Monday, June 30, 2014

What exactly does grandfathering mean in your community?

In the community association setting, we often hear about certain things, people or practices being “grandfathered in” which basically means that new restrictions cannot apply in those instances.

The term “grandfather clause” has an ignominious past; it arose as a constitutional device used by some Southern states to deny voting rights to black Americans between 1895 and 1910 by exempting those people whose lineal descendants had enjoyed the right to vote prior to 1866 from having to comply with latter-day voting requirements tied to education, income and real property ownership.

In today’s parlance, someone can be “grandfathered in” when it comes to owning a pet, driving a commercial vehicle, leasing out a home and more.

Why does the notion of grandfathering create strong emotions on both sides of the equation? 

For boards and association members wishing to enforce new restrictions which they feel are in the best interests of the community, it is important to know that the rules will apply equally to all. For people who bought in a community without certain restrictions, it can be unsettling to learn that your dog, vehicle or tenant is no longer welcomed.

In Florida several years ago, the Condominium Act was changed to provide that changes to leasing restrictions would only apply to existing owners who consented to such leasing amendment and to new owners who took title to their property after such amendment had already been recorded in the public records. Naturally, that legislative change has been met with some consternation over the years as boards and managers struggle with the administrative and practical challenges associated with some owners being restricted in terms of their ability to lease while others are not.

One of the biggest hurdles and misunderstandings associated with grandfathering is the time period during which the exemption should exist. For example, if a new pet restriction is passed, should current pet owners be entitled to keep only their current pet for its natural life expectancy or does that mean that subsequent pets can be maintained in the unit as well? The same question applies to rentals, vehicles and other use restrictions. Often people believe that it is the unit which is grandfathered and not a particular condition or situation. Pets, lease agreements and vehicles all have a “life span” of sorts.


Be sure to speak to your association attorney about how grandfathering should be handled when new restrictions are being considered in your community.

Sunday, June 22, 2014

Could your condominium be voluntarily terminated?


Do you live in an older condominium building in a prime location? Have you ever thought about terminating your condominium in order to sell your older building to a developer desirous of your location? Has the fact that your older building is going to require significant ongoing maintenance and repairs become an inducement to consider termination?

I heard earlier last week from the son of a woman who lives in a Boynton Beach community which has accepted a developer's offer to purchase the condominium property and terminate the condominium form of ownership. He was citing the  provisions in Section 718.117, F.S. relating to waste and questioning whether or not the termination of his mother's condominium met that litmus test. I provided him with the voluntary termination provisions in that same section of the Condominium Act and explained that 80% of the owners can vote to terminate the condominium form of ownership for any reason so long as not more than 10% of owners do not object to same.

Florida's Condominium Act was changed a few years ago to make voluntary condominium terminations possible so that owners could take advantage of offers to purchaser without being hamstrung by a handful of their neighbors. This last session saw language pass which now requires a delay in voting on a termination for several months after an initial vote fails to achieve the necessary threshold.

The downside to any termination is that an owner could have purchased his or her unit at the height of the market, taken a mortgage and when the termination is approved, receive fair market value which is far below the outstanding mortgage balance. The upside to the voluntary termination provisions is that it allows the vast majority (80%) of owners to take advantage of an advantageous developer offer to purchase an older building in a prime location.

There will always be owners who resist a termination offer as being a hassle or not likely to result in sufficient monetary gain. However, for others the ability to make an otherwise unconsidered real estate gain, the offer may be too good to turn down. Still others may be disenchanted with the condominium concept altogether and would welcome the opportunity to "cash out".

Has your condominium community been approached about a possible termination and what would you do if you were?

Monday, June 16, 2014

Construction Cranes are going up but would you buy a new condo?



We've all seen the construction cranes going up, now the data confirms our suspicions. According to Cranespotters.com, there are 247 South Florida condominium projects in the works. Condominium sales currently make up half the home sales in South Florida. This trend of renewed condominium construction is not confined to our geographic area but is being seen throughout the U.S., particularly in Boston, Seattle, LA, Houston, New York City and San Francisco.

Many industry experts see this period as the early stage of a long-term recovery in the condominium market. South Florida developers with whom I have spoken expect the bulk of these units to be purchased by foreigners and, to a lesser extent, local empty nesters who are looking to downsize and transition to a more urban and convenient lifestyle. Let's face it, if you want a certain location combined with a relatively maintenance-free lifestyle, single family home ownership is not likely to meet those goals. A single family home on or near the beach is going to cost a lot more than a condominium unit and require extensive upkeep.



With this flurry of condominium construction surrounding us, it does raise the question of whether or not the intended purchasers of these units will be happy long-term with their choice. One way to ensure that your housing purchase remains a good fit is to do your due diligence ahead of time.

Certainly, you need to read the governing documents and association policies thoroughly and ask yourself if any of the restrictions currently impact your lifestyle or could do so in the future. Attending a condo class or hiring an association attorney to give you an overview of what items in your association documents could change over time is also not a bad idea.

However, there are some things that are typically out of your control no matter how much deliberation and planning go into your condominium purchase. Why? Because the game changes after you transition from developer control.  For example, you will probably not know:

-Who will sit on the board of directors after the community transitions from developer control.
-Whether or not a chronic smoker will move in next door.
-Whether or not that required soundproofing material was installed in the unit above yours.
-Whether or not the developer will deliver a structurally sound and defect-free community.
-Whether or not the assessments you are paying while the developer is in control will go up a little or a lot (assume the latter).
-Whether or not the developer has left the association's coffers financially sound.
-Whether or not you or a neighbor will need a service animal or emotional support animal at some point.
-Whether or not you will be outvoted on most matters in the future including amendments to the documents, funding reserves and material alterations to the common elements.

For condominium purchasers, a cost/benefit analysis is in order along with a leap of faith. Know that some things are entirely in your control including your choice to either be part of the solution or part of the problem.

As for the developers who have such high hopes for their new projects, they would be well advised to start taking into account the long-term comfort and peace of mind of their purchasers by creating certain safeguards (both in the documents and structurally) to ensure that the condominium lifestyle choice remains a popular one for many people. There are ways to better insulate units from secondhand smoke and  noise but tight budgets are often earmarked for bells and whistles that can be seen and not more mundane items.

So, will I ever leave my suburban home and delve into the condominium lifestyle? Time will tell but the doctrine of caveat emptor would certainly be forefront in my mind.

Monday, June 9, 2014

BP Oil is still paying on claims. Could your association or individual community members be eligible?


As virtually every resident, property owner and business owner along the Florida Gulf Coastknows, BP Oil has entered into a class action settlement designed to compensate victims of the April, 2010, oil spill from BP’s Macondo well. The fund was originally established at $20 billion with the requirement under the settlement agreement that if it is depleted before all claims are paid, BP is required to replenish it. As of this time last year, there was $300 million remaining in the fund.

The Deepwater Horizon Settlement was approved by a Louisiana Federal District Court on June 2, 2012, and a court-appointed claims administrator has been evaluating and paying spill-related claims ever since. The original claims deadline of April 22, 2013 has now been extended until at least September 13, 2014. In another bit of fortunate news, the U.S. Supreme Court ruled today that BP must continue paying claimants while it pleads its case to our nation's highest court. Today's decision comes after the U.S. Fifth Circuit Court of Appeals in New Orleans ruled that businesses claiming damages from the 2010 spill don't have to prove direct harm, under the terms of the settlement.

For rental property owners, business owners and all types of community associations located in the areas covered by the settlement who have not yet filed claims, now is the time to act.

The settlement created six distinct categories of claims. The category most commonly applicable to community associations is the Business Economic Loss (BEL) category. Eligibility for BEL claims depends upon whether the claimant’s property is located within the covered geographical area and whether the Claimant can show a loss in revenue. If so, chances are that the claim will be paid. The coverage area is comprised of four separate geographical zones identified as Zones A through D. Properties in Zone A receive the most favorable treatment and can qualify for payment without having to prove that their revenue losses were directly caused by the oil spill.  As you know, most associations can show losses related to delinquencies as well as to increased insurance premiums and other rising costs to operate and administer their communities.

Zone A includes stretches of the FloridaGulf Coastfrom Pensacola to the Florida Keys. Zones B, C and D extend inland from the coast for as much as 100 miles. You can determine whether your property is within a coverage area, as well as your particular Zone, by reviewing the Deepwater Horizon Claim Center’s website at:  http://www.deepwaterhorizoneconomicsettlement.com/maps.phpor by reviewing this interactive map: http://69.166.140.73/zonelocatoreconomic/

The formula employed by the Claims Administrator to determine economic losses is not necessarily logical or intuitive. Evaluation of a BEL claim involves comparing averages of income and expenses during a pre-spill “Benchmark Period”—a series of months selected by the claimant—with a corresponding “Compensation Period” during 2010. Certain revenues and expenses are excluded when making this comparison. If the comparison establishes a loss, a risk transfer premium may apply, increasing the potential claim by as much as 150%. In most cases, it will be impossible to determine whether your association has a viable claim without having your financial information reviewed by a professional with a working knowledge of the settlement and the protocols employed by the Claims Administrator. Consequently, many associations will no doubt leave “money on the table” by assuming they have no loss and failing to secure the proper guidance to determine whether they have a viable claim. 


While aspects of the settlement are still being appealed and uncertainties remain, one thing is certain: those who miss the claims deadline will not be paid, even if they have compensable losses. Becker & Poliakoff has been handling these claims for communities, individual property owners as well as business owners in the eligible zones. If your community is located in one of the four zones and you have not filed a claim or even considered doing so, now is the time to contact us to discuss your options before the window of opportunity closes forever. If you and/or your fellow board members or your association members in your community rent out their units or own businesses in any of the four zones, the same logic applies.  For more information please contact us at bpoilinfo@bplegal.com.

Sunday, June 1, 2014

Some guidance for new board members



When you first learn that you will be serving as a new member of your community's board of directors, you are likely to be offered either congratulations or condolences; what you are not likely to be offered is much in the way of guidance for your new "job".



You probably achieved your director's seat in one of the following ways:

1.      You were recruited/urged to run for the board by your neighbors or current board members;
2.      You were appointed by the existing board to fill a vacant seat;
3.      You ran for the board because you were anxious to correct perceived deficiencies in current association operations or you are one of the rare few who embrace service to others; or
4.      You threw your name in the ring and an election never occurred as there were not more candidates than available slots.

Regardless of how you came to serve on your board, there are right and wrong ways to begin your tenure as a community association director.

Ask questions.  Rather than making assumptions, why not ask questions about why the board is doing certain things and enforcing or ignoring certain policies? Of course, questions should be just that, inquiries with the genuine purpose of obtaining information, not veiled accusations or overt criticism. There will be time for change and possible censure later after all the facts are gathered. For now, just try to figure out why your board does what it does and based on what authority.

Do your homework. The work begins not ends after you join your board of directors. First and foremost, you must be prepared to attend your board meetings as well as any membership meetings. However, your work as a director doesn't end there. For self-managed communities you could be looking at quite a bit of legwork to perform the necessary duties of operating and administering the community. Even if your community is professionally managed, you should not expect to abdicate your responsibilities as a director to a manager or to your fellow directors. You will need to read reports, minutes and a host of other materials pertaining to your role as a director before you are expected to weigh in with a decision on them.

Become familiar with your role and your association's documents.  There are a plethora of free and good classes out there that will help you better understand your role as a community association board member. Attend a class, read a book and yes, read your governing documents even if you do both of the foregoing. If you are the ambitious type, you might want to also consider reading the statute which governs your particular type of association but do not expect to interpret everything on your own-that is your association attorney's role.

Take your role seriously. As with any representative form of governance, people are relying upon you to make sound and reasonable decisions on their behalf. The members are also allowing you to spend their hard-earned dollars so understanding what it means to be a good financial steward is a critical component of serving on your board. You cannot fulfill your fiduciary obligations if you do not show up, are not adequately prepared and do not take your role as a director seriously. Remember, even if you think the role is a cakewalk, you might learn a hard lesson to the contrary in court.

Put aside your personal issues and hotspots and focus on what is in the best interests of the community. This is perhaps one of the hardest lessons to embrace but is likely to be the most important overall. You cannot truly represent your community if you are focusing on what matters to you to the exclusion of what matters to the majority of your association members.

Lastly, be proud of the fact that you chose to serve as a community association director at some point in your life. Winning that seat is usually a vote of confidence in your skills. Remember, your voice and your vote count so use both wisely.