by Kathy Danforth / Published December 2014
Laws may start out in the august halls of the legislature or Congress, but they are hammered into (or out of) shape by the subsequent decisions by courts and administrative authorities. These rulings then set precedents that increase the likelihood of similar outcomes as time goes on. Below are a few of 2014’s decisions, which may influence how your association should conduct business.
ISSUE: PARTIAL PAYMENTS MARKED “PAID IN FULL”
Donna DiMaggio Berger, attorney with Becker & Poliakoff, relates, “The Second District Court of Appeal’s decision in the case of St. Croix Lane Trust & M.L. Shapiro, Trustee v. St. Croix at Pelican Marsh Condominium Association, Inc., Case No. 2D13-3636 (Fla. 2nd DCA, Aug. 8, 2014) is likely to alter the way many people in the community association industry treat payments tendered for delinquent amounts owed. The appellate court in the St. Croix case reviewed the ‘allocation of payment’ provisions found in Section 718.116(3) of the Condominium Act and chose to disregard those provisions in favor of the general concept of accord and satisfaction found in Section 673.3111 of the Florida statutes.”
Jeffrey Rembaum, attorney with Kaye Bender Rembaum, PLLC, explains, “In this case, the St. Croix Trust acquired its unit as a result of a foreclosure. Upon taking title, the association demanded $38,586.11 as the assessments that remained due and owing. The St. Croix Trustee disputed the assessment amount and argued to the association that it only owed $840. The St. Croix Trustee then sent its check in the amount of $840 to the association, and in so doing wrote a restrictive endorsement on the check, ‘paid in full.’ While the association continued to seek the difference from the St. Croix Trustee, the attorney handling this collection matter for the association deposited the $840 check. The court held that the St. Croix Trust did not owe the balance due because the restrictive endorsement written on its check combined with the association’s lawyer’s act of depositing the check was a de facto acceptance of the St. Croix Trust’s $840, a process in legal terms referred to as an ‘accord and satisfaction.’ The key to understanding this outcome is that the St. Croix Trustee, an association member, had first disputed the assessment amount due and then sent in the St. Croix Trust’s $840 check that contained the restrictive endorsement ‘paid in full,’ which was deposited by the association (or in this case, its attorney).”
Rembaum clarifies the impact of the ruling for associations: “If the association member has not in any way disputed the amount due, then even if the payer writes ‘payment in full’ on their check, it would be ok to deposit it. But, if the member does dispute the amount due in any way whatsoever, then the St. Croix holding would apply and depositing the member’s check with ‘paid in full’ written on it would be an accord andsatisfaction, thereby alleviating the member of any remaining amount due.”
Berger concludes, “The court’s ruling in the St. Croix case has far-ranging consequences for communities who depend on common funds to provide essential services. The St. Croix decision also is in direct conflict with the Third DCA case of Ocean Two Condominium Association, Inc. v. Kliger, 983 So. 2d 739 (Fla. 3rd DCA 2008), which held that an association must accept partial payment. As a result, it is essential that managers and boards who receive partial payments on amounts owed contact the association attorney before depositing that check.”
ISSUE: UPDATING OF DOCUMENTS NECESSARY FOR MAXIMUM COLLECTIONS
Michael Gelfand, attorney with Gelfand & Arpe, PA, states, “Just days into the new year, a United States District Court announced one of the most significant decisions affecting Florida community associations’ pocketbooks this year. The proverbial ‘moral to the story’ is that associations, especially ‘old’ associations, need to understand changes in the law and amend documents to avoid pitfalls created by new court decisions and legislative enactments.
“U.S. v. Forest Hill Gardens East Condominium Association., Inc., (S.D. Fla., January 3, 2014), involved a foreclosure, which resulted in HUD obtaining title to units. The association demanded years of unpaid assessments, interest, late charges, collection costs, and attorney’s fees. The Condominium Act’s ‘safe harbor’ in §718.116(1)(b)(1) Fla. Stat. limits first mortgage lender assessment liability to the lesser of unpaid common expenses and regular periodic assessments, which accrued in the 12-month period before title was issued or one percent of the mortgage.
“Differentiating assessments from other charges, the court held that interest, late charges, collection costs, and attorney’s fees simply do not fit within the statutory or common sense understanding of ‘regular periodic assessments.’” There is a public policy to allow prompt sales following a foreclosure, and the court held that “limiting a foreclosing first mortgagee’s liability to certain, readily verifiable figures … provides certainty to the resale process and removes potential impediments to reconstituting the condominium community.”
“But, the court looked further, to the association’s Declaration of Condominium, which excused lenders from liability for assessments accruing before foreclosure. Rejecting the association’s argument that this provision was superseded when the Florida Legislature adopted the ‘safe harbor’ in 1992, the court stated, ‘The association could have, had it chosen to, revised its declaration to incorporate by reference a future enactment of the Condominium Act.’ Thus, HUD was exempt from all liability for unpaid assessments at the time of the foreclosure!”
Gelfand advises, “So what is an association to do? Review their declaration of condominium or covenants to confirm assessment rights allow the maximum assessment rights permitted by law, and if not, consider amending the declaration.”
ISSUE: FORECLOSURE ON MEMBERS OF THE MILITARY
Since this ruling was in late 2013, its impact has not been discussed until this year, according to Barbara Billiot Stage, attorney with Stage & Associates, PA. “In Higgins v. Timber Springs Homeowner Assoc., Inc., 5D12-4806, the Fifth District Court of Appeal issued a stern warning to HOAs about foreclosing against members of the military on active duty and ordered the foreclosure reversed,” states Stage. “The HOA ignored the owner’s notice that he was deployed on active duty and had requested a 90-day stay until he could be in Florida to address the issue. The HOA claimed that he did not comply with the formalities of the Servicemembers Civil Relief Act, a federal statute protecting servicemembers from foreclosure while deployed. The owner, who was representing himself because he was not in Florida, put the HOA on notice but did not cite the specific provision of the Act.
“The Court said, ‘How dare you,’ to the association, and clearly was not happy,” explains Stage. “The lack of citing the provision did not matter in the opinion of the court, and the HOA acted improperly. The court also noted that the disputed amount—$306—was also an issue in their opinion.”
ISSUE: EXPLANATION REQUIRED FOR DENIAL OF HOUSING
Matthew Zifrony with Tripp Scott Attorneys at Law explains, “Both Broward County and Miami-Dade County have taken away an associations’ ability to keep their reason for denying a prospective renter or purchaser hidden, regardless of what the associations’ governing documents may allow. Prior to the new ordinances, associations were not required to specify the reason for rejecting a prospective renter or purchaser unless the association’sgoverning documents required the association to do so.
“The new changes in both Miami-Dade and Broward Counties establish two new requirements for associations in connection with the screening/approval process of prospective purchasers and renters. First, within 15 days after receipt of any incomplete or incorrectly completed (or amended) application to purchase or rent a dwelling, the association must provide the applicant with written notice specifically identifying any and all items in the application that need to be completed or corrected. Also, if an association denies an application, the applicant must receive a written notice explaining the reason for the denial within 45 days of the filing of the correctly completed application.
“Associations should look at their governing documents to see if their screening/approval process complies with the above-mentioned requirements. Most association documents require the association to approve or deny the applicant within 30 days, so the timing for the denial shouldn’t be a problem. However, if the association’s documents do give the association more than 45 days to approve or deny the applicant, the 45-day time period in the ordinance will control and trump the governing documents.
“If the association does not comply with the ordinance, such failure may be considered in determining whether reasonable causes exist to believe the association’s decision or action was discriminatory. There are very limited reasons an association is justified in denying a prospective purchaser or renter. Any time an association denies an application, it runs the risk of being sued. Prior to denying any applicants, the association should first contact legal counsel,” Zifrony recommends.
ISSUE: USE OF WRITTEN CONSENTS
“In the case of Daniel DiCiolla v. Bayhead Landings Property Owners’ Association, Inc. (Pasco County Case No 2013-CC-3057), deed restrictions were declared expired when the HOA used written consents to gather votes approving the filing of a Notice of Preservation prior to the expiration of the restrictions,” according to Stage. “The HOA bylaws did not provide for voting by any means other than in person or by proxy. The HOA claimed the right to use written consents by statute FS 617 governing not-for-profit organizations, but the court noted that the 1990 bylaws were written before the statute was enacted.
“The HOA argued that this would invalidate voting across the state because many HOAs use written consents now. The appeal was dropped, and the HOA revitalized (re-recorded the Declarations after receiving approval by the Department of Economic Opportunity). However, this will be appealed because written consents were used to revitalize, and the revitalization statute was enacted after the plaintiff purchased his property, so this is a constitutional property issue.”
ISSUE: ACCESS TO HOMEOWNER UNIT
Gelfand reports on a decision with practical, boots-on-the-ground impact. “No decision is more immediate than Small v. Devon Condominium B Association, Inc. (Fla. 4th DCA, April 2, 2014),” he states. “Why? This decision explains when a Florida condominium association may enter a unit without the owner’s consent, and does so in a way that also provides guidance to Florida homeowners associations.
“In this case, the association’s ability to enter was complicated by theentry purpose and the owner’s response. In response to the owner’s request because of a breathing disorder, the association had stopped in-unit pestcontrol spraying for about four years before the association again demanded access. The owner provided her physician’s affidavit, which stated, “It would be deleterious to her health to be exposed to any chemicals.”
“Under the Condominium Act’s right of entry provisions in Section 718.111(5) Fla. Stat., the law does not require access to a unit be provided at any time or for any reason. Instead, the Court provided a two-part test to help guide associations and their counsel when an association seeks to enter a unit over the owner’s objection: the purpose for the entry must be within the condominium association’s authority and reasonable. In the Small matter, there were questions of reasonableness because of timing, the owner’s pest control efforts, and the owner’s health.
“Generally, if a recalcitrant owner refuses access to a Florida association, the association must confirm whether:
Keeping up with current rulings can help associations avoid practices that might inadvertently lead to legal complications. Or, a change in association documents or lobbying for law changes may be in order. Regardless, knowing where legal skirmishes are occurring is the first step in knowing when to call in your own legal support for advice!