New Condo Laws Have Potential to Increase Litigation

During the 2017 legislative session, new laws were adopted
which significantly change the way condominium associations are managed
and operated. Many of the new provisions are well-intentioned, but raise a
number of questions that remain unanswered and have the potential
to increase litigation in some condominiums. This article will address two particular issues—term limits and recalls—and provide suggestions for fixing them
during the next legislative session, which is scheduled to begin
in January 2018.

Term Limits
The new law provides that a board member may not serve more than four consecutive twoyear terms, unless approved by an affirmative vote of two-thirds of the total voting interests of the association or unless there are not enough eligible candidates to fill  the vacancies on the board at the time of the vacancy. One of the unanswered questions raised by this new law is whether it applies to boards with one-year terms.
The plain language of the statute suggests that it does not apply to one-year terms. Another unanswered question is whether the law is intended to be applied retroactively or prospectively beginning with terms starting after July 1. In other
words, if prospective, the earliest that a board member would be prohibited from running because of term limits is 2025. If retroactive, many directors may be
“termed out” now or at the next election. Interestingly, when Floridians
voted to amend the Florida Constitution to impose term limits on state office holders, it was implemented prospectively. The constitutional amendment was adopted in 1992 but became effective in 2000, thereby allowing sitting legislators to serve an additional eight years. The Division of Condominiums, Timeshare, and Mobile Homes has not announced its interpretation, although only an interpretation by an appellate court would be binding in the legal sense. As such, associations face uncertainty and will need to consult with counsel to decide how the law applies to them.
Another issue with the new law is that it allows a “term-limited” board member to continue to serve if approved by two-thirds of the total voting interests of the
association (i.e., two-thirds of all members). Assuming this means that the two-thirds vote is determined in conjunction with the election, (which is also debatable), it is my experience that the chance of getting two-thirds of the members to vote in a condominium election is slim to none. Further, the condominium law only requires 20 percent of the members to cast a ballot in order for there to be a valid election, acknowledging that it is hard to get condominium owners to vote. I suggest changing
the two-thirds threshold to twothirds of those who vote, and to allow an omnibus “opt out” from the statute to be included in the association’s bylaws. The “twothirds
of those who vote” threshold will still allow an incumbent director to be defeated if owners are truly opposed to the director continuing to serve on the board, or if enacted through the bylaws, would require super-majority support for an “opt out.”

Recalls
Under the “old” recall law, when the board was served with a petition for recall, the board was required to “certify” or “not certify” the recall. This gave the board the opportunity to review the recall petition to make sure it was actually signed by a majority of the owners. If the board did not certify the recall, the board was required to file a petition for arbitration with the Division of Condominiums, Timeshare, and Mobile Homes, and the arbitrator would decide whether the recall was valid or not. The old law was criticized because owners argued that boards were using their power to not certify a recall, even if clearly valid, just to stay in control of the association for as long as possible. The intent of the “new” law appears to be to make recalls effective immediately upon receipt by the board of directors of a recall petition. The intent also appears to be to require the individual board members who are recalled to file a petition for arbitration if they believe the recall to not be effective. However, the law leaves in the provision which requires a board meeting to be held when the board is served with a petition for recall arbitration, but removes the provision requiring the board to certify or not certify the recall. So, what is the board supposed to do at the
board meeting? Also, what is the board’s responsibility or duty with respect to a recall that is on its face is invalid, or that clearly is not signed by a majority of the owners?

In my opinion, the law should require the board to make an initial determination as to whether the recall petition is facially valid. The law should be amended to list the things that would make a recall petition facially valid—the most important being that it was signed by a majority of the owners. If the legislature wants to place the burden of challenging a recall petition on the board members being recalled, it should at least require that the petition be facially valid. Otherwise, the law could be easily abused, and would have the unintended consequence of undermining the integrity and reliability of the election process.

Written by Yeline Goin and originally posted on Florida Condo HOA Law Blog.

ELSS Bill Vetoed, Condominium Bill Approved, & Final Report on Community Association Bills for 2017 Session

Governor Rick Scott has now taken action on all of the community association bills that passed during the 2017 legislative session.

HB 653, Relating to Community Associations, was Vetoed.  Among other things, the bill would have allowed high rise buildings to opt out of an engineered life safety system (ELSS) with a vote of two-thirds of the owners.  The lead lobbyist in this effort to change the law for high rise condominiums and cooperatives is former State Senator Ellyn Bogdanoff, who is now an attorney and lobbyist with Becker & Poliakoff.  Here is a note from Ellyn:

I received a call last night from Rep. George Moraitis to let me know that Governor Scott vetoed the bill. The London fire clearly played a role in this decision. The loss of life there was a tragedy that gave all of us pause but it should not have had an impact on the opt out for ELSS. Our opposition seized the moment and in an abundance of political caution, Governor Scott vetoed the bill. We lost the battle but we have not lost the war. We will regroup and press on.”

If your association is a high-rise, please reach out to your association attorney for the next steps and advice regarding an ELSS.

HB 1237, Relating to Condominiums, was Approved and the effective date is July 1, 2017.  Please read a summary of the bill here.  As you will note, it will require some significant changes in the operation of condominiums with respect to the following subjects:  term limits, conflicts of interest, websites for official records (for condominium associations with more than 150 units), the use of debit cards, recalls, arbitration of disputes, and suspension of voting rights.  Condominium associations will want to consider updating its policies and procedures to ensure compliance with the new laws.

HB 6027, Relating to Financial Reporting, was Approved and the effective date is July 1, 2017.  The bill removes the provisions in the Condominium, Cooperative, and Homeowners’ Association Acts that allow an association that operates fewer than 50 units, regardless of the association’s annual revenues, to prepare a report of cash receipts and expenditures in lieu of the required financial statement.  The bill also removes the provisions from the Condominium and Cooperative Act which state that associations may not waive the financial reporting requirements for more than 3 consecutive years.  Therefore, all associations, regardless of size, must have prepared the appropriate financial report, based on the association’s revenues, unless waived in advance by the members.

SB 398, Relating to Estoppel Certificates, was approved and the effective date is July 1, 2017.  Please read a summary of the bill here.  Associations should update their Estoppel Certificate Resolution and their Estoppel Certificate Form to ensure that it is compliance with the new statute.  We have already developed the necessary forms, so please contact your association attorney to assist you with that process.

SB 1520, Relating to Condominium Terminations, was approved and the effective date is July 1, 2017.  This new law will increase the thresholds necessary for an optional termination.

Now that the Governor has taken action on all of the bills, we will be putting our finishing touches on our 2017 Legislative Guide, including important action items for the Association to take in light of the new laws.

Thank you for all of your support during this Legislative Session!

Written by Yeline Goin and originally posted on Florida Condo HOA Law Blog.

Florida Condominium and HOA Fining Laws are Slightly Different

Question: There seems to have been a lot of change in the law about fining. Has the legislature finally made the condominium statute and the homeowners’ association statute the same on this issue? (C.M. by e-Mail)

Answer: More or less. The legislature is getting closer to making the statutes identical, but there are still a few minor differences. For an overview of the fining (and suspension process), see my column dated September 15, 2016, titled “Association Has Several Options to Enforce HOA Documents.

The first difference is who may serve on the independent committee. The condominium law only allows unit owners to be committee members. Those unit owners cannot be on the board or live with a board member. There is no ownership requirement found in the homeowners’ association statute, although the bylaws would still have some role on the composition of committees. The only restriction in the HOA law is that committee members may not be officers, directors, or employees of the association, or the spouse, parent, child, brother or sister of an officer, director, or employee.

There is also a difference between the two laws regarding the required number of committee members. The Homeowners’ Association Act states that there must be a minimum of three members on the committee, but the Condominium Act is silent. The Florida Not for Profit Corporation Act provides that a committee must have at least two members.

The statutes differ materially regarding the amount of a fine that can be imposed. The Condominium Act provides that no fine may be more than $100.00 per day and the total fine may not exceed an aggregate of $1000.00. The Homeowners’ Association Act contains similar limits, but also allows both a higher daily and aggregate amount if established in the association’s governing documents.

Homeowners’ associations provide that fines of $1000.00 or more may become a lien on the property. The Condominium Act prohibits fines from being secured by a lien.

Written by Joseph Adams and originally posted on Florida Condo HOA Law Blog.

Does Each Unit Get One Vote in a Florida HOA?

Question: There are 10 homes in our community. The declaration of covenants provides that it can be amended by a majority of the voting interests. It also provides that homes 1 through 9 each get one vote and home 10 gets 10 votes. An amendment is approved 10 to 9, with the 10 yes votes coming from home 10. Homes 1 through 9 all voted no. It does not seem right that one homeowner can determine whether an amendment passes or does not. Would the courts agree a majority of the “voting interests” of this association wanted this amendment to pass, even though only 1 out of 10 members voted yes? S.C. (via e-mail)

Answer: Yes. The term “voting interest” is defined rather broadly in the Florida Homeowners’ Association Act (Chapter 720, Florida Statutes) to mean the voting rights distributed to the members of the homeowners’ association, pursuant to the declaration of covenants. Although I have never seen a declaration with such a provision, if the declaration as originally recorded specifically apportions voting rights by providing one homeowner with more votes than another, a court would likely agree that the amendment was approved as required by the declaration.

If the home has 10 votes because it is still owned by a developer, the result may be different. In general, both the statute and the case decisions places more limits on amendments passed by preferential developer voting rights than amendments that are subject to a democratic vote of non-developer amendments.

Written by Joseph Adams at Florida Condo & HOA Law Blog

What You Need to Know About Mandatory Mediation Between HOAs and their Homeowners

Before You Sue Your HOA—or Your HOA Sues You!

As you may already know, before certain suits may be filed by an HOA against one of its residents, by a resident against his or her HOA, or between two residents in an HOA, the parties must first take part in a pre-suit mediation conference to attempt to resolve the dispute. But exactly what types of disputes are we talking about?

The statute, by its terms, applies to “[d]isputes between an association and a parcel owner regarding use of or changes to the parcel or the common areas and other covenant enforcement disputes, disputes regarding amendments to the association documents, disputes regarding meetings of the board and committees appointed by the board, membership meetings not including election meetings, and access to the official records of the association.”  For more information, please take a look at Section 720.311, Florida Statutes.

The statute requires that, before filing suit, the “aggrieved party”—whether the HOA or the homeowner—send a written notice to the other party, setting forth the nature of the dispute and requesting that the party agree to take part in a mediation conference.  The form of the required notice is set forth in the statute.

A party refusing to take part in the mediation, or failing to respond to the request within the 20 days provided in the statute, will lose any claim it may have for attorneys’ fees and costs if it is the prevailing party in the ensuing lawsuit.  This can be a substantial penalty, since Chapter 720, Florida Statutes, provides for an award of attorneys’ fees and costs to the prevailing party in nearly all of the types of disputes which are subject to the mediation requirement.

As a twenty-year Certified Circuit Court Mediator who has focused a substantial portion of his litigation practice over the past thirteen years on community association disputes, I would be happy to assist parties to HOA disputes in fulfilling their mediation requirements and, more importantly, resolving their differences prior to embarking on expensive litigation. Please contact me at gschaaf@bplegal.com, or visit my website at www.bplegal.com/gschaaf, for more information.

Written by Gary M. Schaaf

Originally posted at Florida Condo & HOA Law Blog

Clearly defining nuisance activity in your governing documents can help association boards avoid future headaches

A nuisance is generally defined as a person, thing or circumstance which causes inconvenience or annoyance. For some people living in shared ownership communities, there is no escaping a nuisance situation that has risen to a level which impacts the enjoyment of their homes and their community.

If you have ever suffered through a nuisance scenario, you may understand how hard it can be at times to achieve consensus on whether or not the activity in question is an actionable nuisance. Is that television really being played at a blaring decibel level or is the neighbor just particularly sensitive or, worse, looking for a new angle in a personal fight?

In a community association setting, nuisances can come in many forms.

  • Loud, consistent noise either in the form of music, yelling, use of electronic devices or failure to properly soundproof flooring in a multifamily building
  • Pets-barking, defecating, biting, and running around off-leash
  • Secondhand smoke-spilling into neighboring units, balconies and common areas
  • Odors from cooking, chemicals and other sources
  • Hoarding-creating conditions for insect and rodent infestation into neighboring units and common areas
  • Domestic violence-frequent arrival of emergency services and police at all hours
  • Visually unappealing property condition-one example would be an overflowing dumpster sitting in front of a house undergoing renovations for months
  • Short-term rentals

A general nuisance provision is standard in most developer-drafted documents. However, it is rare to find a nuisance restriction that is fully fleshed-out; one which clearly defines the various conditions or behaviors which constitute a nuisance in that particular communities and which can therefore be more readily abated by enforcement efforts. When confronted with a nuisance, the starting point is to find out what is driving the behavior or condition and identify the quickest way to resolve the problem. Sometimes the behavior is driven by a mental illness and other times it is a deliberate attempt to annoy.
If an owner is unwilling to cure the nuisance activity, the association’s options may include fining, suspension of common area use rights and pursuing a Court Order to force the behavior or activity to stop.  All enforcement will be easier if the activity or behavior is clearly identified in your governing documents as being a nuisance rather than having to debate the issue.

Next time you decide to update your governing documents, please discuss what changes should be made to your nuisance restriction with your association attorney.

Written by Donna DiMaggio Berger at The Community Association Law Blog

Condominiums That Fail To Properly Fund Reserves Will Usually Resort to Costly Special Assessments

Question: My condominium association has no reserve funds for our roof. Every year at the annual meeting, the board asks the owners to waive the reserve funding and every year the owners vote to waive the reserves. Now we need a new roof for the building and the board is telling the owners that there will be a special assessment of over five thousand dollars per unit. Can the board just levy such a large special assessment without the owners voting on it? N.R. (via e-mail)

Answer: Probably. The Florida Condominium Act does not impose any limits on a board’s authority impose special assessments. The statute simply provides that the association must give fourteen days mailed and posted notice of any board meeting where special assessments are to be considered. There are other technicalities in the statute as to the content of the notice, as well as the content of follow-up notices that must be sent. Obviously, any special assessment would have to be for a proper common expense, but I assume there is no debate that your roofs are the association’s responsibility.

Any limitation on a board’s authority to impose a special assessment would have to be contained in the condominium documents. Although not the norm, it is not totally uncommon to see condominium documents that impose limits, such as providing that any special assessment over a certain amount requires unit owner approval. I have heard some debate the legality of such a
restriction.

Your situation demonstrates the risk of routinely waiving the funding of reserves. While associations want to keep assessments low, if there are insufficient reserve funds to pay for a capital item that needs to be replaced, the association has limited options.

 

Written by Joseph Adams

Originally posted at Florida Condo & HOA Blog

Will Florida’s new online election law for community associations spell welcome relief or more headaches?

The Florida Legislature recently approved a new law which will allow community associations to conduct their elections online through the use of electronic voting. While associations in other states have had this ability for some time now, this is a sea change for the millions of Floridians living in shared ownership communities.

For years, many of the disputes in condominiums, cooperatives and homeowners associations, have stemmed from the annual meeting and election process. People who ran for the board and weren’t elected were convinced that the current board or the manager who doesn’t like them somehow “kept them off’.  We’ve heard tales of ballot boxes being stuffed, tampered with and altogether ignored. In the condominium setting, allegations of forgeries on outer envelopes is always a concern while in the HOA setting, complaints of rampant proxy abuse are common in connection with the election of the board members.

Howard Perl, a Shareholder with the law firm of Becker & Poliakoff, has handled these disputes for more than a decade. “Many of the disputes involve judgment calls. Some ballots are discarded when they shouldn’t be and others are allowed when clearly they should have been invalidated” he explained.

Election disputes don’t come cheap. They are subject to mandatory arbitration with a Florida state agency and can cost up to $5,000 or more depending on how hotly contested the matter is.  Florida’s Department of Business and Professional Regulation will be meeting in early August to begin drafting rules to address the new statute.

Now that the path has been cleared to allow Florida’s associations to utilize online voting, the question remains whether this move will result in fewer or greater complaints associated with electing a community’s board of directors.  Remember the national focus on the Sunshine State’s unfortunate hanging chad incident? Hopefully, we will not have a repeat performance and our Florida communities will embrace this new option as one which will (a) likely increase voter participation and (b) reduce the possibility for voter fraud.

 

Written by Donna DiMaggio Berger

Originally posted at Community Association Law Blog