Monday, July 20, 2015

Will Florida's new online election law for community associations spell welcome relief or more headaches?


The Florida Legislature recently approved a new law which will allow community associations to conduct their elections online through the use of electronic voting. While associations in other states have had this ability for some time now, this is a sea change for the millions of Floridians living in shared ownership communities.

For years, many of the disputes in condominiums, cooperatives and homeowners associations, have stemmed from the annual meeting and election process. People who ran for the board and weren't elected were convinced that the current board or the manager who doesn't like them somehow "kept them off'.  We've heard tales of ballot boxes being stuffed, tampered with and altogether ignored. In the condominium setting, allegations of forgeries on outer envelopes is always a concern while in the HOA setting, complaints of rampant proxy abuse are common in connection with the election of the board members.

Howard Perl, a Shareholder with the law firm of Becker & Poliakoff, has handled these disputes for more than a decade. "Many of the disputes involve judgment calls. Some ballots are discarded when they shouldn't be and others are allowed when clearly they should have been invalidated" he explained.

 
Election disputes don't come cheap. They are subject to mandatory arbitration with a Florida state agency and can cost up to $5,000 or more depending on how hotly contested the matter is.  Florida's Department of Business and Professional Regulation will be meeting in early August to begin drafting rules to address the new statute.

 
Now that the path has been cleared to allow Florida's associations to utilize online voting, the question remains whether this move will result in fewer or greater complaints associated with electing a community's board of directors.  Remember the national focus on the Sunshine State's unfortunate hanging chad incident? Hopefully, we will not have a repeat performance and our Florida communities will embrace this new option as one which will (a) likely increase voter participation and (b) reduce the possibility for voter fraud.

 

Tuesday, July 7, 2015

U.S. Supreme Court Ruling on Fair Housing Law Could Have Wide-Ranging Impact on Community Associations



The U.S. Supreme Court has been in the news a lot which is not surprising given its recent newsworthy rulings. However, there is one ruling that could impact the community association industry profoundly. The 5-4 Supreme Court holding in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, could have wide-ranging impact on community association boards. Previously, a board was diving into dangerous waters when it passed rules and restrictions with the intent to treat people differently. Under the new Supreme Court ruling, a board can be held liable for housing discrimination whether or not anyone on the board intended to discriminate so long as the rule or restriction has a disparate impact on a legally protected group of people.

Boards will have to show that (a) they had a good reason for the rule or restriction and (b) there was no way in which to accomplish their reasonable goal in a manner which had a less disparate impact. 

So how could this impact your community?

Many members wish to ensure the continued success of their community by regularly amending the documents. Often those amendments allow their boards to thoroughly screen new tenants and new purchasers to ensure that newcomers will not present a financial burden on association (if a member cannot pay assessments, the remaining members must make up the deficit) nor will they present a threat to the health, safety or welfare of the community.

Do the following restrictions which are fairly standard in the community association arena create disparate impact concerns?

-Screening applications which inquire about previous criminal background?

-Screening applications which inquire about credit score, employment status and other indicators of financial stability.

-Requirements that a new purchaser have a certain equity interest in the property being purchased.

-Rules involving access to an association's pool and other common areas that may impact families with children

While the ruling isn't a reason to panic or to abandon any attempt to pass and enforce reasonable rules in your community, it does make it more important than ever that you discuss your restrictions with your association attorney prior to implementing same in order to decide whether or not there will be a disparate impact and whether or not there is a way to accomplish your goals without creating a disparate impact.

The four dissenting justices voiced their concerns that the majority decision is based on the Griggs v. Duke Power Co. case rather than focusing on the actual intent and text of the Fair Housing Act. In the Griggs case, 401 U.S. 424 (1971), the Court held that black employees could recover from their employer under  Section 703(a)(2) of Title VII of the Civil Rights Act of 18-964 without proving that the employer's conduct (the employer required a high school diploma or a qualifying grade on a standardized test as a condition for certain jobs) was motivated by a discriminatory intent.

Disparate impact is a much different threshold than disparate intent.

To read the full decision click here:

http://www.supremecourt.gov/opinions/14pdf/13-1371_m64o.pdf

 

Tuesday, June 23, 2015

Has your Community ever assigned your post-loss claim or insurance policy benefits to a contractor? Two recent Court rulings uphold your right to do so.


In an opinion filed on June 22, 2015, the 1st DCA ruled in the case of Security First Insurance Company vs. State of Florida, Office of Insurance Regulation that the OIR was correct in not allowing Security First Insurance Company to change language in its policies which would restrict the ability of policyholders to assign policy rights without the insurer's approval.


This is the second ruling in little more than a month (the first ruling was issued by the 4th DCA) which has supported a policyholder practice known as an "assignment of benefits". This practice often occurs when a homeowner or an association hires a contractor to make necessary repairs in the aftermath of a hurricane, other storm or other casualty event such as a water leak. Once those policy benefits have been assigned, the contractor then pursues payment directly from the insurance company. Insurance companies have argued that the practice of assigning benefits can encourage inflated costs and fraud. Policyholders and contractors argue that the practice allows cash-strapped communities to recover more quickly from emergencies.


Security First attempted to change its policy language to the following:


“Assignment of this policy or any benefit or post-loss right will not be valid unless we give our written consent.”


On July 22, 2013, the Office of Insurance Regulation (OIR) denied Security First's request claiming that the change in language would “violate the intent and meaning of Sections 627.411(1)(a), 627.411(1)(b), and 627.411(1)(e), Florida Statutes[, and] contain[ed] language prohibiting the assignment of a post loss claim under the policy, which is contrary to Florida law.”


A three-judge panel of the appeals court said state law has long allowed assignments of insurance benefits.  "On this point we find an unbroken string of Florida cases over the past century holding that policyholders have the right to assign such claims without insurer consent." The 1st DCA Panel held that the matter of whether or not the practice of assignment of benefits should continue would be more properly addressed by the Florida Legislature.  In fact, Florida legislators considered a pair of bills (HB 669 and SB 1064) in the 2015 Session that would have substantially restricted assignments of benefits but both bills failed.


Not discussed in these cases was the more practical question of whether or not an assignment of benefits to a contractor is a wise decision for an association. Fortunately, we have not had a hurricane impact Florida significantly for more than a decade but in the aftermath of the tumultuous 2004-2005 storm seasons, we saw many out of state, unlicensed and unknown contractors arrive in communities at a time when they were most vulnerable. A Board's priority in the immediate aftermath of a disaster is to mitigate further damage. Negotiation on overall repairs requires deliberation, thoughtful negotiation and careful review of the contract. 
 
The moral of this blog post is just because you can do something does not necessarily mean you should.
 
 

 

Monday, June 8, 2015

12 Angry Men-Classic Movie or Average Association Master Board Meeting?


Last night I watched a classic American film-12 Angry Men. The title actually refers to the twelve jurors deliberating the fate of a boy on trial for murdering his father but could just as easily describe the average master association board of directors. 

I am sure many of my blog readers have seen this movie but for those who haven't, the entire film takes place in a hot, stuffy jury room. Henry Fonda starts out as the lone hold-out with his Not Guilty vote and he faces the wrath of his fellow jurors who want to get to a ball game, their jobs or their homes and do not appreciate his dissenting voice delaying their escape from their confined quarters.

At one point, a juror accuses Fonda of being talented at the "soft sell" negotiation technique. Fonda doesn't attempt to shout, scream or bully in order to get his fellow jurors to slow down in their rush to judgment. Instead, he bravely admits that he doesn't know whether or not the boy is guilty but he would like to talk about it a little and ask some questions before rendering a verdict which will end the boy's life. Eventually the discussion results in the other jurors realizing that the evidence they had relied on so heavily and hastily could not support a guilty verdict and an unanimous acquittal results.

While the decisions made in association board meetings are not nearly so significant, those decisions still can impact the quality of life for many people.   How often has a member of a community association board felt that the rationale being expressed by some or the majority of his or her fellow directors was not in the community's best interests but remained silent for fear of being rebuked or rejected? Conversely, how many directors do stand up and voice their concerns but do it in such a hostile manner that their message is drowned out by their rhetoric? Association members can also be the right messengers at times when a majority mindset needs to change.

There are a lot of lessons to be learned from 12 Angry Men for the many thousands of volunteers serving on community association boards. 

  • Speak up, especially if the stakes are high. 
  • Present your message in a way that makes your fellow directors really hear what you are saying. 
  • The way to unmask the extreme members of your board is by giving them enough room to do that task themselves in the face of unemotional data.
If you haven't seen the movie in a while or have never seen it, perhaps it's time for movie night in your community.

Monday, May 25, 2015

Florida shared ownership statutes continue to catch up with Digital Age

Given the significant percentage of Floridians living in all types of shared ownership communities, it is not surprising that each year we see at least a handful of bills pass which directly or indirectly impact those private residential communities and one primary association bill which contains both substantive changes and technical fixes needed to address glitches associated with the legislative changes from prior years.

2015 was no different. Florida's 60-day Legislative Session recently ended (and abruptly with the House adjourning several days early) with another omnibus association bill, HB 791, having passed; that bill is now on the Governor's desk awaiting his action. The Governor is likely to sign this bill into law and it will become effective on July 1, 2015.  


Among other changes, HB 791 will help Florida condominiums, cooperatives and homeowners' associations catch up with the digital age thanks to the following changes:
Electronic Voting (Condominiums, Cooperatives, & Homeowners' Associations): The
bill provides that associations may conduct elections and other membership votes by utilizing 
an electronic (interned-based) method. The bill also specifies the requirements necessary to 
establish an electronic voting method, including a board resolution.  The bill requires that an 
owner consent to online voting, and if the owner does not consent, the owner is entitled to 
vote by paper ballot. While it is certainly easier to cast your vote from the comfort of one's 
home or office, the real question here is whether or not communities are ready for this kind of
change and whether or not the typical complaints of election fraud will increase or 
decrease once voting online is implemented.
Digital or Electronic Transmission of Proxies (Condominiums, Cooperatives &
 Homeowners’ Associations): The current law does not specifically authorize owners to 
transmit a copy of their proxy to the association (for example, by fax or a scan of the proxy
sent via email).  The intent of this language is to facilitate voting.  Many owners are not able
to attend meetings in person and may wish to bypass U.S. mail and send their proxy to the 
association in some other fashion.  The proposed language is similar to language currently 
found in Section 607.0722(10), Florida Statutes, which governs corporations for-profit.  The
proposed language is being added to Section 617.0721, Florida Statutes, which governs 
corporations not-for-profit, and therefore, will also apply to condominium, cooperative, and 
homeowners' associations. It is important to remember that this change does not allow 
someone to simply send an email stating how he or she wishes to vote on a particular matter; 
it requires an owner to actually scan or fax his or her actual proxy. Also, this change does 
not allow directors to cast votes at board meetings by email. Still, this change is well
overdue-whatever can be done to make it easier and more cost-effective to relay one's vote 
should be permitted.
Electronic Notice to Owners (Condominiums, Cooperatives and Homeowners’
Associations):  Currently, in order to provide notice to owners electronically, an Association's
bylaws must provide for electronic notice and the owner must consent in writing.  The bill
removes the requirement that electronic notice be authorized by the bylaws which is a 
welcome change as some communities cannot easily amend their bylaws to include this 
language.  Therefore, as long as the owner consents in writing, the association can provide
the owner with electronic notice. Some ways to obtain such consent would be in the new
owner approval package and as a separate consent form included with
the annual meeting package. Speak to your association attorney about the easiest methods
to obtain this consent from your owners.
It is encouraging to see that our statutes are changing to address the way Florida's significant
shared ownership population actually lives and conducts business. Now that we've made it a
little easier for people to become involved in the voting process, let's hope the numbers increase in terms of those who actually do participate.

Sunday, May 10, 2015

Five Questions You Need to Ask Yourself Before Serving on Your Association's Board

Before agreeing to serve on your community association's Board of Directors, please do yourself and everyone else a favor and run through these five questions first.

1. Do I have time to serve on the Board?

Running and being elected to your community's board of directors can be an exciting experience as it is an affirmation of sorts. However, once the election is over there is that little matter of actually attending meetings and handling the work that may be delegated to directors. In self-managed communities, your successful service on the Board is likely to be even more dependent upon your ability to carry your share of the workload. If you have certain circumstances in your life which would prevent you from being an active and responsible director, you should reconsider your decision to serve..

2. Can I make unpopular decisions?

Being a community association director should not be a popularity contest. As a director, you will be asked to make decisions which can upset your neighbors. These decisions can range from having to lien and foreclose on the nicest guy in the community as well as passing a costly special assessment to make necessary roof repairs. You cannot play favorites and you should not abstain from casting your vote because you want to be liked. Also, trying to "fly under the radar" by allowing a dominant director or directors to make all the decisions or abdicating control entirely to a manager is a choice that will will likely come back to haunt you.

If you cannot bear the thought of making someone unhappy (including yourself), then serving on the Board might not be for you. 

3. Do I have an ax to grind with anyone?

Do you see serving on the Board as an opportunity to help your community or is it a chance to use the position with a less than noble goal in mind?  While there is nothing wrong with new Board members joining with a goal towards correcting a former board's mistakes, there should be concern if the battle is a more personal one with a neighbor or vendor. Board service requires a neutral stance where you are making decisions based on the overall good of the membership and not for personal gain.

Be honest with yourself about your intentions for serving on the board because if they aren't good, you won't fool anyone for long.

4. Am I willing to read and comply with the governing documents?

I have been reading governing documents for two decades and I have yet to come across a set which would qualify as a thriller. When you include amendments passed over many years, some governing documents can be comprised of hundreds of pages of legalese so reading them is not on most people's "Wish List". Still, if you agree to serve on your community's Board, you have an obligation to read those documents. No, you do not have to perfectly understand them-that is what your association attorney is there to explain. You do, however, have to be prepared to comply with them along with everyone else. Also, attending a class each year will not only make you a better director, it might make you happier serving on the board.

5. Do I have skills that would assist the community?

Despite what some owners might think, association directors are not tied to a standard of perfection. These volunteers are human and they will make mistakes. Community association directors are tied to a reasonableness standard so one of the greatest skills you can bring to your Board of Directors is that of being a reasonable person willing to listen with an open mind, eager to seek assistance from experts when an issue is beyond your skill set and mindful of the tone and content you use when communicating with members, fellow directors and vendors.

I served on my HOA Board for a two-year term and during that time we undertook some major community projects, we made a few mistakes and I found myself on the losing end of more than one vote. I applaud everyone who volunteers and serves on a community association board with the right intentions. It is not an easy job but it does give you a different perspective from that point forward!

Thursday, April 30, 2015

Is it time for Local and State Governments to do some of the heavy lifting for community associations when it comes to secondhand smoke?


Has your condominium or cooperative board been contacted by a member who has been impacted by a neighbor's nicotine habit? Has your Board struggled to understand what your obligations are and how much it will cost you to find out?

By defining secondhand smoke as a nuisance, local and state governments can do the heavy lifting for condominiums and cooperatives who are struggling with this issue. 

Some of the actions taken by the following California cities to address the topic of smoking in rental apartments could be modified by our Florida legislators to address the issue of excessive secondhand smoke in our State's condominium and cooperative communities.


  • In 2006, the City of Dublin declared secondhand smoke to be a nuisance.  One Dublin couple won a restraining order against a downstairs neighbor whose smoke invaded their unit through shared ventilation and windows – the judge issuing the order cited the nuisance provision as well as a year’s worth of email exchanges over the situation.  Dublin eventually adopted a 75% non-smoking units law in 2013. 

  • In 2009, the City of Richmond  adopted a law banning smoking in all multi-unit housing of two units or more which law became effective Jan. 2011.  Richmond has a special hybrid police/code enforcement team of sworn officers called the Regulatory Unit which enforces the non-criminal code violation calls.  When a tenant calls about a smoking neighbor, an officer will go the unit and take a complaint.  The officer will attempt to speak with the property manager/owner and will ask to see a copy of the smoke-free lease that each tenant should have signed as of Jan. 2011.  The officer also checks the property to make sure that the required signage is up and asks to see the letter that landlords must send out to tenants to inform and remind them of the law.   If time permits, the officer will also attempt to contact the alleged violator.  If that person is home and answers the door, the officer will talk with him/her about the law and the need to comply.  The officer informs the complainant to advise the Regulatory Unit if the problem persists.  If the owner/property manager is not using the proper lease, sample letter and/or signage, then he or she is asked to take remedial steps, with the officer checking back in one month’s time to confirm compliance.  Violation of the ordinance is considered a nuisance under the city’s Code which means that the city may, if  it so chooses, levy a fine against the property owner for each day that the violation continues.  Having a uniformed officer take a police report seems to have done the trick in terms of discouraging smokers from continued violations as no fines have been levied to date. 



  • At the end of 2013, the City of Berkeley, adopted a law which took effect May 1, 2014 requiring all leases issued after May 1, 2014 to be non-smoking.  Existing lease holders were asked by landlords if they would be willing to voluntarily sign a new smokefree lease addendum and many did agree.  Nonetheless, as of May 1, 2014, it was illegal to smoke inside apartment and condominium units in Berkeley.    Since this law's inception, only one person has been cited.  Some Berkeley landlords are also attempting to check on the status of these complaints as proof of nuisance behavior which can be used in an eviction action.


In addition to California, Utah defined secondhand smoke in 1997 to be a nuisance as it pertains to multi-unit housing. Some states classify secondhand smoke as a nuisance-is it time for Florida to follow suit?