Articles Posted in Homeowners association law

Hurricane Irma is now a category five storm that is predicted to impact the state of Florida by late this week.  As all community associations prepare their properties for the storm, they should also take specific measures to prepare for any insurance claims that may arise.  Below is an excerpt from an article by firm partner Laura M. Manning-Hudson on these pre-storm insurance recommendations that was posted in this blog earlier this year:

At the start of every hurricane season, association board members or property management should photograph and/or video all of the main public areas of the condominium property.  These images could become vitally important in the event that a storm strikes and claims are filed.   Associations should also take the time to store copies of their wind, flood and property insurance policies in waterproof cases in a secure location.  If possible, digital copies should also be stored in several computers and devices.

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Florida community associations, just as with all other property owners in the state, can be held liable for crimes committed on their properties.  Associations and other property owners owe a duty to their residents and guests to undergo reasonable steps to protect against foreseeable crimes.

There have been cases over the years of Florida associations being sued by the victims of crimes that took place in their community for allegedly failing to implement adequate security measures.  Some of these suits, especially those involving severe injuries, have been resolved in considerable rulings or settlements in favor of the victims.  These awards, combined with the litigation costs and the possibility of increased insurance premiums, can be financially disastrous for many associations.

ggate-300x225Exactly what is considered reasonable security is the key question before the courts in these negligence claims. Other considerations include whether the crime that took place was foreseeable.  For instance, in a gated high-end community, residents and guests may expect a greater level of security, so some might argue that such community is to take measures at a higher standard.

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The new Florida law that establishes criminal penalties for association fraudsters should help many associations to contend with suspicious and irregular activities by unscrupulous board members.

Association boards of directors control the purse strings for their condo communities, and as such they have always made for extremely appealing targets for fraudsters who conspire to assume control via their annual elections.  In a Las Vegas case, a U.S. Justice Department investigation revealed that 11 associations were defrauded of tens of millions of dollars in a board of directors takeover scheme from 2003 to 2009.  Forty-one defendants were convicted of rigging board elections through such tactics as traveling to Mexico to print phony ballots, using the master key at a condominium complex in order to remove ballots from mailboxes, and retrieving discarded ballots from condo dumpsters.

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Nicole-Kurtz-2014-thumb-120x180-87971The firm’s Nicole R. Kurtz authored an article that appeared as a “Board of Contributors” guest column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which was titled “Short-Term Rentals Not a Violation of Rules Against Business, Non-Residential Uses,” focuses on the ramifications of a recent ruling by the First District Court of Appeal that found short-term rentals do not constitute a violation of association rules prohibiting business uses of residences.  Her article reads:

In the case of Santa Monica Beach Property Owners Association v. David Acord, the association appealed a lower court’s order dismissing its action against the homeowners who rented their homes on a short-term basis. The association’s argument in both the lower court and the appellate court was that such short-term rentals constituted a violation of the community’s occupancy restrictions, which required that the homes be used for residential, non-business uses. Specifically, the association’s argument hinged on the community’s occupancy restrictions, which provided that the plots “shall be used only for residential purposes … nor shall any building on said land be used as a hospital, tenement house, sanitarium, charitable institution, or for business or manufacturing purposes nor as a dance hall or other place of public assemblage.”

The association’s complaint for declaratory judgment alleged that the Acords’ two homes in the beachfront community were being used for a “business purpose” not permitted by the association’s occupancy restrictions, as the owners offered the homes for rent on the home-sharing site VRBO.com, received income for renting the properties on a short-term basis, were required to collect and remit state and local sales and bed taxes, and had obtained a license to operate their properties as transient public lodging establishments under the name “Acord Rental.”

The Acords responded by contending that the association’s complaint failed to state a cause of action, and that the short-term rental use of the homes did not violate the restrictive covenants. They argued that because the short-term tenants were using the homes for residential purposes, regardless of the fact that they were paying for their stays, the homes were being used in accordance with the community’s occupancy restrictions.

dbr-logo-300x57The trial court agreed with the Acords and dismissed the association’s complaint. It reasoned that the proper focus in making a determination as to whether the short-term rental of the homes was in violation of the association’s occupancy restrictions was to determine the actual use undertaken at the properties. The trial court found that the nature of the homes’ use was not transformed from residential to business simply because the owners were subject to regulations that required licensure and they earned rental income. The court also noted that because the restrictive covenants were silent on the issue of short-term rentals, and failed to provide for a minimum lease term, any ambiguity as to whether short-term use was permitted must be resolved in favor of the homeowners’ free and unencumbered use of their properties.

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The other South Florida community association attorneys at our firm and I are often called upon by our clients with questions regarding how to more efficiently run their board meetings and control the conduct of members during those meetings.  Very often it seems that directors who are simply trying to be polite and respectful of owners by allowing them to express their opinions wind up losing control of the meeting and actually accomplish very little business.  This trend of owners seemingly “hijacking” board meetings is not a new one, but it does seem to be fueled in recent months by the political climate we find ourselves living in now where all people want to be heard.  Fortunately, the HOA and Condominium Acts provide board members with the tools they need to control their meetings while allowing all members to also have their “say.”

Association board meetings are defined as any gathering for the purpose of conducting association business by the members of the board of directors at which a quorum is present.  Unless the association’s by-laws or other governing documents provide for a longer period, notice of board meetings must generally be conspicuously posted within the community 48 hours in advance of the meeting.  However, in certain circumstances (such as the adoption of assessments or some types of rules), written notice must be posted and provided to the members at least 14 days in advance of a board meeting.

In accordance with Florida law, an item of business that is not noticed may only be addressed on an emergency basis, such as situations involving sudden damage to the building, natural disasters and similar events.  Emergency actions must be ratified or approved at the board’s next properly noticed board meeting at which a quorum of directors is attained.

meetThe notice of the board meeting should list specific business items on the agenda.  Boards and managers should make every effort to ensure that all reasonably anticipated topics of discussion are included.  The more specific the agenda, the easier it will be for the board to control the pace and flow of the meeting.  When agendas list broad topics without specific business items, boards leave themselves open to having to address issues brought up by members that would arguably “fit” under broad category headings.  As such, the agenda should be comprised of specific open items from the previous meeting requiring action; specific owner items that may require board action; building maintenance items, as required; project information, updates, requests and actions; and seasonal information, such as annual and budget meeting information as well as hurricane preparation matters.

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Each year, our elected state representatives and senators meet in Tallahassee for a legislative session where they review and debate an extensive amount of proposed bills, only to send a few of those bills to the governor to be signed into law.  For the third year in a row, our elected lawmakers will be discussing a bill that has once again resurfaced, and if passed, may have a significant impact on community associations’ wallets.

House Bill 483 — also known as Senate Bill 398 or “the home tax” bill — proposes to place a considerable amount of requirements relating to the issuance of estoppel certificates on the condominium, cooperative or homeowners association responsible for preparing them. If signed into law, community associations will need to be both financially and operationally prepared to abide by the stringent changes set forth in the bill.

An estoppel is a legally binding document prepared by a community association or its agent that discloses any liens, overdue assessments or any other money owed to the association, such as late fees and attorney’s fees.  Estoppels are required by title companies in standard real estate transactions in order to inform the seller and buyer of any outstanding financial obligation(s) on the unit or parcel.  If prepared incorrectly, the community association could be liable for miscalculated or incomplete balances, resulting in a loss for the association.

Contrary to some people’s beliefs, estoppels aren’t generated by the push of a button. They take time and precision to prepare, which is why a bill that shifts even more of the burden on the association could be detrimental.

Florida-legislature2-300x169One of the main components of this proposed bill is to mandate more rigorous deadlines for the preparation of estoppels.  Currently, associations have 15 days to prepare and deliver an estoppel once it is requested.  The bill would shorten this period to 10 business-days, which could be difficult for associations of varying sizes and levels of sophistication, as some will be anchored by antiquated bookkeeping or a lack of resources.

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With the approval of Amendment 2 last November to legalize the use of medical marijuana in Florida, the state legislature and Department of Health are now developing the rules and regulations that will govern the use of cannabis by those who suffer from a number of ailments listed in the new constitutional amendment.  Likewise, now is also the time for associations to begin discussing and considering the implementation of their own rules and restrictions regarding the use of the drug by unit owners in their communities.

For most communities, the question of whether the use of medical marijuana should be allowed in the common areas will likely cause the most unease.  Other concerns include the use of cannabis inside of the residences, especially in condominiums where the odor could permeate into the common elements or other residences, and some properties may wish to ban the drug from the community in its entirety.

It remains unclear whether the state’s lawmakers will attempt to ban the smoking of medical marijuana.  If smoking marijuana is allowed under the laws that will be adopted in order to comply with the amendment, community associations will need to address whether they must make exceptions to their rules in order to allow residents with a doctor’s prescription to smoke medical marijuana.

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When the Condominium Act was amended several years ago to allow associations to demand and collect rent directly from the tenants of unit owners who were delinquent in the payment of their monthly fees, community associations thought it was an answer to their prayers.  Associations were struggling to recover from the foreclosure crisis, and many homeowners made the decision to rent their units to make some money but, unfortunately, they also chose not to pay their associations.

However, utilization of this amendment has proven to be difficult and sometimes costly to enforce in cases in which de facto tenants and their landlords are able to demonstrate to the court that a tenancy under the letter of the law is not actually in place.  How many times have we heard that the tenant is “family,” that the tenant does not pay the landlord, and that there’s no lease in place?

A noteworthy example is found in a ruling last year by the Miami-Dade County Circuit Court Appellate Division in the case of Cecil Tavares v. Villa Doral Master Associationvdoral-300x226 Tavares had conveyed his condominium unit via quit claim deed to a new owner, but he and his wife continued to live there.  When the new owner went into arrears with the association, it attempted to collect the rent directly from Tavares and eventually filed for an eviction.

The county court granted default judgment in favor of the association and issued a writ of possession to enable it to move forward with the eviction, but Tavares appealed on the question of whether the court erred by defining him as a tenant based on the quit claim deed.

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MTobacksrhl-law2-thumb-120x179-96777The firm’s Michael Toback authored an article that appeared as a “Board of Contributors” guest column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which was titled “Rulings Clarify Application of Safe Harbor Caps on Association Dues,” focused on a couple of recent Florida appellate court rulings that brought additional clarity to the application of the criteria for foreclosing lenders and servicers to qualify for the caps that limit their liabilities for association dues.  Michael’s article reads:

In Brittany’s Place Condominium Association v. U.S. Bank, the Second District Court of Appeal settled some lingering questions as to whether a lender or servicer that takes title to a residence via a mortgage foreclosure must also be the current owner of the first mortgage when the final judgment of foreclosure is issued.

The case stems from a 2009 mortgage foreclosure action filed by U.S. Bank against the unit owner and all interested parties, including the association. The bank alleged that it was both the holder and servicer of the note and mortgage, acting on behalf of and with the authority of the owner. It was in possession of the note endorsed in blank, but the Federal Home Loan Mortgage Corp., better known as Freddie Mac, owned the note and mortgage.

After securing a final judgment of foreclosure and acquiring title to the property via the foreclosure sale, U.S. Bank requested an estoppel letter from the association to determine the amount of past-due assessments. The parties could not agree on the extent of the lender’s liability, and the association eventually filed a lien foreclosure complaint against the lender, which then filed a counterclaim to seek compliance with the safe harbor caps.

dbr-logo-300x57The trial court found that there were no genuine issues of material fact and U.S. Bank met the statutory requirements entitling it to the limited liability provisions provided by the safe harbor caps, so the court granted the bank’s motion for summary judgment.

In the subsequent appeal, the association contended that U.S. Bank did not satisfy the safe harbor statute, which requires the entity acquiring title to have also been the first mortgagee or its successor or assignee. The association interpreted “first mortgagee or its successor or assignees” as necessitating ownership of the loan.

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The growing use of drones by consumers across the U.S. is leading to the adoption of new rules and restrictions by the federal government, state governments and community associations.  Questions regarding safety, property damage and privacy abound with drones, and associations are responding by establishing clear parameters for their use by unit owners.

Last year, the Federal Aviation Administration enacted new regulations for the use of unmanned aircraft systems, which are more commonly referred to as drones.  For recreational users, the FAA now requires that drones must be properly registered and labeled with the registration number.  They must only be flown below 400 feet and always within sight of the operator, and they are banned from use near other aircraft and airports as well as over groups of people, stadiums, sporting events, or emergency response efforts.

Privacy concerns over the use of drones with cameras were addressed by a new Florida law that was enacted last year.  The law stipulates that drones with cameras may not be used to record images of privately owned properties or of the owners, tenants or occupants of properties in violation of their reasonable expectations of privacy without their written consent. drne-300x200 Reasonable expectations of privacy are presumed if individuals are not observable by others located at ground level in a place where they have a legal right to be, regardless of whether they are observable from the air with the use of a drone.

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