My Email Regarding HOA Reform Bill and Affordable Legal Representation

I wrote this to Senator Alan Hayes, House Representative Mike La Rosa, Florida Bar President Ramon Abadin and my friend, Jan Bergemann of Cyber Citizens for Justice (www.ccfj.net):

Gentleman,

I am writing to you today, as an attorney who represents both homeowners’ associations and homeowners who are being victimized by their associations. The HOA Reform bill is critical at this point and comes at a time when the president of the Florida Bar, Mr. Ramón Abadin, has pointed out, in the November issue of the Florida Bar Journal, the need for a new business model because the working class cannot afford an attorney and do not qualify for legal aid.  I see this injustice every day in my practice as I have to tell clients the high legal fees and costs they would incur to hire me to protect them from being another HOA victim.  These cases are not the type that are done on a contingency because rarely has someone been physically injured.  I turned down at least one case a day, sometimes as many as five.  Yesterday it was three.   Most firms won’t represent the homeowners because the associations are a “cash cow.” 

The homeowners’ associations are unregulated and the condominium associations have limited regulation with the Dept. of Business and Professional Regulation (“DBPR”) not having jurisdiction over assessments, which is the biggest source of abuse for homeowners.  Even the appellate courts, in a case called Ocean Two Condo. v Kliger, where the Court stated “Because of the statutory lien rights and the power to prosecute the foreclosure action, an association and its attorneys have ample leverage, and the unit owners have very little. Every telephone call, meeting, or hearing regarding the genesis of the dispute and the amount due produces an incremental unit of attorney billings, and every day until resolution of the dispute increases the interest tariff.” 

In my practice I have witnesses law firms that have paralegals do all the work, yet the homeowners are billed attorneys’ fees, not paralegal fees.  I have witnessed a law firm give sales pitches to associations during hiring interviews and state that “95% of the homeowners can’t afford to sue you and the 5% that can will soon learn that money can be used for a vacation, their children’s college, or retirement and will give up.”  Unfortunately, this is true.  I have seen a law firm give homeowners a letter stating they could not call or come to their office to resolve their assessment delinquency, but could fax their credit card or email and then are given the email address of a former staff member.  Once I got involved the charges ballooned from $795 to over $3,600 with the attorney telling me he had to read all those emails the owner sent trying to get a response.  This is outrageous and had I not gotten involved he would have forced the homeowner to pay those ridiculous legal fees.

The industry not only needs more regulation, but more affordable legal representation. Let’s give DBPR jurisdiction to arbitrate assessment disputes.  This is the biggest source of abuse.  Arbitration is less expensive for the homeowner and the threat of arbitration might help tamper the abuse.

Regulation of the homeowners’ associations is needed to help curtail the abuse of out of control board members.

Right now there is a rise in homeowners’ associations setting up their own corporations to perform work normally performed by vendors.   This results in the board of directors putting their family members on the board of these corporations as paid directors, if not themselves in some cases; the board members receiving free services, the members being denied access to see accounting records of these corporations even though their assessments paid to set up this corporation and bought any equipment, furniture or other assets.  Several times I have witnesses where these corporations are either owned or operated by a board member or have contracts with a board member.  Some associations set up these companies to operate a receivership or rental program to take control of homes in foreclosure, which is needed, but instead funnel the rental income to themselves or the corporation without the association getting a dime.

There is also a rise in the community association management firms setting up their own corporations to perform work normally performed by vendors.  These corporations are then paid top dollar and paid promptly with no one given a chance to dispute an invoice.

There is a rise in the number of cases in which deed restrictions have expired under the Marketable Record Title Act but the HOAs continue to operate as mandatory associations and threaten to foreclose on owners who refuse to pay because they know the chances of the owner affording an attorney are slim.

I have witnessed board members targeting homeowners they do not like.  This targeting sometimes includes criminal activity, which is hard to prove.  Any witnesses refuse to get involved because they know they will be targeted.

The Village Condominium Association in Orlando was taken over by a board member who slowly was able to get rid of anyone who did not agree with him and then proceeded to give himself the management contract, the security contract (with armed security despite not having the proper licenses), and the maintenance contract.  This board member marked all the board members’ assessments as paid each month despite no payment.  He was able to take approximately $40,000 a month from the association (which we documented), depleted the reserves and diverted money from insurance claims to his own pocket. A receiver was eventually appointed to take over and the board removed.

I could write a book on the atrocities committed against homeowners, including cars being set fire, fake bombs on lawns, handicapped owners in wheelchairs being refused to attend meetings and harassed, racial discrimination, sex discrimination, discrimination against veterans.  I have witnessed homeowners being evicted from their homes for past due assessments when their home was in a trust and the association demands the rent be paid to them from the “tenant.”  And let’s not forget the Higgins v. Timber Springs case in which Mr. Higgins was foreclosed upon while on active duty in the military.  Our firm was able to get the foreclosure reversed.  We took the case pro bono, one of the few we could afford to handle as a small firm, because Mr. Higgins could not afford an attorney and was trying to deal with this situation while deployed. 

The sad part is when I have to give these homeowners a quote of the fees to litigate they decide it’s easier to sell their home and move, sometimes to another state.

I apologize this email is so long, because I know your time is valuable, but I appreciate the efforts each of you are making in trying to protect the rights of our citizens.  So many of them lose their homes, not because they can’t afford them, but because they upset their HOA, became a victim, and cannot afford an attorney.  Thank you!

Regards,

Barbara Billiot Stage, Esq.

Fines Authorized by Statute?

The great debate:  Can the HOA fine if the governing documents do not authorize it but Fla. Stat. 720.305(2) establishes procedures for fining? 

Many community association lawyers and community association managers say yes.

My answer is no despite many of my colleagues disagreeing with me. The statute starts out "The association may levy reasonable fines of up to $100 per violation....." which my colleagues have interpreted to mean the association has a statutory right to levy fines. 

My argument is the Florida Constitution prohibits retroactive application of a statute to change an existing contract (Declarations, bylaws and articles of incorporation are contracts) as reinforced by Cohn v. The Grand Condominium. Additionally, S&T Anchorage v. Lewis held an association cannot act in any way not authorized by its governing documents. The exception to the retroactive application is statutes which are public policy (such as the Florida Friendly Landscaping Act), statutes which are remedial or curative (the recall statute) and statutes which are procedural. The fining statute is procedural, but the part that would allow for a statutory right to fine is not nor was it a public policy statute. 

From Haven Fed. Savings and Loan v. Kirian: “Substantive law has been defined as that part of the law which creates, defines, and regulates rights, or that part of the law which courts are established to administer. It includes those rules and principles which fix and declare the primary rights of individuals with respect towards their persons and property. On the other hand, practice and procedure 'encompass the course, form, manner, means, method, mode, order, process or steps by which a party enforces substantive rights or obtains redress for their invasion. 'Practice and procedure' may be described as the machinery of the judicial process as opposed to the product thereof." It is the method of conducting litigation involving rights and corresponding defenses.” 

My colleagues disagree and until an appellate court rules on the subject we will not know who is right. Does your HOA want to foot the bill for an appellate case to figure this out? My suggestion is err on the side of caution.

Correct Mailing Address is Critical to Association Living!

Questions about past due assessments, collection fees and liens almost always include a statement the inquirer did not receive notice.  Not having your correct mailing address on file with the association puts the liability on you. Just like not signing for the certified letter is on you and the association will receive it back marked "UNCLAIMED."

If you are going to dispute any charges, here is my advice:

Pay off the lien first and then bring a separate action for recovery of any fees if the association violated your due process rights. Never risk the loss of your property to prove a point or fight over improper fees.

Hire a HOA/condo lawyer  to audit the fees and bring any possible action.  You need someone who is experienced not only in this area of the law, but the industry practices.

Tenants Attending HOA Meetings!

A common question I run into involves HOAs and condo associations (COAs) denying tenants attendance at meetings.  This is a big mistake for the associations.

The problem started with revisions to the Florida Statutes. Years ago Chapter 720 (HOAs) and Chapter 718 (COAs) used to provide rights for the members or "their authorized representatives" to attend meetings.  Over the years revisions to the statutes removed that language and the HOAs now erroneously believe they can ban non-owners from meetings.

This thinking runs afoul of the Fair Housing Act because Fla. Stat. 720.305(1) requires members, their tenants, guests and invitees to all comply with the governing documents and Chapter 720.  The FHA requires associations to provide those governed by the HOA access to attend meetings

HOA Rant

There is a great article posted on CyberCitizens for Justice yesterday.  It's a rant from Lindsey Nesmith in an article she wrote which printed in the Florida Weekly.  My hat is off to Ms. Nesmith for saying the obvious, but what many of us are afraid to say.

You can read the article at:  http://www.ccfj.net/HOARANT.html

How An Association Can Get Into Trouble Over Assessments - BOARD MEMBERS PAY ATTENTION!

With the volatile economy more and more associations are changing property management firms and law firms, but there are some problems which can arise and the association would probably be on the losing end of litigation.

Many owners contact me because their associations have made these changes and now they are unable to pay their assessments because the information regarding where to send payments is not timely distributed to the members.  When a member's check or electronic payment is returned, this is a refusal of a tendered payment, which is not permitted by Florida law.  Should the association attempt to lien and foreclose, the member not only has a valid defense, but could also bring a counter claim for breach of contract.

It is imperative for associations to notify their members immediately of any changes to make sure payments are not being rejected.

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.