Tuesday, October 28, 2014

Secret Board & Committee Meetings

I know it's been a long time since I wrote a blog, but I have to say it's not due to laziness, but rather success.  I have come up with a creative way to deal with HOAs and COAs (condo associations) pre-suit and business has been brisk.  I did answer an interesting question on www.avvo.com just now and I feel I need to share this one.  Here it is:

My HOA has recently enacted a "fine committee" after the recent change in law (720.305)2). I have tried in vain to find any details of what this committee does, its scope of work, a list of violations and fines and who the members are. There is nothing in meeting minutes and nothing has been added to the documents of the association that I can find. Does the HOA have the obligation to notify all homeowners and post the detailed information and process of each committee it forms? Or can it operate in secret on a need to know basis? They have done something similar with a very brief bullet in one newsletter that refers to a "stated late fee and collections Board policy" none of which I can find anywhere. Neither issue is covered in the rules and regs. Thank you for your time.

Your question set off numerous red flags for me when I read it.  The whole purpose behind many of the revisions to Chapter 720 of the Florida Statutes, the Homeowners Association Act, was to create transparency.  When governments operate in secret there is a chance for corruption and dictatorships to form.  The same goes for HOAs, which despite court rulings, rule like quasi-governments.

First, your HOA cannot impose fines against the owners unless the authority to do so is included in the governing documents (Declarations, Bylaws and Articles of Incorporation).  An older version of the statute provided rules for fining "if the governing documents so provide."  The statute was revised to remove the language allowing fines to become liens and foreclosures if unpaid.  Later it was revised to add that language back in if unpaid fines were more than $1000, but it also did not include "if the governing documents so provide."  This did two things.  The HOAs began claiming they had a right to fine by statute and instead of fines being $100, we now see fines of $1000 and more.  The HOAs do not have a right to fine by statute.  The statute in existence at the time the HOA was formed governs unless there is language in the HOA documents which say it is governed by Chapter 720 "as amended for time to time" or something similar.

All committees are required to keep minutes and if the committee has decision-making authority, then the meetings must be open to members and properly noticed.  The exception is fining committee hearings, which are not meetings, in which an owner is requested to appear and the committee will consider a fine. 

Board meetings and committee meetings which will consider and adopt policies must be open and properly noticed.  Any meeting which will adopt a policy or rules and regulations affecting parcel use must be noticed by sending the owners individual notices to their address of record 14 days in advance of the meeting.  Policies and rules cannot be adopted without an open board meeting.

If the Board of Directors is meeting in secret to adopt policies and rules, or adopting these by corresponding with email, they are violating state law.  The problem is there is no agency to regulate the HOAs and their violations are a civil matter, not a criminal matter.  Your only recourse is to ask for pre-suit mediation and then sue them if they don't settle, or start talking to your neighbors to get involved -- they need to wake up and pay attention to what is going on now.   If they wait until it affects them personally, they are liable to find themselves on the wrong end of a court 

Friday, September 19, 2014

A Win for the Homeowners in a Mortgage Foreclosure


Pineda v. Wells Fargo, 2014 WL 3608886 (Fla. 3d DCA 2014); decision rendered July 23, 2014 
The homeowners received a discharge in bankruptcy, releasing them from personal liability from all debts including their first and second mortgages.  A foreclosure sale was held on the second mortgage.  A third party bidder purchased the property, subject to the first mortgage, for nearly $100,000 more than the second mortgage’s foreclosure judgment. Pursuant to Florida Statute § 45.032(2) the owner was supposed to get the nearly $100,000 surplus.
However, the third party purchaser petitioned for the surplus and promised to use the money to pay down the first mortgage.  The purchaser argued that the owners would be unjustly enriched if they received the surplus because they no longer had any liability for the first mortgage note and would keep the money.  The trial court, claiming it was equitable,agreed and ordered the surplus disbursed to the purchaser with the requirement that the purchaser to use the money to pay down the first mortgage.
The District Court of Appeals held  the case was a “cautionary tale to bidders at foreclosure sales” and reversed because “[t]he statute is clear: the owner of record at the time of the recording of the lis pendens is entitled to any surplus proceeds.” The bankrupt owners are to receive the nearly $100,000 surplus and they can spend it anyway they want to.

Thursday, August 14, 2014

I'm Back....And the Topic Today is Conducting Board Business in HOAs & COAs

It has been a while since my last blog.  I attribute this to the summer peak in business.  I don't know if it's the hot weather, adults dealing with children home from school for a couple of months, or the people from the North leaving the state and not being around to keep an eye on their association, but business is always brisk in the summer with associations behaving badly.

The topic for today is a change in the law stipulating to how board members can conduct board business. It is one I think will generate more litigation because board members can discuss board business by email and leave the homeowners out of the discussions. A new provision in the Florida Statutes allows board members to conduct and discuss board business through email, but any voting must be done at a meeting.  What we are now seeing is board meetings that last 15 minutes and under because the board members walk in and sit down, make a motion to vote on a topic, second the motion, vote and done.  Homeowners are not even aware of what the issues are much less get a chance to speak on the matter.

I recently read meeting minutes where the board voted to approve a contract with XYZ Landscaping.  No mention of two other bids or voting to see which landscaping company they should vote on -- it was already a done deal and they were just ratifying their decision. What does it matter anyway, right? With no state agency regulating HOAs there is no penalty for cheating unless the homeowner has deep pockets to sue.

Monday, July 7, 2014

HOA Emergency Powers - Legislative Update FS 720.316

There is trouble brewing on the horizon and it doesn't come from a hurricane, but the effects will be felt after a hurricane or some other natural disaster passes through.  I'm talking about the provisions in House Bill 807, which is now state law (FS 720.316) effective July 1, 2014, which give homeowner associations emergency powers in case of a natural disaster.  Those powers include levying special assessments, borrow money or pledge assets as collateral without a vote of the membership.  You want to know why I think it's a bad idea? Subsection (2) of the law states the authority granted in subsection (1), which I stated above, is "limited to that time reasonably necessary...."  Any time you see the word "reasonable" in a statute it will take a judge, at least two lawyers and close to $200,000 or more in legal fees and expenses to determine what is "reasonable."

Why would the Florida Legislature think giving HOAs a free pass on this is a good idea?  Do they really think life in a HOA is perfect for most people and all will be okay? These are the same people who could not get a bill passed to allow for a state agency to regulate HOAs -- they should know giving them more power will only add to the corruption and abuse that goes on in an unregulated industry.  My only guess is someone spiked the refreshments on Capitol Hill. This is why my friend, Jan Bergemann of CyberCitizens for Justice, thinks the HOA statute is the "Attorney Employment Act."  It will surely keep me busy for years to come.  

Let's revisit this after a hurricane hits Florida.  I would like any HOA or member of a HOA hit by a hurricane to let me know how this new law worked out for you.  Please prove me wrong.

And speaking of new laws....we now have a challenge under the Florida Constitution for retroactive application of a new law to an existing contract.  The law doesn't say it is intended to be applied to existing associations.  In the section authorizing special assessments, it comes slightly close. In subsection (1)(j) with "Notwithstanding a provision to the contrary, and regardless of whether such authority does not specifically appear in the declarations..."  Wait a minute -- the first part says the HOA can't do it if there is a provision in the association documents prohibiting it, but the part after the comma says the HOA can regardless of what's in the governing documents!  More billable hours for all attorneys! 

This one really disappoints me......

Tuesday, July 1, 2014

Community Association Law 2014 Legislative Updates

The information below is copied word for word from the summary of House Bill 807 located at http://www.flsenate.gov/Committees/BillSummaries/2014/html/728.  I will discuss each revision in the next coming weeks.

The provisions related to condominium associations include:
  • Authorizes the associations to enter an abandoned unit to inspect the unit and adjoining common elements, to make specific repairs, and to maintain the unit, and permits the association to charge the unit owner for expenses incurred by the association,
  • Provides the circumstances in which a unit may be considered abandoned;
  • Provides that the insurance responsibility of the association or unit owners for reconstruction, repair, or replacement in the absence of an insurable event shall be determined by the provisions of the declaration or bylaws;
  • Permits board and committee members to participate, including voting, in a meeting via telephone, real-time videoconferencing, or similar real-time electronic or video communication, and for such participation to count towards a quorum;
  • Provides that the previous owner does not include an association that acquires the title to a delinquent property through foreclosure or by deed in lieu of foreclosure. The present unit owner’s liability for these costs associated with the collection process is limited to the amounts that accrued before the association acquired the title to the delinquent property.
  • Prohibits condominium associations from recording a termination of condominium that failed to receive the required approval (80 percent of the voting interesting and 80 percent of the original principal amount of outstanding recorded mortgage liens of timeshare estates in the condominium, unless the declaration provides for a lower voting percentage). It provides that a new attempt to terminate the condominium may not be proposed at a meeting or by solicitation for joinder and consent for 180 days after the date the failed plan was first given to all unit owns;
  • Repeals the Community Association Living Study Council; and
  • Extends the time period to be classified as a bulk buyer or bulk assignee from July 1, 2015 to July 1, 2016.
For cooperative associations, the bill:
  • Revises the financial reporting requirements by increasing from 60 days to 90 days the time to prepare a financial statement, or to contract with a third party to prepare the financial statement;
  • Specifies the type of financial reporting required based on the association’s total annual revenue amounts;
  • Limits the financial reporting requirement, for associations of fewer than 50 units, regardless of the association’s annual revenues, to the preparation of a report of cash receipts and expenditures, unless otherwise required by the declaration or other recorded governing documents;
  • Provides that persons who have been suspended or removed by the division or who are delinquent in the payment of any monetary obligation due to the association are not eligible to be a candidate for board membership and may not be listed on the ballot; and
  • Provides for the removal from office of a director or officer charged by information or indictment with a felony theft or embezzlement offense involving the association’s funds or property.
In regard to homeowners’ associations, the bill:
  • Requires that meetings of the board of directors of a homeowners' association and meetings of the association’s membership must be held at locations that are accessible to physically handicapped persons; and
  • Provides that an association does not have to provide members with copies of an amendment to the governing documents after it is approved by the membership if a copy of the proposed amendment was previously provided to the members before the vote on the amendment and the proposed amendment was not changed before the vote.
In regard to condominium and cooperative associations, the bill requires outgoing board or committee members to relinquish all official records and property of the association in their possession or control to the incoming board within five days after the election. The bill provides that an outgoing board or committee member who violates this requirement is personally subject to a civil penalty by the Division of Florida Condominiums, Timeshares, and Mobile Homes. It also prohibits a board member from voting by e-mail.
For cooperative and homeowners’ associations, the bill authorizes boards to exercise specified emergency powers in response to the declaration of a state of emergency, including the authority to implement a disaster plan, mitigate damages, and borrow money with the approval of the membership.
In regard to condominium, cooperative, and homeowners’ associations, the bill provides that unit owners may consent in writing to the disclosure of contact information to which other owners are prohibited from having access.

Monday, June 30, 2014

HOAs - Don't Mess with the Disabled!!!

It's that time of year when all the community association law firms start blogging about the legislative updates to the Florida Statutes that will be enacted July 1, 2014.  It's interesting to read the various blogs because they always include what the writer interprets the meaning of the new statute will be and, if you read more than one blog, you get a more than one interpretation (flag on the play -- litigation imminent!).

Here's one that should be real clear and I credit John and Kim Whitt for standing firm and seeking justice. They proposed to our elected leaders to add two words to Fla. Stat. 720.303(2), which requires meetings to be open to all members. Those two words "and accessible" make a world of difference to people like John who is confined to a wheelchair.  Common sense and compassion for other human beings would lead you to think this is not necessary; after all, the Fair Housing Act requires HOAs to provide reasonable accommodations for those who request it in order to attend meetings. Well, no one goes around accusing HOA board members of using common sense with any regularity.  In fact, all I hear all day is about conduct that is not only senseless, but unreasonable, offensive, insensitive and ruthless.  But I digress.  While those two words didn't make it into the statute, a version of it did:  "A meeting of the board must be held at a location that is accessible to a physically handicapped person if requested by a physically
handicapped person who has a right to attend the meeting."

This was no simple task and I congratulate the Whitts and our political leaders for accomplishing this. At this point I bet you're wondering what led to this.  I am here to tell their story -- the real story.  Not some version with a spin on it to make the people think it was an innocent mistake.

John and Kim Whitt are wonderful people.  They are nice people.  They are not troublemakers.  When they bought their home in 2009 in a beautiful, rural community in Pasco County life for them changed. The community is comprised of 45 or so well-kept spacious homes on spacious lots, many of which are adjacent to wetlands.  Everyone's dream home, right?  The Whitts were eager to be involved in the community and to get to know their neighbors.  One obstacle faced them.  The HOA held it's meetings, as it did for a number of years, in a vacant lot with a cattle grate, livestock fence and extremely soft soil.  The meetings are held in a far back corner under trees with roots that made it impossible and still make it impossible for John to attend the meetings.  John asked the board if the meetings, not all, but at least some, could be held somewhere so he could attend and even offered his house.  He was refused.  A former board member, who is a contractor, offered to install a concrete pad a no charge to accommodate John's request.  The board voted against this. Of course in their version they offered to install the concrete pad and John refused, but that's just the usual HOA spin on facts to try and get people to believe they meant well.  John even offered the HOA to remove him from membership and the deed restrictions so the HOA would not have to comply. It's not like he was going to start a pig farm at his beautiful home.  Pig farms are prohibited by zoning ordinances in this area, but more on that later.  The HOA spins the tale the Whitts never wanted to be part of the community and when their request to be excused was denied they resorted to pushing the access to meetings as the issue.

Here we are five years later. The Whitts sued the HOA, but lost. I won't rant about that until I'm ready to relinquish my license to practice law.  The former board member/contractor and two other couples who own homes in the community sued the HOA because the deed restrictions had expired while the Whitts were litigating and were not properly amended to extend them.  They won on summary judgment.  No HOA.  The HOA is appealing, but going through the revitalization process as the same time. They are promoting revitalization by claiming if the deed restrictions are not revitalized they will be a community with pig farms.  I don't think any of the owners have a pot-bellied pig, much less a pig farm, which is illegal in this particular area anyway.  On top of that, the HOA has held the Whitts out in ill will to the neighbors every chance they get, blaming them for the high legal fees they incurred with a huge unpaid balance.  No one really knows what that balance is because not only will they not show the owners the amount due and the balance changes frequently.  If they think the HOA won, how come they owe so much money in legal fees?  

The Whitts may have lost the case, but evidently a lot of people, including members of the Florida Legislature and some decent people in their community, thought they shouldn't.  They were successful in getting the statute amended despite the HOA attorney saying they wanted to create the "Homeowners Association with Disabilities Act."  They have suffered for it.  Homeowners in their community who do not even know them despise them based on the tale the HOA spins about this -- a HOA that has been ruled to not have deed restrictions.  

And just for giggles -- the HOA now claims it is still a mandatory association without deed restrictions because the Articles of Incorporation and the Bylaws are still valid.  

Monday, May 19, 2014

Covenant Violations and the Fining Process - What Your Rights Are as a Homeowner

This is the time of year where our firm gets a lot of calls about covenant violations, mostly lawns that took a beating during the winter months.  The Florida climate, which goes from almost freezing to tropical in a 24-hour period, tends to be harsh on lawns, but I digress.  That's a blog about Florida-Friendly Landscaping.

There are several things the homeowner should know about the fining process because if you know what the law provides, it is less likely you will be taken advantage of by your HOA.  Remember -- knowledge is power.

A board of directors cannot impose a fine against a homeowner.  The HOA is required to have a committee of at least three (3) members, who are independent and are no relation to the board of directors, the property manager, officers, agents or employees of the HOA.  The committee should be comprised of an odd number to avoid a tie vote.  The odd number of members is industry standard and not part of the statute.  The committee has to agree by a majority vote to impose a fine, which cannot be retroactive, and the board of directors cannot override the vote to impose a fine, but can override the vote to withhold a fine being imposed.

The HOA is required to give the homeowner notice of a hearing to be held to vote on the fines.  The HOA is required to give the owner at least 14 days notice. Now here's where many HOAs get it wrong.  The statute, Fla. Stat. 720.305(2)(b) states "A fine or suspension may not be imposed without at least 14 days’ notice to the person sought to be fined or suspended...."  The statute does not say mailed at least 14 days in advance, IT REQUIRES THE NOTICE TO BE GIVEN TO THE OWNER AT LEAST 14 DAYS IN ADVANCE.

The statute also provides this is a hearing, not a meeting.  The HOA should not be noticing the hearing to the membership to attend as a lynch mob.  Hearings do not require notice.  The only people that should be present are the homeowners, the committee and if the HOA is going to present the case to the committee, a representative of the HOA.  This is usually the property manager or a board member.  The representative of the HOA should not be sitting in on deliberations and voting by the committee.  This would prevent the committee from making an independent decision.

If you find yourself in front of the committee, bring a recorder.  You have the right to do so, although the committee will probably say you don't.  Even board meetings are cut short and adjourned because board members tend to think you have no statutory right to record meetings.

You are entitled to obtain a copy of the minutes from the hearing.  The committee should create minutes and record the vote, listing the vote of each committee member.

If a fine is imposed, you should pay it and then challenge the decision.   Never risk your home.  If you pay the fine, the risk to your home is removed and you can challenge the decision without worrying about losing your home to a foreclosure.  Unpaid fines in excess of $1,000 can be the source of a lien and foreclosure.

Now, off topic, if you have one of those troublesome lawns that doesn't thrive no matter what you try to do to save it (you know, those St. Augustine lawns), then look into Florida-Friendly Landscaping (FFL).  You still have to submit an application to the ARC or ACC or whatever your HOA calls it, but by law the HOA cannot prohibit you from implementing FFL.  Check out the website by the University of Florida's IFAS extension at floridayards.org

As far as other violations go, please do not make improvements to your home without filing the ARC/ACC application and please do not store boats, trailers, RVs, 4-wheelers, jet skis and other recreational items on your property.  These are the biggest sources of fines in HOAs.