Tuesday, March 27, 2012

Pending civil suit in Trayvon Martin case highlights potential liability for associations

Ongoing news coverage in the aftermath of the tragic shooting death of Trayvon Martin may well begin to focus on liability for community associations that do not adequately screen and monitor volunteer security efforts in their communities.

In this March 25th video clip, WFTV-9 in Orlando interviews me about the liability that The Retreat at Twin Lakes community association and other communities could face in such a situation ...

Monday, March 26, 2012

Change within your association ... it can be done!

We often hear from people who lament the fact that nothing can be done to improve their association from within. The board may be in the grip of a miserable despot, the membership may be apathetic, money may be missing and more.

Some of these folks think the solution is to abolish associations altogether but realistically speaking that is not going to happen any time soon. Others think more state laws are needed but again, realistically speaking, there are plenty of laws already on the books that aren't enforced or are misinterpreted.

There are success stories out there but some folks don't want to hear about them. People who have formerly been categorized as the "disgruntled owner type" have successfully turned around a dysfunctional board through teamwork, tenacity and sheer force of will. From the ones I have met who have been successful at doing this, they are not the flamethrowers or fearmongers. They are intelligent, reasonable people with patience who worked to educate their neighbors and the board members willing to listen.

I recently was copied on an email from an owner expressing sheer joy at the turn of events in his HOA after years of turmoil. At first glance, it seemed over the top to compare a modern association struggle to our country's revolution. Upon second reading, however, it really reflects how long the writer has fought this battle. Here are his words:

"Today marked a day that I had thought I would never see in the annals of Continental Country Club.

I could almost imagine how someone back in the 1770's might have felt to have the Yoke of tyranny lifted from their neck, and to breath in the first breath of Freedom. There were no "Gavels" banging away, no pious sanctimonious people acting like they, and only they, knew what is best for the rest of us!

I could almost imagine what it must have been like on that day, in New York City when George Washington took the first oath as President of the United States of America, and Government "Of the People, By the People and For the People" first sallied forth across this great land.

I take my hat off to our new Board President, Deb Egger, the newly elected Board members and the current sitting Board members, I pray that you, and we can restore the feeling of community and belonging that has been sorely lacking over the last several years.

Like those courageous few, who risked everything and pledged: "Our Lives, Our Fortunes, and Our Sacred Honor", I for one pledge to offer whatever help I can to turn this Community into the best dam place in Florida to live for everyone! And hope never again to see a Board who is constantly one hundred and eighty degrees out of tune with the wants and needs of the People.
Hal Hoffman

Tuesday, March 20, 2012

Trayvon Martin tragedy in Central Florida HOA highlights need to know what association volunteers are doing!

Hardly a person in Florida who keeps up with the news doesn't know the name Trayvon Martin and the circumstances surrounding the teenager's death on February 26th when he was shot and killed by a volunteer Captain of the Neighborhood Watch in a gated Orlando community.

The 28-year old volunteer, George Zimmerman, had apparently wanted to be a police officer at one time but that career never became a reality. While the coverage on this case has been constant, one issue that is not being discussed yet is what relationship the Homeowners' Association had to this Neighborhood Watch and to Zimmerman in particular.

In the coming weeks and months, more attention might turn to this Central Florida HOA especially in any civil actions the Martin family may bring. Many communities have volunteers that perform certain functions including grounds beautification and planning social events. However, the kind of volunteer security detail involved in this case creates all sorts of concerns and potential for liability.

In the Martin case, some questions for the HOA Board might be:

• Did the board request the creation of this Neighborhood Watch?
• Did the board appoint the volunteers?
• Was the board kept apprised of the Neighborhood Watch's activities?
• Did the board know that Zimmerman and perhaps other members of the Neighborhood Watch were patrolling the community armed?
• Did the board screen any of the volunteers including Zimmerman to determine that they were mentally and physically fit to serve this function?

There were incidences in Zimmerman's background that were troubling including a battery against an officer and resisting arrest. His record was expunged at some point which allowed him to carry a weapon. This tragedy is a cautionary tale for other associations out there.

Since many volunteers are not directors, officers or employees of the association, the association may have no insurance coverage whatsoever for their wrongful acts in the absence of a specific policy rider. While the Martin case deals with life and death, there are other cases where community volunteers exposed an association to discrimination and harassment claims. If your community has volunteers, you need to know what those folks are doing and you need to speak to your insurance agent to ensure that there is coverage in place should something go horribly wrong.

Monday, March 19, 2012

Federal agency issues Final Rule that could impact association transfer fees

Last week, the Federal Housing Finance Agency (FHFA) published a Final Rule restricting the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Banks from dealing in mortgages on properties encumbered by certain types of private transfer fee covenants. The Rule bears an effective date of July 16, 2012.

The FHFA is an independent agency of the federal government which was established by the Housing and Economic Recovery Act of 2008 (HERA). This agency's mission is to reduce the risk exposure for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The FHFA explains that the Rule is intended to protect the regulated entities (named above) from exposure to mortgages with certain features that may impair their value and increase risk to the financial safety and soundness of those entities. This Final Rule specifically applies to developers, condominium, cooperative and homeowners' association restrictions created after February 8, 2011.

The type of "private transfer fee" that was the intended target for the FHFA Rule was typically created by a developer as either a fixed amount or as a percentage (ie 1% of the property's sale price) and attached to real property in order to allow the developer to continue deriving revenue from that property each time it was subject to a resale. Some developer provisions went so far as to make these private transfer fees continue for 99 years!

The question for my readers is whether or not this FHFA Final Rule will impact the kinds of application fees that have been traditionally charged by all kinds of community associations in connection with the sale of lease of property in their communities. Could communities that have these kinds of application and approval fees in their declarations find themselves ineligible for federal-backed loans? For communities already struggling to find credit-worthy purchasers, this could be a significant setback.

There is an exception under the FHFA Rule as follows: "Excepted transfer fee covenant means a private transfer fee covenant that requires payment of a private transfer fee to a covered association and limits the use of such transfer fees exclusively to purposes which provide a direct benefit to the real property encumbered by the transfer fee covenants."

A "covered association" is defined as a nonprofit mandatory membership organization comprising owners of homes, condominiums, cooperatives and manufactured homes.

A "direct benefit" means that the proceeds of a private transfer fee are used exclusively to support maintenance and improvements to encumbered properties and acquisition, improvement, administration, and maintenance of property owned by the covered association of which the owners of the burdened property are members and used primarily for their benefit.

Boards who are currently charging and collecting application, transfer and approval fees in connection with the sale or lease of property must ask themselves whether or not those fees are then being used in accordance with the "direct benefit" language defined above. If they are not, your association members may find they are ineligible come July for federal-backed mortgages as a result. This FHFA Rule does not mean you must stop charging a transfer fee, it may mean that you must ensure that any fees collected are used to directly benefit the encumbered properties. A call to your association attorney to discuss your particular association covenant regarding transfer fees is highly recommended prior to July 16th!

Monday, March 12, 2012

Status quo for community associations after 2012 Legislative Session ends

Florida's 2012 Legislative Session ended last Friday with a flurry of activity and nothing positive passing this year for community associations other than HB 13/SB 88 relating to dock space in multifamily communities. This bill removes some of the monetary inequities that the State has foisted on dock owners in multifamily communities.

This year's community association bill, HB 319 (Moraitis) passed the House with a vote of 114 to 1. Its Senate counterpart, SB 580 (Bogdanoff) died in Senate Messages on Sine Die, or the last day of Session, Friday of last week.

Did a pricey PR campaign bring down the bill? Oddly enough, no.

While the emails for and against the bill undoubtedly played a role, what ultimately killed the bill was Senate President Mike Haridopolos's refusal to allow it to be voted on by the full Senate. Apparently, Senator Haridopolos who is from Melbourne, was contacted by an umbrella group of associations on Florida's Space Coast opposing the bill. This group had issues with two provisions in the bill: the third party purchaser language which would have required purchasers at foreclosure auctions to pay more than just unpaid assessments for a delinquent property and the Safe Harbor clarification. Had Senator Haridopolos allowed SB 680 to be heard, chances are it would have passed.

The foreclosure bills HB 213/SB 1890 met a similar demise this Session. These bills also attracted their share of proponents and opponents. Some of the provisions in these bills would have provided community associations with more tools to force banks to speed up their foreclosures. However, there were constitutional and drafting concerns with these bills from the outset.

Lastly, the Florida Legislature did see fit to pass SB 1196 which is one of the most unfriendly pieces of legislation we've seen in years. This bill will remove an HOA owner's right to pursue a developer in Florida for defects in the sidewalks, driveways, drainage areas and other improvements not located directly on the owner's lot and/or not contributing to the habitability of the home. It is hard to truly understand the logic at play when deciding to pass a law that would have individual owners paying out of pocket for defective sidewalks, driveways, etc. The developers' argument was that the cities pass final inspection on these items so why should the people who built them be liable.

There is still the possibility that Governor Scott may view this new law in its true consumer unfriendly light. You can contact Governor Scott and urge him to veto this bill via email at rick.scott@eog.myflorida.com.

Monday, March 5, 2012

Negotiations 101 for Community Associations

The common definition of negotiating is to communicate in search of mutual agreement. We negotiate every day whether we realize it or not. Often, it is obvious especially when we are trying to purchase a service or a product. Maybe it is a little less obvious when we are negotiating at our workplace or even just dealing with relatives about where we want to spend the holidays.

If you walk into any bookstore, you will find dozens of books teaching successful negotiation techniques. There are tricks of the trade that increase your odds of achieving mutual agreement in less time and more painlessly. Since almost of all these techniques can be utilized in a community association setting, it always amazes me that more boards, managers and association members don't employ them.

How much more effective do you think your negotiations with your board would be (or with your owners if you serve on the board) if effective negotiators were involved in those communications? No matter whether you are an owner addressing a shortcoming of the board or a director or manager addressing an owner's violation, the first thing to remember is that taking positions does not work during negotiations. Looking at the big picture or end game is much more effective than starting a dialogue from an entrenched position. Humor can also be a very powerful and effective tool.

Here are a few more tips to remember next time you are negotiating with your board or your owners to solve a particular problem:

• Not everything is worth negotiating; some battles simply don't need to be fought;
• Warn in a respectful way, don't threaten;
• Be soft on the people and hard on the problem;
• You can't control a bully's behavior, you can only control your response;
• Don't strike back;
• Don't give in;
• Don't break off or walk way. Keep working towards a mutual agreement;
• Ask the right questions: "What will it cost if we don't reach an agreement here?";
• Acknowledge some expertise on both sides;
• Present your view in addition to the other side's view not as an alternative;
• Don't always respond with a like-kind response;
• Acknowledge differences with some degree of optimism;
• Consider options that allow your opponent to "save face";
• Do the proper reserach befor embarking on the negotiations. Don't threaten certain actions or repercussions that simply aren't feasible; and,
• Silence can be powerful.

Successful negotiation in a community association context is especially important because it is a "living together" relationship. Unlike typical business negotiations, in an association setting, you will be forced to contend with each other for many years after the negotiations are over unless one of the party leaves the community. Realizing that dynamic should make it more compelling for your board, manager and association members to learn how to effectively negotiate.