Sunday, June 25, 2017

Going Too Far Down the Rabbit Hole: How Our National Political Discourse Parallels Our Community Association Discourse

It's hard right now to turn away from the 24/7 news cycle and its discord, rancor and heated rhetoric. When we spend the majority of our time discussing just 20% of the topics which concern us, we cannot commit time or energy to the other 80% which also demands our attention.  It's not surprising that the same prioritization pressure occurs in private residential communities.  How often has a board or membership meeting been monopolized by the concerns of one very vocal owner?  That owner may very well have legitimate concerns but that still does not justify how some communities seem to be the equivalent of the tail wagging the dog.

We live in a world of increasing oppositions; it's becoming harder to find a middle ground on most topics.  For those of us who work with and live in community associations, the current state of political discourse in America sadly comes as no surprise.  In fact, there are some eerie similarities that reveal a few uncomfortable truths about our society.

Name calling, speaking (and yelling) over others, character assassination, accusations, conspiracy theories, and filibustering are never productive and usually reflect a certain intellectual laziness. Fake news and alternative facts have been employed for decades in some communities where facts matter less than agendas and can be employed equally by both members looking to oust a board as well as boards looking to shut down opposition. the best way to do battle with this problem is to have a membership comprised of people willing to undertake an independent analysis of the situation rather than relying on someone else's version of the truth.  When id doubt, just remember this quote by Daniel Patrick Moynihan: "everyone is entitled to his own opinion, but not his own facts."

Calls to remove leaders are nothing new.  Unfortunately, the recent changes to Florida law will make it less likely that recalled board members will challenge even a questionable recall petition if they must do so by paying for such a challenge out of their own pockets.

Conflicts of interest can erode the trust between an elected official and the people who elected him or her. Just as some members of Congress have filed litigation based on the Emoluments Clause in the U.S. Constitution, a perception that a board member has an undisclosed conflict of interest can lead to dissatisfaction at best and recall and litigation at worst. It's impossible to serve two masters so if you have agreed to serve on your community's board of directors, your decisions must be based on what is best for the community and no longer what is in your best interests.

Just as we have spent an inordinate amount to time on a national discussion concerning the improper use of emails and sloppy email protocol, some directors completely underestimate the trouble a lack of email protocol can cause.  The failure to understand, let alone embrace, best practices when it comes to email protocol which includes safeguarding privileged information and employing language which is designed to achieve a goal not blow it up, can make a small flare-up quickly turn into a full-blown conflagration.

Recently, a new client asked me about what can be done to stop leaks and leakers on their board.  Just how did one roofing vendor reduce his bid to make it lower than the bid that was going to contract?  Leaks on community association boards are often designed to do nothing more than embarrass a board member or officer (or help a vendor friend) but occasionally they cause a lot more damage including an anticipatory breach of contract claim.  When it comes to litigation matters or pursuing insurance claims, closed-loop communications are crucial to the ability to minimize the association's exposure in the former instance and maximize its recovery in the latter circumstance.

Building a proverbial wall can become the turning point in a community. Some directors have very firm ideas about the material improvements they would like to make in their community and how to pay for those improvements, either by special assessment or loan.  Often these ideas are not as wildly popular with the association members as Mr. or Ms. Director would like to believe. It is always best to gauge community sentiment before embarking on costly and potentially divisive projects.

Inevitably, the issue of personality conflicts arises in many communities.  Dealing with personality issues (as exhibited by board members, owners or both) can be one of the toughest problems to solve in a shared ownership community.  It is important to remember that your conflicts involve a "living together" relationship so patience, empathy and updated emergency contacts are some of your best tools when dealing with sensitive behavioral problems.

Finally, the potential for violence is the most disturbing comparison of all between the national stage and our local communities. There have been sporadic reports of violence in community associations over the years.  Two that come to mind include a manger who was shot in the head (but mercifully survived) by a disgruntled former association employee and a board member shot and killed by a fellow director as they argued over association matters.  Violence is never the answer but it does underscore how a 'pressure cooker' situation can blow the lid off any society, micro or macro.

The ability to find some middle ground is sadly disappearing from the national stage and it is, unfortunately, no different in some of our communities but our disgust with our national discourse might just lead us to insist that our association affairs be handled more productively.

Monday, June 5, 2017

"What's in a Name?" Quite a bit, particularly for Association Board Members who have been Defamed.

When Shakespeare coined the phrase "the slings and arrows of outrageous fortune" in Hamlet, he probably wasn't envisioning that sentiment could apply centuries later to volunteer board members.  However, the Bard was opining that bad things can happen to a person and, in the present-day context, if you serving on a community association board of directors, those bad things can arrive in the form of defamation:  slander and libel.

Over the years, I've been contacted by far too many board members who recount stories about horrible things which had been said or written about them both during their board service and even years afterwards.  After the tale is told, the next statement is usually, "I want to sue".  This blog post is not about whether or not those harsh words were warranted; it is about whether or not a board member can successfully pursue a defamation claim against his or her detractors. Defamation is a tort which refers to a false statement, either spoken (which is known as slander) or written (which is known as libel) that injures someone's reputation.

Some types of false statements are considered so damaging that they are deemed defamatory on their face (which is known as defamation per se) and thus, do not require the plaintiff to prove the defamatory nature of those statements or the plaintiff's damage. Typical examples of these kinds of statements which are deemed inherently injurious to one's reputation are:

  • Statements that injure another's reputation in his trade, business or profession. For example, if the Board President is a licensed real estate agent and a unit owner alleges that he has cheated other brokers out of their fair share of commissions over the years, his reputation in the real estate industry would be injured;
  • Statements claiming someone has a "loathsome disease";
  • Statements claiming that the person is "unchaste". In one community, a manager was accused of engaging in an extramarital affair with the community's landscaper and thus was the victim of slander per se;
  • Allegations that an individual has been involved in criminal activity.
To state a cause of action for defamation in Florida, a plaintiff must allege the following:

  • The defendant published a false statement. The defendant's knowledge that the statement was or was not false is not the crux of the issue; the defendant's intent to publish the statement to a third party is.
  • The statement was made about the plaintiff.
  • The statement was made to a third party. The defendant must communicate the information with an intent to have someone hear or read it.  For example, if the defendant made the statement with the reasonable belief that no one was around to hear it but the statement was overheard by a third party, that is not slander. The defendant must intend to have the statement read or heard by a third party.  In addition, if the besmirched director is the only one who heard or read the statement, that also does not constitute slander or libel.
  • The falsity of the statement caused injury to the plaintiff.
The following are some of the recognized defenses to a defamation suit:

  • Truth is a complete defense to any slander claim.
  • Opinion as a defense depends heavily on the credibility and reputation of the person rendering the opinion.  If a third party would typically rely upon the person's statements, then simply prefacing the defamatory content with an "in my opinion" qualifier will not be sufficient to shield the statement maker from liability.
  • Consent is analogous to truth as an absolute defense. If the statement maker had the subject's consent to publish the statements than that consent will bar a slander action.
  • Poor Reputation is not a complete defense to slander but can be used by the defendant to mitigate his or her damages in a defamation lawsuit by proving that the plaintiff had a bad reputation for the character trait at issue.
Some problems when attempting to pursue a defamation lawsuit include:

  1. It can be difficult to prove that the statements are false.  Statements that a director is a criminal can be easily proven false by submitting a clean criminal background as proof. However, statements that a director tampered with election ballot envelopes is harder to address unless the director can account for every step of the election process.
  2. "She said, he said" situations can result in a stalemate.  It will be necessary to have witnesses come forward when dealing with slander.  Libel is easier because the written material can be produced.
  3. Online defamation can be tricky.  The plaintiff must prove that the defendant was actually the one making the statement(s) and that may require forensic investigation to uncover the identity of a particular online account.
  4. Proving financial damage in a community association setting is not easy.  Community association directors are typically unpaid positions. Unlike an employee who is slandered and subsequently fired as a result of the statements made, what real financial harm does a board member suffer as a result of statements made to ensure that he or she is not re-elected to the Board?  Emotional distress alone is not enough to mount a successful defamation claim.
  5. Directors may be considered limited purpose public figures rather than private figures. My law partner, Howard J. Perl, authored an article published in the Florida Bar's ActionLine periodical discussing the growing body of national case law which is making it harder for association board members to pursue defamation actions.  According to Howard, "to support a claim for defamation, a private figure need only show negligence by the alleged defaming party, while a public figure must show 'actual malice'." Board members can take themselves out of the realm of a private figure and wind up becoming a limited purpose public figure if they become "a key figure in a particular controversy." For example, if a director takes a very aggressive and outspoken approach on a particular capital improvement project in an attempt to gain membership approval for same and a detractor decides to respond by listing all the reasons that director should not receive support for the project including a regurgitation of past transgressions, the director may have to prove that the statements were made with actual malice. To read Howard's full article on this topic please click here: http://www.becker-poliakoff.com/community-association-board-members-can-be-considered-limited-purpose-public-figures
If you serve on your board and you have been the victim of defamation, speak with an experienced association attorney who can walk you through the steps discussed herein to determine whether or not you have a viable cause of action.

Since I started this post with the Bard, I will end with him:


"Good name in man and woman, dear my lord,
Is the immediate jewel of their souls;
Who steals my purse steals trash; 'tis something, nothing'
'Twas mine, 'tis his, and has been slave to thousands;
But he that filches from me my good name
Robs me of that which not enriches him,
And makes me poor indeed."  William Shakespeare-Othello

Tuesday, May 30, 2017

Would you know if financial fraud is taking place in your community?

I was recently contacted by a condominium client to discuss a growing distrust which had taken hold amongst the board members
and management related to financial functions, particularly with regard to the reconciliation of bank statements I asked my friend and national insurance expert, Joel Meskin, to weigh in on the best way to implement a system of checks and balances to deter and detect fraud. Joel is a fellow attorney, the Managing Director of Community Association Products for McGowan and a fellow member of the prestigious College of Community Association Lawyers (CCAL).


The following is an edited version of our conversation.


DB:    Is awareness of the potential for fraud in a private residential community more important for boards today?


JM:    With the current hyper scrutiny being directed at condominium associations, community association managers and boards of directors in Florida, it is imperative that all involved be very sensitive to the heightened demand and need for transparency.  This should particularly be the case with respect to financial records.


DB:    How do financial crimes occur in community associations?


JM:    Crime in community associations manifests in many ways.  Associations are soft targets and are often lulled into a false sense of security.  Most often, associations are victims of crimes of opportunity due to the failure to use simple checks and balances.  Whether committed by directors or officers, employees or community association managers, even the best can take advantage of unchecked opportunities.  As you know, we provide director and officers' liability insurance and fidelity/crime insurance to community associations around the country, including Florida. With respect to fidelity/crime insurance, it is all about the "Checks and Balances".


DB:    Do you have any recommendations for communities regardless of their size, their budget or their location?


JM:    One thing we have found to be absent from association governance and management is conducting a standard background check on all those who will be handling, managing or involved with financial transactions.  I do not believe that it will be a prohibitive cost and I believe it will be worth its weight in gold to help instill a sense of trust and transparency at this time.  Community associations are often lulled into a false sense of security and informality when it comes to those volunteers who help manage their association. Safeguarding against this false sense of security is simple and inexpensive.


As far as checks and balances go, it is imperative that no single person has control of protocols from beginning to end, especially those who reconcile should not be making deposits.  Many of us have friends or family members who work at banks and we know that they are required to take vacations for specific periods of time to run through oversight cycles. These checks and balances are deterrents more than anything.


DB:    What kind of first party insurance coverage should an association consider when crafting a solid anti-fraud policy?


JM:    You insure the money you have.  You add up all the operating and reserve accounts, add three to six months of operating expenses and that is the limit you need. A Board also needs to make sure it ahs the following coverage:


  • Forgery and Alteration
  • Inside the Premises, Theft of Money & Securities
  • Inside the Premises, Robbery & Safe Burglary
  • Outside the Premises
  • Computer Fraud
  • Funds Transfer Fraud-this is the biggest threat these days as this is when someone hacks into the association's account and then transfers money to another account without authorization.
  • Social Engineering and False Pretense
In my client's case, Joel recommended that the association engage its CPA firm to handle the bank reconciliations for the association rather than having a board member or the manager perform that function. He also recommended an annual audit even if not currently required by statute.


A big thank you to Joel Meskin for his insight and tips on how to prevent fraud in your community association.



Thursday, May 4, 2017

YOU ASKED AND WE DELIVERED! Florida High-Rises Achieve ELSS Opt Out Rights!

YOU ASKED AND WE DELIVERED!

To all existing Florida high-rises who previously opted out of sprinkler retrofits only to be told by their local fire marshals that they still had to install....sprinklers, only this time as part of an Engineered Life Safety System (ELSS), I'm delighted to tell you that your Becker & Poliakoff Lobby Team delivered on a promise and a passion to ensure that your residents have the right to determine for themselves how to handle this costly issue in their buildings.

Thank you to all the high-rise communities who joined our ELSS Opt Out Lobby group and carried the water on this bill and a huge thank you to our Lead Lobbyist, former State Senator and B&P Shareholder Ellyn Bogdanoff.

Fire Sprinkler/ELSS/Bulk Buyer Bill, by Rep. Moraitis and Sen. Passidomo (HB 653 and HB 744)was approved by both the House and Senate and will be sent to the Governor for consideration. It will become effective on July 1, 2017. We are hopeful that the Governor will visit our friends on the Galt Ocean Mile in Ft. Lauderdale who have worked so diligently on the sprinkler issue for well over a decade to sign the bill personally.

 Among other items, the bill will allow high rise buildings to opt out of an engineered life safety system (ELSS). The required vote to do so is two-thirds of all voting interests. This bill also clarifies that non-high rise buildings (under 75 feet) are not required to retrofit with sprinklers or an ELSS. The new law will also require condominium and cooperative associations that operate a building of three stories or more that have not installed a sprinkler system in the common areas of the building to mark the building with a sign or symbol approved by the State Fire Marshal in a manner sufficient to warn persons conducting fire control and other emergency operations of the lack of a sprinkler system in the common areas.


 No other community association law firm in Florida was seen or heard on this issue. This success proves that targeted advocacy on significant community association issues by a capable team and engaged communities is possible. Please be sure to speak with your B&P attorney after July 1st to set up your ELSS Opt Out vote if you are inclined to do so. If your association has any questions regarding this new law or your options, please feel free to contact me at dberger@bplegal.com or by phone at 954-364-6031.

Sunday, April 30, 2017

Be prepared to answer the question "Why?" if you want to defuse conflict in your community

"Why can't we use the pool after dusk?" the wiry man at the microphone bellowed. "I've been a swimmer my whole life and I need to use the pool to stay in shape" and with that statement, he pointed to his trim waistline to indicate how well his exercise regimen had been working.

I waited along with the audience to see how the President who was chairing the meeting would respond.  Instead of discussing the safety concerns she had articulated to me earlier regarding night-time swimming in an unlit pool as well as a desire to save money by not having to heat the pool after hours, she chose, instead, to brush the mater off with a "because we said so" response and called for the next person who had a question to come forward. The swimmer's face reddened and he immediately voiced his outrage, launching into a full-scale denouncement of "this board's policies and arbitrary decisions."

I knew that this would not be the last the board would hear from this owner; likely his affront at the response would find other outlets, including repeated document inspection requests and perhaps even a recall initiative at some point. This was my third Board meeting that week and they all had involved, at some point, association members questioning the wisdom of one or more board rules.  Experience has taught that whenever you tell people what they must do or what they must refrain from doing, you will almost certainly be met with the question, "why?"  How a board member or manager responds to this questions can either inflame the situation or defuse it.

With the recent United Airlines kerfuffle still in the news, more people have been discussing the right and wrong ways to enforce policies.  Do you use a carrot, a stick or alternate between the two?  When a passenger was forcibly pulled off one of United's planes, there were differing opinions about which party bore the greatest blame. Some blamed Dr. Dao for failing to cooperate when the police arrived while others saw an abuse of power and poor decision making on the airline's part in ejecting a customer who had paid for a seat.  Lastly, the initial statements made by the company's CEO that he regretted having to "re-accommodate" a customer were seen as downplaying the aggressive actions taken and only served to inflame an already sensitive situation.

When it comes to association rules and regulations, many boards prefer a stick and a big one at that.  My job as association counsel is to ensure that boards can successfully enforce the rules they pass, otherwise they risk losing both credibility and control.  A successful rule protocol has to (a) identify a real not imaginary problem (b) craft a reasonable rule to solve that problem and (c) communicate (a) and (b) to the individuals against whom the rules will be imposed.

If your board has a rule that requires head-in parking in the association parking lot, you might want to explain in your rules booklet and/or at the meeting where you will adopt that rule that you are doing so to avoid visibility issues and potential accidents as tail-in parking impedes the adjacent walkway.  If another rule provides that renovation work can only be done within the units during certain times and months, you can improve compliance by including an explanation that the times and dates were chosen to minimize inconvenience to other residents when the community is most heavily occupied.  If an owner understands that enforcement of the rule can also benefit them when a neighbor or other occupant violates same you might just have the "aha" moment which encourages compliance.  Rules that are seen as petty or unnecessary are the most likely to result in your owners ignoring or openly defying same.

Volunteer boards can increase the likelihood of their members' voluntary compliance if they let them know why they have made certain decisions. Sadly, in some instances, a reasonable explanation will not satisfy certain members who cannot be assuaged regardless of the message conveyed.  In those instances, enforcing rules violations can include levying fines, suspending use rights, denying lease approvals and, in the most egregious cases, pursuing arbitration and/or injunctive relief in court. However, don't assume that the rationale for even the most basic rules will understood by all your members and, without understanding, you cannot count on voluntary and consistent compliance. 

When you explain the rationale for a rule, you are showing respect. For most people that will be enough as it allows them to comply while saving face.

As for the man who lamented his inability to engage in his nocturnal swimming habit, he joined the board a few years later and became one of the more vociferous proponents of that rule when he bore the responsibility of being a director.

Thursday, March 23, 2017

Part III of the Breaking Up Series: Leaving the Past Behind You

In this final installment of my Breaking Up series, I want to talk about what a new board needs to do to get out from under the legacy left behind from an old board, particularly when that legacy is not a positive one. 

"The secret of change is to focus all of your energy, not on fighting the old, but on building the new." 

Some new boards find that they need to depart entirely from the manner in which the association had previously been operated.  This is especially true when a prior board had been in place for a long time.
Some of the unpleasant discoveries that new boards may make include:
  1. A pattern of signing unfavorable service contracts which were never reviewed by legal counsel and which now bind the association for many years without any possibility for early extrication.
  2. The failure to routinely and consistently enforce important provisions in the governing documents.
  3. A disorganized jumble of association books and records which makes swift and successful document inspections unlikely.
  4. Large delinquencies which have not been properly handled.
When I meet with boards who are confronting the foregoing problems, my first piece of advice is to look forward and focus on setting better patterns in place. Typically, the only exception to this advice is if a crime or fraud was perpetrated by prior board members in which case we discuss all legal and criminal options available to the Board.

In terms of cleaning up the problems inherited from a previous board, the following steps can help put a healthier pattern in place:
  1. Have association counsel review all existing contracts; renegotiate when possible and send out termination notices for those no longer desirable contracts where are up for renewal or for which a verifiable breach exists.
  2. Just because a previous board has failed to enforce certain use restrictions does not mean subsequent boards are forever barred from doing so.  A new board can undertake a process known as "republication" which allows you to once again enforce overlooked restrictions by sending out proper notice of your intention to do so. Please speak with your association attorney to discuss the proper steps to take in order to accomplish this republication process.
  3. Work to digitize your books and records, create an association website if you don't already have one or update the one you do have and upload those newly digitized records to your website. The more organized and transparent you make your operations, the easier your board's job will be.
  4. Large balances are much more difficult to collect than small ones. New boards should discuss their existing collection policy with counsel and decide what is and is not working. You want to strike the right balance between not allowing a delinquency to balloon out of control while not being too harsh in terms of your policy.  Speaking of counsel, assess whether or not your current attorney is proceeding expeditiously with your collections or is part of the problem.
Perhaps the most difficult aspect of breaking free from a prior board is the fact that in many communities the previous board members remain residents in the community and often become very vocal critics of their successors. Moreover, a board is often not overhauled entirely but in a piecemeal fashion which means holdovers from the "old days" may become an impediment to changing the association's culture since they are usually fans of "business as usual".

Change is usually not easy but in the association context, it can make a world of difference when it comes to the board's ability to move critically important projects forward and resident satisfaction.

Tuesday, March 7, 2017

Email Intelligence-does your Board possess it?


In my last blog entry, I discussed the considerable downside to sending a resignation via email. Today, I am discussing the pros and cons of board members and managers using email for other purposes and how to craft a sound email policy for your association.
Board members, managers and association residents are no different from everyone else you know inasmuch as they are all heavily reliant upon electronic means to communicate. Phone conversations and, even more rarely, in-person conversations do still occur but not nearly as frequently as emails and text messages.
Whether you are a member of an association board of directors or are a manager assisting such a community, it is important to understand that (a) everything you put in writing can and will be used against you and (b) some topics and situations are not well suited to an email response.
Whenever I teach a Board Certification or other educational course, I always ask the directors and managers in attendance to raise their hands if their community has a comprehensive email policy in place. Surprisingly, not a single hand is raised.  Deciding in advance how your Board will handle emails from residents, professional advisers and vendors is not only advisable, it is necessary.
Here are some questions you need to ask yourselves and then craft the appropriate email policy with your association attorney's assistance to ensure it complies with both your documents and applicable law.
  •         If a resident emails the entire board with a complaint, who should respond? Without protocol in place, chances are everyone will respond (and sometimes with different answers and conflicting information) or no one will respond as a result of assuming someone else did.
  •         If a resident's email is akin to a rant with no specific purpose or request, how should it be answered, if at all? Florida law requires certified inquiries and written requests to inspect the association's books and records to be answered within a certain time period. However, nothing requires boards to respond to venomous email rants. Decide as a board how you wish to handle these kinds of communications. Some boards choose to use a simple auto response such a-"Thank you for your email. Your input will be reviewed and should a response be necessary, you will receive one."
  •         Email communications to and from professional advisers, particularly the association attorney should be deliberate and thoughtful. Since reading and responding to emails is typically a billable event, the board should determine who can send such communications to the attorney or the attorney's staff. In addition, when litigation is being discussed extraneous people should not be added to the recipient list for fear of jeopardizing the attorney-client privilege.
  •         Replying to all on an email and allowing Outlook to automatically complete email addresses (and thereby send to the wrong recipient if you don't check carefully) are the bane of most emailers' existence. This is doubly true for board members and managers so be sure to review your recipient list prior to hitting send. Also, know that blind copies are  no guarantee that your email recipient will not reveal having seen a copy of your email so think twice before doing that as well.
  •         Emails are typically part of the association's official books and records. As a director, if you do not wish to have your personal email address used to send and receive emails related to the business of running your association, it is wise to set up an official association email address for your directors. You should also discuss with your association attorney how many years you must retain those emails and the best method to do so.
These are just a few areas that need to be covered in your association's email policy. If you don't have such a policy, what are you waiting for?