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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Recent Arbitration Decision Offers Stern Warning to Associations Making Certain Alterations Without a Membership Vote

September 25, 2014, Posted by Laura Manning-Hudson


Laura Manning HudsonAn arbitration decision rendered earlier this year by the State of Florida Division of Condominiums involving a dispute over alterations approved by a condominium board without a prior meeting and vote of the unit owners did not surprise our firm's community association attorneys. We often find ourselves reminding association directors and property managers that the changes they are considering - albeit seemingly minor in nature - could be among those changes that are considered "material alterations" requiring approval by the membership.

While what constitutes a "material" alteration is not always clear, the rule of thumb is that if it changes the color, form, shape, elements or specifications from the original design or plan, or existing condition, in such a manner as to appreciably affect or influence its function, use, or appearance, then it is material. And, while the additional costs and time commitments that the approval process entails can be considered a bit ponderous, this recent decision serves as an important reminder of the potentially significant economic repercussions of forgoing the vote.

The case involved alterations that were approved by the Nine Island Avenue Condominium Association board of directors, which included changes and improvements to the pool deck furniture including cushions and fixtures, trellis, observation deck, pool steps and ladder, landscaping, the color of the paint in the koi pond, and the removal of a water filtration system. pool deck renovation.jpg After a hearing that took two full days and included a number of witnesses and experts for both the unit-owner petitioner, Ms. Jacqueline Simkin, and the association, the arbitrator found in favor of the unit owner and concluded that prior approval by the unit owners was required for practically every single alteration that had been made at the property.

The order concludes:

"Unless the alteration is approved by 66 2/3% of the unit owners, no later than December 31, 2014, the Association shall:

a. Return the color of the recreation deck waterways and curbing to the original light gray, and return the color scheme of the deck furnishings to original grey-blue, or something substantially similar;

b. Rebuild the trellises to the original footprint, design intent, appearance, and natural weathered wood finish, subject to current code requirements;

c. Return the gazebo to its original natural weathered wood finish;

d. Rebuild the wooden observation deck over the waterway;

e. Replace the pool egress ladders with ladders substantially similar to original, such that the steps extend farther down into the water and can be used as a means of egress from the pool by unit owners;

f. Return the entrance drive landscaping to its original, or substantially similar, condition; and

g. Repair or replace the building water filtration system with a comparable system utilizing current technology."

Depending on how the final vote of the members turns out, the association may be facing significant expenses in order to return some or all of these elements to their original condition prior to the alterations being completed. These expenses, not to mention the potentially contentious nature of the meetings that will lead up to the vote as a result of this significant lapse in judgment, will certainly prove to be more costly and difficult for the association than the vote that it should have undertaken prior to moving forward with the alterations. Not to mention the attorneys fees and costs incurred by the association in defending this proceeding - and the unit owner's attorneys fees and costs which the association will be responsible to reimburse.

This costly lesson comes free of charge to all other Florida condominium association boards of directors that are considering moving forward with what potentially may be considered a "material alteration" without obtaining prior membership approval as required by the Condominium Act. Bypassing the approval process is simply not worth the financial risk, as this condominium association learned the hard way.


Video of Fight at South Florida Condo Board Meeting Makes Nightly News

September 16, 2014, Posted by Nicole R. Kurtz


Nicole Kurtz 2014.jpgOur firm's other community association attorneys and I have witnessed, or heard about, scores of heated exchanges between disgruntled unit owners and board members at community association board of directors' meetings. However, a video that aired on WPLG Local 10 nightly news last week involving the physical attack of a unit owner by the then-president of the condominium association governing the Waterbridge Condominiums in Sunrise left many of us shocked.

In the video, association member Stephen Smith is shown requesting association financial documents from the members of the board at a 2009 video-recorded board meeting. Subsequent to his request, the then-president of the association, Jacqueline Chance, physically attacks Smith, causing a brawl between the two and others present at the meeting. WPLG reports that Chance was charged with battery as a result of the altercation, and she pled no contest to same. The station further reports that the depicted violent exchange was not the first time Smith was attacked by a board member within this community. Smith was apparently criticized and confronted by board members in previous years in connection with his requests for association records.

Smith explains that in addition to being assailed by board members for requesting association records and questioning the status of the association's reserve account, he has also been harassed for requesting that his unit be repaired by the association following a fire to the condominium building.

Smith has filed a lawsuit against the condominium association based upon a theory of negligence, which Smith says arose because the actions and decisions of the association's board of directors have resulted in his inability to sell his unit. We actively await the outcome of Smith's lawsuit (the next hearing is scheduled for November), as the video and audio recordings included in the report by Local 10 are undoubtedly very damaging to the association.

Click below to watch the video, and click here to read the report on WPLG's website.


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New Case of Theft, Fraud by a South Florida Homeowners Association President

September 15, 2014, Posted by Roberto C. Blanch


Roberto Blanch 2013.jpgYet another case of theft and fraud inflicted on an association by an HOA president made local South Florida headlines recently. According to news reports, Michelle Changar-Coe, a former homeowners association president, has been arrested and stands accused of embezzling more than $180,000 from her Tamarac community. Police reports indicate that she forged dozens of checks totaling $181,441.85 which were deposited into her bank account. The authorities reported that the fraud and theft occurred at the Mainlands Section 7 homeowners association from January 2009 through December 2013. Changar-Coe, 44, forged the signatures of four persons without their consent between May 2011 and October 2013. While conducting an audit of financial records, a board member found several checks from community funds that appeared to be forged with his signature and reported it to police. He later found a check for $20,475 that he never recalled signing and had been made payable to a "Michel Chandar," a name that was later found to be bogus.

Changar-Coe (pictured below) is being accused of creating a fraudulent agreement for the association to pay a "city liaison" $2,575 per month for representation at City Hall. However, "no such position existed with the city of Tamarac, according to two city officials who provided sworn statements," reads the police report. mcc.jpg She continued to invoice and collect from the association for the fake job from May 2011 to November 2013 using the name of Michelle Charger. Investigators found checks deposited into Changar-Coe's personal bank account bearing the supposed city liaison's name. She has been charged with first-degree grand theft of more than $100,000 and four counts of fraud.

An article by Tamarac Talk (www.tamaractalk.com) further details how the fraud was finally uncovered, detailing that "[r]resident Steve Soloff was suspicious, and informed the board that he had visited the City of Tamarac and spoke with City Clerk Pat Teufel" who had informed him ". . . that in her 10-year tenure with the city, she has never heard of any agreement by a homeowners association to hire a city liaison . . . " and that ". . . she knew of no person named Michelle A. Charger."

Apparently, key details of the fraud were uncovered as a result of a former director's investigation of discrepancies uncovered in connection with the association's finances in early 2012, when a fraudulent court document was presented demanding that such director and another director both resign immediately or face a $1 million lawsuit.

The above account underscores the importance for association directors and managers to implement procedures and policies aimed to avoid the victimization of the association and its members. These efforts may include requiring that at least two board members sign all checks, 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 without board authorization by the property manager, and a detailed review and understanding by directors of the association's yearly financial audits performed by independent professionals.

Additionally, the foregoing story also highlights the relevance of what a thorough review of association records may reveal following a detailed inspection of official records by or on behalf of owners having reasonable suspicions of wrongful activity by directors or other association representatives. Lastly, this story suggests that in the event that directors have doubts or questions regarding suspicious activities or documents presented to the association, then such concerns should be promptly reported to association counsel for evaluation.

Our firm's other HOA and condominium association attorneys and I work very closely with our clients to help them to avoid and detect theft and fraud in their communities. 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.


Right of Access to Personnel Evaluations, Background Screenings for Community Association Directors, Members

September 2, 2014, Posted by Roberto C. Blanch


Roberto Blanch 2013.jpgOur firm receives a great deal of questions about association matters from the readers of our blog and the listeners of our radio show on WIOD 610-AM every Sunday at noon. We try to provide specific responses to each and every inquiry that we receive. Recently, we received a question from a condominium association board member in Sarasota pertaining to a topic that we have not covered in quite some time and would like to revisit.

The reader explained that his association conducts an annual evaluation of the association's property manager that includes an evaluation questionnaire. The evaluation meetings were conducted with the manager by each of the board members, and the evaluation questionnaire forms were collected by the manager who later delivered them to the board president. The reader asks if there are any Florida laws that govern the right of association board members to access these personnel evaluation forms as well as the results of the background screening that was used prior to the hiring of the property manager.

The laws related to community association official records and their accessibility to association members and directors specifically designate "personnel records" of the employees of associations as protected official records. The statutes for both condominiums and HOAs specifically stipulate that personnel records are not to be made accessible to unit owners. However, these and other types of protected official records must also be maintained by the association, and they must be made available to all board members. The members of the board of directors are fiduciaries of the association, and as such they are obligated to make important financial and administrative decisions for the association. In order to carry out their function in this role, they must have access to all of the protected official association records that are specifically barred from the unit owners who are not directors of the association. In addition, it should be noted that there may be other factors that must be considered with regard to the right of a director or association member to have access to such records. As such, we recommend that community association board members consult with legal counsel with inquiries they might have in connection with the specific circumstances of their community's personnel records.

Our community association attorneys and I regularly consult and advise our clients on the proper procedures and best practices for maintaining the association's official records and providing association members with access to such records in accordance with Florida law. We write about important legal and administrative issues for condominium associations and HOAs in this blog on a regular basis, and we encourage association director and members as well as property 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.


Appellate Ruling Creates New Wrinkle Over Acceptance of Partial Payments That Are Endorsed as Full Payments

August 29, 2014, Posted by Roberto C. Blanch


Thumbnail image for Roberto Blanch 2013.jpgAs if collections of delinquent accounts were not already difficult enough for condominium associations and HOAs in Florida as the state recovers from the foreclosure crisis, a recent ruling by the Second District Court of Appeal has unfortunately created a new wrinkle that will require community association managers, directors and their legal counsel to pay close attention when accepting partial payment of assessments from owners. The court's ruling in the case of St. Croix Lane Trust v. St. Croix at Pelican Marsh Condominium Association essentially now makes it a necessity for associations to consult with experienced legal counsel when they receive checks that are in any way endorsed as representing the full and final payment of assessments owed by the owner on whose behalf the payment is made.

Prior to this ruling, associations and their attorneys were guided by the 2008 ruling by the Third District Court of Appeal in the case of Ocean Two Condominium Association v. Kliger which held that associations cannot refuse partial payments of assessments made by or on behalf of owners. In its opinion, the court in Ocean Two further suggested that its conclusion might even apply in the event that the partial payment included a restrictive endorsement such as "Paid in Full" or "Full and Final Payment."

However, in the St. Croix case, the unit owner's attorney specifically wrote to the association attorney stating that the payment made by the owner in the amount of $840 was to be considered as the full and complete payment for the settlement of the account, which the association claimed was delinquent in excess of $38,000. While the association responded to the owner's attorney by denying that the partial payment was the full and final payment of the amount owed, it accepted and deposited the check, applying the funds as a partial payment in accordance with Florida condominium law.

2dca.jpgDespite the previous ruling in the Ocean Two case, the appellate panel in St. Croix reversed the trial court's ruling, finding that the association's depositing of the check containing the above-described restrictive endorsement operated as an "accord and satisfaction," resulting in a waiver of the association's right to collect the remaining debt alleged to be owed by the owner.

This ruling appears to create a conflict with regard to the extent to which the appellate courts will consider the partial payment of assessments including restrictive endorsements to constitute an "accord and satisfaction" of a larger debt owed by the owner on whose behalf the partial payment is made. As such, it is possible that this conflict may ultimately be taken up for resolution by the Florida Supreme Court or may result in action by the state legislature.

In the meantime, associations should pay very close attention to any payments that are made with restrictive endorsements of any kind indicating that such payments reflect the complete and final payment of the amount owed to the association. Managers and directors presented with similar circumstances would be well advised to consult with experienced and qualified legal counsel before depositing such payments if they are not indeed for the full and final amount owed.

Our community association attorneys will continue to monitor and write about the consequences of this ruling as they relate to the handling of partial payments that are made with restrictive endorsements indicating such payments to be full payments. We encourage association directors and members as well as property managers to submit their email address in the subscription box at the top right of this blog in order to automatically receive all of our future articles.