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Budget. Reserves. Insurance. Collections. How your community association addresses these will determine its financial health and well-being for years to come.

Budget. Reserves. Insurance. Collections. How your community association addresses these will determine its financial health and well-being for years to come.

  • Posted: Aug 27, 2021
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Budget. Reserves. Insurance. Collections. How your community association addresses these will determine its financial health and well-being for years to come.

by Becker / Lilliana M. Farinas-Sabogal

To ensure the financial well-being of the association, boards and managers should focus on at least four factors in the association: budget, reserves, insurance, and collection practices. This article will take a brief look at each of these, but this is not a finite list. It is recommended that you consult with your association attorney and accounting professionals to ensure you are doing all that you can to address these and any other financial facets of the association in the best way possible for your community.

 

Budgets
Without sufficient funds, the association cannot carry out all the duties it is required to undertake pursuant to the Florida Statutes or its governing documents. The association obtains these funds from its members. Unfortunately, many associations tend to try to keep the budgets as lean as possible to keep the assessments as low as possible. While no one likes to pay high maintenance fees if that can be helped, no one is served well by an association maintaining an artificially low budget to keep the monthly assessments low either.

The budget process should be an honest evaluation of the known and expected expenses the association will have in the coming year, and the ultimately adopted budget should reflect as much. A budget committee can be formed to help the board with the budgeting process. The Florida Condominium Act requires the proposed annual budget of estimated revenues and expenses to be detailed and to show the amounts budgeted by accounts and expense classifications.

Rather than minimizing anticipated expenses in the hopes they won’t be needed after all or creating a budget on an expectation that certain expenses may be negotiated for a lower price in the future, the association should budget on what things are actually expected to cost. Thereafter, if the lower price is negotiated, the budget can be amended downward. Most owners will agree that an amendment to lower the budget is much more palatable than a surprise special assessment because the anticipated expense did not go down as previously hoped.

Properly budgeting the association is the first step in securing the financial well-being of the association.

 

Reserves
The next step in ensuring the financial well-being of the association is to ensure the monies necessary will be available when expensive, but expected, repairs and maintenance are needed. This is the concept of reserve funding. Florida community association law requires associations to establish and collect “reserves” as part of their annual budgets. This means that an association must create a separate budget that will ensure it collects enough money every year so that when the estimated useful life of the component is expired, the association will have saved the amounts necessary to replace the component without the need for a special assessment.

For example, condominium associations are required by law to collect reserve amounts for the roof, building painting, and pavement resurfacing, regardless of the amount of the replacement costs of these and for any item for which replacement or deferred maintenance will exceed $10,000. The monies in these reserve accounts must be used for the purposes they were collected unless the owners vote to approve their use for alternative purposes.

While associations must include full funding of statutory reserve accounts in each year’s budget, the statutes allow the owners to vote to waive full funding of reserves. In such a vote, or in a vote to use reserve monies for other purposes, the statutes require warning language to be printed on the voting documents to advise owners that voting to use reserve money for another purpose or waiving reserves altogether may lead to special assessments in the future.

Reserve funding should be part of the budgeting process. Maintaining proper reserves ensures the association’s ability to handle its expected needs effortlessly by saving for this over time.

 

Insurance
In the case of the association’s financial well-being, two kinds of insurance are important. The most obvious may be the property and/or liability coverage that every association should have to cover damage to property or persons due to casualty or other unanticipated events. This kind of insurance is extremely important because, besides the fact that insurance is required by law or the association’s governing documents, an association can suffer untold damage that could create substantial financial strain on its members if they must pay for the repairs or damages out of pocket because the association did not carry the proper insurance.

In addition, however, it is also very important to remember that among the numerous provisions in the Florida Condominium Act and the Florida Homeowners Association Act, there is a requirement that the association carry fidelity bonding/insurance. For example, Florida Statute §718.111(11)(h) states:

  • The association shall maintain insurance or fidelity bonding of all persons who control or disburse funds of the association. The insurance policy or fidelity bond must cover the maximum funds that will be in the custody of the association or its management agent at any one time. As used in this paragraph, the term “persons who control or disburse funds of the association” includes, but is not limited to, those individuals authorized to sign checks on behalf of the association, and the president, secretary, and treasurer of the association. The association shall bear the cost of any such bonding.

These fidelity policies help protect the association against the financial loss in cases of defalcation of association funds.

 

Collection Practices
The association should have fair, but effective, collection practices and policies in place. While associations often feel the need to give some owners time to catch up with payments, or delay “sending the file to the attorney” to “help out” the owner, this can create a number of unanticipated problems for the association’s finances. First, an uneven application of “giving an owner time” can lead to potential defenses to legal action by those who were not “given time.” Second, many boards woefully underestimate exactly how long collections and foreclosure processes can take from start to finish.

Prior to the 2021 legislative session, the statutes already required the association give notice to owners far in advance of the association filing a claim of lien and then again waiting a long time before proceeding to filing a complaint for foreclosure of the claim of lien. The 2021 statutory changes have further expanded the timelines. Now, associations must give an owner a 30-day notice before even sending the file to the association attorney for collections. Once the attorney receives the file, it must give the owner 45 days’ notice of the association’s intent to file a claim of lien for delinquent assessments.

Thereafter, if the owner still has not paid the delinquent amounts, another 45-day notice must be sent to the owner advising of the association’s intent to foreclose the lien, prior to filing the complaint to foreclose. All told, a condominium association, for example, would have to wait at least 120 days after it decided to send the file to the attorney for collections before it would be able to even just file a complaint to foreclose a claim of lien for delinquent assessments.

Associations should consult with their legal and accounting professionals to ensure they have and consistently implement a collections policy to rein in delinquencies and send out the appropriate notices to owners as soon as possible to avoid even longer and more drawn-out collections of needed funds.

Again, this is not a finite list of considerations an association should take into account related to the association’s financial well-being. However, these issues do form the base for the association’s economy and should be top of mind for boards and managers.

 

Lilliana Farinas-Sabogal is a Board Certified Specialist in Condominium and Planned Development Law and a shareholder in Becker’s Community Association and Business Litigation practice groups. In addition to her experience assisting community associations with day-to-day management and operation of governing their communities, she advises Boards of Directors, unit owners, and community association managers on how best to resolve their contractual and transactional disputes and issues. To learn more about Lilliana, please click here.

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NEW CDC ORDER – THE CHAOS NEVER ENDS.

NEW CDC ORDER – THE CHAOS NEVER ENDS.

  • Posted: Aug 09, 2021
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NEW CDC ORDER – THE CHAOS NEVER ENDS.

NEW CDC ORDER – THE CHAOS NEVER ENDS. Billions of dollars hung up and not being distributed. This could be fixed so easily. So few tenants are indeed delinquent but most of those that are have been scamming the system for months. Why bother having 3 Branches of government anymore? The Supreme Court ruled on this and now is completely being ignored.

 

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Slow Your Roll: How to Address Speeding Issues in Your Association

Slow Your Roll: How to Address Speeding Issues in Your Association

  • Posted: Mar 22, 2021
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Speeding is a big problem for many community associations — a problem that is not always easily addressed or corrected. How can your board slow the speed of traffic in your community?

by Jennifer Horan

If your association does not currently have traffic rules, you may be able to rely on a nuisance provision in your Declaration. Alternatively, if your board has the authority to adopt rules and regulations regarding the common areas, the board can adopt traffic rules at a duly noticed board meeting. To enforce the rules, the association has a variety of enforcement tools available, including sending warning letters, notices of violation, fining, suspension of use rights, or further legal action.

Fining is the most common “enforcement tool” that is utilized to curb speeding, for associations who monitor speeding. Fining is most effective when pursued against owners/residents in the community. It is more difficult for an association to pursue fines against visitors, guests, invitees, or contractors who speed. So, for the most part, most associations that pursue fines for speeding opt to only pursue fines against owners/residents who speed. Anytime an association intends to fine an owner or resident, the process and procedures for fining must comply with the statute. Therefore, it would require the board to establish a fining committee (if your community does not already have a committee in place). Notice must be provided to the owner or resident of the violation and the owner or resident must be provided with an opportunity to be heard in front of a fining committee.

For those communities who do not want to impose fines, there are a variety of other enforcement tools available, including sending warning letters, notices of violation, suspension of use rights, or further legal action (such as seeking injunctive relief). When it comes to either fining or the suspension of use rights the association must follow the statutory procedure described above. An additional method of enforcement would be through an agreement with the county which would authorize a local law enforcement agency to enforce state traffic laws on the association’s private roads. Section 316.006, Florida Statutes, authorizes local law enforcement agencies to enforce state traffic laws on the private roads of associations pursuant to an agreement between the association and law enforcement. It requires a majority vote of the board of directors of a homeowners’ association to elect to have state traffic laws enforced by local law enforcement agencies on private roads that are controlled by the association.

There are other practical concerns with regard to enforcement against speeders, most notably, evidence of speeding. How can your board of directors “prove” that a vehicle is speeding? Depending on the speed of the vehicle, it could be established simply by the testimony of the person who saw the car speeding. Some communities have purchased equipment that monitors speed and that can also take photos or videos of the speeding vehicle. If your community is considering purchasing a speed gun, it should be noted that there is an administrative rule that deals with “speed measuring devices”. This rule provides that evidence of the speed of a vehicle measured by a radar speed measuring device is inadmissible in “any proceeding with respect to an alleged violation of provisions of law regulating lawful speed of vehicles” unless such evidence of speed is obtained by a law enforcement officer who meets certain requirements, including the satisfactory completion of certain training courses. The rule also requires a visual determination that the vehicle was speeding and a written citation based on evidence obtained from an approved speed measure device. Also, the particular speed measuring device must meet specifications and must be tested in accordance with other procedural rules related to the testing of speed measuring devices.
Slowing traffic helps promote a more relaxed residential environment and as you can see there are various options available. An association need not choose one however to the exclusion of all others. The key is be consistent and properly apply the various options chosen.

 

Jennifer Horan

Jennifer Horan
Jennifer Horan focuses her practice on all aspects of condominium and homeowners’ association law. She has over 12 years of community association law and general litigation experience. In addition to practicing law with a number of Florida-based firms, Jennifer also spent time as a Senior Attorney with the State of Florida Department of Health. Here, day-to-day legal services were provided to seven county health departments and children’s medical services. State contracts were drafted, reviewed and approved while she oversaw and directed EEOC investigations. Prior to her legal career, she acted as the Head of Special Education at Richardson Independent Schools in Dallas, Texas.

 

 

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Spotless Roof Solutions

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Legal Morsel | Court Concludes That Mistakes on a Claim of Lien Does Not Invalidate the Claim by BY ROBERT KAYE, ESQ., B.C.S

Legal Morsel | Court Concludes That Mistakes on a Claim of Lien Does Not Invalidate the Claim by BY ROBERT KAYE, ESQ., B.C.S

  • Posted: Feb 22, 2021
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Legal Morsel | Court Concludes That Mistakes on a Claim of Lien Does Not Invalidate the Claim

by BY ROBERT KAYE, ESQ., B.C.S

The Florida Fourth District Court of Appeal recently provided a ruling regarding the ability of a homeowner’s association to successfully complete a foreclosure for unpaid assessments when there was an error in the amount indicated as being owed on the claim of lien.  In the case of Pash v. Mahogany Way Homeowners Association, Inc., Case No. 4D19-3367, January 27, 2021, the Appellate Court was faced with the challenge of a lower court ruling in favor of the homeowner’s association in which the homeowner, Mr. Pash, had claimed that the amount indicated on the claim of lien was overstated from what was owed.  The record also reflected that the homeowner’s association admitted that it made a mistake in its calculation of the assessments on the lien but corrected the amount when it filed the foreclosure case.  It was not disputed that some assessments were delinquent when the foreclosure case began.

In a split decision, a majority of the Court focused on the requirements of Section 720.3085(1)(a) of Florida Statutes, as well as the provisions of the Declaration of Covenants for the Community.  The Statute provides the following:

To be valid, a claim of lien must state the description of the parcel, the name of the record owner, the name and address of the association, the assessment amount due, and the due date.  The claim of lien secures all unpaid assessments that are due and that may accrue subsequent to the recording of the claim of lien and before entry of a certificate of title, as well as interest, late charges, and reasonable costs and attorney fees incurred by the association incident to the collection process.  The person making payment is entitled to a satisfaction of the lien upon payment in full.

While the case was reversed for other reasons, the majority of the Court stated that “Nothing in section 720.3085(1)(a) suggests that the claim [of lien] must be free of error for it to serve as an otherwise valid claim of lien.”  The Court also concluded that the statute, as written, does not provide that an error in the amount stated in the claim of lien invalidates an otherwise valid claim by an association.  Rather, the Court indicated that the association is merely asserting “a claim” in the lien and the association remains obligated to prove its claim in order to prevail in its case and homeowners have the ability to contest the claim made.

The Florida Condominium Act contains substantially the same provision as set forth above in Section 718,116(5)(b) F.S.  Consequently, it is anticipated that a lower court would likely apply the conclusions of this case to a condominium association foreclosure case.

It remains to be seen whether this holding is going to be viewed as an anomaly or will be followed by the remaining District Courts in Florida.  Notwithstanding this easing of the perception of association requirements on this point, it remains the recommendation that all collection efforts by associations be fully documented to a “zero” balance on the specific homeowner account to minimize any possible adverse conclusion in an assessment foreclosure case.  Legal counsel familiar with community association law should be involved to assist in the formal collection efforts against any homeowner.

 

 

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Condos and HOAs who are forced to collect on delinquent accounts must consider the proper and most important ETHICAL solution. “Ask Mr. Condo” Bob Gourley

Condos and HOAs who are forced to collect on delinquent accounts must consider the proper and most important ETHICAL solution. “Ask Mr. Condo” Bob Gourley

  • Posted: Feb 17, 2021
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Condos and HOAs who are forced to collect on delinquent accounts must consider the proper and most important ETHICAL solution.

by Axela’s “Ask Mr. Condo” Bob Gourley

 

Why Ethical Collections Really Matters for HOAs and Condominium Associations

What happens if 5% or more of the members of a condominium association or HOA don’t make timely payments to the association as expected? What if one or more homeowners stops contributing altogether? How can condominium associations and HOAs protect themselves while not playing the role of the villain in the eyes of the delinquent homeowners? Here is the argument in favor of ethical collections.

What is in the best interest of the association or the delinquent homeowner?

No one can question the need for a condominium association or HOA to act against delinquent owners within their association. After all, successful collection and distribution of common fees and assessments are the only way a condominium association or HOA can survive. Budgets are prepared annually. On one side of the budget are all of the known and anticipated expenses, contributions to Reserve Funds, and other expenses the association will face in the upcoming year. On the other side of the budget are the income items to pay for those expenses, namely the anticipated income from common fees and assessments from individual homeowner and unit owners within the association. A balanced budget can only be maintained if both sides of the equation are accurate.

Condominium associations and HOAs are typically not-for-profit businesses. The governing documents that create the bond between the unit owner and the association usually give the association serious clout when it comes to collecting common fees and assessments in a timely manner. Additionally, many associations engage an attorney to assist them in contract negotiation, interpretation and modification of governance documents, and much more. It’s not surprising, then, that many condominium associations and HOAs simply turn to their attorney when it comes to matters of collection of delinquent common fees and assessments. But boards should be asking themselves, is that wise? Is that in the best interest of the association or the delinquent homeowner? Is it the best way to protect the association’s assets and actually collect the money it is owed? Is it ethical?

 

The goal should be to educate delinquent homeowners and help them get current

There are several reasons that a condominium or homeowner can become delinquent. The simplest reason is that they simply don’t have enough money to pay all of their bills. Credit card bills, utility bills, car payments, and even the mortgage all need to be paid. There are perceived repercussions from missing any of these payments, including having utilities turned off, a car repossessed, or a foreclosure action from missed mortgage payments. For these reasons, a person who is short of cash might make the decision to defer or miss payments on their common fees or assessments for the simple reason there doesn’t appear to be any repercussions from doing so. It is a mistaken notion that is all too common. Other reasons include an owner’s death or severe illness, a lack of receiving or paying attention to communications from the condominium association or HOA, and even plain forgetfulness.

Whatever the reason, once the unit or homeowner gets behind in their common fees, the goal should be to educate them and get them back up and current so that their lack of payment doesn’t hurt the other association members who are paying on time.

 

Legal fees can even outweigh the amount the homeowner owes to the association

There is a huge difference between attempting to collect a debt and simply taking legal action against the debtor. Both have very real consequences to both the condominium association or HOA and the delinquent homeowner. Simply referring the matter to an attorney isn’t an attempt to collect a debt. It is an action that will lead to a lien and eventual foreclosure if the debt isn’t settled. Used as a first resort, it is an unethical solution because it harms the homeowner and puts the association at risk of losing additional money as the attorney will get paid for the legal work regardless of the outcome.

Since the delinquent unit owner is encumbered to the terms of the association’s governing documents, the hefty and often burdensome cost of the legal fees is also lumped onto the delinquent amount the homeowner owes to the association. In some extreme cases, the legal fees can even outweigh the amount owed to the association. Can you blame the delinquent unit owner for crying “foul” when this happens? It is unfair and unethical.

 

A specialized collection agency can work with the homeowner without threatening to foreclose

A far better and less expensive solution would be to work with a specialized collection agency that fully understands the plight of the condominium owner or HOA homeowner who has missed a few payments and become delinquent.

Axela Technologies is just such a collection agency. In addition to offering a no upfront cost to the condominium association or HOA, the fees for using a collection agency to service the debt is far more agreeable to the delinquent homeowner. They have the opportunity to address their delinquency and get themselves back in good standing with their association. A specialized collection agency can work with the homeowner politely and professionally, encourage a repayment plan, without involving the courts or threatening to foreclose on the homeowner’s home unless, and only unless, the debtor is unwilling to resolve the debt.

 

95% of delinquencies are settled without the need for the hefty legal expense of an attorney

In our experience, that is a rare occasion that only happens about once for every 20 accounts referred. That means up to 95% of delinquencies are settled without the need for the hefty legal expense of an attorney. Not only is this solution far less expensive for all concerned, it’s also a far more effective method of collecting delinquent common fees and assessments.

An ethical collection strategy needs to be considered in all cases of homeowner delinquency and not just because it is the right or ethical thing to do. Many associations have felt the bitter sting of financial loss after pursuing a strictly legal “lien and foreclose” strategy. Savvy homeowners who get swamped with legal fees on top of delinquencies are far more likely to file their own bankruptcy leading to the association simply “writing off” the delinquency and the legal fees spent trying to collect.

Using Axela Technologies and their ethical collections strategy proves effective 19 times out of 20. Ethical collections save time, save money, and encourages a “win/win” for the association and the homeowner. Take a look at your current condominium association or HOA collections strategy today. If it isn’t ethical, it’s time to talk to Axela Technologies.

 

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We are getting ready for this year, remember: When you keep us informed we can use this to keep the industry informed. | SFPMA

We are getting ready for this year, remember: When you keep us informed we can use this to keep the industry informed. | SFPMA

We are getting ready for this year, we offer many services for members. When you keep us informed we can use this to keep the industry informed.

We ask our members about Advertising
– In the next week we have information that will be sent directly to our members.
– Advertising includes: On our Website, On the Directory Categories, In our Email Blast and our Magazine, Florida Rising Magazine.
These when sent go out to industry professionals. Boards for Condos and HOA’s, Managers and YOU if you sign up.
Be safe and healthy
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Here is some information about SFPMA.
What you can expect and rely upon with your membership.
We are a multi-member property management organization in the State of Florida. Expand your professional network, connect with those who work directly with Professionals in our Industry that may not necessarily know about your business.
Take advantage, meet like minded professionals and opens up opportunities for future business ventures and lifelong partnerships.
Through your Membership:
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It starts with: Membership and being listed on the Florida Directory. What we will offer You! Finding the top Companies that work in our Industry is important for Property Managers, Condo & HOA Board Members.
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