Preventing a Condominium Renovation Nightmare

July 9, 2012, Posted by Laura Manning-Hudson


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

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

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

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

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

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


Effective Collection Tactics for Associations Against Owners Who File for Bankruptcy


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

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

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

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

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

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

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

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

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

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

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

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

Our attorneys who focus on bankruptcy matters and community association law work closely with associations that are contending with unit owners who file for bankruptcy. We write about important issues such as these for condominium associations and HOAs in this blog, and we encourage association members and directors as well as property managers to enter their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.


Timely Insurance Info for Unit Owners at Start of Hurricane Season

June 19, 2012, Posted by Roberto C. Blanch


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

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

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

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


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

June 18, 2012, Posted by Laura Manning-Hudson


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

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

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

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

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

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


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


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

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

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

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

Do you see the difference?

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

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

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

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

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

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

Mitigate. Stop. Recover. Rebuild.

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

Don't rebuild just yet.

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

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


Re-Elect Judge David C. Miller

June 9, 2012, Posted by Stuart H. Sobel


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


Judge Miller.jpg

Judge David C. Miller


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


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

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

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

Deductibles

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

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

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

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

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

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

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

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

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

For an Independent Adjuster, Florida law states:

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

For a Company Adjuster, the Florida law states:

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

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

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

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

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

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


Legal Risks Associated with Biometric Resident Access Systems

May 17, 2012, Posted by Laura Manning-Hudson


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

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

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

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

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


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

May 9, 2012, Posted by Laura Manning-Hudson


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

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

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

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

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

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

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


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

May 2, 2012, Posted by Roberto C. Blanch


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

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

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

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

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

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


Responding to Requests for Permission for Service Animals from Residents

April 13, 2012, Posted by Laura Manning-Hudson


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

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

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

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

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

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


A Review of the Election Process at Annual Meetings

March 27, 2012, Posted by Laura Manning-Hudson


Thumbnail image for Laura Manning HudsonSpring is typically the time of year when condominium associations hold their annual meetings and elections. While many areas of the Condominium Act defer to association's governing documents, the laws governing the board member election process are black and white and must be strictly adhered to. It is imperative that an association follow the election process exactly as it is detailed in the statute in order to avoid the possibility that the entire election be invalidated after a challenge.

Of course, the process begins with the proper notices. The first notice of the annual meeting and election must be distributed to the owners no later than 60 days prior to the date of the annual meeting and election, and the second notice must be sent out no later than 14 days prior to. Failure to adhere to these deadlines could render the election invalid. The notices must include the annual meeting date, time and location. The first notice must also provide the deadlines for owners to submit their notices of intent run for the board. An owner desiring to be a candidate for the board must submit their notice of intent 40 days prior to the election, failing which, their name cannot be included on the ballot. For those owners who submit notices of intent to be a candidate, the statute provides that they may submit a resume at least 35 days before the scheduled election.

For the election itself, the process detailed in the statute is exceedingly clear. In order to maintain the owners' right to privacy, the owners should place their actual ballots sealed inside of an inner envelope that is marked "Ballot Only." That inner envelope should then be placed into an outer envelope that has the owner's name, unit number and signature.

meeting vote.jpgIn order to have the election (i.e., open and count the ballots), at least 20 percent of the membership has to cast a ballot. After counting the envelopes cast and verifying that the 20 percent threshold has been met, volunteer members who are not related to anyone running for the board should be appointed to open the envelopes and count the votes. These volunteers should first open the outer envelopes and separate inner "Ballot" envelopes. Then the inner envelopes should be opened and separated from the ballots before counting the votes. It is actually not a problem if there is no inner envelope, as owners are allowed to waive their right to privacy for their vote. However, the outer envelope with the name, unit number and signature is absolutely imperative or the ballot cannot be accepted.

It is generally recommended by most experienced community association legal counsel to have the association's attorney attend the annual meeting to verify that every facet of the election process is followed to the letter. For condominium associations that may not have their attorney attend any other board meeting through the course of the typical year, they would be well advised to have their attorney attend and certify the annual meeting and election. Also, keep in mind that new board members are now required by the State of Florida to attend an approved board member certification course or submit written verification to the association secretary within 90 days of being elected or appointed. Our firm regularly conducts complimentary Board Member Certification seminars and webinars, and we encourage new board members to contact us or visit our firm website for more information or to RSVP.


Are Your Community's Records Accessible to Owners?

February 24, 2012, Posted by Roberto C. Blanch


Thumbnail image for Roberto Blanch.JPGCommunity associations often fail to comply with the requirement under Florida law to provide owners with timely access to official records or responses to inquiries, and these violations can expose the associations to costly penalties and legal expenses. The applicable laws provide that association official records shall be made available to owners within days of the submission of a written request (5-10 days depending on the type of community). Failure to provide access to the records within the time specified by the applicable laws may create a rebuttable presumption of a willful failure to comply with the law, which can subject an association to damages.

Florida statutes include the following among the list of records that associations are required to maintain: a copy of the plans, permits, warranties, and other items provided by the developer; photocopies of the declaration, by-laws, articles of incorporation and rules and regulations; a current roster of all owners; insurance policies; and financial records. Condominium associations must maintain these official records within the state for at least 7 years and make them available for inspection to a unit owner within 45 miles of the condominium property or within the county in which the condominium property is located.

locked info.jpgThere are also several types of association records which are not accessible to owners, such as: records protected by the lawyer-client or work-product privilege; information obtained by an association in connection with the approval of the lease, sale, or other transfer of a unit; personnel records of association or management company employees; medical records of unit owners; and certain personal information of the owner, when consent for disclosure is not provided by the owner (e.g., social security numbers, driver's license numbers, credit card numbers, e-mail addresses, telephone numbers, and other contact information). Boards should ensure that protected records are not disclosed during records inspections.

With regard to responses to written inquiries, Florida law requires condominium and cooperative boards to respond within 30 days of receipt with either a substantive response or a reply indicating that a legal opinion or advice from the Division of Condominiums has been requested. If the board requests advice from the division, the board shall, within 10 days of its receipt of the advice, provide in writing a substantive response to the inquirer. If a legal opinion is requested, the board shall, within 60 days after the receipt of the inquiry, provide in writing a substantive response to the inquiry. Costly consequences may result from a failure to provide a timely substantive response to the inquiry.

Associations may adopt reasonable rules regarding the frequency, time, location, notice and manner of record inspection and copying. Boards may also adopt reasonable rules regarding the frequency and manner of responding to inquiries, and association governing documents may also contain additional restrictions governing the possible rules to be imposed.

Community associations should consult with experienced legal counsel to avoid the pitfalls of untimely responses to records requests or improper responses to owner inquiries.


Helpful Guidelines for Leasing Units Acquired by Community Associations

February 21, 2012, Posted by L. Chere Trigg


Thumbnail image for Chere Trigg.jpgFive years ago, it was rare to see community associations take title to properties using their lien and collection rights. In years past, it was also rare to see community associations leasing newly acquired units in order to recoup past-due fees and assessments from delinquent owners. In light of the increase in association foreclosure actions however, it has now become commonplace to see associations become unit owners, as bank foreclosures are constantly delayed and properties that could yield significant rental income are sitting idle in foreclosure limbo. Community associations that foreclose their claims of liens and take ownership of residences in their communities should be mindful of these helpful guidelines when considering whether to offer these residences for lease.

Prior to entering into lease agreements with tenants, it is important for community associations to review the provisions of their governing documents in order to determine whether there are any restrictions governing rentals. Once a community association acquires title to a unit or home, the association assumes the responsibilities and obligations in the governing documents that apply to property owners. Therefore, associations that become property owners are not exempt from complying with the leasing rules and restrictions set forth in the governing documents. Community associations should be careful to follow the leasing restrictions promulgated for property owners in order to avoid challenges from owners alleging selective enforcement. If, for example, the community association has a tenant approval process that includes a background check, application, screening fee and common-area security deposit, the community association should follow and document each and every step in the screening process prior to approving and entering into a lease agreement with a prospective tenant.

Community associations should also work with experienced legal counsel who is able to draft a lease agreement that incorporates sufficient protections for the association in the lease transaction. Residential lease agreement.jpg For instance, if an association intends to lease property that is subject to a pending lender foreclosure or a superior mortgage lien, the lease agreement for the property should disclose the superior lien interest. The lease agreement should also include releases of liability in order to protect the community association from legal action by the tenant in the event the lender foreclosures its superior lien and the tenant is required to vacate the residence. Although the "Federal Protecting Tenants at Foreclosure Act" provides that foreclosing lenders must give tenants at least 90 days prior notice if the lender intends to terminate the tenancy once it takes possession of the property, an association could be exposed to liability if the potential foreclosure is not disclosed to the tenant and proper safeguards are not in place in the lease agreement to protect the association's interests.

The lease agreement should also include provisions addressing tax certificates that may be issued for outstanding property taxes. Since governmental tax liens are superior to community association liens, these tax liens are not extinguished by association foreclosure actions. Although a community association is not liable for delinquent taxes that accrue prior to the association acquiring title to the property, the unpaid property taxes could lead to tax certificates being issued and sold through tax sales or auctions. If the tax certificate is not redeemed within two (2) years after it is issued (i.e., satisfactions of all delinquent taxes, including interest and costs), the purchaser of the tax certificate can apply for a tax deed to the property. Once a tax deed is issued, the grantee of the tax deed is entitled to the immediate possession of the property, and the tenant will most likely be required to vacate the residence. Therefore, it is essential that the terms of the lease agreement also incorporate adequate disclosures to the tenant and provisions to protect the community association in the event of a tax sale.

It is also important for community associations to maintain adequate property and casualty insurance for the residences that the association intends to lease. Community association boards should consult the association's insurance agent in order to ensure that the association has a landlord insurance policy or some other level of insurance coverage to protect it against damages to the improvements within the residence, personal injuries that may occur within the residence, and damages and claims arising due to the acts or omissions of the tenant. Community associations leasing properties should also require that their tenants maintain renter's insurance policies, and that the association is named as an additional insured and certificate holder on the tenant's policy. Furthermore, evidence of the tenant's insurance should be kept as part of the community association's records.

Community associations should be very aggressive in their approach to using their lien and foreclosure remedies to take title to properties and rent them in order to recover past-due fees and assessments. By using these guidelines and working with experienced counsel to develop and negotiate the lease agreements, associations can effectively lease these residences in order to help to recover from the foreclosure crisis.


The Laws Governing Condominium Association Meetings and Meeting Notifications

February 16, 2012, Posted by Ivette Machado


Ivette Machado Gort photo.jpgOne area of the law which our community association lawyers get asked about on a regular basis is the notice requirements for the various types of condominium association board meetings. Condo associations must strictly follow the statutory requirements for noticing board meetings in order to avoid potential legal complications. This article will serve as a refresher for condominium association board members and unit owners on compliance with the basic laws governing notification of association board meetings.

There are two levels of notification which are required by law for different types of condominium association board meetings. For all general board meetings that must be open to the unit owners, the minimum standard requirement is that the notice with the corresponding meeting agenda ("Notice") be posted at least 48 hours immediately prior to the meeting. The association must post and maintain the Notice in a conspicuous place on the condominium property, and the Notice must specifically identify the agenda items that are slated for discussion.

However, some board meetings must be noticed 14-days in advance. The notice for such meetings must be posted on the condominium property as well as delivered to each owner. CA meeting notice.jpg While Section 718.112, Florida Statutes, does not require the Notice to be mailed, we highly recommend it given that the post office may provide proof of the mailing, which may become necessary if the distribution of the notice is called into question. Further, many owners do not reside in the building and have provided another address for all association correspondence, making personal delivery impossible in some instances. This 14-day Notice is required for board meetings involving discussion and voting of proposed annual budgets of an association or revisions to such budgets, non-emergency special assessments, establishment of the deductible for property/casualty insurance, or changes to the association's rules regarding unit use.

Exceptions to the above-described meeting notice requirements may apply for emergency board meetings. However, these meetings are generally limited to emergencies that may result in harm to persons or property.

Closed meetings of the board which are not open to unit owners are limited by law only to meetings with the association's attorney with respect to proposed or pending litigation, when the meeting is held for the purpose of seeking or rendering legal advice, or meetings of the board alone to discuss personnel matters. While the law allowing for such closed meetings does not speak to a notice requirement, as a conservative measure, we recommend that the Notice be posted in a conspicuous place on the condominium property at least 48 hours prior to the meeting. The notice for such meetings should clearly indicate that it is a closed and private meeting of the board.

Should the board fail to notice meetings in accordance with the requirements of The Condominium Act, the board may be required to re-convene any meetings which are found to be non-compliant with the statutory requirements, and any votes and decisions made during such meetings may have to be repeated. Boards found to be repeat offenders may be fined by the state's Division of Condominiums. Additionally, decisions that are made during the improperly noticed meetings can be called into question, and owners who have been adversely affected by board actions can mount challenges. Such unit owner challenges may result in litigation, which is time consuming and costly to associations. There is also the potential that prospective owners will look into the complaints filed with the Division of Condominiums against the association, possibly raising a red flag in the minds of potential buyers as to the desirability of owning a unit in the condominium.

Associations and their boards should bear in mind that the majority of their board meetings will only require the 48-hour posted Notice, so compliance with that aspect of the meeting procedures should be fairly simple and straightforward. However, there will be instances in which Notice of a meeting must be posted conspicuously on the condominium property and mailed to each unit owner at least 14 days prior to the meeting, or in which the association's governing documents require a different procedure regarding the issuance of a board meeting notice. If uncertain as to which notice requirements are applicable, it is advisable to contact the association's legal counsel for guidance.

Our community association lawyers write about important legal matters for condominium associations and HOAs in this blog, and we encourage association directors and members as well as property managers to enter their e-mail address in the subscription box at the top of our blog in order to automatically receive all of our future articles.