Transparency in Community Associations

It's been quite the busy year so far, so I apologize my blog posts have been few and far between.  Trying to make a difference in Florida community associations is a major task, but comes with some rewards. Our firm was again a winner of the Florida Community Association Journal's Readers' Choice Awards.

The topic for today's blog is transparency.  Transparency is a good thing.  Associations should recognize if they want their members to pay their assessments on time, keep their property maintained and volunteer to help the community, then transparency is the place to start.  The Florida Legislature has started pushing for this with the recent legislative updates to the Condominium Act, Chapter 718, Florida Statutes, by requiring condominium associations with 150 units or more to have a website and post a good number of the official records on the website.  This statute has not been enacted in Chapter 720 governing homeowner associations, but maybe we will see this in the future.

Some of the biggest complaints I hear from homeowners are about transparency --  the HOA will not provide them copies of the records, the records are not easily obtained, the HOA is hiding something.  Now I will be the first to admit this is a red flag for me and I suspect something fishy is going on with the money if the HOA is fighting too hard to keep the members from seeing the financials.  I also recognize some board members do not understand their duties, do not know what records to keep or how to keep them, which records can be disclosed and not disclosed, or how to set up a website to store the documents so members can see them without going through the certified letter, return receipt process.  Those are the HOAs I am eager to represent so I can train their board members on the right protocol.  

The homeowners need to understand the HOA has no duty to respond to a request to send copies to them.  There is a duty to provide access to the official records and allow the members to make copies at the inspection.  

Often this request makes even honest board members suspicious.  It's only natural to get defensive when a request is received and perceived as an attempt to catch you doing something wrong.  And board members make mistakes while homeowners tend to accuse them of intentional wrong-doing.  If everyone would just be respectful of each other and act in a civil manner a good number of these disputes would not even be disputes.

My advice is:

• HOAs put your official records on a website if possible or set up one of the free software applications like Google Docs or Dropbox to share documents with members.  Not only is it easier, but it takes out the possibility of confrontations if one side just can't be civil and respectful.

• Homeowners use the certified letter, return receipt in order to obtain access to records so that you document your request and everyone knows the deadline (10 business days from the date the receipt is signed).  Also, make your request clear and if possible exact.  Asking for "all official records" is your legal right, but it is creates some difficulties because the HOA may have boxes and boxes of records which you will have to go through and may be required to pay for a management person to assist in going through with you.  In addition, it comes across as a fishing expedition and like all fishing trips, you may have to keep casting lots of times before you get the fish you want.  If you are looking for a specific financial transaction, narrow down the description of your request.

• HOAs remember you cannot ask the homeowner why they want the document.

• Everyone keep in mind the HOA does not have to produce a document it does not have.  This means no creating special reports if the reports are not used in the normal course of running the HOA.  If there is a document the HOA should have and can reasonably obtain it without any undue hardship, then the HOA should get it after the first request so it is available should a second request be made for that document.

Fighting Over Your Lawn and the Florida Friendly Landscaping Statute

We frequently hear about disputes with homeowners who are fighting with their association ("HOA") over their right to Florida-Friendly Landscaping ("FFL").  For those of you who are going "what?," several years ago Florida passed several laws to help conserve water and reduce the amount of chemicals applied to landscaping as an initiative to save our aquifers.  The motto of the program is "right plant, right place."  Florida tends to go through cycles of droughts, so having a yard which is 90% St. Augustine grass is not always feasible or environmentally friendly.  This grass is hard to grow in sandy soils and can require watering up to four times a week during the summer.  It also is less tolerant to disease and pests than some of the other alternatives.  For more information on FFL, go to www.floridayards.org.

The purpose of this blog is discuss the litigation aspect of exercising your right to FFL.  Chapter 720 of the Florida Statutes provides a homeowners association may not prohibit a homeowner from implementing FFL.  This does not mean the homeowner can just rip out the St. Augustine grass and proceed with new landscaping.  If the Declarations of Covenants, Conditions and Restrictions ("Declarations" or "CCRs") require approval for landscaping changes, then the homeowner must fill out the application and get approval.

The biggest obstacle to implementing FFL is there are some bad, bad associations out there who know most homeowners are not going to spend their life savings and three or more  years of fighting over their grass.  There is no way to estimate how much a case will cost because you never know what the other party is going to do or how aggressive they will fight.  Staying in a case all the way through trial could cost $100,000 or more.  If the homeowner wins, they are entitled to their reasonable attorneys' fees (not 100%), but if they lose they are on the hook to reimburse the association its reasonable attorneys' fees.  Not many people are willing to take this risk or spend the money, especially over grass, so like so many other association disputes, the homeowner backs down.  There are no state agencies to hold the associations accountable, so they get away with breaking the law.

Homeowners sometimes will start litigating, but halfway through they have a change of heart, run out of money, or worse yet, face some type of personal crisis (divorce, death, health issues).  The problem is they have to decide if they can stick it out or pay the association its attorneys' fees.

Stress is another big challenge to defending your right to FFL.  Just like all litigation, it's an emotional rollercoaster.  There are wins and losses in the battle to the finish line.  Sometimes the stress is overwhelming.

So what's the solution?  Better legislation.  That's no easy task!  Until the Florida Legislature decides to put in a monetary penalty enforceable by a state agency into the FFL statutes, we are at the mercy of the Board of Directors of the associations.  There are a number of good associations out there which embrace FFL.  Your homework, if you want FFL, is to talk to your board and write your legislators!  Now get out there and save the planet!

Tips & Tricks for Living in a Florida HOA (or COA)

Our firm limits its practice to community association law, which is the technical term for the field of law dealing with homeowner associations (HOAs) and condominium associations (COAs).  We also handle work with other types of communities, such as mobile home parks.  We represent both associations and individual homeowners, so we see both sides of the problems.  Everyday we receive multiple calls from homeowners who have problems with their association, often after they have gotten into trouble.  We have blogged about this topic numerous times, but since the laws are revised each year, the advice is subject to change, although not much.  More importantly, we feel the need to say it over and over to help as many people as possible.

Tip No. 1:

Read your association documents and not just the ones you were given. You should have Declarations of Covenants, Conditions and Restrictions (aka Decs or CCRs) or a Declaration of Condominium plus Bylaws, Articles of Incorporation and most likely Rules and Regulations or Architectural Guidelines (or both).  Go to the official records for your county, by searching on the name of your county and Official Records.  Look for a link to search the official records and search for amendments, supplements, modifications, restrictions, bylaws, articles, and notices for any new restrictions or amendments and modifications to the originals, plus any notice of preservation if the original Declarations are approaching thirty years old.  This applies to HOAs only, not COAs.  Read every document carefully and if you are unsure of the meaning and it may have some effect on you or your property, ask a lawyer to interpret it for you.  The best way to stay out of trouble is to know the rules and obey the rules.  The best way to keep your association from becoming corrupt is to know the rules and make it obey the rules.

Tip No. 2:

Read the Florida statutes governing your association (Chapter 720 for HOAs, Chapter 718 for COAs and Chapter 723 for mobile home park lot tenancies where you own the home, but rent the lot).  Familiarize yourself with the relevant statutes, but do not try to cite them and cram them down your Board of Directors throat, at least not without asking a lawyer if your interpretation of them is correct. Knowing the law helps protect you, but misquoting or misinterpreting the law makes you look like a troublemaker and a nut job.  Plus, there is case law (judge's rulings) which interpret the statutes and give them a meaning other than what a layperson would think they mean.  Not all judges interpret them the same way and different jurisdictions (courts in different counties) could have different rulings.  Even the appellate courts (there are five in Florida) do not always agree on the meaning.  The law is not always black and white.  That would be too easy.

Tip No. 3:

Never withhold your assessments (aka dues, maintenance fees).  The law does not permit it.  Here is where the law is black and white.  If you do not agree with the way the association is being operated or managed, either recall the Board of Directors, elect new board members, or seek legal advice.  Withholding your assessments will result in you being foreclosed on and losing your home.

Tip No. 4:

Always pay your assessments.  While this sounds like Tip No. 3, it is not.  Often owners experience some kind of hardship, whether it is financial, family, or physical.  Your association cannot give you a break because you cannot afford to pay and the courts are not allowed to give you a break either.  Inability to pay is not a defense and the association can foreclose on your property a lot faster than any bank.  It can also foreclose even though the bank is foreclosing too.

Tip No. 5:

Always ask permission before making changes to your property.  If you are unsure if you need permission, check your documents.  If you are not positive whether permission is required or not, ask an attorney to review the documents.

Tip No. 6:

Never proceed with an improvement if your application has been denied -- even if you think the association is wrong.  The law requires you to get a court order, called a declaratory judgment, determining who is right and who is wrong.  Proceeding despite a denial will just result in a lawsuit against you.

Tip No. 7:

Always keep you property maintained.  The courts cannot consider financial hardship.  When you purchased a property in an association, you agreed to keep it maintained.  The excuse you were unaware there was an association is not a defense.

Tip No. 8:

Participate in meetings and even campaign to be a board member. Get your neighbors involved. If no one is watching what is going on it is very easy for an association to become a corrupt organization.  If you do not agree with the way the association is being operated and managed, become a board member or recall the Board of Directors.  Legal fights are expensive. Volunteering is not.

Tip No. 9:  Whenever you apply to your Architectural Review Committee (ACC or ARB), save a copy and when you get it back approved, save that copy FOREVER.  More importantly, make sure you get it back.

Board Meetings: How They Should Be Conducted

Today's blog is about notice, quorum, the right to speak, the right to record meetings, handling disruptive attendees and meeting minutes.

Notice Requirements:

The notice requirements for a meeting are contained in the Bylaws and/or Articles of Incorporation of the association.  Sometimes they are even contained in the Declarations if special notice is required to decide a particular piece of business, such as increases in assessments which require membership approval.

The Florida Statutes provide a default notice procedures if the documents are silent. The default notice procedures are as follows:

• Regular board meetings must be "posted in a conspicuous place in the community at least 48 hours in advance of the meeting, except in an emergency."  

• If notice is not posted, then the association is required to mail notice to each member at least seven (7) days before the meeting.

• Any meeting in which assessments will be levied must be noticed with a statement assessments will be considered and the nature of the assessments. This includes levying annual assessments, even if assessments are not increased. While this sentence in the statute does not state 14 days advanced notice is required, it is in the same subsection that requires 14 days notice for meetings to consider special assessments and amendments to rules affecting parcel use.  My opinion is to provide 14 days advance notice and that seems to be the industry standard.

• Any meeting in which special assessments will be considered must be noticed by mailing the notice to each homeowner at least 14 days in advance of the meeting and the notice must state assessments will be considered and the nature of the assessment.  This includes levying annual assessments, even if assessments are not increased.

• Any meeting in which amendments to rules affecting parcel use must be noticed by mailing the notice to each homeowner at least 14 days in advance of the meeting

Quorum Requirements:

Whenever a majority of the board meets, even if it is at a picnic, and discusses board business, it is a board meeting and must be noticed and open to all members.  

For membership meetings, the quorum is the number of owners listed in the bylaws or other association document.  Florida Statutes provide a default of 30% if the documents do not provide for a quorum.

Members' Right to Speak, Right to Record Meetings and Disruptive Attendees:

It is truly amazing how many associations try to circumvent these two rights.  Either they are misinformed, are unaware of the law regarding these rights, or have gone rogue.

Every member has the right to speak at least three minutes at a meeting on any item on the agenda. This law used to have requirements the member had to provide advance notice, which meant the members were not given an opportunity to speak if the agenda was not published in advance. The laws have changed.  The board can adopt reasonable rules on how to comply with this and control disruptions, but not to the point members are denied their rights. Many associations still use the technique of holding all member commentary until the end of the meeting in an open forum, but this could be troublesome eventually. If there is a topic which has generated a lot of controversy, the members should be allowed to speak as long as they remain orderly. Robert's Rules of Order help in these situations.  Appointing a parliamentarian to keep the meeting in order is helpful too. If you do not want your meetings to go on all night, plan them out specifically. If you know you have a controversial topic, allow a specific amount of time to discuss it.  If you know you have someone who will want to talk three minutes on every topic, limit the number of times a member can speak, but make it reasonable. Use a timer for the three minutes so no one will accuse anyone of not allowing the full three minutes.  If the discussion is still heated and taking quite a bit of time, consider tabling the topic for a special meeting and plan for a longer amount of time to discuss.  If the topic is that important to the membership, the board should be paying attention to their concerns.

NOTE:  Any changes to the way meetings are conducted, including adopting Robert's Rules of Order, should be adopted as a policy by the board through a resolution, which can be written, voted upon, recorded in the public records if necessary, and published to the membership.  This will avoid any accusations of making up the rules as you go along.

Florida law allows members to record board meetings. IT IS THE LAW! They can use either video or audio recording and do not have to provide notice the meetings are being recorded. There is no expectation of privacy in an association meeting and board members do not have to give their consent.  Assume all meetings are being recorded. The board of directors can adopt rules to make sure any cameras are not interfering with the meeting, such as blocking the view of other members. Caution should be taken to not create a rule under the right to adopt rules just to make sure the members do not get a good recording and especially do not adopt a rule requiring the member to provide notice the meeting will be recorded.  Do not put your association at risk of a lawsuit for treading on the members rights.  They have very few, but the few they have they will fight aggressively to protect. If the board is not doing anything illegal or unethical there should be no concern with meetings being recorded.

(10) RECORDING.—Any parcel owner may tape record or videotape meetings of the board of directors and meetings of the members. The board of directors of the association may adopt reasonable rules governing the taping of meetings of the board and the membership.

While an association has the right to remove a member from a meeting if they are being too disruptive, the trend to have law enforcement issue a trespass warning against an owner in order to keep them out of all future meetings is just plain dumb.  All meetings must be open to all members, so if an association trespasses an owner from their clubhouse, then the association will need to move the meeting to another location where the owner can attend.  Putting up physical barriers to prevent owners from attending is not a good idea either, especially the disabled.  You would think common sense would not make this an issue, but it became necessary for one homeowner to actually lobby our elected officials to amend Fla. Stat. 720.303(2) to include "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."  His association spent over $100,000 in litigation costs because the association refused to hold any meetings where he could attend in his wheelchair.  He wasn't even asking for all meetings to be moved, just when there was a agenda item that was important to him.

 Meeting Minutes:

This is a very important topic because all too often the minutes do not reflect enough information about the meeting.  Each topic discussed, whether it was on the agenda or not, should be reflected in the minutes.  Each board vote should list specifically how the board members voted by name.  The only exception is if a vote is unanimous, which could be stated as "motion passed by unanimous vote."  Each item should have a motion to present the item for a vote and a second.

Now some words of caution.  The Florida Statutes have been revised to allow board members to "communicate" by email, but votes may not be taken by email. While this has always been the method used to provide information to board members about an upcoming agenda item, there has been a rise in the number of associations who obviously are discussing agenda items in detail in emails and then simply voting on the item at a meeting without discussion, thus circumventing the rights of members to be informed about the details of an issue. This will certainly cause a rise in litigation and is not in the best interest of the association.

The bottom line is board members and owners alike need to use common sense.  Board members should not look for creative ways to hide things from the owners and owners need to communicate in a reasonable manner at meetings.  Shouting at someone will not get them to agree with you.

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.

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......

Associations -- There is a Better Way!

It's no secret I have been an advocate for homeowners embroiled in disputes with their associations.  I originally went to law school to practice employment law.  I changed directions when I bought my home in a HOA and my welcome to the neighborhood consisted of a volley of "f-bombs" from someone claiming to be the HOA president.

In the past couple of years I have changed direction in my practice of community association law.  Not only did I realize individual owners suing an association is difficult for my clients, both emotionally and financially, but creates a hostile environment for everyone that often lingers even after the dispute is resolved. I now focus my attention on representing the associations.  I figure I can make a difference by helping associations proactively avoid litigation rather than helping the owners litigate.  Not all disputes can avoid litigation. There will always be those one or two homeowners in every community that will be stubborn or even aggressive and want to fight, but litigation should be a last resort.

Let's face it -- if your association has a bad reputation it will affect property values and the resale of homes. Desirable associations attract home buyers.

The ingredients for a good association are education, communication, the right CAM and the right lawyer.

Most homeowners do not intentionally violate the covenants.  Just because the homeowner received a copy of the governing documents, doesn't mean they understand them.  If they did, most members who are past due in their assessments would realize the association can lien and foreclose on their home and would keep the assessments current.  I come across homeowners every day who believe if the bank is foreclosing the association cannot foreclose.  They are surprised when their homes are sold by the association with a bank foreclosure pending.

There is a simple fix to this.  The association should have a website the provisions of the governing documents can be explained, broken down in individual topics, and then promote this website regularly. Make sure new owners receive the web address right away.  Encourage members to review the website before undertaking improvements to property.  There are a number of services out there which help those technology-challenged individuals build a website.  If a website isn't feasible, create a newsletter!  Now you have education and communication!

Another point about communications -- confrontational notices do not work.  It is human nature to become defensive when being harshly reprimanded.  I believe the first notice to a homeowner should be a gentle reminder and an invitation to discuss the issue at a meeting if necessary.  The old saying "you catch more flies with honey" is true. You will get more owner cooperation if you acknowledge they either did not know better or forgot and have a chance to remedy the situation.  Threatening to send them to the association lawyer if they do not obey demands only ends up costing the association and owners more money for legal fees.

The right CAM is important.  Identifying the right CAM is not so easy and there is no one size fits all.  Some associations need the CAM to be very involved and some only need a CAM to collect assessments, pay bills and send out violation notices.  The right CAM will meet your expectations and work well with the association.  The wrong CAM will partner with the lawyer to increase billable hours for both of them by fueling disputes.  The wrong CAM will control the association funds and keep board members out of financial decisions.  The wrong CAM will make board decisions without the board members being involved. The wrong CAM will think it's their job to run the association, not the board.  

The same applies to the lawyers.  The right lawyer will answer the board's questions and encourage the resolution of disputes early.  The wrong lawyer will lead the board to believe they have the ultimate power and cannot lose a dispute. The wrong lawyer will bully and abuse homeowners.

Associations should be proactive when dealing with violations and collections.  Identify the problem areas and work on them proactively.  Make sure your owners know not paying assessments means they risk losing their home and usually quickly.  Let them know the association doesn't want their home, but has a duty to collect assessments from everyone.  Let them know financial hardship is not a defense the courts will entertain.  Offer a payment plan to help out those who are already past due, but be aware that if the association lawyer handles the payment there are outrageous fees to set it up and process payments.  The association can facilitate the payment plan so it stands a better chance of success.  If your association has authority to impose fines, make sure the members know about the process and don't try to rig it by appointing members to the fining committee who are friends and supporters of the board or biased against the owner.  Make it a fair hearing before the fining committee or the association will most likely end up in litigation.  Make sure all members are aware of the process for applying for approval to implement improvements to their property.  Communicate on a regular basis those items that require approval as well as those that do not.  

There is a better way to have an association and not make everyone in it miserable.  It's not easy because most members of the association don't care to be involved or hear about it, but it is possible.

Community Association Managers (CAMs)

Laws Regulating CAMs

Fla. Stat. 468.431 requires a CAM to be licensed when "the association served contains more than 10 units or have an annual budget or budgets in excess of $100,000." The management firm is required to have a license as well. CAMs are limited in what duties they can perform by statute as well as an advisory opinion issued by the Florida Supreme Court. 

The advisory opinion has designated activities which would constitute the unlicensed practice of law, such as drafting amendments to documents, drafting proxies, preparing liens, advising anyone how the law applies to a set of facts or circumstances, interpreting statutes, administrative code, the governing documents of an association or contracts, drafting contracts or drafting legal notices. CAMs are licensed and regulated by the Department of Business and Professional Regulation ("DBPR"). Effective July 1, 2013 laws were enacted to create more regulation of CAMs and penalties for violating the regulations. A CAM can be subject to penalties for any violation of Chapters 718, 719 and 720 of the Florida Statutes.

But the Real Problem Is.....

There seems to be a rise in the number of complaints I hear from associations who state their CAM who make decisions without consulting the Board of Directors ("BOD") or take actions against homeowners without BOD approval. I frequently come across liens and foreclosures for trivial amounts against homes which the BOD will claim they did not authorize. I often expect the BOD is not being honest and is throwing the CAM under the bus, but there have been some instances I have investigated where the lien or foreclosure is not in any meeting minutes and the CAM made the decision on their own. I have heard from several associations the CAM handles all the finances, including which bills to pay and when. I have even come across associations claiming the CAM will not let them have access to the association funds. Even more troubling is when the CAM is making board decisions without input from the BOD. The courts have judicially dissolved associations which delegate the board duties to a CAM. It rarely happens, but has happened. Or worse yet, the court can appoint a receiver, which makes assessments skyrocket. Board members need to know their fiduciary duty is to operate and manage the association, including making financial decisions and signing checks. If no one is watching the checkbook except for the person who gets paid regularly with checks, you are not doing your duty! Don't get me wrong -- there are some wonderful CAMs out there, but the BOD should know what their CAM is doing because the association is responsible for the CAMs actions.

Single Biggest Mistake Is.....

Whenever there is a turnover of board members due to an election or other events, the CAMs are naturally concerned because the new BOD can terminate their contract. All too often I come across CAMs who will continue to work with the former BOD to try and oust the new BOD. I have seen CAMs sabotage records and meetings and provide former board members with privileged documents. I have seen CAMs try to circumvent the election process. Associations need to know if their CAM is engaging in this behavior the association needs to replace the CAM because the potential risk of litigation against the association is high in these situations.

Conclusion

Board members need to communicate with their CAMs at the slightest hint of these problems. Sometimes the BOD is sending mixed signals and the CAM needs clear instructions. Anytime there is a change in board members, the board should meet with the CAM to discuss expectations. If something does happen, the board should provide the CAM with a letter outlining the situation and an opportunity to cure the situation. The BOD-CAM relationship is supposed to be a partnership and not a battle of egos.

Eligibility for the Board of Directors

Confusion often arises over who is eligible to run as a candidate for the board of directors of an association.  The answer is in the governing documents of the association; the Declarations, Bylaws and Articles of Incorporation.  The information is usually found in the Bylaws, but can be in other documents.  Unless the governing documents require a candidate to be an owner or member of the association, anyone is eligible.  While condominium documents usually require a candidate to be a unit owner, homeowner association documents do not usually have this requirement.

Both types of associations require, by state law, that any owner be current in any monetary obligations due to the association in order to be a candidate.  This means all financial obligations must be current at the time the election is conducted.  State law further prohibits a  candidate for the board who has been convicted of a felony is not eligible to be a candidate unless the felon's civil rights have been restored.  State law also provides a board member charged with a felony involving the association is automatically removed from office by operation of law.

Conflicts - What Motivates Board Decisions

No matter how nice your community is now, it doesn't take much to change your little slice of heaven into a nightmare.  A new board of directors, a new property manager, a new association attorney, or the neighbors from hell can all wreak havoc on a community and create misery for everyone.  The misery comes in the form of higher assessments for legal fees, those intimidating covenant violation notices and possible fines, past due assessments which spiral out of control with legal fees, interest and late charges, or what I refer to as "neighbor wars," often fueled by one or the other claiming the association supports their position.

Avoiding conflict is best achieved by understanding the governing documents, understanding how an association functions and operates, understanding the various people managing and operating the association, and understanding common problems that may arise between owners or owners and the association.

The biggest complaint I hear are owners who feel victimized by their associations, the association's attorneys, or the property manager.  While it does happen and unfortunately frequently, knowing what motivates the actions and conduct of your association helps to keep you out of the crosshairs.  Once you have that target on your back there is little chance of ever living in peace.  Even if you are successful in litigation, chances are, unless you move, you won't enjoy living in the community and there will always be animosity. 

It takes all kinds of personalities to make up a community and you cannot not possibly get along with everyone or make everyone like you.  Add to the mix a board of directors of a private corporation with a contract you entered into waiving many of your property rights and you have a recipe for disaster if you are not prepared and informed.

While a have a theory the worst of board members are those who failed at their careers and decided to run your association so they can have their egos stroked, many board members start out with good intentions. Some have what it takes to do a good job without making enemies, but many are just average people with the same stresses in life as everyone else -- jobs, family, finances, mortgages, health concerns, etc.  Board members take on a voluntary job (at least they better not be paid or they are violating state law) and try to manage the community with limited funds.  The association, nine times out of ten, has a revenue stream that is generated by assessments only.  Many owners lose sight of that fact and assume it's a corporation with profits and a fat bank account.  Nothing is further from the truth.  Most associations are non-profit organizations with a limited budget based on the amount of assessments per household and an average of 25% to 40% of those households are not paying the assessments and are in a mortgage foreclosure.  Think of it like this -- what would you do if your paycheck was cut 40%?  Ouch!  On top of that you have everyone in the community complaining assessments are too high and at the same time complaining the pool needs repairs, the clubhouse needs a new roof, the entrance sign needs a face lift -- the list goes on and on. It's no wonder these volunteers reach their burn out level quickly.

Now consider the fact associations are either not regulated at all or have little regulation.  Currently the State of Florida does not regulate homeowners associations except for elections. Hopefully that changes in 2014. The State does regulate residential condominiums, but not commercial condominiums and hotel condominiums.  The regulation that does exist is limited and cannot include claims for personal damages or an assessment dispute.  Add to this lack of regulation a property manager who is required to take 18 hours of class work to get a license, if they have a license.  State law requires the property manager, or community association manager (CAM) and the manager's firm to each be licensed, but there are a number of unlicensed managers in the industry.  I am not trying to bash the CAMs -- there are a number of excellent CAMs out there who are hard working and have high ethical standards, but just like lawyers their profession gets a bum rap for the bad apples in the bunch.

Next added to the mix of things is the association attorney.  Associations want aggressive attorneys because the board members are afraid of being personal sued despite being protected by the Business Judgment Rule.  The Business Judgment Rule protects morons, idiots and those who just make plain honest mistakes. It also protects the association to an extent.  There are some overly aggressive association attorneys who count on owners not having the $100,000 or so it takes to fund a lawsuit.  Without state regulation of the association and a high price tag on justice, its the perfect storm.  Every day I get calls from people who ask me to take their case on a contingency because its a good case, it will generate publicity for me or its extremely unjust.  Its not easy for me to tell them a) I don't have the resources to fund their case and b) unless you have a physical injury that generates big money damages no law firm will take it on a contingency because it just not a good business decision to tie you your working capital with no return on investment, if any.

So how do you avoid the perfect storm?  Let's break it down into two categories:  1) past due assessments and 2) violations.

Most owners do not realize there is almost no defense to not paying your assessments.  Its your absolute duty to pay your assessments, even if you think the association failed to properly notice a meeting to vote on an increase or is misappropriating (stealing) funds.  The only defenses available are if you paid the assessments and can prove it, the association refused your payments, the association did not provide notice before filing a lien or foreclosing, the board met in secret to impose the  increase or the board did not notify the community of the increase.  Even with those defenses it is hard to win against the association.

If you get past due in assessments you will always be past due until you pay the total amount due!

I leave that as a stand alone statement so everyone can understand the importance of this.  By state law any payments are credited to all charges other than assessments first.  Assessments are credited last, so anything less than 100% of the amount demanded means you are past due and the association can lien and foreclose on your home.  There is no minimum amount.  Even though you may owe them $100 and your neighbor owes them $10,000, they can foreclose on you first.  Its all about which owner the association is most likely to recover from with the least amount of legal fees expended.  Or it could be they don't like you, but the court recognizes the association does not have the funds to go after everyone at once and will let them pick and choose who to go after without any consequences for their selections.  Before you jump to any conclusions, look at it unemotionally.  Is it smarter to go after the owner who owes $100, is current in the mortgage, has a job and generally pays any debts or go after the owner who owes $10,000, is in a mortgage foreclosure, has no job and is likely to file bankruptcy?  Even if the association forecloses, if there is a mortgage on the property it is only a matter of time before the bank forecloses on whoever buys the property at the foreclosure auction, which is often the association.  If there is already an active mortgage foreclosure the bank can file a motion and get the property from the association in six to eight weeks where it takes years to get it from the homeowner.

What's the deal with all that interest, late fees, administrative charges and attorneys' fees?  Well, as I said before, the only source of revenue an association has is assessments and there has to be consequences to not paying assessments or everyone would withhold them.  The association cannot waive the attorneys' fees or they are passing on costs you generated to your neighbors and your neighbors could bring a lawsuit against the association.  Assessments can definitely not be waived or the association could be sued for not enforcing the declarations.  Do associations abuse this and over charge these fees?  Yes, but I don't blame the associations themselves as much as I blame the property managers and the lawyers.  Like I said -- its the perfect storm -- an unregulated business where those who do business with the association are guaranteed to get paid.  All the association has to do to pay its bills is increase assessments.  Greed is a problem.  Owners and board members alike have to watch out for property managers working with attorneys to generate billable hours for both.

A word of caution -- don't try to plead financial hardship, death, disability, job loss or any other personal issues.  The courts cannot consider this when they rule on these cases. These claims are not a defense to not paying assessments.  If you want to keep the roof over your head pay the mortgage and the association.  I would rather skip a mortgage payment then the association payment. At least you can negotiate with the bank -- eventually.

Next on the list is covenant violations.  The best way to avoid them is to know the rules! Period!

You need approval of your association to change anything.  If you make that assumption you should stay out of trouble.  Its better to ask for permission and not need it then to not ask and try to get a lawyer's forgiveness.  You can count on the lawyer being involved.

Some of the newer rules, or rather laws of the state:

1. An association cannot prohibit or prevent an owner from installing Florida Friendly Landscaping.  Its a matter of public policy and important to conserving our natural resources.  You are still required to get your association's approval.  No one has figured out how to deal with the issue of what to do when the association denies your application and the law says you can do it anyway.  There are cases pending in court over this.  Some associations have been wise enough to realize their lawyers were probably looking at generating billable hours and its a losing proposition for them -- they dismissed their cases.  Other aren't so smart.

2. You have a right to a hearing with 14 days advance notice of the hearing before you can be fined.  While this part of the statute was passed as a matter of public policy the statute is written as if to imply associations have a right by statute to fine owners.  The previous rule, before this statute was passed, was an association could only fine you if the Declarations, Bylaws and Articles of Incorporation authorized fines.  My position is this is still true and there is no pubic policy reason for imposing fines by statute, but its a lot cheaper to pay the fine than to fight in court and possibly an appeal.  Many associations also believe if you don't show up to for the hearing the fining committee can impose the fine without having the hearing.  Wrong!!!  But again, is it feasible to spend lots of money to fight a fine?

3.  A buyer is liable for the past due assessments of any previous owner.  The statute only addresses assessments and not late fees, interest and attorneys' fees.  While it is industry practice to charge all these to any buyer, there are cases pending challenging this.  Stay tuned.  One pet peeve I do have is charging a new owner the attorneys fees for the association attorney's involvement in a mortgage foreclosure.  Associations are named as a defendant in a mortgage foreclosure because they have a competing lien and the bank cannot claim the 12-month cap on liability if the association is not named.  There is no rule of civil procedure that allows one defendant to assess their legal fees against another.  I would think the Florida Bar would have issues with this as well.  It has also been the industry practice to not write off any past due assessments and other charges after the bank pays their 12-month cap and hold this for the next buyer.  The Third District Court of Appeals ruled against that on August 14, 2013.  It sends a clear message.

4. No stealing by board members!  Finally!!!  If a board member is arrested for a crime involving the association the board member is automatically removed from office as a matter of law.  Did I hear a big "WOOHOO" out of Davenport, Florida?  I am eternally grateful to the Polk County State Attorneys' Office for a job well done.

5. Old law, but important:  before you can sue your association you must engage in pre-suit mediation for homeowner associations and arbitration for condominium associations.  There are exceptions as noted above for assessment disputes and, for arbitration, personal damages.

6. Another old law that's important:  if your board of directors is doing a lousy job you can initiate a recall and remove them.  This is much easier and less expensive than a lawsuit.

Remember pay your assessments and ask permission.  Do those two things and you can avoid a lot of heartache and legal fees.  While it goes against my anti-establishment nature, most association battles are not worth it emotionally and financially.

While I didn't touch on neighbor-on-neighbor disputes, which are virtually impossible to resolve, my only advice is to put yourself in their shoes and ask yourself would you be annoyed living next door to you?

Good luck and next time buy farmland.

What's Constitutes A Board Meeting?

Board meetings are a big source of complaints when it comes to HOAs and condo associations.  Fla. Stat. 718.111 governs BOD meetings of condo associations or COAs and Fla. Stat. 720.303(2) governs meetings of HOAs or homeowner associations.

There must be a quorum (majority) of the BOD present in person (or by telephone conference as long as the attendees can hear the member appearing by phone or Skype) in order to have a board meeting and to conduct board business.  Secret voting and proxies are not allowed for board members to vote or attend.  If there is not a quorum present, then the BOD cannot conduct business and any actions would be null and void.  It would also be a breach of fiduciary duty to conduct a meeting without a quorum.

You are entitled to record all board meetings and the board cannot prohibit this.  They also cannot ask why you are recording.  If a board meeting is being conducted in violation of the statutes, you should record the meeting and object to the meeting being conducted.

Board Members Behaving Badly Over Florida Friendly Landscaping

Board Meeting

Click on the link above to watch this outrageous response to a homeowners' application for Florida Friendly Landscaping.

Stand Your Ground Law Abused Again

I think our legislators in Florida need to review the Stand Your Ground Law. I doubt they were thinking of HOA drama when they passed the bill, but we are about to have another Trayvon Martin issue.

I represent a client in a voluntary HOA. They refused to admit they were voluntary until I stepped in to represent the client. Another homeowner is friends with my client and accompanied her to the mediation (these are elderly and/or disabled people and a co-pilot was needed for the drive). We thought all was worked out, but evidently the HOA has some hot heads in the community.

The client and her friend were followed by the HOA president and two board members. When they arrived home this man began a verbal altercation with the friend. Later that day the HOA president sees the friend and her husband headed for their evening bike ride to the common areas and not only locks them out of the common areas, but pulls a gun on them when they asked him if he was going to unlock the gate. Using his cell phone to tape the incident, he announced "I fear for my life" and pulls out the gun.

If this guy feared for his life by two disabled people, both smaller than him, then why did he go to their home earlier? Why did he follow them when he saw them on their bikes? Why didn't he leave after locking the gate?

Yes, the law has no duty to retreat, but I don't think it was intended for you to stalk people either.

2013 HOA Legislation Highlights

Last week the House of Representatives and the Senate passed Bill 7119 providing many needed amendments to Florida Statute 720, the statute regulating homeowner associations. We are now waiting for the governor to sign the bill into law, which would go into effect July 1, 2013.

One of the most important amendments to the statute removes a director or officer from the Board of Directors of an association if the director or officer has been accused of committing a crime of theft or embezzlement involving the association. The bill also includes an amendment to Chapter 468, which regulates community association managers ("CAM"), and calls for discipline by the Department of Business & Professional Regulation ("DBPR") if the CAM commits violations of Florida Statutes 720, 718 and 719, if the CAM contracts on behalf of an association with any entity in which the CAM has a financial interest without disclosure, obtaining a license or certification by fraud, misrepresentation or concealment, being convicted of or pleading no contest to a felony, violation of any DBPR order or rule, committing gross misconduct or gross negligence, or any other violation of Fla. Stat. 468.436.

Directors and officers of a HOA board, if the bill is signed by the governor, will now be required to certify in writing they have read the Declarations, Bylaws, Articles of Incorporation and any other rules and policy of the HOA or complete a certificate attesting they have completed a state-approved educational course. The bill also requires directors and officers to disclose their financial interest in any entity submitting a bid for a contract with the HOA and if a member objects to the contract, the contract must be put to a vote by the membership for approval. Additional language requires the HOA to insure and bond anyone handling HOA funds prohibits kickbacks. Yes, good old common sense needed to be put into the HOA statutes, but I wonder if those people affected by this law will actually care to stop accepting kickbacks!

Associations would now be required to keep the official records within 45 miles of the community or within the county where the community is located. (I predict we will have some legal battles over the use of the word "or" here.) There should never be a choice in a statute. Associations, at their discretion, can provide the records electronically by posting them on the Internet or allowing members to read them on a computer screen and then requesting a printed copy. If the HOA has a copy machine it must provide the copies if the request is 25 pages or less. The association could still charge 25 cents per page (down from 50 cents) for copies made with the HOA copier or, if the request exceeds 25 pages, the actual cost of copies plus any reasonable hourly fee NOT TO EXCEED $20 PER HOUR) for a vendor or employee to make the copies. No personnel charges are allowed if the request is under 25 pages. The HOA is also required to provide the member with a copy of the vendor's invoice for outside copying services. The new bill requires the HOA to allow members to scan documents with any portable device they may have or otherwise make electronic copies.

The new bill would require a developer to designate reserve funds by components rather than one general fund if the developer provides for reserves.

The new bill would require associations to register with DBPR. This is the first step to future legislation to regulate HOAs. Currently no one knows for certain how many HOAs are operating in the State of Florida.

The new bill would also require associations to provide copies of an amendment to its members within 30 days of recording an amendment.

One provision I do not like is HOAs would no longer be required to allow members to be nominated from the floor at elections if there is a process for nominations prior to the election. The HOAs will not be required to hold an election if the number of candidates is equal to or less than the vacancies. While this would save the HOAs money because of the expense involved, it takes away some of the power of the members if they cannot nominate at the election and they don't realize until the election not enough people stepped forward to be elected. Expect a lot of improper conduct with this one. If ever the members of associations needed to be motivated to be involved with their HOA, this provision of the bill should do it.

The new bill has provisions for forcing the turnover of control of the association to the members if the developer abandons its responsibility to maintain or complete amenities, files for Chapter 7 bankruptcy, loses or gives up title to common areas through foreclosure or pre-foreclosure, or a receiver is appointed. The bill also provides the members the right to elect at least one board member when 50% of the properties are no longer owned by the developer and also limits the rights of the developer to amend the governing documents.

Finally, the bill would not wipe out any past due assessments on a property if the HOA takes title to the property to foreclose its own lien. Any buyer would be liable for the past due assessments; however, any assessments accruing while the HOA has title are the responsibility of the HOA.

If you support this bill, please send Governor Rick Scott an email asking him to sign the bill into law. His email address is rick.scott@eog.myflorida.com.

Associations & Board of Directors

The number of board members is determined by the Declarations, Articles of Incorporation and Bylaws. There must be a minimum of three by state law (Fla. Stat. 617 or 607); however, the governing documents of the association often provide for a range -- three to five or three to nine, etc.

If the documents provide for a minimum of three and some other number as a maximum, the number is increased by a vote. Either the Articles or Bylaws will list the initial number of directors and the document must be amended according to the amendment provisions of the document, meaning it could be either by a board vote or a membership vote.

By law, condo board members cannot be paid a salary and cannot enter into contracts between a business owned by the board member and the association unless the membership is notified and, if anyone objects, the membership ratifies the contract by vote. It is slightly different for HOA board members and the new law, enacted July 1, 2010, has been the subject of debate by association lawyers. My take is the literal meaning, which is no board member cannot "receive financial gain." Benefitting from a contract is financial gain as far as I am concerned

While the association is required to have an annual meeting and an election (the governing documents will provide the month), if there is no quorum of members present at the annual meeting, the election does not occur and the previous board stays in power or can appoint their replacements. The governing documents provide the number of members necessary for a quorum and if no number is specified it is 30%.

This is why it is important for owners to get out and vote!!! Don't complain if you don't participate!!