Florida Condo Associations, HOAs Contending with Growing Wave of Rule Violating Airbnb Rentals

July 28, 2015, Posted by Michael E. Chapnick


MichaelChapnicksrhl-law.jpgA recent article in The Boston Globe chronicled the case of a condo owner who earned rave reviews as a host on the vacation rental website Airbnb. He went to great lengths to accommodate the needs and whims of his guests, but apparently his willingness to oblige did not extend to his condominium association and fellow neighbors.

The unit owner was fined $9,700 for violating his condominium association's rules against short-term rentals via the increasingly popular website, which allows users to list their residences for short-term rentals aimed at guests who desire more homey accommodations. The owner has retained an attorney to try to negotiate a lower fine, and he is quoted as saying that he "didn't expect, as an owner, having somebody else in my own home would be a problem."

Perhaps he should have known better, as most association's covenants and rules prohibit short-term rentals, and some even include an application process with background checks for prospective tenants. Yet he and other unit owners are claiming ignorance of the rules after being hit with fines ranging anywhere from $100 to $1,000, depending on their associations' bylaws, for each night that they have rented their units, according to the newspaper's report.

With Florida's countless luxury waterfront condominiums replete with investor-owned units that sit idle during large swaths of the year, the growing popularity of Airbnb and its rivals HomeAway and VRBO represents a potentially significant new problem area that should receive the attention of many association boards throughout the state. The prospect of a revolving door of short-term guests presents security and nuisance concerns, especially for condominiums, and the boards of the state's condo associations would be well advised to review and possibly strengthen their covenants to specifically ban these types of rentals as well as ensure adequate enforcement provisions and procedures.

For those associations which are already contending with owners who are utilizing these websites for short-term rentals or suspect that it is taking place, their rules enforcement actions should begin with thorough investigations. In a non-confrontational and courteous manner, the property manager or board member should inquire with the new guests in the residences that are suspected of being rented as to the nature of their agreement with the unit owner and how they discovered the property. They should document their findings, and they should also research the websites to find and save the offending listings.

abnb.jpgArmed with this information, they can then move forward on two fronts: directly with the owner as well as with Airbnb or the website listing the unit. Airbnb includes in its terms and conditions for hosts that they must comply with the rules governing rentals in their communities, and the site reserves the right to purge any listings that it deems to be in violation of its terms. Presumably, the company and its rivals would be willing to consider the removal of listings by hosts that are in violation of community association rules, and one of my colleagues at our firm has learned of a case from a client in which Airbnb was contacted by the association and pulled a listing from its site after it learned of the rule violation.

In addition, associations should share the evidence that they have gathered of the rentals using these websites with their legal counsel, who can use the information to issue an immediate cease and desist letter to the unit owner and help the association to determine an appropriate enforcement mechanism. However, for unit owners who have already begun enjoying the rewards of their rentals, it is a safe bet that they will be reluctant to discontinue them.

For the ardent renters who will refuse to comply with these demands and continue to rent their residences, the association counsel should move quickly to file a Petition for Mandatory Non-Binding Arbitration on the rule violation with the state's Division of Condominiums, Time Shares and Mobile Homes, administered under the Department of Business & Professional Regulation. The Division of Condominiums, through its Arbitration Division, is equipped to quickly and efficiently conduct arbitrations on disputes involving covenant and rule violations, and its final orders can involve both the issuance of injunctive relief (i.e., requiring someone to do or not do something), as well as requiring the non-prevailing party to pay the reasonable attorneys' fees and costs of the prevailing party incurred in bringing the action to enforce the association's covenants and rules.

In the new peer-to-peer sharing economy, Airbnb and the other websites enabling homeowners to rent their residences to short-term guests are here to stay and likely to enjoy continued growth in the years to come. The associations in Florida that wish to avoid these short-term rentals should act now in order to protect the interests of their members.


Article by Firm's Jeffrey Berlowitz in Today's Miami Herald: U.S. Supreme Court Ruling Preserving Second Mortgages in Chap. 7 Bankruptcies Exposes Flaw in Bankruptcy Code for Community Associations


JeffreyBerlowitz.jpgFirm partner Jeffrey S. Berlowitz wrote an article that appeared in today's edition of the Miami Herald's "Business Monday" about the recent decision by the U.S. Supreme Court in the case of Bank of America v. Caulkett. His article calls for changes to the bankruptcy code to eliminate lien stripping for community associations. It reads:

The Supreme Court ruling does not completely prevent homeowners from canceling second mortgages or other junior lienholders in bankruptcy. Debtors can continue to strip off second mortgages by filing for bankruptcy under either Chapter 11 or 13, which are financial reorganization forms of bankruptcy in which they must pay back creditors over a period of time.


For community associations, the ruling will direct the bankruptcy courts to conclude that the secured liens that associations file against units whose owners have not paid their association dues also cannot be wiped away by underwater homeowners in Chapter 7 bankruptcies. Homeowners and condominium associations in Florida have had to contend with record numbers of foreclosures during the meltdown in the housing market, and many owners of units in foreclosure have been filing for bankruptcy protection and using the same "lien stripping" provisions that were extinguished for Chapter 7 bankruptcies by this Supreme Court ruling to wipe away their association liens. This has resulted in significant shortfalls in associations' finances that have had to be made up by all of the paying unit owners, who are essentially being forced by the delinquent owners to pay more than their fair share.

While the new ruling will benefit community associations by eliminating lien stripping for Chapter 7 bankruptcies, the ruling does not apply to the financial reorganization forms of bankruptcy under Chapter 11 and Chapter 13, in which lien stripping has been particularly abundant for Florida associations. This means that many associations might continue to see their right to collect from delinquent unit owners voided by the bankruptcy courts.

This Supreme Court ruling has shined a spotlight on the lien stripping provisions of the federal bankruptcy code like never before, and the time has come for our country's lawmakers to take note of the fact that legislative changes are required in order to address the inequities that are caused by these provisions as they now stand. Lien stripping represents a huge windfall for homeowners who fall into foreclosure, fail to pay their association dues and are then able to eliminate 100 percent of their association debt by filing for bankruptcy. The associations maintain the property values of the residences for the benefit of the delinquent homeowners, who end up retaining their home free of their maintenance assessment arrears through their repayment plan approved by the bankruptcy court, and they preserve the collateral of the homeowners' first-mortgage lenders. The fellow neighbors of the delinquent unit owner end up footing the bill, which in some cases reach six figures after years of nonpayment, while the debtor and their mortgage lender reap the rewards of a properly maintained property at no expense to either of them.

While the U.S. bankruptcy code is a federal law and the laws governing condominium associations and HOAs are state laws, the lawmakers from states such as Florida, which is the state with the most associations at approximately 46,000, should now consider changes to the federal bankruptcy code that would enable community association liens to take a higher priority. Due to the special role that the associations play in preserving the underlying collateral for home mortgages, their liens should either be exempt from lien stripping altogether or there should be some form of a surcharge against the first mortgage lender to force it to pay the association that is maintaining its collateral.

Our firm congratulates Jeffrey for sharing his insight into this important Supreme Court ruling with the readers of the Miami Herald and calling for the elimination of lien stripping against community associations by unit owners who file for bankruptcy. Click here to read his complete article in the newspaper's website.

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Three-Year Jail Term Begins for Former Condo Manager Convicted of Stealing Over $200,000 from Association

July 17, 2015, Posted by Roberto C. Blanch


RobertoBlanch2013.jpgThe recent news about the start of a three-year jail sentence for the former property manager of a Sarasota, Fla.-area condominium who was convicted of stealing more than $200,000 from the association she managed sent a resounding message about the severe repercussions that property managers and association directors can face for theft and fraud.

According to several news reports, Judy Paul, 51 (pictured below), was sentenced to three years in prison followed by 10 years of probation, and was ordered to pay $200,000 in restitution to the Sand Cay Homeowners Association, following her conviction in July, 2013, on felony counts including grand theft and scheming to defraud more than $50,000. It was further reported that Paul was scheduled to surrender at a court hearing on July 1 but failed to appear. The reports state that when she subsequently appeared in court at a later date, she pleaded with the judge for mercy, claiming that she suffered from several medical conditions including uncontrollable bowels, post-traumatic stress disorder as a result of the conviction, and that she attempted to end her life two days before she was originally scheduled to surrender.

jpal.jpgPaul's case was the first to be brought to trial by the White Collar Crime Division of the State Attorney's Office formed in 2013. Her fraud was discovered when a routine 2009 audit uncovered more than 50 checks that she had issued and cashed or deposited into her own bank accounts. Evidence presented at the trial revealed that she also purchased a Harley-Davidson motorcycle with association funds, and the unit owners were forced to cover the association's shortfalls through assessments.

This case underscores the importance for association directors and property managers to implement procedures and policies aimed at avoiding the theft of association funds by those who are typically authorized to have access to them. These efforts may include requiring that at least two board members sign all checks and review documentation supporting the invoice or obligation to be paid, the requirement for background checks and screenings for managers and employees, the thorough review of all bank statements and financial records presented to directors and managers, the establishment of low limits on discretionary expense approvals by the property manager without board authorization, and a detailed review and understanding by directors of the association's yearly financial audits performed by independent professionals. Directors should also coordinate with the association's insurance agent to confirm that the association is adequately insured to best protect against such instances of fraud, theft and other types of employment dishonesty.

The severe prison sentence and financial restitution imposed in this case against the convicted former property manager should send a compelling message to unscrupulous managers and association directors who contemplate taking part in schemes to defraud and steal from their association.


Article by Michael Hyman in Today's Daily Business Review: "Time's Up for Condo Owners Attacking Developer's Amendment"


MichaelHyman.jpgThe firm's Michael L. Hyman wrote an article that appeared in today's edition of the Daily Business Review, South Florida's only business daily and official court newspaper, about the recent decision by the First District Court of Appeal in the case of Silver Shells v. St. Maarten at Silver Shells Condominium Association. His article reads:

The First DCA's decision in the case of Silver Shells v. St. Maarten at Silver Shells Condominium Association stems from a lawsuit by the Destin condominium association for one of the towers in a multi-building property against the developer.


The suit sought to require the developer to turn over control of the master association to the unit owners and convey a "beach property" that was initially included in the common properties which it was required to convey to the master association at the time of turnover.

The appellate court found that the association's claim that the developer improperly amended restrictive covenants to effectively remove the beach property in question from the common properties is barred by the statute of limitations.

The opinion held that the five-year limitations period began to run when the association for the building was turned over to the unit owners, and the association's action had not been filed within five years of that date.

Michael's article concludes:

The takeaway from this ruling for this condominium association as well as other new condo associations in similar master-association communities is that the clock starts ticking on their limitations period to challenge any of the developer's actions on the date in which their building's association is turned over by the developer to the unit owners.


The developer will continue to have the "power of the pen" to implement any amendments that it sees fit to the covenants for the master association while it maintains control during the build out of the community, so it is incumbent on the associations for the individual towers that have already been turned over to the unit owners to maintain a careful eye on all of the developer's amendments and, when necessary, challenge them before their limitation periods expire.

In this case, the association's challenge to the developer's amendment that enabled it to retain ownership of the beach property, which apparently included a lucrative ongoing revenue stream for the rental of beach chairs and umbrellas, may have prevailed had it been filed before the five-year limitations period had expired.

Our firm congratulates Michael for sharing his insight on this new appellate decision with the readers of the Daily Business Review. Click here to read his complete article in the newspaper's website (registration required).


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Firm's Gary Mars Featured in Report on New Service Animal Law in Daily Business Review


GaryMars.jpgThe firm's Gary M. Mars was one of only three South Florida community association attorneys whose analysis was featured in a front-page report in today's edition of the Daily Business Review headlined "Law Cracks Down on Owners Harboring Fake Service Pets." The article by reporter Samantha Joseph of the DBR, which is South Florida's exclusive business daily and official court newspaper, focuses on the new state law that creates penalties for association members who try to pass off their pets as service animals. It reads:

Thanks to the new law that now makes it a misdemeanor to lie about an animal's skill-set as a designated helper to a disabled owner, condo associations have fresh ammunition to enforce their pet policies.


The law, unanimously approved by state legislators, took effect July 1. It amends existing legislation by elaborating on the tasks performed by service animals.

. . . The new legislation redefines "service animal," for the purposes of public accommodation and limits the term to a dog or miniature horse.

It seeks to protect a broader cross section of people by expanding the existing state law's definition of disability "deaf, hard of hearing, blind, visually impaired or otherwise physically disabled."

The new law covers "physical or mental impairment that substantially limits one or more major life activities," like walking, seeing, hearing, speaking, breathing, learning and working.

It protects people with physical, sensory, psychiatric, intellectual, and mental or psychological disorders specified in the most recent edition of the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders.

It also goes one step further than its predecessor to require the animal's tasks be directly related to the handler's disability.

"What the legislation really did was provide some clarification," said Gary Mars, shareholder at Siegfried Rivera Hyman Lerner De La Torre Mars & Sobel. "As association lawyers, it gives us a better definition of service pets, which prior to this legislation had less definition."

Our firm congratulates Gary for being called on by the editors and reporters of the Daily Business Review for his insight into this important new legislation for community associations. Click here to read the complete article in the newspaper's website (registration required).

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Tenants' Rights in Condominium Communities

July 2, 2015, Posted by Laura Manning-Hudson


LauraManningHudson.jpg Our firm's other community association attorneys and I are often asked by condominium association board members about the rights of tenants who are renting units in a condominium to use the common elements - as well as their ability to participate and vote in meetings and elections.

The Condominium Act provides that tenants who are leasing units in communities "shall have all use rights in the association property and those common elements otherwise readily available for use generally by unit owners." This means that associations must allow renters to have the same use rights as unit owners to the pool, fitness center, clubhouse, tennis court, etc. Renters may also use the parking spaces designated for their unit.

For unit owners who are leasing their residences, the law also provides that they "shall not have such rights except as a guest, unless such rights are waived in writing by the tenant." The law further provides: "The association shall have the right to adopt rules to prohibit dual usage by a unit owner and a tenant of association property and common elements otherwise readily available for use generally by unit owners." tenright.jpg This means that owners who rent out their units may not also come by to swim in the pool whenever they want!

With regard to association meetings and voting, tenants do not typically have the right to attend meetings because they are not owners, however, tenants who are conferred with a Power of Attorney by their unit owners may attend and speak at the association meetings. Voting rights and requirements for board membership are generally document specific and can be found in the association's bylaws.

Another issue that often arises is whether condominiums can prohibit tenants from having pets even if the governing documents allow unit owners to have pets. The issue turns on the exact language in an association's governing documents. Many board members are surprised to learn that they may adopt rules that restrict tenants from having pets based on the language in their recorded documents - but this is not always the case. Many association documents require a unit owner vote to amend the documents in order to restrict tenants from having pets.

Finally, if a tenant or their landlord/unit owner violates the association's rules and regulations or other governing documents, the Condominium Act has empowered the association to restrict the tenant's ability to use the common elements. This also applies to the tenants of unit owners who become more than 90 days delinquent in the payment of their association dues.

With so many investor-owned units in South Florida condominium communities, significant percentages of tenants under short and long-term leases are likely to be a permanent characteristic. Associations should bear in mind that laws do exist to protect tenants' rights in order to help ensure that associations avoid the possibility of unforeseen legal liabilities.


Feature on Condo Association Construction Contracts by Lisa Lerner Appears in Brickell Magazine


LisaLerner.jpgThe firm's Lisa A. Lerner authored an editorial feature about the nuances of construction contracts for condominium associations that appears in the July/August issue of Brickell Magazine, one of South Florida's premier lifestyle magazines. Her article discusses the protections for associations that experienced attorneys recommend and include in their clients' construction contracts.

Our firm congratulates Lisa for sharing her insight into this important topic with the readers of Brickell Magazine. Click here to read her feature in the magazine's website.


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Article by Firm's Michael Chapnick in Today's Daily Business Review: "New Law Allows Electronic Voting by Community Associations"


MichaelChapnicksrhl-law.jpgFor the second consecutive day, an article on important issues for community associations authored by one of our firm's partners appeared today as a guest column in the Daily Business Review, South Florida's only business daily and official court newspaper. Partner Michael E. Chapnick with our West Palm Beach office wrote the article in today's edition of the newspaper about the new electronic voting law for community associations. His article calls for the state's Division of Condominiums to establish an approval and certification process for the e-voting systems providers. It reads:

"Properly implemented, electronic voting may enable associations to overcome the significant challenges created by so many investor-owned units and part-time residents who frequently do not participate in association votes, making it difficult for many associations to achieve quorum at members' meetings and elections so that membership action can be taken.


However, there are some important and necessary measures that were built into the new law which will make the initial implementation of electronic voting extremely challenging for many associations.

With the voter identity verification and security protocols that are called for under the new law, online voting for associations will not be as simple as using an existing off-the-shelf electronic survey provider and adapting it for an association vote.

In fact, the vetting process for the vendors purporting to comply with all of the requirements under the new law will take some time, and the state's Department of Business and Professional Regulation Division of Condominiums should move quickly to develop a vetting and certification process in order to help all of the associations in Florida to identify the providers that are in compliance with the statutory requirements."

Michael's article concludes:

"However, rather than leaving it up to every community association to conduct its own vetting process in order to determine which providers meet all of the law's requirements, the onus should be on the state agency that oversees and enforces association election regulations as well as the other laws governing associations in Florida to create and implement a new vendor approval and certification process for the providers. The state's Division of Condominiums is better equipped with the technical resources and expertise that is necessary to properly review and determine whether these online software application providers are implementing e-voting systems that meet all of the requirements and should be certified by the state for use by associations.


Electronic voting will not be a panacea for all of the issues caused by unit owner apathy and absenteeism in association votes and elections. There are many voters who will decline to use it and will wish to continue mailing in the completed ballots or voting in person at the meetings, so it is unlikely to completely replace the traditional voting methods, at least in the near future. It will, however, give the associations an important new tool for their toolbox that should greatly enhance their ability to conduct annual elections and obtain votes regarding alterations, amendments, reserves and other important association matters that require membership approval.

With the help of an effective approval and certification program for the e-voting system providers by the state, associations will be able to turn to electronic voting to help overcome some of the challenges that have plagued their votes and elections for decades."

Our firm congratulates Michael for sharing his insight with the readers of the Daily Business Review on this important new law for community associations and calling on the state to enact an approval and certification process for the e-voting systems providers. Click here to read the complete article in the newspaper's website (registration required).

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Article by Firm's Roberto Blanch in Today's Daily Business Review: "Ceiling Removal: Condo Renovation or Material Alteration?"


RobertoBlanch2013.jpgFirm partner Roberto C. Blanch wrote an article that appeared in today's edition of the Daily Business Review, South Florida's only business daily and official court newspaper, about the recent decision by the Second District Court of Appeal in the case of Andrews v. Shipps's Landing Condominium Association. His article reads:

". . . The Second DCA found that the association did not conclusively establish that the removal of the drywall ceiling resulted in a violation of the association's declaration of condominium.


The association asserted that the owners did not obtain its approval before removing the ceiling drywall from the interior of the unit and demanded that the owners reinstall the drywall. In turn, the owners responded by filing a lawsuit against the association for declaratory and injunctive relief.

While the trial court record indicates that the owners requested and obtained association approval for certain alterations to the unit, it appears that the nature of the alterations were not precisely described by the owners when seeking the association approval.

Furthermore, while the appellate opinion indicates that the owners opted to remove the ceiling drywall during the performance of the previously approved alterations, it appears that the association did not provide any testimony to counter the testimony proffered on behalf of the owners interpreting that the declaration of condominium establishes that the drywall ceiling is within the unit's boundaries."

Roberto's article concludes:

"Association representatives should also consider standardizing the process for unit owner requests for alteration approval, should it be determined that the association's directors have the authority to grant such approval. For instance, it appears from the opinion that the association in question did not have a clear procedure or form for the requests for renovation approvals requiring detailed descriptions of the proposed alterations.


A form with detailed questions regarding all of the elements that will be renovated should be employed, and the approvals should include stipulations that only the renovations detailed in the form by the owners are being approved and no other elements may be altered without the association's prior written approval.

. . . It is also imperative for associations to act promptly when seeking recourse or corrective actions against an owner if it is determined that an alteration has been made in a manner that is inconsistent with the design approved by the association. An association's failure to do so may adversely affect its ability to successfully do so in the future."

Our firm congratulates Roberto for sharing his insight on this new appellate decision with the readers of the Daily Business Review. Click here to read the complete article in the newspaper's website (registration required).

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Firm's Jeffrey Berlowitz Discusses Implications of Recent U.S. Supreme Court Decision Rejecting Lien Stripping in Chapter 7 Bankruptcies in Article in Today's Daily Business Review


JeffreyBerlowitz.jpgThe firm's Jeffrey S. Berlowitz, who has focused much of his work on helping community associations to contend with unit owners who attempt to wipe away association liens by filing for bankruptcy, was quoted extensively in an article in today's edition of the Daily Business Review on the implications of the recent ruling by the U.S. Supreme Court in the case of Bank of America v. Caulkett. The court ruled that homeowners who are underwater on their first mortgage cannot void second mortgages by filing for Chapter 7 bankruptcy, and the ruling also appears to apply to other secured lienholders including community associations.

The article reads:

Jeffrey Berlowitz is optimistic that within the risky realm of second mortgages, the Supreme Court's ruling may help refresh the lending stream that dried up in the market crash.


"You may see second mortgages being extended if there's equity," said Berlowitz of Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, which represents community associations.

Still, a divisive footnote in the decision suggests if only the debtors had asked the court to overrule its 1992 decision in Dewsnup v. Timm, the court would have obliged. Three justices didn't join Thomas' footnote, meaning they could be outvoted 6-3 if the right case came along.

Dewsnup rejected one form of lien-stripping. The footnote quotes Thomas' concurrence in a 1999 opinion: the "methodological confusion created by Dewsnup has enshrouded both the Courts of Appeal and ... Bankruptcy Courts."

Berlowitz said, "Thomas' comments could lead us to believe the court could overrule Dewsnup down the road." Then lien-stripping would be available in Chapter 7 cases, allowing debtors to void wholly unsecured mortgages. And partially unsecured mortgages could be stripped down to the property's market value.

For now, Berlowitz is happily sharing the ruling with his condo board clients. They've been frustrated by homeowners who fail to pay their fees through months or years of foreclosure and bankruptcy while the association maintains the community.

"There's such animus for the folks who aren't paying while their neighbors are," he said. "I had to explain to our clients this is the law, I'm not making it up."

Our firm congratulates Jeffrey for sharing his insight into this ruling and its implications for community associations with the readers of the Daily Business Review, which is South Florida's exclusive business daily and official court newspaper. Click here to read the complete article in the newspaper's website (registration required).

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Article by Firm's Lindsey Thurswell Lehr in Today's Daily Business Review: Court Rules on Buyer's Liability for Old Assessments


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The firm's Lindsey Thurswell Lehr wrote an article that appeared in today's edition of the Daily Business Review, South Florida's only business daily and official court newspaper, about the implications of the recent decision by the Fourth District Court of Appeal in the case of Pudlit 2 Joint Venture v. Westwood Gardens HOA. Her article reads:

. . . Pudlit had acquired two lots in the Westwood Gardens community via foreclosure, for which the association demanded payment for the past-due assessments that had accrued while Pudlit held the titles to the properties as well as all assessments due from the prior owner, as stipulated under Florida law.


Pudlit made the payment to the association but filed suit against the association seeking its money back by claiming that it was exempted from liability for the prior owners' association debts due to the express language contained in the association's own declaration of covenants, which read:

"The lien of the assessments provided for herein shall be superior to all other liens save and except tax liens and mortgage liens, provided said mortgage liens are first liens against the property encumbered thereby (subject only to tax liens). Sale or transfer of any lot which is subject to a mortgage as herein described, pursuant to a decree of foreclosure thereof, shall extinguish the lien of such assessments as to payments thereof which become due prior to such sale or transfer. No sale or transfer shall relieve such Lot from liability for any assessments thereafter becoming due or from the lien thereof."

Lindsey's article concludes:

The appellate panel found that the state law (Florida Statute ยง720.3085) could not impair or supersede a pre-existing declaration provision, as that would infringe on the prohibitions against the impairment of contract rights and freedom to contract under the state's constitution. The appellate court found that as a successor to the mortgage holder, Pudlit is a third-party beneficiary of the HOA's declaration and the protections which it provides.


The court also noted that the language under Chapter 720 of the Florida Statutes indicating that it is "not intended to impair such contract rights" that were "effective before the effective date of the act" made the existing law inapplicable in this case.

. . . In assessing the implications of this ruling, community association directors and managers should bear in mind that most associations do not have the restrictive language in their declarations nullifying a successor's liability for the previous owner's fees that was at issue in the Pudlit case. In addition, most association governing documents include a provision stating that all new state laws governing condominiums and homeowners associations are deemed to be expressly incorporated into their declarations.

However, this new appellate opinion, which is the first of its kind at the appellate level in the state, should serve as a notification to all community associations in Florida to review their declarations in order to determine if the language that was at issue in this case is found in their governing documents. If it is, they would be well-served to seek the guidance of qualified legal counsel in order to amend their governing documents through the membership meeting and voting process.

Our firm congratulates Lindsey for sharing her insight on this important new appellate decision with the readers of the Daily Business Review. Click here to read the complete article in the newspaper's website (registration required).


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Florida Supreme Court Adds Clarity to Activities That Constitute the Unlicensed Practice of Law by Community Association Managers

June 2, 2015, Posted by Laura Manning-Hudson


LauraManningHudson.jpgIn 1996, the Florida Supreme Court issued an advisory opinion regarding the activities of licensed community association managers (CAM) that would constitute the unlicensed practice of law. In 2013, The Florida Bar weighed in on the issue when its Standing Committee on Unlicensed Practice of Law submitted a report to the state's highest court for its consideration. On May 14, 2015, the Court filed its final opinion based on the Bar's submission.

The Court upheld its findings from the 1996 opinion and adopted all of the recommendations provided by the Bar in its 2013 report. The Court found that the following tasks performed by CAMs are not considered the unlicensed practice of law:

  • Preparation of a certificate of assessments due once the delinquent account is turned over to the attorney for the association
  • Preparation of a certificate of assessments due once foreclosure against the unit has commenced
  • Preparation of a certificate of assessments due once the member disputes in writing to the association the amount alleged as owed
  • Drafting pre-arbitration demand letters

The Court ruled that the following tasks performed by CAMs are considered the unlicensed practice of law:

  • Drafting of amendments to the declaration, bylaws, and articles of incorporation that are recorded in the public records when such documents are to be voted on by the members
  • Preparation of construction lien documents
  • Preparation, review, drafting and/or substantial involvement in the preparation/execution of contracts, including construction contracts, management contracts, cable television contracts, and others
  • Any activity that requires statutory or case law analysis to reach a legal conclusion

flasupcourt.jpgThe Court found that the following tasks performed by CAMs may or may not be considered the unlicensed practice of law, depending upon the facts and circumstances involved in each case:

  • Determination of the number of days to be provided for a statutory notice
  • Modification of limited proxy forms
  • Preparation of documents concerning the right of the association to approve new prospective owners and/or tenants
  • Determination of affirmative votes needed to pass a proposition or amendment to recorded documents
  • Determination of votes needed to establish a quorum
  • Identifying, through the review of title instruments, the owners who are to receive pre-lien letters

The Court's ruling includes examples that help to clarify whether or not these activities constitute the unlicensed practice of law. Click here to read the complete ruling and the examples that are provided for each of these tasks.

With the upsurge in collections and the issuance of demand letters and claims of lien by associations, many CAMs have responded to their association's needs by taking on the preparation of these documents rather than turning to the association attorney. This has led to cases in which demand letters and claims of lien have been invalidated due to mistakes in legal descriptions and recording errors. Association boards should bear in mind that the preparation of demand letters, claims of lien, Notices of Commencement and other legal documents do not typically incur significant attorney fees, but the ramifications of errors in these documents can prove to be very costly. If The Florida Bar determines that a property manager has engaged in the unlicensed practice of law, that manager could face the imposition of fines as well as the possibility of having their CAM license revoked or suspended. It is simply not worth the risk for associations or their managers to prepare these documents in order to avoid the relatively nominal legal fees, and thereby risk exposure to their managers of potential fines and license issues.


Barking Up the Wrong Tree

May 27, 2015, Posted by Michael E. Chapnick


MichaelChapnicksrhl-law.jpgYogi Berra once said "it ain't over 'till it's over." That statement perfectly describes the most recent decision to come out of Florida's Fourth District Court of Appeal dealing with a unit owner's request for a reasonable accommodation under the Fair Housing Amendment Act of 1988 (FHAA) to keep an emotional support animal despite her association's restrictions.

The case of Carolyn Hoffman v. Leisure Village, Inc. of Stuart, Fla. actually involved two dogs. As to the first dog, Hoffman and her association ended up in litigation which resulted in a settlement agreement whereby the association allowed her to keep the dog, with the understanding that she would not get another dog after it passed away, and if she did get another one she would have to move from Leisure Village.

Upon the death of her dog in 2010, Hoffman was diagnosed with chronic depression and her psychiatrist recommended that she get another dog to support her emotionally. Her attorney made a request to Leisure Village for an accommodation under the FHAA, but the request was denied. She got the dog anyway.

esupdog.jpgThe association then went back into court and asked the judge to enforce the settlement agreement. At the same time, Hoffman filed a complaint with the U.S. Department of Housing and Urban Development (HUD) claiming that she was wrongfully denied an accommodation of her disability under the FHAA, and her complaint was ultimately sent to the Florida Commission on Human Relations (FCHR) for investigation. Before FCHR could finish its investigation, the trial court ordered Hoffman to remove her dog from the association.

When FCHR completed its investigation three months later and found cause to believe that a fair housing violation had occurred, Hoffman first tried to file a claim in federal court, and then back in state court, claiming discrimination. The court dismissed her case, saying that she had waived her right to bring a new claim and all of the issues had already been decided in the case relating to her first dog.

The Fourth DCA found that the trial court did not even have the authority to decide Hoffman's discrimination claim because while she had started the process of filing complaints with HUD and FCHR, FCHR did not even complete its investigation of the claim until three months after the court dismissed her claims. The court examined the law and found that Hoffman was required to exhaust the administrative process (i.e., filing a discrimination claim with HUD and having that claim investigated to conclusion) before she was entitled to file a lawsuit. The appellate panel reversed the dismissal of her discrimination claim, thereby allowing her to pursue it back in the trial court.

The lesson to be learned from Hoffman and Leisure Village is even when it appears that a fair housing dispute has been resolved by agreement, it is not necessarily over . . . "until it's over."


Recent Cases Highlight Benefits of Working with Experienced Insurance Attorneys and Public Adjusters for Insurance Claims Involving Community Associations and Property Owners

May 27, 2015, Posted by Susan C. Odess


susanodess-srhl.jpgAfter growing up in the insurance industry as the daughter of one of Florida's premier policyholder advocates, my exposure to insurance practices began at a remarkably young age. As a dually licensed public adjuster and attorney, I focus on insurance matters for our firm's community association clients as well as property and business owners. Through my unique upbringing in conjunction with my years of practice, I have learned that virtually all insureds would amass a great benefit by working with a loss consultant and experienced legal counsel when handling an insurance claim.

Two of my recent cases illustrate the benefits for associations and property owners in working with an insurance attorney and public adjuster for their claims. The first case involved a water loss in the common areas of the Cutler Cay Homeowners Association in southeast Miami-Dade. Upon discovering the loss, the association filed its insurance claim with its insurance company without first consulting a public adjuster or an attorney that specializes in insurance litigation. As a result, the insurance company denied the association's claim and concluded that the loss was not covered under the association's insurance policy.

After unsuccessfully dealing with its insurance company for more than two years, the association contacted our firm to enlist our services. Our firm closely worked with a public adjuster to determine the full extent of the insured's damage. Within several months of filing a lawsuit on the association's behalf, we were able to effectively demonstrate the clear coverage for the association's loss and recover over $269,000 for the association.

water.jpgThe second case involved two separate water-related losses at a single-family home in Broward County. The homeowner immediately retained a public adjuster to assist in the filing and presentation of her claims. In both claims, the homeowner received payment from her insurance company, although the insurance company's payments were insufficient to restore the home to its pre-loss condition. When negotiations between the public adjuster and the insurance company reached a stalemate, the insured contacted our firm. In less than four months, we were able to recover approximately five times the amount of the insurance company's prior payments.

These cases highlight the importance for associations and homeowners of working with experienced insurance attorneys and public adjusters for their insurance claims. Ideally, it is best to retain the services of these professionals prior to the filing of a claim, as their guidance and experience can play a pivotal role in how the claim is handled by the insurance company and ultimately whether the claim is adequately paid. However, it is never too late to enlist these insurance professionals, even if the insurance company denied or issued payment for your claim, as we can often re-open the claim to secure additional funds.


Miami Herald Guest Column by Firm's Susan Odess: Florida Supreme Court Ruling Exempting Citizens from Bad-Faith Suits Requires Legislative Attention


susanodess-srhl.jpgThe firm's Susan C. Odess, who focuses exclusively on insurance law and represents community associations as well as individual residential and commercial property owners in insurance matters, wrote the following guest column that appeared in the May 25 edition of the Miami Herald's "Business Monday" section:

Citizens Property Insurance is commonly known as the insurer of last resort, as it traces its roots to the exodus of insurance carriers from the Florida market after Hurricane Andrew in 1992. The state-run insurer has earned a poor reputation for its mishandling of claims, but for many homeowners, condominium associations and businesses in the state's coastal areas it has been their only option.

Unfortunately for all of those who must remain with Citizens for their insurance coverage, a ruling filed on May 14 by the Supreme Court of Florida will now make the insurer considerably less accountable for its actions in its handling of claims than it has been in the past. The ruling is undoubtedly the worst that has ever come from the Florida courts for the state's approximately 595,000 Citizens policyholders, and it demands a simple and immediate legislative fix during the special session in June.

The court's decision in the case of Citizens Property Insurance Corp. v. Perdido Sun Condominium Association has completely shielded the insurer from liability for acting in bad faith. The ruling revokes, exclusively for Citizens, one of the most powerful tools that policyholders and their advocates have to hold Citizens accountable during the claims process. Under the law, insurers owe a duty of good faith and fair dealing to their policyholders, and they are thereby legally liable for using unfair, dishonest or deceptive practices in their claims and underwriting processes. If the carriers unreasonably delay investigations, deny claims, underpay claims, fail to timely respond to claims, fail to issue coverage decisions, withhold coverage documentation, cancel policies, or conduct other egregious acts they can face bad faith lawsuits for punitive and exemplary sums that go beyond the coverage limits under the standard breach-of-contract claims.

flasupcourt.jpgAfter conflicting decisions by two of the state's district courts of appeal, the Supreme Court of Florida took up the question of whether the Legislature intended for Citizens to be liable for bad faith claims as an exception to its statutory immunity, which as a state agency was based on the principle of sovereign immunity and was enacted by the Legislature to protect the carrier. The case stems from a statutory first-party bad faith suit filed by the Perdido Sun Condominium Association after the association had already prevailed in its breach-of-contract lawsuit against the insurer. The bad faith claim alleged that Citizens refused to pay the full amount owed and take part in the required appraisal process; used the appraisal process in an attempt to forestall litigation; delayed payment of the appraisal award and improperly attempted to condition the payment upon the execution of a universal release; and engaged in a pattern and practice of seeking to avoid or delay the settlement of the claim.

Citizens moved to dismiss the lawsuit by arguing that it is shielded from bad faith lawsuits under its immunity statute. After a review of the statute, the Supreme Court found no support that the Legislature intended for Citizens to be liable for statutory first-party bad faith claims. Even though the Legislature codified Citizens' duty to handle claims in good faith, it did not list first-party bad faith claims as one of the exceptions to Citizens' immunity. The court found that if the Legislature had intended to establish an exception for bad faith claims, it would have done so clearly and unequivocally by including it among the limited exceptions to Citizens' immunity within the statute.

This is precisely what the Legislature should do during the special session in June or during next year's session. Based on the wording of the statute, lawmakers may have believed that bad faith claims did fall under the exception to Citizens' immunity for a "willful tort," but the court ruled that statutory first-party bad faith claims such as the one filed by Perdido Sun are not technically considered a willful tort.

Citizenslogo1.jpgThe end result of the ruling is that Citizens' policyholders will no longer have the only bargaining chip they had to hold Citizens accountable for how it handles claims. It creates an uneven playing field for Citizens against all of the private-sector carriers in Florida that must act in good faith and avoid dishonest and unfair practices with their policyholders. Citizens will face no legal repercussions or liabilities even if it blatantly disregards its duty to make timely claim decisions and payments, conduct fair and unbiased claim assessments, or respond to routine requests for policy and claim documents. The company will have free rein to act with impunity in how it responds to and handles claims, which has horrific implications for all those who will face the prospect of filing a claim with Citizens in the future.

With the hurricane season starting in June, it is imperative for the Legislature to remedy this ruling by adding bad faith lawsuits to the list of exceptions in the Citizens immunity statute. Without this legislative fix, there will be no constraints for the state-backed insurer to act within the bounds of fairness with its policyholders.

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