Managers Report newsletter

Budgets

With budget season approaching, Florida community associations must consider their capital expenditures and long-term maintenance needs. Community associations set aside a portion of their budgets for capital expenses and deferred maintenance, frequently referred to as “reserves.” The reserves are for expenses that do not occur on a regular basis and reserves are designed to ensure that funds will be available for repairs and maintenance without the need for special assessments. Different components will have varying useful lives; for example, a roof may have a useful life of several decades, whereas a building may require painting every few years. Community associations can either reserve, specially assess, or borrow funds to pay their capital expenditures and long-term maintenance needs. When preparing your annual budget, reserve requirements will depend on whether your association is a condominium, cooperative, or a homeowner’s association and the assets your association maintains.

Condominiums & Cooperatives

Condominiums and Cooperatives share similar concepts and reserve requirements. The Condominium Act and the Cooperative Act, and the corresponding Florida Administrative Code sections, have important nuanced differences. You should consult your Association attorney for him or her to review the relevant Act and Administrative Code sections in determining your association’s obligations when reserving for future expenses.

The Condominium Act and Cooperative Act requires that reserves include at least roof replacement, building painting, pavement resurfacing, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. The association may consider each asset separately when determining if a deferred maintenance expense or the replacement cost of an item exceeds $10,000. Alternatively, the association may group similar or related assets together. The condominium portion of the Florida Administrative Code give the example of an association that is responsible for two swimming pools, each with less than $10,000 in deferred maintenance expenses but together require more than $10,000 in deferred maintenance expenses, may establish a reserve for the pools. The reserves must be maintained in a separate account from the operating account unless they are commingled for investment purposes. In that case, the reserves must be separately accounted for in the combined account. Combining the accounts requires the Association to account for the reserves separately from the operating account and the Association must be very cautious to insure there are no mistakes in this regard.

Reserves are calculated using a formula based upon the estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item that can be found in the statutes and/or Florida Administrative Code. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item as a result of deferred maintenance. The formula must provide funds equal to the total estimated deferred maintenance expense or total estimated replacement cost for an asset or group of assets over the remaining useful life of the asset or group of assets. The formula must be based on either a separate analysis of each of the required assets, “straight-line method,” or a pooled analysis, “pooled method,” of two or more of the required assets. Associations should periodically obtain a reserve study to determine the useful life and replacement costs of its reserve items and make adjustments to its reserve funding based on changes. Both the straight-line and pooled reserve methods require setting aside funds based on the cost to repair and replace the capital assessments and remaining useful life of the assets. The projected annual cash inflows may include estimated earnings from the principal’s investment, although the reserve funding formula may not include any balloon payments. The method of calculating each is beyond the scope of this article. The association’s accountant or attorney should be consulted for questions regarding each method.

When adopting a budget, the association must send every unit owner a proposed budget, including full funding of reserves. At the members’ meeting, reserves may be waived or partially funded by a vote of the membership. Limited proxies may be used for the vote to waive or partially fund reserves and the limited proxies must conform to the form adopted by the Division of Florida Condominiums, Timeshares, and Mobile Homes. The limited proxies must include specific statutory capitalized and bold language. If a vote to waive reserves is not conducted, if the vote falls short of a majority, or a quorum is not present, the budget with full reserves goes into effect. Your governing documents may provide a different threshold to waive or partially fund reserves, so your governing documents must be referenced to determine if a different threshold must be met.

Reserve funds must be used for the purpose that they were reserved. This means there is no such thing as “borrowing” from reserves. Any use of reserves for other than the intended purpose must be approved by the membership.

Homeowners’ Associations

Unlike condominiums or cooperatives, homeowners’ associations are not required to establish reserves unless initially established by the developer or the membership of the association affirmatively elects to provide for reserves. Member approval to establish reserves requires approval from a majority of the total voting interest. When establishing reserves by a membership vote, the approval must state that reserves shall be provided for in the budget and must designate the components for which the reserve accounts are to be established. Once the membership provides for reserve accounts, future budgets must include reserve accounts unless waived or partially funded by a majority vote of the members at a meeting where a quorum is present.

If the association maintains reserves, but those reserves were not initially established by the developer or a vote of the membership, then funding of such reserves is limited to the extent that the governing documents limit increases in assessments, including reserves. The annual budget may include reserves that are not required by staute.

Computation of the reserve accounts may be either via a pooled or straight-line method similar to that used by condominium and cooperative associations. If the developer initially established reserves or the membership elected to establish reserves, the reserves must be funded unless a majority of the members present at a members’ meeting votes to waive or partially fund.

If reserves were not initially established by the developer or by a vote of the membership and the association maintains improvements that may result in a special assessment if reserves are not provided, the association must include in its financial report the language mandated by Section 720.303(6)(c)1, Florida Statutes. Additionally, if the association maintains reserves, but those reserves were not initially established by the developer or by a vote of the membership, then the association must include in its financial report the language mandated by Section 720.303(6)(c)2, Florida Statutes.

Marielle E. Westerman

Michael​ Casanover

Attorney at Law, Becker
Ft. Lauderdale | bio

Association Loans/Lines of Credit

In this time of growing financial crises, associations are increasingly considering loans/lines of credit in order to have sufficient cashflow in the event of  budget shortfalls caused by increasing delinquencies or in order to pay for projects that cannot be funded through the operating budget alone but cannot be postponed.

In considering loan/line of credit terms as well as structuring repayment options for owners, associations must be aware of documentary limitations on borrowing and owner assessments as well as legal limitations on borrowing and owner assessments.

Loan/Line of Credit Terms

Associations must be aware of typical loan terms that can run afoul of common provisions in association documents if not handled properly. Such typical terms include the pledging of reserves, real property, personal property, and insurance payments.  In many instances, the inclusion of such terms requires membership approval rather than board approval alone by statute. For instance, the pledging of statutory reserves requires the same approval of the membership as is needed for using reserves for a purpose other than the specified purpose of the reserve account(s).   the Boards must also be aware that the governing documents can restrict the right to borrow money in ways different than the statutes, and such limitations must be addressed.

Repayment Options

In obtaining a loan/line of credit, the repayment of same must always be a consideration. Typical repayment options involve special assessments or the inclusion of payments in future operating budgets. Consideration must be given to the financial climate that is likely during the term of the loan/line of credit. For instance, if during the life of the loan/line of credit, financial instability or crises is likely, then the association needs to plan for the possibility that units/homes may go into foreclosure.  In such a circumstance, if the association has levied a special assessment, the payment obligation to pay the special assessment could be wiped out in the event of a bank foreclosure. Care must be taken to draft special assessments so as to avoid such a scenario.

In terms of repayment of a special assessment, the following cases are relevant. In a 2003 “Declaratory Statement” entitled In Re: Petition For Declaratory Statement, Walter Grover, Unit Owner, Portofino Condominium Apartments of Pompano Beach, Inc., DBPR Final Order No. BPR-2003-02688 (November 15, 2003) was issued. In this matter, the condominium association levied a special assessment and adopted a payment plan. It was determined that it was permissible for a condominium association to permit some owners to prepay a special assessment levied by the Board, while other owners paid over time at a stated rate of interest, where all of the owners were given the same option to either pay a lump sum or to pay in installments. Accordingly, to the extent that an association desires to levy a special assessment in connection with a loan, this statement would stand for the proposition that an association can give the owners the option to either pay up front or over time at the stated interest rate. It should be noted, however, that Declaratory Statements are, as a matter of law, only binding between the parties involved. However, they are at least persuasive authority as to the interpretation of the law from the state agency which has jurisdiction to enforce the condominium laws. However, these pronouncements are not “the law” in the same manner as specific statements in the statutes nor rulings from appellate courts. The second case that is problematic for association is a Fourth District Court of Appeals case entitled Gallagher v. Seagate of Gulf Stream Condominium Ass’n, Inc., 423 So.2d 640 (Fla. 4th DCA 1983). In the Seagate case, the lessor of a recreation lease offered an optional buyout proposal to all unit owners. The non-purchasing unit owners were then assessed a reduced monthly rent and purchasing unit owners were not assessed any portion of the rent. Because the Condominium Act provides that rent on a recreation lease is a common expense, and because common expenses are shared by all unit owners, the Court concluded that excusing one unit owner from payment of his share of the common expenses violated the statute unless all owners were likewise excused from payment. This case could be argued for the proposition that excusing any unit owners from their payment of interest is likewise unlawful.

Lastly, some associations desire to include a “due of sale” provision as to the payment of special assessments. Such a provision is likely not enforceable as it would create two different assessment collection categories which would likely be in conflict with the statutes and most governing documents. It is not to say, a “due on sale” provision of a special assessment would always be invalid but such provisions must be thoroughly reviewed by counsel.

In many instances, if possible, the inclusion of repayment of a loan/line of credit is best handled through inclusion in the regular annual budget of the association. This is so, because the pitfalls and risks of special assessments as to subsequent title holders is reduced since only the past assessments are, in some cases, limited or extinguished through mortgage foreclosure.

Conclusion

In this climate of fast changing economic conditions, associations must thoroughly consider the options available for financing their needs and how they can repay such obligations in order to best position themselves for financial stability.

Marielle E. Westerman

Marielle E. Westerman

Community Association Law, Becker
Tampa | bio

Not All Approaches are “Created Equal” When Getting Rid of Old Discriminatory Covenants

One of the most important and valuable aspects of a property owners’ rights is that owner’s ability to market and sell their property and to do so free from the fear of “hidden” or outdated restrictions or claims which may have previously burdened their property. What to do when a person raises a claim of a 50-year old unrecorded and unused easement agreement between neighbors executed by way of a “gentleman’s handshake”?  Or, what about the long lost great-grandnephew who arrives home from sea with an unrecorded quit claim deed to the property executed and delivered to him personally by his deceased beloved aunt 40 years earlier?  Chapter 712, Florida Statutes, or the “Marketable Record Title Act” (“MRTA”), was first introduced by the Florida Legislature in 1963 with the goal of protecting owners from certain types of stale and undocumented claims against property which are more than 30 years old from the property’s “root of title” (ie: deed).   Since its introduction, the application of MRTA in helping to clear title to property by automatically extinguishing potentially troublesome real estate claims has done much to provide stability and peace of mind to buyers and sellers alike. (Not to mention the cost and time savings for title companies in conducting and reviewing a 30-year title search as opposed to a 100-year title search!)

For years, state legislatures have struggled with balancing the need to protect an individual’s valid property rights while facilitating the removal of outdated, irrelevant and potentially illegal burdens or claims which undermine the free transfer of property.  This year, the Florida Legislature passed a comprehensive housing anti-discrimination bill (SB 374), which, among other changes, seeks to simplify the state-level administrative process for persons affected by housing discrimination.  In addition to removing the requirement that persons alleging housing discrimination must first exhaust their administrative remedies prior to filing a lawsuit for the same in state court, this bill also specifically amends the provisions of Chapter 712 to automatically extinguish any “discriminatory restriction,” defined to mean  “a provision in a title transaction […] that restricts the ownership, occupancy, or use of any real property in this state by any natural person on the basis of a characteristic that has been held  […] by the United States Supreme Court or the Florida Supreme Court be protected against discrimination under the Fourteenth Amendment [to the US Constitution] or under s. 2 Art. I of the State Constitution, including race, color, national origin, religion, gender or physical disability.”

Unfortunately, the existence and influence of discriminatory use restrictions in real estate transactions were at one time common place, not just in the Florida but throughout the country. For example, the 1948 United States Supreme Court case, Shelley v. Kraemer, 334 U.S. 1 (1948), involved the attempted and unsuccessful purchase of a home by an African American couple in St. Louis, Missouri, in which a neighboring property owner sued to enforce a 1911 race-based restrictive covenant which specifically prevented purchase of the property by “people of the Negro or Mongolian Race.”  In that case, the U.S. Supreme Court found that any state court action to enforce such a blatantly discriminatory restriction was in violation of the Equal Protection Clause under the Fourteenth Amendment of the U.S. Constitution.  

The Shelley case made it clear that state courts cannot enforce discriminatory covenants, however, the case did not go so far as to invalidate the existence of discriminatory covenants in the first place.  In other words, even after the Shelley case, community associations and individual neighbors (in lieu of a community association) were still free to create, impose and abide by such discriminatory restrictions, as long as they did not bring a claim to enforce those restrictions in a state court.   Although rare, the reminders and remnants of this period in American history are still evidenced today.  More specifically, some older associations may have provisions in their Declaration or other governing documents which contain obviously discriminatory restrictions based upon a person’s racial, national, ethnic, or religious identification.  To the extent that these restrictions exist in an association’s governing documents, even if they are not enforced, it leaves an association open to liability for claims of discrimination under the Federal and Florida Fair Housing Acts.

The intention of the proposed amendments to Chapter 712 are commendable and long overdue. However, legislators must be careful not to “throw the baby out with the bath water.”  In other words, the attempt to deal with the rare instances in which these discriminatory restrictions still exist should not have the affect of invalidating other restrictions which may be objective, yet unintentionally discriminatory. For example, does a declaration provision restricting holiday decorations to a particular time frame or holiday season diminish or infringe upon a person’s equal protection rights based upon their religion if that person wants to maintain Christmas decorations year-round?  Or is a pet restriction which prohibits or limits the number of pets a person may have in their unit, automatically subject to extinguishment under MRTA because, on its face, the restriction discriminates against a disabled person claiming to need a service or emotional support animal?

Other states have taken more narrowly tailored approaches to address old restrictions which are blatantly discriminatory. For example, in California, a restriction is found to be discriminatory and thus void as a matter of law after notice, review and confirmation by the county attorney.  In Washington state, the law includes a specific list of examples within the statute of potentially discriminatory provisions which are considered void.   The language of SB 374 as passed provides neither a preliminary or subsequent objective review process, by a court or county attorney, nor a list of examples which would help identify or more specifically define a “discriminatory restriction” which would be subject to automatic extinguishment under the new MRTA provisions.  A more narrowly tailored approach would help curb potentially disingenuous claims from owners that an otherwise legitimate and reasonable restriction is “discriminatory” just because it in some way restricts that owner’s use of their property.  Without further direction from the legislature in the first instance as to the type of provisions that are considered “discriminatory,” an Association’s Board is left to wonder whether they may be enforcing a provision that may ultimately be challenged as “discriminatory” and thus void and unenforceable under MRTA.

 

Shayla J. Mount

Attorney at Law, Becker
Orlando | bio

 

PLEASE NOTE:  THE COMMENTS IN THIS ARTICLE MAY REQUIRE MODIFICATION DUE TO THE FAST MOVING EVENTS IN REGARD TO THE COVID-19 OUTBREAK.  NEW DIRECTIVES AND ORDERS ARE BEING ISSUED ON THE FEDERAL, STATE AND LOCAL LEVEL DAILY.  PLEASE CONISDER THE MOST RECENTLY AVAILABLE INFORMATION WHEN REVIEWING THE BELOW ARTICLE.

 PLEASE CONTACT YOUR ASSOCIATION ATTORNEY IN REGARD TO ACTIONS TAKEN IN REGARD TO AN ASSOCIATION’S EMERGENCY POWERS AND OTHER ACTIONS IN THE INTERESTS OF THE HEALTH, SAFETY AND WELFARE OF ASSOCIATION RESIDENTS.

Our society is facing a unique threat from the SARS-CoV-2, better known as the Covid-19 outbreak, and community associations are on the forefront. Community association boards are questioning what they can do, what they should do, and what can’t they do. The Condominium Act, Cooperative Act, and Homeowners’ Association Act provides certain emergency powers under certain conditions (see Sections 718.1265, 719.128, and 720.316, Florida Statutes). The President, Governor and multiple local municipalities have issued emergency declarations, so there is no question that a state of emergency exists. While the community association emergency powers were created in anticipation of a hurricane, many of the emergency powers apply to an infectious disease outbreak and the Director of the Division of Condominiums, Timeshares, and Mobile Homes has confirmed that Boards may utilize their statutory emergency powers pursuant to the Governor’s Emergency Orders.

The emergency powers allow meetings with reduced noticed and allow notice by any practicable manner, including publication, radio, United States mail, the Internet, public service announcements, and conspicuous posting on the condominium property or any other means the board deems reasonable under the circumstances. Additionally, an association may cancel or reschedule any meeting, name non-directors as assistant officers who shall have the same authority as the officers during the state of emergency. Associations may levy a special assessment without an owner vote. Based upon the advice of emergency management officials, an association may determine any portion of the property is unavailable for entry or occupancy by unit owners, family members, tenants, guests, agents, or invitees to protect the health, safety, or welfare of such persons. However, the association may not restrict owners from their units or parcels.

In the event of an infectious disease outbreak, nearly everyone has heard the term “social distancing,” but how does that term relate to the operation of a community association? Associations should take proactive measures to limit the gathering of large groups of people. Associations should cancel meetings unless the meeting is required to take emergency action, and then to the extent possible, attendance by the board and membership should be made available through telephone or teleconferencing. If the community association must conduct an election, the board should allow and encourage electronic voting. To the extent that physical ballots are necessary, the board should make remote viewing of the counting available by live video feed if possible. Large gatherings can be further limited by canceling social events, including common element or area rentals by owners who conduct social gatherings, and closing common area recreational facilities such and a clubhouse, community gym, and community dining. Elections or meetings may be held outdoors to limit the number of persons in a particular room and to facilitate social distancing.

Your association must consider the health and welfare of its staff and employees. The association should consider granting employees additional emergency paid time off. While not required to grant such paid time off, unless required by contract, the association should weigh the potential cost verse the risk of a sick employee showing up for work out of fear of missing pay. In light of the risk-reward, many associations may find the additional cost well worth the benefit and peace of mind provided to the whole community. Your association should seek to limit physical contact not only between the residents but also the residents and the staff. The association should consider closing the management office and requiring appointments with the manager and conducting appointments by via telephone or teleconferencing whenever possible.

It is likely associations cannot prohibit owners and their guests from visiting or occupying a unit or parcel, although, you should consult with your attorney regarding what limits can be placed on guests or visitors. Your association can implement specific procedures and limit the number of persons in a common areas or elevators, providing hand washing or hand sanitizer stations in high traffic areas. The association should also consider suspending or postponing optional maintenance or repairs to limit the number of persons visiting the property. The association may also place reasonable restrictions on the owner’s contractors. The board should analyze its current situation to evaluate what measures are necessary to protect persons at the property and continually reevaluate its measures to determine the needs of the community. The association can work with its attorney to determine how best to implement rules and procedures to accomplish the association’s needs.

Keeping your property clean is important during normal times but is imperative during an infectious disease outbreak. The Center for Disease Control and the Florida Department of Health has published recommendations for cleaning and disinfecting common facilities, and your association should consult those resources. Your Association should continually review recommendations by the Centers for Diseases Control and the Florida Department of Health.

What Do I do If An Infected Person Resides Or Has Visited My Community?

A major infectious disease outbreak, such as Covid-19, has not occurred since the adoption of the community association concept, so associations are navigating uncharted waters. If the association becomes aware that an infected person resides or has visited the property, the association will ask, do we tell the residents, and do we disclose the name of the infected person. While there is no guidance from the Division, Florida Statutes, or case law, an association should make its residents aware of the infection so that its residents may exercise caution. However, the association should not disclose the identity of the infected person without that persons written approval. While an association may be concerned that persons in contact with the infected person may need to know as to allow themselves to take appropriate measures, your association should be cognizant that disclosing the identity of the infected person may lead to stigmatizing that person or other negative consequences. If your association becomes aware of an infected resident, the association should notify the Florida Department of Health, or other relevant government authority, to apprise it of the situation. The association should heed the advice and instruction of the Florida Department of Health or other government authority. Discuss any situations regarding cases of the virus in your association with your association attorney.

Infectious diseases and its fallout is a novel challenge for Florida community associations. Your association should keep itself apprised of best practices and advice disseminated from the Florida Department of Health, Centers for Disease Control, or other pertinent authority. Additionally, Becker maintains a free website to aggregate information relevant to Covid-19 at https://beckerlawyers.com/covid-19/ I encourage all community associations to visit the website for the latest information and developments for Covid-19 information relating to the community association. As you have heard many times keep WASHING YOUR HANDS!

 

Howard J. Perl, Esq.

Shareholder, Becker
Fort Lauderdale | bio

 

No Time Limit to Record Amendments

Q After the unit owners in a condominium association vote to approve an amendment, is there a time limit or deadline by which the amendment must be recorded with the county? (M.A. via e-mail)

A Chapter 718 of the Florida Statutes, known as the Florida Condominium Act, extensively regulates amendments to condominium documents. However, the Act does not contain a specific deadline for when properly adopted amendments to the condominium documents must be recorded.

Section 718.110(3) of the Act states that amendments to the declaration are effective when properly recorded in the public records of the county where the declaration is recorded. Similarly, Section 718.112(1)(b) of the Act states that amendments to the articles of incorporation or bylaws are not valid unless recorded in the public records of the county where the declaration of condominium is recorded. Further, Chapter 617, the Florida Not For Profit Corporation Act, provides that amendments to the articles of incorporation must be filed in the office of the Department of State.

In my opinion, the recording of such amendments is a ministerial act that the board would be required to undertake within a reasonable time of the approval of the amendment. While there is room debate what is reasonable, I would say absent unusual circumstances (such as an intervening legal challenge or some after-discovered error), 30 days from approval would be a reasonable time frame.

However, there is also no specific prohibition in the statute preventing an association from recording an amendment long after the owner vote. I occasionally see situations where an association failed to record an amendment due to changes in the board or management or other circumstances, and records an amendment a year or longer after its approval. This is obviously not an ideal situation since you might have new owners who did not get a chance to vote on the amendment and who could claim that they bought there unit based on what was in the public records.

Q Can you explain what a “material alteration” is? We have a constant argument in our condominium association, usually driven by one particular owner, over what the board can and cannot do. (J.F., via e-mail)

A This is one of the most common areas of disputes in condominiums. As you probably know, Section 718.113(2) of the Florida Condominium Act provides that there can be no material alterations or substantial additions to the common elements except as authorized by the declaration of condominium. If the declaration is silent, then 75 percent of all voting interests must approve the alteration or addition (there is usually one voting interest per unit).

The standard still used by the courts today comes from a decision from a Florida appeals court rendered almost 50 years ago. In ruling that a unit owner’s closing in a screened lanai with windows was a material alteration, the court stated that the term means “to palpably or perceptively vary or change the form, shape, elements or specifications of a building from its original design, or current condition, in such a manner as to appreciably affect or influence its function, use or appearance.” Using this test, appellate courts have ruled that changing the exterior color scheme of condominium buildings is a material alteration, as is changing mansard roof shingles made of cedar to tile type shingles.

As with most rules, there are exceptions, one being the so-called “necessary maintenance exception,” which originates from a series of appellate court cases from the Second District Court of Appeals (which includes southwest Florida). These cases basically say that certain changes can be made without and owner vote when necessary to comply with law or when necessary for the proper maintenance and preservation of the condominium property.

 

Joseph E. Adams

Office Managing Shareholder, Becker
Fort Myers | bio

 

Special Assessments in Condo

Special assessments happen. The unfortunate reality is that during the life of a condominium building some unexpected expenses are going to arise and the association must take steps to fulfill its obligations to the membership.  If the operating budget cannot handle these expenses, and there is not a funded reserve account which can dray the cost, then it is likely that a special assessment will need to be levied.  In Florida, there is a right way and a wrong way to levy special assessments. Levying a special assessment without following the proper procedures could end up costing the association unneeded legal expenses and heartburn; SO DO IT RIGHT THE FIRST TIME!

Levying a special assessment in Florida requires knowledge of certain provisions of the Condominium Act (Chapter 718, Florida Statutes) and your association’s governing documents.  Section 718.112(2)(c)1, Florida Statutes, provides (in material part)

…written notice of any meeting at which nonemergency special assessments, or at which amendment to rules regarding unit use, will be considered must be mailed, delivered, or electronically transmitted to the unit owners and posted conspicuously on the condominium property at least 14 days before the meeting. Evidence of compliance with this 14-day notice requirement must be made by an affidavit executed by the person providing the notice and filed with the official records of the association….Notice of any meeting in which regular or special assessments against unit owners are to be considered for any reason must specifically state that assessments will be considered and provide the nature, estimated cost, and description of the purposes for such assessments.

Breaking down that statutory language amounts to the association having to take the following actions to properly notice a meeting where special assessments will be considered (1) notice of the proposed meeting must be sent to all owners not less than 14 days prior to the meeting; (2) the notice must also be posted in a conspicuous place on the condominium property not less than 14 days prior to the meeting; (3) the notice must explain what the special assessment will be used for and the amount of the expected special assessment; and (4) the person who mailed or delivered the notice to the owners must execute an affidavit which attests to the fact that the notices were mailed or delivered to all owners and the date that the notices were sent.

It is very likely that your association’s governing documents also address special assessments.  It is important to know whether the board of directors has the sole authority to levy special assessments or whether the membership has to approve special assessments.  Regardless of whether the board or the membership approves the levying of special assessments, the notice procedure stated above must be met.  The board of directors needs to be sure that there are no additional procedural measures that the must be followed when special assessments are being considered.  Usually, but not always, any additional measures will be located within the association’s bylaws.

A critically vital, yet often overlooked, aspect of the special assessment levying process is making sure the special assessment purpose is a proper common expense.  Proper common expenses are defined in Section 718.115, Florida Statutes, but can, and usually are, defined within the association’s governing documents.  It is important to review the governing documents prior to embarking on the special assessment path to ensure that what the association would like to raise the funds for is appropriate (if it is not, an amendment to the governing documents may be required prior to levying the special assessment).

If attention is not properly given to the issues discussed in this article, negative consequence may occur.  These consequences may include unit owners refusing to pay the special assessment because they claim that the association did not follow the proper procedure for levying the special assessment or that the special assessment was not levied for a proper common purpose.  Either argument could lead to costly litigation.  Also, many associations use special assessments as collateral for loans taken from institutional lenders.  Those lenders will very likely require the association’s attorney to verify in writing that the special assessment was properly levied, which he or she will refuse to do unless/until the special assessment is properly adopted.

Hopefully special assessments are rare due to prudent financial planning by the association during the budget process.  Ensuring that the association takes the proper steps to levy a special assessment the first time will ease the headache, stress, and cost associated with having to deal with those owners who refuse to pay or lending institutions which require the special assessment lien rights as collateral for a loan to the association.

 

Jay Roberts

Shareholder, Becker
Ft. Walton Beach | bio

 

HUD’s Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records: Where Do We Stand?

A client recently came to me about amending the declaration of the homeowner’s association to prohibit certain specific violent felons, and, in particular, sexual predators from residing in the association. The client posed the question as to whether the proposed amendment would be discriminatory since they had heard that the use of criminal background checks was no longer allowed. The client’s question rose from HUD’s Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records which was issued in April of 2016.

The guidance stated that “[b]ecause 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.” Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions, https://www.hud.gov/sites/documents/HUD_OGCGUIDAPPFHASTANDCR.PDF, April 4, 2016.   

It is important to note that the HUD guidance was issued under the Obama administration. Under the current administration, the Department of Justice, which can enforce the Fair Housing Act in court, does not appear to have focused its enforcement efforts on the guidance as evidenced by the lack of any significant number of cases on the issue. It is also important to understand that the guidance is not law. Rather, it is “an interpretive rule” which clarifies how disparate impact claims  . . . apply to situations where a housing provider takes an adverse action based on an individual’s criminal history.”  Connecticut Fair Hous. Ctr. v. Corelogic Rental Prop. Sols., LLC, 369 F. Supp. 3d 362, 371 (D. Conn. 2019) citing Jackson v. Tryon Park Apartments, Inc., 2019 WL 331635, (W.D.N.Y. Jan. 25, 2019). 

In terms of creating occupancy restrictions related to criminal activity, the following excerpt of the guidance is important:

“In most instances, a record of conviction (as opposed to an arrest) will serve as sufficient evidence to prove that an individual engaged in criminal conduct.29 But housing providers that apply a policy or practice that excludes persons with prior convictions must still be able to prove that such policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest. A housing provider that imposes a blanket prohibition on any person with any conviction record – no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then – will be unable to meet this burden.

***

A housing provider with a more tailored policy or practice that excludes individuals with only certain types of convictions must still prove that its policy is necessary to serve a “substantial, legitimate, nondiscriminatory interest.” To do this, a housing provider must show that its policy accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.” Id.

In a brief that was filed in October of 2016 in a Fair Housing case, the Department of Justice wrote that “[a]lthough the FHA does not forbid housing providers from considering applicants’ criminal records, it does require that providers do so in a way to avoid overbroad generalizations that disproportionately disqualify people based on a characteristic protected by the statute, such as race or national origin. To that end, the FHA bars criminal records bans that have a disparate impact on applicants based on race or national origin unless they are supported by a legally sufficient justification.” The DOJ went on the write that “[a]lthough maintaining safety and security at a property is an important duty for housing providers, simply invoking the need to ensure “safety” or “security” cannot justify a screening policy that categorically excludes any tenant who has a criminal conviction. A ban on tenants with convictions without consideration of factors like the conviction’s nature, severity, and recency is over-inclusive and lacks any principled way to assess who, if anyone, poses a risk to safety or security in the property.” United States of America’s Statement of Interest, The Fortune Society, Inc. v. Sandcastle Towers Housing Development Fund Corp.  (E.D. N.Y. 2016).  

In a recent case involving this topic, the court found that “[t]here is no evidence that the PHA’s criminal history policy violates state or federal fair housing laws or the Constitution.” The policy at issue in this case was a provision which stated “[a]n applicant would be mandatorily denied if:

Any household member has been convicted of a homicide-related offense, i.e. the killing of one human being by another. This includes murder, manslaughter (voluntary or involuntary), and conspiracy to commit murder. Mandatory denial is required if the homicide related conviction is within the time frames, as described in Appendix D.” Hall v. Philadelphia Hous. Auth., 2019 WL 1545183  (E.D. Pa. 2019).

In another case, involving an individual that was convicted of rape, the court found that “[t]he exclusion of applicants with criminal records exhibiting previous violent conduct is rationally related to this goal. Indeed, the Fair Housing Act states that an individual may refuse to rent to an applicant that would pose a health or safety risk. 42 U.S.C. § 3604(f)(9). Talley v. Lane, 13 F.3d 1031 (7th Cir. 1994).

The takeaway from the guidance and cases is that it remains possible to restrict occupancy in associations based on criminal activity but, critically, in order to have an occupancy restriction based on criminal activity, the restriction must only restrict based on criminal convictions, be limited to specific crimes that reasonably bear on the purpose of an association in “promot[ing] the health, happiness, and peace of mind[1]” of the residents of the association and that takes into account the nature, severity and time since the conviction.

” = “3” “” “” ACTIVE 13324691v.1

[1]  Hidden Harbour Estates, Inc. v. Norman, 309 So. 2d 180, 182 (Fla. 4th DCA 1975).

[1]  Hidden Harbour Estates, Inc. v. Norman, 309 So. 2d 180, 182 (Fla. 4th DCA 1975).

 

Marielle E. Westerman

Marielle E. Westerman

Community Association Law, Becker
Tampa | bio

 

Golf Carts and Your Community

Golf Carts and Your Community

Golf Carts, in addition to the obvious use on the golf course, are increasingly being used for short-distance trips in communities as an alternative to the family car, for example, carrying children and pets from home to the club house or recreation center. Golf Carts share an Association’s common element roads with other motor vehicles, bicycles, pedestrians and animals, creating the potential for liability for an Association. Whether or not to allow Golf Carts and how best to regulate them is a decision faced by Associations with increasing frequency. Consequently, Associations are faced with questions such as whether Golf Carts can be operated on private roads in Associations, what laws govern Golf Cart use, and how an Association should regulate and create policy to control the use of Golf Carts in the community. 

Florida law allows Golf Carts to be operated on private roads, subject to the Association’s restrictions and other applicable governing laws. Associations which choose to allow them should implement rules and regulations for their use, including registration with the Association; proof of insurance which names the Association as an additional insured; and mandatory, signed liability waivers for the Association. Importantly, the insurance agent for the Association should be consulted and made aware that Golf Carts are allowed in the community so the Association can be properly protected with appropriate insurance coverage.

In considering and creating a use policy for Golf Carts it is important to understand some of the Florida laws which regulate them. 

Florida law defines a “Golf Cart” as “a motor vehicle that is designed and manufactured for operation on a golf course for sporting or recreational purposes and that is not capable of exceeding speeds of 20 miles per hour.”[1] A Golf Cart driver does not have to have a driver’s license, [2] but must be at least 14 years old to drive on certain public roadways.[3]

A “Motor Vehicle” is defined as “[e]xcept when used in s. 316.1001, a self-propelled vehicle not operated upon rails or guideway, but not including any bicycle, motorized scooter, electric personal assistive mobility device, mobile carrier, personal delivery device, swamp buggy, or moped. For purposes of s. 316.1001, motor vehicle has the same meaning as provided in s. 320.01(1)(a).”[4]  A Golf Cart is a motorized vehicle. 

An “electric vehicle” is defined as a “a motor vehicle that is powered by an electric motor that draws current from rechargeable storage batteries, fuel cells, or other sources of electrical current.” Accordingly, a golf cart running on a rechargeable battery is a type of electric vehicle but not all electric vehicles are golf carts or low-speed vehicles (i.e., those that exceed 20 mph are electric vehicles but not golf carts).[5]

A “Low-Speed Vehicle” is any four-wheeled vehicle whose top speed is greater than 20 miles per hour but not greater than 25 miles per hour, including, but not limited to, neighborhood electric vehicles. Low-speed vehicles must comply with the safety standards set forth in Chapter 49, Code of Federal Regulations and Sections 571.500, 316.2122.[6]  Per Florida law, “a low-speed vehicle must be equipped with headlamps, stop lamps, turn signal lamps, taillamps, reflex reflectors, parking brakes, rearview mirrors, windshields, seat belts, and vehicle identification numbers; must be registered and insured in accordance with Florida Statute 320.02, and titled pursuant to chapter 319; [and] any person operating a low-speed vehicle … must have in his or her possession a valid driver license,”[7] meaning, typically, that the driver must be at least 16 years old.

Golf Carts are vehicles which are designed to not be capable of exceeding 20 miles per hour; therefore, a golf cart is not a low speed vehicle because low speed vehicles have top speeds greater than 20 miles per hour.

A “Utility Vehicle” means a motor vehicle designed and manufactured for general maintenance, security, and landscaping purposes, but the term does not include any vehicle designed or used primarily for the transportation of persons or property on a street or highway, or a golf cart, or an all-terrain vehicle as defined in s. 316.2074.[8] (Emphasis added).  Golf Carts are not utility vehicles because Florida law excludes golf carts from the utility vehicle definition.

A “Recreational Vehicle,” (a/k/a an “RV”), is a “recreational vehicle-type unit primarily designed as temporary living quarters for recreational, camping, or travel use, which either has its own motive power or is mounted on or drawn by another vehicle . . .  As defined below, the basic entities are: . . “travel trailer,” . . . “camping trailer,” . . .“truck camper,” . . . “motor home,” . . . “private motor coach,” . . .“van conversion,” . . .“park trailer,”. . .“fifth-wheel trailer,” . . . .[9]  Golf carts are not recreational vehicles because Florida law defines each type of recreational vehicle separately from the golf cart definition.

Many Associations are surprised to find that Florida law states that any person operating a Golf Cart as defined above, is exempt from obtaining a driver license.[10] Accordingly, Golf Carts can be operated without the requirement of a driver’s license or insurance. However, there is a minimum age requirement.  Golf Carts may not be operated on public roads or streets by any person under the age of 14.[11]  Additionally, Florida law restricts operation of Golf Carts to the hours between sunrise and sunset, and requires Golf Carts to be “equipped with efficient brakes, reliable steering apparatus, safe tires, a rearview mirror, and red reflectorized warning devices in both the front and rear.”[12] 

Operation of golf carts on state and county roads that have been designated for use by golf cart and on self-contained retirement communities is allowed.[13] Many associations have internal roadways which are generally privately-owned roads. Pursuant to Florida law an Association can implement provisions to regulate its internal roadways in the case where the internal roadways are common elements, and the Association has granted its owners a perpetual, non-exclusive access easement over, across, and through the internal roadways.  Golf Carts may operate on private roads subject to any applicable state and federal law, and if there are no Association restrictions prohibiting such operation. 

In the case of condominiums, “condominium property” is defined as the lands, leaseholds, and personal property that are subjected to condominium ownership, whether or not contiguous, and all improvements thereon and all easements and rights appurtenant thereto intended for use in connection with the condominium.”[14] Unit owners own an undivided share of the common elements, i.e., “portions of the condominium property not included in the units.”[15] (Emphasis added).

Accordingly, a condominium association is permitted to promulgate reasonable rules and regulations pertaining to the use of the common elements, common areas, and recreational facilities.[16] Use of that property is subject only to the provisions in the declaration and to those rules and regulations adopted by the association.[17] (Emphasis added).

Absent restrictions on the operation of Golf Carts, it can be argued that such operation is permitted on an Association’s internal roadways. If an Association wishes to regulate, or even permanently ban the operation of Golf Carts within the community, we recommend an amendment to its Use Restrictions to include the desired Golf Cart rules and regulations, including requirements and prohibitions. This paragraph also applies to other types of vehicles, including low speed and electric vehicles.

As noted above, if an Association allows Golf Carts, the insurance agent for the Association should be made aware so appropriate insurance coverage for the Association can be considered.

An Association may be exposed to liability if an accident occurs involving a Golf Cart and the Association has approved the presence of them, or if banned, has not acted to enforce the ban. If the Association has adopted rules governing the use of Golf Carts but has failed to enforce them and an accident resulted, liability could be alleged on the theory of negligence. For example, if the Association implements a rule requiring Golf Carts can only be driven by persons over 16 and carrying a valid drivers’ license, but a younger unlicensed person was driving when an accident occurred, the Association may be sued for negligence due to failure to enforce its rules.

If an Association chooses to implement a policy permitting Golf Carts within its community, we recommend requiring Golf Cart owners sign a liability waiver for the Association, and provide certain information such as the name, address, and phone number of the Golf Cart owner; the names and ages of eligible/authorized drivers; and proof of insurance including the Association as a named insured. Once the policy is adopted, the Association should enforce its terms. 

[1] FLA. STAT. §316.003(27) & § 320.01(22) (2019).

[2] FLA. STAT §322.04(1)(e) (2019)

[3] FLA. STAT §316.212(7)

[4] FLA. STAT §316.003(43)

[5] FLA. STAT. §320.01(36) (2019)

[6] FLA. STAT. §320.01(41) (2019)

[7] FLA. STAT. . §316.2122(2)-(4) (2019)

[8] FLA. STAT § 320.01(42) (2019)

[9] FLA. STAT  §320.01(1)(b) (2019)

[10] FLA. STAT §322.04(1)(e) (2019)

[11] FLA. STAT §316.212(7)

[12] FLA. STAT. §316.212(5)(6) (2019).

[13] FLA. STAT §316.2125 & § 316.212(1)

[14] FLA. STAT §718.103(13) See Silver Beach Towers Property Owners Ass’n, Inc. v. Silver Beach Investments of Destin, L.C., 230 So3d 157 (Fla. 1st DCA 2017).

[15] FLA. STAT §718.103(8); See FLA. STAT §718.108(1)(a)-(1)(d); FLA. STAT §718.106 for a list of what includes common element.

[16] FLA. STAT §718.123 (1).

[17] Id.

discriminatory conduct

Can an Association Be Held Liable for Discriminatory Conduct of Residents?

On a daily basis we read about acts of hatred and discrimination occurring in our society. As residential communities are microcosms of the society at large, associations, too, are increasingly faced with determining how to deal with such issues. Legal precedent has established that associations may be held liable for discriminatory acts committed by its Board members as well as its agents, including the association manager. Pursuant to a 2016 rule enacted by the U.S. Department of Housing and Urban Development (“HUD”), however, associations can also be held liable for failing to “correct and end” discriminatory acts of residents.

Specifically, 24 CFR, Section 100.7(a)(1)(iii), provides that a person is directly liable for “[f]ailing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it.” (Emphasis added.) “Person,” as the term is used in this rule, includes community associations. “Discriminatory conduct” includes unlawful conduct engaged in because of a protected characteristic (race, color, religion, sex, familial status, or national origin). Thus, under this rule, it is possible for an association to be held directly liable where it (1) knew or should have known about discriminatory conduct by one resident towards another resident; (2) had the authority to correct the conduct; and (3) failed to take steps to end the conduct.

This rule raises more questions than it answers which is especially concerning given the potentially dire consequences an association may face if it fails to address the discriminatory conduct of a third-party. For instance, can an association really be expected to “correct and end” the discriminatory conduct of a resident when its enforcement options are limited by statute and the governing documents which may ultimately prove ineffective? HUD’s published response to this issue was that associations regularly rely upon notices of violations, threats of fines, and fines as mechanisms to compel compliance with the community’s restrictions and they should, therefore, use whatever legal means they may take to end the harassing conduct. In practice, however, is a fine or violation letter, or even the inability to vote or use the common areas really going to correct the discriminatory acts of a person driven by prejudice? Further, what if the third-party’s actual activity, even if discriminatory in nature, is not specifically prohibited by the association’s governing documents? Does that mean that the association does not have the “authority to correct the conduct” and would not be held liable under the rule, or does it mean that the association would be required to amend its governing documents to address discriminatory acts by residents? Additionally, does this mean that associations are now responsible for looking at the motivations behind a resident’s actions to determine if they are discriminatory in nature?

Presently, there are no real answers to these questions. Given, though, that the rule requires an association to “take prompt action” the immediate take away is that an association simply cannot ignore a discriminatory situation between residents and would be well advised to consult its community association attorney to discuss the particular facts of the situation and work towards a solution that complies with the current HUD rule.

 

Sara K. WilsonSara K. Wilson

Attorney at Law, Becker
Naples | bio

 

 

Are Signed Election Ballots Valid?

“Are Signed Election Ballots Valid?”

Q: At the recent annual meeting for my condominium there was a hotly contested election. Several ballots were signed by owners, thus no longer making them secret. The association rejected these votes. Should those votes have counted? A.P.

A: Yes, these votes should have counted. This issue was addressed in the arbitration case of Alvarez v. Club Atlantis Condominium Association, Inc. In this case an association rejected ballots because either the owner signed the ballot, signed the “inner envelope”, or signed both. The association claimed this violated the Condominium Act as well as the association’s own voting instructions, all of which required secret ballots and a specific procedure for balloting. The arbitrator stated “…that the secrecy of the ballot is designed primarily to benefit the individual voter. Since it is a personal privilege, that privilege may be waived by the individual voter. The unit owners in this case, by signing the ballots or inner envelopes, waived their right of secrecy provided for in the statute and rules.”

In response to the association’s argument that exact compliance with the statute and rules for voting and balloting was required, so that any ballot not strictly conforming to the statute and rule would be automatically invalid, the arbitrator stated that “substantial compliance is the standard by which to judge the effectiveness of the vote…[and]…the failure of the individual unit owners to preserve the secrecy associated with their ballot does not render their ballots invalid.”

Q: In your recent March column you addressed a question concerning the problems created by short term rentals. Are there any bills pending with the Florida Legislature which impact short term rentals? F.C.

A: Yes, there are several bills currently pending before the Florida Legislature which address short term rentals, including the following:

Senate Bill 824 (filed by Senator Manny Diaz, Jr., Hialeah Gardens) provides that Florida property owners who choose to use their properties as a vacation rental have a constitutionally protected right to do so. This bill preempts certain local regulations and ordinances regarding short term rentals. As an example, local governments would not be able to require inspections or impose occupancy limits on vacation rentals. The House companion to this bill is HB 987.

Senate Bill 812 (filed by Senator David Simmons, Longwood) addresses transient lodging (short term rentals) and conflicts with the Bill discussed above, inasmuch as it confirms that local governments may regulate vacation rentals. This Bill also requires that a valid certificate of registration be displayed in rental listings and advertisements (failure to do so results in a civil penalty ranging from $50-$100/day until compliant).

Senate Bill 1196 (filed by Senator Debbie Mayfield, Melbourne) provides that state regulation of rentals (with regard to the issuance, revocation or renewal of licenses) is subject to a community association’s leasing restrictions regarding same. This Bill would also allow the Division of Hotels and Restaurants to notify an online hosting platform of an advertisement for a shortterm rental which fails to display a valid license number issued by the Division, and the hosting platform would be required remove all advertisements and listings for that property within three business days, unless the listing is brought into compliance. A hosting platform which fails to take such corrective action would be subject to fines up to $1,000 per offense (with each day or portion of a day on which a hosting platform is violating the Division’s directive considered a separate offense) and to suspensions, revocation or refusal of a registration.

Whether any of these bills will ultimately become law remains to be seen, as there are a few weeks remaining of the legislative session. You can access the full text of these bills by going to the Florida Senate website (www.flsenate.gov).

 

David G. MullerDavid G. Muller

Board Certified Condominium and Planned Development Law Attorney, Becker
Naples | bio