Thursday, December 31, 2009

Some good news for owners struggling with Chinese Drywall.

If you live in Broward County and have discovered Chinese drywall in your home, you still have time to file a petition appealing your proposed tax valuation even though the September 18 deadline has long since passed.

As has been extensively reported in the news, some homes constructed in Broward and elsewhere throughout the State and nation within the past few years contain toxic Chinese drywall. When exposed to moisture, this drywall emits sulfur odors and seemingly causes visible corrosion to copper pipes and air conditioner evaporator coils.

Not surprisingly, these drywall problems seriously impact the value of these homes. Various Florida counties have taken pity on those property owners suffering with Chinese Drywall by reducing the taxable value of these damaged properties. Broward County has announced that it will reduce the taxable value of impacted homes by 50% -- subject to the owners providing sufficient documentation of the condition and agreeing to this resolution for the 2009 assessment.

To request this reduction, please contact Broward County's Residential Department Manager Bob Zbikowski at 954.357.5880 to notify them if your home has documented Chinese drywall issues. Also, if you missed the September deadline to file for a value reduction and you subsequently learned about the drywall problems, the Value Adjustment Board has determined this is sufficient "good cause" for you to be allowed to late file for a 2009 value reduction. Contact the Value Adjustment Board at vab@broward.org for more information.

The documentation that must be provided to be eligible for a tax adjustment includes:

Letters from the property owner's builder/developer confirming the presence of contaminated Chinese Drywall within the residence; and

Inspection reports performed by an independent inspection company OR an inspection report completed by the builder's inspection company OR an insurance company inspection reports;

Photos of the damage;

Insurance company's claim determination letter (which, in all cases we've seen to date, is a denial letter) referencing the cause of the denial as a building defect of Chinese drywall;

Proof of a filed law suit claiming damage caused by Chinese drywall OR with WCI-built homes, asserting legal claims made in WCI's bankruptcy case stating Chinese drywall as reason for the claim. Note: Typically, filed lawsuits contain additional information such as inspection reports and some of the other above items.

It is not necessary to supply all of the above documentation. However, you must submit sufficient documentation to confirm the presence of contaminated Chinese drywall within the building or residence; photos alone will not satisfy Broward County's "sufficient documentation" requirement.

If you are struggling with Chinese Drywall issues, please don't pass up the opportunity to get a little relief. If you live outside of Broward County, please check with your county to find out if they have a similar program to help you.

Tuesday, December 29, 2009

Florida Supreme Court Orders Mediation in Foreclosure Cases!

Citing very bleak statistics about the impact of the mortgage foreclosure crisis on our State, the Florida Supreme Court has issued Administrative Order No. AOSC09-54 in accordance with the recommendations made by Florida's Task Force on Residential Mortgage Foreclosure Cases. The 15-member Task Force was established to respond to the growing foreclosure crisis in Florida. The Task Force issued its Final Report and Recommendations on August 15, 2009.

Key among those recommendations was the establishment of a uniform, statewide managed mediation program wherein all foreclosure cases in the state courts which involve residential homestead property with loans that originated under federal truth in lending regulations will be referred to mediation unless the borrower and the plaintiff (bank) agree otherwise or unless acceptable pre-suit mediation has already been conducted.

Of course, there is always the sticky issue of getting enough qualified mediators to hear all these cases and people willing to go this route. What exactly does this mean for struggling associations? It might very well mean that already slow bank foreclosures will take even longer once pre-suit mediation is required.

The Supreme Court's rationale is that our court system is simply not prepared to deal with the onslaught of foreclosure cases it has seen over the last year and promises to continue seeing in 2010 but one has to wonder if this is a case of "passing the buck" rather than solving the problem in a meaningful way. The Task Force's stated goal is that forced mediation will force banks and their borrowers to communicate early in the process before expending too much of the courts' resources. If the threat of losing your home isn't enough to loosen tongues, one has to question how much additional months of forced mediation will!

Monday, December 28, 2009

Is your cable company listening to you?

The vast majority of common interest ownership communities have entered into bulk cable contracts for their residents. Many others have also entered into bundled services agreements that encompass broadband internet and digital telephone services even when their governing documents don't specifically empower them to do so.

Section 718.115 of the Condominium Act provides that a condominium's declaration may classify the cost of a master antenna television system or duly franchised cable television service obtained pursuant to a bulk contract as a common expense. If the declaration does not provide for the cost of a master antenna television system or duly franchised cable television service obtained under a bulk contract as a common expense, the board may still enter into such a contract, and the cost of the service will be a common expense but will be allocated on a per-unit basis rather than a percentage basis even if the declaration provides for a percentage basis for sharing of common expenses.

Any contract made by the board for a community antenna system or duly franchised cable television service may be canceled by a majority of the voting interests present at the next regular or special meeting of the association. Any member may make a motion to cancel the contract, but if no motion is made or if such motion fails to obtain the required majority at the next regular or special meeting, whichever is sooner, following the making of the contract, then the contract is deemed ratified for its entire term.

Not surprisingly, many associations enter into cable contracts with terms in excess of 3 years and sometimes upwards of ten years! The chance to cancel these contracts has long since come and gone for most. Associations that entered into bulk cable contracts as a way to provide a useful service at a valuable bulk rate may now be stuck as a result of increased delinquencies. My attorneys often negotiate renewals or midstream modifications of these contracts with various cable providers or we counsel associations and managers what points to ask for if they will be handling the process themselves.

The hope is always that these service providers will understand the financial crisis being experienced by so many communities today and that they will be willing to be flexible in modifying previously rigid criteria and procedures. Unfortunately, I have been hearing that not only are some cable providers not being helpful with regard to renewing cable contracts on more favorable terms but some have actually been punitive by denying retail internet and telephone services to individuals willing to pay for same in the community!

It is hard to believe that a short-sighted approach such as this will work in any company's best interests in the long term. After all, a willingness to help in rough times usually engenders increased loyalty when good times re-emerge as they undoubtedly will.

Thursday, December 24, 2009

Naughty and Nice list!

Your Condo Law blogger has been out of town enjoying a family vacation in Charleston which has me considering whether historic home ownership is more or less challenging than living in a common interest ownership community! I'll be back on the "job" with more regularity next week. In the meantime, I leave you with my version of Association Land's Naughty and Nice list in keeping with today's date:

NAUGHTY:

Not reading the association's governing documents (directors and owners alike)
Not attending board and member meetings
Never volunteering
Always griping
Holding meetings hostage with your grandstanding
Calling names, harassing employees and assuming bad intentions rather than asking
Loud parties, unapproved tenants, vicious dogs and too many cars for the spaces available
The inability to see when your property is in need of maintenance or repair
The inability to understand that not everyone shares your taste
Inflexibility
Apathy
Being overly liberal with the truth in your verbal and written communications

NICE:

Genuine concern for your neighbors and community
Reading and attempting to understand the governing documents
Asking for assistance from the appropriate experts and not the retired attorney, engineer, accountant on the board who might not be familiar with this state's requirements
Making people feel welcome at meetings and allowing them to speak and provide input
Being a good shepherd of others' money
Spending wisely but not avoiding necessary expenditures to safeguard the community
Taking advantage of educational opportunities
Volunteering
Showing up for meetings and participating in a respectful and meaningful manner

Every year brings new opportunities to "get it right". Here's to a beautiful 2010 for each of you!

Wednesday, December 23, 2009

Time to report for duty Board Members!

There is a reason that soldiers must undergo basic training before being issued weapons! The military understands better than anyone that you must break someone down first before building up a true team member who understands what is expected of him or her and the proper protocol to get there.

Several years ago I started thinking that a boot camp concept can be used to educate any group but it could be particularly appealing to teaching brand new board members as well as those grizzled veterans who think they know it all and usually don't. True there have always been legal seminars for board members and association managers but something about a "talking head" droning on from behind a podium is less than compelling. I had taken part in such seminars for far too long and if I could barely remember the course content I questioned how much the audience took away and remembered.

Frankly, there is something about being put through your paces that not only helps you remember but, hopefully, provides a little bit of entertainment as well. No reasonable person denies the value of educating board members especially since they make daily decisions that impact the people living in their communities and, at times, are exposed to liability if they get it wrong. Most board members I know are clamoring for educational opportunities that have real value and won't bore them to tears.

My law firm, Katzman Garfinkel Rosenbaum, and my group, the Community Advocacy Network (CAN) created a series called Board Member Boot Camp several years ago. We host these free educational events around the State. They say imitation is the purest form of flattery since recently other groups have tried to co-opt the name (we have it trademarked) but there is only one true Board Member Boot Camp!

Our next Boot Camp will be held on Saturday, February 20th from 10:00 am to 1:00 pm at the Knights of Columbus Hall located at 600 Knights Road Hollywood, FL 33021.To register for this event, please visit www.boardmemberbootcamp.com. You can also view a brief video from our last Boot Camp which was held in Bonita Springs.

If you are a board member (newbie or veteran) come on out and let us put you through your paces!

Thursday, December 17, 2009

Back to the basics!

Traditionally, the Division of Florida Condominiums, Timeshares and Mobile Homes was charged with educating the millions of people living in common interest ownership communities. That was a tall but worthy task to fill given the $4.00 per unit fee. Somewhere along the line, however, the Division became more involved in investigating complaints and less involved in educating owners and board members to prevent those complaints.

Depending on where you stand in this debate, you either see that change as shortsighted or necessary. A condominium owner paying his or her $4.00 per year who never makes a complaint may very well not be receiving a proportionate value for that $4.00 yearly fee as the next door neighbor filing 30 complaints a year is. After all, there are only so many resources to go around and the recreational complainers tend to get more than their fair share of the pie while the silent majority go without.

What does this mean? When the Division has the opportunity to educate, condominium and cooperative owners would be well advised to jump at the chance to take advantage of it.

On Tuesday, January 12, 2010, the Division will hold a seminar from 6:30 pm to 9:00 pm at the Miami Beach City Hall located at 1700 Convention Center Drive, 3rd Floor Commission Chamber, Miami Beach, FL 33139. The purpose of the seminar is to discuss budgets, financial reports, the complaint process and board member responsibilities relating to condominium associations. There will also be a section regarding current financial issues facing associations and how they can be addressed.

The seminar is free and open to the public. There will be question and answer sessions and educational materials handed out. If you have any questions about this event, please contact Lynn Bernstein at 305-673-7000, Ext. 6178 or via email at lynnbernstein@miamibeachfl.gov.

Perhaps it's time to take back your share of the pie and receive some of the education for which your annual fee is ostensibly designed.

Tuesday, December 15, 2009

Who really wants to serve on the board?

The notice of my community's annual meeting and election will be going out soon for our mid-February gathering. I am more likely to run a marathon than to run for the board again this year. If that seems harsh, bear with me for a moment.

I served on my association's board several years ago for a 2-year term. Before me, my husband had served for 6 years. At the time, we were both asked to serve to fill the unofficial "attorney" seat on the board. The thinking was that having an attorney (especially one that represents community associations) sitting on the board would be helpful. Despite already having a full plate with my children, work and enjoying the little free time I had, I did agree to serve. Why? Like most people, my home is one of my biggest investments and since that home happens to be located inside a mandatory community association, my husband and I both agreed to serve at different times to ensure that wise spending and maintenance decisions were made. Were we always successful? Heck no. As a board member you have one vote and can find yourself in the losing minority more often than you'd like.

Other than feeling it was my civic duty to serve on the board, I had no other inclination to do so. I have often wondered what motivates others to run for and agree to serve on volunteer community association boards. Of course, there are always certain people who are natural joiners and helpers. Others might see board service as an opportunity to garner favor or power. A certain few might have even more devious reason to run. It is important for everyone considering board service to understand that they are agreeing to serve and that does not mean serving themselves; that means serving their neighbors. It is a selfless task that not many people are entirely comfortable undertaking.

I am sure I will eventually agree that my number is up once again to help out on the board depending on how well or poorly the current board is performing. Until then, I will continue to wonder whether board service calls out most to the saints, sinners, masochists, martyrs, healers, teachers or some combination of all of them.

Friday, December 11, 2009

What constitutes a proper common expense?

If you live in a condominium association, the board is constrained by both statute and the governing documents in terms of how and for what it can spend the members' money. If you live in a homeowners' association, the governing documents will control what does or does not constitute a proper common expense of the association but typically an HOA board has a little more leeway in this regard than a condominium board does.

The Condominium Act defines common expenses as the expenses for the operation, maintenance, repair, replacement, or protection of the common elements and association property, the costs of carrying out the powers and duties of the association, and any other expense, whether or not included in the foregoing, designated as a common expense by the Condominium Act or by the association's governing documents.

Common expenses also include reasonable transportation services, insurance for directors and officers, road maintenance and operation expenses, in-house communications, and security services, which are reasonably related to the general benefit of the unit owners even if such expenses do not attach to the common elements or property of the condominium. However, such common expenses must either have been services or items provided on or after the date control of the association is transferred from the developer to the unit owners or must be services or items provided for in the condominium documents or bylaws.

The expenses for any mandated fire safety equipment or water and sewer service where a master meter serves the condominium, shall be also be common expenses whether or not such items or services are specifically identified as common expenses in the declaration of condominium, articles of incorporation, or bylaws of the association.

What does this mean in terms of daily operation? If there is any question about whether or not an expenditure is a proper use of common funds, ask your association attorney for an opinion. Certain expenditures may be the result of good intentions (throwing a community holiday party, giving a departing board member a commemorative plaque, etc.) however that does not mean that expenditure will pass muster as a proper common expense. More associations are amending their documents to give themselves some flexibility in terms of the types of events and expenditures they want to be able to provide to the community. If your members want that holiday party each year, go ahead and amend your documents to classify it as a common expense just to be on the safe side!

Wednesday, December 9, 2009

Association Management Survey

As the real estate and economic markets continue to wreak havoc on the majority of community associations, many find themselves in the uncomfortable position of having to consider a host of formerly undesirable options. I have heard associations threaten bankruptcy and others consider cutting back on essential services including management. However, neither bankruptcy nor self management is as simple or as beneficial as many associations may believe.

My organization, the Community Advocacy Network (CAN) has just released its Association Management Survey which can be found at http://surveys.canfl.com. The survey is designed to assess what factors most associations take into account when considering their various management options and which services they value most.

In my own community we were self managed for years because the board members were retired and could devote the time and energy required to run a 100+ home community. Even though we have a relatively small neighborhood, do not have an abundance of common areas to maintain or services that we offer, it soon became apparent that newer board members were not willing to devote the same amount of time as their predecessors had. Moreover, when times were good, we had relatively infrequent violations and delinquency issues. However, with the downturn, more problems arose and the ones that did were complicated and messy. It became harder for the Board members to put on their "director hats" and confront their neighbors about unpaid dues and unkempt homes.

In the end, we have returned to professional management for a variety of reasons including the convenience factor and the buffer on issues such as maintenance and collection. We consider this service essential to our sanity. Of course, every community is different and what works for one is an abysmal failure for another. It is for that reason that I want to hear what has worked for you, what hasn't and what you feel is important to help you successfully operate and administer your private residential community. The CAN Association Management Survey will remain open until January 15th at http://surveys.canfl.com. If you currently live in or have ever lived in a community association you are eligible to take the survey. The results will be tabulated and should be available the first week of February.

Tuesday, December 8, 2009

Can the board take matters into its own hands?

I am often asked by frustrated board members whether or not they can legally hire someone to clean that dirty roof, cut the overgrown lawn or tow away the illegally parked vehicle after they have tried unsuccessfully to convince a unit owner to comply with the association's governing documents.

The answer depends on whether or not such authority is granted to the board under the documents. Many, but certainly not all documents, do grant some form of "self help" that boards can utilize to solve a violation when all else has failed. Of course, there are several factors to consider when deciding whether or not to take this route.

1. Do the documents allow the board to perform maintenance or repairs that are the responsibility of the unit owner when he or she refuses to do so and specially assess the owner for those costs? If the documents allow the board to perform the work but not to charge the owner directly for those costs, that is usually the dealbreaker for most associations contemplating self help.

2. Does the association know a reliable contractor willing to undertake the work knowing that the homeowner is not in agreement with the board? Many contractors are understandably reluctant to step foot on private property under these circumstances.

3. Will the owner or other resident become violent once an attempt is made to undertake the work? Many associations choose to commence the necessary repairs or maintenance while the owner or resident is vacant from the property to avoid an escalation or possibly violent encounter.

4. If towing is contemplated, is the proper authority for same provided in the documents and is the proper signage installed on the property?

5. Has the proper notice been given to the owner demanding that the violation be cured and failing compliance, notice given that the board will be exercising its right to perform the maintenance, repairs or other corrective action itself and bill the owner accordingly?

The upside to self help is obviously the ability to fix the immediate problem without having to wait forever for an owner to do so. Being able to specially assess the violating owner for the work without having to incur attorney's fees to otherwise pursue the matter is also a benefit. The downside includes potential liability should the contractor hired by the association injure person or property and the possibility that the situation could quickly become hostile during the performance of the project.

As with every other enforcement method, self help must be applied routinely and uniformly. If your association documents do not provide for this method of enforcement, you should discuss the pros and cons of such a provision with your association attorney.

Monday, December 7, 2009

Florida as "the condo promised land"?

That was the description of our state given to me by a frustrated condominium owner living in Virginia. After dealing with Floridians' issues concerning mandatory community associations for a while now, it was a real revelation to hear an outsider's admiring take on us.

Jack wrote to me about the ongoing struggle he is having in his Reston, VA homeowners' association. Among other issues, the board president has apparently claimed the association's website as his own private turf. Jack also expressed concerns about the integrity of his community's annual election. I asked him if Virginia Statutes provided for a Condominium Ombudsman (to monitor the election) and he said the Office of the Common Interest Community Ombudsman was recently created there in 2008 but with relatively little enforcement authority.

In Florida, we certainly are a lot farther down the path than most other states with common interest ownership communities. We definitely have the lengthiest common interest statutes if not the clearest. We have the most organized advocacy groups and perhaps the most educated legislators on these issues. For $4.00 per unit, the following resources are supposed to be available to a condominium owner in the State of Florida: the Division of Florida Condominiums, Timeshares and Mobile Homes (for education and enforcement), the Condominium Ombudsman (a neutral resource to defuse situations that might otherwise escalate to the point of needing the Division's investigatory resources) and a host of Select Committees designated at varying times by the Legislature to address condominium and homeowners' association issues.

Jack ended his email to me with the following sentiments: Florida may have problems but from what I see, you have more legislative "teeth" to protect the homeowners. I am jealous as to how much more "advanced" you are in FL.

It was nice to hear, for a change, that a citizen of another state looked at those of us living down here with envy rather than pity. I only hope someone from Montana (with its extremely concise and well worded Unit Ownership Act) doesn't write in to tell me we have it all wrong!

Thursday, December 3, 2009

More financial questions your board should be asking.

One of an elected board's most significant responsibilities is the handling of the members' money. Every director should understand that being a good steward of the common funds is paramount to the job. Part of that job is spending common funds in accordance with the statutes and the association's governing documents and the other part of the equation is ensuring that there is a system of checks and balances in place to detect and prevent possible fraud.

Here are some more questions your board and association manager need to be discussing:

1. Are all supporting documents properly canceled at the time checks are signed to prevent duplicate payment?

2. Is signing blank checks prohibited?

3. Are dual signatures required on checks and must a member of the board serve as one of those dual signatories if a manager can sign checks?

4. If check signing machines are used, are facsimile signature plates adequately safeguarded, used in the presence of the custodian and controlled by using numbering devices?

5. Is custody of checks after signature and before mailing handled by an employee independent of all payable, disbursing, cash, receiving and general ledger functions?

6. Are bank accounts reconciled within a timely specified period after the end of each month?

7. Are reconciliations made by someone other than persons who receive or disburse cash?

8. Does the President, Secretary or Treasurer receive the bank statements unopened from the banks?

9. Are checks that are outstanding for more than 90 days investigated and payment stopped?

10. Does the Treasurer or other director periodically compare actual cash receipts and disbursements to budgeted cash receipts and disbursements and investigate further when there are significant variances?

If you sit on a board of directors and you have never asked or been asked any of the questions outlined in today's blog and yesterday's, it's time to find out who is minding the store.

Wednesday, December 2, 2009

Internal financial controls for your association.

It's the calendar year-end which means boards must be in the mindset of planning financially for the upcoming year. Financial statements need to be prepared as well as new budgets. This is also a good time to start thinking about what internal controls your association has in place to protect you from fraud and waste.

Here are some tips gleaned from the Guide to Homeowners' and Other Common Interest Realty Associations (a publication widely used by accounting professionals):

Ask yourself these questions about your association's current financial practices:

1. Is the bank immediately notified of all changes of authorized check signers?

2. Does the association require dual signatures on withdrawals from reserve funds?

3. Are all employees handling cash bonded?

4. Are checks restrictively endorsed "for deposit only" by the individual who opens the mail when received?

5. Are receipts (checks and currency) deposited intact on a daily basis?

6. Does the association use a lockbox or electronic transfers to collect assessment revenue?

7. Do adequate physical controls exist over cash receipts from the time of mail opening until the time of bank deposit?

8. Are monies designated for future repairs and replacements deposited to separate bank accounts?

9. Is access to computerized cash receipts records limited to those with a logical need for such access?

10. Are checks prenumbered and used in sequence?

11. Are controls over unused checks adequate?

12. Prior to checks being prepared are the following compared: (i) purchase order (ii) receiving report (iii) vendor invoice?

13. Do only persons authorized to prepare checks have access to blank checks?

14. Are checks made payable to specified payees and never to cash or bearer?

15. Are all check numbers accounted for?

16. Are voided/spoiled checks properly mutilated (signature portion removed) and retained?

With some associations handling operating budgets in the millions of dollars, these are just a few of the questions your board should be discussing as you plan for another year of "doing business". I'll give you more financial food for thought throughout this week.

Tuesday, December 1, 2009

Victim or Victimizer? It's not so easy to distinguish in association land.

I am often asked if my law firm represents owners in disputes with their associations or only represents "the board". My first response is that we represent the association which is comprised of the individual owners but we must, of necessity, take direction from those owners' elected representatives. Imagine trying to serve 100+ individual masters and the resulting legal fees!

My second response is that yes, we represent owners in disputes depending, naturally, on the validity of the owner's complaint. I will never forget the time I met with a couple who came to my office to discuss the wife's need for a "prescription pet". This couple was being fined on a daily basis for a dog they were keeping in their unit despite a longstanding no pet restriction in the community. The husband gently caressed his wife's arm while describing her depression and the fact that only their new Westhighland Terrier Sparky could alleviate.

The association was represented by a highly respected attorney. I looked over his correspondence to this couple and found nothing overtly disrespectful or incorrect but still felt there was room to negotiate to keep the dog in the home. I took the case and was ultimately successful in not only keeping Sparky in the unit but also having the association waive the accumulated fines. My clients' unit in their high-rise was on the ground floor and bordered the pool. As part of our settlement agreement, they were asked to not allow Sparky to use a small dish garden on their terrace as a litter box of sorts since the odor was problematic.

If you already guessed what came next, you've lived in an association for far too long already! I was contacted 4 weeks later by opposing counsel to say that my clients had not only breached the agreement by allowing Sparky to continue using the litter box but they had moved a new puppy into the unit as well. Apparently one dog alone was not enough to alleviate the depression notwithstanding the fact that the odor from Sparky and the new puppy crying was creating a new tier of depression amongst my now former clients' neighbors. In short, I had been had. It got me to thinking that determining who is the victim and who is the victimizer is not always as easy as it seems at first blush.