Monday, December 27, 2010

Association Governance Elsewhere.

I was fortunate enough to take a recent vacation to Costa Rica. The phrase “Pura Vida” is heard at every turn in this Central American country. Most folks think the words mean Pure Life but it has evolved into several meanings and uses including a greeting, a goodbye and a phrase to celebrate good living.

My family and I stayed in several secluded areas where cell and internet service were not available. Having the chance to unplug for a little while was wonderful but even so I managed to still come in contact with community association issues!

Several of the people we met who live in Costa Rica mentioned their desire to move into gated communities for security reasons. When I asked them whether or not they believed such security was real or merely an illusion I was informed that guards in these private residential communities are armed and have the ability to discharge those firearms under certain circumstances so yes, the security they provided was quite real to them. What were some other surprising association tidbits I learned during my stay?

For starters, an owner of a Costa Rican condominium unit has voting power relative to the value of his or her unit. Those with more valuable property in the community carry greater voting power.

As far as HOA’s are concerned, they are unconstitutional in Costa Rica as having a purpose which is contrary to the inalienable rights of property owners granted under the constitution of Costa Rica. I know that tidbit will make some readers of this blog very happy and will strike terror in the hearts of other readers.

In Costa Rica, it is not uncommon for developers of single family lot subdivisions to represent to prospective purchasers that an HOA will be formed to deal with matters of common interest as well as to deal with common property and to levy fees on the property owners to carry out the mandate of such homeowners’ association. Despite those representations, Costa Rican HOA’s are purely voluntary in nature as far as participation by property owners is concerned. Costa Rican HOA’s do not have the legal authority to carry out any proposed mandates or to collect fees from the property owners in the subdivision that they purport to govern. Although the formation of HOA’s may make practical and logical sense in these communities, their mandate and the collection of any fees from property owners is unenforceable.

Just when I thought the association topic was over when I reached the airport in San Jose to return home, a fellow Spirit passenger mentioned how much he hates all kinds of community associations. This amiable fellow’s occupation was “house flipper” (his words) and he mentioned that the associations made his job of buying and selling real estate quickly in these communities very difficult. He did concede that his perspective was quite different from people who actually buy in these communities with a goal of making it their home. His main work now rests in Las Vegas and California since Florida proved to be an inhospitable climate what with our real estate taxes, high insurance rates and other fees related to property transfers. This gentleman’s parting advice to me was that no one should ever buy property in the State of Florida; renting was the way to go.

One thing is certain: everyone has an opinion about the community association lifestyle. Next time you travel, inquire about the local laws pertaining to common interest ownership communities; you might be surprised to find out how much better (or worse) we have it down here in Florida.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Thursday, December 16, 2010

Board Member Certification Requirements

If you are a newly elected or appointed condominium director, are you aware of the statutory certification requirements that apply to you?

Within 90 days after being elected or appointed to the board, each newly elected or appointed director shall certify in writing to the secretary of the association that he or she has read the association’s declaration of condominium, articles of incorporation, bylaws, and current written policies; that he or she will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association’s members.

In lieu of this written certification, the newly elected or appointed director may submit a certificate of satisfactory completion of the educational curriculum administered by a division-approved condominium education provider.

A director who fails to timely file the written certification or educational certificate is automatically suspended from service on the board until he or she complies with this certification requirement. The board may temporarily fill the vacancy during the period of suspension. The secretary must place a director’s written certification or educational certificate in the association’s official books and records for inspection by the members for 5 years after a director’s election or appointment.

The failure to have such written certification or educational certificate on file does not affect the validity of any action taken by the board. Please click the link below to find a sample Condominium Association Board Member Certification Form promulgated by the Division of Condominiums.

Some of the questions that have arisen as a result of this certification requirement are whether or not directors who have served before and are being re-elected are required to submit this certification form or attend an educational course and whether or not a possible candidate for the board can attend such a course prior to actually being elected and still use the course completion certificate after being elected.

Since the Division has not, to my knowledge, issued a definitive rule on these two questions, here are my common sense answers. When a director’s term is up and he or she is re-elected to serve, they are new to that board! I think an argument can be made either way but often the directors who are in the most dire need of education are the ones who might have served the longest. The most prudent course of action would be for every director to read the association’s governing documents and attend educational courses to help them best serve their communities.

With regard to individuals who might want to serve on their board, attending a course beforehand would be one of the best ways to learn about what that service entails. As long as the attendance occurred within a reasonable period of time prior to the election, I suspect that the certificate of attendance will meet the certification requirements.

The Community Advocacy Network (CAN) has a free Board Member Boot Camp (TM) coming up on Saturday, February 5th from 10 am to 3 pm at Century Village East in Deerfield Beach. All interested “recruits” should register at You can also call Drill Sergeant Tisa Christiana at 954-315-0372 to register. Board Member Boot Camp has been certified by the Division to meet your certification requirements. We hope to see many of you on February 5th!

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Friday, December 10, 2010

5th DCA rules that Association can demand sale date in a mortgage foreclosure case!

Finally some good news on the mortgage foreclosure front for associations! The Fifth District Court of Appeals has recently ruled in the case of LR5A-JV, etc. v. Little House LLC, et al (Case No. 5D09-3857) affirmed the trial court’s order setting a date for the lender’s foreclosure sale at the association’s request.

The lender, LR5A, argued unsuccessfully that as the judment holder only it has the right to control when, if at all, a foreclosure sale takes place under Section 45.031, F.S. According to LR5A, the Association as a junior lien holder cannot demand that a foreclosure sale be set. LR5A appealed to the 5th DCA claiming that the trial court erred as a matter of law when it set the date for the lender’s foreclosure despite the lender’s objections.

The association argued that Section 45.031, F.S. gives the trial court the ultimate authority to order a judicial sale and the 5th DCA agreed with the association. The exact language from Section 45.031(1)(a) is as follows:

(1) Final judgment. –
(a) In the order or final judgment, the court shall direct the clerk to sell the property at public sale on a specified day that shall be not less than 20 days or more than 35 days after the date thereof, on terms and conditions specified in the order or judgment. A sale may be held more than 35 days after the date of final judgment or order if the plaintiff or plaintiff’s attorney consents to such time . . . .

The appellate court stated that the lender’s argument “not only contravenes the provisions of section 45.031, but also ignores the Association’s interest in collecting lawful assessments on the subject property. As the Association points out, LR5A is not obligated under 7203085, Florida Statutes, to pay the Association’s assessments, yet, the Association must still maintain the common property and facilities, which inure to the benefit of the property.”

This ruling is binding authority in Florida’s Fifth District ( which includes 13 Florida counties: Orange and Osceola, Volusia, Flagler, Putnam, St. Johns, Lake, Marion, Sumter, Citrus, Hernando, Brevard and Seminole) and persuasive authority in other districts elsewhere in our State. It is welcome relief provided by both the trial and appellate courts which acknowledged that foreclosure proceedings are equitable in nature and, as such, the interests of all involved parties should be taken into account when the matter of the foreclosure sale date is raised!

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Tuesday, December 7, 2010

What are some banks telling your delinquent association members?

A colleague of mine was recently in court waiting his turn for 2 hours listening to mortgage foreclosure cases all the while. During this time, he learned that some banks are telling delinquent owners NOT to pay the association assessments and instead direct that money to the bank during the mandatory mediations that are required in residential mortgage foreclosures. Some banks are actually telling people that they should just stop paying their HOA, condominium or cooperative assessment and other monies such as cable television in order for the banks to come to some sort of a settlement with the homeowner at the mediation. In the meantime, the delinquency owed to the association continues to balloon.

We all know that banks are taking forever to foreclose either because there is no incentive to do so or they can’t due to documentary hurdles but how many of us knew that some were actively working against associations getting paid??

It seems pretty simple, doesn’t it? If an owner has a finite amount of money and cannot pay both the association and the lender, the lender wants to grab as much as possible of those limited resources. We must educate every association member that if they are on the receiving end of this kind of advice from their lender it is very misleading and self-serving given that:
1. There is no defense to the association’s foreclosure (other than that the debt is not owed) which means that association foreclosures can typically be prosecuted much quicker than a bank’s foreclosure which can be stalled as a result of lost promissory notes, botched documents as well as numerous statutory and equitable defenses;

2. The bank’s liability once it obtains title (which is likely to happen since most loan modifications seem to fail eventually) is limited in any event for pre-title delinquencies; and

3. The banks are putting money in their pockets at the association’s expense which really means the expense of all those owners still paying their share of the assessments.

This information should strengthen the resolve of many associations to forge ahead with their own foreclosures. In addition, with this evidence in hand, our legislators might be more inclined in the 2011 Session to reconsider the statutory cap enjoyed by lenders which they managed to so skillfully protect during the 2010 Session.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Saturday, December 4, 2010

Happy Holidays and Wishes for a Brighter 2011!

2010 brought many significant changes to community associations around our State. Many of them were unfortunately not positive such as the continued harmful impact of the foreclosure crisis on our communities. Others were baby steps in the right direction like the new statutory tools for associations to begin dealing with their ongoing delinquencies.

What has been a constant is the camaraderie that is felt when you go out to various town hall and other umbrella organization speaking events and realize that association members around the State are experiencing the same fears, frustrations and small triumphs regardless of where they are located.

It has been my pleasure to be at so many of those events listening to you and answering your questions. Please click this link to see my law firm’s heartfelt holiday message to you and your community:

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Monday, November 29, 2010

Three ways to kickstart a lender’s foreclosure action

Ask any community association board member what their #1 complaint is right now and the answer is likely to be the detrimental impact lenders’ delayed foreclosures are having on their communities. Waiting around for the banks to foreclose is not a viable option for community associations. Associations can move forward aggressively, take title to delinquent properties and rent them out for the months or years it takes the bank to finalize its own foreclosure action. However, if the unit or home is uninhabitable or if the association simply prefers to attempt to force a lender to complete the foreclosure rather than taking title, the association does have a few options.

Here are three methods an association can employ to speed that lender foreclosure along:

1. Set the lender foreclosure action for trial. If the judge orders the case to trial as requested by the association, the lender must try the case (which it often is not prepared to do) or the lender will negotiate a positive result with the association to avoid a trial. Regardless of what the lender chooses to do, if the judge orders the case to trial, the association usually benefits.

2. Move to dismiss the lender’s case for Lack of Prosecution. If the lender foreclosure action has been stagnant for ten months or more, the rules of civil procedure allow the association to warn the lender that if it does not move its case forward before the conclusion of a year, the association will move to dismiss the case for Lack of Prosecution. This tactic cannot be used after setting the case for trial. However, depending on the circumstances, it may be the better tactic as lenders often ignore such warnings and judges today tend to be more willing to dismiss for lack of prosecution. Moreover, if the lender files something to avoid the dismissal, then the association can set the case for trial as described in #1 above.

3. File a Motion for Sanctions. One final method to be deployed in the event the lender is not moving its foreclosure action forward it to file a Motion for Sanctions. Arguably, by leaving open a case the lender does not intend to prosecute, the lender and its attorney are acting in bad faith. If the Motion for Sanctions is successful, the association would be awarded monetary amounts from the lender and possibly the lender’s attorney as well and the lender would have to conclude the case or negotiate with the association.

Every foreclosure case presents a different set of circumstances and challenges but if you haven’t already discussed your various legal options with the attorney handling your community’s collection work, it is time to do so.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Tuesday, November 23, 2010

What do you have to be thankful for in your association?

Far too often we hear the horror stories associated with the community association lifestyle and tend to forget that there are some really great communities out there that didn’t get that way by happenstance. I have heard of communities undertaking various fundraisers to help neighbors in need as well as those that have fostered such a sense of community that grown children tend to return and start their own families there as well.

No community is perfect but many come very close to creating the sense of well-being that we all seek when we first head out on our search for a home. As for my own HOA, I am grateful for the following:
• That there are seven people who continue to donate their time each week to ensure that our assessments are collected, bills are paid, insurance renewed and common areas maintained, repaired and replaced as needed. I have served on the board before so I understand the time commitment related to these functions.

• That there are a number of widowed owners who remain in the community knowing that they feel included and their neighbors are happy to help out as needed.

• That we have directors who understand the concept of fiscal responsibility so that our reserves are fully funded and we are able to meet future needs. When Wilma hit, our beautiful oak canopy on our main street was decimated and our homeowners along that street were trapped until the roads were clear. The costs to clear away our debris and make repairs throughout the neighborhood exceeded $25,000 but our reserves made this a possibility without a special assessment.

• That the default greeting for most folks living in my community is a smile and a wave.

• That we use an email alert system that allows us to easily know what is going on in the community including the occasional alligator sighting!

• That we find reasons throughout the year to hold various holiday and special events to further foster a sense of community including owners opening up their homes for luncheons and other social gatherings.

• That we have vendors who diligently perform their services to make our community a nicer place to live.

As we all celebrate Thanksgiving this Thursday by giving thanks for a variety of things and people in our lives, have you ever given thought about the positive things in your community association? If there is not a lot to be thankful for in your community currently, have you given any thought as to what you and your neighbors can do to change that?

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Thursday, November 18, 2010

Common myths surrounding community associations!

I am fortunate to be able to go out and speak to various organizations about community association issues. Inevitably at these meetings, an audience member will make a statement or ask a question that adds to my list of common association myths that persist out there. Here are some that I have heard over the last few years and none of them are correct.

• The association president can only vote to break ties (This is true for the Vice President of the United States who also serves as President of the Senate and only votes to break ties; in a community association setting the President of the association has the same voting rights as every other board member).

• An insurance company will cancel you for filing a property damage claim. (It is illegal under Florida law for insurance companies to drop policyholders for filing claims. Specifically, Section 627.4133(3) provides: “Claims on property insurance policies that are a result of an act of God may not be used as a cause for cancellation or nonrenewal.”

• An association cannot foreclose on homesteaded property (This statement was actually made by a Florida licensed real estate broker at an open meeting. In fact, mandatory community associations have the same rights as banks have to foreclose on real property in Florida regardless of its homestead status).

• The board is required to adhere to Roberts Rules of Order. (While RRO is a well-established guidebook for parliamentary procedure, an association is not required under the common interest ownership statutes to use it for meetings. An association’s individual governing documents might require its use so please check your documents).

• If an attorney is present, the board can keep owners out of its meeting. (Some associations think having its attorney present means the entire meeting can be closed to the membership. In fact, the attorney must be present to discuss pending or proposed litigation and even then, the meeting must be properly noticed to the members with a line item revealing that it will be closed for the purpose of discussing proposed or pending litigation).

• A director may abstain from a vote if he or she doesn’t want to go on the record. (A director must have a true conflict of interest-a direct or indirect monetary benefit- to abstain from a vote, not just a reluctance to go on the record on a particular issue).

• The association attorney works for the board. (An association attorney’s client is the not-for-profit corporate entity or association which is naturally made up of the membership; the client is not the board or particular directors. As with any corporate representation, however, the attorney must take direction from a corporate head, in this case the board and in many instances, the authorized contacts for that board).

• Once a quorum is established it’s good for the duration of the meeting. (If the board notices that a quorum during board meetings or membership meetings no longer exists because of the departure of people, the meeting must be suspended or adjourned once that lack of a quorum becomes apparent).

• If you take a sprinkler opt-out vote and it does not pass on the first try you must install sprinklers. (There is no limit in the statute to the number of times an older high-rise community can vote to waive the sprinkler retrofitting requirement in their building. The vote must be taken by 2016 but it can be taken as many times as needed to attain successful opt out before then; it is not a one-time vote. The vote to opt back in to sprinkler requirements can only take place once every three years but the vote to opt out can take place as many times as necessary to achieve the majority approval prior to 2016.

As with most myths, they often spread quickly, do a lot of harm and take a lot of time to overcome. If you know of any other association myths out there, please let me know and to the extent you can now debunk the ones listed above, please do!

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Tuesday, November 16, 2010

Handful of vetoed bills subject to possible override!

There will be a Special Session following the Organizational Session currently scheduled for November 16th. Over 1/3 of the Florida Legislature is now comprised of newly-elected members so House Speaker-Designate, Dean Cannon, along with incoming Senate President Mike Haridopolos, have called for a meeting to discuss a handful of potential veto overrides, as well as discuss the principles the Florida Legislature will consider in drafting a proposal for future Medicaid reform.

The bills that were previously vetoed by Governor Crist which may be the subject of potential overrides are:
• HB 545-Residential Property Sales
• HB 981-Agriculture
• HB 1516-State-Owned Lands
• HB 1565-Rulemaking
• HB 5603-Department of Financial Services
• HB 569-Landfill
• HB 1385-Petroleum Site Clean Up
• SB 1842-Transportation Projects
• HB 5611-Review of Department of Management Services Under the Florida Government Accountability Act
In addition to discussing these bills, the Legislature will also e asked to evaluate the State’s Septic Tank program scheduled to be implemented on January 1, 2011 as well as a review of Florida’s HVAC and Solar Rebates program.

To view the actual Memorandum from Speaker-Designate Cannon to Members of the Florida House, please click the link below:

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Monday, November 8, 2010

Imagine what Medieval Covenants and Restrictions would look like!

How long do you think private community associations of one sort or another have existed?

The legal model actually dates back to feudal times in Western Europe. In medieval England, peasants were given land to cultivate in exchange for the ability to keep a small portion of the fruits of their labor for their own purposes. In addition to enriching the lord, these same peasants were also required to make promises to the lord to not use the soil in ways that were harmful to the collective use, thus creating a system of interdependent values that lives on in common interest ownership communities today.

The present-day American homeowners’ association and private residential community date back to the 1830s, when the concept was imported from London. Communities back then were often established with the less than honorable purposes of prohibiting certain religious activities, dictating racial makeup, and monitoring the way in which the land could be used. Thankfully, none of those purposes are sanctioned by law these days and the vast majority of communities have long since moved past the feudal system!

It is interesting, however, to learn more about how and why communities with private restrictions first emerged to best plan their future improvement and evolution.
Now, for your reading pleasure only, please try to imagine the following covenants and restrictions in that Medieval or Roman era community association:

• Horses and other livestock are not allowed to be kept in your hovel overnight.

• Legionnaire Banners may only be flown on Cesar’s birthday, Gladiator match days, or the week the Army returns from a campaign.

• All blood soaked bandages must be disposed of properly in the street sewer, not the common areas.

• All visiting Barbarians must be registered and carry their Barbarian ID’s at all times.

• No children under the age of 8 allowed in the cesspool without an adult.

• Begging not permitted in common areas between the hours of sunrise to sundown.

• All chariots must be parked on property you or your master owns.

• No carrier pigeon stands allowed on common areas.

• All meetings must be held at a Round Table.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Monday, November 1, 2010

Note to the Banking Industry on refiling troubled foreclosure actions

Sun Sentinel Reporter, Paul Owers, recently wrote that South Florida leads the nation with more than 58,000 foreclosure filings in the third quarter. Mr. Owers writes that “the number of filings in Palm Beach, Broward and Miami-Dade counties rose 25 percent from the second quarter and 9 percent from the third quarter of last year.” On the same day, Sun Sentinel Reporter, Diane Lade, focused on the fact that banks must prove they own and hold the mortgage on a property if they expect a judge to grant them a foreclosure judgment. Up until now, many banks have been getting lucky in terms of their foreclosures despite missing, badly prepared and, in the worst cases, inaccurate or fraudulent documentation.

Attorneys General in all 50 states are now investigating the full extent of the “robosigning” scandal and the number of foreclosures that were consummated on the basis of faulty documents or procedures. We are also told that many banks are planning on refiling their foreclosure documents in the hopes of getting it right this time. In the interim, many of the properties that have been the subject of mortgage foreclosures are now being highly scrutinized by the real estate, legal and title insurance industries. Resales of these properties are becoming more difficult as problems are revealed.

Rather than spending thousands of dollars in reopening and refiling these actions, has our banking industry given any serious thought to taking the same amount such action would cost and simply putting that money in the pockets of the homeowners they displaced in exchange for a Quitclaim Deed to the property and a Stipulation to the Entry of a Foreclosure Judgment? Sure there is the chance that the bank won’t be able to find the owner or he or she will say “No”. In those instances, the bank can proceed with refiling a foreclosure action that would have otherwise been successful but for the shortcuts taken. Hiowever, for the folks who can be found, who had no defense to the foreclosure and who have given up all hope of ever getting those properties back, this money in their pockets could certainly help with relocation costs and would serve a more humane purpose than simply refiling.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

Thursday, October 28, 2010

Is your confidential information exposed for all to see in the Public Records?

Did you know that there is an awful lot of private information that has been recorded in the county public records that might include your credit card numbers, social security numbers, drivers license numbers etc.

A friend recently asked me to review her mortgage and I was shocked to find out that the No Lien Affidavit, Continuous Marriage Affidavit and other mortgage documents that she and her husband signed included their Drivers License numbers in the Notary certification. Some notaries simply check off that such identification was produced and others actually take down the license numbers which are then recorded in the Public Records and available for anyone to see! This got me curious and I went back to check personal real estate transactions for my family. My brother and his wife sold a townhouse years ago and the deed actually contains the purchaser’s social security number!

The rules pertaining to state and federal court filings have been tightened up over the years to protect sensitive information like this but many documents involved in real estate transactions (sales, mortgages, lines of credit, etc.) still contain sensitive information which is subsequently recorded in the Public Records for all to see. Broward, Miami-Dade and Palm Beach Counties have online mechanisms to have such information blocked. I’m sure other counties have similar mechanisms.

See for more info.

For the Broward form, please click here:

Request for Confidentiality in Miami-Dade:

Palm Beach County info: and form:

To block any private record information, you will first need to do a name search and review the various documents because you need the Official Records Book and Page Number of the document you want protected. Identity theft is a terrible crime that often takes years to recover from; please take a moment to ensure that your sensitive information is not open for all to see in the Public Records. In addition, the next time you sign a document look to see what personal information of yours is listed therein if that document will subsequently be recorded in the Public Records.

Tuesday, October 26, 2010

Reserve Accounts and Your Association!

Many of you are in the midst of creating association budgets for 2011. As you know, in a condominium and cooperative association, in addition to annual operating expenses, the budget must also include reserve accounts for capital expenditures and deferred maintenance.

The Condominium and Cooperative Acts require reserves for roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and for any other item for which the deferred maintenance expense or replacement cost exceeds $10,000. The statutes state that the amount to be reserved shall be computed via a formula which is based upon the estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. A condominium or cooperative 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.

While a condominium or cooperative board MUST adopt a proposed budget with statutorily required reserves, the statutes also allow association members, by a majority vote at a duly called meeting of the association, to provide no reserves or less reserves than required by statute. If a community is still under developer control, however, the developer is only permitted to vote to waive the reserves or reduce the funding of reserves for the first two (2) fiscal years of the association’s operation, beginning with the fiscal year in which the initial declaration is recorded, after which time reserves may be waived or reduced only upon the vote of a majority of all nondeveloper voting interests voting in person or by limited proxy at a duly called meeting of the association. It is important to remember that if a meeting of the unit owners has been called to determine whether to waive or reduce the funding of reserves, and the vote fails or a quorum is not attained, the reserves as included in the proposed budget MUST go into effect. After the turnover, a developer may vote its voting interest to waive or reduce the funding of reserves.

In a Homeowners’ Association, if the operating budget does not provide for reserve accounts and the association is responsible for the repair and maintenance of capital improvements in the community that may result in a special assessment if reserves are not provided, the association’s financial report for the preceding fiscal year must contain the following statement in conspicuous type: THE BUDGET OF THE ASSOCIATION DOES NOT PROVIDE FOR RESERVE ACCOUNTS FOR CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE THAT MAY RESULT IN SPECIAL ASSESSMENTS. OWNERS MAY ELECT TO PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO SECTION 720.303(6), FLORIDA STATUTES, UPON OBTAINING THE APPROVAL OF A MAJORITY OF THE TOTAL VOTING INTERESTS OF THE ASSOCIATION BY VOTE OF THE MEMBERS AT A MEETING OR BY WRITTEN CONSENT.

An HOA is deemed to have provided for reserve accounts if reserve accounts have been initially established by the developer or if a majority of the total voting interests of the association votes to establish reserves. Upon approval by the membership, the board must include the required reserve accounts in the budget in the next fiscal year following the approval and each year thereafter. Once established, the reserve accounts must be funded or maintained or have their funding waived in the same manner provided for condominium and cooperative owners. As with condominiums and cooperatives, the amount to be set aside in reserves shall be computed by using a formula that 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 of cost or useful life of a reserve item.

When creating a proposed budget each year, how many of you rely upon a Reserve Study to determine just how much should be put aside for a rainy day? While the Florida Statutes don’t require the use of specific reserve studies, many association documents do. Whether or not your community traditionally waives or only partially funds reserves, the amounts reflected in your proposed budget must still be accurate.

Thursday, October 21, 2010

Community Association Education You Need to Know About!

I am very pleased to announce that my Firm’s 2011 Legal Update has been approved by the Department of Business & Professional Regulation. Our Legal Update course is approved for two (2) hours of Continuing Education for Managers. We have other courses available as well. The 2011 Legal Update course is particularly important given the number of sweeping changes passed to the common interest ownership statutes last Session.

If you are a manager and are in need of continuing education hours, please contact my assistant, Tisa Christiana, at or by phone at 954-315-0372 to schedule this free course.

On another note, I am equally pleased to announce that our free series entitled Board Member Boot Camp (TM) has been approved by the Division for certification purposes for board members. All those board members who prefer to attend an educational course to meet their certification requirements under the Condominium Act can do so by attending our Boot Camp! Our next Board Member Boot Camp is scheduled for Saturday, January 22nd from 10:00 to 2:00 at Century Village East in Deerfield Beach. The event is open to all who wish to attend. Refreshments will be served. Be prepared to be put through your paces. All interested recruits should register at Please be sure to watch the 3-minute video to see what you will be missing if you don’t sign up!

There are two other exciting community association educational events on the horizon.

On Wednesday, November 3rd, the Aventura Marketing council will be hosting its Taste of the Chinese New Year & Networking Receiption & Expo at Christine Lee’s at Gulfstream Park at 901 S. Federal Highway, Hallandale Beach on the 3rd Floor from 5:30 to 8:00 pm.The event is free with free self parking. It promises to be both entertaining and educational with more than 80 Exhibitors on display. Please click the link below for more information.

The Broward Coalition will be hosting its Annual Share & Learn Trade Show on Friday, November 12th from 8:00 am to 1:00 pm at Diamante’s Banquet Center at 6501 W. Commercial Blvd in Ft. Lauderdale. Admission is free to Association Officers and Board Members; those of you wishing to attend are only asked to bring a single canned item or other non-perishable food item with you to support The Cooperative Feeding Program.

Breakfast and Lunch will be served at the event with a drawing for cash gift cards and an impressive variety of association vendors. Morning and afternoon association educational programs will be featured; my partner Leigh Katzman will be speaking at the morning program. For more information about this wonderful event, please click the link below:

For those of you who are unfamiliar with the Broward Coalition, it has been supporting community associations and their unique needs and issues for the last 30 years in Broward County. I am honored to serve as their Pro Bono Legal Advisor and would urge each of you to take a moment to become more familiar with this fantastic organization. You can visit for more information. For more information about their upcoming Share & Learn Trade Show, please contact Mary Macfie at 954-336-3335 or via email at

I hope to see many of you turn up for these events and programs that are aimed at making the time you spend serving your communities more rewarding and a little easier!

Thursday, October 14, 2010

Debunking foreclosure myths for your association members

Most of us are reading the bleak headlines each day about foreclosure freezes, investor losses, lawsuits, bank write downs and the robosigning scandal. I read recently that hundreds of depositions of former Bank of America and JP Morgan Chase employees are now revealing that these financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and assembly line workers and gave them the title of “foreclosure expert” with no formal training. Many of these folks testified that they barely knew what a mortgage was, had trouble defining the terms “affidavit” and “complaint” and some even admitted under oath that they knew they were lying when they signed the banks’ foreclosure affidavits.

Signing things you don’t understand, however, is just the tip of the iceberg. The real issue is ownership of these loans and who has the right to foreclose. Attorney Generals in all 50 states have stated that they will launch a collective probe into the mortgage industry. If you thought the banks were taking a long time to foreclose on delinquent properties in your community up until now, just imagine the amount of judicial scrutiny that will take place over the next few years when that bank’s counsel walks into court seeking a foreclosure!

How many of your community members are reading these headlines and breathing a sigh of relief that their own foreclosure will surely be stalled or derailed entirely? How many of these folks think this also means that the association cannot foreclose on them as well?

I know that many of you are expeditiously pursuing delinquent accounts in your communities. How many of you, however, are advising the entire membership (not just the delinquent owners) about what you are doing and why? Have you sent out a letter to your entire membership advising them of the following:

• If they are fighting their bank foreclsoure, working on a mortgage modification or if their bank has put its foreclosure on hold, they still must pay the association assessments! It doesn’t make much sense to work out your bank issues only to lose your home to your association foreclosure!

• It is much easier for a community association to foreclose on a home than it is for a bank to foreclose on the same property. Mortgage foreclosures can be attacked if the promissory note is lost or missing, if there are problems with the Truth In Lending Form, RESPA violations and now faulty affidavits among other items. Association foreclosures cannot be defeated because the owner challenges the validity of the most recent election, claims the common areas haven’t been maintained or has any other complaint other than that the amount is not due and owing.

• Owners with financial difficulties should be advised that avoiding their obligation to the association will only add to those difficulties. What might have been a delinquency of less than $1,000 can quickly become an amount several times more than that if the matter is turned over to the association’s attorney for collection.

I recommend that every association send out a letter to its membership reminding them of the association’s collection policy, when amounts become delinquent and how long of a grace period is given before the file is sent over to the attorney for collection. This same letter should debunk some of the myths and confusion out there about why and how associations foreclose on homesteaded property and what should be done to avoid becoming another foreclosure statistic.

Will such a letter cure all that ails your community? Absolutely not, but if reading it convinces one or two of your owners to continue paying their assessments, it is invaluable. Please don’t hesitate to contact me if you would like us to prepare such a letter for your use.

Lastly, some other recent reading added to my thoughts about this blog. Do you know which four states had the highest foreclosure rates in August? You are living in one and Florida is joined by Arizona, California and Nevada. In fact, one in every 155 Florida houses received a foreclosure notice which is 2 1/2 times the national average. Contrast that with a recent move last week by the City of Shanghai, China to prevent families from purchasing more than one home in that city in an effort to cool down surging property prices and curb “irrational demand”. Housing prices in 70 major Chinese cities rose 9.3% in August from the previous year. Bejing implemented a similar “one home per family” rule last Spring. We can’t give away many of our properties while Chinese citizens can’t buy property in their country quickly enough! Go figure.

Tuesday, October 12, 2010

Board and management company sued for failing to enforce community restrictions

We often hear of community residents upset about “condo commandos” overzealously enforcing the community’s rules and regulations. What about those times when a board chooses not to make an issue over rule infractions? Sometimes you’re darned if you do and darned if you don’t.

An 83-year-old Port St. Lucie man died more than two months after being attacked by a pit bull in February 2009 and his widow and adult son are suing the dog’s owners for wrongful death.

The civil suit filed last week in the 19th Circuit Court of St. Lucie County also names Cascade at St. Lucie West Residents’ Association and the association’s management company as defendants for allegedly failing to enforce dog weight limits and leash laws in the subdivision’s covenants. It also names insurance companies representing the Cutlers, the homeowners association and the management company as defendants for allegedly failing to pay Mr. Klatch’s medical bills.

According to the complaint, Robert J. Klatch was riding in a golf cart Feb. 11, 2009, in the Cascades at St. Lucie West neighborhood when his shih tzu, Shayna, was attacked by a pit bull owned by Harvey and Jane Cutler. The lawsuit states the Cutlers’ dog, named Buddy, was “unleashed and running loose.”

Klatch was thrown from the cart and bitten as he tried unsuccessfully to save his dog, according to the lawsuit. He died April 21, 2009, as a result of the injuries, according to the family’s attorney.

In Cascades at St. Lucie West, the board and manager allegedly failed to take owners to task for having overweight dogs off leash in the community. If the association and/or manager were in the process of addressing Mr. Cutler’s violation and have letters to demonstrate their intention to enforce the restriction, it could make a difference in the outcome of this litigation.

Monday, October 11, 2010

Just how valuable is the “Mortgage Terminator” legal tactic for your community?

Many of you may have questions about what has now become one of the most talked about Sun-Sentinel articles regarding condominium law in some time. The article by reporter Daniel Vasquez discussed a new legal tactic with the catchy title “Mortgage Terminator” and concerned a Pompano Beach condominium community that was able to obtain title to a property free and clear of the existing mortgage.

The Palm Aire Gardens Condominium Association was awarded title free and clear of a $184,400 mortgage held by Wells Fargo. The current value of the 2-bedroom unit is $32,500.

While the result sounds wonderful and like something every association should be pursuing, there are a few key facts that were not revealed in the article. First, how much in attorneys’ fees was spent to obtain this unusual result and how many times was this tactic tried unsuccessfully for other communities where the association was left with nothing but a larger legal bill?

In the case referenced in the article, the bank decided to walk away from a unit that was worth about $150,000 less than what was owed on the mortgage after a series of events and legal filings that fell into place just right. In other words, the Association risked attorney’s fees to try and obtain an unusual result, and got lucky in the reported case, which actually ended in settlement. The likelihood that this result will be duplicated on a widespread basis remains to be seen.

In the few cases seen so far where a mortgage has been “wiped out”, that result was obtained by the bank voluntarily walking away and NOT because a judge ordered this relief. In the cases we’ve seen thus far, banks have agreed to walk away only in instances where the property involved had an extremely low value and had been abandoned for some time. In one case, it appears there was so much damage to the property and the value of the unit was so low that the bank did not want to become involved in repair and reconstruction. In another, it appears the bank ignored court orders entered against it, and made a business decision to simply “walk away” from another low valued unit rather than fight. We have yet to see a case where this result was actually obtained by court order in a contested case. Generally speaking, to obtain a similar result to the Palm Aire Gardens case seems to require the home or unit to be worth $50,000 or less, the property to have been abandoned for a significant period of time or significantly damaged, the lender to ignore its mortgage foreclosure, and then decide to voluntarily walk away.

For situations that do not meet this criteria (and even for those that do), the same result cannot be guaranteed and there is the not-so-small matter of attorney’s fees to employ this tactic in court to convince a judge to actually terminate a mortgage when heretofore it has only happened because the banks have agreed to such termination voluntarily. If you swing 100 times, you’re bound to hit the ball at least once or twice! If you file an action enough times, eventually you will get a default, or the stars will align, or the bank will throw in the towel and you will have a big story on your hands. For those communities where the right set of circumstances are in place on a particular property, this strategy might work. However, whether or not this strategy will work across the board remains highly suspect for all the reasons set forth herein.

Not surprisingly, things always seem a little rosier in theory than in reality. Those of us who work for associations must keep trying to help our communities weather the current economic storm by employing strategies that make sense after taking into account each association’s particular set of circumstances and doing a cost/benefit analysis.

Thursday, October 7, 2010

Seeing Signs?

Enforcement of association sign restrictions always seems to raise complaints about freedom of speech issues but especially during election time. Most Associations have some sort of sign restrictions usually designed to reduce visual clutter in the community. Not surprisingly and irrespective of those restrictions, many folks still want to put up their favorite political sign this time of year.

What’s an Association to do?

Go back to the basics – review your documents, and enforce them accordingly. Courts have ruled that an association can enforce sign restrictions, even in regard to political signs. Remember, restrictions that are part of the Declaration are given more deference by the courts than rules passed by the Board as Association Rules and Regulations. Some guidelines for sign enforcement (and good rules of thumb for rule enforcement in general):

• Enforce restrictions equally and fairly against all owners

• Follow the language of your documents – don’t creatively “interpret”

• Amend your rule if it lacks specificity. For example, if you don’t want signs anywhere in the community be sure your restrictive language includes signs placed on or inside vehicles or other personal property

• Follow your documents in regard to enforcement

• Document the Association’s actions

• Use a common sense approach

Some communities decide to carve out an exception for political signs during an election year since they know they are temporary in nature.

What does your community plan to do in this election year?

Monday, October 4, 2010

New IRS Guidelines Provide Relief for Homeowners with “Chinese Drywall”

The Internal Revenue Service recently issued guidelines providing relief to homeowners who have suffered property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009.

Revenue Procedure 2010-36 enables affected taxpayers to treat damages from corrosive drywall as a casualty loss and provides a “safe harbor” formula for determining the amount of the loss.

In many instances, owners with certain imported drywall have reported blackening or corrosion of copper electrical wiring and copper components of household appliances as well as the presence of sulfur gas odors. In November, 2009, the Consumer Product Safety Commission (CPSC) reported that an indoor air study of a sample of 51 homes found a strong association between the imported drywall and levels of hydrogen sulfide and corrosion of metals in those homes.

Revenue Procedure 2010-36 provides the following relief to these impacted homeowners:

• Individuals who pay to repair damage to their personal residences or household appliances resulting from corrosive drywall may treat the amount paid as a casualty loss in the year of payment.

• Taxpayers who have already filed their income tax return for the year of such payment generally have three years to file an amended return and claim the deduction. The amount of a loss that may be claimed depends on whether the taxpayer has a pending claim for reimbursement (or intends to pursue reimbursement) of the loss through property insurance, litigation or otherwise.

• In cases where a taxpayer does not have a pending claim for reimbursement, the taxpayer may claim as a loss all unreimbursed amounts paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances resulting from corrosive drywall.

• If a taxpayer does have a pending claim (or intends to pursue reimbursement) a taxpayer may claim a loss for 75% of the unreimbursed amount paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances that resulted from corrosive drywall.

A taxpayer who has been fully reimbursed before filing a return for the year the loss was sustained may not claim a loss. A taxpayer who has a pending claim for reimbursement (or intends to pursue reimbursement) may have income or an additional deduction in subsequent taxable years depending on the actual amount of reimbursement received.

Further details on Revenue Procedure 2010-36 can be found at

Thursday, September 30, 2010

Could the Small Claims Process work for you?

Do you really want your day in court?

Ask someone who has been involved in a lawsuit, and the answer might surprise you. Generally speaking, the civil litigation system is not a cost-effective way to resolve small monetary disputes. Even for simple conflicts, the process can be drawn out and expensive, leaving those without significant resources at a disadvantage. Many start out litigation expecting that justice will be served but end up discouraged and having to withdraw their claim or settle it for an amount that would otherwise be unacceptable, simply due to the high cost (and risk) of proceeding to a trial. The saying that you “start out litigation as a pig, but end up a sausage” aptly describes the bitter experience some have had with the system.

Did you know that small monetary disputes can be litigated without attorneys-or attorney’s fees-in the Small Claims Court? Surprising information coming from an attorney to be sure but it’s true. Complex cases or cases involving larger amounts in controversy cannot be handled in this manner but for small matters you might consider this path.

One of the chief misconceptions contributing to the belief that litigation can effectively resolve small disputes arises out of the right to recoup legal fees from your opponent if you win the case. In Florida, the prevailing party of a litigation is entitled to recover his or her legal fees and costs from the opposing party, so long as the litigation was over a contract containing an attorney’s fee provision, or over a right granted by a statute that authorizes such a recovery. But, in reality, the amount of attorneys’ fees that are ultimately awarded to the winner of a lawsuit is usually far less than what actually had to be spent to win that suit. Also, both the judgment and the attorneys fees awarded to that prevailing party still have to be collected – and there is no guarantee that the defeated party can, or will, voluntarily reimburse the victor. Even more money may therefore have to be spent trying to collect these judgments (and you may be throwing good money after bad – it is likely not a coincidence that high profile defendants have moved to a debtor-friendly state like Florida in the face of civil judgments being entered against them). Because of these practical realities, a conscientious attorney will counsel clients to accept otherwise unacceptable settlement offers rather than file lawsuits over small business disputes.

Along with entering displeasing pre-litigation settlements or avoiding lawsuits altogether, another alternative to resolving small monetary disputes is the small claims court. My firm often counsels our community association clients to file small claims court actions for uncomplicated matters such as collection of fines, reimbursement of repairs to damages to the common elements, or reimbursement of expenditures for necessary repairs made to a unit by the Association. The small claims court is set up to avoid the drain on time and resources that often occur in the State Circuit Court. Small claims proceedings can be used by anyone – individuals or corporations – where the amount in dispute is less than $5,000.00. Small claims proceedings are intentionally designed to permit a quick, simple and inexpensive way to resolve small monetary disputes. Unlike in the State Circuit Courts, corporations (including community associations) are allowed to appear in the small claims court without a lawyer. Immediately, this avoids the lion’s share of the cost of a lawsuit – legal fees. As the opposition most likely also will not retain counsel, the risk of having to reimburse legal fees is also avoided.

Self-representation may seem like a daunting task, but there is really no need to fear doing so in the small claims court. While small claims proceedings might not be quite as simple as they appear on television shows such as “Judge Judy,” they are nowhere near as procedurally complicated as ordinary civil lawsuits. In small claims court, there is generally no discovery (such as interrogatories, document requests and depositions) allowed, and the evidentiary rules at the “trial” are significantly relaxed. The process is genuinely designed to permit persons without legal training to proceed without attorneys, and the judges are acutely aware of this and give significant latitude to such persons.

Along with the savings in cost, small claims proceedings also save you time. Small claims do not get bogged down in a judge’s cluttered trial docket as can often occur in the State Circuit Courts. The small claims system is set up to resolve matters within several months, not years. Initially, the case is assigned a pre-trial hearing date, to take place within fifty (50) days of the initial filing. This pre-trial hearing is simply a settlement conference similar to a mediation – where many, if not most, cases are resolved without the need for further proceedings. If the matter does not settle at the pre-trial hearing, a “trial” date is assigned, which by statute is to take place within sixty (60) days.

Although the jurisdiction of the Small Claims Court is limited to matters under $5,000.00, a party can take advantage of this system regardless of the amount at issue so long as they are willing to accept a maximum award of $5,000.00 Such a tactic may be economically advantageous when taking into account the savings on legal fees and the cost of the additional time that would otherwise be incurred if litigating in the State Circuit Court. Obviously, there are some limitations to the small claims system, and we always recommend consultation with an attorney before filing a small claims action. However, this manner of litigating small monetary disputes can be highly effective and should be considered by persons who believe they are owed money but are reluctant to pay an attorney to seek recovery with no guarantee of success.

Wednesday, September 29, 2010

What is involved in an owner’s contest of lien?

When an owner is delinquent in assessments, most Associations enforce their declarations and proceed with collection efforts. A critical step in this process is to file a lien against the property of the delinquent owner. This lien will advertise to the public that the Association has a claim on the subject property and provides the Association with an avenue to foreclose on the unit. After the Association sends its initial demand letter and provides the owner the required 30 day (COA) or 45 day (HOA) notice of intent to place a lien, it should immediately proceed with the filing of the claim of lien. Along with the filing of the lien, another demand lender must be mailed to the delinquent owner giving 30 day (COA) or 45 day (HOA) notice of intent to foreclose on the claim of lien. Once the required time frame elapses, the Association will typically proceed to file a foreclosure action.

Once the lien has been recorded in the public records, Section 718.116(5)(c) (COA) and 720.3085(1)(b) (HOA), Florida Statutes, provides a path for the owner to dispute the Association’s claim of lien by filing a Notice of Contest of Lien. Similar to the Association’s lien, the filing of this Notice must be recorded in the public records of the county where the property is located. This Notice will state the book and page number where the Association’s claim of lien is recorded and requires that the association’s foreclosure action must be filed within 90 days. Once the Notice of Contest is filed, the Clerk of Court will send a copy to the address of the Association by certified mail, return receipt requested and, upon mailing, the 90days to file a foreclosure action begins to run.

The consequence for the Association of the filing of this Notice is that the amount of time to file a foreclosure action on the claim of lien is reduced to 90 days. Typically, a claim of lien filed by a Condominium Association is valid and enforceable for a one year period, while a claim of lien for a Homeowners Association is valid for five years. For an owner who believes the Association wrongly filed the claim of lien, this statutory provision expedites the process and provides an opportunity for the owner to appear before a Judge with the goal of removing the encumbrance on the property. The Association may also view a Notice of Contest of lien as a benefit as it can enforce the lien immediately without having to wait for the expiration of the 30 day (COA) or 45 day (HOA) notice of intent to foreclose on the claim of lien. Moreover, the Association can view a Notice of Contest of Lien as an opportunity to ensure that the ledger, lien, and all other preconditions to initiating litigation are in order. It is also important to recognize that the 90 day period will be extended if the Association is prevented from filing a foreclosure, which can occur if the owner files for bankruptcy protection.

The filing of a Notice of Contest of Lien is a rare occurrence because most liens are not recorded until it is verified that the debt is owed so there is no ability to contest. Nevertheless, in the scenario where the Association does not file a foreclosure action within 90 days of the filing of the Notice of Contest of Lien, the lien will be deemed void. Once the lien is considered void, if a delinquency remains, the Association will have to start the collection process anew and send out the initial demand letter giving the owner 30 day (COA) or 45 day (HOA) day notice of intent to place a lien on the property.

I have included below the actual statutory notice to contest a claim of lien. Be aware that if you do contest a lien and the lien is valid, you will only speed up the foreclosure against your property!

TO: (Name and address of association)

You are notified that the undersigned contests the claim of lien filed by you on , (year) , and recorded in Official Records Book at page , of the public records of County, Florida, and that the time within which you may file suit to enforce your lien is limited to 90 days following the date of service of this notice. Executed this day of , (year) .

Signed: (Owner or Attorney)

Monday, September 20, 2010

Back to the starting gate: think twice before canceling that foreclosure sale!

An association client recently called two days before the foreclosure sale at which it was to take title to a property that had been delinquent for almost two years to request that the sale be canceled! Huh?

The association had not actually entered the property (this is an HOA not a condominium) but had been told that the owner had removed all the appliances and had left the property in terrible condition before leaving the State. The association was understandably reluctant about taking title to a property in woeful condition. To make matters worse, the lender must have shared those trepidations because it had dismissed its foreclosure action without prejudice (meaning they can refile again in the future) just a few weeks earlier.

What does all this mean for this association?

• The property has been abandoned and is in terrible condition.

• The bank isn’t likely to take title to the property for months or years.

• The association was at the finish line but, if its sale is canceled, they will be back at the starting gate.

This association does have a few options. If it takes title to the property, it does so subject to the outstanding mortgage. The association is not obligated to pay that mortgage but eventually the bank will take title to the property back. Since this particular lender has only recently dismissed its foreclosure action, that is not likely to happen anytime soon. In the interim, if the association takes title to the property it can either do a short sale or start renting out the property. The other option is for the association to go to court to seek a “reverse foreclosure” to force the bank to take title back to the property. The last option is risky: it will cost money to go back to court and there is no assurance of a successful outcome.

The manager advised that rentals in the community for a similar size property usually fall in the $1,500 per month range. If that is the case, the association might want to invest the equivalent of 2 months’ rent to replace the appliances in the home with scratch and dent models or other bargain appliances. Some communities with similar situations advise that certain renters are willing to purchase their own appliances if they can rent out the home for 50% or more below market value. In this case, even renting the property out for less than $800.00 a month would be better than letting it sit fallow for months or years to come.

Since the bank only just dismissed its action, chances are the association will be able to rent out the property for a year or longer before the bank gets around to refiling its action. Even after the bank takes title via foreclosure, any tenant in residence at that time is afforded another 3 months’ occupancy under a federal law known as the Protected Tenants at Foreclosure Act.

In this case, this association might not have really looked at the practicalities involved with moving back to the starting gate when the finish line is within reach.

Wednesday, September 15, 2010

Fannie Mayhem

A condominium association client recently wrote to advise of the frustration that a potential purchaser in their community is experiencing in trying to qualify for Fannie Mae (FNMA) financing for their unit purchase. Not only is this purchaser befuddled by the sheer complexity and number of Fannie Mae requirements but the owner/seller and the board have all spent countless hours trying to ensure that the purchase goes through, apparently to no avail at this point.

Two FNMA guidelines that proved to be hurdles to this transaction are:

1. Fannie Mae is requiring that “the annual budget must reflect at least 10% of the total income to be transferred to a reserve account.” This community’s 2010 income was $890,000 and they would be required by Fannie Mae to transfer $89,000into reserves. However, this community’s membership has waived full funding of their reserves since 1988 which is their statutory right. Over the years, they have placed $19,800 annually in reserves and now have approximately $250,000 in reserves, a whopping 28% of their budget. They have not, however, deposited 10% in any given year and that is the sticking point!

2. Fannie Mae is requiring fidelity bond coverage of $456,100. The community bonds the amount in its Operating Account which is $100,000, protects against fraud by annual independent audits and requires dual signatures on all disbursements. Requiring 4 1/2 times the coverage in this economy is not feasible for them right now without increasing assessments.

The purchaser, owner and board were all left to wonder whatever happened to the old-fashioned litmus tests traditionally used by lenders such as credit scores, income and the borrower’s other obligations? The people trying to buy and sell units in these communities are the ones feeling the harsh effects of Fannie Mayhem!

What can a CERT do for your community?

Have you ever heard the term “CERT” tossed around and not known what it really means or what these teams can do for community associations around our State?

Since we are now in the very middle of the most active part of our Hurricane Season, I have included below frequently asked questions and answers regarding a Community Emergency Response Team or CERT.

Q: What is CERT?
A: The Community Emergency Response Team (CERT) Program educates people about disaster preparedness for hazards that may impact their area and trains them in basic disaster response skills, such as fire safety, light search and rescue, team organization, and disaster medical operations. Using the training learned in the classroom and during exercises, CERT members can assist others in their neighborhood or workplace following an event when professional responders are not immediately available to help. CERT members also are encouraged to support emergency response agencies by taking a more active role in emergency preparedness projects in their community.

Q: How can CERT benefit your community?
A: People who go through CERT training have a better understanding of the potential threats to their home, workplace and community and can take the right steps to lessen the effects of these hazards on themselves, their homes or workplace. If a disaster happens that overwhelms local response capability, CERT members can apply the training learned in the classroom and during exercises to give critical support to their family, loved ones, neighbors or associates in their immediate area until professional help arrives. When help does arrive, CERTs provide useful information to responders and support their efforts, as directed, at the disaster site. CERT members can also assist with non-emergency projects that improve the safety of the community. CERTs have been used to distribute and/or install smoke alarms, replace smoke alarm batteries in the homes of the elderly, distribute disaster education material, provide services at special events, such as parades, sporting events, concerts and more.

Q: Is there a CERT near me?
A: There are 224 CERT programs in the State of Florida, one of the largest concentrations in the country.
Please click here to view those programs.

Q: How do we start a CERT program?
A: CERT requires a partnership between community members and local government, emergency management and response agencies. The program does take a commitment of time and resources from all parties. Interested community members should discuss with local government and emergency management officials ways to improve their community’s preparedness capability and how they can be involved. The outcome of these discussions can range from education programs to an active training program like CERT that prepares participants to be part of the community’s response capability following major disasters. It is also important to develop a plan that covers training, maintenance and activation standards as well as administrative requirements like databases and funding. This plan will act as a guide so that one can evaluate the program and make adjustments.

Q: How is the CERT funded?
A: Congress has provided funds through the Citizen Corps program to the States and Territories. Grants from these funds may be available to local communities to start CERT programs. Contact your State Citizen Corps point of contact to learn more about grant possibilities. Also, there are a variety of local approaches to funding. Some communities build costs into their local budget while others charge participants to attend training to cover costs for instructors and course materials. In a few communities, CERT organizations have formed 501 (C) 3 for non-profit status to allow them to do fundraising and seek corporate donations.

Q: What about liability?
A: The text of the Volunteer Protection Act of 1997 is available online. Also there is information about State Liability Laws located on the Citizen Corps website. During training, each sponsoring agency should brief its CERT members about their responsibilities as a CERT member and volunteer. Finally, there is a job aid on liability for you to review in our Start a CERT Program section. The CERT material was developed by the Los Angeles City Fire Department and adopted by the Federal Emergency Management Agency in 1993. The CERT manual contains basic and straightforward material that has been accepted by those using it as the standard for training. It is important to remember that the best sources of help in emergencies are professional responders. However, in situations when they are not immediately available, people will want to act and help. CERT training teaches skills that people can use to safely help while waiting for responders.

For more information, please visit the Florida Citizen Corps website at:

Monday, September 13, 2010

One positive for the Florida Housing Market: prohibition against developers’ resale fees!

Florida has at least one good thing going for it in the housing market – Section 689.28, Florida Statutes, which prohibits transfer fee covenants.

While transfer fees payable to a condominium association, cooperative association, homeowners association or mobile home association were specifically exempt from the statute, in general the statute prohibits developers from collecting a fee every time a property is sold. Other states do not have such statutory protections, and developers are attempting to take advantage in today’s tough market. Some developers are including transfer fees of $5,000.00 or $7,500.00 every time the property is sold for the next ninety-nine years! Thank goodness the Florida legislature prohibited such practices in Florida.

See the story in the New York Times, here.

The FHFA should take into account that its recent proposed regulation should similarly exempt association transfer fees. It is hoped that other states will follow Florida’s suit and similarly prohibit developer transfer fees that are quickly becoming a relied-upon source of revenue for some desperate developers in today’s real estate market.

Higher water bills in the future for Floridians

You can expect to see higher water bills in the near future as a result of new mandates required by a lawsuit settlement between the federal government and environmental activists.

The first set of Environmental Protection Agency (EPA) mandates is scheduled to take effect in October and it is estimated it will cost the average Florida household an additional $700 per year. Why are the costs increasing? The new mandates will require utilities across Florida to make expensive, widespread retrofitting to water treatment systems. According to a study performed by Carollo Engineers, the capital costs for these projects could total $50.7 billion and require an additional $1.3 billion per year in additional operating costs.

This means that Florida’s utilities will be passing the cost of complying with the new mandates on to Florida’s families and businesses and services you are already receiving will cost more. As it stands, Florida would be the only state singled out thus far by the federal government with these new mandates and Floridians will be the only ones burdened with these additional water costs. A recent poll conducted by Mason-Dixon Polling & Research of likely Florida voters shows that 61 percent of Floridians are against the water mandates if the mandates were to result in a $700 increase in their water bills.

Naturally, we all want to keep our state waters clean, and Florida has been an exemplary leader in aggressively protecting our streams, lakes, rivers, estuaries and other waterways. However, many government and scientific agencies have expressed concerns that these proposed federal mandates are not supported scientifically. In this tough economy, how many Floridians can afford to invest more money to meet mandates that have no guaranteed results?

One set of the proposed federal water nutrient criteria singling out our State has been delayed until 2012 but others have not and the effects will be felt sooner rather than later. Please ask your Senators and members of Congress to stop the federal government from imposing this added financial hardship on Floridians at a time we can least afford it.

Thursday, September 9, 2010

Now may be the right time to buy out that long-term recreation lease!

My sister bought a condominium unit a few years ago and quickly found out that more than 50% of her monthly maintenance was going to pay a husband and wife living in another state for the long-term lease they held on her community’s recreational facilities. After paying for insurance, there was almost nothing left over to fund essential services in the community. Associations in this situation have three options: try to attack the lease as being unconscionable, persuade the lessor to sell or persevere and know that the 99-year lease will not be paid off in their members’ lifetimes!

Most lessors will not be inclined to sell given that the lease payments make a nice annuity for them. While Section 718.401 lays out what is and is not acceptable in recreational leases, any challenge to such a lease will inevitably be met by strong lessor objections and a claim that the statute is unconstitutional. Nevertheless, associations that are currently struggling under the burden of paying enormous land lease fees might want to consider current economic conditions and the wholesale devaluation of real property to determine if now is the right time to exercise your right to purchase the land lease.

If the association and the lessor cannot agree on the sale price (and it is almost a certainty that these two parties will not agree) arbitration must be used to determine such sale price. While there are many factors that will go into the arbitrator’s determination of such price, current assessed value will be part of the equation. Here is the pertinent section of 718.401:

f)1. A lease of recreational or other commonly used facilities entered into by the association or unit owners prior to the time when the control of the association is turned over to unit owners other than the developer shall grant to the lessee an option to purchase the leased property, payable in cash, on any anniversary date of the beginning of the lease term after the 10th anniversary, at a price then determined by agreement. If there is no agreement as to the price, then the price shall be determined by arbitration conducted pursuant to chapter 44 or chapter 682. This paragraph shall be applied to contracts entered into on, before, or after January 1, 1977, regardless of the duration of the lease.

If your community has ever toyed with the idea of buying out your land lease, now might be the best time to do it.

Tuesday, September 7, 2010

Did cluttered condominium unit contribute to fatality?

Firefighters in Lauderhill recently responded to a fire in a two-story condominium building. The fire was contained within a single unit but the cause remained unknown. When firefighters arrived on the scene, they encountered substantial difficulty in extracting the female occupant from the unit due to the number of items inside the unit. Their access was limited to about an 18-inch passageway. The firefighters were able to rescue the woman from the unit but sadly she passed away later at the hospital as a result of her injuries.

How do and should condominium and cooperative associations deal with the issue of owners who maintain unsafe conditions within their units?

Sometimes, it is an owner storing combustible material in their units, other times it is an owner who has been hoarding material for years to the point that there is no longer a safe place to enter or exit the unit. Some individuals living alone may begin to have problems caring for themselves and allow food and other materials to decay and attract rodents and other pests. These same folks may have problems with units that no longer have kitchen and bathroom facilities that meet their changing needs.

The starting point should be communication with the resident to determine what the association can do to assist him or her. If that communication is not welcomed, the association may wish to reach out to the resident’s family members if they have their contact information. Often, the board has no such information or the family members do not wish to get involved. If the board suspects that an owner is becoming a danger to himself or to the community, then the State’s Elder Services can be contacted for assistance but a speedy resolution is hardly guaranteed.

The issue of owners presenting a possible danger to the community is one of the hardest to resolve. With regard to this fire, owners in the other 13 units were eventually allowed to return to their units after a harrowing morning; other communities have not been so lucky.

Friday, September 3, 2010

How clear are your ballots on amendment issues?

Earlier this week, the Florida Supreme Court affirmed three (3) trial court decisions that struck proposed constitutional amendments from the upcoming ballot. The three (3) proposed constitutional amendments concerned health care, election districts, and Homestead exemptions. The Court upheld the trial courts’ rulings that the proposed constitutional amendments: 1) did not give fair notice and purpose of the effect of the amendment; and/or 2) the ballot summary was false and/or misleading; and/or 3) the amendment title was faulty and /or misleading.

How does this apply to your association?

When your association is contemplating or preparing amendments to your governing documents, make sure the information you convey to the owners is clear, concise and an accurate representation of what the proposed amendment will actually accomplish. Although the Statutes contain notice requirements, insure that you not only comply with these Statutory requirements, but that you also give the owners information as to the purpose of the amendment and the effect it will have. Your owners must be able to clearly understand what section or sections of your governing documents are being amended and which language is being added or deleted. In addition to having your association attorney prepare the actual amendment, have them prepare a cover letter in non-legal terms that simply and accurately portrays the reasons for the amendment as well as the effect on the owner and the association if the amendment is passed.

Is this something your association is doing? It should be!

Wednesday, September 1, 2010

Proposed Federal Regulation may further restrict access to mortgages for those living in associations

Many of you may have already heard or read about a proposed regulation from the Federal Housing Finance Agency (FHFA) issued on August 13, 2010, which would prohibit Fannie Mae, Freddie Mac and all federal home loan banks from purchasing mortgages for properties in communities with “deed-based transfer fees”.

The definition of these private deed-based transfer fees appears broad enough to include the types of screening and transfer fees that many communities in Florida charge when property in those communities is conveyed. If this proposed rule is adopted as it is currently drafted, that could mean that residents living in associations with such fees may be locked out of the mortgage markets.

There is a very real possibility that the rule will be modified after the FHFA is informed about this regulation’s potentially disastrous effect on thousands of Florida communities. Towards this end, the Community Associations Institute (CAI) is conducting a survey relating to the use of these fees by community associations. After the data is collected (no later than September 16, 2010), CAI will prepare a response to FHFA regarding its proposed regulation.

Whether you agree that associations need to charge a fee to properly screen new purchasers or you hate the idea, if this new regulation is adopted it will impact you either way as it can restrict access to financing for those living in associations with these fees.

I am sure there will be the usual useful comments to dismantle the association, not buy in one in the first place or amend the documents to remove any transfer fees, but the easiest path to take for those currently living in an association with these fees is to encourage the FHFA to modify its proposed regulation so the millions of Floridians living in community associations can have equal access to mortgages for their properties.

There will also be an opportunity for individual communities to file comments on the proposed regulation and naturally, you can and should reach out to your representatives in Congress on this issue.

If you are interested in taking the CAI Survey on these fees, please click here. If you have any questions, please send them to G& with the subject line “FHFA Transfer Fee Regulation.”

Monday, August 30, 2010

Florida’s Third District Court of Appeal issues ruling on truck parking restrictions

In a decision that could have a positive impact on an association’s ability to enforce its parking restrictions, last week Florida’s Third District Court of Appeal finally issued its ruling in the case of Kuvin v. City of Coral Gables. Although the case involved a municipality’s right to enforce parking restrictions, much of the reasoning in the decision could be applicable to community associations as well.
Because community associations are not political subdivisions, an association would not be held to the stricter analysis the court applied to the City of Coral Gables. In the opinion, the court upheld the City of Coral Gables’ restrictive ordinance concerning trucks and stated that:

“The City may constitutionally pass ordinances to enhance or maintain the aesthetic appeal of the community and to protect the City’s residential neighborhoods against the lingering presence of commercial-looking vehicles.”

While an association’s ability to regulate the community on aesthetic grounds is generally acceptable if provided for in the association’s governing documents, and subject to other statutory provisions (such as Section 720.3035, Florida Statutes, in regard to homeowner associations), this ruling appears to extend the ability to regulate due to aesthetics to parking as well. The exact wording of your association’s documents in regard to parking would have to be reviewed to determine if the Kuvin case would be beneficial. Furthermore, whether such parking restrictions appear in the association’s declaration or by-laws, as opposed to a rule passed by the association board, may also be a factor in determining the enforceability.

No matter what your feelings are about the appeal of trucks, this case will certainly be used by associations looking to uphold parking restrictions based on aesthetic considerations in the future.

Thursday, August 26, 2010

Be careful before you post that “anonymous” comment!

Depending on the topic, some internet blogs and websites are almost certain to stir up controversy and elicit strong opinions. A sewing blog might not rile people up but a blog about life in Condo and HOA land absolutely will bring out both sides on any particular issue.

Of course, that is the whole point, isn’t it? Allowing healthy public debate over issues of importance? Absolutely, but it can be all too tempting for some people to cross a line in such debate. Expressing an opinion is fine even if that opinion is that a certain hotel or restaurant has lousy service or food. Disparaging a business operator personally or accusing a public official of criminal conduct are danger zones.

Often, the cloak of anonymity gives a false sense of security. Many people have no idea of the potential liability they face when they publish something online. Last month, the San Francisco-based 9th U.S. Circuit Court of Appeals upheld a District of Nevada Order requiring the disclosure of the identity of three people accused of conducting an “internet smear campaign” via anonymous postings against Amway Global. In Canada, courts are also ordering ISP’s to identify individuals who have posted defamatory material online.

It is important to remember that there is never any real expectation of privacy on the Internet; even postings made at public locations such as libraries and internet cafes can be tracked if necessary. Most bloggers and people responding to blogs have no understanding of the distinctions between expressions of opinion and libel. Don’t assume that the cloak of anonymity can’t be stripped by court order. Even if the owners of a website don’t know a poster’s actual identity, ISP addresses, as well as email addresses, are frequently stored and that information is subject to discovery under the proper circumstances. The law governing the prerequisites for compelling the disclosure of a poster’s identity remains unsettled.

So do these recent court cases spell the demise of our constitutional rights to freedom of speech or are they the proper response to “keyboard bullies” who spread misinformation and vitriol on the internet without regard to the consequences?