing, the furnishing of services or materials. A lien cannot be enforced unless the lienor has served the Notice to Owner. In order to prevent the filing of a lien against your property and to prevent having to pay twice for the same work, before making any payment (partial or full), the association must be sure to receive a Partial or Full Release of Lien from whomever and for whatever the payment is being made.

Indemnification. Imagine if your construction contract provided for a full indemnity for any damage and injury whatsoever that the contractor or anyone employed or contracted by the contractor caused – This has to be too good to be true… It is! Pursuant to section 725.06, Florida Statutes, any construction contract where the contractor promises to indemnify or hold harmless the association for liability for damages to persons or property caused in whole or in part by any act, omission or default of the contractor arising from the contract or its performance is void and unenforceable UNLESS the contract provides a specific monetary limitation (often not less than $1 million per occurrence) on the indemnification which must bear a reasonable commercial relationship to the contract. You should also be aware that disputes over the enforceability of the indemnification clause do not include prevailing party attorney fees unless the indemnification provisions also specifically provide that, in the event of a dispute concerning the applicability of the indemnification, the prevailing party must indemnify the other for its attorneys’ fees, costs and expenses in enforcing the right to be indemnified.

Termination. While most construction contracts provide that an association may terminate the contract for cause by providing the contractor with reasonable notice and the opportunity to cure, the association should strive for a without cause termination provision. A without cause termination may require the association to pay the contractor liquidated damages, which is an amount the parties agree upon during the formation of the contract for the contractor to collect as compensation. Minimally, the contractor will want to be paid through the date of termination.

 

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(9-2-15)

Should the Board Put that Contract in Writing?

You Bet It Should

Generally speaking a contract that cannot be per-formed within one year, must be in writing. The opposite is true, too. So, if the contract can be performed within one year, then it does not necessarily have to be in writing. In other words, it can be an oral contract. But, if the other party does not perform their obligations, then you’ll likely need the courts to help sort the mess out. You can guess what happens next. One party says they had a contract and the other party denies it. It sure would have been simpler if the parties took a few minutes to sign a contract. Let’s say, for example, a few board members decide to buy lottery tickets and split the winnings. Then, as fate would have it, they win, but two weeks prior they disagreed with each other over an association matter, are at each other’s throats, and the holder of the winning tickets refuses to share the proceeds. "Preposterous", you say? Not so fast.

Fairly recently, the Supreme Court of Florida in the case of Browning v. Poirier, Case No. SC13-2416 (Fla. May 28, 2015), reviewed a very similar fact pattern. Browning and Poirier lived together as a couple between 1991 and 2009. In 1993, the couple orally agreed that they would split the winnings of any lottery tickets purchased by either of them while they remained in a relationship. In 2007, Poirier purchased the winning ticket and received $1 million dollars less taxes. Despite their agreement, Poirier refused to give Browning half of the proceeds. Browning in turn sued for breach of an oral contract and unjust enrichment, seeking his half of Poirier’s winnings. Poirier defended the claims by arguing that the agreement could not be enforced against her because it did not comply with the statute of frauds. Because the contract could have been completed within one year at the time the agreement was made, the Supreme Court of Florida decided in Browning’s favor and held that the oral agreement between Browning and Poirier fell outside the "Statute of Frauds" providing that unenforceable oral contracts are only those which cannot be performed within one year.

By way of summary, the Statute of Frauds, as set out in section 725.01, Florida Statutes, requires that, in addition to other types of agreements, contracts which cannot be performed within one year from the making of the contract must be in writing and signed by the party against whom the contract is being enforced. Thus, in Browning v. Poirier, the Court held that an oral agreement to share equally in the proceeds of any lottery winnings, which could have been terminated by either party at any time, was not required to be in writing in accordance with the "Statute of Frauds" where the agreement could have been performed within one year.

So, while this case is seemingly unrelated to community associations, condominium, cooperative and homeowners association are subject to their own version of the Statute of Frauds as set out in sections 718.3026, 719.3026 and 720.3055, Florida Statutes, respectively. Similar to the Statute of Frauds analyzed by the Supreme Court of Florida, these laws provide that all contracts described in these statutory sections and any contract that is not to be fully performed within one year after the contract is made for the purchase, lease or renting of materials or equipment to be used by the association in accomplishing its purposes must be in writing. In addition, these laws require that all contracts for the provision of services must be in writing, regardless of whether or not the contract could be performed within one year.

Remember, too, that in addition to the written agreement requirement as set out in sections 718.3026, 719.3026 and 720.3055, Florida Statutes, these statutory sections also require that an association obtain competitive bids for contracts for the purchase, lease or renting of materials or equipment, or for the provision of services, which require payment by the association that exceeds, in total, a certain percent of the total annual budget of the association, including reserves. For condominium and cooperative associations, the percent of the total annual budget at which competitive bids must be obtained is five percent. For homeowners associations, the percent of the total annual budget at which competitive bids must be obtained is ten percent. While an association is required to obtain competitive bids in these instances, the association is in no way required to accept the lowest bid and may select the winning bid using its reasonable business judgment.

Based on the interpretation by the Supreme Court of Florida of the Statute of Frauds as set out in section 725.01, Florida Statutes, a community association’s board of directors should be ever mindful of the oral promises they make.

 

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(8-19-15)

Fining and Suspending Use Rights

"Pursuant to the New Legislation Effective July 1, 2015"

On July 1, 2015, new provisions which clarify the procedures for fining and use right suspensions for non-monetary violations became effective. The term "non-monetary violations" refers to such things as failing to pressure clean roofs and driveways, to remove dead trees, to bring in the garbage cans and to pick up after your pet, etc., and obviously excludes delinquent monetary obligations.

These new provisions were put into place to clarify the manner in which an association’s board of directors and its fining and suspensions committee coexist. Prior to these provisions, there were some who were unsure as to whether the fining and suspensions committee would first meet and then the board of directors would levy the fine, or if the board of directors would first meet, determine the amount of the fine, and then the fining committee would meet to provide the offending owner with the opportunity to be heard. Now, it is patently clear. The board must take action first.

According to these recent amendments to Chapters 718, 719 and 720 of the Florida Statutes, regarding condominiums, cooperatives and homeowners’ associations, respectively, an association’s board of directors must first levy the fine or enact a use right suspension for a non-monetary violation at a properly noticed board meeting. After, the person who is to be fined or suspended must then be provided with at least fourteen days’ notice and an opportunity for a hearing before the fining and suspensions committee. If the fining and suspensions committee does not exactly agree with the board, then the fine or use right suspension may not be enacted.

With that in mind, the role of the fining and suspensions committee is strictly limited to determining whether to confirm or reject the fine or use right suspension levied by the board of directors. The committee cannot make any changes whatsoever to the fine or use right suspension enacted by the board as any such change would constitute a rejection of the fine or use right suspension levied by the board.

As a matter of practicality, if the fining and suspensions committee rejects the fine or use right suspension, the board could start its decision making process anew or the fining and suspensions committee could make a recommendation to the board as to what it would approve. In either event, it begins the fining and use right suspension process anew. This means that the offending member should also be provided another fourteen days’ notice and opportunity to appear in front of the fining and suspensions committee before the recommended fine or use right suspension becomes effective.

Condominium and cooperative associations can only file a lawsuit seeking a money judgment in order to collect unpaid fines. While homeowners’ associations can also similarly seek a money judgment, if the homeowners’ association’s declaration provides for fines exceeding a total of $1,000.00 and also allow a fine to become a lien, then the homeowners’ association may use the foreclosure process to collect an unpaid fine. In all cases, in any action to recover a fine, the prevailing party is entitled to recover their reasonable attorneys’ fees and costs from the non-prevailing party, as determined by the court.

Fines apply to the owner and, if applicable, to any tenant, licensee or invitee of the owner. Use right suspensions apply to the property’s occupant, licensee or invitee, which includes tenants, and still applies even if the violation that resulted in the suspension arose from less than all of the multiple properties owned by a member. Also, the terms of the association’s declaration likely provides that the owner is ultimately responsible for the acts of their tenants, guests and invitees.

For condominium and cooperative associations, the fining and suspensions committee is comprised of unit owners who are neither board members nor persons residing in a board member’s household. For homeowners’ associations, the fining and suspensions committee is comprised of at least three members who are not officers, directors or employees of the association, or the spouse, parent, child, brother or sister of an officer, director or employee.

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(8-5-15)

2015 Legislative Update

Although Florida’s 2015 Legislative Session ended earlier than expected when the House of Representatives abruptly adjourned prior to the scheduled end of the Session, some new legislation affecting community associations was passed and subsequently signed into law by the Governor and became, for the most part, effective July 1, 2015. Following is a brief summary of these new laws.

ELECTRONIC VOTING

Electronic voting is now available for condominium, cooperative and homeowners’ associations. Under these new provisions, an association, through resolution of the board, may conduct its elections and any other owner votes through an online voting system.

1) The advanced written consent of the owner is required in order to participate in online voting.

2) The association is required to provide:

(a) a method to authenticate the owner’s identity to the online voting system;

(b) a method to confirm, at least 14 days before the voting deadline, that the owner’s electronic device can successfully communicate with the online voting system;

(c) for condominium and cooperative elections of the board, a method to transmit an electronic ballot that ensures the secrecy and integrity of each ballot; and

(d) for homeowners’ association elections of the board, a method that is consistent with the homeowners’ association’s election procedures as set out in its bylaws.

3) The online voting system must be able to authenticate the owner’s identity and the validity of each electronic vote to ensure that the vote is not altered in transit.

4) A receipt for the vote received through the online voting system must be provided to the owner.

5) For board member elections, the electronic voting system must be able to permanently separate any authentication or identifying information from the electronic election ballot so that it is impossible to tie an election ballot to a specific owner.

6) The voting system must also be able to store and keep electronic votes accessible for recount, inspection and review purposes.

7) In order to use this voting procedure, the board of directors must adopt a resolution containing specific requirements, including notices to the owners of the option, requirement of their consent and opportunity to opt out. If the resolution is to be considered at a board meeting, written notice of that meeting must be mailed, delivered or electronically transmitted to the owners and posted at the property.

8) Once an owner consents to online voting, the consent is valid until the owner opts out.

FINING AND SUSPENSION OF USE AND VOTING RIGHTS

Clarification is provided to condominium, cooperative and homeowners’ associations regarding the order of the proceedings that are necessary for imposing a fine or use right suspension for non-monetary violations. First, the board must levy the fine or use right suspension, and then the offending owner must be provided at least 14 days’ notice of the fining/suspension committee’s meeting where it will hold a hearing to approve or disapprove the fine or use right suspension for non-monetary violations levied by the board. If the committee does not agree with the fine/suspension, then it cannot be imposed against the offending owner.

The legislation also clarifies that the role of the committee is only to confirm or reject the fine or use right suspension (non-monetary) levied by the board. This means that if the committee wishes to impose a fine of a different amount, it is powerless to do so. Rather, the modification of the fine would have to be done at a properly noticed board meeting first.

As to cooperative associations, the qualifications for those who serve on the fining committee must be "other owners who are neither board members nor persons residing in the board member’s household."

Both the Condominium Act and Homeowners’ Association Act were amended to clarify that:

1) the "monetary obligations" that qualify for suspension of use rights include a fee, fine or other monetary obligation;

2) when the voting rights of an owner are suspended, the total number of eligible units is reduced for the purpose of calculating the necessary percentage to pass a proposal;

3) any authorized suspension applies not only to the member, but also to the tenants, guests or invitees, and even if the delinquency or failure that resulted in the suspension arose from less than all of the multiple units or lots owned by a member. This means that if an owner owns three units and is delinquent more than 90 days on one of the units, the voting rights on all three units may be suspended.

PROXIES

As to condominium, cooperative and homeowners’ associations, a complete copy, facsimile transmission or other reliable reproduction of the original proxy may be used instead of requiring the original proxy. This change appears to formally legalize a process already in existence by many associations and applies to all not-for-profit corporations, which includes condominium, cooperative and homeowners’ associations.

INSURANCE

As to condominiums, if there is no insurable casualty event that caused the damage, the maintenance provisions of the governing documents are to be used to provide for the determination of responsibility for the repairs caused by events other than casualty.

OFFICIAL RECORDS

As to condominiums, relative to the "catch-all" provision of what is identified as the Official Records of a condominium association, open to inspection to owners or their authorized representatives, has been modified to add the word "written" regarding such records.

MEETING NOTICES

It is no longer required to have the authority in the association’s bylaws to use electronic mail (e-mail) for association notices. As a result, all meeting notices, including for condominium, homeowners’ and cooperative board and committee meetings, may be provided by e-mail. However, the requirement that owners provide their advanced written consent to receive such notices by e-mail, remain. So, the owners must still opt-in to receive electronic notices.

ANNUAL BUDGETS

As to condominiums, statutory provisions regarding the annual budget have been revised to clarify that minimally, the items listed in section 718.504(21), Florida Statutes, must be included in a proposed budget. Although no substantive provisions were made, the provisions addressing reserves have been split into two parts, with subsection (a) addressing the reserves in general, and subsection (b) addressing reserves before the turnover of control of the association by the developer to the non-developer owners. Subsection (b) further clarifies the ability of the developer to vote its units to waive reserves.

ASSESSMENT PAYMENTS

As to condominium and cooperative associations, a legislative fix was provided in response to St. Croix Lane Trust v. St. Croix at Pelican March Condominium Association, Inc., 144 So.3d 639 (Fla. 2d DCA 2014) regarding the application of accord and satisfaction to a restrictive endorsement placed on an assessment payment. These sections have been revised to clarify that the application of payments made on a delinquent account are to be applied in the manner specified within the Florida Statutes, notwithstanding any purported "accord and satisfaction" or settlement agreement claimed by the payer by delivery of the payment. These provisions also state that they are intended to clarify existing law, which makes the application of the change retroactive. Noticeably lacking is a similar amendment to the Homeowners’ Association Act.

BULK BUYERS

This legislation applies to the condominium bulk assignee or bulk purchaser of units, and extends the period of time for qualification from July 1, 2016 to July 1, 2018. In plain English, this means an investor can acquire seven or more condominium units without concern of acquiring the predecessor developer’s liability for such things as construction defects and other obligations.

HOA RULES AND REGULATIONS

The rules and regulations of the homeowners’ associations are now included within the definition of the "governing documents."

CHAPTER 720, FLORIDA STATUTES

This new statute appropriately names Chapter 720, Florida Statutes, as the "Homeowners’ Association Act."

TENANT PROTECTION

A new section 83.561, Florida Statutes, has been added, entitled "termination of rental agreement upon foreclosure." This new Statute creates certain rights and entitlements in tenants following the foreclosure sale.

The tenant is allowed to remain in possession of the premises for a 30 day period following the date that the purchaser at the foreclosure sale delivers the 30-day notice of termination. The Statute also provides a form of suggested language that the 30-day notice should include. A writ of possession may only be applied for after the expiration of the 30-day period.

 

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(7-22-15)

Florida’s New Service Animal Laws

A Nail without a Hammer

When it comes to service dogs and assistance animals, people often confuse the Federal American with Disabilities Act (ADA) with the Federal Fair Housing Act (FHA). The ADA laws apply only to commercial (non-residential) settings. They apply to specifically trained service dogs (and the very occasional miniature horse). The ADA laws specifically exclude emotional support animals of any kind. On the other hand, the FHA laws apply to residential communities and apply to pretty much all domestic animals, including dogs, cats, pot belly pigs, etc. The FHA laws allow a person living in a residential community access to both specifically trained and untrained animals and, importantly, include the sub-category of the much beloved emotional support animal, especially when they might be otherwise prohibited by the community’s governing documents. While the ADA uses the term "disability" and the FHA uses the term "handicap", these two terms are, for all intents and purposes, interchangeable.

What is missing from both the FHA and the ADA are penalties to prevent against fraudulent misuse of both acts. In trying to create conformity with FHA and the ADA protections and greater protection against fraud, the Florida Legislature has brought the definition of an "individual with a disability" as set out in Chapter 413, Florida Statutes, into conformity with both the definitions for the terms "disability" and "handicap" as set out in the ADA and FHA, respectively. Florida’s newest legislation also defines the term "service animal" similar to the ADA legislation to mean an animal that is trained to do work, or perform tasks, for an individual with a disability and clarifies that the crime- deterrent effect of an animal’s presence and the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for purposes of this definition. But, a service animal does include a dog (or miniature horse) trained to assist mentally and emotionally disabled individuals with such tasks as helping an individual with a psychiatric or neurological disability by preventing or interrupting impulsive or destructive behaviors, reminding an individual with mental illness to take prescribed medications or calming an individual with posttraumatic stress disorder during an anxiety attack. The important distinction is the dog’s training.

It is important for community associations to remember that, although this new State law exists, community associations must ensure that they do not run afoul of the Federal Fair Housing Act by requiring that an "assistance animal" be a dog or be specifically trained to assist with the disability. If so, then FHA penalties will apply.

Chapter 413, Florida Statutes, also provides that a disabled person is entitled to rent, lease or purchase any housing accommodations offered for rent, lease or purchase in this state as any other member of the general public would be entitled and is entitled to full and equal access to all housing accommodations and cannot be required to pay an extra fee for the service animal, which is in conformity with its Federal counterparts, the ADA and the FHA.

What has really gotten people talking is that this new law makes it a second degree misdemeanor offense for a person to knowingly and willfully misrepresent herself or himself, through conduct or verbal or written notice, as using a service animal, being qualified to use a service animal or as a trainer of a service animal. Those who are found to have done so may serve up to 60 days imprisonment or pay a fine of $500.00 and must perform 30 hours of community service for an organization that serves individuals with disabilities or for another organization selected by the court to be completed in not more than six months. So, what does all this mean? It means that while there is a penalty for misrepresentation where it concerns a trained service dog or miniature horse, there is still no penalty ascribed for the one major area where the most abuse occurs, that of the qualification to own an emotional support animal! In summary:

• As to residential settings inclusive of Florida’s community associations, if the dog is specifically trained to assist its owner with a handicap or disability, then the FHA and the laws set out in Florida’s Chapter 413 apply. Fraudulent penalties apply.

• If an animal is not trained and otherwise qualifies as an emotional support comfort animal, then only the FHA applies. No fraudulent penalties apply.

• As to non-residential settings, if the animal is a dog or miniature horse and is specially trained, then the ADA and Florida’s Chapter 413 apply. Fraudulent penalties apply.

With all that in mind, I’m still waiting to see a miniature horse riding in the elevator of a commercial condominium who is specially trained to alert its owner to take his or her medications. One day, I fully expect the elevator doors to open and a miniature version of Mr. Ed to look up and say, "Hello Willllllbur."

 

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(7-8-15)

New Provision Regarding Fining and Use Right Suspensions

Prior to recent amendments to the procedures for fining and use right suspensions for non-monetary violations, which amendments became effective on July 1, 2015, there was a gap in the Florida Statutes regarding the manner in which a community association’s board of directors and its fining and suspensions committee coexisted, meaning there was no clear guidance with regard to whether the fining committee would first meet and then the board would levy the fine or if the board would first meet, determine the amount of the fine and then the fining committee would meet to provide the offending owner his opportunity to appear. That said, it was clear that if the fining committee did not agree with the fine, then the board could not authorize its levy against the offending owner. Well, now there is great clarity as to the procedural requirements.

Pursuant to the recent amendments to Chapters 718, 719 and 720 of the Florida Statutes, regarding condominiums, cooperatives and homeowners’ associations, respectively, the association’s board of directors must first levy the fine or use right suspension for non-monetary violations at a properly noticed board meeting. After the board of directors has levied the fine or use right suspension for non-monetary violations, the person who is to be fined or suspended must be provided with at least fourteen (14) days’ notice and an opportunity for a hearing before a fining and suspensions committee. The fining and suspensions committee must be comprised of other owners who are neither board members, nor persons residing in a board member’s household. The role of the fining and suspensions committee is limited to determining whether to confirm or reject the fine or use right suspension for non-monetary violations levied by the board of directors.

If the fining and suspensions committee does not approve the fine or use right suspension for non-monetary violations EXACTLY as levied by the board of directors, the fine or use right suspension for non-monetary violations cannot be imposed. If the fining and suspensions committee does approve the fine or use right suspension for non-monetary violations, which must be done by a majority vote, the association must then provide the person to be fined or suspended with written notice of the fine or use right suspension by mail or hand delivery.

Although the association may suspend the right to use the common areas, common elements, common facilities and association property, generally a use right suspension, whether for monetary or non-monetary violations, does not apply to that portion of common areas, common elements, common facilities and association property used to provide access or utility services to the owner’s property.

With specific regard to homeowners’ associations, prior to the recent amendments to the fining and use right suspensions for non-monetary violations provisions, a suspension of use rights could not impair the right of an owner or tenant to have vehicular and pedestrian ingress to and egress from their property, including, but not limited to, the right to park. However, as of July 1, 2015, this language has been revised to provide that a use right suspension may not prohibit an owner or tenant from having vehicular and pedestrian ingress to and egress from their property, including, but not limited to, the right to park.

The change from "impair" to "prohibit" in the Homeowners’ Association Act is significant in that the 2015 statute suggests that a homeowners’ association can impair vehicular and pedestrian ingress to and egress from the owner’s or tenant’s property so long as such impairment does not prohibit such access. For example purposes only, in gated communities, this new language lawfully allows a homeowners’ association to force the owner or tenant to use the guest lane, instead of the resident’s lane, at the community’s entrance gate.

For condominiums and cooperatives, a use right suspension does not apply to limited common elements intended to be used only by that unit, parking spaces, or elevators. Additionally, as of July 1, 2015 for condominium associations only, a use right suspension applies to a unit owner who owns multiple units even if the delinquency or violation that resulted in the use right suspension arose from less than all of the multiple units owned by that owner. This means that if an owner, who owns three units, has his use rights suspended due to a continued delinquency associated as to only one of the units, then, nevertheless, the suspension would apply to all of the units and not just the unit associated with the delinquency.

 

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(6-24-15)

Terminating the Condominium Terminator; Rembaum’s Association Roundup’s First Ever Award of Excellence

On Saturday, June 20, 2015, Palm Beach Post staff-writer, Tony Doris, reported that condominium owners in Century Village’s "Sheffield O" condominium are under the very real threat of a condominium termination from an investor who is continually purchasing units in the condominium. Century Village is a 600 building, 55 and older (better) community. Century Village was developed in the 1970s by H. Irwin Levy, a real life condominium superhero. Not only did he develop the community that combines affordable home ownership and community based activities for seniors, but 40 years later, he is ready to don a red cape and be a superhero by defending those seniors who chose to purchase units in his community and cannot afford the battle that may need to be fought to continue to live there.

Imagine moving to the Sunshine State and purchasing what you hope is your last home in an affordable community geared for seniors. Then, imagine being told your home is being sold against your will and you’ll receive only the present fair market value of your home, likely leaving you in debt to your mortgage company. How can such a thing happen you ask? Florida’s legislation regarding termination of condominium, section 718.117, Florida Statutes, –that’s how.

The condominium termination legislation was primarily enacted to deal with several problems which include destruction due to casualty and circumstances which may create "economic waste, areas of disrepair, or obsolescence of a condominium property for its intended use and thereby lower property tax values." Nowhere in the legislation does it address terminating the condominium for the benefit of a private investor. But, like any other piece of legislation, there are always unintended consequences. And, such an unintended consequence is why owners in the Sheffield O Condominium are justifiably worried.

All that it takes to terminate a Florida condominium is 80% of the owners to vote in favor of a plan of termination and not more than 10% of the owners to formally object to it. This process is referred to as an "optional termination."

In the present version of the condominium termination legislation there is no requirement for the owners to be made, at least minimally, financially whole. So, the condominium termination plan could be put into effect and an owner could be forced to move out and still be on the hook for thousands of dollars still owed to their lender. One small silver lining is that, effective July 1, 2015, if the condominium is terminated under the optional termination process, all mortgages for those who homesteaded their home must be fully satisfied. While that won’t solve every problem, such as securing a new home for those forced out and coming up with a new down payment, at least the unfortunate owners being forced out against their will who are homesteaded in Florida will not end up upside down to their lender while having to find a new home. But there is no such benefit if the owner has not homesteaded their home.

According to the Palm Beach Post, the investor, "a Palm Beach Gardens resident who owns 15 of the 24 units in Sheffield O and has an interest in two more, wrote to the remaining owners in the Sheffield O Condominium that he plans to dissolve its condominium association and force them to sell to him at the price the Palm Beach County Property Appraiser puts on the units." H. Irwin Levy was quoted as saying, "We’re going to take on this man, have a letter written to him, and whether he backs off..., we’ll see what happens but we’ll take on the cost so these people aren’t penalized for trying to protect their interests."

To prevent problems, such as what may occur to the owners in the Sheffield O Condominium, the condominium termination legislation needs further amending to provide clear authority to the court to deny the optional termination when it’s clear that the termination is being undertaken to inure to the benefit of a private investor to extreme detriment of existing owners, unless the investor undertakes financial responsibility to secure new housing equal to or better than the terminated condominium plus moving costs for the powerless minority opposing the termination. In addition, the same benefits should be available to those who have homesteaded their property as to those who have not done so.

Here is a real brain teaser to consider: Recently, the Fourth District Court of Appeal in Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Association, Inc., Case No. 4D14-1385 (Fla. 4th DCA May 27, 2015), held that the safe harbor legislation (section 720.3085, Florida Statutes) adopted in 2008, which was before a borrower entered into its mortgage and before a third party investor acquired the property, did not take priority over the language set out in the homeowners’ association’s declaration, which provided that neither the lender nor a third party purchaser who acquires the property as a result of the foreclosure has any assessment liability for past due assessments. So, reasoning by analogy, given that condominiums are purely creatures of the legislature, meaning that without Chapter 718, no condominium would exist, how can the condominium termination legislation, which is relatively recent legislation, disturb the rights of condominium unit owners by terminating the condominium in a way not foreseen by the purchaser upon acquiring the unit and certainly not foreseen when the condominium was created? This is the point Levy was making when he was quoted by Tony Doris as saying "[the investor] certainly can’t change people’s rights to their homes retroactively."

By now, it should be self-evident why H. Irwin Levy is deserving of Rembaum’s Association Roundup’s very first Award of Excellence. Not only did he develop the Century Village community over 40 years ago, but, more importantly, he is standing by its residents some 40 years later to try to prevent what he sees as an extreme injustice and apparently willing to fund it, too.

Kudos to Tony Doris for writing the story that appeared in the June 20, 2015 edition of the Palm Beach Post; kudos to the editors who not only published this story, but put it on the first page; and most of all kudos to H. Irwin Levy for standing up for and standing with the owners of Sheffield O.

 

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(6-10-15)

The Safe Harbor Statute Is Not So Safe After All

On May 27, 2015, Florida’s Fourth District Court of Appeal entered its whirlwind decision in Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Association, Inc., Case No. 4D14-1385 (Fla. 4th DCA May 27, 2015). This case rocks the boat in what was considered the "safe harbor," referring to the limitation of a first mortgagee’s liability for assessments which result from the first mortgagee obtaining title as a result of its mortgage foreclosure action or by deed in lieu of foreclosure as set out in section 720.3085, Florida Statutes (the "Safe Harbor Statute").

Most, if not all, homeowners’ associations throughout Florida take the position that the Safe Harbor Statute takes priority over any conflicting terms set out in the association’s declaration. However, at odds with this notion is that the declaration is a contract between the members of an association and the association itself. The substantive law in effect at the time a contract is made is a part of the contract as if it were written therein. Associations take the position that the Safe Harbor Statute is a procedural law and therefore controlling over any provisions to the contrary set out in the declaration, especially to mortgages entered after July 1, 2008 which was when the present Safe Harbor Statute became law. Lenders and third party bidders who acquire property as a result of the lender’s mortgage foreclosure take the position that the Safe Harbor Statute is substantive, and therefore, to apply the Safe Harbor Statute to a declaration that provides otherwise is an impairment of contract prohibited by the Constitution itself.

In this case, which will no doubt muddy third partly assessment liability quite a bit, Pudlit 2 Joint Venture, LLP ("Pudlit") purchased two properties at foreclosure sales that were located within communities maintained by Westwood Gardens Homeowners Association, Inc. ("Westwood Gardens HOA"). As a result, Westwood Gardens HOA then demanded that Pudlit pay all assessments, including all assessments which came due before Pudlit acquired title to the properties. Pudlit paid the assessment arrearage amounts demanded, however it did so "under protest and with full reservation of all rights and remedies." After which, Pudlit sued Westwood Gardens HOA seeking recovery of the monies paid, asserting breach of contract, referring to Westwood Gardens HOA’s declaration of covenants which is in and of itself a contract between the owners and the association, and for declaratory relief. In the end, the Court ruled in favor of Pudlit and, in so doing, held that the terms of Westwood Gardens HOA’s declaration controlled over the Safe Harbor Statute.

Had Pudlit not clearly and overtly established that it paid the assessment arrearage under protest and with a full reservation of rights, then it very well may have not been in a position to file its lawsuit. This is because when a person, the payor, freely pays an alleged debt due, without a reservation of rights of any kind and later files a lawsuit seeking a recovery of its monies from the payee, the payee can defend the case by arguing that the payor voluntarily paid the debt freely and voluntarily and thus waived any later right of protest. (We will have to see how these competing arguments resolve themselves in future court battles.)

Of relevance to the Pudlit case, Westwood Gardens HOA’s declaration of covenants provided that:

"The personal obligation for delinquent assessments shall not pass to [an owner’s] successors in title unless expressly assumed by them.

Sale or transfer of any Lot which is subject to a mortgage as herein described, pursuant to a decree of foreclosure thereof, shall extinguish the lien of such assessments as to payments thereof which become due prior to such sale or transfer."

Such language is in conflict with the Safe Harbor Statute, which provides that a first mortgagee’s liability for assessments which accrued prior to the first mortgagee obtaining title as a result of its foreclosure action or by deed in lieu of foreclosure is limited to one percent of the original mortgage debt or twelve months assessments which accrued prior to the first mortgagee obtaining title. The Safe Harbor Statute, additionally provides that all other successors in interest are jointly and severally liable for all past due assessments, with exception for assessments charged during an association’s ownership of the property.

Applying a constitutional principal which prohibits the impairment of contracts, the Court held that the Safe Harbor Statute, could not impair (meaning, override) the provisions of Westwood Gardens HOA’s declaration of covenants, unless the plain language of the statute requires such application or the declaration of covenants contains "Kaufman" language, which has the effect of making amendments to the Florida Statutes automatically applicable to an association’s declaration of covenants as the Florida Statutes are "amended from time to time." The Court further held that the provisions of Westwood Gardens HOA’s declaration of covenants expressly created rights for third party purchasers who are "intended third party beneficiaries" to such provisions which rights cannot be impaired pursuant to the same constitutional principal.

Although the Pudlit case is with regard to a third party’s liability for assessments which accrued prior to the third party obtaining title at a foreclosure sale, this decision will impact the manner in which assessments due on a property are analyzed in the "safe harbor" context. Pudlit essentially provides that, unless the statute provides for automatic application or unless the declaration contains "Kaufman" language, the terms of the declaration will prevail over the provisions of the statute.

As with many declarations which have not been amended since their creation by the community’s developer, declarations may provide for a wipe out of all assessments that accrued prior to the first mortgagee obtaining title as a result of its foreclosure action or by deed in lieu of foreclosure. The Pudlit case further emphasizes the importance of reviewing and updating your association’s declaration to ensure that it provides for necessary and available protections for the association and its members which includes the importance of including "Kaufman" language.

If your association’s declaration does not contain language similar to the following sentence, then the board should consider further discussing this important matter with the association’s legal counsel:

This Declaration is subject to Chapter 720, Florida Statutes, as it is amended from time to time.

 

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(5-27-15)

The Unlicensed Practice of Law:

What It Is, What It Isn’t and What it Might Be

On May 14, 2015, the Supreme Court of Florida issued an Advisory Opinion regarding which activities of community association managers are and are not considered the "Unlicensed Practice of Law" (UPL). The Advisory Opinion is No. SC13-889. In the Advisory Opinion, the State’s highest Court adopted the position of the Florida Bar’s Standing Committee on UPL which in part i) reaffirmed the Court’s 1996 advisory opinion of Florida Bar re Advisory Opinion-Activities of Community Association Managers, 681 So.2d 1119 (Fla. 1996), ii) expanded on certain activities that are considered UPL, iii) explained that certain activities may or may not be UPL depending on the circumstances, and iv) may have created some confusion which will be cleared up for the readers of this article. By way of background, Court’s adoption of the Advisory Opinion has the same force and effect of an order issued by the Court, and readers should take note that the Florida Legislature enacted laws in 2014 pertaining to this very subject that in a few instances are contrary to the Court’s adoption of the Advisory Opinion. To clear up the potential confusion, know this – the Court’s May 14, 2015 adoption of the Florida Bar’s Standing Committee Advisory Opinion on UPL trumps the 2014 legislation.

New legislation adopted on July 1, 2014 to section 468.431, Florida Statutes provided additional activities that a community association manager may perform. Of relevance to the Court’s adoption of the Advisory Opinion, section 468.431(2), Florida Statutes, provides that a community association manager may determine the number of days required for statutory notices and may calculate the votes required for a quorum or to approve a proposition or amendment. While such activities may be within the community association manager’s ability to perform, the Advisory Opinion provides that these activities may constitute the unlicensed practice of law depending on the specific factual circumstances.

Further, the changes to section 468.431(2), Florida Statutes, also adopted on July 1, 2014, provides that a community association manager may negotiate monetary or performance terms of a contract subject to approval by an association and may complete forms related to the management of a community association that have been created by statute or state agency, which includes release of lien, pre-lien notice and pre-foreclosure notice forms. However, because the Supreme Court of Florida has now ruled that the drafting a claim of lien and satisfaction of lien form and that the preparation, review, drafting and/or substantial involvement in the preparation/execution of contracts (construction contracts, management contracts, cable television contracts, etc.) constitute the unlicensed practice of law when performed by a community association manager, the related activities as provided by section 468.431(2), Florida Statutes adopted, are greatly abridged and are abrogated by the Court’s adoption of the Advisory Opinion.

The following activities when performed by a community association manager are NOT considered UPL and may be properly conducted by a community association manager:

• Completion of the change of registered agent or office for corporations form and the annual corporation report form as provided by the Secretary of State,

• Drafting certificates of assessments,

• Drafting first and second notices of the date of an election,

• Drafting ballots,

• Drafting written notices of annual or board meetings,

• Drafting annual meeting or board meeting agendas,

• Drafting affidavits of mailing, and

• Drafting a pre-arbitration demand letter required by section 718.1255, Florida Statutes.

On the other hand, the following activities are considered UPL when performed by a community association manager (or other non-lawyer):

• Completing a frequently asked questions and answers sheet (DBPR Form 33-032),

• Drafting a claim of lien, satisfaction of lien and notice of commencement form,

• Determining the timing, method and form of giving notice of meetings,

• Determining the vote necessary for certain actions which would entail interpretation of certain statutes and rules,

• Answering a community association’s questions about the application of law to a matter being considered or advising a community association that a course of action may not be authorized by law, rule or the association’s governing documents,

• Drafting amendments to the association’s governing documents,

• Preparing, reviewing, drafting and/or substantial involvement in the preparation/execution of contracts, including construction contracts, management contracts, cable television contracts, etc., and

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

Those activities that may or may not be considered UPL and fall into a gray area depending on the specific factual circumstances are:

Modification of limited proxy forms created by the state or drafting a limited proxy form – Modifying the limited proxy form to include the name of the association or to certain "yes" or "no" voting questions would not be considered the unlicensed practice of law; however, modifications which are more than ministerial in nature require the assistance of an attorney (i.e.: drafting questions which requires discretion in the phrasing or involves the interpretation of statute or legal documents).

Drafting documents required to exercise the community association’s right of approval or right of first refusal on the sale or lease of a property – A community association manager may prepare these documents but cannot advise the association as to the legal consequences of taking a certain course of action, which can only be performed by an attorney.

Determining the number of days to provide statutory notice – If this requires the interpretation of statutes, administrative rules, an association’s governing documents or the rules of civil procedure, then it must be done by an attorney; otherwise, it may be performed by a community association manager.

Determining the affirmative votes needed to pass a proposition or amendment or the owners’ votes needed to establish a quorum – If this requires the interpretation and application of statutes and an association’s governing documents, then it must be done by an attorney; otherwise, it may be performed by a community association manager.

Identifying, through review of title instruments, the owners to receive pre-lien letters – The community association manager may make a list of all records owners, however, the community association manager cannot then use the list to determine who needs to receive a pre-lien letter.

 

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(5-13-15)

Survivors of Florida’s 2015 Legislative Session: Waiting to Become Law, Unless Vetoed

Sometimes the right thing happens for the wrong reasons. This is one of those times. Much of our prior discussion regarding Florida’s 2015 Legislative Session was centered on the overtly draconian Estoppel Bill (House Bill 611 together with its companion, Senate Bill 736) and the financial harm it would have caused to community associations throughout Florida if passed into law. While the Estoppel Bill showed all signs of becoming law, because Florida’s House of Representatives walked out of the 2015 legislative session several days early due to a disagreement with the Senate over Medicare and the State’s overall budget, the Estoppel Bill never made it to the House Floor for final vote meaning that the rumored two million dollars of lobbying efforts expended by the title and real estate lobbies was a huge, colossal waste of money. Candidly, it serves them right for failing to meaningfully cooperate with Florida’s community associations which overwhelmingly opposed the Estoppel Bill, albeit to no avail.

Let us turn our attention to those bills as related to community associations which have survived the 2015 Legislative Session and are on their way to the desk of Governor Rick Scott to become law or vetoed, although a veto is considered by most to be unlikely.

Senate Bill 748 and House Bill 791, an Omnibus Bill: These bills provide various amendments which affect condominium, homeowners’ and cooperative associations. These bills address the following changes:

• Provides that a copy, facsimile or other reliable reproduction of a proxy is valid for the purposes of the proxy. (This makes sense, but strange in that this was already quite obvious.)

• Revises the "catchall" provision of what constitutes the official records for condominium and cooperative associations to include only written records of the association, as already provided for homeowners’ associations.

• Removes the requirement that electronic notice be authorized by the bylaws in order to use e-mail rather than U.S. Mail for official notice purposes.

• Allows associations to implement online voting through a board resolution. (This should prove to be very interesting.)

• Clarifies that partial payments may be applied to outstanding amounts due. (This makes sense, but strange in that this was already quite obvious.)

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

• Clarifies that if voting rights are suspended, the voting interest allocated to the unit is subtracted from the total number of voting interests. (This makes sense, but strange in that this was already quite obvious.)

• Applies the suspension of voting rights or the right to use common elements to member and tenants and guests, regardless of number of units owned by the member.

• Extends the "Distressed Condominium Act" until July 1, 2018. (This is good for Florida’s economy in that it encourages "white knight" investors to invest in fractured condominium projects by shielding them from liability caused by their predecessor.)

• Titles Chapter 720, Florida Statutes, the "Homeowners’ Association Act."

• Adds a homeowners’ association’s "rules and regulations" to the term "governing documents."

• Clarifies that the failure to timely provide notice of recording an amendment in a homeowners’ association does not affect the validity or enforceability of the amendment.

House Bill 643 and Senate Bill 1172, The Condominium Termination Bill: House Bill 643 and its companion, Senate Bill 1172, address condominium termination and change the voting requirements and procedures for optional termination of a condominium. These bills provide that optional termination cannot be used until five years after the recording of a declaration of condominium, unless there is no objection to the plan of termination. Additionally, a bulk owner who owns at least 80 percent of the units must ensure that each first mortgage is fully satisfied when a condominium is terminated. In addition, all unit owners, other than the bulk buyer, must be compensated for 100 percent of the fair market value of their unit. However, if an original unit owner, who purchased their unit from the developer, together with additional conditions, votes against the termination plan, the bulk owner must promise to pay them no less than the same amount they purchased their unit.

House Bill 71 and Senate Bill 414, The Service Animal Bill: These bills, among other things, provide that a person who knowingly and fraudulently represents himself or herself through conduct or verbal or written notice as requiring the need for a service animal or as being the trainer of a service animal is guilty of a misdemeanor in the second degree, punishable in the same manner as other second degree misdemeanors, and requiring the performance of 30 hours of community service for an organization which serves disabled individuals to be completed within six months. It is important to note that that these bills do not address "assistance animals" governed by the Fair Housing Act. In order to trigger the Americans with Disabilities Act (ADA) in a residential association, the association must have a nexus to the public. For example if a homeowners’ association rents out its clubhouses to the public for weddings, etc., then that association would be subject to ADA requirements as far as its clubhouse is concerned. The overwhelming majority of Florida’s community associations are subject only to the Fair Housing Act, and not the ADA. Sadly, there is no companion bill that would make such fraudulent activity unlawful as applied to fraudulent "assistance animal" requests… yet.

 

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(4-29-15)

Speak Now or Forever Hold Your Peace ~ An Association’s Right to Surplus Foreclosure Proceeds

As today’s real estate market continues to strengthen and the economy continues to grow, lenders are foreclosing against delinquent borrowers with more and more haste. Bargain hunters continue to monitor foreclosure sales, often bidding an amount greater than the amount of the foreclosure deficiency. This result leads to surplus funds. For example, a delinquent borrower defaults on their mortgage owing a remaining $300,000 on their home whose market value is closer to $500,000. The lender forecloses. At the foreclosure sale, the highest bid is $400,000, leaving a $100,000 potential profit for the highest bidder when they ultimately sell the property. As a result of the foreclosure sale, the foreclosing lender first receives its deficiency, in this case $300,000 dollars, and the remaining $100,000 dollars is placed into the Registry of the Court as "surplus funds." If no one claims the surplus funds within 60 days, then the defaulting borrower can claim the overage, meaning that, as applied to this example, the defaulting homeowner could receive a $100,000 windfall.

Pursuant to Chapter 45, Florida Statutes, "[t]here is established a rebuttable legal presumption that the owner of record on the date of the filing of a lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim." A lis pendens is recorded in the county’s public records by the foreclosing lender. Once recorded, it means that should anyone else take title to the property, it is subject to the outcome of the present foreclosure litigation.

Also pursuant to Chapter 45, Florida Statutes, "[i]f any person other than the owner of record claims an interest in the proceeds during the 60-day period or if the owner of record files a claim for the surplus but acknowledges that one or more other persons may be entitled to part or all of the surplus, the court shall set an evidentiary hearing to determine entitlement to the surplus."

So, what happens if a junior lienholder, who would otherwise be entitled to the surplus foreclosure proceeds, files their claim for the surplus after the expiration of 60 days? In the recent Fourth District Court of Appeal case, Saulnier v. Bank of America, N.A., decided March 25, 2015, a junior lienholder made their claim past the 60 day period. The trial count found in favor of the junior lienholder based on a theory of excusable neglect, but the appellate court reversed the trial court’s judgment in favor of the homeowners.

The junior lienholder argued, amongst other things, that its untimely claim for the surplus proceeds should be excused because it did not receive a copy of the final judgment or certificate of disbursements and that that the homeowners’ claim did not acknowledge the subordinate lienholder’s claim to the surplus. However, these arguments were found to be without merit by the appellate court. Rather, the statutory 60-day window to claim the surplus funds was strictly construed by the appellate court.

In reversing the trial court’s decision, the appellate court stated, "[w]hile we recognize the subordinate lienholder’s argument before the [trial] court that the homeowners ‘should not be permitted an inequitable windfall simply because [the subordinate lienholder] missed the 60-day deadline by a few weeks,’ we agree with the homeowners that ‘equity follows the law and cannot be used to eliminate its established rules.’" This statement from the appellate court means that when the statutory law clearly addresses an issue, the courts are not free to apply principles of equity to right an otherwise unjust situation. Simply put, the statutory law provides for a 60-day window for a junior lienholder to make a claim for the surplus funds. If the junior lienholder misses that deadline, then it has no right to claim the surplus funds.

As applied to Florida’s community associations, once the association records its assessment lien in the county’s public records, it has perfected its lien rights. This means that the association’s lien relates back to the date of the recording of the association’s declaration! While the association’s lien remains subordinate to the lender’s mortgage, it is ahead of almost every other lien. But, if the association does not timely record its motion for surplus funds within the 60-day window then, it too will miss out on any surplus proceeds and the excuse that the association was not aware of the foreclosure sale and resulting surplus carries no merit whatsoever. So, if you snooze, you lose.

 

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(4-15-15)

Misinterpreting Declaration Leads To Financial Disaster

Don’t Let This Happen in Your Community

Associations are charged with the duty to operate, maintain, repair and replace the common areas of the community. The question that often plagues the minds of members of a board of directors is, who is going to pay for that? The association? The owners? Which owners? An insurance carrier? Whose insurance carrier? Is it even the association’s responsibility to repair or replace? More often than not, the answer depends on a very similar question and which is typically answered in the community’s declaration of covenants – who is responsible to maintain, repair or replace the item in need of maintenance, repair or replacement? The answer may also depend on who created the need for the repair. For example, in the event repairs are needed in the recreation room because a member’s child attempted to do a skateboarding trick and instead put a hole in the wall, the association is likely responsible to conduct the repair, but the owner is likely responsible to reimburse the association for the cost of the repair. The answers to these types of questions rely heavily upon what is contained in your association’s governing documents and will have an important impact on the amount of assessments the owners will have to pay. These types of questions, along with the right answers, would have been very helpful to the parties in the March 6, 2015 Second District Court of Appeals case of Fern v. Eagles’ Reserve Homeowners’ Association, Inc.

In Fern, Ms. Fern, an owner of a newer townhouse, who was sued by her homeowners’ association for failure to pay special assessments for repairs made to the community’s older townhouses, challenged the association’s levy of such special assessments. When the townhouse community was developed, the first townhouses were poorly constructed and required extensive reconstruction. However, the newer townhouses were properly built and required few or no repairs. The association conducted the reconstruction of the older townhouses and minor repairs to the newer townhouses and levied a special assessment against all of the owners for all of the repairs notwithstanding the language of the association’s declaration which provided that the association was responsible for the maintenance, repair and replacement of the "exterior of the Dwelling Unit."

In examining this phrase, it’s important to note a fundamental difference between owning a condominium unit versus owning a home in a homeowners’ association, even if it is a townhome as did Ms. Fern. Typically, in a homeowners’ association, the owner of a townhome, or perhaps all of the owners whose townhomes comprise a singular townhome building, are responsible for the exterior walls. So, even if the association is required to effectuate the repairs, only the owner of the repaired home pays for the repairs to that home. This is further evidenced by section 720.308, Florida Statutes, which allows different levels of assessments assessed against different owners based on the level of services provided by the association.

At trial, Fern asserted that the special assessments were improper expenditures of the association and were therefore unenforceable. Other owners who felt the same had previously sued the association in the case of Klak v. Eagles’ Reserve Homeowners’ Association, Inc., 862 So.2d 947 (Fla. 2nd DCA, 2004). In Klak, the Court held that the association’s obligation to repair the townhouses, and therefore its authority to assess the owners for such repairs, was limited to only the exterior surfaces of the exterior walls of the townhouses. This interpretation was based on language in the association’s declaration which provided that the association was responsible for the maintenance, repair and replacement of the "exterior of the Dwelling Unit" and is much narrower than what the association had hoped or believed. Hoping and wishing could be some very dangerous tools to employ in interpreting a declaration of covenants.

The Court provided that the owners should be assessed for their share of the expenses to repair the building exteriors but that the association would need to seek payment or reimbursement for the remaining expenses from the individually benefited owners and return money to those owners who paid more than their fair share of the repairs.

In the meantime, because of the terrible condition of the older townhouses, the association was ordered by the trial court to continue conducting the repairs. Due to the various lawsuits the association was facing as a result of this special assessment, many years passed, and the association filed for Chapter 11 bankruptcy. The bankruptcy plan permitted the Association to continue its collection efforts but did not address Ms. Fern’s asserted defense of whether the special assessments against her were actually unenforceable. The case against Ms. Fern was ultimately sent back to the trial court because of her asserted defense of whether the special assessments were actually enforceable was required to be determined by the trial court. What happened next? Well, it’s too soon to know. In reviewing the judicial decision, and to add another level of both complexity and absurdity, it does appear that while this case was pending in the appellate court, Ms. Fern actually lost her home as a result of the association’s foreclosure.

This case provides great insight into the importance of properly interpreting the maintenance, repair and replacement provisions set out in the declaration and the assessment authority that goes with it. While the questions may sound simple, the answers often require in depth analysis of your association’s governing documents and the application of Florida case law to reach the right conclusion.

 

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(4-1-15)

Contractor and Engineer Liability: How to Better Protect Your Association

If Your Association is Planning a Maintenance, Repair or Restoration Project, You Better Read This First!

At some point in time, every association is faced with a major maintenance and repair undertaking, whether it be concrete restoration, elevator refurbishment, new roofs or a similar monumental task, which requires the association to place their trust, and a large sum of their money, in the hands of contractors, engineers and architects.

The bid process begins, and all of the prospective contractors, engineers and architects tout their skills and expertise in the hopes that the association selects them for the work at hand. More and more, despite the professional’s desire to win the job, the professional contractor does not want to take on the liability for their own work. This is evidenced by broad waivers of liability, disclaimer of warranties and terribly one-sided indemnity provisions that are set out in the contractor’s contract that is given to the association for review.

As a community association attorney who regularly reviews contracts for community associations, I have seen enough of these broad waivers and disclaimers of liability and one-sided indemnity provisions to last a lifetime. One such example of an attempt to limit liability follows:

In recognition of the relative risks, rewards and benefits of the project to both the Client and the Contractor, the risks have been allocated so that the Client agrees that, to the fullest extent permitted by law, the Contractor’s liability to the Client, for any and all injuries, claims, losses, expenses, damages or claims expenses arising out of this Agreement, from any cause or causes, shall not exceed $20,000.00 or the amount of the Contractor’s fee, whichever is greater. Such causes include, but are not limited to, the Contractor’s negligence, errors, omissions, strict liability or breach of contract.

The association is hiring the contractor, engineer and architect because of their professional expertise, yet the professional is, in essence, saying "I’m great, but I’m not responsible to the association if a make any errors." This is absolutely absurd and an abhorrent practice. Sure there need to be a relative balance so that the professional is not sued by the client association for such matters beyond the control of the professional but to call yourself a professional and run from your own liability is insulting, at best.

Depending on the scope of the association’s maintenance, restoration or repair project, this limit on the contractor’s liability could be egregious. To put this language in a real-world context, let me provide you with an example of the application of this provision to a hypothetical scenario. An association undertakes a concrete restoration project for its entire building which is going to cost the association about $500,000.00. The professional makes a mistake in the waterproofing of the envelope of the building, exposing the building to water intrusion. Months after the project has been completed, residents begin to complain about the smell of the building. Tests are conducted and, sure enough, the condominium is riddled with mold which the association is responsible to repair to the tune of $250,000.00. The association’s insurance carrier is, no doubt, fighting them for coverage, and meanwhile the association is stuck with the bill. So, the association turns to the professional who did the work for answers. Pursuant to the language above, the contractor is only liable to the association for $20,000.00, or the contractor’s fee, whichever is greater. So the association has to come up with difference! Even though the contractor was clearly at fault, the contractor cannot be held liable for its own negligence, errors, omissions, strict liability or breach of contract above the limits as set out in the contract.

Provisions like this could be devastating to an association! While the details of the maintenance project itself, such as the time of the project and the materials used, are important, it is also important for the association to properly protect itself and its members in the event something goes wrong, which happens more often than I prefer. Contractor prepared agreements tend to be a minefield for associations because there are many liability related provisions which must be considered and re-drafted in order to protect the association.

While protecting the association, and its members and residents, is of the utmost importance, it is also important to consider the potential liability of the contractor because, realistically, no deals would be made if the association was fully protected, while the contractor is left completely exposed. There is a balance between protections for the association and protections for the contractor that must be struck in order for associations and contractors to have a mutually beneficial relationship. Finding that balance is easier said than done in many cases, but is entirely possible.

The simplest way to plan for your association’s maintenance, repair and restoration project, and avoid such pitfalls, is for the association to provide the requisite professional with the association’s own draft contract as a part of the bidding process. In that way you can hopefully avoid wasting countless hours in selecting the right professional only to have the deal fall apart because they refuse to stand behind their own work.

Any reputable professional, be it a contractor, engineer, or architect, should stand behind their work. If they won’t, then find one who will!

 

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(3-18-15)

The 2015 Legislative Session

Association Estoppel Certificates

The Devil is in the Details

Florida’s 2015 Legislative Session began on March 3, 2015, and several bills regarding community asso-ciations were filed. An already paired set of such bills, House Bill 611 and its companion, Senate Bill 736, are creating great controversy among Florida’s community associations. Both bills propose significant changes to the laws regarding the issuance of estoppel certificates by community associations. To accomplish this, patently drastic and overtly draconian amendments are proposed to section 718.116, section 719.108 and section 720.30851, Florida Statutes, regarding condominium associations, cooperatives and homeowners associations, respectively.

A brief explanation of the term "estoppel certificate" is in order. An estoppel certificate is a certificate issued by a community association (or its manager or attorney), which provides the monies owed to the association as of a particular date, minimally including due and owing assessments, late fees and interest charges, by a current or prior owner. A prospective purchaser may then rely on the estoppel certificate, until its expiration date. Simply put, an estoppel certificate "estops" the association from asserting a greater amount due than what is provided by its estoppel certificate.

House Bill 611 and Senate Bill 736 propose very strict maximum estoppel certificate fees that may be charged. The legislation mandates that the fee for an estoppel cannot, under ordinary circumstances, exceed $100.00, plus $50.00 for a rush and plus another $50.00 if issued by an agent of the association or its attorney. So, these lowered fees will be made up for elsewhere. Likely it will be in higher management and legal fees passed on to the association which are then paid by each member in pro-rata share. No one other than the buyer and seller should share in these costs.

It is comical, in a tragic fashion, just how much attention is being paid to this issue in this year’s legislative session. Realtors typically earn a whopping 6% commission when the property sells. It doesn’t matter how long the property was on the market, the efforts expended by the realtor, or even the ultimate price of the property. Be it a $100,000.00 or $10,000,000.00 sale, the realtor’s commission is customarily 6%. The closing agents earn their fees, the appraiser charges their fees as does the surveyor, the lender and everyone else associated with the sales process. So, in the infinite wisdom of our Florida Legislature, they have decided to make the "association" the bad guy in this process by focusing on the, more often than not, insignificant estoppel fee.

House Bill 611 and Senate Bill 736 will also shorten the amount of time community associations have to respond to requests for estoppel certificates from 15 days to 10 days. If a community association fails to provide an estoppel certificate within the 10 day period, House Bill 611 and Senate Bill 736 provide that the community association will have effectively waived any claim for any amounts due and owing that should have been shown on the estoppel certificate. Furthermore, there is no mechanism provided in the proposed legislation which provides for an extended timeframe within which to respond should the estoppel certificate request be referred to an attorney or in the event an issue arises during the preparation of an estoppel certificate. At times, due to complications that are understood best by those who issue countless estoppel certificates, 15 days is barely sufficient time to issue an estoppel certificate. Under some circumstances, a 10 day window to do so is laughable. Who suffers as a result of the unissued estoppel? Every single member in your association, but for its newest owner, because it is the existing members who have to make up the financial shortfall.

While the amount due as reflected in the estoppel certificate is the maximum amount a community association is allowed to collect, the legislation also provides that it is the maximum amount due from anyone who relies in good faith on the estoppel certificate including successors and assigns. This provision which provides for a chain of never ending assignability is just plain wrong! An estoppel certificate should only inure to the benefit of the requesting party. If someone else wants one, they too should have to pay for it. Otherwise, it is no different than going to the grocery store demanding a free gallon of milk, because your neighbor bought one yesterday.

Additionally, estoppel certificates, under the new laws if made effective, must be effective for thirty (30) days from the date the estoppel certificate is received by the requesting party, which date must be provided on the estoppel certificate. There is no great justification to require the estoppel certificate remain valid for an entire 30 days. Essentially, the inability of the parties to timely close their deal is being held against the association. At times, budgets are amended and special assessments levied. If either is done after the estoppel certificate is issued, then that person may not have to pay their fair share. The longer period of time the estoppel remains valid, the greater the potential harm to the association.

Given the tens of thousands of association members in Florida who can be financially hurt by this legislation, it amazes me how silent this block of voters often remains. If you want good laws benefiting your association then let your legislators know that the terms of this proposed legislation are unacceptable.

 

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(3-4-15)

If You Think Your Community Has Enforceable Landscape Standards, After Reading This, You Might Think Again!

If ever there was a need to appeal a decision, the Florida Fifth District Court of Appeal’s February 6, 2015 deci-sion in Bendo v. Silver Woods Community Association, Inc., Etc. might be it. After reading the following architectural provision of the Silver Woods Community Association’s Declaration of Covenants, the 5th DCA held that the Association did not have the power to approve or deny an owner’s non-structural landscaping plan, which, in this case was denied because the landscaping plan did not include a grass lawn. At issue was the following section of Silver Woods Declaration:

"Section 1. Approval of ARC. No building, fence, wall or other structure shall be commenced, erected or maintained upon the Property, nor shall any exterior addition to or change or alteration therein be made, unless it is in compliance with the zoning code of Orange County, Florida, and other applicable regulations and until the plans and specifications showing the nature, kind, shape, height, materials, and location of the same shall have been submitted to and approved in writing as to harmony of external design and location in relation to surrounding structures and topography by the Board of Directors of the Association, or by the Architectural Review Committee (ARC)." [Bold in the original; underline added.]

While the trial court held that the Association had the power to approve or deny the "soft" landscaping portions of Bendo’s landscaping plans, the 5th DCA did not. The facts of this case are pretty straightforward. The installation of a new septic drain field in Bendo’s front yard destroyed the existing landscaping. Bendo’s new landscape plans did not include any grass. Rather, he included a new retaining wall, vegetation and mulch. After the Association approved the wall, Bendo submitted additional plans for the "soft" landscaping which failed to include grass. So, the Association rejected the landscape plan and litigation ensued. As reported in the 5th DCA’s decision, "[t]he trial court concluded that the ‘plain’ language of the covenant requires… approval and ordered [Bendo] to submit a new plan for approval in accordance with [the Association’s] directives." Bendo challenged this conclusion, contending that the applicable provision is, at the very least, ambiguous, and the 5th DCA agreed with him.

Admittedly, there is a long line of precedent that stands for the notion that ambiguous covenants must be construed in favor of the land owner. But, is Section 1 (above) ambiguous? While it is pretty clear that Section 1 is not at all ambiguous and that the plain meaning of the sentence should be applied, the 5th DCA did not ask me and rather chose to deeply examine, and quite possibly misinterpret, the sentence structure. WARNING: As a result of reading this article, flashbacks and nightmares of your elementary school English grammar class may result (as happened to me while writing it). But, I digress.

The decision in this case turns on how the reader applies the word "therein," underlined above. The 5th DCA explained that the subject of the sentence is the phrase "building, fence, wall or other structure." Therefore, the 5th DCA reasoned the word "therein" applies to this phrase and not the word "Property" (referring to the owner’s lot). The 5th DCA found that the word "Property" was merely a reference to the land upon which the "building, fence, wall or other structure" could be erected or maintained. Therefore, the 5th DCA reasoned that the Association’s power to approve and deny an owner’s landscaping plans only pertained to the structural aspects of a landscape design and not the non-structural aspects of a landscape design. As I recall from prior grammar lessons, the modifying phrase inserted after a series of subjects applies to the last in the series, not the former subjects.

Simply put, there are five, not four, subjects in the relevant section of the Silver Woods Declaration at issue. The subjects of the sentence are "building, fence, wall or other structure" and the term "Property." The phrase "nor shall any exterior addition to or change or alteration therein be made" at the very least applies to the last subject mentioned, "Property," and likely applies to the entire series because the "building, fence, wall or other structure" are included as a part of the "Property." Having participated in the drafting of countless declarations, to apply the term "therein" to only the "building, fence, wall or other structure" is to fully misinterpret the Association’s otherwise clear ability to approve or deny an owner’s requested landscaping improvements.

Just because a contrary argument was made, it doesn’t mean that the phrase is ambiguous, or does it? School is dismissed.

 

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(2-18-15)

How to Be an Ineffective Board Member

You Know It’s Time to Resign When…

Being a lawyer whose practice concentrates almost exclusively on the representation of community associations throughout the State of Florida, I thought I had seen it all. These days, it is becoming harder and harder to surprise me with stories about association living. But, every now and then, admittedly, I find myself shocked. Sadly, today’s column will describe one such event.

"Condominium living" – the term denotes living on top of one another, literally. It is the great social experiment of the Twentieth Century. Pragmatically, condominium living makes all the sense in the world. Instead of one person enjoying the beautiful ocean view in a single family home, the condominium allows sometimes hundreds of families to enjoy that same ocean view, albeit stacked on top of one another like sardines.

The condominium building is a complex building of various degrees. It can cost tens, if not hundreds of millions of dollars to construct. In many ways it could be compared to a cruise ship complete with HVAC systems, boilers, restaurants, elevators, swimming pools, and in South Florida, the building must weather ocean conditions and storms. Like any ship, the condominium needs a good crew. We call the condominium’s crew, the ever revered board of directors. It is a thankless and time consuming job. Everyone is an expert at what the board members should have done. The association member should be ever grateful to their board members for stepping up to the plate and giving themselves so selflessly.

Unless you yourself have served on the board, then you really can’t imagine the countless hours and aggravation you will sometimes experience. In the utopian association, members serve on the board because they truly care and want to help maintain what is no doubt a fabulous way of living. In the not so utopian association, members want to serve on the board for a whole host of other reasons such as ego, Napoleonic syndrome and power trips. It is to those board members that today’s column is directed.

Board members have a fiduciary duty to their association to exercise their reasonable business judgment. Over the past couple of weeks several regular readers of Rembaum’s Association Roundup have shared an exchange between themselves and their association’s president. The entire association is experiencing a troubling issue with a commercial neighbor. The association members are looking to their board president for information, guidance, support and peace of mind in knowing that their elected "captain" is guiding the ship through the turbulent waters. As you read the verbatim dialogue below between the members and the president, you should know that the association members live out of town most of the year and are a respected doctor and clergyman. Both are well published in their field and have national reputations.

Owner(s) to the President: "I recently sent an email to you and a follow up when I did not hear back. Could you let me know if you received them? I would be happy to meet with you directly regarding the ongoing issue if you prefer."

President to the Owner(s): "If you want an update go to the board meetings like everyone else… or read the minutes of the meeting… That is what they are for… My job is not to respond on an individual basis to unit owners who make up stories of selling their apartment and are too lazy to attend board meetings!"

Having looked at the minutes from the past year and not seeing much about the issue, the owners write back to the president.

Owner(s) to the President: "I am not sure what to make of your recent email to me except to attempt to impune my character and avoid the issue about which we have previously communicated. Perhaps you are not aware that I reside in New York and work full time as, frankly, a nationally recognized physician… As the problem continued unresolved, as you know, we became stressed and frustrated to the point of considering a sale, of which we informed you. We indicated this to you in earnest… If you would take a moment to re-read your email to me and reflect on whether it went, let us say, overboard, I would appreciate your response."

President to the Owner(s): "I REALLY DON’T CARE WHAT YOU DO OR ARE… YOUR ROOMMATE TOLD ME DAY ONE THAT YOU WOULD BE A PAIN AND HARASS ME. GO TO THE MEETINGS AND OR READ THE MINUTES!"

Owner(s) to the President: "Are you confusing me with someone else? I own the unit with my spouse of many years and we have never had a roommate…"

President to the Owners: "I DO NOT TAKE EMAILS FROM RESIDENTS… ALL YOURS WILL BE GOING TO SPAM… FOLLOW PROPER PROCEDURES… IF YOU WOULD HAVE ATTENDED THE MEETINGS YOU WOULD KNOW THIS. FEEL FREE TO READ ANY MINUTES OR COME TO ANY MEETING TO ASK QUESTIONS AND EXPRESS YOUR CONCERNS… I HAVE ALWAYS OPENED UP THE MEETINGS TO QUESTIONS AND STAYED UNTIL ALL WHERE ANSWERED!!!! BELIEVE ME I AM VERY PREPARED!!!!"

Clearly, this president is reacting… to what, we may never know. Why does this president feel the need to yell (evidenced by the all caps in the emails) at these members asking for information? Why won’t he take the time to be responsive to the members’ simple request for a status update? Why does a president not take emails from members? Why is this president so rude and callous? Maybe this president will do the ship a favor and disembark at the port!

 

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(2-4-15)

Do Board Members Owe a Duty of Care and Loyalty to their Association?

A community association is a corporation, in many ways similar to any other corporation, be it a for-profit or not-for-profit company. In exercising decisions, for the most part, the community association’s board members must adhere to the "business judgment rule." As I like to explain it, this means that the board member’s decisions might be right or might be wrong. However, the ultimate question is, "did the board member act reasonably?" In other words, did the board member exercise his or her discretionary decisions in a reasonable manner? It should be obvious that, in making such decisions, the director must owe some type of duty to the association, too.

In a recent case, McCoy v. Durden, decided on December 31, 2014, the Florida’s First District Court of Appeal had occasion to answer this question, albeit in a slightly different context than that of a community association. Nevertheless, in a generic sense, the First DCA examined the duty of care and loyalty owed by a director to his or her corporation that they serve and provided some interesting historical context, too.

The First DCA in McCoy quickly pointed out that Florida courts have long since recognized that corporate officers and directors owe both a duty of loyalty and a duty of care to the corporation that they serve. As early as 1907, in a case styled, Jacksonville Cigar Co. v. Dozier, the Florida Supreme Court recognized that, under the Florida common law, a director is in a fiduciary relationship with the corporation. In 1932, in Orlando Orange Groves Co. v. Hale, the Florida Supreme Court described the relationship between a corporation and its directors and officers. The Florida Supreme Court explained in the Orlando Orange Groves Co. case that "[t]hey are required to act in the utmost good faith, and in accepting the office they impliedly undertake to give to the enterprise the benefit of their best care and judgment, and to exercise the powers conferred solely in the interest of the corporation."

Later, in 1980, in Snead v. U.S. Trucking Corp, the First DCA explained that "[a] director’s… acts are subject to be tested by the rules governing the relation of a trustee to his cestui que trust... He is bound to act with fidelity, the utmost good faith, and with his private and personal interests subordinated to his trust duty whenever the two come in conflict." By way of explanation (and because I had to look it up, too) a "cestui que" is the person for whom a benefit exists, and a "cestui que trust" is a person for whose benefit a trust is created.

Under Florida’s common law, the Florida Supreme Court has defined the concept of fiduciary duties broadly reflecting its historical origin in equity. In other words, even if a legal duty was not codified in the statutory law, a common law duty exists, too. In 1927 in Quinn v. Phipps, a case involving allegations that a real estate broker had violated his fiduciary duty, the Florida Supreme Court explained the basis of the duty: "The term ‘fiduciary or confidential relation,’ is a very broad one. It has been said that it exists, and that relief is granted, in all cases in which influence has been acquired and abused – in which confidence has been reposed and betrayed. The origin of the confidence is immaterial. The rule embraces both technical fiduciary relations and those informal relations which exist wherever one man trusts in and relies upon another … Stripped of all embellishing verbiage, it may be confidently asserted that every instance in which a confidential or fiduciary relation in fact is shown to exist will be interpreted as such. The relation and duties involved need not be legal; they may be moral, social, domestic or personal. If a relation of trust and confidence exists between the parties… that is sufficient as a predicate for relief." (Emphasis added.)

So, does a director of a community association owe his or her association a duty of care and loyalty? You bet they do! Now that we have established that a board member owes a duty of care and loyalty, what exactly are they? It is a fiduciary duty to act in the best interests of the association by acting with loyalty, honesty, and in good faith. Put simply, a director owes a duty to exercise good business judgment and to use ordinary care and prudence in the operation of the association. A director should perform his or her actions in good faith and in the best interest of the association, exercising the care an ordinary person would use under similar circumstances. A director’s decisions are typically protected under the "business judgment rule" unless they breach one of these duties. So, if you are a board member, remember the duty of care and loyalty that you owe to the association you serve.

 

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(1-21-15)

Statute of Limitations in Foreclosure Action:

Timing is Everything

Timing is everything – in love, in life and in lawsuits. Unlike timing in love and in life, timing in lawsuits is governed by certain laws including those referred to as the statute of limitations. Determining when the statute of limitations’ clock begins to tick can be tricky. For example, and as further discussed in today’s article, in Florida, a lender has five years from the date of default to foreclose on its mortgage and note. If the lender fails to file a foreclosure action within five years of the date of default upon which its lawsuit is based, the lender is barred from filing the foreclosure action.

This was the issue before the Third District Court of Appeal in the very recent case of Snow v. Wells Fargo Bank, N.A., decided on January 14, 2015. In this case, on May 25, 2007, the Snows executed a mortgage note with Wells Fargo for property located in Miami, Florida. Pursuant to the terms of the mortgage, Wells Fargo had the option to accelerate the debt in the event of a default.

Prior to accelerating the remainder of the debt upon default, Wells Fargo was required to provide the Snows with notice specifying the default, providing an opportunity for the Snows to cure the default within thirty days of the notice and informing the Snows that the failure to cure the default may result in acceleration of the mortgage debt. Upon the Snows’ default on October 1, 2007, Wells Fargo sent a notice to the Snows on December 6, 2007 which provided the Snows with thirty-five days to cure the default by paying off the amount of the default. However, the Snows failed to cure the default within the thirty-five day period (by January 10, 2008). It’s important to note that Wells Fargo’s notice did not provide notice that the remainder of the note would be accelerated if the default was not cured.

Then, on March 12, 2008, Wells Fargo filed a foreclosure action against the Snows. However, on June 28, 2011, Wells Fargo voluntarily dismissed their lawsuit against the Snows, without prejudice. The term "without prejudice" in a judgment of dismissal ordinarily indicates the absence of a decision on the merits and leaves the parties free to litigate the matter in a subsequent action, as though the dismissed action had never existed.

On March 5, 2013, Wells Fargo filed its second foreclosure action against the Snows. The Snows argued that the second foreclosure action was barred by the five-year statute of limitations because the limitations period began to run on January 10, 2008 (the date by which the Snows were required to cure the default). Therefore, the Snows asserted the statute of limitations expired on January 10, 2013, three months prior to the filing date of the second foreclosure action.

Wells Fargo argued that the date the statute of limitations began to run was not January 10, 2008, but rather March 12, 2008, the date the first foreclosure complaint was filed. Therefore, Wells Fargo asserted the five-year limitations period had not yet expired when Wells Fargo filed the second foreclosure lawsuit on March 5, 2013. The trial court agreed with Wells Fargo and determined that the second foreclosure action was filed prior to the expiration of the statute of limitations.

On appeal, the Third District Court of Appeal affirmed the trial court’s decision and held that the second foreclosure lawsuit was timely filed. In its discussion, the Court noted the difference in the calculation of the statute of limitations with regard to mortgage notes with an automatic acceleration clause and those with an optional acceleration clause.

When an acceleration clause is automatic, the entire indebtedness becomes due immediately upon default, and the five-year statute of limitations begins to run without notice. When an acceleration clause is optional, the lender must exercise this option and give notice to the borrower of the election, making the entire indebtedness due. It is when the lender exercises the acceleration option and notifies the borrower of its exercise that the five-year statute of limitations begins to run.

In this case, the statute of limitations began to run on March 12, 2008, when Wells Fargo filed its first foreclosure action. The Court found that the December 6, 2007 notice of default from Wells Fargo was not Wells Fargo’s exercise of its option to accelerate the mortgage note because the notice did not provide that the full amount of the indebtedness was immediately due nor did it demand payment of the full amount of indebtedness. Wells Fargo did not make such a demand for the full amount due (i.e., the accelerated amount) until it filed its first foreclosure complaint on March 12, 2008. Therefore, the Court determined that the statute of limitations would have expired on March 12, 2013, a week after the second foreclosure action was filed. Timing is everything.

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(1-7-15)

Developer Sells HOA’s Common Areas

In this December 3, 2014 case, Bethany Trace Homeowners Association, Inc. v. Whispering Lakes I LLC and Waterman-Pinnacle, Inc., the association’s subsequent developer, Waterman-Pinnacle, sold lands designated in the Bethany Trace HOA’s declaration as common areas. As a result, when the Bethany Trace HOA found out, it sued Waterman-Pinnacle to get its common areas back.

In 1990, Leigh Corporation started building out the Bethany Trace HOA. As a part of the initial development, Leigh Corporation drafted and recorded Bethany Trace HOA’s declaration. In the declaration, the common areas were identified as "those tracts, easements or areas of land shown on any recorded subdivision plat of the property which are intended to be devoted to the general common use and enjoyment of the Owners in the Property," and included certain designated items such as "fences surrounding the property, a maintenance area, a conservation area, an entranceway along with all of the improvements located thereon." There was one small problem, however. The plat was never recorded. (Does this mean that the common areas were never actually created?)

Eleven years later, Leigh Corporation sold its rights and obligations under the Bethany Trace HOA declaration to Waterman-Pinnacle, the subsequent developer. In the assignment, Waterman-Pinnacle agreed to convey the common areas to Bethany Trace HOA "for no further consideration and free and clear of any liens or encumbrances." Nevertheless, Waterman-Pinnacle sold the lands designated as common areas to another developer which bulldozed them in anticipation of building additional homes. When Bethany Trace HOA learned of this, it sued to get its common areas back.

In summary, Waterman-Pinnacle argued that, because the plat was never recorded, the common areas identified in the declaration weren’t actually common areas and, therefore, the property could be sold. Bethany Trace HOA argued that the lack of a recorded plat did not affect its interest in the identified common areas as the common areas were identified by name and included metes and bounds legal descriptions in the declaration itself. Interestingly, the trial court agreed with Waterman-Pinnacle’s arguments. As a result, Bethany Trace HOA appealed.

When an appellate court reviews a trial court’s interpretation of a contract, the style of its review is referred to as "de novo." This means that, because the interpretation of a contract is a question of law, the appellate court is free to reach a different interpretation than that of the trial court.

The appellate court found that the language of the Bethany Trace HOA, when taken in the entirety, provided that Bethany Trace HOA has ownership rights in its common areas. The appellate court further found that the interpretation adopted by the trial court resulted "in portions of the declaration being meaningless" in that the trial court ignored certain portions of the declaration that provided Bethany Trace HOA would own and maintain certain identified common areas. The appellate court held that Bethany Trace HOA’s interpretation of the provisions of the declaration was reasonable and gave meaning to all of the provisions in its declaration. The case was then remanded (returned) back to the trial court for further proceedings consistent with the ruling of the appellate court.

When the trial court proceedings take place Bethany Trace HOA will no doubt ask the trial court to order that its common areas be formally returned and to award it applicable financial damages.

The moral of this case is simple. At its core, an association’s declaration is a contract between the association and its members. When interpreting a contract, one sentence or phrase, when read in a vacuum, cannot be used in favor of one party when doing so is contrary to the remainder of the contract when read in its entirety.

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(12-24-14)

Contracts, Be Careful What You Sign

Did you read that contract and fully understand your obligations before signing it? Almost every day, we are faced with new terms and conditions for the mobile app we can’t live without. Most people do not take the time to read every word before we hit "I agree" to those new terms and conditions. While the impact of these terms and conditions may not be felt on a daily basis, upon your acceptance, you are bound by these newer terms and conditions as if you read and understood them. While there are certain instances where the terms of a contract cannot be enforced, such as when a contract is unconscionable, when the terms of a contract are clear and unambiguous, the plain language of the contract will be enforced accordingly. This was the subject of a December 5, 2014 opinion of the Fifth District Court of Appeal of Florida in Thyssenkrupp Elevator Corp. v. Hampton Manor at Deerwood, LLC.

In this very recent case, Thyssenkrupp and Hampton Manor had entered into an elevator maintenance contract for a term of five years. Thyssenkrupp provided the services for the entire five-year term. At the end of the five-year term, the contract automatically renewed for an additional five years and continued to automatically renew for additional five year terms thereafter, which is when the trouble began.

During the second five year renewal period, Hampton Manor failed to pay for work performed by Thyssenkrupp in the amount of $1,157.14. The contract provided that upon failure to pay an overdue invoice, Thyssenkrupp could either: 1) suspend all service until all amounts due had been paid in full or 2) declare all sums for the unexpired term of the contract due immediately and terminate the contract. Thyssenkrupp selected option two and filed a lawsuit against Hampton Manor for the unpaid invoices and for all sums due for the unexpired term of the contract.

At summary judgment, Thyssenkrupp provided the elevator maintenance contract, the unpaid invoices and an affidavit of its corporate representative who testified as to all the amounts due and owing to Thyssenkrupp from Hampton Manor totaling $30,259.71, which included the remaining amount due for the unexpired term. Harbor Manor argued that Thyssenkrupp’s corporate representative’s affidavit did not comply with Florida Rules of Civil Procedure 1.510(e), which requires that affidavits must (i) be made on personal knowledge, (ii) set forth facts as would be admissible in evidence and (iii) affirmatively show that the affiant (the person providing the testimony) is competent to testify to the matters provided in the affidavit.

The trial court disagreed with Hampton Manor, finding that Thyssenkrupp’s corporate representative’s affidavit complied with Rule 1.510(e), and ruled in favor of Thyssenkrupp. However, the trial court only awarded Thyssenkrupp $1,157.14, the amount of the outstanding invoices and did not award damages for the unexpired term of the contract in the amount of $29,102.57. Disappointed with the result, Thyssenkrupp appealed the trial court’s award. The Fifth District Court of Appeal of Florida found that the clear and unambiguous language of the elevator maintenance contract entitled Thyssenkrupp to recover the monthly fee for the remaining term of the contract upon Hampton Manor’s default.

When the terms of a contract are clear and unambiguous, a court has no right to give it a meaning other than what is expressed. Quoting a Florida Supreme Court case, the Court provided that "[t]o hold otherwise would be to do violence to the most fundamental principle of contracts."

Because Thyssenkrupp and Hampton Manor had contractually agreed that Thyssenkrupp could cancel the contract and accelerate the remaining term in the event Hampton Manor failed to pay an outstanding invoice, Thyssenkrupp was entitled to damages for the unpaid invoices in the amount of $1,157.14 and damages for Hampton Manor’s breach in the amount of $29,102.57.

The moral of this story is to make sure that, as an association board member, you read and understand every term of a contract before casting your vote in favor of that contract. To do otherwise can cause significant monetary damages.

 

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(12-10-14)

How to Derive Income from Vacant and Abandoned Units

A long, long time ago, in a land far, but not too far, away, England, there were two distinct court systems – the court of law, the Court of the King’s Bench, which followed the letter of the law, and the Court of Chancery, which was a court of equity and had the ability to do what was fair and equal. Although these two courts have had a sordid past, they continue to exist today in our very own court system; however, now the same judge may hear both legal and equitable claims. In general, when the law provides a remedy, the principles of equity cannot be employed by the court.

A core principle in the court of law is inclusio unius est exclusio alterius. It means that the inclusion of one thing is the exclusion of another, meaning that if the law says you can have apples, you can’t have oranges. While this is a general statutory interpretation principal, the Supreme Court of Florida held in the case of Granada Lakes Villas Condominium Association, Inc. v. Metro-Dade Investments Company that the enumerated instances in which a court could appoint a receiver for a condominium association as provided for by Florida Statutes did not limit the court’s power to appoint a receiver but actually expanded upon the court’s inherent equitable powers to do so, which turned out to be pretty good for Florida’s community associations.

In Granada Lakes Villas, the developer, Metro-Dade Investments Company, and the community’s master association, sued the condominium association, Granada Lakes Villas Condominium Association, Inc., for the its failure to pay the developer and the master association their share of the related expenses after collecting the fees and assessments from the condominium’s unit owners. As a result of the condominium association’s failure to pay, it was argued by the developer and the master association that they were unable to pay for utilities and maintenance expenses for the common areas, which resulted in ongoing health nuisances on the property.

At trial, the developer filed an emergency motion for the appointment of a receiver over the condominium association in order to facilitate the collection of the fees and assessments from the unit owners and to perform a proper accounting. Although the trial court had determined that a receivership would be helpful to the court, the trial court held that it had no power under Chapter 718, Florida Statutes, to appoint a receiver because Chapter 718, Florida Statutes, enumerates certain instances when the court may appoint a receiver, including failure of the association to elect enough directors to establish a quorum, failure of the association to act after a natural disaster and the need to liquidate and close a non-profit corporation as found in Chapter 617, Florida Statutes, which governs non-profit corporations. The trial court reasoned that because the statute itemized only these few grounds for appointment of a receiver, the court could not appoint a receiver unless one of these grounds was applicable.

However, on appeal, the Second District Court of Appeals reversed and remanded the case back to the trial court, concluding that the court’s power in these circumstances was "inherent in a court of equity, not a statutorily created right." The Second District also found that the enumerated instances in Chapter 718 and Chapter 617, Florida Statutes, do not "restrict a trial court’s broad, equitable authority to appoint a receiver; rather, the statutes merely cite to specific instances when a receiver may be appointed."

The Supreme Court of Florida, which took jurisdiction because of a conflicting ruling in a 2009 case in the Third District Court of Appeals, agreed with the Second District’s findings. The Supreme Court of Florida provides that the fact that the Florida Statutes lists certain grounds for the appointment of a receiver does not mean that appointment of a receiver is unavailable unless one of those grounds is applicable. The Supreme Court noted that the receivership remedy is available in equity – typically in cases of fraud, self-dealing, waste or destruction or loss of property – even without statutory authority, and that the principles of equity would authorize the court to appoint a receiver under a broader range of circumstances other than those specified by Florida Statutes. The Supreme Court also provided that "nothing in the statutory language of these sections expressly prohibits or even implies that these enumerated circumstances are the only instances in which a court may appoint a receiver in cases involving a non-profit condominium association."

Many associations rely on these cases to seek appointment of a court appointed receiver in an effort to derive rental income over otherwise vacant and abandoned units where, but for the appointment of a receiver, the units would continue to be a drain on the association’s financial resources.

 

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(11-26-14)

Lien Stripping, a Dirty Phrase

In Bank of America, N.A. v. Caulkett, the United States Supreme Court granted certiorari, and thus has agreed, to address whether the Bankruptcy Code permits a Chapter 7 debtor to "strip off," or void, a junior mortgage lien in its entirety when the outstanding debt owed to a senior lienholder exceeds the current value of the collateral, an issue on which the Courts of Appeal are divided.

Imagine: Your association is owed thousands of dollars from a delinquent member who has not paid their mortgage either. The lender, being "on the ball," begins to foreclose its mortgage. At some point, the board authorized an association assessment lien to be recorded against the property, too. Six to nine months later, the lender’s lawsuit is almost over. Then, without warning, the association is placed on notice that the debtor filed a Chapter 7 bankruptcy in Federal court. By operation of law, the lawsuit grinds to a screeching halt much like a racecar slamming into a concrete wall.

No further action can be taken until either the bankruptcy is discharged (the case is over) or the lender receives the express permission from the bankruptcy court to continue foreclosing the property in exchange for an agreement that the lender only seeks to acquire the delinquent member’s property and will not seek monies due and owing on the mortgage. Meanwhile, the association still has its assessment lien recorded against the property, meaning that there is still a chance the association can receive the monies it is still owed, especially if a third party purchaser acquires the property. Right? Well, not if during the bankruptcy the debtor "strips" the association’s assessment lien; a process referred to as "lien stripping."

Lien stripping occurs when the court grants a request to wipe out all liens that are inferior to a superior lien. In the association’s case, it means that if the bankruptcy court were to allow lien stripping, the association would have no chance whatsoever of recovery of back assessments due and owing which, without going out on a limb, is extremely unfair to the association. Not all bankruptcy courts permit lien stripping. Some do, and some don’t. In such cases, where Federal Circuit Courts acting in their capacity as appellate courts disagree with one another, the United States Supreme Court has the right to examine the differing lower appellate court decisions; a process referred to "certiorari."

Previously, the Supreme Court held that Section 506(d) of the Bankruptcy Code, which provides that a lien is not valid to the extent that it secures a claim against the debtor that is not an "allowed secured claim," does not allow a Chapter 7 debtor to "strip down" a mortgage lien to the current value of the collateral. This will become VERY important for reasons explained below.

On the other hand, the Eleventh Circuit (with jurisdiction over the Middle District of Alabama, Northern District of Alabama, Southern District of Alabama, Middle District of Florida, Northern District of Florida, Southern District of Florida, Middle District of Georgia, Northern District of Georgia and Southern District of Georgia) held that a Chapter 7 debtor may "strip off" a valid junior lien on the debtor’s house when the debt owed to a senior lienholder exceeds the house’s current value, relying on controlling precedent that the Eleventh Circuit believed distinguishes its decisions from the Supreme Court’s rationale. Similarly, in other cases, the bankruptcy court, in unpublished decisions, entered orders voiding wholly unsecured second priority liens on residential property owned by the Chapter 7 debtors which, in unpublished orders, the district court has affirmed.

In its petitions for certiorari to the Supreme Court, a junior lienholder argued that the Eleventh Circuit’s position is irreconcilable with the Supreme Court’s decision that the Bankruptcy Code does not allow a Chapter 7 debtor to "strip down" a mortgage lien. The petition asserted that, because the junior lienholder had valid claims for the money loaned to the debtors, the Bankruptcy Code provided no basis for the debtors to "strip off" the subject liens. Furthermore, the petition continued, the fact that a mortgage is underwater matters only to the treatment of the creditor’s claim as "secured" or "unsecured" and has no effect on the treatment of the creditor’s lien under Section 506(d) of the Bankruptcy Code.

Hopefully, the United States Supreme Court will explain that lien stripping is not permitted, keeping association liens alive after bankruptcy proceedings and thereby providing the association a better chance of collecting past due assessments!

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(11-12-14)

When Expenditures Requiring Owner Approval, Don’t

Not too long ago, Briny Beezes, Inc., a cooperative association (the "Association") sought a declaratory statement from the Division of Florida Condominiums, Timeshares, and Mobile Homes (the "Division") as to whether the Association’s Board of Directors (the "Board") could use its more than adequate reserve funds to repair a seawall to prevent flooding where the Association’s Bylaws required a majority of the membership vote to approve any expenditure greater than $30,000.00. At the heart of the Association’s request was its engineer’s opinion that the expenditure was necessary for maintenance to the seawall to prevent further flooding. The orders of the Division do not have precedential value similar to district court of appeal cases, but rather its orders are specific to the parties involved in the arbitration petition. While the petitioner in this case is a cooperative, the Division’s resulting May 31, 2013 Order remains both useful and instructive to condominiums, and due to the Order’s logic and common sense approach, perhaps also to homeowners’ associations.

The arbitrator noted that the Florida Statutes regarding cooperative associations and condominium associations provide that the Association has the power to make and collect assessments and to maintain, repair and replace the common areas. (The author notes that so do homeowners associations.) The arbitrator looked to a bankruptcy case, In re Colony Beach and Tennis Club Association, Inc., where the court held that that, "in fulfilling the duty to maintain the common elements, the board may assess members for common expenses without a vote of the unit members." It was noted that the Board’s statutory duty and authority to maintain the common elements trumps any provisions in the Association’s governing documents requiring member approval for expenditures that are necessary for maintenance. Then the arbitrator looked to state court cases.

In Tiffany Plaza Condominium Association v. Spencer, a 1982 Second District Court of Appeals case, the Court held that, "the board had the authority to authorize the construction of a rock revetment necessary to protect the common elements without the consent of unit owners." In Ralph v. Envoy Point Condominium Association, Inc., another Second District Court of Appeals case, the Court stated, "[s]imply because necessary work for maintenance may also constitute alterations or improvements does not nullify a condominium board’s authority and duty to maintain a condominium common elements." The arbitrator also noted that, as recognized in Ralph, "even if expenditures result in alterations or improvements to the common elements, it is within the board’s authority to authorize those expenditures without member approval when they are necessary to protect the common elements." Finally, the arbitrator referred to guidance from A. N. Inc. v. Seaplace Association, Inc., a 1998 Division Arbitration Order that held, "expenditures which are reasonably necessary for maintenance do not require a vote of the members."

The arbitrator wisely pointed out that "if the contemplated upgrades to the seawall constitute a material alteration to the common elements that go beyond the necessary repair to protect the common elements, the board’s decision is open to challenge an arbitration or court where the question of fact as to the extent of the changes may be determined."

PRACTICE TIP: Prior to relying on these cases, if your association requires membership approval before spending thousands on necessary repairs, the board should at least explain the situation to the members at a properly noticed membership meeting and try to obtain the membership vote in favor of the repairs. If the membership does not approve the expenditure, then the board should consult with the association’s attorney to plan the proper course of action. Under no circumstances should the board decide, on its own, to circumvent the requirements of the association’s governing documents.

 

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(10-29-14)

The Association’s Right to Access Your Unit: What You Need to Know

Did you know that, according to section 718.111(5)(a), Florida Statutes, your 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?"

In Small v. Devon Condominium B Association, Inc. (a 4th DCA case), Small, suffering from a breathing disorder, discontinued her condominium association’s optional pest control services in 2005. In 2009, the association demanded to access the unit to perform pest control services. Small refused. The association filed a petition for condominium arbitration seeking access to her unit. A default judgment was entered in favor of the association which provided it with monthly access to her unit to perform pest control services. However, a condominium arbitration order is not final and binding until 30 days have passed from the date of the arbitrator’s order.

During this 30 day period, the losing party can appeal to the circuit court for a trial "de novo", (which essentially means holding a new trial) and that is exactly what Small did. In response, the condominium association counterclaimed against her for injunctive relief, breach of contract and for a request to uphold the arbitrator’s award.

During the proceedings, the association argued that it had the irrevocable right to enter all units for necessary maintenance. In response, Small presented testimony from her physician who provided that "it would be deleterious to her health to be exposed to any chemicals." Small also questioned whether the association’s demands were "reasonable and necessary". Small’s arguments failed. The trial court’s order provided that, amongst other things, the association would have access to the unit on the third Monday of every month to perform pest control services.

Small appealed the trial court’s decision. In response, the association moved for contempt when she prevented the association from performing pest control services until she could have someone inspect the spray to be used. She continued to refuse access to her unit because her expert found that the spray was harmful to her breathing condition and that there was no evidence of insects. The Court then found Small in contempt of court. Thereafter, when Small was still not compliant, the association sought an enforcement order against her, which was decided in the association’s favor. By this time there was both an order of contempt and enforcement against Small.

Small appealed the enforcement order, but not the court’s contempt order issued against her. She argued that an issue of material fact existed as to whether the association’s demands were reasonable and necessary. The association argued that its actions were necessary and reasonable to prevent a pest infestation that may spread to the condominium’s common elements. The Court explained that for access to a unit, the association’s actions must be (1) within the association’s authority and (2) reasonable. Further, a mere "claim" of necessity is not sufficient.

The Court reversed the trial court’s enforcement order. However, the Court affirmed the contempt order because Small failed to appeal it, thereby waiving any challenge on the merits of the contempt order. Furthermore, the Court explained that "a contempt order may stand even if it is based on an erroneously entered order."

As to Small, it would have been interesting to see if her situation would have turned out differently had she made a request for a reasonable accommodation to her association’s pest control policy under the Federal Fair Housing Act.

For those readers who are members of a homeowners’ association, you can breathe a sigh of relief (pun intended). Unlike condominium associations, homeowners’ associations do not have a statutory right to access an owner’s lot. However, a homeowners’ association’s declaration of covenants may grant the association a right to access an owner’s lot, but not the home, in emergency circumstances or for purposes of undertaking an owner’s maintenance obligations on the lot in the event the owner fails to properly maintain his or her lot.

 

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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.

* * * * * * *

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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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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