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Why Condominium Associations Must Carefully Evaluate  Their Long-Standing Tenant Approval Policies

by Jacob Epstein and David Podein

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The tenant application process to a condominium association can be long, arduous, and sometimes, expensive. Associations often require that prospective tenants submit pages and pages of paperwork, undergo background and credit checks, and pay application fees. However, what information may the Association actually rely upon in making its decision to accept or deny a prospective tenant’s application? The answer is more complicated than you may think. When weighing the information discovered during the application process, the Association must consider: (i) whether the Association’s process for approving and/or rejecting prospective tenant applications complies with the Association’s governing documents and current laws; (ii) whether the evaluation criteria used by the Association will have a disparate impact on a minority group; and (iii) whether the Association can provide a prospective tenant with a specific and appropriate reason for rejection.

As a preliminary matter, the Association’s governing documents may not even grant the Association the power to approve or deny prospective tenants. Rather, such a decision may be left up solely to the unit owner/landlord. Additionally, the Association’s governing documents may or may not include the power to accept or reject a tenant for any reason or without having to provide an explanation. The Association should consult with its legal counsel before utilizing certain powers provided for in the governing documents, as sometimes, the very powers articulated in the those documents may be in violation of applicable laws.

If the Association does have tenant approval power, whatever the reason for rejecting the tenant, the Association must be prepared to explain. Miami-Dade County Ordinance Section 11A-18.1(b) requires that the Association must: (i) provide notice within 45 days of any tenant application rejection, and (ii) state, with specificity, the reason for the rejection. The Association should be prepared to provide this explanation even if the Association’s governing documents do not require the Association to do so.

Additionally, the federal Fair Housing Act¹ (more commonly referred to as the “FHA”) and Florida’s Fair Housing Act² each provide numerous protections from discrimination by housing providers, including condominium associations. Prior to denying an application, and prior to offering a “reason” for the denial, the Association must ensure compliance with these laws, the reach of which was recently expanded by the United States Supreme Court. Under the Court’s decision in Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.³, if a housing provider’s resident acceptance policy has a “disparate impact” on a minority group, such a policy would fall under the purview of FHA prohibited practices. For example, if it can be demonstrated that the Association’s reliance on a certain type of background check to reject tenant applications has a disparate impact on a minority group, the Association may open itself up to potential FHA liability.

The FHA prohibits housing providers from refusing to “otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.”⁴ Despite the FHA’s language, which provides protections for minority groups based on race, color, religion, sex, familial status, or national origin, the FHA’s reach has been expanded to protect other minority groups not specifically listed in the statute. Specifically, the Department of Housing and Urban Development has warned housing providers of potential FHA liability for denying tenant applications based on requests by individuals with disabilities to reside with assistance animals.⁵ Associations must be careful to ensure that their tenant application policy and reasons for denying tenant applications do not have a “disparate impact” on any particular race, sex, or people of any particular national origin or familial status, or for that matter, on people with disabilities.

Despite this recent expansion of the FHA’s reach, Associations retain the discretion to reject tenant applications for a variety of reasons. In the Inclusive Communities Project opinion, Justice Kennedy explained: “An important and appropriate means of ensuring that disparate-impact liability is properly limited is to give housing authorities and private developers leeway to state and explain the valid interest served by their policies.” For example, prior to the Inclusive Communities Project decision, certain federal Courts found that limiting the number of occupants in a unit can be an acceptable policy under the FHA. The Association should carefully consider its policy regarding tenant applications, specifically the criteria used by the Association in making its decisions, to ensure that “valid interests” are protected by such policy. A careful analysis – – and potential corresponding adjustment – – of the Association’s tenant acceptance policy could protect the Association should a disgruntled applicant bring a FHA claim against the Association.

It is dangerous for Associations to deny tenant applications without having a specific, justifiable basis, as such a rejection may open the Association up to potential liability. Reliance on outdated governing documents to reject “undesirable” tenants could lead to liability under the FHA and/or violation of local ordinances. Whenever a tenant application is about to be denied, the Association must be ready to provide the specific reason for the denial, with such reason having its basis in a counsel-reviewed, tenant application policy. Although nothing will completely prevent challenges by applicants and potential liability in this process, the Association should consult with legal counsel, and carefully evaluate whether any changes to its tenant application process are necessary to prevent discrimination against a minority group or to ensure compliance with applicable laws and the Association’s governing documents. Addressing any flaws in the Association’s tenant application process now may help to prevent or reduce litigation down the road.

jacob-epstein Jacob Epstein is an associate with the Miami-based law firm of Haber Slade, P.A. He concentrates his practice areas on business litigation, condominium and community association law, construction law, and real estate litigation. He can be reached at jepstein@dhaberlaw.com.

david-podein David T. Podein is a senior associate at Haber Slade. He concentrates his practice in the areas of complex commercial and business litigation, real estate leasing and construction, contract negotiations, real estate development disputes, condominium and community association law and bankruptcy litigation. He can be reached at dpodein@dhaberlaw.com.

¹ 42 U.S.C. § 3604.

² Fla. Stat. § 760.23.

³ Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S.Ct. 2507 (2015).

⁴ 42 U.S.C. § 3604(a).

⁵ See Mem. from U.S. Dept. of Hous. and Urban Dev. on Service Animals and Assistance Animals for People with Disabilities in Housing and HUD-Funded Programs, FHEO-2013-01 (April 25, 2013).

⁶ Texas Dept. of Housing and Community Affairs, 135 S.Ct. at 2522.

⁷ Mountain Side Mobile Estates Partnership v. Secretary of Hous. and Urban Dev., 56 F.3d 1243 (10th Cir. 1995); U.S. v. Weiss, 847 F. Supp. 819 (D. Nev. 1994).

FCAP Presents CFCAM Designation to Robert Johnson

From L to R: Alan Jones-Corporate Trainer, KW Management, Richard Johns-FCAP, Robert Johnson-CFCAM, KW Management, Sandy Bennett-Executive Director, Bruce Masia-Regional Manager, Robert White-Managing Director, all with KW Management.

From Left to Right: Alan Jones-Corporate Trainer, KW Property Management & Consulting, Richard Johns-FCAP, Robert Johnson-CFCAM, KW Property Management & Consulting, Sandy Bennett-Executive Director, Bruce Masia-Regional Manager, Robert White-Managing Director, all with KW Property Management & Consulting.

On Wednesday evening, April 21, FCAP presented Robert P. Johnson with his certificate of achievement for successfully completing the Certified Florida Community Association Manager curriculum. Robert joins a group of nearly 60 Community Association Managers within FCAP that hold this designation.

Mr. Johnson first began managing community associations at The Estates, an 860 unit HOA community. He later managed a couple of luxury high-rise condominiums before settling into his current position as General Manager of the luxurious Turnberry Village, a pristine 14 story condominium located in Aventura, Florida.

Robert has experienced the rewards of pursuing educational achievements along his journey. Along with being a CFCAM (Certified Florida Community Association Manager), he also has completed the educational requirements for being a CMCA (Certified Manager of Community Associations), AMS (Association Management Specialist), and a PCAM (Professional Community Association Manager). In 2013 and 2014, Robert was selected as one of the 100 Finalists for the “Manager of the Year” award, presented by Association Reserves.

The FCAP family congratulates Robert for his accomplishments and the contributions he makes to the community association industry in Florida.

FCAP Presents: CAM to CAM

Do you enjoy sharing real work experiences with other licensed CAMs?

This is your opportunity!

When: April 23rd
Where: South County Civic Center, Delray Beach, FL
Format: Roundtable discussions
Time: 7:30am – 9:30am

There will be food, door prizes, fun and fellowship.

* This event is for licensed managers only, seating is limited.

For questions contact Richard or Dana Johns.

Phone: 772-266-8539 | Email Richard | Email Dana

The Association Law Firm, PLLC Selected to Inaugural Gator100

GAINESVILLE, Fla. – The Association Law Firm, PLLC was named to the University of Florida’s inaugural 2015 Gator100 during a ceremony Feb. 6 at UF’s J. Wayne Reitz Union Grand Ballroom.

Sponsored by UF, the Warrington College of Business Administration and the Center for Entrepreneurship & Innovation (CEI), the Gator100 recognizes the 100 fastest-growing businesses owned or led by UF alumni. Ernst & Young calculated each company’s compounded annual growth rate (CAGR) over the past three years to generate the ranking.

The Association Law Firm, PLLC was highly ranked thanks to an impressive compound annual growth rate (CAGR).

The Association Law Firm is built around the core philosophy that Community Matters. This philosophy serves as the heart of the Firm’s mission to be a compassionate advocate for communities and act in support of the association by providing professional, prompt, and affordable legal assistance. Michael A. Ungerbuehler & Paul E. DeHart III have been helping community associations with their legal needs for over a decade. In 2008, they teamed up at the Association Law Firm to exclusively focus their practice on providing legal services to community associations. Their vision is simple: to offer communities in Florida a better and more affordable community association legal product. Mike and Paul both graduated from the University of Florida College of Law. They are passionate double Gators who bleed UF orange and blue.

“The Gator100 is an important initiative that recognizes entrepreneurial excellence,” said Dr. Michael Morris, the Academic Director of the entrepreneurship program at UF. “It is open to any and all companies founded or run by Gator alumni, and recognizes those who are achieving growth, innovating, and making a difference in their communities.”

To qualify for the Gator100, companies must have been in business for five years or more as of September 2014, and have had verifiable annual revenues of $100,000 or more in 2011. Additionally, a UF alumnus or alumni must have met specific leadership criteria.

“As a proud, lifetime alumni of the University of Florida, it was an honor for the Firm to be recognized with this prestigious award. Thanks to the hard work and dedication of the Team assembled at The Association Law Firm, we have not only made an impression on the Gator Nation, but also on the community association industry,” said Ungerbuehler.

View the full list of Gator100 honorees at gator100.ufl.edu.

Eyes in the Sky

by Chere Trigg / Published February 2015

Drones have been the topic of conversation for the past several years sparking privacy concerns among residential communities. In the state of Florida, Governor Rick Scott signed a bill that limits law enforcement’s use of drone aircrafts; however, that bill does not pertain to or restrict the commercial and private use of drones. The “Freedom from Unwarranted Surveillance Act,” which came into effect on July 1, 2013, allows law enforcement agencies to launch camera-carrying surveillance drones under two circumstances: if a warrant from a judge is obtained or if a person’s life or property is believed to be in im-minent danger. In 2013, the use of drones was reported by both the Miami-Dade and Orange County Sheriff’s departments, each owning two drones used solely for training purposes.

However, not all states are restricting domestic drone use. The state of North Carolina, for example, does not have a bill protecting its citizens from law enforcement agencies using drones. In fact, North Carolina’s legislation recently passed a bill giving authorities permission to use drones to photograph open-invitation gatherings without the need to obtain a warrant—even if the gathering is held on private property. That is not to say there are not regulations in place protecting citizens from peeping toms photographing someone and/or their property. The use of drones for business purposes is also prohibited. For example, photographers cannot sell photos or videos taken with a drone as drones should strictly be used for recreational purposes.

Even with all of the FAA’s rulings, the commercial and private drone industry is expected to become a multimillion dollar industry, creating numerous jobs within the next ten years. The controversial topic revolving around the right or wrong use of unmanned aircrafts has many asking, where can the line be drawn? Drones are easily accessible and are found for sale all over the Web. With laws being passed focusing only on law enforcement’s use of drones, such as Florida’s Senate Bill 92, what can be said about your neighbor flying his drone over your house or condominium unit? Is it deemed acceptable because it is a hobby? Or does your neighbor need to limit his drone flying to his property only?

Allowing the use of drones within communities could also violate the privacy rights of residents and could result in legal actions for trespassing, voyeurism, harassment, and invasion of privacy. For instance, neighboring residents could attempt to use drones to spy on other residents by viewing into windows and balconies. Further, some question whether associations may use drones to inspect units for violations without the owner’s knowledge. The questions are endless, but communities can set rules in an effort to protect their residents’ privacy. At your next association meeting, you could request to limit the flying of drones to cer-tain areas to prevent anyone in your community who may own a drone from flying it near your home, on the common areas, or from the condominium property. With the popularity of the technology and lack of restrictions, board members should even consider a ban altogether to avoid any unnecessary hassles. With prices as low as $50, it is best to put the proper restrictions in place for your community before privacy is jeopardized.

Over the course of time, we will hear of new rules and regulations regarding the use of drones, especially as technology assists in their evolution to become smaller, cheaper, and much more efficient than existing methods. Companies like Amazon are already seeking approval from the FAA in an effort to pioneer drone-delivery services. Although the use of drones could potentially revolutionize the way many existing companies operate, the bigger focus lies in the misuse of drones should they begin to trample on privacy laws.

Right from the Top

by Mike Shephard / Published January 2015

Your roof is the most important element to be installed during construction, and often it is the last item to be improved upon after installation. As events happen during the years, it is easy to forget that the roof is exposed to the environment on a daily basis. These elements wear down the most expensive part of the building structure. The old saying, “out of sight, out of mind” is an apt description to describe what often occurs when it comes to the roof. How can this be changed so the roof isn’t forgotten about?

All roofs should be inspected regularly in order to prevent a small failure from becoming a substantial failure. Inspect your roofs at least twice a year to look for ponding water, to make certain flashing details are secure, to have the roof inspected for loose tiles or shingles, and to remove any debris that could cause gutters or drains not to work properly. Have a regular maintenance program and keep the findings documented so you can budget yearly for the cost of replacing a roof. Most roofs can last longer if they are maintained, just like your car!

When the time comes for a new roof, here are a few tips that help in the process:

• Qualify your roofer.

• Must be insured and licensed in your state (your state codes might be different than others).

• Can they produce a bond?

• Run a background check and reference check.

• Set a meeting and visit their company. You must feel comfortable and confident that you are choosing the right partner in your decision.

Ask a lot of questions.

• Set the expectations from the job start to its completion and from materials to clean up. Be specific in your expectations.

Secondly, the types of roofs can be expensive. Roofing should be considered as an investment that is going to last 20 years or more. When buildings are designed, the roofing structure is chosen. The trusses are built to handle the weight of certain types of roofing choices. Often people will ask, “Can I change my shingle roof to concrete tile?” The answer is “no” because the trusses were built to handle the weight of a shingle roof, not a concrete tile roof. It is important to know the different types of roofing products and what options you may have on the different types of roofs. So, let’s put together types and cost outlines to help guide you through the process.

ROOF STRUCTURES

Low Slope Roofs

• Single ply (known as TPO and EPDM)

• Modified bitumen (common types APP & SBS)

Steep Slope Roofs

• Asphalt shingle • Steel tile

• Cement tile • Metal roof

TPO and modified bitumen roofs are mostly used on commercial buildings. They provide energy efficiency, excellent durability, and strength. Modified bitumen will be a bit more expensive. The durability is greater.

The least expensive roofing option in the steep slope roofs category is asphalt shingles. It is a good roofing system with a predictable lifespan of 15–20 years in Florida. A shingle roof can be put on any building.

The upgrade from shingles is cement tiles, which again can last 20-plus years. Concrete tiles come in many profiles and colors. They can be installed by attaching with foam adhesive or screws. Florida has many communities with cement tiles as their choice. Stone-coated steel tile is more ex-pensive than concrete, though it has virtually the same appearance. The chief advantage is that it has a much higher resistance to windstorm events. A steel tile has more fasteners per tile, and the tile itself is the primary waterproofing element of the roof. The underlayment provides only a secondary role as all the water by design stays on top of the roof tile.

Metal roofing is the most expensive of the steep slope roofs. Trending in popularity, metal roofing is not just for the commercial buildings now. Homeowners are choosing this look too! With many colors and a long life span of 20-plus years, it’s on the rise. Commercially, schools are using this for the energy efficiency and the long-lasting warranty. This is a great product without a noise issue.

Overall when selecting and investing in a roofing system, you must do your homework. Invest your time wisely in choosing your roofer and the type of roof you want on your business or home. Great success in all of these roofing systems has been seen. They have performed well in most cases and some have done better than others during our Florida hurricanes or tropical storms.

Foreclosure Rate Shows Biggest Increase Since March 2010

By Lisa Whitson

Biggest Monthly Increase Since U.S. Foreclosure Activity Peaked in March 2010;
Scheduled Foreclosure Auctions Post 24 Percent Monthly Increase, REOs up 22 Percent;
Top Five State Foreclosure Rates in Maryland, Florida, Nevada, Ohio, Illinois;

According to a monthly report released by RealtyTrac, the nation’s leading source for comprehensive housing data, Florida remains in the top 5 states for foreclosure rates and two of Florida’s MSA’s (metropolitan statistical area) have the highest number of homes or units in foreclosure; Tampa and Miami.

While the term foreclosure carries a negative connotation, attorney Frank Ruggieri with The Ruggieri Law Firm in Orlando explains that Florida being at the top of the list in number of foreclosures is not necessarily a negative statistic for the state. “Florida can and should lead the way in making some important reforms to the foreclosure process as the State continues to have one of the highest foreclosure rates in the U.S.,” says Ruggieri.

Daren Blomquist, vice president with RealtyTrac states in a press release found on the RealtyTrac website that accompanied the October report that although this is not a surprise, the biggest increase in U.S. foreclosure rates since March, 2010 is more than just a seasonal uptick as many experts have suggested. “The October foreclosure numbers are not a complete surprise given that over the past three years there has been an average 8 percent monthly uptick in scheduled foreclosure auctions in October as banks try to get ahead of the usual holiday foreclosure moratoriums,” said Blomquist, “But the sheer magnitude of the increase this year demonstrates there is more than just a seasonal pattern at work. Distressed properties that have been in a holding pattern for years are finally being cleared for landing at the foreclosure auction.”

Ruggieri agrees that the report is not surprising and goes on to share why he feels the foreclosure numbers remain high in Florida. “I believe the increased activity I have seen is mostly associated with concluding foreclosures which have sat idle for years as well as ‘secondary foreclosures’ in connection with previously modified mortgages. Banks are now more willing to take title in light of increasing property values. Homeowners who previously negotiated modifications are now, in some cases, defaulting once again,” said Ruggieri.

The RealtyTrac report goes on to discuss increased foreclosure activity according to metro areas across the country, again showing the strength of Florida’s foreclosure process. “Among the nation’s 20 largest metros, those with the five highest foreclosure rates were Miami (one in every 363 housing units with a foreclosure filing); Tampa (one in every 395 housing units); Baltimore (one in every 435 housing units); Riverside-San Bernardino in Southern California (one in every 495 housing units); and Chicago (one in every 553 housing units).”

Click here to read the October, 2014 report in its entirety.

Information for this article was provided by RealtyTrac and FCAP service provider member Frank Ruggieri with The Ruggieri Law Firm.

About RealtyTrac
RealtyTrac is a leading supplier of U.S. real estate data, with nationwide parcel-level records for more than 129 million U.S. parcels that include property characteristics, tax assessor data, sales and mortgage deed records, Automated Valuation Models (AVMs) and 20 million active and historical default, foreclosure auction and bank-owned properties. RealtyTrac’s housing data and foreclosure reports are relied on by the Federal Reserve, U.S. Treasury Department, HUD, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.

About Frank Ruggieri
Frank A. Ruggieri is the founding member of The Ruggieri Law Firm, P.A. and has practiced law for 18 years in Central Florida, 14 of which have been devoted to community associations. He concentrates his practice in the areas of community association, commercial, and general corporate law. Ruggieri has prosecuted and defended covenant violation, collection, commercial, and construction defect cases on behalf of the Firm’s community association and corporate clients.

SUBSTANTIAL COMPLIANCE WITH THE DISTRESSED CONDOMINIUM RELIEF ACT

SUBSTANTIAL COMPLIANCE WITH THE DISTRESSED CONDOMINIUM RELIEF ACT: THE NEXT BATTLEGROUND IN THE FEUD BETWEEN CONDOMINIUM BULK PURCHASERS AND ASSOCIATIONS

By David B. Haber, Esq. and Jonathan S. Goldstein, Esq.

With every year that passes since the “Distressed Condominium Relief Act” (“DCRA”)(§§718.701-708, Florida Statutes, Et. Seq.), Part VII of the Florida Condominium Act, took effect, there is the increased possibility that the novel issues that it raises will become the subject of significant and impactful legal disputes as many associations grapple with the protections and requirements for bulk purchasers of condominium units under the DCRA. The DCRA was a law enacted in 2010 to encourage bulk purchasers of distressed condominium projects, while balancing consumer protections that have long been present in the Florida Condominium Act to protect new condominium unit owners at “Turnover” — the time when control of a condominium association is transferred to the non-developer voting interests. The DCRA creates two new classes of condominium bulk purchasers, the “Bulk Buyer” and “Bulk Assignee,” each with their own level of responsibilities and protections from the assumption of Developer obligations and liabilities. The DCRA alleviated uncertainty for bulk purchasers regarding their classification and obligations, most notably whether they were a “Developer” as defined by law and whether they were obligated to provide those statutory warranties for condominium property provided by a Developer pursuant to Section 718.203(1), Florida Statutes. The DCRA typically protects Bulk Assignees from such warranties for all work not performed by or at their behest. The DCRA also protects Bulk Buyers from any and all Developer liabilities and responsibilities, including statutory warranties, not expressly assumed in writing by the Bulk Buyer.

However, Bulk Assignee status involves significant duties and responsibilities. Pursuant to Section 718.704(1), a Bulk Assignee is responsible for all duties and responsibilities of a Developer except for those duties and obligations specifically set forth in the DCRA. It remains to be interpreted whether this catch-all includes a Bulk Assignee’s responsibility for any and all actions and violations of a pre-turnover association pursuant to Section 718.301(5), Florida Statutes, and a Bulk Assignee’s obligation to indemnify an association for pre-turnover actions of the association under the control of the Bulk Assignee, pursuant to Section 718.301(6), Florida Statutes, though the language strongly suggests that this is the case.

Pursuant to Section 718.706(3)(a) and (b) of the DCRA, Bulk Assignees are required to fund mandatory reserves unless a waiver of reserves is approved by the non-Bulk Assignee controlled units. Bulk Assignees are required to provide various turnover records in a timely fashion and conduct reasonable due diligence to attempt to locate same pursuant to Section 718.705(3), Florida Statutes. Additionally, pursuant to Section 718.704(2), Florida Statutes, a Bulk Assignee that is not assigned the right to guarantee a level of assessments and fund budgetary deficits is required to pay maintenance for all of their unsold units. Bulk Assignees are also responsible for transferring control of the condominium association in the manner required by Section 718.705(2), Florida Statutes.

While Bulk Buyers are perhaps provided with fewer specified obligations in the DCRA as Bulk Assignees, Bulk Buyers still can assume liabilities and responsibilities voluntarily. Bulk Assignees and Bulk Buyers must both comply with various pre-sale disclosure and administrative filing requirements pursuant to Section 718.706, Florida Statutes, including requirements to include certain conspicuous disclosures related to their status. Pursuant to Section 718.706(4), Florida Statutes, the DCRA does not allow Bulk Assignees or Bulk Buyers to run afoul of the prohibition in Section 718.302(4), Florida Statutes, against unreasonable “Pre-Turnover” contracts entered into by the Association.

The failure to meet these respective obligations could have significant consequences upon the Bulk Assignee or Bulk Buyer’s rights to avoid Developer liabilities. Tucked into the DCRA is a provision that all associations dealing with Bulk Assignees and Bulk Buyers must take heed of, because it is a trap for the unwary Bulk Assignee or Bulk Buyer that can drastically overturn the dynamics of their obligations to the association. Specifically, section 718.705(5), Florida Statutes, states in pertinent part:
“(5) Failure of a bulk assignee or bulk buyer to substantially comply with all the requirements in this part results in the loss of any and all protections or exemptions provided under this part.”
This language refers to all of the requirements and protections or exemptions of “this part,” which seemingly refers to the DCRA as a whole.

The stakes of such substantial compliance are likely very high. Forfeiture of these DCRA exemptions and protections due to non-compliance could potentially expose a Bulk Assignee or Bulk Buyer to unexpected liability for any and all statutory warranties pursuant to §718.203(1), Florida Statute, which the DCRA would typically protect Bulk Assignees from for all work not performed by the Bulk Assignee. In addition, there are other obligations and responsibilities of Developers from which Bulk Buyers and Bulk Assignees are generally exempt, including certain financial obligations of the Developer that a Bulk Assignee or Bulk Buyer could become exposed to. This concept of “substantial compliance” with the DCRA still awaits judicial clarification, and it is likely to be the next major battleground between both types of bulk purchasers and condominium associations.

Attorneys David B. Haber and Jonathan S. Goldstein, of the Law Firm of David B. Haber, P.A., can be reached at dhaber@dhaberlaw.com and jgoldstein@dhaberlaw.com. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Consumer viewing patterns putting pressure on associations to choose the right technology

FCAP’s John Wattick with Converged Services Inc., shares why it’s important for board members and managers to monitor trends in technology and why it can even impact a board member’s fiduciary duty if left unchecked.

Consumers of all age groups are watching video on many devices and remotely. Recent surveys have shown that over 60% of the viewing audiences have at least 4 devices in their homes and want the ability to remotely enjoy video as well as have access to security systems, lights and other in-home devices.

What impact does this shift in viewing habits have on community associations? Access to services and amenities by residents is the reason association board members and management company executives should take notice of trends in technology. The service in this instance is broadband technology.

The growing number of Smart TVs, tablets, smart phones and personal computers found in homes across the country is fueling the upward trend in broadband requirements in community associations. Time spent watching digital video daily among adults 50 – 64 increased 72% in the second quarter of 2014 according to Nielsen’s Cross-Platform Q2 2014 viewing report. More than 70% of U.S. households subscribed to broadband services at the end of last year and more than half of those households surveyed have a TV connected to the internet, according to various research reports.

In addition to multiple devices used in homes, viewers are also moving in large numbers to direct streaming which pulls on an already stressed broadband delivery system in some of our existing communities. Welcome to the over-the-top era or OTT as media insiders refer to this period in consumer viewing history named for the proliferation of direct streaming services like Netflix, Hulu, and Amazon Prime. The OTT era is here and it’s not showing signs of slowing in the near future.

Researcher Joyce Wang says, “It’s been a busy couple months with numerous significant OTT announcements.” Time Warner execs finally confirmed an OTT version of HBO service to be launched in 2015. CBS is making its OTT service available in its owned-and-operated markets, and last month, Viacom officially announced a deal with Sony to license live and on-demand programming for Sony’s to-be-launched OTT service. Dish is working on its OTT package to be released by the end of the year. The Telcos (telephone companies) are looking to get a slice of the pie too, with both AT&T and Verizon execs signaling their interests in launching similar offerings.

A high-rate of subscriptions to OTT services was found among owners of streaming media players—devices like Roku, Amazon Fire and Apple TV, among others—with more than 75% of streaming media player owners subscribing to an OTT service, according to Parks Associates.

Online video streaming continues its major transgression into the consumer mainstream, with research firm Frank N. Magid Associates reporting that 83 percent of U.S. TV viewers now stream movies and TV shows, at least occasionally.

Another concern association decision makers should keep in mind is that more video content over broadband means the possibility of internet service providers (ISPs) charging for data transport. There is significant scrutiny for the first time into interconnection, analysts say. The risk of OTT depends on whether cable can or can’t price broadband in such a way to offset lost video transport revenue and the most obvious ways to recapture lost “transport revenue” are usage based pricing, surcharges on naked broadband (deeper discounts on bundles) and interconnection pricing.

OTT providers have the support of the FCC as FCC Chairman, Tom Wheeler has circulated a rulemaking proposal to give OTT providers access to programming. Wheeler announced “We have passed from an era where it was necessary to build a purpose-specific pathway to deliver video. The innovation of internet protocol (IP) has freed video from these closed pathways and single-purpose devices. Consumers have long complained about how their cable service forces them to buy channels they never watch.” Wheeler went on to say “The move of video onto the internet can do something about that frustration— but first internet video services need access to the programs.”

We are seeing this shift reflected in the numbers of broadband internet customers in the major providers’ portfolio vs their traditional video business.

Charter has about 4.15 million pay-TV customers and nearly 4.7 million broadband internet customers.
Video subscribers for Comcast now total 22.4 million. Comcast now has 21.6 million internet broadband customers.
Verizon has a total of 6.5 million Fios internet and 5.5 million Fios video connections.
Time warner has 10.8 million TV users and 11.5 million internet broadband customers.

As these trends in viewing continue it is imperative that service providers build and upgrade their architecture to handle these demands. Deeper fiber penetration to the home (FTTH), IP and Cloud technology become essential features homeowners expect in their community. Associations and management companies are beginning to experience selection when an association signs or renews their cable TV, internet and voice agreements, whether they are bulk, ROE (Right-of-Entry) or a combination.

The right-of-entry (or ROE) agreement is the legal agreement that allows the service provider to access private property for the purpose of providing broadband services to residents in a multi-dwelling unit such as a high-rise condominium.

Under a Bulk ROE agreement, the service provider provides its services to 100% of the residential units at the property, and the HOA pays a monthly bulk fee.

Under a standard ROE agreement, the service provider provides its service to any resident who subscribes to that service under a separate individual service agreement between the resident and the provider.

The chart below is significant for association board of directors and management companies as many residents are choosing communities that reflect this change in technology and delivery architecture.

As a community association board member or management company executive it is imperative to stay abreast of technology and the costs associated with providing or more importantly, not providing access to the latest in broadband services to residents and homeowners. Industry consultants like FCAP’s John Wattick at Converged Services Inc. (CSI) can work with associations to determine if their community’s existing infrastructure is sufficient to meet current and future needs. Visit CSI at www.convergedservicesinc.com for more information on technology and your community.

All Aboard Florida Makes Stop in FCAP’s Backyard

All Aboard Florida’s public forum for its express passenger rail service made a stop in Stuart Thursday night and FCAP’s Director of Business Relations, Richard Johns, was in attendance for a portion of the meeting.

According to an article published last night by the Palm Beach Post, the meeting in Stuart was one of the largest meetings to date in their public relations tour. “It was the fourth, and busiest so far, of eight draft environmental impact statement meetings for residents to learn more about the unprecedented train service from Miami to Orlando that will operate on the Florida East Coast Railway tracks,” writes Kimberly Miller.

Johns attended the meeting in an effort to gather information on the impact of All Aboard Florida on community associations along the route of the rail service which will serve Floridians from Miami to Orlando with stops in West Palm Beach and Fort Lauderdale.

The reaction in the room of over 700 residents was mixed with a majority opposing the rail service and its impact on boat traffic along waterways of Treasure Coast communities.

Those in favor of the express rail service see it as an economic boost of over $6 billion for the state’s economy.

Four public meetings remain on the All Aboard Florida environmental report tour.

Nov. 5, 3:30 – 7 p.m., Indian River State College, Richardson Hall, 6155 College Lane, Vero Beach
Nov. 6, 3:30 – 7 p.m., Port St. Lucie Civic Center, 9221 S.E. Civic Center Place, Port St Lucie
Nov. 12, 3:30 – 7 p.m., Cocoa Civic Center, 430 Delannoy Ave., Cocoa
Nov. 13, 3:30 – 7 p.m. Wyndham Orlando Resort I-Drive, 800 International Drive, Orlando