Florida Supreme Court Limits Economic Loss Rule Only to Product Liability Cases in Ruling on Lawsuit by Community Association Against Insurance Broker

March 18, 2013, Posted by Nicholas D. Siegfried

Nick Siegfried 2013.jpgA 5-2 majority decision by the Florida Supreme Court in the case of Tiara Condominium Association v. Marsh & McLennan limits the legal principle known as the "economic loss rule" only to product liability cases, thereby allowing many claims for breach of contract in the state to be accompanied by tort claims of negligence. The ruling allows the association to proceed with its lawsuit seeking to recover approximately $50 million in damages from its insurance broker, which it claims knew the 42-story oceanfront tower on Singer Island in Palm Beach County was underinsured and failed to tell the association.

The lawsuit stems from the more than $100 million in damages that the luxury condominium tower sustained as a result of two hurricanes in 2004. After settling with the insurance company for $89 million, the association then sued the broker for the remaining balance of the approximately $140 million in repairs, claiming breach of contract, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, negligence, and breach of fiduciary duty. The trial court in 2009 dismissed the lawsuit, and the association assessed each owner between $110,000 and $150,000 for the repairs and filed an appeal. The Eleventh Circuit Court of Appeals concluded that judgment in favor of the broker was proper as to the breach of contract, negligent misrepresentation and breach of implied covenant of good faith and fair dealing claims. However, as to the negligence and breach of fiduciary duty claims, a matter of state law, the Eleventh Circuit Court of Appeals directed a certified question to the Florida Supreme Court which restated the certified question as follows:

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Does the economic loss rule bar an insured's suit against an insurance broker where the parties are in contractual privity with one another and the damages sought are solely for economic losses?

The majority opinion found that the economic loss rule did not bar the community association's lawsuit, and held that the economic loss rule only applies in the products liability context.

The legal principle of the economic loss rule originated as a means of limiting potentially unbounded losses based on a customer's expected profits from the use of a product that turned out to be defective. The most oft-cited case originating the rule involves a delivery company that sued a truck manufacturer for its lost profits resulting from a truck's defects that caused it to cease functioning. The court ruled that damages for lost profits and for money paid on the purchase price were appropriate under breach of warranty. However, the delivery company could not pursue the same claim in tort since it suffered only economic loss. The court reasoned that contract law was best to resolve economic losses as the parties are able to negotiate remedies for nonperformance. Tort law was more appropriate to address personal injury and damage to other property. Each state addresses the economic loss rule differently and Florida, while initially expanding the economic loss rule, began limiting the economic loss rule to its principled origins. With this decision, the Florida Supreme Court has now returned the economic loss rule to its original application and has limited it to products liability cases.

The dissenting opinion asserts that the majority expanded the use of "tort law at a cost to Florida's contract law." The number of tort claims will likely increase as a party may bring tort claims along with its breach of contract claim and recover remedies that may not otherwise be available under the contract. Our community association attorneys write regularly in this blog about important business and legal matters for community associations in Florida, and we encourage association members, directors 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.

2013 Community Association Proposed Legislation

March 4, 2013, Posted by Roberto C. Blanch

Roberto Blanch.JPGThe 2013 Florida legislative session will soon kick into high gear, and with it will come another round of bills related to Florida community associations. This article provides a brief overview of bills that have been filed in the Florida Legislature which aim to create new laws that will impact condominium, cooperative and homeowner associations in Florida.

SB 596: This bill is aimed at Homeowners Associations. It seeks to rename the Florida Division of Condominiums to include HOAs and would also require annual funds collected by the Division relating to the regulation of HOAs to be deposited into the Florida Condominium, Homeowners Association, Timeshares and Mobile Homes Trust Fund. The bill further seeks the establishment of the Office of the Community Association Ombudsman.

HB73 / SB436: These companion bills are the primary vehicles pushing for changes to the laws that govern Florida HOAs, condominiums and cooperatives. Once again, the bills aim to create exemptions of certain elevators from legally mandated code update requirements. If adopted, the law would delay mandated updates to elevators in some community association buildings for implementation of Phase II Firefighters Service until the elevator is replaced or requires major modification.

The bills also seek to remove requirements for a unit owner vote to approve two-year terms for condominium directors and would allow such terms if provisions for them are included in an association's by-laws or articles of incorporation. Procedural changes are also proposed aimed at clarifying the posting of notices for meetings when using broadcast notices, and at the retention of condominium board member certification certificates for 5 years or for the duration of a director's uninterrupted tenure.

Florida legislature photo.jpgThese bills include proposed revisions to community association laws related to election dispute arbitrations so that such proceedings must be commenced within 60 days from the announcement of election results. New procedures and deadlines for filing recall petitions are also proposed in the event that the association fails to do so timely. The new procedures would create a limit to the nature of the proceeding and would provide a window of time for filing recalls (i.e., not within 60 days of a scheduled re-election or before 60 days from election of the director(s) sought to be recalled).

The legislative changes proposed in this session further seek to expand upon the existing statutory protections related to hurricane shutters and glass installed in condominium buildings by broadening the scope to also reference hurricane "protection" as well as new provisions which are submitted to implement deadlines to add phases in phase condominiums and to clarify developers' ability to create "condos within condos."

The proposed legislation included in these bills further aims to establish clarifications pertaining to the ability of community associations to suspend the use of common elements due to owners' or residents' noncompliance, and the bills also seek to implement restrictions on an association's ability to suspend use rights for noncompliance to more closely resemble the common areas that are not able to be suspended for non-payment.

These bills contain proposed legislation that would clarify that lawyer-client privileged and work-product privileged documents are not reviewable by owners in HOAs and cooperatives, thus creating other clarifications to official records provisions to more closely resemble the provisions applicable to condominiums. Lastly, proposed changes are included to create certain situations limiting the requirement to obtain mortgagee consents for some votes in cooperatives and HOAs.

SB120/HB175: These companion bills were filed on behalf of developer interests and were proposed to address concerns regarding Interstate Land Sales Act compliance matters to clarify when a condominium comes into existence. These bills contain technical revisions that practitioners will have to be mindful of as many deadlines and timeframes currently included in the Condominium Act commence upon the filing of the Declaration of Condominium - a critical event that the proposed legislation seeks to modify.

HB87: This bill includes proposed revisions aimed at streamlining mortgage foreclosure cases. Many hope that the enactment of this bill will result in procedures that may be used by community associations to assist in having mortgage foreclosures expedited. Expediting mortgage foreclosures is expected to minimize the time associations typically wait before a paying owner is placed in legal title to an otherwise non-performing unit.

All community association stakeholders are encouraged to keep a watchful eye on the progress of these and other bills that have been filed given that their possible enactment may result in significant changes to the Florida community association arena. Our other community association attorneys and I will continue to monitor and write about the outcomes for these and other new legislative measures for the 2013 Florida legislative session, and we encourage community association members, directors and 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.

Third DCA Opinion Deals Significant Blow to Condo Associations That Foreclose on Units in Advance of Banks

February 15, 2013, Posted by Laura Manning-Hudson

Laura Manning HudsonFor the past several years we have written many articles in this blog encouraging condominium associations to aggressively move their foreclosure cases forward in order to take ownership of those units whose owners are delinquent in advance of the banks' foreclosures. RealtyTrac's data shows that it takes an average of 2.5 years for bank foreclosures in Florida to conclude. By aggressively pursuing their own foreclosures, associations were able to acquire title to the units and subsequently lease them in order to recoup some of their back-due fees. This strategy has become increasingly popular with condo associations, which have benefitted economically from the approach and, in turn, regained financial stability. However, a recent ruling by the Third District Court of Appeal should cause condominium associations to reconsider.

Our other community association attorneys and I were quite surprised by the appellate court's reversal of the lower court's ruling in the case of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. In Aventura, the lower court found that the condo association (which had acquired title to a unit through its own foreclosure) was entitled to bill all of the outstanding past-due fees to the eventual new owner, subsequent to the bank's foreclosure.

The appellate court disagreed and reversed the decision, finding that Florida law clearly provides that "the previous owner is jointly and severally liable" together with the new owner for all unpaid assessments that come due up to the time of the transfer of title. The opinion reads: "The plain language of the Statute does not state or suggest that an exception is to be made when the previous owner is the condominium association." Therefore, by positioning itself as the "previous owner," the majority held that the condominium association became liable for the unpaid assessments and could not turn around and impose that liability solely onto the eventual new owner.

Judge Shepherd.jpgJustice Frank A. Shepherd wrote the dissenting opinion and stated: "Applying these rules to the case before us, it is apparent the fundamental purpose of the Legislature in promulgating section 718.116 was to assist condominium associations to be made whole in the collection of past due assessments, while at the same time not unduly impairing the value of collateral held by first mortgagees. In furtherance of this design, the Legislature has given condominium associations a statutory lien on each condominium unit over which it has jurisdiction, to secure payment of assessments without the necessity of filing a claim of lien in the public records, with the single exception of first mortgagees, where record notice is required. ยง 718.116(5)(a). Thus, under the legislative scheme, third-party purchasers of condominium units, like Aventura Management, LLC, are subject to old-fashioned caveat emptor principles. Their protection lies in satisfying themselves before purchase, whether by contract or judicial sale, of the status of past-due assessments on the unit."

Our other condominium association attorneys and I agree with Justice Shepherd's dissenting opinion. In our communications with Florida legislators prior to and during the 2013 legislative session that starts in March, we will be urging them to enact new legislation to exempt condominium associations who take title to units via their own foreclosures from liability for past-due assessments. Until such legislation is ratified, condominium associations that are considering pursuing their own foreclosure actions and taking title to units in advance of banks' foreclosures should consult with qualified legal counsel to examine the specifics of their case in light of this new decision.

Third District Appellate Opinion May Affect Collection Strategies

February 4, 2013, Posted by Roberto C. Blanch

Thumbnail image for Roberto Blanch.JPGIn its recent opinion in the case of Aventura Management, LLC vs. Spiaggia Ocean Condominium Association, Inc., the Third District Court of Appeal may have significantly impacted the collection strategies implemented by many condominium and homeowner associations in Florida. The case involved a condominium association's efforts to recover full payment of past-due assessments and related amounts against an entity that acquired title to a unit resulting from a lender's foreclosure of the mortgage on such unit. At the time that the entity acquired title to the unit, the condominium association was the owner of the unit in question - having taken title to the unit as a result of being the prevailing bidder at the clerk's sale following the foreclosure of the association's lien on the unit.

In its attempts to recover payment from the new entity unit owner, the association argued that the condominium statutes in Florida provide that unit owners are jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title to the unit. While the trial court apparently agreed with the association's position, the appellate court disagreed, determining that the association was the "previous owner" as contemplated in the statutes and as such, the association was jointly and severally responsible for the assessments together with the person or entity that owned the unit prior to the association.

3rd district court of appeal.jpgThe appellate court was not persuaded by the association's arguments that it was not responsible for the assessments and other amounts owed to the association. These arguments included claims that the applicable statutes were not intended to apply to associations acquiring title to units as a result of their own foreclosure cases, and that the new entity owner knew or should have known that it was responsible for the past-due assessments and other sums.

The appellate court is relevant given that the current legal and economic climate for community associations continues to be dominated by excessive mortgage foreclosure actions, which at times are dueling with community association efforts to collect on unpaid assessments owed by the owners of units subject to such mortgage foreclosure actions.

In light of the legislative protection for lenders foreclosing on their mortgages on units in community associations, prior to the inundation of court dockets with mortgage foreclosure cases, community associations were traditionally reluctant to aggressively pursue foreclosure actions on their own liens if the same unit was subject to a mortgage foreclosure action. However, the economic and real estate market crash coupled with the glut of mortgage foreclosure cases and the robo-signing fiasco dealt a crippling effect to the court system and the ability of community associations to collect upon delinquent owners. The board of directors of community associations and their management and legal counsel were forced to depart from the traditional philosophy of standing on the sidelines while bank foreclosure cases proceeded at speeds less than snail's pace. As a result, community associations commenced aggressively pursuing their lien foreclosure cases notwithstanding the existence of lender foreclosure cases on the same property - in hopes that such efforts would aid in mitigating prolonged periods of weakened cash flow to the associations.

As a result of these strategies, many community associations foreclosed upon their liens, resulting in the acquisition of such foreclosed homes by third parties or more typically, the acquisition of such homes by the associations themselves - in both instances, subject to the foreclosing lenders' mortgage liens. In cases where associations acquired title, some of these associations continued to pursue collection of past-due assessments from the eventual third-party purchaser who acquired title to the home at the conclusion of the lender's foreclosure case - despite objections from such new third-party owners. However, in light of the ruling in the Aventura Management, LLC case, community associations will have to think twice before continuing with such aggressive strategies.

Accordingly, this decision underscores the importance for community association managers and directors to consult with qualified legal counsel regarding the pros and cons of pursuing various strategies related to the collection of delinquent association assessments.

Report in Daily Business Review: Firm Wins Appeal Before Third DCA in Dispute Between Developer, Condo Association Over Ownership of Parking, Storage Spaces

3rd district court of appeal.jpgIn December, firm partners Helio De La Torre and Laura M. Manning-Hudson, together with of-counsel attorney H. Hugh McConnell, prevailed in their appeal on behalf of the developer of the 28-story Courvoisier Courts condominium tower on Miami's Brickell Key before the Third District Court of Appeal. The appellate court found that the lower court erred when it entered a Final Judgment requiring the developer to relinquish to the association all of the parking spaces and storage areas that it assigned to an unsold penthouse prior to turning over control of the property to the association.

The appellate court's decision in the case of Courvoisier Courts, LLC v. Courvoisier Courts Condominium Association, Inc. hinged on the association's declaration of condominium, which states that the association would receive all parking spaces and storage areas that are left unassigned after the developer has sold all of its units. The panel found that the parking and storage spaces in question did not become the property of the association upon turnover, and the developer retained the right to assign the exclusive use of these limited common elements until such time as it had sold all of its units.

dbr logo.jpgA report on the ruling from the Daily Business Review on December 27, 2012 quoted De La Torre indicating that "The lower court ruling said basically that all of the assignments made since the turnover were invalid. [The appellate decision] means we get our parking spaces back, [and] it's a very significant opinion." He, Manning-Hudson and McConnell believe that the trial court's interpretation of the condominium's declaration in this case could have set a challenging precedent for condominium developers in Florida.

Click here to read the Third District Court of Appeal's opinion for the case.

Top 10 Collections Resolutions for 2013 for South Florida Community Associations

January 7, 2013, Posted by Renee Renuart

Renee Renuart.jpgThe start of the year marks an ideal time for community associations to take a close and careful look at their collections practices and establish some new year's resolutions to make their efforts as effective as possible. Here are my top 10 suggestions for the best collections resolutions for associations to consider and adopt for 2013:

  1. Avoid Delays - Delays in taking action to collect delinquent dues and assessments from owners only encourage them to continue to avoid paying their share. It is natural to sympathize with owners who are struggling financially, but association boards have a fiduciary duty to protect the interest of the association as a whole. Associations should make a commitment to adopting uniform collections policies and procedures that call for expeditious actions to begin the collections process as soon as the law allows with all owners who become delinquent in their payments. No owner's account should be treated differently from another owner. This will avoid the defense of selective enforcement and gives everyone in the community the message that they must carry their part of the burden.
  2. Rely on Experts - Associations should rely on their attorneys to guide them through the different options that they have available to collect from delinquent owners. Part of being automatic with your collection process is knowing when to take the next step and what that step should be. The boards should require that their attorneys take the time to explain the entire collections process and how every facet is to be implemented in order to maximize the results of their efforts.
  3. Review and Understand Your Governing Documents - It is imperative for boards to review the association governing documents and bylaws in order to determine whether new rules need to be adopted to establish uniform collections procedures for the property. These rules, which can be implemented by a meeting and vote by the board, will help to avoid any arbitrary selective enforcement, which can lead to successful defenses by the unit owners in a foreclosure action.
  4. Issue Demand Letters Quickly - Some associations that do not establish uniform collections procedures slow down the start of the process by delaying the use of a demand letter from the association attorney immediately once an owner's payments are delinquent. There are many owners who will refuse to pay until they receive such a letter, so it is vital for the associations to issue them as quickly as possible.
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  6. File a Lien - Florida law requires that condominiums wait at least 30 days and HOAs at least 45 days from the issuance of the demand letter before they can file a lien against the owner's property for continued nonpayment. Associations should expeditiously exercise their lien rights by filing the claim of lien against the owner's property immediately after the statutory waiting period expires.
  7. File Foreclosure Actions - Florida law requires that associations provide a delinquent owner with an intent to foreclose letter prior to initiating a foreclosure action. Condominiums must wait at least 30 days and HOAs at least 45 days from the issuance of the intent to foreclose letter before filing the foreclosure action. Once the lien is in place and the owner has been provided with an intent to foreclose letter, associations and their attorneys should assess the status of any foreclosure actions by banks with superior first-mortgage liens in order to determine if delays in the lenders' foreclosure case creates a window of opportunity for the association to quickly foreclose and take title to the delinquent owner's unit. Many bank foreclosures are taking years to complete, and during that time associations can take title to the unit and lease it in order to begin recouping the past-due balances.
  8. Move Quickly to Collect from the Tenants of Deadbeat Landlords - A Florida law that became effective July 1, 2010, and has become a very effective collections tool allows associations to demand and collect the rent from the tenants of delinquent owners. Associations should move quickly to send demand letters to the tenants of delinquent owners requesting that they begin paying all of their monthly rent directly to the association or face eviction, as the law now allows.
  9. Offer Payment Plans - In today's economy and housing market, associations are finding that offering payment plans to owners who fall behind but want to avoid foreclosure and keep their residence makes a great deal of sense. It may not lead to recouping all of the past-due balances as quickly as the associations would like, but by offering and agreeing on a reasonable repayment plan the associations can recoup a great deal of what they are owed over time while avoiding the headaches, delays and expense of continued collections and foreclosure squabbles.
  10. Prompt Replies to Owners' Responses - Associations and their attorneys should work to ensure that they respond quickly to owners who raise any questions or concerns after receiving the initial demand letter or the intent to foreclose letter. If a foreclosure action is initiated against the delinquent owner, this enables the association to demonstrate that they responded to the owner in a timely fashion and allows them to avoid any potential defenses by the owner that they previously tried to resolve the matter but were unable to get a response. Boards should immediately refer any responses by the delinquent owner to the attorney, who can in turn reply to the owner as quickly as possible.
  11. Take Away Owners' Rights to Use Amenities and Vote in Association Matters - Florida law allows an association to suspend the right of a member, or the member's tenant, guest, or invitee, to use common areas and facilities for nonpayment of monetary obligations which are more than 90 days delinquent. pool 2.JPG These amenities include the pool, hot-tub and fitness center, as well as access to the clubhouse and the express entry gate for residents. The governing documents of the association do not need to provide for such suspension, but a suspension does not apply to the portions of the common areas used to provide access or utility services to the parcel and may not impair the right of an owner or tenant to have vehicular or pedestrian ingress and egress from the parcel, including the right to park. An association may also suspend the voting rights of an owner for nonpayment of monetary obligations more than 90 days delinquent. Suspension of use or voting rights imposed for delinquent monetary obligations must be approved at a properly noticed board meeting. Upon approval, the association must notify the parcel owner and, if applicable, the owner's occupant, licensee or invitee by mail or hand delivery. Many communities have found that the ability to suspend use and voting rights has been an extremely effective tool both in terms of deterring potential new delinquencies as well as getting some of the current delinquencies cured.

The challenges facing community associations in South Florida will not disappear anytime soon, but by adopting these collections resolutions for 2013 the associations can take important steps towards alleviating the financial strains caused by delinquent owners.

Hidden Costs for Associations Playing Music or Movies in Common Areas

December 20, 2012, Posted by Roberto C. Blanch

Thumbnail image for Roberto Blanch.JPGMany community associations provide for music and movies to be played in the common areas or common elements for the enjoyment of guests and residents. For instance, an association may play a series of songs over the stereo system at the association clubhouse dining facilities in hopes of providing a pleasant dining experience for residents and their guests. Another community may provide a similar environment for those entitled to use its gym facilities. Yet another community may schedule a weekly movie night for residents at no charge to those interested in attending. The foregoing scenarios are all too common throughout many community associations in Florida and may result in hidden costs to the associations in the event that the appropriate safeguards are not implemented.

Title 17 of the United States Code, known as the "Federal Copyright Act," grants certain exclusive rights to the owners of copyrighted works, such as the right of a musical composer to "perform the copyrighted work publicly." The term "perform" is defined in the Federal Copyright Act to mean "to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible." In addition, the Act provides that to perform the work "publicly" means "... to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times."

In light of the foregoing and in accordance with other general provisions of the Copyright Act, it has been suggested that businesses broadcasting background music to the public must obtain a license to play such music. While there are exceptions to copyright infringement for small businesses, including restaurants, when they broadcast radio or televisions shows, the same businesses are not exempt from copyright infringement when they play music from devices such as tapes or compact discs. Based upon the foregoing, certain facilities that publicly play recorded music from devices such as compact discs must obtain a license from the songwriter or the songwriter's agent to play such music.

Performing Rights orgs.jpgFederal copyright law permits a songwriter or his agent to grant permission to others to legally "perform" the songwriter's copyrighted work "publicly" and thus avoid copyright infringement claims. These performance rights are generally licensed on behalf of copyright owners by business entities or associations known as "performing rights" societies. The three major performing rights societies recognized by the Federal Copyright Act are the American Society of Composers, Authors and Publishers ("ASCAP"); BMI; and SESAC, Inc. These societies may grant a license to commercial establishments to use the music in their repertoire through a licensing agreement. The license entitles the commercial establishment to play only the music in that society's repertoire. Therefore, it may be necessary to enter into a licensing agreement with more than one society.

As an alternative to obtaining performance licenses from performing rights societies, commercial establishments may enter into an agreement with a commercial music services provider, which in turn enters into the licensing agreements with the performing rights societies. Under this arrangement, the commercial establishment only enters into one contract with the commercial music services provider and pays the provider for the privilege of playing copyrighted music rather than entering into licensing agreements with various performing rights societies.

Please note that Florida law imposes certain obligations on performing rights societies by statute, such as disclosure requirements that societies must meet when presenting proprietors with information on their services and requirements with which their contracts with proprietors must adhere. However, a discussion of these requirements is outside of the scope of this opinion. As such, it is advisable to have counsel for the association review any disclosures together with proposed agreements provided by a performing rights society prior to the association entering into any such agreement in order to determine whether they comply with Florida law.

Observance of the foregoing requirements may mean the difference between compliance with applicable copyright laws or committing potentially costly violations of such laws. Consult with your association legal counsel for an opinion as to your exposure if your community engages in activities or services such as those described above.

Clear Dog Policies Help to Avoid Disputes, Confusion for Community Associations

December 10, 2012, Posted by Laura Manning-Hudson

Thumbnail image for Laura Manning HudsonDoggie disputes are a common issue for many owners and board members in South Florida condominium communities. In today's housing market, many people who were previously living in a single-family home are now finding themselves living in condominiums or deed-restricted communities with their pets. Subsequently, association boards are now facing more situations involving dogs and dog owners in their communities. However, by taking a new look at their policies concerning "man's best friend," associations can better serve their community by adopting policies specifically pertaining to the board's ability to quickly and fairly deal with any dog-related issues that may arise, including how to deal with what some have called "dangerous dogs."

Most governing documents have provisions concerning dogs, but many lack the specificity required by boards in order to remove the dogs should they be determined to be a danger to the community. By adopting a policy that provides when a dog may be determined to be a nuisance and must be removed, both boards and pet owners are better served by having specific parameters to assist them when it comes to incidents such as dog bites, lunging, growling, and intimidating behavior or aggression toward other residents or dogs in the community. Additionally, more and more condominium and HOA documents are specifically identifying certain breeds of dogs that are deemed to be dangerous and prohibited in the community. Typically these are the Doberman Pinscher, Pit Bull and Rottweiler breeds. (The origination of these lists of dangerous dogs goes back to homeowner's insurance policies.) Some documents use a weight-limit maximum for pets, which also serves to prohibit most of the larger breeds of potentially dangerous dogs.

Any policies adopted by a board should specify the type and number of incidents and/or complaints that can be used by the board to determine when a dog is a nuisance (or perhaps dangerous) and must be removed from the property. ddog.jpg Most dog owners know and understand their own dog's individual personality and tendencies, so owners will be better equipped to use their own judgment to mitigate potential incidents that are detailed in the rules, such as waiting for the next elevator if another dog owner is already in it with their pet. Also, by establishing in the pet policy the specific number and types of incidents that can be considered aggressive behavior, a board will be able to make uniform decisions when it comes to all dogs in their community - regardless of size or breed - and avoid any arbitrariness in their decisions that could result in a successful challenge by an owner before the Division of Condominiums.

Another rule that associations should consider is requiring residents who own dogs to maintain a homeowner's or renter's insurance policy to insure against any dog incidents that could occur in or around the condominium property. Associations should also consider the creation of a rule that provides that dog owners agree to indemnify and hold the association harmless from any liability resulting from incidents involving a dog.

The pet policies and restrictions in community association governing documents and rules tend to vary greatly depending on the individual property and the prevailing mindset of the community. Community associations that wish to make their property user-friendly for dog owners who abide by the rules should make every effort to enact clear and detailed rules and pet policies that make sense for their community and eliminate the potential for arbitrary enforcement.

Appellate Ruling Upholds Dismissal of Wrongful Death Lawsuit Against Valet Company for Returning Vehicle to Intoxicated Driver

November 26, 2012, Posted by Roberto C. Blanch

Thumbnail image for Roberto Blanch.JPGMany of the condominiums and condo-hotels in South Florida offer valet parking for the convenience of their residents and guests. With so many gatherings and celebrations taking place at these properties, the valet companies that provide these services sometimes face the difficult situation of whether to provide an individual who is clearly intoxicated with their vehicle for them to drive. The question then arises: Are the valets legally liable for any incidents resulting from visibly intoxicated drivers to whom they have returned vehicles?

The recent ruling by Florida's Second District Court of Appeal in the case of Debbie Weber v. Marino Parking Systems, Inc. provides some clarity for valet companies in this situation. The court upheld the lower court's dismissal of the lawsuit, which was filed on the grounds of wrongful death by Weber against the valet company after it returned the vehicle to an obviously intoxicated driver who then got into accident that caused the tragic death of his passenger, the plaintiff's daughter.

valet.jpgThe court ruled that a valet parking service does not owe a duty to third parties to refrain from returning a vehicle to an obviously intoxicated driver. In its ruling, the court acknowledged that cars, just like firearms, are dangerous instruments, but unlike gun sellers, a valet is not acting as a seller, lessor, donor, lender or bailor in providing its services. Instead, it serves as a bailee, which is defined as one who holds property for another. Bailees, the court concludes, do not have a superior right to control the property, which means that valets have no discretion to refuse to return the vehicle without potentially being liable for a conversion.

While this ruling does seem to shield the valet parking service providers from legal liability in these cases, there are other measures that the valet companies and the condominiums and condo-hotels which retain them can and should take to dissuade intoxicated individuals from demanding their vehicles and driving off. These include hiring off-duty uniformed police officers to provide on-site security for large parties and special celebrations, and coordinating with local taxi companies to have taxis available for these events. The horrors of the consequences of drunk driving are too serious to ignore, and we encourage valet companies and the properties that they serve to take all of the precautions at their disposal to avoid enabling intoxicated individuals from getting behind the wheel.

Laura Manning-Hudson Featured in Local TV News Report on Pet Dispute at Condo Association

Laura Manning HudsonThe firm's attorneys regularly write about community association issues and serve as sources for the South Florida media. On Nov. 14, Laura Manning-Hudson, a partner in our West Palm Beach office, was featured by the local CBS affiliate for Palm Beach County in a story about how local condominium and homeowners associations deal with dangerous breeds of dogs.

According to the owner of two Siberian Husky dogs, the condominium association she lives in, which our firm does not represent, indicated that the dogs' breed was on its list of dangerous breeds that are not permitted in the community. A Siberian Husky is pictured below.


In Laura's interview with the reporter from WPEC News 12, she is quoted discussing the importance of looking to the association's governing documents in order to determine the association's pet-restriction capabilities and protocols. Laura goes on to explain that for issues involving dangerous dogs, the problems usually stem from an incident involving the dogs in question.

Click here to watch the report on the station's website.


Lawsuit by Neighborhood Association Against Homeowner for Water-Conserving Yard Will Test Florida's Xeriscaping Law

November 9, 2012, Posted by Laura Manning-Hudson

Thumbnail image for Laura Manning HudsonIn 2009 the Florida legislature amended the HOA Act to prevent HOAs from prohibiting "Florida friendly landscaping" or enforcing landscaping criteria against owners who use "Florida friendly landscaping." Florida friendly landscaping is defined as landscaping that does not require sprinklers and chemicals to survive, but exists in our natural Florida climate. Since 2009, several disputes between associations and owners have arisen over the use of these xeriscaping techniques, most of which have been resolved amicably. However, a new lawsuit filed by a neighborhood association in Orange County, Florida, against a homeowner should add some clarity as to how the courts will apply this controversial law.

In the case of Summerport Residential Property Owners Association v. Parker, homeowner Renee Parker was sued by her association after she replaced the St. Augustine grass in her yard with an Argentine bahia sod variety (see sample pictured here) that is considerably hardier and requires significantly less watering and fertilizer. bahiagrass.jpg The HOA documents specifically require St. Augustine grass for lawns. The HOA is seeking an order from the court forcing Parker to permanently cease violating the community association's landscaping rules -- or return the lawn to St. Augustine type grass.

Parker claims that she filed an application for modification with the association detailing the areas to be replanted and a list of the plants to be used, but she never received a response. When she didn't receive a response from her HOA, Parker went ahead with her landscaping plans. Parker is also claiming that the HOA is violating Florida Statute 720.3075 by attempting to enforce its landscaping rules and requiring her to remove the Florida friendly landscaping and plants that she installed. The defense of the Florida friendly landscaping prohibition raises several legal issues for both Parker and the HOA.

Our other South Florida community association attorneys and I will continue to keep a close eye on the outcome of this case, as it should help to clarify how the courts will apply this law. Until we see a determination on the application of this statute, however, the lesson for both HOAs and homeowners is to follow the procedures set out in your community's governing documents regarding modifications to the exterior of the property. If there is a requirement that an owner file an application before making any modification, then xeriscaping.jpgowners should comply -- regardless of the type of plants they are intending to install. And, as for HOAs, if the governing documents set out a time deadline to respond to such a request for modification, ensure that your association responds in a timely manner.

We will cover the outcome of this case in this blog in the coming months, and we encourage community 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 receive all of our future articles.

The 40-Year Recertification of Condominium Buildings in Miami-Dade and Broward

October 31, 2012, Posted by Roberto C. Blanch

Thumbnail image for Roberto Blanch.JPGAs the cranes involved in our last building boom disappear from our skyline, making way for the appreciation of new buildings resulting from settling construction activity, attention is drawn to past construction booms in our region. Decay resulting from the element of time -- exacerbated by our proximity to the salty ocean air -- has proven to require attention to the structural maintenance of the buildings erected throughout the years in South Florida. Additionally, advances made in keeping building occupants safe result in the requirement to make electrical and life safety improvements to aging buildings. One of the tools implemented by local governments to ensure the safety of persons residing in multi-family condominium buildings is the 40-Year Recertification Process (the "40-Year Process"). This process requires many condo buildings in Miami-Dade and Broward counties to undergo a thorough assessment prior to being certified by local authorities as safe for occupancy. Unfortunately, the boards of directors of many community associations subject to this 40-Year Process are unaware of their obligation to comply with this requirement until they are provided with a notice of non-compliance from their local authority and are faced with the possibility of fines being assessed or confronted with the unexpected expenses related to the process.

Miami-Dade logo.jpgThe 40-Year Process requires the recertification of all buildings in existence for 40 years or longer (except single-family residences, duplexes and certain minor structures). For buildings subject to the 40-year Process, a written report prepared by a professional engineer or architect registered in the State of Florida must be provided to the corresponding building official within 90 days of the initial Notice of Required Inspection. The report should certify that each building or structure is structurally and electrically safe, or has been made structurally and electrically safe for the specified use for continued occupancy. The report must comply with minimum inspection procedural guidelines as issued by the local government's Board of Rules and Appeals. If the inspection reveals that repairs or modifications are found to be necessary, then such repairs or modifications shall be completed within 150 days from the date of the Notice of Required Inspection (in Broward, the timeframe is 180 days from the date of the Building Safety Inspection Report). Once such repairs or modifications are completed, then the building must be re-inspected for compliance and recertification. Following certification, the building will have to undergo the same inspection process every 10 years. broward-county logo.jpg Failure to comply with the required process exposes community associations to fines that may be imposed by the governing authority, and these fines can result in liens recorded against the property. In some instances, buildings determined to be unsafe for occupancy may even be condemned, and the occupants may be forced to move out.

As with most matters, preparation for the 40-Year Process is the key. Implementation of a proper maintenance program of the buildings' structural and electrical components will likely decrease the likelihood of a building having to undergo significant modifications or repairs to achieve compliance. Additionally, community association directors must work closely with management to ensure that they properly budget for the engineering/architectural fees to be incurred during the 40-Year Process and that they have a qualified professional timely engaged to ensure compliance with the strict deadlines related to the process. Further, strict adherence to the deadlines imposed by the governing authority is recommended to avoid the imposition of fines or violations.

Lastly, boards should consult with legal counsel in the event timely compliance should be unlikely or if the association is already in violation of the requirement. In many instances, experienced legal counsel may assist the community association board with obtaining extensions to deadlines related to the process, protection from possible fines which may be imposed due to anticipated non-compliance and the reduction of fines imposed for non-compliance.

While the 40-Year Process may be considered an inconvenience to some, with the proper planning it should be viewed as a mere tool to assist boards with a mechanism to ensure the proper maintenance of the property and the safety of the residents.

Assessment Collections Practices are Leading to Lawsuits

October 25, 2012, Posted by Jonathan M. Mofsky

Thumbnail image for Jonathan Mofsky Gort photo.jpgRecent lawsuits involving community associations have created quite a stir among condominiums and homeowners associations, as owners have alleged in the suits that law firms and associations are improperly seeking to collect unpaid assessments, interest and other charges in violation of Florida law and the governing documents of the associations. The lawsuits seek to recover significant amounts due to demands for what are claimed to be excessive and unlawful charges.

For example, in the case of USA v. Keys Gate Community Association, Inc. which was filed in February, the government sued the association after the U.S. Department of Housing and Urban Development (HUD) obtained title to a foreclosed home in the community. The government's lawsuit alleges that the association sought to collect an improper amount of assessments, interest, late charges, attorney's fees and costs from HUD as the new owner. The suit includes assertions that the claim of lien was invalid because it encumbered the subject property for more money than HUD was legally required to pay, and it further alleges that the claim of lien violated Section 720.3085, Florida Statute, in that it failed to itemize any of the charges claimed to be owed by HUD.

HUD.jpgThe suit claims, among other things, that claim of lien prevented HUD from being able to sell the property, and alleges numerous causes of action for slander of title, tortious interference with business relationship, breach of contract, and declaratory relief.

Similar claims regarding the collection of unpaid assessments and other charges have been alleged against other community associations by foreclosing banks as well as investors who acquire title to properties. Florida is not alone, as other states, including Nevada, are also seeing lawsuits pertaining to collections practices and lien amounts.

The lesson here for community associations is to work closely with management and attorneys in order to ensure that the association is seeking to collect proper amounts from owners, and to comply with statutory safe harbor limitations as well as any limitations set forth in the association's governing documents, if applicable. This will enable associations to avoid lawsuits which could potentially force them to pay significantly more in damages than the amount in dispute.

Aggressive Strategies with Foreclosure Properties Helping Many Associations

October 19, 2012, Posted by Jonathan M. Mofsky

Thumbnail image for Jonathan Mofsky Gort photo.jpgDuring the slow recovery in the housing market, many community associations are taking more aggressive approaches with foreclosures and rentals to recover delinquencies and gain financial strength. These associations are using their lien rights in order to avoid the issues that arise with bank delays in foreclosure cases, as delays have become the norm in the aftermath of the recent robo-signing scandal, foreclosure moratoriums and related mortgage foreclosure crisis. By employing aggressive strategies with foreclosure properties in their communities, associations are recouping much of their past-due assessments, if not all, oftentimes prior to the bank completing its foreclosure. These collections are far in excess of that which many associations would have recovered had they simply waited for the foreclosing lender to complete its case and take title to the property through judicial sale.

The strategies employed by these associations involve working closely with their attorneys and managers to properly evaluate lender foreclosure cases, assess the condition of subject properties and ownership interests, and develop a cost-effective streamlined course of action to maximize the association's recovery. If delays are present due to a slow-moving bank, the associations and managers are working with their counsel to quickly obtain a foreclosure judgment for unpaid association fees. The judgments then go through the public foreclosure auction process, and associations will either recoup the indebtedness from third-party purchasers or, more likely, they will acquire title to the foreclosed property subject to any existing encumbrances.

After title transfers, associations can either list the property for rent or sale, subject to the association's governing documents, but the process is different from a typical lease or sale. For leases, associations, as owners, should work with their counsel to ensure that the lease terms comply with the leasing restrictions and requirements set forth in the community's declaration and by-laws, as leases for association-owned properties are not exempt from tenant screening procedures, minimum lease terms and other provisions contained in the association's governing documents. In addition, appropriate disclosures should be included in the lease agreement regarding the superior mortgagee, unpaid real estate taxes, and other issues which may affect the tenant's interests in the leased property. Such disclosures will protect the association against potential claims by the lessee if the property is subsequently sold through a foreclosure auction or tax sale.

Short Sale sign photoAnother option that is becoming increasingly popular among community associations is negotiating a short-sale with the lender. This requires teamwork among the association, its manager, counsel and other parties involved. It also entails added legal expense associated with contracts and negotiation, but the end result can be well worth the effort. Generally, the first step is for the association to engage a real estate agent to begin listing the property and obtain a buyer. The executed purchase and sale agreement will then be presented to the lender for approval, and the former owner may also need to be involved in the transaction because many lenders are only willing to approve a short sale if the former owner is identified as the seller. If the parties can finalize an agreement, it is a win all around, with the association recovering the past-due assessments under the terms of the short-sale and also benefitting from a new owner in the property who will start paying monthly association fees moving forward.

Whether an association desires to lease or sell the property, the association should always consult its counsel prior to signing a listing agreement or other contract. Oftentimes, addendums will need to be drafted or contracts will need to be revised so they are suitable for the association's use and execution.

The recovery in the housing market is indeed moving slowly, but the community associations that are working closely with their managers and counsel to employ these strategies are making significant strides toward solid financial footing.

Associations Should Turn to Managers for Property Management, Not Legal Work

October 17, 2012, Posted by Laura Manning-Hudson

Thumbnail image for Laura Manning HudsonCommunity associations often turn to their licensed CAM property managers for matters that they truly should be referring to their attorneys. The Florida Bar has recently revisited the issue of the unlicensed practice of law by property managers, and it expects to submit a proposed final advisory opinion to the Florida Supreme Court in the coming months.

In 1996, the Supreme Court of Florida reviewed an advisory opinion issued by The Florida Bar on cases involving the activities of community association managers that constituted the unlicensed practice of law. The court's review of the advisory opinion held that property managers can take on ministerial actions that do not require legal expertise and interpretation, including the completion of forms for the state's office of corporations and annual reports; preparation of first and second notices for elections and ballots; written notices of annual meetings; board meeting and annual meeting agendas, and affidavits of mailings.

However, the advisory opinion adopted by the court also found that managers would be engaging in unauthorized legal practice if they should prepare claims of lien and satisfactions of claims of lien documents, as these documents require legal descriptions of the property and establish the lien rights of community associations. The opinion also held that the drafting of a Notice of Commencement form also constitutes the practice of law, as does determining the timing, method and form of giving notices of meetings, and determining the votes necessary to take certain actions - because such determinations necessitate an interpretation of Florida law and the association's governing documents. In addition, responding to the association's questions regarding the application of the law to specific matters being considered and advising the association that a specific course of action may or may not be authorized under the law also constitute the practice of law by a CAM.

Fl bar logo.JPGIn the latest meeting of The Florida Bar's advisory committee, many of the committee's prior opinions remained consistent, however there were four matters that the committee determined required clarification. Specifically, the committee determined that the term "modification" needs to be defined in terms of what "modifications" a property manager may make to a limited proxy form and whether those modifications are material or ministerial. The committee also requested an opinion as to whether a property manager may prepare documents concerning the rights of the association to approve prospective owners, draft the pre-arbitration demand letters required by Section 718.1255, Fla. Stat., and identify, through review of title instruments, the owners who are required to receive pre-lien letters.

While stricter definitions make the determination of what is the unlicensed practice of law easier to resolve since the line is brighter, associations may argue that they will have to incur more expenses in legal fees because the manager can no longer perform the given task. However, there are a plethora of legal decisions that evidence the complications surrounding the issues created by managers who take on legal responsibilities. In many of these cases, the association whose manager has performed the "legal" task and drafted a demand letter or a claim of lien, the ensuing litigation results in the invalidation of claims of lien and dismissal of arbitrations for non-compliance with the statute -- all of which ultimately result in the association incurring more in legal fees to correct the mistake than it would have spent had it originally used the attorney.

Association boards should bear in mind that the preparation of claims of lien, Notices of Commencement and other legal documents do not typically incur significant attorney fees, but the ramifications of problems with these documents and forms can prove to be very costly. It is simply not worth the risk for associations or their managers to prepare these documents in order to avoid the relatively nominal legal fees, and thereby also risk exposing the managers to potential fines and license issues.