Wednesday, August 3, 2016

When Can the Association Board Have a “Closed-Door” Executive Session?

I get this question more than I like. The association board wants to have a meeting and either not notify the owners about it or keep owners from attending (i.e. “closed-door”). Most of the time it comes up when a board has a controversial or unpopular decision to make and, frankly, does not want to discuss it in front of the ownership. Unfortunately, neither the Condominium Act nor the Homeowners Association Act has a provision for closed-door meetings in these situations.

One of the fundamental concepts of association living is that everything is done in the full view of the ownership. Almost every decision and document, for better or worse, needs to be open to scrutiny from the ownership. After all, it is the owners’ money and property that the board decisions are impacting!

There are two exceptions to the open meeting policy. The first is when the board is discussing personnel (a/k/a employee) issues. See Fla. Stat. § 718.112(2)(c)3.b. In this situation, the legislature decided the privacy rights of a worker trump the owners’ rights to transparency from the association. This section covers discussions regarding in house employees. However, this does not include decisions regarding the management company contract. The concept gets gray when dealing with managers that work for a management company but basically function as an employee of the association. In those cases the language in the management company contact could provide some insight. If in doubt contact your legal counsel for an opinion.

The second exception is a meeting to discuss proposed or pending litigation where the attorney is present. See Fla. Stat. § 718.112(2)(c)3.a. Basically, this is meeting covered by the “attorney-client privilege.” There are two prongs to this situation. First, there has to be litigation proposed or present. The board cannot have a closed meeting to get a legal opinion from legal counsel a topic for which litigation is not proposed or pending. Whether litigation is pending or not is self-explanatory but when litigation is “proposed” can be a grey area. If this is a question, one of the directors should reach out to the attorney individually and ask whether a conversation on a given topic would qualify under this statute for a closed-door meeting. Second, the attorney for the association must be present. The board cannot have an “attorney-client” meeting, with out the attorney present (in person or by phone).

So what can the board do to mitigate the awkwardness of these meetings? First, as long as there isn’t a quorum of directors present, directors can discuss association business. The president can call each director individually to get an idea of where they stand on an issue. This gives the directors the ability to flush out some of their differences behind the scenes. But this does not negate the requirement that the issue the board is trying to avoid must be brought up at an open meeting where owners can comment to the directors and the ultimate decision is made in the open.

Friday, July 29, 2016

Association Key Access to Units - What Are the Rules?

Can a condominium association require that unit owners provide the association with a key to access a unit? The short answer to the question is yes.

Most associations and owners are aware of Fla. Stat. § 718.111(5)(a) that states “The association has the irrevocable right of access to each unit during reasonable hours, when necessary for the maintenance, repair or replacement of any common elements or any portion of a unit to be maintained by the association pursuant to the declaration or as necessary to prevent damage to the common elements or to a unit or units.”

In the case of Harbour Royale Condominium Association vs. George Mitchell, Case No. 13-02-8797, (Brevard County, September 17th 2013), the Association established a rule requiring owners to deliver a key to their unit to the association. Specifically, their rule stated that “It is required that keys to the unit be provided to the Association Office. They are to be used for emergency purposes and for periodic spray controls. The Association has the right to authorize entrance to the owner's unit by any means necessary in case of an emergency at the expense of the owner.”

Despite the association’s rule, one particular owner refused to provide a key on the grounds that he previously provided a key to the association and the keys were misplaced. He was also afraid that the association would make copies and give the copies to unauthorized maintenance personnel.

The Arbitrator ordered the owner to permanently provide the Association with a key and stated that ““The right of access granted by [Fla. Stat. § 718.1255] is broad enough to support a requirement that unit owners must provide key access to their unit to the Association.” The Arbitrator went on to say “Even if the Association lost the copy of the key [the owner] allegedly gave to the Association, [the owner’s] remedy is not to refuse to provide another copy of the key to the Association.”

If your community is interested in implementing a policy requiring owners to deliver keys or key access codes to the association, we recommend the following:
  • The association must adopt a formal rule implementing the new key access policy.
  • The rule should describe the requirement to deliver keys or codes to the association, how those keys and codes will be handled and safeguarded, the instances in which those keys and codes will be used for access to the unit, etc.
  • Give written notice to all the owners that the new policy is in place.

As always, check your particular association’s governing documents for specific restrictions regarding entry to units, adoption of rules, etc.

If you have any questions on this topic or any other Homeowner or Condo Association issues, please contact me and I will be happy to help.

Tuesday, July 26, 2016

Five Key Points for New Association Board Members

Below are five key points that will prove invaluable for both potential board members and for those already serving their term.

Becoming elected or appointed to serve on a Homeowner’s Association or Condominium Association’s board of directors can be an exciting, rewarding and enriching experience. It can be an opportunity to give back and contribute to the success and future of a community. However you should also realize the responsibilities that come with the posting, especially with some of the larger associations where you will be at the helm of a potentially multi-million dollar company. You could be accountable to several hundred homeowners, be responsible for large budgets, and you may oversee the complexities that come along with high-rise and/or multi-structure complexes.

1.  Know What You Don’t Know.

You are not required to have all the necessary information memorized. The Florida Statutes are constantly being amended and your own association rules and regulations will be ever evolving. While you are not expected to know everything, you are expected to engage the right people to advise you. The most effective way to stay current and meticulously proficient is to engage the appropriate experts – a specialized attorney, a qualified CPA, an efficient manager, and a reputable insurance agent will ensure you have access to the information and advice you need.

2.  Be Consistent and Abide by the Documents.

A director on an association board must be consistent and enforce the rules/restrictions as written. Admittedly, this is tough when the restrictions for the community seem obsolete or misguided. Keep in mind though that as a director, the restrictions are provided TO you to enforce. If you feel any part of the restrictions no longer best serves the community, do not just ignore the issue or pick and choose what you’re going to follow and ignore. If the association does not want to follow a rule or restriction, then meet with your attorney to figure out the process and language to change it. Otherwise, consistently follow the rules as written. 

3.  Be Transparent.

An obligation of being a director is to promote transparency within the association. The owners have a right to information and you’re making decisions affecting their finances and property rights. Therefore, they have a right to know what’s going on with the association.  Ways to promote transparency include ensuring the owners are receiving the correct notices, having regularly scheduled board meetings, and making official records and financial statements available. If your association does not have a user friendly, updated website then this is great way to improve association/owner communication.  

4.  Have a Plan for the Future.

There are two reasons to have future plans for the Association: 1) it defines what you want to accomplish, and 2) it makes for better meetings.  First, you likely ran for the board to have an impact on the community. However, how can you have an impact if you don’t have a plan for what that impact is going to be? Anytime you can define discrete goals you’re more likely to accomplish them. Second, I have found that associations that don’t have a plan for the future tend to focus on the past. This means discussions over past events dominate the meetings. If you give your owners an outlook for the future and define the priorities of the community over the next 1, 3, & 5 years, you will be pleasantly surprised how much support you get from the owners, plus how much more efficiently your meetings will run.  

5.  Understand the Financials.

Association financials can be extremely complex. Although you don’t need to be able to translate every single document, we do recommend you form a basic understanding of the balance sheet, the income statement, the annual budget and the accounts receivable. You should also have a clear picture of the reserves – are you adequately funded? If you can understand these documents you’ll get a baseline picture of the financial health of your community. Then, engage a specialized community association accountant or CPA who can answer any questions that you might have.

If you do those 5 things you will be a key asset to your association, improve your community, and also likely enjoy your experience as a director.  

For more information on this issue or other association questions contact

Friday, July 22, 2016

Community Associations - 2016 Legislative Update

On Thursday, June 23 I was privileged to be part of Carr, Rigg's & Ingram's 2016 Community Association Managers (CAM) CPE Seminar in Miramar Beach, where I was invited to speak on legislative updates for 2016 pertaining to community associations. For those who were unable to attend, here's all the information provided at the seminar. 

HB791 – The 2015 Association Bill
  - Insurance Clarification – Condos: Stat. § 718.111(11)
  • Provides that condominium property that is damaged by an insurable event must be repaired or replaced by the association as a common expense. If the damage is not the result of an insurable event, the association or the unit owners are responsible for the repair or replacement, as determined by the declaration or bylaws.
  • The bill specifies that in cases where the damage is not the result of an insurable event, themaintenance provisions of the declaration or bylaws determine whether the association or the unit owners are responsible for the repair or replacement.
 - Assessment Payment: Stat. § 718.116(3) & (5), 719.108(3)
  • The previous payment structure (payment received and applied in order to interest, admin late fee, attorney’s costs/fees, then to delinquent assessment) applies in spite of any restrictive endorsement, designation, or instruction placed on or accompanying a payment.
  • The bill amends this to provide that the required distribution of delinquent assessment payments also applies in spite of any purported accord and satisfaction.
    • This is in response to Croix Lane Trust v. St. Croix at Pelican Marsh Condo. Ass'n, Inc., 144 So. 3d 639 (Fla. 2d DCA 2014), owner sent payment to association marking “payment in full.” Court said that by the Association accepting and depositing this resulted in an accord and satisfaction. 
  • Fining Procedure
    • Starting to unify fining procedure for HOA, COAs, and Co-ops.
    • A fine may be levied by the board on the basis of each day of a continuing violation, with a single notice and opportunity for hearing before a committee.
    • The committee’s role is basically an appellate role. It is limited to determine whether to confirm or reject the fine or suspension levied by the BOD.
      • Condos (& Co-ops generally)
        • The role of the committee is limited to determining whether to confirm or reject the fine or suspension levied by the board. If the committee does not agree, the fine or suspension may not be imposed.”
      • HOAs
        • “If the committee, by majority vote, does not approve a proposed fine or suspension, it may not be imposed. The role of the committee is limited to determining whether to confirm or reject the fine or suspension levied by the board.” 
  • Amounts of the fines: Stat. § 718.303(3), 719.303(3), 720.305(2)
    • Condos & Co-ops
      • Do not allow for fines greater than $100 day or $1000 in aggregate, regardless of what docs say.
    • HOAs
      • Fines may not exceed $100 per violation unless provided in the governing docs. Used to say “up to $100 per violation” and did not have provision for governing documents allowing for higher daily fine.
      • Note – this doesn’t change the $1000 aggregate fine unless otherwise stated in governing documents. 
  • Suspension of Voting Rights and Use Rights: Stat. § 718.305(5) & (7), 720.305(5) & (6), 720.305(2)(A) 
  • Suspensions apply to the owner more so than the unit. In other words, suspensions imposed apply even if the suspension arose from less than all the units or parcels owned by the member.
    • Applies to Condos
    • Provides that if delinquent when nominations for HOA director are due, that person cannot run for the board. Provides that if director is 90 days delinquent then their seat is deemed abandoned.
      • Only applies to HOAs. Can’t hold seat when delinquent for Condos, but can run for director while delinquent.
      • Owners with suspended voting rights do not count toward quorum or any voting percentages. Suspension may not prohibit ability to enter or leave property, as well as may not prohibit the right to park on property.
  • Electronic Notice: Stat. § 719.112(2), 719.10691)(d)3., 720.303(c)
    • Strikes the requirement in that electronic notice can only be provided if allowed in the by-laws. Now owners can opt-in to electronic notice of meeting regardless of by-laws.
      • Applies to Condos, Co-ops, and HOAs. 
  • Electronic Voting: Stat. § 718.128, 719.129, 720.317
    • Allows for internet-based online voting according to certain terms:
      • Authenticate the member's identity to the online voting system.
      • Transmit an electronic ballot for board elections to the electronic voting system that ensures the secrecy and integrity of each ballot.
      • Verify the authenticity of receipts sent from the electronic voting system
      • Confirm, at least 14 days before the voting deadline, that the member's electronic device can successfully communicate with the online voting system.
    • The bill also provides that a member voting electronically is counted as being in attendance at the meeting for purposes of determining a quorum, and for condominium and cooperative associations, a quorum established based on members voting electronically is only limited to the issue specifically identified in the electronic vote.
    • In addition, the condominium, cooperative, or homeowner’s association's online voting system must be able to:
      • Authenticate the member's identity.
      • Authenticate the validity of each electronic vote to ensure that the vote is not altered in transit.
      • Transmit a receipt from the online voting system to each member who casts an electronic vote.
      • Permanently separate any authentication or identifying information from an electronic ballot for board elections, rendering it impossible to tie a ballot to a specific member
      • Store and keep electronic ballots accessible to election officials for recount, inspection, and review purposes. 
  • Process for electronic voting must be approved by board resolution.
    • The board resolution must provide that members receive notice of the opportunity to vote through an online voting system, must establish reasonable procedures and deadlines for members to consent, in writing, to online voting, and must establish reasonable procedures and deadlines for members to opt-out of online voting after giving consent.
    • Written notice of a meeting at which a board resolution regarding online voting will be considered must be provided at least 14 days before the meeting. 
  • HOA Amendment Notice: Stat. § 720.306(1)(B)
    • Generally, an HOA must provide each member with a copy of an amendment within 30 days of recording. However, in lieu of providing a copy of the recorded amendment, the HOA may provide notice to members that the amendment was adopted and identify the book/page number or instrument number of the recorded amendment. 
    • This bill provides that the HOA’s failure to timely provide notice of the recording of the amendment does not affect the validity or enforceability of the amendment.
  • Proxy – Amends Chapter 617 (not-for-profit corporations): Stat. § 617.0721
    • No need for original proxies. A copy, fax, or other reliable reproduction of an original proxy may be substituted for any purpose for which the original proxy could be used. 
  • “Official Records” Definition – Condos & Co-ops: Stat. § 718.111(12), 719.104(2)
    • The bill specifies that “all other written records” of the condominium association, which are related to the association, are considered official records that must be maintained by the association. 
  • Definition of “Governing Docs” – HOAs: Stat. § 720.301(8)
    • Definition of “governing documents” for homeowner’s associations has been updated to include the “rules and regulations” adopted under the authority of the association’s declaration, articles of incorporation, or bylaws.
      • For some reason “Governing Documents” is not a defined term in Chapter 718.
  • “HOA Act” Stat. § 720.3015
    • The bill defines Chapter 720 as the “Homeowners’ Association Act.”
  • Extends Bulk Buyer until 2018 – Condos Stat. § 718.707
    • Extended time limitation for classification from July 1, 2016 to July 1, 2018.
HB71 – Service Animal Bill
  • Service Animal Accommodation
    • This law specifically applies to “service animals” and NOT “emotional support animals.”
  • Misrepresentations
    • Although much of the bill reiterates rights and rules included in the Americans with Disabilities Act, it also makesmisrepresenting your pet as a service animal a second-degree misdemeanor.
    • The punishment: 30 hours of community service for an organization that assists the disabled or other group decided by a judge. The community service must be completed within six months.
HB87 – Construction Defect Bill
  • Definition of “completion of a building or improvement”
    • Current law requires notice of a claim of defect AFTER a project is complete. The bill changes the definition to include a temporary certificate of occupancy.
  • Changes the requirements for a notice of claim of an alleged construction defect
  • Changes the requirements in the response to notice of claim
    • Notice of claim to the contractor, subcontractor, supplier or designer must be made at least60 days before filing any action, or at least 120 days before filing an action involving an association representing more than 20 units.
    • Response to the claim from a contractor, subcontractor, supplier or designer must be received no later than 15 days, or within 30 days for an association representing more than 20 units.
  • Allows for claims to be made directly to the insurance carrier.
  • Provide a mechanism for pre-suit exchange of information. 

HB643 – Condominium Termination Bill  - Fla. Stat. § 718.117
  • A condominium may be terminated at any time if the termination is approved by 80 percent of the condominium's voting interests and no more than 10 percent of the voting interests reject the termination.
  • The bill provides that if at least 80 percent of the voting interests are owned by a bulk owner, the following terms govern the termination:
    • Unit owners must be allowed to lease their units if the units will be offered for lease after termination;
    • Any unit owner whose unit was granted homestead exemption must be paid a relocation payment;
    • Unit owners must be paid at least 100 percent of the fair market value of their units;
    • Certain dissenting or objecting owners must be paid at least the original purchase price paid for their units;
    • The outstanding first mortgages of all unit owners current on association assessments and mortgage payments must be satisfied in full;
    • A notice identifying any person or entity that owns 50 percent or more of the units and the purchase and sale history of any bulk owners must be provided to owners; and
    • A board with at least one-third of the members elected by unit owners other than a bulk owner must approve the termination. 
  • The bill also makes changes to condominium termination proceedings that are not specific to those owned by bulk owners, including:
    • If a condominium association fails to approve a plan of termination another termination may not be considered for 18 months;
    • A condominium formed by a conversion cannot be terminated for five years, unless there are no objections to the termination;
    • A plan of termination may be withdrawn under certain circumstances;
    • A termination trustee may reduce termination proceeds to a unit for unpaid fines, costs, and expenses;
    • Unit owners may only contest the fairness and reasonableness of the apportionment of the proceeds from the sale, that the liens of the first mortgages of unit owners will not be satisfied, or that the required vote was not obtained;
    • An arbitrator may void a plan of termination if it determines that the plan did not apportion the sales proceeds fairly and reasonably, that the plan was not properly approved, or that the procedures to adopt the plan were not properly followed.
2016 Legislative Changes
SB130 – Discharge of Firearm In Effect Now
  • Allows for criminal penalties for anyone who discharges a firearm in a residential area that has a density of one unit or more per acre.
SB184 – Military Service Personnel Rental Approvals
Signed and Effective July 1
  • Requires Associations to complete processing of a rental application from a military service member within a specified time frame.
    • Imposes a 7-day period on a condominium association or mandatory homeowner’s association to review the application and must notify the service member in writing.
    • If denial of an application does not come in a timely manner, the Association must rent or lease the unit or parcel to the service member if all other terms are complied with.
SB498 – Repeal of the Cohabitation Ban In Effect Now
  • Allows for the cohabitation of an unmarried man and woman, which is currently banned in s. 798.02 of the state’s criminal code.

2016 Legislation of Interest that Failed
HB203 – Estoppel Letters
  • Companion bill with SB722
  • Would revise the process for providing estoppel certificates by designating a specific response time, duration of certificate, and amount of the fee that can be levied.

SB792 – Amending rentals in HOA
  • Tried to make it like condos with grandfather clause. HOA amendments that modified rental duration would only be applicable to those who consented to the amendment and to those who acquired a parcel or unit after the adoption of the new amendment.

Companion Bills HB653 and SB1502 – State Regulation
  • Would have renamed the Division of Condominiums and provide for the regulation of mandatory homeowner’s associations.
    • Would allow for the Division to assess an annual $4.00 per home fee payable to the Division.
    • Would allow for the Division to conduct investigations and imposed penalties for violations.
    • Revised the procedures for transition from developer control.
    • Would regulate proxies and elections. 
Other misc. issues of interest that did not pass.
  • Mandatory binding arbitration of homeowner’s association disputes (i.e. inclusion of HOAs in DBPR)
  • Removing the exemption for less than 50 units related to audits, reviews and compilations. Accounting requirements would be based solely on revenues.
  • Mandatory websites for condominiums and homeowner’s associations.
  • Exempting covenants and restrictions from the Marketable Record Title Act (MRTA);
  • Requiring payment plans for delinquent owners.

Case law Update 2015-2016
 Mortgage Foreclosure Statute of Limitations
  • Deutsche Bank Trust Co. Americas v. Beauvais, 188 So. 3d 938 (Fla. 3d DCA 2016)
    • “A dismissal without prejudice which does not adjudicate the merits of a first filed foreclosure action, similarly can do no more than terminate a lender's ability to collect on the underlying defaulted installment, again leaving the lender free to accelerate and file a subsequent foreclosure action for subsequent defaults.”
Safe Harbor Updates
  • Catalina West HOA, Inc. v. FNMA, 3D15-217 (Fla. 3d DCA March 30, 2016)
    • Safe harbor, Fla. Stat § 720.3085, does not include late fees, attorneys fees, etc., prior to the bank taking title. 
  • Pudlit 2 Joint Venture LLP v. Westwood Gardens Homeowners Association, Inc., 4D14-1385 (Fla. 4th DCA May 27, 2015)
    • If there’s a conflict between the safe harbor provisions in the HOA Declaration and the statute, the Declaration controls. 
Attorney-Client Privilege Discussions
  • Las Olas River House Condo. Ass'n, Inc. v. Lorh, LLC, 181 So. 3d 556, 557 (Fla. 4th DCA 2015), reh'g denied (Jan. 26, 2016)
    • In the course of the case, the owner asked the association to disclose all communications between the association, its attorney, and management. The owner argued that the association waived the attorney privilege when it included the manager in communications with the attorney.
    • Surprisingly, the trial court agreed with the owner and ordered that all those communications be disclosed! The association appealed, and subsequently “won” the appeal but unfortunately this was no big victory. The appellate court told the trial court to reexamine the issue instead of ruling that these communications were inherently protected by the privilege. This leaves open the possibility that these communications may still not be protected.
    • Put in your management contracts that the Association intents to extend the attorney-client privilege to you! 
Statute of Limitations to Challenge Amendment? 5 years
  • Hilton v. Pearson, 2016 WL 517105 (Fla 1st DCA 10 2016)
    • 5 years to challenge the process
    • “A suit challenging the validity of an amendment to restrictive covenants must be filed within five years of the date that the amendment is recorded even if the suit alleges that the amendment was void because it was not properly enacted.” 
  • Harris v. Aberdeen Prop. Owners Ass'n, Inc., 135 So. 3d 365, 369 (Fla. 4th DCA 2014)
    • 5 years to challenge the interpretation or meaning of an amendment. 
Architectural Restrictions
  • Leamer v. White, 156 So. 3d 567, 573 (Fla. 1st DCA 2015)
    • Covenants state: “Ostentatious Site Features.  The construction of ostentatious site features such as topiary, sculpture, free standing fountains in the foreground of townhouses or lighting systems which may be offensive to adjacent neighbors is unacceptable.”
    • What does that mean? Are all topiaries and sculptures ostentatious? Is whether something is ostentatious completely in the eye of your adjoining neighbor?
    • Morale: Be very careful of the words used in your rules. They must be clear to all and cannot leave room for interpretation.
 If you have any questions on this subject or Homeowner's/Condo Associations, please contact the author, Brandon Burg