Monday, December 19, 2011

Is your association vulnerable to a frivolous age discrimination lawsuit?

Last week, the Housing Opportunities Project for Excellence, Inc ("HOPE") called a press conference, issued a press release and sued several real estate agencies and condominium associations in Broward County. The group announced that one of its goals was to remind folks that are in the housing industry that they cannot discriminate against families with children.

HOPE was established as the result of a grant from HUD in October, 1988 to Metro-Dade County's Equal Opportunity Board (formerly the Fair Housing and Appeals Board). On its website, HOPE states that it is the only non-profit fair housing organization in Miami-Dade and Broward Counties currently engaged in "testing for fair housing law violations, pursuing enforcement of meritorious claims and conducting fair housing education and outreach." HOPE further states that it has recovered in excess of $8.5 million in settlements for victims of housing discrimination. HOPE's board of directors is composed of accomplished and well-known individuals.

This all sounds like our tax dollars hard at work in the worthy pursuit of ferreting out injustice in the housing industry. However, in the case of at least two Broward County condominium associations sued last week and named in that press release and at the press conference, none of the careful HOPE activities cited on their website actually took place.

According to HOPE's own lawsuits, HOPE "tester" and named plaintiff, Alyssa Arnell, apparently visited several internet sites listing classifieds for unit rentals and found ads which had language stating that "children under 12" were not allowed to visit the property being advertised for lease. In the case of one of the associations, Ms. Arnell also located an age restriction from 1986 but did not search further to find that the 1986 restriction was removed by further amendment in 2002.

In fact, HOPE did not take even the most basic steps to "research" the potential discrimination. A simple phone call to the association would have revealed that the unit being leased was being leased by an owner and not the association, that the association had no knowledge of the language this owner had in his ad, that the 1986 age restriction had been removed and that the association had never disapproved any prospective residents based on age since the 2002 amendment.

What attempts did HOPE make to educate these boards and communities before suing them and denouncing them in a highly public fashion? What level of care does a tax-funded agency such as HOPE have before calling private communities discriminatory when the facts don't support the accusations? Is it possible that HOPE is unaware that associations who are sued must put their insurance carriers on notice and risk possible repercussions as a result? Is it possible that HOPE is unaware that associations who unjustly find themselves on the receiving end of negative publicity might just have their pending sales affected?

Hopefully, HOPE will do right by the two associations it has apparently wrongly accused and any others out there with similar fact patterns. Perhaps, however, there is a silver lining in all of this for everyone else? Every community would be well advised to check their governing documents to ensure that age restrictions that are no longer legal and enforceable are promptly removed or, if amending them out is not a possibility given membership apathy, that a disclaimer is placed in the public records acknowledging that the restriction is no longer enforceable nor does the association refuse housing based on age.

If you find an out-of-date age restriction in your governing documents, it must be removed or disclaimed even if your association has never enforced it. Leaving it intact can be construed as de facto discrimination. Sometimes these restrictions are remnants from developers dating back decades and associations are unaware that they even exist in the documents. As for HOPE, let's all hope they start really researching and educating in addition to denouncing and suing.

Friday, December 9, 2011

Does your board have to enforce your community's governing documents?

How many times have you wondered if your board was going to get around to pursuing the blatant parking violator next door or the nightly nuisance across the street? Most folks living in a common interest ownership community assume that the board must take action to enforce the documents, but is this assumption legally supportable?

The Fourth District Court of Appeal issued a decision this week in the case of Robert Heath v. Bear Island Homeowners Association, Inc.

Heath, a parcel owner, sought an injunction to require his HOA to enforce the community's Declaration of Covenants against other owners who allegedly undertook changes, modifications and improvements to their residences without first obtaining the association's approval.

The trial court held:

The Association, however, had no legal obligation to take legal action to enforce the Declaration. Article XII, entitled “Enforcement of Declaration,” states, in pertinent part:

The enforcement of this Declaration may be by proceeding at law for damages or in equity to compel compliance with its terms or to prevent violation or breach of any of the covenants or terms herein. The Developer, the Association, or any individual may, but shall not be required to, seek enforcement of the Declaration.

Quite simply, because this plain language explicitly makes enforcement of the Declaration a purely discretionary decision on the part of the Association, Heath had no clear legal right to an injunction to compel the Association to enforce the terms of the Declaration.

Does this decision create potential issues as to whether a Board has any fiduciary duty to enforce its covenants when the language is permissive as it is in the Bear Island example above?

It certainly does make sense for boards to make strategic decisions when it comes to enforcement of the covenants. Not all rules and battles are created equal and some may be moot before a legal decision would be obtained. For example, in the case of a nuisance tenant with only 2 months left on his or her lease, the better option might be to advise the owner that the lease will not be approved for renewal as opposed to going to court to seek an injunction against the nuisance when it is likely that the lease will expire and the tenant will be removed before the injunction is granted.

The danger with a decision like Bear Island, however, is the uncertainty as to whether a board can look the other way on some violations it chooses not to fight, while pointing at the covenants and saying, "it only says may, not shall enforce". Would an association be more willing to enforce the documents on behalf of some owners and not others? The ripple effects from this case bear watching closely.

Monday, December 5, 2011

Not all association information is created equal

Recently I came across a few topics for community associations published online and in print which were at worst legally incorrect and at best simply misleading.

It seems that most papers these days have condo and HOA columnists, online blogs abound and a new "expert" pops up every other month. Just how much of the information being blasted out there, however, is completely accurate?

A few weeks ago, an association columnist in a Florida paper answered a question from a reader who wanted to know if the members could cancel a reconstruction contract entered into by the board. The columnist answered firmly and affirmatively that the membership could indeed cancel such contract by a majority vote of the voting interests present at the next regular or special meeting of the association. The columnist even cited the particular statutory provision on which he relied. All of this to the average reader would be enough to undertake the vote to cancel the reconstruction contract. The only problem? The statutory provision cited was a subsection of a paragraph dealing with bulk cable contracts. While the columnist's advice was spot on regarding cancellation of a bulk cable contract, it was not applicable to other types of contracts such as the reconstruction contract referenced by the reader.

Most folks agree that requiring directors to be certified in some fashion to serve on their boards and undertake all of the tasks necessary to properly administer and operate a community on behalf of the residents, is a worthy goal. In fact, my group, the Community Advocacy Network (CAN) has included language in HB 319 to add the current certification requirements for condominium directors to the HOA and Cooperative Acts as well.

The current statutory condominium certification requirement can be fulfilled one of two ways: sign a certification or attend a Division-approved education class. In addition to classes provided by the Division and the Ombudsman's Office, the private sector has stepped up by providing a plethora of free classes in a variety of formats and venues. The problem this time? Some providers of these classes are not informing people that the classes are not mandatory. In fact, a newly elected or appointed condominium director (and soon HOA and Cooperative directors) can fulfill his or her statutory certification by signing a certification attesting 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."

Whether you believe that signing this certification is meaningful or simply a waste of time, it is the law in its current form and any advice or representation regarding this requirement should cite to the current law, not wishful thinking.

The third item that made me look twice? One of the association educational providers citing in promotional materials that condominium directors must read "the statute" in addition to the association's governing documents and attest to reading same in the signed certification. In fact, when the certification language was first drafted a few years back, having to read the statute was originally in there but that language was removed from the bill before it was passed.

So what does all this mean to you? Well, advice given in blogs, online, on the radio, etc. is not all created equal. Moreover, since it is "general in nature" and comes with the standard disclaimer of such, you will probably have no recourse if you follow it to your detriment. This is why the tried and true attorney-client relationship provides you with perhaps the most comfort when it comes to relying on advice.

Does this mean your attorney will never make a mistake? No it doesn't. We all err from time to time. However, you have a lot better shot at proving you acted reasonably as a director if you do make a mistep by saying you followed your attorney's advice in writing as opposed to saying you read it in the paper or online somewhere!

Monday, November 28, 2011

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

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

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

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

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

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

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

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

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

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

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

Monday, November 21, 2011

City filled with HOAs resists downward trend in property values

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

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

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

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

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

For the article on the Bloomberg survey, please click here:

Thursday, November 17, 2011

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

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

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

What are your thoughts on the following proposed changes?

Late fees -

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

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

Education for board members –

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

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

Elevators –

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

HOA Elections –

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

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

Monday, November 14, 2011

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

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

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

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

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

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

What do you think? You can see the full video interview below, or by clicking on this link:

Monday, November 7, 2011

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

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

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

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

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

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

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

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

Thursday, November 3, 2011

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

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

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

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

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

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

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

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

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

Tuesday, October 25, 2011

How to pick a legal professional that is the right fit for your community!

I was interviewed recently for an article outlining tips on how to choose the right attorney to represent a community association. Specifically, the reporter wanted to know which qualities I thought might be crucial for a successful relationship.

Most of us have been taught how to pick the right piece of fruit or what to look for in a mate but picking the right attorney, accountant, engineer or other professional? I suspect that many of us choosing these professionals work off of referrals, word of mouth and gut instinct. All of those avenues may lead you to the perfect fit but I would suggest that the following are also some qualities/credentials that a board would want to seek in an attorney to assist their community:

● Knowledge in this area of the law. How many years has the attorney been working with community associations and what percentage of his or practice is devoted to the representation of community associations? 5%, 50%, 100%?

● Does the attorney or the firm for whom the attorney works represent any other clients that may have conflicts of interest that could impact the community? I have seen community associations dumped as clients when their law firm also represents a developer, bank or other entity with a competing interest since those entities are often seen as the source of more "lucrative" work.

● Has the attorney ever served on a community association board? It usually helps create a sense of understanding and empathy when an association attorney has actually sat in the shoes of a volunteer board member. Most of our KG&B attorneys and many of our staff members have sat on association boards which is very helpful in their daily interactions with our clients.

● Does the attorney have the ability to communicate clearly in writing and verbally? It doesn't matter if your attorney graduated from Harvard if no one can understand the advice he or she is rendering. Lengthy paragraphs in legal opinions that could have been written by James Joyce are one tip-off that you might have a problem. I have never seen a potential client do this, but I would suggest asking an attorney to give a writing sample; perhaps an opinion letter with sensitive information redacted. I do this when I interview job candidates and associations should do this to see if the attorney's communication style is a good fit for them.

● Does the attorney have common sense and experience to realize when they are "being played"? Experienced community association attorneys get a sense when one board member is seeking advice that was not sanctioned by the full board but is really a personal agenda item for that director. Similarly, experienced community association attorneys know not to take sides when there are intra-board disputes and remind the board that it is their duty to advise the entire board what can and can't be done within the confines of the statutes and the association's governing documents.

● Does the attorney have a history of disciplinary action with their State's Bar and, if so, for what reason and what was the disposition of those complaints?

● What do other associations have to say about this attorney or Firm's work? Are they on top of the changes to the law each year? What kind of programs and services do they provide to their community association clients?

● What is this attorney's track record in terms of litigation successes if you are seeking assistance on a potential litigation matter? Does the attorney and/or firm give a choice of billing options for litigation including deferred billing or contingency work if your association has limited resources to pursue its rights legally?

Overall, the successful community association/attorney relationship depends on mutual respect, clear communication and clearly articulated goals and expectations.

Monday, October 24, 2011

What is your community association's responsibilities when it comes to wild animals?

This past weekend, I received several calls from neighbors advising that an alligator had been spotted in the canals and lakes in my community and also received two email blasts from our board alerting us to the alligator's presence and urging that care be taken particularly with small dogs and children. The board also advised that a trapper had been contacted to relocate the animal elsewhere given its size.

It should really come as no surprise that alligators and a plethora of other wildlife appreciate our community as much as the two-legged inhabitants do. After all, this community was built in the late '70's in what was then almost the edge of the known universe in western Broward County. Our community prides itself on the abundance of wildlife just outside our doors; we even had an otter who loved to entertain with his antics in our canals at one point. However, despite the community's warm embrace of this "outdoorsy" lifestyle, what would happen should that alligator or any other of our wild inhabitants injure or kill a human or pet?

The Georgia Supreme Court is struggling with this very issue right now. Last week, Georgia's highest court agreed to take up a case that those of us living in community associations in Florida (and other associations around the country in areas replete with wildlife) would be well advised to monitor. In October, 2007, an 83-year old woman was house-sitting for her daughter and son-in-law in a coastal community known as The Landings. The woman was killed in a grisly alligator attack and was later found in one of the community's many lagoons. A trapper found and killed the 8-foot gator and evidence that it was responsible for the woman's death was obtained.

The family members then sued their homeowners' association claiming that it should have done a better job protecting the safety of residents and visitors in a community where alligators are common. The family won at the appellate level. One of the main issues to be raised before the Georgia Supreme Court is whether the legal doctrine known as "animals ferae naturae" should shield the association from liability in connection with death or injury that can naturally occur when humans and domesticated animals come into contact with wild animals. That doctrine would typically provide such a shield so long as the property owner had not reduced the wild animals to its possession or control or introduced a non-indigenous animal to the area. Since alligators are indigenous to coastal Georgia (and throughout our fair State as well) it is possible that the Georgia Supreme Court could absolve the association of liability in connection with the attack.

This case bears watching and associations that do have indigenous wildlife that is capable of injuring or killing humans and domesticated animals within their boundaries, should be discussing what can be done to minimize harm and maximize safety. In my community's example, residents received a series of alerts and the board called out a trapper to catch and relocate the animal. Boards that become aware of a dangerous animal's presence and do nothing may be setting the stage for catastrophic consequences.

Tuesday, October 18, 2011

It's beginning to look a lot decorating time once again in association-land!

I took my daughter and her friends recently to Halloween Horror Nights in Orlando. The weather was beautiful, the haunted houses were indeed fantastically spooky and other than a three-hour car ride listening to some truly awful music dictated by the younger occupants in the vehicle, the trip couldn't have been any nicer. If you have experienced Universal at Halloween, you were probably as amazed as we were at the staging that goes into this event. Abundant holiday-appropriate lighting, music and decorations set the tone.

When I returned home, I noticed that many of the houses in my own homeowners' association had already started putting out their decorations for Halloween including a pretty elaborate display down the street. This started me thinking about the various issues that crop up in common interest ownership communities when it comes to owners decorating their own properties as well as boards decorating the common areas.

So what are some of these issues?

Could an association pass a rule that flat out bans holiday decorations?

There is abundant caselaw in the state of Florida which provides that board rules and regulations must be reasonable in order to be enforceable. An owner could make an argument that a total holiday decorating ban impedes upon his or her freedom of speech and freedom of religion. While owners agree to abide by the governing documents and Rules and Regulations when purchasing in an association, and these are private communities we are discussing so the ability to tie a board decision to the "State Action" needed for a constitutional challenge is nebulous at best, those restrictions still must be reasonable. If nothing else, most association members enjoy some decorations at the various holidays and a total ban may not be a terribly popular decision.

What are the issues involved with the association putting up lights/decorations on the common areas?

A condominium association's decision to place holiday decorations upon the common areas could be challenged by some owners as a material alteration even though the display is only temporary in nature. Although the duration of the display is likely to be much shorter than the challenge, the possibility of a challenge does exist and someone may see fit to take up that fight to prevent similar alterations in the future. Another pertinent question is whether the costs of a community holiday display is a proper common expense?

This is another area that is definitely up for debate. In Florida, we have had associations that were challenged for spending association funds to provide refreshments at meetings, and the Division of Florida Condominiums took the position that if such expenses were not authorized in the Declaration, then they were not proper common expenses. While most people enjoy these displays, and would not be likely to challenge the expense if reasonable, boards must still realize that this is a possibility especially in the current economic environment when so many associations are struggling. Having fewer owners to foot the bill for a lavish lighting display in the community might be the proverbial straw that breaks the camel's back. The bottom line is that if such expenditures are not authorized in the Declaration, then they are vulnerable to a challenge as being improper.

Lastly, with any community holiday display, thought should be given to community diversity and the fact that many members of the association may celebrate a variety of holidays. It is for this reason that many communities choose to use holiday neutral light displays as opposed to erecting religious symbols associated with particular holidays.

How to get around these hurdles if your association wants to show its festive side for the holidays?

- Seek membership approval to amend your declaration to provide that holiday decorating is a proper common expense. If you want to increase the likelihood of getting such an amendment passed, put a percentage cap based on the total budget of what can be spent in this endeavor lest Joe Homeowner worry that the community overspends in this area. The goal is to keep the expense reasonable.

- Get the members involved in donating items to decorate the common areas. Word of caution: this can get sticky as folks often have different ideas about what is acceptable holiday decor.

- Set reasonable rules for owners to take down their decorations within a reasonable time after a holiday passes and ensure that the association does the same for any items it installs on the common areas. Most folks don't want to be looking at Fall Harvest displays in April. What is a reasonable time? It will vary depending on whom you ask but two weeks seems to be enough time to take your pumpkins and snowmen down.

- Set reasonable rules regarding a display's size and scope and ensure that both owners and the association comply with those rules when planning their holiday displays. The goal is to prevent any display from becoming a source of nuisance in the community due to excessive noise, lights and probably more significantly, traffic issues. In communities without a means of controlling visitor access, this can become a problem when homeowner displays are advertised to the general public. It would be reasonable to restrict any decorations that impede access on catwalks or HOA streets or otherwise create fire hazards.

Common sense, reasonableness and the definition of “excessive” seem to be the operative words/themes when creating a sound policy on personal and community holiday displays.

Monday, October 10, 2011

Condo collections today: the squeaky wheel gets the grease

An attorney at my Firm shared the following success story with me last week. It highlighted what we have been discussing in this blog about collections today being a matter of strategy and expertise. If you are a fan of Sun Tzu's Art of War, the example below reflects that the opportunity to defeat an "enemy" is indeed provided by the enemy himself.

I wanted to share our latest victory against a mortgagee/bank with you. In our estoppel letter we demanded the full amount because there was no assignment from the original lender to the Plaintiff in the foreclosure sale. They paid the full amount but under protest. They then filed a Motion to Limit Liability pursuant to 718.116(1)(b) Fla. Stat. against the association and scheduled the Motion for hearing. I had several communications with their counsel who shared a case with me in which he was the appellate counsel and where he prevailed. I also had several communications with the bank’s in house counsel but I stood firm on our position.

I then investigated their case and found all the discrepancies and filed a 57.105 Motion against them listing all the problems. The bank's attorney cancelled their hearing and transferred the case to another law firm who then rescheduled their Motion. However, they asked to review the 57.105 Motion I filed. The result is, they advised me yesterday that they have withdrawn their Motion and cancelled the hearing.

Had we given in to them, the association would have been limited to receiving $3,051.33 for assessments and would have had to pay attorney's fees that would not have been covered by the bank’s payment. Instead, the association will receive $10,912.56 for assessments and the attorney's fees are covered.

A motion made pursuant to Florida Statute Section 57.105 is often referred to as a "frivolous claim motion". A court must find that a claim was frivolous and that the attorney was not acting in good faith in filing it. The 2nd DCA has already held that a bank filing a foreclosure action against a property for which it never received an assignment of the promissory note is not acting in good faith by filing that foreclosure.

Successful collection outcomes today require good lawyering, tenacity and, at times, old fashioned good luck.

Monday, October 3, 2011

Negotiating 101 for Community Associations

Whether we realize it or not, everything we do within the confines of a community association framework boils down to negotiations. An owner wants a second parking space, the board wants the membership to approve a material alteration, the manager wants a good turnout for the annual meeting and the list goes on. Unfortunately most people are not terribly skilled at the art of negotiation.

According to Wharton Professor Stuart Diamond, "Effective negotiations are about perceptions and emotions, not about win-win and threats. It is about valuing others, even people who might hate you. And that is more effective than power which might make the opposing side resentful and retaliatory."

In his book, Getting More, Diamond advises that trading items of unequal value can be one of the best negotiating tools. In our everyday lives this can play out as "you do the wash on Monday and I'll do the shopping on Thursday." This too can have a counterpart in association-land. Perhaps you change the time of the board meeting to a day or hour that is more convenient to the owners in exchange for member cooperation on parking issues? The book outlines hundreds of case studies covering everything from women in certain Third World countries trying to avoid arranged marriages to CEO's trying to close billion-dollar deals. Attempting to get your community issues under control won't seem like such a stretch after reading some of these success stories.

What is the worst negotiating technique? Being a bully. In community associations there are various actors that can fill the bully role. It might be a director who is selectively enforcing the covenants against some owners and not others; it might be the resident who is harassing the association employees or the board; it might be the manager who is blocking an attempt to inspect the association records and it might be the association attorney who is protecting certain members of the board. What all of these folks lose sight of is the fact that successful negotiation will ease their problems much quicker than flexing their muscle ever will but that requires an attitude change.

In his book, Diamond relates the following joke:

A guy goes into a store and buys a lamp. He goes home, rubs the lamp and a genie comes out. The genie says, "I'll give you anything you want but your neighbor has to get twice as much." The guy says to himself, "I want a house-but my neighbor will get two houses! I want a million dollars-but my neighbor will get two million." Finally the guy gets an idea. "I know what I want," he says to the genie. "Put out one of my eyes."

Sadly this is how most people negotiate along the lines of "This will hurt you more than it hurts me." Unfortunately, it usually hurts everyone equally and in a community association where the actors all have to live with each other on a daily basis, the impact will be felt much more keenly.

Condo owners sue association over cell tower health risks

A Naples couple, Jerry and Trish Cohen, have filed suit against their condominium association as a result of cellphone towers being installed on the roof above their penthouse unit. Mr. and Mrs. Cohen claim that these towers have disturbed their quiet enjoyment of their property both as a result of the noise they produce as well as the health risks they believe are associated with them.

Jerry Cohen claims that noise from the cell towers routinely awakened the couple usually between 2 and 4 am with vibrations shaking their ceiling. The Cohens bought the unit back in 1982 and finally abandoned it in 2007 after they claim the association took no steps to address their noise and health concerns.

Their complaint, which was filed in August in Collier Circuit Court, delves into the health risks that some scientists attribute to cellphone use. While scientists differ on the risks, the Cohens claim that the studies are based on average cell phone use and not living underneath large towers. While an association typically has the authority to enter into contracts such as the leasehold of roof space for cell tower use without membership approval, adding the towers and their related structures and equipment would have constituted a material alteration of the common elements requiring membership approval. Assuming that such membership approval was obtained, the Cohens were still the most impacted parties given their unit's proximity to the roof, the noise and any health risks.

Almost a decade ago, a cell tower was slated to go up across the street from my own community. After our residents did some research, reviewed the plans for the tower, the proximity to our homes and the equipment and barbed wire wall that would have accompanied the tower, we mobilized and forced the cell phone company to locate the tower close to a highway and not our homes. At that time, I couldn't imagine living across from a cell tower let alone under one.

This case raises the issue of whether the owners who are most impacted by an installation like this should have to consent in addition to the other approval required. Of course, that also raises the specter of one or two people blocking something that the entire community might feel is beneficial.

If you would like to know where there are cellphone towers near your home, go to

Tuesday, September 27, 2011

Coping with Compliance Costs – What is your community’s plan to pay for Phase II Elevator Fire Safety Implementation?

The year 2015 may seem comfortably down the road, but cash-strapped community associations with elevators should already be planning for a pricey big-ticket item: 2015’s Phase II Elevator Fire Safety requirements.

In 2010, legislators passed a measure that requires condominiums and multifamily residential buildings to provide firefighter service for the elevators in an association’s buildings.

The implementation of this service is divided into two phases.

Phase I requires elevators to be recalled to a specific floor and have the doors open if smoke or heat is detected in the lobby or machine room. The elevators remain at the designated floor until authorized personnel make them operable.

Phase II – elevators must have a system that would permit firefighters, exclusively, to control the elevator once “Phase I” is activated in an emergency. Associations may waive the Phase II requirement if the local fire marshal creates a substitute elevator access plan “if it is technically, financially or physically impossible” for the association to comply with the regional access requirements.

The Phase II elevator retrofit costs are significant. The estimates run from hundreds of thousands of dollars into the millions. For homeowners already trying to weather community association life in the face of delinquencies, this is a major financial burden.

Interestingly, Florida’s Department of Business and Professional Regulation has stated that there have been no reported instances of injury or death in Florida related to the failure or absence of these components in an elevator.

Has your community begun to seek estimates? If so, how much are these changes going to cost?

How is your community going to pay for this upgrade? Do you have funds in your reserves to cover the cost?

It goes without saying, you cannot put a price tag on safety, but would your community prefer to postpone these changes until the financial condition of our economy and communities is a bit sunnier?

Monday, September 26, 2011

Board member eligibility in Florida: what does it mean to have one's civil rights restored?

Last year, HB 1195 transported certain board member eligibility requirements from Chapter 718, F.S. (the Condominium Act) over to Chapter 720, F.S. (the HOA Act). Specifically, members who are delinquent in the payment of any fee, fine or other monetary obligation to the association are ineligible to serve on an HOA board as well as any person who has been convicted of a felony in Florida or in any US District or Territorial Court or in any other jurisdiction where such act would be considered a felony if committed in Florida UNLESS the felon's civil rights have been restored for at least five years as of the date on which such person seeks election to the board.

Before 2008, the language in the Condominium Act pertaining to board member ineligibility as a result of a felony background tied the matter to a former felon's "right to vote" being restored. However, in 2008, the Condominium Act was amended to change that to a requirement that a felon's "civil rights" be restored for at least five years.

Community association election season in Florida is right around the corner which begs the question: does your board know what is meant by the requirement that a candidate's civil rights be restored?

In 2010, The Pierre Association confronted this very issue and sought clarification from the Division of Florida Condominiums, Timeshares and Mobile Homes. The association was inquiring whether a candidate to the board whose civil rights had been partially restored (the right to bear arms had not) was eligible to serve on the condominium board. Years earlier, this particular board candidate had pled guilty to one count of federal mail fraud which is a felony. In 2002, the candidate's federal civil rights were restored; in 2004 his Florida civil rights were also restored.

The association took the position that this individual was not eligible to serve on the condominium board becasue he was not yet authorized to bear arms within his federal civil rights. Civil rights include the following:
- the right to vote
- the right to hold office
- the right to serve on a jury
- the right to bear arms
In the case at hand, the candidate's Florida civil rights were restored by executive order which served to only partially restore his civil rights since the order specifically excluded the right to "own, possess or use firearms." On April 12, 2010, the Division issued a Declaratory Statement (No. 2010009834) stating that the candidate was ineligible to serve on the board until his federal and Florida civil right to possess a firearm along with all other civil rights had been restored for a period of no less than 5 years as of the date on which the candidate seeks election to the board pursuant to Section 718.112(2)(d)1. This law is now also in effect for homeowners' associations in Florida.

Does the inability to bear arms render a candidate for a Florida condominium board ineligible to serve? Turns out it does! While having an ineligible person serve on the board does not automatically nullify any board action taken before such ineligibility is discovered, the preferred course of action is obviously to ensure that directors are all eligible to serve. Now that you know what to look for, keep that in mind when association members start throwing their hats in the ring this election season.

Monday, September 19, 2011

There ought to be a law ... easier said than done

There has been much talk lately about the very significant success that the 232-unit Spa at Sunset Isles condominium community obtained in Bankruptcy Court under its Chapter 11 proceedings. This community was able to hold banks liable for surcharges incurred as the struggling community continued to maintain the property which comprised the banks' collateral.

Naturally, after hearing of the win, the first question some association leaders asked was: how do we do it? Well, the first step would be to file for Chapter 11 bankruptcy protection and many communities are not prepared to do that either because they do not meet the conditions precedent to filing, don't want to incur the costs incurred to proceed in bankrutpcy court or find the consequences of a bankruptcy to be unappealing.

The second utterance after considering this community's award and the fact that a bankruptcy prompted it, is often: there ought to be a law to do the same thing without having to file for bankruptcy first!

Great sentiment but just how easy would it be to pass such a law?

First, one would have to contend with the very strong Florida Bankers Association (FBA), the lobbying arm of Florida's banking industry. The FBA was established in 1888 (you read that correctly, it's one of the oldest trade associations in Florida), has a 39-member Board of Directors, 19 full-time employees and is composed of more than 300 banks and financial institutions. They are the epitome of a well-organized, successful machine.

Second, one would have to recognize that approximately 1/3 of Florida's legislators have strong ties to the banking industry.

Third, one would have to understand political realities and the fact that of all the bills proposed each Session, the vast majority do not become law.

This does not mean we should throw our hands up and despair of ever passing needed legislative reforms. Community association members are becoming more effective each year at doing just that. However, there might be other avenues to achieve the same goals without having to jump through the many hurdles that present themselves whenever a change in law is contemplated. Lawyers representing associations can and are making the same or similar arguments that were made in the U.S Bankruptcy Court in the Spa at Sunset Isles case to hold banks responsible for delays in foreclosing on troubled properties and the real costs to the rest of the community as a result of those lender delays.

I suspect that much of the successes we see for associations going up against banks will take place in the courts and not in the Legislature.

Monday, September 12, 2011

4th DCA decision makes waiting for the banks to foreclose an even longer proposition for associations!

Most associations these days have stopped waiting for the banks to foreclose and have started proceeding with their own foreclosures against non-paying owners even though the association is the junior lienholder in most cases. Those associations that heeded this advice years ago have managed to recoup significant amounts around the State in past due amounts owed to the community by renting out those properties until the banks finally completed their own foreclosure actions.

Often we hear that the banks “don’t want to foreclose” because they don’t want these properties in their inventory, they don’t want to pay to rehab them or they don’t want to be stuck paying association assessments until they can unload the properties. All of that may be true but far too often, banks aren’t foreclosing, or their foreclosures are being delayed, due to technical improprieties.

Many months ago we first heard of the “robo signing scandal” wherein bank employees with little to no experience in handling foreclosure cases were preparing and filing massive amounts of foreclosure documentation, often improperly. In a 4th DCA decision last week, this issue has reared its head once again. The 4th DCA reversed, in part, a 2010 Palm Beach County Circuit Court that had granted a summary judgment in favor of LaSalle Bank against homeowners, Gary and Anita Glarum in the amount of $422,677.00.

Why did the 4th DCA overturn the foreclosure judgment in favor of the bank? Quite simply because the $422,677.00 amount was based on an affidavit of indebtedness signed by a loan servicer employee who had no personal knowledge that a debt in this amount was in fact owed to LaSalle Bank. Instead, the employee pulled the amount from a computer which the Appellate Court said amounted to “hearsay”. The bank employee did not know who put that figure into the bank’s computer system, how it was calculated or when the data was inputted into the system. However, LaSalle relied upon that Affidavit to obtain its summary foreclosure judgment which the Appellate Court ruled was improper.

This home has been in foreclosure since 2008 and the borrowers continue to reside there. Where does the story go from here? Presumably the owners will not live there forever without having to pay their mortgage but the bank will now have to attempt another summary judgment or start over, all of which means a lot more time invested in the process. Imagine if the Glarums’ home was located within a condominium or homeowners’ association. Imagine the board thinking that the bank’s foreclosure was imminent and waiting. Of course, we know now that the association would have been waiting 3 1/2 years up to this point with the prospect of waiting for months or even years to come based on this recent legal loss for the bank.

Frankly, association foreclosures do not have the same inherent hurdles as bank foreclosures. Association members have fewer holes to poke in an association foreclosure. Delinquent association members cannot derail an association foreclosure because a director was improperly elected or the pool is not well maintained. The only defense to an association foreclosure is that the debt is not owed. If the association member can provide proof of payment, he or she can halt the association foreclosure.

If your board is not having a frank discussion with your association attorney or collection agency about strategies that make sense in today’s environment, what are you waiting for?

Tuesday, September 6, 2011

Condominium Association Loses Fight to Keep Its Beach Private!

A federal judge in Pensacola has dismissed a lawsuit filed by the Crystal Dunes Owners' Association and individual condominium owners alleging that the City of Destin, the City Manager, the Mayor and the Okaloosa County Sheriff all violated their due process and equal protection rights by failing to provide the association with notice and an opportunity to be heard before declaring their beachfront property subject to "customary use" and therefore open to the public.

The lawsuit was filed in May, 2010, after the City and the Sheriff's Office allowed people to use the beach 20-feet landward of the line between wet and dry sand in front of the condominium complex. The association had argued that the property was private and therefore subject to enforcement of trespassing laws.

The Erosion Control Line was established by the State of Florida to distinguish between publicly and privately owned property. The defendants in this case argued that the plaintiffs failed to state a claim for a violation of their procedural due process rights because they have no right to enforcement of the criminal trespass laws. The defendants further argued that the plaintiffs failed to state an equal protection claim as they did not allege that other citizens in similar circumstances received more favorable treatment.

The U.S. District Court for the Northern District of Florida cited the case of Town of Castle Rock, 545 U.S. at 755, as follows:

"While states may provide their citizens with benefits, the mere provision of a benefit does not bestow upon citizens the right to receive it; indeed, benefits are not protected entitlements if government officials may grant or deny them in their discretion....In Florida, law enforcement officials have discretion in determining whether to enforce the laws, particularly where, as here, the statute contains no mandatory enforcement language."

Chief U.S. District Judge, M. Casey Rodgers, clearly felt that the association members had no right to enforcement of Florida's criminal trespass laws and thus, were not entitled to notice or an opportunity to be heard before the City of Destin and the Sheriff's Office decided not to enforce those criminal trespass laws against members of the public wishing to use the beach in front of their condominium complex.

Beachfront associations in Florida would be wise to discuss this case with association counsel to determine whether their current expectations regarding the private or public nature of their beaches are reasonable and enforceable.

A copy of the Judge's order can be read online, here:

Wednesday, August 31, 2011

Electric Cars: The Next Parking Issue in Your Community?

Remember when pick-up trucks were restricted in many community associations? That rule has fallen out of favor these days. How about motorcycles or their less intimidating cousin, scooters? Many associations now allow owners to park these types of vehicles in the community as their popularity has grown.

Far too many communities in Florida have parking accommodations and the restrictions relating to their use, dating back to a time when many families used only one car. Has your association changed its rules or policies in regard to these parking issues? Has your board peered into the future to discuss the next parking issue on the horizon so you can be part of the vanguard rather than playing catch-up? If you have, has the topic of electric cars come up and what their growing popularity might mean for your community?

Electric cars are hailed by some as the panacea to eliminate our country’s dependence on foreign oil. According to proponents, they are ‘green” which means they are planet-friendly (friendlier than our current gas guzzlers, anyhow) 2.4 percent of all cars bought in 2010 were electric or hybrid, with that projected to increase to 3.7 percent in 2011, 4.1 percent in 2012 and 4.8 percent in 2013. That reflects a twofold increase in electric and hybrid cars in a four year period. The federal government has set a target of at least 1 million electric vehicles in service nationwide by 2015. About 80 percent of charging is expected to occur at home which is where your association comes into the picture.

So what does that mean for your community?

Imagine coming home to your townhouse parking lot or underground parking garage and having to drive over extensions cords strewn throughout the parking area for cars recharging their batteries, or someone else’s car plugged into your electrical outlet in front of your townhouse? Who should pay for the electricity to charge a few owners’ electric or hybrid vehicles? How would you police "electrical theft" should an owner plug his or her vehicle into another owner's or the community's socket?

How will your association handle this potentially looming problem? Let’s take a look.

Charging Equipment for Plug-In Electric Vehicles

How fast a vehicle charges depends on the battery type and the type of charging equipment used. Level 1 equipment can charge an electric vehicle (“EV”) in 8 to 20 hours. Level 2 equipment performs the same task in 3 – 8 hours. DC Fast Charging does the trick in less than 30 minutes. The Electric Power Research Institute anticipates most EV owners will charge their vehicles overnight at home. For this reason, Level 1 (120 volts) and Level 2 (240 volts) charging equipment will be the primary options for homeowners.

Level 1 equipment provides charging through a 120 volt (V), alternating-current (AC) plug (up to 15 amperes and 1.8 kW). Level 1 EVSE is portable and does not require installation of charging equipment. On one end of the cord is a standard, three-prong household plug. On the other end is a connector, which plugs into the vehicle. Level 1 works well for charging at home, work, or when there is only a 120 V outlet, or "trickle charge," available. Depending on the battery type, Level 1 charging can take 6 to 20 hours for a fully depleted battery to reach a full charge. Unless an association installs a charging station as discussed below, EVs using this type of charging equipment may become a problem for an association. By plugging into a standard 120 volt electrical outlet, this type of charging is available wherever you can plug in an extension cord. However, the question remains as to how feasible this type of charging may be if it takes anywhere from 6 – 20 hours to fully charge a depleted EV battery.

Level 2 equipment offers charging through a 240 V, AC plug and requires professional installation of home charging or public charging equipment. Many available units operate at 30 amperes, delivering 7.2 kW of power. These units require a dedicated 40 amp circuit. Level 2 equipment can take anywhere from 3 – 8 hours to fully charge a depleted EV battery. There are numerous companies that can install Level 2 charging stations in your association. Some of these companies will install the equipment at no charge and share a percentage of the revenue generated with the association.

We know electric cars will be a more widespread purchase in the future. At my Firm, we have already had a few clients contact us regarding installation of Level 2 charging stations in their communities. Among other concerns, the following are some factors we discussed with them:

1) Is the installation of the charging station a material alteration that may require the vote of the owners to install?

2) How many charging stations would be required and where would be the most logical place to locate them?

3) Who should pay for the electricity to charge the EVs – the owner(s) or the association?

4) Does the association need to pass policies and rules regarding the use of the charging stations and limit or prohibit Level 1 charging which would tap into the association's common area electrical outlets?

5) Are there any liability and insurance concerns?

We will continue this dialogue in upcoming blogs. In the meantime, don’t be "shocked" when long orange extension cords crop up in your parking areas!

Tuesday, August 23, 2011

Just Who Does Your Insurance Agent/Broker Represent?

I am often asked about the issue of insurance agent allegiance and whether or not an individual is acting as an "agent" for the insurance carrier or as a "broker" for the insured. I have been informed that the term "independent agent" in this regard is really somewhat of a misnomer. The basic rule of thumb is that an agent of a carrier is someone that is appointed by the carrier and can accept an application on behalf of the carrier and has binding authority. On the other hand, a broker is primarily representing an insured in the insurance transaction.

Let's take a look at the standard distinctions between these groups:

Insurance Agents

Insurance agents are insurance professionals that serve as an intermediary between the insurance company and the insured. As a broad statement of law, an agent’s liability to their customers is administrative. That is, agents are only responsible for the timely and accurate processing of forms, premiums, and paperwork. Agents have no duty to conduct a thorough examination of your business or to make sure you have appropriate coverage. Rather, it is your obligation as an insurance consumer to make sure you have purchased the necessary coverage. This obligation weighs even heavier on representative boards.

Insurance agents can be either:

•Captive – A captive agent is an agent who works for only one company and is a “captive” of that company. A captive agent will sell policies only for that insurer.

•Independent – An independent agent is one who works as an agent for a variety of different insurers. An independent can produce policies from several insurers and offer some comparisons of different insurance policies.

Insurance Brokers

Insurance brokers can be best described as a kind of super-independent agent. Brokers can offer a whole host of insurance products for you to consider. Brokers are required to have a broker’s license which typically means the broker will have more education or experience than an agent.

Brokers also have a higher duty, in most states, to their clients. Brokers have the duty to analyze a business and secure correct and adequate coverage for the business. This is a higher duty than the pure administrative duty of the agent. However, this expertise comes at a price. Brokers typically charge an administrative fee or premium payments are higher when purchased through a broker.

Now that you know the difference between an insurance agent and an insurance broker ask yourself with whom you've been dealing and whether or not your expectations of him or her are truly in line with their function as a broker or an agent.

Special thanks to attorney Joel W. Meskin, Vice President of the Community Association Insurance Department at McGowan Insurance, for enlightening me on the distinction between agent and broker. McGowan has the leading D&O program in the US for community associations. For more information you can visit them at

Sunday, August 21, 2011

Penny Wise and Dollar Foolish: Vendor Due Diligence

If you want to strike terror in the heart of your association attorney, you need only utter this sentence: "I signed a contract last week and want you to review it to make sure it's alright." Unfortunately, far too many boards underestimate the importance of having their contracts reviewed by legal counsel before signing them.

It is a near certainty that every board will have the opportunity at some point during its tenure to negotiate with at least one community vendor. Whether the project involves simple maintenance or complex reconstruction, the same basic principles apply.

Before spending money on legal fees, it is best for the association to negotiate the Business Terms of the contract. These include: "What am I getting?", "How much is it going to cost us to get it?" and "How long will this project take?". Once these basic Business Terms have been hammered out, it is the job of legal counsel to ensure that the Legal Terms of the contract match the agreed upon Business Terms.

Often an association needs help from other experts to understand what it is or should be getting. Many times, associations enter into contracts for more than what they need. If there is any doubt, it is best to consult with an expert. For example, if an association is modernizing its pool filtration system, it is best to get an expert opinion on what that entails so the association knows what to ask from its vendor(s) rather than having the vendor tell the association what is needed.

Most boards are not experts when it comes to contracts involving painting, concrete restoration, elevators, roofs, management, accounting, security gates, cable or wireless services or any of the myriad of projects associations routinely face. For this reason, experts such as engineers, attorneys, accountants or other consultants should be enlisted to help in the negotiation process. Resist the urge to rely upon the "resident expert" on the board who may not have worked in the subject industry for decades.

Boards must also be aware of their obligations to obtain competitive bids. ALL types of association boards (condominiums, cooperatives and HOA's) must obtain competitive bids for the following types of contracts:

1. Any contract that is not to be fully performed within 1 year after it is executed; and

2. Any contract for the purchase, lease or renting of materials or equipment or for the provision of services which requires payment by the association in the aggregate that exceeds 5% of the total annual association budget.

Boards do NOT have to obtain competitive bids for the following:

1. Contracts with employees of the association;

2. Contracts for an attorney, accountant, architect, community association manager, timeshare management firm, engineer or landscape architect;

3. Contracts with a business entity which is the only source of supply for the services needed within the county serving the association; or

4. Contracts for products and services supplied in an emergency.

Boards are not required to accept the lowest competitive bid received. Although contract price will always be a consideration taken into account when awarding a contract, it should NOT be the only consideration. Additional factors to be considered should include:

-Vendor Identification/Verification: Is the vendor authorized to conduct business in the State where the association is located? Florida associations can check out the validity of the vendor's busines organization with the Division of Corporations at

-Vendor Licensing: Does the vendor hold a valid license to perform the necessary work? Florida associations can check a vendor's professional licenses with the Florida Department of Business and Professional Regulation at

-Vendor Referrals: How do the vendor's prior customers feel about their work? The association should always ask to speak with a vendor's most recent customers in order to get honest feedback on that vendor's qualifications and customer satisfaction. If the referral list provided to you contains old projects, it may be a warning sign.

-Length of Service: How long has the vendor been in business? The longer the track record, the better.

-Ability to Perform the Services: What are the vendor's resources? Do they have the correct knowledge, equipment and personnel to perform the services you are requesting or is the vendor going to sub-contract the work to other vendors?

-Insurance: The association should always obtain copies of the vendor's insurance certificates and ensure that the limits are acceptable.

-Bonding: A qualified vendor should not have any issue or problem obtaining the proper payment or performance bonding to complete the job.

In my next blog, we will talk about some common red flags that many boards overlook in the contract negotiation process and specific legal terms you need to know about in the event you choose to go it alone.

Monday, August 15, 2011

How does fraud take hold in a private residential community?

Fraud is certainly nothing new but in today's troubling economic climate, the chance that your community may be harmed by a fraudster, especially if you don't have a series of checks and balances in place, rises dangerously.

The Fraud Triangle has been used as a model to explain the fraud phenomenon as the first step in preventing its occurence. This Fraud Triangle consists of the following three elements:

  • Opportunity: presents itself when a person sits in a position of trust in a community which affords the potential fraudster with access (i.e. to the financial books and records) that is not available to outsiders.

  • Pressure:  presents itself when outside forces wreak havoc on the potential fraudster. This pressure is usually economic and usually arises in the form of a job loss, divorce, death or illness of a family member, gambling or other addiction problem. Some red flags evidencing the pressure side of the Fraud Triangle are a lavish lifestyle which does not fit the fraudster's income level or an employee who is very secretive and never takes a day off in years.

  • Rationalization:  allows the fraudster to avoid seeing himself or herself as a criminal who is stealing money from people. Instead the fraudster may see his or her actions as simply righting hte wrongs of the universe. Typical fraudster thinking in this regard usually falls along these lines:  "I am overworked and underpaid so this balances things out" or "I am just borrowing those funds and will return them at a later date" or "They'll never notice, they have so much money".
There are over 60 different types of fraud that can impact a community association including forgery, skimming, paying false payees or ghost employees, writing off accounts receivable as bad debt when the debt has been paid, reimbursing individuals improperly for personal expenses, falsifying accounts payable, bank statements and more. The typical fraud lasts for 2  years; at that point the fraudster starts getting weary or sloppy. By the time you become suspicious of a potential fraud you need to realize that it has probably been going on for some time.

Here are some things you can do to protect your community:

  • Always have a system of checks and balances in place. Require two signatures on your checks even if your bank will accept only one. Your internal association policy should still require two signatures and directors should never sign a blank check.

  • Always have more than one set of eyes on your books. No oversight of the person handling your association's books and an overly informal operation can set the stage for fraud.

  • Always properly screen employees in advance to weed out potential fraudsters. Some instances of association fraud involved collusion between association employees (in one instance the landscapers submitted false invoices for payment to the bookkeeper whereupon they split the amounts paid).  If an association employee pushes you to hire people he or she knows, do your homework first. When collusion amongst employees is present, the opportunity for a loss is multiplied by three!

  • Make sure your bank provides duplicate statements directly to someone else other than the person handling your books. Why do this? A case out of Michigan dealt with a bookkeeper who received the bank statements and then cooked up a duplicate set with new numbers on her home computer to present to the board. Having dual statements sent out would have prevented this fraud.

  • If you have an association credit card, keep the limits very low. Always check receipts against the statement and scrutinize receipts submitted for reimbursement to see if any personal or odd items are included in the reimbursement request.

  • Do not allow owners to make payments in cash or by checks made payable to anyone other than the association in order to avoid skimming.

  • Make sure your association's accountant reconciles your bank statements and never relies solely on bank statements provided to him or her.
These are just a few examples of steps your association can take to prevent your community from becoming a victim of fraud. If someone wants to steal from you, he or she can usually do it at least for a short while. However,  with some advance planning and foresight, you can make your community a much more difficult target for a potential fraudster. For more information about fraud prevention, you can visit which is the website for the Association of Certified Fraud Examiners, the world's largest anti-fraud organization and provider of anti-fraud training and education.

Monday, August 8, 2011

Is it the right time to require mandatory board service?

What are some of the most common complaints we hear about community associations and the manner in which their board members are elected?

● The election process is rigged;

● The HOA board collects proxies and votes itself in year after year;

● No one cares enough to run;

● The ballots and the entire election process is manipulated; and,

● The same folks have been "in power" for years.

Whether or not these complaints are actually true in every case in which the accusations are made is a topic for another blog. In today's blog, let's discuss how the concept of a mandatory association board draft would do away with these issues.

Imagine if elections were no longer necessary because every member of the community would have to serve on the board when his or her "number" was randomly selected for such service? Most of the angst of running for the board would be removed because every association member would eventually receive his or her term. Of course, there would be new angst for those who don't really want to serve but would rather complain. For those folks, I envision a system not dissimilar to our current jury service system where the expectation is that it is your civic duty to serve unless you have a compelling reason (financial, health, personal situation, etc.) not to do so. Moreover, folks who would otherwise be ineligible to serve (due to a delinquency, felony background, etc.) would simply not be put in the pool.

Mandatory board service might result in the following:

● A greater appreciation for the time and energy it takes to run a private residential community on a volunteer basis;

● An assurance that there will be a board in place despite general apathy;

● An inability to argue that mandatory education for directors is not advisable lest there be a chilling impact on folks willing to run for the board; and

● A reduction in the often signifcant costs associated with board elections.

Is it unreasonable to expect otherwise able-bodied folks to contribute to the success of their communities by serving one term on the association board? Most folks grumble when they get that jury summons in the mail and the reason is clear; most people just don't like to serve others. That is why jury service is mandatory and not voluntary lest we wind up with the same jurors time and again. Has the time come to treat association board service in the same manner?

Monday, August 1, 2011

Will you be sunk by costly increases in sinkhole coverage?

Last week, Citizens’ Board of Governors approved a massive rate increase (made possible by SB 408) for optional sinkhole coverage, including rate hikes of more than 2,000% in some Tampa-Bay areas. Now, the Office of Insurance Regulation (OIR) must hold public hearings and vote on the proposed rates.

OIR will post the scheduled hearing date on its website:

Insurance is about spreading risk across large numbers and those that are in higher risk areas should pay higher premiums than those that do not, but hitting some with 400%+ increase in one year seems harsh. Was any real thought given to at least spreading the impact over a few years? Certainly, this is a tough situation that will generate heated debate depending on your perspective because Citizens has suffered huge sinkhole losses. Last year Citizens took in $32 million in sinkhole premiums and paid out an estimated $245 million in claims.

For a good article on the topic see this article from Bloomberg:

How many folks who bought homes in high-risk sinkhole zones years ago (e.g. Escambia , Hernando, Pasco, Pinnellas and Hillsborogh Counties) do you think had any idea that their property was in an area prone to sinkhole issues? How many other sinkhole-prone areas in Florida have yet to be discovered.

While there are Florida and County maps of sinkhole events that have occurred, there is currently no sinkhole risk map analogous to the flood zone map developed for flood insurance; perhaps there should be? Unlike buying property on the coast, it is not always obvious when you are buying in an area that might soon require you to carry this kind of coverage.


By County:

Moreover, here is what OIR has posted in terms of sinkhole information:

Some legislators are encouraging OIR to deny the proposed rate increase; others, like Senator Mike Fasano, are in favor of getting rid altogether of this new law that permits large rate hikes in either a Special Session or during the regular 2012 Legislative Session.

You can email your comments to OIR at - be sure to include "Citizens" in the subject line.

Wednesday, July 27, 2011

Do Section 8 Tenants Need to Comply with an Association's Demand for Rent?

A tenant renting property in the Willoughby Estates Homeowners' Association received a Demand for Rent from the HOA as a result of the landlord/owner owing the association almost $3,000. Not so unusual in today's market except this particular tenant was receiving a Section 8 rent subsidy.

While the tenant agreed to pay her portion of the rent ($275.00) to the HOA, the West Palm Beach Housing Authority refused to pay its portion ($1,509.00) as demanded by the association pursuant to Section 720.3085(8). The Housing Authority claimed it was exempt from the application of this statute. The association refused to take no for an answer and went to court.

On July 19th, the association was rewarded for its tenacity with an order requiring the West Palm Beach Housing Authority to tender its portion of the monthly rent to the association until the past due assessments, interest and other fees were paid off.

This is welcome news for associations who continue to use the statutory ability to collect rent from tenants in delinquent properties which was granted two years ago and further clarified in the 2011 Session. Interestingly enough, there was no mention in this case as to whether or not later passed amendments to the HOA Act applied to this community's declaration.

Can your Condominium Association or HOA claim be impacted by Social Media sites?

The short answer to the question of whether your postings on Social Media can impact your association's claim is: YES.

Let's take the scenario of your association suing its insurance company for breach of the insurance policy. It is fairly standard policy these days for the insurance company or its attorney to conduct an investigation of the claimants as a part of its evaluation of the value of the claim being made. Anything posted on websites that can be viewed by the public such as Facebook, MySpace, YouTube, Foursquare, LinkedIn, Twitter, etc. is fair game for an investigator to review.

In addition to individual directors and managers having all these Social Media accounts, more and more associations are setting up Social Media pages for their communities. These sites can be a wonderful way to create additional communication channels to foster greater community unity but some thought needs to be given to what is viewable and by whom.

If you haven't checked your privacy settings on these accounts in a while, it's time to do so especially with a claim pending. Make sure you know the people you accept into your circle or do some due diligence on them if you are networking.

What are investigators looking for? Usually anything to prove you are not a solid upstanding citizen. A "Social Intelligence" report prepared for these investigators will look for rascist remarks, pictures or comments concerning drug and alcohol use, displays of weapons or other illegal activity.

Think no one could be so silly as to make those comments or post those kinds of pictures? Think again and then scroll through your Newsfeed!

Before you say/post/transmit anyting in a digital (i.e. permanent) form or anything that can be converted into a digital form, please consider the consequences. The bottom line is that if there is information you would not want heard in open court on your Social Media sites, take them down while your case is pending or better yet, don't put them up there in the first place!