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Guest Column by Lisa Lerner in Daily Business Review: Creative Solutions for Community Associations


LisaLerner.jpgThe firm's Lisa A. Lerner contributed a guest column in the Friday, March 13, 2015 edition of the Daily Business Review that focused on the changes that have taken place with some of the practices of South Florida community associations as a result of the foreclosure crisis and the investor-fueled recovery.

Lisa's article reads:

. . . For all of these growing numbers of associations, things are quite different today than they were 10 years ago at the height of the area's condominium and housing boom. After the national meltdown in the housing market and bursting of the condominium bubble in South Florida, the associations have adapted by becoming considerably more forceful in their collections practices, especially in cases involving prolonged foreclosures against their delinquent unit owners. Also, for many of the new condominium properties that are owned primarily by investors from abroad, the challenges caused by having so few full-time residents who are willing to take on the responsibilities of serving on the board of directors or even voting at the membership meetings are being met with novel and creative solutions.


One of the most significant changes in today's community association practices entails foreclosures by the associations against their delinquent unit owners. The practice was virtually unheard of 10 years ago, as the lenders would almost always move quickly with their own foreclosures against these owners, and the first-mortgage liens are superior to those of the associations. However, today it has become fairly common, as the lenders have proved to be anything but efficient and expeditious in the prosecution of their foreclosure cases while they wait for the housing market to recover.

The prolonged lender foreclosures caused significant financial strains for the associations, and many of their attorneys responded by helping them to complete their own foreclosure actions in advance of the banks in order to acquire and rent the residences before the lenders' foreclosures are finalized. Since many of the lenders have been taking years to complete their foreclosures, the revenues from these rentals have helped to allay a great deal of the financial difficulties that the associations have faced.

Other major changes in how today's condominium associations operate have to do with the nature of the current recovery in the market for new luxury condominium developments in South Florida. The predominant type of buyer for a great deal of the area's largest and most expensive new offerings are investors, many of whom primarily live abroad and use their local condominiums as a second or third home. Typically, a considerable majority of these unit owners do not take part in the matters involving their condominium associations. Many of them do not even bother to vote in the annual elections for their association's board of directors, let alone taking on the responsibilities of serving as a director.

For all of these new luxury South Florida condominium developments, it takes a greater level of outreach and communications by their associations and property managers in order to conduct all of their elections and association business as prescribed under Florida law. For example, Florida law requires that at least 20 percent of eligible voters cast ballots in order to have a valid election at the annual meeting, but even that modest percentage can be difficult to achieve for many of these properties.

For votes on material alteration projects and other issues that may require even greater participation rates, the associations and their attorneys have had to get creative in order to secure the necessary involvement. For example, several of my condominium association clients have developed and used password-protected websites that were designed to showcase to the unit owners all of the renderings and descriptions for proposed renovation projects, and these sites helped to facilitate the participation of owners who are not residing at the properties. The sites, which also included the paperwork and instructions for the owners to vote by limited proxy in order to approve or reject the renovations, enabled the properties to achieve the necessary votes.

Finally, perhaps the most important and positive change for community associations today is the increased level of informational resources that are available to enable association directors and members to cope with all of the difficulties that they have had to overcome. Blogs on association issues such as the one by our firm as well as those from other community association attorneys are constantly updated with timely and helpful information on the most pressing matters affecting associations, and there are also a number of publications and their corresponding websites that are devoted exclusively to community associations. With these resources and the help of experienced legal counsel, condominium and homeowners associations are implementing the necessary changes to overcome the challenges of today's investor-fueled recovery.

Our firm congratulates Lisa for sharing this article on some of the changes that have taken place at South Florida community associations in recent years with the readers of the Daily Business Review, which is the South Florida region's only daily business newspaper.


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New Florida Bill Presents Serious Concerns for Estoppel Certificates Issued by Community Associations


AEsteras.jpg MDeCastro.jpgBy: Awilda Esteras and Maryvel De Castro Valdes

In addition to the bills pertaining to construction defect litigation that our firm's Georg Ketelhohn shared his insights on in previous articles in this blog as well as in a recent report in the Daily Business Review, another bill was recently introduced during the current session of the Florida Legislature that also presents significant concerns for community associations.

House Bill 611 (SB 736 in the Senate) aims to make major changes to the process, costs and effects of the estoppel certificates that are prepared by associations. Estoppel certificates are issued by associations, their attorneys or their property managers to provide the amounts owing to an association for a unit as of a particular date. Prospective buyers rely on the estoppel certificates to bind the association to the stated amount until the expiration date of the certificate.

The proposed bill intends to impose a maximum estoppel fee of $100 to $150, as opposed to a "reasonable fee" as the current law allows. Since the preparation of estoppel certificates can be highly detailed and labor intensive for experienced professionals, the newly proposed fee range is inadequate and may lead to increased management and legal fees that are passed on to associations for the preparation of these certificates, which in fairness should only be paid for by the buyers and sellers.

The bill also aims to eliminate the ability of an association and its agents to collect an estoppel fee prior to the closing of the sale of the underlying property by requiring that the estoppel certificate be paid from the proceeds of the sale. In addition, the proposed bill provides for extremely limited recourse for the collection of the fee should the closing never occur. Ultimately, the association may become liable for any fees that go uncollected.

flcap.jpgThe bill further proposes the reduction in the number of days that associations have to respond to estoppel requests from 15 days down to 10 days. In complex cases such as those that include fines levied against an account in addition to delinquent maintenance dues and/or litigation, the preparation of an estoppel certificate typically exceeds 10 days. According to the proposals found in the bill, associations that are unable or fail to meet the 10-day deadline will have effectively waived any claims for the amounts due that would have been provided in the estoppel certificate. This is an extreme measure that would seriously impact an association's right to collect unpaid assessments.

Another important concern for associations is that the bill would require all estoppel certificates to be valid for 30 days from their issuance, and it prevents the association and its agents from collecting additional assessments or other costs that accrue within those 30 days. In the case where an estoppel certificate is being requested for a delinquent account in litigation, attorneys would either have to stay the case pending payment or would need to include additional attorney's fees if there are pending matters to be addressed in the 30-day period from the issuance of the estoppel.

Lastly, the proposed bill would require a waiver language to be included in the estoppel certificate preventing the association from collecting moneys in excess of the amount set forth in the estoppel certificate.

For the professionals who prepare estoppel certificates for community associations on a regular basis, the measures that are being put forth in this bill appear to be drastically onerous. We encourage association directors, members and property managers to contact their state legislators to express their concerns and disapproval with this bill.

Click here to find the contact information for the legislators for your district.


Front-Page Article in Yesterday's Daily Business Review Features Insight from Firm's Georg Ketelhohn on Concerns for Associations with Construction Defect, Claims Bills


GeorgKetelhohn.jpgWhen the Daily Business Review, the South Florida region's only daily business newspaper, decided to report on the proposed bills at the start of this year's legislative session that would impact construction defect claims for Florida community associations and property owners, it turned to the firm's Georg Ketelhohn for his insights on the bills for the front-page story, which also featured his photograph. Georg, who wrote about the concerns for community associations with these bills in recent articles in this blog, served as one of the primary sources for the article, which appeared in yesterday's edition of the newspaper and was titled "Construction Defect, Claims Bills Favor Contractors, Designers."

The article focused on Georg's views about the concerns for community associations with House Bill 87 and House Bill 501. It reads:

One of the most hotly debated proposals comes from Rep. Jay Fant, R-Jacksonville, whose House Bill 501 would reduce the window for homeowners to file claims for latent defects against contractors, designers and planners.


Florida law allows homeowners four years after discovering a structural defect--or four years after they should have discovered the defect with due diligence--to bring a construction claim.

But also at play in the four-year statute of limitation is the statute of repose. That law expires 10 years after the owner takes possession of the property or completes the contract with an engineer, architect or contractor; a certificate of occupancy is issued; or construction is completed or abandoned. It expires even if the statute of limitations has not run.

Under Fant's proposal, the 10-year window could shrink to seven, leaving homeowners responsible for fixing any defects discovered after the cutoff period for filing suit.

"Most people are very aware of the statute of limitations, but the statute of repose has no tolling or exemptions. It's an absolute cutoff even if the defect was latent and could not have been discovered until that time," said construction litigator Georg Ketelhohn, a senior associate at Siegfried Rivera Hyman Lerner De La Torre Mars & Sobel in Coral Gables. "It's a concern because some construction defects do not manifest for at least seven years."

Opponents say the bill would especially hurt condominium associations and owners who might not gain control of units for years but would face a shorter window to file claims for faulty construction or design work.

The bill made it past the House's Civil Justice Committee on a 7-6 vote Feb. 17 and is headed next to the Judiciary Committee. If it becomes law, the change would take effect July 1 and become one of two potential game changers for property owners across the state.

The article continues to discuss HB 87:

Another proposal would require litigants to provide more detailed information when filing claim notices. Instead of identifying only some defects up front, a bill would require homeowners to identify every affected location as the basis of the claim.


Opponents say uncovering the full scope of a faulty construction or design would force property owners to undertake destructive investigations including demolition work to expose all shoddy work.

The bill by Rep. Kathleen Passidomo, R-Naples, also would require the initial notice to specify the building code, project plans, drawings or other project specification to serve as the basis for the claim.

Sen. Garrett Richter, R-Naples, filed a companion Senate bill Jan. 21.

"The intention is to limit construction claims in the state," Ketelhohn said.

Our firm congratulates Georg for sharing his views on these important new pieces of proposed legislation for community associations with the editors of the Daily Business Review and the newspaper's readers. Click here to read the complete article in the newspaper's website (registration required).


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Notes from My Course Titled "The Association Attorney's Role in Disaster Recovery" at the 36th Annual Community Associations Institute Law Seminar

March 3, 2015, Posted by Michael L. Hyman


MHymanseminar2015.jpgIn January I had the privilege of leading one of the courses for the attendees of the 36th annual Community Associations Institute Law Seminar in San Francisco. More than 550 community association attorneys from throughout the country attended the four-day event, which focused on discussions of emerging trends and legislative issues that are important to the practice of community association law.

My seminar, which I led together with Daniel B. Odess of GlobalPro Recovery, focused on the association attorney's role when disaster strikes. It covered how attorneys are able to counsel associations through every facet of the insurance claims process. We discussed the activities that need to take place immediately after the loss occurred in order to document and investigate the nature of the damage, and the best practices for working with mitigation contractors and public adjusters.

Dan and I also answered a number of questions from the attendees about the claims process and how to ensure a maximum recovery. We also included a discussion of the rebuilding/remediation process and working with contractors.

As a member of CAI's College of Community Association Lawyers (CCAL), I have had the honor of conducting several seminars at this annual event over the years. CCAL was established in 1993 to acknowledge CAI member attorneys who have distinguished themselves through contributions to the evolution or practice of community association law. Of the thousands of attorneys practicing community association law in the United States, fewer than 150 have been granted membership in the college.


Florida's HB 501 Seeks to Limit Construction Defect Claims to Seven Years from Date of Completion

February 24, 2015, Posted by Georg Ketelhohn


GeorgKetelhohn.jpgIn addition to Florida House Bill 87, which I wrote about in this blog last month, HB 501 also presents serious concerns for associations, property owners and even also public-sector projects. The bill seeks to reduce the statute of repose for construction-related claims from the current 10 years to just seven years, meaning that claimants will have only seven years from the date of the completion of construction to file any claims for the design, planning or construction of any improvement to real property.

Unlike the statute of limitations, which establishes a time limit within which an action must be brought from the time of the accrual of the cause of action, the statute of repose bars a claim after the conclusion of the period of repose, thereby creating an absolute bar to such claims even if the claim is for a latent defect that was not discovered until years after the completion of construction. It holds contractors, subcontractors, architects, engineers and other construction-industry professionals free from all liability after the set term of time expires.

Under Florida law, the statute of limitations for construction defects expires four years after the defect is discovered or should have been discovered using due diligence, but the statute of repose expires (even if the statute of limitations has not run) ten years after the later of:

  • the date of actual possession by the owner;
  • the date of the issuance of a certificate of occupancy;
  • the date of abandonment of construction if not completed; or
  • the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer.

With HB 501, the legislature would reduce the period of repose from 10 to seven years, so after seven years any latent structural defects or other latent defects that have not manifested themselves beforehand would become solely the responsibility of the property owner. For condominium associations, this change would be particularly troublesome because, unlike the period for the statute of limitations which does not begin to run until after the turnover of control from the developer, the clock starts ticking for the period of repose at the completion of construction, which is often years before the turnover. Thus, if the turnover of a property from the developer is delayed beyond the normal course for some reason, the period for a condominium association to bring any construction claims could be quite short, as no extension is given to the association for the period of repose under current law or under the proposed bill.

constdefect1.jpgTypically, construction defect claims for condominium associations are only brought after turnover has taken place, as the turnover process includes an independent engineering inspection of the structural and mechanical elements. Also, prior to the turnover, the unit owners will not be as informed and involved with the management and administration of the property while it is still being overseen by the developer. And, it would be cost-prohibitive and impractical for individual unit owners to commission an engineering inspection and report for the common areas on their own, and then file suit for the construction defects of the whole condominium on their own.

Thus, the statute of repose, if it gets shortened to seven years, could create an incentive for developers to limit their exposure to construction defect liability by delaying the turnover as long as possible, as the longer they wait to complete the turnover, the shorter the window of opportunity becomes for the association under the statute of repose to identify any defects and pursue a claim.

Builders and their lobbyists in support of this legislation argue that most construction defects become apparent within a few years of the completion of construction, but the fact is that some of the most costly and cumbersome defects to repair are latent structural and mechanical defects that can take well over seven years to become evident. A well-known and oft-cited example of this took place years ago in Key West when one of the area's largest concrete firms used salt water to mix its concrete. The residual salt in the concrete caused the reinforcing steel to corrode, but the defect did not become fully apparent until years after the completion of construction.

The current ten year statute of repose was already previously reduced from fifteen years in 2006, and the additional reduction to seven years that is being considered appears to be receiving mixed reviews by the lawmakers. Two civil engineers gave expert testimony against the bill before the House's Civil Justice Subcommittee, which narrowly passed the bill by a vote of 7-6 and sent it on to the House Judiciary Committee.

Our firm encourages associations and property owners to contact their state representatives and senators to share their concerns regarding HB 501 as well as HB 87, which you can learn more about by clicking here to read my recent blog article. Click here to find the contact information for the state legislators for your district.


Dispute Over Condo Association's Financial Documents, Elections and Alleged Board Member Malfeasance Makes the Nightly News


Yet another report about an ongoing dispute involving alleged board member malfeasance at a Broward County condominium association has made the local nightly newscast on Local 10 News (WPLG, ABC). The report by the station's Bob Norman chronicles the concerns of a number of the residents at the Summer Lake Condominium in Oakland Park over the actions of their association's board of directors, which has been fined by the state's Division of Condominiums for failing to hold timely elections.

In the report, the concerned residents complain to Norman that the directors have also refused to disclose the association's financial records. They also say that former president of the association had signed off on payments in excess of $300,000 over a two-year period to a management company that was founded by his wife.

The residents claim that the former and current board presidents have used their positions on the board to facilitate their buying, renting and flipping condo units in the community using their private real estate investment company, which property records indicate has earned tens of thousands in profits from the purchase and sale of distressed units in the development. In one case, the two men orchestrated a short sale of a unit that had been deeded to Summer Lake to their own company for $83,000 and then sold it just four months later for $101,000. The concerned residents also say that they have seen the condo association's maintenance men working in the middle of the day on units owned by the men.

Click below to view the station's report.


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Appellate Court Decision: Unit Owner Loses Right to Redeem Property Back After Association's Foreclosure

February 9, 2015, Posted by Nicholas D. Siegfried


NSiegfried2013.jpgFor years our firm's community association attorneys have been counseling and working with our association clients to complete their own foreclosures in advance of the lenders, which have often been slow to act on their foreclosure cases. The recent decision by the First District Court of Appeal reinforces that associations which complete their own foreclosures and acquire a certificate of sale via foreclosure auctions cannot be forced to sell the property back to the original owner due to the owner's right of redemption.

The Florida law that governs the right of redemption reads:

At any time before the later of the filing of a certificate of sale by the clerk of the court or the time specified in the judgment, order, or decree of foreclosure, the mortgagor or the holder of any subordinate interest may cure the mortgagor's indebtedness and prevent a foreclosure sale by paying the amount of moneys specified in the judgment, order, or decree of foreclosure, or if no judgment, order, or decree of foreclosure has been rendered, by tendering the performance due under the security agreement, including any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney's fees of the creditor. Otherwise, there is no right of redemption.

The statute applies to lender foreclosures as well as association foreclosures.

In the recent case of Waterview Towers Yacht Club Owners' Association v. Saeid C. Givianpour et. al., the association filed an appeal to challenge the trial court's ruling that granted the delinquent unit owner who had lost his property to foreclosure the right of redemption. On April 9, 2013, the association filed a suit to foreclose a claim of lien for condominium assessments owed by the unit owner, and on March 7, 2014, it was granted a final judgment ordering the property owner to pay the total amount owed or the property would be sold at public auction. Subsequently, on April 11, 2014, the clerk of court filed a certificate of sale, and the unit was sold at public auction to the association.

Surprisingly, on April 16, just five days after the foreclosure sale, the property owner obtained a loan for the full amount of the judgment and sought to pay it to the association, which refused the offer. 1dca.jpg The former owner then filed a motion to enforce redemption of the property and, apparently without explanation, the trial court granted the motion to enforce redemption.

The appellate opinion reads:

Here, in accordance with section 45.0315, Florida Statutes, the final judgment provided that the property owner's right of redemption in the property was extinguished upon the filing of the certificate of sale. As such, the right to redeem was extinguished when the certificate of sale was filed on April 11, 2014. There is no evidence that the property owner tendered payment to the Appellant at any time before April 11, 2014. In fact, the property owner admits he did not obtain the money to satisfy the judgment until April 16, 2014. At this point, the right of redemption was extinguished.

The court concluded that "the property owner fails to cite any authority for its proposition that the trial court properly acted when it granted the motion to enforce redemption after the time period for redemption had expired." The lower court's ruling was reversed, and the association will now retain its title to the property pending any outstanding liens by the first-mortgage holder.

Our firm's other community association attorneys and I write regularly in this blog about important court rulings and other issues for associations, and we encourage association directors, members and property managers to submit their email address in the subscription box at the top right of the blog in order to receive all of our future articles.


Association Board Member Education

January 26, 2015, Posted by Eduardo J. Valdes


Eduardo Valdes srhl law.jpgWith the New Year in full effect and new board members being elected, it is time to get caught up on all things community association. As of 2013, all condominium and HOA board members are required to become certified within 90 days of the election. Certification can be completed in one of two ways: either by (1) attending a State approved course administered by a qualified condominium or HOA education provider or by (2) signing an affidavit stating that all of their community's governing documents were read, that they will work to uphold such documents and policies to the best of their ability and that they will faithfully discharge their fiduciary responsibilities to the association's members.

Needless to say, it is recommended that a board member attend a certification course to best understand what it takes to run an association smoothly and efficiently. By attending a course, board members will be better equipped when handling disputes and making decisions for their communities.

RBlanch seminar 1-17-11 photo 1.jpgDuring our firm's board member certification courses, for example, we educate participants on the most important issues they have to be wary of such as voting quorums, meeting notices and handling vendor contracts. All of our courses are interactive, allowing attendees to ask questions.

Knowledgeable board members are beneficial to a community because they will be less likely to face unnecessary issues leading to unforeseen costs and potential legal issues. Their informed decisions will be attributed to their understanding of current legislation and full comprehension of their community's governing documents.

The State of Florida approved board certification courses are often times free of charge and presented by attorneys who specialize in community association law. Many topics are covered, each ranging anywhere from one to four hours in duration, and discuss topics ranging from association operations to reserve funding and budgets. Board members in attendance can walk away feeling confident about their role.

Education is a key initiative here at our firm. We are always looking for ways to teach board members and property managers how to make educated decisions and lead their community while avoiding a crisis and costly litigation. Click here to visit the "Upcoming Events" page of our website to view a list of the complimentary courses offered by our firm.


Changes to Construction Defect Claims Process Being Considered by Florida Legislature Create Concerns for Associations, Property Owners

January 22, 2015, Posted by Georg Ketelhohn


George Ketelhohn Gort photo.jpgDeveloped with the assistance of the South Florida Chapter of the Associated General Contractors of America, House of Representatives Bill 87 seeks to amend Chapter 558, Florida Statutes, in an effort to help contractors and design professionals avoid construction defect litigation. For community associations and property owners, there are a number of concerns about the proposed changes under this new legislation as it currently stands before the House's Civil Justice Subcommittee. The changes under HB 87 would require community associations or other property owners that wish to pursue a construction claim to meet additional procedural requirements which could require substantial expenditures on engineering fees before being able to file suit. The bill would also require property owners to produce potentially large amounts of documents to the contractor or design professional before being permitted to file suit without imposing a similarly broad requirement on the contractor or design professional, and it would impose monetary sanctions against property owners who file suit for construction defects in several circumstances, while not providing for any sanctions against contractors or design professionals in similar situations.

The changes under HB 87 include:

  • Revising the legislative intent to address the involvement of insurers.
  • Revising the legislative intent to indicate that Chapter 558 is intended to provide an opportunity to resolve construction defect claims through confidential settlement negotiations.
  • Revising the definition of the term "Completion of a building or improvement" to include issuance of a temporary certificate of occupancy, which could potentially shorten the statute of limitations for a property owner to file suit for construction defects.
  • Providing additional requirements for a notice of claim, including the identification of specific location(s) of each alleged construction defect, as well as the specific provisions of the building code, project plans, project drawings, project specifications, or other documentation, information, or authority that serve as the basis of the claim for each alleged construction defect.
  • Revising the requirements for a response to a notice of claim to address monetary settlement offers.
  • Providing that, if a claimant proceeds with an action that includes any claim previously resolved in accordance with Chapter 558, the associated portion of that action shall be deemed frivolous. The term "previously resolved" is not defined.
  • Providing for sanctions for such frivolous claims, including attorneys' fees.
  • Revising the provisions relating to production of records requested under Chapter 558, to include a claimant's maintenance records and other documents related to the discovery, investigation, causation, and extent of the alleged defects identified in the notice of claim and any resulting damages.
  • Providing for sanctions for construction defect claims that were solely the fault of a claimant or its agents, including costs of investigation, testing, and attorneys' fees. (No sanctions are provided against a defendant if the defect is deemed to be solely the defendant's fault.)

HB 87 defines "completion of a building" to mean issuance of a temporary certificate of occupancy (TCO) instead of the final certificate of occupancy (CO), which may shorten the statute of limitations for construction defects in some cases. Currently, the statute of limitations for construction defects commences with the final certificate of occupancy, but if the bill is ratified defendants will use it to argue that the period for the statute of limitations begins with the issuance of the TCO rather than the final CO.

Florida legislature2.jpgThe proposed bill would require associations and property owners to identify in the initial notice of claim every single location of each defect rather than to provide a representative sample. If the type of defect involved is concealed, this would necessitate destructive investigations, and would require associations and property owners to demolish building elements in search of each instance of the defects in order to include all of them in the notice.

In addition, the bill also requires that the initial notice includes all of the specific provisions of the building code, project plans, project drawings, project specifications and other documentation, information or authority that serve as the basis for the defect claim. The failure to include each of these would serve to invalidate the notice of claim as deficient. This would create a significant obstacle to bringing a claim for construction defects, as the associations and property owners often do not have all the project drawings, specifications, etc., at the outset. Before initiating a claim, associations and property owners have often not yet had the opportunity to obtain project records or depose the defendants, which frequently allows the issues causing the defect(s) to be expanded during the course of litigation. Under this bill, if the claim is expanded based on information learned in discovery, the defendant can argue that the initial notice of claim was deficient.

The bill would require more detailed settlement proposals from contractors that wish to extend a settlement offer, but it provides no penalties for defendants that fail to comply with this requirement. However, the associations and property owners that file claims are subjected to several potential penalties if they do not comply with the requirements under the proposed modifications to Chapter 558.

The bill provides for sanctions if a claimant sues for any claim that had been "previously resolved" in accordance with Chapter 558, but it fails to define "previously resolved." If a construction defect is settled by repairs offered by the contractor during the Chapter 558 claims process but the repairs fail to fully correct the defects and the owner or association then files suit because the issue was not resolved, the defendant may claim that the issue was "previously resolved" and the owner may face penalties. However, the bill provides no similar penalty for contractors that agree to provide repairs and then breach that agreement.

The proposed law would also require owners/associations to produce all of their maintenance records and other documents related to discovery, investigation, causation and the extent of the alleged defect(s) identified in the notice of claim as well as the damages resulting from the defects. This will typically require an extensive, time consuming, invasive and expensive process of document inspection, review and production on the part of the claimant before a lawsuit is ever filed, creating another significant roadblock to filing a suit for construction defects. From the owner/association's perspective, this defeats part of the benefit to settling before litigation starts, as they must incur significant discovery expenses and attorney's fees just to go through the claims process prior to the filing of a lawsuit. In addition, the provision is one sided in that it does not require the contractors or design professionals to produce to the claimant a similarly broad amount of discovery during the process.

HB 87 would also provide for sanctions against an owner or association that brings suit for an item that is ultimately deemed by the court to be solely the fault of the claimant or its agents. Florida Statutes Section 57.105 already provides for fees against a party that prosecutes a frivolous claim or a frivolous defense. The bill does not reference the standard in Section 57.105, so essentially it creates a possibly different standard. HB 87's possible sanctions against associations/owners include not only attorney's fees but also costs of inspection, investigation and testing. However, if a contractor or other respondent is ultimately found to be responsible for a defect, and its defense was not supported by the facts or the law, no sanctions are provided against the contractor or its attorney under the bill.

As it now stands, HB 87 would cause significant obstacles and undue burdens on property owners and community associations that wish to pursue construction defect claims. Our firm's other community association attorneys and I encourage Florida associations and property owners to become informed about this bill and its progress in Tallahassee. The bill has been assigned to the Civil Justice Subcommittee, the Business & Professions Subcommittee and the Judiciary Committee, and it must pass those committees before coming before the full Florida House of Representatives in the 60-day legislative session that begins March 3, 2015. If passed, the new law would take effect October 1, 2015.


Elections 101

January 19, 2015, Posted by Laura Manning-Hudson


Laura Manning HudsonWith the new year comes new plans, new resolutions and . . . elections. For many community associations election season is well under way and, as easy as an election may seem (go out, get the votes, and count the ballots - right?), there are so many statutory nuances in the electoral process that, if handled improperly, can invalidate the entire election and cost the association both time and money. In an effort to assist association boards and hopefully avoid costly mistakes during the process, we have outlined the pertinent information that you need to know.

The Election Process:

First notice of election

The first notice must be mailed, emailed, or hand delivered to the membership at least 60 days prior to the annual meeting/election day.

The notice must include:

  1. The date, time and location of the meeting and election.
  2. The number of seats that are open for election.
  3. Details surrounding the information sheet that candidates must submit if they wish to run for the board.

Receipt of intents to run for the board

  • All eligible persons who wish to run for the board must submit their notice of intent to be a candidate for election no less than 40 days prior to the annual meeting/election.
  • Notice of intent may be submitted via mail, email, or hand delivered statement.
  • Any notices of intent received on the 39th day before the election (regardless of the day of the week that the 40th day falls on) - are deemed invalid and those names may not be placed on the ballot.
  • Each eligible candidate then has an additional 5 days (35 days prior to the election) to submit an information sheet (resume) to the association which will be mailed out with the second meeting notice.

Second Notice of Election

  • The second notice of election must be mailed, emailed or hand delivered to the membership at least 14 days prior to the annual meeting/election.

The Second Notice should include:

  1. Instructions for casting a ballot.
  2. The notice and agenda for the annual meeting (which will include the election).
  3. Any information sheets (resumes) submitted by eligible candidates.
  4. The ballot listing all of the eligible candidates' names in alphabetical order.
  5. An inner envelope labeled "Ballot Only" and an outer envelope labeled with the address of the property manager or the association.

MeetingVote.jpgVoting

  • In order to be valid, the unit owner's name must be printed on the outer envelope, together with the unit number, and the eligible voter's signature.
  • The eligible voter must select a candidate using the ballot included with the second notice and place it in the inner envelope.
  • The inner envelope must then be placed in the outer envelope.
  • The outer envelope may then be mailed or hand delivered to association or property manager.
  • The same process must be utilized (ballot, inner envelope and outer envelope) at the annual meeting up until the time that the inspectors of the election begin to open the outer envelopes.

While this process may seem tedious and time consuming, it is extremely important to remember that the process is in place to ensure a fair election. When casting your vote, keep in mind the importance of the board in your community. The board generally serves as the "people's voice" and handles the day-to-day operations and decisions of the association and, in conjunction with the manager, ensures that the community runs smoothly. Annual meetings and elections are an extremely critical time for any community association, so it is important that they are treated as such.

Please be advised that you may contact your attorney to handle the election for your association, as they are able to monitor and assist with the process to ensure all steps are followed correctly.


Appellate Opinion Reverses Foreclosure Court Decision Granting Association First-Priority Lien Rights Over Lender

January 12, 2015, Posted by Nicholas D. Siegfried


Nick Siegfried 2013.jpgIn another appellate ruling on a case involving significant delays by a bank in a residential foreclosure, the First District Court of Appeal has reversed a lower court's decision that awarded first-priority lien rights to a condominium association in Destin, Fla. over those of the lender due to the bank's dilatory tactics.

In the case of U.S. Bank National Association v. Nicholas Farhood, the First DCA reversed the trial court's final summary judgment of foreclosure and remanded the case back to the circuit court. The appellate panel found that the lower court's use of its "equitable power and authority to fashion a sanction for unspecified delays in this case constituted an abuse of discretion which must be reversed."

U.S. Bank had originally filed its complaint for foreclosure in this case with the circuit court on July 15, 2007, but then it progressed very slowly with the litigation for the ensuing four years. On September 1, 2011, upon U.S. Bank's motion to dismiss the association's counterclaim and upon an unrecorded hearing on that motion, the circuit court found that U.S. Bank had delayed the case and failed to act upon it, and as a "sanction" it ordered the lender to pay $2,500 to the association.

1dca.jpgThe litigation proceeded and in early 2012 U.S. Bank filed its motion for summary judgment of foreclosure, which included allegations that its mortgage was superior to the association's lien. The association responded with its own motion to dismiss and for sanctions against U.S. Bank for additional delay tactics, and it asked the court to issue a summary judgment on its counter claim for foreclosure for the past-due assessments and alleged that its lien was superior to any interest of U.S. Bank and the borrowers. Based upon the circuit court's equitable powers, the court declared the association's lien superior to U.S. Bank's first mortgage. U.S. Bank appealed the order and the appellate court reversed, finding that the circuit court exceeded its authority.

The appellate opinion concludes:

Even if the court correctly found that U.S. Bank or counsel had engaged in sanctionable delay tactics, the court had no need to resort to its equitable powers to create the sanction in this case. Appropriate remedies to address any willful and deliberate delay in the litigation are already established. See ยง 57.105(2), Fla. Stat. (award of attorney's fees and costs caused by opposing party's deliberate delays); Fla. R. Civ. P. 1.420 (dismissal of all or part of an action); 1.440 (setting action for trial); Fla. R. Jud. Admin. 2.545(e) (continuances should be few, good cause is required).


Not only did the court unnecessarily invoke equitable powers to create a remedy for delay, the order declaring the Association's lien superior to U.S. Bank's lien as a sanction for such delay exceeded the court's authority. '[C]ourts of equity have no power to overrule established law.' . . . The court's declaration of lien priority as a sanction impermissibly overlooks the common law and encroaches on the Legislature's codification of well-established property rights.

. . . Contrary to its assumption in the order imposing the sanction, the circuit court did not have 'equitable power and authority to give [the Association] first lien priority in this matter,' without regard to the statutes governing such lien priorities. The imposition of sanctions which contravene the recording and lien priority statutes, or the statutes establishing time and amount limits for a mortgagee's liability for condominium assessments, exceed a trial court's discretion and require reversal."

Our other community association attorneys and I will continue to monitor foreclosure cases and their impact on community associations. We write about important legal and administrative issues for Florida HOAs and condo associations in this blog on a regular basis, and we encourage association directors, members and 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 vs. Almost-New

January 5, 2015, Posted by Roberto C. Blanch


Roberto Blanch 2013.jpgConstant new development of residential and mixed-use towers can be seen all over South Florida, with new projects being announced constantly. The construction of these new towers evokes buyers to ask themselves: What is better, new or old? The answer to that question is triggering existing community associations to spruce up their communities by giving them a facelift in an effort to stay competitive.

With the intention of luring buyers to choose new over old, newer buildings are offering luxuries such as: sleek and polished designs, newer amenities, revolutionized living technology and the idea of being the first to live in a space that has not yet been inhabited. Add-ons such as state of the art fitness centers, exclusive resident spa services and five-star concierge and building services are making the choice of selecting new construction more appealing. However, this option commonly comes with a heavier price tag and some unexpected issues. A few draw-backs such as unforeseen construction delays and unknown kinks arising after construction are common issues owners face when selecting new construction. They also face the infamous turnover phase -- a time that could be very difficult for newly established community associations if they lack the right experts to guide them through the process. These challenges have prompted older towers to improve their buildings with hopes of enticing these buyers to look their way.

pool deck renovation.jpgOlder buildings are using the risks buyers face when purchasing new construction to their benefit. Towers over three years old are labeling themselves "established," having already dealt with most, if not all, construction defects found after the developer turned over control. They also highlight the fact that their boards are more seasoned, helping buyers feel like they are placing their investment in knowledgeable hands. Also, construction delays would never be an issue since these units are all move-in ready. In addition to highlighting some of the benefits that come with moving into an established community, many older condo towers are also making the effort in renovating their spaces to update their design to match the designs offered in newer construction. Some have gone as far as converting racquetball courts into multi-purpose rooms, yoga rooms, arts and crafts rooms and additional fitness centers. Simply by turning something old into something almost-new, these towers are keeping up with newer condos and competing at a price level that tends to be much more affordable, while still offering a similar style of living. With this in mind, the boards of these older buildings should be cautioned that their association's governing documents may prevent some of the proposed changes, and that many alterations and improvements must be approved by the association membership. Accordingly, it is advisable for community association counsel to be involved in the planning of any such changes.

It will be interesting to see what buyers will choose once most of these towers are finalized. Our firm's community association attorneys have assisted numerous clients with redesign projects throughout the years. We write in this blog about important legal and administrative issues affecting associations in Florida, and we encourage association directors, members and property managers to enter their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.


Nicholas Siegfried Discusses His Recent Win Before Third District Court of Appeal in Article in Today's Daily Business Review


Nick Siegfried 2013.jpgThe firm's recent win before the Third District Court of Appeal in an important decision for Florida community associations was the subject of an article in today's edition of the Daily Business Review. Nicholas Siegfried, who represented the community association in the case together with Steven Siegfried and wrote about the decision in the preceding blog article below, was interviewed and quoted by the newspaper.

The report reads:

The case shows the "negative consequences that lenders can face if they go too far with their delay tactics in foreclosure cases," condo association attorneys Nicholas and Steven Siegfried said in a statement.


The case was Deutsche Bank Trust Co. Americas v. Harry Beauvais, a borrower who defaulted on his mortgage within months of securing it in early 2006.

Loan servicer American Home Mortgage Servicing Inc. filed suit in January 2007, demanding accelerated payments for the full $1.44 million.

Ironically it was this move for upfront payments that would unravel the lender's case and cost the bank the million-dollar property, because the condo association successfully argued the demand started a five-year clock for resolving the foreclosure.

Statute of Limitations

The court booted American Home Mortgage's case without prejudice when the servicer failed to attend a hearing.

That dismissal led the condo group to start its own efforts to claim outstanding fees on the penthouse.

"Like a lot of associations, this one was waiting to see what would happen with the foreclosure action," said Nick Siegfried, shareholder at Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel in Coral Gables. "But since the bank didn't proceed and the case was dismissed, the association had no choice but to proceed on its own."

Aqua Master Association won control of the penthouse in 2011, but its claim remained subject to the mortgage.

When Deutsche Bank took over American Home's foreclosure suit in December 2012, Aqua said the clock had already been ticking for five years and was about 11 months outside the statute window.

The bank argued the earlier dismissal "decelerated" the loan, but a judicial panel disagreed.

In an opinion issued Dec. 17, judges Frank Shepherd, Kevin Emas and Edwin Scales barred Deutsche Bank from pursuing the foreclosure. They found the bank never withdrew the original demand for accelerated payments, and so had to abide within the five-year window.

Our firm congratulates Nicholas and Steven for prevailing in this case for the association for Aqua Allison Island in Miami Beach and drawing the attention of the Daily Business Review. Click here to read the complete article in the newspaper's website (registration required).


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Firm Prevails in Appellate Ruling: Bank's Foreclosure Delays Exceeded Statute of Limitations, $1.4 Million Penthouse Goes to Miami Beach Condo Association

December 19, 2014, Posted by Nicholas D. Siegfried


Nick Siegfried 2013.jpgOur firm's founder, Steven Siegfried and I are very pleased to have prevailed on behalf of one of our community association clients before the Third District Court of Appeal in the opinion filed this Wednesday, Dec. 17, in the case of Deutsche Bank Trust Company Americas v. Harry Beauvais et. al. The appellate panel affirmed the Miami-Dade Circuit Court's summary judgment that I had secured earlier this year barring Deutsche Bank from foreclosing on its $1.43 million first-mortgage on a penthouse at the Aqua Condominium in Miami Beach which the association had acquired ownership of in 2011 through its own foreclosure action. Since the bank failed to file its foreclosure action within the five-year statute of limitations period, it was barred from seeking to collect the amounts due under the mortgage (click here to read the blog article that I wrote on the circuit court's decision).

At the trial court level, we successfully argued that the bank had "started the clock" for the filing of its foreclosure action in January, 2007 when its loan servicer filed the initial foreclosure suit and accelerated the amounts due under the mortgage. The foreclosure was dismissed when the lender's attorneys failed to appear at the initial case management conference in December, 2010. For unexplained reasons, the bank then waited until December, 2012 to file its second foreclosure action, nearly a full calendar year after the five-year statute of limitations had expired. The circuit court granted our motion for summary judgment declaring the first mortgage held by the lender unenforceable, null and void and discharged of record from the penthouse unit.

3rd district court of appeal.jpgThe bank appealed the circuit court's judgment. Along with our co-counsel Todd Wallen, we successfully countered the bank's contention before the appellate panel that its second filing represented a new foreclosure action. The Third DCA determined that the initial foreclosure suit triggered the commencement of the statute of limitations and, thus, the filing of the subsequent action, after expiration of the statute of limitations, was therefore barred. As a result, the Third DCA affirmed the circuit court's order that the lender was barred from foreclosing on its mortgage, but it reversed the court's finding that the bank's mortgage was null and void. The end result is that although the mortgage remains on the property until its expiration, the lender is precluded from taking any action to collect the debt, thus allowing the association to continue to rent the unit without fear of an eventual foreclosure action by the lender.

This opinion is emblematic of the ultimate negative consequences that lenders are facing due to their failure to timely enforce their rights. After years of suffering due to the dilatory tactics of lenders, an association has finally caught a break and will benefit by this ruling. Every citizen of this state is bound by the applicable statute of limitations, and the Third DCA made it clear that banks are no exception. The ruling represents the first appellate opinion on a decision barring a lender from foreclosing on its mortgage due to the expiration of the statute of limitations, and it is likely to be considered by the Florida Supreme Court which is set to hear a similar case.


Firm's Michael Hyman Quoted in Daily Business Review Article on Appellate Ruling on Lenders' "Safe Harbor" Liability Limits


Michael Hyman srhl-law.jpgThe firm's Michael Hyman provided some insight into a recent decision by the Fifth District Court of Appeal in an article in today's edition of the Daily Business Review. The appellate ruling, which was also the subject of the preceding blog article by firm partner Nicholas Siegfried, affirms that subsequent mortgage assignees of the original first mortgage of a property are entitled to the "safe harbor" limitation for unpaid association dues of the lesser of twelve months of assessments or one percent of the original mortgage debt.

The article reads:

"It's really a better decision for the lending industry than it is for the community association industry," said Michael Hyman, who is not involved in the Beltway case but knows the issue.


"It certainly doesn't help the associations in trying to capture as much of their delinquencies as they can," he said.

Hyman's firm, Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, has hundreds of condo association clients; he got his first one in 1970.

Over the years Hyman has watched the push-pull of the two industries in the courts and the Legislature.

"Safe harbor was a result of the banking industry years ago going to the Legislature and convincing them that lending would be in peril if a first mortgagee didn't have priority over a condo assessment," he said. "It was instituted so that a lender could always be in a position of priority over an association lien."

Before the condo statutes were amended to add safe harbor, many of the older associations had governing documents that failed to address the liability or assessments post-bank foreclosure. Or they had provisions that would entirely extinguish the liability for assessments incurred before a bank received title through foreclosure.

Condo associations having a pretty strong lobby of their own, the point was taken that they were losing barrels of money. The resulting compromise added the 12 months or 1 percent provision for first mortgagees.

"It was sort of a bone that was thrown to the condo associations by the banking industry to prevent a catastrophe," Hyman said.

Since the mortgage meltdown, however, the bone has lost meat. There were so many foreclosures and they took so long that associations found themselves "upside down" and suffering, he said.

"We had associations that had a large portion of their units in foreclosure and the associations had to change their operational motifs and pass special assessments because they didn't have enough money to pay their bills," Hyman said.

Most recently, the Legislature changed the safe harbor rules effective July 1 to help aggressive associations that beat out lenders in the competition to foreclose.

The banks argued that by foreclosing, an association would put itself in the position of the prior owner who isn't entitled to collect any past-due fees. An amendment provided clarity, Hyman said.

"Now if the association takes title, the bank coming behind them on the bank's foreclosure still has to pay the 12 months or 1 percent," he said.

. . . Hyman has his own take on how Beltway came to be a case of first impression.

"The issue has never been brought up because nobody would have thought to argue it was even controversial," he said. "It was never teed up for determination."

Lawyers for the condo association used a creative defense against application of the safe harbor law that swayed the trial judge.

"Then the appellate court kind of straightened it out," Hyman said. "The court basically said, 'Hold on, you're not looking at this in the appropriate way.' "

Our firm congratulates Michael for providing his expert analysis of this ruling for the readers of the Daily Business Review. Click here to read the complete article in the newspaper's website (registration required).


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