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 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:


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
Being overly liberal with the truth in your verbal and written communications


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
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 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

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 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 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.

Monday, November 30, 2009

It's all in the family!

Hopefully you all had a wonderful Thanksgiving. If the leftovers are still good and the out of town visitors are safely on their way back home, consider yourselves fortunate!

If you're like me, you try to keep discussions of work out of your family gatherings. However, with so many people living in common interest ownership communities around the country these days it's inevitable that someone sitting at your table lives in one and has a problem or knows someone who does. My holiday gathering was not immune to the issues plaguing many of you who read this blog.

My older brother lives in a homeowners' association in Indiana that denied his request to build an 8-foot high fortress-like enclosure around his lot; they weren't too crazy about his pool plans either. My sister lives in a Broward County condominium association that is struggling with delinquencies hovering near the 40% mark and further struggling with an unreasonable land lease on their recreational facilities. After paying the lessor each month, the association barely has enough left over for basic community maintenance. As a result, they have been unable to pursue any sort of beautification or improvement projects for years. She'd like to sell her unit and move but its current value is about $50,000 less than what she owes to the bank.

My parents live in a homeowners' association in Weston where they both have served on the board or a committee at one time or another and have seen firsthand how difficult it is to get people to attend the association meetings or even send in their proxies instead. A neighbor has been the subject of bank and association foreclosure actions for well over a year but the parties and parade of new cars in their driveway continues.

My mother-in-law lives in a "55 and Over" community that has its own constant challenges as to whether or not senior housing communities can be realistically maintained in this day and age. If you polled her community members about whether or not they are happy, there would certainly be no consensus about whether the current reserve levels were correct, management was efficient and the vendors used were the best and cheapest out there.

The only one quiet at the table was my baby brother; he and his wife rent an apartment

Wednesday, November 25, 2009

What do you need to know about the new FHA condominium mortgage approval process?

The Federal Housing Administration (FHA) has a new loan approval process for condominium projects pursuant to the Housing and Economic Recovery Act of 2008 (HERA).

The FHA has revisited its earlier proposals in this regard after meeting with considerable public backlash. While the transitional and successor criteria issued by the FHA on Friday, November 6th, still make it much more difficult to obtain FHA-backed financing for condominiums, they are more positive than the FHA's first attempts in this area several months ago.

The latest proposal, Mortgagee Letter 2009-46 B, includes the following requirements for those wishing to obtain FHA financing for condominium purchases:

1. The condominium must be covered by hazard and liability insurance and when applicable, flood and, in condominiums with 20 or more units, fidelity bonding/insurance on ALL officers, directors and employees of the association and all other persons handling or responsible for association funds. The fidelity coverage must be no less than a sum equal to 3 months aggregate assessments on ALL units plus reserve funds;

2. A right of first refusal for the association IS permitted unless it is exercised discriminatorily;

3. No more than 25% of the condominium's total floor area can be used for commercial purposes;

4. No more than 10% of the units can be owned by one investor. This limitation also applies to developers/builders that subsequently rent vacant and unsold units. For condominiums with 10 or fewer units, no single entity may own more than one unit. In order to be eligible for FHA financing, all units, common elements and facilities within the condominium must be 100% complete;

5. No more than 15% of the total units can be more than 30 days past due in their payment of assessments;

6. At least 50% of the units must be owner-occupied or sold to owners who intend to occupy the units; and

7. Lenders must review the association's budget to determine if it is adequate. In cases where the budget documents do not meet the FHA's standards, the lender may request a reserve study (which cannot be more than 12 months old) to assess the financial stability of the condominium.

These are only a few of the new guidelines that FHA-approved lenders must follow to determine the eligibility of a particular condominium for financing. What does this mean for you and your community? It means the pendulum has swung very far in the other direction and it is now much more difficult for potential purchasers to qualify for the financing needed to purchase units and homes. At a time when some owners are looking to move out of communities because they cannot afford to keep paying the shortfall created by non-paying owners, their pool of eligible purchasers just got smaller. For communities praying for new owners to move in and start paying assessments, they too just took a hit.

Let's hope that the FHA further relaxes these guidelines in the coming months.

Wishing you all a very Happy Thanksgiving!

Tuesday, November 24, 2009

What tactics do banks use to stall their foreclosure actions?

I haven't talked to a single person (other than my banker) who doesn't want to either (a) make banks pay more back assessments to community associations in which they hold mortgages or (b) make banks expedite their foreclosure actions.

We are obviously at cross purposes with most banks who have absolutely no incentive whatsoever to take back title to these properties. What happens when the bank takes back title especially to a property that has no equity?

1. The bank must first pay the statutorily required back assessments (6 months in a condominium association and 12 months in a homeowners' association);

2. The bank must start paying regular and special assessments on that property like every other owner in the community; and

3. The bank must incur additional liability as a property owner to maintain, insure and repair that property and market it for sale.

What happens when the bank delays taking title back to the property?

1. The rest of the owners in the community continue to maintain the value of the bank's collateral by paying to maintain and insure the overall community (fixing the roof, maintaining the landscaping, etc.); and

2. The property is waiting for them to take back when the market rebounds.

The question then is how are banks managing to stall their foreclosure actions? Some are using the judicial process cleverly by filing ex parte motions. An ex parte motion asks for a court order before the other party (the association) has an opportunity to be heard on the request. An ex parte motion in a child custody hearing where a parent could flee the jurisdiction is one thing but an ex parte motion to set aside the bank's Final Judgment because there is no equity in the unit??

What other tactics are lenders' counsel employing lately? They are moving to vacate the certificate of title, moving to vacate final judgments (discussed above), moving multiple times to reschedule the foreclosure sales or simply not showing up to scheduled sales or canceling the sale date unilaterally by putting these options into their Final Judgments. Of course, there are defenses to these tactics that the association can raise but most don't have the money or energy to fight the banks.

Interestingly, lender's counsel usually must convince the Court that no defendant will be prejudiced by the granting of the ex parte motion being requested. An association not hurt after years of waiting for the bank to foreclose and to have a new owner start paying its fair share of assessments only to be delayed once again by legal maneuvering? It's hard to believe any trier of fact would easily buy that argument.

Monday, November 23, 2009

How much do you know about the proper handling of condominium reserve accounts?

Section 718.112 (2)(f) of the Condominium Act provides that the annual budget prepared by the board each year shall include reserve accounts for capital expenditures and deferred maintenance. A condominium budget MUST include reserves for roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost for these items, and must also include reserves for any other item for which the deferred maintenance expense or replacement cost exceeds $10,000.

The formula to determine how much to put away in reserve is based upon the estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance.

Even though the board must create a budget with full reserves, the members of an association have the right, by a majority vote at a duly called meeting of the association, to provide no reserves or less reserves than required by the Condominium Act. If a meeting of the unit owners is called to determine whether to waive or reduce reserves and majority approval is not obtained or a quorum is not established at that meeting, the board's budget must go into effect with FULL reserves.

Prior to turnover of control of an association by a developer to unit owners, the developer has the statutory right to unilaterally waive the reserves or reduce the funding of reserves for the first 2 fiscal years of the association's operation, beginning with the fiscal year in which the initial declaration is recorded. After that time, reserves may only be waived or reduced with the consent of a majority of all nondeveloper voting interests voting in person or by limited proxy at a duly called meeting of the association.

Reserve funds and any interest accruing thereon MUST remain in their individual reserve account or accounts, and shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a duly called meeting of the association. This means that the funds in the roof reserve can be used only to maintain, repair or replace the roof and for no other purpose unless the membership consents to such different use.

Given the serious ramifications that can occur in communities where reserves have been waived for years, the Florida Legislature amended the Condominium Act several years ago to provide that the following prominent disclaimer language be put in bold on any proxy or ballot used by owners to waive or reduce reserves:


The idea behind reserves is quite simple: put away money for a rainy day a little at a time so it doesn't hurt as much when that rainy day finally arrives. However, there will always be folks who don't like to be forced to save because they might not be around to enjoy the benefits of those savings (the "I no longer buy green bananas" crowd) as well as those folks who don't like to put any more funds than absolutely necessary at the disposal of an elected board. There have been legislative proposals the last few years that would take away the members' rights to waive or reduce reserve funding; this means that all condominium budgets would automatically include reserve amounts regardless of majority membership opinion on the matter. How many of you would support such legislation and how many of you would see that as unnecessary governmental meddling in your private community affairs?

Friday, November 20, 2009

What would happen if community associations ceased to exist?

We hear a lot from people unhappy with the concept of common interest ownership communities that we would all be better off if they ceased to exist. Not building any more mandatory associations is one thing but what would really happen if the 55,000+ mandatory associations that are already in existence simply ceased to exist?

The answer depends in large part on the type of community that was built. A small homeowners' association with only some green areas would be much easier to handle following the demise of the association than a large community with tons of shared recreational amenities. If you bought in a community with a large clubhouse, pool, guard gate, tennis courts, etc. you have to wonder what would happen to all those structures were a functioning mandatory association not in place to (i) collect dues to pay for their upkeep as well as insure them (ii) hire and fire vendors and employees as needed to actually maintain, repair and replace those amenities and oversee the services they provide and (iii) provide corporate protection should someone be injured or killed while in or using those amenities.

In a condominium association, each owner owns a pro-rata share of the common elements; in an HOA, the association owns the common areas. If any of the recreational facilities are on leased land you have even more of a problem in the absence of a functioning association since the lessor can take back that property and perhaps use it for a purpose that would not be beneficial to your community or its values.

Does anyone really believe that the cities in which these communities are located would be rushing to step in to fill the void left by a former association? How many citizens are entirely happy with the job local City Code Enforcement is doing right now? Add another 55,000+ associations in to that mix and ask yourselves the same question.

The fact is that most cities would vehemently oppose having to step in to perform the functions and services currently provided by private residential community associations. These communities already function as quasi-cities by providing services such as utilities and security, disaster planning and recovery, recreation, community outreach programs and more.

The next time you hear someone say we would be better off without functioning private residential community associations ask them to map out a realistic plan that addresses the practical realities and challenges that would surface were their wish to come true!

Thursday, November 19, 2009

Could your community pool be shut down on November 25th?

On December 19, 2007, the Virginia Graeme Baker Pool and Spa Safety Act (VGBA) was signed into law. This federal law was named after the daughter of Nancy Baker and the granddaughter of former Secretary of State James Baker, who drowned in June 2002 after the suction from a spa drain trapped her under water. This Act, which was first introduced by Florida Representative Debbie Wasserman-Schulz, specifies that on or after December 19, 2008, all public swimming pools, wading pool, spas and hot tubs must meet certain requirements for the installation of compliant anti-suction drain covers.

In order to prevent drowning due to entrapment, the VGBA requires that each public pool and spa in the United States be equipped with anti-entrapment devices or systems that comply with the ASME/ANSI A112.19.8 performance standards. Each public pool and spa with a single main drain other than an unblockable drain must also be equipped with a secondary device or system designed to prevent entrapment.

The VGBA defines the term "public pool and spa" to include a pool or spa that is open to residents of all types of common interest ownership communities such as condominiums, cooperatives, homeowners' associations, timeshares and mobile home parks. If you operate your community's pool in a manner that is not compliant with the VGBA, it is a violation of Section 1404(c)91)(A)(ii) of that Act which can subject the community to fines up to $100,000 for each violation up to a maximum of $15 million for any related series of violations, imprisonment for not more than five (5) years and/or forfeiture of assets.

The U.S. Consumer Product Safety Commission (CPSC) has the authority to enforce the VGBA and random inspections have already begun. Florida's Code imposes a deadline of November 24th to comply with the main drain cover and grates. If your community has a pool and you are not certain that you meet the VGBA's and Florida's requirements regarding anti-entrapment devices, please call your pool company immediately. If you are unable to obtain the necessary parts or labor, please discuss shutting down your pool until it is compliant with the law with your association attorney.

For more information, you can contact the Federal Consumer Product Safety Commission at or you can call 800-638-2772.

Tuesday, November 17, 2009

The most difficult problem for some boards.

Yesterday, I met with the 8-member Advisory Council for my Community Advocacy Network (CAN). CAN is a statewide not-for-profit organization that I created to help educate people who live, work and serve in community associations about the laws and government agency mandates that impact their real property values and the way they operate those communities.

My Council had a lot to discuss over the course of an afternoon but one area that took up a lot of our time was creating our legislative agenda for 2010. What help could our legislators give to those of us living in community associations? Which problems could be successfully addressed by legislation and which are just the unfortunate byproduct of living in close proximity to other human beings?

One problem we discussed at length was a problem that many in the room had dealt with personally and without much success. What can and should a board do when witnessing the physical or mental decline of a resident who lives alone in a community association?

One of the symptoms of a person in this kind of decline is hoarding items in their home (years of stacked newspapers, rotting food, etc.) for which an insect or rodent infestation is the first tipoff to the board or a neighbor that something is amiss. Other symptoms may be a radical change in behavior (belligerent interactions with association employees, board members or other residents), change in appearance and other odd behavior (cooking on the catwalks), etc.

If a resident's behavior poses a threat to his or her safety as well as to the community as a whole there are legal steps you can take but none of them are quick or easy. Many boards don't know which governmental agencies to contact to help with an impaired owner. Elder Services comes to mind but often they are unable to resolve the issue long-term. Medicine may be the solution for some of these kinds of issues but a resident living alone may forget or refuse to take it. Often, the board does not have contact information for family members or those family members have no interest in getting involved.

Naturally, there are privacy issues that must also be considered when dealing with a sensitive problem like this. Overall there is no simple solution when dealing with a resident living alone who is in a downward spiral. Compassion, even in the face of outrageous behavior, is the first thing that is needed. However, a little help from the State to deal with these types of situations comes in a close second!

For more information about my Community Advocacy Network or CAN, please visit our website at

Should a certain percentage ownership be required to serve on a community's board?

The common interest ownership statutes do NOT require a director to be an owner in the community. Whether or not ownership is a prerequisite to serving on the board depends entirely on what a particular association's governing documents say.

Most documents do state that only association members are entitled to run for the board and membership is based on ownership of property in the community. Some documents, however, have throwback language to when the developer was still in control and thus, do not specify that only owners can run for the board. In these communities, anyone who is interested can run for the board. This means the landscaper, the association manager, renters or someone's cousin who lives one county over can run for the board and serve, if the community votes them in.

Of the communities that do require that directors be owners in order to serve on the board, the vast majority do NOT specify a minimum percentage of ownership to qualify. In today's crazy real estate market there are a lot of quit claim deeds flying around. Some people are purchasing or being given, for a variety of reasons, very small percentages in residential property. This begs the question: does a 1% owner have enough of a vested interest in the property and the community to want to serve on the board?

How many of you feel that this issue should be addressed legislatively in March when our 2010 Session commences? Should a minimum percentage ownership be required in order to be eligible to serve on one's board? Should ownership at all be mandated since currently it is not?

If you can't live with the thought of non-owners serving on your board, this is one more item you will want to look at in the documents before you buy!

Friday, November 13, 2009

How does Tallahassee impact you and your community?

How many of us stop to think about how much of what goes on during the 60-day session up in Tallahassee each year impacts the way we run our communities and the costs to do so? By the time most of you read in the papers about the various community association bills that were debated and passed, it is too late for you to weigh in.

More so than other real property owners, people living in mandatory community associations are greatly impacted by the bills our legislators sponsor and pass each year. If the law is changed to require mandatory yearly audits, count on increasing your budget next year to pay for that. If the law is changed to impose one-year term limits on directors, plan on having to undertake a strong push to solicit new people willing to take on the drudgery of board work or plan for a paid receiver to come in as a worst possible scenario if no eligible people are willing to serve. These are just examples of the types of laws that could pass and the impact they will have on both board members and owners alike!

We are still months away from the start of the 2010 Legislative Session in Florida and already there are four filed bills that impact community associations. Do you know their numbers and their sponsors? Here they are: HB 115 sponsored by Representatives Ambler and Robaina; HB 327 (Robaina), HB 329 (Robaina) and HB 337 sponsored by Rep. Yolly Roberson. We will be discussing the contents of these and other bills in the upcoming months. Last year there were almost 2 dozen bills filed that could have impacted your communities and none ultimately passed. This year there will be as many or more as your legislators attempt to tackle some very real issues including lender reform for struggling communities.

I head up an organization called the Community Advocacy Network or CAN. One of our main goals is to give people like you the opportunity to play a meaningful role in the process that takes place in Tallahassee each year so you can let your legislators know your wishes before they cast their votes on these bills which can so greatly impact your lives and your bottom lines. For more information about my statewide not-for-profit group, please go to

Thursday, November 12, 2009

What should be expected of owners in community associations?

The media likes to report on the rights of condominium and HOA owners being trampled by their boards of directors. Yes, that happens and abuses deserve media attention to prevent their continuation but equal attention should be paid at least to the fact that owners have responsibilities in addition to their rights.

What, then, should an owner expect to take on as his or her responsibilities when buying a home in a mandatory community association?

1. Read the association's governing documents (the Declaration, Articles, Bylaws and Rules and Regulations). Yes, they are long and boring and filled with legalese but you have to know what you are getting into before you buy. If you have a 75-lb. Rottweiler you might want to think twice before buying a condominium with a no pet restriction or a 25-lb weight limit on dogs. The same holds true for leasing restrictions, commercial vehicle restrictions and a host of other rules that you must decide you can live with or you can't.

2. Pay your assessments even if you have a dispute with your association. If you don't like the board, hate the manager or deplore the community's condition, you must still pay your assessment or you risk being liened and ultimately losing your home to foreclosure. Pay your assessments in full and fight your other battles separately.

3. Attend board and membership meetings, vote in board elections or better yet run for the board. You lose your credibility if you complain but never get involved.

4. Speaking of complaining, resist the urge to become a recreational complainer. Some owners start out with legitimate complaints but make a career out of complaining about everything and anything. Pick your battles.

5. Maintain, repair, replace and properly insure the property for which owners bear those responsibilities.

6. Secure your property prior to a hurricane or other storm approaching. If you have furniture, plants and other items on your balcony, please take them in so they don't become missiles and harm your neighbors' property.

7. Provide the association with your most current contact information so you can receive all association notices.

8. Be a courteous neighbor and a respectful participant at meetings.

9. Don't assume other peoples' intentions; if you don't know, ask.

10. If you lease out your unit, get approval first and make sure your tenants and other occupants understand that they must comply with the association's rules and regulations.

Just as an owner should understand and fight for their rights, if necessary, he or she must also honor the responsibilities they undertake when choosing to live in a mandatory community association.

Wednesday, November 11, 2009

What does it mean to owe someone a fiduciary duty?

We hear the words fiduciary and fiduciary duty tossed around a lot in the community association setting. How many of us give real thought to what those words mean?

The textbook definition of a fiduciary is one who is in a position of authority who obligates himself or herself to act on behalf of another (as in managing money or property) and assumes a duty to act in good faith and with care, candor and loyalty in fulfilling that obligation.

When you agree to serve on your community's board of directors, you assume a fiduciary duty to the association members. If you fail to fulfill that duty, you leave yourself vulnerable to a breach of fiduciary duty lawsuit. Hopefully, the preceding sentence will not make you want to tender your immediate resignation; hopefully, it will make you want to learn more about your responsibilities as a board member.

Here are a few examples of what is expected from the board:

1. Maintain, repair, replace and properly insure the common elements/areas;

2. Properly vet vendors who service the community;

3. Disclose any conflicts of interests or, even better, avoid conflicts of interest;

4. Be good stewards of the members' money;

5. Insist on transparency in association operations;

6. Hold frequent and open meetings and conduct fair elections;

7. Read the association's governing documents;

8. Know when to ask an expert's advice rather than relying on the resident board "expert";

9. Treat your association's official records with respect and make them available to the owners for inspection; and

10. Basic communication skills are good; great communication skills will serve you even better while you serve your community. Tomorrow we'll talk about the owners' responsibilities.

Tuesday, November 10, 2009

What can be done about troublesome tenants?

Let me start out by saying that today's blog is not meant to suggest that every tenant is or will become a nuisance to his or her community. There are many tenants who make better neighbors than the people who own the unit next door.

That being said, many communities today are struggling with tenants who, for whatever reason, have become a source of general nuisance to others. Most of us have suffered living next to these kinds of occupants at one time or another: loud parties, disabled car on perpetual cinder blocks, garbage on the front lawn, frequent visits from the police for the all-too-frequent domestic disputes and more.

Often the unfortunate people living next to these characters expect and fully demand that the association do something NOW! Realistically, however, how many tools does an association have at its disposal to deal with this kind of situation?

If the tenants' behavior rises to the level of a general nuisance, the association can pursue an injunction against the owner who rented to them to stop the behavior from continuing. If the association's governing documents require the use of a board-approved uniform lease form or lease addendum (and the owner in the case at hand complied with the requirement), such document should provide the association with even more options to quickly remove a troublemaking tenant. In addition, if the association's governing documents allow fining, the association can fine an owner for his or her tenant's or other occupant's misbehavior.

There is no easy or cheap solution to rid your community of a truly bad tenant. The best solution is better prevention. If you don't have the ability to screen tenants, speak with your association attorney about what you can and can't do in terms of screening. I have often told clients that it is also important to have your owners screen their own tenants to get a clear picture of who they are letting into their homes. Too many owners stick their heads in the sand about the type of tenant they are bringing in to the community. If your governing documents required owners to submit their own screening results for their proposed tenants, it might make some of them think twice if some red flags surface.

There is no surefire guarantee that screening can prevent a troublesome tenant just as there is no way to ensure that owners cannot also become a source of nuisance to their neighbors. In these troubled economic times, many owners are happy to have any tenants to supplement their assessments let alone good ones.

Monday, November 9, 2009

Dealing with satellite dishes in your community?

Have you seen a crop of satellite dishes sprouting in your community? Are some of them in unusual places? Have some been installed without obtaining board approval, or worse installed by a tenant in a unit where the owner is delinquent?

Be careful you understand what your board can and can't do under federal law with regard to satellite dishes. The first thing you need to know is that the telecommunications industry has one of the strongest lobbies on the planet. Their strength resulted in Section 207 of the Telecommunications Act of 1996, which directed the Federal Communications Commission (FCC) to adopt the Over-the-Air Reception Devices (OTARD) rule concerning restrictions on viewers' ability to receive programming signals from, among other items, direct broadcast satellites.

That rule which has been in effect since October, 1996, prohibits restrictions by both governmental and nongovernmental entities that impair the installation, maintenance or use of satellite dishes that are less than one meter (39.37") in diameter. In the community association context, the association cannot pass rules that (i) unreasonably delay or prevent installation, maintenance or use of the satellite dish (ii) unreasonably increase the cost of installation, maintenance or use; or (iii) preclude reception of an acceptable quality signal.

Be sure to speak with your association attorney to ensure that any rules you may have passed with regard to the approval process for satellite dishes, location of same or placement of concealing shrubs passes muster under the FCC Rules.

This does not mean that owners can install satellite dishes on the roof or by affixing them to the building's exterior. In fact, a condominium or cooperative owner can only install a dish pursuant to the OTARD rule to areas that are "within their exclusive use or control". Typically, that refers to a balcony or patio. Another alternative for a community that wants to prevent the installation of hundreds of individual satellite dishes is to install a community satellite dish subject, of course, to membership approval.

Friday, November 6, 2009

Important event for Broward County community associations.

There will be a "one-of-its-kind" event coming up next week for Broward County community associations. The Broward Coalition will be holding its first "Share and Learn" Workshop: What Every Association Needs to Know event at the Sunrise Lakes Phase 1 Clubhouse at 8100 Sunrise Lakes Drive North, Sunrise, FL 33322.

The purpose of this event is to provide a forum for education, discussion and even a little bit of entertainment for those of you involved in community association living!

The event will take place from 9:00 am to 1:30 pm. There will be a panel of experts and plenty of Q and A time for those in attendance. Breakfast & Lunch will be served for everyone in attendance and there is NO admission fee although attendees are asked to bring one non-perishable food item for the Cooperative Feeding Program. There will be 21 door prizes awarded in addition to two $250.00 gift certificates (winners of all prizes must be present to collect their prize).

I am proud to serve as the Broward Coalition's Pro Bono Legal Advisor. What does that mean? I try to answer a lot of association questions for the Broward Coalition members the same way I do in this blog. The Broward Coalition serves the interests of more than 200 community associations in Broward County and that number is growing. Their board is comprised of so many talented and dedicated people and is led by well-known community advocate and activist, Charlotte Greenbarg. You may have read about Charlotte lately in her fight to make sure the Broward School Board and other elected Broward County officials actually do the job we elected them to do.

I hope as many of you as possible are free to join us on November 13th for this amazing event. Please RSVP to Mary Macfie by November 10th if you will be attending via email at

Thursday, November 5, 2009

Is your community violating state and federal fair housing

Sometimes discrimination can be subtle by just implying that something is not wanted rather than shouting it. A sign at the front of a beautiful community in a desired location proclaiming: "A 55 and Older Community" sends a pretty clear message that families are not wanted. In other communities, it may be a little more subtle with pictures on their website of only seniors and tagwords like "mature" when describing the type of occupant who will enjoy living there.

In addition to the federal fair housing law, Florida law also prohibits discrimination based on familial status. Both the state and federal fair housing laws permit communities to exclude children as permanent occupants if they meet certain exclusions. To qualify for the "55 and older" federal exemption, communities must meet the requirements established in the Housing for Older Persons Act of 1995 (HOPA). Specifically, at least 80% of the units or homes must be occupied by at least one occupant who is age 55 or older and the community must be able to demonstrate, through written policies, lease provisions, advertising, etc. that the community is designed exclusively for older residents.

A community will only be able to exclude children if it meets this criteria and if the age restriction is applied to the entire development and not just one portion of it. In other words, a multi-condominium community could not set aside just one building for older occupants and exclude children from the entire complex.

You cannot get around this criteria by simply passing rules designed to discourage families with young children while not meeting the 80% occupancy threshold. A classic example is prohibiting children from riding bikes in the community's green areas while not similarly prohibiting adults from riding bicycles there. The Department of Housing and Urban Development (HUD) periodically sends "spotters" to test for discriminatory practices and a large percentage of those tests do produce fair housing complaints. Remember, if you have that sign out front proudly proclaiming that you are a Senior Housing Community but you haven't taken a census in the last decade to actually verify that information, you have committed de facto discrimination because potential younger purchasers drove by under the mistaken assumption that they could be kept out.

Most people living in adult communities purchased there because they wanted a certain lifestyle. If that is the case in your community, it is important that you routinely safeguard that lifestyle by ensuring that you continue to meet all necessary requirements under federal and Florida law. Lastly, considering that women today are having babies well into their forties and most 55-year old's in 2010 are 2 or 3 decades from retiring, the tagline "55 and Over" for a community without children seems a little out of touch with today's realities. The threshold would probably make more sense if we nudged it up a decade to 65 and Over.

Wednesday, November 4, 2009

No one benefits from a community in turmoil.

Despite what you may have been told, most attorneys I know don't root for communities to head into crisis mode so they can crank out the billable hours. These kinds of communities present all sorts of challenges and potential liabilities for the attorneys who serve them.

A board under siege (either due to their own petty infighting or because they have been victimized) is an unfocused board. A client that can't understand and follow advice or, even worse, doesn't know when to reach out for help in the first place, is a dangerous client to have. It's easy for fighting board members to twist counsel's words or advice to their own advantage. Let's not also overlook the fact that having a scapegoat like your association attorney when there is nowhere left to hide from bad decisions can be appealing for some.

Do you know what happens most frequently in conflicted communities? They don't pay their legal bills. Contrary to the belief that "the lawyers are benefitting from all this", many times lawyers representing communities in crisis wind up struggling to get paid. Wise attorneys won't work with communities who can't or won't benefit from their advice.

Associations are corporate entities which require general corporate representation. There will always be enough legal work that must be performed for well-run, peaceful communities. Documents need to be tended, budgets prepared, meetings held, units conveyed, etc. Of course, just as with any other corporate entity there will be bumps in the road in the form of collections and litigation.

An association attorney's real worst nightmare is a community in turmoil because it probably means being fired, not paid or possibly sued. Just as associations should be picky about the attorneys they invite into their communities, attorneys should be equally selective about the associations with whom they choose to partner for the ultimate benefit of the membership.

Tuesday, November 3, 2009

Is Chinese Drywall creating problems for you?

Last week the Consumer Products Safety Commission (CPSC) came out with a series of inconclusive reports regarding the stinky Chinese Drywall (CDW) plaguing so many American homeowners. The most definitive finding was that CDW has a higher level of strontium than domestic drywall.

There is no known relationship, as of yet, between strontium and the "rotten egg" odor typically caused by sulfur and the corrosive effects of CDW on copper piping that have been reported. Of course, many people are most concerned with whether or not CDW carries any health risks in addition to these other adverse effects.

There is an ongoing nationwide class action regarding CDW. All CDW cases filed in federal court have been transferred to Judge Fallon of the Eastern District of Louisiana in New Orleans. Judge Fallon has scheduled three trials for early next year, the first of which will begin in January. Judge Fallon has decided that the first trial will be for a house in Louisiana and will be focused solely on property damage rather than health issues.

So how do you know if you have Chinese Drywall in your home? Here are some telltale signs:

1. The easiest way to determine whether you have CDW is to look on the backside of a piece of your drywall for an identification mark such as "made in China" or the name of a CDW manufacturer such as Knauf;

2. Do you detect a foul smell in your home similar to rotten eggs?; and

3. Look for corrosion on your copper pipes or the coils inside your air conditioning unit. Have an electrician inspect these items rather than attempting to do it yourself as you can be injured;

For more information on the nationwide class action lawsuit on Chinese Drywall please visit:

Monday, November 2, 2009

Tenants get new federal rights while associations get nothing.

How many of you are aware of the existence of the Protecting Tenants at Foreclosure Act of 2009? Apparently, this law was slipped in while people were busy watching the health care bills, the new Supreme Court Justice nominee and which of Obama's staff members didn't pay their taxes!

The law is not crystal clear as to what rights it affords tenants in homes or units that have been foreclosed on but it clearly confers some important new tenant protections. The law automatically expires on December 31, 2012, but until then it could significantly impact your community association. The Act provides protection to bona fide tenants (defined as any person not related to the person being foreclosed on who enters into a lease before the notice of foreclosure, in an arms-length transaction for a rental amount that approximates fair market rental value).

The Act specifically provides that a bona fide tenant cannot be kicked out of the dwelling as soon as someone else (the bank or presumably the association) takes title to the property. Instead, whoever takes title to the property at the foreclosure sale does so subject to the tenant's new federal right to occupy the unit for a period of time and must provide the tenant with a 90-day notice to vacate before attempting to remove that tenant.

Moreover, unless the property is sold to someone who intends to occupy the property as their primary residence, whoever takes title at the foreclosure sale must honor any existing bona fide lease even if it goes beyond the 90 days. In other words, someone who has a year left on their lease cannot be kicked out until their lease is over unless the property is sold to someone who intends to occupy it as their primary residence and the 90-day notice has been given.

For some associations this might be a good thing as the units/homes they foreclose upon will come with ready-made tenants. However, I can see room for problems including tenants who claim they have prepaid their rent to the prior owner and issues with troublesome tenants whose removal will now be delayed as a result of this new law.

The real question remains why struggling association members remain the last group standing who have not received any sort of federal or local help.

Friday, October 30, 2009

Town Hall Meeting on Condo and HOA issues.

The Sun Sentinel's Town Hall meeting last night drew a big crowd of people looking for answers to fairly common association problems. I was very pleased to sit on a panel that was asked to listen to those questions and try to help.

Two issues were raised that directly pertain to my profession-lawyers! The first issue pertained to the association attorney's perceived support and loyalty for the board alone. Several audience members complained that attorneys representing their communities were (a) helping boards do bad things (b) wouldn't speak with them as unit owners and (c) were part of the problem and not the solution.

As an owner who is not part of the board's decision-making process, it can feel like the attorney represents the board and not YOU. In fact, association attorneys (the good ones at least) realize that they represent the association which, of course, is comprised of all the members. However, when representing any large organization, you can't take direction from several hundred masters and that is why the board is the liaison with the attorney.

I have seen association attorneys overstep their boundaries, become too attached to one or two board members to the exclusion of others, and not be forceful enough when they are cognizant that the board is operating outside the confines of their documents and the statutes. It's equally important to remember, however, that the boards who are most intent on operating outside those boundaries often do not get their attorney's advance buy-in for their agenda. Just because the association is represented by counsel, don't assume that the board has gotten the attorney's approval for a clearly unadvisable decision; chances are the attorney was never consulted.

The other issue raised regarding association attorneys is why 5 of them can give you 4 different opinions!! My first answer would be "it's the nature of the beast"! In all seriousness, however, most of what we do hinges on interpreting language that would make my English professors at Northwestern cringe. Sadly, many developers create awful governing documents and many of our laws are also very poorly drafted. Don't assume that all of the laws being written in Tallahassee are drafted by lawyers. Many times they are the result of lobbyists writing out suggestions on cocktail napkins!

When our laws and association documents are written in concise, plain English it makes it much easier to render useful and uniform opinions. Garbage in, garbage out or conversely, quality in, quality out!

Thursday, October 29, 2009

The advantages and disadvantages of living in a common interest ownership community.

Have you ever made a list of pros and cons to decide how you really feel about a person or an issue? It sometimes helps to see in black and white which column outweighs the other.

Realistic expectations can often help avoid disappointment and failure in any endeavor. If you didn't make a list before you moved in to your current condominium, cooperative, homeowners' association or mobile home community, it's not too late to take a moment to figure out whether the advantages outweigh any perceived disadvantages.

Some of the advantages to that common interest ownership community are:

-Shared vision for aesthetics;

-Shared expenses for common facilities and amenities that you would not otherwise be able to afford;


-Location (can't afford a house on the beach but a condo on the beach might be in your budget!);

-Rule enforcement (you hopefully won't have a neighbor paint her house purple or leave a car on cinderblocks for months);

-Bulk buying power.

Some of the disadvantages to that common interest ownership community may be:

-Your priorities in terms of maintenance and repair items might not be shared by the board;

-You are subject to the board's judgments in terms of vendor selection, contract sums, etc.

-You are subject to the documents being amended and rules you agreed to at the time of purchase being changed (you must be prepared to be on the losing end of votes at times);

-Your home is your castle except in a community association. You will have to tone down the all-night noisy parties, drive fewer cars and adapt to certain aesthetic standards you might not share;

-You could be the subject of arbitrary and capricious enforcement at some point or nasty board politics;

-You could be forced to pay for owners who aren't paying.

Of course, everyone's list will be different so it might be time to brush off or update yours to see if your community is still a good fit.

Wednesday, October 28, 2009

Director conflicts of interest.

The term "conflict of interest" gets thrown around a lot but I often wonder how much is understood about the hurdles a conflict may present and how they can be surmounted.

There is a difference between a true conflict of interest and a public relations problem. A director who owns the landscape company that the board is considering hiring, clearly has a conflict of interest; that does not mean, however, that the board cannot hire that company. It does mean that the conflicted director must disclose the relationship or interest to the board prior to the vote and the approval must be obtained without counting the votes of the interested director.

A separate issue for that director is whether or not it makes sense to do business with one's own community. Even if the director does everything right in terms of disclosing the conflict and abstaining from voting, the resulting contract will still be viewed with a certain amount of suspicion by some members.

At what point is a conflict not really a conflict at all? If that same landscape company is owned by the director's third cousin whom he's never met, is that still a conflict? Typically, a conflict is present when someone is receiving something of value either directly or indirectly as a result of a relationship or an interest and his or her position on the board affords an opportunity to advance that interest.

If you think you have a conflict of interest, you probably do. Disclosing a potential conflict that turns out not to be a conflict after all is not nearly as bad as failing to reveal a relationship or interest that is later discovered to be a true conflict.

Thanks to all of you who logged on today to the Sun Sentinel's live chat on condominium and HOA issues. We were amazed at the number of participants and there were so many fantastic questions that we simply did not have enough time to answer. If any of your unanswered questions can be addressed as a future blog topic, please email me at

Tuesday, October 27, 2009

Look before you leap when amending your documents.

The associations who get into the most trouble when it comes to amending their documents are usually those who did not think through the process ahead of time.

The starting point for any association wishing to amend its documents is to review the amendatory threshold in the document being amended. The declaration, articles and bylaws might all have different amendatory requirements. If you are amending a document that requires lender consent to do so, please save yourself a costly headache and contact your association attorney to discuss what must be done and whether or not you can rely on the relatively new statutory procedures concerning lender consent requirements.

If amending your declaration requires 90% approval from your total membership, you might want to consider first amending the declaration to lower that threshold and then going on to amend other provisions at a later time.

You must also consider whether or not the document you are amending is the proper place for the provision you are adding. For example a leasing restriction should not be placed in your Articles of Incorporation simply because the Articles contain an easier method of amendment than the Declaration does.

Here is a checklist of sorts next time you want to amend your documents:

1. Can we achieve the necessary amendatory threshold?

2. Is lender consent required and if so can we obtain it?

3. Are we amending the correct document?

4. Is the amendment reasonable and enforceable?

5. Does the amendment in one document require an amendment to another in order to avoid a conflict?

6. Are the members aware that we will be asking them to vote on this amendment and will they support it?

Some amendments are relatively easy to pass (i.e. making the date of the annual meeting more flexible) and others meet a high level of resistance (i.e. guest/occupancy restrictions). Make sure you know ahead of time what your chances of amendment success are and whether or not you have followed all the proper steps.

Monday, October 26, 2009

Are you dealing with a master association?

How many of you are dealing with the issue of a master association? "What does this mean?" some of you might ask.

This means that in addition to your own condominium or homeowners' association, you are also obligated to be an assessment-paying member of another association which has certain overall control regarding the entire community in which you live.

If you live in a condominium association, you should have knowledge of the existence of a master association because you are entitled to receive a Question and Answer Sheet and one of the questions pertains to whether or not there is a master association. If you live in an HOA, you will not receive such information so be sure to ask your seller when purchasing if there is a master association to which you must also belong in addition to the HOA.

The absolute bare minimum you need to know about a master association follows:

1. Who are members of the master association, all of the individual owners or the sub-associations?

2. Is the master association board elected and, if so, by whom or is the master board automatically comprised of certain directors from the sub-associations?

3. What are the rights and responsibilities of the master board? What common areas does it maintain, repair and replace?

4. Can the master board enforce your own community's governing documents in the event your board fails to do so?

5. Are the master association's documents more restrictive than your sub-association documents and which set prevails as it pertains to your individual unit/home use?

6. How does the master association collect its dues? Are fees collected directly from all owners or do the sub-association boards collect and remit the portion of assessments owed to the master?

7. Does the master board have the right to lien you for nonpayment of assessments or to fine you for certain use violations?

Not surprisingly, sub-associations and their master associations do become combative with each other at times. Much of that stems from either a misinterpretation of their respective governing documents or the failure of the community's developer to create a development scheme that laid the groundwork for a properly functioning master/sub relationship.

Friday, October 23, 2009

The one-year countdown begins!

Probably the last thing on your mind right now is a storm that blew through here four years ago to the day this Saturday. However, if your association was like many and suffered damages when Hurricane Wilma paid us her unfriendly visit, you need to know that the one-year countdown on the 5-year statute of limitations to pursue a casualty claim has begun.

My law firm, Katzman Garfinkel Rosenbaum (KGR) and the Community Advocacy Network (CAN) are committed to educating board members, association members and community association managers about their rights before this window of opportunity closes forever.

Community association boards are particularly vulnerable to the common myths that are associated with the complicated insurance claims process. Have you ever thought your policy would be canceled or your rates raised if you made a claim for property damage? If you have, you are a member of a very large and misinformed group of people. In fact, Florida law prohibits an insurer from cancelling or failing to renew a policy as a result of a claim made for damage caused by an act of God.

Moreover, even if you've never filed a claim, you are just as likely to have your rates raised as your neighboring property owner who has made dozens of claims and been paid on them. Insurance companies raise rates in broad swaths and not just in reaction to your particular claim.

Many boards submitted claims for Wilma storm damage four years ago and were told that their claims did not reach their deductible level. Others received some money from their carriers but not nearly enough to pay for repairs and, as a result, they were forced to specially assess their members. Incredibly, a few associations never even made claims because they relied on their resident community "expert" who told them not to bother.

For far too many communities, the storms that ravaged Florida in 2005 (Katrina and Wilma) created a hole from which they never dug out. The special assessments that their members were forced to pay for damage that should have been covered by their insurance carriers made them less able to bear the current real estate market conditions.

Time is running out to help associations that may have been impacted by the inequities in the insurance claims process. Please visit a special website I helped create at for more information about what you can do.

Thursday, October 22, 2009

Does the Florida Clean Indoor Air Act apply to your community?

The Florida Clean Indoor Air Act (FCIAA) was enacted in 1985 by the Florida Legislature. The purpose of the Act was to protect people from the health hazards of secondhand smoke at work. In November 2002, seventy-one percent of Florida's citizens voted for a constitutional amendment to prohibit smoking in all enclosed indoor workplaces. The smoke free law became effective July 1, 2003.

Originally condominiums were exempt from this Act. That exemption was removed. Common areas and recreational facilities may be deemed to be the "workplace" for your lawn people, pool maintenance workers and others. Thus, the association can prohibit smoking there even if some of those areas are not enclosed. The more interesting question is whether or not a condominium or cooperative can prohibit smoking inside the units.

The units are not a "workplace" if no one other than the owners and their guests and invitees enter them. However, what if the association sends in a pest control man regularly or has to perform other maintenance inside the unit? Is it now an "indoor workplace" for those workers?

In the event no one ever enters a unit to perform any sort of work, a heavy smoker whose smoke is penetrating another unit or units via the ventilation system could still be pursued as a general nuisance even if the FCIAA is not an option.

The Department of Health (DOH) and the Department of Business and Professional Regulation (DBPR) are responsible for enforcement of the FCIAA. DOH shall enforce the FCIAA in all facilities not regulated by DBPR. To obtain a list of facilities that are regulated by the DBPR, click on the FCIAA Brochure .

To report a violation of the FCIAA, you can contact either the DBPR or the Bureau of Tobacco Prevention at the emails listed below. The following information is required to process a complaint:
  • Name of workplace (where violation is occurring);
  • The mailing address, city, county and zip code;
  • Nature of the violation (ex. smoking in an enclosed indoor workplace); and
  • If available, provide a telephone number and name of the person in charge of the workplace.

Email: Bureau of Tobacco Prevention Program

Tuesday, October 20, 2009

One statute for all types of communities?

In Florida, we have five different statutes for five different types of community associations: 718 (condominiums), 719 (cooperatives), 720 (homeowners' associations), 721 (time shares) and 723 (mobile home parks).

While there is no doubt each of these kinds of communities have very different components, they all share certain procedural necessities as corporate entities (holding meetings, preparing budgets, etc.) that might benefit from one streamlined statutory process.

Vermont, Nevada and Minnesota are some of the states that have Common Interest Ownership Acts. Is it time that Florida join the list? Mark R. Benson, Past Chairman of the Florida Community Association Living Study Council, Past Member of the Regulatory Council of Community Association Managers, Past Vice-Chairman of the Advisory Council on Condominiums and a County Court Mediator, believes the answer is a resounding "Yes".

Mark has spearheaded a project known as the 7xx Project for Community Association Legislative Change whose highlights are as follows:

1. A single, streamlined uniform statute which addresses residential condominiums, HOA's and Co-ops;

2. Use of common language;

3. Replaces the DBPR with the Department of Agriculture Consumer Services;

4. Greater accountability for board members;

5. Better access to education and assistance;

6. More education for and discipline of community association managers; and

7. Places time shares and condo-hotels in a separate statute to which they are better suited.

If you want a copy of the 7xx Draft, please send an email request to and indicate if you want it in Word or PDF format.

Having one uniform common interest ownership statute will certainly make association attorneys' lives a little easier as it cuts down on the potential to misquote the wrong statute. The real question is will it make your life as a board member or a unit owner any easier?

No matter what you feel about "one statute to rule them all" most of us can agree that some sort of change is needed. Our Florida Condominium Act is one of the most bloated and incomprehensible laws on our books. At some point we might want to stop putting new parts in an old car and just buy a nice, shiny new one instead!

Monday, October 19, 2009

Do you know which of your actions are really material alterations?

Most board members understand that they must obtain membership approval for material alterations or substantial additions. What they are not so clear on is what constitutes a material alteration.

The most basic litmus test is if the change materially or palpably changes a common element's appearance or use, it's a material alteration. In a condominium association, a material alteration must be approved by at least 75% of the total voting interests unless the governing documents provide otherwise. In a homeowners' association, the governing documents will control what needs to be done in the event the board makes any changes to the common areas.

The reasoning behind the requirement for membership approval is quite simple. An owner might have purchased in a particular community solely because it has a tennis court or is painted a lovely shade of blue. While that same owner might be on the losing end of the vote to change these items, they must at least have a say.

Some examples are obvious and others might be a little less clear. The following examples are material alterations which must be approved in advance by your members:

1. Changing the paint color of the building's exterior, corridors or any other common area;

2. Adding a cell phone tower to the roof;

3. Changing from carpeting to tile or vice versa;

4. Changing from a flat tile roof to barrel tile;

5. Cutting down a large tree on the common areas;

6. Changing light fixtures in the clubhouse;

7. Adding a fountain to the lake; and

8. Changing the card room to an exercise room.

These are just a few examples of changes that constitute material alterations which require membership approval. There are exceptions to the need for membership approval. For example, changes required in order to comply with local or state ordinances can be made without membership approval. If you are performing maintenance or repairs and simply want to take advantage of new materials or technology that was not available when your community was originally built you can do so without treating it as a material alteration.

This is one of those areas that definitely requires a discussion with your association attorney in advance. Some boards are hesitant to ask the members for approval for these kinds of projects for fear they will be voted down. Even the best ideas can fail to garner enthusiasm and support; they should be scrapped until the board and members can jointly decide on a vision.

Friday, October 16, 2009

Voting certificates and other common recall pitfalls.

If you just learned that your members are trying to recall you as a director, your head is probably spinning. Keep it in place and remember that this is one of those times where it makes sense for the board to call your association attorney immediately and not try to muddle through the process yourselves.

Some of the common pitfalls boards encounter when dealing with a recall are:

-Failing to timely and properly notice and hold a board meeting to vote on the recall;

-Failing to establish a quorum at that board meeting;

-Failing to list specific reasons in support of their decision not to certify (any reason for not certifying which is not contained in the minutes of the board meeting cannot later be raised in the Petition for Arbitration so you've got to get this right!);

-Failing to timely file a Petition for Recall Arbitration; and

-Voting Certificates

Voting Certificates may be the most contested items in any recall arbitration. Here the old adage proves true: If You Don't Use It, You Lose It!!

Voting certificates are forms submitted to the association's secretary for units owned by more than one person, or owned by a corporation, partnership or other entity to designate the person authorized to vote on behalf of the unit if the association's governing documents require the use of a voting certificate.

If the governing documents require the use of voting certificates, the association must provide evidence that it has routinely enforced this requirement in order to deny any recall ballot because it was not signed by the authorized voter. In other words, the association cannot reject a recall ballot from a person from whom it has accepted votes on other issues in the past.

While a Petition for Recall Arbitration is pending, the board carries on business as usual. If the recall is later certified, the actions taken by the board during the pendency of the arbitration are presumed valid. If less than a majority of the board is recalled, the remaining board members appoint members to fill the vacant seats. However, the board may not appoint any of the recalled members to fill those vacant seats. If an election occurs during the pendency of a Recall Arbitration, the arbitration will be deemed moot.

In tough times, people question the role their leadership played in their current suffering. Are you hearing more grumbling about potential recalls? The best way to avoid being in the position of having to defend yourself from a recall is to insist on transparency and pro-activity in all your association operations.