Florida HOA Lawyer Blog

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

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

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

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

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

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

One area of the law which our community association lawyers get asked about on a regular basis is the notice requirements for the various types of association board meetings. Community associations must strictly follow the statutory requirements for noticing board meetings in order to avoid potential legal complications. This article will serve as a refresher for association board members and unit owners on compliance with the basic laws governing notification of condominium association board meetings, and the second part of this series will focus on the notice requirements for homeowners association meetings governed by Chapter 720, Florida Statutes.

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

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

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

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

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

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

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

Before commencing a new project or improvement to an association's property, it is essential for community association board members to review and follow the procedures which are required. Florida statutes restrict the ability of board members to authorize certain alterations to their community's property. For instance, the applicable statutes provide that condominium board members in Florida cannot effectuate material alterations to the common elements without the approval of 75 percent of the voting interests, unless otherwise provided in the association's governing documents.

Condominium associations in Florida have been required to obtain unit owner votes for improvements as minor as painting the bottom section of columns in a garage in order to make them more visible to the drivers. Other precedential examples of "material alterations" requiring unit owner votes have included the redecorating of common-element facilities, painting the exterior of buildings, and changes to roofs or pool-deck flooring.

The governing documents for most community associations will contain provisions addressing how to proceed with making alterations. Some documents may provide that the association's board alone is authorized to proceed with making the alteration. Others may set monetary limits as to alterations that may be effectuated by board vote alone, and some require a unit owner vote but at a lower approval percentage than what is statutorily required.

However, in certain situations, material alterations have been permitted without unit owner votes, such as alterations which are required to protect the safety of residents. In such example, a condominium was permitted to have a fence installed in order to protect against a high volume of documented criminal activity. Material alterations have also been permitted without unit owner votes to provide for the installations of "better systems." For example, a condominium association was allowed to install a new pool deck surface because it was heralded as being a more economical system to maintain and repair, and it would make repairs to underlying common-element components more affordable and practical.

To a great extent the restrictions pertaining to material alterations do not apply to homeowner associations, given that the Florida Statutes governing HOAs do not contain these same types of restrictions. However, some homeowner association governing documents do contain restrictions to alterations of common areas and association property.

Community association boards should consult with legal counsel to ascertain the extent to which they are required to obtain a vote of the owners with regard to a project, and if so, whether any recognized exceptions exist. This will help them to avoid the consequences of not getting the required vote, which may include having to get the vote and/or revert the alterations to their pre-alteration condition if the vote is not obtained.

A recent decision by the Fourth District Court of Appeal has the potential to be misconstrued by community associations to mean that they can arbitrarily and selectively enforce their governing documents against members. In the case of Heath v. Bear Island Homeowners Association, Inc., the appellate court upheld the lower court's decision in favor of Bear Island Homeowners Association, noting that a clause in the association's Declaration of Covenants and Restrictions specifically stated that it was not required to seek enforcement of its declaration in connection with all violations.

Most community association attorneys, including those at our firm, counsel their clients to avoid acting arbitrarily in the enforcement of their rules and other governing documents because it could lead to effective legal defenses by owners challenging the association's enforcement actions. Associations are required to enforce their covenants equally against all owners, and the failure to do so may result in an owner claiming that the association has engaged in "selective enforcement." By enforcing its governing documents only against some owners, while allowing others to commit violations without fines or other sanctions being imposed, an owner may be able to defend against an enforcement action by claiming that the association has not equally enforced its documents. Additionally, there have been cases in which owners have prevailed in court by arguing that their association waived its right to enforce a specific provision of the covenants because it had previously neglected to enforce it against other members.

In the recent Bear Island decision, the court based its ruling on the specific language of the association's Declaration of Covenants, which plainly stated that the association "may, but shall not be required to, seek enforcement of the Declaration." The plaintiff in the case, who was a unit owner and a member of the association, petitioned the court for an injunction to force the association to enforce the terms of its declaration against other owners who had modified and improved their properties without first seeking prior approval by the association. Due to the specific language in the declaration, the court found that the plaintiff did not have a clear legal right to injunctive relief.

Associations should avoid reading more into this case than what is actually there. The ruling applies only to the appropriateness of injunctive relief to force an association to enforce its governing documents when the association's declaration specifically states, in plain and clear language, that the association is not required to seek enforcement. Community associations, including those with this or similar language in their declarations, should continue to act equally towards all members and avoid arbitrary enforcement of their governing documents, as the failure to do so could continue to result in owners successfully defending against an enforcement action or challenging the association's actions.

This ruling is bound to receive a fair amount of attention, and we encourage associations with questions about its applicability to their enforcement actions to consult with our community association attorneys or their own qualified and experienced legal counsel.

A change to the Florida Rules of Civil Procedure that took effect on January 1, 2012, has significant implications for the future of all mediations in Florida, including mediation proceedings involving community associations.

The Florida Supreme Court recently ratified a significant change to the state's mediation procedures found in Rule 1.720 of the Florida Rules of Civil Procedure. The new rule now requires that each party (or its representative) that appears at the mediation proceedings must have the "full authority to settle." This means that the party or representative must be the final decision maker with respect to the issues presented at the mediation and must have the legal capacity to enter into a binding agreement on behalf of the party.

A major impetus for this change has been the problems stemming from bank foreclosure mediations. Generally, banks and their servicers in these cases have sent to mediations an individual who did not have the authority to approve a settlement, or worse, would have such individual appear telephonically. Further complicating the problem is the fact that oftentimes several different departments within a bank may be required to approve a proposed settlement, and fewer than all of these departments attended the mediation. The change in the rule forces the banks and their servicers to send to mediation their agents who have the complete authority to consider and authorize a settlement with no additional consultation.

Under the amended rule, each party must file a Certification of Authority at least 10 days prior to appearing at the mediation. The certification must identify the person who will be attending the mediation and must further confirm that this individual has the full authority to settle the issues raised at mediation. In other words, the person identified must be the "final decision maker with respect to all issues presented by the case who has the legal capacity to execute a binding settlement agreement on behalf of the party." Sanctions may be imposed for the failure to file a Certification of Authority or the failure of the individual(s) actually identified in the certification to appear at the mediation. These sanctions can include awarding the opposing party its attorneys' fees and costs.

This amendment to Rule 1.720 applies to all mediations within the State of Florida, but it will likely have a great impact on the manner in which community associates handle mediations. Traditionally, community associations have sent the association president, property manager or a designated board member(s) to attend mediations, and these representatives would reach only a tentative settlement at the mediation, which the entire board of directors would need to approve or reject at a later date. Under the rule change, this approach is no longer acceptable. The community associations must now either have a quorum of its board appear at the mediation or send a representative who has been pre-authorized by the board to accept a settlement that meets certain parameters that have been pre-approved by the board. The appearance of such individuals at mediation could arguably be considered a board meeting, and therefore should be noticed, albeit as a privileged meeting at which the association's legal counsel should be in attendance. Alternatively, if a quorum of an association's board cannot attend the mediation, it will be imperative for a duly noticed board meeting to be held in advance of the mediation in order to vote on the settlement terms that the association is willing accept and whom they will authorize to attend.

Of course, the individual(s) who attends the mediation on behalf of the community association will continue to be able to reject any settlement offers at the proceeding. Simply rejecting a proposed offer does not, by itself, indicate that the attendee lacks the authority to settle. However, they must also be able to accept a settlement without the need for a subsequent final review and approval by the board. As community associations often utilize mediation either as a prerequisite to litigation or as a means to avoid costly and prolonged litigation, this rule change has very significant implications for all of the community associations in the state.

This rule change should help to make mediations in Florida more effective and expeditious for community associations and all others who take part in these proceedings. Our South Florida community association attorneys have helped many homeowners associations and condominium associations use mediations to find fair resolutions to various types of lawsuits and disputes. We will continue to write about these and other important matters for associations in our blog, and we invite association members, directors and property managers to submit their e-mail address in the subscription box on the right in order to automatically receive all of our future articles.

Community associations throughout Florida have benefited greatly from last year's amendments and this year's expansion of the Condo Act enabling associations to collect rent payments directly from the tenants of delinquent unit owners. Pursuant to the Condo Act, associations are now able to quickly and effectively evict tenants who refuse to comply with their demands for rent. However, some associations needlessly delay utilizing the new teeth that the legislature has provided and exerting legal pressure by filing for eviction against tenants with creative explanations for why they are unwilling to pay the association.

In many of the cases that the community association attorneys at our firm are seeing where tenants refuse to comply with an association's demand for rent, the tenants are residing in units that are in foreclosure. Many of these renters are under short-term or month-to-month leases, and they are often paying reduced rental rates because of the pending foreclosure. In some situations, the associations have no record of the lease on file or they are told that there is no lease between the tenant and the unit owner. When some of these tenants receive the association's demand, they reply by indicating that they are no longer paying rent to the unit owner, or that the owner has agreed to let them remain in the residence until the foreclosure is over.

For many associations, this type of reply from a tenant causes them to question their ability to file an action for eviction - a right that the law allows and which can exert considerable legal pressure on the tenant to force them to begin paying the association. Under the Condo Act, associations have the right to file a complaint for eviction in the name of the landlord if the tenant refuses to comply with the association's rent demand. The association simply needs to follow the procedures set out in the Condo Act by sending an initial notice letter requiring the tenant to make his or her monthly payments to the association. If the tenant does not make the payment to the association, then the association has the right to commence eviction proceedings as if it were the landlord in a landlord-tenant action by sending a three-day notice of nonpayment. If payment is still not made after the three-day notice, then the association can immediately file a complaint for eviction, which has the benefit of being expedited by court. In eviction proceedings, a five-day summons is issued - meaning that once the tenant is served with the complaint, the tenant has five days to respond. If the tenant raises any defense other than payment, the tenant is required to pay the rent into the court registry. Failure to respond or make the rent payment into the court registry results in an immediate default judgment for removal of the tenant with a writ of possession.

Once the eviction process is underway, the association should bear in mind that it is still possible to negotiate with the tenant to try and get them to start making some sort of a monthly payment if they wish to remain the residence. Sometimes the tenant will agree to pay an amount equal to the monthly maintenance fee. If so, at least the association can begin collecting payments for the current and future months of the tenancy. Bear in mind that if the tenant has a written lease on file with the association, the tenant cannot be obligated to make monthly payments to the association in excess of the amount of the rent payment set forth in the lease.

As the slow pace of the foreclosure process continues to unwind with many thousands of condominiums and homes in South Florida, cases of tenants refusing to comply with these types of rent demands are bound to continue to grow. For the associations that hope to recover from the housing market meltdown as quickly as possible, using these eviction proceedings against tenants who refuse to comply offers them a powerful new collection tool.

The repercussions of the robo-signing debacle are still reverberating in foreclosure cases that are being heard today in the South Florida courts. Delays and dismissals of the banks' foreclosures due to improper paperwork and loan documentation have become the norm, and this is dealing another significant financial blow to the community associations that have already been struggling with unprecedented numbers of foreclosures during the last several years.

The South Florida community association attorneys at our firm have found that it has become imperative to take a very active role in the banks' foreclosure cases in order to help ensure that any delays are kept to a minimum. Many bank foreclosures are being delayed or dismissed because the bank's paperwork is questionable or the homeowner has retained a foreclosure defense attorney to mount a number of strategic defenses. This makes it vital for the associations and their legal counsel to regularly monitor the dockets for these cases, and to quickly take action to speed things along as necessary.

Associations can enter a request for a status conference on the case, which would enable them to determine the exact progress of the case and the nature of any delays. They can also file a Motion to Compel, which essentially asks the court to require the bank to take specific actions by set deadlines. If the association takes title to a property via its own foreclosure action then, in the bank foreclosure, the association can make a request for a summary judgment in the bank's favor. If the delays are taking place in the earliest stages of the bank's case, the association's attorneys should make these efforts to notice the case for trial and move it to the final judgment hearing as soon as possible. If the bank's case is almost complete and the bank has received a final judgment, the association can ask the court to set or reset the sale date for the property. Many banks that reach this stage are cancelling their foreclosure sales just days prior to the sale date, and the courts have been receptive to requests from the associations to immediately reset the sale dates.

If a bank's foreclosure is dismissed, or even prior to it being dismissed, it may be prudent for an association to proceed with its own lien foreclosure action, as the bank's delays or dismissal creates a window of opportunity. If the association is comfortable owning the residence and the governing documents allow rentals, then the association can and should quickly foreclose and take title to the residence, as it is then able to begin renting the unit to recoup the past-due fees and assessments. If the bank's foreclosure is dismissed, it could take the bank a significant amount of time for it to gather missing documentation and try again to foreclose on the residence. During that time, the association is able to use the residence to generate revenue.

As the delays and dismissals in the lenders' foreclosure cases continue to slow the pace of the entire process, the community associations that act quickly to move the bank cases along or take title to the properties are the ones recovering from the housing meltdown as expeditiously as possible. Our attorneys will continue to write about these and other pressing issues for Florida community associations, and we encourage association members, directors and property managers to submit their e-mail address in the subscription box on the right in order to automatically receive all of our future articles.

In addition to the suspension of the rights to use the shared amenities in a condo or HOA community for association members who fail to pay their monetary obligations, the legislature has also enabled the associations in the state to suspend the voting rights of delinquent unit owners. However, unlike with the suspension of the rights to use the pool or the fitness center, there are some potential drawbacks for some associations with the suspension of voting rights that require careful consideration.

HOAs and condominium associations are both able to suspend the voting rights for owners who become delinquent in the payment of monetary obligations exceeding 90 days. These suspensions are automatically lifted upon the full payment of all monetary obligations currently due and overdue by the member. HOAs are also able to suspend both the voting rights and the use rights of the common elements in the community for noncompliance with the governing documents.

As with the issuing of fines, some of these collections remedies require advance written notice and a hearing opportunity for the unit owner. However, with a suspension of voting rights for being delinquent, the law does not require a notice or a hearing. Associations only need to adopt a collection policy which includes the suspension of voting rights as a remedy, and this new policy should be communicated in writing and at a general membership meeting. A typical association policy for the suspension of voting rights establishes that the board of directors will take a vote at a meeting of the board to initiate the suspension of a delinquent member's voting rights.

Unfortunately, the use of this remedy against delinquent members has the potential to backfire for some associations that may rely on the votes of their large numbers of delinquent owners on a regular basis. Voting suspensions serve to reduce the pool of potential voters on any issues that require membership votes, and there is a section of the statute (720.305 for HOAs and 718.303 for condos) that implies that the number of owners who would be needed to constitute a quorum is reduced by the number of units with suspended voting rights. However, there remains some debate as to whether that was the true intent of the revision to this statute by the legislature, and this uncertainty creates the potential for votes to be challenged by recalcitrant members on the grounds of whether they achieved the required number of voters to fulfill the quorum.

Due to these issues, the most prudent policy for associations which depend on the voting by delinquent members in order to carry forth their votes on a regular basis would be to avoid the suspension of voting rights.

Suspending the voting rights of nonpaying members is just one of the remedies that the associations can use to spur these unit owners to bring their accounts current. The condominium associations and HOAs in the state should carefully consider and utilize this and all of the other collections measures that the law allows.

Our community association attorneys represent more than 500 condominium associations and HOAs throughout South Florida, and we will continue to monitor and write about important issues impacting the associations in this blog. We encourage association members, directors and property managers to submit their e-mail address in the subscription box on the right in order to automatically receive all of our future articles.

Every year, after the legislative session is concluded, it is always an adventure to see how various bills were tweaked along their way to becoming laws. Drafting legislation is a process in which the bill's author must not maintain any pride of authorship whatsoever. For example, often a bill's text is tweaked when Senate and House bills are combined, each needing to leave their unique mark.

This year's 2011 community association legislation is no exception, and as a result, both the Condominium and Homeowners Association Acts now provide that "an association, or its successor or assignee, that acquires title to a unit through the foreclosure of its lien for assessments is not liable for any unpaid assessments, late fees, interest, or reasonable attorney's fees and costs that came due before the association's acquisition of title in favor of any other association, as defined in s. 718.103(2) or s. 720.301(9), which holds a superior lien interest on the unit. This subparagraph is intended to clarify existing law."

Before we examine how this law can affect your association, let's first take a peek at how the new law actually "clarifies existing law." Remember learning not to believe everything you read? Well, it's true! There is little chance this new law is a clarification of existing law because there is no existing law addressing this subject matter in the first place! Nevertheless, let's apply the new law to a hypothetical situation that will soon likely mirror real life events:

Let's say Daniel Debtor lives in a sub-association community that has a master association, too, and that Daniel is behind in his assessment obligations to both the sub-association in the amount $3,000, and to the master association in the amount of $2,500. Both associations send Daniel Debtor the statutorily required notice of intent to record a lien and notice of intent to foreclose the lien. Not only was the master association's declaration recorded before the sub-association, but the master association recorded its lien against Daniel's property one month before the sub-association. As fate would have it, the sub-association decides to foreclose, acquires title to the home, and leases it out to Timmy Tenant for $500 per month. Shortly after the sub-association acquired ownership of the home, the lender begins its own foreclosure and, as a result, around one year later, Betty Buyer purchases the home during the court ordered auction. What does Betty owe to the master association?

Betty Buyer will only have to pay assessments that remain due to the master association from the date the sub-association acquired the title. As a result of the new law, the master association's prior assessment debt against this lot (through the date the sub-association acquired title) is wiped out, as the sub-association along with its successors in title no longer have liability to pay the master association's assessment arrearage. Title to the home passes from the sub-association to Betty through a "clerk's deed" because she was the successful bidder at the lender's court ordered auction. Thus, Betty Buyer is a "successor" in title to the sub-association. Applying the new law, the master association's prior lien that secured its assessments owed is completely wiped out through the date that the sub-association acquired title.

That's right! Based on this new law, the association that first acquired title wipes out any other association's assessment lien through the date of acquisition of title, without regard to the actual lien priority. What was that, you ask? You believe that this sparkling new law actually retroactively impairs existing contracting rights? Well, at its very core, every "declaration" is a contract between the community and each homeowner. In addition, many declarations have language that provides that a recorded lien dates back to the day of recording of the declaration itself! There even already exist other statutes that address lien priority, too. Does this mean, similar to the application of the "safe harbor" statutes that define a lender's assessment liability, that this new law only applies to declarations recorded after the effective date of the new law? Could be.

Remember, Timmy Tenant? During the year it owned the home, the sub-association leased it to him. Timmy is a tenant and not a "successor or assignee" to the sub-association's acquisition of title. With that in mind, can the master association make demand upon the sub-association's tenant to pay the rent to master association? A most excellent question indeed! Until the courts provide guidance or the legislature amends this new law, we'll all be well advised to watch this one closely.

Never underestimate the power of the United States bankruptcy courts. As a much younger lawyer, I was amazed to learn that in a bankruptcy proceeding, rather than requiring a process server to serve the complaint upon the defendants, a debtor-plaintiff can actually serve their bankruptcy complaint on the creditor-defendants by U.S. First Class Mail! Yes, the bankruptcy court is full of surprises. A bankruptcy court might even be able help fix the unfixable, unanswerable problem: How can an association require a first mortgagee lender to pay assessments during the lender's own self-stalled foreclosure?

If you're following recent developments in the foreclosure courts, you already know that many lenders have stopped their foreclosures cold because they have no confidence in their very own mortgage documents. Apparently, with the securitization of mortgage backed securities, "Wall Street" failed to keep track of the actual mortgage documents. For analogy, imagine the paperwork that evidences each residential mortgage as a stack of paper six inches high. Imagine how many six inch stacks of paper can fit into a semi-trailer. Now imagine each semi-trailer full to the brim with these six inch stacks. Remember, each six inch stack represents only one mortgage. Think of the loaded semi-trailer as the hard asset upon which each mortgage backed security was created; one semi-trailer for each mortgage backed security that was created. With that in mind, imagine that the semi-trailer representing only one of seemingly countless mortgage backed securities, is bought and sold multiple times each day to multiple investors from all over world . . . every day for several years. What happened to the semi-trailers? Where are all of those loan documents that together comprise the mortgage backed security?

Recently, "60 Minutes" suggested that hundreds of thousands of loan documents were re-created by companies outsourced by our nation's largest lending institutions. These re-created documents are nothing more than forgeries. Any lawyer who knowingly forecloses a debtor based on fraudulent documents commits a fraud on the court, not to mention exposing their client to significant liability. Meanwhile, associations, large and small, suffer from a continued lack of assessment revenue from these stalled foreclosures.

For a time, upon proper motion, the trial courts were ordering stalling lenders to either move their foreclosures along or pay assessments. On appeal, the appellate courts reversed. Primarily, they held that where a remedy at law exists, the trial courts could not create equitable relief for associations. With that in mind, how can the lender ever be responsible to pay assessments before it finally acquires title to the property?

The answer, pending the financial strength of your association, might be a bankruptcy to reorganize the debts of the association. In these situations, a Chapter 11 bankruptcy might just be what the doctor ordered. Not only does it provide the restructuring of existing debts, but it allows the federal bankruptcy court to do what the state courts cannot. Specifically, under federal bankruptcy law, the court can order the secured creditor (in this case, the lender whose mortgage is secured by the property) to pay a "surcharge" during the reorganization.

As discussed in the recent United States, Southern District Bankruptcy Court case, In re the Spa at Sunset Isles Condominium Association, the federal bankruptcy "surcharge" can be implemented to require a lienholder (the lender) to be charged with the reasonable costs and expenses incurred by the debtor (the association) to preserve or dispose of the lienholder's collateral to the extent that the lienholder derives a benefit as a result.

The lender had argued that any order requiring it to pay the "surcharge" was improper because state law had already prohibited requiring the lender to pay towards the upkeep of the property prior to the time it acquires title to the property as a result of its own foreclosure. The bankruptcy court looked to Article VI of the United States Constitution, the Supremacy Clause, which provides that the laws of the United States "shall be the supreme law of the land and the judges in every state shall be bound thereby, anything in the Constitution or Laws of any state to the contrary notwithstanding." The court required the lender to pay their pro rata share of preserving the association's common elements.

Not every association is a candidate for a Chapter 11 bankruptcy. Pending the number of foreclosures in your community, the financial shortfall created by the debt, the association's cash on hand, the ability of the association to pay its debts, etc., a Chapter 11 bankruptcy may or may not be appropriate. Clearly, the necessary first step is consultation between the board and qualified bankruptcy counsel.

For condominium associations in Florida, enforcing rules against unit owners who are in violation does not require costly and prolonged litigation in circuit court. Condominium associations have the option of using the Mandatory Non-Binding Arbitration Program under the Division of Florida Condominiums, Timeshares, and Mobile Homes for quick and fair resolutions to the vast majority of disputes involving enforcement of restrictions found in an association's governing documents. In fact, condominium associations are not allowed to take disputes involving pets, unapproved construction/modifications, nuisance violations, elections and meetings to the local courthouse without first filing a petition for arbitration under this state program.

Prior to filing a petition for arbitration, the unit owner must be given written notice of the violation and a reasonable amount of time to cure the violation (or cease and desist from the violating activity). If the owner refuses to comply or re-violates, then a petition for arbitration may be filed with the division of condominiums by the association's counsel.

Once the petition is received and reviewed by the division of condominiums in Tallahassee, the arbitrator who is assigned to the case accepts jurisdiction and sends an Order Requiring Answer to the owner via certified mail. The Order requests that a written response to the petition be filed by the owner within 20 days of the owner's receipt of the Order. Once the arbitrator receives a response from the owner, he or she will either enter a final decision or refer the response to the attorney for the association in order for them to review and refute the owner's defenses. Shortly thereafter, the arbitrator will either enter a summary disposition or set the matter for a final hearing.

All appearances with the arbitrator are via telephone, or for the rare, complicated case a live web-conference is used. Arbitration cases typically take from two to six months from start to finish depending on the nature of the violation and the owner's defenses, if any.

In the case where the arbitrator's decision is favorable to the association but the owner still refuses to comply, the association is required to file a complaint in county court to confirm the arbitration award, which is routinely quickly confirmed since the award is admissible into evidence for the court to consider. With that judgment, the association is then able to impose all of the penalties and consequences that its policies allow, including recovery of its attorney's fees and costs from the owner.

In general, condominium associations would be well advised to take advantage of the arbitration program to enforce their policies and restrictions when they are disregarded by rogue owners. The arbitrations are designed to be inexpensive and expeditious for both the associations and their members, who in most cases are not represented by counsel. However, many associations are still reluctant to use this process to enforce the rules against owners who are in violation, even when the owner blatantly refuses to comply. For these associations, not enforcing the restrictions may result in the waiver or loss of the right to enforce those restrictions in the future, which would be unfair to all other members who follow the rules.

Our community association attorneys in South Florida regularly work with many of our condominium association clients to enable them to utilize this arbitration program in order to effectively and cost-efficiently enforce violations against noncompliant owners. We write about important issues for condominium associations such as this in our blog on a regular basis, and we encourage members, directors and property managers to enter their e-mail addresses in the subscription box on the right in order to automatically receive all of our future articles.

A couple of weeks ago I wrote an article for this blog that focused on the tactics that we are using to enable community associations to contend with unit owners who file for personal bankruptcy protection. For my first video as part of our new video series, I focused on one of the strategies that we have now been using with considerable success.

Many of these associations are quite surprised when they learn that under Chapter 13 bankruptcy, homeowners can strip away any second mortgages or association liens if they are able to prove that they have absolutely no equity in the home. By submitting to the bankruptcy court a professional appraisal that says that the current market value of their home or condo is actually less than the amount that they owe under the first mortgage, they are able to use the "lien stripping" provisions under Chapter 13 bankruptcy to wipe out everything that they owe to the association or under a second mortgage from prior to the bankruptcy filing.

As you can well imagine, the use of lien stripping has grown quite a bit during the last several years with the meltdown in the housing market, and as a result we are working with a number of our association clients to help them to fight it. To learn more about exactly how we are helping our association clients to successfully contend with lien stripping by their members in bankruptcy, click below to watch my brief video on the matter and scroll down to read my article posted on Sept. 20.

Our firm is very proud to serve as one of best sources for information and sound legal insight for community associations in Florida via our blog and our live weekly radio show. As a complement to the topics that we discuss in both this blog and the radio show, we are launching a new series of online videos featuring brief discussions from our attorneys about some of the most pressing issues that we cover.

The videos will become a regular feature in our blog and on our website, and the best way to make sure that you do not miss them is to subscribe to the blog by submitting your e-mail address in the subscription box on the right.

Click below to watch my first video introducing the new series and discussing the types of topics that we will be covering in our future videos.

The recent report in The Miami Herald stating that the number of South Florida homeowners who owe more on their mortgage than their property is worth remains above 400,000 was very disquieting for the thousands of community associations in the region. Many of these associations have already discovered that their members who file for Chapter 13 bankruptcy have the opportunity to wipe away their association lien and second mortgages or secured credit lines if they are able to demonstrate that they have no equity in their property because it is now valued at less than what they owe on their first mortgage. With so many homeowners underwater on their first mortgages in South Florida, the use of these lien stripping provisions under the bankruptcy code seems destined to continue to rise.

Thankfully for the associations, there is a strategy that we have been using with considerable success to enable them to fight back and avoid lien stripping. It hinges on the fact that the criteria in the bankruptcy code for lien stripping to take place essentially creates an all or nothing requirement for the debtor who is trying to show that they have no equity in the residence. If the association is able to demonstrate to the bankruptcy judge that there is even just one dollar in equity in the residence, then the debtor is unable to strip away the association lien or second mortgage.

The issue becomes a "battle of appraisers." Given that, we are counseling our association clients in these cases to obtain detailed professional appraisals based on recent comparable sales and the condition of the residence that show that it is worth more than the balance due on the debtor's first mortgage. We then submit the higher appraisal to the bankruptcy court, and in many of these cases we are able to reach a settlement to recoup some of the delinquent fees that would otherwise have been eliminated using lien stripping. In one recent case, the association was owed $28,000 and we secured a settlement for $17,000 to be paid through the Chapter 13 bankruptcy, marking a very successful outcome for the association in today's "debtor friendly" bankruptcy world.

The results, of course, will vary based on the amount that the homeowner owes under their first mortgage and the strength of the association's higher appraisal. However, we have certainly realized a great deal of success using this approach, and we plan to continue using it on behalf of many of our association clients that are facing the prospect of receiving nothing for what they are owed from prior to their member's bankruptcy filing.

Directors and managers of Florida community associations seem to be on a never-ending search for effective tools to compel unit owners or their tenants and guests to comply with the association's rules and restrictions. Until not too long ago, Florida condominium association boards had few practical remedies at their disposal to address violations. Of course, the condo associations could file lawsuits or arbitration actions to seek recourse for violations, but the costs of pursuing these cases is a significant deterrent, despite the hope that they will recover attorney's fees and costs should they prevail. The associations may also impose fines - if their governing documents allow - but deterrents to the implementation of fining as a viable remedy include the caps applicable to such fines and the difficulty of getting individuals to serve on fining committees.

As a result of recent legislative changes to the Condominium Act, associations gained the ability to suspend the rights of an owner, tenant or invitee to use common elements, common facilities or any other association property, in the event that the owner of the unit is delinquent more than 90 days in paying a monetary obligation to the association. Subsequently, as a result of the 2010 legislative session, a condominium association may also suspend, for a reasonable period of time, the right of a unit owner, or a unit owner's tenant, guest or invitee, to use the common elements, common facilities or any other association property for the failure to comply with any provision of the declaration, the association bylaws or reasonable rules of the association.

As with the imposition of fines, these suspensions may only be imposed if the association provides the owner with at least 14 days' written notice and an opportunity for a hearing. If applicable, the unit's occupant, licensee or invitee must also receive such notice. The hearing must be conducted and held before a committee of other unit owners who are neither board members nor persons residing in a board member's household. If the committee does not agree, then the suspension may not be imposed.

Unlike suspensions for failure to pay monetary obligations, the wording of the newly adopted changes to the statute does not limit the portions of the common elements, common facilities or association property that may be suspended for the failure to comply with any provision of the declaration, the association bylaws or reasonable rules of the association. This distinction creates the argument that associations may be more aggressive in this type of suspension, to include the suspension of the use of parking spaces, limited common elements, etc. - though conservative practitioners caution that this is not necessarily the case.

Additionally, the success of this type of remedy may depend upon various factors, including whether the community has the ability to enforce the suspension, whether there are community facilities that are worthwhile suspending, and whether there are qualified owners who are willing to serve on the committee that is required to impose the suspension. Lastly, when implementing the suspension, board members should be aware of what the association may be required to do in order to enforce the suspension in the event that the suspended individual defies it.

In light of the implications and procedural considerations related to the suspension of use rights, we encourage board members and managers alike to work closely with their association's legal counsel in order to determine the best course of action to address violations in their community.