Changes to Construction Defect Claims Process Being Considered by Florida Legislature Create Concerns for Associations, Property Owners

January 22, 2015, Posted by Georg Ketelhohn


George Ketelhohn Gort photo.jpgDeveloped with the assistance of the South Florida Chapter of the Associated General Contractors of America, House of Representatives Bill 87 seeks to amend Chapter 558, Florida Statutes, in an effort to help contractors and design professionals avoid construction defect litigation. For community associations and property owners, there are a number of concerns about the proposed changes under this new legislation as it currently stands before the House's Civil Justice Subcommittee. The changes under HB 87 would require community associations or other property owners that wish to pursue a construction claim to meet additional procedural requirements which could require substantial expenditures on engineering fees before being able to file suit. The bill would also require property owners to produce potentially large amounts of documents to the contractor or design professional before being permitted to file suit without imposing a similarly broad requirement on the contractor or design professional, and it would impose monetary sanctions against property owners who file suit for construction defects in several circumstances, while not providing for any sanctions against contractors or design professionals in similar situations.

The changes under HB 87 include:

  • Revising the legislative intent to address the involvement of insurers.
  • Revising the legislative intent to indicate that Chapter 558 is intended to provide an opportunity to resolve construction defect claims through confidential settlement negotiations.
  • Revising the definition of the term "Completion of a building or improvement" to include issuance of a temporary certificate of occupancy, which could potentially shorten the statute of limitations for a property owner to file suit for construction defects.
  • Providing additional requirements for a notice of claim, including the identification of specific location(s) of each alleged construction defect, as well as the specific provisions of the building code, project plans, project drawings, project specifications, or other documentation, information, or authority that serve as the basis of the claim for each alleged construction defect.
  • Revising the requirements for a response to a notice of claim to address monetary settlement offers.
  • Providing that, if a claimant proceeds with an action that includes any claim previously resolved in accordance with Chapter 558, the associated portion of that action shall be deemed frivolous. The term "previously resolved" is not defined.
  • Providing for sanctions for such frivolous claims, including attorneys' fees.
  • Revising the provisions relating to production of records requested under Chapter 558, to include a claimant's maintenance records and other documents related to the discovery, investigation, causation, and extent of the alleged defects identified in the notice of claim and any resulting damages.
  • Providing for sanctions for construction defect claims that were solely the fault of a claimant or its agents, including costs of investigation, testing, and attorneys' fees. (No sanctions are provided against a defendant if the defect is deemed to be solely the defendant's fault.)

HB 87 defines "completion of a building" to mean issuance of a temporary certificate of occupancy (TCO) instead of the final certificate of occupancy (CO), which may shorten the statute of limitations for construction defects in some cases. Currently, the statute of limitations for construction defects commences with the final certificate of occupancy, but if the bill is ratified defendants will use it to argue that the period for the statute of limitations begins with the issuance of the TCO rather than the final CO.

Florida legislature2.jpgThe proposed bill would require associations and property owners to identify in the initial notice of claim every single location of each defect rather than to provide a representative sample. If the type of defect involved is concealed, this would necessitate destructive investigations, and would require associations and property owners to demolish building elements in search of each instance of the defects in order to include all of them in the notice.

In addition, the bill also requires that the initial notice includes all of the specific provisions of the building code, project plans, project drawings, project specifications and other documentation, information or authority that serve as the basis for the defect claim. The failure to include each of these would serve to invalidate the notice of claim as deficient. This would create a significant obstacle to bringing a claim for construction defects, as the associations and property owners often do not have all the project drawings, specifications, etc., at the outset. Before initiating a claim, associations and property owners have often not yet had the opportunity to obtain project records or depose the defendants, which frequently allows the issues causing the defect(s) to be expanded during the course of litigation. Under this bill, if the claim is expanded based on information learned in discovery, the defendant can argue that the initial notice of claim was deficient.

The bill would require more detailed settlement proposals from contractors that wish to extend a settlement offer, but it provides no penalties for defendants that fail to comply with this requirement. However, the associations and property owners that file claims are subjected to several potential penalties if they do not comply with the requirements under the proposed modifications to Chapter 558.

The bill provides for sanctions if a claimant sues for any claim that had been "previously resolved" in accordance with Chapter 558, but it fails to define "previously resolved." If a construction defect is settled by repairs offered by the contractor during the Chapter 558 claims process but the repairs fail to fully correct the defects and the owner or association then files suit because the issue was not resolved, the defendant may claim that the issue was "previously resolved" and the owner may face penalties. However, the bill provides no similar penalty for contractors that agree to provide repairs and then breach that agreement.

The proposed law would also require owners/associations to produce all of their maintenance records and other documents related to discovery, investigation, causation and the extent of the alleged defect(s) identified in the notice of claim as well as the damages resulting from the defects. This will typically require an extensive, time consuming, invasive and expensive process of document inspection, review and production on the part of the claimant before a lawsuit is ever filed, creating another significant roadblock to filing a suit for construction defects. From the owner/association's perspective, this defeats part of the benefit to settling before litigation starts, as they must incur significant discovery expenses and attorney's fees just to go through the claims process prior to the filing of a lawsuit. In addition, the provision is one sided in that it does not require the contractors or design professionals to produce to the claimant a similarly broad amount of discovery during the process.

HB 87 would also provide for sanctions against an owner or association that brings suit for an item that is ultimately deemed by the court to be solely the fault of the claimant or its agents. Florida Statutes Section 57.105 already provides for fees against a party that prosecutes a frivolous claim or a frivolous defense. The bill does not reference the standard in Section 57.105, so essentially it creates a possibly different standard. HB 87's possible sanctions against associations/owners include not only attorney's fees but also costs of inspection, investigation and testing. However, if a contractor or other respondent is ultimately found to be responsible for a defect, and its defense was not supported by the facts or the law, no sanctions are provided against the contractor or its attorney under the bill.

As it now stands, HB 87 would cause significant obstacles and undue burdens on property owners and community associations that wish to pursue construction defect claims. Our firm's other community association attorneys and I encourage Florida associations and property owners to become informed about this bill and its progress in Tallahassee. The bill has been assigned to the Civil Justice Subcommittee, the Business & Professions Subcommittee and the Judiciary Committee, and it must pass those committees before coming before the full Florida House of Representatives in the 60-day legislative session that begins March 3, 2015. If passed, the new law would take effect October 1, 2015.


Elections 101

January 19, 2015, Posted by Laura Manning-Hudson


Laura Manning HudsonWith the new year comes new plans, new resolutions and . . . elections. For many community associations election season is well under way and, as easy as an election may seem (go out, get the votes, and count the ballots - right?), there are so many statutory nuances in the electoral process that, if handled improperly, can invalidate the entire election and cost the association both time and money. In an effort to assist association boards and hopefully avoid costly mistakes during the process, we have outlined the pertinent information that you need to know.

The Election Process:

First notice of election

The first notice must be mailed, emailed, or hand delivered to the membership at least 60 days prior to the annual meeting/election day.

The notice must include:

  1. The date, time and location of the meeting and election.
  2. The number of seats that are open for election.
  3. Details surrounding the information sheet that candidates must submit if they wish to run for the board.

Receipt of intents to run for the board

  • All eligible persons who wish to run for the board must submit their notice of intent to be a candidate for election no less than 40 days prior to the annual meeting/election.
  • Notice of intent may be submitted via mail, email, or hand delivered statement.
  • Any notices of intent received on the 39th day before the election (regardless of the day of the week that the 40th day falls on) - are deemed invalid and those names may not be placed on the ballot.
  • Each eligible candidate then has an additional 5 days (35 days prior to the election) to submit an information sheet (resume) to the association which will be mailed out with the second meeting notice.

Second Notice of Election

  • The second notice of election must be mailed, emailed or hand delivered to the membership at least 14 days prior to the annual meeting/election.

The Second Notice should include:

  1. Instructions for casting a ballot.
  2. The notice and agenda for the annual meeting (which will include the election).
  3. Any information sheets (resumes) submitted by eligible candidates.
  4. The ballot listing all of the eligible candidates' names in alphabetical order.
  5. An inner envelope labeled "Ballot Only" and an outer envelope labeled with the address of the property manager or the association.

MeetingVote.jpgVoting

  • In order to be valid, the unit owner's name must be printed on the outer envelope, together with the unit number, and the eligible voter's signature.
  • The eligible voter must select a candidate using the ballot included with the second notice and place it in the inner envelope.
  • The inner envelope must then be placed in the outer envelope.
  • The outer envelope may then be mailed or hand delivered to association or property manager.
  • The same process must be utilized (ballot, inner envelope and outer envelope) at the annual meeting up until the time that the inspectors of the election begin to open the outer envelopes.

While this process may seem tedious and time consuming, it is extremely important to remember that the process is in place to ensure a fair election. When casting your vote, keep in mind the importance of the board in your community. The board generally serves as the "people's voice" and handles the day-to-day operations and decisions of the association and, in conjunction with the manager, ensures that the community runs smoothly. Annual meetings and elections are an extremely critical time for any community association, so it is important that they are treated as such.

Please be advised that you may contact your attorney to handle the election for your association, as they are able to monitor and assist with the process to ensure all steps are followed correctly.


Appellate Opinion Reverses Foreclosure Court Decision Granting Association First-Priority Lien Rights Over Lender

January 12, 2015, Posted by Nicholas D. Siegfried


Nick Siegfried 2013.jpgIn another appellate ruling on a case involving significant delays by a bank in a residential foreclosure, the First District Court of Appeal has reversed a lower court's decision that awarded first-priority lien rights to a condominium association in Destin, Fla. over those of the lender due to the bank's dilatory tactics.

In the case of U.S. Bank National Association v. Nicholas Farhood, the First DCA reversed the trial court's final summary judgment of foreclosure and remanded the case back to the circuit court. The appellate panel found that the lower court's use of its "equitable power and authority to fashion a sanction for unspecified delays in this case constituted an abuse of discretion which must be reversed."

U.S. Bank had originally filed its complaint for foreclosure in this case with the circuit court on July 15, 2007, but then it progressed very slowly with the litigation for the ensuing four years. On September 1, 2011, upon U.S. Bank's motion to dismiss the association's counterclaim and upon an unrecorded hearing on that motion, the circuit court found that U.S. Bank had delayed the case and failed to act upon it, and as a "sanction" it ordered the lender to pay $2,500 to the association.

1dca.jpgThe litigation proceeded and in early 2012 U.S. Bank filed its motion for summary judgment of foreclosure, which included allegations that its mortgage was superior to the association's lien. The association responded with its own motion to dismiss and for sanctions against U.S. Bank for additional delay tactics, and it asked the court to issue a summary judgment on its counter claim for foreclosure for the past-due assessments and alleged that its lien was superior to any interest of U.S. Bank and the borrowers. Based upon the circuit court's equitable powers, the court declared the association's lien superior to U.S. Bank's first mortgage. U.S. Bank appealed the order and the appellate court reversed, finding that the circuit court exceeded its authority.

The appellate opinion concludes:

Even if the court correctly found that U.S. Bank or counsel had engaged in sanctionable delay tactics, the court had no need to resort to its equitable powers to create the sanction in this case. Appropriate remedies to address any willful and deliberate delay in the litigation are already established. See § 57.105(2), Fla. Stat. (award of attorney's fees and costs caused by opposing party's deliberate delays); Fla. R. Civ. P. 1.420 (dismissal of all or part of an action); 1.440 (setting action for trial); Fla. R. Jud. Admin. 2.545(e) (continuances should be few, good cause is required).


Not only did the court unnecessarily invoke equitable powers to create a remedy for delay, the order declaring the Association's lien superior to U.S. Bank's lien as a sanction for such delay exceeded the court's authority. '[C]ourts of equity have no power to overrule established law.' . . . The court's declaration of lien priority as a sanction impermissibly overlooks the common law and encroaches on the Legislature's codification of well-established property rights.

. . . Contrary to its assumption in the order imposing the sanction, the circuit court did not have 'equitable power and authority to give [the Association] first lien priority in this matter,' without regard to the statutes governing such lien priorities. The imposition of sanctions which contravene the recording and lien priority statutes, or the statutes establishing time and amount limits for a mortgagee's liability for condominium assessments, exceed a trial court's discretion and require reversal."

Our other community association attorneys and I will continue to monitor foreclosure cases and their impact on community associations. We write about important legal and administrative issues for Florida HOAs and condo associations in this blog on a regular basis, and we encourage association directors, members and managers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.


New vs. Almost-New

January 5, 2015, Posted by Roberto C. Blanch


Roberto Blanch 2013.jpgConstant new development of residential and mixed-use towers can be seen all over South Florida, with new projects being announced constantly. The construction of these new towers evokes buyers to ask themselves: What is better, new or old? The answer to that question is triggering existing community associations to spruce up their communities by giving them a facelift in an effort to stay competitive.

With the intention of luring buyers to choose new over old, newer buildings are offering luxuries such as: sleek and polished designs, newer amenities, revolutionized living technology and the idea of being the first to live in a space that has not yet been inhabited. Add-ons such as state of the art fitness centers, exclusive resident spa services and five-star concierge and building services are making the choice of selecting new construction more appealing. However, this option commonly comes with a heavier price tag and some unexpected issues. A few draw-backs such as unforeseen construction delays and unknown kinks arising after construction are common issues owners face when selecting new construction. They also face the infamous turnover phase -- a time that could be very difficult for newly established community associations if they lack the right experts to guide them through the process. These challenges have prompted older towers to improve their buildings with hopes of enticing these buyers to look their way.

pool deck renovation.jpgOlder buildings are using the risks buyers face when purchasing new construction to their benefit. Towers over three years old are labeling themselves "established," having already dealt with most, if not all, construction defects found after the developer turned over control. They also highlight the fact that their boards are more seasoned, helping buyers feel like they are placing their investment in knowledgeable hands. Also, construction delays would never be an issue since these units are all move-in ready. In addition to highlighting some of the benefits that come with moving into an established community, many older condo towers are also making the effort in renovating their spaces to update their design to match the designs offered in newer construction. Some have gone as far as converting racquetball courts into multi-purpose rooms, yoga rooms, arts and crafts rooms and additional fitness centers. Simply by turning something old into something almost-new, these towers are keeping up with newer condos and competing at a price level that tends to be much more affordable, while still offering a similar style of living. With this in mind, the boards of these older buildings should be cautioned that their association's governing documents may prevent some of the proposed changes, and that many alterations and improvements must be approved by the association membership. Accordingly, it is advisable for community association counsel to be involved in the planning of any such changes.

It will be interesting to see what buyers will choose once most of these towers are finalized. Our firm's community association attorneys have assisted numerous clients with redesign projects throughout the years. We write in this blog about important legal and administrative issues affecting associations in Florida, and we encourage association directors, members and property managers to enter their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.


Nicholas Siegfried Discusses His Recent Win Before Third District Court of Appeal in Article in Today's Daily Business Review


Nick Siegfried 2013.jpgThe firm's recent win before the Third District Court of Appeal in an important decision for Florida community associations was the subject of an article in today's edition of the Daily Business Review. Nicholas Siegfried, who represented the community association in the case together with Steven Siegfried and wrote about the decision in the preceding blog article below, was interviewed and quoted by the newspaper.

The report reads:

The case shows the "negative consequences that lenders can face if they go too far with their delay tactics in foreclosure cases," condo association attorneys Nicholas and Steven Siegfried said in a statement.


The case was Deutsche Bank Trust Co. Americas v. Harry Beauvais, a borrower who defaulted on his mortgage within months of securing it in early 2006.

Loan servicer American Home Mortgage Servicing Inc. filed suit in January 2007, demanding accelerated payments for the full $1.44 million.

Ironically it was this move for upfront payments that would unravel the lender's case and cost the bank the million-dollar property, because the condo association successfully argued the demand started a five-year clock for resolving the foreclosure.

Statute of Limitations

The court booted American Home Mortgage's case without prejudice when the servicer failed to attend a hearing.

That dismissal led the condo group to start its own efforts to claim outstanding fees on the penthouse.

"Like a lot of associations, this one was waiting to see what would happen with the foreclosure action," said Nick Siegfried, shareholder at Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel in Coral Gables. "But since the bank didn't proceed and the case was dismissed, the association had no choice but to proceed on its own."

Aqua Master Association won control of the penthouse in 2011, but its claim remained subject to the mortgage.

When Deutsche Bank took over American Home's foreclosure suit in December 2012, Aqua said the clock had already been ticking for five years and was about 11 months outside the statute window.

The bank argued the earlier dismissal "decelerated" the loan, but a judicial panel disagreed.

In an opinion issued Dec. 17, judges Frank Shepherd, Kevin Emas and Edwin Scales barred Deutsche Bank from pursuing the foreclosure. They found the bank never withdrew the original demand for accelerated payments, and so had to abide within the five-year window.

Our firm congratulates Nicholas and Steven for prevailing in this case for the association for Aqua Allison Island in Miami Beach and drawing the attention of the Daily Business Review. Click here to read the complete article in the newspaper's website (registration required).


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Firm Prevails in Appellate Ruling: Bank's Foreclosure Delays Exceeded Statute of Limitations, $1.4 Million Penthouse Goes to Miami Beach Condo Association

December 19, 2014, Posted by Nicholas D. Siegfried


Nick Siegfried 2013.jpgOur firm's founder, Steven Siegfried and I are very pleased to have prevailed on behalf of one of our community association clients before the Third District Court of Appeal in the opinion filed this Wednesday, Dec. 17, in the case of Deutsche Bank Trust Company Americas v. Harry Beauvais et. al. The appellate panel affirmed the Miami-Dade Circuit Court's summary judgment that I had secured earlier this year barring Deutsche Bank from foreclosing on its $1.43 million first-mortgage on a penthouse at the Aqua Condominium in Miami Beach which the association had acquired ownership of in 2011 through its own foreclosure action. Since the bank failed to file its foreclosure action within the five-year statute of limitations period, it was barred from seeking to collect the amounts due under the mortgage (click here to read the blog article that I wrote on the circuit court's decision).

At the trial court level, we successfully argued that the bank had "started the clock" for the filing of its foreclosure action in January, 2007 when its loan servicer filed the initial foreclosure suit and accelerated the amounts due under the mortgage. The foreclosure was dismissed when the lender's attorneys failed to appear at the initial case management conference in December, 2010. For unexplained reasons, the bank then waited until December, 2012 to file its second foreclosure action, nearly a full calendar year after the five-year statute of limitations had expired. The circuit court granted our motion for summary judgment declaring the first mortgage held by the lender unenforceable, null and void and discharged of record from the penthouse unit.

3rd district court of appeal.jpgThe bank appealed the circuit court's judgment. Along with our co-counsel Todd Wallen, we successfully countered the bank's contention before the appellate panel that its second filing represented a new foreclosure action. The Third DCA determined that the initial foreclosure suit triggered the commencement of the statute of limitations and, thus, the filing of the subsequent action, after expiration of the statute of limitations, was therefore barred. As a result, the Third DCA affirmed the circuit court's order that the lender was barred from foreclosing on its mortgage, but it reversed the court's finding that the bank's mortgage was null and void. The end result is that although the mortgage remains on the property until its expiration, the lender is precluded from taking any action to collect the debt, thus allowing the association to continue to rent the unit without fear of an eventual foreclosure action by the lender.

This opinion is emblematic of the ultimate negative consequences that lenders are facing due to their failure to timely enforce their rights. After years of suffering due to the dilatory tactics of lenders, an association has finally caught a break and will benefit by this ruling. Every citizen of this state is bound by the applicable statute of limitations, and the Third DCA made it clear that banks are no exception. The ruling represents the first appellate opinion on a decision barring a lender from foreclosing on its mortgage due to the expiration of the statute of limitations, and it is likely to be considered by the Florida Supreme Court which is set to hear a similar case.


Firm's Michael Hyman Quoted in Daily Business Review Article on Appellate Ruling on Lenders' "Safe Harbor" Liability Limits


Michael Hyman srhl-law.jpgThe firm's Michael Hyman provided some insight into a recent decision by the Fifth District Court of Appeal in an article in today's edition of the Daily Business Review. The appellate ruling, which was also the subject of the preceding blog article by firm partner Nicholas Siegfried, affirms that subsequent mortgage assignees of the original first mortgage of a property are entitled to the "safe harbor" limitation for unpaid association dues of the lesser of twelve months of assessments or one percent of the original mortgage debt.

The article reads:

"It's really a better decision for the lending industry than it is for the community association industry," said Michael Hyman, who is not involved in the Beltway case but knows the issue.


"It certainly doesn't help the associations in trying to capture as much of their delinquencies as they can," he said.

Hyman's firm, Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, has hundreds of condo association clients; he got his first one in 1970.

Over the years Hyman has watched the push-pull of the two industries in the courts and the Legislature.

"Safe harbor was a result of the banking industry years ago going to the Legislature and convincing them that lending would be in peril if a first mortgagee didn't have priority over a condo assessment," he said. "It was instituted so that a lender could always be in a position of priority over an association lien."

Before the condo statutes were amended to add safe harbor, many of the older associations had governing documents that failed to address the liability or assessments post-bank foreclosure. Or they had provisions that would entirely extinguish the liability for assessments incurred before a bank received title through foreclosure.

Condo associations having a pretty strong lobby of their own, the point was taken that they were losing barrels of money. The resulting compromise added the 12 months or 1 percent provision for first mortgagees.

"It was sort of a bone that was thrown to the condo associations by the banking industry to prevent a catastrophe," Hyman said.

Since the mortgage meltdown, however, the bone has lost meat. There were so many foreclosures and they took so long that associations found themselves "upside down" and suffering, he said.

"We had associations that had a large portion of their units in foreclosure and the associations had to change their operational motifs and pass special assessments because they didn't have enough money to pay their bills," Hyman said.

Most recently, the Legislature changed the safe harbor rules effective July 1 to help aggressive associations that beat out lenders in the competition to foreclose.

The banks argued that by foreclosing, an association would put itself in the position of the prior owner who isn't entitled to collect any past-due fees. An amendment provided clarity, Hyman said.

"Now if the association takes title, the bank coming behind them on the bank's foreclosure still has to pay the 12 months or 1 percent," he said.

. . . Hyman has his own take on how Beltway came to be a case of first impression.

"The issue has never been brought up because nobody would have thought to argue it was even controversial," he said. "It was never teed up for determination."

Lawyers for the condo association used a creative defense against application of the safe harbor law that swayed the trial judge.

"Then the appellate court kind of straightened it out," Hyman said. "The court basically said, 'Hold on, you're not looking at this in the appropriate way.' "

Our firm congratulates Michael for providing his expert analysis of this ruling for 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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New Appellate Ruling Limits Lenders' Liability for Assessments

December 15, 2014, Posted by Nicholas D. Siegfried


Nick Siegfried 2013.jpgWith so many mortgages having been sold off by their original lenders to other lenders during the foreclosure crisis, a ruling last week by the Fifth District Court of Appeal provides clarification as to whether subsequent assignees of the original first mortgage are entitled to the "safe harbor" limitation for past due assessments. The opinion affirms that subsequent mortgage assignees of the original first mortgage of a property are entitled to the safe harbor limitation of the lesser of twelve months of assessments or one percent of the original mortgage debt.

In the case of Beltway Capital, LLC v. The Greens COA, Inc., the Fifth DCA reversed an order by the trial court granting the association's motion to determine amounts due. The association had successfully convinced the trial court that because the law states that the safe harbor caps are limited to the "first mortgagee or its . . . assignee," it excludes Beltway because it was not a direct assignee of the original lender. The original mortgagee was MERS as nominee for First National Bank of Arizona, and MERS assigned the mortgage to a GMAC entity which subsequently assigned it to Beltway.

5DCA Court House.JPGBeltway, which had already acquired the property in question through foreclosure, filed an appeal of the trial court's ruling interpreting the safe harbor statute as only including the original lender, the original lender's successor, and the original lender's assignee as parties qualifying for the narrow liability exception." The appellate court reversed the trial court's ruling and held as follows:

Beltway correctly notes that the first fatal flaw in both the trial court and The Greens' construction of the statute is their equation of "first mortgagee" with "original lender." Neither section 718.116 nor any other part of the Condominium Act define the term "first mortgagee." Black's Law Dictionary defines the term "first mortgage" as "[a] mortgage that is senior to all other mortgages on the same property." Black's Law Dictionary 1102 (9th ed. 2009). In contrast, a "second mortgage" is one "that is junior to a first mortgage on the same property, but that is senior to any later mortgage." Id. at 1103. A "mortgagee" is "[o]ne to whom property is mortgaged; the mortgage creditor, or lender. -- Also termed mortgage-holder." Id. at 1104. Thus, a "first mortgagee" is simply one who holds the first mortgage, whether that be the original lender or a subsequent holder. The modifier "first" refers to priority of lien, not necessarily to the first in time . . . For example, a person who acquires a first mortgage from the original lender after a second mortgage has been executed is still considered a first mortgagee because he or she holds a higher priority mortgage despite acquiring it later in time.

Accordingly, since Beltway held the first mortgage at the time it acquired title by foreclosure, it was entitled to the safe harbor protection as a "first mortgagee" under Section 718.116(1)(b), Florida Statutes. While this ruling is detrimental to community associations, it does help to clarify an important issue concerning the liability of lenders where they acquire title to property in foreclosure actions. Thus, with this ruling, community associations can better plan their budgets and legal strategy as the foreclosure crisis nears its end.


Don't Get Scrooged By Your Neighbors During the Holidays

December 8, 2014, Posted by Laura Manning-Hudson


Laura Manning HudsonHolidays are time for out of town visitors, lots of parties with family and friends, and the inevitable traffic that all of the festivities bring with them. Unfortunately, not all neighbors and communities welcome the season and all that it brings with open arms. Typical complaints that many boards deal with during the holiday season revolve around high traffic, high noise levels and violations of parking rules. However, by taking certain precautions ahead of time, residents can hopefully avoid being scrooged by their neighbors and having their holiday spirit deflated.

If you are hosting a party, a good rule of thumb is to plan ahead in terms of parking. Find out about the guest parking in your community - where spaces are located and how many spaces are available is a good starting point. If you live in a gated community, find out if visitors will be required to go through a security gate or obtain guest parking passes beforehand. Some communities require that a guest list be provided to security prior to the party so that guests can more easily be identified when entering the community and then directed to the appropriate parking locations. You may also want to ask around to see if any of your neighbors will be out of town and whether your guests can use their parking spot while they are away. If guest parking is limited or just not accessible, you may have to park visitors outside of the community and shuttle them in.

From the board's perspective, make sure that your community is prepared to accommodate the increased traffic and parking during the holidays. The parking rules may differ from association to association, but the most important thing to consider is to keep the roads safe for other drivers and emergency vehicles. Gatehouses or guard gates should be well-staffed to ensure that visitors aren't forced to wait long periods of time in order to be granted entry. Also, make sure that security follows your community's protocol when allowing visitors access - you don't want them bypassing security procedures in an effort to avoid long lines. If your community has roving security guards, make sure that officers are continuously moving through the property -- extra security presence helps deter unruly behavior.

h party post.jpegSince South Florida is notorious for its nightlife and parties, make sure to keep your noise levels in check when hosting your holiday gathering. Ask yourself at what point does sound become noise. Keep in mind that each county has noise ordinances that regulate the times of day that noise levels should be kept at a minimum. The most common times which counties allow loud music to play are Sunday through Thursday until 10 p.m., and Friday through Saturday until 11 p.m. If the designated noise restrictions are ignored, your neighbors may call the police with a nuisance complaint and your party may be over before you've been able to ring in the New Year. Officers will typically give a warning, but if the noise persists, you may receive a ticket or even be arrested for public nuisance.

Finally, parties and family gatherings often mean that our furry friends get booted to the garage, backyard, balcony, or confined to a crate indoors - and with that may come incessant barking, whining and howling. While neighbors and board members may not call animal control unless they have reason to believe the animal's safety is in jeopardy, they do have a right to exercise what is legally referred to as "quiet enjoyment" of their residences. If you have already been warned about your animal's disruptive behavior and the issue persists, you could face fines or other legal action.

While the holidays are a hectic time of year, communities that plan ahead are better served - as are their residents who know (and hopefully follow) the rules. We encourage association directors and members to review their community's parking, party and security rules at board meetings leading up to the holiday season. Distribution of information to the membership is key with the ultimate goal to make the season merry and bright while not ruining the magic for those around you.


Know Your Association's Rules before Hanging the Mistletoe

November 24, 2014, Posted by Laura Manning-Hudson


Laura Manning HudsonTis the season to be jolly! Or is it? The time of year is near where holiday songs are being sung, and lights and other decorations are being hung. However, before you start decking the halls - you may want to check your association's rules for spreading the holiday cheer. Not all communities are keen on holiday décor. In fact, some communities ban the use of inflatable snow globes and over excessive lights. The best way to know your community's position on the matter is to start by asking if there are any rules or policies in place for holiday decorations. If your neighbors don't know, find a board member or certainly the property manager can steer you in the right direction.

If your association allows decorations, the most common rule of thumb is to keep them on your property and keep them to a minimum. If there are no rules in place regarding holiday decorations, the association has the right to ask you to remove your decorations should they interfere with common elements, draw too much attention causing unnecessary traffic, or if the light and noise are disrupting those around you. In a condominium association, this applies to the outside of the unit including the front door (the exterior side is generally a common element). Something else to keep in mind is the amount of time that the decorations are displayed. It is recommended that decorations should be up no longer than thirty days prior to and thirty days after the end of holiday season - after all, the holidays should be celebrated during the month of the "main event."

hlights.jpgUnfortunately, some communities can be rather "scrooge-like" and have rules against all decorations. While the Condominium Act prohibits associations from refusing to allow religious objects (not exceeding 3 inches wide, 6 inches high and 1.5 inches deep) from being attached to the mantel or frame of the door, there are some associations that prohibit the placement of any décor whatsoever. Your association may have penalties in place for those wanting to spread merry cheer with lights, nativities and dancing snowmen. Penalties may include a request to immediately remove decorations or may even come in the form of a fine (with notice and opportunity to be heard, of course); it all depends on the rules and regulations set forth in your association's governing documents and bylaws.

If you are wondering whether there are any loopholes to the bah-humbug attitude, perhaps there are, but in order to find out you need to do your research. We recommend that you attend board meetings, check the state laws and review your association's rules and regulations. And, before you storm into a board meeting fuming with frustration, keep in mind that even though your home is your property, you did agree to a specific set of rules and regulations when you joined the community. It is best to be well informed before you are asked to take down your décor or worse - asked to pay a fine for something as innocent as displaying some holiday spirit. If you are on the board at your community and there are no rules in place for holiday décor, you may want to suggest adopting a policy at the next board meeting, voting on the policy and then distributing the new rules to the membership.


Eyes in the Sky

November 13, 2014, Posted by L. Chere Trigg


Chere Trigg.jpgDrones have been the topic of conversation for the past several years sparking privacy concerns amongst residential communities. In the state of Florida, Governor Rick Scott signed a bill that limits law enforcement's use of drone aircraft; however, that bill does not pertain to or restrict the commercial and private use of drones. The "Freedom from Unwarranted Surveillance Act," which came into effect on July 1, 2013, allows law enforcement agencies to launch camera carrying surveillance drones under two circumstances: if a warrant from a judge is obtained or if a person's life or property is believed to be in imminent danger. In 2013, the use of drones was reported by both the Miami-Dade and Orange County Sheriffs departments, each owning two drones used solely for training purposes.

However, not all states are restricting domestic drone use. The state of North Carolina for example does not have a bill protecting its citizens from law enforcement agencies using drones. In fact, North Carolina's legislature recently passed a bill giving authorities permission to use drones to photograph open-invitation gatherings without the need to obtain a warrant -- even if the gathering is held on private property. That is not to say there are not regulations in place protecting citizens from peeping toms photographing someone and/or their property. The use of drones for business purposes is also prohibited. For example, photographers cannot sell photos or videos taken with a drone, as drones should strictly be used for recreational purposes.

d2.jpgEven with all of the FAA's rulings, the commercial and private drone industry is expected to become a multimillion dollar industry, creating numerous jobs within the next ten years. The controversial topic revolving around the right or wrong use of unmanned aircraft has many asking: Where can the line be drawn? Drones are easily accessible and are found for sale all over the web. With laws being passed focusing only on law enforcement's use of drones, such as Florida's Senate Bill 92, what can be said about your neighbors flying their drones over your house or condominium unit? Is it deemed acceptable because it is a hobby? Or does your neighbor need to limit drone flying to their property only?

The questions are endless, but communities can set rules in an effort to protect their residents' privacy. At your next association meeting, you could request to limit the flying of drones to certain areas to prevent anyone in your community who may own a drone from flying it near your home, on the common areas or from the condominium property. With the popularity of the technology and lack of restrictions, board members should even consider a ban altogether to avoid any unnecessary hassles. With prices as low as $50 and retailers expecting record breaking sales this holiday season, it is best to put the proper restrictions in place for your community before privacy is jeopardized.

Over the course of time, we will hear of new rules and regulations regarding the use of drones, especially as technology assists in their evolution to become smaller, cheaper and much more efficient than existing methods. Companies like Amazon are already seeking approval from the FAA in an effort to pioneer drone delivery services. Although the use of drones could potentially revolutionize the way many existing companies operate, the bigger focus lies in the misuse of drones, should they begin to trample on privacy laws.


Another HOA Board Meeting Brawl Caught on Video Makes the Nightly News

November 7, 2014, Posted by L. Chere Trigg


Chere Trigg.jpgNicole Kurtz, one of our firm's other community association attorneys in our Miami office, wrote in this blog in September about a fight caught on video at a Sunrise HOA board meeting that was aired by WPLG Local 10 on the station's nightly newscast. Well, it did not take long for the station to air another story featuring a brawl as well as nasty arguments videotaped at another local HOA community.

It appears from the report that the situation at the Mainlands 3 retirement community in Tamarac has escalated to the point of becoming a complete debacle. The residents are clamoring to remove the current directors from the HOA's board, and the president and vice president of the board are resisting their efforts by adjourning or cancelling meetings in order to prevent votes by the members to recall the current board and demand a new election. One of the homeowners in the community is even quoted saying that she believes many of the combatants are carrying concealed weapons to the meetings, and as a result, she is in fear for her and her neighbors' safety.

Click below to view the report from Local 10 News.

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Preparing for the Snowbird - the Unofficial State Bird of Florida

October 27, 2014, Posted by Laura Manning-Hudson


Laura Manning HudsonLast winter was particularly brutal for many parts of the country, and it was among the coldest on record in large swaths of the Midwest. For South Florida however, the weather was as mild and beautiful as ever. TV viewers across the country were often reminded of the spectacular South Florida weather on national television showing ubiquitous scenes of sunbathers on the beach during the nationally televised Miami Heat games.

South Florida's mild winters have made the Snowbird, those part-time residents who flock here by the hundreds of thousands from December through March, the unofficial state bird of Florida. Many of these Snowbirds own units in condominiums and homeowners association communities, making it necessary for full time residents and managers to adjust to the influx of residents. In order to make the transition into the "season" run smoothly, community associations can take a few simple steps to prepare.

For full time residents, board members and managers, the return of the Snowbird is the ideal time to reconnect with friends and ensure that the association has all of their current contact information. Snowbirds should also be sure to change their mailing addresses for all association communications from their residences up north to their local address in the community.

fs1.jpgA nice way to welcome Snowbirds back to their winter homes is with a special reception for all of the residents in the community clubhouse or pool area. Speaking of which, the association's common areas (card rooms, meeting rooms, pool areas, and clubhouse) are also likely to see more engagement by residents hosting their own gatherings and events over the holidays. Anyone who may be considering reserving the common areas for private gatherings should be reminded to schedule ahead of time with management in order to ensure availability.

Boards of directors should also be prepared for increased attendance at meetings. There will certainly be more architectural review submissions from unit owners who are planning changes to their seasonal homes, so any architectural review committee should be prepared for the increased workload.

For condominiums, parking garages will be much fuller, and management should be prepared to promptly respond to any parking or security issues that may arise in order to avoid their escalation into disputes between residents. Residents who live in gated communities should also confirm that their access cards/fobs/transponders are active in order to avoid pileups of vehicles at community entrances.

By working closely together and planning ahead, association boards and their property managers can make the transition into the busy winter season run as smoothly as possible.


Palm Beach Condo & HOA Expo on October 15th

2015 Legal Update Seminar Picture.jpgOn October 15th, the firm participated in the Palm Beach Condo and HOA Expo at the Palm Beach County Convention Center. It was a huge event attended by hundreds of property managers, board members, owners, and fellow industry experts. Attorney Laura Manning-Hudson presented the 2015 Legal Update course which had an outstanding turnout of over 150 attendees. Attorneys Evonne Andris and Nelson Rodriquez were also in attendance and answered questions throughout the day giving out great advice and engaging in lively conversation with those who stopped by our booth. To all who attended and visited our booth, thank you for making the Palm Beach Condo and HOA Expo so memorable!


Guest Column by Helio De La Torre in Daily Business Review: Un-American Condo Termination Law Needs To Be Changed

Helio De La Torre 2013.jpgFirm partner Helio De La Torre wrote a guest column that appeared in the Daily Business Review last Friday, September 26, calling for the Florida legislature to consider significant changes to the state's condominium termination law.

Helio's column reads:

"In light of the importance of property rights in our society, it has come as a shock to many that the condominium termination law, which was amended by the Florida Legislature in 2007, is now being used successfully throughout the state by real estate developers to take over communities and force unwilling homeowners to sell their residences at prices that are often well below their original purchase price, and in many instances, below their remaining mortgage debt.
The new changes to the condominium termination law were enacted in response to the hurricanes of 2004 and 2005, which ravaged many condominiums throughout Florida. Scores of these condominiums could not afford the repairs, so they were abandoned and languished. As a result, in 2007 the legislature amended the state's condominium laws in order to lower the thresholds for terminating condominiums so that they could be sold to developers with the option of converting the entire community to rentals."

Helio concludes by discussing the outlook for changes to this controversial law:

"State Rep. Carl Zimmermann, D-Palm Harbor, filed a bill in this year's legislative session that was aimed at giving those owners an opportunity to recover their investment, but the bill died in committee.


It now appears that such a bill would have the support of Florida's next governor, regardless of who prevails in the November gubernatorial election. Gov. Rick Scott has asked state regulators to determine what could be done to stop the abuses of this law, and a spokesman for Charlie Crist has indicated that the former governor now believes the law needs to be changed.

Zimmermann's proposal was to require developers to pay at least 110 percent of the original purchase price, or 110 percent of the fair market value, whichever is greater. Another option was proposed by former Gov. Jeb Bush, who vetoed the condominium termination amendment in 2006. He suggested only allowing for a single vote per person/entity, regardless of the number of units owned. A third option would be to change the law so that it applies only to properties with significant hurricane damage as opposed to allowing it to be applied for undamaged complexes.

All of these options should be considered by the Florida lawmakers during the next legislative session, as a remedied version of this law continues to make sense for condominium communities that are badly damaged by hurricanes and need to be renovated or converted. However, as it now stands, the law is allowing for unintended consequences that have effectively wiped away the property rights of some Florida homeowners."

Our firm congratulates Helio for shining a spotlight on the significant problems with this law and calling for Florida's lawmakers to address these issues during the next legislative session.

Click here to read the complete article.

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