Managers Report newsletter

Are E-Mails Official Records?

Whether you live in a condominium, cooperative or homeowner association, the Statue governing your community defines the term “official records”. In defining official records, each Statue has a catch-all provision.

All other written records of the association not specifically included in the foregoing which are related to the operation of the Association.

Sections 718.111(12), 719.104(2), and 720.303(4), Florida Statues.

Questions abound as to whether e-mails are official records. The Department of Business and Professional Regulation (“Division”) has ruled that e-mails to an association can be considered official records and are therefore subject to inspection and copying by owners or their representatives. The question is, what are e-mails “to an association?” Are personal e-mails between board members official records? What about an owner’s e-mail to a board member’s email address and the board member’s response to that owner – is that considered an official record subject to another owner’s inspection and copying?

Division rulings have held that e-mails to an individual director or to all directors as a group, addressed only to their personal computers are not written communication to the association and therefore not considered an official record. This is because there is no obligation for a director to turn a personal computer with any regularity, or to open and read e-mails before deleted them. Irzarry v. Laguna Point Condominium Association, Inc., Arbitration case No. 08-05-2791 (April 10, 2009/Final Order). This point was further clarified in the arbitration case of Humphrey v. Carriage Park Condominium Association, Inc., Case NO. 08-04-0230 (March 30, 2009/Final Order/Campbell), where the arbitrator stated that “any e-mails received by, stored upon, or otherwise contained upon or within the personal computer devises (e.g., computers, laptops, cell phones, tablets, etc.) of Directors shall be considered the personal property of the Director upon whose devise said e-mail exists.” I other words, the e-mail does not belong to the association.

However, arbitrator in Humphrey went on to state “[t]he conclusion may be different if the association owns a computer on which management conducts business including e-mails (analogous to government public records); or if e-mails are printed up and passed around for discussion at a board meeting.” In other words, e-mails to an association’s e-mail address, the (“@codename.com”) are considered official records.

It is important to have a clear understanding of and a policy in place related to e-mail to assure that those e-mails that are official records are properly kept and those e-mails that are not official records are properly deleted. There are also exceptions for things such as communications that relate to litigation, which must be considered when creating and implementing an e-mail policy. It is therefore strongly recommended that all associations involve their attorney when formulating their e-mail retention policy.

 

Steven H. Mezer

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

 

Estoppel Certificates

A Requirement of Condominiums, Cooperatives, and Homeowner Associations

Some associations are not complying with the new laws on Estoppel Certificates which is required of condominiums, cooperatives, and homeowners associations. Prior to July 1, 2017, the association only had to provide the prospective purchaser with information about the monies owed to the association attributable to the unit being purchased. Now, the association must provide a certificate with a considerable amount of additional information as described below. If the information is prepared incorrectly the association may be estopped (barred or precluded) from alter going back to that individual for the funds or violations that were omitted from the certificate. My recommendation is that the association have their attorney prepare the initial certificate and provide that certificate to their manager or management company as some of the information requires a review and analysis of the association’s governing documents.

There is a long list of information which is required to be in the estoppel certificate found in Sections 718.116 (Condo), 719.108 (coop), 720.30851 (HOA), Florida Statues which includes (by way of example only and not as a complete list):

  • parking or space number, as reflected in the books and records of the association;
  • attorney’s name and contact information if the account is delinquent and has been turned over to an attorney for collection;
  • an itemized list of all assessments, special assessments, and other monies owed;
  • an itemized list of any additional assessments, special assessments, and other monies that are scheduled to become due for each day after the date of issuance for the effective period of the estoppel certificate is provided.

The statue then requires you to provide:

  • whether there are any open violations of rules or regulations noticed to the unit owner in the association official records;
  • whether the rules and regulations of the association applicable to the unit require approval by the board of directors of the association for the transfer of the unit and if so, whether the board has approved the transfer of the unit;
  • whether there is a right of first refusal provided to the members or the association, and if there is if the members of the association have exercised that right of first refusal; In addition, the association is also required to provide a list of, and contact information for, all other associations of which the unit is a member, provide contact information for all insurance policies maintained by the association, and provide the signature of an officer or authorized agent of the association.

For some associations, your manager has handled this certificate when it was just a matter of filling in the amounts owed, because they took care of the accounting for the association. However, reviewing and analyzing association documents to correctly answer the questions on rights of first refusal and other legal issues should be handled by your association attorney and then provided to management for future use thereafter. Further, if the management contract does not provide for charging for estoppel certificates, the Board will need to approve a resolution in order to do so.

 

Steven H. Mezer

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

 

Communication With Your Attorney

Most attorneys are adept and accustomed to using a variety of forms of communication with their clients. Most attorneys will also charge for communications with their clients, so clients should consider what is best, not only in the context of cost, but also what is best for providing and receiving legal advice. As an attorney representing community associations, one of the most satisfying aspects of that practice is being able to efficiently answer questions and providing legal guidance to my clients. However, I know that certain methods of communication work better for some clients. If you prefer communication by mail, e-mail, facetime, text, or in person, make your preference known to your attorney.

If you are a community association manager, I can offer you the following seven (7) observations to assist in effective communication with counsel:

  1. Designated Point of Contact. The Association should designate one person to communicate with the attorney, while providing copies of that communication to all board members in a confidential setting. If we assume that the typical board of directors has five members, the association does not want to pay for five separate communications with the attorney regarding the same subject matter, plus a communication between the community association manager and the attorney. The attorney does not need to receive six almost identical communications regarding the same issue. The community association manager typically has good communication skills and can succinctly state the legal issue and related questions, therefore, he or she is often the best choice for both the association and the attorney. Sometimes, one or more board members wants to assume this role. The association is the client, therefore, this is their choice to make.
  2. Ask Specific Questions. The attorney’s response and legal advice are responsive to the question presented. Therefore, a full statement of the relevant facts and a clear statement of the question will provide the most valuable and legally accurate response to the association’s question. Providing an incomplete (intentionally or unintentionally) or inaccurate set of facts may result in the attorney providing an incorrect or even useless response answer to the association’s actual question. This is not the time for secrets, selective omissions or hiding facts from your attorney. Even small details may have legal significance to your issue and to your attorney. Most attorneys will respond to the question as presented and will not make an assumption that the association actually had a different question to be answered. Asking the correct question should yield the most accurate answer, not just the answer that was wanted. Therefore, the statement of the facts and the composition of the question should be given the appropriate attention to detail.
  3. Confidentiality. Communications with counsel regarding legal issues are confidential and privileged. Directors should be reminded of that fact on a regular basis. Many attorneys will mark all such communications “Attorney/Client Confidential” and you should do the same. Attorney/client confidentiality may be waived by sharing copies of the communications with any person who is not on the board of directors, therefore extreme caution is required when handling communications with counsel. Please do not share legal opinions with other managers or board members from another community, unless the original recipient gave you written consent to do so.
  4. Official Records. Communications with counsel should be segregated in a file clearly marked “Attorney/Client Confidential” to avoid the inadvertent disclosure of confidential communications. These documents containing legal advice of counsel or attorney’s work product are not available for inspection and copying by unit/lot owners.
  5. Costs. While we recognize that no one likes to pay attorney’s fees, a short consultation with counsel can often save the association significant funds when the association implements the contemplated action. For example, having contracts reviewed by counsel is a highly recommended defensive action by a board of directors. It is much easier to decide to not enter into a contract due to legally objectionable terms than it is to get the Association out of that same contract after it has been entered into without the advice of counsel. It is usually much less expensive to add legally desirable language to a contract than to later face the consequences of the omission. The adage that “contracts are made to be broken” is neither factually nor legally correct. A court will not save your association from a bad contract, if it is an otherwise lawful contract. Contracts are easily created by conduct, even in the absence of a signature.
  6. Communicate, Communicate, Communicate. Your attorney is not a mind reader. It is impossible for anyone to interpret silence. Regular, clear and accurate communication with your attorney can provide you with support and assurance that the board of directors and that the association are operating in compliance with its governing documents and in compliance with Florida law. While it is clear that some legal fees may be a cost of the association “doing business” it is also a form of insurance that is often far less expensive than not communicating with your counsel. Addressing issues and decisions in real time is far less expensive than the litigation that can result from a wrong decision. Communicate early and often.
  7. Document the Response. It is basic that a community association should not rely on the manager for legal advice, but that is what often occurs when the manager is asked to relay or interpret a conversation that she or he has had with association counsel. Request a written response, whether it is a confirming e-mail or a formal written legal opinion each time that you seek legal advice. If you want citations to a statute to cases and references to the governing documents, specify your expectations so that there is no question as to the adequacy of the response. Although most legal advice is not a simple “yes” or “no” it need not be a confusing treatise. There are times when you should not get the response in writing, but there should be a reason for not putting the response in writing when that occurs. You have a right to clear understandable response from the attorney.

Finally, communication increases confidence and comfort. There is no (legal) question that should not be asked, if it is a question that you or a member of the board of directors may have. Keep the lines of communication open with your attorney.

 

Steven H. Mezer

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

 

water leak

The Subrogation Situation

With increasing frequency, insurance companies that provide unit owner insurance are suing community associations to recover payments made to the unit owner that are related to water leaks in the unit. The problem with these lawsuits is two-fold. First, the insurance companies are waiting years to bring them, although still within the statute of limitations for the lawsuit, but nonetheless to the detriment of the community association’s defense of the case as records and memories fade overtime. Secondly, the cases are many times brought in small claims court as a result of the insurance company seeking at most $5,000.00 in “reimbursement” from the community association. The issue with defending a small claims court case is that the cost of defending the lawsuit can be more than the amount the insurance company is seeking which puts pressure on the community association to simply settle. The basis of the insurance company’s lawsuit against the community association is negligence; the insurance company claims that the association had a duty to take some action, failed to take the action and such a failure led to loss that resulted in the insurance payment to the unit owner.

What can be done to limit a community association’s exposure to such lawsuits? First, the community association should consult with its attorney to determine if an amendment to the declaration for the association should be adopted related to subrogation. Next, community associations need to promptly respond to complaints related to leaks and properly document repair work in a detailed manner so that the location and extent of work is easily understood. The documentation related to repair work should be kept for 7 years and be readily accessible. Community associations should perform routine maintenance and inspections of property that the association is required to maintain in order to identify in advance of a water leak areas of needed maintenance. Lastly, anytime there is a water leak or other casualty to unit, the association must thoroughly document, in writing, what happened to cause the leak, what was done in response to the leak and all communications between the association, the unit owner and the unit owner’s insurance company and adjuster. Such documentation should be shared with the community association’s attorney and kept in the association’s official records.

 

Marielle E. Westerman

Marielle E. Westerman

Construction Law Attorney, Becker
Tampa | bio

 

electronic voting

Does Electronic Voting For Community Associations Really Work? How Do You Implement?

Q: I heard that the law in Florida recently changed and that owners in community associations can now vote electronically. What is required to implement electronic voting in my community?  And does it really work? A.A. via e-mail

A: You heard correctly. During the 2015 Legislative Session, a new law was passed authorizing condominiums, cooperatives and homeowners associations to conduct elections and other owner votes through an internet-based online voting system. In the spring of 2016, the Department of Business and Professional Regulation adopted administrative regulations to implement the new electronic voting statutes for community associations.

The first step is for the Board to decide if they wish to offer electronic voting to their members by adopting a resolution. The resolution will establish the procedures and deadlines for owners to consent to electronic voting and, thereafter, opt out of electronic voting (if desired). Written notice of the board meeting at which the resolution will be considered must be mailed, delivered, or electronically transmitted (where an owner has consented in writing to receive official notices by e-mail) to the owners, and conspicuously posted at least fourteen (14) days before the meeting.

The next step is for the Board to select an operating software system to utilize and administer the electronic votes. The administrative regulations require the use of sophisticated operating software which will enable the electronic voting website provider to accurately tally votes and be able to defend the result. The operating software also needs to be able to preserve the secrecy of owner votes in the election of directors. There are several different vendors who offer operating software to community associations for a fee. Most of the vendors utilize a similar electronic voting format: (1) the association provides a roster of eligible voters, (2) a unique PIN number is sent to the e-mail address provided by the owner, (3) owners are asked to create a user name and password to log on to the website; and (4) the owner votes electronically.

The Board does not have the right to force owners to vote electronically. Owners have the option to decide if they wish to vote electronically. Owners who do not consent to vote electronically must still be permitted to vote the “old fashioned” way via paper. At the membership meeting the electronic votes and the paper votes are tabulated together and the voting results announced.

Electronic voting does work. Several of my association clients have successfully used electronic voting at their meetings and elections. I predict that electronic voting will become commonplace very soon. The days of shuffling through stacks of paper at association annual meetings may soon be over.

 

David G. MullerDavid G. Muller

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

 

 

Material Alterations to lobby

Material Alterations

We receive numerous questions from our condominium association clients regarding proposed “material alterations” to the common elements. In general, the board is empowered with authority to maintain the common elements. However, certain changes to the common elements may be considered a “material alteration” which may require unit owner approval. Florida courts have held that a material alteration is one which “palpably or perceptively varies or changes the form, shape, elements or specifications” of the common elements “in such a manner as to appreciably effect or influence its function, use or appearance.” Sterling Village Condominium, Inc. v. Breitenbach, 251 So.2d 685 (Fla. 4th DCA 1971). In many instances the material alteration questions we receive pertain to redecorating common elements, such as a lobby area. If the change in the new décor theme of the lobby is considered a material alteration (as opposed to routine maintenance/replacement), approval of the unit owners may be required. Section 718.113(2)(a), Florida Statutes, requires 75% of the total voting interests to approve a material alteration unless the declaration provides for an alternative approval method/standard. Many condominium association declarations contain a provision which specifically establishes a unit owner approval standard for material alterations to the common elements. Other governing documents specifically carve out exceptions whereby the board of directors alone can approve certain material alterations without the need to obtain unit owner approval. For example, many governing documents will grant the board discretion to approve a material alteration if the cost of said alteration is below a specific dollar amount. This area of condominium law is complex and there are additional considerations which may impact the ultimate analysis (e.g. what if the alteration is required to comply with code, etc.), which are beyond the scope of this article.

 

David G. Muller

David G. Muller

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

 

 

Unit Owners, Beware: The Developer May Have Stacked the Board Against You

Condominium and HOA Board Members May be Neglecting the Duties You are Owed

Are you concerned that the developer of your condominium did not deliver on the promises made to you when you purchased your condominium unit? Are you concerned with the construction of the condominium in which you live? For most individuals, the purchase of a condominium unit can be their most important investment. However, many of the decisions impacting this investment are not up to the owner of the unit, but rather, are left up to a board of directors controlling the association.

At a specified time, the developer of a condominium is required to relinquish control of the association’s board of directors in favor of the unit owners. The turnover of an association from developer to the unit owners presents the first opportunity for the association’s board to hire a lawyer, an accountant, and an engineer to perform important and time-sensitive inspections of the condominium. These inspections will identify construction defects and other concerns that may exist. As such, it should not be surprising that a developer would want a “friendly” association board of directors following turnover. But imagine the havoc an unscrupulous developer could inflict if the association’s newly elected board members—or the attorney and engineer working for the unit owners—have financial ties to the developer.

 A recent Miami-Dade Grand Jury report found that there was extensive fraud, mismanagement, stacking of boards, and conflicts of interest among condominium association boards.[1] Such misconduct is not limited to Miami-Dade, however. Perhaps surprisingly, one of the largest public corruption cases set in the fast-paced, scheming neon desert notoriously dubbed “Sin City” did not involve the usual Las Vegas suspects, but rather a contractor, a lawyer, and a stacked board of condominium directors. In 2015, Leon Benzer, a construction company boss, was sentenced to 15 ½ years in federal prison for orchestrating a scheme to take control of association boards for the purpose of channeling construction defect repairs to Benzer’s company. Benzer’s scheme involved a network of recruited purchasers and real estate agents who would get elected to association boards, hire Benzer’s attorney, and award lucrative contracts to Benzer’s construction company. Through these unethical practices, these individuals violated the duties owed to the association and its unit owners.

Condominium unit owners who serve on the board of directors are considered shareholders of the association, and act in a fiduciary relationship to each owner. In such relationships, the law demands a higher than ordinary degree of care from each director and officer, with Florida law specifically demanding directors to discharge their duties in good faith. Simply put, directors should act to protect the best interests of the association and its unit owners, rather than their personal interests or those of affiliated third parties. The actions of the board members in Benzer’s scheme were in complete disregard of the unit owners’ rights, as they participated in rigging elections and seeking only personal gain. In order to avoid a Benzer-type scheme, it is critical for unit owners to exercise due diligence in selecting truly independent individuals to become board members to represent the best interests of all the unit owners at the time control of the association is transferred from the developer. Since Florida law permits condominium association boards to settle claims concerning monies owed from the developer and matters of common interest to the owners, including construction defect claims, it is even more vital to ensure that an association’s board, their attorney, and engineer are not being led by ill-intended individuals to unscrupulously settle claims for pennies of their real worth, accept cosmetic repairs that do not fully address the underlying defective condition, and waive association claims for latent defects.

In order to ensure that meritorious claims of unit owners are adequately protected, unit owners must get involved and confirm that independent board candidates without financial ties to the developer or contractor are seeking election to the association’s board. Additionally, steps should be taken to confirm that the association’s officers and directors hire independent, knowledgeable attorneys and engineering firms, not attorneys and engineers affiliated with the developer or contractor. Unit owners should be cautious when dealing with an attorney that was selected, hired, and paid by the developer-controlled board prior to the unit owners taking control of the association. Unit owners must ask critical questions of management, those seeking election to the board, and the attorneys and engineers being interviewed to represent the association, as to their involvement or affiliation with the developer or contractor that built the condominium. Protect your investment, and avoid a Benzer “stacked board.”

For further information regarding the turnover process, self-dealing, conflicts of interest, and the duties of your board of directors, please submit your questions on our website and get the information you need to make sure you are safeguarding your investment.

 

David Haber

Nicholas Siegfried is a partner with the South Florida law firm of Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, P.A. who has focused on community association and construction law since 2006. He is based at the firm’s office in Coral Gables, and the firm also maintains offices in Broward and Palm Beach counties, representing more than 800 associations throughout Florida. He may be reached at nsiegfried@srhl-law.com and at (305) 442-3334.

[1] Final Report of the Miami-Dade County Grand Jury Spring Term 2016, Addressing Condo Owners’ Pleas for Help: Recommendations for Legislative Action, at 1-31(Fla. Cir. Ct. Feb. 6, 2017). A copy of such grand jury report may be found at: http://www.miamisao.com/wp-content/uploads/2017/02/Grand-Jury-Report-Final.pdf.

Short-term Rentals in Private Residential Communities

Florida Appellate Court Weighs in on Short-term Rentals in Private Residential Communities

The topic of Airbnb and similar short-term rental sites is on most boards’ minds these days as more and more owners look to monetize their condominium and cooperative units as well as their single-family homes. Recently, the First District Court of Appeal issued a ruling in the case of Santa Monica Beach P.O.A. v. Acord, Case No. 1D16-4782, (Fla. 1st DCA, April 28, 2017), which held that residential use restrictions in a community’s covenants were not sufficient to curb short-term rental activity. The homeowners, Mr. and Mrs. Acord, listed their homes on the VRBO website, obtained transient rental licenses in a corporate name, and collected and remitted state sales and local bed taxes. The association asserted that such activity violated the Santa Monica Beach subdivision restrictive covenants which stated:

Said land shall be used only for residential purposes, and not more than one detached single-family dwelling house and the usual outhouses thereof, such as garage, servants’ house, and the like, shall be allowed to occupy any residential lot as platted at any one time; nor shall any building on said land be used as a hospital, tenement house, sanitarium, charitable institution, or for business or manufacturing purposes nor as a dance hall or other place of public assemblage

The trial court granted a motion to dismiss with prejudice after finding that the short-term rental use was residential rather than commercial.

The First District Court of Appeal was asked to determine whether short-term vacation rentals violate restrictive covenants requiring property to be used only for residential purposes and prohibiting its use for business purposes. The Court focused on the actual use by the short-term renters (eating, sleeping, etc.) and not the hotel-like duration of the rental. The Court cited other case law holding that a rental, even a rental for profit, does not transform the use of a dwelling from residential to either business or commercial. After all, even short-term renters are using the premises for typically residential purposes and not to run a business, and the fact that the owners of these units are deriving revenue from the rentals does not change the use of the premises from residential to commercial. Ultimately, the Appellate Court simply could not rely upon the “no business use” restriction in the restrictive covenants to prohibit short-term rental activity. Had the association attempted to rely on leasing restriction rather than a “no business use” restriction, would things have turned out differently?

Perhaps the most telling and most instructive comment from the court in the Santa Monica Beach case was the observation that the association had no specific restriction on short-term rentals. Many communities have restrictions on leasing in their governing documents, which can include minimum and maximum lease terms, a limit on the number of times per year an owner can rent, to an overall cap on the number of properties that can be leased at any one time. Enforcement of short-term rental restrictions against this kind of transient rental can be very difficult because the tenant comes and goes before there is any opportunity for enforcement action rendering the violation moot. However, an action or activity, like repeated short-term rentals, that is capable of repetition but evading review would be an exception to the mootness doctrine. In the Santa Monica Beach case, if the association had short-term rental restrictions in its governing documents, an owner’s pattern of renting out the dwelling in violation of the minimum lease terms could have been used to seek injunctive relief against future violations. The goal for most associations, however, is to deter the activity rather than having to overcome hurdles in court.

Regulate or Prohibit?

In some communities, it might make sense not to prohibit short-term rental activity, but to regulate it and perhaps even monetize it to defray the association’s operating expenses. Fees can be charged for registration, parking, and the use of recreational amenities. It might also make sense for the association to operate a mandatory rental pool in order to control all aspects of rental activity from booking to arrival and departure.

For those communities who do wish to restrict this kind of activity, the starting point is to ensure that their governing documents contain a clear, unambiguous restriction which defines engaging in Airbnb activity as a violation of the contract between the association and its members. From there, the association can proceed to impose fines, suspend use rights, put the short-term rental websites on notice of the ineligibility of properties in the community to offer these services, and/or pursue arbitration or injunctive relief.

Local Government Likely Cannot Help Your Association in This Battle

There is a logical argument to be made that local governments have a dog in this fight and should be regulating and/or restricting short-term rental activity. Airbnb and similar companies understand that their business model can be greatly impacted by local ordinances, so they have been proactive in seeking out legislators who will ensure such actions are not permissible. In the 2017 Florida Legislative Session, two vacation rental bills were introduced that primarily impact local governments. The goal from Airbnb’s standpoint is to preempt local governments from regulating vacation rentals. Given Airbnb’s success so far in protecting its business model by putting the brakes on those who might oppose them, it only makes sense that private residential covenants might come up on their radar in the near future. Associations, particularly those in tourist-heavy locations, would be well-advised to review and amend their documents now to address this issue as waiting too long might result in an inability to impose meaningful restrictions.

The takeaway from this first appellate case regarding the inevitable tug of war between the desire of some association members to monetize their properties and the association’s desire to protect the residential nature of the community is that in order to curb or prevent Airbnb activity in a private residential community, the governing documents must tackle the problem head-on. No beating around the bush or relying on existing restrictions which were drafted years before the Airbnb business model came into existence.

 

Donna DiMaggio Berger

Donna DiMaggio Berger is a shareholder at the community association law firm of Becker & Poliakoff and has represented all types of shared ownership communities throughout Florida. Berger is a member of the College of Community Association Lawyers (CCAL), a prestigious national organization which acknowledges community association attorneys who have distinguished themselves through contributions to the evolution or practice of community association law and who have committed themselves to high standards of professional and ethical conduct in the practice of community association law. Berger can be reached at (954) 364-6031 or via e-mail at dberger@bplegal.com.

 

Insurance Appraisals and Coverage for Condominiums

Insurance Appraisals and Coverage for Condominiums

Property insurance premiums are continuing to rise, and now is a good time for condominium boards and property managers to review their understanding of insurance coverage requirements and the insurance appraisals that are used to establish coverage limits. Per Florida Statute 718, The Condominium Act, the association “…shall use its best efforts to obtain and maintain adequate property insurance to protect the association, the association property, the common elements, and the condominium property….” Additionally, the statute requires that the insurable replacement cost be “determined by an independent insurance appraisal or update of a prior appraisal.”

Hazard Insurance

Every hazard insurance policy issued or renewed after January 1, 2009, must provide primary coverage for “All portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications.”

Further, the statute defines building components that are not included in the condominium hazard insurance. The Statute specifically states:

The coverage must exclude all personal property within the unit or limited common elements, and floor, wall and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit.

Items excluded from the condominium association’s property insurance are the responsibility of the individual unit owners to insure. Thus, it is important for condominium unit owners to have a good understanding of the association’s insurance policies and their individual unit policy to avoid gaps or overlap in coverage. Certainly, a key goal for the Condominium Act is to clarify coverage responsibility and “to ensure consistency in the provision of insurance coverage to condominiums and their unit owners.” Additionally, standard underwriting guidelines for hazard insurance values exclude foundations and piping underground from coverage. 

Flood Insurance

While the Florida statutes specify coverage parameters for hazard insurance, they are largely silent on the issue of flood insurance. Coverage for flood insurance is defined by the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Agency (FEMA). FEMA coverage is based on Replacement Cost Value (RCV) of the complete residential condominium building without the exclusions mentioned previously for hazard insurance. RCV is defined as the full current cost to construct replacement buildings (or portions thereof based on the extent of flood damage) having equal utility as the damaged property using current construction methods and materials. This coverage includes the interiors as they were originally built, and does not cover upgrades which were added by the unit owners. Federal flood insurance, underwritten by the U.S. Government, is available for residential condominium buildings up to a maximum RCV of $250,000 per unit (calculated by multiplying the total number of units in the building by $250,000). Additional flood coverage over this limit is obtained on the open insurance market.

Non-residential association buildings (defined as buildings with less than 75 percent of structure floor space for residential use) having two or more outside rigid walls and a fully-secured roof can obtain FEMA flood insurance up to a maximum actual cash value (ACV) of $500,000 per building. ACV is defined as replacement cost minus physical depreciation value. Clubhouses and pool houses would be typical examples of association non-residential buildings. Note that any amenities not meeting the rigid wall and roof requirement such as carports, walkways, pools, tennis courts, fences, etc. would not be covered for flood insurance.

The difference between hazard insurance and flood insurance values can create a great deal of confusion among unit owners and condominium boards. Typically, hazard values are typically around 65–70 percent of flood insurance values.

Insurance Appraisals

For an association property to be properly insured, an accurate, unbiased appraisal of the replacement costs must be obtained. Given the complexities of the appraisal process in determining current building costs and differentiating hazard and flood values, it is strongly recommended that condominium associations seek out an appraisal firm that has expertise in this area. A firm that has Florida state-certified and licensed appraisers assures a high level of competence. Licensed appraisers are accountable to the Florida Department of Business and Professional Regulation and the Florida Appraisal Board. Cost estimators who are not state-licensed appraisers typically have no government oversight or accountability for the accuracy of their reports.

The insurance appraisal process involves a physical inspection of the buildings and amenities being insured. Photographs are taken for reference as required by the insurance carriers. When available, “as-built” architectural building plans are utilized by the appraiser to determine square footages and building details that are not observable from the on-site inspection. When plans are not available, measurements are taken and drawings are made on-site. From these, computer-aided drawings are created to accurately determine the square footage for all building areas.

Current construction costs are determined using professional building cost systems based on building type, class, size, design, quality and many other factors including local construction material and labor costs. Finally, an appraisal report is developed in the format required by the insurance carrier to properly underwrite the association hazard and flood policies.

Accurate Appraisals Are Critical

The risks associated with poorly developed and inaccurate insurance appraisals can be high. No association wants to find itself in a position of being over or under-insured. If the appraisal is low, the risk of co-insurance penalties and insufficient insurance proceeds to replace a total loss are very real. Conversely, if appraised value is high, the insurance premium will be higher than necessary and a waste of association budget dollars.

 

Rick Logan

Rick Logan and Bob Townsend are both Florida State-Certified General Real Estate Appraisers and have more than 50 years combined appraisal experience. Their firm, Townsend Appraisals, specializes in developing insurance appraisals for condominium associations and commercial building owners to establish coverage limits for hazard and flood policies. Their office is in Naples, Florida, and they service all Southwest Florida from Everglades City to Tampa. All staff appraisers are state-certified and licensed. For more information, visit www.townsendappraisalsinc.com.

 

Wait Times at the Gate

Frequently Asked Questions: How Can a Community Reduce Wait Times at the Gate?

It’s a question and issue that almost everyone faces. Whether you are the property manager, a resident living in a gated community, a vendor, or a visitor who uses a community’s gate often—it is easy to relate to the frustrations that come with long wait times at a community entrance. Many people refer to this as stacking, or the buildup of vehicles at an entrance. While it is unlikely that this issue will be resolved at all times, with technological advancements, there are methods that can greatly decrease the chances of stacking.

Before a community discusses the options to alleviate wait times at the entrance, it’s important to determine the cause, and there can be several explanations. First, a telephone entry system is a common culprit for stacking. Not only are these systems typically unreliable and antiquated, but the codes can be misused or time consuming as visitors search through a long list of names to find the resident he or she would like to see. Just one driver dealing with this can create a long back-up of vehicles at a community, especially during busy times of the day.

There are other instances with gate guards that can cause stacking at communities. If the guard does not have an updated system that allows him or her to quickly verify visitors and complete transactions, it is likely that stacking will frequently occur. While a revised method for verification would help expedite transactions, there are also cases where the drivers trying to enter a community create a backup. Unfortunately, this type of situation is difficult to control. The visitor may not be approved to enter or cannot reach the resident he or she is trying to visit. This type of circumstance makes it even more important to have a quick transaction process that can speed up the verification of other guests after a backup.

Once a community determines the main cause or causes of stacking, then the options for expediting the process can be examined. The most efficient method to decrease stacking at a community is to incorporate a form of automation at the entrance. The two main types of automation are automatic license plate recognition and automatic driver’s license recognition. Both allow permanent and pre-registered visitors to quickly gain access to a community after immediate verification.

Automatic license plate recognition verifies visitors at a community when a license plate is associated with a registered visitor. When an image of the license plate is captured, the plate is cross-referenced with the database of approved vehicles, and the gate opens for permitted guests. Not only does this expedite wait times, but it easily verifies repeat visitors with a high capture of vehicle information to keep the community secure. If a vehicle’s license plate is not recognized, the driver can speak with a virtual guard or gate guard, depending on what the community uses.

Automatic driver’s license recognition easily recognizes verified guests by capturing an image of the name on the driver’s state-issued identification. Typically, drivers insert their license into an ATM-like scanner that will verify the name and automatically open the gate for permitted visitors. If the driver’s name is not recognized, the driver can speak with a virtual guard or gate guard, similar to the process with automatic license plate recognition.

Both types of automated systems also increase the security of a community. With simple tracking and recording of all visiting drivers entering, the community has the capability to recall identification information of guests should a problem ever occur at the gate or in the neighborhood. In addition, a virtual guard kiosk can record the audio of a transaction, and more cameras can capture angles of an entrance for added security.

While every community has different needs and preferences, both automated options are effective and efficient for reducing wait times at a gate. Allowing permanent and pre-registered visitors to have automatic entry expedites the entire transaction process and is easier for the guests, residents, and property managers at the community. Plus, the automation systems keep the entrances secure with a high capture of identification and/or vehicle information. If you have security questions or concerns, please e-mail ask@enverasystems.com.

 

Brie Peterson

Brie Peterson is the Business Development Consultant for Envera Systems. She works closely with the sales and marketing departments to provide best-in-class service to the communities that Envera works with. Envera Systems specializes in security technology systems with remote guards to replace or enhance guards at communities. Contact info: (855) 380-1274 or www.EnveraSystems.com.

 

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