Monday, November 28, 2011

Keeping your association documents up to date and in line with your community's needs

Far too often when a new board is initially meeting with one of our attorneys, they will pull out a sheaf of haphazardly rubber-banded documents that look like they were written on parchment paper and turn them over with a flourish as the association's official governing documents. They will then advise that these need to be "freshened up" since a few decades have passed since they were first created.

Some boards take a very hands-on approach to amendments and create a Document Review Committee to go through the governing documents line by line, marking up what they wish to change. Others rely entirely upon an attorney's recommendations regarding a possible upgrading of the documents. Sometimes boards wish to have an entirely clean set of documents and others wish to have only strategic amendments prepared that will bring their association into compliance with newer statutes and changed lifestyles in their community.

No matter which approach is used, there are some amendments that almost every community should consider:

1. One of the first amendments which must be considered these days in Florida associations is whether or not to add Kaufman language to the Declaration. This language would submit the governing documents to the terms and provisions of the applicable common interest ownership statute as it "may be amended from time to time". This means latter-passed changes to the statute would be automatically incorporated into the association's governing documents. However, there are pros and cons to adding this language to your declaration so it should be discussed thoroughly with your association attorney.

2. These days many associations have some kind of leasing restriction in their governing documents. Communities with high delinquencies might want to consider easing up on those restrictions to allow owners with financial problems to rent out the property in order to meet their assessment obligation. Communities who are nearing the edge of unacceptable leasing percentages under federal lending guidelines might want to consider tightening up their rental policies in order to keep their properties attractive to the FNMA.

3. Any document amendment project should include a review of the documents to identify any archaic provisions that are no longer enforceable under the law. Illegal age restrictions and satellite dish bans are two that come to mind.

4. Some language in older governing documents may no longer bear any resemblance to the current lifestyle in the community. Parking restrictions that were created when most homes had only one car, restrictive language on what constitutes a "single family" and restrictions on any kind of business being conducted in a unit or home (which could include activities most of us undertake on a daily basis from our home computers) should all be scrutinized and possibly updated.

5. One of the issues that can be most confounding for association boards is the issue of how to stop certain behaviors deemed to be a nuisance by most reasonable people. Do repeated police visits to address a tenant's domestic violence issues constitute a nuisance under your current governing documents? Depending on how that nuisance provision is drafted, they may or they may not. Whenever an association is attempting to enforce a provision in the governing documents, any ambiguity will be construed against the association. In most cases, the more specific your documents, the better.

6. Do your documents contain a provision that requires you to use a bank as an Insurance Trustee whenever a claim is paid out under the association's policy? Have you really paid a bank in the past to serve this function? A thorough review of your documents might reveal a lot of protocol that is currently required which you are not following. Do your documents require a certain agenda for board meetings which has never been used? These discoveries should prompt a discussion on why you are not following these provisions, whether or not they are still deemed worthy and perhaps an amendment to incorporate the procedures that are being used into your documents instead.

These are just a few of the amendments that should be considered when the request is made to update your association documents. Remember, developers draft documents with an eye towards selling property and not always with an eye towards long-term living in those communities. It is up to the association members to ultimately revise the community's governing documents to best fit their needs.

Monday, November 21, 2011

City filled with HOAs resists downward trend in property values

We often hear from some folks that mandatory community associations drag down property values. Dictatorial boards, botched elections, disgruntled owners, missing reserve funds, none of these stories paint a rosy picture of the community association lifestyle but how much of an impact does all that really have on property values?

According to a recent Bloomberg Businessweek survey, the city of Weston, FL, which is comprised almost entirely of mandatory associations, has seen a 15.1% increase in property values from February, 2009 to August, 2011. This increase occurred during the same time period that most homeowners across South Florida saw their property values drop by as much as half!

In 1984, the first homes in Weston were built by Arivda/JMB Partners as part of a planned 15,000 acre master community. Ultimately, Weston became a city comprised of 110 Subdivisions with over 61,000 residents. 90% of Weston residents live in communities governed by homeowners' associations. Another 8.5% live in condominiums.

Only 350 houses in the entire city of Weston aren't in a development controlled by an association. Weston is one of those unique cities where almost the entire populace lives in a mandatory association and yet it has, according to the Bloomberg survey, flourished in spite of an incredibly challenging real estate market. It's hard to make the argument that Weston is succeeding in spite of their associations when almost 99% of the population lives in one!

My parents have lived in Weston since the early '90's and they have all the usual complaints about their board, the parking policies, the fining committee and more. Still, their home has retained much more of its value than my sister's in Sunrise outside the confines of an association. Coincidence or something else?

For the article on the Bloomberg survey, please click here: http://miami.cbslocal.com/2011/10/25/weston-home-values-defy-downward-trend/.

Thursday, November 17, 2011

You Be the Judge on Late Fees, Board Member Certification and More!

Although this year's community association bills, HB 319 and SB 680, were not debated this week there was much work done behind the scenes in preparation for the bill’s first hearing.

There have been numerous discussions among the representative of various groups, but I’d like to do an informal policy survey of those who work day in and out in the community association industry.

What are your thoughts on the following proposed changes?

Late fees -

Should the amounts collected from delinquent accounts be limited to only “administrative late fees, interest, costs and reasonable attorney’s fees” or should management companies be allowed to collect a reasonable fee up to $150 per account for the work they do on delinquent accounts. Yeline Goin of the Community Association Leadership Lobby (or CALL) and the Becker & Poliakoff attorneys prepared language that could be added to HB 319/SB 680 that would provide as follows: "If provided in the management agreement between the association and a community association manager or community association management firm, the community association manager or community association management firm may retain, or be paid, all or a portion of the administrative late fees charged to a delinquent account. No fees other than administrative late fees, interest, costs and reasonable attorney's fees are chargeable to the owner's account in connection with the collection of delinquent assessments. For purposes of Section 718.116, costs are defined as taxable costs as determined by the Florida Supreme Court."

Is your association currently sharing these late fees with your manager or management company or do they look elsewhere to be compensated for the extra time they spend each month dealing with owners who aren't paying?

Education for board members –

Legislators have been asked to remove language requiring HOA and Co-op board members to be certified for Board service from the bill by CALL. Additionally, they are advocating that the current certification requirements for condominium board members be eliminated.

Do you share their concerns that asking directors to certify that they will "faithfully discharge" their duties creates potential liability for them? Do you think the fewer board members would attend classes and attempt to become educated if the certification process was no longer required? Do you support or oppose requiring all types of community association directors from having to either certify that they've read their governing documents or attend a Division-approved educational course?

Elevators –

Some are arguing that the provision allowing associations to retrofit their elevators when the next major change is needed (as opposed to automatically upgrading in 2015) should be removed from the bill. What are your thoughts? If you currently know how much it will cost your association to upgrade your elevator in line with the Phase II Firefighter retrofits, please let us know so we can provide that information to our bill sponsors.

HOA Elections –

Last year CAN’s language changing the HOA election procedures to mirror condominium elections was resoundingly rejected by some industry stakeholders. At that point, it was not politically feasible to move it forward. Now some of those folks agree that moving forward with this change would be acceptable. Would you support such a change in election procedure for HOA's?

A lot can change as these bills wind through the Committee process so stay tuned. Please do reach out with your comments and input since what ultimately passes has the potential to impact you on a daily basis.

Monday, November 14, 2011

Does charity start at home or in the community next door that doesn't have a No Solicitation Rule?

Differences of opinion can and do arise when trying to interpret what territory rules really cover, particularly in light of a recent decision by a central Florida HOA to prohibit a resident Boy Scout from conducting the Scouts' annual food drive inside his own neighborhood. The HOA president opined that allowing the food drive, which would entail only leaving bags for nonperishables on people's doorsteps with no phone calls, knocks or really any human interaction, would violate the community's "No Solicitation" rule.

"If we open the door to one, we open the door to everything" the president is quoted as saying. "We take a very firm stance." However, not all owners in this 278-lot community agree and many are quite disturbed that a Boy Scout and his troop members living in the community cannot pursue a charitable purpose in the place they know best: home.

The first question that comes to mind is whether or not every resident sees a food drive as being a solicitation in the same vein as someone with a catalogue attempting to sell you something at your home. What about a child who is selling wrapping paper or candy for school? Most of us have gotten those knocks on our doors. Does it make a difference if it is a salesman who does not live in your community intruding on your otherwise peaceful day with a commercial pitch or the neighbor's child next door trying to fulfill a sales quota for a school fundraiser?

Like most other things in life, there is a sliding scale for nuisance so rules should be crafted with that in mind. Thankfully, many folks these days are still very charitable and there is no easier way to fulfill that obligation than inside their own communities by helping their neighbors. A "carve out" under the no solicitation rule for events like a food drive or school fundraisers might solve the problem. In fact, pass enough rules that have a disproportionate impact on families with young children who engage in these types of fundraisers and events and you might wind up with another problem: being seen as a not family-friendly neighborhood and possibly discriminatory in your intentions.

At the end of the day, boards must listen to their community needs. If I lived in this particular community, I'd like to see the board and members discuss at the next board or membership meeting whether the No Solicitation rule needs revising in light of divided community opinion over the food drive. As for the Board President who was standing firm, he advised the reporters who interviewed him that if the community didn't like his stance, they could "fire him".

What do you think? You can see the full video interview below, or by clicking on this link:
http://www.myfoxorlando.com/dpp/news/brevard_news/111011-HOA-turns-boy-scouts-away



Monday, November 7, 2011

How much thought goes into the selection of your community's Fining Committee?

Last week I was required to report for jury duty in Broward County. I arrived at 7:45 am along with many of my fellow Broward County residents and spent the rest of the day in Voir Dire for a criminal trial. I was not ultimately selected for the jury (most lawyers aren't) but the lengthy jury selection process made me think about how much thought goes into selecting the right jury for the prosecution and the defense.

Voir Dire is the process by which potential jurors are questioned by both legal sides to determine their backgrounds and any potential biases before being selected to serve on a jury. Since this was a criminal trial, some of the questions asked included if the jurors had friends or relatives who were lawyers or members of law enforcement. Why is this important? If a juror has had much exposure to criminal lawyers and law enforcement, the fear is that he or she may bring this background with them into the jury room and may disregard any instructions given to them by the judge. What if a juror has been a victim of the same type of crime for which the defendant stands accused? Obviously, the defense will have some concerns that such a juror will struggle with impartiality throughout the trial.

Given the weighty issues usually being considered inside our courtrooms, it is no surprise that a selection process like Voir Dire exists to ensure the fairest possible outcome for a trial. While the matters being heard by most Fining Committees serving in private residential communities are not nearly as dire, they can still impact people's homes and wallets. Just how much thought is given to the composition of those fining committees?

In a Florida condominium, for example, neither board members nor persons residing in a board member's household may serve on the fining committee. In a cooperative, the statute merely says that the fining committee shall consist of "other unit owners". In an HOA in Florida, the requirements for fining committee eligibility are a lot more specific. An HOA fining committee must consist of at least three members appointed by the board who are not officers, directors or employees of the association or the spouse, parent, child, brother or sister of an officer, director or employee of the association.

Still, none of the Florida common interest ownership statutes take into account the fact that folks serving on fining committees bring with them their own personal backgrounds and potential biases to the task at hand. Since the statutes lend no assistance in this regard, does your association inquire about the fining committee members' past experiences in order to ensure the most fair and just results? Have any of the committee members personally been fined in the current community or a past one? If so, for which kind of rule infraction? What if a member of the established fining committe is also involved personally with the rule violation at hand? For example, if a person is being fined for parking illegally on a swale and the swale happens to be in front of the house of a member of the fining committee, does that pose a problem or a conflict?

If the board is not asking these questions of potential fining committee members, how then are they selecting these folks for service? Is anyone who expresses an interest put on the committee or anyone the board knows personally will serve without regard to past background and experiences?

The Voir Dire process reminds us that being asked to pass judgment on your peers is a serious matter. When asked directly by the prosecutor and defense counsel whether or not they could render a fair and impartial decision in the trial at hand, some of my fellow potential jurors answered honestly that they could not. How would they have known that, however, if they had not been asked?

Thursday, November 3, 2011

Failure to address elevator maintenance comes back to haunt Condominium Association.

A case out of Palm Beach County recently addressed the issue of a condominium association's failure to maintain its elevators and the resulting injury to a condominium employee.

In Westervelt v. Thyssenkrupp Elevator Corporation and Toscana North Condominium Association, Inc.(Fla. App. 4 Dist.), association concierge, Jane Westervelt, was injured when the condominium elevator in which she was riding came to an abrupt stop. Westervelt sued both the elevator company, Thyssenkrupp, as well as the Toscana North Condominium Association.

Westervelt's expert testified at trial that the accident was caused by a small piece of wood that hit an elevator mechanism. This same expert testified that had chicken wire been installed, it would have prevented wood and other debris from interfering with the elevator's mechanism and thus, would have prevented the accident that injured Westervelt.

Installing this type of chicken wire is apparently a fairly routine and simple solution particularly for buildings under construction where construction materials are transported in the elevators and can create problems in the absence of such measures.

The Toscana building had been completed two years before Westervelt's accident but both the association and the elevator company were aware that many residents were bringing construction materials into the elevators to finish their units. In fact, another association employee who was in charge of maintaining the elevators at the condominium had previously notified the board that he had observed wood in the elevator pit and on top of the elevator car.

One of the elements of a negligence cause of action is a "duty or obligation recognized by law, requiring the defendant to conform to a certain standard of conduct for the protection of others against unreasonable risks."

The lower court in this case directed a verdict in favor of Thyssenkrupp and the Toscana Condominium Association and the Appellate Court reversed that directed verdict and remanded the case for a new trial.

This case does answer the question asked by many boards, "Can we be sued if X goes wrong with the elevator, doors, etc.?" If a board has been negligent in maintaining or repairing a common element, the answer is a resounding "Yes" you might be liable.