Friday, August 30, 2013

Should associations articulate the reason for denying a proposed renter or purchaser?

Many associations have the authority under their governing documents to scrutinize proposed leasing and sales transactions and to issue an approval or denial in connection with same. 

Boards are often advised that it is safer to simply say that an application was "denied" without going into the details surrounding that denial. If the property owner wishes to know the reason for the denial and pursues it legally then yes, the board will have to capitulate and provide that reason.

One school of prevailing thought remains that providing reasons for a denial could fuel unnecessary legal fights. Naturally, the other side of that debate demands transparency and the reasons that the board is exercising its authority to deny when screening renters and purchasers.

Broward County has recently proposed a new ordinance which would require all Broward County condominium, cooperative and homeowners' associations to give a specific reason in writing for the denial of an application for purchase or rent. All Broward County associations must also give written notice to the Board of County Commissioners of the status of all pending applications to rent or purchase a dwelling!

There is a public hearing scheduled for Tuesday, September 10, 2013 which will start at 10:00 am in the Commission Chambers on the 4th Floor of the Governmental Center located at 115 S. Andrews Ave, Ft. Lauderdale, FL.  Since this proposed ordinance references the Human Rights Act, one can safely surmise that the Broward County Commissioners suspect most reasons for denial are discriminatory. If that is not their suspicion, they are surely likely to increase discrimination filings nevertheless as a result of this ordinance being passed. If you are a Broward County board member or if you manage a Broward County community association,  it is important that you attend this meeting and let the Commissioners know how impractical it may be for your board to advise them about the status of every pending sales and leasing application you receive. It would also be nice to ask the Commissioners what public purpose is being served by the implementation of this ordinance. 

If you live in another county in Florida, this proposed ordinance should still be of concern to you as often counties look to each other and borrow liberally from each other when creating ordinances.

For those of you who may be thinking that there is a preemption issue for this ordinance with state law, there is nothing in the shared ownership statutes which protects a board's right to silence on the reason for denying an application for sale or purchase. There may be some association documents which specify that articulating a reason for denial is not necessary but, in my opinion, the local ordinance would likely trump that documentary provision. 

This proposed ordinance may have wide-ranging impact on the manner in which association approvals must be handled.

Monday, August 26, 2013

Could academic principles transform private residential communities?

My husband and I just returned from dropping off our daughter for her freshman year of
college at a very beautiful school with a rigorous undergraduate business program. While we were bracing ourselves for the flood of emotions associated with dropping off a child at a campus a great distance from our  home, we also managed to enjoy the entire orientation program presented by the school.

As I looked around the packed auditorium where the Dean of the Business School delivered a very heartfelt speech, I thought to myself: "how many of these eager college students see themselves one day sitting on a community association board?" "How many will find themselves living in a condominium, cooperative or homeowners' association in the future?"

Naturally, the answer is not one of them was thinking anything at all pertaining to the community association lifestyle.

The reality is, however, that a great many of them will one day live in a shared ownership community because that is what is being built throughout the United States. Since many of these students are bright and have already demonstrated leadership capabilities by virtue of being admitted to a school like the one in which we were sitting, the hope would be that many of them would give back to the communities they will call home some day when they are raising their own families and, afterwards, when they find themselves as Empty Nesters. But, would they? Why do the lessons of our childhood and young adulthood seem to leave us when we need them most,  later in life and in instances where they could be most helpful?

The Dean told the students and their parents that the faculty and administration demanded excellence from them and insisted on integrity. The goal in the next four years was to create knowledge and transform each of them into their highest selves. The students wouldn't have to go it alone. Each would have a team of advisors assisting them every step of the way.

How many communities could be transformed into places we love to call home if some of these university principles were applied to private residential communities? Why is there not the equivalent of a "team of advisors" helping people when they first move into a community? Many times, people are lucky if they get a wave and a nod from new neighbors. Wouldn't it be wonderful if newcomers to the community were treated to an encouraging orientation program designed to help them succeed in the community, get involved and perhaps run for the board themselves?

Sure, this doesn't always help; not every student will graduate from the university my daughter is attending but by setting the goals high and providing the support needed to achieve them, the administration has greatly increased their odds. What do we as community leaders do to ensure that newcomers to the community truly understand the rules, feel as though the community welcomes them and have the support needed to thrive as an association member? What is done to inspire talented and well-meaning  folks to serve on these boards? Maybe each of our board members and association members need to remember what used to inspire them to be their best selves and apply it where it is needed most these days: their own community.

Sunday, August 18, 2013

Bank awarded fees after condominium association pushes too far!

On August 14, 2013, Florida's Third District Court of Appeal ruled that a bank which had taken title to two condominium units was entitled to its attorney's fees from a condominium association just as any other condominium owner would be pursuant to Section 718.303(1), F.S.

The Ocean Bank v. Caribbean Towers Condominium Association, Inc. case began when Ocean Bank foreclosed on two delinquent units in the Caribbean Towers condominium community in North Bay Village, FL. The bank properly named the association as a defendant in both actions.  Ultimately, the bank took title to both properties at its own foreclosure sales. The bank then attempted to sell the properties and ran into a stumbling block when the association's estoppel certificates demanded payoff amounts almost 9x and more than 13x higher than the statutory maximum known, in the vernacular, as "Safe Harbor". 

Section 718.116(1)(b) of the Florida Condominium Act was amended to cap an institutional first lender's liability for past due assessments in a condominium association at the lesser of 12 months' past due assessments or 1% of the original mortgage debt. You might ask why this occurred. Well, lenders will tell you the statutory cap was needed to encourage them to continue making loans in condominium communities. Association members will tell you that the cap is there because bankers have one of the strongest lobbies in our state and that is the case in most other states as well.  The genesis of the Safe Harbor cap is not as important at this point as the fact that it is THE LAW as interpreted in this and other cases.

Due to the wrangling with the association over the non-conforming estoppel certificates, the bank was forced to delay its closings on the units and filed post-judgment motions against the association requesting that the Safe Harbor statutory cap be applied and seeking an award of attorney's fees. It is important to note that both trial judges ruled for the bank on the merits of their case with one judge referring to the association's position as "frivolous".

The 3rd DCA ruled that the bank was entitled to an award of its attorney's fees since it owned both units and it was the prevailing party in its dispute with the condominium association.

There are not many associations out there who are feeling overly generous with banks right now. Most associations would appreciate having the statutory cap removed entirely so banks who take title to these delinquent properties would be forced to pay all amounts owed, not just the lesser of 12 months' past due or 1% of the original mortgage debt. Since that legislative change is not likely to happen any time soon, if ever, the most prudent course of action is for an association to follow the law when it comes to demanding amounts owed from lenders who meet the statutory threshold. Yes, there are some lawyers and collection companies that will tell you that there is enough wiggle room in the statute to demand more than just past due assessments and they will also tell you that their arguments have prevailed before. However, that doesn't do much for the Caribbean Towers Condominium Association that just got slapped hard and is paying the price. Rest assured, banks' counsel never come cheap and these association members must now foot the bill.

The Ocean Bank appellate decision is binding on all trial courts throughout Florida unless and until a conflicting appellate decision is issued.

Stay tuned and if you are thinking about pushing the boundary on Safe Harbor, get an indemnification from the person or firm doing the pushing that is worth more than the paper it is written on or, better yet, operate within the safe boundaries of the Safe Harbor law. 

Monday, August 12, 2013

Community associations and property insurance: many questions, many concerns.

Last Thursday, I was fortunate to participate on a panel at State Senator Eleanor Sobel's request to discuss property insurance issues at the Hallandale Beach City Hall.

Joining me on the panel were:
  • Robin Smith Westcott, Florida's Insurance Consumer Advocate
  • Alexander Dopazo, President of the Latin American Association of Insurance Agents
  • Carlos Lacasa, former chairman of the Board of Governors of Citizens Property Insurance
  • Bill Newton, Executive Director of the Florida Consumer Action Network
  • Jay Neal, President and CEO of the Florida Association of Insurance Reform (FAIR)
Naturally, there was a lot of discussion about rising rates, shrinking coverage (particularly regarding sinkholes) and the fiduciary duties volunteer board members have when selecting insurance coverage and pursuing claims for damages. Not surprisingly, most of the people in attendance and many of the panelists found it difficult to easily understand the terms and provisions of their insurance policies. The suggestions provided were quite good including the need to always shop around for the best agent and the best coverage which seems to be such basic advice but is not all that common for some boards who have become complacent over the years with both their agents and their coverage.

So what did I have to say about property insurance and Florida associations?

One of the biggest problems for shared ownership communities is the fact that the policies they purchase to protect the common areas falls within the commercial-residential category. As a result, association boards have fewer consumer protections when it comes to understanding the terms of those policies. Unlike a purely residential policy, a commercial-residential policy is not required to have the same bold disclosures regarding pricing and terms. In addition, an association's common property (the roof, the clubhouse, etc.) is not eligible for the mitigation credits that have lowered premiums for countless residential policyholders.

Property insurance concerns for a board of directors include the following:
  • How much coverage do we need?
  • Can we afford it?
  • Do we really understand what our out-of-pocket costs will be if our community does sustain a loss?
  • What can we do if our claim is denied or underpaid?
Property insurance concerns for the association members include the following:
  • Has our board purchased sufficient insurance coverage for the items for which they are responsible? Incredibly, one Hallandale community was unaware that the condominium president had failed to renew the building's property insurance policy and the building was subsequently devastated by a fire.
  • Has our board comparison shopped for our agent, our insurance company and our coverage?
  • Does our board understand how to properly file and diligently pursue a claim should we suffer a loss?
  • Assuming our board is not comprised of insurance experts, have they reached out to the proper professionals to guide them with the foregoing decisions?
  • How much could I be forced to pay via special assessment for our deductible, uninsured losses, etc.?
Association directors and managers continue to advise that insurance premiums are the single largest line item on their budgets each year. Since that doesn't seem likely to change any time soon, doesn't it make sense for all association members to become much more engaged with their public policy makers regarding insurance availability and affordability?

Sunday, August 4, 2013

Where does your condominium, cooperative or HOA board hold its meetings?

All the shared ownership statutes provide that association members have the right to attend meetings of the board, certain committee meetings and, naturally, the annual membership meeting. However, the statutes don’t specify a particular place where those meetings must be held.
The Florida Condominium Act states that the annual meeting must take place within 45 miles of the condominium property but other than that, the statutes don’t provide much guidance about wise or convenient choices for meeting venues.  Sometimes, an association’s governing documents will specify where meetings must be held. However, if the documents do not, boards would be well advised to give some due consideration to the location selected. After all, the goal should be to encourage, not discourage, attendance and participation at your meetings.
Here are some of the locations I’ve seen used over the years for association meetings:
  • The community’s clubhouse: this one is a logical choice. However, please be sure the lights and air conditioning work. Believe it or not, I once attended a meeting in a clubhouse with no electricity.
  • Director’s home or unit: this one is more problematic as the size of the residence could pose a problem depending on how large the potential turnout. Some people would also not feel comfortable attending a meeting in a director’s home if they happen to be feuding with that particular director.
  • Management company: this location is usually selected when the board fears a meeting might get out of hand. Boards contemplating using this venue should consider the costs, if any, involved to do so and the inconvenience factor depending on the office location.
  • Attorney’s office: See above.
  • House of worship: this choice can be uncomfortable for those association members who are of a different faith.
  • Library:  usually a good choice so long as it is close to the community.
  • Denny’s:  yes, I once attended a board meeting at a Denny’s. It was neither convenient nor tasty.
  • Pool deck: this could be a delightful choice during our gorgeous winter months in Florida but being outside in our steamy summer months could very well mean fewer folks showing up. The reverse is true for our northern neighbors selecting meeting venues.
  • Under a tree: yes, in one HOA, the board selected a large oak tree in one of the community’s parks as the place where meetings should be held. While it had a certain amount of charm, there were weather, seating and bug issues.
  • Rooftop:  one of our cooperative clients routinely held meetings on their roof which was beautifully finished in a garden-like setting. However, a couple in the building was afraid of the height and complained relentlessly about the meeting location until it was changed.
So where does your board hold its meetings? Is the locale selected for your convenience or the members?  Is any thought given to the room temperature, time of the meeting, available bathroom facilities and other factors that might influence whether or not people look forward to attending?
Meetings should be an opportunity for your board to shine. Why not design them to showcase your hard work by encouraging maximum attendance and participation with a little thoughtful planning in advance?