Keeping Meeting Minutes Forever

How long is a condominium required to keep minutes of its meetings?   Prior to July 1, 2018 the answer was seven years.  This requirement had both its pros and cons.  Likely the biggest advantage was minimizing storage requirements, as months, years, and even decades of minutes add up, particularly for older communities or those that held monthly board meetings.  Conversely,  the manner or reasoning for certain board actions could not be verified after seven years. This left many boards to simply declare, “this is how it’s always been done” or owners to claim improper alterations had been approved by prior boards, which essentially impaired the ability of the association to enforce a covenant.

As of July 1, 2018, the requirement to keep minutes has changed.  Rather than seven years, minutes must now be kept forever.  This applies to all meetings of the association, whether of the board, members, committees, etc.  Essentially, the change applies to any meeting where minutes are taken.   Although the Legislature had its reasons for this change, concerns of storage nowadays are simply not the same given the advent of cloud storage.

What does this mean in terms of the good and the bad which may be lurking in the minutes?  On any given day what is written in the minutes could benefit or hurt the association.  Nonetheless, minutes are crucial to confirm the proper operation of the condominium.  That said, keep in mind that minutes should reflect who was present, motions made, and the logistics of the motion (who moved, seconded, and the vote).

Originally posted on floridacondohoalawblog.com and written by Marilyn Perez-Martinez

To Record or Not Record? That Is The Question!

Community association boards often ask the question of whether they must record a claim of lien on a property in order to protect the association’s right to recover past due assessments on the property. Although the answer to this question changes based on the specific set of facts controlling each scenario, there is at least one scenario where the answer is NO!

In Calendar v. Stonebridge Gardens Section III Condominium Association, Inc., the association was faced with a scenario where a property was sold at a tax deed sale and there were surplus funds in the registry as a result of the tax deed sale. Pursuant to §§197.582(2) and 197.522, Fla. State., the association was entitled to file a statement of claim against the surplus funds. However, the association did not have a claim of lien recorded in the public records at the time of the tax deed sale. The association filed a statement of claim against the surplus funds, as did the prior homeowner. The prior homeowner argued that the association was not entitled to the surplus funds as the association did not have a recorded claim of lien on the property. The trial court disagreed and entered an order awarding the surplus funds to the association. The prior owner appealed.

The Fourth District Court of Appeal affirmed the trial court’s ruling, citing to the case of Bessemer v. Gerstein, 381 So.2d 1344, 1348 (Fla. 1980) and the specific language found in §718.116(5)(a), Fla. Stat, which states:

The association has as lien on each condominium parcel to secure the payment of assessments. [T]he lien is effective from and shall relate back to the recording of the original declaration of condominium. However as to first mortgages of record, the lien is effective from and after recording of a claim of lien in public records of the county in which the property is located.

Based on this language and the holding in Bessemer that the owner’s acceptance of a deed referencing the recorded Declaration of Condominium puts the owner on notice of the lien provisions found in the Declaration, the appeals court found that the association had a statutory lien on the subject property and that this was sufficient to protect the association’s ability to collect the surplus funds from the tax deed sale.

While in this case the appeals court ruled in favor of the association despite the lack of a recorded claim of lien, uncertainty remains as to whether the statutory lien alone will always protect the association’s ability to collect past due assessments. In its opinion, the appeals court references scenarios in which an association also needs to have a recorded claim of lien to recover past due assessments, namely scenarios where a first mortgagee is also asserting a claim. Given this uncertainty and the various fact-specific scenarios faced by associations, obtaining the advice of counsel on this issue is the best way to protect the association and its membership.

Originally posted on floridacondohoalawblog.com and written by K. Joy Mattingly

Owner’s Don’t Have Right to Call in to Board Meetings

Q:        My condominium association is mostly composed of seasonal owners and every member of the board leaves town for the summer. At the last board meeting, the board announced that it intends to post notice of upcoming board meetings over the summer on the condominium property but that all of the board members will be attending the meeting by conference call. While we have a speakerphone in our meeting room, the owners are being told they cannot call into the conference call but have to attend the meeting in the office. Aren’t seasonal owners also entitled to call into the board meeting, as well?  (F.W. via e-mail)

A:        No. The Florida Condominium Act requires that board meetings be properly noticed. Other than certain specific board meetings, such as board meetings to levy assessments or adopt rules regarding unit use, the notice must only be posted at least 48 hours before the meeting on the condominium property. Further, owners are entitled to attend meetings and may speak at the meeting as to all designated agenda items.

The statute contemplates that the meetings will take place at a specific location and that notice of that meeting need only be posted on the condominium property.  The statute provides that board members may participate in a meeting via telephone, video conferencing or similar real-time electronic or video communication, and such participation counts towards the quorum. Board members participating by remove means may vote as if they were physically present in the room. The Condominium Act does not mention unit owners attending board meetings through remote means.

While the board can allow board members to participate or remote means, there is no legal requirement to do so. I am aware of a few associations which allow owners to call into board meetings, but it is certainly not the norm.

Q:        As a member of a homeowners’ association, do I have a right to review the association’s contract with its manager? I am curious to know the terms. (D.L. via e-mail)

A:        Yes. You are legally entitled to inspect the management agreement, if you make a written request to inspect the association’s official records.

Included on the list of official records that homeowners’ associations are required to maintain under the “a current copy of all contracts to which the association is a party, including, without limitation, any management agreement, lease, or other contract under which the association has any obligation or responsibility.”

While the statute provides that certain “personnel records” of association or management company employees are not subject to owner inspection, such as disciplinary and health records, this prohibition does not include written employment agreements between the association and its management company. Further, agreements between the association and its employees are also not included within “personnel records.”

The Florida Condominium Act contains similar provisions relating to official records.

Q:        Does the upcoming change to the Florida Cooperative Act mentioned in your previous article about keeping minutes apply to future minutes only, or all minutes? (H.A. via e-mail)

A:        You are referring to the amendment to Section 719.104(2)(a)4. of the Florida Cooperative Act. The current law requires cooperative associations to maintain minutes for a period of seven years. The law effective July 1, 2018 will require minutes to be retained perpetually.

In my opinion, if the association has destroyed minutes that are over seven years old, it is not a violation of the current law (though in my opinion, it is generally not a good idea). However, as of July 1, you will be obligated to retain all minutes the association has in its possession, even if over seven years old, and will be obligated going forward to maintain all minutes as part of the official records, regardless of age.

Written by Joe Adams and originally posted to the FL Condo HOA Law Blog

Legislative Review Wrap-Up

This week we conclude our annual review of 2018 legislation affecting Florida community associations, with a review of the amendments to Chapter 712 of the Florida Statutes, the Marketable Record Title Act, or MRTA, which become effective on October 1, 2018.

MRTA is primarily intended to facilitate real estate transactions, by eliminating “stale claims” against real property. However, the courts have found that covenants and restrictions of a homeowners’ association can be extinguished by MRTA. The general yardstick for MRTA extinguishment is thirty (30) years from the “root of title.” Though usually not the exact extinguishment date for most parcels, the most prudent yardstick for determining potential MRTA extinguishment is 30 years from the recordation of the original covenants and restrictions.

MRTA includes a process that allows residential homeowners’ associations to preserve the covenants and restrictions to prevent extinguishment. There is also a process in the Florida Homeowners’ Association Act, Chapter 720 of the Florida Statutes, which allows a community to “revitalize” covenants and restrictions that have been extinguished by MRTA.

One of the most significant changes regarding MRTA is actually found in the Homeowners’ Association Act. The new law requires that at the first board meeting after the annual members’ meeting, excluding the organizational meeting, the board shall consider the desirability of filing notices to preserve the covenants or restrictions affecting the community or association from extinguishment under MRTA.

Therefore, pursuant to the new statute, the board of every homeowners association, must annually consider the impact of MRTA even if the 30 year deadline is not imminent, or even if a preservation notice has already been filed.

Updates to Definitions in Chapter 712

  • Creates a new definition for “community covenant or restriction” to mean any agreement or limitation contained in a document recorded in the public records of the county in which a parcel is located which:
  • Subjects the parcel to any use restriction that may be enforced by a property owners’ association; or
  • Authorizes a property owners’ association to impose a charge or assessment against the parcel or the parcel owner.
  • Changes the term “homeowners’ association” to “property owners’ association” and defines the term to include a homeowners’ association as defined in Section 720.301, a corporation or other entity responsible for the operation of property in which the voting membership is made up of the owners of the property or their agents, or a combination thereof, and in which membership is a mandatory condition of property ownership, or an association of parcel owners which is authorized to enforce a community covenant or restriction that is imposed on the parcels.
  • Amends the definition of “parcel” to mean any real property that is subject to any covenant or restriction of a property owners’ association (and no longer requires that the property be used for residential purposes).

Filing Notice to Preserve

  • A property owners’ association may preserve and protect a community covenant or restriction from extinguishment by the operation of MRTA by recording, at any time during the 30-year period immediately following the effective date of the root of title:
    • A written notice in accordance with Section 712.06 of MRTA; or
    • A summary notice in substantial form and content as required under Section 720.3032(2) of MRTA; or an amendment to a community covenant or restriction that is indexed under the legal name of the property owners’ association and references the legal name of the property owners’ association and references the recording information of the covenant or restriction to be preserved.
  • The new law also includes a form which satisfies the notice obligation and constitutes a summary notice sufficient to preserve and protect the referenced covenants and restrictions from extinguishment under MRTA.

Revitalization of Covenants and Restrictions by Parcel Owners Not Subject To A Homeowners’ Association

  • Creates a process for communities not governed by a homeowners’ association to revitalize covenants and restrictions to revive covenants or restrictions, with certain exceptions.

Written by Joe Adams and originally posted on the FL Condo HOA Law Blog

Board Members Can Be Recalled Without Cause

Q:        I have heard that a condominium board member can be removed from the condominium association board by a process called recall. What causes can be used to justify the recall? (C.Q. via e-mail)

A:        Section 718.112(2)(j) of the Florida Condominium Act states that any board member can be recalled and removed from office with or without cause by a vote or written agreement of a majority of all voting interests.

While cause could be specified to justify the recall of a board member, just cause does not have to be shown.

After a director is recalled, the law allows the board to fill the director’s vacancy by appointing a new director, pursuant to a majority vote of the remaining directors, even if it is less than a quorum. The appointed director then serves the remainder of the recalled director’s term. A different process is used if a majority of the board, or the entire board, is recalled.

Homeowners’ associations generally use a similar process for recall.

Q:        What happens if there is a tie between two candidates running for a board of directors’ seat at the annual meeting? Do both candidates win? (E.A. via e-mail)

A:        No. The Florida Administrative Code, Rule 61B-23.0021, states that if two or more candidates for the same position receive the same amount of votes, the association must conduct a runoff election.

At the runoff election, the only eligible candidates are the candidates who received the tie vote at the previous election. The runoff election cannot be held less than 21 days or more than 30 days after the date of the election where the tie vote occurred.

The Code also requires the association to send notice of the runoff election within 7 days of the election where the tie occurred. The notice must be mailed or personally delivered to the members, and must include the date of the runoff election, a ballot, required envelopes, and copies of any candidate information sheets previously submitted to the association by the runoff candidates.

Q:        The board of my condominium association is considering adopting new rules, including rules which change some of the restrictions contained in the condominium declaration. Can board rules change the declaration of condominium? (M.O. via e-mail)

A:        No. Board made rules cannot conflict with any right which is expressly granted or inferable from the declaration. Further, board rules must be “reasonable.” The rules must also be adopted in a procedurally correct manner.

Q:        Are reserve accounts supposed to be kept in separate accounts? In other words, should the roof reserve be in one account, the painting reserve be in another account, and so on. (D.R. via e-mail)

A:        No. There is no requirement in the law prohibiting the “comingling” of reserve funds, and they are most often kept in a single account (but should also be kept within federal insurance limits).

Section 718.111(14) of the Florida Condominium Act does prohibit “comingling” reserve and operating funds. However, for investment purposes only, a multicondominium association may commingle the operating funds of separate condominiums with the reserve funds of separate condominiums.

Q:        Can a candidate running for a homeowners’ association board of directors seek and hold proxies to vote for themselves? (T.M. via e-mail)

A:        Yes. Assuming that the bylaws permit proxy voting in the election of directors (which is prohibited in the condominium context) and absent a limitation on the number of proxies a particular person can hold, there is no prohibition in the law against this.

Most associations that use proxies in elections, however, use a “limited proxy,” so that the person soliciting the proxies would have no discretion on how the votes should be cast.

 

Written by Joe Adams and originally posted on FL Condo HOA Law Blog

BEWARE: Bankruptcy Do’s and Don’ts

If your Community Association has been spared from bankruptcy in the last decade count yourself lucky.  Bankruptcy, in general, is intended to (1) provide a fresh start for the honest, but unfortunate debtor (delinquent owners), and (2) provide equal treatment of all Creditors (including the Association).  Unfortunately, Bankruptcy has also become a safe haven for delinquent owners who file bankruptcy in bad faith simply to delay a foreclosure sale without any real intention of actually organizing their debts and completing the bankruptcy plan.  While an Association cannot prevent an owner from filing for bankruptcy there are some steps you can take to mitigate the impact of a bankruptcy filing.  Here are my top eight Do’s and Don’ts:

  1. DO: Implement and follow a strict collections policy that includes turnover of delinquent accounts no later than 90 days from the date of delinquency.  The longer you hold off on pursuing collections the higher the amount of the debt and the bigger the exposure to the Association should the Debtor value the Association’s lien in a Chapter 13 Bankruptcy.  Often times a Debtor will wait until the date of the foreclosure sale to file a Chapter 13 Bankruptcy and if the amount owed to the first mortgagee is more than the value of the property the Debtor can strip the secured status of the Association’s claim of lien and only pay a fraction of what was owed prior to the bankruptcy filing (pre-petition debt) through a 36 or 60 month bankruptcy plan.
  2. DO: File a Proof of Claim.  Secured creditors must file a proof of claim for the claim to be allowed.  The deadlines for filing a proof of claim have been tightened in recent years.  Failure to file a proof of claim may prevent the Association from collecting its pre-petition debt.
  3. DO: Continue to send routine correspondence to debtors, including but not limited to annual meeting notices, coupon books, meeting notices to levy a special assessment.
  4. DO: Notify your bankruptcy attorney of any changes in post-petition maintenance including special assessments or regularly accruing maintenance BEFORE they come due.  Assuming the post-petition maintenance is being paid inside the bankruptcy plan a Creditor must notify the Bankruptcy Court, Debtor, Debtor’s counsel, and Trustee of any change in the amount of the maintenance 21 days before the change is to take effect.  Failure to notify the Court and the parties of this change could prevent the Association from collecting on the difference owed at all.   
  5. DON’T: Try to collect, enforce, or otherwise pursue an owner for any amounts owed prior to the filing of a bankruptcy petition.  This could be a violation of the automatic stay in Section 362 of the Bankruptcy code.
  6. DON’T: Charge the debtor late fees or interest while the bankruptcy is pending. Only if the Association’s claim is secured is interest collectible.  A conservative approach is to keep both the interest and late fees off the Association’s ledger for the pendency of the Bankruptcy.
  7. DON’T: Send the delinquent owner an invoice for any amounts that came due prior to the filing of the bankruptcy petition.  Unless or until your bankruptcy attorney has advised you that the stay has been lifted do not send the debtor an invoice for amounts owed.  If you know that the debtor has filed for bankruptcy yet innocently sent the invoice, the Bankruptcy courts will consider this a knowing violation of the bankruptcy stay and the Association would be responsible for any damages, such as legal fees incurred.
  8. DON’T:  Try to handle a bankruptcy on your own.  Immediately upon notice of a bankruptcy filing contact your community association attorney or a bankruptcy attorney who specializes in representing creditors.  Bankruptcy is not only a complicated process with long term financial and legal consequences, but a corporation must be represented by a lawyer in Federal Bankruptcy Court.  Only in very limited circumstances according to local rules can a corporation perform certain acts on its own such as filing proofs of claim and filing a request for service.

Written by Candace C. Solis and originally posted to the FL Condo HOA Law Blog

Owners Generally Do Not Have the Right to Approve the Annual Budget

Q:        Do condominium owners have a say in approving the annual budget? (D.J. via e-mail)

A:        Unit owners do not have the right to adopt or approve a proposed budget as a matter of law. The association’s bylaws will address how the budget is adopted, which is usually by the board. Some condominium documents, particularly older documents, require unit owner approval to adopt the budget. Such a provision is, in my opinion, lawful (though not recommended).

Section 718.112(2)(e) of the Florida Condominium Act, provides that any meeting where the proposed annual budget will be considered shall be open to all unit owners. Notice of the meeting must be provided to all unit owners 14 days in advance, along with a copy of the proposed budget. Owners also have the right to speak at board meetings regarding all designated agenda items.

The statute does provide unit owners with a process to propose an alternative annual budget under certain circumstances, typically when assessments exceed the prior year’s by more than 115%, excluding assessments for reserves and non-recurring items. Also, owners do have some say in the budget process, even where the bylaws give the board the authority to adopt the budget. Specifically, a board cannot adopt a budget without “fully funded” reserves unless a majority of the unit owners voting at a meeting have authorized a waiver or reduction of reserve funding.

Written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Originally posted on FL Condo HOA Law Blog

Notice of HOA Board meetings

Q:        Does notice of a homeowners’ association board meeting with an attorney require an agenda to be posted? (W.C. via e-mail)

A:        No. The Florida Homeowners’ Association Act does not require posting of an agenda for any board meeting, only posting notice. I do believe that a notice should be posted, even for properly closed meetings of the board with legal counsel.

In the condominium setting, notice and an agenda must be posted 48 hours in advance of board meetings. Again, I recommend posting a notice even for permissible closed meetings with association counsel. The state agency which enforces the condominium law has made at least one ruling to this effect.

The agenda for closed board meetings should be prepared or reviewed by the association’s attorney to avoid the risk of inadvertent waiver of the attorney-client privilege.

Written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Originally posted on FL Condo HOA Law Blog

Is it too soon to start talking about the 2018 Hurricane Season?

No! If Hurricane Irma taught us anything it is that adequate preparation before the storm will go a long way towards addressing issues after the storm.

Now is the time for associations to communicate with its owners about insurance- and liability-related issues. One of the often-confusing areas for many is understanding the scope and reach of the association’s insurance coverage versus the insurance coverage obligations of individual unit owners. Generally speaking, the association’s insurance coverage will only address the common elements. It will be up to individual unit owners to secure adequate insurance coverage for their own units.

If there is any confusion associated with insurance-coverage-related issues, the time is now to speak with an insurance agent to ensure that both your community and personal unit are adequately insured.

Speaking of insurance, associations should safely store copies of all of their applicable insurance policies. To the extent digital copies can be arranged for these insurance policies then that should be arranged too. These policies should be stored not just safely but stored in a manner that permits the association to easily gain access to the information contained in those policies after the storm has passed.

In the event that an insurance claim will need to be pursued then it is important to have “before” photos and videos of the property. In other words, take the time now to document, photograph and video your property. This will allow you to compare and contrast the extent of your damage “after” the storm hits. You can then present both “before” and “after” photographs, and videos, to an insurance company in support of your insurance claim.

Associations should also develop a plan to address a catastrophe. Since many associations are not just communities, but also families, these plans should include items such as cell phone communications and even meals. In the event of a lengthy power outage the association may want to take steps to have a generator present to have warm meals prepared for its members. The generator may also serve as a means to permit many individuals to charge their cell phones and other electronics to permit the members of the association to adequately communicate with their loved ones. The point here is that in addition to the traditional hurricane planning associated with many communities that focus on protecting the property, take some time to consider quality-of-life issues for the community in the event of a lengthy power outage or other related issues.

After a hurricane we often see many individuals, and companies, swoop in from out of town and promise many associations millions of dollars in insurance proceeds. But these groups often fail to deliver on those promises. Rather than falling victim to the overzealous, post-storm claim professionals promising riches, the better practice is to put your team in place before the storm hits. That way as soon as the storm passes and it is safe to start working on your insurance claim, your pre-screened professionals can begin the process for you. It would also be just as important to discuss all of these issues with your association’s legal counsel as well.

Addressing these issues now will ensure that your community is prepared for the 2018 hurricane season before it even starts.

 

Written by Hugo Alvarez, ESQ and originally posted to the FL Condo HOA Law Blog

Conflicts of Interests – Condominium Service Providers

An association’s officers and directors, along with their family members and anyone who has a financial relationship with the director and/or officer, are completely prohibited from entering into an agreement with the condominium association.

Prior to July 1, 2017, §718.3026(3), Florida Statutes, was the only statute applicable regarding conflicts of interest. It permitted the association to enter into a contract or transaction with one or more of its directors or an entity in which one or more of its directors are directors or officers or are financially interested. In doing so, the Statute only required compliance with the conflicts of interest requirements of Chapter 617.0832, the not-for-profit corporation statute, and only required the approval of 2/3 of the directors to approve the conflict.

After July 1, 2017, however §718.112(2)(p), Florida Statutes, went into effect and it set forth the prohibition as to service provider contracts.

“(p) Service providers; conflicts of interest.—An association, which is not a timeshare condominium association, may not employ or contract with any service provider that is owned or operated by a board member or with any person who has a financial relationship with a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer. This paragraph does not apply to a service provider in which a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer, owns less than 1 percent of the equity shares.”

The only exception to §718.112(2)(p), exists when the ownership giving rise to the conflict constitutes less than 1% of the equity shares.

So what is a service provider? Unfortunately, the term is not defined, which leaves the association to determine if certain contracts are “service” contracts or not. A decision that should not be made without the assistance of counsel and, when made, should be tempered with an eye toward erring on the side of caution until a legal precedent that defines the term “service” comes into existence.

 

Originally written by Elizabeth “Beth” A. Lanham-Patrie and posted on FL Condo HOA Law Blog