Owner Vote Not Required to Purchase Unit in Foreclosure

Q: We have an owner who stopped paying their assessments to our condominium association. The association recorded a lien against the unit and foreclosed. The association was the only bidder at the foreclosure sale. Now some unit owners are saying that the board of directors acted inappropriately and there should have been a vote of the members before the association took title to the unit. They are saying that the association cannot purchase any kind of real estate without a vote of the members. Are they correct? (R.G., via e-mail)

A: Generally, a unit owner vote is required for the association to purchase real property. Section 718.111(7) of the Florida Condominium Act provides that the association has the power to acquire title to property and convey, lease or mortgage association property for the use and benefit of the members. However, the association may not acquire title to real property except as provided in the declaration and, if the declaration is silent, then the association must obtain approval of 75% of the total voting interests in the association.

There is a separate clause in the statute that addresses acquiring title to a unit following foreclosure of the association’s lien. Section 718.111(9) of the statute states that there is no limitation on an association’s right to purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments.

Therefore, while, a membership vote may be required for the association to take title to real property generally (including purchasing a unit on the open market), there is an exception for when the association is foreclosing its lien for unpaid assessments.

Q: My homeowners’ association recently sent out the annual financial statement. The statement is a “compiled” financial statement for the previous fiscal year. I questioned the board why we didn’t get an audit. The board said it did not want to have an audit and that an audit has never been done in the past. This seems outrageous. Isn’t every association required to have an audit performed at least occasionally? (W.O., via e-mail)

A: For homeowners’ associations, the level of year-end financial reporting that is required is dependent on the total annual revenues of the association. Under Section 720.303(7) of the Florida Homeowners’ Association Act, if an association has total annual revenues of less than $150,000, the association is only required to prepare a “report of cash receipts and expenditures.” If the association has total annual revenues of more than $150,000 but less than $300,000, it must prepare a “compiled” financial statement. If the association has total annual revenues of more than $300,000 but less than $500,000, it must prepare “reviewed” financial statements. Finally, if an association has total annual revenues of more than $500,000, it must prepare “audited” financial statements.

The statute also provides that the members may vote to reduce the required level of the association’s year-end financial report for a given year. For example, if the proper vote was taken, an association that is required to prepare an audit could prepare a cash receipts and expenditures report, compiled financial statements or reviewed financial statements, in accordance with the members’ vote.

The Board is also authorized to order more thorough financial reports than the statutory minimum. Further, the association’s governing documents may impose requirements more stringent than the statute.

Originally posted on floridacondohoalawblog.com. Written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com

Subdivision Lots Subject to Easement Rights

Q: What homeowners’ association activity is allowed within “access easements” and “lake maintenance easements?” We own the title to our lots but these easements against our property are set forth in our documents. Does this give the association or other owners the right to come on our property? (J.S., via e-mail)

A: The answer to your question depends on several things, including the language contained within the subdivision plat’s dedication language, the language in your declaration of covenants, and what easement  across your property may  held by third parties, such as utility service providers.

The basic rule is that a third party (your neighbors, your association, or a utility company) can use your property for the purposes intended by the easements imposed against the property. For example, many plats impose Lake Maintenance Easements (often referred to as LMEs). The purpose of the LME is for maintenance of a lake and it is usually the association which is the beneficiary of that easement. So, for example, the LME would give the association the right to come on to your property to maintain the lake, but would not give your neighbor the right to fish in your back yard. Work by the association within these easement areas, consistent with the dedication language and the purpose and authority detailed in the governing documents, is generally permissible at reasonable times and in a reasonable manner, and no prior permission is needed to enter your property.

On the other hand, if a plat dedicates an Access Easement (often referred to as “AEs”) to all lot owners around the bank of a lake, this would likely mean that your neighbor would have the right to enter upon that portion of your lot for enjoyment of the lake. Therefore, a careful reading of the plats and the homeowners’ association’s governing documents is needed to determine what easement rights others have across your land. A title search is usually needed to ascertain easements to third parties, such as utility companies.

This is also an important issue for associations to understand and address as concisely as possible in their governing documents. For example, an easement imposed on a lot may be described in the declaration of covenants as part of the common areas, but not necessarily an area the association should be maintaining, such as mowing the grass on a LME. Detailed document provisions regarding these issues can avoid disputes and uncertainty.

Q: My condominium association has historically had problems with certain owners not paying their assessments on time. In an effort to avoid collection problems in the future, the association is considering requiring that assessments to be paid on a one-time, annual basis, rather than paid monthly, as is our practice now. Can the association require assessments to be paid annually? (R.B., via e-mail)

A:  No. Section 718.112(2)(g) of the Florida Condominium Act states that assessments may not be made against the unit less frequently than quarterly. Therefore, a condominium association can require assessments be paid on either a monthly or quarterly basis, but cannot require assessments be paid on an annual basis.

However, if a unit owner is delinquent in the payment of assessments and the association has recorded a claim of lien against the unit, the statute provides that the outstanding assessments for the remainder of the budget year may be accelerated. Again, this is only in the context of a delinquent owner where the association has recorded a claim of lien.

Otherwise, for a condominium association assessments may not be collected less frequently than on a quarterly basis.

There is no similar limitation in Chapter 720, Florida States, the Florida Homeowners’ Association Act. As such, it is not uncommon for homeowners’ associations to require that their assessments be paid on an annual basis.

Originally posted on floridacondohoalawblog.com. Written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com

Performing Rights for Organizations and Associations

So your community association has survived Hurricane Irma and completed all the repairs. In celebration of this milestone, the association decided to hold a community wide cookout with live music. The celebration was a success and thoroughly enjoyed by everyone. Now, two weeks later, you are in receipt of a certified letter from a Performing Rights Organization advising you that the band you hired performed copyrighted material from artists it represents, and that the association is in violation of federal copyright law and is threatening serious penalties unless you agree to purchase a license from the organization. What have you done and what do you do?

This scenario, in various forms, plays out for numerous community associations every year. If your community association displays copyrighted materials such as music, movies, or television programs, and even if only the owners or residents of your community attend such performances, the association is likely engaging in the public performance of copyrighted material and is therefore required to obtain the appropriate license. The key to understanding whether a license is required is first understanding whether the display of the copyrighted material constitutes a public performance. Typically, a public performance is any display or performance of copyrighted material at a place that is either open to the public or where a substantial number of persons outside a normal circle of family or social acquaintances are gathered. Further, performances in “semi-public” places such as private clubs, lodges, summer camps, and schools are considered “public performances” for the purposes of copyright law. Therefore, the display of copyrighted material in one’s home with family or friends is not considered a public performance, however, the display of the same material by a community association at a function that is only attended by owners or residents could possibly be treated as a public performance.

A community association that engages in the performance of copyrighted material, whether through hosting events with music, or otherwise, would either need to purchase its own licenses from the appropriate Performing Rights Organizations or ensure that any performers have acquired the necessary licenses. Examples of Performing Rights Organizations are BMI (Broadcast Music Inc.), ASCAP (American Society of Composers, Authors and Publishers) and SESAC (Society of European Stage Authors and Composers). Further, there are other organizations for musicians and composers, as well as additional organizations for visual media. While an association can protect itself by confirming that its performer has purchased all appropriate licenses, in the event that the performer does not have the appropriate license, even if their contract with the association requires them to do so, the association can still be found liable for the copyright violation.

Violations of copyright can carry significant monetary penalties. As such, this is an area where the association should tread cautiously.

The best course of action for a community association is to address the licensure issue prospectively before any performance. However, if the association receives a notice of a violation from a copyright holder or a Performing Rights Organization, the association should consult with its legal services provider to determine the best strategy moving forward to limit the association’s exposure.

Originally posted on floridacondohoalawblog.com. Written by James Robert Caves, III

Avoiding Defense of Selective Enforcement

A common defense raised by owners who find themselves on the wrong side of a covenant enforcement action is to allege an association’s failure to enforce the covenant at issue against all violators and instead only selectively enforcing it. The defense of selective enforcement is based upon a case decided by the Supreme Court of Florida in 1979. Essentially, an association cannot enforce the restrictions in the recorded documents or those contained in the rules and regulations in an inconsistent or arbitrary manner.  The issue is addressed by the courts and arbitrators frequently and as explained in Oceanside Plaza Condominium Association, Inc. v. Salussolia: the claim of “selective enforcement will succeed if the failure of the Board to enforce documents in other instances bears sufficient similarity to the case at issue as to warrant the conclusion that to permit the enforcement in the instant case would be discriminatory, unfair, or unequal.”

Nevertheless, even if certain provisions were not uniformly enforced in the past the association is not without options if it determines that such provisions should be enforced going forward. The process for “reviving” a provision that has not been previously enforced is derived from a condominium case called Chattel Shipping and Investment, Inc. v. Brickell Place Condominium Ass’n, Inc. In Chattel Shipping, the association’s declaration of condominium prohibited enclosing balconies without prior association approval. Despite this prohibition, multiple unit owners enclosed their balconies before the association announced its intent to prohibit future balcony enclosures. After the announcement, one unit owner, Chattel Shipping and Investment, Inc., enclosed its balcony and the Association thereafter demanded removal of the enclosure and sought injunctive relief to enforce the restriction. The trial court granted the injunction in favor of the association, and Chattel appealed. Chattel Shipping argued that in light of the association allowing other enclosures in the past, the association’s demand to remove Chattel’s enclosure constituted unequal and arbitrary enforcement of the restriction in violation of the principle of selective enforcement. The court rejected Chattel Shipping’s argument, holding that enforcing a uniform policy, under which a given building restriction will be enforced prospectively is not selective and arbitrary. The court noted that enclosures built before the association made its announcement protected other owners who had built their enclosures in reliance on the status quo, whereas Chattel Shipping had erected its enclosure following the association’s specific notice that subsequent violations would not be tolerated. Ultimately, the court affirmed the trial court’s holding in favor of the association.

Originally posted on floridacondohoalawblog.com. Written by John Stratton

Developments Regarding New Term Limit Law

 Q: In your September column you addressed the new term limit law for condominium association directors.  Have there been any developments regarding this law since your September column was published? T.W.

A: Yes.  The recent amendments to the condominium statute establishing 8-year term limits for directors have raised many questions. As discussed in my September 16, 2018 column, there is a significant legal question as to whether this law should be applied retroactively. Since my September column was published, the Division of Florida Condominiums, Timeshares, and Mobile Homes, the state agency that has certain regulatory oversight over condominiums, has concluded in at least one case that the law does apply retroactively.

Even if the Division’s position is correct (and I personally do not believe that it is), “termed out” directors still have the right to put their name in for election. If there are insufficient candidates to require a contested election, they are entitled to be seated on the board. If there is a contested election, and they receive at least 2/3rds of the votes cast, they are likewise entitled to be seated under the current law.  If they are elected, but not by 2/3rds of the ballots cast, the association will need to make a decision based on advice of legal counsel as to the best course of action to take.

Q: I serve on the Board of a homeowners association.  I travel quite a bit and am often not able to attend the regularly scheduled Board Meetings.  We are getting ready to vote on some very important issues and I want to make sure I get to exercise my vote.  Can I vote through the use of a proxy? J.A.

A: No, Section 720.303(2)(c)3, of the Florida Homeowners’ Association Act specifically prohibits a director from voting via proxy on matters that come before the Board.  Similar prohibitions exist in the Florida Condominium Act and the Florida Cooperative Act, found at Chapters 718 and 719 of the Florida Statutes, respectively.

Q: Is the president of the board only supposed to vote in order to break a tie? S.S.

A: Most community association bylaws require the president to be a director.  Often the president serves as the chairperson of the board of directors’ meetings. As a director the president also participates as a member of the board during board meetings.

Although Robert’s Rules of Order and similar parliamentary guides provides that the chair only votes in the event of a tie, even if the bylaws incorporate Robert’s Rules, state law supersedes the procedural guidance from these manuals.

Under Florida law, directors who are present and attending meetings where action is being taken are presumed to have agreed with such action, unless the director votes against the issue or abstains from voting. So, as a director, the president gets one vote which should be cast on the issue at hand in the same manner as other directors.

In the rare instance where the president is not also a director (I don’t recall ever having seen this), he or she would not be able to cast a tie breaking vote since only directors are permitted to vote.

Originally posted on floridacondohoalawblog.com. Written by Attorney David G. Muller is a shareholder with the law firm of Becker & Poliakoff, P.A., Naples (www.beckerlawyers.com). The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this column does not create an attorney-client relationship between the reader and Becker & Poliakoff, P.A. or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.