Florida HOA Lawyer Blog

With the recent proliferation of condominium foreclosures and owners becoming delinquent in their monthly assessments, many South Florida condominium associations are experiencing difficulties in paying their bills and have thus considered the bankruptcy option. While it's not the norm for condominium associations to file Chapter 11 bankruptcy, it is a recourse that has increased in the past several years, particularly in overbuilt markets such as Miami and throughout South Florida. The point at which associations begin considering bankruptcy relief is when the remaining owners in the community are forced to cover far more than their proportionate share of the assessments, resulting in even more owners falling delinquent. As a result, lawyers who focus on bankruptcy matters for condominium associations and homeowners associations have become an invaluable resource for these community associations that had traditionally been able maintain solvency and avoid bankruptcy filings.

One of the first such filings for a major Miami condominium association came in June of 2009 when the association for the 502-unit Maison Grande in Miami Beach filed a Chapter 11 petition. Others soon followed, as new properties were completed but the majority of their units remained unsold. Developers also began filing bankruptcies due to the state of the market, and now a number of properties are being turned over to their lenders as a result of these bankruptcy filings by insolvent developers. These include the Everglades on the Bay condominium and ICON Brickell in downtown Miami, and the Terrazas River Park and Village near Miami International Airport.

For the community associations for these and scores of other financially troubled properties throughout South Florida, it is imperative to work very closely with highly experienced attorneys who concentrate on bankruptcy issues. The community associations must consider the following: while associations are seeking mechanisms to test the bankruptcy laws, at first glance, it appears that Chapter 11 bankruptcy may not be available because associations are pass-through vehicles and not property owners. Difficulties arise for an association seeking bankruptcy relief, as typically an association does not generally find itself in a position where its liabilities exceed its assets, especially with its power to levy a special assessment in order to satisfy its debt. Bankruptcy is a costly endeavor and should be used as a last resort, given that the courts are inclined to review an association bankruptcy filing as dilatory and often disallow the filing.

Corporations need an exit strategy in Chapter 11 bankruptcy, and it is presently unclear how an association having trouble covering basic monthly services could reorganize. Generally, associations have nothing to "sell off" in a bankruptcy reorganization plan, except common areas such as a lobby or a recreational facility. Therefore, the "jury is still out" with respect to whether bankruptcy could benefit an association, as the association's assets consist of the property's common arrears and its ability to assess individual unit owners. Associations may be better off negotiating with their creditors and achieving an out-of-court restructuring plan.

As with other South Florida law firms that focus on representing condominium associations and homeowners associations, our firm is working very closely with several community associations to help them to explore their options involving bankruptcy filings. I have focused on guiding both debtors and creditors through bankruptcy proceedings for much of my 20-year legal career in South Florida, and my experience has proven to be an important resource for many of our community association clients.

The recent case that we handled on behalf of one of our homeowners association clients in Miami serves as an excellent reminder of the importance for community associations to communicate with and inform their members about the policies of the property's architectural control committee (ACC). A homeowner in the community had not sought and secured the requisite prior approval with the association's ACC for an addition to his home, and as a result we were able to secure a court decision that forced the homeowner to make significant and costly changes in order for his property to be in compliance with the ACC's standards for the community.

Our other community association attorneys and I counsel our HOA clients on the importance of communicating with their members to help avoid these legal actions whenever possible. We work closely with South Florida community associations in order to enable them to create and maintain an effective architectural control committee that requires advance approval before exterior work is done on a home.

For HOAs, it is essential that they avoid acting arbitrarily in their enforcement of the architectural and design policies of the community. The goals for all ACCs are to establish and preserve a harmonious design and protect the value of the community. They typically require that prior to a homeowner making any improvements or alterations to the outside of their home, the plans must be submitted to determine if they are in compliance with the association's legal requirements. Most associations will adopt guidelines for the homeowners to use prior to their submission of their plans to the committee, and we believe that developing and using specific guidelines is critical to the effective enforcement of architectural and design standards for communities.

It is also essential for the HOAs to make educating and communicating with the community's homeowners about the ACC's policies and guidelines a top priority. Our lawyers who focus on working with HOAs and condo associations help our clients to determine and implement the tools and procedures that they need in order to effectively enforce their ACC policies and requirements. We write about important issues for community associations such as this in our blog, and we encourage readers to submit their e-mail address in the box on the right in order to receive all of our future posts.

During the last several months, our live weekly one-hour radio show called "Straight Talk on Condos and HOAs" airing every Sunday at noon on WIOD 610-AM has lived up to its moniker by offering direct and informed responses to many of the most complicated questions facing condo associations and HOAs throughout South Florida. Our other attorneys who host the show and I have been honored to have many distinguished guests join us on the program to provide their own insights and perspectives. The show on Feb. 20 featured state Sen. Ellyn Bogdanoff discussing the new condo and HOA laws that were adopted last year, as well as the changes that she and her fellow legislators are now considering during this legislative session in Tallahassee.

This and all of our past radio shows can be heard anytime via our online archive in our website, which you can access by clicking here. Also, please feel free to send us questions regarding condo association and HOA matters via e-mail at straighttalk@wiod.com for consideration for an on-air response during our next show, or call in to the show to ask your question live at 1-866-610-NEWS (866-610-6397) on Sundays from noon to 1 p.m.