Managers Report newsletter

Tips, Tricks and Things You Can Mix

In this article, I am going to review some tips and suggested procedures to deal with some common misperceptions and/or misunderstandings in regard to various association items. These suggested procedures are based on what I have found to be recurring questions / actions or inactions from and/or by associations. Let’s dive right in.

Timesavers

Proxies and Limited Proxies

In condominiums and cooperatives, general proxies are used for establishment of a quorum and limited proxies are used to vote on a particular matter – amendments, waive reserves or financial reporting requirements, etc. In homeowner associations proxies may also be used for elections. Proxies and limited proxies are not secret. When returned in an envelope to the association, they can be opened in advance of the meeting. They should be opened in advance of the meeting and placed in unit order (whether numerical for a condominium or cooperative or by street address in a homeowners’ association). This allows you to keep a running tally of whatever is being voted on, ensure you are using the most recent proxy submitted, and saves time at the actual meeting. By keeping a running tally of the vote, the only proxies that have to be tallied at the actual meeting are those turned in at the meeting. Depending on the number of units in your association and the question or questions being voted on, this can save an enormous amount of time at the actual meeting.

Keep in mind that owners can always rescind or change their limited proxy, and the most recent one submitted controls. This is different from an election ballot in a condominium and cooperative, which cannot be rescinded or changed once submitted.

Voting Certificates

The same concept as above applies to voting certificates. When owners are returning voting certificates, whether for an annual / election meeting or any other meeting, open the voting certificates and file them before the meeting. If your association requires voting certificates, the association should maintain a book of voting certificates, in numerical or address order, for use as needed at membership meetings. The most recent voting certificate will always control.

Ballots

In condominiums and cooperatives, owners are required to submit their election ballots in an inner and outer envelope. The owner envelope has to have the owner’s name, address and signature. While some associations keep the submitted ballots in a locked ballot box until the election meeting is called to order, there is nothing in the law that requires this. Ballots should be placed in unit / address order before the meeting. This will speed up the outer envelope verification process as well as identity duplicate ballots.

Documents for an Annual / Election Meeting

When preparing for an annual / election meeting, you should always have at the meeting:

Sign in roster
Unit roster by last name
Unit roster by unit/address
Voting certificate book
Meeting notice
Proof of meeting notice
Minutes from last membership meeting
If using electronic voting, a printout of the electronic vote tally by unit number /street address
Tally sheet(s), whether for an election, to vote on a matter, etc.
Letter openers
Empty bankers’ box for all the meeting documents required to be kept
Extra ballots and envelopes (for an election) and ballots and limited proxies for other matters being voted on
Designated person(s) for owner sign in

I cannot tell you how many times meetings have been delayed, sometimes significantly, because of a lack of some, or most of, the items listed above being prepared before the meeting.

Verify Outer Envelopes Before Annual / Election Meeting

This can be a real time saver of at least an hour, if not hours, at a condominium or cooperative annual / election meeting. Both the condominium and cooperative statutes allow an association to have a meeting on the day of the election, before the election meeting, to verify the information on the outer envelopes. This means that by following the required procedures, the ballot outer envelope information can be verified before the annual / election meeting, allowing an association to perform the tedious task of verifying the outer envelope information before the annual / election meeting is called to order. This allows an association to spend the time, in many cases an hour or more, before the meeting verifying the information as opposed to at the actual meeting, so the actual meeting can be completed much sooner than if the verification process took place after the annual / election meeting was called to order. Florida Administrative Code Rule 61B-23.0021(10)(b) provides:

Any association desiring to verify outer envelope information in advance of the meeting may do so as provided herein. An impartial committee designated by the board may, at a meeting noticed in the manner required for the noticing of board meetings, which shall be open to all unit owners and which shall be held on the date of the election, proceed as follows. For purposes of this rule, “impartial” shall mean a committee whose members do not include any of the following or their spouses:

Current board members;
Officers; and
Candidates for the board.

At the committee meeting, the signature and unit identification on the outer envelope shall be checked against the list of qualified voters. The voters shall be checked off on the list as having voted. Any exterior envelope not signed by the eligible voter shall be marked “Disregarded” or with words of similar import, and any ballots contained therein shall not be counted.

Verifying the outer envelope information before the annual / election meeting is a real time saver at the actual meeting. Note that this type of meeting must be noticed at least 48 hours in advance like a board meeting.

Myths and Misconceptions

Presidents only vote to break a tie. Incorrect. We are not talking about the United States Senate. Presidents should vote on every motion, unless there is a bona fide conflict of interest. That is what board members are elected to do.
A quorum of the board is required for a membership meeting. Incorrect. A membership meeting is not a board meeting. Board members do not vote at a membership meeting in any other capacity other than as a member. There are no board member votes at a membership meeting. A board member (usually the president or someone the president appoints) will usually run the annual meeting from an administrative point of view. Your governing documents usually contain an agenda for membership meetings.
A quorum is a majority. Incorrect. A quorum is whatever your governing documents say it is. It can be a majority of all owners or a certain percentage of owners (30%; 25%; etc.).
A majority of owners is 50% plus 1. Incorrect. While this seems to make sense, in certain circumstances it results in more than a majority. For example, if you have 100 owners, 50% equals 50, plus 1 equals 51, which is a majority of 100. But, if you have 99 owners, 50% of 99 equals 49.5, plus 1 equals 50.5, which is rounded up (you always round up) to 51, which is more than a majority of 99. (Note that 50.5 is more than a majority of 99 as well. A majority of 99 is 50).

If you have any questions regarding the above, contact your association attorney.

Howard J. Perl, Esq.

Shareholder, Becker
Fort Lauderdale | bio

Can the Board Enforce Restrictions that the Previous Board Failed to Enforce?

The short answer is yes. But not so fast. The correct procedures must be followed. The Board needs to put owners on notice that from this point onward, the restriction that was previously unenforced will now be actively and evenly enforced. This is done through a Board resolution adopted at a duly noticed Board meeting. Association counsel should draft the resolution to ensure that the necessary language is included to begin properly enforcing the restriction(s) going forward.

The process of reviving a previously unenforced restriction comes from the case named Chattel Shipping and Investment, Inc. v. Brickell Place Condominium Association, Inc., 481 So.2d 29 (Fla. 3rd DCA 1985). In Chattel Shipping, the association’s declaration of condominium prohibited unit owners from enclosing their balconies without prior approval from the board. Multiple owners, nevertheless, enclosed their balconies without the requisite approval. The board, prompted by a letter from the city that the enclosures violated the city’s zoning ordinance, informed the owners that it would enforce the restriction and prohibit future balcony constructions. After this announcement, one unit owner, Chattel Shipping and Investment, Inc., enclosed its balcony. When the association secured a mandatory injunction requiring the removal of the balcony enclosure, the unit owner sought a reversal on the ground that the association had failed to require the dismantling of the other existing enclosures and thus was unequally and arbitrarily enforcing the restriction.

The Court rejected the owner’s argument, holding that the association could adopt and implement a uniform policy under which a building restriction will be enforced only prospectively without the enforcement of the same being deemed selective and arbitrary. Thus, the Chattel Shipping case stands for the proposition that an association can revive the enforcement of a restriction despite previous non-enforcement by notifying the members of the Board’s intent to prospectively enforce the restrictions.

The reason the Board needs to notify owners that it will begin to enforce a specific restriction going forward is to ensure that the Board is not selectively enforcing the restriction. When a Board seeks to enforce a restriction against an owner, if an owner can show that there are instances of the same violations that the Board has noticed and not acted upon, the owner may be able to show selective enforcement. For example, in White Egret Condominium, Inc. v. Franklin, 379 So. 2d 346 (Fla. 1979), the owner raised the defense that the association was selectively enforcing the restriction against children while allowing other families with children in other units. The Court agreed with the owner and did not enforce the restriction against this owner. The Chattel Shipping Resolution therefore acts to “reset” the enforcement of a restriction by stating that from the date of the resolution, the Board will begin to enforce the restriction.

There may be practical issues with beginning to enforce certain restrictions that were previously unenforced. For example, with the White Egret scenario above, the Board cannot reasonably expect that following the adoption of the resolution that owners with children would leave the condominium. Or if the previous boards have turned a blind eye to house cats or has not enforced the one-dog policy and now a number of owners have pets in violation of this restriction, the Board cannot reasonably expect that following the date of a resolution all owners with pets in violation will move or get rid of their pets.

In these cases, unlike temporary violations such as those of parking restrictions that the Board may begin to enforce against all owners immediately, the Board may need to adopt a “grandfather clause” as part of the restriction. “Grandfathering” allows owners or residents that are already doing something to continue doing so, even if they would be in violation of the new (or newly-enforced) restriction. Over time, there will be fewer and fewer exceptions to the restriction as grandfathered owners move away or pass. And eventually, the restrictions will apply to all owners and residents of the community, as subsequent purchasers in the community will be buying the units under constructive notice of the community’s restrictions. Such grandfather clauses should be carefully considered and only adopted in consultation with association counsel.

What about violations that involve permanent structures like the balcony enclosures in Chattel Shipping? Owners had enclosed their balconies without approval in violation of the documents. When resetting the enforcement of the violation, the Board did not require that these owners take down their enclosures, rather future balcony constructions were prohibited. This will usually need to be the case if owners reasonably relied on the Board’s failure to enforce a restriction. However, there are important exceptions. For example, if a new restriction to balcony enclosures is adopted by the association due to a need to protect the structural integrity of the building, the prior right to place items on the balcony will need to yield to the overriding safety considerations of the new rule. In such a case, the Board should obtain documentation of the overriding safety concerns, such as from an engineer’s report, before requiring owners to change structures that were previously allowed. Another example is if certain items are no longer code compliant, even if the equipment would ordinarily be entitled to grandfather status, the equipment should be brought up to code, if possible, or removed if rendered inoperable.

The Board should consult with counsel if it is facing issues with restrictions previously unenforced by prior boards. Association counsel can assist in reviving the restriction so that it is once again enforceable.

Karyan San Martano

Attorney at Law, Becker
Ft. Lauderdale | bio

Is your Community Association Set up to Vote Electronically?

With election season upon us, has your community set up electronic voting? In many communities, voter apathy is an issue with members not returning their proxy and not attending meetings. Not only does this impact elections, but also other membership votes, such as amending the governing documents, voting on material alterations, etc.. One way to simplify the voting process for members is for the community to authorize and implement electronic voting. The Florida legislature has authorized electronic voting for elections and other membership votes in condominiums, cooperatives, and homeowners’ associations since 2015. Many communities, however, have not taken advantage of this option, even though electronic voting is a vital tool to encourage member participation at meetings.

In authorizing electronic voting, the Legislature set forth several statutory requirements to do so, which are discussed below. As always with statutory requirements, it is important to discuss the matter with association counsel to ensure that your community correctly implements its online voting system.

First, a unit owner must consent in writing to online voting. This consent is distinct from a unit owner’s consent to receiving certain notices by electronic transmission. However, for administrative ease and efficiency, association counsel can prepare a form for your community on which owners have the option to consent to either, or to both, receiving official association notices by e-mail and to online voting together. For the owners who consent to electronic voting, these consent forms become part of the association’s official records that are open to inspection upon written request from an owner. Unlike other official records which must be maintained either for seven years or permanently as outlined in the statute, papers and electronic records relating to voting must be maintained for one year from the date of the election, vote, or meeting. An owner who consents to electronic voting may opt out later.

In addition to the consent form, the association should have association counsel prepare the board resolution authorizing the online voting system, as the statute contains several requirements for this resolution. The board resolution must provide that unit owners receive notice of the opportunity to vote through an online voting system, must establish reasonable procedures and deadlines for unit owners to consent, in writing, to online voting, and must establish reasonable procedures and deadlines for unit owners to opt out of online voting after giving consent. Written notice of a meeting at which the resolution will be considered must be mailed, delivered, or electronically transmitted to the unit owners and posted conspicuously on the condominium property or association property at least 14 days before the meeting. Evidence of compliance with the 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.

Prior to any membership vote taken at a meeting, except for the election of board directors, a specific quorum must be reached. The statute provides that a unit owner voting electronically is counted as being in attendance at the meeting for purposes of determining a quorum. Thus, setting up electronic voting and having owners’ consent to using electronic voting helps the association achieve quorum and required approvals by making it easier for owners to be “present” and to vote.

The statute dictates several requirements for the association to set up online voting. The association must provide each unit owner for a method to authenticate the unit owner’s identity to the online voting system and a method to confirm that the unit owner’s electronic device can successfully communicate with the online voting system. The method to confirm that the unit owner’s device will be able to communicate with the system must be available at least fourteen days before the voting deadline. The online system must also be able to authenticate the unit owner’s identity and to authenticate the validity of each electronic vote to ensure that the vote is not altered in transit. The system needs to also be able to transmit a receipt to each unit owner who casts his or her electronic vote.

In addition to the above, for elections of the board of directors of the association, the association must also provide a method to transmit the electronic ballot to the online voting system that ensures the secrecy and integrity of the ballot. They system must also be able to permanently separate any authentication or identifying information from the electronic election ballot. This is so that it is impossible to tie an election ballot to a specific unit owner. The system needs to be able to store and keep electronic votes as accessible to election officials in the event that a recount, inspection, and/or review is required.

These specific requirements are found in Section 718.128 of the Condominium Act, Section 719.129 of the Cooperative Act, and Section 720.317 of the Homeowners Association Act. To learn more about how to properly set up electronic voting for your community and the statutory requirements, speak with your association counsel.

Karyan San Martano

Attorney at Law, Becker
Ft. Lauderdale | bio

Lender Questionnaires

Associations and association managers routinely receive what are referred to as lender questionnaires on a regular basis. What is a lender questionnaire?

A lender questionnaire is usually a request from a bank, lending institution or title company that requests the Association provide information about the community to the lender. Such requested information generally includes request for information concerning the community make up, collection procedures, community delinquency information, recreation areas, etc. More recently, requests from Fannie Mae and Freddie Mac have requested the Association provide information regarding the structural integrity of the building, reserve analysis reports, pending code violations, etc. What is the Association’s legal responsibility to answer such questions?

Associations are not required by law to provide a prospective purchaser or lienholder with information about the association other than information or documents required by the statute that governs such association, such as 718, 719 or 720, Florida Statutes This generally means the Association is only required by law to provide estoppel information as required by the pertinent statute.

There are slight differences in the statutes in regard to Sections 718, 719 and 720, Florida Statutes.

Section 718.111(12)(e)(1), F.S.:

1. The association or its authorized agent shall not be required to provide a prospective purchaser or lienholder with information about the cooperative or association other than the information or documents required by this chapter to be made available or disclosed. The association or its authorized agent may charge a reasonable fee to the prospective purchaser, lienholder, or the current unit owner for providing good faith responses to requests for information by or on behalf of a prospective purchaser or lienholder, other than that required by law, if the fee does not exceed $150 plus the reasonable cost of photocopying and any attorney’s fees incurred by the association in connection with the response.

2. An association and its authorized agent are not liable for providing such information in good faith pursuant to a written request if the person providing the information includes a written statement in substantially the following form: “The responses herein are made in good faith and to the best of my ability as to their accuracy.”

Note the quoted language in the last sentence, which limits the liability for any response as long as the quoted language is included in such response.

Section 719.104(2)(d), F.S.:

The association or its authorized agent shall not be required to provide a prospective purchaser or lienholder with information about the cooperative or association other than the information or documents required by this chapter to be made available or disclosed. The association or its authorized agent shall be entitled to charge a reasonable fee to the prospective purchaser, lienholder, or the current unit owner for its time in providing good faith responses to requests for information by or on behalf of a prospective purchaser or lienholder, other than that required by law, provided that such fee shall not exceed $150 plus the reasonable cost of photocopying and any attorney’s fees incurred by the association in connection with the association’s response.

Unlike the Condominium Act, the Cooperative Act section does not contain any language limiting the liability of the responder. But of course, there is no harm in including such language in any response.

Section 720.303(5)(d), F.S.:

The association or its authorized agent is not required to provide a prospective purchaser or lienholder with information about the residential subdivision or the association other than information or documents required by this chapter to be made available or disclosed. The association or its authorized agent may charge a reasonable fee to the prospective purchaser or lienholder or the current parcel owner or member for providing good faith responses to requests for information by or on behalf of a prospective purchaser or lienholder, other than that required by law, if the fee does not exceed $150 plus the reasonable cost of photocopying and any attorney fees incurred by the association in connection with the response.

Also, unlike the Condominium Act, the Homeowners Association Act section does not contain any language limiting the liability of the responder. As noted above, of course there is no harm in including such language in any response.

Associations may provide additional information as requested by lender questionnaires. Associations may charge up to $150.00 to provide such information, as well as any reasonable attorney’s fees and costs incurred in connection with such a response. In the past, associations would routinely provide this additional information, which sometimes included information on association amenities, a percentage of how many accounts were delinquent, etc. As mentioned above, Fannie Mae and Fannie Mac have now added questions requesting the Association to provide information regarding the structural integrity of the building, reserve analysis reports, pending code violations, etc.

Generally, board members, managers and even the association attorney are not in a position to provide answers to these questions, and the Association is not required to provide answers to such questions. It has been my experience that most loans will close even if the specific questions are not responded to.

If the association does respond to these structural questions, it should be the association engineer that provides such responses. Some of the questions cannot be answered – questions that ask if there will be any violations in the future, for example.

If your association decides to respond to the lender questionnaire, before it just routinely responds to these lender questionnaires, take a close look at the questions; include the limited liability language mentioned above; and engage the association’s engineer to answer the appropriate questions.

Howard J. Perl, Esq.

Shareholder, Becker
Fort Lauderdale | bio

Charging Stations for Electric Vehicles in Condominium Associations

Boards of condominium associations should anticipate that more owners and residents within their communities will be purchasing electric vehicles as they continue to rise in popularity. Several years ago, the Florida Legislature noted that the use of electric vehicles serves an important public interest by conserving and protecting the state’s environmental resources. The Legislature also provided that electric vehicles may provide significant savings to drivers, which continues to be true with the current rise in gas prices. The Legislature decided to encourage the use of electric vehicles. Finding that the participation of condominium associations is essential to these stated goals, the Legislature amended Chapter 718, Florida Statutes (the “Condominium Act” or “Act”) to address electric vehicle charging stations. Electric vehicles are powered by an electric motor that draws from rechargeable storage batteries, fuel cells, or other sources of electrical current. This necessitates the installation of charging stations for these vehicles, which are not nearly as commonplace as gas stations. Boards may reasonably expect to receive more frequent inquiries from residents regarding the installation of charging stations on the property. Anticipating these inquiries and planning ahead will allow the board to avoid the number of logistical issues of these charging stations, as well as potentially give the community an advantage with prospective buyers who compare available amenities when deciding where to purchase.

The association on its own accord may decide to make available, install, or operate an electric vehicle charging station upon the common elements or the association property, rather than wait for individual unit owners to request an installation of the same. The statute specifically provides that the installation, repair, or maintenance of an electric vehicle charging station does not constitute a material alteration or substantial addition to the common elements or association property. This means that this can typically be done via board vote alone. However, there are still a number of determinations the board needs to make, with guidance from association counsel and an electrical engineer or similar expert. For example, the board needs to establish the charges or the manner by which unit owners, residents, or even guests if allowed to use the station will pay for use of the charging station. Further, does the planned location of the charging station(s) impact existing parking spaces? The board should have association counsel review how the spaces are treated in the governing documents and determine whether the board has authority to reassign the same. An electrical engineer should also be involved to determine whether the planned locations, and even the association’s electrical systems, are able to accommodate such an installation.

The association may also wish to leave the installation or operation of electric vehicle charging stations to individual units owners. The statute makes clear that the declaration of condominium may not prohibit or be enforced by the board to prohibit any unit owner from installation a charging station within the boundaries of the unit owner’s limited common element or exclusively designated parking area. But there are numerous requirements a unit owner must following order to do so. Again, the board should work with counsel to determine how the parking spaces are treated in the documents, because this provision does not mean that a unit owner may install a station anywhere outside of their designated limited common element parking space. Although the board cannot prohibit such an installation, the board should consider amending the governing documents or adopting thorough rules regarding the installation, operation, maintenance, repair and other logistical issues that may arise from unit owner installations, such amendments or rules in accordance with the statutes.

For example, there are potential safety issues to consider. The association may deny such a request for an installation if there is proof that it will cause irreparable damage to the association property. The association will need to work with an expert to determine the same. Further, although Chapter 718 allows each owner to install a charging station, the association needs to determine how it may accommodate several requests and whether the property is able to safely accommodate multiple charging stations. The association must ensure that the owner’s charging station complies with all federal, state or local laws and regulations, including with safety requirements, consistent with the applicable building codes or safety standards. The association should also require a certificate of insurance listing the association as an additional insured on the owner’s policy for any claim related to the charging station. Having a detailed application process will allow the association to gather the information it needs to ensure the safety of the condominium prior to the unit owner installation a station.

Additionally, there are the issues surroundings the costs of these electric vehicle charging stations. If an individual unit owner is requesting to install a station on his or her own space, the unit owner is responsible for the costs of installation, operation, maintenance, and repair, including, but not limited to hazard and liability insurance. The electricity must be separately metered or metered by an embedded meter and payable by the unit owner installing such charging station or by or her successor. The association may enforce the payment of the costs installing, operating, maintaining, repairing, or the removal of the station if the owner decides there is no longer a need, via the lien procedures provided for in Section 718.116, Florida Statutes.

Lastly, the board may want to adopt certain reasonable architectural standards that govern the dimensions, placement, or external appearance of the electric vehicle charging station, provided that such standards cannot prohibit the installation of such charging or substantially increase the cost thereof.

Before the association is taken by surprise by a request from an owner or from multiple owners regarding electric vehicle charging stations, the Board should consider the above issues. The association may wish to have counsel put together a written policy about how such issues should be addressed, and an agreement form that owners will be required to sign so that their installation complies with the statute and the governing documents.

Karyan San Martano

Attorney at Law, Becker
Ft. Lauderdale | bio

Understanding the Distinction between the Different Association Governing Documents

A recent decision from Florida’s Second District Court of Appeal highlights the importance of understanding the distinction between the different documents that govern the Association, as well as when and how each needs to be amended. Many people use the term “bylaws” as a catch-all term to describe the entire set of documents, but each document serves a different purpose, even if there is some overlap in provisions from time to time.

The case is Joy v. Oaks Club Corporation, — So.3d —- 2022, WL 2541701 (Fla. 2d DCA July 8, 2022), wherein the Joys challenged their Club’s decision to use its bylaw amendment procedure, rather than amending the Declaration, to redefine the membership requirement. Since the Declaration was recorded, it provided that an existing property owner could purchase another property within the community without having to purchase an additional club membership. The Declaration only required that all property owners be members of the Club. The Club amended its Bylaws, and not the Declaration, to provide that an existing property owner who purchases an additional property must now also purchase an additional club membership with each new property acquired in the community. An amendment to the Bylaws required approval by a simple majority of the owners, while an amendment to the Declaration required the approval of a super-majority of the owners, specifically by not less than 75% of the owners. The Joys sued contending that the amendments to the Bylaws were void and only an amendment to the Declaration could change the mandatory club membership requirement. The Court agreed. It explained, in part, that the obligation of an owner to purchase a single club membership was based for thirty years on the Declaration, and therefore the Court was thus hard-pressed to find that the Club could redefine this requirement through a bylaw amendment.

This case serves as a reminder to understand the hierarchy of the Association’s governing documents. At the top of this hierarchy is the Association’s Declaration. Florida case law often describes the Declaration as the Association’s “constitution” as it carries the most legal weight of the Association’s documents. This means that provisions of the Articles of Incorporation, the Bylaws, or the Rules and Regulations cannot contravene an express provision of the Declaration. The Articles of Incorporation create the corporation or the corporate entity responsible for the management and operation of the condominium – in other words, the Association. The Bylaws contain the operating procedures of the Association. This is the document that generally contains meeting procedures, notice requirements, and other operational matters. Finally, the Rules and Regulations, which are essentially the “do’s and don’ts” of the community that govern day-to-day functions of the community. For example, pool rules or gym rules will be found therein.

Moreover, not only can the Articles, the Bylaws, and the Rules and Regulations not contravene an express provision of the Declaration, but Florida case law has also established that these documents cannot contravene a right reasonably inferable from the Declaration. Determining whether an amendment contravenes a right reasonably inferable from the Declaration is tricky and should be determined with the assistance of association counsel.

For example, returning to the case described above, the Court discussed that the Club Declaration required only that all property owners be members, but once membership was obtained, the Declaration contained no limitations on the nature or the scope of the property that may owned. Thus, the Court reasoned that the right to own multiple properties while only being required to purchase one club membership was a right reasonably inferable from the Declaration. This meant that the Bylaw amendment requiring the purchase of additional club memberships for each additional property purchase in the community contravened this right inferable from the Declaration.

Lastly, despite the Declaration’s ultimate place at the top of the document hierarchy, it is important to note that if the Declaration is in conflict with the law, the law prevails in most instances. There are several statutory provisions that expressly defer to the governing documents. Again, working with experienced association counsel will ensure that the documents are properly in line with the law so that such a conflict does not find itself in the Association’s documents.

In addition to understanding the function of each document and their hierarchy in relation to one another, it is important to determine whether each governing document is subject to its own amendatory procedure, which is the case in many communities. Generally, the Declaration may require the highest level of owner vote, such as in the Joy case wherein the Declaration required a super-majority approval and the Bylaws required a simple majority approval. This means that the Club’s decision to amend the Bylaws, even if it did receive a membership approval for the same, was not enough. Some communities have association counsel draft amendments that can simplify the amendatory procedure. For example, the Declaration, Articles of Incorporation, and the By-Laws can be amended to have matching amendatory thresholds, which can be easier to remember and implement. In some cases, the vote is based on the total number of members, and in other cases, the required vote to amend is based on the number of members who actually vote at a meeting where a quorum is established. The latter is generally recommended to combat voter apathy and can be changed with the assistance of association counsel. Lastly, in most communities, the rules and regulations are typically adopted and amended by a vote of the Board alone, assuming the other documents give the Board adequate rulemaking authority. The Board’s rulemaking authority is found in the other three documents, and the Board should verify with counsel when adopting new rules to determine if this is within the scope of their authority.

A higher threshold for amending the Declaration, or a requisite membership approval for amending the Declaration, the Articles, or the Bylaws rather than a Board-made rule, should not deter the Board from properly amending the correct document. Improperly passing a rule or amending a document in the procedurally incorrect fashion can lead the Association to expensive issues and legal liabilities. By working closely with experienced association counsel when amending any of the Association’s governing documents, the Association can ensure that the provisions of its documents are legally enforceable, complimentary to one another, and in the best interest of the community.

Karyan San Martano

Attorney at Law, Becker
Ft. Lauderdale | bio

Vetting Contractors and Contracts

If you live in a condominium or cooperative association in Florida, it may seem like your building is in a constant state of repair. Roofing. Painting. Concrete restoration. Pool deck. Pool re-marciting or diamond briting. Asphalt. Pavers. Elevators. Windows. The list goes on and on, and the work goes on and on. With the new statutory structural integrity inspections and reports that are now required, the work will only increase. While all these repairs and maintenance are required and good for the building and its residents, choosing the right contractors to perform these jobs are critical in order to ensure the job is done timely, properly, at a reasonable cost, and with proper warranties as applicable.

How does an association find the right contractor? In today’s market, how does the association find any contractor? What are the steps? The pitfalls? Who do we get references from? This article will assist you with these questions.

References can come from many sources. Neighboring buildings. Your manager. The management company. Your other professionals – accountant, insurance agent, attorney. Your engineer. An association should be able to secure at least three or four qualified contractors from these sources. How many bids do you need? By law, when competitive bids are required, the minimum is two. That is all the statute requires – two bids. Not three, like many people think. But I always suggest you solicit at least three bids for any job over $10,000.00, and for major work, like roof replacement, painting, concrete restoration, etc., six or seven bids are not uncommon.

Major work, like roof replacement, painting and waterproofing, concrete restoration, etc., should have a formal bid package prepared by the association’s engineer in conjunction with the association. The bid package will contain detailed specifications that each bidder is required to comply with, resulting in the “apples to apples” bid comparison every association wants to see. How does the association engage an engineer? See the above paragraph.

The formal bid package will include specifications, timetables for the work, payment provisions, payment approval provisions, insurance requirements, warranty information, performance deadlines, penalties for missing performance deadlines, inspection requirements, who pays for permits, and a host of other information. Generally, there is a matrix where each contractor is required to insert their price for that specific portion of the job. Once all the bids are received, the engineer or association can prepare a matrix showing all the contractors and their prices for each portion of the work. This is the beginning, just the beginning, of the contractor vetting process.

Price is not everything. Price is not the only thing. Generally, a contract should not be awarded based on price alone. While price is certainly an important factor, it is not the only factor.

Availability, supervision, reputation, ongoing other jobs, past performance, complaints on file, warranty, and other factors should be considered. If possible, walk another community where the contractor is doing work. Speak to those board members and residents, if possible, regarding the work, the contractor, problem resolution, supervisor availability, etc. All of this information should be factored into a board’s decision when choosing a contractor.

Of course, do not forget the basics, which will be part of the bid package – licenses and insurance. Always verify licenses and insurance. Let me say that again – always verify licenses and insurance. The association should be an additional insured under the contractor’s insurance policy – not just a certificate holder.

While the above bid package and related information is generally just for major projects as noted above, the theories can be applied just as well to a $5,000 pool heater replacement, a $7,500 sidewalk installation or a $15,000 playground installation. Check references. Verify licenses and insurance. Look at warranties.

One of the most important pieces of advice I can give – do not sign any contract before it has been reviewed by your association counsel. AIA contracts are not written to protect an association – they are written to protect the contractor. One page proposals, with a signature line and small print on the back page, are generally a red flag. Not always, but generally. Usually, a more formal contract that protects the association is required.

My second most important pies of advice regarding contracts – never sign a notice of intent without the notice being reviewed by your association counsel. These notices of intent can bind an association to engage in a contract, payments, etc., before a contract is even produced, reviewed or executed.

Living in south Florida, we have six months of hurricane season. Once a storm hits, contractors from all over the country descend upon Florida looking for work. Many of these are legitimate companies here to help. Just as many are not. When dealing with contactors after a storm or other disaster, the best piece of advice is “Do not lower your standards”. Go through the vetting process. Check references. Verify licenses and insurance. Legitimate companies that want to do business in Florida have licenses and insurance in place before a disaster. Watch out for red flags:

You need to sign the contract today
I can only give you ___% off today.
50% down
We can start work immediately – right now
Just sign the agreement – all payments will come from your insurance company
Any type of pressure tactic

Use your common sense. If a deal is too good to be true, it usually is too good to be true. There are no free lunches. Choose your contactors wisely. Time spent up front doing so will save you thousands, if not tens of thousands of dollars and as much aggravation later.

Howard J. Perl, Esq.

Shareholder, Becker
Fort Lauderdale | bio

Disputes in Community Associations: Arbitration, Mediation, or Litigation?

Disputes within community associations were originally treated like other civil disputes, requiring litigation when the parties could not agree. The law evolved to now require certain types of “alternate dispute resolutions” for community associations before the parties head to court. Specifically, both the Florida Condominium Act (Chapter 718 of the Florida Statutes) and the Florida Cooperative Act (Chapter 719 of the Florida Statutes) require mandatory arbitration or mediation before the filing of a lawsuit for a number of specific disputes. On the other hand, the Florida Homeowners Association (Chapter 720 of the Florida Statutes) requires a demand for pre-suit mediation prior to the filing of a lawsuit. In making these alternative dispute resolutions mandatory, the Florida legislature explained that its intent was to reduce the crowed court dockets and alleviate the high cost and significant delay often faced by parties in litigation.

But what exactly do arbitration or mediation mean in terms of resolving a dispute? Both are extrajudicial alternatives intended to resolve disputes. Similar to an internal grievance procedure, both are intended to avoid the time-consuming and costly nature of litigation. But unlike an internal procedure, both involve the use of an outside, independent party of the dispute and typically involve the use of legal counsel.

In mediation, the parties to the dispute meet with an independent, trained third party, who seeks to assist the parties in coming to a mutually agreeable solution to the dispute. The mediator does not make a “ruling” or a “decision” but rather attempts to facilitate the parties’ path to a resolution. For example, a mediator may assist both parties in seeing the potential weaknesses in their case, navigate personality conflicts, and remind the parties of the financial reality of litigation if the dispute is not resolved. The negotiated written settlement agreement following mediation is not subject to review by courts. However, if the agreement is breached by one party, typically the other may seek a court order for enforcement of the settlement agreement.

On the other hand, in arbitration, an arbitrator enters an order following the parties’ presentation of their cases. The arbitrator essentially sits as the judge and makes the decision. Like mediation, such a decision is often made more quickly and more economically than in litigation. The prevailing party is entitled to their reasonable attorney’s fees as awarded by the arbitrator. If the losing party wants to “appeal” the arbitrator’s decision, it may file what is called a trial de novo. A trial de novo is basically a new trial, and the case is heard by the judge as if the arbitration never occurred. This is so because although the Florida legislature seeks to encourage the resolution of condominium disputes through mediation or arbitration, the Florida Constitution guarantees the right of access to courts to all, including in regard to community association disputes. The arbitration order can be introduced as evidence in the trial, but recent case law decisions had lessened the weight an arbitrator’s final order might carry with a judge. If a trial de novo is not filed within 30 days of the arbitrator’s final order, the order is final, and may be enforced by a court of law.

In addition, the arbitrator may also refer a dispute to mediation at any time if he or she finds that the parties may best be served by mediating the dispute. The parties may also request that the arbitrator refer the case to mediation. Additionally, although the Florida Condominium Act requires mediation or arbitration for certain disputes, a party may file a motion for emergency relief or temporary injunction depending on the facts and circumstances of the particular case. For an injunction, the motion must show a clear legal right to the relief requested, that irreparable harm or injury exists or will result, that no adequate remedy at law exists, and the relief of injunction would not be adverse to the public interest.

The Florida Condominium Act is specific as to which disputes must first be brought to mediation or arbitration. Section 718.1255, Florida Statutes, defines disputes as any disagreement between two or more parties that involves the authority of the board of directors to either 1) require any owner to take any action, or not to take any action, involving that owner’s unit or the appurtenances thereto, or 2) alter or add to a common area or element. The statute further defines disputes as any disagreement that involves the failure of a governing body, when required either by the Florida Condominium Act or the association documents, to properly conduct elections, give notice of meetings or other actions, properly conduct meetings, or allow inspection of books and records. This means that any of these disputes in a condominium must first go through the arbitration process through the Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation (the Division). The section also defines issues not subject to mediation or arbitration, such as title disputes and alleged breaches of fiduciary duty.

Sometimes, controversies will include both matters that are eligible and ineligible for mediation or arbitration. In such a case where a petition involves a mix of both, an arbitrator may determine whether the ineligible matters can be properly separated so that the eligible issues may be arbitrated separately. Further, much like litigation, there must be an actual present and bona fide dispute for arbitration. The Division will not accept petitions that present issues that are moot, abstract, or hypothetical.

Although alternative dispute resolutions for community associations are guided by statutory requirements, a community association’s governing documents may also require mediation or arbitration either as a condition precedent to litigation or as the sole dispute resolution process. Due to the complex procedural nature of dispute resolution and the fact-dependent nature of most disputes, the association should seek guidance from counsel on not only the proper method, but also the one that will resolve the dispute most expeditiously and efficiently.

Karyan San Martano

Attorney at Law, Becker
Ft. Lauderdale | bio

2022 Community Association Legislation—What Happened?

After the Surfside tragedy, everyone wanted to know how such a tragedy could happen and what steps could be taken to avoid similar incidents in the future. What caused the collapse? Could it have been avoided? Why were repairs not made? Why did local governments allow repairs to drag on? Why were repairs not made in a timely fashion? Unfortunately, none of these questions can be answered quickly, and proper answers will require years of study and analysis.

The above questions, and attempts to enact legislative reform to address some of these questions, were a hot topic for the Florida legislature this year. Several counties and the Florida Bar convened task forces in the aftermath of the Surfside tragedy. Primary among the suggested legislative changes for multifamily buildings were periodic engineering inspections, reserve studies, and reserve funding mandates. While all agreed generally in regard to these reforms, at the end of the day, the Senate and House could not agree on the reserve funding issue and, as a result, nothing passed. Currently Florida law can allow for owners to opt to fund less than required reserves, or no reserves. Most legislative proposals included mandatory reserve funding of one type or another. The sticking point was how quickly to implement such mandatory reserves, without the option of owners being able to waive such requirements. Whether to implement immediately, effective in 2022, or over the next three or five years, to allow a gradual implementation, is ultimately what led to nothing being passed. Rather than compromise, which seems to be a forgotten word in Tallahassee these days, legislators could not, or refused, to come to an agreement for the benefit of all condominium and cooperative residents in Florida.

These issues are certain to be re-examined next year. As such, your association should begin recognizing what is most likely coming down the pike and preparing the association and its residents now. Most likely the days are gone when owners will have an opportunity to fully waive reserves. I anticipate mandatory reserve funding of some type will be implemented. Whatever version is implemented, the result will be an increase in annual maintenance assessments. Depending on what is implemented and your association’s current reserve funding situation, some owners may be looking at a significant increase in your 2024 assessments (as the laws I am discussing would be passed in 2023, and most likely effective for the 2024 association budget).

The association should be anticipating and working on these items now. For example, some sort of reserve study requirement is most likely coming. Budget for one now. Get proposals now. Have the study done now. Once mandated by statute, demand will go up, availability will go down, and of course prices will go up. We are seeing exactly that scenario now in regard to structural engineers and 40/50-year recertifications.

In regard to reserve funding, take a good look at your reserve schedules. Get updated estimates of repair costs. Factor in inflation when projecting 10 and 20 year replacement items such as painting, roofing, etc. Any effort to increase your 2023 reserve balances will help lessen any blow of 2024 mandated reserves. Explain these issues to your residents now. Many associations are understandably involved with 40/50-year recertification requirements and other life-safety related issues. Obviously these issues need to be addressed immediately and on an expedited basis. But associations and their members should keep their eye on long-term remedial requirements as well. More oversight; more required inspections; more required repairs; and more required reserves. All of these are good things for 40–50-year-old buildings in a saltwater environment in Florida.

The outcome of the 2022 legislative session once again underscores the inherent problem when all community association ideas are placed in only one omnibus bill. Until our legislators acknowledge this problem and start using stand-alone bills for important proposals, there is always the risk that needed reforms will not pass.

Contact your legislators, tell them you welcome these types of reforms, but they need to be addressed as needed, not all under one take it or leave it omnibus bill. Work with your association leaders on the above discussed items. Don’t be surprised by increased annual assessments, special assessments, and other upcoming expenses. They are coming. Prepare now.

Howard J. Perl, Esq.

Shareholder, Becker
Fort Lauderdale | bio

Should an Association Allow Its Clubhouse, or Other Common Area, to Be Used for Gambling?

While there are certain exceptions, generally, any game of chance is considered gambling. Section 849.08, Florida Statutes, defines gambling as follows:

“Gambling.—Whoever plays or engages in any game at cards, keno, roulette, faro or other game of chance, at any place, by any device whatever, for money or other thing of value, shall be guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083.”

The first type of gambling games, which are not subject to criminal penalties, are penny-ante games. Penny-ante games are specified in Section 849.085, Florida Statutes, as “a game or series of games of poker, pinochle, bridge, rummy, canasta, hearts, dominoes, or mah-jongg in which the winnings of any player in a single round, hand, or game do not exceed $10 in value.” Penny-ante games may be played in a dwelling, which is defined to include the common elements or common area of a residential subdivision of which a participant in a penny-ante game is a unit owner.

While penny-ante games are not subject to criminal penalties, the $10 restriction is very limiting and many games of chance, such as poker, exceed this amount. Poker games exceeding this amount would be considered illegal gambling.

In addition to penny-ante games, Bingo games are also not subject to criminal penalties. Pursuant to Section 849.0931(4), Florida Statutes, Bingo is defined as:

“Bingo game” means and refers to the activity, commonly known as “bingo,” in which participants pay a sum of money for the use of one or more bingo cards. When the game commences, numbers are drawn by chance, one by one, and announced. The players cover or mark those numbers on the bingo cards which they have purchased until a player receives a given order of numbers in sequence that has been preannounced for that particular game. This player calls out “bingo” and is declared the winner of a predetermined prize. More than one game may be played upon a bingo card, and numbers called for one game may be used for a succeeding game or games.

While not specifically addressed in Chapter 720 or Chapter 719, the Condominium Statute, Section 718.114, Florida Statutes, provides: “[a] condominium association may conduct bingo games as provided in s. 849.0931.” That being said, Section 849.031, Florida Statutes, recognizes the right of a homeowners’ association, cooperative association and a condominium association to have bingo games on the common areas. Although permitted, there are several limitations on having a bingo game in a community. Just a few of the limitations under this statute include the following:

The jackpot shall not exceed the value of $250 in actual money or its equivalent;
The organization conducting the bingo cannot have bingo games exceeding two days per week;
No more than three (3) jackpots on any one day of play; and
No one under 18 is allowed to play.

There are also specific requirements for the bingo cards and the objects/balls marked by letters and numbers.

Based upon the foregoing, most games of chance are considered illegal gambling and should not be permitted on an association’s common areas. If an association wishes to proceed with allowing penny ante games or bingo games on the common area, it should first consult its attorney to verify that it is complying with the requirements of Section 849.085 and Section 849.0931 of the Florida Statutes.

Elizabeth A. Lanham-Patrie

Shareholder, Becker
Ft. Lauderdale | bio

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