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?

FL Associations Beware: Governor Signs Law Today which Shortens Screening Time for Members of the Military!

SB 184 was signed by Governor Rick Scott of FL today. The new law which amends Section 83.683, F.S. will take effect on July 1st and will apply to condominiums, cooperatives, HOAs and landlords.

The new requires an association to complete the processing of a rental application submitted by a prospective tenant who is a service-member within a mere seven (7) days after submission and must, within that 7-day period, notify the service-member in writing of an application approval or denial and, if denied, the reason for denial. If the association fails to timely deny the application within seven days, the leases goes into effect.

A service-member is defined in Section 250.01, F.S. as “any person serving as a member of the United States Armed Forces on active duty or state active duty and all members of the Florida National Guard and United States Reserve Forces.”

§ 250.01(13) defines the national guard as “the Army National Guard and the Air National Guard.”

§ 250.01(2) and (6) define the Air National Guard and Army National Guard as including “active or inactive.”

As such, the shortened application review period would seem to apply not just to active duty service-members but also to any member of the reserves even those who are not on active duty. The rationale for assisting active military members in securing housing quickly makes sense. However, this new law seems to have a much broader application and puts a real burden on volunteer boards to screen an application within just one week after receiving same.

The starting point for associations is to ensure that their applications ask whether or not the rental applicant is an active member of the military or a reservist. Given the scope of this new law, associations must ensure that screening companies return results more quickly on applications highlighted as belonging to a member of the military or a reservist. Boards are well advised to speak with experienced association counsel about how to quickly handle an application that contains any issues that might trigger a disapproval.

This new law is yet another example of how associations must be nimble enough in their operations to implement statutory changes quickly. Most boards take a full 30 days to respond to an application. For rental applications from active members of the military and reservists that will no longer be an option.

Part II of the Breaking Series: 50 Ways to Leave Your Lawyer

"Make a demand, Stan"

"Write off the fee, Lee"

"What does this cost, Ross?"

In Part II of my Breaking Up series, I will discuss how to leave your lawyer....if you must! The title of this blog post is a bit of misnomer as I won't indulge every fantasy you may have about canning your counselor.

As with your change in management, to transition to new legal representation it helps greatly if you have a copy of your retainer agreement to review first. Some lawyers and law firms would have you believe that you must defer your decision to seek representation elsewhere until the term of their retainer expires which is simply not true. Unlike other contracts, legal retainers are terminable at will. As such, if there is a specific termination notice required by your legal retainer it is really a formality as (a) your association can hire and use more than one lawyer or law firm at a time and (b) the attorney should only be performing services requested by your association.

Some boards prefer to have new counsel send prior counsel notice of that termination and request for the turnover of any active files.  Others prefer to do it themselves, either to thank the attorney for his or her past service or to outline the litany of complaints that led up to the departure decision. Once the decision is made to leave, it is important that the notice of that decision be very clear that work must stop other than on litigation matters which might be jeopardized before new counsel can substitute in. On non-crucial matters, I have sadly seen attorneys on the way out the door engage in a flurry of last minute billing activity so it is important to ask for a complete accounting of what is owed at the time notice of termination of representation is given.

It is also important to remember that if your board chose to have an attorney defer fees and advance costs on litigation matters (this is often the case with collection matters), you will need to pay those deferred fees and costs prior to those files being turned over to the association and its new counsel.  However, there are times that new counsel can move forward without having to obtain files from former counsel; this may be particularly true with non-litigation matters where new counsel is less than confident in a predecessor's work product. Maintaining a legal relationship because you don't want to pay those deferred fees even
while the matters are not being adequately handled would be shortsighted at best.

Litigation files may have what is called a charging lien on them. A charging lien is a type of attorney's lien under which an attorney can eventually claim a portion of any money paid to the client as a result of a judgment, settlement or verdict for unpaid legal fees and costs owed to that prior attorney. It is essential to advise subsequent counsel of any fee arrangements, particularly contingent fee arrangements, made with prior counsel as those arrangements could impact strategic decisions with regard to your pending legal matters as well as limit your new counsel's options.  Lastly, you may be surprised and very disappointed to learn that prior counsel did not handle things as efficiently or properly as possible, resulting in damages to your association and a potential malpractice claim against former counsel. It is then up to your board to decide whether or not you wish to spend time and resources pursuing a claim to make you whole.

As with other transitions, the best lawyers understand that the end of a client relationship is not always permanent and that a gracious and professional departure is in the best interests of all parties.

Sunday, February 26, 2017

Breaking up is hard to do: PART I- How to Navigate Management Company Transitions

Hopefully, most of us enter into relationships with the expectation that they will last. However, for those of us past adolescence, we realize that even long-term relationships can end and, even when they were good for a long time, the manner in which they do can overshadow everything that preceded that ending.

In the next few posts in this Breaking Up blog series, I will discuss the various transitions a board can face including transitions from the developer, from former counsel and from a long-standing predecessor board.

In the context of a community's relationship with professional management, the stakes can often be quite high.  More and more volunteer boards have come to rely upon professional management to undertake the daily operation and administration of their communities. For some boards, this reliance is reasonable and a balance is struck between the directors' responsibilities and that of their licensed manager. However, for a growing number of communities, the professional manager has supplanted the board with the staff, contract vendors and professionals, and, in extreme cases, even with the members. What these boards may not realize, is that the ultimate responsibility and accountability will legally and stubbornly cling to them regardless of their efforts to transfer much of the operational control to management. As such, it is time for boards to become more proactive about how a relationship with a professional advisor might end and what can be done before that happens to insert some clarity into that process.  Otherwise, the transition can be difficult and even damaging to the community.

One of the first and most obvious steps a board can take is to ensure that its management agreement is properly reviewed by legal counsel prior to signing.  If your board would like the ability to terminate, with or without cause, at any time throughout the term of the contract, then the contract must provide the association with that right. If your Board would like to have the ability to control the handling of association funds and records, then that must be spelled out as well. The time to discuss what you want the relationship to be and how its ending should be handled, naturally, is before you sign on the line.

Equally important, the board must retain a copy of the executed management contract. Many boards are dismayed to learn that they have not retained possession of a copy of their management agreement, which can be problematic if problems surface and they must ask the management company to provide that agreement to them or to their attorney. Most large management companies these days provide an impressive array of services which can include all aspects of the financial operations for the community, in addition to the infrastructure maintenance, insurance procurement, collection of delinquent accounts and interaction with vendors and professionals. Most large management companies also offer technology which can streamline operations and make them more effective by taking advantage of available technology.  However, when it comes to receiving copies of all those digitized records at the end of a relationship, some companies are better than others at achieving a graceful departure and some refuse to deliver the records altogether and assert that those records belong to the management company, not the association for whom the records were created.

Florida law requires management companies to turn over the association's records at the end of the relationship, even if a monetary dispute exists.  It might be tempting to use the leverage of those records and the crippling effect their absence will create for the community and the new manager or company coming on board, but it is in the manager's or management company's best interests to resist that urge. As with most things in the community association arena, what goes around comes around and new boards often bring back the management company which their predecessors ousted; that is unless a less than gracious departure left a sour impression.

As for the board's responsibilities in this process, it is analogous to a marriage. A fine-tuned prenuptial agreement can prevent a lot of unnecessary pain down the road and, if you were the partner who did not handle any of your personal finances, it helps to learn how to write a check and fast. Boards need to ensure that a management company transition does not place the association's operations in jeopardy.  While a perfect management company fit can last for decades and be mutually beneficial for both parties, it is important for boards to at least consider the possible end of the relationship at the time they are entering into each new contract.

Monday, February 6, 2017

Attention Boards: your two favorite menaces have combined: Airbnb and Pets!

Whether I am giving a presentation to hundreds of people, teaching a class to dozens of managers or meeting privately with a board of directors, the two issues that have come up without fail over the last few months are: Airbnb and Emotional Support Animals (ESAs) and other pet issues.

The questions I field on these topics usually sound like this:

"Our community is turning into a hotel. We have people coming and going at all hours and we have no idea who they are and, in addition to our security concerns, our recreational amenities are taking a beating."

"We are a no pet community but we have people bringing in more dogs each year and claiming they are emotional support animals. What about the people who bought here specifically because they do not want to or cannot live in close contact with dogs?

As a result of having recently rescued a dog from our local Humane Society, I have been searching for ideas to keep her from tearing down the house during working hours when she is alone. Lo and behold I cam across a site which advertised itself as "Airbnb for Dogs"! Oy. For a fee you can drop off your pet at a sitter's home but just imagine if that home happens to be inside a pet-restricted condominium or HOA? You get the best (or worst depending on one's perspective) of both violations!

With regard to Airbnb, VRBO, HomeAway and other similar sites, the ability to control your owners' engagement in this type of short-term rental activity depends largely on the provisions in your association's governing documents. If you were hoping your local government would help regulate this activity you should know that Airbnb is making that much more difficult by pursuing legislation which would restrict or prohibit a local government's ability to impact their business model which means your association is likely to be on its own when trying to regulate this behavior.  Attempting to pursue each violation as a violation of your minimum leasing requirements can be both costly and laborious given that each renal lasts only mere days. In my opinion, it is more effective to amend your documents to make the listing of properties in your community on these sites the violation rather than focusing on the rental term.

"But how can we tell if we have properties in our community listed on these sites before the guests show up?" you might ask.  Wherever there is a problem, a cottage industry designed to solve it cannot be far behind and the same is true here. There are now companies that exist which search these short-term rental sites each month to confirm whether or not there are units or homes in your community listed there. When those listings are found, your board can spring into action.

With regard to emotional support animal requests, I realize that you may question the truthfulness of many of these requests. You may even feel that the cards are very much stacked against a volunteer board of directors attempting to enforce reasonable pet restrictions.  This does not mean that associations need to rubber stamp all requests the receive. The best policy is to turn over these requests to a community association attorney who is highly experienced with requests for accommodations under the fair housing laws. This way, you can ensure, to the fullest extent the law allows, that any request for an exception to your pet rules is properly investigated and documented. Some people making false claims for fair housing accommodations will back off when asked to produce proper documentation while others are more intransigent and will proceed to acquire documentation off the internet without ever seeing a medical professional. It is also important to remember that there are individuals who are truly in need of an emotional support animal and are legally entitled to a reasonable accommodation.  Your job as a volunteer Board member or community association manager should be to work with your counsel to comply with the law and avoid the often significant penalties and costs associated with violating the fair housing laws while protecting the integrity of your pet restrictions.

The appeal of monetizing one's assets should really come as no surprise as that appeal is strong and there is no asset more easily monetized than a Florida getaway. For volunteer boards attempting to deal with a member's desire to do whatever he or she pleases with regard to occupancy of his or her unit, getting a handle on short-term rental activity and fraudulent ESA requests will certainly require the assistance of experienced counsel, a little ingenuity and a whole lot of patience.

For board members and managers in Florida who have more questions about this blog topic, you may reach me at or by phone at 954-364-6031.

Wednesday, December 28, 2016

Will Your Community Association be Sponsored by Advertisers Someday?

I read recently that some of our national parks in the U.S. are going to permit advertising in certain locations within the parks.  The reason for this move is ostensibly due to the appeal of millions of annual park visitors who spend many hours or days enjoying the natural beauty of these venues. Corporate America knows that a large captive audience provides the best opportunity to have a branding message resonate.  Despite the logic, to me some things should be off-limits, sacrosanct if you will.

The continuing trend to brand everything and carve out messaging on every available blank space has me thinking about the potential for advertisers to look inside private residential communities next. Many condominium and cooperative high-rises as well as large HOA communities already allow certain advertising activity such as cell phone towers and ads in their social directories and on in-house cable channels.  Most of that activity, however, is relatively unobtrusive and does not raise any eyebrows.  This could change if companies look next to large, private residential communities which contain hundreds or even thousands of residents along with the guests of those residents entering and exiting the community each day.  Can you imagine the potential for advertising, particularly in creative ways?

Some untapped areas might include:

  • Ads on the community bulletin board, association website, newsletter and other communication portals;
  • Ads on bus benches and other stops in communities with transportation systems;
  • Targeted sponsorship for certain recreational amenities or events. For example, the exercise room sponsored by LA Fitness, the Spring Picnic sponsored by Publix;
  • Signage at the community entrances and guard house;
  • Ads in the elevators, mail room, laundry facilities and other common areas.
Some larger communities in Florida and likely throughout the country are already experimenting with allowing more advertising involvement in their community's lifestyle. I have been to social events in client communities where portions of the event costs were defrayed by contributions from vendors who provide services to the community. I think more communities might consider these advertising arrangements if they were approached by companies to do so but up until now corporate America does not appear to have given much thought to the potential for community association advertising.

That might change and volunteer boards must decide in advance how to navigate these potentially risky waters.

Advertising inside your community might very well fall within the category of 'be careful what you wish for'.  It is important for community association boards to remember that they are typically operating not-for-profit corporations. As such, while certain sources of income other than the collection of assessments can be used to defray costs, they can also trigger tax consequences.  In Florida, boards can grant long-term easements so these kinds of advertising arrangements could be structured as easements which could prove difficult to vacate early if the association experiences buyer's remorse.  Boards considering such arrangements in the future would be well advised to consult with experienced counsel to discuss how long the initial term should be (a trial period would be best) and to craft sufficient disclaimer language advising residents and guests that the association is neither advocating for nor vouching for the advertisers in the community.

It is equally important to understand that once you start deriving revenue from a certain source, it is easy to become dependent on that revenue and therefore loathe to turn off its source.  While advertising is the fuel which drives the capitalistic engine, when it is used in a private residential community setting, the big question becomes whether such advertising will improve the quality of life in our communities or will it merely make it more difficult to seek refuge inside our previously tranquil communities.