Category Archives: Legal Morsels

RECORDING RULES AND AMENDMENTS THERETO RECENT STATUTE CHANGE AFFECTING HOMEOWNERS’ ASSOCIATIONS

Many residents of Florida live within a community operated by an association of some kind, whether it be a community of single-family homes under the jurisdiction of a homeowners’ or property owner’s association, or a condominium building maintained by a condominium association.  All in such situations should be well-aware that many aspects of life within these communities are subject to restrictions outlined in a set of governing documents, which include a declaration, articles of incorporation, bylaws, and rules and regulations. While the declaration, articles of incorporation, and bylaws are typically recorded among the public records of the county in which the community is located, rules and regulations are more often not recorded.

As rules and regulations are usually amendable by the approval of the board of directors only (as opposed to the additional approval of the membership), allowing rules and regulations to be unrecorded provides the board of directors with the flexibility to amend the rules and regulations as the need arises without the added expense and time required to record these rule amendments among the county’s official records. However, this option has changed for homeowners’ associations as a result of recent legislative changes which took effect on July 1, 2018.

How Has This Changed?

Pursuant to new provisions set out in Section 720.306(1)(e) of F.S., “[a]n amendment to a governing document is effective when recorded in the public records of the county in which the community is located.”  While this has certainly always been the case for a declaration, articles of incorporation, and bylaws, this is new as to rules and regulations of a homeowners’ association because they were added to the definition of the term “governing documents” as set out in Section 720.301(8), F.S. when the Statute was amended in 2015, effective in July of that year.

Due to the fact that many homeowners’ associations have not recorded their rules and regulations in the public records of the county, consideration should be given to recording all of the rules and regulations, particularly if there are plans to amend them.  Failing to record the rules and regulations prior to (or at the same time as) recording an amendment will possibly create what is termed a “wild” amendment, which is not connected in the public records to the document it is trying to amend.  Additionally, if an amendment to the rules and regulations must be recorded in order to be effective, it is logical to conclude that the initial rules and regulations must also be recorded in order to be effective. Under Section 720.303 F.S., all governing documents are required to be recorded in the public records.  Therefore, a homeowners’ association should record its rules and regulations in the public records in order to avoid this possible claim against the legal effectiveness of the rules when it becomes necessary for the association to enforce its rules against an owner.

As with any other amendment to the governing documents for a homeowners’ association, within thirty (30) days after recording an amendment to the governing documents, the homeowners’ association must provide notice of the change to the Members. This is accomplished either by sending a copy of the recorded amendment to the members or, if a copy of the amendment was provided to the members before they approved it (for those communities with owner approval requirements for rules) and the amendment was not changed before the vote, a notice providing that the amendment was adopted, identifying the official book and page number or instrument number of the recorded amendment, and that a copy of the amendment is available at no charge to the member upon written request to the association.

While the consequences of this new legislation may have been unintended, it is the law until amended otherwise or an appellate court makes a contrary ruling. Although this will likely result in some minor additional costs to homeowners’ associations, this is a good opportunity for a board of directors to examine their existing rules and regulations and update them prior to recording them among the public records.  It is also recommended that you have experienced Association counsel review any proposed rules and regulations prior to approving them to ensure that they are enforceable and do not unnecessarily expose the Association to liability (e.g., Fair Housing violations).

APPELLATE COURT CLARIFIES MATERIAL ALTERATION APPROVAL REQUIREMENTS FOR CONDOMINIUMS

As condominiums age, boards of directors choose to update and refurbish the common elements from time to time.  Quite often the updates involve changing the appearance and the materials being used, such as replacing carpeting with tile flooring.  Such changes frequently become what is called a “material alteration or substantial addition” to the common elements.

Whether or not the choice to undertake a significant change to the common elements of the condominium is that of the board of directors or must be put before the unit owners for a vote is always a concern that must be resolved before starting the project.  This is primarily due to the provisions of Section 718.113(2)(a) of Florida Statutes, which provides, in pertinent part, the following:

. . . there shall be no material alteration or substantial additions to the common elements or to real property which is association property, except in a manner provided in the declaration as originally recorded or as amended under the procedures provided therein. If the declaration as originally recorded or as amended under the procedures provided therein does not specify the procedure for approval of material alterations or substantial additions, 75 percent of the total voting interests of the association must approve the alterations or additions before the material alterations or substantial additions are commenced. . .

The Fourth District Court of Appeal was faced with that issue in the recent case of Lenzi v. Regency Tower Association, Inc.,Case No. 4D17-2507, June 20, 2018.  The Firm of Kaye Bender Rembaum provided representation to the Association in this case, which prevailed in its position.

The Regency Tower Association, Inc. (“Association) had decided, by a vote of the Board of Directors, to alter certain common element flooring from marble to tile.  Unit owner Lenzi objected to the Board making that decision, claiming it was a material alteration, requiring a vote of the unit owner.  The Declaration of Condominium for Regency Tower expressly authorizes the Board of Directors to make “alterations or improvements” to the common property without requiring a vote of the unit owners.  Lenzi claimed that because the Declaration did use the phrase “alteration” over “material alteration” required a vote of the owners.  When the Board declined to accept Lenzi’s interpretation, Lenzi filed for arbitration with the Division of Condominium to challenge the decision of the Board.

In arbitration, the arbitrator sided with the Association, issuing a ruling that the language of the Declaration is sufficiently clear to encompass the limitations set forth in the Statute.  Lenzi was not satisfied with the decision of the arbitrator so he appealed the decision to the Circuit Court, which likewise decided that the documents clearly provide for the authority in the Board of Directors and that decision was in compliance with the Statute.  The Circuit Court further found that the term “alteration” includes material alterations.

In its recent decision, the Appellate Court agrees with these conclusions, ruling that words of common usage should be given their plain and ordinary meaning.  The Appellate Court expressly stated that it would not arbitrarily limit the word “alteration” to exclude material alterations, finding that the word included all alterations and concluded that the Board had the authority in accordance with the Statute to make the change to the common element.

Whenever a condominium association is considering making changes to the common elements, the governing documents should be reviewed to make certain that this issue is sufficiently addressed and consult with counsel before making the change.  It is important to also be mindful that with the changes to the Statute that are effective July 1, 2018, the vote of the unit owners is required to occur “before the material alterations or substantial additions are commenced.”  Unfortunately, this statutory change fails to include what might happen if the vote does not occur prior to the alterations being completed.

There is currently no similar provision in Chapter 720 F.S. regarding homeowner’s associations.  In these situations, the provisions of the governing documents will determine the issue.  If there is no limitation on the alteration of the common properties or requirement of a vote of the owners in such event, the decision will typically be that of the board.  Confirmation from qualified counsel is recommended.

Three Kaye Bender Rembaum Attorneys Receive New Florida Bar Certification as Specialists in Condominium and Planned Development Law

Kaye Bender Rembaum is pleased to announce that the Florida Bar has confirmed that three of its attorneys, founding and Managing Member Robert L. Kaye, Firm Member Andrew B. Black and Senior Associate Allison L. Hertz, are among the inaugural class of esteemed attorneys to be officially certified by the Florida Bar in the new area of Condominium and Planned Development Law. The new certification became effective as of June 1, 2018.

Board Certification is the highest level of recognition by the Florida Bar and recognizes attorneys’ special knowledge, skills and proficiency in various areas of law, and professionalism and ethics in practice. Only Certified attorneys may utilize terms such as “specialist”, “expert”, and/or “B.C.S.” (Board Certified Specialist) when referring to their legal credentials. Board Certified Florida Bar Members are rigorously evaluated for professionalism and tested for their expertise in their areas of law. According to the Florida Bar, certification is the highest evaluation of attorneys’ competency. Attorneys must meet stringent application criteria before officially becoming certified, including satisfactory peer review as it relates to character, ethics and professionalism, satisfying the certification area’s higher level of continuing legal education requirements and passing a rigorous examination.

Robert Kaye, Andrew Black and Allison Hertz are especially honored and proud to be among the Florida Bar’s inaugural class to receive this particular certification. The Firm is pleased to not only offer its clients the high quality legal services that they are accustomed to receive from all of its attorneys but to also have available board certified legal services with this designation in this area of law.

Those Certified account for less than one percent (1%) of nearly 118,000 Florida lawyers. Thus far, only 127 lawyers obtained this new Certification. The Florida Bar website maintains a free online directory of all Board Certified attorneys, categorized by specialty area. You may find it at FloridaBar.org/certification.

Broward County Revised Ordinances to Create New Protected Classifications in the Housing Arena

The Broward County Board of Commissioners has amended the County Ordinances regarding discrimination in housing within the County to add additional classifications of individuals who are protected from housing discrimination under the Code. Effective December 6, 2017, Sections 16½-2(a)(2), 16½-3(p) of the Broward Code added “veteran or service member status, lawful source of income, or being the victim of dating violence, domestic violence or stalking” to those who are protected in the sale and leasing of real property within the County.

Section 16½-3 provided further definitions of these classifications to be the following:

Lawful source of income – “the origin or cause of a legal gain or recurrent benefit, often measured in money or currency, including, but not limited to, income derived from social security, supplemental security income, child support, alimony, veteran’s benefits, disability benefits, unemployment, pension and retirement benefits, an annuity, a gift, an inheritance, the sale or pledge of or interest in property, or any form of federal, state, or local public or housing assistance or subsidy, including Housing Choice Voucher Program or ‘Section 8′ vouchers, whether such income is received directly or indirectly by the renter or purchaser and even if such income includes additional federal, state, or local requirements.”

Service member status – “the state of serving on active duty in the armed forces of the United States, including the Reserves and National Guard.”

Veteran status – “the state of having served in any branch of the armed forces of the United States, including the Reserves and National Guard, and having been discharged or released therefrom under conditions other than dishonorable as defined under federal law.”

Victim of dating violence – “a person who has been subjected to acts or threats of violence, not including acts of self-defense, during the course of a significant relationship of a romantic or intimate nature, committed by another person under the following circumstances:

(1)  The nature of the relationship was characterized by the expectation of affection or sexual involvement between the individuals; and

(2)  The frequency and type of interaction between the individuals was on a continuous basis during the course of the relationship.

This subsection does not include violence between individuals involved in a casual acquaintanceship or individuals who have engaged only in ordinary fraternization in a business or social context.”

Victim of domestic violence – “a family or household member who has been subjected to acts or threats of violence, not including acts of self-defense, by another family or household member. For purposes of this section, ‘family or household member’ includes:

(1) A current or former spouse of the victim;

(2) A person with whom the victim shares a child in common;

(3) A person who is cohabitating with or has cohabitated with the victim; or

(4) A person who is or has continually or at regular intervals lived in the same household as the victim.”

Victim of stalking – “a victim of acts that constitute or are deemed under state law to be willful, malicious, and repeated following, harassing, or cyberstalking of another person, or the making of a credible threat with the intent to place that victim in reasonable fear of death or bodily injury of the person, or the person’s child, sibling, spouse, parent, or dependent. The term ‘cyberstalking’ means engaging in a course of conduct to communicate, or to cause to be communicated, words, images, or language by or through the use of electronic mail or electronic communication, directed at a specific person, causing substantial emotional distress to that person and serving no legitimate purpose.”

Of particular note in all of the foregoing is the extension of a protected classification to recipients of Section 8 Housing vouchers. As “financial condition” and/or “source of income” has not previously been a protected classification (and is still not one under State and Federal laws), it now has such protection in Broward County. Board members in Broward County reviewing prospective leasing applications which were previously denied will need to be mindful of this change. If there is ever a question regarding the status of a protected classification, or whether or not the board may disapprove an application for sale or lease, the board should consult with its qualified counsel before making a decision.

Link

On Tuesday, September 12, 2017, the Federal Emergency Management Agency (FEMA) announced Hurricane Harvey and Irma claim handing process for buildings insured under the Standard Flood Insurance Policy (SFIP), specifically recognizing that catastrophic flooding from those storms demands “fast and accurate payments to all National Flood Insurance Program (NFIP) policyholders. The published guidance is an effort to facilitate prompt post-inspection advance payments to policyholders. The Fact Sheet attached outlines the steps associated with the claims process.  (Click the link for the Fact Sheet nfip_flood_claim_process-003 )

FEMA may authorize advance payments to policyholders before inspection by an adjuster in certain circumstances, emphasizing that advance payments are not available for additional living expenses such as temporary housing after the storm.

Policyholders have an obligation to minimize mold damages as much as possible, however coverage needs to be verified before engaging a mitigation contractor to perform water extraction. Kaye, Bender, Rembaum strongly advises against signing any open-ended or undefined contracts and all contracts should be reviewed by Association counsel before the Board signs off. For water extraction or emergency services in units, associations should ensure there are separate contracts for each unit with a clearly defined scope of work along with associated costs to submit to the owner’s carrier. Community association managers (CAMs) and/or board members must make an effort to contact owners before arranging to perform water extraction or removal of contents.

If possible require the owner to separately contract for these services. If that is not possible, make sure your contract contains limiting language indicating that the association is only signing as an agent for the owner under its emergency powers (§718.1265 and §720.316, Florida Statutes). Please note, however, emergency powers set forth in Florida Statutes are only available for the limited period of time reasonably necessary to protects the health, safety and welfare of those affected and to mitigate further damages or effectuate emergency repairs.

By now you should have already reported the claim if you have suffered a flood loss – it is important to file the claim with the carrier, not simply the agent, although in many cases the agent may submit the notice of claim on your behalf. The NFIP policies generally require policyholders to mitigate (or reduce potential) damages by separating damaged from undamaged property and retaining compromised materials after removal from the home for adjuster inspection. Photographs and video records are extremely helpful in establishing the scope of loss.

Additionally, FEMA reminds those impacted that:

FEMA does not authorize individual contractors to solicit on its behalf. Beware of any individual contractors contacting you directly on behalf of FEMA to sign you up for debris removal or remediation services.

If you have any concerns about individuals representing themselves as FEMA or would like to report fraud, please contact the National Center for Disaster Fraud at (866) 720-5721 or via email at disaster@leo.gov.

Federal and state workers never ask for, or accept money, and always carry identification badges

There is NO FEE required to apply for or to get disaster assistance from FEMA, the U.S. Small Business Administration or the state.

APPELLATE COURT LIMITS ASSOCIATION ABILITY TO STOP OWNER POSTING OF NEGATIVE OPINIONS ON SOCIAL MEDIA

Many community associations throughout Florida have experienced an owner who opposes the board and is vocally negative toward the efforts of the association representatives. With the development of social media and the internet, many have also experienced these disgruntled owners posting their opinions on the internet through blogs, website and the like. Quite often these owners are not expressing accurate information regarding the association and boards look for help from their attorneys to stop what they consider to be abusive and harassing conduct. The Florida Fifth District Court of Appeal has recently issued a ruling that identifies some limits that court action can take in dealing with such disputes and leaving questions regarding other actions that can be taken unanswered.

In Fox. V. Hampton at Metro West Condominium Association, Inc., Case No. 5D16-1822 (July 21, 2017), the Appellate Court was presented the situation in which the Condominium Association had initially brought a legal action against the unit owner to obtain an injunction to stop the owner from what they claimed to be conduct that was harassing, intimidating and otherwise threatening to other owners, and for his on-going publishing of negative claims about the Association and/or the Board on the internet. No trial was held as the parties entered into a settlement agreement that was ultimately incorporated into a final judgment under which Fox agreed to stop certain actions. Soon thereafter, however, the conduct began again and the Association filed a motion for contempt and enforcement of the agreement, claiming that Fox had willfully and intentionally violated the terms of the agreement.

After holding a hearing, the trial court did find Fox in civil contempt for the violations of the agreement and, in addition to enforcing the provisions of the settlement agreement, also ordered Fox to stop posting, circulating, and publishing any pictures or personal information about current or future residents, board members, management, employees or personnel of the management company, vendors of the Association, or any other management company used by the Association, on any website, blog or social media. Fox was also ordered to take down what he had already posted on any of his websites or blogs. The trial court also prohibited Fox from starting any new blogs, website or social media website related to the Association. Fox was also told by the trial court that he could not respond to an inquiry about living at the Community online, but rather could only respond with a telephone call to the inquirer. Fox appealed the added requirements of the trial court that went beyond the original agreement and judgment, claiming that they violate his right to speak freely, and the appellate court agreed as to the added limitations.

In reaching it’s conclusion, the Appellate Court applied the Freedom of Speech provisions of the US and Florida Constitutions, noting that the “penalties” and additional limitations imposed by the trial court beyond the terms of the settlement agreement constituted what is termed “prior restraint” (or censorship) by the government, which is not allowed. This action by the trial court effectively was sufficient “State Action” to trigger the Constitutional protections for the unit owner.

While the Appellate Court notes that freedom of speech does not extend to obscenity, defamation, fraud, incitement, true threats and speech integral to criminal conduct, the conduct of Fox in this case did not reach any of these levels. The Court indicated that it is more legally appropriate to address the conduct of an owner posting or publishing allegedly false statements and/or other actionable statements after the fact rather than before it occurs. Consequently, the Appellate Court decided that the trial court made an error when it prohibited Fox from making any future statements whatsoever pertaining to the Community or the Association without conducting a proper constitutional inquiry first and reversed that part of the trial court decision. However, the Appellate Court did not reverse any aspect of the trial court’s enforcement of the original settlement agreement and final judgment. Only by it adding the “punishment” terms did the Appellate Court conclude that this particular trial court went too far.

This particular case is unusual in that Constitutional protections are being applied to a situation that traditionally has been considered one of private contract. Constitutional concerns apply to actions of the State or government and generally do not apply to private agreements or individuals. Time will tell whether this is a trend that may be starting among the courts or simply an anomaly decision limited to the facts of just this case. This is particularly so in light of the Appellate Court upholding the restraints on the speech of Fox that was set forth in the original settlement agreement and judgment, which also was enforced by the trial court, bringing State action into the situation as well. As with any case of this nature, much will depend upon the particular facts involved as to whether court action may be considered and/or worth pursuing.

2017 Legislative Changes

The 2017 Legislative Session was fairly active with respect to issues involving Community Associations. The following is a brief outline of some of the significant changes that became effective July 1, 2017.

Estoppel Certificates: Senate Bill 398: Applies to Condominium, Cooperative & Homeowners’ Associations.

Content and cost limits for estoppel certificates were issues attempted to be addressed several times in the past few years, but this year, SB 398 passed and substantially changed the content and procedure for responding to requests for information when a unit or property within the community is transferring, as well as setting up specific costs for the information. An “estoppel certificate” is defined to be a signed document establishing certain specific facts related to a particular transaction. In the past the estoppel certificate typically consisted of a basic statement of account, notifying the buyer/lender whether the account was current and identifying upcoming or ongoing financial obligations. The new law has the following affects: (a) reduces the time period for responding to a request for an estoppel certificate from 15 days to 10 business days, and if not delivered within 10 business days no fee can be charged for the estoppel; (b) the association’s website, if it exists, must contain the name and street address or e-mail address of the person to whom requests for estoppel certificates are to be sent; and, estoppel certificates must be delivered by hand, mail or e-mail on the date the estoppel is issued.

The estoppel must contain specific information, as follows:

Date of Issuance;
Name of the owner of the property to which the estoppel information pertains;
The property designation and address;
Any assigned parking or garage space;
Contact information for the association’s counsel if the account is in collection;
The amount of the fee for preparation of the estoppel; and,
Identify the person/entity requesting the information.

Assessment Information required to be included:

Payments required on a periodic basis for “regular” assessments, including the required frequency of payment;
Date through which payment has been received;
The date due and amount of the next “regular” payment;
Itemized list of any amounts currently due; and,
An itemization of the amounts to become due while the certificate is pending.

Other Information required:

Disclose the existence and amount of any capital contribution fee;
Whether there are any open violations;
Whether the governing documents require the buyer to be approved and if so, whether the buyer has been approved;
Whether the association has a right of first refusal and exercised it;
A list of and contact information for any other associations governing the property;
Contact information for insurance verification; and,
Contain the signature of an officer or authorized association agent (management, etc.).

An estoppel certificate is effective for 30 days (35 if delivered by regular mail). The fee for an estoppel certificate may not exceed $250 unless (a) the estoppel is requested on an expedited basis and is delivered within 3 days, in which case an additional fee of up to $100 is allowed, or (b) delinquent assessments are owed in which case an additional fee of up to $150 is allowed. The statutorily set fees shall be adjusted every 5 years based on the CPI.

Condominium Crime & Penalties: House Bill 1237: Applies to Condominium Associations

While portions of the bill have been criticized for “criminalizing” certain activities, these initiatives were largely in response to what has been considered as the scathing Miami-Dade grand jury report issued earlier in the year. The report found tremendous abuse associated with elections, conflicts of interest and association records. Records were purposely withheld in some cases and modified in others. The bill emphasizes that forgery of ballot envelopes or voting certificates is a crime punishable by law. Destruction of or the refusal to allow inspection or copying of an official record of a condominium association within the time periods required by law in furtherance of any crime is punishable as tampering with physical evidence or as obstruction of justice.

Kickbacks are specifically prohibited and could result in criminal penalties if accepted by condominium association officers, director and/or CAMs.

Condominium election ballot and voting certificate forgery could result in criminal penalties.

Theft of condominium funds, and destruction or refusal to allow access to official records of a condominium in furtherance of a crime are all subject to criminal penalties.

New conflict provisions are added. Under the new law the following is prohibited:

An association may not hire an attorney who represents the management company of the association.
A board member, manager, or management company may not purchase a unit foreclosed as a result of the association’s lien (or take title by deed in lieu of foreclosure).
The association cannot employ or contract with any service provider that is owned or operated by a board member or with any person who has a financial relationship with a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer. (This does not apply if the board member or officer [or relative as described] owns less than 1 percent of the equity shares.)
An officer or board member of an association’s contract provider of maintenance or management services is likewise precluded from purchases a unit at the association’s lien foreclosure sale (or take title by deed in lieu).

Cancellation – Majority Ownership Contract
If 50 percent or more of the units in the condominium are owned by a party contracting to provide maintenance or management services to an association managing a residential condominium, (or an officer or board member of such), the contract may be cancelled by a majority vote of the non-interested unit owners.

Disclosure and Termination of Contract
Includes new conflict of interest provisions for directors and officers, and their relatives. Any activity that may reasonably be construed to be a conflict of interest must be disclosed.

A rebuttable presumption of a conflict of interest exists if any of the following occurs without prior notice:

A director or officer, or a relative, enters into a contract for goods and services with the association; or,
A director or an officer, or a relative that holds an interest in a corporation, limited liability corporation, partnership, limited liability partnership, or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

A proposal for any service in which a director or officer, or a relative to the association must be clearly disclosed on all contracts and transactional documents and those actual documents must be attached to the meeting agenda.

If the board votes against the contract or service, the interested party must notify the board in writing that he/they will not continue to pursue the relationship, failing which the interested director must withdraw from office. If the board finds that an officer or a director has violated this provision, they are automatically removed from office.

Any contract, agreement or other relationship that has not been properly disclosed, is voidable and terminates after written notice from the board of directors supported by the consent (petition) of at least 20 percent of the voting interests of the association.
(For purposes of the conflict of interest provisions, the term “relative” means a relative within the third degree of consanguinity by blood or marriage.)

Records Access – Renters are now permitted access to certain records.

Website for Condominiums with 150 or more Units – Condominium associations with more than 150 units will be required to post (upload) copies of a whole host of documents on websites created for this purpose. The website must requires updating throughout each year. Condominium associations without websites or use of websites, web portals or web pages will need to create them or hire third-parties to do so. Among other documents, the website must contain:

The recorded declaration with all amendments;
The recorded bylaws with all amendments;
The articles of incorporation with all amendments and current rules;
All management contracts, leases or other contracts where the association is a party of which unit owners have obligations;
Summaries of bids for materials, equipment or services;
The adopted annual budget and any proposed budget to be considered at the annual meeting;
The year-end financial reports required by statute;
Each director’s self-certification or evidence of participation in a Division approved educational program;
All contracts or transactions between the association and any director, officer, corporation, firm or any other entity in which an association director is financially interested;
Conflict of interest disclosures; and,
Notices and agendas for both membership and board meetings.

Condominium associations that operate fewer than 50 units and homeowners associations of less than 50 parcels must comply with the financial reporting requirements based upon the total revenues of the association (although another bill permits the members to waive financial reporting requirements).

Annual condominium financial reports must be provided within 5 days of request by a unit owner, and specific remedies and enforcement by the Division are provided for failure to meet this requirement.

A condominium association, its officers, directors, employees, and agents may not use a debit card issued in the name of the association or billed directly to the association for payment of any association expense. Doing so can be prosecuted as credit card fraud.

A board member of a condominium association may not serve for more than 4 consecutive two-year terms unless approved by an affirmative vote of two-thirds of the total voting interests of the association, or there are not enough eligible candidates to fill the vacancies. (The new law does not contain limitations if directors serve one year terms.)

The recall provisions have been substantially revised – the board will no longer have the obligation or opportunity to vote whether or not to certify the recall. Recalled board members are immediately removed and could challenge the recall by filing a petition for arbitration at their personal expense.

Associations must furnish the Division of Florida Condominiums, Timeshares and Mobile Homes with the names of all financial institutions with which it maintains and accounts on an annual basis.

The right of a condominium association to suspend voting rights of an owner for non-payment of a monetary obligation to the association is limited to a monetary obligation of more than $1,000, and proof of such non-payment must be provided to the unit owner at least 30 days before such suspension takes effect.

Arbitrator qualifications have been strengthened as well as an intent to speed up the arbitration process.

The foregoing is general in nature, not intended to be an exhaustive and complete rendition of all of the legislative changes for 2017, nor should it be considered legal advice. If you have any specific questions regarding any of the items set forth herein, as well as any other legislative change, please contact this office.

Condo Crimes & Conflicts of Interest

A Florida Bill creating additional costs and burdens for condominium associations may become law.

By:  Lisa Magill, Esq.

lmagill@kbrlegal.com

(954) 928-0680

I believe most Floridians support toughing up on abuses in condominium associations.  The Division of Florida Condominiums, Timeshares and Mobile Homes and law enforcement should have the tools they need to ferret out theft, forgery, self-dealing, conflicts of interest or other wrongdoings and punish those purposely violating the law.  That goes without saying.

However, Florida CS/HB 1237, approved unanimously on April 20, 2017 by the Civil Justice and Claims Subcommittee contains provisions seemingly intended to increase transparency, but likely will increase costs and administrative burdens for condominium associations.  These additional costs will be passed through to the members, leading to budget increases for those communities with more than 150 units.

Association records maintenance is very important for compliance with regulatory requirements.  Each and every owner’s right to inspect Official Records must be preserved.  After all, the unit owners ultimately pay the bills.  Are the existing laws adequate?  Pursuant to the current statutes, members are entitled to request access to a host of records including financial records, meeting minutes, contracts and correspondence.  Associations that fail to provide access are subject to penalties and exposure for opposing party attorney fees.  The statutes also call for civil penalties against any individual who defaces, destroys or intends to cause harm to the members by failing to create or maintain the records listed in Section 718.111(12), Florida Statutes.

Disputes concerning maintenance and access to records cause a tremendous amount of strife in community associations.  In some cases, association leadership may be somewhat lax so the records are not maintained exactly as contemplated by Statute.  Leadership efforts to purposely withhold access to Official Records also does happen from time to time.  On the other hand, condominium unit owners frequently use their record inspection rights to harass and annoy board members and management.

This Bill, if adopted, would require condominium associations to also allow renters access to certain records.   Associations with more than 150 units will be required to post (upload) copies of the following documents on an association website created for this purpose.  Associations without websites or use of websites, web portals or web pages will need to create them or hire third-parties to do so.  The website must contain:

  1. The recorded declaration with all amendments;
  2. The recorded bylaws with all amendments;
  3. The articles of incorporation with all amendments and current rules;
  4. All management contracts, leases or other contracts where the association is a party of which unit owners have obligations;
  5. Summaries of bids for materials, equipment or services;
  6. The adopted annual budget and any proposed budget to be considered at the annual meeting;
  7. The year-end financial reports required by statute;
  8. Each director’s self-certification or evidence of participation in a Division approved educational program;
  9. All contracts or transactions between the association and any director, officer, corporation, firm or any other entity in which an association director is financially interested;
  10. Conflict of interest disclosures; and
  11. Notices and agendas for both membership and board meetings.

Who will perform these services?  Will volunteers undertake these obligations?  What if the leadership isn’t computer or internet savvy?  Many associations will need to rely upon vendors to perform these services or expect management to absorb these responsibilities.  Management companies may have to hire additional staff to account for the extra work load.  All of this translates to increased costs to the associations and, as a result, the unit owners.

Additionally, associations will have to file a report with the DBPR containing the names of all the financial institutions with which it maintains accounts on an annual basis.

This Bill dramatically changes recall procedures and apparently eliminates the ability for a board to not certify a recall and then submit it to arbitration.  Admittedly, many recall efforts that should be certified by the board wind up in arbitration.  That is unfortunate but, at the conclusion, the rightful board controls operations.  Eliminating recall arbitration after a board fails to certify the recall means that wrongfully removed board members will have to defend their positions as individuals.  Board members will either have to accept their fate or file a petition for arbitration at their own expense.

This Bill is very close to being passed.  You only have a short time to contact your legislators if you believe these procedures will negatively impact condominium associations.  If you have any questions regarding these issues, please contact this office.

 

Appellate Court Extends Association Protection Relative To Third Party Purchasers

Kaye Bender Rembaum is pleased to announce another appellate court ruling in favor of a client of the Firm, which is beneficial to all community associations in Florida.  In its decision published on March 15, 2017, the Fourth District Court of Appeal has further confirmed and clarified that the lien of the association contained in the recorded declaration is sufficient to allow the association to pursue an independent foreclosure action when a lender foreclosure case is pending.  In Fountainspring II Homeowners Association, Inc. v. Veliz, Case No. 4D-3408 (Fla. 4th DCA March 15, 2017), the Court was presented with a situation similar to what it had recently decided in Jallali v. Knightsbridge Village Homeowners Association, Inc., Case No. 4D15-2036 (Fla. 4th DCA Jan. 4, 2017) (reported by us after the original decision in October 2016 at http://www.kbrlegal.com/4th-dca-corrects-prior-ruling-clarifies-limited-application-quadromain-decision/), involving an association that had been pursuing a foreclosure for unpaid maintenance assessments which had been challenged by the homeowner over a technical jurisdictional issue in the lower court.

In Fountainspring II, the property in question was purchased by a third party at the Association foreclosure sale.  That purchaser held the property for over two (2) years, had it occupied by a tenant, and never paid assessments to the Association.  Before the Association commenced its own collection against the new owner/third party purchaser, the lender foreclosure case that had been pending when the Association completed its foreclosure case (allowing the new owner to take title to the property) concluded, and a foreclosure sale took place which resulted in title to the property being taken away from the third party purchaser.  The third party purchaser then went back to the trial court in the Association foreclosure case to claim that the Association should have brought its claim in the lender case rather than in a separate case as had been done (this was some time before the Jallali decision was published).  The trial court granted that motion and the appeal of that decision followed.

In reaching its decision, the appellate court reiterated that the claim of lien of the association related back to the recording of the declaration of covenants, which predated the mortgage.  As such, the Association had a prior recorded lien interest which did not require the Association to bring its claim in the lender foreclosure case.  By this conclusion, the principle of Jallali that involved the former owner of the property has been extended to include third party purchasers as well.

Appellate Court Reverses Itself On The Issue Of Accord And Satisfaction As A Defense In A Condominium Foreclosure

In 2014, the Second District Court of Appeal published its decision in St. Croix Lane Trust v. St. Croix at Pelican Marsh Condominium Ass’n., which created confusion in association collection cases (See our Legal Morsel article on this case from August 14, 2014, at: www.kbrlegal.com/appellate-court-decision-alters-23-years-collection-practices-condominium-associations/).  The Court ruled at that time that the provisions of Section 718.116(3) of Florida Statutes, regarding the application of partial payments made on a delinquent account, would not affect certain situations in which the party paying identified the payment as full satisfaction of the debt, called “accord and satisfaction.”  The Court held that these situations are governed by another provision in the Statute, Section 673.3111 F.S.

In St. Croix, an owner made a fairly small payment (under $900) and included a letter indicating it as “payment in full” against a claim of over $36,000.  The Circuit Court applied the provisions for the application of payment in the Statute.  After reviewing the facts, the Appellate Court reversed and ruled that by accepting the payment under those circumstances, the association was bound by the “accord and satisfaction” Statute in Section 673.3111 F.S. and that the application of payment provision of Section 718.116(3) F.S. would not apply.  In making that ruling, the Court indicated that because Section 718.116 F.S. did not expressly identify the accord and satisfaction issue, rather making reference only to “restrictive endorsements” on a payment, it was not the intent of the Legislature for this protection to apply to condominiums.  The Court further noted that there was no indication in the Legislative history to reach the conclusion that Section 718.116 F.S. should apply when there is a clear intent by the paying party to satisfy the entire obligation with the partial payment.

Immediately following that decision, there was much concern among attorneys and associations regarding its effects as, up to that point, it had been understood for roughly 23 years since Chapter 718 F.S. was changed to include that the intent of the application of payment provision in Section 718.116(3) F.S. (and subsequently included in Section 720.3085 F.S. for homeowners associations) was to eliminate claims of “payment in full” on partial payments, and for all payments to be applied in accordance with the Statutory formula.  It had also been the decisions of other District Courts that Section 718.116 F.S. applied in such situations.

In response to the St. Croix decision, the Legislature acted during the next Legislative Session in 2015, adding the express provisions to the Statute which clearly indicates that Section 673.3111 F.S. does not apply, and that the changes were made “to clarify existing law” (see Legal Morsel from June 30, 2015 at: www.kbrlegal.com/2015-legislation-affection-community-associations/.)  This last portion of the change is important as it allows for retroactive application of the change in the Statute which otherwise would not be available.

While this legislative change was pending, waiting for the governor to sign it into law, the case of Madison at Soho II Condominium Association, Inc., v. Devo Acquisition Enterprises, LLC was being litigated.  In Madison, there were similar facts to the St. Croix case, with a small partial payment expressed as payment in full on a large debt.  As it was required to, even with pending legislation to change the result, the Circuit Court applied the principles expressed in St. Croix, finding for the unit owner as an accord and satisfaction, which was appealed by the Association.  The Appellate Court expressly reversed itself on St. Croix, acknowledging that the Legislature clearly expressed the intention of the Statute and further, by including the language that the change was intended to clarify existing law, meaning it could be applied to existing cases.

The result of the Madison decision is, at least for condominiums, that partial payments on the account of a delinquent unit owner will be applied in accordance with the Statute, first to interest, then to any late fees, then to any costs of collection, then to any attorney’s fees, and then, whatever is left is applied to the unpaid assessment.  This application will apply even if the paying party includes a letter or notation or otherwise makes the claim that the partial payment was intended to be payment in full or an accord and satisfaction.  (It remains an issue as to whether the St. Croix decision will cause issues for homeowners associations as the provisions of Section 720.3085 F.S. have not been changed from what the St. Croix court applied in 2014.)