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

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

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

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

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

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

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

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

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

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

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

Community Association Living - Notice Requirements for Board Meetings and Member Meetings

Very rarely is a statute clear enough to avoid debate by lawyers taking different positions. Even if the law seems to be clear, it will still generate lots of questions with lawyers taking different positions.  The notice requirements in Fla. Stat. 720.303(2)(c) are a good example.

This statute provides the Bylaws will determine the notice requirements and if they do not then the following apply....  The statute then goes on to state BOD meetings are to be posted 48 hours in advance of the meeting in a conspicuous place in the community.  Exceptions to this are meetings to "levy" assessments or to change rules governing parcel use, which require fourteen (14) days notice to the members by U.S. mail to their home address.

The confusion comes in because the statute reads:

"An assessment may not be levied at a board meeting unless the notice of the meeting includes a statement that assessments will be considered and the nature of the assessments. Written notice of any meeting at which special assessments will be considered or at which amendments to rules regarding parcel use will be considered must be mailed, delivered, or electronically transmitted to the members and parcel owners and posted conspicuously on the property or broadcast on closed-circuit cable television not less than 14 days before the meeting."

Breaking this down, you can see the confusion.  First, what is the meaning of "an assessment may not be levied.."  It is unbelievable how much you can debate if an increase to an existing assessment is levying an assessment.  My opinion is each year when you set the rate of assessments you are "levying" an assessment. The next issue is the second sentence states the fourteen (14) day written notice is required for "special assessments" and ignores regular assessments.

Leave it to the lawyers to muck it up, right?  Just use common sense!  Play it safe and use the fourteen (14) day notice.  If your Bylaws have a longer period (many have fifteen days), then use that.  Out of precaution, don't use less even if the Bylaws permit it.  Industry practice has been to use the fourteen (14) day notice as a guideline.  When in doubt, be conservative!

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.

Assessments Current But The Association Insists Assessments Are Past Due - Who Is Right?

What do you do when the association claims you are past due with your assessments and your records indicate you are current?   

Answer:  Address this immediately because the association can lien and foreclose on your property!  

Don't ignore that first Intent to Lien Notice!!  It will not resolve itself or go away.

You need to attempt to resolve this now before a foreclosure gets recorded because even if you win, it still shows up in the public records and court records and cannot be removed. 

Here's the things you need to check for:

The association is required to send you two copies of the Intent to Lien Notice and then, after filing the lien, two copies of the Intent to Foreclose Notice before foreclosing.  Each notice is sent by regular mail and certified mail.  Avoiding signing for the certified mail will do more harm than good because most judges will consider the mail received if you leave it unclaimed.

The notices are sent 45 days in advance for homeowner associations and 30 days in advance for condominium associations.

While you have a good defense if this procedure is not followed, you are risking losing your home.  Better to be proactive and get it resolved rather than waiting for a summons to be served by the sheriff.

Check to see if you were late.  If you were late with any payments, the HOA is entitled to the interest, late fees and attorneys' fees. So while you may think you are paid up to date, if you were ever late and only paid the assessment, you are past due because all the other charges are paid first and the HOA last.  Do not submit the assessment payment to the association thinking you can pay the interest, late fees and attorneys' fees later.  Once your account is with the attorney, you are liable for all of the charges.  State law protects the associations on this issue and provides for payments to be applied to assessments last.

If, after all these issues are considered, you still are certain you do not owe the additional fees, I suggest you pay what they are asking and then sue the HOA. If there is a property manager (CAM) and/or attorney involved, I suggest filing a complaint against their licenses if you are certain you were never liable for additional charges. It's not unusual for HOAs to stand firm even when they are wrong because they figure you can't afford to sue them (it is expensive). 

Time to Pay Assessments - Even If You Don't Receive a Bill

One of the biggest issues my clients have with their associations is past due assessments because they did not receive a bill from the association.   Don't make the mistake of thinking you have a defense if they do not send out a bill.  The state laws protect associations and do not require them to send the bill.

Florida courts have ruled an owner is on notice of assessments due by virtue of purchasing property subject to an association and it is the duty of the owner to make sure those assessments are paid.  If you have not received your bill for your assessments, it is your duty to contact the association to find out if the amount has changed and to remit payment.

Also, remember -- the association is entitled by law to all interest, late fees and attorneys' fees and costs if you are past due.  IF YOU HAVE BEEN TURNED OVER TO THE ASSOCIATION ATTORNEY FOR COLLECTION, SEND PAYMENT TO THE ASSOCIATION ATTORNEY.  Attempting to avoid these fees by sending the assessments to the association directly will only cause you to incur more fees and costs.  The association will either return your payment (even though they are required to accept it) or forward it to the attorney.  No matter how they handle it, by law, the payment is applied to everything but assessments and if there is any leftover then it is applied to assessments.  Until you pay the full amount you will always be past due.

Bottom line -- you cannot get out of paying the assessments because the association may not have sent a bill or, because of mail service, you didn't receive the bill and the association can LIEN and FORECLOSE on your property for non-payment.

Rental Restrictions

A popular topic among association dwellers is the right of an association to restrict rental of property.  This is one of the areas where it is important to distinguish between a COA (condo association) and a HOA (single family homes).  Each association is governed by different laws.  Fla. Stat. Chapter 718 governs COAs and Fla. Stat. Chapter 720 governs HOAs.

Condo rental restrictions are common and receive the most attention.  A few years back a judicial ruling supported condo rental restrictions which were created by a membership vote, noting when a person buys a condo they are on notice the rules and restrictions of the COA can be amended.  In response to the ruling, the Florida Legislature enacted Fla. Stat. §718.110(13), which states any amendment to restrict rentals is only effective against those owners who voted for the amended and those purchasing property after the amendment is recorded.

HOAs have traditionally been treated differently than COAs when it comes to rental restrictions.  The reason being COAs have members living in very close proximity to each other whereas a majority of HOAs have stand alone housing (the exception being townhomes, which are more like condos, but formed as HOAs).

The court cases involving HOAs have for the most part ruled the right to sell, lease or otherwise transfer property is a vested right which cannot be taken away without consent of the owner.  A vested right is any right which would be a deal-breaker for the reasonable buyer if the rule prohibiting it were in existence at the time of purchase.  In other words, if the restriction existed when you were considering your purchase you would have not purchased the property.  

The issue members of HOAs have in asserting this right is the rulings are at the appellate level and if an owner does not know to argue this at the trial level and cite the appellate rulings, the judges will consider the condo rulings because the HOA lawyers will use those to promote their position the HOA can create rental restrictions.

The lack of a significant amount of case law governing HOAs means judges and lawyers turn to the condo cases for guidance.  In a majority of the issues, the law is the same, but there are still differences between the two.  This is why it is important to have a lawyer for these types of cases and one that is experienced in HOA and condo law.  Not only are there nuances in the law, but both types of associations have special procedures for litigating.