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......

HOAs - Don't Mess with the Disabled!!!

It's that time of year when all the community association law firms start blogging about the legislative updates to the Florida Statutes that will be enacted July 1, 2014.  It's interesting to read the various blogs because they always include what the writer interprets the meaning of the new statute will be and, if you read more than one blog, you get a more than one interpretation (flag on the play -- litigation imminent!).

Here's one that should be real clear and I credit John and Kim Whitt for standing firm and seeking justice. They proposed to our elected leaders to add two words to Fla. Stat. 720.303(2), which requires meetings to be open to all members. Those two words "and accessible" make a world of difference to people like John who is confined to a wheelchair.  Common sense and compassion for other human beings would lead you to think this is not necessary; after all, the Fair Housing Act requires HOAs to provide reasonable accommodations for those who request it in order to attend meetings. Well, no one goes around accusing HOA board members of using common sense with any regularity.  In fact, all I hear all day is about conduct that is not only senseless, but unreasonable, offensive, insensitive and ruthless.  But I digress.  While those two words didn't make it into the statute, a version of it did:  "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."

This was no simple task and I congratulate the Whitts and our political leaders for accomplishing this. At this point I bet you're wondering what led to this.  I am here to tell their story -- the real story.  Not some version with a spin on it to make the people think it was an innocent mistake.

John and Kim Whitt are wonderful people.  They are nice people.  They are not troublemakers.  When they bought their home in 2009 in a beautiful, rural community in Pasco County life for them changed. The community is comprised of 45 or so well-kept spacious homes on spacious lots, many of which are adjacent to wetlands.  Everyone's dream home, right?  The Whitts were eager to be involved in the community and to get to know their neighbors.  One obstacle faced them.  The HOA held it's meetings, as it did for a number of years, in a vacant lot with a cattle grate, livestock fence and extremely soft soil.  The meetings are held in a far back corner under trees with roots that made it impossible and still make it impossible for John to attend the meetings.  John asked the board if the meetings, not all, but at least some, could be held somewhere so he could attend and even offered his house.  He was refused.  A former board member, who is a contractor, offered to install a concrete pad a no charge to accommodate John's request.  The board voted against this. Of course in their version they offered to install the concrete pad and John refused, but that's just the usual HOA spin on facts to try and get people to believe they meant well.  John even offered the HOA to remove him from membership and the deed restrictions so the HOA would not have to comply. It's not like he was going to start a pig farm at his beautiful home.  Pig farms are prohibited by zoning ordinances in this area, but more on that later.  The HOA spins the tale the Whitts never wanted to be part of the community and when their request to be excused was denied they resorted to pushing the access to meetings as the issue.

Here we are five years later. The Whitts sued the HOA, but lost. I won't rant about that until I'm ready to relinquish my license to practice law.  The former board member/contractor and two other couples who own homes in the community sued the HOA because the deed restrictions had expired while the Whitts were litigating and were not properly amended to extend them.  They won on summary judgment.  No HOA.  The HOA is appealing, but going through the revitalization process as the same time. They are promoting revitalization by claiming if the deed restrictions are not revitalized they will be a community with pig farms.  I don't think any of the owners have a pot-bellied pig, much less a pig farm, which is illegal in this particular area anyway.  On top of that, the HOA has held the Whitts out in ill will to the neighbors every chance they get, blaming them for the high legal fees they incurred with a huge unpaid balance.  No one really knows what that balance is because not only will they not show the owners the amount due and the balance changes frequently.  If they think the HOA won, how come they owe so much money in legal fees?  

The Whitts may have lost the case, but evidently a lot of people, including members of the Florida Legislature and some decent people in their community, thought they shouldn't.  They were successful in getting the statute amended despite the HOA attorney saying they wanted to create the "Homeowners Association with Disabilities Act."  They have suffered for it.  Homeowners in their community who do not even know them despise them based on the tale the HOA spins about this -- a HOA that has been ruled to not have deed restrictions.  

And just for giggles -- the HOA now claims it is still a mandatory association without deed restrictions because the Articles of Incorporation and the Bylaws are still valid.  

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).