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Articles Posted in Renovation Projects

An arbitration decision rendered earlier this year by the State of Florida Division of Condominiums involving a dispute over alterations approved by a condominium board without a prior meeting and vote of the unit owners did not surprise our firm’s community association attorneys. We often find ourselves reminding association directors and property managers that the changes they are considering – albeit seemingly minor in nature – could be among those changes that are considered “material alterations” requiring approval by the membership.

While what constitutes a “material” alteration is not always clear, the rule of thumb is that if it changes the color, form, shape, elements or specifications from the original design or plan, or existing condition, in such a manner as to appreciably affect or influence its function, use, or appearance, then it is material. And, while the additional costs and time commitments that the approval process entails can be considered a bit ponderous, this recent decision serves as an important reminder of the potentially significant economic repercussions of forgoing the vote.

The case involved alterations that were approved by the Nine Island Avenue Condominium Association board of directors, which included changes and improvements to the pool deck furniture including cushions and fixtures, trellis, observation deck, pool steps and ladder, landscaping, the color of the paint in the koi pond, and the removal of a water filtration system. pool deck renovation.jpg After a hearing that took two full days and included a number of witnesses and experts for both the unit-owner petitioner, Ms. Jacqueline Simkin, and the association, the arbitrator found in favor of the unit owner and concluded that prior approval by the unit owners was required for practically every single alteration that had been made at the property.

The order concludes:

“Unless the alteration is approved by 66 2/3% of the unit owners, no later than December 31, 2014, the Association shall:

a. Return the color of the recreation deck waterways and curbing to the original light gray, and return the color scheme of the deck furnishings to original grey-blue, or something substantially similar;

b. Rebuild the trellises to the original footprint, design intent, appearance, and natural weathered wood finish, subject to current code requirements;

c. Return the gazebo to its original natural weathered wood finish;

d. Rebuild the wooden observation deck over the waterway;

e. Replace the pool egress ladders with ladders substantially similar to original, such that the steps extend farther down into the water and can be used as a means of egress from the pool by unit owners;

f. Return the entrance drive landscaping to its original, or substantially similar, condition; and
g. Repair or replace the building water filtration system with a comparable system utilizing current technology.”

Depending on how the final vote of the members turns out, the association may be facing significant expenses in order to return some or all of these elements to their original condition prior to the alterations being completed. These expenses, not to mention the potentially contentious nature of the meetings that will lead up to the vote as a result of this significant lapse in judgment, will certainly prove to be more costly and difficult for the association than the vote that it should have undertaken prior to moving forward with the alterations. Not to mention the attorneys fees and costs incurred by the association in defending this proceeding – and the unit owner’s attorneys fees and costs which the association will be responsible to reimburse.

This costly lesson comes free of charge to all other Florida condominium association boards of directors that are considering moving forward with what potentially may be considered a “material alteration” without obtaining prior membership approval as required by the Condominium Act. Bypassing the approval process is simply not worth the financial risk, as this condominium association learned the hard way.

Daniel Salas SRLDS.jpgConcrete restoration projects are unavoidable during the lifespan of every concrete building in South Florida. They are among the most expensive construction renovation projects that associations will be required to take on, and as such many associations and their property managers try to mitigate the costs as much as possible. However, the old adage that an ounce of prevention is worth a pound of cure holds true with these projects. Associations should be very careful to avoid cutting corners on the record keeping, making sure to chronicle all of the work that was performed as part of these restoration projects in order to protect against the repercussions of shoddy work and defects.

My colleagues and I have experienced a number of instances where our association clients have had defects manifest themselves only a few years after a concrete restoration project has been completed. However, the associations have had a difficult time proving that the contractor was responsible due to inadequate and incomplete records of the work that was performed. After inspecting the defects in question, the contractors have responded by indicating that they were not responsible for the work on the affected areas. The associations then request records and work logs to verify the contractors’ claims, only to find that the contractors and engineers did not keep detailed work logs of the work that was performed, leaving the association with little evidence to prove their claims.

balcony renovation.jpgThere are a number of measures that associations should take to avoid this scenario and protect themselves against the potential for inferior and defective work in concrete restoration projects. The foremost among these is the retaining of an independent third-party engineer or project manager to oversee and chronicle the restoration work performed in the building, and to help ensure that all of the work is performed in a cost-effective and timely manner. A third-party project manager not only protects the interest of the association during the construction process but also protects the association’s interests should defects in the restoration work arise in the future. The benefits of hiring a third-party project manager are countless, for example, project managers will assist in the evaluation and hiring of the project engineer and contractor; evaluate the work of the engineer and contractor; hold timely meetings to review the process of the work performed; review the payment requisitions and daily logs; and keep the association informed of any potential issues on the project.

In addition to the use of an independent engineer or project manager, the association’s attorney should also be called upon to review and or draft the contracts for the restoration project. The associations should ensure that their contracts include stipulations requiring that the general contractor and engineer maintain and provide to the association detailed work logs of all of the work performed. The standard warranty language in general construction contracts will not suffice without the detailed work logs showing exactly what work was performed and the location of such work in every facet of the building. It is much more difficult to hold contractors liable for defects in areas that are not documented as having been part of the restoration work performed.

Although these additional measures will add to the costs of concrete restoration projects for associations, without them the associations would be taking a significant risk of being unable to hold contractors responsible for any defects that may arise in the restored areas. Additionally, these added costs are minimal compared to the costs that the associations would endure in litigation or in repairs to the areas which had been restored. There is no doubt that concrete restoration projects are expensive, time consuming and a nuisance to the residents of the building. However, keeping these measures in place throughout the process will mitigate the time and money spent on the project as well as result in a well done concrete restoration project, retaining the value of the building as well as the safety of the residents.

Many individuals or associations have been victimized by unscrupulous contractors. These experiences include defective work resulting in costly disputes with contractors and efforts to correct deficiencies; contractors abandoning jobs; and the filing of liens on the owners’ property, despite payment for such services or goods having been made to the contractor. A basic understanding of construction lien laws may minimize exposure to the problems described above. Chapter 713, Florida Statutes (the “Construction Lien Laws”), provides protection to owners engaging contractors to perform work on their property, and it protects contractors, their subcontractors, suppliers and other professionals to ensure that they are paid for their services.

Under this law, lienors have the right to record a lien against real property if they are not paid for services, labor or materials provided for the improvement of such property. A lienor may be a contractor; subcontractor; sub-subcontractor; laborer; materialman who contracts with the owner, a contractor, a subcontractor, or a sub-subcontractor; or certain professionals (such as engineers or architects). While the owners of real property may be able to ascertain their exposure to a lien resulting from non-payment to a contractor that was engaged for the improvements, exposure to liens from non-payment to other lienors may be difficult to ascertain given that it is typically the contractor hired by the property owner that is entrusted with the obligation to pay the other parties having a right to place a lien on the property. For example, property owners may be aware that they have entered into a contract with a specific contractor, but they may be unaware that their contractor has engaged a subcontractor to excavate the land for the pool, and they have acquired the plaster and other materials from suppliers.

lien formIn the above example, lienors engaged by the contractor must be paid for their services, labor and materials. While the property owners may be aware that they have paid their contractor, they may be unaware of the subcontractors or suppliers. Failure to ensure that payment has been issued to the subcontractors and suppliers may result in the filing of a lien against the property, even if the owner paid the contractor.

The laws provide property owners with tools to notify the general public of their agreements with contractors hired for the improvement of real property so that potential lienors that have a right to file a lien on the owner’s property may then provide the owner with notice of their rights to lien for non-payment. In such cases, the property owner will file a Notice of Commencement in the public records of the county in which the property being improved is located. Those having lien rights for the work being performed and materials being supplied will be able to serve the property owner with a Notice to Owner advising the owner that they have been hired by the contractor to provide services or materials in connection with the project. Once a property owner is alerted as to the existence of all parties having a right to lien the property in connection with the improvement, the owner is in a position to ensure that all lienors are paid by the contractor, thus reducing each respective lienor’s rights to record a lien to the extent that they receive payment on the owner’s behalf. In order to ensure that lienors have been paid, the owner should condition that the contractor and other lienors provide releases of lien upon their receipt of payment.

The construction lien laws consist of a tedious set of statutes – complicated further by case law interpreting legal disputes involving such laws. Although the foregoing serves as a basic introduction of such laws, managers and directors must implement the procedures to protect against pitfalls such as those described above. Managers and directors should work closely with their engineers and attorneys to ensure that a contractor’s requested payment is conditioned upon satisfactory performance of work and compliance with procedures and forms included in the construction lien laws.

Has this ever happened at your condominium? You’re on the Board of Directors. The building has not been painted in 20 years and could definitely use some restoration. You realize that a special assessment is going to have to be passed in order to start a painting and restoration project, but before an assessment can be passed, you need to know how much it’s going to cost. Bids for a painting and restoration contractor are requested, and ultimately High & Dry Painting Company (“High & Dry”) is hired to do the work. Without having an attorney look anything over, the association signs a contract with High & Dry and the project is underway. High & Dry arrives at the building along with a crew and equipment, and the company finishes the job in a month. The association writes a check for the full amount of the contract and everybody is happy. Or so you thought.

Six months later the paint starts to crack, the manager realizes that High & Dry forgot to deliver a warranty for the work, and the association has just received a document in the mail entitled “Claim of Lien” from ABC Equipment Supply, a company the association did not contract with, threatening to file a lawsuit against the association and lien the entire building if payment is not made within 30 days. building painters.jpg In addition, the unit owners are disgruntled with the work and start to discuss whether they should challenge the special assessment because they don’t think the restoration work was even needed. Now what? Begrudgingly you call the association’s attorney and advise him or her of all that has transpired and hope that the nightmare will soon end. After a little research by the attorney, you’re told that not only was High & Dry not licensed, but they have since closed up shop and run for the hills. The nice little project has turned into a nightmare for the association.

All of this could have been avoided if the condominium association’s attorney had been contacted when the determination was made that the building needed to be painted and restored. The fact that the association did not have an attorney review the contract was the root of every problem in the scenario outlined above because contracts performed by unlicensed contractors are unenforceable in law or equity. Accordingly, the contract that the association entered into which may have provided a warranty is now unenforceable, and High & Dry is nowhere to be found. When an association signs an agreement with a contractor it must be diligent in obtaining all of the appropriate releases not only from the contractor, but also from the subcontractors, material men and suppliers hired by the contractor. Even if the association has no knowledge of who ABC Equipment Supplier is, and regardless of whether the association paid High & Dry for the full contract amount, the association may still be responsible for any outstanding sums owed to ABC.

Contractual problems or disputes such as the example set forth above may be avoided by the board simply seeking the advice of a professional or expert prior to the signing of an agreement. In the case of third party contracts, an attorney would be able to prepare a contract to protect the association from unlicensed and uninsured contractors. In addition, utilizing the services of an engineer or other professional for advice as to needed repairs and restoration will further insulate the board from liability when the disgruntled unit owners threaten legal action.

Some condominiums tend to rely heavily on their property managers. However, property managers may not engage in the unlicensed practice of law. This includes the giving of legal advice and counsel to others as to their rights and obligations under the law and the preparation of legal instruments, including contracts, by which legal rights are either obtained, secured or given away, although such matters may not then or ever be the subject of proceedings in a court.

Finally, preventing a condominium nightmare by having an attorney review a third-party contract or consulting with an expert can save an association thousands of dollars in unexpected costs for repair, not to mention attorneys’ fees spent defending and prosecuting actions on behalf of the association.

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