Attention CAMs and Board Members: Summary of Legislative Changes for 2017

CONDOMINIUMS

HB 1237- EFFECTIVE JULY 1, 2017

This bill makes various changes to Florida’s Condominium Law, Chapter 718, Florida Statutes. Of particular interest:

  • Legal penalties are imposed for voting fraud in the context of condominium elections, theft, embezzlement of funds and tampering with association official records;
  • A pending criminal charge against an officer or director of an association disqualifies that office/director from continued service and from access to association official records;
  • Numerous conflict of interest guidelines are added;
  • An association may not hire an attorney who represents the management company of the association;
  • Except for timeshare condos, a board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title to a unit via deed in lieu of such foreclosure;
  • By 7/01/2018, an association with 150 or more units which does not manage timeshares shall post digital copies of certain association records on its website;
  • Guidelines are added for the content and management of the association’s website;
  • Board members many not serve more than four consecutive 2-year terms, unless approved by a 2/3 vote or unless there are not enough eligible candidates to fill all the vacancies on the board;
  • The Division may certify an arbitrator if he/she has been a member in good standing of the Florida Bar for at least 5 years and has met other conditions in the three years preceding the application

SB 1520- EFFECTIVE JULY 1, 2017

This this bill would amend Section 718.117, Florida Statutes, involving termination of condominiums. The statute is amended to provide additional legislative intent for termination of the condominium form of ownership — including to ensure continued maintenance of storm water management and conservation easements, to avoid transferring the expense of these area of maintenance to the general tax base, to prevent covenants from impairing the productive use of the property, to protect residents from health and safety hazards, to provide fair and just compensation for individuals and preserve property values and the local tax base and to preserve homestead property rights. The amendments are created to clarify existing law and apply to all condominiums created under the Condominium Act.

 

COMMUNITY ASSOCIATIONS

HB 653 – EFFECTIVE JULY 1, 2017

This bill, among other provisions, removes the accounting option for condominium, cooperative and homeowners’ associations which has less than 50 units whereby they could use cash receipt reports in lieu of financial statements and it also removes the 3- year limitation for cooperative and condominium associations whereby they could not waive financial reporting for more than three consecutive years.

It expands the time within which an association must reply to a records request from 5 to 10 business days and reduces the amount of time a condominium must maintain bids for contracts for work from seven years down to one year.

The new law would provide a complete exemption from retrofitting with a fire sprinkler system/ engineered life- safety system for a condominium or cooperative building less than 75 in height without a vote. The requirement to retrofit a building above 75 feet in height, unless waived by a majority of owners has been extended 2 years.

The bill requires cooperative associations to retain electronic records related to voting as official records. The bill also now requires condominium and cooperative associations to create rules for to provide notice of all board meetings on a website if the time requirements for physically posting the board meetings are otherwise met.

The new law would require homeowner’s associations to have reserve funds for all items with deferred maintenance costs over $100,000 and restricts use of reserve funds to only the authorized expenditures.

Homeowners Association annual budget requirements now must match the requirements of condominium associations.

The new law would require that a vote authorizing an alteration or addition to a condominium must be held prior to beginning of the work.

Lastly, the bill amends requirements regarding removal of board members of cooperative associations who are 90 days or more delinquent on payments and restricting co-owners from serving on the board of directors to match those of Condominium associations.

 

ESTOPPEL CERTIFICATES

HB483/SB 398- EFFECTIVE JULY 1, 2017

This bill when enacted into law will give precise instructions on delivery of, what information must be included in the estoppel certificate and the maximum amount that can be charged for preparation and delivery of estoppel certificates.

HB 483/SB 398 caps the fees that community association management companies can charge for estoppel certificates at $250 for unit owners who are current in their assessments. An additional $100 can be charged for “expedited” estoppel certificates (delivered within three business days), and another $150 can be charged for owners who are delinquent in their assessments. This is a maximum of $500 for an expedited, delinquent estoppel certificate. Fees charged for the estoppel certificates will be adjusted every five years based on the Consumer Price Index.

Should you let sleeping (service) dogs lie?

Many boards are receiving requests for accommodation for purported service animals. But is it fair to be skeptical about certificates purchased from purported registries? We explore some considerations for boards in granting accommodations for service or emotional support animals.

Pet restrictions can serve very legitimate purposes, particularly in condominiums or townhomes with owners living in close proximity. However, it seems that there are more individuals now seeking to circumvent these restrictions by having their pets registered “officially” as a service animal or an emotional support animal. What right does your board have to question these registrations or other information that an owner might provide?

It’s important to understand the difference between a service animal and an emotional support animal. Service animals are dogs individually trained to do work or perform tasks for people with disabilities, like a seeing-eye dog. For the most part, service animals must be allowed to accompany people with disabilities in all public areas. On the other hand, emotional support dogs, which provide comfort, do not qualify as service animals under the Americans with Disabilities Act (“ADA”) and can be restricted from public places.

A Growing Industry: Service Animal Registries

A quick online search reveals a growing number of companies that offer registration services for both service and emotional support animals. Many of them have official sounding names (for example, the “United States Dog Registry” or “National Service Animal Registry” or “US Service Animals”) and are fully-equipped with websites designed to look like government websites. Many people won’t even notice the small print that says the organization is an, “independent organization providing service dog, emotional support dog, and therapy dog registration and products, and is not affiliated with the ADA or any government agency.” It’s important to note that the ADA specifically says that registration for service animals is not required.

On the United States Dog Registry (again, unaffiliated with any government agency), you can purchase a “Lifetime Registration” for a service animal for just $79. The cost is the same for an emotional support animal. It does not seem that these registries perform any sort of verification of the animal’s training or the owner’s need for them. If this is not even required by the ADA, what exactly are people purchasing? Is it even worth the paper it’s printed on?

The National Service Animal Registry (also unaffiliated with any government agency) states that despite it not being required by the ADA, “[v]oluntary registration and service animal identification makes dealing with service animal accessibility in public places, private housing with no-pet policies, lodging, and public transportation MUCH easier.” Moreover, they claim that by purchasing their services, you’ll have what you need, “to avoid nearly all questions and confrontations.”

So let’s be clear: these services are designed to make community associations (and like-minded entities) to back off.

Considerations for your Board

The question is what can your community do when an owner requests an accommodation for his or her pet that would otherwise by restricted under your governing documents. First, it must be distinguished whether it is a specially trained service animal, or just an emotional support animal. If the person seeking an accommodation has a physical or mental impairment that substantially limits one or more major life activities, then they are afforded protection under the ADA. It’s not enough to just have the disability though, they must have a disability-related need for the service animal (for instance, a seeing eye dog is needed for a blind individual). Of course, it might not be immediately apparent whether an individual truly has a disability, and your board may ask for additional information necessary to verify that such a disability, as defined by the ADA, exists, describes the specific need for the accommodation, and shows the relationship between the disability and the need for the service animal. If an owner provides a certificate from one of these registries, that doesn’t necessarily address these questions (and it’s not required that they provide one either)

If it is an emotional support animal, your association board should also require a doctor’s note attesting to the need for such animal before allowing the accommodation. If one is provided, even though they may be forged, the best course of action may be for your association to grant such accommodation. It is not our role to question medical notes or opinions.

Each request should be dealt with on a case-by-case basis, and you should seek legal counsel if the right decision isn’t clear. You don’t want to be like the Broward County condominium that paid a $300,000 settlement to an owner for unreasonably banning a service dog! See Sabal Palm Condominiums of Pine Island Ridge Association v. Fischer, No. 12-60691-Civ-SCOLA

 

Is your President Doing Too Much?

Being President of a community can be an arduous task, and we commend you if you’ve stepped up to this position! It’s one that comes with a lot of responsibility, because whether it’s accurate or not, your neighbors and vendors will think you speak and act on behalf of the rest of the Board. That appearance of authority can get your community in trouble though if you act without consent of the rest of your fellow directors.

After being elected, the Board of Directors will appoint or elect  who amongst them will be an officer: President, Vice President, Treasurer, or Secretary. For many communities, these titles are symbolic, as the officers themselves generally rely on their licensed community association management professionals to guide them. However, some officers take a more active approach.

Many people look to the President of a company as its leader, its voice, or its ultimate decision-maker, but that isn’t necessarily the case. For community associations, the President doesn’t necessarily have more power than the Secretary or even a director-at-large who isn’t serving as an officer. The President’s vote isn’t worth more than that of any other director. But not everyone knows that. So what happens if your President acts purportedly on behalf of your community, but without the knowledge of the rest of the Board? Can their acts bind or obligate your community? Could they sell all of the community’s assets without anyone else knowing? As ridiculous as that sounds, there’s a President that tried doing just that!

In Lensa Corp. v. Poinciana Gardens Ass’n, Inc., 765 So.2d 296 (Fla. 4th DCA 2008), Poinciana Gardens’ President, Dr. Goodman signed a contract for the sale of all of Poinciana Gardens’ assets and land to a third party. When another director discovered that this contract had been signed, Poinciana Gardens informed the purchaser that they would not consummate the transaction because Dr. Goodman did not have the authority to sign the contract and that the price was too low. The purchaser sued for breach of contract, and ultimately lost after appeal.

Authority to act on behalf of a corporation can be either actual or apparent. It’s clear that the President didn’t have the actual authority to sign the contract, because no board vote was taken. However, the question is whether he had apparent authority. That means the question is whether the third party reasonably believed that the President did have the authority to sign. Moreover, courts have held that as to acts done in the ordinary course of business, there is a “presumption of authority” in case of acts done by a president.

The Fourth District held that (1) this was not done in the ordinary course of business for a community association (a sale of substantially all assets), and (2) the signature of the president (and board minutes as well) were not sufficient to create apparent authority. Fla. Stat. § 617.1202 requires that for a non-profit corporation, the board of directors must authorize the sale. Because the board did not make any representations or hold a vote, there was no apparent authority. Great news for this community!


“[W]e believe that your President has the apparent authority to sign contracts. In other words, a third party vendor would be acting reasonable in relying on the signature of the President to indicate that he has a contract with the association.”


But, don’t take this case to mean that if the President signs a contract with no other input from the Board, then your community won’t be obligated! In fact, other than acts that are regulated by statute (like selling substantially all of the assets of the community), the exact opposite ruling is likely if the contract. This court ruled this way specifically because selling all of the assets was not in the ordinary course of business. But what about other acts done during the ordinary course of business? What if your President (or even Vice President) signs a contract with a landscaper without Board vote? Based on this court’s rationale, we believe that your President has the apparent authority to sign contracts. In other words, a third party vendor would be acting reasonable in relying on the signature of the President to indicate that he has a contract with the association.

Being an officer of the association carries a lot of weight, even more than just being a director. Officers have an air of authority, meaning people believe that they are speaking or acting with the authority of or on behalf of the association. If you’re on your Board, and especially if you’re an officer, make sure you stay involved and know what your fellow officers are doing.

Crossing the Line

If you are a board member or a licensed community association manager, you’ve probably reviewed an invoice from your collections services provider, whether it be a law firm or a collections agency, and wondered whether the amounts you see charged are reasonable. Because many of us in this business offer to handle your collections at no up-front bill to the associations that we represent, the only person that ever sees what is being charged is the delinquent owner. However, if you ever get stuck having to pay the bill (for instance, if you’re dissatisfied with the progress of collections and want to go with a different law firm), the numbers that you see can be quite alarming. In Florida, fees related to collections must be “reasonable,” but it seems that some take the position that “reasonable” means “whatever we can get away with.” Is there any way to prove that some of these practices are crossing the line?

WHAT IS REASONABLE?

In November 2015, a Texas court ruled on this very issue. Several homeowners successfully got a lower court to stop Stewart Beach Condominium Homeowners Association from foreclosing on their units because the attorney’s fees on their accounts were excessive and unconscionable, and so, Stewart Beach appealed that decision. The attorney for the condominium charged a flat fee of $300 for pre-suit demand letters (including a lien), plus a 20% contingency fee on all collections, plus an additional hourly fee for his and his paralegal’s time. In his pre-suit demand letters, the attorney demanded attorneys’ fees ranging from $1,600 to $2,150, which were held to be “clearly excessive, unreasonable, and unconscionable” by the lower court which determined that reasonable pre-suit fees would have only been $300.  On appeal, the lower court’s decision was upheld. Among other things, the appellate court noted that charging a contingency fee on top of other fees is excessive, and “particularly unreasonable given that the [assessments] were comparatively small dollar amounts compared to the value of the condominiums.”

As this is a Texas ruling, it has no effect on us here in Florida, but it definitely provides valuable insight and you should be able take a lot from this case. First, if you know that delinquent owners within your community are being charged almost $2,000 in fees before a lawsuit is even filed, that likely would be considered excessive, unreasonable or unconscionable. You also know that adding a contingency fee on top of already-defined fees might likewise raise an eyebrow or two.

WELL THAT’S NOT MY PROBLEM…IS IT?

But if your collections services provider is not billing you up front, why should you care? It’s the owner’s fault that they became delinquent in the first place, so why should the boards care what is being charged to them at all? Well, if you care about the well-being of your community, you should actually care very much about the fees! First, rapidly increasing and undeterminable fees can prolong the time that it takes your collections service provider to collect and disburse money to you. Second, if for any reason the provider is unable to collect from the owner, or you decide you want to work with a different provider for collections, you will be stuck paying that bill, and you don’t want to be surprised or stuck when that happens. Third, there’s a chance the judge may deny the fees as the court in Texas did, thus preventing or delaying your foreclosure of your lien, and leaving you with a hefty bill in collections fees.

To us, the biggest reason you should care is that we are all in the business of building better communities. At our firm, we do not blame people for their financial problems. We work with your neighbors and make sure our fees do not become a deterrent to you lowering your delinquencies. Our pre-suit fees are generally about $225 and our flat fee for foreclosure actions is $1,300. We don’t cross the line into unreasonableness. Contact us today to learn more about our qualifications and our fee schedule, and let’s work together to build a better community!

Pudlit: An Investor’s Silver Bullet

It used to be a good thing when investors bought a foreclosed home, because associations could collect all of the assessments that were unpaid before the foreclosure. Now the tables have turned and the investors have found their silver bullet. Learn what you can do to protect your interests!

We in the industry have a love-hate relationship with the “Safe Harbor” provisions of Chapters 718 and 720 of Florida Statutes. On one hand, it’s nice to finally get some money when a home is foreclosed (whether it be 1% of the original mortgage or 12 months’ past due assessments), but on the other hand, since some of these homes have been delinquent for years, and the write-off could be substantial. Things actually got worse in 2010 with the case Coral Lakes Community Ass’n, Inc. v. Busey Bank, NA in which the court held that Safe Harbor does not apply if your declaration has language stating that a mortgage foreclosure cuts off any liability for assessments due prior to a foreclosure (which you most likely have). After Coral Lakes then, many associations were getting even less than the Safe Harbor amounts, they were getting $0 for pre-foreclosure assessments! The only silver lining was that all of this only applied if it was the bank that took title at foreclosure. But if a third party investor took title, Safe Harbor didn’t apply and neither did Coral Lakes. At least, that was the argument until 2015.

The case Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners Association, Inc. changed all of that. It used to be that when a third party investor won a foreclosure auction, we could demand payment in full of all pre-foreclosure assessments because Safe Harbor and Coral Lakes were only available to the banks. Unfortunately for us, Pudlit extended the protection of Coral Lakes to the investors as well, meaning that if your declaration contains Coral Lakes language, we can’t collect anything from the investors for the pre-foreclosure assessments. The investors and their attorneys are now quick to bring this case law up to limit their liability. They finally had a silver bullet in their arsenal.

So is there anything you can do about this? Probably not for existing mortgages, but we think there’s a way to dodge the bullet for future mortgages! We recommend that you obtain legal advice as to whether your declaration has Coral Lakes language, meaning whether it has language that cuts off a bank’s liability for assessments after a foreclosure. If you do, then you should consider amending your declaration to match Safe Harbor. That way after a foreclosure of any future mortgages, you can ensure that you’ll get at least the 1% or the 12 months.

Now, you may be wondering, if you are going through the hassle of amending your declaration, why stop at just parroting Coral Lakes? Why not amend it to say that all pre-foreclosure amounts can be recovered from either the bank or the investor? We believe that the effect of doing this, while seemingly good on paper, could prove devastating to your community. When reviewing loan applications, banks’ underwriting departments carefully review your community’s declaration. If you amend your declaration in a way that makes it riskier for the bank to approve a loan, you could be inadvertently limiting the chances of anyone being approved for a mortgage, which means your property values may plummet.

Please seek advice of your attorney as the case law, statute, and your governing documents can be antiquated or even inconsistent. Our team has done this for several communities and offers a simple flat rate for the entire process. Take steps today to protect your ability to collect after a foreclosure!

Introducing a new addition

Join us in welcoming Attorney Ryan Fong to our team! Originally from San Francisco, Ryan moved to Orlando shortly after graduating from New England School of Law in 2014 and has quickly fallen in love with the area (aside from the humidity).

When not in the office, Ryan likes to relive his glory days of starring on his college’s track and field team by staying active. Although Ryan is still new to the area, if you’re in Winter Park, you’ll probably find him at a local coffee shop or farmer’s market. He is a regular volunteer with the Baby Basics program through St. Margaret Mary’s Church in Winter Park which provides diapers for mothers from low or limited income households. We’ve also heard that congratulations are in order, because this April, he and his fiancée Jenn and will be saying, “I Do!”

Ryan began his career providing legal advice on immigration, real estate, and business matters to overseas investors. “The most rewarding part of my job has been being able to share in my client’s enthusiasm when we’re able to get the results they’re seeking,” Ryan says, and adds, “I want my clients to see me as someone they can rely on to be responsive and to give them my professional opinions.” In joining our team, Ryan looks forward to expanding his knowledge community associations and how he can help build better communities.

We’re excited to have him on board, and we know you’ll enjoy working with him! Here’s to Ryan, his soon-to-be wife, and to new beginnings!

 

New Year New Look!

It’s official!

In celebration of a big year for the firm, DHN | Attorneys has launched a brand new website!  We feel our website’s new look embodies the fun and friendly personality of our team and of our amazing clients. Our website highlights who we are and what we do, and also streamlines information so you can easily find what you need. Let us know what you think!

Since the firm’s founding, DHN | Attorneys has maintained its Preeminent AV Rating from Martindale-Hubbell, as well as a perfect rating on AVVO.com. In addition, we’ve been one of Central Florida’s Top Real Estate Law Firms for both years of our existence. We’d like to thank all of you for making 2015 a success, and look forward to carrying this momentum into the year to come!