Thursday, March 23, 2017

Part III of the Breaking Up Series: Leaving the Past Behind You

In this final installment of my Breaking Up series, I want to talk about what a new board needs to do to get out from under the legacy left behind from an old board, particularly when that legacy is not a positive one. 

"The secret of change is to focus all of your energy, not on fighting the old, but on building the new." 

Some new boards find that they need to depart entirely from the manner in which the association had previously been operated.  This is especially true when a prior board had been in place for a long time.
Some of the unpleasant discoveries that new boards may make include:
  1. A pattern of signing unfavorable service contracts which were never reviewed by legal counsel and which now bind the association for many years without any possibility for early extrication.
  2. The failure to routinely and consistently enforce important provisions in the governing documents.
  3. A disorganized jumble of association books and records which makes swift and successful document inspections unlikely.
  4. Large delinquencies which have not been properly handled.
When I meet with boards who are confronting the foregoing problems, my first piece of advice is to look forward and focus on setting better patterns in place. Typically, the only exception to this advice is if a crime or fraud was perpetrated by prior board members in which case we discuss all legal and criminal options available to the Board.

In terms of cleaning up the problems inherited from a previous board, the following steps can help put a healthier pattern in place:
  1. Have association counsel review all existing contracts; renegotiate when possible and send out termination notices for those no longer desirable contracts where are up for renewal or for which a verifiable breach exists.
  2. Just because a previous board has failed to enforce certain use restrictions does not mean subsequent boards are forever barred from doing so.  A new board can undertake a process known as "republication" which allows you to once again enforce overlooked restrictions by sending out proper notice of your intention to do so. Please speak with your association attorney to discuss the proper steps to take in order to accomplish this republication process.
  3. Work to digitize your books and records, create an association website if you don't already have one or update the one you do have and upload those newly digitized records to your website. The more organized and transparent you make your operations, the easier your board's job will be.
  4. Large balances are much more difficult to collect than small ones. New boards should discuss their existing collection policy with counsel and decide what is and is not working. You want to strike the right balance between not allowing a delinquency to balloon out of control while not being too harsh in terms of your policy.  Speaking of counsel, assess whether or not your current attorney is proceeding expeditiously with your collections or is part of the problem.
Perhaps the most difficult aspect of breaking free from a prior board is the fact that in many communities the previous board members remain residents in the community and often become very vocal critics of their successors. Moreover, a board is often not overhauled entirely but in a piecemeal fashion which means holdovers from the "old days" may become an impediment to changing the association's culture since they are usually fans of "business as usual".

Change is usually not easy but in the association context, it can make a world of difference when it comes to the board's ability to move critically important projects forward and resident satisfaction.

Tuesday, March 7, 2017

Email Intelligence-does your Board possess it?

In my last blog entry, I discussed the considerable downside to sending a resignation via email. Today, I am discussing the pros and cons of board members and managers using email for other purposes and how to craft a sound email policy for your association.
Board members, managers and association residents are no different from everyone else you know inasmuch as they are all heavily reliant upon electronic means to communicate. Phone conversations and, even more rarely, in-person conversations do still occur but not nearly as frequently as emails and text messages.
Whether you are a member of an association board of directors or are a manager assisting such a community, it is important to understand that (a) everything you put in writing can and will be used against you and (b) some topics and situations are not well suited to an email response.
Whenever I teach a Board Certification or other educational course, I always ask the directors and managers in attendance to raise their hands if their community has a comprehensive email policy in place. Surprisingly, not a single hand is raised.  Deciding in advance how your Board will handle emails from residents, professional advisers and vendors is not only advisable, it is necessary.
Here are some questions you need to ask yourselves and then craft the appropriate email policy with your association attorney's assistance to ensure it complies with both your documents and applicable law.
  •         If a resident emails the entire board with a complaint, who should respond? Without protocol in place, chances are everyone will respond (and sometimes with different answers and conflicting information) or no one will respond as a result of assuming someone else did.
  •         If a resident's email is akin to a rant with no specific purpose or request, how should it be answered, if at all? Florida law requires certified inquiries and written requests to inspect the association's books and records to be answered within a certain time period. However, nothing requires boards to respond to venomous email rants. Decide as a board how you wish to handle these kinds of communications. Some boards choose to use a simple auto response such a-"Thank you for your email. Your input will be reviewed and should a response be necessary, you will receive one."
  •         Email communications to and from professional advisers, particularly the association attorney should be deliberate and thoughtful. Since reading and responding to emails is typically a billable event, the board should determine who can send such communications to the attorney or the attorney's staff. In addition, when litigation is being discussed extraneous people should not be added to the recipient list for fear of jeopardizing the attorney-client privilege.
  •         Replying to all on an email and allowing Outlook to automatically complete email addresses (and thereby send to the wrong recipient if you don't check carefully) are the bane of most emailers' existence. This is doubly true for board members and managers so be sure to review your recipient list prior to hitting send. Also, know that blind copies are  no guarantee that your email recipient will not reveal having seen a copy of your email so think twice before doing that as well.
  •         Emails are typically part of the association's official books and records. As a director, if you do not wish to have your personal email address used to send and receive emails related to the business of running your association, it is wise to set up an official association email address for your directors. You should also discuss with your association attorney how many years you must retain those emails and the best method to do so.
These are just a few areas that need to be covered in your association's email policy. If you don't have such a policy, what are you waiting for?

FL Associations Beware: Governor Signs Law Today which Shortens Screening Time for Members of the Military!

SB 184 was signed by Governor Rick Scott of FL today. The new law which amends Section 83.683, F.S. will take effect on July 1st and will apply to condominiums, cooperatives, HOAs and landlords.

The new requires an association to complete the processing of a rental application submitted by a prospective tenant who is a service-member within a mere seven (7) days after submission and must, within that 7-day period, notify the service-member in writing of an application approval or denial and, if denied, the reason for denial. If the association fails to timely deny the application within seven days, the leases goes into effect.

A service-member is defined in Section 250.01, F.S. as “any person serving as a member of the United States Armed Forces on active duty or state active duty and all members of the Florida National Guard and United States Reserve Forces.”

§ 250.01(13) defines the national guard as “the Army National Guard and the Air National Guard.”

§ 250.01(2) and (6) define the Air National Guard and Army National Guard as including “active or inactive.”

As such, the shortened application review period would seem to apply not just to active duty service-members but also to any member of the reserves even those who are not on active duty. The rationale for assisting active military members in securing housing quickly makes sense. However, this new law seems to have a much broader application and puts a real burden on volunteer boards to screen an application within just one week after receiving same.

The starting point for associations is to ensure that their applications ask whether or not the rental applicant is an active member of the military or a reservist. Given the scope of this new law, associations must ensure that screening companies return results more quickly on applications highlighted as belonging to a member of the military or a reservist. Boards are well advised to speak with experienced association counsel about how to quickly handle an application that contains any issues that might trigger a disapproval.

This new law is yet another example of how associations must be nimble enough in their operations to implement statutory changes quickly. Most boards take a full 30 days to respond to an application. For rental applications from active members of the military and reservists that will no longer be an option.

Part II of the Breaking Series: 50 Ways to Leave Your Lawyer

"Make a demand, Stan"

"Write off the fee, Lee"

"What does this cost, Ross?"

In Part II of my Breaking Up series, I will discuss how to leave your lawyer....if you must! The title of this blog post is a bit of misnomer as I won't indulge every fantasy you may have about canning your counselor.

As with your change in management, to transition to new legal representation it helps greatly if you have a copy of your retainer agreement to review first. Some lawyers and law firms would have you believe that you must defer your decision to seek representation elsewhere until the term of their retainer expires which is simply not true. Unlike other contracts, legal retainers are terminable at will. As such, if there is a specific termination notice required by your legal retainer it is really a formality as (a) your association can hire and use more than one lawyer or law firm at a time and (b) the attorney should only be performing services requested by your association.

Some boards prefer to have new counsel send prior counsel notice of that termination and request for the turnover of any active files.  Others prefer to do it themselves, either to thank the attorney for his or her past service or to outline the litany of complaints that led up to the departure decision. Once the decision is made to leave, it is important that the notice of that decision be very clear that work must stop other than on litigation matters which might be jeopardized before new counsel can substitute in. On non-crucial matters, I have sadly seen attorneys on the way out the door engage in a flurry of last minute billing activity so it is important to ask for a complete accounting of what is owed at the time notice of termination of representation is given.

It is also important to remember that if your board chose to have an attorney defer fees and advance costs on litigation matters (this is often the case with collection matters), you will need to pay those deferred fees and costs prior to those files being turned over to the association and its new counsel.  However, there are times that new counsel can move forward without having to obtain files from former counsel; this may be particularly true with non-litigation matters where new counsel is less than confident in a predecessor's work product. Maintaining a legal relationship because you don't want to pay those deferred fees even
while the matters are not being adequately handled would be shortsighted at best.

Litigation files may have what is called a charging lien on them. A charging lien is a type of attorney's lien under which an attorney can eventually claim a portion of any money paid to the client as a result of a judgment, settlement or verdict for unpaid legal fees and costs owed to that prior attorney. It is essential to advise subsequent counsel of any fee arrangements, particularly contingent fee arrangements, made with prior counsel as those arrangements could impact strategic decisions with regard to your pending legal matters as well as limit your new counsel's options.  Lastly, you may be surprised and very disappointed to learn that prior counsel did not handle things as efficiently or properly as possible, resulting in damages to your association and a potential malpractice claim against former counsel. It is then up to your board to decide whether or not you wish to spend time and resources pursuing a claim to make you whole.

As with other transitions, the best lawyers understand that the end of a client relationship is not always permanent and that a gracious and professional departure is in the best interests of all parties.