Recently in Condominium Association Law Category


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


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

Lisa's article reads:

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


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

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

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

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

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

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

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


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


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

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

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

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

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

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

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

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

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

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


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


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

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

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


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

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

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

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

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

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

The article continues to discuss HB 87:

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


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

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

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

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

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


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

March 3, 2015, Posted by Michael L. Hyman


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

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

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

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


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

February 24, 2015, Posted by Georg Ketelhohn


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

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

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

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

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

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

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

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

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

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


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


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

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

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

Click below to view the station's report.


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