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.

New ADA Regulations for Public Pools Do Not Apply to Private Pools at Most Condos, HOA Communities

October 16, 2012, Posted by Caridad Rusconi

Thumbnail image for Caridad Rusconi.jpgIn addition to several of our other community association attorneys, I have recently counseled some of our clients about the applicability of the new pool accessibility requirements under the Americans with Disabilities Act (ADA). The new ADA pool accessibility requirements apply to state and local government services as well as places of public accommodations (e.g., hotels, fitness centers, etc.), and they call for the provision of accessible means of entry and exit from pools. The Department of Justice recently extended the compliance deadline for existing pools to January 31, 2013.

The new ADA pool accessibility requirements do not apply to most community associations, as the pools and amenities at typical condominiums and HOA communities are strictly for the use of the residents and their guests and are not open to the public.

pool lift.jpgHowever, those community associations that operate as a resort/hotel condo and are therefore open to the public will definitely be required to meet the new ADA pool accessibility requirements. In addition, community associations that allow the use or rental of their pool(s) for events and activities that are open to the public (e.g., swimming competitions, water aerobics, etc.) will also very likely be required to comply. For these communities, it is imperative that they consult with their attorney to determine if they must comply with the new ADA pool accessibility requirements.

Finally, if your community association is considering or already allowing the use of its pool for events or activities that are open to the public, I would recommend consulting with the association's attorney to determine whether it should constitute any concerns over the applicability of ADA regulations.

Our attorneys write about the legal and regulatory issues impacting Florida community associations in this blog, and we encourage association members, directors and property managers to enter their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

TV News Report on Association Lien Foreclosures Sold at Foreclosure Auctions Mischaracterizes These Investments as Deceptive, Valueless

Thumbnail image for Roberto Blanch.JPG Thumbnail image for Nicholas Siegfried Gort photo.jpgBy Roberto C. Blanch and Nicholas D. Siegfried

The recent report by Patrick Fraser of the South Florida Fox affiliate WSVN Channel 7 took many of the community association attorneys at our firm by surprise. The report featured what appeared to be novice and uninformed real estate investors who claimed to have been duped into buying community association lien foreclosure sales from a Miami-Dade online foreclosure auction. They are now working with a foreclosure listing company to get their money back, and the president of the company is quoted in the story claiming that he considers these investments to have no real value, and all of those who are buying them are completely uninformed as to what they are actually acquiring and will end up losing their money. Click here to watch or read the report on the station's website.

Association lien foreclosures are nothing new, as they have served for decades as legal recourse for associations to foreclose on unit owners who do not pay their assessments.

Prior to the recent crash in the housing market, association lien foreclosures were attractive to investors, as they allowed investors to purchase property and take advantage of the equity that was likely to exist in the property. These days, many association lien foreclosures are sold subject to a first-mortgage lien that encumbers the property often times in excess of its fair market value. Normally, a bank holding a first mortgage could proceed with its foreclosure action in a timely manner, and the association would likely receive a minimum amount from the bank for the payment of the past-due assessments in the event that the bank acquires title to the property. In those cases there would be little need or incentive for the association to pursue its foreclosure remedy.

However, due to the abundance of foreclosure cases that have been filed along with the robo-signing debacle that ensued, bank foreclosure cases began to take years instead of months to complete. As a result of the delays in bank foreclosures, community associations have been forced to pursue foreclosure of their own liens given that they could no longer simply wait for banks to finalize their foreclosure cases.

Associations, with assistance from their counsel, reassessed their legal strategy and began utilizing their lien rights to foreclose on units, obtain ownership, and either lease the residences or negotiate short sales with the banks in order to recoup the past-due assessments along with the late fees, interest, and attorneys' fees and costs. With respect to investors, in some circumstances, these association foreclosures have represented extremely valuable investments to those who conduct proper research before bidding. Some investors have been able to acquire title to condominium units for less than $5,000, and they have then been able to reside in or rent out these residences for months - and sometimes years - before the bank forecloses its first mortgage. Others have placed themselves in a position to negotiate with the lender and possibly obtain free and clear title to the unit. There are even rare cases in which banks complete their foreclosure, obtain ownership of the property and then fail to pay the assessments to the association. The associations are then able to exercise their lien rights, foreclose on the bank and acquire the property via the association lien foreclosure auction, as it is then free and clear of all other liens except possibly a tax lien, which is typically a nominal amount in comparison to the value of the property.

fa1.jpgNo matter what type of foreclosure is involved (e.g., bank, association, etc.), investing in foreclosed real estate is a huge industry with thousands of experienced professionals who understand that diligent and proper research is a required cost of doing business. It is no coincidence that all of the public foreclosure auction websites have multiple layers of disclosures and disclaimers stressing the importance of doing research and noting that superior liens may exist on the listed properties. Despite these warnings and the old adage that "If it looks too good to be true, it probably is," uninformed and novice investors do, in limited circumstances, purchase property at these sales which may be encumbered by superior liens placing the winning bidder's investment at risk.

The "foreclosure list" business owner in the Channel 7 report asserts that the associations and their attorneys are using these foreclosure sales in an attempt to swindle novice real estate investors into buying a potentially worthless foreclosure judgment. This notion is absurd.

The bottom line is that the associations are not making any representations about these foreclosures or using them in an attempt to deceive novice investors into bidding on them in the foreclosure auctions without prior knowledge of a superior bank lien. The associations are simply using the legal recourse at their disposal to collect what they are owed, and it is incumbent upon the buyers in these auctions to heed all of the warnings and do their homework before bidding.

Just as the associations use informed strategies to optimize their efforts to collect upon unpaid assessments, individuals seeking to acquire real estate at public auction should take careful steps to research their target investments. They should also utilize legal representation as necessary to help ensure that their investment is not lost to unknown superior liens or encumbrances that might be attached to an otherwise attractive property.

Community Associations' Rights to Interview and Screen New Tenants, Buyers

October 5, 2012, Posted by Roberto C. Blanch

Thumbnail image for Roberto Blanch.JPGThere seems to be a common misunderstanding by the directors of many community associations in Florida as to their rights to approve and screen individuals seeking to purchase or rent homes within their communities. An overwhelming number of board members seem to think that their associations have unfettered rights to interview, screen and either accept or reject prospective owners or tenants who are interested in purchasing or renting units within their community. Often times, these directors are disappointed to learn that Florida law and their association's governing documents are not as restrictive as they would like.

Unreasonable restraints on the alienation of property are disfavored by Florida courts. In other words, previous legal cases addressing the restrictions on a person's ability to sell or transfer real property have upheld the restrictions only to the extent that they are considered reasonable. Therefore, to ascertain what approval rights the association may have regarding a prospective tenant or purchaser, the association should begin by reviewing its own governing documents. If the community's declaration of covenants or declaration of condominium does not contain a provision authorizing the association to reject potential purchasers or tenants, the board should refrain from disapproving any tenant or purchaser except in the event of exigent circumstances (the applicability of which should first be analyzed and determined by association counsel).

However, an association's board is not necessarily free to approve or disapprove prospective purchasers and tenants merely because the authority to do so appears in the association's governing documents. As I indicated, the requirement to obtain an association's approval prior to selling or leasing a home or unit is deemed to be a restraint on the alienation of such real property, and as such, that restraint may only be imposed to the extent that it is reasonable. An arbitrary disapproval of a tenant or purchaser is likely to be unenforceable. fairHousingLogo.jpg One measure that the courts have determined to be reasonable when disapproving a potential sale of a home or unit is the "right of first refusal," which would require an association or its designated representative to step in and consummate the sale or lease of the potential purchaser or tenant who is disapproved. This protective measure is deemed to enable the association to exercise some level of control as to the individuals that may reside in a community without unreasonably limiting the owner's right to sell or lease the property.

Other grounds that might be argued to be reasonable in connection with the disapproval of an applicant seeking to reside in a community may include the following: (1) the applicant has been convicted by a court of a felony involving violence to persons or property, or a felony demonstrating dishonesty or moral turpitude, and has not had their civil rights restored; (2) the application for approval, on its face, or the conduct of the applicant, indicates an intent to act in a manner inconsistent with the association's governing documents; (3) the applicant has a history of disruptive behavior or disregard for the rights and property of others as evidenced by his conduct in other residences, social organizations or associations; and (4) the applicant has failed to provide the information required to process the application in a timely manner, or has materially misrepresented any fact or information provided in the application or screening process. In no event, however, may an association disapprove a proposed purchaser or lessee on the basis of race, gender, religion, national origin, or physical or mental handicap.

This article provides a basic overview of the limitations affecting associations with regard to the ability to approve or disapprove individuals seeking to purchase or lease within the community. Given the sensitive nature of those rights - and the potential for liability should the association overstep its rights - we caution that every association consult with its legal counsel to obtain a clear understanding as to its right to approve or disapprove potential purchasers and tenants.

Lessons Learned from Tragic HOA Shooting in Kentucky

September 21, 2012, Posted by Roberto C. Blanch

Thumbnail image for Roberto Blanch.JPGThe recent case in Louisville, Ky., of a shooting at an HOA meeting that left a 73 year-old former president of the association dead on the scene of a gunshot wound to the head was a horrific tragedy. The alleged shooter, who is pictured below, was a member of the HOA who had a history of disputes with the association over a fence that the association said did not meet its height or design requirements, and he is now being held on a $1 million bond (click here for the full article in USA Today).

This case illustrates some of the real and disconcerting dangers that may arise in an HOA or condo association community in the event of escalated disputes between owners and the board. Boards and owners become embroiled in disputes on a regular basis, and the boards must remain cognizant of the possibility of dangerous individuals taking violent actions against their members or others in the community.

HOA shooting.jpgFor some association boards, these types of disputes are going to be inevitable due to the actions of individual owners. As such, associations should take care to act as reasonably and professionally as possible in the process of enforcing all of their restrictions and rules, even with the most recalcitrant owners. Boards should be cautious and vigilant with all of their enforcement actions, and they should not take lightly any potentially dangerous threats to their safety and security as well as that of the other members of the community.

If a unit owner makes any kind of threat of physical harm against a board member or fellow owner in response to an enforcement action, the matter must be taken with the utmost seriousness and should be immediately referred to the local police department. Efforts should also be coordinated with association counsel to ensure that the association is proceeding with appropriate action to avoid casualties and damage that may be caused by the threatening individual.

Determining whether a threat is vague or veiled is ultimately left up to the judgment of the board members and/or owners who are involved, but boards should always err on the side of caution with these disputes. As the recent shooting in Kentucky reminds us, they can and sometimes do escalate to become serious matters of life and death.

Is Your Association Utilizing All of The Tools Available To It?

September 4, 2012, Posted by Laura Manning-Hudson

Thumbnail image for Laura Manning HudsonMany times I receive calls from condominium and homeowners association board members and managers who are at their wits end with certain residents in their community who cannot seem to follow the rules. These are the residents who paint their homes without seeking and receiving approval, move tenants into their units under the cover of darkness, and have a Labrador Retriever in a no-pet building. They play their TVs and stereos too loud and too late at night. There's one in every community.

Surprisingly, I have found that many associations are completely unaware of some of the tools that the legislature has given them to assist in the enforcement of their rules. Both the Condominium Act and the Homeowners Association Act contain similar tools for enforcing restrictions against non-conforming residents. However, associations must be careful when utilizing these tools, as failing to "dot your I's" and "cross your T's" may result in having all of your hard work go down the tubes.

Specifically, section 718.303, Florida Statutes, and Section 720.305, Florida Statutes, provide that associations may impose fines, suspend use rights, and suspend the voting rights of residents who fail to comply with any provision of the association's governing documents or who become more than 90 days delinquent in paying any of their monetary obligations to the association.

Fines may be levied on the basis of each day of a continuing violation (for example, a resident leaves their bicycle out on the balcony -- in violation of a no bicycle rule -- for days on end). The fine may not exceed $100 per violation, or $1000 in the aggregate. What this means is that the association may fine the resident that leaves their bicycle out on the balcony up to $100 per day for every day that the bicycle is on the balcony - up to 10 days. The maximum amount of the fines for the bicycle on the balcony is $1000.

Imposing the fine or suspension, however, is the tricky part for associations, as they must provide the resident with at least 14 days' written notice of a hearing to be held in front of a violation or fining committee. The members of the committee may not be board members or persons residing in a board member's household. After providing 14 days' notice, the committee conducts the hearing (somewhat like a mini trial) and then considers and decides whether a fine or suspension should be imposed and, if so, what should they constitute. IMPORTANT: if the committee does not agree with the imposition of a penalty, then the penalty may not be imposed!

pool 2.JPGAnother tool that associations may use is suspending a residents' right to use the common areas or to vote due to their failure to comply with their monetary obligations to the association. An association may suspend a members' voting rights or rights to use the common areas if the member is more than 90 days delinquent in any monetary obligation due to the association. Therefore, for the resident who has been fined for having his bicycle out on the balcony for days on end but continues to enjoy the use of the pool and fitness center, the association may suspend their right to use those common area amenities until the fines are paid.

Obviously, for some communities with particularly troublesome residents, these tools are just the first steps to be taken in order to gain compliance with the association's governing documents. Failure by a resident to comply after fines and suspensions are imposed may result in the need to take further legal action, but many times the imposition of a suspension or a fine will do the job.

For those communities that have to take non-conforming residents to the next level, following the steps detailed above is crucial to winning their case against the unit owner, as the failure by the association to follow these procedures may result in losing a case or having a court find that the fine or suspension was not imposed according to the statute and is therefore unenforceable.

Of course, many of the tools that the legislature has provided are ones that associations may utilize on their own without the necessity of retaining counsel - which keeps costs and expenses down. However, it is recommended that you consult with your association's attorney when getting started in order to ensure that your process comports with all of the statutory requirements.

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

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. (

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.