Managers Report newsletter

Golf Carts and Your Community

Golf Carts and Your Community

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[2] FLA. STAT §322.04(1)(e) (2019)

[3] FLA. STAT §316.212(7)

[4] FLA. STAT §316.003(43)

[5] FLA. STAT. §320.01(36) (2019)

[6] FLA. STAT. §320.01(41) (2019)

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

[8] FLA. STAT § 320.01(42) (2019)

[9] FLA. STAT  §320.01(1)(b) (2019)

[10] FLA. STAT §322.04(1)(e) (2019)

[11] FLA. STAT §316.212(7)

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

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

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

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

[16] FLA. STAT §718.123 (1).

[17] Id.

discriminatory conduct

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

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

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

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

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

 

Sara K. WilsonSara K. Wilson

Attorney at Law, Becker
Naples | bio

 

 

Are Signed Election Ballots Valid?

“Are Signed Election Ballots Valid?”

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

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

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

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

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

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

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

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

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

 

David G. MullerDavid G. Muller

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

 

 

Illegal Rentals

Illegal Rentals Might Mean Jail Time

Owners with illegal unit rentals can end up in jail. At least they can if they live in Miami Beach. The City of Miami Beach is on the forefront of municipalities cracking down on illegal Airbnb rentals. The city announced it will prosecute hosts who provide fake business license numbers in order to list their properties on the site. The penalty is 60 days of jail time and/or a $500 fine. Cities across the U.S. are battling illegal short-term rentals which are believed to negatively impact the quality of life for the neighbors. Property values are affected in condominium associations with a revolving door of unknown occupants.

In Miami Beach Airbnb must now list the host’s business license if the rental is within the City limits. Airbnb will not be required to verify the license numbers are correct and that they tie to the right property. The way it works is that a host must obtain a business license and a resort tax registration number. There are areas within the City which prohibit short term rentals of six months or less. Hosts who use the Airbnb platform to illegally allow short term rentals in areas where they are prohibited face steep penalties of $20,000 for the first violation and $40,000 for the second and $20,000 for each subsequent one.

By requiring a host to post a business license number and a resort tax registration certificate number on their listings, code enforcement officers can more easily police the Airbnb listings. Other short-term rental platforms conform to the business license posting requirement, but they, too, have hosts providing fake numbers.

It is a welcomed breath of fresh air to see a city employing a cutting-edge approach to dealing with such short-term rental violations which oftentimes plague condominium associations. Other municipalities would be well-advised to follow suit as the enforcement efforts not only add funds to a city’s coffers but also provide back-up to the local constituent associations which are having difficulty enforcing their own short-term rental bans. A condominium association would not be delegating its duties to the city, but a team approach would be used to have multiple layers of policing to enforce the rental restrictions against the scofflaw hosts.

 

Rosa M. de la Camara

Shareholder, Becker
Miami | bio

 

condominium elections

Avoiding Election Pitfalls

Many condominium associations are gearing up for, or in the midst of, election season, which presents challenges and questions regarding the election process. Condominium elections that fail to follow the procedures outlined in the Condominium Act, Florida Administrative Code, and the association’s governing documents can result in an election being voided.  Homeowners’ associations should check their governing documents to determine if they have adopted condominium election procedures or condominium-style elections.  Homeowner association governing documents detail the election procedures.  Running afoul of proper election procedures that result in an election that must be “redone” can jeopardize the credibility of the board and manager in the members’ eyes.

Condominium elections are conducted on the date of the annual meeting, regardless if a quorum is present. While a quorum is not required, at least twenty percent (20%) of the eligible voters must cast ballots to have a valid election. Condominium elections must be done by secret ballot or voting machine and may including online voting if the association has provided for and authorized online voting. Proxies may not be used to elect directors but may be used for other matters occurring at the annual meeting, such as voting to waive or partially fund reserves or amendments to the governing documents. Unlike many homeowners’ associations, a condominium cannot use a nominating committee but may create a search committee to encourage eligible persons to run for election.

First, the association must determine the date of its election as the election date controls deadlines for sending and receipt of notices. Often the annual meeting date, or date range, will be dictated by the governing documents, so the association should start with a review of its governing documents. At least sixty days before the election, all owners must be mailed or electronically transmitted, if the owner has opted into electronic notice, the first notice of the election. The first notice must contain the name and mailing address of the association and must disclose the procedure and deadline to consent to electronic voting if the association has provided for and authorized electronic voting. If the association fails to follow the procedures for the first notice, the election must be re-noticed with a new first notice if the election is more than sixty days away; if the election is less than sixty days away, then the election must be rescheduled. If the error is discovered after the election, then the association must conduct a new election.

At least forty days before the election, eligible persons who desire to be a candidate must give the association their notice of intent to be a candidate. U.S. mail, facsimile, personal service, telegram, and email all suffice as notice, and such notice is effective upon receipt. However, the Association should implement procedures so it can verify a candidate timely submitted the notice, and you do not get into a dispute with a prospective candidate who claims to have slipped the notice under the manager’s door at 11:59 pm on a Wednesday evening for a Thursday deadline.

At least thirty-five days before the election, the board candidates may furnish the association with a candidate information sheet. The association may not edit, alter, or modify the content of the information sheet. The Association must furnish the candidate information sheets to each owner, which should accompany the second notice of the election. If the Association fails to send all eligible voters the candidate information furnished by each eligible candidate, then the association must send an amended second notice, which must explain the need for the second notice and include the candidate information sheets, to all owners assuming there is sufficient time to do so.  If there is not enough time, then the election must be rescheduled and a new second notice sent to all owners. If the election has already occurred, then the election is void and must be redone. 

For an election to be necessary, a vacancy requires two or more eligible candidates. If not enough eligible candidates notice their intent to run, then an election is not required and will not be conducted. Since write-in candidates and nominations from the floor are not accepted, the association will know well in advance of the scheduled election if it is necessary. The association should also be aware to ensure only eligible candidates are listed on the ballot.   The association should review its governing documents to determine if board members must be unit owners.  Further, persons delinquent on any monetary obligation due to the association are not eligible to be a candidate for board membership. The date to measure delinquency is the last date notices of intent to be a candidate are due, not the election date. Also, persons convicted of a felony in Florida or in a United States District or Territorial Court, or who has been convicted of any offense in another jurisdiction which would be considered a felony if committed in Florida, are not eligible for board membership unless such felon’s civil rights have been restored for at least five years as of the date such person seeks election to the board. If an election is not required, then the association holds a membership meeting, usually the annual meeting, to announce the names of the new board members and if one or more board seats are unfilled.

If there are more eligible candidates, the association proceeds with the election.  Between fourteen days and thirty-four days before the election, the association sends a second notice of election to all unit owners.  Make sure to check your governing documents for this notice, as although the statutes require a fourteen day notice, your governing documents may require a thirty day notice.  The second notice should contain the candidate information sheets and the association may not endorse, disapprove, or comment on a candidate. The second notice should also include the ballot along with the outer envelope addressed to the person authorized to receive the ballots and a smaller inner envelope in which to place the ballot. The outer envelope must indicate the name of the voter, unit for which the vote is cast, and signature space for the voter.  After the voter completes the ballot, the voter must place the ballot inside the smaller inner envelope and seal the envelope. Then the voter must place the sealed inner envelope in the outer envelope and seal the outer envelope. The voter then signs the outer envelope and returns it, personally or by mail, to the association. Upon receipt, by the association, the ballot may not be rescinded or changed.

Before the meeting, the association may verify the outer envelope information in advance of the meeting. To verify before the meeting, the association must appoint an impartial committee at a duly noticed board meeting. The impartial committee may not contain current board members or their spouses, officers or their spouses, or candidates for the board or their spouses. The committee must meet the day of the election but before the meeting to check the signature and unit identification on the outer envelope against a list of qualified voters. The voter should then be checked off a list as having voted. If a voting certificate is required, then the committee should check to ensure that the owner has placed a voting certificate on file with the association, and the voting certificate holder has cast the ballot. Unsigned outer envelopes, units that require a voting certificate holder but have not submitted a voting certificate to the association, units where the voting certificate holder did not vote, and units submitting duplicate outer envelopes shall be disregarded. The committee should not open outer envelopes until the actual election meeting.

The association does not want to have to search the county’s official records the night of the election to determine which units require a voting certificate and its designee. For a quicker and smoother election process, the association should indicate on a copy of its roster of owners which units require voting certificates and who is designated as the voting certificate holder.

On the day of the election, the association should transport the envelopes containing the ballots to the location of the election. Also, the association should have blank ballots available for distribution to the eligible voters who have not already voted. Ballots distributed at the meeting shall be placed in the same inner and out envelope system used by persons returning ballots before the election. If an impartial committee has not been previously appointed, the association should appoint such a committee at a board meeting before the annual meeting. The impartial committee will then validate the outer envelopes in the same manner listed above. Once the outer envelope validation is complete, the valid outer envelopes may be opened, which should be done in the presence of the owners. Once the first outer envelope is opened, or accessing the electronic votes, the polls are closed, and no additional ballots may be accepted. The inner envelopes must be opened and counted in the presence of the unit owners. Any inner envelopes containing more than one inner ballot envelope must be disregarded.  If a ballot indicates a vote for more candidates than vacancies, the vote is disregarded.  A plurality of ballots case decides the election.

 

Michael Casanover

Michael Casanover, Esq.

Attorney at Law, Becker
Fort Lauderdale | bio

 

master association elections

“Master Association Elections Can Be Confusing,” News-Press

Q: What are the Florida requirements for election of the board of directors and the eventual election of officers in a multicondominium association? Can anyone who is a member of any of the individual boards run for election? Does each association get a single vote? Does each association choose a representative who then becomes a member of the board which then elects officers? How does it work? (J.J., via e-mail)

A: The legal structuring of multi-tiered condominium communities is a rather complex issue, and the manner in which the developer chose to set up the community will be of the most relevance. Developers usually set up multibuilding projects under some sequential development scheme, using “phase” condominiums, “series” condominiums (which then often involve a “master” association and “association property”) and “multicondominiums.”

Since your question mentions “individual boards,” I assume you are really asking about a “master association” since a multicondominium by definition is one association that operates more than one condominium, since there is only one board. In multicondominiums, you still sometimes see bylaws that provide for representational board seats from the various condominiums operated by the association, although it is my experience that the majority follow “at large” voting procedures where any unit owner from any condominium has an equal opportunity to run for the open board seats.

For multicondominium associations created on or after July 1, 2000, Section 718.405 of the Florida Condominium Act requires, among other things, that the voting rights of the unit owners in the election of the directors be described in the condominium documents. Section 718.103(30) of the Florida Condominium Act also states the voting interests of the association are the voting rights distributed to the unit owners in all condominiums operated by the multicondominium association. For matters related to a specific condominium, the term “voting interests of the condominium” is used, sometimes referred to as “class voting.” So for true multicondominium associations electing directors, the simple answer is “follow the documents.”

If, as I suspect, you are actually dealing with a “master association,” the situation is decidedly more complicated. The first question to resolve is whether the association is governed by the condominium statute, or some other statute. At the risk of oversimplification, if any members of the association are not condominium unit owners or their governing representatives (e.g. “subassociations”) you are not covered by the condominium statute. If all members are condominium unit owners or their representatives, you would fall under the condominium statute although there is a different rule for pre-1991 communities where there is a split of authority under the Florida case law.

I have seen many different types of board election procedures for “condominium master associations.” Obviously, the simplest, and most clearly compliant with the statute is the “regular” condominium election procedure where “at large” elections are held and anyone can put their name in to run for the board. Beyond that, there are many different types of procedures I have seen, including where the president of each subassociation is a master board member, where the board of each subassociation appoints the master board member, where the unit owners in the subassociations elect their master board representative, and where all members get to vote on all candidates, even those from another condominium (an “at large” election).

The law in this area is different for condominiums than it is for homeowners’ associations. For condominium master associations, the basic rule is, again, “follow the documents.” However, there are some issues that have not been addressed by the courts, and have proven problematic for the state agency which enforces the statute, such as how you square a particular voting procedure with certain provisions of the statute, such as the provision stating “any unit owner” wishing to run for the board may do so by following certain procedures. This is definitely an area where there are some “holes” in the law which I hope are someday fixed.

 

Joseph E. Adams

Office Managing Shareholder, Becker
Fort Myers | bio

 

Back to Basics

Back to Basics

There are articles every month covering community association issues, which you can find from a plethora of sources. This magazine, other similar magazines, national magazines, newspaper articles, everyone’s favorite blog, attorney resources, Internet, etc. Most of these articles deal with specific issues, such as short term rentals, or emotional support animals, or the latest case law and how it applies in general to associations, and other specific issues. I want to go back to some of the basic tenants of association operations, back to many items that are not discussed on a day to day basis, but which can, and do, lead to problems and issues in community associations.

I want to discuss items that appear to be so basic, board members and managers overlook them, take them for granted, misconstrued how such items are to be handled or just plain forgot how to deal with such basic issues.

Proxies

Limited proxies are required to be used for many things in condominiums, such a voting on proposed amendments, waiver of reserves and waiver of financial reporting requirements, to name a few.  When the limited proxies are turned in to the association, either via mail or in person, they are not required to remain sealed until the meeting, like election ballots.  Proxies should be opened and tallied as they come in; this way the association knows where it stands in regards to the proxy vote before it calls the meeting to order.  This can save the association a lot of time at the meeting that is spent finally opening and tallying all the proxies at the meeting.  You do not need a special meeting, committee, open the proxies in front of everyone at the meeting, etc., as is required with condominium election ballots.

The same theory holds true for proxies in homeowner association elections, which, unlike condominium associations, can be used for the election of directors unless the governing documents provide otherwise.  There is no requirement that homeowner association election proxies can only be opened at the election meeting, unless the governing documents provide otherwise.  Save some time at your meetings – open proxies in advance of the meeting and keep a running tally.

Rules

In my experience board members and managers have more trouble in properly amending and passing rules as any other topic.  There are many subtleties and complexities when discussing an association’s rule making powers, and an association should never attempt to undergo rules changes without consulting its attorney.

The first thing to look at is if the Board has the authority to pass rules and regulations.  While most documents grant such authority, some do not.  If the Board is not granted the authority in the governing documents to pass rules, it has no authority to do so.  So while most documents do contain such authority, just make sure yours do so.

Some documents state that the Board has the authority to make rules regarding the use of the common elements.  Common areas does not include the units.  So if your documents only allow the Board to pass rules regarding common elements, the Board cannot pass rules regarding unit use, such as quiet hours, limiting work hours in the unit, arguably guest restrictions, etc. 

A few association documents require the members to approve all changes to the Rules. Obviously this can be problematic.  It is more of a problem if you have such a requirement, it is not followed, and then an owner challenges the Board’s attempted enforcement of an improperly passed rule.

Assuming the Board has the authority to pass rules, changes in a rule regarding unit use requires a fourteen (14) day posting and written (or electronic if authorized) notice to owners regarding the proposed rule change.  I have seen many rules invalidated because the requirement was not followed.

Finally, as a general overview, any rule must be reasonable.  Who decides what is reasonable?  Ultimately a judge or jury, which is a situation you do not want to be in, where a judge or jury is making such a determination.  Word to the wise – check with your association attorney when considering adopting or amending rules and regulations.

Contracts/Notice of Intent

Obviously most contracts (especially those in excess of $10,000.00) should be reviewed by the association’s attorney before being executed by the Board.  Sometimes a contractor will ask the association to sign a notice of intent, which, according to the contractor, merely puts the contactor on notice that the association intends to sign a contract without actually signing the contract yet.  DO NOT SIGN such a notice of intent without running it by the association attorney first.  Most notices of intent are, in fact, a form of a binding contract, and provide for penalties and payments in the event the association does not, eventually, sign a contract.  Any time a vendor tells you that it is not necessary to have your attorney review such a “simple” document, a red flag show go up in your mind.  I have seen this become more prevalent recently in regard to rooftop leases for cell towers.  I through reading of the notice of intent revealed the association was locking itself into a 99 year lease with the vendor.  I do not think or advise, that any association would want to enter into such an agreement without its attorney reviewing such a document.

Please be extremely careful before signing a one page contract that has print so small on the back of the page that it is hard to read even with a magnifying glass (I am not exaggerating).  Many of these types of “simple” contracts (telephone systems, garbage removal / dumpsters, etc.) are simple only for the contractor, as they lock an association into the vendor’s right of first refusal, automatic renewals, etc.

Running an association is not easy for volunteer board members, and is not easy for trained, professional managers either.  Do not make the job harder than it already is, and open the association up to criticism of legal action, over simple, day to day matters.  Don’t be afraid to ask your professionals for help, and don’t be penny-wise and pound foolish when it comes to seeking legal advice to help with association operations. 

 

Howard J. Perl, Esq.

Shareholder, Becker
Fort Lauderdale | bio

 

borrowing money

Borrowing Money

As buildings age, repairs become necessary. For associations that have not funded reserves, money will be in short supply, leaving two possible options depending on what is permitted under your governing documents: special assess and/or borrow money from a bank.

The problem with special assessing, especially in some communities, is that unit owners may be on fixed incomes and cannot afford a sudden spike in monthly payments. Under such circumstances some associations consider applying for a loan from a bank so that funds are immediately available for repairs or reconstruction but repayment is spread over time, thus lowering the monthly payments for each unit owner.

In considering these issues, I have prepared the following checklist which should be followed to guide you through this process.

  1. Speak to your attorney first. There are a number of legal issues with regard to loans such as, whether you have the authority to borrow; and if you do, whether the Board can make this decision or if a vote of the owners is required. It is also import to consider whether the association has the authority to special assess its members or if a membership vote is required for that as well. These are threshold issues that must be reviewed.
  2. It is important to discuss with your attorney, first, and then with the bank, what type of collateral you will use. Some loans have not been able to be finalized because the Board did not consider this issue in advance. Generally speaking, real property is not used as collateral for community association loans. The collateral is created primarily by providing the bank a lien on your accounts receivables; which includes your assessments and special assessments as well as other income derived from other sources. Most term sheets require that “all” funds be used as collateral without any consideration of the three points listed below because they are not used to working with community associations. Keep in mind the following basics regarding collateral:
    – Reserves accounts and reserve funds can only be used for the purposes for which they were intended, unless the membership vote to use those funds for another purpose. Therefore, as a general rule, you should not use your reserve accounts (without a vote of the membership) as collateral.
    – Special assessment funds can only be used for the purposes for which they were levied. If the special assessment was not levied for the purpose of repaying the loan it should not be used as collateral.
    – Property/casualty insurance proceeds should not be used as collateral. Such insurance is usually purchased for the unit owners and their mortgagees (a general statement in Declarations of Condominium) and, therefore, should only be used for the purposes for which they were intended without the risk that the bank will retain those funds to pay down the loan when you need those funds in the aftermath of a casualty.

Many associations skip any discussions with their attorney during these initial steps which causes a number of problems when the process is too far underway.

  1. The Board should determine which bank it wishes to use for its loan transaction. You should consult with your attorney as he or she has probably worked with a number of banks and can give you a list of banks which handle loans for community associations. The Board will determine which bank has the best interest rate and repayment terms based on its own discussions with these banks.
  2. Provide the bank with all of the financial reports, budgets, audits, etc. that they may require. If you are approved, the bank will provide you with either (or both) of a term sheet and/or a commitment letter. These documents outline the main terms of the loan. Some banks use both; others use one or the other. It is by no means a complete list of terms but it outlines the most salient points and requirements. Your attorney should review the term sheet and commitment letter PRIOR TO execution of those documents. If you don’t take that step you could find your association stuck with the choice to live with bad terms or to walk away from the non-refundable loan commitment fee paid at the time you return this document.
  3. Once the term sheet and/or loan commitment letter have been negotiated the bank will provide you with a set of loan documents. Generally, it is best to let a bank use their attorney to generate the loan documents than to use computer generated documents which are not specifically geared to condominium or homeowner association loans. It should be noted that the association will pay the bank’s attorney’s fees as well as its own attorney’s fees. That is standard practice. Your attorney will review the loan documents to ensure that not only the terms from the term sheet and/or commitment letter made it into the text of the loan documents but that the other terms are also equitable to the association. By way of example, some loan documents will include provisions which makes the officers signing the loans a personal guarantor. We reviewed one loan document recently which stated, that if the person signing is married that his personal assets, to the extent they were separable from his spouse, would be used as collateral. We required the bank to remove that text and all similar text and substituted a clause that stated that the persons executing are doing so for and on behalf of the association and not in his/her personal capacity. I think the reader can see the problem that could have resulted had the association president signed the loan documents without consulting legal counsel.
  4. Revising and negotiating the text of the loan documents is the next step. Depending on the bank and their attorney this can be a quick process or a long drawn out process. That’s why the preliminary steps are important to follow as it can weed out a bank that may not wish to be flexible in changing its documents.
  5. An opinion of counsel letters is required for most, but not all loans. This is the bank’s way of obtaining an extra layer of protection for the repayment of its loan. The opinion is done, with the permission of the association, for the benefit of the bank. The bank will want to know if the association has the authority to enter into the loan and if it took all of the proper steps to approve the loan.
  6. Loan closing is the final step. All of the paperwork is signed and the loan and opinion of counsel letter (if required) returned in to the bank.

Loan documents are very complex documents and should not be handled by the Board without the assistance of legal counsel.

 

Mark D.Friedman

Shareholder, Becker
West Palm Beach | bio

 

key

Why Do They Need a Key to My Unit???

“Every man may justly consider his home his castle and himself as the king thereof; nonetheless his sovereign fiat to use his property as he pleases must yield, at least in degree, where ownership is in common or cooperation with others. The benefits of condominium living and ownership demand no less” Sterling Village Condominium, Inc. v. Breitenbach, 251 So.2d 685, 688 (Fla. 4th DCA 1971). The foregoing case is famous in condominium law circles for being a seminal case in defining material alterations and substantial additions in the context of common elements, but the passage I cite applies to many (if not most) contexts of common interest life. The issue de jour is a fundamental example of the need to yield some exclusivity rights for the benefit of all your neighbors.

Why do they (the condominium association) need a key to my unit? The answer is quite simple: water, fire, and other perils do not care where unit boundaries begin or end. The law recognizes this basic fact. Section 718.111(5)(a) of the Florida Condominium Act states “The association has the irrevocable right of access to each unit during reasonable hours, when necessary for the maintenance, repair, or replacement of any common elements or of any portion of a unit to be maintained by the association pursuant to the declaration or as necessary to prevent damage to the common elements or to a unit.” This provision of the Act recognizes that the association must be able to enter the unit to (1) perform its maintenance obligations and (2) protect the condominium property (both units and common elements).

The DBPR’s Division of Condominiums, Condominiums, Timeshares, and Mobile Homes has recognized that owners must provide the condominium association with a means of access to the unit (e.g. key or punch code) in order to be able exercise the statutory easement rights contained in Section 718.111(5)(a), Florida Statutes. Of course, associations (and the managers and vendors providing services to associations) must exercise this right of access with respect for the occupants of the unit. In non-emergency situations, this means providing appropriate notice to the unit owner of the particular need for access and when the access will occur. In cases where the unit must be accessed in an emergency situation, the association should give a prompt report to the unit owner of why the unit needed to be accessed, who accessed the unit, and what, if any, actions were taken in the unit. Lastly, the statutory easement right discussed in this article should not be conflated in manner to allow an association agent access to a unit for any reason whatsoever. The language of the statute is clear that the purpose of the access is to perform association maintenance functions and to protect the condominium. Any easement for access other than those purposes needs to be stated within the declaration of condominium.

 

Jay Roberts

Shareholder, Becker
Ft. Walton Beach | bio

 

defamation

Say What?

In terminating a third party vendor, a board of directors must be careful in disseminating information concerning the basis for its decision – especially if the decision was due to poor performance or contractual violations by the vendor.

In Florida, a cause of action for defamation can be brought against a corporation, including specifically, a community association. “Defamation” is defined as the unprivileged publication of false statements which naturally and proximately result in injury to another.” Hoch v. Loren, 273 So. 3d 56 (Fla. 4th DCA 2019). “The elements of a claim for defamation are as follows: “(1) publication; (2) falsity; (3) actor must act with knowledge or reckless disregard as to the falsity on a matter concerning a public official, or at least negligently on a matter concerning a private person; (4) actual damages; and (5) statement must be defamatory.” Jews for Jesus, Inc. v. Rapp, 997 So.2d 1098, 1106 (Fla. 2008). “In order for a defamatory statement to be actionable it must be published. Publication requires communication to one other than the person defamed.” Am. Ideal Mgmt., Inc. v. Dale Vill., Inc., 567 So. 2d 497, 498 (Fla. 4th DCA 1990). However, “[o]ne who publishes defamatory matter concerning another is not liable for the publication if (a) the matter is published upon an occasion that makes it conditionally privileged and (b) the privilege is not abused.” Nodar v. Galbreath, 462 So.2d 803 (Fla.1984).

Given that defamation can be a viable cause of action against an association, the question becomes “how can a board convey to the membership the reasons it had for terminating a vendor.” The answer is that the board can convey the information to its members but it must be extremely careful in doing so.

The case of American Ideal Management, Inc. v. Dale Village, Inc. is extremely helpful in understanding how a board of directors can communicate information to its members regarding unflattering information involving a third party vendor. In American Ideal Management, Inc., the board of directors of a community association terminated its management company. Id.  In explaining its decision, the board posted two informational bulletins outlining its reasons for terminating the company. Id. The company sued the Association for defamation. Id. In its defense, the association asserted that the bulletins were subject to a qualified privilege and, accordingly, the association could not be liable for defamation. Id. The management company countered the association’s argument by asserting that a qualified privilege did not attach to the bulletins because the elements of a qualified privilege were not met. Id.

The essential elements of a qualified privilege are (1) good faith; (2) an interest in the subject by the speaker or a subject in which the speaker has a duty to speak; (3) a corresponding interest or duty in the listener or reader; (4) a proper occasion, and (5) publication in a proper manner. The qualified privilege vanishes, however, when the defamatory statement is made with express malice.” Nodar v. Galbreath, 462 So.2d 803 (Fla.1984) (internal citations omitted).

Importantly, the management company was able to produce evidence that the bulletins had been sent to non-member residents. The bulletins had also been posted on the bulletin board of the association’s recreation center. The management company asserted that the recreation center was frequented by non-residents.  The court noted that “the communication reached not only owners and residents of the park who would have a corresponding interest but also there is at least circumstantial evidence that it reached nonresidents. Id. The publication of the bulletins to these non-members opened the door to defeating the association’s claim of qualified privilege. Id.

The ability to successfully assert a qualified privilege is very important as it can defeat a defamation claim because “where a qualified privilege exists, plaintiffs must prove express malice or malice in fact in order to recover. Actual malice, or malice in fact, constitutes an abuse of a qualified privilege leaving the defendant liable.” Schreidell v. Shoter, 500 So. 2d 228, 230 (Fla. 3rd DCA 1986) (internal citations omitted).

“The Supreme Court defines express malice as ‘ill will, hostility, evil intention to defame and injure.’ Nodar 462 So.2d at 811 citing Montgomery v. Knox, 23 Fla. 595, 3 So. 211 (1887). The Supreme Court has unequivocally established that all of the three elements (ill will, hostility and evil intention to defame and injure) and more must be shown. Nodar at 811 fn 8. It is insufficient that the speaker have generalized feelings of hostility and malice towards the Plaintiff. Only if the Plaintiff demonstrates the primary motivation for the statements uttered was express malice, is the privilege overcome.” Boehm v. Am. Bankers Ins. Grp., Inc., 557 So. 2d 91, 94 (Fla. 3rd DCA 1990).

While harm to another may be incidental as a result of an unflattering publication, unless the harm is the primary motivation, malice cannot be established. It goes without saying that a board should not make or publish any communication if the intent of the communication is to harm another.

While the court in American Ideal Management, Inc. remanded the case back to the trial court to determine whether non-residents would have a sufficient interest in the bulletins to warrant extending the qualified privilege to cover publicizing the bulletins to them, it would be very unwise for an association to publish unflattering information regarding a vendor to anyone other than its own members.

Thus, to protect itself from a defamation claim, a board must only make and publish information that is truthful and without malice, that is communicated only to its members and is made for the purpose of informing its members about association business.

 

Marielle E. Westerman

Marielle E. Westerman

Community Association Law, Becker
Tampa | bio