Wednesday, February 25, 2015

Change Your Address with the Association!!


All too often I am asked for advice on dealing with associations filing a lien or foreclosing on a home and the first statement the homeowner makes is "I never received a notice."  Unfortunately, rarely will that work as a defense to save your home from being sold at a foreclosure auction by your association.  

You have to give your association your address where you receive your mail!  It's foolish to think if you don't update your address to get notices and payment coupons a judge not order a sale of your home.  You have a duty to notify the association of your most current address.  You also have a duty to ask for the amount due if you don't receive a notice or payment coupon.  The courts have ruled against homeowners consistently on these issues because if you live in a community that has a sign with the communities name on it at the entrance, you have notice your community is governed by an association and you pay assessments to that association.

Avoiding the mail or a summons does not work either.  All the association has to do is prove they mailed the notice to the correct address. If you avoid a summons the courts allow the associations to serve you by publishing a notice in some obscure small newspaper no one reads.  Its usually too late by the time you find out you have been served by publication because the court can then enter a default judgment against you.  Plus this just adds to the attorney's fees you are required by state law to reimburse the association (that's if you can come up with the money to pay off the demand or judgment and save your home).

The bottom line is don't be foolish.  If you can't afford to pay the association, call them and try to make payment arrangements.  The association can foreclose on your home quickly and faster than a bank because the association is the original creditor and not a third party who took it by assignment.

Wednesday, December 31, 2014

Pre-Suit Mediation or Not?

A homeowner asked the question on www.avvo.com if moving from the community would mean he no longer needed to provide his HOA with an offer of pre-suit mediation.

Moving would not circumvent the pre-suit mediation requirement because the suit would, I assume, be based on acts that occurred while you were a homeowner.  Pre-suit mediation is not just for homeowners either.  It covers members, vendors, invitees, licensees, and guests.


Not all disputes require pre-suit mediation.  FS 720.311(2)(a) provides:

Disputes 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 shall be the subject of a demand for presuit mediation served by an aggrieved party before the dispute is filed in court.

A dispute over a financial obligation or enforcement of a settlement agreement are not subject to pre-suit mediation.  Also, any dispute in which a party seeks an emergency injunction is not subject to pre-suit mediation.  It is important to note that what you may think is an emergency is usually not one in the eyes of the court.

I don't recommend going to pre-suit mediation without a lawyer.  The HOAs usually have veteran lawyers who are very good at bulldozing over unrepresented parties.

Revitalization Question

Today I answered a question on www.avvo.com regarding the revitalization process and I think it is important to post the question and my response in this blog for those who do not or have not visited the Avvo website.

Question:

Our HOA's CC&R's have expired and an attempt is being made to revitalize the Declaration. In the interim, I am told we are a voluntary association and a not-for-profit corporation governed under FS617. 

Can the previous Board simply "take over" the corporation and run it without ratification by the owners? There is no confidence in the current Board and their continuing possession of documents, control over Management Company and bank accounts is regarded as hostile. Do owner/shareholders have a right to reorganize under any law?

Response: 

Here's a crash course on the Marketable Record Title Act (MRTA) and revitalization process governed by Fla. Stat. 720.403 - 720.407: 

1. It is possible for the Declarations to be valid against some lots, but not all. The Declarations can be preserved by being specifically referenced in a deed by the Official Record Book and Page Number or by reference to a plat that has the deed restrictions recorded on the plat. An analysis of each lot is required to determine if the deed restrictions have been extinguished by MRTA against that lot because the last reference is more than 30 years old. 

2. Revitalization can be used to breathe new life into the Declarations if they have ceased to govern one or more lots. 

3. The Declarations have no force and effect against those lots where the deed restrictions have expired and there is no duty to obey the restrictions or pay assessments. If the Declarations are revitalized they are not retroactive -- meaning the HOA cannot go back and collect assessments for the period of time between expiration and revitalization. 

4. It takes at least a majority of the homeowners to approve revitalization. It could be more if the Declarations require more than a simple majority to approve amendments to the Declarations. 

5. Revitalization is a very strict process which requires the HOA to appoint an organizing committee and to have a court reporter present at a meeting to vote on revitalization. While written consents can be used to gather the votes, if the bylaws and articles of incorporation do not provide for written consent the HOA is required to hold a meeting so homeowners can vote in person or by proxy (if proxies are allowed). 

6. If revitalization is approved by the homeowners the HOA has to apply to the Dept. of Economic Opportunity (DEO) for revitalization and, if granted by DEO, re-record the Declarations, index them against each lot and deliver a copy of the revitalized Declarations to each homeowner. The revitalized Declarations cannot be more restrictive than the original Declarations, although there are a few exceptions in the statute. 

To answer your question, in the interim the HOA still has bylaws and articles of incorporation which must be honored, including having elections and annual meetings. 

The revitalization statute was recorded in 2004. My opinion is this statute presents a constitutional issue on property rights and contract impairment for anyone who purchased their property before the statute was enacted. Statutes cannot be applied retroactively to change existing contracts and the Declarations, bylaws and articles are contracts between the HOA and the homeowner. This issue has not, to my knowledge, been litigated. 

If you feel your HOA is not following the procedures for revitalization properly you should consult with a HOA lawyer for an opinion. If revitalization is granted by DEO and you feel the HOA did not follow the procedures in the statute and any requirements in the Declarations, bylaws and articles (which is required by the revitalization statute), you have a very short period of time to petition DEO for an administrative hearing to challenge the revitalization.

Friday, November 14, 2014

CAMs in Control

In the past few weeks I have been contacted by community associations regarding issues they have with their community association managers (“CAM”) making decisions on behalf of the association without the board of directors being involved.  This seems to be an alarming new trend as certain CAM firms have started their own maintenance companies and terminate contracts with vendors to give their own companies the contract for services – all without the board’s knowledge or approval.  In one instance a CAM actually refused to allow a board member to vote and provided a legal opinion the board member was ineligible, which is clearly the unlicensed practice of law.  In another instance, which I have seen before, a CAM took it upon himself to take action against an owner despite the board voting to table the issue until they had a chance to talk to the association’s lawyer.

A CAM does not have the authority to make board decisions.  The CAM works for the Board of Directors, not in place of it.  CAM contracts have indemnification clauses, which means the association is liable for the CAMs actions and must pay for a legal defense should someone try to sue the CAM.  Owners cannot sue the CAM in most circumstances because the owners are not in “privity of contract” to sue the CAM, as established in the case of Greenacre Properties. v. Rao, 933 So. 2d 19(Fla. Dist. Ct. App. 2d Dist.2006), meaning the owners are not a party to the CAM contract.  This shield against liability means there are not many consequences for the CAM acting outside their scope of authority.

In my opinion, CAM firms being allowed to set up their own maintenance companies to provide services to the associations is not a good idea.  There is an inherent conflict of interest.  The CAM usually controls the association’s bank account.  The CAM will then make sure their maintenance company is paid, even if the work is not satisfactory.  I have come across instances where the work was not satisfactory, but the board was not aware of the issue because the CAM did not inform the board.  Why would they complain about their own work?

When the associations hire a CAM it is now important to inquire if the CAM firm has its own maintenance company and review the contract thoroughly to see how much control the board will relinquish to the CAM in hiring vendors or other actions which create liability for the association.  Many CAM contracts also provide the CAM with a “bonus” of 10% of the value of the contract for procuring a contract on behalf of the board.  I think it’s more of kickback then a bonus, but this is a common practice in Florida.


Selecting a CAM is an important task for associations.  It is up to the board of directors to perform their due diligence and make sure the contract is clear regarding decision-making activities.  The actions of an overzealous CAM could be costly and lead to litigation against the association.

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.