Basic Recall Procedures

August 21, 2012, Posted by Roberto C. Blanch


Thumbnail image for Roberto Blanch.JPGOne inquiry community association members often present is how a director may be removed from the association's board. The response to this question is usually a simple one for an attorney to provide - but understandably a complicated one for many owners to comprehend. While some situations may result in a board member's disqualification from the association's board (e.g., nonpayment of monetary obligations exceeding 90 days, selling home in communities having ownership requirements for directors, voluntary resignations by directors), in Florida a qualified community association director may only be removed pursuant to a procedure known as a "recall."

Members of a Florida community association board may be recalled and removed from office with or without cause by a majority of all voting interests of the association by vote at a meeting or by agreement in writing. If the recall is to be achieved at a meeting, a minimum of 10 percent of the association's voting interests must provide for the giving of notice of the meeting. meeting vote.jpg The notice for such meeting must state that the purpose of the meeting is to recall one or more directors, and if a majority or more of the board is subject to recall, the notice shall also state that an election to replace recalled board members will be conducted at the meeting. If less than a majority of the board is recalled, the existing board members may fill the vacancies. If a majority or more of the existing board is recalled, an election shall be conducted at the meeting to fill the vacancies resulting from the recall.

Within five days of the adjournment of the members meeting to recall one or more of the directors, the board shall properly notice and hold a board meeting to consider whether to certify or reject the recall. If the board certifies the recall, then the recall is effective upon certification.

Alternatively, directors may be recalled by written agreement. A sample of the form to be used in a recall by written agreement is available from the Division of Florida Condominiums, Timeshares, and Mobile Homes ("Division") by clicking here. In this form of recall, the name of the directors sought to be recalled must be listed and the form must provide spaces by the name of each board member sought to be recalled so that the person executing the agreement may indicate whether the director should be recalled or retained. If a majority or more of the existing board members are to be recalled, the agreement shall list at least as many eligible persons who are willing to be candidates for replacement board members as there are board members subject to recall, and it should contain additional spaces for write-in votes. Further, there must be a signature line for the person executing the agreement to affirm he/she is authorized to cast the vote for his unit. The original agreement must be served on the board by certified mail or personal service. As with recall efforts conducted at a meeting, the board must call a meeting within five business days after service of the agreements and either certify the recall agreements.

In the event the board fails to certify the recall (whether a recall by written agreement or by vote at a meeting), they must file a petition for arbitration with the Division within five business days of adjournment of the board meeting. If the board fails to duly hold a meeting to vote on whether to certify or reject the recall, then the recall shall be deemed effective.

The foregoing serves as a brief outline of the recall procedures for removal of community association directors in Florida and shall not be exclusively relied upon for recall efforts. While the owners seeking to remove a director must always consult with the governing documents for the association in case there may be additional requirements or procedures for the removal of a member of the community's board, Florida law provides the minimum requirements that must be adhered to for the removal of such director. Although there have been little changes to such procedures for many years, an increased understanding of community association laws and procedures seems to have led to greater use of the recall process to remove directors deemed to be undesirable. Fortunately, careful adherence to the legal procedures will provide successful results for the parties seeking the recall. However, just one seemingly insignificant failure to follow such procedures may render an otherwise well supported recall effort ineffective. In light of this, owners seeking to commence recall efforts are encouraged to seek the advice of counsel or the representatives from the Division in order to ensure a successful outcome to their recall effort.


Don't Pay Twice for that Construction Project

July 24, 2012, Posted by Roberto C. Blanch


Thumbnail image for Roberto Blanch.JPGMany individuals or associations have been victimized by unscrupulous contractors. These experiences include defective work resulting in costly disputes with contractors and efforts to correct deficiencies; contractors abandoning jobs; and the filing of liens on the owners' property, despite payment for such services or goods having been made to the contractor. A basic understanding of construction lien laws may minimize exposure to the problems described above. Chapter 713, Florida Statutes (the "Construction Lien Laws"), provides protection to owners engaging contractors to perform work on their property, and it protects contractors, their subcontractors, suppliers and other professionals to ensure that they are paid for their services.

Under this law, lienors have the right to record a lien against real property if they are not paid for services, labor or materials provided for the improvement of such property. A lienor may be a contractor; subcontractor; sub-subcontractor; laborer; materialman who contracts with the owner, a contractor, a subcontractor, or a sub-subcontractor; or certain professionals (such as engineers or architects). While the owners of real property may be able to ascertain their exposure to a lien resulting from non-payment to a contractor that was engaged for the improvements, exposure to liens from non-payment to other lienors may be difficult to ascertain given that it is typically the contractor hired by the property owner that is entrusted with the obligation to pay the other parties having a right to place a lien on the property. For example, property owners may be aware that they have entered into a contract with a specific contractor, but they may be unaware that their contractor has engaged a subcontractor to excavate the land for the pool, and they have acquired the plaster and other materials from suppliers.

lien formIn the above example, lienors engaged by the contractor must be paid for their services, labor and materials. While the property owners may be aware that they have paid their contractor, they may be unaware of the subcontractors or suppliers. Failure to ensure that payment has been issued to the subcontractors and suppliers may result in the filing of a lien against the property, even if the owner paid the contractor.

The laws provide property owners with tools to notify the general public of their agreements with contractors hired for the improvement of real property so that potential lienors that have a right to file a lien on the owner's property may then provide the owner with notice of their rights to lien for non-payment. In such cases, the property owner will file a Notice of Commencement in the public records of the county in which the property being improved is located. Those having lien rights for the work being performed and materials being supplied will be able to serve the property owner with a Notice to Owner advising the owner that they have been hired by the contractor to provide services or materials in connection with the project. Once a property owner is alerted as to the existence of all parties having a right to lien the property in connection with the improvement, the owner is in a position to ensure that all lienors are paid by the contractor, thus reducing each respective lienor's rights to record a lien to the extent that they receive payment on the owner's behalf. In order to ensure that lienors have been paid, the owner should condition that the contractor and other lienors provide releases of lien upon their receipt of payment.

The construction lien laws consist of a tedious set of statutes - complicated further by case law interpreting legal disputes involving such laws. Although the foregoing serves as a basic introduction of such laws, managers and directors must implement the procedures to protect against pitfalls such as those described above. Managers and directors should work closely with their engineers and attorneys to ensure that a contractor's requested payment is conditioned upon satisfactory performance of work and compliance with procedures and forms included in the construction lien laws.


What is a Covered "Collapse" for Insurance Purposes?

July 13, 2012, Posted by B. Michael Clark, Jr.


Michael Clark Gort photo.jpgRecently, the Fifth District Court of Appeal issued the opinion of Kings Ridge Community Association v. Sagamore Insurance Company, clarifying what constitutes a covered "collapse" under an All Risk Business Owner's policy. On February 24, 2010, the association's clubhouse began to shake, which was apparently caused by a failure of the roof trusses, which had deflected downward by approximately twelve inches. As a result, the drop ceiling and soffits deflected downward, and there was a substantial depression in the flat roof.

The association made a claim to Sagamore, the insurer which had issued an "All Risk" policy. Sagamore instituted an action for declaratory relief seeking a determination as to whether the damage caused by the truss failure constituted a covered loss.

ceiling collapse.jpgUnder the policy, "collapse," defined as "an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose," was a covered cause of loss. Furthermore, the policy provided coverage for a collapse caused by:

(d) Weight of people or personal property; (e) Weight of rain that collects on a roof; (f) Use of defective material or methods in construction,

It was undisputed that the failure of the roof trusses was caused by ponding rain, heavy A/C equipment and defective truss construction.

However, the trial court entered a summary judgment of no coverage based upon the following exclusions:

(c) A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building;

(d) A building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.

The Fifth District Court of Appeal, relying upon the dictionary definition of "standing" reversed, commenting:

Moreover, "standing" is defined as "upright on the feet or base; remaining at the same level, degree, or amount for an indeterminate period." Merriam-Webster's 1216. Prior to the incident of February 24, 2010, the drop ceiling, flat roof, and trusses were upright on their base and had remained at the same level, degree, and amount of height for an indeterminate period. At the time of the incident, they collapsed. Immediately after the incident, they were no longer upright on their base; they were no longer at the same level, degree, or amount of height that they had previously maintained. Therefore, by definition, the drop ceiling, flat roof, and trusses are not standing and this section [these sections] does [do] not apply.

The court held that the policy was subject to two different interpretations and thus ambiguous. Consequently, as ambiguous policies are read in favor of coverage, the association was entitled to coverage.

When dealing with insurance issues, it is important to carefully consider the insurance carrier's position in light of the policy language. Our South Florida community association lawyers have a great deal of experience with insurance issues, and we are available to respond to associations' insurance questions and provide counsel on all insurance matters. We write regularly about important issues such as this for community associations in this blog, and 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 the blog in order to automatically receive all of our future articles.


Our Latest Community and Industry Involvement Efforts


Ever since our inception in 1977, involvement in worthwhile community and industry organizations and initiatives has been a constant priority for our firm and its attorneys. Here are just a few of our latest efforts:

CAI golf tournament logo.jpgSoutheast Chapter of the Community Associations Institute - Our firm has been an active member of the Southeast Chapter of the Community Associations Institute for many years, and for 2012 we are proud to sponsor the chapter's annual golf tournament, which is one of its premier annual events. The tournament begins with a shotgun start at noon on Friday, Oct. 26, at the beautiful Jacaranda Country Club in Plantation, and registration, which costs $125 per golfer, starts at 11 a.m. Prizes and trophies will be awarded immediately following the tournament, which is always one of the best networking events of the year for the group's members and guests. Click here to learn more and register to participate.

Raise the Bar Silent Auction and Reception Benefitting the Women's Fund of Miami-Dade - The firm was proud to be a corporate sponsor of the 2012 edition of Raise the Bar, the 8th annual silent auction and reception benefitting the Women's Fund of Miami-Dade. The event, which took place on June 7, raises funds for the organization's programs to empower women and girls through innovative initiatives that build equality, foster social change, and create community partnerships. Since 1993, Women's Fund has awarded more than $3 million to a wide range of innovative programs that provide women and girls the skills and resources necessary to improve their lives.


photo (4).JPG2012 Mercedes-Benz Corporate Run - We were a proud supporter and participant in the 2012 Mercedes-Benz Corporate Run in downtown Miami on April 26. The event, which benefitted the American Red Cross, drew more than 22,000 runners to Bayfront Park for the 5k run, and the law firm's team was very proud to take part. Pictured here from left to right are team members Erica Sefton, Stephanie Moeller, Johanna Ortega, Lindsey Pressner and Stephanie Bonilla at the start of the run.


Crohn's & Colitis Foundation's Take Steps - The firm was proud to sponsor the Fort Lauderdale edition of Take Steps 2012, the CCFA's largest annual fundraising event. The walk-a-thon took place on April 28 at Huizenga Park in Fort Lauderdale. The firm also served as the "Comic Relief Sponsor" for the Crohn's & Colitis Foundation of America's 2nd annual "Comedy Night," which took place at on Feb. 16, 2011, at the Improv Comedy Club at the Seminole Hard Rock Hotel & Casino in Hollywood. The proceeds from these events benefit the foundation, which focuses on funding research to find a cure for Crohn's disease and ulcerative colitis, and improving the quality of life of children and adults affected by these diseases. To learn more or sign up for the 2013 walk, visit www.cctakesteps.org.

Click here to visit the Community & Industry Involvement page of our website to learn more about other events and initiatives that we are proud to support.


Preventing a Condominium Renovation Nightmare

July 9, 2012, Posted by Laura Manning-Hudson


Thumbnail image for Laura Manning HudsonHas this ever happened at your condominium? You're on the Board of Directors. The building has not been painted in 20 years and could definitely use some restoration. You realize that a special assessment is going to have to be passed in order to start a painting and restoration project, but before an assessment can be passed, you need to know how much it's going to cost. Bids for a painting and restoration contractor are requested, and ultimately High & Dry Painting Company ("High & Dry") is hired to do the work. Without having an attorney look anything over, the association signs a contract with High & Dry and the project is underway. High & Dry arrives at the building along with a crew and equipment, and the company finishes the job in a month. The association writes a check for the full amount of the contract and everybody is happy. Or so you thought.

Six months later the paint starts to crack, the manager realizes that High & Dry forgot to deliver a warranty for the work, and the association has just received a document in the mail entitled "Claim of Lien" from ABC Equipment Supply, a company the association did not contract with, threatening to file a lawsuit against the association and lien the entire building if payment is not made within 30 days. building painters.jpg In addition, the unit owners are disgruntled with the work and start to discuss whether they should challenge the special assessment because they don't think the restoration work was even needed. Now what? Begrudgingly you call the association's attorney and advise him or her of all that has transpired and hope that the nightmare will soon end. After a little research by the attorney, you're told that not only was High & Dry not licensed, but they have since closed up shop and run for the hills. The nice little project has turned into a nightmare for the association.

All of this could have been avoided if the condominium association's attorney had been contacted when the determination was made that the building needed to be painted and restored. The fact that the association did not have an attorney review the contract was the root of every problem in the scenario outlined above because contracts performed by unlicensed contractors are unenforceable in law or equity. Accordingly, the contract that the association entered into which may have provided a warranty is now unenforceable, and High & Dry is nowhere to be found. When an association signs an agreement with a contractor it must be diligent in obtaining all of the appropriate releases not only from the contractor, but also from the subcontractors, material men and suppliers hired by the contractor. Even if the association has no knowledge of who ABC Equipment Supplier is, and regardless of whether the association paid High & Dry for the full contract amount, the association may still be responsible for any outstanding sums owed to ABC.

Contractual problems or disputes such as the example set forth above may be avoided by the board simply seeking the advice of a professional or expert prior to the signing of an agreement. In the case of third party contracts, an attorney would be able to prepare a contract to protect the association from unlicensed and uninsured contractors. In addition, utilizing the services of an engineer or other professional for advice as to needed repairs and restoration will further insulate the board from liability when the disgruntled unit owners threaten legal action.

Some condominiums tend to rely heavily on their property managers. However, property managers may not engage in the unlicensed practice of law. This includes the giving of legal advice and counsel to others as to their rights and obligations under the law and the preparation of legal instruments, including contracts, by which legal rights are either obtained, secured or given away, although such matters may not then or ever be the subject of proceedings in a court.

Finally, preventing a condominium nightmare by having an attorney review a third-party contract or consulting with an expert can save an association thousands of dollars in unexpected costs for repair, not to mention attorneys' fees spent defending and prosecuting actions on behalf of the association.


Effective Collection Tactics for Associations Against Owners Who File for Bankruptcy


Thumbnail image for Jeffrey Berlowitz - Siegfried law firm.jpg Thumbnail image for Jonathan Mofsky Gort photo.jpgBy Jeffrey S. Berlowitz and Jonathan M. Mofsky.

Associations have been contending with unit owners who file for personal bankruptcy protection in greater numbers since the start of the economic crisis. In response to a unit owner bankruptcy, and in an effort to preserve and protect the rights of an association as a creditor in the bankruptcy proceeding, a number of effective tactics have emerged for associations and their attorneys when faced with a unit owner bankruptcy filing. This article provides an overview of certain of these strategic measures for condominium associations and homeowners associations.

Typically, unit owners file either a Chapter 7 or Chapter 13 bankruptcy petition, both of which are personal bankruptcy filings. A Chapter 7 bankruptcy case is filed by an individual and involves the complete liquidation of a debtor's non-exempt assets to pay creditors in exchange for a discharge of the debtor's remaining debt, giving the debtor what is referred to as a "fresh start." In Chapter 7, an individual can wipe out many types of unsecured debt and certain secured debt (in the event the debtor surrenders possession of the secured creditor's collateral - typically real estate or an automobile). However, in the event the debtor elects to retain their real property or automobile, the secured obligation survives the bankruptcy and the debtor remains responsible for these secured obligations during and after the close of the bankruptcy case. This affects an association to the degree an owner elects to retain their unit. If such an election is made, then a Chapter 7 debtor remains obligated to pay the assessments that come due after the bankruptcy filing. Otherwise, if the owner surrenders the unit, then the owner will receive a full discharge of all monetary obligations to the association. As an aside, some debts, including alimony and child support obligations, taxes less than three years old, student loans and several others, are not dischargeable in a Chapter 7 bankruptcy.

To the extent there is a distribution to creditors in a Chapter 7 case, which is not the norm, the amount creditors will receive is determined by the value of the debtor's non-exempt assets that are liquidated for the benefit of creditors.

With regard to real property, a unit owner who files for Chapter 7 bankruptcy is either retaining the unit and will agree to continue to pay the monthly assessments that become due after the bankruptcy case is filed, or alternatively, will surrender their unit as a result of the proceedings. In this context, associations should be cognizant of whether the owner is retaining or surrendering their unit. A retention of the unit most often results in the owner maintaining current with the assessments after the bankruptcy is filed. A surrender of the unit, which means the owner is relinquishing possession of the unit to his or her secured creditors (the first mortgage lender and/or the association), will result in the owner discharging all monetary obligations due the association as of the date of the bankruptcy filing. Additionally, at the successful conclusion of a Chapter 7 bankruptcy case, the owner will receive a discharge of all sums due the association as of the date of the bankruptcy filing. However, as stated, if the owner elects to retain the unit, then the owner will remain liable for all assessments that come due after the bankruptcy case is filed.

Sometimes called a personal reorganization bankruptcy, a Chapter 13 bankruptcy does not require debtors to hand over any property to creditors. Instead, they must use their income to pay all or some of what is owed over a three to five year period, depending on the scope of the debt and income. Those who qualify for Chapter 13 must submit a detailed repayment plan that is subject to objections by creditors and must ultimately be approved by the court. Most owners who file for Chapter 13 are striving to keep their residence. Underwater house.jpg However, unit owners are now attempting to take advantage of a debtor friendly component of the bankruptcy laws affording a debtor the right to "strip off" all junior mortgages, lines of credit and association liens in the event the debtor proves to the court that the value of their unit is less than the amount due on their first mortgage. If successful, then the unit owner may receive the benefit of a complete avoidance of an association's lien claim that existed as of the date of the bankruptcy filing. Discussed below, the association is not without a remedy and there are approaches to defending against a lien strip.

For owners in Chapter 13 bankruptcy who are trying to formulate a plan to repay some of their debt, the association has the right to review and object to the plan being considered by the bankruptcy court. However, bear in mind that judges tend to be fairly lenient in favor of debtors who make a good faith effort to confirm a repayment plan resulting in a restoration of their financial lives. In reviewing the owner's proposed repayment plan, a primary concern of an association should be to verify that the amount that the debtor claims to the court that they owe to the association is correct and includes interest and attorneys' fees. To best protect the association's claim in the bankruptcy case, the association should file a "Proof of Claim," which details to the penny exactly what the association is owed by the unit owner as of the bankruptcy filing date.

As mentioned, many Chapter 13 bankruptcy debtors attempt to utilize the lien stripping provisions of the bankruptcy code that enable them to have the bankruptcy court wipe away any second mortgages and association liens tied to the property if they are able to demonstrate that they owe more to their first mortgage lender than what their home is worth. If successful, then the owner will be able to avoid all sums due the association as of the bankruptcy filing date. However, note that in order to gain the benefit of the lien stripping laws, the owner must complete his or her bankruptcy plan and remit all payments due under the plan to the bankruptcy court. If the owner's Chapter 13 case is dismissed for any reason or if the case is converted to a Chapter 7 liquidation (usually because the owner could no longer afford the Chapter 13 plan payments) then the association's lien will be reinstated against the unit. Importantly, and as some consolation to the association, the owner remains liable to the association for all assessments that come due after the bankruptcy filing, even if a lien stripping action is in place. In other words, if the owner is maintaining the unit in either Chapter 7 or 13, the owner is liable for all assessments that accrue against the unit after the bankruptcy filing date.

As we have noted in previous articles and videos in this blog, we have assisted associations to avoid having their past-due assessments wiped away by Chapter 13 debtors using lien stripping. This is accomplished by countering the owner's value of their home with an appraisal procured by the association which demonstrates that the current market value is actually greater than the amount due under the owner's first mortgage.

In the rare case that the unit owner in Chapter 13 bankruptcy is current in the payment of their association fees and assessments at the time the bankruptcy case is filed, then the owner is authorized to make the assessment payments directly to the association outside of the structure of the bankruptcy repayment plan. Should the owner fall behind with these payments after the bankruptcy filing date, then the association can automatically commence collection/foreclosure actions directly against the owner without obtaining the bankruptcy court's permission or otherwise going through the process of the bankruptcy proceedings.

Last, but not least, and of significant importance, once a bankruptcy case is commenced, under any chapter (7, 11 or 13), there is an "automatic stay" on all collection actions by any creditor, including the association. No creditor may continue to collect a pre-bankruptcy debt from a debtor, after the bankruptcy case is commenced, unless the court authorizes that creditor to do so. There are mechanisms and procedures to be followed in seeking "stay relief" from the court to resume collections, and these actions should be coordinated with a bankruptcy attorney who focuses on creditors' rights.

Upon the issuance of a bankruptcy discharge in favor of a unit owner, which signifies the successful completion of the bankruptcy case, the stay on collections is lifted, but the association is no longer able to pursue personal liability against the unit owner for their debt which was owed as of the date of the bankruptcy filing. However, the association can and should pursue its lien rights by initiating a foreclosure action against the unit itself. This will help ensure that it will receive the maximum reimbursement from the foreclosing lender allowed under Florida law and from any potential third party who successfully bids on the unit at the foreclosure sale. The association should also send a letter to the owner acknowledging it is aware of the bankruptcy discharge and will act accordingly, including by exercising its rights to pursue a foreclosure action against the property itself as allowed under the law, and not seek monetary relief against the owner, personally.

Our attorneys who focus on bankruptcy matters and community association law work closely with associations that are contending with unit owners who file for bankruptcy. We write about important issues such as these for condominium associations and HOAs in this blog, and we encourage association members and directors as well as 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.


Timely Insurance Info for Unit Owners at Start of Hurricane Season

June 19, 2012, Posted by Roberto C. Blanch


Thumbnail image for Roberto Blanch.JPGAt the onset of another hurricane season, now is one of the best times of the year for condominium associations in Florida to remind unit owners about their insurance requirements and liabilities under state law.

Florida law stipulates that the association will maintain insurance for all portions of the condominium property as originally installed or renovated. However, the statutes do not provide that the association's insurance coverage must extend to personal property or limited common elements inside of the individual residences. Essentially, the owners are responsible for maintaining their own insurance to cover damages to the floors, walls, ceilings, electrical fixtures, appliances, cabinets, counters and window treatments in their units.

The owners should also be reminded that they can be held liable if, for example, water damage from their unit causes damage to other units or the common elements. water.jpg This underscores the importance to encourage owners to maintain adequate insurance coverage, as a leak in their residence could seep into the walls and cause significant damage to the units or common elements below.

With the start of another hurricane season, associations would be well advised to develop and distribute a letter to remind their unit owners that it is incumbent upon them to maintain their own homeowner's insurance policies to cover their personal property, the limited common elements inside of their residences and other property not insured by the association. Our community association attorneys regularly write about important issues for Florida HOAs and condominium associations in this blog, and we encourage association members and directors 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.


New Law Eliminates Important Homeowner, HOA Protections Against Construction Defects in Community Infrastructure Systems

June 18, 2012, Posted by Laura Manning-Hudson


Thumbnail image for Laura Manning HudsonHB 1013, one of the most surprising and anti-consumer pieces of new legislation for Florida homeowners and HOAs, was recently signed into law by Gov. Scott. HB 1013 was passed in direct response to the Fifth District Court of Appeal's decision in the case of Lakeview Reserve Homeowners Association, Inc. v. Maronda Homes of Florida, Inc. In Maronda, the appellate court extended the common law warranty of fitness and merchantability to off-site improvements such as roads and drainage systems within a community. The new law eliminates an HOA's cause of action for breach of the common law warranty of fitness and merchantability as it pertains to defective roads, walls, drainage areas, utilities, or any other improvements that are not located on or under the lot on which the home is constructed or which do not "immediately and directly support the habitability of the home itself."

In Maronda, the HOA sued the developer alleging defective construction of private roads, drainage systems, retention ponds and underground pipes within the subdivision. The appellate court reversed the trial court's decision and ruled that the implied warranty of habitability extends to developers and contractors that have built communities with defective infrastructure because purchasers of new homes in a subdivision "must rely on the expertise of the builder/developer for proper construction of these complex structures, where they are in an inferior position to inspect the work and to correct the defects in the construction phase and where the defects are not readily discernable to the average homeowner." Defective drainage.jpg The Fifth DCA specifically held that roads, drainage systems, retention ponds and underground pipes are all essential services that support the habitability of the home for purposes of the application of the implied warranties.

HB 1013 becomes the law on July 1, 2012. However, there is a possibility that the new law will face a constitutional challenge because its application is intended to be retroactive - meaning that it applies to issues and cases already in existence. Because the new law is retroactive, it may be considered to be an impairment of an existing contract - which is unconstitutional in Florida. However, until such a challenge is made, the law will now only allow homeowners to bring claims for damages due to defective construction if they can prove a breach of the building code or negligence in the design of the infrastructure systems. These claims can be difficult to prove, since typically all of the building permits and inspections have been passed by a builder during construction, and infrastructure systems are built in accordance with proven designs.

With the passage of this new law however, it is now more imperative than ever that the turnover process for communities include thorough testing and inspections of the infrastructure and drainage systems by a certified engineer. If the community is experiencing flooding prior to turnover, the association should have its engineer inspect and identify any flaws in the infrastructure that may require additional work or repairs. Many times in the past, when these types of defects have arisen, the parties have been able to settle their issues because reputable developers and contractors generally take responsibility for faulty infrastructure and make the necessary repairs.

A hearing in the Maronda case before the Florida Supreme Court was slated for later this year, however it is yet to be seen how the parties will address the passage of HB 1013 and whether the hearing will go forward.

Other community association attorneys at our firm and I were very surprised by the passage of this new law, as it appears to us to be unfairly allowing developers, contractors and engineers to avoid liability for defects in infrastructure systems that can lead to significant and costly repairs for HOA communities and their homeowners. We will continue to monitor and write about this and other important issues for Florida community associations in this blog, and we encourage board members, unit owners and 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.


Guest Article from Daniel Odess of Globalpro Recovery: Condominium Association Insurance Mistakes (Part 2 of 2)


This article is the second of a two-part series of articles on insurance issues for condominium associations by our friend Daniel B. Odess, the president of Globalpro Recovery, Inc. (www.getglobalpro.com).

Hurricane, Windstorm, Thunderstorm, Wind, or Rain; One of these is not like the other. Do you know the difference?

Do you remember the jingle for the candy bars Almond Joy and Mounds? "Sometimes you feel like a nut . . . sometimes you don't" . . .

Sometimes your policy defines words in the definitions section of your policy . . . sometimes it doesn't. Some terms aren't even in your policy, but these events cause significant damage to your building. Quite often these types of claims are either unreported or improperly reported as something else. It doesn't help that sometimes we find that a policy has a deductible for "wind" on the first page, but has an endorsement for "Windstorm."

Do you see the difference?

I do, but I'm well-versed in the language and I'm supposed to know the difference. If you think about it logically, on any given day in South Florida we have wind, but we most certainly do not have windstorms. So, logically it would not make sense for the insurance company to apply my wind deductible to a windstorm claim, especially if it's not specifically defined in the policy as being one in the same. This is just one of the many issues with most insurance policies placed on commercial policies and why it's very important to take the time to understand how you're to get paid rather than how you pay your insurance company.

With the recent bad weather that continues to bring heavy rain, wind, and thunderstorms, many businesses and condominium associations are making claims for roof failures that have caused substantial damage to the interior of their buildings. Unfortunately, many of these claims will be wrongfully denied simply because they are being misrepresented and/or misreported. Here is the rule of thumb when it comes to interior damage caused by a failed roof:

  • The loss is not covered unless there is a clear opening created in the roof caused by a covered peril.
  • Peril is generally defined as a specific cause of loss covered by your insurance policy, such as fire, windstorm, flood, or theft.

But, why so technical, you ask? You're not obligated to prove that your loss is covered by your insurance policy. If you're not an expert or have substantial experience in engineering, construction, meteorology, and/or insurance, the best advice is to stick to the damages.

  • Is the drywall wet in your building? If yes, then tell the insurance company that the drywall is wet.
  • Is the carpet destroyed by the water? If it is, then say just that - carpet destroyed by water.
  • Why did the roof fail? If you're not a roofer, an engineer, and/or a contractor, then you simply don't know.

Stick to the KISS theory (Keep It Short Simple) and report the facts and what you know for sure. Your opinion is just that, it's an opinion and not a matter of fact. Your insurance company is going to stick to the policy verbatim, so if you have never opened it, read it, or understood it, you're putting yourself and/or the association in a bad position. Provide the facts and rely on your experts.

Mitigate. Stop. Recover. Rebuild.

Your policy of insurance is your guideline to recovery. Being familiar with your policy will save you and your association a lot of time and money. You are never obligated by your insurance policy to rebuild before you recover. In fact, the policy is laid out so that you recover before you rebuild. Remember, the policy requires that in order to recover you must mitigate your damages. Translation -- stop your damages from getting worse, i.e., cap the broken pipe or put a tarp on the roof to stop the water from causing any further damage. That's it. Ironically, if you mitigate and rebuild too fast, your insurance company can deny your claim, even though you did what you believed to be the most logical thing to do. Why wait? Because your policy requires you to wait, so that the insurance company can adequately document and adjust your loss fairly and timely. If you're short on funds, or don't have the time, you might cut corners or restore your property with lessor quality materials. Both will substantially lower your recovery because you're entitled to what you had before the loss occurred. Even with that said, sometimes Associations are encouraged by their insurance companies to produce receipts, proposals, and invoices from contractors prior to a coverage decision being made or before the association has received a dime from the insurance company. In order to recover everything you're entitled to under your policy of insurance, mitigate and then stop.

Don't rebuild just yet.

Don't obtain proposals from contractors to do the repairs.

You have no idea how much the insurance company is going to pay you for your damages. Why get yourself in a financial bind by not knowing how much money you have in order to rebuild? Why get estimates for materials and labor, if you don't know if it is covered? Don't waste your time! The insurance company has an obligation to fairly and timely adjust your loss by providing you a coverage decision and by estimating the full value of your damages. Delays in their obligation to you can spell financial disaster for your association. By hiring a public adjuster or a knowledgeable consultant to handle this process on your behalf, it will expedite the process and put pressure on the insurance company to make the appropriate decisions and payments before you over extend your association financially or box yourself into inadequate repairs.


Re-Elect Judge David C. Miller

June 9, 2012, Posted by Stuart H. Sobel


Stuart H. Sobel.JPGOn August 14, 2012, Miami-Dade County Circuit Judge David C. Miller stands for re-election. We urge you to vote for him. Judge Miller is one of the very best judges deciding YOUR cases. He is bright, honest, possessed of unassailable integrity and, importantly, is educatable on facts with which he might initially be unfamiliar. In our experience, he relishes the challenge of difficult cases -- and difficult decisions. He is unfailingly prepared, polite, firm, compassionate, deliberate and studied. We have never before used this platform for the purpose of asking for your support. However, it is imperative for the benefit of our community that we re-elect Judge Miller. Please vote and tell your family and friends to vote for him, as well, and click here for additional information and to support his re-election campaign.


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Judge David C. Miller


Guest Article from Daniel Odess of Globalpro Recovery: Condominium Association Insurance Mistakes (Part 1 of 2)


This article is the first of a two-part series of articles on insurance issues for condominium associations by our friend Daniel B. Odess, the president of Globalpro Recovery, Inc. (www.getglobalpro.com).

Have you or your association ever relied on the insurance company, your rep, agent or broker to tell you how to file your insurance claim? Or, how much your claim is worth? Or, whether or not it's even worth filing a claim? If you answered yes to any of these questions, then you're not alone. To take it one step further, as shocking as it might sound, it's probably not the best move either. When it comes to insurance, the reality is when they have a loss, most people focus on how much they pay for insurance rather than on how they get paid by their insurance company. If you've ever reviewed your policy to find out what it covers, within a few sentences you've probably read a statement similar to this one: "We do not insure, however, for loss..." So, does that mean what is included is not specifically excluded? For most policyholders, it would've been hard enough to find this section, let alone understand it. If you haven't experienced it, grab your policy to see for yourself.

Here are some points to keep in mind when you start thinking about "how am I going to get paid for my damages?" Thankfully, there are people who exist that do, in fact, represent your interest.

Deductibles

Such a difficult topic, but it's important to know that just because the policy says you have a deductible, doesn't mean it always should be applied to your loss. Too often, the deductible is not specifically stated in the policy or can't be interpreted by the average policy holder. It's important to review the policy and make sure the exact dollar amount of your deductible is included in your policy. If you can't figure out the deductible, then how can your insurance carrier expect to deduct it from your recovery?

To continue, it's not a good idea to assume that just because the insurance company's rep, agent, or broker tells you that your damages are below your deductible, that it is true.

1. Did the insurance company actually visit and inspect the property?
2. Did the insurance company's adjuster inspect the entire property or only what perceived to be your damages?
3. Did the insurance company rely on your opinion to formulate the total amount of your damages? If the answer to question #3 is yes, then what expertise do you have in construction, engineering, and most of all, insurance in order to assist the insurance company in determining the total amount of your damages?

It's mandatory to allow the insurance company to inspect your visible damages for however long and often as they deem reasonable. However, you're not responsible for the adjustment of your loss. Also, if the insurance company rep sees extensive damage, you want them to utilize the expertise of licensed and/or qualified consultants, such as engineers and contractors.

Lastly, and just as important, if the insurance company elects to repair the damages for you with one of their "preferred vendors," you are not obligated to pay any part of the deductible to the insurance company's preferred vendor.

Who's on your side? It's not who you think

Understanding the role of each individual involved in an insurance claim is vital to recovering the full amount of monies owed to your association. When it comes to property insurance claims, there are three kinds of adjusters who are licensed to handle the claim matters in the field:

1. Independent Adjuster
2. Company Employee Adjuster
3. Public Adjusters

When your association experiences a loss, your insurance company hires either an Independent Adjuster or a Company Employee Adjuster (more commonly referred to as a "Company Adjuster"). The common misconception is that the adjuster sent out by the insurance company has the policyholder's best interest in mind and represents the interest of the policyholder. Ironically, Florida law specifically states otherwise.

For an Independent Adjuster, Florida law states:

626.855 "Independent adjuster" defined.--An "independent adjuster" is any person who is self-employed or is associated with or employed by an independent adjusting firm or other independent adjuster, and who undertakes on behalf of an insurer to ascertain and determine the amount of any claim, loss, or damage payable under an insurance contract or undertakes to effect settlement of such claim, loss, or damage.

For a Company Adjuster, the Florida law states:

626.856 "Company employee adjuster" defined.--A "company employee adjuster" is a person employed on an insurer's staff of adjusters or a wholly owned subsidiary of the insurer, and who undertakes on behalf of such insurer or other insurers under common control or ownership to ascertain and determine the amount of any claim, loss, or damage payable under a contract of insurance, or undertakes to effect settlement of such claim, loss, or damage.

Therefore, both the Independent Adjuster and Company Adjuster "[undertake] on behalf" of your insurance company, "to ascertain and determine the amount of any claim, loss or damage payable under your policy."

However, Florida law states for a Public Adjuster, the following:

626.854 "Public adjuster" defined. -- (1) A "public adjuster" is any person, except a duly licensed attorney at law as exempted under s. 626.860, who, for money, commission, or any other thing of value, prepares, completes, or files an insurance claim form for an insured or third-party claimant or who, for money, commission, or any other thing of value, acts on behalf of, or aids an insured or third-party claimant in negotiating for or effecting the settlement of a claim or claims for loss or damage covered by an insurance contract or who advertises for employment as an adjuster of such claims. The term also includes any person who, for money, commission, or any other thing of value, solicits, investigates, or adjusts such claims on behalf of a public adjuster.

According to the OPPAGA study published by the Florida Insurance Council, " 'The typical payment to a policyholder represented by a public adjuster was $22,266 for claims filed in 2008 and 2009 related to the 2004 hurricanes. In contrast, policyholders who did not use a public adjuster received typical payments of $18,659.' The report also notes that the difference in payments was even larger for claims related to the 2005 hurricanes, 'with public adjuster claims resulting in payments that were 747% higher.' "

To summarize, the Public Adjuster "acts on behalf of... an insured..." unlike the Independent Adjusters and Company Adjusters sent out by your insurance company when you experience a loss.


Legal Risks Associated with Biometric Resident Access Systems

May 17, 2012, Posted by Laura Manning-Hudson


Thumbnail image for Laura Manning HudsonCommunity associations are constantly striving to implement new, more effective and more convenient security systems for their owners. One new trend that is starting to replace the magnetic cards, key fobs and code-key number pads controlling resident access is biometrics. These biometrics systems are predominantly fingerprint recognition scanners. While there is a significant legal concern that comes with the use of these systems that community associations should be aware of, there are also contractual measures that may be used in order to address and mitigate these concerns.

There is no doubt that biometrics will become more prevalent in the years to come, as it can be very effective and cost efficient. Biometrics offers owners the convenience of doing away with cards, fobs and codes to gain access to the property. Its deployment costs are becoming very reasonable, and it offers considerable savings by diminishing the need for security guards to monitor and control resident access at all of the entrances into a property.

biometrics.jpgHowever, the inherent problem with these biometric security systems is that they are gathering and storing personal identification information. The U.S. Constitution guarantees individuals the right to privacy and due process, so community associations must be extremely careful with the information collected through biometrics (i.e., fingerprints). If an individual's private information is compromised or provided to any third party - including the government - without due process, it can be found to be a violation of the resident's constitutional right to privacy, which could have significant legal and financial repercussions for the association.

Community associations that are considering using biometric security systems to provide a cost-effective and secure solution for resident access on their properties should understand this particular vulnerability. Associations should work with a qualified and experienced attorney in order to address these concerns with vendors of the biometric security systems. Attorneys can review and add language to the contract referencing that the association has been assured and guaranteed that the information will not be shared and is adequately protected. Realistically, there are no true guarantees that a breach in the vendor's system could never take place and expose the information collected. However, by including indemnification clauses and other language in the contract, associations can work to ensure that they avoid taking on significant legal liability in their deployment of 21st century security systems for residents.

Our South Florida community association attorneys write about important legal and business issues for community associations in this blog, and we encourage association members and directors as well as property managers to enter their e-mail address in the subscription box on the top right in order to automatically receive all of our future articles.


Condominium Associations Have the Right to Access Owners' Residences for Maintenance and Repairs to the Common Elements

May 9, 2012, Posted by Laura Manning-Hudson


Thumbnail image for Laura Manning HudsonWhile Florida law provides that condominium associations have the right to access all units in the condominium for maintenance and repairs to the common elements, many unit owners are often reluctant to provide a copy of the key to their unit to the association. Owners cite a variety of reasons for their unwillingness to provide the association with a copy of the key and allow access to the residence, but in reality there are no valid reasons for owners to avoid complying with this aspect of the state's condominium laws.

Florida law specifically provides that condominium associations have the irrevocable right of access to each unit during reasonable hours when it is necessary for the maintenance, repair or replacement of the common elements or any portion of the unit that the association is required to maintain, as well as to prevent damage to common elements. Most condo association governing documents also include language regarding the right to access the units and requiring owners to provide the association with a copy of the key to the residence for the association to keep.

The most typical use of this right to access the residences is for projects involving work on the balconies and windows. Contractors require access to the units for these projects, and many times they also need to temporarily store the equipment that they are using for the work on private balconies and ground-floor terraces while the projects are underway.

balcony renovation.jpgUnfortunately, even for these important renovation projects, there always seems to be at least one owner who attempts to refuse to comply or insists that the access or equipment storage be restricted in a manner that is not conducive to the completion of the work. Many owners do not realize that the law states that the condo associations have this irrevocable right of access for these purposes, and if necessary the associations can file suit for injunctive relief to gain access to the units of recalcitrant owners and store some of the equipment as required for the work to be completed.

For associations and property managers, it is important to bear in mind that they are not allowed to use the keys to gain access to residences unless it is specifically for these types of projects involving the common elements or to prevent damage to the common elements. For example, if there is a known leak and water is seeping through the walls or ceiling of the space below a residence, the association and management can access the unit to inspect the plumbing and repair the leak in order to prevent further damage. However, if the association simply suspects that there is a plumbing issue, such as a running toilet, but there is no evident leak or property damage, it is not allowed to just access the residence. Instead, the association should contact the unit owner to inquire about the plumbing issue and schedule a time to inspect the fixtures as necessary. Maintenance and repairs of toilets, faucets and other plumbing fixtures inside of the residences are generally the responsibility of the individual unit owners, so the association and management must work with the individual owners to address any such issues.

Whenever possible, the association and property management should contact the unit owner in advance of using their right to access the unit. However, in cases involving property damage of an emergency nature, the association would be able to use the key to access the unit even without advance notice to the owner. It is imperative for associations to keep copies of the keys to all of the units in the building in a secure location with restricted access only for the property manager and/or specific board members. Condominium associations that do not have copies of keys to all of the residences in their buildings should consider adopting a rule requiring that the unit owners provide them with copies of the keys.

Associations facing unit owners who refuse to provide a copy of the key or grant access to their unit as required by law should file a petition for arbitration with the Division of Condominiums to force the owners to comply. Because the law is very clear about this irrevocable right of access for condominium associations for the purposes described in this article, they are virtually guaranteed to prevail in these arbitrations. Filing a lawsuit against the owner for injunctive relief to access the residence is also possible for extreme cases in which the owner refuses to comply with the arbitration ruling.


Concerns for Associations Over Neighborhood Watch Programs Spurred by Trayvon Martin Case

May 2, 2012, Posted by Roberto C. Blanch


Thumbnail image for Roberto Blanch.JPGIn the wake of the tragic death of Trayvon Martin, associations throughout the country are now reassessing their involvement in neighborhood watch programs in their communities. My comments to a reporter with the Associated Press on the matter were published in a recent article that appeared in news outlets nationwide (click here to read the report), and it now appears likely that Martin's parents will be filing a wrongful death lawsuit against the community association.

In reaction to this and other news reports about the legal implications of the actions of neighborhood watch volunteers within community associations, the Community Associations Institute (CAI) recently issued a press release with helpful guidelines and recommendations for community associations that wish to implement watch programs manned by volunteer residents in their communities. The press release, which can be accessed by clicking here, stipulates that associations should work with their local police department to implement these programs, create a process for recruiting responsible volunteers who will follow all of the written procedures for the security measures, and continuously reinforce these procedures and the do-not-engage rules with the volunteers. Our firm is very active with the South Florida CAI chapters, and we applaud the organization for issuing this press release to help associations gain a better understanding of the proper procedures for implementing neighborhood watch programs in their communities.

Security has traditionally been one of the most important considerations that associations feel compelled to address, but budget constraints limit their ability to hire professional security guards for on-site monitoring and protection for their residents. watch program sign.jpg In response, many associations resort to creating neighborhood watch programs, which are typically comprised of volunteer owners who agree to keep a watchful eye for suspicious activity.

The Trayvon Martin case illustrates the concerns for associations that organize their own watch programs. In light of this tragic case, many associations are likely to avoid partaking in the organization and implementation of these programs, because doing so could result in significant liability for the association. Notwithstanding these concerns, if associations feel compelled to participate in the organization of a watch program and endorsing it in their community, they should do so with the utmost precautions detailed in the CAI release. These include organizing workshops with their local police department to establish procedures and training for the individuals who volunteer to participate in order to help ensure that they limit their involvement to watching and listening for suspicious activity and contacting the police when necessary, rather than taking on active duties to follow and engage individuals who are suspected of being involved in criminal activity. It is also important for the associations to stress in their written procedures that these individuals are not allowed to conduct armed patrols in the community.

In addition, the associations should consult with their insurance carriers and agents to determine whether they are covered for liabilities that may be caused by the actions of the watch volunteers, who should be vetted by the association with a criminal records background check. If the association learns of any questionable conduct or history of criminal activity by the volunteer, they should take immediate steps to disallow any involvement in the watch program by the individual.

There are many reasons why associations should avoid formally creating these watch groups and leave it up to the individual owners to band together to develop their own efforts outside of the auspices of the association. However, for associations that cannot or will not distance themselves from the formation of the watch groups, they should follow these and other guidelines, including those suggested by CAI, and consult with their own attorneys in order to limit their potential liability to the greatest possible extent.


Responding to Requests for Permission for Service Animals from Residents

April 13, 2012, Posted by Laura Manning-Hudson


Thumbnail image for Laura Manning HudsonRequests by residents for permission to keep service animals in their units are becoming more and more common throughout community associations in South Florida. In many cases, the requests are for emotional support animals, and the resident's disability is not readily apparent. Even though these requests have become fairly common, many no-pet communities remain uncertain as to how they should respond, especially when the resident skirts the rules and brings the animal into their unit under the cover of darkness.

Associations facing this scenario should avoid knee-jerk denials of requests for permission to keep the animal without first requesting additional information from the resident. By law, associations are entitled to ask the resident about the nature of the disability and other pertinent information to enable the association to determine if the request is legitimate and whether the dog is a necessary accommodation in order for the resident to be able to use and enjoy the dwelling. A flat-out denial without any evaluation or request for additional information will open the community up to a successful fair housing discrimination complaint by the resident.

Thumbnail image for Service Animals (2).jpgAssociations are also entitled to inquire about how the disability affects the resident's major life activities (walking, breathing, working, seeing, hearing are examples of some defined major life activities), and how the animal assists the individual with this major life activity that is impaired by their disability. Associations may also request that the resident provide this information from their doctor.

If a resident does not respond to the association's request for information regarding the disability, then, in the case of a no-pet building, it is reasonable for the association to proceed with the filing of a petition for arbitration with the Division of Florida Condominiums seeking removal of the animal from the premises. If the resident fails to provide the requested information and instead files a fair housing discrimination complaint, the association will be able to demonstrate that it never declined to permit the service animal but simply asked for more information that was not provided.

The most difficult disabilities that associations grapple with are those disabilities that are relieved by emotional support animals as opposed to a service animal. However, just because the disability is not readily apparent, but rather psychological in nature, does not mean that the resident's claim is bogus or deniable. If a resident is being treated for depression, especially if they have lost a spouse or loved one and are receiving psychiatric therapy and perhaps also medication, it is difficult to deny a doctor's claim that the animal provides the emotional support that is necessary for them to perform the most basic major life activities such as going to work, buying the groceries and even simply just getting out of bed.

Associations must keep in mind that it is the resident's burden to prove the disability and that the relief provided by the service animal is necessary to afford them an equal opportunity to use and enjoy the dwelling. Associations should always request and evaluate all of the necessary information in order to make an informed decision as to whether to grant permission for the animal.