Wednesday, August 8, 2018

Some States are protecting First Amendment Rights in Private Residential Communities. Will the Sunshine State follow suit?

In 2012, the New Jersey Supreme Court ruled 5-1 that a condominium owner could place election signs on his front door and side window of his townhome over the objections of his association.

Wasim Khan, an oncologist who was a Democratic candidate for the Morris County Board of Freeholders, fought the Mazdabrook Commons HOA when they began fining him $25.00 a day for each day his election signs remained. That wasn't the first time that Khan tangled with his association; they had previously fined him for his rose bush vines growing too high.

Khan was ecstatic over the Court's ruling, saying "We won for the rights of a million fellow New Jerseyans and countless more across the U.S."

Well, maybe not so fast here in Florida. Our State's Supreme Court has not ruled on the issue of whether a private residential community's governing documents can restrict signs without running afoul of the U.S. Constitution's First Amendment protections which prohibit government from abridging the freedom of speech. Generally speaking, there would have to be some "tie in" between a private residential community and state action in order to have the First Amendment apply. Some people think that the fact that Florida condominiums are regulated by the State is sufficient to create that necessary state action but that theory has not yet been tested in our highest court.

In a Florida decision that arose from a Naples neighborhood, a homeowners association sued an owner who refused to remove a “For Sale” sign, which violated the restrictive covenants, from their front yard. The trial judge ruled in favor of the homeowner, finding the association’s rule to be an abridgment of free speech. Upon appeal, the appeals court sided with the association, finding that the association was not an arm of government, that there was therefore no “state action, and enforcement of the no-sign-in-the-yard rule did not violate free speech rights.  See Quail Creek Homeowners’ Association vs. Hunter.  Since the Quail Creek case involved what is called “commercial speech”, which is afforded less protection than pure “political speech”, it is perhaps debatable whether the same result would have happened if the test case was a political yard sign.
Meanwhile, the State of California has also taken steps to safeguard the rights of those living in common interest ownership communities to express themselves via signage. A 2011 law sponsored by Senator Christine Kehoe even went so far as to ensure that tenants in these communities could display political signs. There were some limitations on this right including the requirement that such signs be no larger than 6 square feet and that the signs not be installed more than 90 days prior to the election or vote and must be removed no later than 15 days after such election or vote. Moreover, the signage must relate to a specific election, referendum, recall or issue before a public body and not just contain a general political sentiment.

A ride through my own HOA last weekend revealed one brave soul who had installed a small sign for a local candidate near his mailbox. Our community's covenants ban all signs except the statutorily-permitted security signs. Sure enough, the latest issue of our HOA Newsletter contains a bolded section reminding us all that signs are not permitted including political signs.

What are your thoughts about private covenants and political signs given the upcoming midterm elections in November? Do such restrictions save us all from visual clutter and our neighbors' questionable political choices or do they abridge our freedom of speech? Will Florida follow the examples set by other states or are we still a long way off from that happening?

Sunday, August 5, 2018

FL Division of Condos Proposes Greater Financial Penalties on Associations

Florida condominiums, cooperatives and, to a lesser degree, homeowners' associations are subject to the imposition of fines and penalties by the Division of Florida Condominiums, Timeshare and Mobile Homes ("Division") for a variety of mistakes and missteps.  The Division plans to pass sweeping changes to Chapter 61B-21 of the Florida Administrative Code which may go into effect in the coming weeks.

Why is this important for your Board to know?  Because many of the actions listed below occur on a regular basis in many associations that can otherwise be described as high functioning communities.

The category of minor violations has been narrowed while the category of more egregious violations has been expanded. The following violations are considered minor violations for which a Notice of Noncompliance will be issued:


  • Failing to disclose the beginning and ending dates of the period covered by the proposed budget.
  • Failing to disclose periodic assessments for each unit type in the proposed budget.
  • Distributing candidate information sheets consisting of more than one page.
  • Verifying the outer envelope information BEFORE the date of the election.
  • Failing to disclose the amount required to fully fund each reserve account as of the end of the fiscal period covered by the annual financial statements.
  • Failing to disclose the method of allocating income and expenses in the annual financial statements or turnover audit.
The following violations will result in a MINIMUM total penalty of $10-$30 PER UNIT or $1,000 whichever amount is greater. In a high rise with 350 units, a penalty for one of the following violations could cost $10,500.  As you can see, some of the violations below are much more egregious than others. 

  • Failing to maintain complete accounting records.
  • Failing to maintain separate accounting records for each condominium.
  • Not passing assessments sufficient to meet expenses.
  • Collecting assessments less frequently than quarterly.
  • Not apportioning assessments correctly amongst multiple condominiums.
  • Failing to charge interest on past-due assessments.
  • Improperly excusing the developer or other owners from paying assessments.
  • Improperly amending the Declaration of Condominium to change the percentage by which the unit owners share the common expenses.
  • Imposing improper use fees.
  • Imposing late fees, transfer fees or security deposits without proper documentary authority to do so.
  • Failing to maintain adequate fidelity bonding.
  • Compensating board members or officers without proper documentary authority to do so.
  • Improperly allocating reserve requirements.
  • Failing to include a separate budget for each condominium operated by the Association as well as a budget for the Association.
  • Failing to obtain competitive bids fore each contract that exceeds 5% of the association's budget.
  • Imposing fines and suspending use rights without proper notice and an opportunity for a hearing.
  • Allowing an ineligible person to fun for the Board.
  • Failing to adopt a budget each year.
  • Commingling reserve funds with operating funds.
  • Using Association funds for items other than proper common expenses.
  • Contracting with a service provider owned by a board member.
  • Using an association debit card for any association expenditure.
  • Failing to hold an annual election. The caveat here is that if you do not have more candidates running than open seats or if you do not have at least 20% of your eligible voters cast a ballot you will not have an election.
  • Failing to use ballots or voting machines.
  • Failing to provide space for the name, unit number or signature of the outer envelope used for elections.
  • Failing to provide timely first and second notices of the election.
  • Using improper nomination procedures in the election.
  • Holding the election at a time and place other than the annul meeting.
  • Failing to provide a candidate with a receipt for written notice of his or her candidacy.
  • Permitting ineligible candidates to be listed on the ballot.
  • Allowing members to rescind or change their previously cast election ballots.
  • Including comments from the board about election candidates in the Second Notice of Election and accompanying documents.
  • Not using an impartial committee to count the ballots.
  • Altering or editing candidate information sheets. The caveat here is that if a candidate submits a double-sided candidate information sheet or a candidate information sheet that is more than one page long, that candidate must be told that only one side of a page will be distributed.
  • Failing to place the inner envelope in a separate receptacle before being opened.
  • Not using uniform ballots.
  • Not checking the outer envelopes against a list of eligible voters.
  • Counting ineligible ballots
  • Failing to count properly cast ballots.
  • Opening outer envelopes prior to the election meeting or opening outer envelopes outside the presence of unit owners.
  • Failing to maintain official records.
  • Requiring a unit owner to pay a fee for access to association records.
  • Failing to timely provide access to records or failing to allow scanning or copying of records.
  • Improperly purchasing a unit at a foreclosure sale.
The foregoing list of violations is not inclusive and, in addition to the penalties established by the rule chapter, the Division may also seek to recover any other costs, penalties, attorney's fees, court costs, service fees, collection costs and damages allowed by law. . There are a lot of other areas where a volunteer board can unknowingly go astray and wind up being monetarily penalized as a result. The changes being proposed by the Division to 61B-21.003 F.A.C reflect a shift in the Division's focus from education to enforcement. While both are important, education helps boards avoid the types of infractions which result in fines and penalties.

The Division has posted notice of a Public Meeting/Workshop Hearing for Monday, August 13th from 9:30-11:30 am in Tallahassee. I realize that most of you reading this blog are not likely to make it up to Tallahassee for this hearing.  However, you can submit a comment regarding the proposed rules by sending an email to the following email address which has been set up for this purpose:

fctmh.rulehearing@myfloridalicense.com

The imposition of fines against associations will have a financial impact and may result in the community looking for ways to hold individual board members accountable for the costs to the association. Do not expect insurance to cover fines or penalties.  Given these new enforcement parameters, I am urging associations to consult with their management professionals and experienced legal counsel to ensure that they are operating within the requirements of the Statute and Administrative Code.  Particular attention should be paid to fiscal operations (budgeting, calculating and handling of reserves, collection of assessments), imposing fees of any kind other than assessments, elections and board member conduct and the awarding of contracts.  Serving on your board of directors is almost guaranteed to be a thankless job but you should try to avoid it also becoming a costly job!