Association Collections and Bankruptcy - Info for Board Members

One of the biggest issues facing associations is the ability to collect from delinquent owners who have filed bankruptcy.   It is critical an association has an attorney experienced in creditor bankruptcy law in order to avoid waiving the right to collect those assessments from the delinquent owners, which often is thousands of dollars.  Below is some general guidance for associations:

• Whenever the association receives notice an owner has filed bankruptcy, immediately send the notice to the association attorney, who should file a claim with the bankruptcy court on behalf of the association.  Make sure the claim is filed.  For some reason not all attorneys file these claims on behalf of associations.

• The bankruptcy court issues an "automatic stay," meaning the association cannot contact the owner to collect a debt.  Leave the collections to the association attorney.

• Owners have a duty to pay assessments as they come due after filing.  If the owner does not pay, notify the association attorney, who can file a motion to lift the automatic stay.

• Bankruptcy does not mean the past due assessments cannot be collected. It simply means the association cannot go after the owner personally by garnishing wages or other collection measures.  The association can still foreclose on the property "in rem," meaning against the property only, not "in personam," which is against the person.

• Delinquent owners can strip the association lien in a Chapter 13 bankruptcy if the first mortgage exceeds the value of the property.  It is important for the association attorney to monitor the case and properly object to lien stripping.  There has to be a credible valuation of the property with a thorough survey.

• If the bankruptcy case is dismissed, the automatic stay is lifted, usually 15 days after the order is entered, and the association can pursue it assessments, interest, late fees, attorneys' fees and costs as normal.

Homeowner Beware -- the Changing Management Company

With the downturn of the housing market in the early 2000s many associations became more budget conscious and looked for community association management firms (CAMs) who would provide the same services for less money.  Over the years many associations have continued to change management companies as they try to find the right fit.  This has led to a bigger problem as a waive of homeowners become past due in their assessments as a result of sending payments to the former CAM firm.  Unfortunately, the associations are not responsible for homeowners sending payments to the wrong CAM firm and the responsibility is squarely on the homeowner.

The issue is the notice of a change of CAM firms and the change of address to send payments is sent to homeowners by the new CAM firm.  Many of us have become frustrated with the amount of junk mail we receive and tend to toss mail from companies we do not do business with and are unfamiliar to us.  A good many of these notices are tossed without the owner opening the letter.

My tip for staying out of collections with the association attorney is to make sure you open any letter you receive from any management firm.  Quite a few use "association management" or "community management" in their name, but quite a few do not.  If the homeowner does not send payment to the correct address it ends up being an expensive lesson because the homeowner is liable for all attorneys' fees, costs, interest and late fees.  Any payments submitted for less than the full amount are applied to interest and late fees first, then attorneys' fees and costs, with any remaining funds applied to assessments last.  If homeowner does not pay in full the homeowner will always be past due and subject to lien and/or foreclosure of your home.

Another tip -- do not try to circumvent the process by paying the association directly once you receive a letter from the association attorney.  This will only increase the attorneys' fees you owe.  The attorney will spend time communicating with the association about the payment and the homeowner will again be responsible for those fees.

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.

The Marketable Record Title Act ("MRTA")

There's been lots of discussions regarding the Marketable Record Title Act ("MRTA") lately with some of the most back and forth discussions coming from the Real Property, Probate and Trust Law ("RPPTL") section of the Florida Bar.  This piece of legislation is very complicated and it is nothing short of amazing how different facts can produce different legal opinions. 

Recently Chapter 720 of the Florida Statutes, also known as the Homeowners' Association Act ("the Act"), was revised to provide for a more expeditious process to file a Notice of Preservation.  The Notice of Preservation is done before the covenants expire against any lots, which is usually the 30th anniversary of the date the covenants were recorded.  Note the word "usually."  I'll get back to that later.

The Act also contains a section for revitalization of expired covenants, which is a whole different process from preservation.  Once covenants have expired against any lot a homeowners' association is left with only revitalization to try and breathe new life into the old covenants.

The hard part for most non-lawyers to understand is covenants can expire against just one lot, but not all the lots.  It's not as simple as saying the covenants are 30 years old and because no Notice of Preservation was filed, they cease to exist.  Covenants can be preserved in a number of ways, including a reference on a recorded plat by the Official Records Book and Page.  Covenants recorded on a plat in such a way do not expire which is why I used the word "usually" with caution.

Covenants can also be preserved in the chain of title to a lot by the recording of a deed which references the covenants by the Official Records Book and Page within the last 30 years.  This is why a title search is necessary before an opinion can be rendered whether or not the covenants expired against that particular lot.  

Once covenants have expired against a lot the HOA cannot enforce those covenants against that lot or usually cannot collect assessments from that owner. There's that pesky word "usually" again.  The exception to this rule regarding the collection of assessments would be very fact specific and based on a theory of unjust enrichment.  An example would be when an association owns the roads and the lot owner uses those roads to get to and from their home.  It would be unfair for the owner to use the roads but not be required to contribute to the repair and maintenance of those roads, which is called unjust enrichment.  The court would have to make such a determination based on the facts specific to that lot.

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.

Helpful Tips to Fight Back with Your HOA

Great article:  http://www.ccfj.net/HOAgen8Things.html

The Importance of Insurance for Condominium Owners

I continue to be amazed by the number of condominium owners who contact me after they have lost everything in a disaster and had no insurance to cover their personal property and the improvements in their unit, such as kitchen cabinets, or to protect them from liability for damages to adjacent units.  The "this will never happen to me" mentality can result in financial devastation.

If a fire were to destroy everything, the condo association ("COA") is not liable, in most instances, to fully restore your unit, especially if the fire is caused by another owner or tenant.  In most instances, the COA is only liable to restore the unit to bare floors, walls and ceilings -- no fixtures, no cabinets, no floor coverings, not even paint on the walls.   This scenario gets even worse if your the unit owner liable for the fire when an appliance or electrical outlet short circuits.  You could be on the receiving end of a lawsuit by every other unit owner affected and their insurance companies. 

The same problems would occur if there is a water leak, which are very common in condominiums -- toilets overflow, air conditioning units leak, and pipes under the sink can fail.  In this scenario, not only are you liable for your damages, and your tenant if you rent, but you are also liable for any water leaking into or flooding an adjacent unit.

Get that insurance!

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.

2016 Senate Bill 7031 - HOA Declarations Exemption from Marketable Record Title Act

I personally think this bill is a bad idea.  We have enough problems with HOAs which are governed by ancient documents written decades ago!

Bill Text Senate Bill 7031

Proposed language:

712.03 Exceptions to marketability.—Such marketable record 33 title shall not affect or extinguish the following rights: 34 (10) A covenant or restriction of a homeowners' 35 association or mandatory property owners' association.

HOA Reform Bill -- Please show your support

You can view the bill in its entirety at:

http://www.hoareformbill.net/PB16SB1122OR.pdf

It is sponsored by Senator Alan Hays.

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.

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.