Published December 2015
Editor’s Note: For this article, FLCAJ asked several legal service providers to comment on pertinent topics that impact community associations. Below is a compilation of their helpful comments on various topics.
By Michael Chapnick
As we approach the end of 2015 and look forward to a new and eventful New Year, it’s time to once again think about our upcoming association elections. Board elections can be challenging under the best of circumstances, but there are several things that an association should be aware of to make the process run more smoothly.
First, pay attention to deadlines. Remember that condominium elections are governed strictly by Florida Statutes and the Administrative Code, which lay out exactly how elections are to be conducted, including notice requirements and balloting procedures. Homeowners associations, on the other hand, must adhere to their bylaws for how their elections are to be conducted. But remember, if the homeowners association’s documents don’t provide for notice provisions, Florida Statutes require 14 days’ notice for a membership meeting.
Next, remember that in a condominium, elections require at least 20 percent of the ballots cast. However, to hold an annual meeting, the association must meet its quorum requirements. In a homeowners association, unless the association’s governing documents specify a lower number, quorum for an annual meeting is 30 perent of the total voting interest. Remember that in a condominium, elections cannot be conducted by proxy (although a quorum can be attained with the help of proxies). In a homeowners association, a general proxy can be used for any purpose, including the election of directors, unless the association’s governing documents say otherwise. Most challenging can be getting owners to attend the meeting. Be diligent. It’s worth it.
For more information, visit www.srhl-law.com.
By Barbara Billiot Stage, Esq.
Disputes happen, especially in associations, but don’t let the way you handle the dispute escalate the issue. The two biggest sources of litigation are past due assessments and covenant violations. How your association handles these can make a huge difference in collecting money and getting voluntary compliance or spending thousands of dollars in legal fees.
My advice when communicating with homeowners is to imagine how you would react if you were the recipient of the letter and think about what the letter could say to get you to react favorably. In other words, don’t resort to insults and threats. Granted there are legal requirements, especially in those intent to lien and intent to foreclose notices, but a carefully worded letter could mean the difference between an owner writing a check or fixing their fence versus hiring an attorney to dispute the allegations or creating more work with debt validation letters or complaints to state and federal agencies.
My recommendation is to not only point out the problem in the letter, but offer a solution. Now is not the time to go on a power trip. Communicate to the owner that a written offer or payment plan will be considered or provide a point of contact for resolving a violation. Imagine the owner’s more favorable reaction reading a letter that offers a solution rather than
For more information, visit www.stagelaw.com.
For more on the issue of emotional support animals, please read the article by Haber Slade.
By Carlos Arias
In Willoughby Estates v. BankUnited, 23 Fla. L. Weekly Supp. 84a (Fla. 15th Cir. Ct. 2015) a court recently ruled against an association in a dispute over unpaid assessments where the bank failed to name and foreclose the association’s lien in its mortgage foreclosure.
BankUnited argued that although it failed to foreclose the association’s lien, it was not liable for unpaid assessments prior to acquiring title because the association’s declaration absolved it from such liability. The association countered that in order for BankUnited to benefit from the declaration’s subordination clause, BankUnited needed to join the association as a defendant in its foreclosure action.
In its ruling, the Court acknowledged the basic principle that in order for a junior lien to be wiped out as a result of a senior lien foreclosure, the senior lien holder must join the junior lien holder as a defendant to the senior lien foreclosure action and a failure to do so leaves the junior lien intact and in the same position as if no foreclosure took place. The Court then abruptly ignored this long standing tenet of foreclosure law by declaring that the tenant did not contradict the declarations provision absolving first mortgagees from liability.
There you have it folks—subordination clauses now self-execute to foreclose association liens. This serves as another reminder that every community association should have their attorney review and amend their governing documents to maximize the ability of the association to recover unpaid assessments from a purchaser at a foreclosure sale.
For more information, visit www.ABlawFL.com.
By Keith F. Backer
Florida Statute Section 720.305 concerning fining and suspensions of use rights was amended to clarify that fines or suspensions of the right to use common areas and facilities may be levied or imposed by the board of directors, not the fining committee appointed by the board. The purpose of the fining committee is now expressly stated to be limited to determining whether to confirm or reject the fine or suspension levied or imposed by the board. This amendment answers the question of whether a board of directors is obligated to levy a fine simply because the fining committee has determined that a fine should be levied. Now, since the statute clarifies that it is the board that levies the fine and that the committee’s role is simply to determine whether the fine should, in fact, be levied, that issue is definitively resolved. The statute was also amended to clarify that suspensions may not “prohibit” an owner or tenant “from having” vehicular and pedestrian ingress and egress from the parcel, including the right to park. The word “prohibit” was substituted for the words “impair the right of” in the prior version of the statute. The change of those few words provides support for the proposition that a suspension of a resdent’s transponder may be permissible provided that there is an alternative way to get to and from the parcel.
For more information, visit www.bapflaw.com.
For more on the issue of the downsides to having governing documents that are stagnant, read the article by Becker & Poliakoff.
For more on the issue of dealing with mold, read the article by Angius & Terry.
By Jeffrey Rembaum, Esq.
The dog barks and the parrot squawks. The neighbors are all complaining. What is an association to do? In dealing with any possible nuisance, the board should first decide whether or not the activity in question constitutes a “nuisance”. Bear in mind that an individual’s personal sensitivity to another’s activity is probably not a nuisance.
In the event the board determines that a nuisance is occurring, then the association should first send a letter to the offending owner alerting them to the nuisance behavior, explaining why the behavior creates a nuisance, and most importantly, the specific relief sought. The letter should be firm, but not over-the-top. Ask yourself, if you were the owner causing the nuisance behavior and received the letter from your association, would you respond in a positive manner? Remember the golden rule, to treat others as you wish to be treated.
After sending the initial letter, the dog still barks and the parrot still squawks. Now what? It is time to consider other measures such as fining and use right suspensions. Pursuant to legislation effective July 1, 2015, the board must act first. However, before a fine or suspension can be levied against the offending owner, a 14 day notice and opportunity to appear in front of the Grievance Committee must take place. If the Grievance Committee does not exactly agree with the board’s decision, then the fine or suspension may not be levied.
If the nuisance continues, another tool that is available to community associations is the filing of a lawsuit against the owner causing a nuisance. In some instances, it may be necessary for condominium associations to file an arbitration action with the Florida Division of Condominiums. For a homeowners association, before filing a lawsuit, the association must comply with mandatory mediation requirements set out in Chapter 720, Florida Statutes.
If the arbitration or mediation is not successful in curbing the nuisance behavior then it is time to seek relief by filing a lawsuit in the local Circuit Court.
For more information, visit www.kbrlegal.com.
By Ben Solomon, Esq.
The proper review and vetting of contracts is one of the greatest responsibilities a board has on behalf of its association members. Frequently such vendor contracts are for long periods of time and involve sizable financial obligations and liabilities to the association. Such contracts also frequently relate to important issues like services for the community and/or capital improvements.
As such, proposed contracts should always be carefully reviewed by the association’s attorney for legal input, including on things such as indemnity, insurance, warranties, and cancelation rights. If the vendor only submits essentially a proposal as its contract, suggest having your attorney create a standard addendum that can be added to the proposal to better protect the association instead of entirely redrafting the contract, which would be more expensive and time consuming. Boards also need to carefully review all proposed business points to make sure the same are exactly what was agreed to with the vendor, that the terms are commercially reasonable, and will properly benefit the needs of the association. Make sure such contracts also include an adequate level of detail on issues like quantities, timeframes, pricing, number of workers, and an agreed upon mechanism to modify the contract later, if needed.
Boards should also be on the lookout for renewal clauses, whereby some contracts automatically renew if not canceled in writing in advance. Avoiding auto renewals is especially important in cases where the association may have otherwise wished to cancel and/or renegotiate such contract. Finally, it is sometimes required by law, and is generally good practice anyway,
to get multiple bids from vendors to ensure the association is receiving the best possible quality and pricing on its vendor services and contracts.
For more information, visit www.algpl.com.
By Peter Cardillo
Protecting your community from termites doesn’t end with selecting a good pest control outfit to properly treat your property. Indeed, many communities at some point will have to deal with at least some termite damage. Yet most communities find out too late that the termite outfit’s pledge falls far short of fixing the problem. In other words, nearly every pest control company fights picking up the whole tab, which is why communities need two different, but curiously complementary, strategies. These are a termite company repair guarantee—or bond, as it’s sometimes called—and a property damage insurance policy.
As I’ve said, termite repair guarantees rarely result in a termite-damaged property being fully repaired. Associations often find themselves having to come out of pocket (sometimes deeply) to complete fixes. Yet you also can’t rely solely on a property insurance policy, because these almost invariably exclude termite damage. However, most property insurance policies still can be interpreted—often with the help of a knowledgeable lawyer—to include termite damage, despite the termite damage exclusion. For example, I’ve been able to successfully argue that so-called collapse provisions in property insurance contracts include termite-related damage.
It’s rare that one form of protection will do the job in terms of paying to fix your termite damage problem. So the best policy is, have both.
For more information, visit www.cardillolaw.com.
By Erik Whynot
Congratulations! Your association realized a year-end surplus. What should be done with that extra money? Who makes that determination, the board or the membership?
Ultimately, provided your governing documents do not state otherwise, the elected board of directors, both condominium associations and homeowners associations, decide what to do with a year-end surplus. The most common applications are 1) roll it into reserves, 2) roll it into a contingency or deferred maintenance line item in operating, 3) roll it into the budget to fund unanticipated expenses that occurred the prior year that will occur again, or 4) return it to the owners.
In all financial decisions, the board should be mindful of its fiduciary duty to the membership to prudently invest and manage association funds. While the handling and use of surplus is ultimately a board decision, the board should closely consult with its CPA concerning the scheduling of the year-end surplus. For example, IRS Ruling 70-604 applies to homeowner and condominium associations that file their annual tax return using Form 1120. This ruling provides that an owner vote is necessary to decide whether to roll surplus over to the following year and avoid taxation or return the surplus to the membership. There are ways around this revenue ruling such as using Form 1120-H or rolling the surplus into a capital reserve account before year-end. However, the tax implications can be complicated. The association should consult with its CPA to properly consider and implement tax planning techniques that specifically benefit your association.
For more information, visit www.LikeYourLawyer.com.