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A Differing Tale of Two Terminating Condominiums by Rembaum’s Association Roundup

A Differing Tale of Two Terminating Condominiums by Rembaum’s Association Roundup

A Differing Tale of Two Terminating Condominiums

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An extremely similar fact pattern leads to diametrically opposed results between Florida’s Fourth District Court of Appeal and Florida’s Third District Court of Appeal.

In the case before the Fourth District Court of Appeal, Fellman v. Mission Viejo Condominium Association, Inc., Case No. 4D22-1260, (Fla. 4th DCA April 6, 2023), 175 of the 176 condominium units were acquired over time by a bulk owner, and the bulk owner sought termination of the condominium. However, Fellman as the single holdout objected to the plan of termination. At trial, the trial court entered a summary judgment in favor of terminating the condominium, which Fellman then appealed to the Fourth District Court of Appeal.

The Mission Viejo Declaration of Condominium was recorded in 1980 and required 100 percent consent of all unit owners as necessary to terminate the condominium form of ownership. Forty-one years later, on February 5, 2021, the bulk owner amended the required vote to terminate the condominium from 100 percent to 80 percent, using the general amendatory provision set out in the Declaration of Condominium, which required only 80 percent consent of the voting interests. Therefore, notwithstanding the original 100 percent requirement necessary to terminate the condominium, only 80 percent of the owners had to vote in favor of lowering the consent needed from 100 percent to 80 percent, which resulted in fully divesting Fellman of the right to object to the termination of the condominium.

Obviously, Fellman did not vote in favor of the amendment. Fellman argued that by allowing 80 percent of the unit owners to amend the otherwise required 100 percent consent of all owners to terminate the condominium, it fully eviscerated his right to object to the termination of the condominium and his voting rights—a right bestowed upon him when he purchased the unit. There are few things more sacrosanct than an owner’s right to vote. Nevertheless, neither the trial court nor the Fourth District Court of Appeal agreed.

While Fellman should have been able to rely on the 100 percent termination approval requirement as originally required in the declaration of condominium, the trial court believed that if the 100 percent requirement was to be protected from being amended with a lower percentage of voting interests, then the provision in the declaration of condominium should have clarified that it could only be amended by nothing less than 100 percent approval of the unit owners. Since it did not, the trial court found no issue with the bulk buyer eviscerating the 100 percent vote needed to terminate the condominium with 80 percent of the voting interests casting their vote in favor of the amendment.

Fast forward eleven months to March 13, 2024, when Florida’s Third District Court of Appeal, in Avila v. Biscayne 21 Condominium, Inc., Case No. 3D23-1616 (Fla. 3d DCA Mar. 13, 2024), noted that the provision in the Biscayne 21 Declaration of Condominium (requiring 100 percent of the voting interests to vote in favor of the termination could NOT be amended using the lower vote threshold needed to amend the declaration of condominium) was likely to prevail. As you will note, this decision diametrically opposes the outcome in the Fellman case. In this case, Avila sought a temporary injunction to stop the plan of termination. The trial court denied it. Avila appealed, and the Third District Court of Appeal agreed with Avila that Avila’s claim stood a substantial likelihood of success on the merits. The declaration of condominium at issue in the Avila case had an additional provision that required “100 percent approval for amendments that alter the voting power of unit owners.” However, it should be axiomatic that to obliterate an owner’s right to vote by terminating the condominium where the declaration had required 100 percent of the owners to vote in favor of termination could not be amended by a termination provision of anything less than 100 percent of the owners.

The Third District Court of Appeal commented that the change to the termination vote threshold materially altered the unit owners’ voting rights. By requiring a unanimous vote for termination, the declaration of condominium originally gave every unit owner an effective “veto” over any termination plan, which would be lost if the amendment adopted by using the general amendatory powers set out in the declaration of condominium were to stand. The Court even cited the Tropicana Condominium Association, Inc. v. Tropical Condominium , LLC, 208 So. 3d 755 (Fla. 3d DCA 2016), finding that nonunanimous amendments to a declaration reducing the vote threshold for termination of condominium could not be applied where the declaration expressly required the unanimous vote to amend the termination provision, and the amendment, if retroactively applied, would eviscerate the unit owners’ contractually bestowed veto rights.

In fact, Fellman also argued the Tropicana case to the trial court, which rejected the argument; and to add insult to injury, such decision was affirmed by the Fourth District Court of Appeal. So, in the world of inconsistent decisions, Fellman was denied by the Fourth District Court of Appeal the right to veto the plan of termination and is in process of potentially losing his unit, while the Avila court found his right to veto the plan of termination seemingly protected by the Third District Court of Appeal as evidenced by issuance of the temporary injunction in his favor. Unfortunately, even once the Avila case reaches a final judgment, and if in Avila’s case that decision is appealed and upheld by the Florida Supreme Court, Fellman still loses his right to veto the plan of termination as initially bestowed upon him and, even more unfortunately, will lose ownership of the unit.

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Join us on Tuesday, November 12th at 12:00 PM for our Community Roundtable: Technology and Community Governance!

Join us on Tuesday, November 12th at 12:00 PM for our Community Roundtable: Technology and Community Governance!

Join us on Tuesday, November 12th at 12:00 PM for our Community Roundtable: Technology and Community Governance!

During this discussion, our panel of professionals consisting of Kerstin Henze, Esq. (KBR Legal), Frank Valdes (GetQuorum), and Dianne Skinner (Artemis Lifestyle Services) will cover various topics, including:

  • The importance of updating governing documents
  • Association Record and new Florida Statute requirements
  • How communities can leverage technology, like virtual meetings and electronic voting, for more efficient governance and more!

Enroll for the November 12th Discussion.

 

Join us on Tuesday, November 12th at 12:00 PM for our Community Roundtable: Technology and Community Governance!

During this discussion, our panel of experts consisting of Kerstin Henze (KBR Legal), Frank Valdes (GetQuorum), and Dianne Skinner (Artemis Lifestyle Services) will cover various topics, including:

  • The importance of updating governing documents

  • Association Record and new Florida Statute requirements

  • How communities can leverage technology, like virtual meetings and electronic voting, for more efficient governance and more!

Don’t miss out; register today!

 

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DOS AND DON’TS OF ELECTION CHALLENGES by Rembaum’s Association Roundup

DOS AND DON’TS OF ELECTION CHALLENGES by Rembaum’s Association Roundup

  • Posted: Nov 04, 2024
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DOS AND DON’TS OF ELECTION CHALLENGES

Rembaum’s Association Roundup

Pursuant to their relevant statutory provisions, election disputes that take place in condominium, homeowners’, and cooperative associations are subject to mandatory nonbinding arbitration before the Division of Florida Condominiums, Timeshares, and Mobile Homes (the “Division,” for short). It is referred to as “nonbinding” because the arbitrator’s order is not final until 30 days after its issuance, which provides time for either party in the dispute to challenge the decision to their local circuit court, which hears the case de novo (anew).

As you will read, not every election dispute will be heard by the Division. As a threshold matter of importance, the Division will not hear election disputes within 60 days prior to an election or 60 days after the election has taken place. In order to bring an election challenge, Florida Statutes require prior written notice to the other party of the dispute, where a reasonable opportunity to correct the alleged error is provided, and it is clearly expressed that if the alleged error is not cured, an arbitration action will take place. In a prior arbitration case, it was held that providing only 10 days to cure the alleged defect in a pre-arbitration notice was insufficient. Therefore, it is suggested to provide more than 10 days opportunity to cure the alleged election defect prior to filing an action for arbitration.

Interestingly, the general rule is that to have standing to challenge election results, arbitration action must be brought by a candidate or an individual who was prevented from being a candidate.  The Division has even held that a member who was not a candidate did not have standing to challenge the election results that other persons should have been declared the winning candidates. While these arbitration decisions are not binding precedent, they are instructive and, if nothing else, useful in evaluating the best course of action.

In the context of condominium election challenges, there are three flaws that are typically “fatal” to the association, if committed. They are i) a substantive or serious defect in the first notice of election, ii) the failure to include a timely submitted candidate information sheet in the second notice of election, and iii) failure to include the name of each eligible candidate on the election ballot. While each of these can potentially be timely cured in advance of the election, if not, then they likely lead to a successful election challenge.

For example, failing to mail the notice of election to one or more owners or the failure of the first or second notice of election to accurately state the street address of the meeting have been considered as “fatal” flaws. Also, the failure to include a timely submitted candidate information sheet or failure to include the name of a candidate on the ballot have also been considered as  “fatal” flaws. However, so long as the election is re-noticed from the second notice of election, including all of the candidate and information sheets and/or also including the name of all of the candidates on the ballot, then such fatal flaws can be cured in advance of the election. In these instances there would be no further solicitation of candidates, but rather a rescheduling of the night of the election itself by sending a revised and corrected second notice of election at least 14 days prior to the election which would cure that defect. This amended second notice should clearly state the reason(s) for having to send the corrected notice.

It is important to note that while condominium association elections are strictly construed in accordance with relevant Florida Statutes, homeowners’ association elections occur in accordance with their governing documents. Therefore, whether the above fatal flaws have applicability to a homeowners’ association fully depends upon the style of election set out within the governing documents.

Arbitrators with the Division have held that a new election will have to be scheduled if  in the governing documents there is included a requirement that candidates be full-time residents of the state of Florida or even reside in their unit full time and such requirements were enforced during the election. Therefore, there cannot be a residency requirement of any kind for board members. Similarly, arbitrators have held that associations cannot require candidates to complete a criminal background check or even execute an acknowledgment that they are not a felon.

Contrary to popular belief, the relevant Florida Statutes do not require candidates to be members of a community association in order to run for the board of directors (often, “membership” is defined in the governing documents as being an owner of a parcel within the community). However, such requirements can be set out in the governing documents; but if such a requirement is not in the governing documents, then the board cannot disqualify a potential candidate because he or she is not an owner or member. This means that without such requirements specifically set forth in the governing documents of the association, any non-member, including tenants and occupants, are qualified to run for the board of directors. Therefore, if you desire to avoid such a circumstance, you should consult with legal counsel for your association regarding whether such requirements exist in the governing documents; if not, then you should consider preparing an amendment for the community to approve to ensure that only members who are actual members/owners of the association are qualified to run and serve on the board.

As to the first notice of election, notwithstanding any strict requirements set out in the first notice of election regarding where potential candidates must submit their notice of candidacy, it is not sufficient to exclude a candidate on the basis of the candidate  delivering his or her intent to be a candidate elsewhere so long as it is reasonable to conclude the association actually received notice of such candidate’s intent to run for the board. For example, a specific address could be required to mail the intent to run form, but the fact that a candidate hand-delivered such notice to a board member or manager would likely not be sufficient grounds to exclude the candidate.

Through a variety of arbitration decisions, the arbitrators have made clear that if the violation at hand would not have changed the results of the election, then the challenge will fail. For example, an association that improperly excluded several ballots due to perceived flaws with the outer envelope, which in fact were later held not to be flaws at all and which if counted would not have overturned the otherwise valid election results if the ballots were later included in the total count, would not have changed the result.

In other instances where numerous violations combine to clearly affect the reliability of the election results, then an election challenge may be valid. For example, where unit owners are permitted to cast ballots without inner envelopes, at least one owner was permitted to retrieve his ballot and change it, and nobody verified signatures on the outer ballot envelopes and where at least one unit owner was allowed to cast a ballot after the polls had already closed, then cumulatively the election results were determined to be  no longer reliable and a new election was required.

While the Division has promulgated condominium election rules in the Florida Administrative Code, it has not yet done so for homeowners’ associations. Therefore, the body of condominium arbitration decisions can provide some guidance; but for the most part, when examining homeowners’ association election challenges, the arbitrators are required to consider the significance and totality of violations in their decision-making as to whether to void an election, or not.

At times, for reasons that really do not make any practical sense, some management companies when preparing a homeowners’ association election revert back to the condominium form of election with a first notice, second notice, intent to run, etc. rather than relying on the homeowners’ association governing documents, which have a completely different election style and where voting is by proxy or in person. Also, there are no requirements to declare candidacy in advance of the annual election, meaning a candidate could actually nominate himself or herself from the floor of the meeting on the election day itself. When management companies go on autopilot and use the condominium style of election contrary to the requirements set out in the homeowners’ association governing documents, then the arbitrators will likely require a new election to take place in conformity with the governing documents of the homeowners’ association.

A successful challenge of a homeowners’ association election often rests upon whether the alleged violation affected the outcome of the election. This once again is evidence that unless the alleged violation would have changed the outcome of the election, then the election challenge likely fails even if there were serious irregularities during the election process.

A few odds and ends are worthy of discussion as well. An active board of directors should not use the association’s pulpit for campaigning. Doing so can lead to a successful election challenge. However, an existing board member can certainly campaign on his or her own time and using their own means but not through the association or its website. If the association has not enforced use of voting certificates, then to do so without providing advanced written notice and an opportunity for the owners to comply could invalidate election results. Finally, if a valid election does not occur because either a quorum was not achieved or in the condominium context at least 20 percent of the eligible voters did not cast the ballot, then there is no obligation of the association to try again.

When bringing an election challenge is under consideration, ask yourself if the irregularity would have brought about a change in the outcome of the election. If not, then, think twice about bringing the challenge. In any event, it is worthwhile for an association concerned with its election process to consult with the association’s lawyer for a detailed conversation as to how best to avoid such problems in the future.

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VIDEO REPLAY webinar: “Dollars & Sense | Milestone Inspections & Structural Integrity Reserve Studies (aka SIRS): Senate Bill 4-D, What’s Next?”

VIDEO REPLAY webinar: “Dollars & Sense | Milestone Inspections & Structural Integrity Reserve Studies (aka SIRS): Senate Bill 4-D, What’s Next?”

“Dollars & Sense | Milestone Inspections & Structural Integrity Reserve Studies (aka SIRS): Senate Bill 4-D, What’s Next?”

Today’s Requirements vs. Proposed Legislative Changes

Jeff Rembaum provided a thorough update covering the latest proposed changes to the Milestone and Structural Integrity Reserve Study (aka SIRS) requirements.

Jeff joined Kelly Britten (The Castle Group), Greg Main-Baillie and Jeremy Caldwell (Colliers) and Timothy Marshall (A.T. Designs), all of whom provided insight from the perspective of licensed CAMS, project management and engineering, respectively.

Milestone Inspections and Structural Integrity Reserve Studies (SIRS) | Senate Bill 4-D…What’s Next: Today’s Requirements vs. Proposed Legislation. Our panel of experts and professionals answered your questions concerning the new condo reserve laws, proposed legislation, responsibilities and roles of those involved.

    • Jeffrey A. Rembaum, Esq. (Kaye Bender Rembaum)
    • Greg Main-Baillie (Colliers)
    • Jeremy Caldwell (Colliers)
    • Kelly Britten (The Castle Group)
    • Timothy S. Marshall (A.T. Designs)

This webinar does not satisfy any requirements for manangers or board members, nor should it be considered legal advice.

For more great Videos view our YouTube page, view our members videos.

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MANDATORY CONDOMINIUM & COOPERATIVE BUILDING INSPECTIONS & NON-WAIVABLE RESERVE REQUIREMENTS SENATE BILL 4-D

MANDATORY CONDOMINIUM & COOPERATIVE BUILDING INSPECTIONS & NON-WAIVABLE RESERVE REQUIREMENTS SENATE BILL 4-D

  • Posted: Oct 23, 2024
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MANDATORY CONDOMINIUM & COOPERATIVE BUILDING INSPECTIONS & NON-WAIVABLE RESERVE REQUIREMENTS

We are reposting this, for all the buildings That have not had inspections…..

SENATE BILL 4-D

With home insurers leaving Florida in droves, and following pressure from members of both political parties in the legislature to actually do something about it, in May 2022, the governor called a special legislative session to address the problem. A very real concern to the insurers is the effect of both time and inclement weather on Florida’s aging high-rise buildings. Until now, and for the most part, Florida law largely ignored these concerns. Enter Senate Bill 4-D (SB 4-D) which already became effective upon being signed into law by Governor DeSantis on May 26, 2022. This new piece of legislation addresses condominium and cooperative building inspections and reserve requirements (while this article primarily addresses these new laws in the context of condominium association application, they are equally applicable to cooperative associations).

By way of background, during the regular legislative session, there were several bills introduced in the Florida House of Representatives (House) and in the Florida Senate (Senate) addressing building safety issues, but none of them were passed into law due to the inability to match the language of the bills in both the House and the Senate which is a requirement for legislation to pass and go to the governor for consideration. As such, it was a little surprising to many observers that the legislature was able to approve SB 4-D in essentially a 48-hour window during the special session in May. The language used in SB 4-D was initially drafted into a proposed bill in November 2021. At that time, and during the most recent legislative session, input was provided by many industry professional groups including engineers, reserve study providers, and association attorneys. Many of these industry professionals indicated that there were challenges with some of the language and concepts being proposed in SB 4-D during session.

Notwithstanding these challenges, and in an effort to ensure some form of life safety legislation was passed this year, SB 4-D was unanimously approved in both the House and Senate and signed by the governor. A plain reading of this well intended, but in some instances not completely thought-out, legislation evidences these challenges. Some will say it is a good start that will need significant tweaking, which is expected during the 2023 Legislative Session. Others praise it, and yet others say it is an overreach of governmental authority, such as an inability to waive or reduce certain categories of reserves. You be the judge. We begin by examining the mandatory inspection and reserve requirements of SB 4-D.

I. MILESTONE INSPECTIONS: MANDATORY STRUCTURAL INSPECTIONS FOR CONDOMINIUM AND COOPERATIVE BUILDINGS. (§553.899, Fla. Stat.)

You will not find these new milestone inspection requirements in Chapters 718 or 719 of the Florida Statutes, but rather in Chapter 553, Florida Statutes, as cited above.

MILESTONE INSPECTIONS:

The term “milestone inspection” means a structural inspection of a building, including an inspection of load-bearing walls and the primary structural members and primary structural systems as those terms are defined in section 627.706, Florida Statutes, by a licensed architect or engineer authorized to practice in this state for the purposes of attesting to the life safety and adequacy of the structural components of the building and, to the extent reasonably possible, determining the general structural condition of the building as it affects the safety of such building, including a determination of any necessary maintenance, repair, or replacement of any structural component of the building. The purpose of such inspection is not to determine if the condition of an existing building is in compliance with the Florida Building Code or the fire safety code.

SUBSTANTIAL STRUCTURAL DETERIORATION:

The term “substantial structural deterioration” means substantial structural distress that negatively affects a building’s general structural condition and integrity. The term does not include surface imperfections such as cracks, distortion, sagging, deflections, misalignment, signs of leakage, or peeling of finishes unless the licensed engineer or architect performing the phase one or phase two inspection determines that such surface imperfections are a sign of substantial structural deterioration.

MILESTONE INSPECTIONS FOR BUILDINGS THREE STORIES OR MORE IN HEIGHT:

A condominium association under chapter 718 and a cooperative association under chapter 719 must have a milestone inspection performed for each building that is three stories or more in height by December 31 of the year in which the building reaches 30 years of age, based on the date the certificate of occupancy for the building was issued, and every 10 years thereafter.

WITHIN THREE MILES OF COASTLINE:

If the building is three or more stories in height and is located within three miles of a coastline, the condominium association or cooperative association must have a milestone inspection performed by December 31 of the year in which the building reaches 25 years of age, based on the date the certificate of occupancy for the building was issued, and every 10 years thereafter.

The condominium association or cooperative association must arrange for the milestone inspection to be performed and is responsible for ensuring compliance.

The condominium association or cooperative association is responsible for all costs associated with the inspection.

IF THE CERTIFICATE OF OCCUPANCY WAS ISSUED BEFORE JULY 1, 1992:

If a milestone inspection is required under this statute and the building’s certificate of occupancy was issued on or before July 1, 1992, the building’s initial milestone inspection must be performed before December 31, 2024. If the date of issuance for the certificate of occupancy is not available, the date of issuance of the building’s certificate of occupancy shall be the date of occupancy evidenced in any record of the local building official.

Upon determining that a building must have a milestone inspection, the local enforcement agency must provide written notice of such required inspection to the condominium association or cooperative association by certified mail, return receipt requested.

Within 180 days after receiving the written notice the condominium association or cooperative association must complete phase one of the milestone inspection. For purposes of this section, completion of phase one of the milestone inspection means the licensed engineer or architect who performed the phase one inspection submitted the inspection report by e-mail, United States Postal Service, or commercial delivery service to the local enforcement agency.

A MILESTONE INSPECTION CONSISTS OF TWO PHASES:

    (a) PHASE 1: For phase one of the milestone inspection, a licensed architect or engineer authorized to practice in this state must perform a visual examination of habitable and non-habitable areas of a building, including the major structural components of a building, and provide a qualitative assessment of the structural conditions of the building. If the architect or engineer finds no signs of substantial structural deterioration to any building components under visual examination, phase two of the inspection (discussed below) is not required. An architect or engineer who completes a phase one milestone inspection shall prepare and submit an inspection report.

    (b) PHASE 2: A phase two of the milestone inspection must be performed if any substantial structural deterioration is identified during phase one. A phase two inspection may involve destructive or nondestructive testing at the inspector’s direction. The inspection may be as extensive or as limited as necessary to fully assess areas of structural distress in order to confirm that the building is structurally sound and safe for its intended use and to recommend a program for fully assessing and repairing distressed and damaged portions of the building. When determining testing locations, the inspector must give preference to locations that are the least disruptive and most easily repairable while still being representative of the structure. An inspector who completes a phase two milestone inspection must prepare and submit an inspection report.

POST-MILESTONE INSPECTION REQUIREMENTS:

Upon completion of a phase one or phase two milestone inspection, the architect or engineer who performed the inspection must submit a sealed copy of the inspection report with a separate summary of, at minimum, the material findings and recommendations in the inspection report to the condominium association or cooperative association, and to the building official of the local government which has jurisdiction. The inspection report must, at a minimum, meet all of the following criteria:

    (a) Bear the seal and signature, or the electronic signature, of the licensed engineer or architect who performed the inspection.

    (b) Indicate the manner and type of inspection forming the basis for the inspection report.

    (c) Identify any substantial structural deterioration within a reasonable professional probability based on the scope of the inspection, describe the extent of such deterioration, and identify any recommended repairs for such deterioration.

    (d) State whether unsafe or dangerous conditions, as those terms are defined in the Florida Building Code, were observed.

    (e) Recommend any remedial or preventive repair for any items that are damaged but are not substantial structural deterioration.

(f) Identify and describe any items requiring further inspection.

LOCAL GOVERNMENT ENFORCEMENT:

A local enforcement agency may prescribe time lines and penalties with respect to compliance with the milestone inspection requirements.

A board of county commissioners may adopt an ordinance requiring that a condominium or cooperative association schedule or commence repairs for substantial structural deterioration within a specified time frame after the local enforcement agency receives a phase two inspection report; however, such repairs must be commenced within 365 days after receiving such report. If an association fails to submit proof to the local enforcement agency that repairs have been scheduled or have commenced for substantial structural deterioration identified in a phase two inspection report within the required time frame, the local enforcement agency must review and determine if the building is unsafe for human occupancy.

BOARD’S DUTY AFTER OBTAINING THE MILESTONE REPORT:

Upon completion of a phase one or phase two milestone inspection and receipt of the inspector-prepared summary of the inspection report from the architect or engineer who performed the inspection, the association must distribute a copy of the inspector-prepared summary of the inspection report to each unit owner, regardless of the findings or recommendations in the report, by United States mail or personal delivery and by electronic transmission to unit owners who previously consented to receive notice by electronic transmission; must post a copy of the inspector-prepared summary in a conspicuous place on the condominium or cooperative property; and must publish the full report and inspector-prepared summary on the association’s website, if the association is required to have a website.

WHO PAYS FOR THE MILESTONE INSPECTION:

Pursuant to section 718.112, Florida Statutes, if an association is required to have a milestone inspection performed, the association must arrange for the milestone inspection to be performed and is responsible for ensuring compliance with all of the requirements thereof. The association is responsible for all costs associated with the inspection.

FAILURE TO OBTAIN THE MILESTONE INSPECTION:

If the officers or directors of an association willfully and knowingly fail to have a milestone inspection performed pursuant to section 553.899, Florida Statutes, such failure is a breach of the officers’ and directors’ fiduciary relationship to the unit owners.

MANAGER’S DUTY:

If a community association manager or a community association management firm has a contract with a community association that has a building on the association’s property that is subject to milestone inspection, the community association manager or the community association management firm must comply with the requirements of performing such inspection as directed by the board.

EXEMPTIONS:

For clarity, the otherwise required milestone inspection does not apply to a single family, two-family, or three-family dwelling with three or fewer habitable stories above ground.

FLORIDA BUILDING COMMISSION REQUIREMENTS:

The Florida Building Commission must review the milestone inspection requirements and make recommendations, if any, to the legislature to ensure inspections are sufficient to determine the structural integrity of a building. The commission must provide a written report of any recommendations to the Governor, the President of the Senate, and the Speaker of the House of Representatives by December 31, 2022.

The Florida Building Commission must consult with the State Fire Marshal to provide recommendations to the legislature for the adoption of comprehensive structural and life safety standards for maintaining and inspecting all types of buildings and structures in this state that are three stories or more in height. The commission must provide a written report of its recommendations to the Governor, the President of the Senate and the Speaker of the House of Representatives by December 31, 2023.

II.    STRUCTURAL INTEGRITY RESERVE STUDIES AND MANDATORY RESERVES:

The reserve legislation set out in section 718.112 (f)(2)(a), Florida Statutes, is, for all intents and purposes, re-written. Prior to examining these most recent revisions, it is necessary to first examine the definitions set out in section 718.103, Florida Statutes, where a brand new term is added as follows:

    Structural integrity reserve study means a study of the reserve funds required for future major repairs and replacement of the common areas based on a visual inspection of the common areas applicable to all condominiums and cooperative buildings 3 stories or higher.

Hereafter, the structural integrity reserve study is referred to as “SIRS”. Now we can turn our attention to the requirements of the SIRS as set out in section 718.112 (f)(2)(a), Florida Statutes

THE STRUCTURAL INTEGRITY RESERVE STUDY (required for all condominium and cooperative buildings three stories or higher regardless of date of certificate of occupancy):

An association must have a SIRS completed at least every 10 years after the condominium’s creation for each building on the condominium property that is three stories or higher in height which includes, at a minimum, a study of the following items as related to the structural integrity and safety of the building:

a.     Roof.

b. Load-bearing walls or other primary structural members.

c. Floor.

d. Foundation.

e. Fireproofing and fire protection systems.

f. Plumbing.

g. Electrical systems.

h. Waterproofing and exterior painting.

i.  Windows.

j. Any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000 and the failure to replace or maintain such item negatively affects the items listed in subparagraphs a.-i., as determined by the licensed engineer or architect performing the visual inspection portion of the structural integrity reserve study.

The SIRS may be performed by any person qualified to perform such study. However, the visual inspection portion of the structural integrity reserve study MUST be performed by an engineer licensed under chapter 471 or an architect licensed under chapter 481.

As further set out in the legislation, at a minimum, “a structural integrity reserve study must identify the common areas being visually inspected, state the estimated remaining useful life and the estimated replacement cost or deferred maintenance expense of the common areas being visually inspected, and provide a recommended annual reserve amount that achieves the estimated replacement cost or deferred maintenance expense of each common area being visually inspected by the end of the estimated remaining useful life of each common area.”

The amount to be reserved for an item is determined by the association’s most recent structural integrity reserve study that must be completed by December 31, 2024. If the amount to be reserved for an item is not in the association’s initial or most recent structural integrity reserve study or the association has not completed a structural integrity reserve study, the amount must be computed using a formula based upon estimated remain useful life and estimated replacement cost or deferred maintenance expense of each reserve item.

If the condominium building is less than three stories then the legislation provides that, “in addition to annual operating expenses, the budget must include reserve accounts for capital expenditures and deferred maintenance. These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000.”

The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance.

If an association fails to complete a SIRS, such failure is a breach of an officer’s and director’s fiduciary relationship to the unit owners.

NON-WAIVABLE AND WAIVABLE RESERVES IN THE UNIT OWNER CONTROLLED ASSOCIATION:

As to the SIRS, the legislation is patently clear that unit owners may not vote for no reserves or lesser reserves for items set forth SIRS report. There is on-going debate amongst attorneys in regard to whether a condominium under three stories can waive or reduce reserves for any of the reserve items required to be in the SIRS that are included in the under three story condominium reserve, for example, roof and painting (For those interested, examine lines 1029 to 1033 and 1050 to 1071 in SB 4-D).

MANDATORY RESERVES IN THE DEVELOPER CONTROLLED ASSOCIATION:

Before turnover of control of an association by a developer to unit owners other than a developer pursuant to section 718.301, Florida Statutes, the developer-controlled association may not vote to waive the reserves or reduce the funding of the reserves (Previously, a developer could fully waive all reserves for the first two years, meaning this is a monumental change).

PRE-TURNOVER DEVELOPER DUTY:

Before a developer turns over control of an association to unit owners other than the developer, the developer must have a SIRS completed for each building on the condominium property that is three stories or higher in height.

III.    OFFICIAL RECORDS:

Official records of the condominium and cooperative association include structural integrity reserve studies, financial reports of the association or condominium, and a copy of the inspection reports and any other inspection report relating to a structural or life safety inspection of condominium or cooperative property.

In addition to the right to inspect and copy the declaration, bylaws and rules renters have the right to inspect the milestone inspection report and structural integrity reserve study inspection reports as well.

Structural integrity reserve studies must be maintained for at least 15 years after the study is completed. In addition, inspection reports report and any other inspection report relating to a structural or life safety inspection of condominium property must be maintained for 15 years after receipt of such report.

IV.    ASSOCIATION WEBSITES:

In addition to other positing requirements, the inspection reports described above and any other inspection report relating to a structural or life safety inspection of condominium property and the association’s most recent structural integrity reserve study must be posted to the website.

V.    JURISDICTION OF DIVISION OF CONDOMINIUMS, TIMESHARES, AND MOBILE HOMES:

Pre-turnover, the Division of Florida Condominiums, Timeshares, and Mobile Homes (Division) may enforce and ensure compliance with rules relating to the development, construction, sale, lease, ownership, operation, and management of residential condominium units, and complaints related to the procedural completion of milestone inspections. After turnover has occurred, the Division has jurisdiction to investigate complaints related only to financial issues, elections, and the maintenance of and unit owner access to association records, and the procedural completion of structural integrity reserve studies.

VI. NEW REPORTING REQUIREMENTS FOR ALL CONDOMINIUM AND COOPERATIVE ASSOCIATIONS:

On or before January 1, 2023, condominium associations existing on or before July 1, 2022, must provide the following information to the Division in writing, by e-mail, United States Postal Service, commercial delivery service, or hand delivery, at a physical address or e-mail address provided by the division and on a form posted on the division’s website:

  1. The number of buildings on the condominium property that are three stories or higher in height.
  2. The total number of units in all such buildings.
  3. The addresses of all such buildings.
  4. The counties in which all such buildings are located.

An association must provide an update in writing to the division if there are any changes to the information in the list within six months after the change.

VII.    APPLICABLE TO ALL SELLERS OF UNITS:

As a part of the sales process, the seller of a condominium or cooperative unit and developers must provide to potential purchasers a copy of the inspector-prepared summary of the milestone inspection report and a copy of the association’s most recent structural integrity reserve study or a statement that the association has not completed a structural integrity reserve study.

VIII.    GLITCHES:

As with any new legislation of such a substantial nature, there often follow in subsequent years what are referred to as “glitch bills” which help provide additional clarity, remove ambiguity, and fix unintended errors. To name a few: (i) the term “common areas” is used in the legislation when in fact the correct term is “common element;” (ii) clarity needs to be provided regarding whether reserve items that are required to be in SIRS, but show up in the under three story reserves, such as paint and paving, can be waived or reduced by the membership; and (iii) for those buildings that are within three miles of the coastline, additional clarity could be provided to provide better guidance as to how to perform the measurement.    

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The latest post into “Rembaum’s Association Roundup” is here. “FIDUCIARY DUTY: What it Means to Your Community Association”.

The latest post into “Rembaum’s Association Roundup” is here. “FIDUCIARY DUTY: What it Means to Your Community Association”.

REMBAUM’S ASSOCIATION ROUNDUP | The Community Association Legal News You Can Use

What duty does a community association board member owe to their association? What happens if that duty is breached? During the legislative session, legislation was proposed that would have made directors criminally liable for failure to timely respond to official record requests, among other provisions. The legislation in House Bill 919 was proposed by Representative Porras in response to the alleged $3.4 million dollar embezzlement scheme that took place at the Hammocks Community Association, located in Miami-Dade County. Parts of this proposed bill were well-intentioned; however, several provisions were commonly viewed as too broad and expansive.

On November 15, 2022, the Miami-Dade State Attorney’s Office announced charges related to the Hammocks’ criminal case, including racketeering, organized scheme to defraud, money laundering, grand theft, and fabricating physical evidence against five board members. These board members have been accused of the following:

i) running a scheme in which they used HOA checks and HOA credit cards from 55 bank accounts to pay for “no-show” work by shell companies or vendors, who would funnel money back to the directors for their personal use;

ii) withholding official records from members; and,

iii) failure to hold valid elections, among other bad acts.

If found guilty these board members overtly breached their fiduciary duty to their association.

During the 2023 legislative session, House Bill 919 initially contained significant criminal penalties to punish board members who failed to provide official records when they otherwise should have, criminal penalties for kickbacks, and criminal penalties for improper election interference, among other provisions. Such laws, while well intended, went overboard as evidenced by the creation of criminal penalties for failure to provide official records, as such severe criminal penalties for operational matters would likely only deter good people from running for the board. Recognizing this potential issue, parts of HB 919 were tempered a bit prior to it becoming law. That said, in the opinion of this author, new laws with new criminal penalties are not the answer. Bad people do bad things, and no amount of laws will likely significantly change that. So, what is the answer?

One answer is to shore up the educational and certification requirements for board members. At present, there are two ways to be certified as a board member. One method is to take a State-approved class, which provides an overview of the voluminous information board members need to know in order to perform their duties. The other method is to sign a piece of paper that the board member has read the governing documents, will abide by them, and will faithfully discharge their duties. This second method should be eliminated as there is no method to confirm compliance, and this method does not have any educational component. In addition, continuing education requirements should be required for any board member serving consecutive years.

During a board certification class, time should be spent discussing the term “fiduciary duty.” While the term is repeatedly used in Chapters 718 and 720 of the Florida Statutes, it is not expressly defined in these statutes. Section 718.111, Florida Statutes, makes reference to Section 617.0830, Florida Statutes, which provides for general standards for directors of not-for-profit corporations, such as community associations.

Section 617.0830, Florida Statutes, provides the following:

      1. A director shall discharge his or her duties as a director, including his or her duties as a member of a committee i) in good faith; ii) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and iii) in a manner he or she reasonably believes to be in the best interests of the corporation.
      2. In discharging his or her duties, a director may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: i) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; ii) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the persons’ professional or expert competence; or iii) a committee of the board of directors of which he or she is not a member if the director reasonably believes the committee merits confidence.
      3. A director is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) unwarranted.
      4. A director is not liable for any action taken as a director, or any failure to take any action, if he or she performed the duties of his or her office in compliance with this section.

Still, though, there is no express definition of the term “fiduciary duty.” The purpose of studying fiduciary relationships is to identify the areas where it exists and gain an insight into the duties of a fiduciary. After all, every board member is a fiduciary for their community association. Common definitions of the term “fiduciary” include:

      • A fiduciary relationship is a relation between two parties wherein one party (fiduciary) has the duty to act in the best interest of the other party (beneficiary or principal).
      • A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person.
      • A fiduciary duty is a relationship in which one party places special trust, confidence, and reliance in and is influenced by another who has a fiduciary duty to act for the benefit of the party.
      • Most importantly, and germane to this discussion, a fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust.

In other words, a good community association board member puts the interest of their association above their own personal interests. Thus, while we may not be able to stop bad people from doing bad things, through continuing education we can help good people do better.

To recap, there are three things that can be readily accomplished that would make a positive difference for Florida’s community associations.

      1. Remove the ability of a board member to be “certified” by signature alone.
      2. Require continuing education for board members serving continuous years.
      3. Amend Florida Statutes, Chapters 718 and 720, to include express definitions of fiduciary duty so that it is made patently clear that every board member must put their community association above and ahead of their own personal interests.

 

 

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FIDUCIARY DUTY: What it Means to Your Community Association. by REMBAUM’S ASSOCIATION ROUNDUP

FIDUCIARY DUTY: What it Means to Your Community Association. by REMBAUM’S ASSOCIATION ROUNDUP

  • Posted: Sep 08, 2024
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What duty does a community association board member owe to their association? What happens if that duty is breached? During the legislative session, legislation was proposed that would have made directors criminally liable for failure to timely respond to official record requests, among other provisions.

The legislation in House Bill 919 was proposed by Representative Porras in response to the alleged $3.4 million dollar embezzlement scheme that took place at the Hammocks Community Association, located in Miami-Dade County. Parts of this proposed bill were well-intentioned; however, several provisions were commonly viewed as too broad and expansive.

On November 15, 2022, the Miami-Dade State Attorney’s Office announced charges related to the Hammocks’ criminal case, including racketeering, organized scheme to defraud, money laundering, grand theft, and fabricating physical evidence against five board members. These board members have been accused of the following:

i) running a scheme in which they used HOA checks and HOA credit cards from 55 bank accounts to pay for “no-show” work by shell companies or vendors, who would funnel money back to the directors for their personal use;

ii) withholding official records from members; and,

iii) failure to hold valid elections, among other bad acts.

If found guilty these board members overtly breached their fiduciary duty to their association.

During the 2023 legislative session, House Bill 919 initially contained significant criminal penalties to punish board members who failed to provide official records when they otherwise should have, criminal penalties for kickbacks, and criminal penalties for improper election interference, among other provisions. Such laws, while well intended, went overboard as evidenced by the creation of criminal penalties for failure to provide official records, as such severe criminal penalties for operational matters would likely only deter good people from running for the board. Recognizing this potential issue, parts of HB 919 were tempered a bit prior to it becoming law. That said, in the opinion of this author, new laws with new criminal penalties are not the answer. Bad people do bad things, and no amount of laws will likely significantly change that. So, what is the answer?

One answer is to shore up the educational and certification requirements for board members. At present, there are two ways to be certified as a board member. One method is to take a State-approved class, which provides an overview of the voluminous information board members need to know in order to perform their duties. The other method is to sign a piece of paper that the board member has read the governing documents, will abide by them, and will faithfully discharge their duties. This second method should be eliminated as there is no method to confirm compliance, and this method does not have any educational component. In addition, continuing education requirements should be required for any board member serving consecutive years.

During a board certification class, time should be spent discussing the term “fiduciary duty.” While the term is repeatedly used in Chapters 718 and 720 of the Florida Statutes, it is not expressly defined in these statutes. Section 718.111, Florida Statutes, makes reference to Section 617.0830, Florida Statutes, which provides for general standards for directors of not-for-profit corporations, such as community associations.

Section 617.0830, Florida Statutes, provides the following:

      1. A director shall discharge his or her duties as a director, including his or her duties as a member of a committee i) in good faith; ii) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and iii) in a manner he or she reasonably believes to be in the best interests of the corporation.
      2. In discharging his or her duties, a director may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by: i) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; ii) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the persons’ professional or expert competence; or iii) a committee of the board of directors of which he or she is not a member if the director reasonably believes the committee merits confidence.
      3. A director is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) unwarranted.
      4. A director is not liable for any action taken as a director, or any failure to take any action, if he or she performed the duties of his or her office in compliance with this section.

Still, though, there is no express definition of the term “fiduciary duty.” The purpose of studying fiduciary relationships is to identify the areas where it exists and gain an insight into the duties of a fiduciary. After all, every board member is a fiduciary for their community association. Common definitions of the term “fiduciary” include:

      • A fiduciary relationship is a relation between two parties wherein one party (fiduciary) has the duty to act in the best interest of the other party (beneficiary or principal).
      • A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person.
      • A fiduciary duty is a relationship in which one party places special trust, confidence, and reliance in and is influenced by another who has a fiduciary duty to act for the benefit of the party.
      • Most importantly, and germane to this discussion, a fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust.

In other words, a good community association board member puts the interest of their association above their own personal interests. Thus, while we may not be able to stop bad people from doing bad things, through continuing education we can help good people do better.

To recap, there are three things that can be readily accomplished that would make a positive difference for Florida’s community associations.

      1. Remove the ability of a board member to be “certified” by signature alone.
      2. Require continuing education for board members serving continuous years.
      3. Amend Florida Statutes, Chapters 718 and 720, to include express definitions of fiduciary duty so that it is made patently clear that every board member must put their community association above and ahead of their own personal interests.

 

 

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By now, you likely have heard that House Bill 1021 was signed into law by the Governor on June 14, 2024.

By now, you likely have heard that House Bill 1021 was signed into law by the Governor on June 14, 2024.

This new law impacts condominium associations governed under Chapter 718 of the Florida Statutes and for the most part has an effective date of July 1, 2024 (one Section is effective January 2026).

There have been several local (and even national) news stories focusing on various aspects of these wide-ranging changes, which are intended to strengthen what is perceived as a lack of oversight of board members and other stakeholders in the operation of condominium associations….

Read the full article on our website:

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Reach any office: 800-974-0680
Condominium Legislative Spotlight-House Bill 1021

Condominium Legislative Spotlight-House Bill 1021

By now, you likely have heard that House Bill 1021 was signed into law by the Governor on June 14, 2024. This new law impacts condominium associations governed under Chapter 718 of the Florida Statutes and for the most part has an effective date of July 1, 2024 (one Section is effective January 2026). There have been several local (and even national) news stories focusing on various aspects of these wide-ranging changes, which are intended to strengthen what is perceived as a lack of oversight of board members and other stakeholders in the operation of condominium associations. If you have not done so already, we encourage you to review our comprehensive update that includes all of the 2024 relevant legislative changes impacting both condominium and homeowners’ associations (which can be found HERE).

As these new changes can be overwhelming to digest all at once, for this article, we will focus on a few key new items that will directly impact your day-to-day operations:

(A) Official Records:

(i) Website: Currently, only an association managing a condominium of 150 or more units must post copies of its official records on its website. With the new changes, by January 1, 2026, any association managing a condominium of 25 or more units must have a website with its records posted and available for unit owner review.  Further, in response to a record request, an association may direct the requesting party to its website (rather than having to schedule a physical inspection appointment).

(ii) Organization and Checklist:  The Official Records must be maintained in an “organized” manner, and in the event any of the records are lost, destroyed, or otherwise unavailable, the association will have a “good faith obligation” to obtain and recover the records as soon as reasonably possible. Further, in response to a record inspection request, the association must provide a “checklist”, which identifies the records that were provided and the records that were not made available (the “checklist” is an Official Record itself and must be maintained for 7 years).

(iii) Emails:  The law clarifies that owner email addresses are NOT part of the official records that are open for inspection by the owners unless: (i) the subject owner has consented to receiving notices of association meetings via email; or (ii) the subject owner has expressly indicated that his or her email address can be shared with other owners.

*Key Takeaway:  The new laws include increased penalties (including potential criminal charges for board members or managers who knowingly, willfully, and repeatedly violate the record inspection requirements, or who intentionally defaces or destroys financial/accounting records), so it is extremely important for your board to review its official record practices and procedures to avoid potential sanctions.  As a reminder, the law allows a board to adopt reasonable rules regarding the frequency, time, location, notice, and manner of record inspections and copying. Accordingly, we recommend contacting your association counsel to discuss these new requirements, and to consider reviewing (or modifying) your current record inspection rules.

(B)  Board Meetings/Board Education:

(i)  Frequency and Content of Board Meeting Notice/Agenda: The board must now hold a meeting at least once each quarter during the calendar year. Further, at least four (4) times each year, the agenda for the board meeting must include the opportunity for owners to ask questions of the board, including the right to ask questions relating to the status of construction/repair projects and the revenues/expenditures of the association. Also, if the board meeting has an agenda item regarding the approval of a contract for goods or services, a copy of the contract must be included with the notice.

*Key Takeaway: While the law does not expressly require the board to provide a substantive answer to these owner questions, be sure that the notice of your board meetings (at least 4 times a year) contains an agenda item for “owner questions” or words of similar effect.

(ii)  Continuing Education for the Board:  Board Members are now required to satisfactorily complete at least four (4) hours of State-approved “new board member” education curriculum (check our website at kbrlegal.com for upcoming approved classes) that include instruction on a host of important topics, including milestone inspections, structural integrity reserve studies, elections, and financial literacy and transparency.  The educational certificate must be submitted within 1 year before or within 90 days after election or appointment to the Board, and is valid for 7-years (and does not need to be resubmitted as long as the directors serves without interruption during the 7-year period).  Any Board Member elected or appointed prior to July 1, 2024 will have unitl July 1, 2025 to comply with this 4-hour education requirement.

Additionally, within one year after submitting the 4-hour educational certificate (and annually thereafter), all Board Members must complete one (1) hour of continuing education by a State-approved provider that addresses legislative changes from the past year. This is in addition to the “new board member” educational requirement.

*Key Takeaway: Simply signing a statement that you have read the governing documents and will work to uphold them to the best of your ability, in and of itself, is no longer sufficient to comply with the Board Member certification requirement.  It is clear that the new changes are aimed at ensuring that Board Members cannot “bury their heads in the sand” regarding the legal requirements of operating condominiums and will be proactive in ensuring awareness of the requirements of serving their communities.

C. Prohibition on Board Members “Retaliating” against Owners

The new changes expressly prohibit associations from “retaliating” against an owner, who, in good faith, does any of the following actions:

(i) filed a complaint with a governmental agency against the association;
(ii) organized, encourages, or participated in a unit owner’s organization;
(iii) exercised his or her rights under the Florida Statutes (for instance, by submitting a record inspection request or submitting questions via certified mail to the association); and/or,
(iv) made public statements critical of the operation or management of the association.

Further, associations may not expend association funds to bring a lawsuit for defamation against an owner or any other claim against an owner based on the conduct described in paragraphs “(i)-(iv)” above.

*Key Takeaway:  There is no doubt that every community, from time to time, has to deal with at least one difficult owner.  However, the law makes clear that public criticism from owners is “part of the job” of serving on the Board, and an owner expressing his or her opinion (even in a not-so-nice fashion) on operational issues is not a valid basis for the Board to pursue enforcement action with the common funds of the association.  As such, prior to considering sending a “cease and desist” demand letter (or other enforcement measures) to an owner regarding his or her public comments or criticism, it is suggested to review the situation with legal counsel to evaluate the most appropriate option to pursue.

As noted, the topics discussed here are only a small part of the larger changes contained in the new laws for 2024 and beyond. In the coming weeks and months, we will offer additional information regarding other such changes in future editions of Legal Morsels. In the interim, should you have any questions regarding these or any other changes, feel welcome to check with your association attorney.

Kaye Bender Rembaum
Reach any office: 800-974-0680

 

Architectural Committees Formal Procedures, Published Standards, and Self Help by REMBAUM’S ASSOCIATION ROUNDUP

Architectural Committees Formal Procedures, Published Standards, and Self Help by REMBAUM’S ASSOCIATION ROUNDUP

  • Posted: Jun 19, 2024
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Architectural Committees Formal Procedures, Published Standards, and Self Help

by REMBAUM’S ASSOCIATION ROUNDUP

Formal Procedures

There are strict legal requirements that a homeowners’ association’s (HOA) architectural review committee (ARC) must follow, most especially if the ARC intends to deny an owner’s request. As this author has witnessed countless times, it is likely that many ARCs do not conduct their activities in conformity with Florida law such that an ARC denial may not withstand judicial scrutiny. If these legal requirements are not followed, and the ARC denies the owner’s architectural request, then it would be quite easy for the owner to challenge the ARC’s decision and prevail. Upon prevailing, the owner would be entitled to their prevailing party attorney’s fees and costs, as well. It is so easy to avoid this outcome, yet so few associations take the time to do it right.

Pursuant to §720.303(2), Florida Statutes, a meeting of the ARC is required to be open and noticed in the same manner as a meeting of the association’s board of directors. Notice of the ARC meeting must be posted in a conspicuous place in the community at least 48 hours in advance of the meeting, and the meeting must be open for all members to attend. Further, pursuant to §720.303(2)(c)(3), Florida Statutes, members of the ARC are not permitted to vote by proxy or secret ballot. Also, bare bone minutes should be taken to create a record of ARC decisions—especially denials.

We often hear from many HOAs that the ARC does not meet openly and does not notice their meetings. This leaves decisions made by the ARC vulnerable to challenge. If the ARC denies an application but fails to do so at a properly noticed board meeting, the owner can challenge the denial, claiming that it is not valid because the ARC did not follow proper procedure. In such cases, the ARC’s denial of an application is not valid because the ARC failed to comply with the procedural requirements for the meeting even if an application violates the declaration or other association-adopted architectural standards. However, by complying with the provisions of Chapter 720, Florida Statutes, your HOA can work to avoid this debacle.

 

 

Published Standards

Often a top priority for an HOA is ensuring that homes in the community maintain a harmonious architectural scheme in conformity with community standards and guidelines, and because the ARC is at the frontline of owners’ alterations and improvements to their homes, it is instrumental in ensuring that the community standards and guidelines are met. Pursuant to §720.3035(1), Florida Statutes, an HOA, or the ARC, “has the authority to review and approve plans and specifications only to the extent that the authority is specifically stated or reasonably inferred as to location, size, type, or appearance in the declaration or other published guidelines and standards.” But not every owner request is typically addressed in the declaration or other published guidelines and standards. If not, then the association may not be in a good position for proper denial. Therefore, the ARC is only as effective as the objective guidelines and standards (set forth in the declaration and other published guidelines and standards) are inclusive. So, what is the association to do when the ARC receives an owner’s application for an alteration to the home, but the association does not have any architectural guidelines or standards regulating the requested alteration?

While not court tested yet, a possible solution for this conundrum is to include a “catch-all” provision in the declaration to proactively address those ARC applications where a member may request a modification that is not directly addressed by the governing documents. Such a “catch-all” provision stands for the proposition that, if such a request is made, then the existing state of the community is the applicable standard by which the ARC application is to be judged. For example, imagine if an owner applies to the ARC to paint the owner’s house pink. If there are no architectural guidelines or standards that address what color a house must be, and there are no pink houses in the community, then the existing state of the community may provide a lawful basis for the ARC to deny the request because there are no existing pink houses in the community.

The Trouble With Self-Help Provisions

What if an owner refuses to maintain the owner’s property, such as pressure washing a dirty roof, despite the HOA sending demand letters, levying a fine, and perhaps even suspending the owner’s right to use the HOA’s recreational facilities? What is the HOA’s next step? Is it time to file a lawsuit to compel compliance? Well, Chapter 718 (governing condominiums), Chapter 719 (governing cooperatives), and Chapter 720 (governing HOAs) of the Florida Statutes authorize the association to bring an action at law or in equity to enforce the provisions of the declaration against the owner. Additionally, many declarations contain “self-help” language that authorizes the association to cure a violation on behalf of the owner and even, at times, assess the owner for the costs of doing so. These “self-help” provisions generally contain permissive language, meaning the association, may, but is not obligated to, cure the violation. Sadly, in this instance the word “may” means “shall,” and to find out why, read on.

There is a general legal principal that, if a claimant has a remedy at law (e.g., the ability to recover money damages under a contract), then it lacks the legal basis to pursue a remedy in equity (e.g., an action for injunctive relief). Remember, too, that an association’s declaration is a contract. In the context of an association, the legal remedy would be exercising the “self-help” authority granted in the declaration. An equitable remedy would be bringing an action seeking an injunction to compel an owner to take action to comply with the declaration. Generally, a court will only award an equitable remedy when the legal remedy is unavailable, insufficient, or inadequate.

Assume that the association’s declaration contains both the permissive “self-help” remedy and the right to seek an injunction from the court. Accordingly, it would appear the association has a decision to make—go to court to seek the injunction or enter onto the owner’s property, cure the violation, and assess the costs of same to the owner. However, recent Florida case law affirmed a complication to what should be a simple decision. In two cases decided ten years apart, Alorda v. Sutton Place Homeowners Association, Inc., 82 So.3d 1077 (Fla. 2nd DCA 2012) and Mauriello v. Property Owners Association of Lake Parker Estates, Inc., 337 So.3d 484 (Fla. 2nd DCA 2022), Florida’s Second District Court of Appeal decided that an association did not have the right to seek an injunction to compel an owner to comply with the declaration if the declaration provided the association the authority, but not the obligation, to engage in “self-help” to remedy the violation. Expressed simply, this is because the legal contractually based “self-help” remedy must be employed before one can rely upon equitable remedy of an injunction. Therefore, even though the declaration provided for an optional remedy of “self-help,” it must be used before seeking the equitable remedy of an injunction.

In Alorda, the owners failed to provide the association with proof of insurance required by the declaration. Although the declaration allowed the association to obtain the required insurance, the association filed a complaint against the owners seeking injunctive relief, asking the court to enter a permanent mandatory injunction requiring the owners to obtain the requested insurance. The owners successfully argued that even though they violated the declaration, the equitable remedy of an injunction was not available because the association already had an adequate legal remedy—the “self-help” option of purchasing the required insurance and assessing them for same. The Court agreed.

In Mauriello, the declaration contained similar language as in Alorda but involved the issue of the owners failing to keep their lawn and landscaping in good condition as required by the declaration. The association filed a complaint seeking a mandatory injunction ordering the owners to keep their lawn and landscaping in a neat condition. However, the facts were complicated by the sale of the home in the middle of the suit when the new owners voluntarily brought the home into compliance with the declaration. The parties continued to fight over who was entitled to prevailing party attorney’s fees with the association arguing it was entitled to same because the voluntary compliance was only obtained after the association was forced to commence legal action. The owners, citing Alorda, argued that the complaint should have been dismissed at the onset because the association sought an equitable remedy (injunction) when a legal remedy was already available—the exercise of its “self-help” authority. The Court considered the award of attorney’s fees after the dismissal of the association’s action for an injunction. Ultimately, the Court held that the owners were the prevailing party as the association could not seek the injunction because it already had an adequate remedy at law.

Accordingly, if your association’s declaration contains a “self-help” provision, and your association desires to seek an injunction against an owner rather than pursue “self-help,” the board should discuss the issue in greater detail with the association’s legal counsel prior to proceeding. Also, remember that if the association wants to enforce architectural standards, then they must be published to the membership; and always remember to notice ARC meetings and take minutes.

 

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SECURING YOUR GATED COMMUNITY Exactly Who Is Allowed In? by KBR Legal

SECURING YOUR GATED COMMUNITY Exactly Who Is Allowed In? by KBR Legal

  • Posted: May 20, 2024
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SECURING YOUR GATED COMMUNITY  Exactly Who Is Allowed In?

by  Kaye Bender Rembaum

 

While living in a gated community can add peace of mind for the residents who live behind the gates, there are many important considerations for the association when crafting rules and regulations regarding who may and who may not be permitted to enter the community. In today’s gated communities, there are three entry control options: (i) live personnel to monitor the gate, (ii) a virtual gate guard where the gate guard who allows guests to pass through is off-site and monitoring electronically, or (iii) a simple call box.

Many associations adopt rules which require visitors to the community to present valid identification to ensure that the visitors are authorized by the association or a resident to enter the community. But, what kind of identification can an association require? Are there limits? In the end, the association must balance its interest in ensuring that only authorized visitors enter the community with the rights of the owners and the visitors entering the community.

One question which bears analysis is, is the association permitted to “swipe” a driver license? Section 322.143, Fla. Stat. (2021), defines “swiping” a driver license as the act of passing a driver license or identification card through a device that is “capable of deciphering, in an electronically readable format, the information electronically encoded in a magnetic strip or bar code on the driver license or identification.”

Pursuant to §322.143, Fla. Stat. (2021), a private entity is not permitted to “swipe” an individual’s driver license or identification card to capture and store information contained in the magnetic strip unless the individual consents to allow this, and the association informs the individual what information will be collected and the purpose or purposes for which it will be used. However, an exception exists in that the association is allowed to “swipe” the driver license to verify the authenticity of the driver license, as long as the association is not capturing and storing the information on the magnetic strip. More specifically, §322.143(2)(a), Fla. Stat. (2021), provides, in pertinent part, the following:

    (2) Except as provided in subsection (6), a private entity may not swipe an individual’s driver license or identification card, except for the following purposes:

        (a) To verify the authenticity of a driver license or identification card or to verify the identity of the individual if the individual pays for a good or service with a method other than cash, returns an item, or requests a refund.

 

 

In accordance with the foregoing, an association is permitted to “swipe” a driver license but is not permitted to store, sell, or share the personal information collected from swiping the driver license. Although swiping without storing the information is permitted, this author recommends that the association fully avoid swiping the driver license. If the information was inadvertently or even temporarily stored on the device that the association used to swipe the driver license, the association would be in violation of this statute. Note that manually collecting personal information or making a photocopy or other copy of the front of the driver license is not prohibited by the statute and is a far safer practice.

Another question worth addressing is, can the association require a valid United States driver license for any drivers entering the community? Be warned, such a requirement could land the association in hot water. Although the association can likely require any driver entering the community to have a valid driver license, the association cannot require that the license be issued in the United States.

Pursuant to §322.04(1), Fla. Stat. (2021), “a nonresident who is at least 16 years of age and who has in his or her immediate possession a valid noncommercial driver license issued to the nonresident in his or her home state or country” is permitted to operate a vehicle without a Florida license. In other words, a driver with a proper license in another state or another country is legally permitted to drive in Florida as long as they have their valid noncommercial driver license in their possession. Similarly, an association should accept a valid license issued from another state or country for entry into the community.

If the above is not enough to encourage your associations to accept driver licenses from all countries and states, consider that a policy requiring a driver license issued in the United States may be considered a violation of the Fair Housing Act in that doing so may be deemed discrimination based upon national origin and may form the basis of a discrimination lawsuit based on disparate treatment or disparate impact. “Disparate treatment” is an intentional form of discrimination, whereas “disparate impact” discrimination occurs when a policy has an unintentional negative effect on members of a protected class. Thus, while this author is not aware of any such appellate decisions issued in the State of Florida, the last thing any association needs is to be the first defendant in such a Fair Housing Act lawsuit.

 

With regard to all rules adopted by the board of the association, rules regarding who can enter the community are only enforceable if they are within the board’s scope of authority and are reasonable for the purpose. If a rule is outside the board’s scope of authority as set out in the governing documents of the association, or if the rule represents arbitrary or capricious decision-making, such rule will not be enforceable. When adopting rules, remember the following:

  1. The board or the body making the rule must have authority from the governing documents or statute to adopt the rule.
  2. The rule cannot conflict with any rights afforded by documents of higher priority, whether express or implied rights.
  3. The rule must be reasonable. Reasonableness is hard to define, but the case law provides that the rule must be rationally related to a legitimate association objective. The rule cannot be wholly arbitrary or capricious.
  4. The rule cannot contravene any law or compelling public policies.
  5. The rule must be adopted in a procedurally correct manner, which includes proper notice.

 

On a different note, remember that material alterations to the gate area may require a vote of the membership.

In regard to official records and as to homeowners associations, §720.303(5)(c), Fla. Stat. (2021), provides, in relevant part, that although part of the official records of the association, “[i]nformation an association obtains in a gated community in connection with guests’ visits to parcel owners or community residents” are not accessible to members.

As is evident from this discussion, there are many different issues to take into consideration when drafting rules governing who is permitted in your community. To ensure that your rules comply with Florida law, we recommend that the association have its counsel review any rules prior to their adoption.

Jeffrey A. Rembaum, Esq., BCS

Jeffrey Rembaum’s, Esq. legal practice consists of representation of condominium, homeowners, commercial and mobile home park associations, as well as exclusive country club communities and the developers who build them. Mr. Rembaum is a Certified Specialist in Condominium and Planned Development Law. He is the creator of “Rembaum’s Association Roundup,” an e-magazine devoted to the education of community association board members, managers, developers and anyone involved with Florida’s community associations. His column appears monthly in the Florida Community Association Journal. Every year since 2012, Mr. Rembaum has been selected to the Florida Super Lawyers list, and was also named Legal Elite by Florida Trends Magazine. He can be reached at 561-241-4462.

 


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