Roberto Blanch Elected to the Board of Directors of CAI's SE FL Chapter

RobertoBlanch_8016.jpgThe firm congratulates shareholder Roberto Blanch on being elected to the Board of Directors for the Community Associations Institute's Southeast Florida Chapter. This is Mr. Blanch's first time as an elected director for CAI's SE FL Chapter and his term shall commence in 2014.

Throughout the years, Blanch has been an active member of CAI's SE FL chapter and has served as co-chair of the chapter's Miami-Dade committee. He has helped plan numerous events such as the Chapter's educational breakfast series in Miami-Dade County and its Ask the Experts Panel Discussion.

We are very proud to have Roberto Blanch as a member of our firm and recognize his accomplishment.


Homeowner Alterations

December 9, 2013, Posted by Roberto C. Blanch

Some individuals argue that maintaining the uniform appearance of the homes or units in many condominium or homeowner associations is a valuable aspect of owning a home governed by community associations. However, often times, the owners of homes or units governed by community associations seek to deviate from such uniformity and endeavor to implement alterations to the appearance of their homes or units. The willingness of boards of directors to agree to some of the proposed alterations varies widely from one community to another - and in some instances, associations may not even have the right to oppose proposed alterations. When presented with a situation in which an owner is interested in making an alteration to his home or unit, community association directors should consider certain factors prior to making their determination.

First, it must be determined whether the Association has the right to approve or disapprove the proposed alteration. For instance, in the event that the proposed alteration is deemed to affect or alter common elements or common areas, then the association may not have an option but to deny the proposed alteration given that some statutes and the provisions of some community association governing documents restrict the ability of owners or associations to effectuate changes to the common areas or elements. Furthermore, in some instances, alterations to the common areas or elements may only be allowed in the event a certain vote of the owners or directors is obtained. For example, Florida Statutes provide that material alterations to condominium common elements may not be effectuated unless approved by the vote of 75% of the association's voting interests, unless otherwise provided in the association's governing documents. While home owner associations do not have a corresponding material alteration statutory restriction, the governing documents of such associations may provide a requirement for an ownership vote to approve alterations to the common areas - as is the case with many condominium associations.
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Another issue that should be considered by community associations in connection with owner requests to proceed with alterations is how the alteration may impact the association's obligations to maintain, repair, replace or insure the areas affected by the alteration. For instance, the owner of a condominium unit may want to enclose a patio by installing a new roof over the affected area and extending the enclosed area of the unit. Such alterations result in the creation of new areas that will have to be maintained, repaired, replaced and insured. Furthermore, even if the association is deemed not to be required to maintain, repair or insure such improvements, the creation of such improvements may affect existing improvements for which the association is responsible. In light of the foregoing, for those circumstances in which the association is inclined to allow owners to alter, the association directors should consider establishing a contractual relationship between the owner and the association to clearly define how the maintenance, repair, replacement and insurance responsibilities related to such improvements are to be divided. The proposed agreement may further serve to clarify other conditions related to the alteration and the association's approval thereof. For instance, the proposed agreement should establish requirements for the owner to engage licensed and insured contractors, for the work to be performed in accordance with professionally drafted plans and for required permits to be issued for the performance of the work. Additionally, provisions could be included in such agreement for the protection of the association during and after performance of the work, such as insurance and indemnification protection to be provided by or on behalf of the contractor to perform the work.

The foregoing underscores the importance of exercising caution when presented with owner requests to alter home, units or common elements in properties governed by community associations. In light of the broad impact and long term effect that owner alterations might produce, it is advisable for community association directors and managers to consult with qualified and experienced legal counsel to ensure that the association is adequately protected.


Do I Really Have To Turn Over A Copy Of The Key To My Castle?

November 12, 2013, Posted by Laura Manning-Hudson

For anyone who lives in a condominium you know that there are certain trade offs that are made as compared to living in a single family home. For instance, you don't have to mow your own grass, you don't have to paint your own home, and you don't have to maintain your own landscaping. But you do have to allow your condominium association into your unit and sometimes you even have to give them a copy of the key. Yes, the State of Florida requires that all condominium associations have the irrevocable right to access all condominium units. Recall that an association has a duty to protect the common elements of the condominium and preclude damage to owner's units caused by the common elements. As such, the legislature has recognized this duty and codified the duty in Section 718.111(5), Florida Statutes. While an association's right of access to the units is broad and not restricted to instances in which an emergency is presented, it comes into play whenever the association's related functions of maintenance, repair, or replacement of property are implicated, and, although the statute does not require that each owner turn over a copy of the key to their unit, many condominium documents, rules and even simple board policies require owners to provide management with a copy of the key to their unit. Thumbnail image for Laura Manning Hudson

There have been numerous challenges to an association's right to require that a copy of an owner's key be turned over - all of which have been upheld even amid allegations from owners that they fear theft of their valuables or simply don't trust their board members. Both the Division of Condominiums and Florida courts have found that an association's right of access - which is provided for the protection of all unit owners - outweighs any concerns by owners that their valuables could be taken especially where precious minutes could be lost if the association had to find an owner or neighbor or resort to a locksmith for breaking down the door.

While access is allowed, it is not unlimited. Such access must be during reasonable hours, when necessary, for the maintenance, repair, or replacement of the common elements or any portion of a unit to be maintained by the association. In order to avoid the potential for unnecessarily upsetting residents, whenever it is practical or possible, condo association boards should provide notice to their residents of an upcoming inspection in order to allow the resident the opportunity to be present for the inspection. It is also good business practice to have more than one person enter the unit with the contractor. Failure to allow the association access to the unit, or even to turn over a copy of the key to the unit (if required by the association's governing documents) could result in the association taking legal action against the resident.

Finally, for those associations that do maintain copies of keys to units, instituting safeguards to protect the keys by limiting the number of personnel who have access to the keys and/or who know where the keys are located, goes a long way in ensuring and gaining the trust of the residents.


HOAs: To Reserve or Not to Reserve?

October 8, 2013, Posted by Roberto C. Blanch

Many homeowner associations' boards of directors find themselves working on their association budgets for the upcoming fiscal year. A good deal of those budgets will include line items for the funding of unforeseen contingencies. In some instances, the directors preparing such budgets will classify the funds in those line items as "Reserve" funds without knowing that laws governing Florida homeowner associations provide for special treatment of such funds. Since the use of designated reserve funds are restricted by Florida law, community association directors should exercise caution before categorizing a budgetary contingency line item as a reserve account. Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Roberto Blanch.JPG

Specifically, Florida law provides HOA boards with the discretion to fund their association's budget with reserve accounts for capital expenditures and deferred maintenance for which the association may be responsible, except to the extent that the association's developer established the reserves or the associations' membership elected to provide for budgetary reserves. Therefore, while it is advisable for associations to have some funds on hand for anticipated capital expenditures and deferred maintenance, in the event that HOA reserves were not established by the association's developer or the associations' membership, then boards might wish to consider categorizing such funds as something other than "reserves" (e.g. "Contingency Funds"). Of course, directors in those communities without "reserve" accounts should be mindful of limits that might be imposed upon increases resulting in the level of assessments charged to owners as a result of the increases to budgetary funding for capital expenditures and deferred maintenance. Additionally, directors HOAs without established reserves will have to be sure to comply with statutorily required disclaimers to the association's membership if the association is responsible for the repair and maintenance of capital improvements that may result in special assessments if reserves are not provided. The terms of such disclaimer will differ in the event that formal reserves have not been established but the association is providing for the funding of capital expenditures and deferred maintenance.
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For those HOAs with reserves established by the association's developer or membership, directors should pay special attention to the statutory conditions for the funding of such accounts and the limitations imposed by law as to the use of the funds accrued in reserve accounts. For instance, the applicable statutes provide a formula that must be followed as to the annual funding of the reserve account. Additionally, once reserves are formally established, the applicable statutes permit for the funding of reserves to be reduced or waived upon obtaining a favorable vote from a majority of the association's membership voting at a meeting at which a quorum is present. Lastly, the funds that have accumulated in reserve accounts shall remain in such accounts and shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a meeting at which a quorum is present.

Once again, the foregoing serves to illustrate the importance of having HOA directors work closely with a team of experienced and qualified community association managers, accountants and attorneys in order to steer clear of the pitfalls that may arise in the complex world of community association administration.


Do You Really Need to Install A Fire Sprinkler System In Your Condominium Building?

September 12, 2013, Posted by Roberto C. Blanch

Many condominium buildings throughout Florida will be required by local municipal ordinance or other requirements to retrofit their buildings with code-compliant fire sprinkler systems. The estimates provided to a good deal of those associations indicate that the costs associated with such retrofitting may exceed the million dollar range. However, the owners of units in a large number of the condominium associations which would be required to retrofit their buildings with fire sprinkler systems may not be in a position to pay the assessments that may have to be imposed by the association in order to comply with the foregoing retrofit requirements. Fortunately, Florida law offers condominium associations with breathing room - providing unit owners with the ability to vote to forego the retrofitting that may be required by the local governmental authorities having jurisdiction.Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Roberto Blanch.JPG

The Florida Condominium Act provides that the local governmental authorities having jurisdiction cannot require a condominium building to be retrofitted with a fire sprinkler system if a majority of the voting interests within the condominium vote to forego such retrofitting. Those associations that do not vote to forego the retrofitting requirement may not be obligated to retrofit their buildings prior to December 31, 2019. The law further provides that associations which have not obtained the vote to forego the retrofitting requirement, and which have not yet achieved compliance with the applicable retrofit requirements, will have to initiate the application process for the issuance of a building permit by December 31, 2016, for the installation of such fire sprinkler system by the December 31, 2019, deadline.

It is important to keep in mind that the above-described majority vote of the association's voting interests may be obtained by written consent of the association's members or by a vote at a duly noticed meeting at which a quorum has been achieved. If the vote is to be taken at a meeting, then the use of limited proxies may facilitate the association's efforts to obtain the vote. Once the required vote is achieved, then other steps must be followed. For instance, a certificate of the vote to forego the retrofitting requirement will have to be filed in the public records of the county where the condominium is located. Additionally, a written notice must be sent to the owners within 30 days of the vote announcing the successful results and a notarized affidavit must be kept with the association's official records to document that the foregoing notice was properly sent. Within 60 days from recording the above-described certificate, the association must also file a notice with the Florida division of condominiums announcing the successful vote. Lastly, each unit owner is required to provide a copy of the notice sent by the association to anyone renting his unit and to the purchaser of the owner's unit prior to the closing of such sale.

It should be noted that the decision to forego retrofitting is one that should be carefully evaluated by condominium directors, managers and unit owners given that buildings which forego retrofitting will not have the fire sprinkler systems that could play a vital role in protecting the residents of such buildings from injury and damage in the event of a fire. Additionally, buildings that forego retrofitting may be required to pay higher insurance premiums and may be subject to lower property values due to the lack of life safety systems valued by some purchasers. Moreover, even after a successful vote to forego retrofitting, owners of units in a condominium may trigger a vote to require retrofitting, provided at least 10% of the voting interests petition for such a vote.

Given the tedious requirements involved in above-described process and the impact such vote might have on a community, it is advisable that associations seek the assistance of their legal counsel in the process to ensure that the votes have been properly obtained and to minimize the risk of liability that may result from a failure to comply with the applicable requirements.



Association held Liable for Excessive Collection Demands

August 19, 2013, Posted by Jonathan M. Mofsky

Jonathan Mofsky Gort photo-thumb-100x150-17765-thumb-120x180-17766.jpgWhile everyone agrees that a first mortgagee's ("bank") liability for assessments when they acquire title to a unit is limited to 12 months of assessments or 1% of the mortgage, whichever is less, some associations take the position that a first bank is also liable for all of the past due interest, late fees and attorney's fees and costs due on the account. However, a newly released opinion from the Third District Court of Appeal along with the trial court rulings against the association illustrate the risks and exposure that associations and attorneys take when seeking amounts in excess of the statutory maximum.

In Ocean Bank v. Caribbean Towers Condominium Association, Inc., the Third District addressed two trial court orders which stated that the association could not recover interest, late fees and attorney's fees and costs from a bank who acquires title to a unit pursuant to its own foreclosure action.  The Third District agreed with the trial courts' finding that an association is not entitled to recover interest, late fees and attorney's fees and costs and is limited to collecting 12 months of assessments or 1% of the mortgage, whichever is less.  Furthermore, the Third District held that the bank was entitled to its attorney's fees for having to litigate the association's position which one trial court referred to as "frivolous".  As a result of the association's counsel losing on its claim for attorney's fees, costs, interest and late charges, the association is now exposed to a claim for attorney's fees likely to be thousands of dollars, if not more, for having taken such a position. If appellate attorney's fees are awarded to the Bank, the association will likely be accountable for paying substantially more.   

In the opinion, the Third District stressed the excessive demands of the association, noting that for one unit, the association claimed almost nine times that which it was entitled to collect, and on the other unit, the association was found to have improperly claimed more than thirteen times the amount to which it was entitled from the bank. The Third District commented that:

Section 718.116(1)(b), Florida Statutes (2012), capped the Bank's liability for condominium assessments at no more than one percent of the original mortgage debt. Notwithstanding this statutory cap, on one unit in this consolidated appeal, the Association issued a certificate . . . totaling $8,835.93, an amount almost nine times the statutory maximum. On the other unit, the Association issued a certificate claiming a lien of $20,233.14, an amount more than thirteen times the statutory maximum.

This appellate decision highlights the importance of seeking counsel from community association attorneys with regard to association collection policies and uncertainties about the association's ability to recover attorney's fees, costs and other charges from a bank or other purchaser.


DO NEW LAWS PROVIDE UNINTENDED CONSEQUENCES?

August 7, 2013, Posted by Roberto C. Blanch

The recent session of the Florida legislature produced a series of new laws affecting community associations in Florida. However, often times the creation of new laws have unintended consequences that could not be foreseen.
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One example of the foregoing relates to the provisions of Section 718.112(2)(d)2, Florida Statutes, governing the qualifications of candidates seeking to be elected to a condominium association's board, which were modified by HB 73. Prior to July 1, 2013, a candidate seeking to be elected to a condominium board was required to meet certain procedural thresholds established by the statute and statutory eligibility criteria included in the above-enumerated statute. Such eligibility criteria provided that the following individuals could not be listed on a ballot for a condominium election: (i) a person who has been suspended or removed from the board by the Division under Chapter 718, Florida Statutes; or (ii) a person who is delinquent in the payment of a fee, fine or special or regular assessment owed to the association for more than 90 days. However, after July 1, 2013, the second prong of the foregoing criteria was revised to preclude condominium election ballots from including the names of individuals who are delinquent in the payment of monetary obligations due to the association. Such legislative change broadened the scope of the types of debts that may disqualify an individual from being considered for condominium board election. Prior to July 1, 2013, a candidate would be ineligible if he was delinquent by more than 90 days in his obligation to pay the association a fee, fine or special or regular assessment. Now, the 90 day requirement has been eliminated and the debt has been expanded to include any "monetary obligation" owed to the association.

However, in those associations where there is no requirement for directors to be unit owners, it would be possible to have a non-unit owner - with no obligation to pay assessments to the association - run for election - whereas a unit owner who is delinquent in his monetary obligations to the association may not do so. Additionally, while a sitting director may not be considered disqualified from the board until he has been delinquent in his payment of monetary obligations to the association for more than 90 days, the tolerance for a candidate is significantly lower. The foregoing issues present interesting questions. For instance, in those condominiums with no requirement for directors to be unit owners, does it make sense to remove the requirement for unit owners to be current on their monetary obligations to the association? Additionally, would it not make sense to disqualify directors from the board the moment they become delinquent, as is the case with regard to the consideration of a candidate as ineligible for election to the condominium association board? Additionally, was it intended for all possible monetary obligations owed to the Association to serve as the basis for a potential disqualification from eligibility to run for election to the board? For instance, should the eligibility also extend to those owners that may have monetary judgments entered against them by the association, albeit not related to their assessments, fines or fees?

The foregoing illustrates that new laws may not always eliminate problems or questions related to condominium governance but may create a new line of issues or uncertainties. This result highlights the importance of seeking counsel from community association attorneys with regard to the new laws affecting your community association and the impact that such laws might have.


Supreme Court Responds to Law Eliminating Important Homeowner, HOA Protections Against Construction Defects in Community Infrastructure Systems

August 7, 2013, Posted by Laura Manning-Hudson

In previous articles and blogs we wrote about a new law enacted in 2012 which we considered one of the most surprising and anti-consumer pieces of legislation for Florida homeowners and HOAs. Section 553.835, Florida Statutes, was enacted in 2012 in direct response to a decision from the Fifth District Court of Appeal in the case of Lakeview Reserve Homeowners Association, Inc. v. Maronda Homes of Florida, Inc., where the appellate court extended the common law warranty of fitness and merchantability to off-site improvements such as infrastructure, roadways, retention ponds and drainage systems within a community, holding that "essential services" must include items that obviously support the home and make it habitable including roads for ingress and egress, drainage systems to divert flooding, retention ponds to correct water flow damage, and underground pipes (whether they be storm water or sanitary sewer pipes) which are necessary for living accommodations. Thumbnail image for Laura Manning Hudson The new law however, eliminated an HOA's cause of action for breach of the common law warranty of fitness and merchantability as it pertains to 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." The new law was specifically enacted "to reject the decision by the Fifth District Court of Appeal in the Maronda case..." and was also intended to apply to all cases accruing before, pending on, or filed after the July 1, 2012 effective date of the statute.

But earlier this month the Supreme Court of Florida issued its opinion agreeing with the appellate court below and chastising the legislature for overstepping its bounds stating "[t]he statute even provides that the purpose of the law is to place limitations on the applicability of the doctrine or theory of implied warranty of fitness and merchantability, and to reject the decision by the Fifth District Court of Appeal in the Maronda case. This is a clear violation of separation of powers because the Legislature does not sit as a supervising appellate court over our district courts of appeal."
The attempt by the legislature to limit the Lakeview Reserve HOA's ability to continue to pursue its existing cause of action against its developer and builder would have had the effect of just pulling the rug right out from underneath the HOA. The wisdom of the Supreme Court prevailed however and the Lakeview Reserve HOA will be able to maintain its claim because generally, once a cause of action accrues, it becomes a vested right - which means that it is a right that may not be eliminated or curtailed in any manner. Because in Maronda, the HOA had already filed suit for breach of implied warranties when the statute was enacted, its cause of action became a vested right which could not be taken away by an act of the legislature.

Even so, the developer and builder argued that the Supreme Court should not apply implied warranties beyond what the statute prescribes because it is generally the province of the Legislature to balance public policy and define the scope of the implied warranties. The Supreme Court fired back again stating "[i]t is however, the province of this Court and not the Legislature to decide issues of constitutional validity when a statute attempts to retroactively abolish common law remedies or the elements of such actions." The Supreme Court also held that the new law does not apply to any causes of action that accrued before the effective date of the law.

With the passage of this new law, it is 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.


Appellate Court Reverses Foreclosure Judgment for Lack of Proper Notice to Unit Owners by Association

June 24, 2013, Posted by Laura Manning-Hudson


Laura Manning HudsonA decision earlier this month by the Third District Court of Appeal serves as a good lesson to community associations and their attorneys about the importance of working closely with their process servers to ensure that all of the statutory requirements for service or "constructive service" on unit owners in foreclosure actions are met. In the case of Castro v. Charter Club Inc., the appellate panel reversed a Final Judgment of Foreclosure finding that the search and inquiry performed by the Charter Club condominium association and its attorneys did not satisfy the constructive notice statute, its notice by publication was improper, and the foreclosure judgment against the homeowners was void and must be vacated.

In this case, the association's process server went to the Castro's daughter's home address, which the couple had listed as their alternate address and billing address with the association. The daughter stated that she gave the process server the new address for the Castros, but the server never wrote it down. The process server then went to a wrong address in search of the Castros, and no further attempts were made to revisit the daughter to verify the correct address. The process server also did not advise the daughter that he was there to serve the Castros with a complaint for foreclosure.

pserver.jpgIn addition, the association had approved the Castros to lease their unit to a tenant who paid rent directly to the association's attorney in order to pay down the past-due assessments. The association received rent payments for two years prior to moving forward with its foreclosure action. The association never attempted to contact the tenants to see if they knew the correct address for the Castros.

As a result, the court found that the association did not use all of the knowledge in its command or extend its inquiry to those persons likely or presumed likely to know the facts that it sought. Its affidavit of diligent search filed with the trial court merely stated that the Castros' residence was unknown, and it failed to provide the information and addresses that were known to the association for the daughter and tenant. The appellate opinion also notes that the process server's return of service affidavit was defective where it stated that the server had discontinued trying to serve the Castros with the complaint and summons "for the reasons detailed in the comments below" but failed to include any such comments.

Pursuant to Florida law, in order to employ "constructive service" on an owner who cannot be located, associations must strictly adhere to the requirements set forth in the statute and reasonably employ the knowledge at its command, make diligent inquiry, and exert an honest and conscientious effort appropriate to the circumstance to acquire the information necessary to enable it to effect personal service on the defendant. The efforts in this case appear to have fallen far short of these requirements, and as a result the association's foreclosure judgment was found to be void and had to be vacated. We encourage condominium associations and HOAs in Florida to exercise diligence in their work with their attorneys and process servers to locate unit owners and ensure proper notice to those unit owners in foreclosure actions.


Delinquent Assessments and Short Sale Offers - A Quick Guide for Associations

June 12, 2013, Posted by Nicholas D. Siegfried


Recently, short sales in South Florida have become a popular foreclosure alternative. In a short sale, the sales price is less than the amounts owed to creditors. Accordingly, the owner is required to negotiate a settlement with all creditors in order to sell the property free and clear of any liens. Commonly, the offer submitted to the association in connection with a short sale is less than the full amount owed to the association. Should the association accept less that the full amount owed? Should the association negotiate the amount it will accept? Can the association demand payment in full? In the video below, I discuss in detail what associations should look for when considering a settlement offer submitted in connection with a short sale.







2013 Bank Foreclosure Trends

May 23, 2013, Posted by Maryvel De Castro Valdes


For the last several years, the state of Florida has been labeled as the foreclosure "hot spot" of the nation. In February, a report from RealtyTrac, a market research firm, reported that Palm Beach, Broward and Miami-Dade counties were ranked the highest in foreclosure activity in the nation. The report also noted that Florida's foreclosure rate was more than three times the national average.

Foreclosures in Florida have been delayed by lengthy court processes, new legislation and owners who successfully stall the proceedings. These delays have caused thousands of files to sit in South Florida courts without any resolution. In an effort to push through aging foreclosure cases, judges are now setting many of these cases for trial in order to speed up the cases that are not progressing. In the brief video below, I discuss this new trend in more detail.






Inspections, Work Logs Imperative to Protect Condominium Associations Against Defective Concrete Restoration Projects

May 9, 2013, Posted by Daniel Salas


Daniel Salas SRLDS.jpgConcrete restoration projects are unavoidable during the lifespan of every concrete building in South Florida. They are among the most expensive construction renovation projects that associations will be required to take on, and as such many associations and their property managers try to mitigate the costs as much as possible. However, the old adage that an ounce of prevention is worth a pound of cure holds true with these projects. Associations should be very careful to avoid cutting corners on the record keeping, making sure to chronicle all of the work that was performed as part of these restoration projects in order to protect against the repercussions of shoddy work and defects.

My colleagues and I have experienced a number of instances where our association clients have had defects manifest themselves only a few years after a concrete restoration project has been completed. However, the associations have had a difficult time proving that the contractor was responsible due to inadequate and incomplete records of the work that was performed. After inspecting the defects in question, the contractors have responded by indicating that they were not responsible for the work on the affected areas. The associations then request records and work logs to verify the contractors' claims, only to find that the contractors and engineers did not keep detailed work logs of the work that was performed, leaving the association with little evidence to prove their claims.

balcony renovation.jpgThere are a number of measures that associations should take to avoid this scenario and protect themselves against the potential for inferior and defective work in concrete restoration projects. The foremost among these is the retaining of an independent third-party engineer or project manager to oversee and chronicle the restoration work performed in the building, and to help ensure that all of the work is performed in a cost-effective and timely manner. A third-party project manager not only protects the interest of the association during the construction process but also protects the association's interests should defects in the restoration work arise in the future. The benefits of hiring a third-party project manager are countless, for example, project managers will assist in the evaluation and hiring of the project engineer and contractor; evaluate the work of the engineer and contractor; hold timely meetings to review the process of the work performed; review the payment requisitions and daily logs; and keep the association informed of any potential issues on the project.

In addition to the use of an independent engineer or project manager, the association's attorney should also be called upon to review and or draft the contracts for the restoration project. The associations should ensure that their contracts include stipulations requiring that the general contractor and engineer maintain and provide to the association detailed work logs of all of the work performed. The standard warranty language in general construction contracts will not suffice without the detailed work logs showing exactly what work was performed and the location of such work in every facet of the building. It is much more difficult to hold contractors liable for defects in areas that are not documented as having been part of the restoration work performed.

Although these additional measures will add to the costs of concrete restoration projects for associations, without them the associations would be taking a significant risk of being unable to hold contractors responsible for any defects that may arise in the restored areas. Additionally, these added costs are minimal compared to the costs that the associations would endure in litigation or in repairs to the areas which had been restored. There is no doubt that concrete restoration projects are expensive, time consuming and a nuisance to the residents of the building. However, keeping these measures in place throughout the process will mitigate the time and money spent on the project as well as result in a well done concrete restoration project, retaining the value of the building as well as the safety of the residents.


HOA's Settlement with Trayvon Martin Family Illustrates Liability Issues Involving Neighborhood Watch Programs

May 1, 2013, Posted by Roberto C. Blanch


Roberto Blanch.JPGLast year I participated in a discussion with an Associated Press reporter and wrote about a central Florida community association's apparent endorsement of George Zimmerman as its neighborhood watch captain and his involvement in a tragic incident that took the life of the 17-year-old Trayvon Martin. I addressed the possibility that the victim's family may file a wrongful death civil suit against the association. Last month, news broke about the purported settlement reached between the parents of the victim and the association for an undisclosed amount reported by several news outlets to be in excess of $1 million.

During the course of the litigation and a mediation attempt prior to the settlement, it was reported that under the heading "Neighborhood Watch," the HOA's newsletter recommended that residents first call police and then "please contact our Captain, George Zimmerman . . . so he can be aware and help address the issue with other residents." This apparent endorsement of Zimmerman, who claimed to have been acting in the above-described capacity when the teenage victim lost his life, may have been considered by the association's board and counsel to expose the association to liability in the lawsuit.

watch program sign.jpgThe Community Associations Institute (CAI) offers an excellent article on neighborhood watch program considerations for HOAs that is available by clicking here. The article discusses how 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.

This article from the CAI is recommended for all community association board members and managers who are considering implementing or have already implemented a watch program in their community. As I wrote in my article last year, 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 the guidelines offered by CAI and consult with qualified legal counsel in order to limit their potential liability.


House Bill 1339 Would Enable Foreclosing Lenders to Avoid Paying Their Fair Share to Community Associations

April 29, 2013, Posted by Laura Manning-Hudson


Thumbnail image for Laura Manning HudsonOur other community association attorneys and I have been keeping a watchful eye on the bills impacting condominium associations and HOAs that have been proposed for the current legislative session in Tallahassee. Of the several bills that are being considered, House Bill 1339 filed by Representative George R. Moraitis attempts to clarify existing law, while it also appears to be the most potentially troublesome new legislation for community associations in the state. As it now stands, the bill includes language that would, on the one hand, clarify the responsibility of third-party purchasers of foreclosed condominium units but, on the other hand, diminish the financial liabilities of foreclosing lenders to the community associations.

One of the proposed changes to the Condominium Act presented in HB 1339 provides that a first mortgagee bank who acquires title to a unit by foreclosure is not liable for any interest, administrative late fees, reasonable costs or attorney fees, or any other fees, costs or expenses that came due prior to its acquisition of title. This new provision was drafted with the intent of clarifying the existing law. As the statute is currently drafted, for many years associations have sought to collect attorneys' fees, interest, and costs over and above the statutory "safe harbor" amounts of the lesser of 12 months of assessments or one percent of the original mortgage. If this change is implemented by the legislature, banks will have even less financial incentive to complete their foreclosures in a timely fashion, and the community associations would need to pass the burden to their paying owners for all of the fees and costs associated with pursuing their collection efforts against the owners who are not paying.

Florida legislature photo.jpgOne of the benefits of the proposed legislation, however, is that these same late fees, interest, costs and attorneys fees incurred by an association will definitively be collectible from subsequent purchasers of units (no matter how they acquire title). As the statute exists today, purchasers are jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of the title to the unit. Many "subsequent purchasers" have argued that this provision does not include attorneys' fees, costs, interest and late fees, and only means "assessments" in the purest sense of the word. Therefore, if this change is implemented by the legislature, condominiums will likely collect more than they have in the past, as there will be no fear of being challenged for attempting to collect these other amounts.

One other potential amendment present in HB 1339 is with regard to an association's right of access to a unit. As the statute is currently drafted, an association has the irrevocable right to access a unit during reasonable hours when it is necessary to prevent damage to the common elements or other units. This bill would amend the Condominium Act to provide associations with a right to enter abandoned units for inspection, make repairs, turn on the power, and otherwise protect, preserve and maintain the unit and adjoining common elements. Any expenses incurred by an association for this work would be chargeable to the unit owner and enforceable like an assessment. Additionally, the association may file an action in court to appoint a receiver to rent abandoned units for the benefit of the association in order to offset the association's costs and expenses of maintaining, preserving and protecting the unit.

The legislature remains in session until May 3rd and there are several bills in committee that could affect condominium and homeowners associations. We will continue to monitor the legislative session and post updates in our blog, and additional information on the pending bills affecting community associations is also available at www.myfloridahouse.gov or www.flsenate.gov.


Fourth DCA Rules Insurance Companies Not Required to Provide Coverage for all Portions of Condominium Property

April 22, 2013, Posted by Stephanie M. Chaissan


Stephanie Chaissan SRLDS.jpgRecently, the Fourth District Court of Appeal in the case of Citizens Property Insurance Corp. v. River Manor Condominium Association, Inc., ruled that an insurer is not required to provide an association with coverage for "all portions of the condominium property located outside the units" and "all portions of the condominium property for which the declaration of condominium requires coverage by the association," notwithstanding the requirements of Section 718.111, Florida Statutes. In the case, Citizens Property Insurance Corp. ("Citizens") provided insurance to River Manor Condominium Association, Inc. (the "Association") for a residential condominium comprised of three buildings and exterior common elements. The condominium was damaged in Hurricane Wilma and, when the parties were unable to agree on the extent of the damage, they participated in a mandatory appraisal process that resulted in an award that specified the total loss sustained by each building and the exterior common elements.

The policies issued by Citizens for each building excluded from coverage "other structures on the demised locations, set apart from the building by clear space," including such things as carports, swimming pools, walks, decks, etc. Under such exclusion, the condominium's exterior common elements would be excluded from coverage. However, the policies also contained a provision requiring them to be amended to "conform" to any conflicting statutes of the state in which the property was located. The Association claimed that the exclusion conflicted with Section 718.111, Fla. Stat. At the applicable time, Section 718.111(11), Fla. Stat. (2005), provided, in part, as follows:

(a) A unit-owner controlled association shall use its best efforts to obtain and maintain adequate insurance to protect the association, the association property, the common elements, and the condominium property required to be insured by the association pursuant to paragraph (b) . . .


(b) Every hazard insurance policy issued or renewed on or after January 1, 2004, to protect the condominium shall provide primary coverage for:

1. All portions of the condominium property located outside the units;

2. The condominium property located inside the units as such property was initially installed, or replacements thereof of like kind and quality and in accordance with the original plans and specifications or, if the original plans and specifications are not available, as they existed at the time the unit was initially conveyed; and

3. All portions of the condominium property for which the declaration of condominium requires coverage by the association.

(This provision, as amended, is now found in Section 718.111(11)(d) and (f), Fla. Stat. (2012)).

The trial court agreed with the Association and awarded final judgment to the Association, including the amounts that the appraisal attributed to the exterior common elements that were otherwise excluded from coverage.

4th DCA photo.jpgThe appellate court reversed, however, finding that Section 718.111(11), Fla. Stat., governed only condominium associations and not insurers. The court, guided by well-established principles of statutory interpretation, stated that while a statute must be given its plain and obvious meaning, it must be read in the context of the surrounding sections. The court also stated that the language of a statute must not be interpreted so as to lead to an absurd or unreasonable conclusion.

In interpreting Section 718.111(11), Fla. Stat., the court first noted that this section is contained within Chapter 718, which is aptly titled the "Condominium Act," the purpose of which is to give statutory recognition to the condominium form of ownership and to establish procedures for the creation, sale and operation of condominiums. The court went on to explain that the aim of Section 718.111(11), Fla. Stat., is not to further regulate insurance companies, as that industry is extensively regulated in other parts of the Florida Statutes. Instead, Section 718.111(11), Fla. Stat., imposes insurance obligations on associations and their boards.

By further examining the requirement in what was then numbered as Section 718.111(11)(a), Fla. Stat. (2005), that associations use their "best efforts to obtain and maintain adequate insurance to protect the association, the association property, the common elements, and the condominium property required to be insured by the association...," the court found that the purpose of subsection (11) was to identify the types of insurance the association was responsible for obtaining and the level of effort it must use to do so (i.e., "best efforts"). If the Association's argument that subsection (11) imposed an obligation on insurers to provide such coverage, subsection (11)(a) requiring the Association to exercise its "best efforts" would be rendered meaningless - the Association would not have to use any effort to obtain the required insurance as coverage could be obtained by legislative command if an insurer refused to provide it.

As such a result would be unreasonable, the court, therefore, concluded that subsection (11) was intended to impose an obligation only on associations to use their "best efforts" to obtain the required coverage, and it recognized that there may be time where market forces prevent this objective from being achieved. When read as a whole, Section 718.111(11), Fla. Stat., does not impose any obligation on insurers, and the court reversed the portion of the judgment that awarded damages to the Association for excluded items under Citizens' policies, i.e., the exterior common elements.

Based on this ruling, associations should carefully review their insurance policies with their insurance agents and/or experienced community association attorneys to determine the extent of coverage provided. Even though the statute requires associations to exercise their "best efforts" to obtain adequate insurance, insurers are under no obligation to provide such coverage. Therefore, associations may have to obtain more than one policy or pay higher premiums to obtain the necessary coverage for the condominium.