Recently in Condominium Association Law Category


Tenants' Rights in Condominium Communities

July 2, 2015, Posted by Laura Manning-Hudson


LauraManningHudson.jpg Our firm's other community association attorneys and I are often asked by condominium association board members about the rights of tenants who are renting units in a condominium to use the common elements - as well as their ability to participate and vote in meetings and elections.

The Condominium Act provides that tenants who are leasing units in communities "shall have all use rights in the association property and those common elements otherwise readily available for use generally by unit owners." This means that associations must allow renters to have the same use rights as unit owners to the pool, fitness center, clubhouse, tennis court, etc. Renters may also use the parking spaces designated for their unit.

For unit owners who are leasing their residences, the law also provides that they "shall not have such rights except as a guest, unless such rights are waived in writing by the tenant." The law further provides: "The association shall have the right to adopt rules to prohibit dual usage by a unit owner and a tenant of association property and common elements otherwise readily available for use generally by unit owners." tenright.jpg This means that owners who rent out their units may not also come by to swim in the pool whenever they want!

With regard to association meetings and voting, tenants do not typically have the right to attend meetings because they are not owners, however, tenants who are conferred with a Power of Attorney by their unit owners may attend and speak at the association meetings. Voting rights and requirements for board membership are generally document specific and can be found in the association's bylaws.

Another issue that often arises is whether condominiums can prohibit tenants from having pets even if the governing documents allow unit owners to have pets. The issue turns on the exact language in an association's governing documents. Many board members are surprised to learn that they may adopt rules that restrict tenants from having pets based on the language in their recorded documents - but this is not always the case. Many association documents require a unit owner vote to amend the documents in order to restrict tenants from having pets.

Finally, if a tenant or their landlord/unit owner violates the association's rules and regulations or other governing documents, the Condominium Act has empowered the association to restrict the tenant's ability to use the common elements. This also applies to the tenants of unit owners who become more than 90 days delinquent in the payment of their association dues.

With so many investor-owned units in South Florida condominium communities, significant percentages of tenants under short and long-term leases are likely to be a permanent characteristic. Associations should bear in mind that laws do exist to protect tenants' rights in order to help ensure that associations avoid the possibility of unforeseen legal liabilities.


Article by Firm's Michael Chapnick in Today's Daily Business Review: "New Law Allows Electronic Voting by Community Associations"


MichaelChapnicksrhl-law.jpgFor the second consecutive day, an article on important issues for community associations authored by one of our firm's partners appeared today as a guest column in the Daily Business Review, South Florida's only business daily and official court newspaper. Partner Michael E. Chapnick with our West Palm Beach office wrote the article in today's edition of the newspaper about the new electronic voting law for community associations. His article calls for the state's Division of Condominiums to establish an approval and certification process for the e-voting systems providers. It reads:

"Properly implemented, electronic voting may enable associations to overcome the significant challenges created by so many investor-owned units and part-time residents who frequently do not participate in association votes, making it difficult for many associations to achieve quorum at members' meetings and elections so that membership action can be taken.


However, there are some important and necessary measures that were built into the new law which will make the initial implementation of electronic voting extremely challenging for many associations.

With the voter identity verification and security protocols that are called for under the new law, online voting for associations will not be as simple as using an existing off-the-shelf electronic survey provider and adapting it for an association vote.

In fact, the vetting process for the vendors purporting to comply with all of the requirements under the new law will take some time, and the state's Department of Business and Professional Regulation Division of Condominiums should move quickly to develop a vetting and certification process in order to help all of the associations in Florida to identify the providers that are in compliance with the statutory requirements."

Michael's article concludes:

"However, rather than leaving it up to every community association to conduct its own vetting process in order to determine which providers meet all of the law's requirements, the onus should be on the state agency that oversees and enforces association election regulations as well as the other laws governing associations in Florida to create and implement a new vendor approval and certification process for the providers. The state's Division of Condominiums is better equipped with the technical resources and expertise that is necessary to properly review and determine whether these online software application providers are implementing e-voting systems that meet all of the requirements and should be certified by the state for use by associations.


Electronic voting will not be a panacea for all of the issues caused by unit owner apathy and absenteeism in association votes and elections. There are many voters who will decline to use it and will wish to continue mailing in the completed ballots or voting in person at the meetings, so it is unlikely to completely replace the traditional voting methods, at least in the near future. It will, however, give the associations an important new tool for their toolbox that should greatly enhance their ability to conduct annual elections and obtain votes regarding alterations, amendments, reserves and other important association matters that require membership approval.

With the help of an effective approval and certification program for the e-voting system providers by the state, associations will be able to turn to electronic voting to help overcome some of the challenges that have plagued their votes and elections for decades."

Our firm congratulates Michael for sharing his insight with the readers of the Daily Business Review on this important new law for community associations and calling on the state to enact an approval and certification process for the e-voting systems providers. Click here to read the complete article in the newspaper's website (registration required).

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Article by Firm's Roberto Blanch in Today's Daily Business Review: "Ceiling Removal: Condo Renovation or Material Alteration?"


RobertoBlanch2013.jpgFirm partner Roberto C. Blanch wrote an article that appeared in today's edition of the Daily Business Review, South Florida's only business daily and official court newspaper, about the recent decision by the Second District Court of Appeal in the case of Andrews v. Shipps's Landing Condominium Association. His article reads:

". . . The Second DCA found that the association did not conclusively establish that the removal of the drywall ceiling resulted in a violation of the association's declaration of condominium.


The association asserted that the owners did not obtain its approval before removing the ceiling drywall from the interior of the unit and demanded that the owners reinstall the drywall. In turn, the owners responded by filing a lawsuit against the association for declaratory and injunctive relief.

While the trial court record indicates that the owners requested and obtained association approval for certain alterations to the unit, it appears that the nature of the alterations were not precisely described by the owners when seeking the association approval.

Furthermore, while the appellate opinion indicates that the owners opted to remove the ceiling drywall during the performance of the previously approved alterations, it appears that the association did not provide any testimony to counter the testimony proffered on behalf of the owners interpreting that the declaration of condominium establishes that the drywall ceiling is within the unit's boundaries."

Roberto's article concludes:

"Association representatives should also consider standardizing the process for unit owner requests for alteration approval, should it be determined that the association's directors have the authority to grant such approval. For instance, it appears from the opinion that the association in question did not have a clear procedure or form for the requests for renovation approvals requiring detailed descriptions of the proposed alterations.


A form with detailed questions regarding all of the elements that will be renovated should be employed, and the approvals should include stipulations that only the renovations detailed in the form by the owners are being approved and no other elements may be altered without the association's prior written approval.

. . . It is also imperative for associations to act promptly when seeking recourse or corrective actions against an owner if it is determined that an alteration has been made in a manner that is inconsistent with the design approved by the association. An association's failure to do so may adversely affect its ability to successfully do so in the future."

Our firm congratulates Roberto for sharing his insight on this new appellate decision with 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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Firm's Jeffrey Berlowitz Discusses Implications of Recent U.S. Supreme Court Decision Rejecting Lien Stripping in Chapter 7 Bankruptcies in Article in Today's Daily Business Review


JeffreyBerlowitz.jpgThe firm's Jeffrey S. Berlowitz, who has focused much of his work on helping community associations to contend with unit owners who attempt to wipe away association liens by filing for bankruptcy, was quoted extensively in an article in today's edition of the Daily Business Review on the implications of the recent ruling by the U.S. Supreme Court in the case of Bank of America v. Caulkett. The court ruled that homeowners who are underwater on their first mortgage cannot void second mortgages by filing for Chapter 7 bankruptcy, and the ruling also appears to apply to other secured lienholders including community associations.

The article reads:

Jeffrey Berlowitz is optimistic that within the risky realm of second mortgages, the Supreme Court's ruling may help refresh the lending stream that dried up in the market crash.


"You may see second mortgages being extended if there's equity," said Berlowitz of Coral Gables-based Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, which represents community associations.

Still, a divisive footnote in the decision suggests if only the debtors had asked the court to overrule its 1992 decision in Dewsnup v. Timm, the court would have obliged. Three justices didn't join Thomas' footnote, meaning they could be outvoted 6-3 if the right case came along.

Dewsnup rejected one form of lien-stripping. The footnote quotes Thomas' concurrence in a 1999 opinion: the "methodological confusion created by Dewsnup has enshrouded both the Courts of Appeal and ... Bankruptcy Courts."

Berlowitz said, "Thomas' comments could lead us to believe the court could overrule Dewsnup down the road." Then lien-stripping would be available in Chapter 7 cases, allowing debtors to void wholly unsecured mortgages. And partially unsecured mortgages could be stripped down to the property's market value.

For now, Berlowitz is happily sharing the ruling with his condo board clients. They've been frustrated by homeowners who fail to pay their fees through months or years of foreclosure and bankruptcy while the association maintains the community.

"There's such animus for the folks who aren't paying while their neighbors are," he said. "I had to explain to our clients this is the law, I'm not making it up."

Our firm congratulates Jeffrey for sharing his insight into this ruling and its implications for community associations with the readers of the Daily Business Review, which is South Florida's exclusive business daily and official court newspaper. Click here to read the complete article in the newspaper's website (registration required).

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Article by Firm's Lindsey Thurswell Lehr in Today's Daily Business Review: Court Rules on Buyer's Liability for Old Assessments


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The firm's Lindsey Thurswell Lehr wrote an article that appeared in today's edition of the Daily Business Review, South Florida's only business daily and official court newspaper, about the implications of the recent decision by the Fourth District Court of Appeal in the case of Pudlit 2 Joint Venture v. Westwood Gardens HOA. Her article reads:

. . . Pudlit had acquired two lots in the Westwood Gardens community via foreclosure, for which the association demanded payment for the past-due assessments that had accrued while Pudlit held the titles to the properties as well as all assessments due from the prior owner, as stipulated under Florida law.


Pudlit made the payment to the association but filed suit against the association seeking its money back by claiming that it was exempted from liability for the prior owners' association debts due to the express language contained in the association's own declaration of covenants, which read:

"The lien of the assessments provided for herein shall be superior to all other liens save and except tax liens and mortgage liens, provided said mortgage liens are first liens against the property encumbered thereby (subject only to tax liens). Sale or transfer of any lot which is subject to a mortgage as herein described, pursuant to a decree of foreclosure thereof, shall extinguish the lien of such assessments as to payments thereof which become due prior to such sale or transfer. No sale or transfer shall relieve such Lot from liability for any assessments thereafter becoming due or from the lien thereof."

Lindsey's article concludes:

The appellate panel found that the state law (Florida Statute ยง720.3085) could not impair or supersede a pre-existing declaration provision, as that would infringe on the prohibitions against the impairment of contract rights and freedom to contract under the state's constitution. The appellate court found that as a successor to the mortgage holder, Pudlit is a third-party beneficiary of the HOA's declaration and the protections which it provides.


The court also noted that the language under Chapter 720 of the Florida Statutes indicating that it is "not intended to impair such contract rights" that were "effective before the effective date of the act" made the existing law inapplicable in this case.

. . . In assessing the implications of this ruling, community association directors and managers should bear in mind that most associations do not have the restrictive language in their declarations nullifying a successor's liability for the previous owner's fees that was at issue in the Pudlit case. In addition, most association governing documents include a provision stating that all new state laws governing condominiums and homeowners associations are deemed to be expressly incorporated into their declarations.

However, this new appellate opinion, which is the first of its kind at the appellate level in the state, should serve as a notification to all community associations in Florida to review their declarations in order to determine if the language that was at issue in this case is found in their governing documents. If it is, they would be well-served to seek the guidance of qualified legal counsel in order to amend their governing documents through the membership meeting and voting process.

Our firm congratulates Lindsey for sharing her insight on this important new appellate decision with 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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Florida Supreme Court Adds Clarity to Activities That Constitute the Unlicensed Practice of Law by Community Association Managers

June 2, 2015, Posted by Laura Manning-Hudson


LauraManningHudson.jpgIn 1996, the Florida Supreme Court issued an advisory opinion regarding the activities of licensed community association managers (CAM) that would constitute the unlicensed practice of law. In 2013, The Florida Bar weighed in on the issue when its Standing Committee on Unlicensed Practice of Law submitted a report to the state's highest court for its consideration. On May 14, 2015, the Court filed its final opinion based on the Bar's submission.

The Court upheld its findings from the 1996 opinion and adopted all of the recommendations provided by the Bar in its 2013 report. The Court found that the following tasks performed by CAMs are not considered the unlicensed practice of law:

  • Preparation of a certificate of assessments due once the delinquent account is turned over to the attorney for the association
  • Preparation of a certificate of assessments due once foreclosure against the unit has commenced
  • Preparation of a certificate of assessments due once the member disputes in writing to the association the amount alleged as owed
  • Drafting pre-arbitration demand letters

The Court ruled that the following tasks performed by CAMs are considered the unlicensed practice of law:

  • Drafting of amendments to the declaration, bylaws, and articles of incorporation that are recorded in the public records when such documents are to be voted on by the members
  • Preparation of construction lien documents
  • Preparation, review, drafting and/or substantial involvement in the preparation/execution of contracts, including construction contracts, management contracts, cable television contracts, and others
  • Any activity that requires statutory or case law analysis to reach a legal conclusion

flasupcourt.jpgThe Court found that the following tasks performed by CAMs may or may not be considered the unlicensed practice of law, depending upon the facts and circumstances involved in each case:

  • Determination of the number of days to be provided for a statutory notice
  • Modification of limited proxy forms
  • Preparation of documents concerning the right of the association to approve new prospective owners and/or tenants
  • Determination of affirmative votes needed to pass a proposition or amendment to recorded documents
  • Determination of votes needed to establish a quorum
  • Identifying, through the review of title instruments, the owners who are to receive pre-lien letters

The Court's ruling includes examples that help to clarify whether or not these activities constitute the unlicensed practice of law. Click here to read the complete ruling and the examples that are provided for each of these tasks.

With the upsurge in collections and the issuance of demand letters and claims of lien by associations, many CAMs have responded to their association's needs by taking on the preparation of these documents rather than turning to the association attorney. This has led to cases in which demand letters and claims of lien have been invalidated due to mistakes in legal descriptions and recording errors. Association boards should bear in mind that the preparation of demand letters, claims of lien, Notices of Commencement and other legal documents do not typically incur significant attorney fees, but the ramifications of errors in these documents can prove to be very costly. If The Florida Bar determines that a property manager has engaged in the unlicensed practice of law, that manager could face the imposition of fines as well as the possibility of having their CAM license revoked or suspended. It is simply not worth the risk for associations or their managers to prepare these documents in order to avoid the relatively nominal legal fees, and thereby risk exposure to their managers of potential fines and license issues.


Barking Up the Wrong Tree

May 27, 2015, Posted by Michael E. Chapnick


MichaelChapnicksrhl-law.jpgYogi Berra once said "it ain't over 'till it's over." That statement perfectly describes the most recent decision to come out of Florida's Fourth District Court of Appeal dealing with a unit owner's request for a reasonable accommodation under the Fair Housing Amendment Act of 1988 (FHAA) to keep an emotional support animal despite her association's restrictions.

The case of Carolyn Hoffman v. Leisure Village, Inc. of Stuart, Fla. actually involved two dogs. As to the first dog, Hoffman and her association ended up in litigation which resulted in a settlement agreement whereby the association allowed her to keep the dog, with the understanding that she would not get another dog after it passed away, and if she did get another one she would have to move from Leisure Village.

Upon the death of her dog in 2010, Hoffman was diagnosed with chronic depression and her psychiatrist recommended that she get another dog to support her emotionally. Her attorney made a request to Leisure Village for an accommodation under the FHAA, but the request was denied. She got the dog anyway.

esupdog.jpgThe association then went back into court and asked the judge to enforce the settlement agreement. At the same time, Hoffman filed a complaint with the U.S. Department of Housing and Urban Development (HUD) claiming that she was wrongfully denied an accommodation of her disability under the FHAA, and her complaint was ultimately sent to the Florida Commission on Human Relations (FCHR) for investigation. Before FCHR could finish its investigation, the trial court ordered Hoffman to remove her dog from the association.

When FCHR completed its investigation three months later and found cause to believe that a fair housing violation had occurred, Hoffman first tried to file a claim in federal court, and then back in state court, claiming discrimination. The court dismissed her case, saying that she had waived her right to bring a new claim and all of the issues had already been decided in the case relating to her first dog.

The Fourth DCA found that the trial court did not even have the authority to decide Hoffman's discrimination claim because while she had started the process of filing complaints with HUD and FCHR, FCHR did not even complete its investigation of the claim until three months after the court dismissed her claims. The court examined the law and found that Hoffman was required to exhaust the administrative process (i.e., filing a discrimination claim with HUD and having that claim investigated to conclusion) before she was entitled to file a lawsuit. The appellate panel reversed the dismissal of her discrimination claim, thereby allowing her to pursue it back in the trial court.

The lesson to be learned from Hoffman and Leisure Village is even when it appears that a fair housing dispute has been resolved by agreement, it is not necessarily over . . . "until it's over."


Recent Cases Highlight Benefits of Working with Experienced Insurance Attorneys and Public Adjusters for Insurance Claims Involving Community Associations and Property Owners

May 27, 2015, Posted by Susan C. Odess


susanodess-srhl.jpgAfter growing up in the insurance industry as the daughter of one of Florida's premier policyholder advocates, my exposure to insurance practices began at a remarkably young age. As a dually licensed public adjuster and attorney, I focus on insurance matters for our firm's community association clients as well as property and business owners. Through my unique upbringing in conjunction with my years of practice, I have learned that virtually all insureds would amass a great benefit by working with a loss consultant and experienced legal counsel when handling an insurance claim.

Two of my recent cases illustrate the benefits for associations and property owners in working with an insurance attorney and public adjuster for their claims. The first case involved a water loss in the common areas of the Cutler Cay Homeowners Association in southeast Miami-Dade. Upon discovering the loss, the association filed its insurance claim with its insurance company without first consulting a public adjuster or an attorney that specializes in insurance litigation. As a result, the insurance company denied the association's claim and concluded that the loss was not covered under the association's insurance policy.

After unsuccessfully dealing with its insurance company for more than two years, the association contacted our firm to enlist our services. Our firm closely worked with a public adjuster to determine the full extent of the insured's damage. Within several months of filing a lawsuit on the association's behalf, we were able to effectively demonstrate the clear coverage for the association's loss and recover over $269,000 for the association.

water.jpgThe second case involved two separate water-related losses at a single-family home in Broward County. The homeowner immediately retained a public adjuster to assist in the filing and presentation of her claims. In both claims, the homeowner received payment from her insurance company, although the insurance company's payments were insufficient to restore the home to its pre-loss condition. When negotiations between the public adjuster and the insurance company reached a stalemate, the insured contacted our firm. In less than four months, we were able to recover approximately five times the amount of the insurance company's prior payments.

These cases highlight the importance for associations and homeowners of working with experienced insurance attorneys and public adjusters for their insurance claims. Ideally, it is best to retain the services of these professionals prior to the filing of a claim, as their guidance and experience can play a pivotal role in how the claim is handled by the insurance company and ultimately whether the claim is adequately paid. However, it is never too late to enlist these insurance professionals, even if the insurance company denied or issued payment for your claim, as we can often re-open the claim to secure additional funds.


Miami Herald Guest Column by Firm's Susan Odess: Florida Supreme Court Ruling Exempting Citizens from Bad-Faith Suits Requires Legislative Attention


susanodess-srhl.jpgThe firm's Susan C. Odess, who focuses exclusively on insurance law and represents community associations as well as individual residential and commercial property owners in insurance matters, wrote the following guest column that appeared in the May 25 edition of the Miami Herald's "Business Monday" section:

Citizens Property Insurance is commonly known as the insurer of last resort, as it traces its roots to the exodus of insurance carriers from the Florida market after Hurricane Andrew in 1992. The state-run insurer has earned a poor reputation for its mishandling of claims, but for many homeowners, condominium associations and businesses in the state's coastal areas it has been their only option.

Unfortunately for all of those who must remain with Citizens for their insurance coverage, a ruling filed on May 14 by the Supreme Court of Florida will now make the insurer considerably less accountable for its actions in its handling of claims than it has been in the past. The ruling is undoubtedly the worst that has ever come from the Florida courts for the state's approximately 595,000 Citizens policyholders, and it demands a simple and immediate legislative fix during the special session in June.

The court's decision in the case of Citizens Property Insurance Corp. v. Perdido Sun Condominium Association has completely shielded the insurer from liability for acting in bad faith. The ruling revokes, exclusively for Citizens, one of the most powerful tools that policyholders and their advocates have to hold Citizens accountable during the claims process. Under the law, insurers owe a duty of good faith and fair dealing to their policyholders, and they are thereby legally liable for using unfair, dishonest or deceptive practices in their claims and underwriting processes. If the carriers unreasonably delay investigations, deny claims, underpay claims, fail to timely respond to claims, fail to issue coverage decisions, withhold coverage documentation, cancel policies, or conduct other egregious acts they can face bad faith lawsuits for punitive and exemplary sums that go beyond the coverage limits under the standard breach-of-contract claims.

flasupcourt.jpgAfter conflicting decisions by two of the state's district courts of appeal, the Supreme Court of Florida took up the question of whether the Legislature intended for Citizens to be liable for bad faith claims as an exception to its statutory immunity, which as a state agency was based on the principle of sovereign immunity and was enacted by the Legislature to protect the carrier. The case stems from a statutory first-party bad faith suit filed by the Perdido Sun Condominium Association after the association had already prevailed in its breach-of-contract lawsuit against the insurer. The bad faith claim alleged that Citizens refused to pay the full amount owed and take part in the required appraisal process; used the appraisal process in an attempt to forestall litigation; delayed payment of the appraisal award and improperly attempted to condition the payment upon the execution of a universal release; and engaged in a pattern and practice of seeking to avoid or delay the settlement of the claim.

Citizens moved to dismiss the lawsuit by arguing that it is shielded from bad faith lawsuits under its immunity statute. After a review of the statute, the Supreme Court found no support that the Legislature intended for Citizens to be liable for statutory first-party bad faith claims. Even though the Legislature codified Citizens' duty to handle claims in good faith, it did not list first-party bad faith claims as one of the exceptions to Citizens' immunity. The court found that if the Legislature had intended to establish an exception for bad faith claims, it would have done so clearly and unequivocally by including it among the limited exceptions to Citizens' immunity within the statute.

This is precisely what the Legislature should do during the special session in June or during next year's session. Based on the wording of the statute, lawmakers may have believed that bad faith claims did fall under the exception to Citizens' immunity for a "willful tort," but the court ruled that statutory first-party bad faith claims such as the one filed by Perdido Sun are not technically considered a willful tort.

Citizenslogo1.jpgThe end result of the ruling is that Citizens' policyholders will no longer have the only bargaining chip they had to hold Citizens accountable for how it handles claims. It creates an uneven playing field for Citizens against all of the private-sector carriers in Florida that must act in good faith and avoid dishonest and unfair practices with their policyholders. Citizens will face no legal repercussions or liabilities even if it blatantly disregards its duty to make timely claim decisions and payments, conduct fair and unbiased claim assessments, or respond to routine requests for policy and claim documents. The company will have free rein to act with impunity in how it responds to and handles claims, which has horrific implications for all those who will face the prospect of filing a claim with Citizens in the future.

With the hurricane season starting in June, it is imperative for the Legislature to remedy this ruling by adding bad faith lawsuits to the list of exceptions in the Citizens immunity statute. Without this legislative fix, there will be no constraints for the state-backed insurer to act within the bounds of fairness with its policyholders.

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An Overview on Condominium and HOA Reserve Funds, Links to Key Informational Resources

May 21, 2015, Posted by Roberto C. Blanch


RobertoBlanch2013.jpgFor community associations, preserving the property and its common areas is one of the foremost duties of the association directors. Beyond the day-to-day maintenance responsibilities, association directors and managers are responsible to develop funding plans for the upkeep and replacement of common facilities such as elevators, roofs, heating/cooling systems, swimming pools, decks and balconies. These funding plans generally take the form of accumulated budgetary reserves to help spread the anticipated costs of deferred maintenance or capital expenditures for the associations' common facilities or building components over the estimated remaining useful lives of the components. Maintaining well-funded reserves enables associations to avoid large annual assessment increases or special assessments that can create financial hardship for the unit owners at those times when raising funds is required to perform the necessary deferred maintenance or replacement.

For condominium associations, establishing and funding reserve funds is an obligation of the board, as reserves are statutorily required to be included in condominium association budgets that must be adopted each year. Specifically, condominium associations must maintain reserve funds for roof replacement, exterior paint, pavement resurfacing and all other items for which the replacement or deferred maintenance costs exceed $10,000. Additionally, depending upon certain circumstances, the boards of some homeowners associations may also be required to budget for reserves, depending upon whether it is required by the association's governing documents as established by the developer or voted for by the association members. While the funding of reserves may be waived or reduced on an annual basis upon obtaining the appropriate membership vote, community association boards may not be automatically required to submit such a question for a vote of the membership.

In an effort to ensure the proper funding of reserves it is in the best interests of most associations to retain highly qualified and experienced consultants to prepare an objective reserve study for the association. These studies are used to assess the actual costs for the ongoing maintenance of all of common facilities and building components. They include a detailed analysis of the current condition of the major components as well as a financial breakdown for their expected maintenance, repair or replacement costs. The experts who prepare these studies use a formula that takes into account the estimated cost of deferred maintenance or replacement as well as the remaining useful life of the component.

In light of the higher costs typically associated with comprehensive reserve studies, some smaller associations have opted for a simpler analysis, such as a Five-Year Capital Plan that is prepared by experienced professionals. Such a plan may be used by the board to determine the level of reserves expected to be required.

In addition to properly establishing and maintaining reserve funding and preventing deficits thereof, association board members have a fiduciary duty to the unit owners to ensure that a community's reserve funds are protected and invested properly. Risky investments are not appropriate for these funds, and it is highly recommended for associations to turn to qualified professionals for their investment and tax advice. It is also imperative for reserve funds to be accounted for appropriately and accurately in the financial statements, audit reports, budgets and other financial and administrative community association records

dbprlogo.jpgFor condominium associations and their directors, one of the most helpful informational resources related to reserves is available online from the Florida Department of Business and Professional Regulation, Division of Condominiums. The agency's "Budgets and Reserve Schedules: A Self-Study Training Manual" is the state's official training manual for condominium association directors and members on association budgets and reserves. Click here to read and print the manual.

Another very helpful resource for all types of community associations is the "Reserve Studies/Management Best Practices Report" issued by the Foundation for Community Association Research, which is available by clicking here.

Community association board members must consider many factors in order to properly assess and fund their associations' reserve accounts. With the proper guidance and planning, properly established and funded reserve accounts assist associations to avoid unexpected financial burdens for all of the unit owners.


Legislative Update: Estoppel Certificate Bill Dead, Bill to Make Administrative Changes to Association Practices Passes

May 11, 2015, Posted by Roberto C. Blanch


RobertoBlanch2013.jpgThe premature adjournment "sine die" of the recent session of the Florida House of Representatives spelled the demise of various bills that had not yet been passed. One such bill was HB 611, which was the subject of one of our blog articles describing the various changes that were being proposed by the bill in connection with procedures and charges related to estoppels provided by community associations.

A bill that did pass both the House and Senate is HB 791, which soon will be sent to Gov. Scott for his final approval before it is enacted. This bill makes some important updates to the state's laws governing community association practices and procedures, and it includes the following changes:

  • The requirement for electronic notices to be authorized by association's bylaws for some meetings of the board, membership and association committees is eliminated.
  • Establishes that the role of the fining committee is to confirm or reject the fines levied by the board.
  • Suspension of voting rights or right to use common elements will apply to members as well as their tenants and guests, regardless of the number of units owned by the member, even if the delinquency or failure that resulted in the suspension arose from less than all of the multiple units owned by a member.
  • Proxies will be allowed to be submitted to the association via fax or email.
  • When voting rights are suspended, the voting interest allocated to the unit will be subtracted from the total number of voting interests.
  • Establishment of procedures for implementation of electronic online voting for elections and other unit owner votes.
  • A clarification that partial payments may be applied to outstanding amounts.
  • Extends the "Distressed Condominium Act" (i.e., the "bulk buyer" law) until 2018.
  • Amends the official records "catch-all" provision to include "written" records, as already appears in the HOA Act.
  • Names Chapter 720 the "Homeowners' Association Act."
  • Provides that the "governing documents" of an HOA include rules and regulations.
  • The failure to provide notice of recording amendment in an HOA does not affect the validity of the amendment.

Most of the foregoing changes help to clarify and update the existing statutes in an effort to enable associations to overcome some problem areas arising in connection with the laws governing condominium, cooperatives and homeowners associations. However, a few of the changes included in the bill, such as the introduction of electronic online voting, are expected to cause considerable issues as directors, managers and their legal counsel work to navigate through the process related to the implementation of such measures.

Association members, directors and community association property managers should be mindful of these changes and work closely with their legal counsel to address any questions regarding these changes should they eventually become law.


Report from WPLG News 10 Features Condo Board President Pleading Guilty to Taking Illegal Payments from Association, Managing without License

May 7, 2015, Posted by Michael E. Chapnick


MichaelChapnicksrhl-law.jpgInvestigative reporter Bob Norman from WPLG Local 10 News in South Florida has done a number of reports about fraud and theft at area condominium and homeowners associations. His most recent report is a follow up to a story that aired last September about the allegations by the residents of the Georgian Court North condominium in Fort Lauderdale against Ed Ryan, the longtime president of the association's board of directors.

The residents had alleged that Ryan had taken hundreds of thousands in payments from the association that he knew were illegal over the course of more than 10 years. Ryan scampers away from Norman and his videographer to the bathroom outside of the courtroom when he is asked by the reporter to comment on the case. In court, he admits to taking the illegal payments and using some of the proceeds to buy a car, and he pleads guilty to the charges and is sentenced to complete 25 hours of community service, serve three months of probation, return the car and write a letter to the association admitting his wrongdoing. The residents tell Norman that they have also filed a civil suit seeking financial restitution from Ryan to the association.

Click below to watch the report.

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A Review of Some Best Practices for Association Annual Meetings, Elections

April 13, 2015, Posted by Roberto C. Blanch


RobertoBlanch2013.jpgAs the season for annual meetings and elections at South Florida community associations comes to a close, our firm's other community association attorneys and I are reminded of the significance of following all of the necessary protocols to ensure that association meetings and elections run as smoothly as possible. This topic further serves as a priority to many of our community association clients, causing many of them to inquire about safeguarding their election procedures and other issues such as perceived discrepancies between statutory election guidelines and the related provisions of their associations' governing documents.

Below is a recap of recommended best practices related to annual meeting and election procedures, many of which have been discussed in previous articles in this blog.

First, in an effort to promote participation and ensure voting by the qualified individuals, it is advisable that association management take the steps to verify that the association's roster of owners is current and includes a description of all the individuals on title to the home or unit. The roster should further be organized in numerical order by unit numbers or addresses to facilitate the registration and ballot verification process. While a search of the county public records deed database is the most accurate source to verify ownership of units or homes, a more economical approach is to verify the ownership from the county's property appraiser's office. Once obtained, these records should be placed in a binder, together with copies of the deeds organized in the same order as the roster or sign-in sheet. Consider organizing the binder with dividers separating each floor/street, as this step may further facilitate the verification of ownership on the day of the meeting or election.

Proxies received prior to the meeting should be verified so as to ensure that they are dated and signed by the owner or other qualified voting member. Once the proxies have been verified, they should be logged in on the sign-in sheet. A note should be included on the sheet indicating the person who has been designated as the proxy for the corresponding unit, in order to ensure that the designated proxy signs-in at the meeting on behalf of the appropriate unit or home. If a proxy has a deficiency or is found to be questionable during the validation process, it should be set aside for the association attorney to review.

meetingvote.jpgAdditionally, the period between the proxy verification process and the time of the meeting may be used to enable the unit owner to cure any defects or resolve problems that may have been identified with regard to the proxy form. The valid proxies should be organized in a folder in the same order as the sign-in sheet for reference at the time of the meeting.

Ballots received in advance of the election should be organized in the order of the roster. The board should further consider appointing an independent committee to validate that the outer ballot envelopes have been properly executed and signed by the qualified voter(s) prior to the scheduled time of the election. This process will serve to further streamline the ballot validation process, which would otherwise have to be performed at the time of the meeting. Bear in mind that outer ballot envelopes may not be opened prior to the meeting.

It is important to remember that unlike proxies, voting certificates do not expire unless they are rescinded or replaced by another voting certificate. As such, a voting certificate binder should be organized in numerical order by unit or lot number or by street address of the unit or lot. As the voting certificates tend to remain valid until rescinded or as otherwise specified above, those received for the scheduled meeting or election should be included in the binder as replacements for any voting certificates previously provided for corresponding units or lots. Voting certificates are typically required for all units owned by multiple individuals or by a corporation or other legal entity. However, we caution that many community association documents require that voting certificates be submitted for units owned by husband and wife as well.

The executed Proof of Notice Affidavit for the annual meeting should also be available at the meeting. In addition, be sure to have plenty of blank ballots, envelopes (inner and outer ballot envelopes) and voting certificates on hand at the election for use by any owner who has lost or misplaced their ballot or voting certificate and would like to cast a ballot in person at the election.

By adhering to these suggested best practices, working with qualified community association legal counsel and following all of the other prescribed protocols for the annual meeting and election, associations can help to ensure that their elections are in compliance with Florida law.


Magazine Article by Gary Mars: HOAs, Condo Associations Must Implement Safeguards to Prevent Election Fraud


GaryMars.jpgThe following article authored by the firm's Gary M. Mars appeared in the April issues of Our City Weston and Our City Davie magazines:

A recent case in Las Vegas has set a new bar for the heights to which criminals will go in their efforts to defraud condo associations and HOAs for contracts worth millions of dollars. A U.S. Justice Department investigation revealed that 11 homeowners and condominium associations in Las Vegas were defrauded of millions of dollars in a board of directors takeover scheme that took place from 2003 to 2009. Federal prosecutors are seeking jail time for the defendants in addition to approximately $25 million in restitution, and 37 defendants have taken plea agreements and are facing prison sentences while the remaining four defendants are awaiting trial.


The defendants are accused of getting their straw unit buyers elected to community associations' boards of directors through forgery, bribery, ballot stuffing and dirty tricks, all with the help of a Kung Fu grandmaster to intimidate wary board members. As disclosed under his plea agreement, this martial arts expert admitted that the conspirators would rig the associations' board of director elections by using stolen and forged ballots so that they could win a majority voting control of the boards in order to secure lucrative contracts once control of the board and association was obtained. Co-conspirators traveled to Mexico to print phony ballots, used the master key at a condominium complex in order to remove ballots from mailboxes, and retrieved discarded ballots from a condominium's dumpsters.

Community association boards control the purse strings of the communities that they govern, and they have been long-standing targets for unscrupulous board members. For those who own residences in condo and HOA communities, this board takeover scheme underscores the level of involvement and vigilance that is necessary in order to help ensure that their community associations avoid this type of fraud.

Unit owners should make every effort to vote in all elections and submit their own ballots, as fraudsters will typically attempt to secure and utilize forged ballots from those who do not normally vote in the elections. They should also attend the election meeting and determine whether their ballot was counted or disallowed due to the submission of more than one ballot for their unit.

OCweston.jpgIf association members believe that the integrity of their board of directors has been compromised, they should consult with highly experienced legal counsel in order to discuss and determine their next steps. Election recalls, court appointed receivers, and injunctions precluding boards from awarding contracts are among the measures that can be pursued, and criminal investigations by state and federal law enforcement are also possibilities that can come into play.


Miami Herald Business Monday Guest Column by Jeffrey Berlowitz: Chapter 11 Bankruptcy Reorganization is Viable Option for Condo Associations, HOAs


JeffreyBerlowitz.jpgOur firm's Jeffrey Berlowitz has been working closely with many of our community association clients in helping them to contend with bankruptcy filings by unit owners, who can use the bankruptcy code to wipe away association liens. During the last several years, he has also counseled several associations on the prospect of a Chapter 11 bankruptcy reorganization filing to enable them to overcome dire financial circumstances.

On Monday, March 23, Jeffrey's article on Chapter 11 filings for community associations appeared in the pages of the "Business Monday" section of The Miami Herald. His article reads:

While the housing market in South Florida is continuing its recovery, many of the community associations in the region are still struggling with delinquencies by unit owners in the payment of their association dues. The shortfalls in the associations' collections, which in some cases have also been exacerbated by gross mismanagement or even theft by members of association boards, are causing scores of South Florida condominium and homeowners associations to experience significant difficulties in satisfying their operational expenses.


For associations that are incapable of meeting all of their financial obligations, seeking relief through a Chapter 11 bankruptcy reorganization plan has now become a viable option in order to avoid forcing some unit owners to pay more than their proportionate share of the assessments.

While many typically think of financial reorganization under Chapter 11 as being reserved exclusively for large corporations, condominium and homeowners associations are also entitled by law to file for this form of bankruptcy relief. In fact, over the last few years, a couple of South Florida associations have already emerged through a successful Chapter 11 reorganization and regained their financial footing.

Chapter 11 is a designed financial reorganization program that is operated under bankruptcy court supervision, and it enables an association to restructure its debt with the protection of an "automatic stay," which halts creditor collection proceedings during the pendency of the bankruptcy case unless they are otherwise allowed by the court. An association in Chapter 11 has the opportunity to negotiate with its creditors, cancel or renegotiate onerous contracts and leases, and avoid the seizure of assets and garnishing of bank accounts by creditors holding judgments.

In South Florida, two recent cases of association bankruptcies highlight the potential benefits for financially strapped condominiums and HOAs. The first was The Spa at Sunset Isles, which is a 232-unit condominium in Palm Beach County that filed for Chapter 11 bankruptcy in 2010. Because the community's financial strains were being caused by many units under foreclosure, the bankruptcy court issued an order requiring the lenders that were languishing in their foreclosure actions to begin paying monthly assessments to the association before taking title to the units and, at the same time, ordered them to complete their foreclosure actions. Given that certain of The Spa's units were in foreclosure proceedings for more than three years, the bankruptcy court's order provided immediate and substantial relief. Ultimately, the community confirmed its reorganization plan with substantial funds in its operating account resulting from the payments it received from the foreclosing lenders.

Another recent South Florida association bankruptcy was filed last November by the Bella Luna Condominium Association, which was facing court battles with creditors, a 25 percent delinquency rate among its residents, and a threat from the City of Hialeah to cut off its water due to significant arrears in the payment of its water and sewer bills. With the help of the bankruptcy court, the condominium was able to slash its unsecured debt by approximately 85 percent and restructure its remaining debt, paving the way for this community to regain its financial wellbeing.

With the modest pace of the recovery in the housing market, many community associations are still facing significant financial distress, and Chapter 11 bankruptcy reorganization represents perhaps their best possible opportunity for a positive financial future. In fact, for associations that continue to face an exorbitant percentage of units in prolonged foreclosures, the ruling in the Palm Beach County case could set the tone for similar cases in the future. It has the potential to open the door for other associations to seek similar relief whereby lenders behind with their foreclosure actions are forced to begin paying assessments before they take title to the units, which will undoubtedly compel them to expedite their foreclosures.

In light of the two successful Chapter 11 bankruptcy reorganizations by South Florida community associations, the associations that currently find themselves in unsustainable financial straits may consider a bankruptcy reorganization filing as a viable option for a potentially solid financial future.

Our firm congratulates Jeffrey for sharing his insights into the considerations for community associations concerning Chapter 11 reorganization with the readers of The Miami Herald.


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