Sunday, October 28, 2012

Do developers give thought to long-term governance in the communities they build?

It is no secret that developers build communities with one main goal in mind: selling out their inventory.

While development in Florida and many other parts of the country has dwindled considerably over the last few years, now is the time for reputable developers to give some thought to new ways to ensure success for the product they are peddling.

Most purchasers look at all the obvious things: size and location of the community pool, reliability of the security measures being offered and model types for their desired unit or lot. A potential purchaser might not give much thought prior to the closing about how easy it will be to elect a board, whether the assessments are artificially low, the transparency (or lack thereof) of community operations and whether or not the association's governing documents are properly maintained and easily accessible.

Developers who really want their customers to be talking about how wonderful they are years after transition would be well advised to do the following:

-Create a streamlined governing body. Creating communities with 22 sub-associations and a master association might be easier for the developer to manage fiscally but it is a nightmare of duplication and confusion down the road which is almost impossible to untangle as people identify far too greatly with their "building" as opposed to the community overall.

-Create governing documents with practical realities in mind. Don't make it difficult and/or impossible to amend the governing documents by requiring lenders' consent. Why would you ever subordinate the association's lien rights to lenders? Many developers can secure construction financing without doing so and so can you.

-Be a pioneer and understand that technology is here to stay and often cuts down on expense and time for communities who utilize it thoughtfully. Create an association website and upload the governing documents for inspection convenience. Create reasonable rules and regulations that allow the use of smartphones, scanners and tablets so owners can make their own copies of documents of interest without expending funds and without having the association undertake any labor in that regard.

-Do not create a budget with artificially low amounts to entice purchasers. Your customers certainly want to make an informed purchase decision and you deny them this right when they are unaware of the costs it takes to really provide the common area services you deliver while you are still building homes.

-Take out your calculator when creating your documents to ensure that the percentages of ownership actually add up to 100%. One of the most egregious cases of developer error I've seen was in a large condominium where the percentages of ownership did not add up to 100% and were inconsistent with the surveys attached to the declaration.
-Create a real sense of community from the beginning. Rather than just highlighting your sales office, set up a Welcome Committee that is run by the residents and has nothing to do with your remaining sales. Hold regular meetings and set the tone for inclusion and transparency.

The economic woes over the last few years have given developers ample free time to consider new ways of creating planned communities that will support long-term enjoyment by the residents. It all starts with a plan that makes sense for those who live in the community and not just those who buy.

Sunday, October 21, 2012

Two legal concepts that are misunderstood by many community association members.

A blog reader wrote to me the other day and asked what she could tell a member of her community who claimed he was not bound by the association's governing documents because he had never read them.

I introduced my reader to the concept of constructive notice; just because an association member has never actually read the documents does not mean he or she does not have constructive notice of the terms and provisions of those documents if they were properly recorded in the Official Records of the county where the association property is located. The concept of constructive notice imputes knowledge to a person even though actual notice was not personally delivered to him or her.

In the case of a mandatory association's governing documents, those documents must be recorded in the Official Records to be effective these days and purchase contracts include riders referencing them while title insurance policies similarly list them. Moreover, in a condominium purchase, the underlying covenants are identified by Official Records Book and Page number right on the deed. With all this notice that recorded restrictions exist, there is simply no wiggle room for an association member to legitimately claim a lack of knowledge of their existence. Since association members are already seen as having constructive notice of the governing documents, it is in their best interests to obtain actual knowledge by reading them both before and after purchase.

Another legal concept that creates some confusion in an association setting is the issue of who can legally bind the association? The term apparent authority is used when a reasonable person would understand that an agent had the authority to act on behalf of a principal. In a troubled community association, a question that often arises is, "how could our President have gotten us into such an awful contract?" A landscaper, roofer and any other vendor who is doing business with an association, can reasonably expect that an officer or director of that association has the authority to enter into contracts. It is only when such contractor is put on notice that he or she must obtain actual authority (ie a Board Resolution to enter into the contract) that apparent authority can no longer be relied upon to ensure that the contract remains intact.

Both of these legal concepts rely on passivity: constructive notice imputes knowledge while apparent authority imputes authority. In order to avoid the problems that can accompany both of these concepts, association members would be well advised to actually read the documents that govern their association and boards would be well advised to establish protocol to avoid detrimental, unilateral action by any one board member hiding under the cloak of apparent authority.

Sunday, October 7, 2012

Do you know how you will vote on Florida's 11 upcoming constitutional amendments before entering the Ballot Box?

On November 6th, you will hopefully step into a ballot box somewhere in Florida to make your voice heard along with your fellow citizens. In addition to deciding on your president, vice president, senator, representative and retention for several members of the Judiciary, this year's ballot will also contain eleven (11) weighty amendments that merit some deliberation beforehand.

Florida has had six (6) different constitutions throughout its history: 1838, Ordinance of Secession in 1861, 1864, 1868, 1885 and our current constitution which was ratified on November 5, 1968. Florida's Constitution is a living document which can be amended five ways although the two most frequently used are: citizen petition or a Joint Resolution of the Legislature passed by 3/5 of each Chamber.

None of the eleven (11) amendments being proposed this year were placed on the ballot as a result of a citizen petition. If you haven't given much thought to who is sponsoring these eleven (11) amendments and why, the Community Advocacy Network (CAN) will be holding a FREE Luncheon and Town Hall Meeting this Friday, October 12th at the Katzman Garfinkel & Berger Law and Learning Center in Margate. Many of the sponsors of these amendments along with spokespersons from groups supporting and opposing same will be attending.

Amendment One is Florida's response to Obamacare inasmuch as it would prohibit laws or rules from compelling any person or employer to purchase, obtain or otherwise provide healthcare coverage. It is being sponsored by Senator Haridopolos and Representative Plakon. Opponents claim that this amendment, if passed, might very well be moot as the Supreme Court has already upheld the constitutionality of the Federal Health Care Plan.

Amendment Six provides that public funds may not be expended for any abortion or for health insurance coverage of abortion. This amendment is being sponsored by Senator Flores and Representative Baxley.

Amendment Eight deletes the prohibition against using revenues from the public treasury either directly or indirectly in aid of any church, sect or religious denomination or in aid of any sectarian institution. This amendment is sponsored by Senator Altman and Representatives Plakon and Precourt.

Amendment Nine provides for property tax relief for the surviving spouse of a military veteran who died from service-connected causes while on active duty or to the surviving spouse of a first responder who died in the line of duty. This amendment is sponsored by Senator Norman and Representative Harrison.

Blog space allows us to only touch on a small sampling of the proposed amendments. However, at the Town Hall, guests will be provided with full summaries of each amendment along with the opportunity to pick the brains of the folks sponsoring, supporting and opposing these changes. There will also be a discussion of upcoming community association legislation and what your legislators think you need and want in that regard.