Wednesday, September 30, 2009

Should more be expected from unit owners?

When you look at any of the common interest ownership statutes, not a lot is written about what is expected from owners living in private residential communities other than timely payment of their assessments.

You won't find a single sentence obligating owners to actually show up for meetings, you would be hard pressed to find anything requiring them to run for the board or volunteer for a committee. Absolutely nothing is written about individual maintenance responsibilities for units or lots as that is typically outlined in the governing documents. There is no guidance or threat of punishment from the State should an owner destroy association documents, harass association employees or generally become a nuisance to neighbors.

Up until recently, there wasn't even a reason for an owner to engage in regular maintenance for certain items in the unit if they could be passed off as needing replacement due to storm damage. Fortunately, Section 718.111(11) of the Condominium Act was amended to provide that a unit owner is responsible for the costs of any portion of the condominium property not paid for by insurance proceeds if such damage is caused by the intentional conduct, negligence or failure to comply with the terms of the declaration or association rules by a unit owner or members of such owner's family, his or her unit's occupants, tenants, guests or invitees. Moreover, this section of the Act was further amended to provide that an association is not obligated to pay for reconstruction or repairs of casualty losses as a common expense if the casualty losses were known or should have been known to a unit owner and were not reported to the association until after the association's insurance claim was settled, resolved with finality or it was denied as untimely filed.

While this is a good start, the question remains whether the State should more clearly articulate what is expected of owners living in common interest ownership communities in order to ensure harmony.

Tuesday, September 29, 2009

Can a blanket receivership order comfort your struggling community?

There has been widespread media coverage of blanket receiver orders designed to assist communities struggling with high delinquencies while investor owners continue to collect rent with no intention of ever paying the association; these investor owners' goals, quite simply, are to collect as much rent as possible before foreclosure.

To my knowledge, the Association Law Group obtained the first blanket receiver order in Miami-Dade County allowing a Receiver to collect rents from all units in foreclosure. Since that time associations and their attorneys have gotten even more creative. My law firm, Katzman Garfinkel Rosenbaum (KGR) obtained a "first of its kind" order in Seminole County for the Villas at Lakeside Condominium Association. Citing the words "Extraordinary times call for extraordinary measures", the Order Granting the Association's Petition for Appointment of a Receiver to Collect Rents from Certain Tenants was drafted by KGR attorney Stuart Zoberg and provided for the following:

1. The Receiver has the power to demand and collect rents from any tenants who occupy units within the Condominium where the owner is delinquent, in whole or in part, in the payment of regular or special assessments;

2. Any owner whose rents have been collected by the Receiver can file for relief from the Court to request that his or her home be exempted from the Order if good cause is shown as to why such relief should be granted;

3. The Receiver is appointed for the sole purpose of collecting rents on delinquent units. The board will remain in control of the association's affairs;

4. The Receiver cannot attempt to collect rents until notice of the Order and the Petition is properly mailed or delivered to the owner;

5. No owner, tenant, occupant or employees of the former can interfere with the Receiver's efforts to collect rents pursuant to the Order. Anyone so interfering is subject to monetary sanctions, eviction of the tenant or occupants and ultimately incarceration for failing to comply with a Court Order;

6. If the Receiver determines that the occupant or owner or tenant is not cooperating or being truthful about the amount of rent being paid, the Receiver may demand fair market value for the rental of the unit;

7. The Receiver must file a bond to secure the performance of his or her duties and must maintain a separate accounting for each home for which rents are collected under the Order; and

8. The Order continues in full force and effect securing rents from currently delinquent units and those units that become delinquent in the future until either the Receiver or the Association requests that the Order be stopped or the Court decides on its own that market conditions no longer require its existence.

If your community is struggling with an unusually high number of delinquencies while at the same time there are investor owners collecting rents, a blanket receivership order drafted in the manner discussed above might be just the thing to provide you with a little comfort.

Monday, September 28, 2009

How much is too much when it comes to your meeting minutes?

Do you believe that minutes from your board and membership meetings should be a verbatim rendering of what took place and who said what? Does your secretary or other scribe try furiously to keep up or do you simply tape the meetings and transcribe them later?

In fact, minutes from board or membership meetings should be much simpler than you may realize. In their most basic format, minutes should reflect who was present and what was done not what was said.

The first paragraph of meeting minutes should contain the following:

1. Identify the type of meeting that was held (ie. regular or special, board, committee or membership);

2. The name of the association, the date, time and place;

3. If it's a board or committee meeting the names of the directors or committee members present and those who are absent. If it's a membership meeting the fact that a quorum was established;

4. A statement that minutes from the previous meeting were "read and approved" or "approved as corrected". The corrections themselves should be made in the minutes being corrected and not reflected or further described in the minutes of the current meeting.

The body of the minutes should reflect the text of the main motions that were made and whether or not the motion was adopted or defeated. Editorializing by the secretary or other scribe should be avoided. For example, it is not necessary to say that "Jack Smith gave an excellent report" when simply reporting that the Treasurer Jack Smith gave a report suffices. Any debate on motions should be reflected as just that...debate. It is not necessary to capture the "he said, she said" quality of the debate just that a debate ensued. Occasionally people stress that they "want the minutes to reflect..." to make sure their position is memorialized. In those instances, you can but don't have to make mention that Jack Smith asked that the minutes reflect his position against the pool renovation.

The last paragraph of the minutes should simply reflect when the meeting adjourned. Typically the secretary will send out a draft of the prior meetings' minutes in advance of the next meeting so directors have read them and are prepared to either correct them or adopt them at the next meeting. Of course, the less extraneous material in your minutes the easier time your directors will have reading and approving or correcting them.

The issue of whether or not to tape meetings comes up in terms of creating the minutes. If you are handling your minutes correctly, you do not need a tape to capture the material that needs to go in your minutes. Moreover, having a tape even after you have transcribed your minutes can and often does lead to unnecessary disputes that the transcription was not correct or complete enough. Keeping it simple in this regard can save headaches down the road.

Who is "Marta" and why is "she" creating problems for older homeowners' associations?

The Marketable Record Title Act (or "MRTA") has been on the books in the state of Florida since 1963. This law was originally created at the behest of title insurance agents who were understandably frustrated with having to go back to the Spanish Land Grants when writing title insurance policies. These folks asked for a cutoff date beyond which they needn't go when searching title.

This is yet another example of a good law with a bad unintended consequence. It was presumably never the Florida Legislature's intention to make trouble for HOA's but that is exactly what happened. If you create a cutoff date for the viability of restrictions at 30 years from the root of title that will impact the Declaration of Covenants and Restrictions recorded for homeowners' associations. Up until a few years ago, once an older HOA's documents were extinguished by MRTA, there was no way to breathe new life into them. That has now changed and there is a method by which you can easily extend those covenants' life before the 30-year time period runs out or not-so-easily reinstate them after the 30 years has passed.

What will happen once a set of older HOA documents are extinguished by MRTA? A board's ability to collect assessments and/or enforce use restrictions such as age restrictions or architectural control provisions are based on the binding contract between the owners and the association comprised of the covenants and restrictions. Once those are dead, so is your ability to enforce them under a contract theory. There are certain equitable arguments for enforcement that can still be made but those are much more difficult and well beyond the scope of a blog topic.

What are some common misperceptions about MRTA?

My documents say they are good until 2040! The expiration date found in the documents is trumped by the application of MRTA.

We amended and restated our documents within the 30-year time period. If you did not file a Notice of Preservation within the 30-year time period, amending your documents or recording an entirely new amended and restated declaration will not save you from MRTA's harsh effects. There is a case on point, Berger v. Riverwind, which holds that amendments do not create a new root of title and thus do not extend the life of older covenants.

Why don't condominiums have this issue? Every time a condominium unit is sold, the deed references the underlying Declaration of Condominium and thus, creates a new root of title. Most deeds to HOA lots reference only the lot, block and Plat although there are occasional exceptions.

If your HOA covenants and restrictions were recorded in 1985 or earlier you need to speak to your association attorney immediately about your need to either preserve or reinstate those covenants. I worked on the first HOA reinstatement in Florida and have handled dozens of successful preservations and reinstatements since that time. There is nothing more unnerving than finding out that your HOA restrictions seem to have vanished but you can do something about it and the sooner the better!

Wednesday, September 23, 2009

How to pick the right attorney for your community

After sitting through two days of a managing partner conference in the Thompson Reuters building in NYC and listening to attorneys from around the country talk about their firms, I started thinking about what associations should look for when selecting the best attorney for their community.

Is it the person with the Harvard law degree and the firm with offices in Rio, Berlin and Tokyo? Is it the battle-scarred litigator whose expertise lies in class action lawsuits? Is it a sole practitioner, a big firm, a boutique firm or something in between? Is it a homegrown Florida firm or an out-of-state firm with satellite offices in the Sunshine State?

At the end of the day, I think a community's best bet is to pick a lawyer and a firm with whom they feel most comfortable that their needs will be addressed expeditiously, thoroughly and accurately. Many firms dabble in community association law but might not specialize in it. For some it's an add-on, for others it's an afterthought and for a precious few it is their preferred clientele.

I often tell my team of association attorneys that three things kill a relationship with a community association client: lack of responsiveness, overbilling and lack of clarity in work product. If a client can't get in touch with you, doesn't understand you when you answer their questions or feels as if you have billed much more than you should have, you will have an unhappy client on your hands and eventually that client will leave. Another kiss of death is the lawyer who tells his or her client what they want to hear rather than what they need to hear. A community association attorney, like any other attorney, is duty bound to advise his or her client what they can and cannot legally do.

Why then, do so many lawyers get this wrong? Believe it or not, lawyers are people too and they make mistakes. It is not reasonable to expect anyone to be perfect. It is reasonable to expect your lawyer to be honest, diligent and passionate about representing your community. Experience and expertise with the common interest ownership statutes and caselaw is a necessity; having personal experience sitting on a board is also a bonus. A concise and coherent writing and speaking style provides immeasurable benefit because the greatest advice is meaningless if you can't comprehend it.

Tuesday, September 22, 2009

Do you have a "Picasso" in your association's attic?

Hurricane Wilma made landfall in the state of Florida on October 24, 2005. Four years ago, many associations were doing well; most people were paying their assessments, real property values were at an all time high and the subprime mortgage collapse had not yet occurred. When these same associations were told by their insurance companies that their storm damage would not be paid for by insurance proceeds because the association did not meet its deductible or associations received pennies on the dollar and still had to specially assess their members to pay for storm repairs, most did not fight the insurance giants. Instead, they acted like the kind of customers the insurance companies love, took their medicine and went on about their business.

Now, however, that money would come in handy to weather the financial storm many communities are experiencing. What the vast majority of associations don't realize is that they may have that "Picasso" worth millions sitting in their proverbial attic and not even know it. There is a 5-year statute of limitations to bring a claim against an insurance company for a loss. Associations that either did not make a claim for fear of being dropped or their rates raised (an irrational fear given insurance industry practices) and/or were told they did not meet their deductible, have the ability to still make a claim for those losses. Even associations that may have received some money but did not go to appraisal or sign a full release may still be able to revisit their old claim.

The bottom line is that volunteer board members simply cannot "eyeball" storm damage and determine the true extent of damages their community may have suffered. What looks like a damaged roof may actually include significant structural and electrical damage as well. This is one of those times that the best boards reach out to experts to either reinforce their own findings or point them in a different and truer direction.

At this point with time running out in the hourglass, boards need to consult an attorney about their potential claim. Public adjusters play a role early in the process of adjusting claims but not this late in the game when a lawsuit must be filed in order to recoup money owed before the statute of limitations runs out.

So the real question at this point is, if you knew then what you presumably know now would you have accepted what was told to you at face value or would you have fought to be made whole? Would that Picasso make your life a little easier right now?

Monday, September 21, 2009

How much do you know about cooperatives?

I am in NYC for a Managing Partner Conference and I got to enjoy a beautiful day yesterday in Central Park. As I explored all that New York has to offer on a crisp Fall day, I couldn't help noticing the imposing buildings ringing the park. When we see high-rise residential buildings in Florida we usually think "condominium". In fact, most of the architectural beauties I saw were most likely cooperatives.

In case you are entirely unfamiliar with the cooperative form of ownership, individuals purchase shares of stock in the cooperative corporation and their right to live in their particular unit is evidenced by a proprietary lease. Cooperative owners do not receive a deed to their unit; their ownership is evidenced by that stock certificate. The governing documents for a cooperative association are comprised of the Bylaws, Articles of Incorporation, the Proprietary Lease and any additional rules and regulations the board may pass.

NY cooperatives are a different breed entirely from our homegrown Florida variety. These are the same folks who summarily declined a purchase application by the singer/wannabe actress, Madonna, because they didn't think she was "their type". Whether or not that was a wise decision is not the point; NY cooperative boards have great leeway to reject purchases, much more so than their southern brethren do. Some cooperatives still require a full cash purchase price which is getting harder to accomplish all the time.

A decade ago, many Florida cooperatives were exploring the possibility of converting to a condominium form of ownership. Why? Many felt that it would make their real property values increase since the cooperative form of ownership is not readily known or understood in Florida. In addition, many cooperative owners found it nearly impossible to obtain financing since Florida's bankers weren't much more attuned to this form of ownership either. Since then, I've heard less and less about cooperatives converting to condominiums lately. Condominium values have fallen flat and more banks are lending to cooperative purchasers and owners.

The Florida Cooperative Act is Chapter 719 of the Florida Statutes. Over the years, many of the changes made to Chapter 718, the Condominium Act, have not been similarly transported over for cooperatives. As a result, cooperative owners have different rights and responsibilities concerning board member eligibility, insurance and a host of other items. After seeing the voluminous changes made to the Condominium Act over the years (some good, some not so good), Florida's cooperative owners have to ask themselves whether they should be grateful or insulted about the oversight!

Friday, September 18, 2009

Is the Fire Marshal scrutinizing your community?

I have been getting a lot of calls and emails recently about the stepped-up efforts of local fire marshals throughout the state who are demanding that long-standing life safety requirements be implemented NOW.

The Life Safety Code (NFPA-1 and NFPA-101) is a national code that has been adopted by all 50 states. While most people do not deny the benefits of life safety systems for multifamily structures, the question on everyone's mind is why local officials seem to have chosen the most inopportune time financially to start enforcing rules that have been on the books for years.

Some of the items condominiums and cooperatives are being told they must have are:

1. Fire doors in the hallways;

2. Hard-wired smoke detectors in the units as opposed to battery-operated detectors;

3. Master keys for elevators;

4. Handrails, updated signage and recall to the first floor in elevators;

5. Generators; and

6. Sprinkler systems in the common areas.

At times, the local fire marshals and elevator inspectors seem to have a loose grasp on the Code sections they cite and vary what they are asking for depending on the level of resistance they encounter. Many are telling high-rise associations they must place sprinklers in areas they deem are common but are not listed as such in 718. Others have sent mixed signals to various associations within the same geographical area. As a result, there is currently a lot of confusion and fear.

With so many associations caught in the grip of growing delinquencies and delayed foreclosures, it would be reasonable to expect local fire marshals and elevator inspectors to show a little mercy before asking for all their "wish list" items right now. Associations receiving those calls and citations from the City should check with their association attorney to review their options. It might take one brave association to put up a real legal fight to see if a delay in implementation or perhaps an exemption is available to them.

So, has the fire marshal or City inspector come knocking on your door lately?

Thursday, September 17, 2009

Warning signs you shouldn't ignore

Today we'll wrap up our series on how to pick the right manager for your community. We've already discussed the starting steps in selecting the right company or individual for your association, the calls you need to make to ensure you get all the information you need and what to look for in any management contract presented to you.

The last step in this discussion is the big red flags you should be able to recognize but hopefully won't ever encounter. You might want to pull the plug if you notice the following:

1. As a board member, you have questions or concerns and when you turn to your books and records for answers, you discover your board is not in possession of any books or records, or the checkbook or, in fact, even a copy of the management agreement!

2. You consistently receive complaints from vendors about late or missed payments;

3. You have difficulty getting timely responses to your questions or the responses and advice you do get later turn out to be inaccurate;

4. Your manager hasn't taken a day off in years. This is either the sign of a very diligent worker or someone who is afraid to have others checking the books during their absence;

5. You have been unable to verify that your manager or management company is properly licensed and insured; and

6. You have been getting numerous complaints from owners and not just the "recreational complainers" in the community.

There are many wonderful managers and management companies out there that can help take a lot of pressure off a board of directors. There are also some managers and management companies out there that can unfortunately make your job harder not easier. Make sure you take the time to find out which ones are which.

Wednesday, September 16, 2009

Navigating a community association management agreement

The last community association management agreement that crossed my desk was 17 pages long with the attached exhibits. That is a lot to digest for anyone let alone time-strapped board members. The first piece of advice I can give you is to read the entire agreement and the exhibits setting forth the services being offered and the amounts being charged. If you simply can't do it, task a member or members of the board to do it and provide an analysis for the entire board. Of course, as with any contract, attorney review is important prior to signing.

Hiring a manager is the beginning of a partnership that will hopefully result in a better organized, more well-run community. As with any partnership or relationship, communication is key. Your manager must understand the full scope of your expectations as the customer and you must understand what you are being charged and why.

Specifically you will want to look at the following:

1. Term of the agreement. If you are new to this relationship you might not want to commit to a multi-year term with no ability to cancel other than for a material breach. A one-year contract with a 30-day cancellation with or without cause is best. I am not a big fan of automatic renewal clauses especially those that are highly convoluted and require you to send notice of termination 60 days before the sighting of the full moon before the end of the first term. You get the point that anything that makes it more difficult for you to move on from a dysfunctional relationship is not in your best interests;

2. Indemnification clauses. Many contracts I've seen require the association to indemnify the manager or management company for any losses, lawsuits, claims, demands, etc. resulting from the manager's course of performance without similar duties being placed on the manager. When I review a contract I insist on a mutual indemnification at the very least. In addition, given what we've seen with the lien/foreclosure crisis being experienced by so many associations, the manager must be willing to indemnify the association for any legal fees incurred on collection files wherein the manager's handling or mishandling of the ledger or mailings has compromised the collection file so that it cannot move forward; and

3. Scope of services being offered. You will be asked to pay a monthly fee that will encompass certain services and for other services you will be charged extra. You should know in advance whether or not your manager's attendance at your board and membership meetings is part of your monthly fee or is an add-on. The same holds true for services such as assisting with the association's audit and tax return preparation, handling and responding to document inspection requests, certified written inquiries and Division complaints, preparing the budget, handling material improvement projects and a host of other services. In the event of an emergency, does your management agreement obligate the association to use the manager (and pay extra) for him or her to serve as a general contractor of sorts for any repairs?

These are just a few of many different areas that need to be scrutinized before you sign on the dotted line and turn over the keys to your community. Tomorrow we will talk about warning signs that should tell you when you've made a wrong turn in this process.

Tuesday, September 15, 2009

What does the State expect from your community association manager?

Yesterday, I started my one-week series on how to find the right property manager for your community. The starting point is to first determine your community's specific needs. After that is accomplished you need to start making some calls.

If you know particularly well run communities you can ask who they use as a property manager. Accountants and attorneys who work with community associations are also good resources for possible recommendations. Another option is to go online to the Florida Community Association Journal, www.flcaj.com for manager listings as well as the Community Associations Institute at www.caionline.org.

Once you have interviewed a few possible candidates, it is important to call their references, to ensure that they are properly licensed and to check to see if there have been any complaints, investigations or suspensions filed against them by visiting the DBPR's website at www.myfloridalicense.com.

Florida's community association managers and management companies are regulated pursuant to Part VIII of Chapter 468 of the Florida Statutes. Not only must individual property managers be licensed by the State but, as of January 1, 2009, a management company responsible for the management of more than 10 units or a budget of $100,000 or greater must also be properly licensed by the DBPR.

In order to obtain such a community association management license, the following applies:

1. Each applicant must submit a complete set of fingerprints taken by a law enforcement officer to the Florida Department of Law Enforcement for state processing and to the FBI for federal processing;

2. Each applicant must be at least 18 years old and must be "of good moral character" which means a personal history of honesty, fairness and respect for the rights of others and for the laws of the state and the nation; and

3. The DBPR may refuse to issue a license to an applicant ONLY if there is a substantial connection between the applicant's lack of good moral character and the professional responsibilities of a community association manager and such finding is supported by clear and convincing evidence (quite a high standard) OR the applicant is found to have provided management services in the past without being properly licensed.

Unfortunately and not surprisingly, the state agency regulating community association managers often takes some time to respond to complaints or other indicia of abuse or incompetence so a clean record might not always tell the whole story. Glowing references from communities similar to yours and thorough interviews with your managerial candidates will go a long way in determining whether or not this will be a happy partnership. Tomorrow we will discuss what should and shouldn't be in your management company contract.

Monday, September 14, 2009

How to pick the right property manager for your community

This week I am kicking off the first in my series of how to pick the right vendors for your community with the selection of a property manager. Many of you already have one, might be looking for a new one or may be considering going from self-management to professional management.

Each day I will be discussing a different factor in this selection equation. The starting point for your community is to assess your needs. How hands-on do you want or need your property manager to be? Do you want to hire an individual licensed community association manager or a management company? If it's the latter, do you want an onsite manager from that company?

If you are looking for a management company, are you more inclined to go with a small, boutique-type company or one of the larger, more well-known companies? How important is it to you that your management company have widespread name recognition and offer an array of services?

Will you expect your manager to live in the building? Will you want your manager or management company to handle both the accounting aspects of your operations (i.e. financial reports, ledger preparation, budgets, etc.) or do you wish to keep those functions with your accountant and leave only administrative and facilities management to your manager?

What are your community's particular needs? Are you a high-rise association that would benefit from concierge service in addition to a manager who understands and has experience with life safety systems, elevators and concrete restoration projects? Are you a "55 and Older" community that would benefit from a manager that has experience in the community census procedure and other paperwork required to safeguard your senior housing status?

It would be helpful for your board to make a checklist of your likes and dislikes before starting your search. With that in hand, you can then start narrowing down your list of prospects. Tomorrow we'll talk about who you need to call and the questions you need to ask.

Friday, September 11, 2009

Ombudsman Trivia

If you live in a Florida condominium, you hopefully know that Florida is one of two states that has a Condominium Ombudsman. If you do give yourself 1 point! Let's see how much else you know about this Office.

1. When was Florida's Office of the Condominium Ombudsman created?

A. 2001 B. 2004 C. 2007

2. Who was our first Ombudsman?

A. Virgil Rizzo B. Mickey Mouse C. Charlie Crist

3. How does the Ombudsman get the job?

A. Elected by condominium owners B. Volunteers C. Appointed by the Governor

4. How many people have served as Florida's Ombudsman?

A. 2 B. 3 C. 1

5. What are the eligibility requirements to become Ombudsman?

A. Must be an attorney admitted to practice before the Florida Supreme Court B. May not actively engage in any other business or profession C. Must not serve as the representative of any political party D. All of the above.

ANSWER KEY:

1. B-The Office was created in 2004;

2. A-Virgil Rizzo

3. C-Appointed by the Governor

4. This is a trick question. There have been 2 full-time Ombudsmen since the office's creation: Virgil Rizzo and Danille Carroll. Currently Colleen Donahue serves as the "Interim"
Condominium Ombudsman until a permanent replacement can be found for Ms. Carroll.

5. All of the above. Perhaps one of the problems in terms of finding a permanent Ombudsman is that the job description requires an attorney and not many attorneys are willing to take a pay cut to fill this role. Perhaps a change in eligibility requirements is in order.

Thursday, September 10, 2009

So, do you have any Bunnies on your Board?

One of the best things about being an association attorney is the great variety of people I get to meet. Many people think of the "board" as a nameless, faceless organization. In fact, boards are made up of many different types of people with an incredible array of personal and career histories.

Over the years, I've met board members who were pilots, plumbers, parents, teachers, soldiers, college professors, college students, lifetime students, novelists, screenwriters, an astronaut, a professional tennis player, a famous golf course designer, inventors and yes, even a former Playboy bunny!

Sometimes these personalities bring wry and useful experience to their community association board service and other times they just bring good cocktail conversation. Most never mention their backgrounds unless they are asked about what they did "before" getting on the board. A board, however, is not unlike a team or department at work. The more they know about and trust each other the greater the likelihood for productivity and success.

We hear so much about unit owner vs. board disputes but often there are just as many disputes amongst board members either borne out of fears, suspicion, dislike or ignorance. Perhaps the first thing a new board should do is get to know each other and agree on certain goals and certain ground rules for playing nice together. Of course, sometimes you find a board member with a distinctly unappealing criminal background and the board must then take certain considerations into account.

Knowledge is power; cooperation is powerful. Knowing your fellow board members and, even better, liking them makes your job not only easier but faster, more cost efficient and satisfying.

So, do you have any interesting types sitting on your board?

Wednesday, September 9, 2009

Bad service....is the Board to blame?

As I spent the better part of a workday waiting for a well-known electronics store to deliver a television I purchased on Labor Day, I pondered who I should blame for the bad service I was receiving. Should I be annoyed with the sales person who inputted my address incorrectly, the delivery company who could not understand the directions I gave them or myself for walking into the store in the first place?

It got me to thinking about association members who become annoyed with vendors hired by their associations to perform maintenance or repairs in the community. If the board hires a company to perform a lengthy concrete restoration project and that company's workers drop concrete on owners' cars and other property in the process, is the board to blame?

If the contract was properly prepared to hold the contractor responsible for all incidental damages that might occur during their course of performance, the association shouldn't be on the hook monetarily but that doesn't mean the board won't suffer in terms of public opinion.

It is important for directors to remember that the vendors and contractors they "welcome" in to the community act as ambassadors of sorts for the board. Pick a rude or incompetent ambassador and the board's reputation suffers. Conversely, pick a great vendor who delivers flawless service cheerfully and the board has scored a big win. It is important for boards to perform their due diligence when selecting their community partners such as accountants, property managers, roofers, etc. Call references, check with the Department of Business and Professional Regulation and the Better Business Bureau to ensure that no complaints have been filed against the vendor you wish to use and require proof of insurance and licensure.

Even if a board takes all the right steps in advance there is no guarantee you won't occasionally pick a dud. However, you minimize your risks and increase member confidence in the board if you pick the best people to do the job for your community. In this blog, I will be writing a "How to Pick the Right...." series about picking the right manager, attorney, roofer, engineer, etc. Stay tuned!

Tuesday, September 8, 2009

Association election politics

We are all sadly familiar with national and local politics and who hasn't experienced the frustrations of office politics? For those of you living in a common interest ownership community, however, there is another type of politics and it involves being on the board, trying to get on the board and trying to recall the board. Ah, the inevitable community association politics!!

Groucho Marx once said, "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." Perhaps he lived in a condominium or homeowners' association?

Many years ago, condominium elections were conducted by proxy. How well did that function? Well, typically a few motivated people went around and gathered general proxies from the not-so-motivated people and, not surprisingly, the result was the same board year after year. The Florida Legislature responded to this dilemma by implementing an increasingly complicated election procedure for condominiums. The good news is that now condominium owners must cast a ballot to elect the board and the election is not dependent on achieving a quorum (which is hard to achieve when most folks would rather stay home and catch up on Tivo). This has cut down on some of the abuse but not eliminated it entirely.

In an HOA, there is still room for proxy abuse when it comes to electing directors. In terms of progress, HOA election disputes are now subject to mandatory binding arbitration with the Division in the same fashion as condominium election disputes under Section 718.1255.

Condominium owners still have the upper hand when it comes to ferreting out election abuse and dealing with it though. Pursuant to the Condominium Act, 15% of the total voting interests or 6 owners (whichever is greater) may petition the Office of the Ombudsman to appoint an election monitor. The Ombudsman may appoint the following to monitor a condominium election in the State of Florida:

1. A Division employee;

2. A person or persons specializing in condominium election monitoring; or

3. An attorney licensed to practice in Florida.

All costs associated with election monitoring are the responsibility of the entire association and not just the members petitioning for same.

Of course, all of these steps would not be necessary if it were possible to take the politics out of community association elections. It is apparent we still have a way to go. Some associations perform the task of electing a representative board flawlessly and others bring back memories of Florida's "hanging chad" debacle. If the tendency towards politics is a natural human trait we'll never cure this problem; the best we can hope for is to manage it like a chronic illness.

To reserve or not to reserve....that is the question

How many of you live in communities that maintain reserves for capital expenditures and deferred maintenance? How many of you wish you did?

Despite repeated attempts by the Florida Legislature over the last few years to mandate full funding of reserves each year, condominium and cooperative owners still have the right to vote to waive or only partially fund reserves for the roof, painting, paving and any other item for which the cost for deferred maintenance or replacement exceeds $10,000. There is argument in some quarters that the $10,000 threshold has not kept pace with the economic times and needs to be raised to factor in inflation. There is argument in other quarters that the right to waive or reduce funding for reserves should be taken away altogether and reserve funding should be mandatory...period.

The reasoning behind reserves is really quite simple. Those who put away for a rainy day tend to fare better than those who don't. This is still a hard sell for those who, in their own words, don't buy green bananas for fear they won't be around when they ripen (aka the "green banana" crowd). This is also a hard sell for those who fear that the more money lying around, the greater the temptation for someone to take it or use it without membership input.

The Condominium and Cooperative Acts both require boards to adopt budgets each year with full reserves for painting, paving, roof and any other item for which the deferred maintenance or replacement costs exceed $10,000. A majority of the members can then vote to waive or only partially fund those reserves. Up until a few years ago, reserves in homeowners' associations were entirely document driven. Several years ago, the Legislature passed changes to Section 720.303 which, among other things, allows a majority of the members in an HOA to vote to impose reserves in the community.

In the aftermath of several tumultuous storm seasons a few years back, those communities (whether they were HOA's, condominiums, or cooperatives) who had fully funded reserves were able to immediately use those reserves for the roof or to obtain a vote of the membership to use the reserves for other purposes such as clearing storm debris. With the passage of emergency powers for condominium boards, reserve funds will become even more useful in the event a state of emergency is ever declared.

While delayed gratification always requires a certain amount of discipline, the fact that some communities have squirreled away for a rainy day in the form of reserves might make those communities more appealing to potential purchasers in this tight market.

Does your community really qualify as Housing for Older Persons?

Some associations believe they qualify as a "55 and Older" community by virtue of nothing more than a sign at the entrance and a long-standing reputation for being a retirement community.

In fact, it takes more than that to allow a community to purposefully exclude younger purchasers and families pursuant to the Fair Housing Amendments Act. Recognizing that communities designed for the specific needs and desires of older citizens are highly desired by many especially in South Florida, the law does allow these types of communities to exist but only within certain guidelines.

A community must have the proper language in its governing documents, specifically in its Declaration of Condominium or its Declaration of Covenants and Restrictions. Antiquated language which simply says no children younger than 16 is no longer enforceable. The "magic language" must reflect that each unit or home must be occupied by at least one occupant age 55 or older in order to exclude children younger than 18 from living in the residence.

It is important to remember that the 20% cushion allowed under the law is really designed for younger surviving spouses and adult children who inherit their parents' units. Despite pressure from realtors to the contrary, it is not intended to be used for younger purchasers with no prior involvement in the community.

In addition, the community must conduct a census at least every 2 years to collect proof that at least 80% of the homes are occupied by at least one occupant age 55 or older. If the community does not meet the 80% threshold or does not have the proper age restriction in its governing documents, its ability to enforce its age restriction vanishes. Moreover, once that right has vanished, if the association continues to have the age restriction language in its documents or leaves the sign out front indicating that the community is a "55 and Older" community, those actions could constitute de facto discrimination since potential younger purchasers could decide to not even look at the community based on those misrepresentations.

Many older individuals base their purchase decision on the fact that they will retire in a community with their peers. It is important for boards to ensure that the age restrictions upon which these members are relying are safely maintained. If you are currently unsure about the validity of your community's status as Housing for Older Persons, please contact your association attorney to discuss the matter.

How do you breathe new life into long ignored restrictions?

Have you ever served on an association board of directors only to find out that the prior board's actions (or inaction) may prevent you from now enforcing your community's restrictions? It's disheartening to learn that prior boards may not have taken their fiduciary duty to strictly and uniformly uphold the governing documents seriously.

Let's take the typical example of a pet restriction in the declaration limiting owners to no more than one pet weighing no more than 25 pounds. Let's assume that over the last decade, boards have overlooked this restriction and now more than a dozen owners out of 100 have multiple pets in varying shapes and sizes.

A new board is seated and is serious about upholding the governing documents. Is this conscientious board prevented from enforcing the pet restriction as a result of the prior board's lax attitude?

The answer is yes....and no. Association counsel will most likely advise the board to "grandfather in" any existing pet that does not comply with the restriction. Why? Owners with the noncompliant pets could challenge any enforcement action by the board by using a number of affirmative defenses such as selective enforcement (you're coming after me but not others), laches (too much time has lapsed since you knew or should have known about the violation) and equitable estoppel and waiver (it wouldn't be fair to enforce the restriction since I relied on the prior board's consent or acquiescence).

A grandfather clause is an exception that allows an old rule to continue to apply to some existing situations, when a new rule will apply to all future situations. The term originated in late-19th-century legislation and constitutional amendments passed by a number of U.S. Southern States which created new restrictions on voting. It allowed men to vote, even if they did not meet new requirements, if they had ancestors who had had the right to vote before the Civil War.

As to new violations, the board should consider republishing its pet restriction in order to once again safely start enforcing it. The board must mail or hand deliver notice of the board meeting at which it will vote to republish the restriction at least 14 days in advance. After the meeting, the Board Resolution republishing the pet restriction together with the actual restriction should be mailed to each owner to put him or her on notice that the restriction is active and will be enforced.

Cancelling the cable contract just got easier

Last week, Florida's Fourth District Court of Appeals upheld the ability of a condominium association to terminate a cable agreement entered into by its developer. Section 718.302 of the Condominium Act provides that "any contract made by an association prior to assumption of control of the association by unit owners other than the developer, that provides for the operation, maintenance, or management of a condominium association or property serving the unit owners of a condominium shall be fair and reasonable, and such grant, reservation or contract may be cancelled by unit owners other than developer: (a)...by concurrence of the owners of not less than 75% of the voting interests other than the voting interests owned by the developer..."

In the case of Comcast of Florida, L.P. vs. L'Ambiance Beach Condominium Association, Inc. No. 4D08-2326 (FL 4th DCA August 26, 2009), the Appellate Court affirmed a Broward County trial court decision that allowed a condominium association to use Section 718.302 to terminate a cable agreement that the developer had entered into prior to turnover. Comcast had argued that its cable agreement did not fit within 718.302's category of a contract for the "operation, maintenance or management" of the association and thus, the owners could not rely on 718.302 to cancel the cable agreement. Moreover, Comcast hoped that the court would agree that Section 718.115(d) of the Condominium Act which provides specifically that cable agreements may be terminated after execution at the next regular or special meeting of the association by at least a majority of those members present would apply to the exclusion of 718.302. Neither the trial court nor the appellate court agreed with Comcast's arguments.

While cable television providers will undoubtedly be dismayed by this turn of events, the L'Ambiance decision is a significant tool for condominium associations looking to cancel cable agreements made by their developers pre-transition. This ruling does NOT apply to HOA's or to cable agreements that the condominium association entered into itself post-transition. Please speak to your association attorney if your community wishes to cancel a cable agreement that was chosen for you by your developer.

Let them speak....a primer on good member relations

Sometimes difficult owners are made rather than born. If a member feels that he or she is denied the right to speak at board or membership meetings, the situation becomes a pressure cooker and the top eventually blows off.

In a condominium association, owners are entitled to speak on all items listed on the agenda at board meetings. In a homeowners' association, if 20% of the voting interests petition the board to address an item of business the board must, at its next regular board meeting or at a special board meeting, place the item on the agenda. This meeting must take place no more than 60 days from the date the petition was received.

Think about it. If 20% of your neighbors care enough to force the Board to place an item on the agenda, wouldn't you agree that it is worth talking about? Remember, the statute does NOT require the Board to take action with regard to the issue placed on the agenda but it does require a discussion of the item.

HOA owners have the right by statute to speak for three minutes on any matter placed on the agenda by petition of the voting interests. The Board can, naturally, give them the right to speak on ALL agenda items or an HOA board can deny owners that right and strictly follow the statute to allow discussion of only petitioned items by owners.

Many HOA's do allow full discussion by owners on all agenda items in the interest of fostering communication and encouraging meeting participation even though Chapter 720 does not require it.

Condominium owners are not limited to a certain time to speak by statute but many condominium boards do pass rules governing owner participation at meetings which often set certain parameters including a time limit to discuss agenda items and restrictions on the placement of video or audio equipment so as not to disturb or intimidate the board members or owners in attendance.

I have had the misfortune of attending some board and membership meetings that were 5 minutes away from degenerating into a brawl. I have seen an owner hold an entire meeting hostage while he ranted, swore and spoke about everything except what was on the agenda for that night's meeting. I've also seen board members misquote Roberts Rules of Order and their Bylaws, shut down all discussion (even courteous dialogue) and run the meeting in a fashion that would make many tyrants proud. The most lively meetings I've attended were the ones with open bars before the meetings were called to order!

Fairness, courtesy and common sense should be the guidelines for all concerned when it comes to speaking at association meetings.

Live in the sunshine...Notice and hold all board meetings according to the law

People often state that associations are "subject to the Sunshine Law". In fact, Florida's Sunshine Law deals with the operational transparency required for governmental agencies and entities. However, every common interest ownership statute has its own transparency or "sunshine" requirements that boards must follow.

Meetings of the board at which a quorum of the directors is present and discussing association business constitutes a board meeting and must be open to all owners. There is no getting around this; if there are enough directors sitting by the pool discussing association business to constitute a quorum, it is a de facto board meeting that should have been properly noticed in advance so owners could join in or listen to the discussion.

There is no exception for "executive sessions", brief chats or emails that substitute for a discussion that should more properly take place during a board meeting that is open to the members. Asking your association counsel to sit in on a board meeting does not, in and of itself, make it a closed meeting. Your counsel must be present to discuss proposed or pending litigation to warrant closing the meeting to the owners and even then the closed meeting must still be properly noticed to the members as a closed discussion with counsel regarding litigation issues.

Florida law requires associations to post notice of all regular board meetings at least 48 continuous hours preceding the meeting except in an emergency.

If there isn't a place where notices can be posted, notices of board meetings should be mailed, hand delivered or electronically transmitted at least 14 days before the meeting to each owner in a condominium and 7 days before a meeting in an HOA.

Meetings at which special assessments or rule changes affecting unit or parcel usage must be mailed, hand delivered or electronically transmitted at least 48 hours in advance AND posted conspicuously during that same time period. Special assessment notices must also state specifically that a special assessment will be considered as well as the nature, estimated cost and description of the purposes for such assessment.

Not everything is an emergency that will allow you to forego the typical 48-hour notice. For example, if you forgot to put the new landscaping contract your Board is going to consider on the meeting agenda and the contract takes effect in 1 week that does not mean the Board can address the issue with less than 48 hours notice. An emergency typically connotes danger and that usually involves a casualty event such as a hurricane, fire, flood or the roof caving in.

In a condominium association, only meetings of a committee which can take final action on behalf of the board or which makes recommendations to the board regarding the budget are subject to the same notice provisions as board meetings. All other committee meetings do not need to be open to the owners unless the Bylaws require them to be open. In an HOA, committee meetings at which a final decision will be made regarding the expenditure of association funds or meetings of an Architectural Control Committee are subject to the same notice provisions as board meetings.

Associations that operate in the "sunshine" by letting their members know when, where and why the board is meeting have the best shot at avoiding unnecessary conflicts with owners as well as the greatest likelihood of gaining support for pet projects.

Better think twice before you sign that contract......

As a volunteer board member, you are probably not an expert (even if you think you are) on contracts involving painting, concrete restoration, elevators, roofs, management, accounting, security gates or any of the many projects your association may face. For this reason, experts should be called in such as attorneys, engineers, accountants or other consultants to help in the negotiation process for these types of specialized contracts.

Many times, it isn't what a contract says that creates a problem as much as what it doesn't say. This is especially true when it comes to:

-Warranties

-Liquidated damages for contractor delays

-Indemnification language

-Insurance coverage

Depending on the type of contract, the contractor may provide specifications or an outline of duties and responsibilities. However, for more extensive and expensive projects, an engineer or consultant should e brought in at the planning stages to provide specifications that are then put out to bid.

Be sure to bid out your projects when required by law. All types of association boards MUST obtain competitive bids for the following types of contracts:

1. Any contract that is not to be fully performed within 1 year after it is executed; and

2. Any contract for the purchase, lease or renting of materials or equipment or for the provision of services which requires payment by the association in the aggregate that exceeds 5% of the total annual association budget.

It is important to remember that the board is NOT required to accept the lowest competitive bid received.

The board does NOT have to obtain competitive bids for the following contracts:

1. Contracts with employees of the association;

2. Contracts for an attorney, accountant, architect, community association manager, timeshare management firm, engineer or landscape architect;

3. The business entity with which the association wishes to do business is the only source of supply within the association's county; and

4. The products and services supplied by the contract are needed in an emergency.

If a contractor is requiring half or more than half of the contract sum up front it is a warning sign!! Refusing to allow you to retain a cushion at the end to ensure that the work is completed to your satisfaction is another warning sign.

Beware of the incredible, one-sided, one-page "quick" contract that is presented to you. The only thing it will do is keep your attorney very busy down the road!

Is your building nearing its 40-year recertification?

As the registered agent for a Broward County association with a building that recently turned 40 years old, I just received its official "Notice of Required Building Safety Inspection" (aka 40-year certification) from the city of Fort Lauderdale's Building Department.

What does this mean for this particular association?

1. Within 90 days from the receipt of the Notice, a Florida Registered Architect or Engineer must inspect the property and submit a sealed Building Safety Inspection Certification Form to the City;

2. The submitted package must include 1 structural package, 1 electrical package, a permit application and the correct box checked indicating either "Repairs Required" or "No Repairs Needed";

3. The report must be physically dropped off at the City with a $200.00 payment (mailed in reports are not accepted);

4. If the building is determined to be safe, the association will not be required to have another Building Safety Inspection for ten years. If the report indicates there are structural or electrical deficiencies, the association will have 180 days to obtain the necessary permits and complete the necessary repairs;

5. If the association fails to submit the required recertification form, a Notice of Violation and a Notice of Hearing will be issued and significant penalties may ensue; and

6. Extensions can be granted and approved on a case-by-case basis.

Even if you did a complete interior demolition and renovation of your building, you are still not exempt from the 40 year Building Safety Program. Only if your entire building had been demolished would the inspection be waived. The city does not send out an inspector to your property. The city's review is totally based on the architect's report; the architect's seal certifies the integrity of the report and any necessary repairs stated by the Architect will be required by the city.

In Broward County, you can obtain a copy of the Building Safety Inspection guidelines and related forms for the Structural and Electrical Recertification at http://www.fortlauderdale.gov/building_services/40year.htm.

Sooner or later your building will hit its milestone 40th birthday and need to undergo this process.

How many different ways do you communicate with your association members?

More than 90% of disputes (including those amongst people living in community associations) could be prevented if people had better communication skills and more productive communication channels.

How often does your board communicate with its members? Is there a community newsletter that is well written, informative and regular? Do you have a community cable channel or a bulletin board where notices of meetings and other items of community interest are clearly and prominently posted? What about an association website? Are your members encouraged to use it to print out records requests, view notices or post comments?

If your membership and board meetings are not well attended have you asked yourself why? Is it because the meetings are held on inconvenient dates and times for the majority of the membership? Are they held in an uncomfortable setting or do they usually degenerate into a yelling match so that members would rather stay home than participate?

If you are planning a major community project such as a rewrite of your governing documents or a material alteration to the common areas, do you first reach out to members to gain their "buy in" to the project or do you forge ahead and spring it on them at the last moment when their approval is needed?

Some boards are understandably gun-shy about engaging in a high level of communication with their members because they have been subject to harassing or defamatory communication in the past. However, a highly functioning board of directors understands that communication is key and the more avenues of communication used the greater the chance that your message will be heard.

Should "Mrs. Smith" be able to use the pool if she hasn't paid her maintenance in a year?

Hardly a day goes by that I am not contacted by a client asking whether or not certain common area and recreational use rights can be shut off for a chronically delinquent owner. The frustration that these board members, paying unit owners and property managers express is easy to understand. It must be difficult to share a spot by the pool with a neighbor who hasn't paid maintenance in nearly two years!

One of the reasons many people buy in common interest ownership communities is the recreational amenities that most people couldn't afford without a budget shared by many. Over time, people tend to forget all of the amenities that initially drew them to a particular community: tennis court, pool, clubhouse, guard gate, etc. When non-paying owners continue to use these facilities without contributing to their expenses and upkeep, the rest of the community naturally does a double take.

If you live in a homeowners' association, Chapter 720 does give the board the authority to suspend a delinquent owner's use rights and voting rights if the proper authority is provided in the declaration or bylaws. Many HOA's have amended their documents over the last few years to take advantage of this significant tool.

Unfortunately, no such right exists for condominium boards. Last year, my firm drafted language for inclusion in two bills which would have given condominium boards the similar right to suspend use rights for delinquent owners. Sadly, that bill and every other community association bill failed.

When I am asked by a condominium board if they can make "Mrs. Smith" use the visitor entrance at the gate, stop her from using the pool or shut off her cable, I point them to Section 718.106 (3) of the Condominium Act which clearly states that a unit owner is "entitled to use the common elements in accordance with the purposes for which they are intended but no use may hinder or encroach upon the lawful rights of other owners." At the time this language was written, the drafters could not have foreseen our current foreclosure crisis and the fact that it is not equitable to give such unfettered rights to owners who might not have paid their fair share of common expenses for quite some time.

The language we drafted last year will return next session. Please make sure your condominium communities support such change loudly and early. There is no justifiable reason that HOA boards should have this useful tool while condominium boards are deprived of same.

Are any of your board members currently ineligible to serve?

Changes to the Condominium Act two years ago addressed the issue of delinquent board members, a problem that has sadly become even more frequent since that time.

Section 718.112(2)(d) and (2) (n) provide that board members who are more than 90 days delinquent in the payment of regular assessments are deemed to have abandoned the office, thereby creating a vacancy that the rest of the board must fill. The board need not vote to remove the delinquent board member; the board need only vote to fill the automatic vacancy.

A bill last legislative session would have extended ineligibility to serve on the board to those delinquent in the payment of special assessments as well; however, that bill failed.

Currently, the Division takes the position that delinquent owners are eligible to run for the board but must become current at the time of election. If they remain more than 90 days delinquent at the time they are elected to the board, they are deemed to have automatically abandoned the office. Currently, a board member can be more than 90 days delinquent in the payment of a special assessment and still serve. The current law only addresses the issue of delinquency with regard to regular assessments. In addition, there is nothing that would prevent the board from reappointing the same director to the board once he or she becomes current in the payment of assessments.

The issue of multiple unit ownership in this regard is not addressed specifically in the statute but a literal reading of the current provisions would seem to dictate that if an individual owns several units and is current on all except one, that individual would still be ineligible to serve if he or she is more than 90 days delinquent in the payment of regular assessments for that one unit.

Presumably, the legislative intent behind the changes to Chapter 718 was to (a) prevent directors with "unclean hands" from voting to pursue collection efforts against other owners and (b) use board membership as a "carrot" to entice payment of an outstanding debt owed to the association.

It is important to remember that these eligibility requirements do NOT apply to homeowners' association boards. No similar language is found in Chapter 720. Currently, HOA board members could be or become delinquent and still continue to serve unless their community's particular governing documents prohibit them from doing so.

How many of you have delinquent owners serving on your boards? How many of you had delinquent owners running for the board who settled their accounts before election night?

One more reason for associations to forge ahead with their foreclosures

We are going to be talking a lot about the subject of association and bank foreclosures in this blog. Unfortunately there is a lot of ground to cover and a lot of misinformation and confusion out there on the topic.

Today, I want to talk about just ONE of the reasons it is important for associations to be aggressive in pursuing their foreclosure actions through to completion and not suspend their efforts once the bank starts theirs.

An HOA client recently inquired about whether or not they should pursue foreclosure on a 4-bedroom house that was more than a year delinquent. We had already liened the owner but the association had been reluctant to move forward with foreclosure since it did not want to own the property.

The delinquent owners were also being foreclosed on by their lender but the important piece of this puzzle is that the owners had hired a lawyer and were fighting the bank's foreclosure. It is usually much easier to stave off a bank foreclosure action than it is an association foreclosure. With a bank foreclosure, the owner can defend against the action if the original promissory note has been lost, if there were RESPA or Truth-in-Lending violations and now, some clever lawyers are even arguing that if a mortgage was converted into a security it rendered the mortgage unenforceable. The media has reported on a case where a man has successfully defended against a bank foreclosure for 5 years now!!

What does this mean to my client who wants to know whether to forge ahead? In their case, the bank's motion for summary judgment was denied. That means there will likely be several more months of fighting. The amount owed to the association with attorney's fees presently is $2,400. If the association forges ahead, the owner will most likely realize that paying $2,400 to stay in a 4-bedroom house for another 6 to 12 months while he battles the bank is a pretty good deal. Where else could you rent a property for that size during that same time period? This owner might very well lose his house to the bank but in the meantime he does not need to lose it to the association for a much lower amount.

This story would be a lot different if the owner in question did not have a lawyer and was not fighting the mortgage foreclosure. However, these are the types of strategies and the types of analysis your association should be discussing with your attorney when deciding whether or not to move forward with your own foreclosure action.

Do you know who is your association's current registered agent?

When was the last time you checked to see who is serving as the registered agent for your association?

Each corporation in the State must have a registered agent upon whom service of process and other documents may be served. A corporation that fails to have and continuously maintain a registered agent is liable to the State for $500.00 for each year of such failure but that debt is immediately forgiven once the corporation complies.

Often an association will ask its property manager or attorney to serve as their registered agent. Other times, it is a board president or other officer who was serving. What happens over time, though, is that property managers, attorneys and board members change and the registered agent is not changed to keep pace. You might be surprised to learn that your current registered agent is your former property manager from 10 years ago!!

Right now, most associations' registered agents are receiving multiple copies of lender foreclosure complaints. Lenders are required to join the association as a defendant in their foreclosure actions or risk losing their statutory cap on liability for past due assessments. Receiving timely notice of these actions allows the association to closely monitor what is going on in terms of tracking and planning their own foreclosure strategy.

In other instances, registered agents are receiving summonses and complaints for legal actions being brought against the association or code violations. These are items that must be turned over to legal counsel immediately for action or the association risks being defaulted. A registered agent is not liable under Chapter 617 of the Florida Statutes for failing to give notice of the receipt of a subpoena to the association if the registered agent timely sends written notice of the receipt of the subpoena by first-class mail or regular mail to the last address designated in writing to the agent by the association.

Your association's registered agent needs to (a) still be alive and involved with your community and (b) be responsible enough to understand that documents received in his or her capacity as registered agent must immediately be transmitted to legal counsel and the board.

A registered agent does not need to charge the association for his or her services although some law firms charge since there is a certain amount of liability involved should documents received not be timely transmitted. Some associations prefer their attorney to serve as registered agent since that is where the documents need to wind up anyhow.

Of course, all of this begs the question: Who is your association's registered agent? You might be surprised to find out that the former president who was the subject of that nasty recall or the attorney you fired for not being responsive is still listed with the Division of Corporations as your association's registered agent!

Do you know if your association has been administratively dissolved?

Sometimes new boards take over with no continuity from a prior board or a prior manager and things fall through the cracks. One of these forgotten items can be the association's annual corporate report and fee.

The annual corporate report must be filed with the Division of Corporations each year in order to maintain an "active" corporate existence. This report must be filed each year whether there are changes in the officers, registered agent and other information or not. The annual corporate report is not a financial statement; it is a document that the Division of Corporations uses to confirm their corporate records.

The annual corporate report must be filed by May 1st each year. The fee which must accompany the report for not-for-profit corporations (community associations) is $61.25. If paying by check or money order the payment voucher or check or money order must be mailed and postmarked on or before May 1st.

If your association fails to timely file its annual corporate and pay the report filing fee, after some time your corporation will be administratively dissolved resulting in the following:

1. Foreclosing lenders are not required to join the association as defendants in their foreclosure actions (this means the association will be unaware of these actions to their detriment);

2. The members of the association will not enjoy the typical protections from liability afforded under a corporate existence; and

3. A director, officer or agent of a dissolved corporation who knows that the corporation has been administratively dissolved but still continues to act in its name is personally liable for the debts, obligations and liabilities of the corporation.

Sometimes associations function for years without knowing that their corporate existence has been dissolved. Reinstating the corporate entity can cost thousands of dollars at that point. There is no reason to ever get into this predicament. Make sure your board tasks someone (either an officer or the property manager) to ensure that the corporate annual report is filed and the filing fee paid each year on time.

Nasty surprises in the mail for Florida's homeowners

Florida's homeowners are about to start receiving some nasty surprises in the mail! Countless cities and counties across the State have raised their millage rates (sometimes by as much as 40%) and the TRIM notices reflecting your increased property taxes (despite your very depressed property value) are already in the mail.

Owners have 25 days following receipt of their tax notices to appeal to the Value Adjustment Board. The deadline is listed on the bottom of the TRIM notice. Several deadlines are as follows:

Broward County: September 18

Miami-Dade: September 18

Collier: September 11

Lee County: September 15

Palm Beach: September 14

An association can authorize an agent to pursue an appeal on behalf of the entire building and the owners are automatically included in that appeal process unless they opt out. Of course, the association can always decide not to pursue that appeal at some later date but filing for appeal with the Value Adjustment Board by the deadlines listed above at least preserves the association's and the owners' rights to do so.

Often an appeal will be successful but you first have to know to fight the battle! More money in your owners' pockets means a greater ability to pay your association's assessments. A lower taxable value on the property overall can also translate into lower insurance premiums. This is one shot at lowering your tax bill you don't want to pass up.

Does your community want to restrict tenants?

It should come as no surprise that many people are now looking to rent property after having lost their homes or having had their credit negatively impacted during this economy. Communities that might not have traditionally had many renters might now be seeing an increase.

For some communities, these renters could mean the difference between a unit owner being able to maintain control of the property and continue paying maintenance or foreclosure. Bulk investor owners may be a blessing to some failed projects. On the other hand, other associations see an influx in tenants as a headache waiting to happen.

Associations looking to restrict the number of renters in their community often take a couple of steps. If the governing documents are silent on the issue of renting, the first step is to amend the declaration (the document with the highest level of priority). Any time you seek to amend, you must determine if there are any unusual hurdles to the amendment process; i.e. super high percentage membership approval required or lender consent required. If these challenges do present themselves, your first option is to amend the amendatory threshold first and then seek substantive amendments later.

Most amendments restricting leasing include a combination of the following:

1. Prevent leasing within a certain time period after taking title to a unit. This could be either 6, 12 or 24 months. The rationale behind this kind of amendment is to discourage investors from purchasing in the community;

2. Set a minimum lease term and a maximum lease term;

3. Prevent leasing more than a certain number of times each year (usually one or two). The rationale behind this type of amendment is to encourage long-term leases as opposed to transient monthly rentals. The board should give themselves some leeway to allow hardship exceptions to this restriction in the case of a tenant dying or moving out within a short period of time after signing the lease;

4. Require a common area security deposit (cannot exceed more than one month's rent in condominiums);

5. Require a screening process. This can include the payment of a screening fee so the association can do a background check and a personal interview;

6. Add "for cause" language which would allow the association to deny potential renters for particular reasons; i.e. criminal history, history of creating a nuisance in other communities, failure to fully or accurately fill out the application, etc.;

7. Require owners wishing to lease their units to use only a board-approved lease form or lease addendum which would allow the association to collect rent directly from the tenant in the event the landlord/owner becomes delinquent and to empower the association to evict troublesome tenants;

8. Add language that would allow the association to specially assess the owner for any damage a tenant may cause to the common elements over and above the security deposit; and

9. Put a cap on the number of total rentals in the community at any one time.

Again, the issue of whether or not leasing should be discouraged is specific to the particular community involved. In a condominium, any changes affecting "rental rights" will apply only to new owners who take title after the amendments have been recorded and to existing owners who voted "yes" on the amendments. Interestingly enough, the very changes to Section 718.110(13) made at the request of groups fearing amendments restricting rentals will now work against communities attempting to loosen their rental restrictions. Since the language says amendments affecting "rental rights" that can mean language that makes renting more restrictive and it can mean language that makes renting less restrictive since both impact rental rights. Certainly that was not the intention of the groups pushing for that change initially but it is the reality in today's economy. It is for that very reason that my organization, the Community Advocacy Network (CAN) cautions legislators not to create new laws in a vacuum. Good laws must take into effect that the pendulum will only swing so far in one direction before it heads back in the other.

Does the State Care When Unit Owners Harass the Board?

We hear so much about "Condo Commandos" and dictatorial boards of directors who abuse and intimidate unit owners. Those types of directors and officers are out there and should certainly not be tolerated. However, how often do we hear the stories about unit owners intent on creating a miserable living environment for their neighbors, members of the board and association employees?

Some communities have suffered for years with this type of owner. Often the person is confrontational not only with the board but with neighbors and the association employees. The property manager or the landscaper could be subject to a scathing verbal attack at any moment. If the owner becomes worked up enough or feels that his or her concerns are not being adequately addressed, a physical threat might be issued. Sadly, sometimes that threat becomes a reality.

An owner intent on creating mischief or mayhem has some powerful tools at his or her disposal. Repeated document inspection requests for the same or nonexistent items each week can certainly cause a headache for someone. When those nuisance requests are not fulfilled by the board, the owner can then pick up the phone and contact the Ombudsman or the Division to complain about the unresponsive and evil board.

Of course, meeting time can also be a lot of fun for these types of owners. Speaking loudly and often, interrupting others, using bad language, insisting on talking about topics not on the agenda and sticking cameras or tape recorders in people's faces doesn't make for a pleasant experience for the rest of the members attending the meeting. In fact, in communities with these kinds of owners, attendance at meetings often suffers.

Sending certified written inquiries on a daily basis can become a hobby to this type of owner. I call them the "recreational complainers". Mash emails to the board and blasts to the community with unfounded and, at times, defamatory language can also be a source of entertainment. At times, it seems as if no one is immune from this type of owner's attack.

Associations struggling with this type of owner often want to know what they can do. The Division does not investigate owners so that's not an option. The Office of the Ombudsman was created as a neutral resource for associations but there is not much the Ombudsman can do to require an owner to "play nice". Legal intervention can become costly and protracted. Pursuing an injunction to stop one behavior often results in another more disturbing behavior popping up. It becomes an endless battle of wills.

Sometimes it's obvious that the owner creating the problems has problems of their own that no amount of discussion or board transparency can cure. If the board suspects that the problems stem from dementia or other mental illness, the association can contact the Florida Department of Elder Affairs. They have an Elder Hotline set up at 1-800-96-ELDER (1-800-963-5337).

If the board suspects that perhaps the owner is not taking the proper medication and could be a danger to himself or others, reaching out to family members is another option. Obtaining family contact information for owners is very valuable. Calling the police is an option but often they do not want to get involved in these kinds of "social situations".

Again, this discussion does not pertain to owners with legitimate gripes about their board or their association. This discussion pertains to the less discussed situation of owners who become a source of nuisance to the entire community and make everyone start thinking about hanging out the 'For Sale' sign.

Delinquent Owners With Tenants? Help May Be On the Way!

There is a growing trend in the association collection arena to file for a blanket order to appoint a receiver to collect rents on behalf of associations who have a number of delinquent owners with tenants. Basically, the associations are asking a Court to appoint a receiver to collect those rents and then remit them to the association in an attempt to recoup some of the past due assessments. The associations are attempting to plead this one time and to have the order “blanket” the community by securing rents from all owners who are currently delinquent or may become so in the future. This avoids the costs and time that typically would be involved with seeking this relief on a per unit basis.

It is important to remember that if such an order is granted, the rents are paid to a receiver who must then disburse those funds to the association. Not surprisingly, receivers cost money so there are costs involved for the association. Still the benefits to the association should a blanker order be granted can be significant for struggling associations.

There has been success in obtaining blanker receivership orders in Miami-Dade County. It remains to be seen whether this result will adopted by other jurisdictions around the State.

Generally, the association is the only party to these proceedings and the Judge issues an order directing all tenants to pay their rental fees directly to a Court-appointed receiver or face contempt of Court charges. The Association is further directed to serve a copy of the Order upon all owners and known tenants. Some Orders contain a further disclosure that anyone may challenge the entry of the Order through the filing of a Motion with the Court.

For those not well versed in legal matters, generally a party to a lawsuit has the right to appeal, but must first (although there are exceptions) wait until the trial court makes a final determination before appealing to a higher court. Everyone gets one appeal to a higher court as a matter of right without having to obtain permission from the higher court to hear the appeal. This promotes judicial economy so that multiple appeals are not heard on the same case although, again, there are certain exceptions.

Appeals before a case is over are called “interlocutory appeals”. Again, while there are exceptions, often these appeals are denied simply because the matter is not over yet or for other technical legal reasons.

In the recent and widely reported case of Village At Dadeland Condominium Association, Inc. (09-40773), the trial court judge approved the appointment of a blanket receiver for the entire community. This decision was appealed and the appellate court (3rd DCA Case No. 3D09-1784) refused to listen to the appeal while the trial court matter was still pending. The appellate court’s action is not a disposition on the merits of the lower court case and the trial judge’s decision to allow the appointment of a blanket receiver.

What does this all mean?

Well it means that the Appellate Courts have not yet validated the appointment of receivers for the collection of rents despite certain media reports to the contrary. This doesn’t mean it can’t be done, it just means that the matter has not yet been resolved. However, the growing trend of judges (especially in Miami) entering these orders is a good sign. If your association has a significant budget shortfall combined with a number of delinquent owners collecting rent from tenants, please talk to your association attorney about the costs and procedures involved with pursing a blanket receivership order for your community.

Lingering Confusion Over Individual Condominium Insurance Policies

In 2008, the Florida Legislature decided that condominium boards should be required to inquire once a year if their members had insurance coverage for their individual units. These individual homeowner policies (known in the industry as H0-6 policies) were also required by the 2008 Legislature to contain loss assessment coverage (although oddly they called it special assessment coverage) of at least $2,000 per occurrence and to name the association as an additional insured and loss payee on all casualty insurance policies issued to unit owners. Condominium boards were also given the ability to purchase any such missing policies and to specially assess any owners lacking such coverage for the costs of same.

Four and five years ago when a series of hurricanes battered our state, many boards were dismayed to find out that many owners did not have interior unit coverage and those damaged units remained as vacant shells for years after the storms because the owners had no money to restore them. At that time, boards were clamoring for some ability to ensure that owners were responsible enough to maintain H0-6 coverage.

Unfortunately, at the precise moment the Legislature finally provided boards with the tools to ensure interior unit coverage, most boards no longer wanted it! The subprime mortgage crisis was in full swing and boards were seeing their delinquencies rise at an alarming rate. The last thing most boards want right now is to be purchasing individual unit policies and pursuing special assessments for those policies that they might not be able to recoup.

However, much of the fear connected with this issue right now is borne out of confusion or misinformation. Here is a quick overview of the law as it stands.

1. The Condominium Act has required for several years that individual owners have unit coverage there was just never any statutory enforcement mechanism before 2008;

2. Boards must send out a notice inquiring if the owners have coverage and the owners must send back proof of such compliant policies within 30 days of the board's notice;

3. The Board can but is not obligated to purchase any missing policies. That means for many boards once they send out their notice of inquiry their obligation is over;

4. SB 714 which passed both houses of the Florida Legislature during the 2009 Session would have, among other things, removed the right to force place policies. Sadly this bill was vetoed by Governor Crist as a result of other provisions in the bill relating to sprinkler systems. There will undoubtedly be another attempt to address the 2008 changes next year.

It is important for boards to speak with their association attorney to determine the best way to meet their current statutory inquiry obligation without unnecessarily scaring their members. Rather than removing the ability to force place altogether perhaps a better option is to amend 718.111(11) to state that associations who want to force place can and remove the need for all associations to inquire as to coverage especially if many have no desire to become involved in the issue of interior unit coverage.

Apathetic Board Members Need Not Apply

For many people, their home is their largest investment. If that home is located in a mandatory community association it makes sense for them to consider running for the board in order to play a role in the decisions that can impact that investment. Sadly, sometimes the people who are least likely to have a positive influence on the community are the ones serving on the board.

It is a good idea for owners to ask themselves some hard questions before throwing their hats in the ring for board membership.

If you cannot answer "yes" to the following questions perhaps you should reconsider your decision to run for and serve on your community's board of directors:

1. Do I have the time to attend board meetings and contribute to them? "Serving" on a board means just that-you have to be willing to be a public servant of sorts and it is often a thankless job.

2. Have I read the association's governing documents and rules and regulations? This is a statutory requirement to serve on a condominium board not for an HOA board but it is really something every director should do.

3. Do I know what it means when someone says a director has a fiduciary duty to the membership?

4. Am I current in the payment of all assessments owed to the association?

5. Do I comply with the association's governing documents and rules and regulations?

6. Am I able to stand up to a board member or officer who might be acting unilaterally to the detriment of the association?

7. Am I able to admit when I do not have the answer to a problem and committed to seeking help from the proper authority?

8. Do I have the temperament to deal with difficult people and difficult situations?

9. Am I free of conflicts of interest that might impair my ability to make impartial decisions?

10. Am I agreeing to serve as a way to give rather than to take?

11. Does the association have a Directors & Officers insurance policy to cover me as a member of the board?

I realize it is hard enough to find people willing to serve on a community association board but if an owner cannot answer yes to these questions, agreeing to serve on a board might not only be a waste of time but could be disastrous in certain circumstances. If you run for a seat or agree to fill a vacancy, you should do so with the understanding that you will actually be a full participant in board decisions. While board service should not bring monetary rewards to a director it should hopefully bring a sense of community service and accomplishment.

Is that "Prescription Pet" really needed or is the Board being scammed?

Not a week goes by that I am not contacted by an association asking about its rights and responsibilities when presented with a request from an owner or other resident for a service animal. In communities without pet restrictions this is not a huge issue. However, for those communities that have rigorously enforced reasonable pet restrictions for years and sometimes decades, these kinds of requests present a real dilemma.

If an owner or resident has a disability that impairs his or her quality of life and the presence of a service animal can improve his or her quality of life then the board must grant that owner or resident a reasonable accommodation and allow the animal. Of course, some disabilities such as vision, hearing or mobility impairment are easily verified and the animals being requested have specialized training to assist with those issues. The problem arises with the less clear cut issue of mental disabilities such as depression.

The first step with any prescription pet request is to first verify that the person requesting the animal has a disability. The second step is to verify that the animal being requested can actually assist the person with his or her particular disability. The final step is to determine whether or not the accommodation being requested is reasonable.

The law unfortunately does not require a psychiatrist or other licensed mental health therapist to write the prescription for the service animal in the case of a depressed individual. Any "licensed medical professional" will do. Unfortunately, individuals intent on getting a pet regardless of the community's rules can now easily print out a "prescription" off some internet sites. If you feel that the professional submitting the prescription does not have the credentials or training to write such a prescription I urge you to speak with your association attorney.

In addition, a prescription for a service animal for depression should be allowed only after other therapies such as medication and counseling have been tried and not rendered positive results. Lastly, the accommodation must be reasonable. If it is determined that a dog will alleviate the depression, perhaps a 5 pound Yorkie will do just as well as a massive St. Bernard.

Depression is a very real ailment that afflicts millions of people. There are times that a pet is the real solution for some of these sufferers. However, it is also important to remember that many people bought homes in pet restricted communities for the very reason that they are afraid of living in close proximity to these animals. One person's cure can quickly become another's ailment!

Bad Information Can Lead to Association and Owner Headaches

Several years ago my sister was looking to buy a condominium unit. When she found a 2-bedroom unit in a mid-rise building in Broward that she really liked she asked me to come with her to see it. During our visit, my sister asked her realtor whether or not she could install a washer and dryer inside the unit. We had already seen a common area laundry facility on every floor and there were not currently any hookups for a washer or dryer in the unit. The realtor calmly looked at my sister and said, "Of course you can. Many people have!"

Had my sister actually listened to this advice, bought the unit and installed the washer and dryer inside her unit she could have faced potential recourse from the association for an illegal material alteration to the common elements. Of course, if the association had pursued her and prevailed, my sister would also have been on the hook for the association's attorney's fees and costs. This is just one example of the type of bad advice many potential new purchasers take from others when they should be reading the association's governing documents and asking the right questions to determine if the community is a good fit for their particular lifestyle.

Here are some other examples of potentially bad advice:

1. Parking is never a problem here;

2. Ignore the sign out front, plenty of young families live here;

3. Renting here is not a problem;

4. I'm pretty sure they have reserves;

5. Pets aren't allowed but as long as you keep the cat in the unit and no one sees it you're ok;

6. The roof is in tip top shape!!

If you are thinking about buying a unit in a condominium association, you are entitled to receive and review a Question and Answer Sheet which addresses some of the items listed above. Of course, it is still advisable to read the governing documents and not rely solely on the Q and A Sheet but it is a good start. If you are thinking about purchasing a home in an HOA, you are not entitled to a Q and A Sheet so you will have to do a little more digging on your own.

I told my sister to look for/ask about the following:

1. Use restrictions regarding pets, parking, leasing, age, etc. to determine if the community is a good fit;

2. Ask if reserves are fully or partially funded. If they are not, for how long have they been waived;

3. A copy of the budget;

4. A copy of the last reserve study;

5. A copy of the building's recertification documentation if applicable;

6. A copy of the association insurance policy to determine the coverage limits and the deductible for which she as a unit owner will eventually be responsible;

7. Check with the Division to see if a complaint has ever been filed against the board;

8. Ask if elections are held each year or if the same board remains seated year after year due to lack of membership interest; and

9. Check out the association's website or read a copy of its newsletter if they have one.

Of course there is so much more you could ask for but a potential purchaser is often limited by his or her seller's commitment to obtain this information on their behalf. I'm convinced that many, many problems in common interest ownership communities could be avoided if potential purchasers relied on accurate information and reliable sources to obtain the information they need to make an informed purchase decision.