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Articles Posted in Leasing and Tenants

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If your condominium’s governing documents allow dogs and renters, my bet is there’s a large number of both in your community. We get a lot of questions from condominium boards asking how they can reduce the number of renters and dogs in their buildings because – in the words of one manager: “Our building is going to the dogs!”

Depending on the language in your governing documents, you may have to keep living with the dogs unless or until your membership votes to amend them. If your association’s declaration does do not expressly restrict tenants from having pets, then an amendment will be necessary since a rule cannot conflict with a recorded restriction.

Although the association is authorized to adopt and enforce reasonable rules and regulations governing the operation and use of the condominium property, under Florida law in order for such rules to be valid and enforceable they must not contradict a recorded restriction in the association’s governing documents. In general, provisions in the declaration take precedence over any conflicting language in the rules.

esupdog.jpgWhile the Division of Condominiums has upheld and enforced association rules that specifically differentiate between unit owners and tenants, in such cases the declaration contained express provisions to substantiate the rule. Specifically, the Division upheld a condominium association’s rule restricting tenants from maintaining pets on the premises but allowing pet ownership by unit owners. In Grove Isle Condominium Association, Inc. v. Levy, et al, the association’s declaration provided that “[n]o pets may be kept on the condominium property except for usual and ordinary domesticated pets weighing less than twenty-five (25) pounds which may be kept by unit owners . . .” Based upon that provision, the arbitrator held that the board-adopted rule prohibiting tenants from maintaining pets was valid and consistent with the association’s declaration, which specifically granted unit owners the right to own pets – but was silent on the issue of tenants’ rights regarding pet ownership.

Similarly, in the arbitration case of Quatraine Condominium II Association v. Bradley, the association’s declaration provided that original owners of the condominium were permitted to maintain pets in the condominium residences. The board adopted a rule which provided that lessees were not allowed to have any pets. The arbitrator held that differential treatment between owners and renters was valid.

As such, we recommend that before your board starts promulgating rules that could be unenforceable and, if challenged, subject your condominium to expensive legal fees, check first with qualified legal counsel with regard to the options in your community.

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Foreclosures by community associations against their delinquent unit owners were virtually unheard of 10 years ago, as lenders would almost always move quickly with their own foreclosures against these owners, and their first-mortgage liens are superior to those of associations. Today, the practice has become the prudent approach for cases involving lenders that try to place their mortgage foreclosures into a holding pattern while they wait for the housing market to make a complete recovery.

Many community association attorneys now counsel their clients to complete their own foreclosure actions in certain cases in advance of the banks in order to acquire and rent the residences before the lenders’ foreclosures are finalized. With so many lenders taking years to complete their foreclosures, the revenues from these rentals have helped to relieve a great deal of the financial strains that some associations have faced.

Last year, the state legislature added some clarity to the law governing the liabilities of foreclosing lenders to associations for the prior owners’ association debts. The banks had argued in a number of cases that associations which foreclose in advance of mortgage lenders have effectively put themselves in the position of the prior owner, which is not entitled to collect any past-due fees. An amendment to the law fixed this loophole, and now lenders are still held liable for the safe-harbor liability caps to associations that have completed their own foreclosure in advance.

As such, the question for associations facing lender foreclosure cases that appear to be dragging on is when they should pull the trigger and foreclose their outstanding lien held on the property for unpaid past-due assessments. The answer requires qualified legal counsel to carefully review the case file along with the property appraiser website, tax collector website, court dockets and official records. Considerations that always have to be taken into account include the amount that is owed under the first mortgage, if there is also a second mortgage on the property, the exact status of the mortgage foreclosure case, and the status of the tax records on the property.

MT2.jpgIn addition to these universal considerations, some cases may also include issues involving the deterioration of the unit itself. Associations will need to carefully consider their options involving residences that will require major renovations in order to prepare them for rental. This is very important, as associations cannot rely on third parties to purchase these properties via the foreclosure sales but rather they must prepare to take title to the units.

Another important aspect of these prolonged foreclosure cases is that they can set the tone for associations that wish to take a firm and uniform stance on their collections and payment-enforcement efforts. Sending a demand letter and recording a claim of lien but going no further, even when a foreclosure that should take only a few months to complete begins to approach the one-year mark, is probably not the ideal precedent for associations to set.

While the banks are beginning to move their mortgage foreclosures a bit quicker, oftentimes they are still moving far too slowly for associations which are being burdened by the property’s outstanding unpaid assessments. Together with qualified legal counsel, associations should carefully weigh all of the above-mentioned matters and considerations to determine whether to move forward with their own foreclosure actions in advance of lenders or to wait to enforce their liens.

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Many community association boards and property managers are still unfamiliar with Florida Statute 83.561 enacted this summer, offering limited protections to tenants in foreclosed homes.

During the 2008 – 2014 foreclosure crisis, a federal law was passed, The Protecting Tenants at Foreclosure Act, which assisted bona fide tenants by providing them the opportunity to stay in the property after the completion of the foreclosure. The Protecting Tenants at Foreclosure act expired in December 2014 to be replaced by Florida Statute 83.561.

Similar to the federal act, Florida Statute 83.561 only applies to tenants who are renting under a valid arm’s length transaction rental agreement for a rate that is not significantly below market value, and where the tenant is not the mortgagor in the subject foreclosure or the child, spouse or parent of the mortgagor in the foreclosure.

Unlike the expired federal act, Florida Statute 83.561 requires a new owner, including an association, wishing to terminate the tenancy after acquiring a property via foreclosure, to provide the tenant with a 30-day written notice of termination, which should be in substantially the following form:

NOTICE TO TENANT OF TERMINATION

You are hereby notified that your rental agreement is terminated on the date of delivery of this notice, that your occupancy is terminated 30 days following the date of the delivery of this notice, and that I demand possession of the premises on …(date)…. If you do not vacate the premises by that date, I will ask the court for an order allowing me to remove you and your belongings from the premises. You are obligated to pay rent during the 30-day period for any amount that might accrue during that period. Your rent must be delivered to . . . (landlord’s name and address).

If the tenant fails to vacate the property after the 30-day period expires, the new owner may apply to the court for a writ of possession based upon a sworn affidavit that the 30-day notice of termination was delivered to the tenant and the tenant has failed to vacate the residence after the 30-day period has expired. If the court awards a writ of possession, the writ must be served on the tenant.

Unlike the federal act, Florida Statute 83.561 does not require for the new owner to intend to occupy the residence in order to terminate the tenancy, nor does it seek for the tenant to complete the terms of the rental agreement. Rather, the new law assist tenants in foreclosed homes by providing a 30-day window to seek alternate living arrangements, while ensuring compliance by the new owner of the tenant’s rights as afforded under Florida law.

Community associations that acquire title to a unit via foreclosure and wish to terminate a tenancy should consult with qualified legal counsel in order to ensure compliance with the requirements under Florida Statute 83.561.

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RobertoBlanch2013.jpgFirm partner Roberto C. Blanch was quoted in the main cover story of this week’s edition of the South Florida Business Journal, the region’s exclusive business weekly. The article, which is titled “Listings on Airbnb, Similar Sites Often Violate Rental Rules at South Florida Communities,” focuses on the difficulties that some local condominiums are having with short-term rentals that are stemming from listings on Airbnb and its rival websites.

The article reads:

“It becomes a tough pill to swallow for board members and unit owners who see units advertised for short-term rentals when the rules don’t allow for short-term rentals,” said Roberto Blanch, who specializes in community association law at Coral Gables-based Siegfried Rivera. “You have associations that don’t have the means by which to screen these people, who for all you know could be coming in to raise hell on a long weekend.”

. . . One of Blanch’s clients recently asked him if the owner of a short-term rental website could be brought into a claim “to the extent it knowingly or willingly participated in a violation of the association contract,” he said.

But Blanch noted that would be “probably a bit of an aggressive approach, but it is a problem real enough that it merits looking into these questions.”

Our firm congratulates Roberto for sharing his insights into this important new issue for condominium associations with the journalists at the South Florida Business Journal and the publication’s readers. Click here to read the complete article in the publication’s website (subscription required).

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A recent article in The Boston Globe chronicled the case of a condo owner who earned rave reviews as a host on the vacation rental website Airbnb. He went to great lengths to accommodate the needs and whims of his guests, but apparently his willingness to oblige did not extend to his condominium association and fellow neighbors.

The unit owner was fined $9,700 for violating his condominium association’s rules against short-term rentals via the increasingly popular website, which allows users to list their residences for short-term rentals aimed at guests who desire more homey accommodations. The owner has retained an attorney to try to negotiate a lower fine, and he is quoted as saying that he “didn’t expect, as an owner, having somebody else in my own home would be a problem.”

Perhaps he should have known better, as most association’s covenants and rules prohibit short-term rentals, and some even include an application process with background checks for prospective tenants. Yet he and other unit owners are claiming ignorance of the rules after being hit with fines ranging anywhere from $100 to $1,000, depending on their associations’ bylaws, for each night that they have rented their units, according to the newspaper’s report.

With Florida’s countless luxury waterfront condominiums replete with investor-owned units that sit idle during large swaths of the year, the growing popularity of Airbnb and its rivals HomeAway and VRBO represents a potentially significant new problem area that should receive the attention of many association boards throughout the state. The prospect of a revolving door of short-term guests presents security and nuisance concerns, especially for condominiums, and the boards of the state’s condo associations would be well advised to review and possibly strengthen their covenants to specifically ban these types of rentals as well as ensure adequate enforcement provisions and procedures.

For those associations which are already contending with owners who are utilizing these websites for short-term rentals or suspect that it is taking place, their rules enforcement actions should begin with thorough investigations. In a non-confrontational and courteous manner, the property manager or board member should inquire with the new guests in the residences that are suspected of being rented as to the nature of their agreement with the unit owner and how they discovered the property. They should document their findings, and they should also research the websites to find and save the offending listings.

abnb.jpgArmed with this information, they can then move forward on two fronts: directly with the owner as well as with Airbnb or the website listing the unit. Airbnb includes in its terms and conditions for hosts that they must comply with the rules governing rentals in their communities, and the site reserves the right to purge any listings that it deems to be in violation of its terms. Presumably, the company and its rivals would be willing to consider the removal of listings by hosts that are in violation of community association rules, and one of my colleagues at our firm has learned of a case from a client in which Airbnb was contacted by the association and pulled a listing from its site after it learned of the rule violation.

In addition, associations should share the evidence that they have gathered of the rentals using these websites with their legal counsel, who can use the information to issue an immediate cease and desist letter to the unit owner and help the association to determine an appropriate enforcement mechanism. However, for unit owners who have already begun enjoying the rewards of their rentals, it is a safe bet that they will be reluctant to discontinue them.

For the ardent renters who will refuse to comply with these demands and continue to rent their residences, the association counsel should move quickly to file a Petition for Mandatory Non-Binding Arbitration on the rule violation with the state’s Division of Condominiums, Time Shares and Mobile Homes, administered under the Department of Business & Professional Regulation. The Division of Condominiums, through its Arbitration Division, is equipped to quickly and efficiently conduct arbitrations on disputes involving covenant and rule violations, and its final orders can involve both the issuance of injunctive relief (i.e., requiring someone to do or not do something), as well as requiring the non-prevailing party to pay the reasonable attorneys’ fees and costs of the prevailing party incurred in bringing the action to enforce the association’s covenants and rules.

In the new peer-to-peer sharing economy, Airbnb and the other websites enabling homeowners to rent their residences to short-term guests are here to stay and likely to enjoy continued growth in the years to come. The associations in Florida that wish to avoid these short-term rentals should act now in order to protect the interests of their members.

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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.

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The Florida Legislature has enacted a number of new laws over the last several years that were in direct response to the foreclosure crisis and the meltdown in the housing market. The latest example of such a law was enacted during this year’s legislative session and deals with abandoned units in condominiums.

The new law, § 718.111(5)(b), essentially enhances certain rights of access to units. It provides that condominium associations may now enter abandoned units in order to inspect, make repairs, remediate mold, restore utilities, or otherwise maintain and preserve the condominium property. The law defines abandoned units as one that is the subject of a foreclosure action and no tenant appears to have resided in the unit for at least four continuous weeks without prior written notice to the association, or when there is no foreclosure and no tenant appears to have resided in the unit for two consecutive months without prior written notice to the association and the association is unable to contact the owner.

Florida legislature photo.jpgThe law stipulates that associations must provide at least 48 hours prior written notice of their intent to enter an abandoned unit to the owner at the last address reflected in the association’s records. In addition, if the owner has previously consented in writing to receiving email notifications, the association can email this notice to the owner.

Any expenses incurred by associations pertaining to abandoned units may be an assessment against the unit owner and enforceable as an assessment against the unit, meaning it can be subject to a lien and foreclosure if not paid. The new law also enables associations to obtain a court-appointed receiver in order to lease the abandoned unit and use the rental income to offset its costs and expenses as well as for unpaid assessments.

This new law should help to provide some clarity and relief for condominium associations that have been forced to contend with abandoned units in the aftermath of the foreclosure crisis. It will enable associations to move quickly in petitioning the courts to appoint a receiver and begin collecting rent for abandoned units in order to cover their expenses and assessments. While it might be advisable to pursue some of the remedies made available by this new law, questions remain regarding whether it will afford the intended relief envisioned by the legislature. Association directors and managers would be well advised to consult with qualified and experienced legal counsel prior to implementing steps in pursuing the remedies afforded by this law.

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The housing market may be in recovery mode, but many community associations continue to face significant challenges with unpaid assessments from unit owners. One of the remedies that our firm’s community association attorneys have discussed in prior articles in this blog is the ability that associations have to collect the rent directly from the tenants of owners who are delinquent in the payment of their monthly association dues. In this two-minute video, I discuss how associations are now routinely demanding and receiving the rent payments directly from the tenants of the owners who fall behind on their assessments.

 

 

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Our other community association attorneys and I have been keeping a watchful eye on the bills impacting condominium associations and HOAs that have been proposed for the current legislative session in Tallahassee. Of the several bills that are being considered, House Bill 1339 filed by Representative George R. Moraitis attempts to clarify existing law, while it also appears to be the most potentially troublesome new legislation for community associations in the state. As it now stands, the bill includes language that would, on the one hand, clarify the responsibility of third-party purchasers of foreclosed condominium units but, on the other hand, diminish the financial liabilities of foreclosing lenders to the community associations.

One of the proposed changes to the Condominium Act presented in HB 1339 provides that a first mortgagee bank who acquires title to a unit by foreclosure is not liable for any interest, administrative late fees, reasonable costs or attorney fees, or any other fees, costs or expenses that came due prior to its acquisition of title. This new provision was drafted with the intent of clarifying the existing law. As the statute is currently drafted, for many years associations have sought to collect attorneys’ fees, interest, and costs over and above the statutory “safe harbor” amounts of the lesser of 12 months of assessments or one percent of the original mortgage. If this change is implemented by the legislature, banks will have even less financial incentive to complete their foreclosures in a timely fashion, and the community associations would need to pass the burden to their paying owners for all of the fees and costs associated with pursuing their collection efforts against the owners who are not paying.

Florida legislature photo.jpgOne of the benefits of the proposed legislation, however, is that these same late fees, interest, costs and attorneys fees incurred by an association will definitively be collectible from subsequent purchasers of units (no matter how they acquire title). As the statute exists today, purchasers are jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of the title to the unit. Many “subsequent purchasers” have argued that this provision does not include attorneys’ fees, costs, interest and late fees, and only means “assessments” in the purest sense of the word. Therefore, if this change is implemented by the legislature, condominiums will likely collect more than they have in the past, as there will be no fear of being challenged for attempting to collect these other amounts.

One other potential amendment present in HB 1339 is with regard to an association’s right of access to a unit. As the statute is currently drafted, an association has the irrevocable right to access a unit during reasonable hours when it is necessary to prevent damage to the common elements or other units. This bill would amend the Condominium Act to provide associations with a right to enter abandoned units for inspection, make repairs, turn on the power, and otherwise protect, preserve and maintain the unit and adjoining common elements. Any expenses incurred by an association for this work would be chargeable to the unit owner and enforceable like an assessment. Additionally, the association may file an action in court to appoint a receiver to rent abandoned units for the benefit of the association in order to offset the association’s costs and expenses of maintaining, preserving and protecting the unit.

The legislature remains in session until May 3rd and there are several bills in committee that could affect condominium and homeowners associations. We will continue to monitor the legislative session and post updates in our blog, and additional information on the pending bills affecting community associations is also available at www.myfloridahouse.gov or www.flsenate.gov.

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For the past several years we have written many articles in this blog encouraging condominium associations to aggressively move their foreclosure cases forward in order to take ownership of those units whose owners are delinquent in advance of the banks’ foreclosures. RealtyTrac’s data shows that it takes an average of 2.5 years for bank foreclosures in Florida to conclude. By aggressively pursuing their own foreclosures, associations were able to acquire title to the units and subsequently lease them in order to recoup some of their back-due fees. This strategy has become increasingly popular with condo associations, which have benefitted economically from the approach and, in turn, regained financial stability. However, a recent ruling by the Third District Court of Appeal should cause condominium associations to reconsider.

Our other community association attorneys and I were quite surprised by the appellate court’s reversal of the lower court’s ruling in the case of Aventura Management, LLC v. Spiaggia Ocean Condominium Association, Inc. In Aventura, the lower court found that the condo association (which had acquired title to a unit through its own foreclosure) was entitled to bill all of the outstanding past-due fees to the eventual new owner, subsequent to the bank’s foreclosure.

The appellate court disagreed and reversed the decision, finding that Florida law clearly provides that “the previous owner is jointly and severally liable” together with the new owner for all unpaid assessments that come due up to the time of the transfer of title. The opinion reads: “The plain language of the Statute does not state or suggest that an exception is to be made when the previous owner is the condominium association.” Therefore, by positioning itself as the “previous owner,” the majority held that the condominium association became liable for the unpaid assessments and could not turn around and impose that liability solely onto the eventual new owner.

Judge Shepherd.jpgJustice Frank A. Shepherd wrote the dissenting opinion and stated: “Applying these rules to the case before us, it is apparent the fundamental purpose of the Legislature in promulgating section 718.116 was to assist condominium associations to be made whole in the collection of past due assessments, while at the same time not unduly impairing the value of collateral held by first mortgagees. In furtherance of this design, the Legislature has given condominium associations a statutory lien on each condominium unit over which it has jurisdiction, to secure payment of assessments without the necessity of filing a claim of lien in the public records, with the single exception of first mortgagees, where record notice is required. § 718.116(5)(a). Thus, under the legislative scheme, third-party purchasers of condominium units, like Aventura Management, LLC, are subject to old-fashioned caveat emptor principles. Their protection lies in satisfying themselves before purchase, whether by contract or judicial sale, of the status of past-due assessments on the unit.”

Our other condominium association attorneys and I agree with Justice Shepherd’s dissenting opinion. In our communications with Florida legislators prior to and during the 2013 legislative session that starts in March, we will be urging them to enact new legislation to exempt condominium associations who take title to units via their own foreclosures from liability for past-due assessments. Until such legislation is ratified, condominium associations that are considering pursuing their own foreclosure actions and taking title to units in advance of banks’ foreclosures should consult with qualified legal counsel to examine the specifics of their case in light of this new decision.

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